Lawyers for the LGBT Life Center say a former business partner undermined their operations and planned to steal its patients from a drug savings program, according to claims outlined in recently filed court documents in an ongoing lawsuit.
CAN Community Health, a Florida-based nonprofit, is suing the Norfolk-based Life Center for $1.1 million over what CAN lawyers said is money owed from a failed 340B drug program. The federal 340B Drug Pricing Program allows entities to help low-income and uninsured patients with pharmaceutical drug costs.
But attorneys for the Life Center said the failed partnership with CAN cost the organization around $3.2 million to date — more than a third of the nonprofit’s $9 million operating budget for 2023, according to earlier Virginian-Pilot reporting. And they claim that CAN violated a partnership agreement by not disclosing ownership in a pharmacy company it asked the Life Center to use.
CAN filed the lawsuit in May 2023 in Norfolk Circuit Court. Attorneys are now seeking for a judge to rule in the organization’s favor by summary judgement rather than bring the case to trial.
In a new response opposing that motion for summary judgement, the Life Center attorneys argue that by violating the partnership agreement first, CAN nullified the arrangement and the amount of money CAN is suing over.
First, attorneys said CAN encouraged the Life Center to use a pharmacy company, Mail-Meds, which CAN had recently acquired a majority ownership stake in, to “in effect, double or triple charge” the Life Center an extra $2,500 a month. They said CAN leaders also failed to tell the Life Center about the ownership.
Next, Life Center lawyers said CAN began planning to transfer Life Center 340B patients to its own Norfolk operations without notifying the Life Center. Finally, CAN began leasing a Norfolk clinic location it had been subleasing from the Life Center again without notifying the Life Center, lawyers said.
For decades, the Life Center has offered several services to the Hampton Roads LGBT+ community, including housing, health care and counseling. Operation of a pharmacy run through the 340B program and a testing program for sexually transmitted infections were among its biggest services.
The center’s attorneys said in court filings the alleged “bad faith self-dealing” by CAN violates Virginia law and excuses the Life Center from paying the $1.1 million to CAN.
“LGBT (Life Center) would never have agreed to this arrangement had it known of CAN’s controlling ownership interest in Mail-Meds or negotiated differently,” Life Center CEO Stacie Walls said in a sworn declaration.
In an earlier motion for summary judgement, attorneys for CAN detailed how the partnership fell apart as the Life Center struggled with cash flow issues. In a July 2022 email exchange included in the court filings, Walls told CAN CEO and President Rishi Patel that the Life Center is experiencing challenges financing the upfront program costs.
Patel responded by saying CAN is still owed more than $1 million for the program.
“You state you are experiencing a challenge with cash flow managing the 340B program but please understand we are owed a lot of money and are operating a clinic with zero money coming in,” Patel said in the email.
CAN attorneys said the nonprofit performed its role in the partnership consistent with the agreement, while the Life Center made three payments, then refused to pay the rest of what was owed. Additionally, CAN lawyers said none of the actions taken regarding the pharmacy ownership, lease or patient transfer constitute a contract breach.
Life Center representatives and attorneys did not respond to attempts for comment. In an email, Patel declined to comment on pending litigation.
In 2023, Walls’ leadership at the organization was criticized by former employees and board members in a Pilot investigation.
In response, Walls outlined several changes at the organization, including a new human resources position. The Life Center is also constructing a $3.3 million Peninsula location in Hampton, with a grand opening planned for Sept. 5.
Earlier this month, the Life Center also announced it received a significant reduction in funding from the Virginia Department of Health for community-based HIV and sexually-transmitted disease prevention programs, resulting in layoffs and a reduction in outreach activities, according to a news release.
Trevor Metcalfe, 757-222-5345, trevor.metcalfe@pilotonline.com
