STEIN v. MH MASTER HOLDINGS, LLLP, 2024 NCBC 78

STATE OF NORTH CAROLINA
COUNTY OF BUNCOMBE
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
CIVIL ACTION NO.: 23 CVS 5013
JOSHUA H. STEIN, Attorney General,
ex rel. DOGWOOD HEALTH TRUST,
Plaintiff,
v.
MH MASTER HOLDINGS, LLLP,
Defendant.
ORDER AND OPINION
ON MOTION TO DISMISS
COUNTERCLAIMS AND PARTIAL
MOTION TO DISMISS REQUEST
FOR ATTORNEYS’ FEES
1. 	THIS 	MATTER 	is 	before 	the 	Court 	on 	Counterclaim-Defendant’s
Motion 	to 	Dismiss 	Counterclaims 	and 	Partial 	Motion 	to 	Dismiss 	Request 	for
Attorneys’ Fees (the “Motion”), (ECF No. 59).
2. 	By way of the Motion, Joshua H. Stein, Attorney General for the State
of North Carolina, (acting on behalf of Dogwood Health Trust) moves for an order
dismissing Defendant’s counterclaims, largely on the basis of sovereign immunity.
Mr. Stein also requests dismissal of Defendant’s request for attorneys’ fees.
3. 	The Court, having considered the Motion, the briefs supporting and
opposing the Motion, and the parties’ arguments at a hearing held on 28 August 2024,
concludes for the reasons set forth herein that the Motion should be GRANTED in
part and DENIED in part.
Stein v. MH Master Holdings, LLLP, 2024 NCBC 78.

North Carolina Department of Justice by Sarah G. Boyce, Jasmine S. McGhee,
Jessica V. Sutton, Brian Rabinovitz, Llogan R. Walters, South A. Moore, Daniel
P. Mosteller, and Marc D. Brunton for Plaintiff Attorney General Joshua H.
Stein ex. rel. Dogwood Health Trust.
Latham & Watkins, LLP by Allen M. Gardner, Nathan A. Sandals, and Chase
A. Chesser; and Roberts & Stevens, PA by Phillip T. Jackson, John Noor, and
David Hawisher for Defendant MH Master Holdings, LLLP.
Earp, J.
4. 	While in the past, the appropriate rule for consideration of a motion to
dismiss on grounds of sovereign immunity was somewhat unsettled, recent guidance
from our Court of Appeals specifies that these issues should be decided under Rule
12(b)(2). 	Torres v. City of Raleigh, 288 N.C. App. 617, 620 (2023). 	Accordingly, the
Court first addresses Plaintiff’s Motion with respect to Defendant’s counterclaims on
that basis.
5. 	As this Court recently observed,
The standard of review to be applied by a trial court in deciding a motion
under Rule 12(b)(2) depends upon the procedural context confronting
the court. When neither party submits evidence, the allegations of the
complaint 	must 	disclose 	jurisdiction 	although 	the 	particulars 	of
jurisdiction need not be alleged. 	The trial judge must decide whether
the complaint contains allegations that, if taken as true, set forth a
sufficient basis for the court's exercise of personal jurisdiction.
Johnson Bros. Corp. v. City of Charlotte, 2024 NCBC LEXIS 32 at *11-12 (N.C. Super.
Ct. Feb. 27, 2024).
6. 	Having considered the uncontroverted allegations in the pleadings, the
Court makes the following findings of fact and conclusions of law for the purpose of
determining whether Defendant has established by a preponderance of the evidence

that the Court has personal jurisdiction over Mr. Stein, acting on behalf of Dogwood
Health Trust.
I. 	FINDINGS OF FACT
7. 	Plaintiff 	and 	Counterclaim-Defendant 	Joshua 	H. 	Stein, 	Attorney
General for the State of North Carolina (the “Attorney General” or “Plaintiff”),
brought this action on behalf of and in the name of Dogwood Health Trust, a non-
profit corporation. (Am. Compl. [“Am. Compl.”] ¶ 1, ECF No. 50.)1
8. 	Defendant and Counterclaim-Plaintiff MH Master Holdings, LLLP
(“MH Master Holdings” or “Defendant”) is a limited liability limited partnership
formed under the laws of the State of Delaware and registered with the North
Carolina Secretary of State. 	(Def.’s Answ. and Countercls. to Pl.’s Am. Compl.
[“Countercls.”] ¶ 1, ECF No. 55.) 	MH Master Holdings is a subsidiary of HCA
Healthcare, Inc (“HCA”). (Countercls. ¶ 3.)2
9. 	This case centers on the terms of an Amended and Restated Asset
Purchase Agreement (“APA”) between MH Master Holdings and Mission Health
System 	(“Mission 	Health”) 	memorializing 	MH 	Master 	Holdings’ 	acquisition 	of
1 Dogwood Health Trust is identified as the “Foundation” in the APA. (Countercls. ¶ 6.)
2 Pursuant to Section 7.10 of the APA, MH Master Holdings is authorized to do business
under brand names including “Mission Health,” “Mission Health System,” and “HCA.” (Am.
Compl. ¶ 9.) For purposes of the Motion, the Court at times refers to MH Master Holdings
as “HCA.”

Mission Health, a six-campus hospital system serving western North Carolina.
(Countercls. 49.)3
10. 	Defendant 	asserts 	that 	Dogwood Health Trust 	“is 	a party to 	the
counterclaims in name only, as Plaintiff has usurped Dogwood Health Trust’s role as
the party responsible for working with HCA to ensure the continued delivery of high-
quality, affordable healthcare services in western North Carolina.” (Countercls. ¶6.)
11. 	Section 7.13(a) and Schedule 7.13(a) of the APA (the “Hospital Service
Commitments”) speak to HCA’s obligations with respect to the continuation of certain
services by Mission Health during the ten-year period from 2019 to 2029, barring
certain contingencies or extenuating circumstances.4 	(Am. Compl., Ex. 1, APA and
Schedules [“APA”] Section 7.13(a), Schedule 7.13(a), ECF No. 50.1.) HCA alleges that
the Hospital Service Commitments are clear and unambiguous, and that HCA
satisfies 	them. 	(Countercls. 	46-47.) 	HCA 	characterizes 	the 	Hospital 	Service
Commitments at issue as requiring that HCA: “(1) maintain Level II trauma
capabilities at Mission Hospital; and (2) maintain the capabilities to provide the
3 	Defendant’s 	introduction 	to 	the 	counterclaims 	contains 	unnumbered 	paragraphs;
consequently, the Court refers to these introductory allegations by the page number of
Defendant’s pleading rather than paragraph number.
4 The Hospital Service Commitments address emergency services, oncology services,
behavioral health treatment, cardiac services, general medicine services, imaging and
diagnostic services, neuro trauma services, pediatric services, obstetrical services, surgical
services, graduate medical education, geriatric care services, inpatient and outpatient
rehabilitation services, orthotics and prosthetics services, home health and private duty
nursing, hospice care, and pediatric specialty outpatient services. (APA Schedule 7.13(a).)

emergency services and oncology services that were provided at Mission as of January
2019.” (Countercls. 47.)
12. 	On 31 January 2019, MH Master Holdings and Seller5 executed the
APA, which included the Hospital Service Commitments and gave the Attorney
General 	contractual 	enforcement 	rights 	under 	certain 	circumstances.
(Countercls. ¶ 19.)
13. 	On 14 December 2023, the Attorney General, on behalf of the Dogwood
Health Trust, filed this action against HCA6 for violations of the APA. The Attorney
General alleges that HCA has failed to provide the requisite level of emergency and
trauma care, as well as the oncology services required by the APA. 	(See generally,
Am. Compl.) The case was designated as a complex business case the day it was filed
and was then assigned to the undersigned. (ECF Nos. 1, 2.)
5 On behalf of the Mission Health System, the APA was executed by Mission Health System,
Inc., Mission Hospital, Inc., Mission Medical Associates, Inc., Mission Imaging Services, LLC,
Blue Ridge Regional Hospital, Inc., Transylvania Community Hospital, Inc., Angel Medical
Center, Inc., MSJHS and CCP Joint Development Company, LLC d/b/a Asheville Specialty
Hospital, the McDowell Hospital, Inc., Community CarePartners, Inc., Highlands-Cashiers
Hospital, Inc., WNC CareSource, LLC, Avenu Health, Inc., McDowell Hospital Imaging
Services, 	LLC, 	Transylvania 	Physician 	Services, 	Inc., 	Transylvania 	Services, 	Inc.,
Transylvania Hospital Imaging Services, LLC, Highlands-Cashiers Physician Services, Inc.,
the Eckerd Living Center LLC (collectively, the “Seller”).
6 The Attorney General has since amended his Complaint to supplement the Complaint’s
factual allegations and remove two Defendants from the action. (Order on Pl.’s Mot. Leave
Am. Compl. and Defs.’ Mot. Grant Leave Am. Compl. and Set Deadlines Responsive
Pleadings, ECF No. 49; First Am. Compl., ECF No. 50.) In addition, the parties stipulated
to the dismissal of three other Defendants from this action, leaving MH Master Holdings,
LLLP, referenced herein as either MH Master Holdings or HCA, as the sole Defendant in the
Attorney General’s suit. (Parties’ Stip. Facts and Vol. Dismissal Non-Signatory Defendants,
ECF No. 58.)

14. 	On 6 May 2024, HCA filed its Answer, along with two counterclaims.
The counterclaims request that the Court enter a judgment interpreting the APA and
declaring (1) that HCA has not breached APA Section 7.13(a) because it has not
discontinued the oncology or emergency and trauma services required by the APA;
(2) that Section 7.13 of the APA requires only that HCA “continue to make its
facilities, staff and equipment available to medical staff physicians who want to use
those facilities to offer the same services [listed in Schedule 7.13(a)] that Mission
offered before HCA acquired it[;]” and (3) that Section 7.13(a) of the APA does not
obligate HCA “to employ any particular number of providers.” 	(See generally
Countercls. ¶¶ 82-87, ad damnum clause C, D, E.) HCA also requests that the costs
of this action, including attorneys’ fees, be taxed against the Attorney General.
(Countercls., ad damnum clause F.)
15. 	On 6 June 2024, Plaintiff filed the Motion seeking an order dismissing
HCA’s counterclaims for lack of jurisdiction on sovereign immunity grounds pursuant
to Rule 12(b)(1) or 12(b)(2) of the North Carolina Rules of Civil Procedure (the
“Rule[s]”). (Mot. 1.) In the alternative, Plaintiff requests a partial motion to dismiss
Defendant’s request for attorneys’ fees for failure to state a claim under Rule 12(b)(6).
(Mot. 1.)
16. 	After full briefing, on 28 August 2024, the Court held a hearing on the
Motion during which both parties were present and heard. 	The Motion is now ripe
for disposition.

II. 	CONCLUSIONS OF LAW
A. 	Sovereign Immunity
17. 	“It is a fundamental rule of law that the State is immune from suit
unless it expressly consents to be sued[,]” Zimmer v. N.C. Dep't of Transp., 87 N.C.
App. 132, 134 (1987) (citation omitted), “or upon its waiver of immunity, and that this
immunity is absolute and unqualified.” 	Guthrie v. North Carolina State Ports
Authority, 307 N.C. 522, 534 (1983) (emphasis in original) (citations omitted).
18. 	A suit brought “against a public official in his official capacity ‘is a suit
against the State.’ ” 	White v. Trew, 366 N.C. 360, 363 (2013) (quoting Harwood v.
Johnson, 326 N.C. 231, 238 (1990)). 	Thus, public officials sued in their official
capacity are, like the State itself, shielded by sovereign immunity. Id.
19. 	Waiver of sovereign immunity must be established at the outset of any
action against the State or a State official. Arrington v. Martinez, 215 N.C. App. 252,
263 (2011). The burden of establishing waiver falls on the party bringing the action,
in this case HCA. Id.
1. 	Application of Sovereign Immunity to the Attorney General
20. 	HCA rejects the contention that sovereign immunity applies because, it
argues, this action was brought by the Attorney General, not in his state-sanctioned
role, but on behalf of Dogwood Health Trust, a private, non-profit corporation. (Def.
Mem. Opp’n Pl.’s Mot. Dismiss [“Def. Mem. Opp’n”] 9, ECF No. 63.) HCA maintains
that when the Attorney General filed suit under the APA, he did not do so as the chief
law enforcement officer of North Carolina, but rather he did so “on behalf of and in

the name of the Seller Representative” and as “a third-party beneficiary.” (Def. Mem.
Opp’n 9.)
21. 	Plaintiff responds that when the Attorney General brings an action,
including this one under the APA, he does so in his official capacity as North
Carolina’s chief law enforcement officer. (Pl. Reply Def. Mem. Opp’n Pl. Mot. Dismiss
[“Pl. Reply”] 2, ECF No. 64.) Plaintiff maintains that the APA’s protections and the
right to enforce those protections were borne from the Attorney General’s statutory
review authority and are consistent with his broad consumer protection mandate and
his “common law right and power to protect the beneficiaries of charitable trusts.”
(Pl. Reply 3.)
22. 	Underscoring 	its 	position, 	Plaintiff 	points 	to 	the 	language 	of 	the
counterclaims. Defendant specifically pleads that “Counterclaim-Defendant Joshua
H. Stein is sued in his official capacity as Attorney General for the State of North
Carolina.” (Countercls. ¶ 5.)
23. 	Given HCA’s pleading, the Court concludes that Mr. Stein has been sued
in his official capacity. Accordingly, he is entitled to sovereign immunity, unless that
immunity has been waived. White, 366 N.C. at 363.
2. 	Waiver
24. 	HCA must affirmatively allege waiver of sovereign immunity. 	Hinson
v. City of Greensboro, 232 N.C. App. 204, 210 (2014); Arrington, 215 N.C. App. at 263.
However, 	“[p]recise 	language 	alleging 	that 	the 	State 	has 	waived 	the 	defense
of sovereign immunity is not necessary, but, rather, the complaint need only contain

sufficient allegations to provide a reasonable forecast of waiver.” Richmond Cnty. Bd.
of Educ. v. Cowell, 225 N.C. App. 583, 587 (2013) (citations and internal quotation
marks omitted). Therefore, although particularity is not required, a complaint failing
even generally to allege waiver is subject to dismissal. 	Arrington, 215 N.C. App.
at 263; see also Hinson, 232 N.C. App. at 210.
a. Express Waiver
25. 	HCA 	has 	failed 	to 	allege 	express 	waiver. 	Even 	absent 	such 	an
allegation, however, the Court may infer waiver from Defendant’s allegations,
keeping in mind that “[w]aiver of sovereign immunity may not be lightly inferred[.]”
Meyer v. Walls, 347 N.C. 97, 104 (1997) (quoting Guthrie v. N.C. State Ports Auth.,
307 N.C. 522, 537-38, (1983)).
b. Implicit Waiver by Contract
26. 	The North Carolina Supreme Court has held that the State waives
sovereign immunity when it becomes a signatory to a private contract. Smith v. State,
289 N.C. 303, 320 (1976). 	In Smith, the North Carolina Supreme Court articulated
five policy considerations underlying its recognition of this implied waiver:
(1) To deny the party who has performed his obligation under
a contract the right to sue the state when it defaults is to take his
property without compensation and thus to deny him due process; (2)
To hold that the state may 	arbitrarily avoid its obligation under
a contract after having induced the other party to change his position
or to expend time and money in the performance of his obligations,
or in preparing to perform them, would be judicial sanction of the
highest type of governmental tyranny; (3) To attribute to the General
Assembly 	the 	intent 	to 	retain 	to 	the 	state 	the 	right, 	should
expedience seem to make it desirable, to breach its obligation at the
expense 	of 	its 	citizens 	imputes 	to 	that 	body 	“bad 	faith 	and
shoddiness” foreign to a democratic government; (4) A citizen's

petition 	to 	the 	legislature 	for 	relief 	from 	the 	state's 	breach
of contract is an unsatisfactory and frequently a totally inadequate
remedy for an injured party; and (5) The courts are a proper forum
in which claims against the state may be presented and decided upon
known principles.
Id. at 320.
27. 	The Supreme Court concluded, “[i]t cannot be true that a state is bound
by a contract, and yet be true that it has power to cast off its obligation and break its
faith, since that would invoke the manifest contradiction that a state is bound and
yet not bound by its obligation.” Id. at 315.
28. 	Plaintiff alleges that neither the Attorney General nor the State is a
signatory to the APA, the only contract at issue in this case. 	Therefore, Plaintiff
argues, there can be no waiver of sovereign immunity based on contract. 	(Pl. Mem.
Supp. Mot. [“Pl. Mem. Supp.”] 9, ECF No. 60.) 	Plaintiff adds that the public policy
rationale for waiving sovereign immunity, as explained in Smith, is not present here
because the State is not obligated under the APA to provide consideration to any of
the contracting parties. (Pl. Mem. Supp. 9-10.)
29. 	Conversely, Defendant contends that the Attorney General negotiated
for and secured the right to enforce certain APA obligations as a “third-party
beneficiary” and therefore the State and Attorney General should be treated as
parties to the contract, effecting a waiver of sovereign immunity. (Def. Br. Opp’n 12.)
30. 	The Court concludes that the Attorney General’s unique position under
the terms of this APA does not give rise to the policy concerns that resulted in the
waiver of sovereign immunity in Smith. 	Here, the State has not undertaken an

obligation that it is trying to avoid by claiming immunity from suit. 	The Attorney
General’s role in this case, resulting from the exercise of his authority pursuant to
N.C.G.S. §55A-12-02(g) and consistent with his official role generally, is one of
enforcement. 	The fact that his role was written into the contract does not result in
an implicit waiver of governmental immunity. See Smith, 289 N.C. at 417 (“In order
to impose a contractual liability on the state, there must be a contract obligation on
its part”).
c. 	Implicit Waiver - Declaratory Judgment Act
31. 	Citing Can Am S., LLC v. State, 234 N.C. App. 119 (2014), Defendant
argues 	that 	sovereign 	immunity 	is 	waived 	because 	the 	claims 	at 	issue 	seek
declarations of the parties’ rights and obligations under the APA. (Def. Br. Opp’n 14.)
Plaintiff responds that Defendant’s claims for declaratory relief do not give rise to
waiver because they are merely a denial of Plaintiff’s claims coupled with a flawed
attempt to secure advisory rulings from the Court on issues outside the scope of the
underlying dispute. (Pl. Reply 10.)
32. 	The Court agrees. 	Asserting a cause of action against the State
pursuant to the Declaratory Judgment Act (the “Act”), N.C.G.S. §§ 1-253 et seq., does
not necessarily result in a waiver of sovereign immunity. Rather, whether sovereign
immunity is waived turns on the nature of the dispute. Compare Petroleum Traders
Corp. v. State, 190 N.C. App. 542, 547 (2008) (holding that sovereign immunity was
not waived in a declaratory judgment action to determine whether a statutorily
authorized bidding fee violated the North Carolina Constitution) with Can Am S.,

234 N.C. App. at127 (holding that sovereign immunity was waived in a declaratory
judgment action involving lease agreements between the State and a private parties)
and T & A Amusements, LLC v. McCrory, 251 N.C. App. 904, 908 (2017) (holding that
sovereign immunity was waived in declaratory judgment action involving allegations
that State agency acted in excess of the authority granted by statute).
33. 	Here, Plaintiff is exercising his ability to enforce certain provisions of
the APA in the manner contemplated by the parties to the APA, including HCA. As
stated above, the policy considerations identified in Smith that would support a
waiver of sovereign immunity are not present. The fact that Defendant’s claims are
brought under the Act does not change that result.
34. 	Accordingly, the Motion shall be GRANTED on sovereign immunity
grounds, and Defendant’s counterclaims shall be dismissed for lack of in personam
jurisdiction.
35. 	Even were this not the case, to the extent Defendant’s claims for
declaratory judgment exceed the scope of the pending controversy, they are subject
to dismissal pursuant to Rule 12(b)(1). 	The Act grants a court the authority to
“declare 	rights, 	status, 	and 	other 	legal 	relations,” 	but 	only 	when 	an 	“actual
controversy” exists between parties to a lawsuit. Pine Knoll Shores v. Carolina Water
Serv., Inc., 128 N.C. App. 321 (1998). See Sharpe v. Park Newspapers of Lumberton,
317 N.C. 579, 583 (1986) (“Although the North Carolina Declaratory Judgment Act
does not state specifically that an actual controversy between the parties is a
jurisdictional prerequisite to an action thereunder, our case law does impose such a

requirement.”). The “[m]ere apprehension or the mere threat of an action or a suit is
not enough.” Gaston Bd. of Realtors, Inc. v. Harrison, 311 N.C. 230, 234 (1984). 	The
Act “does not require the court to give a purely advisory opinion which the parties
might, so to speak, put on ice to be used if and when occasion might arise.” Tryon v.
Duke Power Co., 222 N.C. 200, 204 (1942).
36. 	Defendant argues that it seeks “broad declarations regarding the correct
interpretation of Section 7.13(a), so that, moving forward, judicial resources need not
be wasted on similar disputes” (Def.s’ Mem. 15, emphasis added) and says that its
counterclaims “are broader [than Plaintiff’s] and seek declarations that will govern
the parties’ prospective relationship.” (Def.s’ Mem. 16, emphasis added.) But as this
Court has previously stated, “[t]o advise on what path a litigant should take in future
proceedings 	falls 	squarely 	within 	the 	definition 	of 	an 	impermissible advisory
opinion. N.C. Acupuncture Licensing Bd. v. N.C. Bd. of Physical Therapy Examiners,
2016 NCBC LEXIS 49, at *6-7 (N.C. Super. Ct. June 24, 2016) (citing Little v.
Wachovia Bank & Trust Co., 252 N.C. 229, 243 (1960)) (“The courts have no
jurisdiction to determine matters purely speculative, enter anticipatory judgments,
declare social status, deal with theoretical problems, give advisory opinions, answer
moot questions, adjudicate academic matters, provide for contingencies which may
hereafter arise, or give abstract opinions.”).
37. 	In addition, to the extent Defendant’s declaratory judgment claims
present no new controversies and simply amount to the converse of Plaintiff’s
declaratory judgment claims already pending before the Court, the Court concludes,

in its discretion, that allowing Defendant’s claims to proceed would not serve a useful
purpose and would “conflict with the interests of judicial economy and efficiency.”
Coca-Cola Bottling Co. Consol. v. Durham Coca-Cola Bottling Co., 141 N.C. App. 569,
580 	(2000); see also 	Augur v. 	Augur, 	356 	N.C. 	582, 588 (2002) 	(“[S]ection 	1-
257 permits a trial court, in the exercise of its discretion, to decline a request for
declaratory relief when . . . the requested declaration will serve no useful purpose in
clarifying or settling the legal relations at issue[.]”); 	cf. Williams v. Hmaidan
Holdings, LLC 2024 Tex. App. LEXIS 2949 (Ap. 30, 2024) (holding that declaratory
judgment counterclaim that was “merely a defensive mirror” was not a valid claim).
B. HCA’s Request for Attorneys’ Fees
38. 	Plaintiff next moves for dismissal of HCA’s request that costs, “including
attorney’s fees as may be allowed by law, be taxed to the Attorney General.”
(Countercls. 82.) Plaintiff contends that HCA has failed to state a claim that would
support this result. (Pl. Mem. Supp. 11.)
39. 	North Carolina law allows for the award of reasonable attorneys’ fees to
the prevailing party in “any civil action . . . if the court finds that there was a complete
absence of a justiciable issue of either law or fact raised by the losing party in any
pleading.” N.C.G.S. § 6-21.5.
40. 	At this early stage, the Court concludes that the issue is not ripe for
determination and therefore DENIES this aspect of Plaintiff’s Motion, without
prejudice.

III. 	CONCLUSION
41. 	WHEREFORE, 	Counterclaim–Defendant’s 	Motion 	to 	Dismiss 	is
GRANTED in part and DENIED in part, as follows:
a. 	The 	Motion 	to 	Dismiss 	Defendant’s 	Counterclaims 	is 	hereby
GRANTED, and Defendant’s Counterclaims are dismissed with
prejudice; and
b. 	The Motion to Dismiss Defendant’s request for attorneys’ fees is
hereby DENIED, without prejudice.
IT IS SO ORDERED, this the 6th day of December, 2024.
/s/ Julianna Theall Earp
Julianna Theall Earp
Special Superior Court Judge
for Complex Business Cases