In re John Michael Baird And Jane Nelson Baird, 6:09–bk–04578–ABB.

• Decision Date: 20 January 2010
• Docket Number: No. 6:09–bk–04578–ABB.,6:09–bk–04578–ABB.
• Citation: 456 B.R. 112
• Parties: In re John Michael BAIRD and Jane Nelson Baird, Debtors.
• Court: U.S. Bankruptcy Court — Middle District of Florida

456 B.R. 112

In re John Michael BAIRD and Jane Nelson Baird, Debtors.

No. 6:09–bk–04578–ABB.

United States Bankruptcy Court, M.D. Florida,Orlando Division.

Jan. 20, 2010.

David R. McFarlin, Wolff, Hill, McFarlin & Herron, P.A., Orlando, FL, for Debtors.

MEMORANDUM OPINION

ARTHUR B. BRISKMAN, Bankruptcy Judge.

This matter came before the Court on the Motion to Dismiss Bankruptcy Case (Doc. No. 31) filed by LifePoint Hospitals, d/b/a Bourbon Community Hospital, LLC (“BCH”), seeking dismissal of this case pursuant to 11 U.S.C. Section 707(a) and the Motion to Dismiss BCH's Motion (Doc. No. 33) filed by the Debtor Jane Nelson Baird. The final evidentiary hearing was held on November 18, 2009 at which the Debtors John Michael Baird (“Dr. Baird”) and Jane Nelson Baird (“Mrs. Baird”) (collectively, “Debtors”), their counsel, a representative of BCH, and counsel for BCH appeared. The parties, pursuant to the Court's directive, filed post-hearing briefs and deposition transcript designations (Doc. Nos. 56, 57, 58, 59, 60).

BCH's Motion to Dismiss is due to be denied and Mrs. Baird's Motion to Dismiss is due to be denied as moot for the reasons set forth herein. The Court makes the following findings and conclusions after reviewing the pleadings and evidence, hearing live testimony and argument, and being otherwise fully advised in the premises.

Mark B. Medley Transcript Designations

Both parties rely upon the deposition transcript of Mark B. Medley (“Medley”), the former Chief Executive Officer of BCH, and seek the admission of various portions of the transcript (Doc. Nos. 56, 59). The Debtors objected to BCH's offering into evidence at trial portions of the deposition transcript. They filed a Notice post-hearing (Doc. No. 56) designating portions of the transcript and request those portions be admitted into evidence. BCH filed a post-hearing response to the Debtors' trial objection asserting the designated portions of the deposition are non-hearsay (Doc. No. 58).

The Debtors' objections to BCH's designations are overruled. The complete transcript of Medley's deposition is admitted into evidence.

Background

Dr. Baird is a sixty-one year-old physician specializing in obstetrics and gynecology (“OB/GYN”). He obtained his medical degree in 1979 and was in private practice in Kentucky from 1983 through 2005. Mrs. Baird has been Dr. Baird's office manager and has always been integral in his professional and financial decisions.

Dr. Baird's practice was successful, generating an annual income of approximately $350,000.00. The Debtors lived a lavish lifestyle. They owned a luxury boat, drove luxury cars, took frequent vacations, lived in an up-scale neighborhood, and Mrs. Baird had a monthly clothing allowance of $2,500.00, which she often exceeded. She spent more than $30,000.00 on clothing at Talbots in 2006. The Debtors explained Mrs. Baird needed to present an image commensurate with her status as a doctor's wife.

Dr. Baird retired from his OB/GYN practice and opened Bariatric Medicine PSC in Owensboro, Kentucky focusing on Bariatrics, the branch of medicine relating to the causes, prevention, and treatment of obesity. Mrs. Baird was the office manager. The practice was not successful and the Debtors incurred loans and credit card debt to pay business and personal expenses. Dr. Baird exhausted his retirement accounts. The Debtors sold their boat and home and purchased a smaller house located at 104 Avalon Path, Georgetown, Kentucky 40324 (“Kentucky Property”). They closed the Bariatrics practice in 2007.

Dr. Baird sought new employment in the OB/GYN field and met with BCH, a fifty-eight bed licensed hospital in Paris, Kentucky, to explore whether the area could support a full-time OB/GYN practice. Dr. Baird and BCH, in April 2007, executed a Physician Recruiting Agreement and addenda, including a Net Collectible Revenue Guarantee (collectively, the “Agreement”), pursuant to which Dr. Baird agreed to establish an OB/GYN practice in the geographic area served by BCH and BCH would pay Dr. Baird:

(i) an advance of $42,918.00 per month for eighteen months;

(ii) a “signing bonus” of $25,000.00;

(iii) relocation expenses of $10,000.00;

(iv) marketing expenses up to $12,000.00; and

(v) practice management consulting service expenses up to $15,000.00.

The Agreement provided the monthly advances were to be reduced by the amounts Dr. Baird collected from patients.

Dr. Baird established an OB/GYN practice near BCH in August 2007 with Mrs. Baird as his office manager. BCH paid $507,859.17 to Dr. Baird during the period July 2007 through July 2008 from which Dr. Baird drew a monthly salary of $22,000.00 and paid Mrs. Baird a monthly salary of $3,000.00.

The practice, from its onset, was not successful. The relationship between Dr. Baird and BCH deteriorated, with each party blaming the other for the practice's failure. Dr. Baird asserts the geographic region could not support a full-time OB/GYN practice and BCH misrepresented the region could support his practice. BCH declared Dr. Baird in default of the Agreement and initiated an arbitration proceeding.

Dr. Baird, while subject to the Agreement, began investigating employment opportunities in Florida and contacted OB–Hospitalist Group LLC (“OBH”) in April 2008 based upon an Internet offering. He became licensed in Florida and was hired by OBH as a hospitalist. The Debtors relocated to Florida in August 2008 where they lease an apartment located at 501 Mirasol Circle, Number 417, Kissimmee, Florida 34747.

Dr. Baird provides emergency and non-emergency OB/GYN services to patients in OBH's facilities as an independent contractor. He is paid an hourly rate of $120.00 based upon a twenty-four hour shift and works approximately 168 hours per month (Doc. No. 4). He is paid wages of approximately $20,160.00 per month. No withholdings are deducted from his pay. Mrs. Baird has not been employed since the Debtors moved from Kentucky (Doc. No. 9). Dr. Baird's OBH income is the Debtors' sole source of income.

Bankruptcy Case

The Debtors filed a joint Chapter 7 petition on January 28, 2009 (“Petition Date”) (Doc. No. 1) and the automatic stay of 11 U.S.C. Section 362(a) arose staying the BCH arbitration proceeding. The Debtors listed in their Schedules (Doc. No. 1) total assets of $259,678.64 comprised of real property valued at $248,220.00 and personal property valued at $11,458.64. They listed total debts of $869,208.32 comprised of secured debts of $233,743.01 and general unsecured debts of $635,465.31.

The Debtors were ineligible for Chapter 13 on the Petition Date because their unsecured debts exceed the debt limitations of 11 U.S.C. Section 109(e). The Debtors are eligible for Chapter 11.

The Chapter 7 Trustee Gene T. Chambers (“Trustee”) concluded the Debtors' 11 U.S.C. Section 341 meeting of creditors on May 15, 2009 and designated this case an asset case on October 17, 2009. She and the Office of the United States Trustee have made no appearances and taken no positions in this dismissal matter.

The Kentucky Property is encumbered by a first-priority mortgage of approximately $233,243.01 held by Traditional Bank and a lien held by The Pavilion Courtyards for homeowner's association dues of at least $500.00. The Debtors value the Kentucky Property at $248,220.00. The Trustee determined the Kentucky Property has no equity and abandoned it pursuant to her unopposed Report and Notice of Abandonment (Doc. No. 46). The Debtors continue to retain the Kentucky Property, which is vacant.

BCH seeks dismissal of this case as an abusive filing citing 11 U.S.C. Section 707(a) as the basis of its Motion, but attempts to bootstrap the Motion into an 11 U.S.C. Section 707(b)(3)(A) and Section 707(b)(3)(B) proceeding. BCH asserts: (i) the Debtors filed their petition in bad faith; and (ii) the totality of the Debtors' financial situation demonstrates abuse, which constitute Section 707(b)(3)(A) and Section 707(b)(3)(B) causes of action.

Much of BCH's trial presentation related to Dr. Baird's alleged breach of the Agreement and whether he entered into the Agreement in good faith. Such issues are relevant to a nondischargeability proceeding pursuant to 11 U.S.C. Section 523(a). BCH did not institute a non-dischargeability proceeding.

Analysis

This case is governed by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). BCH seeks dismissal of the Debtors' case pursuant to 11 U.S.C. Section 707(a) and/or Sections 707(b)(3)(A) and 707(b)(3)(B). BCH has the burden to establish the Debtors' filing is abusive by a preponderance of the evidence. Dionne v. Simmons (In re Simmons), 200 F.3d 738, 743 (11th Cir.2000); In re Parada, 391 B.R. 492, 496 (Bankr.S.D.Fla.2008).

11 U.S.C. Section 707(a)

Section 707(a) of the Bankruptcy Code provides a bankruptcy case may be dismissed “for cause” which includes:

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees or charges required under chapter 123 of title 28; and

(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521, but only on a motion by the United States trustee.

11 U.S.C. § 707(a). The statutory list of “for cause” factors is non-exclusive. In re Simmons, 200 F.3d at 743. The Courts, through pre- and post-BAPCPA case law, have developed an expanding list of factors relevant to a Section 707(a) determination, which include:

(i) the debtor reduced his creditors to a single creditor shortly before the petition date; (ii) the debtor made no life-style adjustments or continued living a lavish life-style;

(iii) the debtor filed the case in response to a judgment, pending litigation, or collection action;

(iv) there is an intent to avoid a large, single debt;

(v) the debtor made no effort to repay his...