GREENBRAE -- The judge arbitrating a lawsuit to recover more than $120 million transferred out of Marin General Hospital into the Sutter Health system has dropped former Marin General Hospital Corp. board Chairman Robert Heller from the case.

In an order issued Dec. 8, San Francisco judge Rebecca Westerfield ruled there "is simply no evidence of any fraud, bad faith or overreaching" by Mr. Heller and ordered summary judgment in his favor, his attorneys announced today.

"I am gratified and believe the judge’s ruling vindicates the actions of the Marin General board of directors before the transfer of control to the district," Mr. Heller said in a statement. "We always strove to exercise sound business judgment and, after due deliberations and counsel from legal and financial professionals, to act in what we believed was the best interests of the Hospital. We turned over a first-class hospital to the Health Care District in 2010."

Mr. Heller was named in the lawsuit that claimed the former Sutter-appointed board failed to act in the interest of the Marin Healthcare District, which oversees the hospital, and thus violated voters' interest by letting equity transfers go to Sutter's Sacramento headquarters. Sutter has maintained that the transfers were a well-known element of an agreement, reached in 2006, that returned hospital to district control in 2010.

Jamie Maites, a spokeswoman for Marin General, said arbitration is not yet complete and that the hospital stands by its claims.

"The arbitrator has yet to rule on whether or not the actions taken by Sutter and supported by Mr. Heller in the years preceding the date of transfer were legal and consistent with their fiduciary responsibility," she said. " We continue to believe that stripping Marin General Hospital of cash and reserves represents an unconscionable violation of their fiduciary duty and an indefensible violation of the interests of the people of Marin"

 The lawsuit claimed Sutter escalated the amount of transfers following the 2006 agreement, a charge Sutter has defended by saying that the increases in transfers reflected the profitability of the hospital.

After the health care district filed suit in August 2010, the Marin Superior Court ordered that the case be submitted to arbitration.

Judge Westerfield, a JAMS arbitrator, dismissed all the claims against Mr. Heller, thereby resolving any and all allegations of wrongdoing in his favor, according to his attorneys, George Niespolo and Stephen Sutro of Philadelphia-based Daune Morris.