Three Hagyard Veterinarians Sue Hospital Over Partnership Deal - Horse Racing News | Paulick Report

Three Hagyard Veterinarians Sue Hospital Over Partnership Deal

Three associate veterinarians at Hagyard Equine Medical Institute in Central Kentucky are suing the hospital and its recently-announced partner, Mixed Animal Veterinary Associates of North America (MAVANA), for what they say were breaches in promises related to a shareholder deal. Drs. Rocky M. Mason, Christopher R. Smith, and Patrick J. Ford claim HDM Holdings, HDM Pharmacy, and Hagyard-Davidson-McGee Associates, PLLC resisted bringing in additional shareholders as the company planned for its merger with Las Vegas-based MAVANA in an attempt to maximize profit for existing shareholders.

The defendants in the case are charged with 14 counts, including claim for declaration of rights, breach of fiduciary duty, tortious interference, breach of implied covenant of good faith and fair dealing, promissory estoppel/detrimental reliance, negligent misrepresentation and fraud, intentional misrepresentation and fraud, breach of implied contract, and breach of express contract.

The Hagyard/MAVANA deal, announced Jan. 19, added Hagyard to a group of 22 mixed animal, equine, and companion animal practices. According to its website, MAVANA is designed to centralize purchasing, human resources, and finance in order to improve value and liquidity for practice shareholders.

Dr. Michael Spirito, Kevin Foote and Foote Works, LLC were originally named as defendants but were dismissed in January.

According to a complaint filed in Fayette Circuit Court on July 21, 2017, Drs. Rocky M. Mason, Christopher R. Smith, and Patrick J. Ford claim they were told at the start of their careers with Hagyard that they would be offered the chance to buy in as shareholders after seven years of employment with the hospital, contingent upon certain performance markers. The trio claims they were not given the chance to buy in until well after they had completed seven years of service to the clinic (during which time they retained roughly one-third of their billed services). Performance for associates during the clinic's peak season was assessed by their ability to hit certain billing goals; those who did not make those goals were required to pay the difference back to the clinic.

Mason was offered the chance to buy in before Smith and Ford, but according to the complaint, all three were told they would get the same buy-in deal. The process turned out to be fraught with complications as Mason had to seek outside financing for the buy-in, which fell through when Hagyard allegedly backed out of co-signing the deal. Smith and Ford claim that after Mason reached an agreement to terms on a shareholder deal, they were eventually offered less advantageous terms – more than $200,000 more apiece for a smaller share of the hospital and pharmacy businesses.

William Rambicure and Mason Miller, attorneys for the plaintiffs, characterized HDM's actions in the complaint as “a cold, calculated, risk/reward analysis for Defendants to attempt to rescind or refuse to perform under their agreements with Plaintiffs and to run the risk [of] the present lawsuit being filed.”  Rambicure and Miller speculated it was in the best interests of the defendants to “substantially and artificially inflate and creatively puff up the valuations of HDM so as to enhance options for liquidity for HDM's members and to attempt to persuade HDM's existing members or owners to agree to HDM's participation in the contemplated merger of various veterinary practices to form MAVANA.”

The suit does not specify the amount sought for damages.

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