ST. CROIX — The Virgin Islands Government Hospitals and Health Facilities Corporation has asked a federal judge on St. Croix to throw out the $6.36 million judgment entered against it and the Governor Juan F. Luis Hospital and Medical Center, arguing that the Michigan court responsible for the ruling lacked both personal jurisdiction over the corporation and the legal authority to hear the case.
In an 18-page motion filed Thursday, November 5, the hospital corporation contends that the September 22 default judgment is legally void because the creditors failed to properly serve the lawsuit and because the corporation is an arm of the Government of the Virgin Islands, rather than an independent entity subject to federal diversity jurisdiction.
The motion, filed by corporation legal counsel Julie A. Beberman under Rule 60(b)(4) of the Federal Rules of Civil Procedure, asks Chief Judge Robert Molloy of the District Court of the Virgin Islands to set aside the Michigan judgment and deny the creditors' pending request to seize hospital bank accounts and other pledged assets.
"Two independent jurisdictional defects require this relief," the corporation states.
The filing marks the hospital corporation's first formal challenge to the judgment in the Virgin Islands enforcement proceeding, following several days of Consortium reporting concerning the debt, its underlying equipment financing arrangement, and attempts by creditors VFI KR SPE I LLC and Varilease Finance, Inc. to obtain hospital assets.
Corporation says lawsuit was improperly served
The corporation's first argument centers on an April 13, 2026, attempt to serve the summons and complaint.
According to Thursday's filing, a process server delivered the documents to Stephanie-Anne Oriol, identified as a legal and administrative coordinator, and submitted a return stating that she was designated by law to accept service on behalf of the hospital corporation.
The corporation disputes that assertion, maintaining that Ms. Oriol was neither its designated registered agent nor otherwise authorized by law to accept service of process. It says the chief executive officer was never served.
Under Federal Rule of Civil Procedure 4(j)(2), the corporation argues, a state-created governmental organization must be served through its chief executive officer or in accordance with applicable local law. Virgin Islands rules similarly specify the persons authorized to receive service on behalf of a public corporation.
The motion contends that the process server's designation of Ms. Oriol as an authorized recipient did not establish her legal authority to accept the documents.
"That the process server checked a box stating Ms. Oriol was 'designated by law to accept service' does not make it so without a law conferring that authority," the filing states.
The corporation says a declaration from Ms. Oriol contradicts the process server's account of her authority to receive service.
The motion also acknowledges that the creditors subsequently provided their request for default judgment and notice of the hearing to Governor Albert Bryan Jr., Attorney General Gordon Rhea, the hospital corporation, JFL, and the hospital's chief executive officer.
However, the corporation argues that providing those later documents did not correct the alleged failure to properly serve the original summons and complaint.
The creditors obtained a clerk's entry of default on May 6, moved for a default judgment on May 29, and secured the September 22 ruling from U.S. District Judge Brandy R. McMillion.
According to the hospital corporation, defective service meant the Michigan court never acquired personal jurisdiction over it, rendering the resulting judgment unenforceable.
Hospital corporation argues Michigan court lacked authority to hear case
The second challenge concerns the legal status of the Virgin Islands Government Hospitals and Health Facilities Corporation itself.
The underlying lawsuit, filed March 31 in the Eastern District of Michigan, asserted breach of contract, claim and delivery, foreclosure of a security interest, and specific performance.
The hospital corporation emphasizes that the creditors brought no federal statutory or constitutional claims. Instead, they relied exclusively on diversity jurisdiction, which generally allows federal courts to hear certain civil disputes involving parties with qualifying different citizenship.
The corporation argues that diversity jurisdiction could not apply because it is legally an arm of the Government of the Virgin Islands. The government itself is not considered a citizen for purposes of establishing diversity jurisdiction, and the same principle can extend to entities legally operating as arms of the government.
The filing cites Virgin Islands statutes and judicial decisions describing the corporation as a public benefit corporation established to manage healthcare delivery in partnership with the territorial government.
It also points to the government's control over the corporation's operations, budget, personnel, and financial obligations.
Among the arguments advanced is that the hospital corporation cannot independently issue bonds and must borrow through the Virgin Islands Public Finance Authority. Its financial dependence on government appropriations, the motion contends, distinguishes it from autonomous entities such as the Virgin Islands Port Authority and Water and Power Authority.
The filing specifically cites $66.5 million appropriated from the General Fund for the hospital corporation's fiscal year 2027 operating expenses, under Act No. 9144.
The corporation maintains that the government's statutory responsibility to finance hospital operations extends to the practical burden of satisfying judgments entered against the public hospital system.
"The practical reality is that the Government is required to fund VIGHHFC's operations without exception, which would encompass VIGHHFC's liabilities for any judgments," the motion states.
The corporation further argues that the Legislature has not expressly insulated the government from the corporation's debts and judgments, unlike statutory provisions governing certain other public authorities.
These assertions form part of the corporation's effort to demonstrate that it is legally an arm of the government. They do not constitute a judicial determination that the territorial government is directly liable for the disputed $6.36 million obligation.
The motion also cites a 2018 Virgin Islands Supreme Court decision establishing that JFL itself is not a separate legal entity empowered to sue and be sued. The corporation argues that the jurisdictional defects therefore apply to the judgment insofar as it names the hospital separately.
Creditors' attempt to seize assets remains before the court
The challenge follows a separate dispute over whether creditors may seize JFL's Banco Popular bank accounts and other assets.
After registering the Michigan judgment in the District Court of the Virgin Islands on October 27, VFI KR SPE I LLC and Varilease Finance requested that federal marshals seize funds in hospital bank accounts, along with other pledged or liened property.
In an October 29 order, Judge Molloy questioned the legal basis for the requested seizure, citing 19 V.I.C. § 245b, which generally exempts the hospital corporation's property and funds from judicial execution.
The statute, however, preserves certain rights held by secured creditors to enforce mortgages, liens, pledges, and other security interests.
Judge Molloy directed the creditors to submit legal arguments by November 13 explaining why they should be permitted to execute against the hospital corporation's assets.
The judge also raised questions about whether the Michigan court had properly exercised diversity jurisdiction, observing that the corporation's status as an arm of the territorial government remained an unsettled issue.
Thursday's motion directly addresses that jurisdictional question. The corporation argues that, because the original judgment is void, the Virgin Islands court need not decide whether the creditors would otherwise be entitled to execute against hospital assets.
The corporation nevertheless reserves its defenses against execution, including those arising from the territorial statute protecting public hospital property.
Earlier explanation for absence from Michigan proceedings
The new legal challenge follows an October 30 statement from JFL and its governing corporation, in which officials said the decision not to appear in the Michigan proceedings followed legal advice concerning service of process and jurisdiction.
That statement also disclosed that the approximately $6 million financing arrangement originated in a 2024 sale-leaseback transaction involving medical equipment the hospital already owned.
Hospital officials said the arrangement was undertaken during a period of severe financial pressure to provide funds for operating expenses, payroll, and outstanding vendor obligations.
JFL reported that it had paid $3,018,815.03 toward the arrangement following a reconciliation of its payments.
The September judgment nevertheless awarded the creditors $6,357,600, plus attorneys' fees, costs, and annual interest of 13 percent. It also ordered the return of equipment identified in the lawsuit, including ventilators, operating tables, ultrasound equipment, infant incubators, hospital beds, patient monitors, and sterilization systems.
The Michigan judgment additionally authorized foreclosure of an all-asset lien, with the monetary award to be reduced by the resale value of equipment or other assets recovered by the creditors.
The November 5 motion does not directly challenge the financing arrangement's terms, dispute the underlying payment history, or ask the Virgin Islands court to determine the amount properly owed. Instead, it seeks to eliminate the existing judgment on jurisdictional grounds.
If the court agrees that either jurisdictional defect renders the judgment void, the corporation argues, the ruling must be set aside.
The motion itself does not vacate the judgment, and the court has not yet granted the requested relief. The creditors retain an opportunity to contest the corporation's arguments as the proceedings continue.
