The court refused to order the seller to transfer patient records without patient consent as required by federal law.
Introduction:
In this legal case, the seller of a mental health and substance abuse center breached the purchase agreement by refusing to transfer patient records to the buyer. However, the court denied the buyer’s request to order the transfer of records without patient consent, as required by federal law.
Background:
The seller operated an outpatient substance use disorder and mental health treatment facility, which was acquired by the owner of a network of similar facilities. The asset purchase agreement included provisions for the transfer of patient lists, charts, records, ledgers, and information. The seller also made promises and warranties, ensuring compliance with laws, including those governing patient privacy and consent.
Lawsuit:
After the closing, the seller denied the buyer access to patient records, claiming that patient consent was necessary for their transfer. Subsequently, the buyer filed a lawsuit in a Delaware court seeking an order for the seller to hand over the records.
Outcome:
The court sided with the seller, agreeing that patient consent was required for transferring the records to the buyer. However, the court also acknowledged that the seller had breached its promise to transfer the records, as stated in the purchase agreement.
Case Reference:
See Lighthouse Behavioral Health Solutions, LLC v. Milestone Addiction Counseling, LLC, C.A. No. 2022-0979-MTZ, Court of Chancery of Delaware (Submitted: March 1, 2023. Decided: May 17, 2023) .
Comment: It is surprising that the buyer, being in the same industry, was unaware of the patient consent requirement. In this situation, the buyer may have a claim for damages resulting from the seller’s breach of the purchase agreement.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Podcasts https://www.buzzsprout.com/2142689/12339043
Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
Legal Disclaimer
The blogs on this website are provided as a resource for general information for the public. The information on these web pages is not intended to serve as legal advice or as a guarantee, warranty or prediction regarding the outcome of any particular legal matter. The information on these web pages is subject to change at any time and may be incomplete and/or may contain errors. You should not rely on these pages without first consulting a qualified attorney.
Recent Comments