ASHLAND, Ky. — A California health care company has won an initial procedural victory in its lawsuit over ownership of the former Bellefonte Hospital property, as a federal court clerk entered a default against one of the defendants after it failed to respond to the case.

The dispute involves Emend Health Corporation, which claims it purchased a 50 percent ownership interest in Bellefonte Properties LLC—the company that owns the former Bellefonte Hospital campus—from Shelton Robinson Properties LLC for more than $1 million in cash, plus a promissory note, in January.

Emend alleges the sale closed Jan. 27 and that, for months afterward, both Shelton Robinson Properties and the property’s other co-owner, Walker Land Company VI, recognized Emend as a 50 percent owner. According to the lawsuit, Emend made capital contributions, paid operating expenses, gained access to company bank accounts and financial records, and worked to lease the property.

The lawsuit claims the dispute arose in May when Shelton Robinson Properties attempted to terminate the purchase agreement, alleging the transaction never closed because certain required documents had not been received. Emend calls that claim false, saying Shelton accepted the purchase money, received the promissory note and later even requested an early payment under that note.

Emend further alleges Shelton later proposed to “unwind the Purchase Agreement” so it could regain ownership rights in the Bellefonte property. The complaint contends the effort was driven by Addiction Recovery Care’s financial problems, alleging Shelton wanted to use the Bellefonte property as part of a settlement related to other litigation. Portions of that allegation are redacted in the public filing.

The timing coincides with a series of high-profile legal and financial challenges facing Addiction Recovery Care. Earlier this year, a federal judge in New York froze approximately $4.7 million of ARC’s remaining liquid assets after creditor Angelica Capital Trust alleged ARC improperly spent money that had been pledged to repay a $5.4 million advance on tax credits. Later, a second company also filed suit, claiming ARC sold them the same tax credits. ARC did not dispute it owed the money. Court filings in that case also stated ARC was attempting to raise approximately $27.7 million to settle a U.S. Department of Justice investigation involving Medicaid and Medicare fraud allegations.

Tim Robinson, who served as CEO of ARC, resigned after he was indicted for wire fraud and money laundering over the alleged tax credit scheme.

According to the New York court filings, Emend Healthcare was identified as the prospective buyer of ARC. ARC told the court Emend advanced $1.3 million of the purchase price to replenish a court-ordered frozen account after operating expenses reduced its balance.

In the Bellefonte lawsuit, Emend also accuses Walker Land Company of reversing course after Shelton sought to undo the sale. The complaint says Walker had acknowledged Emend’s ownership for months before suddenly denying it was a member of Bellefonte. Emend alleges Walker’s challenge is “baseless and contrived” and intended to pressure the company into giving up its ownership interest.

On Wednesday, Emend asked the clerk of the U.S. District Court to enter a default against Shelton Robinson Properties, saying the company had been served with the lawsuit on June 10 but failed to answer by the July 1 deadline. Later that day, the clerk entered the default for “failure to plead or otherwise defend.”

A clerk’s entry of default is not a final judgment, but it is the first step that can allow a plaintiff to seek a default judgment if the defendant continues not to participate in the case.

Emend is asking the court to declare that the January sale is valid, that it owns 50 percent of Bellefonte Properties, that Shelton Robinson Properties has no right to rescind the deal, and that the operating agreement recognizing Emend’s ownership remains enforceable. It is also seeking attorney’s fees.

The court has not ruled on the merits of Emend’s claims.

A copy of Emend’s redacted complaint follows: