Tri-City board loses first appeal of medical office building lawsuit

OCEANSIDE — The Tri-City Healthcare District lost a bid to have a $19.8 million jury verdict against it lowered to $6 million in its eminent domain lawsuit against a former partner in the development of a 57,000-square-foot medical office building.

Superior Court judge Earl Maas III, who presided over the jury trial, also denied a motion by Tri-City to retry the case.

The jury in July awarded Carlsbad-based Medical Acquisition Co. (MAC) $19,763,700 against Tri-City Healthcare District for eminent domain, and breach of the covenant of good faith and fair dealing, and also denied the district’s counter claim of conflict of interest by the company.

The office building has sat vacant for nearly two years, the result of an estranged partnership between the healthcare district and MAC, a vestige of the tenure of former Tri-City CEO Larry Anderson that has resulted in the lawsuits between the parties. Tri-City sought to void the contract it had with MAC in a 149-page lawsuit that alleged the hospital’s former CEO Larry Anderson and board president RoseMarie Reno had illegal conflicts of interest with MAC. MAC in turn countersued Tri-City for interference with its development rights, arguing that the hospital district illegally blocked them from completing the project.

The jury found for MAC on all issues after a monthlong trial, awarding MAC $2,933,700 on its interference claim, and valued the building taken by Tri-City in eminent domain at $16,830,000, which was the amount that MAC claimed in the lawsuit.

Maas this week also granted MAC’s motion requiring Tri-City to make an immediate deposit of $12.1 million toward the value of the building.  Tri-City had previously deposited $4.7 million.

The hospital and MAC in 2011 entered into a complex development agreement that called for MAC to lease district land for 50 years and build a 60,000-square-foot complex. The hospital would then lease almost half the space for $75,000 a month and prepay $7.5 million in up-front rent. MAC would use the rest of the space to house doctors from a side company it set up for spinal surgeries in Tri-City’s operation rooms, as well as other services. The deal fell through in 2012 and the building, which was partially completed, has sat vacant since.  The hospital ousted Anderson in 2013 and seized the building in July 2014 through its eminent domain authority.

Officials see the medical office building as an important piece of its partnership agreement with UC San Diego Health. The university plans to locate specialists in the building, a move that would increase the Tri-City’s service offerings.

“The legal issues are still ongoing so we cannot comment on them,” Tri-City Spokesman David Bennett said.

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