Ruston LA Hosp v. Lincoln Hlth Found

United States Court of Appeals
for the Fifth Circuit

No. 20-30036

Ruston Louisiana Hospital Company, L.L.C.,

Plaintiff—Appellant,

versus

Lincoln Health Foundation, Incorporated,

Defendant—Appellee.

Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 3:18-CV-881

Before Jones, Haynes, and Ho, Circuit Judges.
Per Curiam:*
This case arises from a contract dispute regarding a 2007 asset
purchase agreement (the “Agreement”) between Lincoln Health System,
Inc. (“System”) and Ruston Louisiana Hospital Company, L.L.C.
(“Ruston”). After System dissolved, Ruston sued Lincoln Health
Foundation Inc. (“Foundation”), a majority shareholder of System, for a

*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
United States Court of Appeals
Fifth Circuit
FILED
November 9, 2020

Lyle W. Cayce
Clerk
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No. 20-30036
2
debt incurred prior to the Agreement.
1
We AFFIRM the district court’s
grant of summary judgment in favor of Foundation.
The district court granted Foundation’s motion for summary
judgment, rejecting Ruston’s two theories of successor liability—assumption
and mere continuation. Ruston La. Hosp. Co., LLC v. Lincoln Health Found.,
Inc., No. CV 3:18-00881, 2019 WL 7407432, at *6–8 (W.D. La. Dec. 30,
2019). Ruston’s appeal addresses the same two theories:
2
neither support
Ruston’s claim of successor liability.
Assumption. In Louisiana, “[a]n obligor and a third person may agree
to an assumption by the latter of an obligation of the former. To be
enforceable by the obligee against the third person, the agreement must be
made in writing.” L
A. CIV. CODE ANN. art. 1821. We agree with the
district court’s conclusion that Foundation’s articles of incorporation—
articulating its “support” of System—are not equivalent to a written
assumption. See Ruston, 2019 WL 7407432 at *4. Likewise, we agree with
the district court that there is a difference between determining the
appropriate beneficiary to a charitable bequest and the assumption of

1
Several years after the Agreement, Ruston received notification that it owed the
U.S. Centers for Medicare & Medicaid Services for costs incurred by System prior to the
sale of the Hospital (the “CMS Charge”). Ruston paid the CMS Charge, then sought
reimbursement from Foundation, as System had dissolved. This lawsuit ensued after
Foundation’s refusal.
2
The standard of review, of course, is de novo. See Lyles v. Medtronic Sofamor
Danek, USA, Inc., 871 F.3d 305, 310 (5th Cir. 2017). The district court had diversity
jurisdiction over this case, see 28 U.S.C. § 1332, and we review its final judgment, see 28
U.S.C. § 1291. Accordingly, we apply Louisiana substantive law.
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3
another’s obligations.
3
Id. at *6. Because assumption cannot be shown,
Ruston cannot prevail on this theory of successor liability.
Mere Continuation. Alternatively, Ruston argues that Foundation is a
mere continuation of System. Various cases provide factors to determine this
issue.
4
However, under any of these tests, Ruston fails to prevail.
Ruston relies on the Russell factors, arguing four of the eight factors
apply. See Russell v. SunAmerica Secs., Inc., 962 F.2d 1169, 1176 n.2 (5th Cir.
1992). This argument lacks support in the record; three of the four cited
factors clearly do not apply. Foundation never purchased assets from System
(a bequest is not a purchase) under or after the Agreement; Foundation did
not operate the Hospital after the Agreement; and Foundation never
presented itself as System’s general successor. Thus, only one of the eight
Russell factors—that Foundation shared supervisory personnel with
System
5
—weighs in favor of Ruston’s conclusion that Foundation was a
mere continuation of System. That balance is insufficient to find in Ruston’s
favor regarding this theory of successor liability. Accordingly, we
AFFIRM.
6

3
Ruston argues that Foundation assumed System’s legal obligations through its
actions to secure a charitable bequest from a third party. We reject this contention.
4
Ruston relies on one of those cases. See Russell v. SunAmerica Secs., Inc., 962 F.2d
1169, 1176 n.2 (5th Cir. 1992). We have identified older Louisiana Supreme Court cases
that have articulated slightly different considerations for a mere continuation analysis, see
Roddy v. Norco Local 4-750, Oil, Chem. & Atomic Workers Int’l Union, 359 So. 2d 957, 960
(La. 1978), as well as recent Louisiana appellate court decisions, see Monroe v. McDaniel,
207 So. 3d 1172, 1180–81 (La. Ct. App. 2016). Ruston cannot meet any of the potential
tests, so we need not decide which applies.
5
A majority of System’s board members served on Foundation’s board.
6
Because we conclude that Ruston has not established a genuine dispute as to any
material fact regarding Foundation’s successor liability, we need not address whether
Foundation’s shareholder status protects it from liability.
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