Further Assurances or Cooperation Clauses Cannot Create a Condition Precedent

Further Assurances or Cooperation Clauses Cannot Create a Condition Precedent

A network of mental health and substance use disorder treatment centers acquired another such center. In the asset purchase agreement, the seller promised to convey all its patient lists, charts, and records to the buyer, despite the fact that federal regulations require patient consent to convey patient records.

The seller also promised to deliver the patient records and all documents reasonably required by applicable law, as well as represented and warranted that it had taken all necessary actions to perform the agreement, that it was in compliance with all health care laws, and that consummating the transaction would not violate any applicable law.

However, the patient consents required to deliver those patient records were not within the seller’s control. As a result, the seller was unable to obtain patient consents to transmit every record, and could not transmit every record without consent without violating federal law.

Lighthouse has sued Milestone and its stakeholders for not keeping their promises, seeking specific performance of Milestone’s promise to transfer all its patient records. The defendants responded with a bevy of counterclaims. On the parties’ cross-motions for summary judgment, I conclude that federal law requires obtaining patient consents before conveying Milestone’s patient records to Lighthouse, and that Milestone promised to deliver patient consents to Lighthouse and so promised to obtain them.

Those conclusions do not answer all of the parties’ questions. Neither party has established the consequences of Milestone having promised to deliver the patient consents necessary to convey all the patient records it sold to Lighthouse, when obtaining all the consents is likely impossible and conveying records without them is illegal. These issues will require further development.