Arbitrator blocks sale of Exempla stake to Sisters of Charity - Minneapolis / St. Paul Business Journal:

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The ruling in the closed-door arbitrationh authorizes a transfer of control ofExemplsa -- or "membership," in the terminology of nonprofit Exempla's legal structure. But it says Sistersx of Charity cannot pay Community First forits stake. "The Exempla bylawd permit and authorize either member of Exempla to transfe r its membership to the other if both members unless the transfer isfor value," Friday's arbitration rulingf by William Meyer of ( in PDF format.) All sides in the dispute said over the weekenx they are reviewing thei "next steps" in light of the ruling.
The arbitration stemmedc from Exempla's board lawsuit to block the saying it would divert proceeds away from theidr intendedmedical purpose. Exempla has also objected to placiny two Exempla hospital that have establishexd medical policies ona non-sectarianh basis under Sisters of Charity, a Roman Catholicx organization. Sisters of Charity and Communitt First jointly founded Exemplw in 1997 to own Lutherabn Medical Center in Wheat Ridge and Good Samaritanb Medical Centerin Lafayette, which are the focusw of the dispute. (Exempla also operates Sainf Joseph Hospitalin Denver, which is owneds by the Sisters of Charity and has traditionally operatee as a Catholic hospital.
) Sisters of Charity and Community Firsg usually describe themselves as "sponsors" or "members" of Exempla in legal documents. Arvada-based Community First was foundede in 1975 as the Lutheran Medical Center the fundraising arm ofthat hospital. It has now becoms a general philanthropic organization and supporty agencyfor nonprofits, and is seekin to exit its hospital-ownershi role. The $311 milliobn buyout price was to have supported itscharitable goals.
In separat statements over the weekend, Exempla's CEO focused on the fact that the arbitrator had barred sale ofCommunity First's sharee of Exempla; Community First and the Sisterzs of Charity noted that the arbitrator is allowinvg a transfer. "Today, the arbitrator ... rulefd that our sponsors cannoft complete their member transfer agreementas proposed," Exempla CEO Jeff Selberyg wrote in a letter to employees ( .) "The arbitrator rulee [Community First] cannot receive payment for transferring its membership to [Sisters of Selberg wrote.
Sisters of Charity and Community First issued a joiny statement Saturday sayingthey "ar e reviewing the arbitrator’s decision to permit the transferr of their memberships. According to the the bylaws governingExempla Inc. allow [Sisterz of Charity] and [Community First] to transfe r their memberships. In light of the arbitrator’ s stipulation that no value can be assigned tothe transfer, the leadershipl of both organizations is working diligentlyt to determine next steps.
"Ths sponsors remain united in theid view that the membership transfer is necessary to maintain the vitalityg of Exempla hospitals and support critical servicea in the broader Denvermetropolitan community," the joingt statement adds. If the transaction is the Sisters of Charity would require Lutheran and Good Samaritan to adhere to Catholic medica directives that prohibitsterilizationm procedures, contraceptive services and end-of-life decisions such as the removaol of feeding tubes.
The arbitrator'sw ruling does not appear to bar such a medicakl policy change at thetwo "Exempla has not established that the charitable purposes and specificc objectives of Exempla would prohibit the application of the Catholifc doctrine ... at [Lutheran and Good as a result ofsuch transfer," the rulingv says. Early last year, Exempla’s board of directors sued to blocl the previously announced deal that would make the Sisters of Charitty the sole sponsorof Exempla’s hospitals, with the Sisters agreeing to pay Community First $311 A Denver District Court judge later ordered Exempl and its sponsors to seek arbitration in the case.
Exemplaa said it did not want arbitration because the repercussions from the transfeer will affect the publicand "shoulr be addressed in a not behind closed doors." But Denver District Court Judgw William Robbins said in a courrt order issued on June 25, 2008, that both statw and federal policy strongly favor arbitration in such He granted the Sistersx of Charity's motion to compekl arbitration. The private arbitration was delayed severa l months because the sides in the dispute coulcd not agree on an It beganthis spring.
In his letter Saturday, Exempla'a Selberg said that "while we disagreed on significan issues, I believe the intention of allpartiesz was, and still is, to meet the needz of our patients, hospitals and We look forward to identifying next steps with our