The Reutlinger Community in Danville.
The Reutlinger Community in Danville.

Judge says plaintiffs in lawsuit to derail Reutlinger merger have no standing

A Contra Costa Superior Court judge this week dealt a blow to a lawsuit that seeks to derail the proposed affiliation between The Reutlinger Community in Danville and the Sacramento-based senior living nonprofit Eskaton.

Judge Jill Fannin ruled on Feb. 5 that the plaintiffs, among them Reutlinger donors, family members and former board members, lacked “the required standing to bring their claims.”

Filed last November, the lawsuit charges a breach of fiduciary duty and breach of charitable trust against Reutlinger and Eskaton, and seeks a “temporary and permanent injunction to prevent consummating the affiliation agreement.”

The Reutlinger board, CEO Jay Zimmer and Eskaton, all defendants in the suit, sought a demurrer, which is a formal legal objection from the bench, on the grounds that the 13 plaintiffs lacked standing. In the hearing, Fannin agreed, sustaining the demurrer with leave to amend. That means the plaintiffs have until April 1 to refile an amended claim.

Final approval of the affiliation agreement rests with the California Attorney General’s office, which is slated to make a decision in March; that decision could be yes or no, or could also be that more time is needed.

“We filed this lawsuit in an effort to put the brakes on the [affiliation] going forward,” said Philip Miller, an attorney representing the plaintiffs. “What happened at the hearing is after both sides had an opportunity to file legal papers, the court ruled that these plaintiffs won’t have a voice in being able to challenge the transaction. Reutlinger argued that only a current member of the board could challenge the transaction, and that the board didn’t owe any duty to our 13 plaintiffs. The ruling effectively says, for now, our group of plaintiffs, in spite of their connections with Reutlinger going back a long time in various capacities, are not in a position to challenge the [affiliation].”

Miller said the judge noted that under the law, “only certain categories of individuals are entitled to challenge this kind of transaction. They include officers and directors of Reutlinger and Reutlinger itself as an entity. Their view is that no other individual suffers an injury if the transaction goes forward. So only current officers and directors could challenge the transaction.”

Miller said he and the plaintiffs feel otherwise, and they are now strategizing a response to the court ruling.

The legal wrangling stems from ongoing concerns among some past Reutlinger board members, as well as current trustees and resident family members, that the affiliation could undermine the facility’s Jewish character in as few as five years. They have also complained that Reutlinger did not try hard enough to secure affiliations within the Bay Area Jewish community.

Under the terms of the agreement approved by the Reutlinger board last September, Eskaton, which owns and manages numerous senior residence facilities across Northern California, will manage all Reutlinger assets. Reutlinger will dissolve its board, while a new seat will be created on Eskaton’s board to be filled by one member specifically chosen to represent Reutlinger’s interests. The Reutlinger board has already chosen current chair Jordan Rose to serve the first of three consecutive three-year terms.

For its part, Eskaton has pledged to retain Reutlinger’s Jewish character, keeping on staff a fulltime rabbi, celebrating Jewish holidays, offering access to kosher food and maintaining an on-site Jewish museum. Critics of the affiliation have cited a clause in the agreement that states Eskaton retains the right to “relocate the principal business and operations of Reutlinger to another comparable facility located in the East Bay [after five years]… provided that all of the then-residents of Reutlinger are provided comparable accommodations and services at comparable costs.”

The Reutlinger Community traces its roots back more than 60 years, when it was known as the Home for Jewish Parents in Oakland. In 1999 it opened its current 180-bed Danville facility.

Dan Pine

Dan Pine is J.'s news editor. He can be reached at dan@jweekly.com.