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Citadel Group Limited v. Sky Lakes Medical Center

April 30, 2008

CITADEL GROUP LIMITED, A DELAWARE CORPORATION, PLAINTIFF,
v.
SKY LAKES MEDICAL CENTER, INC., AN OREGON NONPROFIT PUBLIC BENEFIT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge Joan Humphrey Lefkow

Magistrate Judge Nolan

MEMORANDUM OPINION AND ORDER

Defendant/Counter-Plaintiff Sky Lakes Medical Center, Inc. ("Sky Lakes")*fn1 has filed a two-count countercomplaint against Plaintiff/Counter-Defendant Citadel Group Limited ("Citadel") claiming that Citadel is liable under either a breach of contract or an unjust enrichment theory for damages of not less than $40,000 plus costs, interest, and attorneys' fees.

Citadel has filed a motion to dismiss Sky Lakes' counterclaims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. For the following reasons, the court will deny Citadel's motion to dismiss as to Count I (breach of contract) but grant it as to Count II (unjust enrichment).

I. Facts

The following facts are taken from Sky Lakes' countercomplaint and are assumed to be true for the purposes of this motion to dismiss. In early 2004, Citadel and Sky Lakes entered into discussions whereby Citadel would acquire and finance a medical building owned by Sky Lakes in Klamath Falls, Oregon. Citadel would then lease the building back to Sky Lakes. The benefit of the deal would have been to provide Sky Lakes with cash while allowing it to retain operational control of the building.

During the parties' initial and ongoing discussions, Sky Lakes insisted that a necessary condition of the proposed sale and leaseback was that the parties treat the transaction as an off-balance sheet transaction.*fn2 This was a critical requirement for Sky Lakes because it did not want the transaction to affect its borrowing ability. During the parties' negotiations in 2004 and 2005, Sky Lakes reiterated the importance that the transaction be treated as an off-balance sheet transaction several times. Citadel assured Mr. Rybolt that it would treat it as such.

On December 22, 2004, Citadel sent Sky Lakes a letter outlining its proposal to go forward with the project of acquiring and financing the building ("the letter agreement").*fn3 The letter agreement was signed by Citadel's Chief Executive Officer. Sky Lakes, through its Chief Financial Officer, signed it on March 25, 2005. Both parties agree that the letter agreement then became a binding agreement to go forward in pursuit of an ultimate acquisition and financing contract. The following language was included in the letter agreement:

This programmatic approach minimizes [Sky Lakes'] financial exposure, while simultaneously enabling the medical center to take full advantage of its market opportunities. This model is consistent with [Sky Lakes'] capital deployment strategy and generates additional benefits such as:

***

% Improved hospital debt capacity implications.

Pursuant to the letter agreement, Sky Lakes paid a $40,000 good faith deposit to Citadel.

Citadel never propounded a draft contract that would treat the proposed matter as an off-balance sheet transaction. Thus, in October of 2005, Sky Lakes ...


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