FTI Consulting, Inc. v. Regional Health Properties, Inc.

Background

FTI Consulting, Inc. provided consulting services to Regional Health Properties, Inc. under an August 21, 2020 Letter of Engagement. The agreement covered tenant/operator transfer support and restructuring services and provided that FTI would receive a success fee equal to 7.5% of collections of currently due, future due, or past due lease payments under the Wellington leases.

The parties used FTI’s services in negotiating a December 2020 agreement concerning two facilities leased by ADK Georgia, LLC, a wholly owned subsidiary of Regional Health. Under that agreement, the tenants transferred cash and accounts receivable to ADK, and ADK agreed to forbear pursuing its rights under the leases. The total cash collected was $3,123,583.18. Regional Health paid FTI $83,841.00 but refused to pay the full amount FTI claimed.

FTI filed one breach-of-contract claim seeking the unpaid portion of its fee. Regional Health denied that it owed additional fees and asserted eight affirmative defenses. It also brought four counterclaims seeking return of the $83,841.00 payment under theories including unjust enrichment, breach of contract, and restitution. FTI moved for summary judgment on its claim and on the counterclaims.

Contract Enforceability and Interpretation

Applying New York law, the court held that the Letter of Engagement was a valid and enforceable contract. Regional Health argued that the agreement was too indefinite because it did not fully define the scope of services, the term “success fee,” the “Wellington leases,” or which entity had to collect the money. The court rejected those arguments.

The court held that the scope of services could be understood from the agreement, the parties’ prior dealings, and the provision stating that FTI’s services would be performed at Regional Health’s direction. The court interpreted “success fee” as a fee triggered by the collection of lease payments. It determined, using evidence outside the written agreement, that “Wellington leases” referred to the Tara Sublease and the Powder Springs Sublease. It also held that the fee clause did not require collections to be made by Regional Health specifically; collections by ADK could count.

The court further held that the agreement did not require FTI to prove that its work caused the collections, that the facilities were transferred to a particular operator, or that FTI alone was responsible for resolving the dispute. The agreement required Regional Health to pay the fee when the specified lease payments were collected, and it imposed no additional conditions. The merger clause also barred using outside evidence to add conditions that were not in the written agreement.

Summary-Judgment Rulings

The court held that FTI performed its obligations by providing the consulting and advice that Regional Health directed it to provide, including negotiations concerning the facilities. Regional Health argued that FTI breached the agreement when FTI’s involvement declined before the negotiations were completed. The court rejected that argument because Regional Health did not direct FTI to perform additional work at that point.

The court held that the cash and accounts receivable transferred under the Agreement Regarding Leases constituted collections of past-due or otherwise due lease payments. It therefore ruled that 7.5% of the $3,123,583.18 collected—$234,268.74—was the required fee. After crediting Regional Health’s $83,841.00 payment, the court concluded that the unpaid balance was $150,427.74 in the conclusion and judgment provisions.

The court rejected all eight affirmative defenses. It also granted summary judgment for FTI on all four counterclaims. The unjust-enrichment counterclaims failed because a valid contract governed the dispute, and the breach-of-contract and rescission counterclaims failed because FTI had not breached the agreement.

Disposition

Judge John P. Cronan granted FTI’s motion for summary judgment on its single cause of action and Regional Health’s four counterclaims. He ordered the Clerk to enter judgment for FTI for $150,427.74 plus prejudgment interest accruing from April 15, 2021, through the judgment date at New York’s statutory 9% annual rate, and to close the case. FTI’s separate motion to strike Regional Health’s attorneys’ fee counterclaim was denied as moot.

The opinion contains an amount discrepancy: its damages discussion states that the unpaid balance was $150,427.72, while the conclusion and the judgment directive state $150,427.74. The ordered judgment amount is $150,427.74.