District Judge Denies State Block Of S.C. Co. Hospital Purchase

GILROY, CA -- Securing a major victory for Santa Clara County, U.S. District Court Judge R. Gary Klausner denied Friday the state's emergency motion to halt a U.S. Bankruptcy Court’s order to authorize the sale of O’Connor Hospital and St. Louise Hospital to the local government.

The striking down of the stay by California Attorney General Xavier Becerra allows the county to complete the sale and keep the doors open for the San Jose and Gilroy hospitals, respectively. The county was the only bidder for the hospitals when their parent company, Verity Health Systems, went into bankruptcy in August.

"These two hospitals are essential to the continued health and well-being of folks in our region,” said Joe Simitian, Santa Clara County Board of Supervisors Chairman. “Continued litigation by the attorney general is a distraction from the important work we have to do. It's time to stop arguing about who's right and start focusing on what's right. And that's taking care of the folks here in the county who need our help."

Becerra claimed the county didn't meet the state's standards. But judges have seen and painted a different picture since the legal banter between the two parties hit the bench months ago. The latest ruling allows the $235 million sale to advance early next month.

“Two federal judges have now rejected the attorney general’s arguments against the county as meritless attempts to exert authority he does not have over local governments,” County Executive Jeffrey V. Smith said. “The County will ensure that O’Connor and Saint Louise hospitals continue serving our communities with the enhanced services we will offer through the hospitals as part of the county’s integrated health system.”

The court in the Central District held that “as the Bankruptcy Court explained, the sale [of the hospitals] is to a public entity—the county of Santa Clara. As a result, the sale is not reviewable by the attorney general.”

St. Louise Hospital, for one, has been around for decades in an isolated region where choices are not as plentiful as other areas of the South Bay. With that, activists staging "Save Our Hospital" rallies were out in full force.

“Losing St. Louise Hospital simply was not an option for me and for the 100,000 Gilroy and Morgan Hill residents who would have lost their local hospital,” Supervisor Mike Wasserman said. “I am grateful to the many people who joined our fight.”

“The ruling by the U.S. District Court Judge means we can keep San Jose’s O’Connor Hospital, Gilroy’s St. Louise Regional Hospital and the De Paul Health Center in Morgan Hill open. This is all about the thousands of patients who need our services, 451 hospital beds and 1,700 highly trained and dedicated nurses, doctors and other health care industry workers who provide those services,” Supervisor Cindy Chavez agreed.