National HealthCare targeted in suit.

Class action alleges unfair trade practices

A CLASS-ACTION LAWSUIT FILED AGAINST TENnessee-based National HealthCare Corp. (NHQ alleges that the company's recent sale of 12 Florida facilities created shell corporations to avoid lawsuits, increase profits, and circumvent regulatory statutes.

The suit, filed Nov. 3, 2000, claims that NHC pressured some 3,000 residents of its Florida facilities to sign new resident contracts waiving their rights to a jury trial. It also says that NHC failed to disclose that the new corporations had not obtained licenses and legal authorizations to operate Florida skilled nursing facilities.

The plaintiffs are being represented by Wilkes & McHugh, the Tampa-based law firm of Jim Wilkes, who has won several multimillion-dollar verdicts against nursing homes. The lawsuit asked Pasco County, Fla., Circuit Court Judge Stanley Mills to declare the contracts invalid and order NHC to end what the complaint refers to as "fraudulent, deceptive, and unfair methods." The case was remanded to federal court at a Nov. 19 hearing. As CLTC goes to press with this issue, a new hearing date had yet to be set.

Transfer of ownership

NHC announced this past August that it was divesting itself of Florida operations because liability insurance for those facilities was no longer available. Ownership of the 12 facilities was transferred to Steven Strawn--a 20-year employee and former vice president of operations for NHC--along with a group of company insiders.

NHC then sent letters to residents and their families advising them that effective Oct. 1, 2000, the Florida facilities were changing their name. The letters requested that the resident or an authorized legal representative sign and return new admission contracts required by NHC to facilitate the name change. The contracts stated that "By agreeing to arbitration of all disputes, both parties. are waiving a jury trial for all contract, tort, statutory, and other claims."

The suit also alleges that the daughter of a resident at Charlotte Harbor Healthcare in Port Charlotte, Fla., was told that if she did not sign and return the new resident agreement, her mother would be discharged within 30 days.

"We feel that these contracts were not properly acquired, they were not properly disclosed," said Steven Vancore, spokesman for Wilkes & McHugh. "They're saying either sign away your rights or you're getting kicked out. We believe that's unfair trade practices and fraudulent inducement."

NHC declined to comment on the pending litigation.