Radiology practice seeks to dismiss disgruntled doc’s lawsuit over $20M private equity deal
A Buffalo-area radiology practice is seeking to dismiss one dissatisfied physician’s lawsuit over the sale of its imaging centers to a private equity platform for $20 million.
Gregory R. Ball, MD, of Orchard Park, New York, and his attorneys first filed the complaint against Southtowns Radiology Associates in February. Founded in 1959, the practice unloaded its outpatient centers to Rezolut in 2023, generating cash while easing the burden of running the business.
Ball claims he voiced his opposition to the deal, believing it was rushed, and then was shortchanged by at least $2 million after it was finalized. Now Southtowns and its radiologists, also named as defendants in the complaint, are firing back, asking a New York Supreme Court judge to dismiss the case.
Buffalo Business First initially reported news of the court filings on Thursday. Southtowns Radiology Associates et al. contend that Dr. Ball was in no way excluded from the sale process, as he had claimed, and instead declined his opportunity to participate in the long-term employment and equity relationship with Rezolut. Ball’s own request to be “bought out entirely,” deprived him of the long-term earnings that came with the sale.
“Now, having received the benefit of that transaction, Dr. Ball seeks to undo the agreements and recharacterize a fully informed business decision as coercion or fraud,” defense attorneys claim in their motion to dismiss, filed in late April. “This was long after his former partners labored for Rezolut, earning the large advance payment they received in return for their future expected performance. Plaintiff has been lying in the weeds for more than a year and half awaiting the opportunity to launch this lawsuit against his former partners for the advanced earnings they received in return for five years of service with Rezolut.”
Southtowns and its attorneys assert that any claims of fraud, or that Ball signed away his stake in “duress,” are “legally insufficient and lack the particularity required under New York law.” Other allegations fail, they believe, because Ball had “no continuing ownership interest or fiduciary relationship” with the practice after executing his “redemption agreements.”
Ball joined Southtowns in 2017 and became a shareholder in 2020, Radiology Business reported previously. He noted that members of the organization started exploring a sale around 2021 or 2022. However, when final terms of the deal with Rezolut were presented to decision-makers around October 2023, Ball purportedly voiced his opposition, concerned the process was rushed. He held a 10% voting interest at the time, and bylaws required a 70% supermajority for approval.
“In response to Dr. Ball’s vote against the sale as proposed, the partners undertook a campaign of intimidation, coercion and fraud to procure his ownership interests in the companies and to exclude him in sharing in the proceeds of the sale,” the original complaint claimed.
Ball contends that members of the practice discouraged him from seeking separate counsel and “threatened and pressured” him to approve the sale. “Your life will be a world of pain if you mess this up,” one radiologist allegedly said.
Practice partners purportedly coerced Ball into signing “redemption agreements” with the threat that he would “get nothing” if he didn’t take the offer. These agreements required Southtowns Radiology Associates and the related Pinnacle Imaging to pay Ball a total of $313,000 at least two days prior to the closing, which occurred on Nov. 8, 2023.
Ball claims the practice partners “fraudulently” induced him to sell his ownership interest for $313,000 just days before finalizing the sale to Rezolut for $20 million. He believes he is owed “no less than” $2 million and is seeking a jury trial to sort out the details. Ball also claimed the practice failed to properly vest and transfer his 401K, “shorting him” of another $100,000. He left the company in late 2023 but continues to practice medicine in the area.
However, Southtowns Radiology Associates’ attorneys have fired back in court, charging that claims Ball signed documents in “duress” are “entirely unsupported.”
“The only reference in the complaint that even approaches physical duress appears in Paragraph 57, in which plaintiff claims rather alarmingly that he procured firearms to protect himself from the partners,” the response charges. “But the complaint is devoid of any specific conduct by the individual defendants that could reasonably give rise to a fear of physical harm. There are no allegations of violence, intimidation or threats of bodily injury.”
Further, they charge ball was never “forced into a corner,” nor did he face “imminent threat of ruin” when the deal was considered. He had had ample opportunity to access his own legal counsel, review documents, and decline the transaction, which is “exactly what he did.”
“That he was outvoted or dissatisfied with the terms of the sale to Rezolut does not amount to duress. Business pressure among owners in a closely held company—even if extreme—is not actionable coercion,” court filings allege.
The defendants also disputed claims that fraud took place in the transaction, emphasizing Ball’s signing of the “redemption agreements” that granted him $313,000. And they questioned why Ball took 16 months after signing the paperwork to file the complaint.
“Plaintiff alleges that defendants misrepresented his entitlement to proceeds, but his entitlement—if any—arose entirely under the redemption agreements, which he signed,” defense attorneys assert. “His fraud claim does not rest on any promise or representation that was ‘collateral’ to those agreements. Because plaintiff fails to plead a specific, material misstatement of fact, fails to establish justifiable reliance, and merely repackages his contractual grievance as a tort, the first cause of action must be dismissed.”
Ball and his attorneys fired back in a recent court filing submitted on June 9. They’re asking a judge to reject Southtowns Radiology Associates’ motion to dismiss, believing the radiologist has properly asserted claims for fraudulent inducement, duress, breach of fiduciary duty and declaratory judgment. He restated claims that the practice partners imposed “unreasonably short deadlines” for reviewing and signing sale documents in 2023. And that when Ball purportedly stated a desire to seek outside counsel, the practices steered him toward its own corporate lawyers, Epstein Becker & Green PC (which advised SRA on the sale and is named as a defendant in the lawsuit).
“When Dr. Ball talked with EBG, EBG gave him advice to go along with the Rezolut deal so he would at least get something from the sale and that signing onto the sale was the only way Dr. Ball would get anything,” the response claims. “EBG told Dr. Ball that the partners could force him out without paying him anything if he did not go along. When Dr. Ball failed to sign the commitment agreement to close in accordance with the partners’ arbitrary deadline, EBG presented him with the redemption agreements.”
“In addition, the partners also threatened Dr. Ball’s career and livelihood if he failed to sign, telling him they would ‘ruin’ his career and that his life would be a ‘world of hurt,’” plaintiff attorneys further charged.
Atlanta-based Rezolut—which was founded in 2018 and is backed by SRM Equity Partners—has executed a dozen deals since inking the initial PE partnership, now operating across 40-plus locations. Southtowns Radiology, meanwhile, is based in Orchard Park, New York, and provides diagnostic and interventional services to four Catholic Health hospitals in Erie County.
Under terms of the 2023 deal, the physician owners who sold the business continue running Southtowns’ three outpatient sites in Hamburg, Orchard Park and West Seneca.
“The benefits and challenges of running an imaging center really caused our doctors to take a step back,” Dan Strauch, director of operations at Southtowns, said last year in explaining the reason for pursuing the sale. “The other part is there is a lot of activity from private equity groups like Rezolut out there. You don’t want to miss an opportunity if there’s someone who is interested.”
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.