News : Scuttled sale of care facility to troubled out-of-state company sparks lawsuit

By Clark Kauffman

A lawsuit between two health care providers is shedding new light on the scuttled sale of an eastern Iowa assisted living facility to a troubled company that runs substance-abuse treatment centers.

Shellsburg Associates, an Iowa company based in Benton County, is suing Landmark Recovery of Louisville, a company based in Kentucky, in U.S. District Court for the Northern District of Iowa.

Shellsburg Associates was formed in the mid-1990s when it created Rock Ridge Residential & Assisted Living Care Center in the town of Shellsburg. State records indicate that at one time, Rock Ridge had 54 resident rooms, plus self-contained apartments, and offered on-site nursing care along with a doctor's office and a helicopter pad that could be used to help transport residents to hospitals in Cedar Rapids, 19 miles to the east.

According to the lawsuit, Rock Ridge "suffered numerous financial setbacks" tied to the construction of competing residential care facilities that offered a continuum of care from independent living to full skilled-nursing care.

In addition, the lawsuit claims, the COVID-19 pandemic adversely affected Rock Ridge and the industry, resulting in high fatality rates and a resulting decline in occupancy. Rock Ridge, the lawsuit claims, had "difficulty in retaining and paying its nursing and certified nursing assistant staff," and the home's occupancy dropped to only 12 residents in the facility with zero residents in the apartments.

Rock Ridge collected governmental financial assistance in the form of Paycheck Protection Program loans and other pandemic-related benefits, but the lawsuit claims "the funds were insufficient to maintain operations." At one point, the lawsuit alleges, one of Shellsburg Associates' shareholder owners was providing nursing services to residents without pay, while the corporation's president was providing administrative, maintenance and janitorial services without pay.

Shellsburg Associates then fell behind in payments to its primary lender, Bank of the West, and considered filing for bankruptcy but decided instead to pursue a sale of the facility while "winding down the corporation," the lawsuit alleges.

In October 2021, Shellsburg Associates allegedly entered into an agreement with Senior Care Realty to market Rock Ridge. In May 2022, Shellsburg Associates agreed to sell the property for $1.25 million to Landmark Recovery, which planned to establish a substance-abuse treatment program there.

The closing on the real estate transaction was scheduled for Oct. 19, 2022, with Landmark Recovery allegedly assuring Shellsburg Associates the sale would be completed as planned and asserting there were no financing or other issues that would delay the sale.

According to the lawsuit, the owners of Rock Ridge vacated the building, assisted the remaining residents in relocating to other facilities, and cleared the buildings of any remaining personal property equipment so that Landmark Recovery could immediately take possession of the property at the closing.

However, the lawsuit claims, three hours before the scheduled closing, Landmark Recovery notified Shellsburg Associates by email that the sale would not be completed. That decision, the lawsuit alleges, resulted in Shellsburg Associates' inability to satisfy its obligations to Bank of the West, which proceeded to foreclose on the property. The real estate and care facility wound up being sold through a sheriff's sale for an amount that the plaintiff says was "significantly lower" than what Landmark Recovery had agreed to pay.

When Shellsburg Associates attempted to collect money from Landmark Recovery for the damages it had incurred, the latter allegedly asserted that any such claims would have to be submitted to an arbitrator. Shellsburg Associates claims it then initiated an arbitration proceeding but Landmark Recovery refused to respond to the arbitration notices or to participate in the arbitration proceedings.

The lawsuit is seeking unspecified damages for fraudulent misrepresentation, negligent misrepresentation and breach of contract.

When asked about the lawsuit, representatives of Landmark Recovery directed the Iowa Capital Dispatch to the company's corporate office and provided a phone number to a line that was disconnected.

Landmark Recovery has experienced a number of financial and regulatory problems in recent years.

In 2023, Indiana's Division of Mental Health and Addiction shuttered three of the company's Indiana facilities after three patients died in a single week at one of the company's treatment centers. Company officials told Behavioral Health Business the closures led to a cashflow issue that resulted in two other Landmark Recovery facilities - one in Nevada, and one in Oklahoma - losing their lease.

In January 2025, former Landmark patients and staff told Indiana television station WTHR that severe understaffing and neglect had contributed to injuries and deaths at two of the company's Indiana rehab centers.

In February 2025, police alleged a female patient at a Landmark treatment center in Louisville, Kentucky, was strangled by another patient who is now charged with murder.