Founders Pavilion, Inc. v. Pavilion Operations, LLC

Summary

The New York Appellate Division, Fourth Department, held that a settlement payment arising from Medicaid rate appeals belonged entirely to the plaintiff under the parties’ asset purchase agreement. The court also held that issues concerning liability for Medicaid overpayments identified in an audit presented a question of fact because the agreement’s provision concerning liability resulting from a party’s acts or omissions was ambiguous. The order and judgment was modified to deny summary judgment concerning the audit liability and the release and allocation of escrow funds, and was otherwise affirmed.

Holdings

1. The universal settlement agreement and asset purchase agreement unambiguously entitled Founders Pavilion to the entire amount received by the facility under the Medicaid settlement because the proceeds arose from pre-sale rate appeals and services rendered while plaintiff owned the facility.
2. Summary judgment was improper on the parties' liability for the OMIG audit amount and on release and allocation of the escrow funds because the agreement was ambiguous as to whether plaintiff's pre-sale cost-report submissions constituted acts or omissions causing the overpayments, and the parties' extrinsic evidence did not establish either side's construction as the only reasonable one.

Questions Presented

1. Whether the asset purchase agreement and universal Medicaid settlement agreement unambiguously entitled plaintiff to the entire settlement amount allocated to the facility.
2. Whether summary judgment was proper on the parties' respective liability for the amount owed under the OMIG audit and on release and allocation of the escrow funds.
3. Whether the asset purchase agreement's provision concerning overpayments caused by a party's acts or omissions barred defendant's claim that plaintiff was liable for the entire audit amount.

Disposition

affirmed