IN THE SUPERIOR COURT OF THE VIRGIN ISLANDS

DIVISION OF ST. CROIX

GOVERNMENT OF THE VIRGIN
ISLANDS by and through JUSTA
ENCARNACION, Commissioner of Health,
and ARIEL SMITH, Attorney General, and
THE VIRGIN ISLANDS HOSPITALS AND

SX-2023-CV-00354

ACTION FOR: BREACH OF CONTRACT
AND INJUCTIVE RELIEF

HEALTH FACILITIES CORPORATION,
Plaintiffs,
Vv.
HEALTH QUEST, LLC d/b/a CARIBBEAN
KIDNEY CENTER and WALTER
GARDINER, MD.,

Defendants.

Appearances:

CHRISTOPHER TIMMONS, JR., ESQ.
Virgin Islands Department of Justice
Kingshill, VI 00850

For Plaintiffs

SCOT MCCHAIN, ESQ.
McChain Hamm & Associates
Christiansted, VI 00820

For Defendants

Cite as 

MEMORANDUM OPINION AND ORDER

qi THIS MATTER is before the Court on a Motion for Temporary Restraining Order and
Preliminary Injunction filed October 6, 2023. The accompanying Verified Complaint
(“Complaint”) for Preliminary and Permanent Injunction alleges two counts of anticipatory breach
of contract based upon contractual and statutory rights and obligations of the Parties relative to
providing outpatient renal dialysis services to patients of the Virgin Islands.

q2 On October 7, 2023, the Court issued an emergency Temporary Restraining Order (TRO)
enjoining the Defendants from terminating their end-stage renal dialysis (“ESRD”) services at 5:00
p.m. on October 7, 2023. The Court also scheduled the matter for an evidentiary hearing on
October 16, 2023. At the conclusion of the hearing, the Court ruled from the bench and issued a
Preliminary Injunction effective for ninety days (three months) based upon the findings that the
Government of the Virgin Islands, et al. v. Health Quest, LLC., et al. Cite as 

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Government had meritorious claims, irreparable harm would be suffered by the Government as
parens patriae, were status quo not maintained, and the public interest and irreparable harm
outweighed the minimal harm to the Defendants. This Memorandum Opinion follows the Court’s
ruling.

Factual Background

3 Health Quest, LLC d/b/a Caribbean Kidney Center (““CKC”) and Dr. Walter Gardiner!
(jointly referred to as “Defendants”) have been operating renal dialysis facilities in the Virgin
Islands for twenty-one years in St, Croix and nine years in St. Thomas. In addition to providing
services to privately insured clients, Defendants also provide services to clients whose health care
services are insured by Medicare and Medicaid. As a condition of operating in the Virgin Islands,
dialysis facilities are required to comply with rules and procedures administered by the Centers for
Medicaid and Medicare Services (CMS).

q4 During his testimony, Dr. Gardiner explained that throughout the period of operation, CKC
faced staffing challenges which were sometimes resolved by contracting with travel nurse services
or by utilizing the services of Pafford Medical Service (“Pafford”)? to meet CMS staffing
requirements. These staffing methods led to increased costs in addition to the increased costs of
supplies.> However, as Dr. Gardiner testified, CKC managed to continue to provide its renal
dialysis services to its patients, which now total 120, over the years. He further testified that in
2020, when faced with Covid19 challenges, Defendants applied for and received a Covid19 federal
grant to pay for staff trained in dialysis services, who had to be recruited from the mainland mainly
as travel nurses at much higher rates. This was corroborated by Commissioner Encarnacion. Both
Dr. Gardiner and Commissioner Encarnacion testified that in May 2023, the Covid19 grant ended,
and upon Dr. Gardiner’s request, on June 7, 2023, the Legislature of the Virgin Islands granted
$700,000 to Defendants to cover costs to recruit and retain dialysis-trained clinical staff required
by CMS rules and regulations to avert a closure of the CKC facilities.* Dr. Gardiner testified that
he managed the grant so well that he extended the use of the funds beyond August 2023, the period
of its intended use, to October 5, 2023. Dr. Gardiner notified Commissioner Encarnacion and
CMS on October 3,2023 that the funds would expire on October 5, 2023.° For that reason, Dr.
Gardiner stated that he made the decision for CKC to discontinue providing services and cease
operations as of October 7, 2023.

"5 A little more than two years earlier, on July 21, 2021, Virgin Islands Hospitals and Health
Facilities Corporation (“WIHHFC”) and the Defendants entered into an Outsourcing Contract (“the
Contract”). The general purpose of the contract was to establish an arrangement in which

' Dr. Gardiner testified that he is the owner and operator of CKC.

? Hearing Testimony of Or, Gardiner.

3 Hearing Testimony of Or. Gardiner.

4 See also, Hearing Exhibit 1, Letter addressed to Ray Fonseca, Chairman of the Committee of (sic) the Health,
Hospitals and Human Services, which states, “On June 7, 2023, in testimony to the Committee of Health, Hospitals
and Human Services of the 35" Legislature of the Virgin Islands, principals of the Caribbean Kidney Center {CKC)
informed the Committee that due to the ongoing national shortage of dialysis-trained clinical staff and the spiraling
costs of recruiting and retaining staff from the mainland, CKC was forced to consider closing. The Senate responded
quickly and prudently with legislation appropriating funds to supplement CKC staffing temporarily...”

* Hearing Testimony of Dr. Gardiner.
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Defendants would provide renal dialysis services to “the present outpatients of the Governor Juan
F. Luis Hospital and Medical Center” (“JFLH”). JFLH was considering closing its outpatient
ESRD hemodialysis unit, and all patients referred by physicians on its medical staff and in
accordance with CKC’s patient eligibility criteria were to be transferred to CKC’s dialysis facility
located at 5134 Sundial Park, Christiansted, U.S. Virgin Islands 00820.”® The Contract also
provides that (1) the transfer of the patients to Defendants required each patient’s consent to the
transfer of their medical records to CKC;' (2) JFLH is responsible to obtain the signed consent
from each ESRD patient as part of the transition;® and (3) formal meetings with the parties to the
contract and each patient would be held to monitor and manage the transfer of said patient.’
Commissioner Encarnacion and Mr. Christopher Finch, Chair of VIHHFC, testified that the
patients each refused to give their consent to the transfer of their medical records. Hence, no ESRD
patient transfers has occurred to date."” Dr. Gardiner, however, testified that he incurred costs to
have his facilities ready to accept the transfers after the signing of the Contract. Specifically, he
states that he recruited additional staff, dialysis-trained clinical nurses, and technicians, expanded
his facilities, and purchased equipment and furniture. Despite not receiving the expected number
of patients, Dr. Gardiner maintains that CKC was nonetheless forced to maintain additional staff
in anticipation of JFLH’s eventual transition of its ESRD patients to CKC’s care. The Outsourcing
Contract, however, states that CKC is solely responsible for adequate staffing, furnishing and
facilities and supplies.!!

16 Performance of the Contract did not materialize as the parties anticipated because the
patients did not consent to the transfer. Dr. Gardiner contends that this failure added to the risk of
depleting his operational resources. In anticipation of the exhaustion of financing options for the
overhead costs of operation of the facilities, the parties engaged in active discussions and
negotiations for the sale and purchase of both of Defendant’s facilities in St. Croix and St.
Thomas.'* Appraisals were solicited but not received until late September 2023. Mr. Finch testified
that after its receipt of the appraisals, VIHHFC made an offer to purchase the buildings only. Dr.
Gardiner testified that the offer was not made in good faith since he had already made clear that
the buildings would only be sold if the business was also purchased.

17 Commissioner Encarnacion testified that she advised Dr. Gardiner that she had gotten
Pafford to agree to continue to provide staffing services. She explained that Pafford would recover
those costs upon the sale of the business/ buildings while allowing sale negotiations to continue
beyond October 5, 2023. Unsatisfied with the negotiations, on October 3, 2023, Dr. Gardiner
issued notice to Ray Fonseca, Chairman of the Committee of Health, Hospital and Human Services
for the 35" Legislature of the Virgin Islands notifying of his intent to cease providing dialysis
services at any of his facilities effective Saturday, October 7, 2023 at 5:00p.m., because the parties

§ Addendum I, Scope of Work, page 10-11 of the Outsourcing Contract between VIHHFC and CKC.

7 Addendum |, Scope of Work, page 10-11 of the Outsourcing Contract between VIHHFC and CKC.

® Addendum I, Scope of Work, page 14 of the Outsourcing Contract between VIHHFC and CKC.

*Addendum I, Scope of Work, page 13 of the Outsourcing Contract between VIHHFC and CKC.

10 See testimony of Mr. Finch and Commissioner Encarnacion. Mr. Gardiner also testified that VHHHFC did not
transfer any patients to CKC per the Contract.

1 Addendum |, Scope of Work, page 10 of the Outsourcing Contract between VIHHFC and CKC.

™ Hearing Testimony of Mr. Finch.
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have not come to a permanent solution to address the dialysis challenges of CKC.'? A copy was
provided to the Governor of the Virgin Islands, Commissioner Encarnacion, Mr. Finch (for
VIHHFC), CMS representatives and the CEOs for JFHL and the Schneider Regional Medical
Center. Among other actions taken, Government responded with filing for TRO".

78 Through the testimony of Commissioner Encarnacion, the Government established that it
is responsible for “ensuring adherence to regulations and laws relating to the health of the People
of the Virgin Islands and maintenance of health care standards.” As a condition to operate a
dialysis facility in the territory, private and public dialysis facilities must comply with federal and
state laws and regulations governing the Centers for Medicaid and Medicare Services (“CMS”).
Some of those conditional requirements, as stated in the Complaint and supported by
Commissioner Encarnacion’s testimony, can be found in 

 and 

.

q9 § 494.20 requires as a condition to operate a dialysis facility in the territory, that service
providers comply with all applicable federal, state, and local laws, including regulations governing
the Centers for Medicaid and Medicare Services (CMS).'° 

(b) requires that
dialysis facilities provide 30 days advance notice of any involuntary discontinuation of services.

 mandates a patient discharge plan and patient transfer policies and procedures.
Commissioner Encamacion and Mr. Finch stated that CKC’s contract includes language that
requires “compliance with the CMS standards for notification of patients and transfer of care, prior
to closure, as well as adherence to standards of the profession.””"’

q10 The Government’s Verified Complaint against CKC and Dr. Walter Gardiner MD, proceeds
under the Government’s claim of parens pairiae authority for anticipatory breach of contract by
CKC’s failure to conform to the conditions of participation established by CMS and made a part
of its authority to conduct a dialysis facility, and of the VIHHFC July 21, 2021 outsourcing
contract.

LEGAL STANDARD

911 A preliminary injunction is not issued lightly. It has been described as ‘tan extraordinary
and drastic remedy” which should be granted only “upon a clear showing that the plaintiff is
entitled to such relief.”'® The Court must consider four factors when determining whether to issue
a preliminary injunction and make specific findings as to each. These factors are:

(1) whether the movant has shown a reasonable probability of success on the merits;

(2) whether the movant will be irreparably harmed if a preliminary injunction is not entered;

(3) whether the nonmoving party will suffer even greater harm were preliminary relief be
granted; and

™ Hearing Exhibit 1, October 3, 2023, letter to Ray Fonseca, Chairman of the Committee on Health, Hospital and
Human Services of the 35"" Legislature of the Virgin Islands (“This communication, therefore, is te inform you that
CKC will no longer be able to continue and will cease services at 5 p.m. on October 7, 2023.”}.

4 See Hearing Testimony of Commissioner Encarnacion.

45 The testimony of Commissioner Encarnacion is that this responsibility lies with the Commissioner of Health, on
behalf of the Government.

18 42 C.FR. § 494.20,

1? See also, Hearing Exhibit A, p.10 & 11.

18 See, Yusuf v. Hamed, 59 VI. 841, 847 (V.1. 2013) (quoting Munaf v. Geren, 

 (2008}).
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(4) whether granting preliminary relief in the public interest. !°

412 The Court’s analysis must also employ the “sliding scale test” in considering the four
factors.” This test recognizes that a strong showing does not need to be made on all factors. A
movant may be successful with a strong showing on the “imminent and irreparable harm” factor
with a weaker showing on the meritorious claim factor.”!

913 As discussed below, the Court is satisfied that the Government made at least a minimal
showing of all these factors. While the weight of the evidence on some factors was lower than
others, the sliding scale test allows for a balancing of those factors most weighty as the Court
considers whether maintaining the status quo will result in the better option.

ANALYSIS

14 Before addressing each factor, however, the Court must first be satisfied that the
Government has a standing to maintain this action. The Government claims to maintain this action
as parens patriae to the citizens of the Virgin Islands who benefit from renal dialysis care by the
Defendants. While Defendants did not challenge this standing at the hearing”, a determination that
the Government may proceed under the theory of parens patriae must be made before the Court
can proceed to the meritoriousness of the claims, harm to the parties and public interest.

The Government’s Standing to Sue Under Parens Patriae

415 The parens patriae action has its roots in the idea that the sovereign has the prerogative,
right and responsibility to protect its citizens who are unable to protect themselves. 7 It is an
authority inherent in every sovereign regardless of statutory law.** “[T]he Territory of the Virgin
Islands has attributes of autonomy similar to those of a sovereign government or a state, therefore
the Government of the Virgin Islands may bring suits as parens patriae in appropriate
circumstances”.”°

416 This authority to bring suits parens patriae has been recognized by the Supreme Court of
the Virgin Islands. In family Court proceedings, the Supreme Court has found parens patriae
authority “separate and distinct from a purely statutory authority to protect the interest of a minor.
26 This is the only recent decision where the Court expounded upon the Government’s parens
patriae authority. Otherwise, it is addressed with a cursory reference as an option to recover civil
fines by the Superior Court in Government of the Virgin Islands v. ServiceMaster, LLC, 

, 128 (Super. November 27, 2019). Hence, there is little guidance on the scope and parameters
to its application outside of precedent decided before the Virgin Islands Supreme Court was vested

19 Bassil v. Klein, 

, 27-28 (V.1. Super. 2021).

0 See, 3RC & Co. v. Boynes Trucking Sys., 

 (VI. 2025).

21 Yusuf v. Hamed, 59 VI. @ 856.

?? The Court understands that the Defendants’ challenge to Government’s standing relates to its authority to
actually enforce the federal statutes and/or regulations relative to Medicaid and Medicare outside of parens
patriae since the Defendants offered no argument challenging the Plaintiffs’ parens patriae authority.

23 Mormon Church v. United States, 

 (1890}.

4 Alfred L. Snapp & Son v. Puerto Rico, 

 (1982).

25 Mathes v. Century Alumina Co., 

, at *1 (D.V.I. 2008).

26 Tutein v. Arteaga, 

 (V.I. 2014)
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with the authority to shape Virgin Islands laws.?’ While these cases may recognize the prior

Courts’ willingness to adopt the parens patriae doctrine, the full scope and limitation of the
Government’s authority under this doctrine is yet to be addressed by our Supreme Court. Hence,
the Court shall look to the Third Circuit Court of Appeals for guidance on the parameters of parens
patriae authority as it applies to the issue of enjoining the closure of a private facility and the
protection of citizens who may be harmed by the closure.

417 The U.S. Supreme Court has stated that parens patriae involves “more than the state
stepping in to represent the interests of particular citizens who, for whatever reason, cannot
represent themselves but extends to the impact of the discrimination under the Immigration Act on
the island’s economy.’”® As defined by the Third Circuit, a parens patriae suit, by definition,
involves the government as the real party in interest and not just a nominal party.”2” To maintain
parens patriae standing, the state must show a direct interest of its own and not merely to seek
redress for injury to private parties.°° “The State must assert an injury to what is characterized as
‘quasi sovereign’ interests.”*! “The right of the state to sue as parens patriae encompasses suits
either brought to protect its proprietary interests or brought to protect quasi-sovereign interests
such as the health, comfort and welfare of its citizens and general economy of the state.”

418 | The substance of the Government’s claim is that the Defendants, who operate a health care
facility which provides ‘end-stage renal dialysis services,” is threatening to abruptly cease
operations. The Government contends that such an action will critically jeopardize the health and
welfare of all the people who rely on those services particularly as the Government’s own facilities
are not equipped to accommodate the volume of patients in the Virgin Islands who would require
that those services be provided daily. It further contends that the potential harm is compounded by
the fact that the patients did not receive notice of the closure, underscoring its need to intervene
and prosecute this action on behalf of those patients. This interest in seeking redress for the CKC
dialysis patients is elevated by its quasi-sovereign interest in protecting the health and welfare of
its citizens and regulation of the health industry in the territory.

27 The District Court has also upheld the Government’s parens patriae authority over property it holds in public
trust separate and distinct from the interest of individual citizens. It has been found that the Government can
sustain a parens patriae action to enjoin harm to the natural resources of the territory as harm to the Government
and the members of the public. Mathes v. Century Alumina Co., 2008 U.S. Dist. LEXiS 90087, at *29 (D.V.I. 2008).
The Territorial Court also recognizes parens patriae authority even in those instances where it finds constitutional
and other limitations on its exercise. For example, the Department of Education has parens patriae authority in
relation to student conduct although the Fourth Amendment applies to restrict a school’s search of a student in the
absence of probable cause. Gov’t of the in Re M.S., 17 V.1. 289, 295 (Terr. Ct. 1981). The Court has also recognized
the Government’s parens patriae authority to act in the interest of the mentally incompetent but found that the
“fundamental right of a person to be secure in the ability to procreate,” limited the exercise of parens patriae
authority to determine whether a mentally incompetent person could be sterilized. In the Matter of the
Sterilization of A.B., 1985 V.1, LEXIS 40 *6-7 (Terr. Ct. 1985).

28 Alfred L. Snapp & Son, 458 U.S. @ 600,

29 Allegheny Gen. Hosp. v. Phillip Morris, 

, 436-37 (3 Cir. 2000),

30 Pg, by Sheppard v. Nat'l Assn of Flood insurers, 

 (3 Cir.1975).
31 Alfred L. Snapp & Son 458 U.S. @ 601.

32 Pg. by Sheppard v. Nat’! Ass‘n of Flood insurers, 

 @ 21-22.
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419 |The Government asserts that the Defendants have contractual obligations to its citizens
under a service agreement. “Service agreements” constitute contracts, notwithstanding that a
formal contract is not required.**> The Government further contends that the Defendants have
statutory obligations to its citizens who are protected under the regulations governing the Centers
for Medicaid and Medicare Services (“CMS”). The statutory obligations are created under 42
C.F.R. and mandates certain notice requirements and the implementation of transition policies and
procedures to ensure that the rights of the patients being serviced are protected. Witness testimony
establishes that the Commissioner of Health is the local Government head charged with monitoring
compliance. The Government therefore has a direct interest of its own which buttresses its interest
in protecting its citizens.

{20 = It is irrelevant that the laws sought to be influenced by the Government are federal
regulations over which it has no direct enforcement authority, so long as the citizens are afforded
the benefit of those federal rules and regulations. ** For example, in recognizing Puerto Rico’s
parens patriae authority, the U.S. Supreme Court in Alfred L. Snapp & Son y. Puerto Rico found
that discrimination against Puerto Rican migrant farm workers under the Wagner-Peyser Act, 29
U.S.C. 49 et seq., and the Immigration and nationality Action of 1952, 8 U.S.C. 1101 et seq.,
adversely affected the workers and Puerto Rico’s economy. *° _ In this case, the federal rules and
regulation at issue are those that govern CMS, but their application and benefit to the citizens of
the Virgin Islands are conditional to the operation of any dialysis facilities in the territory. The
abrupt closure of the Defendant’s facilities will not only put a significant number of Virgin Islands
citizens at substantial risk of harm which may include the loss of life, but it will suddenly
overburden the Government’s resources in the short term with catastrophic effect. This adverse
effect is sufficient to trigger the Government’s authority to protect its citizens and protect its
sovereign interest in regulating health care in the territory. Therefore, the Court finds that the
Government of the Virgin Islands, through the Commissioner of Health and the Attorney General
of the Virgin Islands, does have standing to act on behalf of Virgin Islands citizens who require
and utilize outpatient renal dialysis care from the Defendants.

Evidentiary Basis for Issuance of a Preliminary Injunction

421 The Court will next consider whether the Government has met their burden of showing, by
clear and convincing evidence, that a Preliminary Injunction should be granted. In so doing, the
Court will determine whether there is a plausible claim(s), the harm to the parties and the public
interests under the “sliding scale” standard.

3 Gov't of the V1. v. The ServiceMaster Co., LLC, 

, 133 (Super. Ct. 2019).

4 See Alfred L. Snapp & Son v. Puerto Rico, 

, (1982) (finding that the Commonwealth of Puerto Rico has
parens patriae authority to bring an action to ensure that its citizens receive the benefits of the Immigration and
Nationality Act, 

 et. seq. and the Wagner-Peyser Act, 

 et. seq.)

35 Alfred L. Snapp & Son, 458 U.S.at 600
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A. Reasonable Probability of Success on the Merits

#22 To obtain a preliminary injunction, the Government has to show that they have at least one
plausible claim.*° A plausible claim is established by the moving party showing a reasonable
chance, or probability, of winning.”?’ This does not translate to a showing that the movant will
actually prevail at trial but that its success is “more likely than not.”?* That is left for the jury as
the ultimate arbiter of the factual issues presented in the case.**. Instead, the movant need only
make out a prima facie case on the claim(s} alleged by introducing evidence supporting each
element of the causes of action.”

423 In this case, the Government filed two claims for anticipatory breach. Count One relates to
a breach of the unwritten “agreement” between the Government and CKC that CKC will comply
not only with applicable Virgin Islands law but with the CMS rules and regulations attendant to
the operation of a dialysis facility in the Virgin Islands. The second count alleges an anticipatory
breach of the July 21, 2021 GHHFC Outsource Contract.

924 After an extensive Banks"! analysis, the Superior Court previously adopted the doctrine of
anticipatory breach of contract stated in Restatement (Second) of Contract § 253(2).”* This Court
adopts the analysis of the Superior Court in Urh v. Buffo, supra. § 253 of the Restatement (Second)
of Contract provides, in relevant part, that “[w]here performances are to be exchanged under an
exchange of promises, one party's repudiation of a duty to render performance discharges the other
party's remaining duties to render performance.” Essentially, a material breach by one party
justifies the other party’s refusal to perform under the contract. The repudiation must “be an
unqualified refusal, or a declaration of inability to perform his contractual obligations.“ Mere
refusal to perform upon a mistake or misunderstanding of facts or upon an erroneous construction
of a contract term does not amount to repudiation.” An indication of an intent to repudiate may be
found in “an unequivocal manifestation” that the nonmoving party will not perform “when the
time fixed for it in the contract arrives.’*>

36 Marco St. Croix, inc. V. Vi. Hous. Auth., 

 (V.I. 2015).

37 23RC & Co. v. Boynes Trucking Sys., 63 V.1. 544, 554.

38 fd.

39 fd,

40 Yusuf, 59 V.I. @ 849.

"1 Banks v. international Leasing and Rental Corp.,55 V.1. 967 (V.1. 2011). A Banks analysis requires a Court to
consider the following factors 1) whether any Virgin Islands Courts had previously adopted a particular rule; (2) the
position taken by most Courts from other jurisdictions; and (3} most importantly, which approach represented the
soundest rule for the Virgin Islands.

#2 Urh v. Buffo, 

, at *6-8 (V.I. Super. Feb. 20, 2018), rev'd in part on reconsideration, 2021 VI
SUPER 51U (V.I. Super. May 18, 2021).

43 Urh v. Buffo, 

, at *6.

4 

Sid.
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925 The anticipatory claims in Counts One and Two implicate basic breach of contract
principles. To establish breach of contract, a party must show that (1) a contract existed (2) that
created a duty (3) which was breached (4) causing harm or damages to the party."

1, There is a Plausible Claim of Anticipatory Breach of CMS Regulations and Injury to
Plaintiff and the Patient Beneficiaries.

{26 The Government claims anticipatory breach of the CMS requirements for the operation of
a dialysis center. Through witness testimony, the Government showed that CKC has service
agreements to provide ESRD dialysis services to at least 120 citizens of the Virgin Islands. Implicit
in the service agreements is the authority to provide ESRD dialysis services to the citizens of the
territory in accordance with the CMS laws from which CKC benefits. The Court is satisfied that
those agreements with the patients are conditioned on CKC’s compliance with CMS regulations.
Commissioner Encarnacion testified that the operation of any dialysis center requires certification
from CMS.*? Even public facilities (the hospitals) must comply with CMS regulations. Dr.
Gardiner testified that CKC, the only privately owned service provider of dialysis services for
ESRD patients in the territory, was benefiting from Medicare and Medicaid with payments for
services rendered to its patients. On October 3, 2023, Dr. Gardiner and CKC sent notice to
Plaintiffs that they intended to close their dialysis facilities. This was the first indication that those
service agreements were in jeopardy. The unequivocal language in the letter is that CKC will be
closing at Spm on October 7, 2023, and ceasing to provide dialysis services at its facilities. The
arbiter of fact can find that the notice reveals an intent to breach the patients’ contracts for services.

{27 The witness testimony at the hearing sustains the required minimal showing that CKC
would violate three CFR regulations on CMS compliance conditions for the performance of
dialysis services. 

 states, “Compliance with Federal, State, and local laws and
regulations. The facility and its staff must operate and furnish services in compliance with
applicable Federal, State and local laws and regulations pertaining to licensure and any other
relevant health and safety requirements.’** Consistent therewith, “the dialysis facility must inform
patients (or their representatives) of their rights (including their privacy rights) and responsibilities
when they begin their treatment and must protect and provide for the exercise of those rights.*”
Additionally, the ESRD facility must follow written patient discharge and transfer policies and
procedures in the event that the facility ceases operation, inclusive of an advance 30 day notice of
the planned discharge to the patient and local ESRD Network.” *°

428 Witness testimony*! and the affidavit of one patient of CKC™ establishes that this
anticipatory breach is compounded by the failure of CKC to give its patients notice of CKC’s intent
to cease providing dialysis services, as required by 42 CFR 494.180(f). Additionally, a plan to

“6 Government of the Virgin Islands Department of Health v. United industrial Service Transportation Professional
and Government Workers of North America, 

 (VI Super 12/16/2019)

47 See, Hearing testimony of Commissioner Encarnacion.

48 

. See also, Paragraph 26, Plaintiff's Verified Complaint,

9 42 CFR 494.70. See also, Paragraph 27, Plaintiff's Verified Complaint.

5° 42 CFR 494.180(f). See also, Paragraph 28, Plaintiff's Verified Complaint.

51 Commissioner Encarnacion and Mr. Finch testified to the CMS requirements to which CKC (and the public
hospitals) must comply to provide ESRD dialysis services.

™ Exhibit 3 to Plaintiff's Memorandum in support of Motion for Preliminary Injunction.
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transition CKC’s patients to another service provider was not presented to the patient(s) as required
by 42 CFR 494.70. This anticipated breach of the service agreement of CKC would result in harm
to the 120 current patients of CKC. CKC’s patients would be left without consistent and continual
services while the Government scrambles to meet the sudden increase in dialysis outpatients left
stranded without a transition plan. Witness testimony further proves that any interruption in the
current services received by CKC’s patients could result in serious bodily injury as dangerous
toxins accumulate in their bodies leading to death.

q29. A showing of the existence of a contract, a breach of the contract, and injury to the
Plaintiffs, parens patriae, has been clearly established on the record. The Court finds a plausible
claim of anticipatory breach of CMS regulations.

2. There is Evidence of a Breach of the VIHHFC Outsourcing Contract, but only
minimal evidence of an injury to the Plaintiffs or the Patient Beneficiaries of the
Contract.

430 The Government also claims an anticipatory breach of the VIHHFC Outsourcing Contract
dated July 26, 2021. This written contract requires CKC to “provide high quality hemodialysis
care services that meet all of the requirements of Renal Network 3 and the Centers for Medicare
and Medicaid Services (“CMS”) without interruption” to “the present outpatients of the Gov. Juan
F. Luis Hospital and Medical Center (Hospital” or “JFLH”) and its soon to be closed outpatient
ESRD Hemodialysis unit.”** Witness testimony established that the current number of patients in
the outpatient ESRD Hemodialysis Unit was 40.°° Witnesses also established that, consistent with
the terms of the contract, the Government would facilitate the transition of the patients to CKC
based upon a written transition plan to be approved by CMS. The transition of patients was to
occur “on an agreed upon timeline by both JFLH and CKC upon execution of this contract.”*’
Notwithstanding that there was no evidence of an agreed upon transition plan as anticipated by the
Contract or that CMS approved the transition plan for the JFLH outpatient dialysis patients, the
Court notes that the Contract provides that the transition of each patient was also conditioned upon
each patient’s “signed consent to allow JFLH to provide their medical records to CKC as part of
the transition.”*8 Commissioner Encarnacion and Mr. Finch testified that none of the patients
would sign a consent to the transfer of their records. Hence, JFLH has not transferred any patients
to date.””

{31 Nonetheless, the Government claims that the October 3, 2023 letter™ notifying of a closure
of CKC’s dialysis facilities constitutes a breach of CKC’s contractual obligations to provide
services to JFLH’s outpatient dialysis patients. Witness testimony established that the contract
terminates on July 31, 2026. The Contract does not provide a timeline by which patients must be
transitioned and therefore the July 31, 2026 termination date establishes the period by which a

53 See, Hearing Exhibit A- contract for Professional Services dated July 26, 2021.
*4 Hearing Exhibit A, page 10.

5 Hearing Testimony of Commissioner Encarnacion and Mr. Finch.

>= Hearing Exhibit A, page 12-13.

>" Hearing Exhibit A, page 12

58 Hearing Exhibit A, page 14.

5° See Testimony of Commissioner Encarnacion and Mr. Finch.

* Hearing Exhibit 1, October 3, 2023 letter
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patient of JFLH may be transitioned to CKC and CKC would be expected to perform under the
contract. By giving notice of the closure of its facility, CKC was in effect ending its obligation to
service patients that may be transitioned from JFLH’s outpatient dialysis unit within the term of
the contract. This is equivalent to an unequivocal manifestation of CKC’s intent not to honor the
terms negotiated in the July 26, 2021 Outsource Contract. Moreover, CKC has not given the
required notice of intent to terminate the Contract.*’ The Court therefore finds that the Government
has shown an anticipatory breach of the July 26, 2021 Contract.

{32 Thenext inquiry is whether the Government submitted prima facie evidence on the element
of injury or harm because of the anticipatory breach. The answer to this question is a bit more
challenging for the Court as the Government’s evidence of harm for breach of the written contract
is minimal. At best, the evidence is that in the absence of the negotiated option for the transition
of consenting outpatient dialysis patients, the government must continue servicing its outpatient
dialysis patients which it already services. There is no evidence that a patient was in the process
of transition. Such evidence may have allowed for a stronger showing of harm as that transition
process would have to be halted and the benefit delayed. Hence, while there is a showing of a
contract and anticipatory breach, a showing of injury is weak. Thus, the court finds that the proof
of a meritorious claim factor for breach of the July 26, 2021 Contract is weak.

B. Irreparable Harm to the Movant

933 The moving party’s chance of succeeding on the merits is evaluated in combination with
the moving party’s claim of injury.°* The Supreme Court of the Virgin Islands has confirmed that
“irreparable harm” is the primary factor that a moving party must demonstrate in order to succeed
on a motion for preliminary injunction.®? The Court’s finding of irreparable harm must also include
a finding that the irreparable harm is “certain and imminent harm for which a monetary award
does not adequately address.” This imminent and irreparable harm must also be likely to result
without an injunction.*®

34 | Where the risk of irreparable harm to the moving party is substantial, the showing of a
likelihood of success on the merits may be weaker.®° However, if the likelihood of success on the
merits is very strong, a showing of irreparable harm is less decisive. ®’ In this case, the Government
has shown “imminent and irreparable harm” which the Defendant did not dispute.

435 Justa Encarnacion, Commissioner of the Department of health, who is also a Registered
Nurse, testified that she has experience with treating end stage renal dialysis patients. She testified
that renal dialysis is necessary for persons whose kidneys can no longer adequately clean the
buildup of toxins in the blood. The treatment must be given at least three times a week and the

*! Mr. Finch testified that VIHHFC has not been provided adequate notice of the planned closure, which under its
contract with the Defendants, require 90 days prior written notice with cause and 180 days prior written notice
without cause under paragraph 16 of the Contract. See, Hearing Exhibit A, page 4.

2 3RC & Co. V. Boynes Trucking Sys., 63 Vl. @ 554.

8 

 @ 555

54 

 @ 556.

® Hansen v. Virgin Islands Water and power Authority, 55 V,I. 309, 314 {V.I. Super. Ct. 2011).

£6 3RC & Co. V. Boynes Trucking Sys., 63 V.I. @ 555.

*7 

 @ S56.
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treatment process can last as long as three hours for each treatment. Patients denied this treatment
have no other medical option and will die, she said. Dr. Gardiner, who himself has over 40 years’
experience working with ESRD patients, did not dispute the Commissioner’s description of the
care necessary and dire consequences in the absence or delay of that care.

936 Dr. Gardiner’s testimony corroborated the testimony of Commissioner Encarnacion and
Mr. Finch of VIHHFC that CKC is the only outpatient private provider of renal dialysis services
in the Virgin Islands. Commissioner Encarnacion and Mr. Finch testified the Juan F. Luis Hospital
and the Schnieder Regional Hospital and Medical Center provide public inpatient and limited
outpatient renal dialysis services. These public hospitals do not have the current facilities and
staffing to accommodate an immediate increase in the number of patients that would require
outpatient renal dialysis care were CKC to close. Mr. Finch provided even greater detail,
explaining that there are currently forty-two (42) outpatient dialysis patients receiving services at
the Juan F. Luis Hospital and seventy-two (72) at the Schnieder Regional Hospital and Medical
Center. “The capacity is full” at each hospital, Mr. Finch testified. He added, “accommodating
more outpatients would require identifying and preparing a new/ different location for dialysis
treatment, guaranteeing proper water treatment through regular testing before services can begin
to meet CMA requirements, additional! staffing, equipment, and supplies. Additionally, currently
the number of shifts at each hospital needs to change. He concluded by stating that it would take
six (6) months to “fill out” a new location, and even on an emergency basis, at least ninety days
(three months) would be needed.

437 When queried about the alternatives available were CKC permitted to close, Commissioner
Encarnacion stated that arranging for off island care would require more time and even then, may
still not be available to many who do not have insurance and off-island accommodations.
Commissioner Encarnacion also stated that the patients of CKC did not receive advance notice of
the closure as is required by certain CMS regulations that would ensure that patients are not
blindsided with the involuntary termination of services, and left scrambling with minimal options
outside of a proper plan for transfer of services. Finally, Mr. Finch stated that options to expand
the hospitals’ services or bring in another private outpatient provider may take as long as nine (9)
months.

438 The Court is satisfied that a clear showing has been made that in the absence of the
outpatient renal dialysis services provided by the Defendants and adequate time to prepare to
accommodate the influx of patients needing dialysis care on an outpatient basis at the hospitals,
the patients will suffer in the short term an unacceptable fate: death or serious bodily injury as the
toxicity in their blood increases to dangerous levels. This serious threat to life meets the “imminent
and irreparable harm” factor.

939 When the “imminent and irreparable harm” factor is evaluated in combination with the
moving party’s claim of injury, the scale slides further in favor of the granting of a preliminary
injunction. The Court therefore finds that plaintiffs (dialysis patients) will suffer irreparable harm
if the preliminary injunction is not granted.
Government of the Virgin islands, et al, v. Health Quest, LLC, et al Cite as 

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Irreparable Harm to the Nonmoving Party

40 The Court must also determine whether the nonmoving party will be irreparably harmed
were an injunction issued.© Even if the moving party successfully demonstrates a substantial risk
of irreparable harm if no injunction is granted, this ‘“’must be balanced against any similar risk to
the other party in the light of the chance of each party to succeed on the merits.””*’ The Supreme
Court has stated that a strong showing on the merits with a weaker showing of irreparable harm,
may still weigh in favor of injunction where the harm to the nonmovant is similarly low.” The
ultimate aim of the Court is to maintain the status quo, which by itself, is not considered
“irreparable harm.”?!

{41 Defendants argue that were this preliminary injunction ordered, they would face a
substantial risk of financial irreparable harm. Dr. Gardiner testified that neither he nor CKC can
afford the cost of adequate staffing since the depletion of the Legislature’s July 24, 2023 grant of
$700,000.00 on October 5, 2023. The government fundings was intended to offset its staffing and
operational costs pending resolution of the parties’ negotiation for the sale and purchase of
Defendants’ dialysis business and associated properties in the Virgin Islands to the Government of
the Virgin Islands. Dr. Gardiner further testified that CKC no longer had the funds to pay its staff
after October 5, 2023 and he was not confident that the Government was negotiating in good faith
and may not intend to purchase his business. He explained that after he rejected the Government’s
offer to purchase his properties, on October 5, 2023, he met with Commissioner Encarnacion to
try to resolve the issues and they “made some progress”. He communicated the progress to CMS,
and memorialized into a proposed agreement what he understood were the terms agreed upon. Dr.
Gardiner testified that he signed the proposed agreement and submitted it to JFLH, but they refused
to sign. He concluded his statement by saying “without a signed agreement, I am not rescinding
anything,” referring to his October 3, 2023, letter threatening to cease operations at 5:00 p.m. on
October 7, 2023. Dr. Gardiner also testified that the arrangement for payment to Pafford in the
future was not guaranteed given the Government’s apparent lack of interest in finalizing an
agreement to purchase his business.

942 ~=— Staffing was the primary concern emphasized by the Defendants as increasing their risk of
irreparable harm. Dr. Gardiner testified that staffing through Pafford is prohibitive without outside
financial assistance. “CKS can’t operate without outsource staff,” he stated. As an example, Dr.
Gardiner explained that a traveling RN’s hourly pay is approximately $130.00 an hour while a
local RN is paid approximately $60.00 an hour. Dr. Gardiner explained that the pool of local
Registered Nurses is limited or nonexistent and consequently, in the past he has had to rely on
travel nurses. However, under current circumstances, he states that he cannot afford the cost to hire
qualified nurses and other staff. On cross examination, Dr. Gardiner admitted that CKC has been
billing the patients’ health insurance carriers and Medicaid/ Medicare for services provided to his
patients.

58 Yusuf, 59 VI. @ 856.

59 3RC & Co. v. Boynes Trucking Sys., 63 VI. @ 544, 555.

* Yusuf, 59 V.I. @ 856.

7 SBRMCOA, LLC, v. Morehouse Real Estate Invs. LLC, 

 (V.I. Super. Ct. 2015}.
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443 Upon consideration of the evidence, the Court finds that the option for Pafford to continue
to provide staffing with delayed compensation is unsubstantiated in the record. While
Commissioner Encarnacion provided hearsay testimony on these arrangements, the Government
could have introduced testimony from a Pafford witness on Pafford’s commitment to that
arrangement. Nonetheless, by Dr. Gardiner’s testimony, the record sustains that CKC bills and
receives payments from Medicare, Medicaid and health insurers for services provided to CKC’s
patients. This revenue was in addition to the funding provided by the Covid19 grant and VI
Legislature’s grant award. Defendants have not shown that these revenue sources which they have
relied upon from the inception of CKC’s dialysis operations are now insufficient to sustain the
payment of the increased costs for staffing and supplies.

944 Additionally, witness testimony supports that from the 2019 COVID grant award to
October 5, 2023, CKC’s staffing expenses were covered by other sources. There are no indicia of
evidence that CKC’s normal revenue stream, which covered all costs of the business before
Covid19,”? abated during and post Covid19. Dr. Gardiner’s testimony is that his monthly staffing
expense was about $60,000.00. There is no explanation for how $700,000 grant awarded on June
2023 from the VI Legislature was fully depleted by October 5, 2023, such that there are no funds
available for staffing. The Court cannot infer from what is not in the record, and therefore finds
that Defendants have not sustained their burden of showing by clear and convincing evidence that
they will suffer irreparable harm were the TRO not lifted. Whereas increased costs may be
burdensome, there is no evidence that the increased costs in this case have resulted in irreparable
financial harm to the Defendant.

945 ‘As is the case here, where there is not as strong a showing on the merits of at least one
claim, a strong showing of “imminent and irreparable” harm to the movant and a weak showing
of harm to the nonmovant, the Court is satisfied that under the sliding scale, its consideration must
weigh in favor of an injunction, particularly when the public interest is factored in.

Cc. The Public Interest

q46 The Yusuf’? Court has also guided that the Court should seek to prevent the parties from
halting specific acts presumptively benefitting the public until the merits can be reached, and a
determination made as to what justice requires.’ The Territory has one privately owned, fully
operable outpatient dialysis treatment facility operating on St. Croix and St. Thomas, which is
capable for servicing its current patients totaling 120, and up to at least another 40 transferees
(based upon the July 26, 2021 Outsourcing Contract.) In contrast, it is evident that the public
health facilities on St. Thomas and St. Croix are not prepared to accommodate a sudden increase
in its outpatient dialysis pool to provide immediate outpatient dialysis treatment for end stage renal
dialysis patients. Maintaining the status quo not only allows the public health facilities to prepare,
but allows adequate time, under CMS regulations, for the affected patients to be notified and a
transfer plan implemented. Renal dialysis is a critical and urgent health care service to those who
need it. The public interest is best served by the continuation of those services and the legal

72 See Hearing testimony of Or. Gardiner regarding the challenge of the business being the limited availability of
staffing and with the advent of Covid19, the associate high costs of imported staff.

7 Yusuf v. Hamed, 

 (VI. 2013),

7 Yusuf, 59 V.I. @ 858.
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compliance by those facilities which provide them. Finally, the Government’s responsibility to
ensure qualified healthcare services for the citizens of the territory should not be sidestepped for
private interests whose injury, when measured against the public concerns, is insubstantial.

Criminal Liability under 34 V.L.C. § 469

{47 Since it was raised by the Plaintiffs as a further reason for the Government’s interest in
requesting the TRO, the Court will address and dismiss from its consideration the Government’s
allegation of criminal conduct. The Government alleges that Defendants have “‘... threatened to
abandon [their] patients in violation of 34 V.I.C. § 469 (the Elder and Dependent Adult Abuse
Prevention Action (“‘Act”). They appear to claim that under parens patriae, it must also protect the
patients of CKC from conduct that violates Virgin Islands law, namely the abandonment of elderly
patients. This Court agrees that its parens patriae authority extends to protection of Virgin Islands
citizens under statutory law and under the appropriate circumstances, but the Court will not make
that determination as it finds that there is not a clear showing of criminal violation under 34 V.IL.C.
§ 469.

148  § 469(b) provides that ‘“[a] person being a caregiver who commits the offense of criminal
abuse or neglect of an elder or dependent adult... and it results in serious bodily injury or death of
the person abused or neglected is guilty of felony aggravated criminal abuse or neglect of an elder
or dependent adult punishable by a term of imprisonment not less than 3 year nor more than 14
years.”’> In answering the question of whether CKC and/or Dr. Gardiner may even be criminally
responsible under § 469, it must first be determined that one or both Defendants fall within the
definition of “caregiver”. Defendants maintain that they are not caregivers, but rather care
custodians, and cannot be charged under this statute.

149 A “caregiver” is defined as ‘a person who provides direct care for elderly people, or the
dependent adult.””* In contrast, a “care custodian” is an administrator or an employee of any of a
public or private facility or agency, who provide care or services for elder and dependent adults.”’
The Government has not shown by clear and convincing evidence that Defendants are caregivers
within the meaning of § 452(g). if the Defendants are correct that they are care custodians and not
caregivers, § 469’s criminal penalty, applicable only to caregivers’, is inapplicable to the
Defendants. It follows that there can be no authority under parens patriae or statute to pursue a
charge impermissible by law.

Conclusion

q50 All TRO factors considered, the Court finds that the Government, under their parens
patraei authority, has made a reasonable showing of plausible claims and a strong showing of
irreparable and imminent harm. The Court further finds that the Defendant’s risk of harm is low

78 34 VIC. § 469.

78 34 VLC. § 452{g).

77 34 VLC. § 452{e}.

78 § 469(b) provides, “A person being a caregiver who commits the offense of criminal abuse or neglect of an elder
or dependent adult...and it results in serious bodily injury or death of the person abused or neglected is guilty of
felony aggravate criminal abuse or neglect of an elder or dependent adult punishable by a term of imprisonment
not less than 3 years nor more than 14 years.: 34 VIC. § 469(d).
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and cannot override the weight of the first two factors. Finally, there is a strong public interest in
ensuring that the proper procedures are followed as required by CMS for the transfer of dialysis
patients and that the public hospitals are prepared to accommodate the influx of new patients under
a contemplated plan by the CMS regulations and Virgin Islands law.

Accordingly, it is hereby,

ORDERED that the Government’s request for Preliminary Injunction against
Defendants Walter Gardiner MD and Health Quest LLC d/b/a Caribbean Kidney Center is
GRANTED. It is further,

ORDERED that the Preliminary Injunction shall remain in effect for ninety (90) days
from October 16, 2023. It is further,

ORDERED that during the ninety (90) days of this preliminary injunction, the parties,
in accordance with their respective legal responsibilities, shall ensure that all dialysis patients of
Walter Gardiner MD and Health Quest LLC d/b/a Caribbean Kidney Center receive notice of the
intended closure, a transfer plan is implemented, and the public facilities ready themselves to
service an increased number of outpatient renal dialysis patients and/or exercise such other dialysis
care options as are available, consistent with Medicaid & Medicare statutes and regulations and
the laws of the Virgin Islands. It is further,

ORDERED that a copy of this Order shall be served upon each of the parties through
their respective counsel.

DONE AND SO ORDERED this ent. day of October 2023.

“3 atl

aE ae a oe,
PP BEE ot Oe ep it de

ae

ATTEST:

TAMARA CHARLES
Clerk of the Court

By:

Court Clerk
Dated: