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Surgical center sues physicians group, doctors over development of new facility

SIOUX CITY | A Sioux City outpatient surgery center has sued a physicians group and several doctors for their involvement in the development of a competing center across the Missouri River in Nebraska, claiming those involved are violating non-compete clauses.

Pierce Street Same Day Surgery, 2730 Pierce St., is seeking a temporary injunction to enforce those non-competition provisions and prevent Drs. Adam Smith, William Samuelson, Kevin Liudahl and Joseph Morris from owning, operating, investing in, managing, promoting or being employed by the Riverview Surgical Center, which is under construction along South Sioux City's riverfront.

The injunction also seeks to prevent Drs. Terry Monk and Duane Nelson, as well as Tri-State Specialists and its CEO Lee Hilka, from cooperating with those four physicians in the development and promotion of Riverview.

Pierce Street is asking that the injunction be in place for the duration of the litigation of its lawsuit.

A hearing has been scheduled for Jan. 10 in Woodbury County District Court.

Ground was broken for the $37 million Riverview Surgical Center next to the Delta Hotels by Marriot at 385 E. Fourth St. in November. The proposed two-story structure, which would be owned by Tri-State Specialists and offer orthopedic, gastrointestinal, plastic surgery, some OB-GYN and ear, nose and throat surgical services, will include nearly 50,000 square feet of space for operating rooms, medical offices and patient suites and is expected to open in 2019. Patients and families also will have the option of staying in the adjacent Delta Hotels by Marriott, formerly known as the Marina Inn.

Pierce Street, which offers many of the same services planned by Riverview, said in its lawsuit that the doctors, some of whom are or were members of Pierce Street, have non-compete provisions in individual operating agreements they signed with Pierce Street that prohibit them from being involved with a competing hospital or surgery center within 30 miles of Pierce Street while they hold an interest in Pierce Street and for one year after leaving the company.

Located at 2730 Pierce St., across the street from UnityPoint Health -- St. Luke's, Pierce Street is less than four miles from the Riverview site. Pierce Street said that the doctors, even while still members of the Sioux City center, have been recruiting other physicians, including other Pierce Street members, to work at or invest in Riverview. The recruitment "is tantamount to siphoning patients away" from Pierce Street because physicians typically select the surgery center where a patient's procedure will be performed. In the lawsuit, Pierce Street said it could lose 60 percent of its patient volume referred to it by Tri-State physicians, many of whom could begin sending patients to the new Riverview facility.

The lawsuit includes claims for breach of contract, intentional interference with a contract and with prospective business advantage, breach of duty of loyalty and conspiracy.

Tri-State, which is based on the the UnityPoint Health campus, disputes the allegations.

"We believe the filing of the lawsuit was unfortunate and the allegations to be meritless, and we look forward to challenging the lawsuit in the appropriate setting," the company said in a news release.

Tri-State intends to move forward with the Riverview project, the news release said. Site preparation work has taken place, and construction is expected to begin in the spring.

Bridget Penick, a Des Moines attorney representing Pierce Street, declined to comment on the lawsuit.

In the lawsuit, Pierce Street said it had suspected that Tri-State, Hilka and some of the physicians had been working on a competing surgery center for some time. Those suspicions were confirmed when plans were made public and Hilka, Monk and Nelson identified themselves as members of Riverview board at the ground-breaking, at which Liudahl and Samuelson also were present, the lawsuit said.

According to the lawsuit, Pierce Street is owned by UnityPoint Health -- St. Luke's and individual community physicians, including Smith, Samuelson, Liudahl and Morris. Monk and Nelson were formerly members of Pierce Street, the lawsuit said. Hilka served as the Pierce Street CEO from March 2008-April 2015. He voluntarily resigned after Pierce Street became aware he was providing services to Tri-State during a portion of the same time period, the lawsuit said.

Pierce Street said it became aware that as early as 2015, plans to develop Riverview were being discussed by the physicians, Hilka and Tri-State, which is located at 2730 Pierce St. in the same building as Pierce Street Same Day Surgery. Those discussions would have taken place when all six physicians named in the lawsuit had signed operating agreements containing the non-compete provisions in place with Pierce Street.

In addition to violating their non-compete provisions, Pierce Street said, Hilka and some of the physicians had access to confidential information and Pierce Street's business strategies in developing plans for Riverview. Hilka and some of the physicians continue to recruit physicians and investors and hand out Riverview-branded folders, mugs and pens to patients and staff members, making it difficult for Pierce Street to attract new physician investors, the lawsuit said.

Pierce Street said it has had meetings with Tri-State and some of the doctors to discuss the Riverview development, but those meetings were not fruitful, leading to filing of the lawsuit.

Unlike Iowa, Nebraska does not require surgical facilities to undergo a regularly review process known as a Certificate of Need prior to construction. That's one factor Tri-State has cited for choosing to build in South Sioux City. Another is the proximity of the site to Delta Hotels by Marriott. Hilka has said it would be the first such hotel recovery program in Siouxland, with the next closest located in the Twin Cities.

"We were looking for comfort suites for an overnight stay," Hilka told the Journal last month. "So we had to find basically a vacant lot for sale next to a hotel that we think is a prestigious hotel." 


Siouxland honey business targeted
Vandalism destroys half million bees, wipes out Sioux City honey business

SIOUX CITY — A couple who manufacture and sell honey are feeling the sting after their Sioux City operation was vandalized overnight, killing at least half a million bees.

Justin and Tori Engelhardt, the owners of Wild Hill Honey, went to go dust the snow off 50 hives stored in a grove on their 18 1/2 acre property on Sioux City’s west side around 10 a.m. Thursday.

As they approached the area where the hives were kept, Justin Engelhardt noticed their beekeeping supplies shed had been ransacked.

He feared that whoever committed the act had done much worse, a thought that unfortunately came true for the apiarist.

“They knocked over every single hive, killing all the bees. They wiped us out completely,” Engelhardt said. “They broke into our shed, they took all our equipment out and threw it out in the snow, smashed what they could. Doesn’t look like anything was stolen, everything was just vandalized or destroyed.

Engelhardt called the crime “completely senseless.”

He and his wife started Wild Hill Honey about six years ago after he became interested in bees after hearing an interview with world-renowned animal behaviorist Thomas Seeley on National Public Radio.

Wild Hills sells jars of pure, raw and creamed varieties of honey and other honey byproducts at Pierce Street Coffee Works, Sioux City Gifts, Palmer’s Olde Tyme Candy Shoppe, trade shows and other spaces.

“We’re really well known around Sioux City,” Engelhardt said.

Engelhardt estimates the vandalism caused $50,000-$60,000 worth of damage. He said insurers don't offer beehive coverage, so he doesn’t foresee a way the couple can financially rebuild their business.

“This probably sunk us,” he said.

The Sioux City Police Department is investigating the crime. Engelhardt said he was impressed by the department’s quick response, noting they came out and dusted for fingerprints and measured footprints left in the snow.

Engelhardt also shared the incident on Wild Hills Honey Facebook page. A little after 2 p.m. Thursday, the post had more than 400 shares.

“Maybe somebody knows something, right?” he said. “It may produce a lead for the police.”

Tim Hynds, Sioux City Journal 

Beef Products Inc. attorneys Eric Connolly, left, and Dan Webb, right, and other members of BPI's legal team walk to the Union County Courthouse in Elk Point, S.D., June 5. ABC's parent company reported a $177 million charge for litigation related to the case settled June 28, two days after the end of Disney's quarterly report.


The above rendering shows the anticipated front view of Riverview Surgical Center, a $37 million, 50,000-square-foot facility being built by Tri-State Specialists on the riverfront in South Sioux City. Six doctors have asked a judge for clarifications and to reconsider portions of an injunction preventing them from being involved in the Riverview project.

No. 2 story of 2017
No. 2 story of 2017: BPI settles with ABC

DAKOTA DUNES | Courtroom drama wasn't lacking for three weeks in a makeshift Union County courtroom in June, when Beef Products Inc.'s billion-dollar defamation lawsuit against ABC went to trial after nearly five years of buildup.

The trial, perhaps the biggest in South Dakota history, was humming along. For three weeks, BPI's lawyers called experts and company officials who supported the Dakota Dunes-based company's contention that its Lean Finely Textured Beef product was safe and nutritious and that a series of stories by ABC and correspondent Jim Avila in March and April 2012 used false information about the product. Particularly damaging, the company said, was the repeated use of the term "pink slime" to describe LFTB.

Then the trial, which had attracted national media coverage and was expected to last eight weeks, was suddenly over.

BPI reached a confidential settlement with ABC on June 28 -- the trial's 17th day -- ending the trial and the lawsuit, in which BPI had sued ABC and Avila, seeking $1.9 billion, an amount that could have been tripled to $5.7 billion under a South Dakota law designed to protect agricultural interests.

"ABC made us an offer that we just could not refuse," Regina Roth, who founded BPI with her husband, Eldon, told an audience a month later at a Sioux City Rotary Club meeting. "They had been making offers, but they were nowhere where they needed to be. It was enough money for us that we felt vindication."

Terms of the settlement and the amount are confidential. A regulatory report filed by Walt Disney Co., ABC's parent company, would later list a $177 million litigation settlement. That total is believed to be a portion of the settlement not covered by Disney's insurers.

The resolution of the five-year-old legal fight that attracted scores of national attention is The Journal's No. 2 story of 2017.

BPI filed its defamation lawsuit against ABC, Avila, who reported many of the stories, and several others who were later dismissed from the suit, in Union County Circuit Court in September 2012, just six months after the network' stories had aired. In many of the reports, then-ABC anchor Diane Sawyer and Avila repeatedly referred to the product as "pink slime," a term BPI claimed led consumers to believe the product was unsafe and low in nutritional value.

The fallout from those stories left BPI reeling. Fearing backlash from consumer groups, large grocery chains and other customers stopped selling ground beef that had LFTB, which is blended with the beef to reduce its fat content. BPI reported that sales of LFTB before the ABC reports were at 5 million pounds per week, a total that dropped to 1.3 million pounds two weeks after ABC's reports began to air. That drop led BPI to close plants in Waterloo, Iowa; Garden City, Kansas; and Amarillo, Texas, leaving its South Sioux City plant as the only one in operation. More than 700 workers were laid off.

With the lawsuit settled, BPI has moved forward, Regina Roth said. She told the Rotary Club that sales of LFTB have rebounded to about 3 million pounds per week, and the company is gearing up its research and development of new products, one of which is a new line of taco meat that is now available in local grocery stores.

Jim Lee, Sioux City Journal  

Country singer Toby Keith performs at the Tyson Events Center in Sioux City on Aug. 26.

Deadline met: Sioux City ag center hits $5M in private fundraising

SIOUX CITY | Plans to construct the $16 million Bomgaars Ag Expo Center in the city's former stockyards have reached a major milestone. 

The project recently surpassed the $5 million private fundraising mark, meeting the Dec. 31 deadline set by the state board that awarded $14 million in tax credits to help finance a series of big-ticket projects designed to attract visitors.

The deadline was among a handful of contingencies outlined by the Iowa Economic Development Authority Board when it approved Sioux City's $13.5 million Reinvestment District funding award in August. The district also includes a Courtyard by Marriott hotel and parking structure near the Convention Center, Ho-Chunk Inc.'s Virginia Square development and the revitalization of the historic Warrior Hotel and Davidson Building.

The ag expo center will receive more than half, or about $6.7 million, of the state funding. The project, which will be built at the site of the since-demolished John Morrell plant once, will host equestrian events, trade shows, indoor recreation and educational programming. It is currently in the design phase. 

The more than 200,000-square-foot venue will have a 45,000-square-foot main arena with approximately 2,000 seats, a warm-up arena and additional exhibit space. The large space will also allow for removable indoor turf and sport courts to be used for recreation purposes such as sports practices, games, tournaments and camps. 

The project will also include space for Western Iowa Tech Community College to hold veterinary classes. 

Siouxland Expo Center Board of Directors President Dirk Lohry told The Journal Thursday that the board now anticipates a final design in early 2018, with construction starting in May and reaching completion by the end of 2019. 

The $5 million private funding and $6.7 million in state reinvestment funds will join contributions of $2 million from Sioux City, $1.5 million from Woodbury County, $1 million from Missouri River Historical Development, $1 million from the state's Brownfield/Grayfield program, $650,000 from Bomgaars, $250,000 from Western Iowa Tech and $200,000 from the Gilchrist Foundation. 

"Together, the public and private commitments of over $16 million will allow this exciting new multi-purpose complex to become reality," Lohry said in an email.

Originally envisioned mainly as an agriculture-oriented center, the facility has undergone significant changes over the past year. Plans have since downsized the venue slightly to decrease a previous $18.5 million price estimate and have included elements that will allow it to host sports practices, camps and games

Those tweaks also have turned cash flow projections for the facility from negative to positive. 

Now that the fundraising deadline has been met, future contingencies for the city to receive the Reinvestment District funding include construction documents for the ag center project, a development agreement and documentation of financing for the Warrior project and a development agreement and documentation of financing for the fourth building of the Virginia Square project.