Abrams v. Collins (In re Heartland Mem'l Hosp., LLC )

• Decision Date: 09 June 2011
• Docket Number: CASE NO. 07-20188 JPK,ADVERSARY NO. 09-2068
• Parties: In re: HEARTLAND MEMORIAL HOSPITAL, LLC and Robert Handler, Debtor. DAVID ABRAMS, not individually but solely as the Liquidating Trustee and court-appointed manager of Heartland Memorial Hospital, LLC, Plaintiff, v. HAROLD E. COLLINS, KAREN BRIGGS, MARK EFRUSY, VIJAY GUPTA, RAMON HALUM, ALLEN HILL, HILTON HUDSON, PAUL JONES, JOHN KNIAZ, SHAUN KONDAMURI, RANDALL C. MORGAN, JR., JAGDISH PATEL, VIJAY PATEL, DAVID RAY, ALFRED SHARP, JEFFREY YESSENOW, WRIGHT CAPITAL PARTNERS, LLC, and LEROY J. WRIGHT Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

IN RE: HEARTLAND MEMORIAL HOSPITAL, LLC and Robert Handler, Debtor DAVID ABRAMS, not individually but solely as the Liquidating Trustee and court-appointed manager of Heartland Memorial Hospital, LLC, Plaintiff, v. HAROLD E. COLLINS, KAREN BRIGGS, MARK EFRUSY, VIJAY GUPTA, RAMON HALUM, ALLEN HILL, HILTON HUDSON PAUL JONES, JOHN KNIAZ, SHAUN KONDAMURI, RANDALL C. MORGAN JR., JAGDISH PATEL, VIJAY PATEL DAVID RAY, ALFRED SHARP, JEFFREY YESSENOW, WRIGHT CAPITAL PARTNERS, LLC, and LEROY J. WRIGHT Defendants.

CASE NO. 07-20188 JPK

ADVERSARY NO. 09-2068

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF INDIANA HAMMOND DIVISION

Dated June 9, 2011

ORDER CONCERNING PLAINTIFF'S MOTION FOR LEAVE

TO FILE SECOND AMENDED COMPLAINT

This order concerns the Motion for Leave to File Second Amended Complaint ["Motion"] filed on May 27, 2010 (record #104), and the objections of Harold E. Collins, Vijay Gupta, Shaun Kondamuri, Randall C. Morgan, Jagdish Patel, and David Ray to the Motion.

In entering this order, the court provisionally determines that actions asserted by the plaintiff David Abrams, as Liquidating Trustee, ["Abrams"] are not within the court's "core proceedings" jurisdiction as provided for by 28 U.S.C. § 157(b), but rather constitute "proceedings . . . related to a case under title 11" under 28 U.S.C. § 157(a). The court's jurisdiction is thus defined as that imparted in "related to" proceedings. Pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and N.D.Ind.L.R. 200.1(a)(1), this court has jurisdiction to fullyadminister "related to" proceedings to the fullest extent provided for by 28 U.S.C. § 157(c)(1). The parties in this case have not consented to this court's exercise of final judgment authority in this adversary proceeding. However, the court determines that ruling on the Motion does not constitute a final order or judgment within the restrictions provided for by 28 U.S.C. § 157(c)(1), and that the court has complete jurisdiction to enter an order determining the Motion itself, and that the procedure provided for by that statute for submission of proposed findings of fact and conclusions of law to the district court is not applicable with respect to final determination of the Motion.

I. CASE HISTORY

This adversary proceeding was initiated by a complaint filed by Abrams on February 28, 2009. The caption of the complaint was as stated in the caption of this order.

On September 24, 2009, Abrams filed a Motion for Leave to File Amended Complaint (record #14), which was granted by the court's order entered on October 15, 2009 (record #16).¹ The amended complaint was filed on October 22, 2009 (record #18).

Following the initial preliminary pre-trial conference in the adversary proceeding, the court entered an order on May 26, 2010 (record #103) which provided that Abrams would file a motion for leave to file a second amended complaint by May 28, 2010, and that by June 11, 2010 any party desiring to do so was to file an objection to that motion.² Abrams filed theMotion which is the subject of this order on May 27, 2010 (record #104). On June 11, 2010, the defendant Harold E. Collins ["Collins"] filed his Collins' Response to Plaintiff's Motion for Leave to File Second Amended Complaint (record #111). On June 18, 2010, the defendants Gupta, Kondamuri, Morgan, Patel and Ray filed a joint objection to the Motion entitled "Certain Defendants' Objection to Plaintiff's Motion to File Second Amended Complaint" (record #115).³

By order entered on October 27, 2010 (record #129), the court scheduled oral arguments on the Motion, and provided Abrams with an opportunity to file a response to the objections which had been filed with respect to the Motion. Abrams timely filed a response (record #135).

As the foregoing establishes, the defendants Collins, Gupta, Kondamuri, Patel, Ray and Morgan were the only parties who filed a separate motion to dismiss with respect to the first amended complaint, and those parties are the sole parties who object to the Motion.

It is important to note the material similarities and differences among the originalcomplaint, the first amended complaint, and the proposed second amended complaint in relation to the parties objecting to the Motion.

A. Original Complaint

1. The original complaint included Collins, Gupta, Kondamuri, Morgan, Jagdish Patel and Ray as defendants in the caption of the complaint.

2. Paragraph 23 of the original complaint states:

23. Defendant, Shaun Kondamuri, M.D., is an individual and he resides at 1943 Redwood Lane, Munster, Indiana 46321.

3. Paragraph 27 of the original complaint states:

27. Defendant, David Ray, D.P.M., is an individual and can be reached at 2001 US Highway 41, Suite J, Schererville, Indiana 46375.

4. Paragraph 39 of the original complaint states:

39. From 2004 until approximately October of 2005, Heartland's business affairs were managed by the directors of iHealthcare through a management committee for Heartland, comprised of Vijay Gupta, M.D., Harold B. Collins, Karen Briggs, D.O., Mark Efrusy, D.O., Ramon Halum, M.D., John Kniaz, D.O., David Ray, D.P.M., Jagdish Patel, M.D., Vijay Patel, M.D., Shaun Kondamuri, M.D., Randall Morgan, Jr., M.D., Jeffrey Yessenow, M.D., and Thomas McDermott, Sr. (hereinafter, collectively referred as the "Old Management").

5. The title of Count I of the original complaint is the following:

Liquidating Trustee's Breach of Fiduciary Duty and Self-Dealing Claims Against Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow

6. There is no mention of Kondamuri or Ray in any rhetorical paragraph in Count I of the original complaint.

7. Paragraphs 104 and 105 of the original complaint stated:

104. Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow all owed fiduciary duties of care and loyalty to Heartland and, due to Heartland's insolvency (at all relevant times), to Heartland's employees, creditors and other vendors.

105. As more fully alleged above, Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow all breached their fiduciary duties and acted in their own self interest by causing, without limitation, the transfer of the Munster hospital facility, making lease payments on the Munster hospital, permitting New Management, though Wright, Sharp and Hill to assume control of Heartland, failure to properly supervise New Management, allowing Heartland to make payments to Wright Capital Group, and allowing New Management to enter into detrimental transactions including, without limitation, the AIC transaction, and allowing the proceeds of the AIC transaction to be paid to Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow.

B. First Amended Complaint

1. The first amended complaint included Collins, Gupta, Kondamuri, Morgan, Jagdish Patel and Ray as defendants in the caption of the complaint.

2. Paragraph 23 of the first amended complaint states:

23. Defendant, Shaun Kondamuri, M.D., is an individual and he resides at 1943 Redwood Lane, Munster, Indiana 46321.

3. Paragraph 27 of the first amended complaint states:

27. Defendant, David Ray, D.P.M., is an individual and can be reached at 2001 US Highway 41, Suite J, Schererville, Indiana 46375.

4. Paragraph 39 of the first amended complaint states:

39. From 2004 until approximately October of 2005, Heartland's business affairs were managed by the directors of iHealthcare through a management committee for Heartland, comprised of Vijay Gupta, M.D., Harold B. Collins, Karen Briggs, D.O., Mark Efrusy, D.O., Ramon Halum, M.D., John Kniaz, D.O., David Ray, D.P.M., Jagdish Patel, M.D. ("J. Patel"), Vijay Patel, M.D. ("V. Patel"), Shaun Kondamuri, M.D., Randall Morgan, Jr., M.D., Jeffrey Yessenow, M.D., and Thomas McDermott, Sr. (hereinafter, collectively referred as the "Old Management").

5. Paragraph 99 of the first amended complaint states:

99. Heartland received a disproportionately small portion of the proceeds from the SSFHS Sale/Leaseback transaction due to New Management's decisions regarding the allocation of thepurchase price between Heartland and Munster Holdings.⁴

6. The title of Count I of the first amended complaint is the following:

Liquidating Trustee's Breach of Fiduciary Duty Claims Against Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow

7. The body of Count I does not mention either Kondamuri or Ray.

8. Paragraphs 103 and 104 of the first amended complaint stated:

103. Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow all owed fiduciary duties of care and loyalty to Heartland and, due to Heartland's insolvency (at all relevant times), to Heartland's employees, creditors and other vendors.

104. As more fully alleged above, Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow all breached their fiduciary duties by committing, without limitation, numerous acts of financial mismanagement, including inter alia, the transfer of the Munster hospital facility, making lease payments on the Munster hospital, permitting New Management, though Wright, Sharp and Hill to assume control of Heartland, failure to properly supervise New Management, allowing Heartland to make payments to Wright Capital Group, and allowing New Management to enter into detrimental transactions including, without limitation, the AIC transaction, and allowing the proceeds of the AIC transaction to be paid to Collins, Briggs, Efrusy, Gupta, Halum, Morgan, J. Patel, V. Patel and Yessenow.

C. Proposed Second Amended Complaint

1. The defendants designated in the caption of the second amended complaint are the same defendants as designated in the captions of the original complaint and of the first amended complaint.

2. Paragraph 23 of the second amended complaint states:

23. Defendant, Shaun Kondamuri, M.D., is an individual and he resides at 1943 Redwood Lane, Munster, Indiana 46321.

3. Paragraph 27 of the second amended...