Lipkowitz v. Hamilton Surgery Ctr., LLC (Summary)

ANTI-KICKBACK

Lipkowitz v. Hamilton Surgery Ctr., LLC, No. A-4489-08T1 (N.J. Super. Ct. App. Div. Aug. 4, 2010)

The Superior Court of New Jersey affirmed summary judgment in favor of an ambulatory surgery center which exercised its option to purchase the shares held by two physicians who refused to return the annual eligibility affirmation statement required for compliance with the federal anti-kickback statute. The physicians sued under the state’s Uniform Securities Law, alleging that one of the physicians on the ambulatory surgery center’s board misrepresented to the physicians that it would be no problem if they did not satisfy the one-third/one-third test (which is part of the safe harbor that allowed the physicians to invest in the ambulatory surgery center). Though the physicians’ shares were purchased for over $185,000, which constituted over $136,000 profit over their original $69,000 investments, the physicians argued that the purchase price was insufficient. Rather, they claimed that they were entitled to damages that would give them "the benefit of the bargain." In affirming summary judgment, the appellate court noted that the purpose of the securities law (which prohibits misrepresentations and omissions in the offering of securities for purchase) was to place investors in the same position they were in before making the investment. The court held that the law was not intended to give victims of a misrepresentation the benefit of the bargain. Accordingly, because the physicians had not experienced a loss when their shares were repurchased, their claim could not go forward.