A Pulaski County judge dismissed a lawsuit filed by an Atlanta man who challenged the Arkansas Department of Human Services’ first-of-its-kind decision to reject his bid to acquire two nursing homes in late 2019.
The case followed the abrupt shuttering of nursing homes in Hope and Horseshoe Bend a year ago, which forced the hasty relocation of more than 60 residents to other facilities before food and medical supplies ran out.
Circuit Judge Mary McGowan ruled the lawsuit is moot because the homes’ previous owner has since “voluntarily surrendered” the licenses for the closed homes, meaning the licenses “no longer exist” and cannot be transferred to the companies that filed suit.
“As a result, the matter is not currently ripe, and Petitioners lack standing to bring this action,” says McGowan’s four-page order, dated Tuesday.
McGowan’s order did not address the case’s merits — whether the Human Services Department followed state laws when it rejected applications to acquire the licenses by companies linked to Christopher Brogdon.
Attorneys representing Brogdon argued state officials denied Brogdon’s companies based on “rumor, innuendo and information that is irrelevant” and then “worked backwards” to justify the decision.
State officials contend the denial was proper because Brogdon and his associates could not prove their existing facilities across the country were in “substantial compliance” with federal and state laws — one of four possible reasons for denial spelled out in the state’s long-standing law about nursing-home licensing transfers.
Little Rock attorney Ashley Hudson of Kutak Rock, who is representing Brogdon, said by email Friday that attorneys are “reviewing the options” with Brogdon “but we haven’t made any decisions.”
Human Services Department spokeswoman Marci Manley said the agency believes McGowan “applied the law appropriately.”
Brogdon continues to operate nursing homes in Hazen and Lonoke.
The Arkansas Democrat-Gazette reported in April 2019 that a trust managed by Brogdon had acquired those two nursing-home licenses despite a standing $83.1 million federal civil fraud judgment against him when he applied.
In that case, Brogdon was found liable for misleading bond investors by using their money to prop up facilities outside the scope of borrowing and to bankroll a lavish lifestyle, according to the U.S. Securities and Exchange Commission.
State officials were unaware of the judgment until the newspaper asked them about it, a department spokeswoman previously said.
Within months of the article, Brogdon applied for — and was denied — the licenses in Hope and Horseshoe Bend.
Internal agency emails show the civil fraud judgment was among the factors state officials considered when weighing Brogdon’s licensing applications.
The denial meant that the Hope and Horseshoe Bend licenses remained in the hands of the previous owner Cathy Parsons, who at the time was failing to pay rent to the company that owns the real estate and the physical buildings, according to Todd Luth, a member of the family behind the landlord company.
At a Nov. 6 hearing conducted on Zoom, attorneys for Brogdon and the Department of Human Services debated several issues, including whether the licenses for the homes had been properly surrendered.
Human Services Department officials contended that Parsons “voluntarily” gave up the licenses, which meant the nursing homes could not be reopened without formal approval from the Health Services Permit Agency, a separate state agency that controls where long-term care facilities may open.
McKenzie Raub, one of Brogdon’s attorneys, argued that state officials “led Ms. Parsons down the path to surrender these licenses,” encouraging her to do so.
“This is ultimately nothing more than an attempt to avoid accountability for their own actions and their own role in accepting the surrender of licenses from Ms. Parsons,” Raub said.
Luth said at last month’s hearing that if the licenses lost their “grandfathered” status, his buildings would have to be upgraded to meet more stringent code requirements.
Luth’s attorney, Chris Arnold, told Judge McGowan a lease agreement between Parsons and the landlord prohibited her from “taking any actions that would jeopardize the licenses.” Parsons did not have the authority to turn over the licenses — which were in her name — because of her agreement with the landlord, he said.
“Your honor, it’s the same as me going to the Arkansas Supreme Court and surrendering your law license,” Arnold said at the hearing.
McGowan, also on Tuesday, granted a motion for Luth’s company to intervene in the lawsuit.
Brogdon’s companies signed lease agreements with the landlord on Oct. 1. After filing the change-of-ownership paperwork and while waiting on the state’s decision, Brogdon’s companies managed the homes. The companies wracked up hundreds of thousands of dollars in expenses — for which they can’t be reimbursed — in the meantime.
Arkansas denied the applications on Nov. 4. Brogdon’s companies continued managing the homes until Dec. 4, when they pulled out and filed the lawsuit.
At the hearing, Luth said he received no clues from the Human Services Department that the licensing transfer would not go through.
“I would not have done the leases with [Brogdon] if I had any indication he wouldn’t be able to get the license,” Luth said.
State officials then told Luth estate officials that they would not consider another licensing transfer for the homes until the Brogdon litigation ran its course, he testified.
A Missouri group was prepared to take over the licenses “sight unseen,” he said.