Court: Former Lutheran CEO divulged confidential information but can continue to work with IU Health
Former Lutheran Health Network CEO Brian Bauer can continue to help IU Health establish a presence in Fort Wayne, but a Tennessee judge has ruled he delivered confidential information to potential investors when trying to find a buyer for the network last year – and has ordered him not to do so again.
Lutheran Health’s Nashville-based parent company, Community Health Systems, filed a lawsuit against Bauer and five unnamed defendants last year, claiming they had attempted to promote a sale of the network by driving down the value of LHN through misrepresentations about “patient care, capital investment and the financial status (of CHS).” The lawsuit also alleged Bauer and the others were “executing a long-range scheme to harm plaintiffs’ business and to drive them from the Fort Wayne market for the purpose of advancing the defendants’ own private economic interests.” In May, Bauer presented a $2.4 billion buyout offer on behalf of a group led by local physicians CHS ultimately rejected as $1 billion too low. Bauer was subsequently fired.
CHS also asked the court to prevent Bauer from working with IU Health, and Bauer has contended the lawsuit was intended to impede IU Health’s entry into Fort Wayne.
In his decision Monday, Williamson County Circuit Judge Joseph Woodruff rejected CHS’ request to bar Bauer from working with IU Health. But Woodruff also found that Lutheran Health “has carried its burden to prove a likelihood of success on the merits” of the case because Bauer “admitted he delivered LHN’s confidential and proprietary information . . . without authorization, to a venture capital private equity investor, New Mountain, and to representatives of the Menard family. New Mountain and Menard’s could have provided capital for the proposed sale of LHN.
The judge also stated that Bauer “has been involved with the solicitation and recommendation for employment of certain LHN employees, likewise in violation of the restrictive covenants of (Bauer’s) stock option agreement.” LHN could suffer “immediate and irreparable injury” as a result, Woodruff wrote.
IU Health has stated it has received no confidential information from Bauer, the judge added, “and purports to have implemented internal controls to prevent the receipt or dissemination of such information.”
As a result of Monday’s decision, Bauer is prevented, at least temporarily, from using or disclosing LHN confidential information, including financial data and physician recruiting strategies and contract terms. Bauer is also ordered to recover LHN’s protected information and is enjoined from soliciting LHN employees for work with IU Health.
In a statement, CHS spokeswoman Tomi Galin said the ruling “contradicts Bauer’s repeated and erroneous claims that the litigation against him is ‘baseless’ . . . the court rulings not only demonstrate that the litigation has merit, they also ensure that the litigation will proceed and prohibit Bauer from continuing to use Lutheran’s confidential information for his personal gain.”
Bauer also issued a statement saying he is “tremendously gratified” he can continue to work with IU Health and that he’s “excited to move forward with IU Health expanding access to high quality health care in Fort Wayne.”