County Superior Court
Plaintiff: William Mark Russo, Esq.
Defendant: V. Edward Formisano, Esq.
the Court are Plaintiff Prospect CharterCARE, LLC's (PCC)
Motion to Vacate an Arbitration Award and Defendant Michael
E. Conklin, Jr.'s (Conklin) Cross-Motion to Confirm the
same award. Jurisdiction is pursuant to G.L. 1956 §
Facts and Travel
Health Partners (CharterCARE) owned and operated two
hospitals: Roger Williams Medical Center (Roger Williams) and
Our Lady of Fatima Hospital (Fatima). Ken Belcher (Belcher),
President and Chief Executive Officer (CEO) of CharterCARE,
hired Conklin in May 2010 to serve as Vice President of
Finance and Chief Financial Officer (CFO) at an annual salary
of $311, 000. Pl.'s Mot., Ex. A (Award) at 8. As CFO,
Conklin was part of the Senior Leadership Team at
October 2010, the President of St. Joseph Health Services of
Rhode Island resigned. Id. In response, the
CharterCARE Board of Trustees (Board) asked Belcher to assume
the same role. Id. at 5. Given the demands of the
position he already held, Belcher agreed to do so only if the
Board would allow for an on-site "head of
operations" at both Roger Williams and Fatima.
Id. at 5, 8. The Board obliged, approving a Revised
Leadership Organizational Structure whereby Conklin became
head of operations at Fatima and Kim O'Connell
(O'Connell), Chief Legal Counsel for CharterCARE, became
the same at Roger Williams. Id. at 5, 8.
Conklin and O'Connell both retained their previous
positions and remained responsible for their existing duties.
Id. at 5, 8. The Board assigned each of them the
additional title of "Senior Vice President" to
reflect their new head of operations duties. Id. at
5. Such duties were summarized in Conklin's updated job
description as follows: "The position of Senior Vice
President and Chief Financial Officer also serves in the
capacity of head of operations for St. Joseph Health Services
of Rhode Island." Id. at 5-6, 14. Conklin
received a pay raise of $19, 000 to compensate him for his
new responsibilities. Id. at 6, 8-9.
CharterCARE was looking to secure a capital partner.
Id. at 9. In order to create a safety net for those
executives who had faithfully served the company, the Board
voted in November 2011 to modify all Senior Leadership Team
executives' employment agreements to provide for an
eighteen-month enhanced severance in the event of a "de
facto termination" resulting from a "change in
control." Id. at 6, 9. This added provision set
forth the following terms:
"7. De Facto Termination
(b) In the event of a material reduction of the
duties or authorities of Executive (or a termination without
cause) without the Executive's written consent such
that it can be reasonably found that he is no longer
performing the material duties normally incident to the
position of Sr. Vice President and Chief Financial Officer of
CharterCARE resulting from and occurring within one (1) year
of a Change in Control, the Executive shall have the right,
in his discretion, to terminate this Agreement by written
notice delivered to the President and CEO, within ten (10)
days of such material reduction in duties or authority. After
such termination, Executive shall be entitled to the payments
and benefits described in Paragraph 6 [(CharterCARE shall
continue to pay Executive his then monthly salary)] for a
period of eighteen (18) months following the termination date
as an enhanced severance payment (the "Extended
Severance Period") subject to the requirement to execute
and not revoke the Separation Agreement.
For purposes of this Section 7(b), 'Change in
Control' is defined as the reorganization, merger, or
consolidation of CharterCARE with one or more entities as a
result of which CharterCARE is not the surviving entity, or a
sale of substantially all the assets and property of
CharterCARE or all the assets and property of both of its
constituent hospitals, i.e. Roger Williams Medical Center,
St. Joseph Health Services of Rhode Island and Elmhurst
Extended Care to another entity." Pl.'s Mot., Ex. D
(Employment Agreement) at 3-4 (emphasis added).
signed a new Employment Agreement, which contained the
above-cited provision, on January 1, 2012. Award 9;
see Employment Agreement 3-4, § 7(b). The
Employment Agreement did not contain a job description from
his previous CFO contract, but it did reflect his newfound
title of "Sr. Vice President and Chief Financial
Officer." Award 9; see Employment Agreement 1.
March 2013, Prospect Medical Holdings (Prospect) and
CharterCARE signed a letter of intent to enter into a joint
venture. Award 9. Thomas Reardon (Reardon), President of
Prospect East, held a meeting in October 2013 with executives
from Prospect and CharterCARE, which Conklin attended.
Id. In that meeting, Reardon indicated that he would
like Conklin to remain with the company as CFO. Id.
As one Prospect executive noted, the company was "in the
business . . . of making money, and [Prospect] need[s] the
CFO just to be the CFO." Id. Reardon again
expressed his desire for Conklin to stay on as CFO at a March
2014 meeting between the two and during multiple
conversations thereafter. Id. at 10.
April 2014, Prospect leadership offered Tom Hughes (Hughes)
the position of President of Fatima. Id. Conklin
learned of Hughes's hiring around the same time.
Id. Hughes officially took over as President of
Fatima in July 2014, at which point Conklin's
responsibilities as head of operations at the hospital
ceased. Id. at 10. In the meantime, the joint
venture transaction between CharterCARE and Prospect had
closed on June 20, 2014, giving rise to PCC as the successor
corporate entity. Id. at 11. Thus, on July 10, 2014,
Conklin delivered to Belcher a letter invoking the "De