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Business Observer Friday, Jun. 25, 2004 18 years ago

Firm Accused of Malpractice

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New owners of a St. Petersburg nursing home inherit legal controversies involving a malpractice claim against Holland & Knight LLP, and a contract dispute with a management company.

Firm Accused of Malpractice

New owners of a St. Petersburg nursing home inherit legal controversies involving a malpractice claim against Holland & Knight LLP, and a contract dispute with a management compan

By David R. Corder

Associate Editor

Carrington Place, a St. Petersburg skilled nursing facility, scored fairly average scores on its most recent annual governmental inspection. The 11 deficiencies recorded three months ago are only slightly higher than state and federal averages. Inspectors labeled them as level-two infractions, or less, on a four-point scale, which means they posed only "minimal harm or potential for harm."

But the 120-bed nursing home at 10501 Roosevelt Blvd., N., is embroiled in legal controversies over its legal representation and ownership. A few months ago the facility's new owner accused Florida's largest law firm, Holland & Knight LLP, of legal malpractice, seeking damages of more than $40 million. And earlier this month a management company accused the new owner, a former affiliate, of violating a contract that purportedly granted the management company first right of refusal to buy the facility.

It appears Benjamin Atkins and Marya Morrison inherited a caldron of legal problems in December when they acquired the 46,018-square-foot facility for about $3.3 million. Atkins did not respond to a request for comment.

Over the years, Atkins and Morrison, the principals of Clearwater-based Ben Atkins Consulting, have built a thriving entrepreneurial business advising and managing long-term care facilities in the Tampa Bay area.

Management contract

Draped in a pink facade, Carrington Place projects a tasteful decor with home-style semi-private and private rooms, modern furniture, a non-denominational chapel and a beauty salon/barbershop. Rather than buffet-style meals, food-service workers deliver the food to residents' tables. The center emphasizes resident exercise and rehabilitation.

With a 99% occupancy rate, the facility does well. Semi-private rooms cost $4,185 a month, $4,805 for a private room. Calculated just on semi-private room costs, the facility produces around $500,000 in monthly revenue, or about $6 million a year.

Up until December, Canadian investors Find U. and Arlene Christiansen owned the 16-year-old facility through Jaylene Inc., which relied on a management company to run it.

In the summer of 2001, Jaylene entered into contract talks with Largo-based Senior Management Services Inc. Corporate records list John J. Piazza Sr. as Senior Management's president. In August, Jaylene retained Michael Geldart, then a Holland & Knight LLP partner, to negotiate and draft an agreement with Senior Management.

The agreement charged Senior Management with numerous duties such as patient services, financial operations and public relations. In exchange, Jaylene agreed to pay Senior Management a 6% management fee, payable at 4% monthly and 2% annually.

Senior Management then assigned its rights under the management contract to ACMC-CNH Inc., a Largo-based company that lists a John T. Young as its president.

The contract between Jaylene and Senior Management also contained a standard indemnification clause that has become central to the legal malpractice lawsuit by Jaylene - under Atkins and Morrison's control - against Holland & Knight and Geldart.

The discrepancy

About seven months after the contract signing, Jaylene officials say they discovered a discrepancy. The contract assigned indemnification for any negligence or intentional acts to Jaylene. Jaylene claims in court records it advised Geldart and the law firm to assign the indemnification provision to Senior Management and any successor through assignment of the contract.

After company officials purportedly discovered the discrepancy, Jaylene assigned all of its rights under the Jaylene-Senior Management and ACMC-CNH contract to Candansk LLC, a St. Petersburg-based company managed by Paul Prybylski.

The nursing home's contractual dispute emerged publicly in mid-April when Jaylene and Candansk sued Geldart and the law firm. The lawsuit seeks $10 million each on two counts of breach of contract and two counts of professional malpractice involving negligence. It also seeks additional compensatory damages on two additional counts of professional malpractice and two counts of breach of fiduciary duty.

"As a direct result of Holland & Knight's breach of its duty to provide competent legal services to Jaylene in the drafting of the management agreement, Jaylene has suffered and continues to suffer damages which accrued beginning Sept. 14, 2001, continuing through May 28, 2002, including but not limited to, increased exposure to indemnity claims arising out of alleged misfeasance, malfeasance or nonfeasance of the management company," the lawsuit states.

Neither officials at Holland & Knight nor Geldart, now general counsel at Clearwater-based CCS Medical, would comment. Nor would the firm confirm whether its legal counsel represents Geldart in the malpractice matter. Up until Geldart's resignation in early 2003, he served as a co-chairman of the firm's national health law practice group.

The nursing home, under Atkins control, hired Gallagher & Howard attorney Edward M. Brennan to prosecute the malpractice claim. He declined comment on the allegations. The Tampa lawyer practices in the areas of complex commercial and business litigation, including nursing home matters. He possesses an AV rating from Martindale-Hubbell.

Holland & Knight retained Edward C. LaRose of Trenam Kemker Scharf Barkin Frye O'Neill & Mullis PA. LaRose, who also possesses an AV rating, is Florida Bar board certified in the areas of antitrust and trade regulation law.

The malpractice lawsuit shows little sign of activity through the early part of the third week of June. Neither the law firm nor Geldart have responded to the allegations.

The entrepreneurs

In December last year, Atkins formed American Care Real Estate Holdings LLC as the corporate entity to acquire Carrington Place. Corporate records also list Morrison as a managing member.

Besides Carrington Place, corporate records also show Atkins and Morrison as managing members of Ben Atkins Consulting. The two also manage the affiliated BAMM Consulting & Accounting, which publishes brief biographies of the two on its Internet Web site (www.timeforbamm.com).

The site describes Atkins as earning bachelor's and master's degrees from the University of South Florida. He has experience in health care, business management, acquisitions, divestures and financing.

Atkins began his career as a "regional accountant" with responsibilities for four assisted living facilities and two skilled nursing homes. Then he operated a 120-bed skilled nursing facility for an entity known as Angel Care/Meadowbrook Healthcare.

Next, Atkins formed Total Rehab South Inc., a provider of rehabilitation, speech and occupational therapists to nursing homes in Florida and Georgia. In 1996, Atkins sold the company to Louisville, Ky.-based In House Rehab Corp., a publicly traded company that later changed its name to Perennial Health Systems Inc.

Following the sale of Total Rehab, Atkins created two new entities, Key Rehab Inc., Key LTC Management and the Independent Therapy Center.

The Florida chapter of the American College of Health Care Administrators once elected him as their president.

Morrison also earned a bachelor's degree from the University of South Florida. Her biography states she began work as a staff accountant at Multicare Services, a Hackensack, N.J.-based company that originally managed about 20 skilled nursing facilities, went public as Multicare Cos. Inc. and ultimately became a holding of publicly traded Genesis HealthCare Corp., once the federal bankruptcy courts approved the spinoff of Multicare's assets.

After Multicare, Morrison became a regional director of accounting for Southern Management, a Florida-based long-term care provider.

The buyout

During the past few years Atkins and Morrison apparently became affiliated with Piazza's Senior Management Services, according to a lawsuit Senior Management and ACMC-CNH jointly filed earlier this month in the 13th Circuit against Jaylene, Candansk, American Care Real Estate, Atkins and Morrison.

Senior Management and ACMC-CNH retained Tampa attorney Hildegund P. Wanders of Barnett Bolt Kirkwood Long & McBride PA to represent the company in the lawsuit that seeks specific performance from Jaylene and Candansk over the management contract Senior Management assigned to ACMC-CNH. It also accuses the defendants of breach of contract, breach of fiduciary duty and theft of corporate opportunity.

In May 2002, the lawsuit states, Senior Management and ACMC-CNH notified Jaylene and Candansk about its intent to exercise a buyout option in the management contract. But apparently negotiations stalled when Jaylene and Candansk set the purchase price at $6 million. The Senior Management and ACMC-CNH lawsuit also claims Jaylene and Candansk refused to comply with contract language allowing for an independent appraisal.

About four months later, the lawsuit states, Senior Management and ACMC-CNH learned Candansk terminated the contract Senior Management assigned to ACMC-CNH. They also learned Jaylene intended to sell the nursing home to an unidentified third party.

Later, the lawsuit states, Senior Management and ACMC-CNH learned that Atkins, as executive director in charge of managing the nursing home, and Morrison, as its director of finance, intended to purchase Carrington Place.

"It leveraged on plaintiff's investment in Atkins and Morrison and their insider knowledge of the facility's management and technical procedures, for which Jaylene and Candansk were previously obligated to pay management fees to ACMC-CNH," the lawsuit states.

Around the time of the purchase, the Senior Management and ACMC-CNH lawsuit states, Atkins and Morrison became officers and directors of Jaylene.

"The sale of Carrington Place from Jaylene to American Care was not an arms-length transaction and American Care is not a bona fide purchaser for value as Atkins and Morrison had intimate prior knowledge of ACMC-CNH's option to purchase Carrington Place and actively participated in depriving ACMC-CNH of its rights under the September 2001 management agreement and amended addendum," the lawsuit states.

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