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The Appellate Division, 3rd Department, of the New York Supreme Court has rebuffed an attempt by New York Attorney General Eliot Spitzer to monitor a proposed merger of a Catholic-sponsored and nonsectarian hospital. While the court was mindful that such a merger could affect the delivery of abortion-related and other reproductive medical services, it found the Attorney General’s effort to intervene “both strained and overly simplistic.” In a decision last week, the 3rd Department unanimously upheld the trial court and said the proposed affiliation of Nathan Littauer Hospital in Gloversville, N.Y., and St. Mary’s Hospital in Amsterdam, N.Y., is not contingent on the approval of the attorney general and the court. The ruling is a significant setback for abortion rights activists who have complained of Catholic interference in the provision of reproductive services when community hospitals are taken over by entities controlled by the church. Several organizations, including Planned Parenthood Mohawk-Hudson Inc., Family Planning Advocates of New York State, Citizen Action of New York State and the National Women’s Law Center, had joined as amici curiae in support of Spitzer’s position. Spitzer claimed that the proposed merger would entail significant alterations to the underlying purpose of a not-for-profit corporation, and therefore the union could not take place without court approval. But neither Fulton County Supreme Court Justice Robert Best nor the 3rd Department found that argument availing. Nathan Littauer Hospital v. Spitzer, 89484, arises in the context of a trend that has developed statewide in recent years. In many rural localities, struggling community hospitals have merged with Catholic-operated institutions. Reproductive rights groups have fought to ensure that family planning and associated services provided prior to the merger continue after the union. Church leaders, however, have staunchly resisted those efforts, which they say would require religious-affiliated hospitals to perform procedures contrary to the teachings of the church. Here, Nathan Littauer Hospital and St. Mary’s Hospital sought to set up a “passive parent” relationship with a newly created corporation, Tri-County Health System. The new entity would be comprised of Colonial Healthcare Corp., the sole member of Littauer, and Carondelet Health Systems Inc., the Catholic-sponsored parent company of St. Mary’s. Spitzer took the position that the union would fundamentally alter the corporate purposes of the two hospitals and result in a disposition of assets. Therefore, he argued, under the Not-for-Profit Corporation Law, the proposed affiliation is subject to attorney general review and ultimate approval by the supreme court. The hospitals disagreed and prevailed on a declaratory judgment action, which led to this appeal. MISSION UNCHANGED In its ruling last week, the 3rd Department found no substantial change in the underlying corporate purpose or mission of the hospitals and no change to the basic business purpose. “In our view, [the Attorney General's] interpretation … is both strained and overly simplistic,” Justice D. Bruce Crew III wrote for the court. “Plainly, the statute is designed to require prior court approval only in instances where the proposed amendment truly seeks to change the nature, object or powers of a particular corporation … . The mere act of delineating powers already validly possessed by a particular corporation does not constitute an ‘addition’ of corporate powers, thereby triggering the review and approval procedures.” The court specifically responded to the concerns of the amici regarding a provision in Littauer’s restated certificate of incorporations. That provision requires conformance with the “Ethical and Religious Directives for Catholic Health Care Services.” Amici contended that the potential impact on Littauer’s ability to offer not only abortion-related services but also contraception services and counseling constituted a change in corporate powers that would implicate the review requirements in the Not-for-Profit Corporation Law. The 3rd Department disagreed. “The decision to delineate in a restated certificate of incorporation a specific or potential restriction upon the services to be provided by the corporation is not the functional equivalent of altering the corporation’s underlying purpose or curtailing its power to achieve its overall objectives,” Justice Crew wrote in an opinion joined by Presiding Justice Anthony V. Cardona and Justices Anthony J. Carpinello, Carl J. Mugglin and Robert S. Rose. Appearing were: William Josephson for the attorney general’s office; Paul R. Braunsdorf of Harris Beach in Rochester, N.Y., for Nathan Littauer Hospital Association; and Michael L. Costello of Tobin & Dempf in Albany for St. Mary’s Hospital. Paul Larrabee, a spokesman for the attorney general, said the office is reviewing the decision and considering its options.

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