Anderson v. Bajaj (In re Med. Mgmt. Grp., LLC)
| Citation | 534 B.R. 646 |
| Decision Date | 23 July 2015 |
| Docket Number | C/A No. 13–01264–DD,Adv. Pro. No. 15–80029–DD |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re, Medical Management Group, LLC, Debtor. Robert F. Anderson, as Chapter 7 Trustee, Plaintiff, v. Rajesh Bajaj, M.D., John Culleton, M.D., Vinod K. Jona, M.D., Zothanmawii Khiangte, M.D., H. Stuart Markwell, M.D., Heather F. McCown, M.D., Gerald B. Miele, M.D., F.A.C.E., Jeffrey P. Muha, D.P.M., F.A.C.P.A.S., Meenakshi A. Pande, M.D., Supen R. Patel, M.D., Michael D. Pavy, M.D., F.A.C.P., Sreenivas V. Rao, M.D., William D. Remmes, Kevin W. Shea, M.D., F.A.C.P., James C.H. Smith, M.D., Robert E. Turner, III, M.D., F.A.C.P., and Richard D. Weber, D.P.M., F.A.C.F.A.S. Defendants. |
In re, Medical Management Group, LLC, Debtor.
Robert F. Anderson, as Chapter 7 Trustee, Plaintiff
v.
Rajesh Bajaj, M.D., John Culleton, M.D., Vinod K. Jona, M.D., Zothanmawii Khiangte, M.D., H. Stuart Markwell, M.D., Heather F. McCown, M.D., Gerald B. Miele, M.D., F.A.C.E., Jeffrey P. Muha, D.P.M., F.A.C.P.A.S., Meenakshi A. Pande, M.D., Supen R. Patel, M.D., Michael D. Pavy, M.D., F.A.C.P., Sreenivas V. Rao, M.D., William D. Remmes, Kevin W. Shea, M.D., F.A.C.P., James C.H. Smith, M.D., Robert E. Turner, III, M.D., F.A.C.P., and Richard D. Weber, D.P.M., F.A.C.F.A.S. Defendants.
C/A No. 13–01264–DD
Adv. Pro. No. 15–80029–DD
United States Bankruptcy Court, D. South Carolina.
Signed July 23, 2015
Entered: July 24, 2015
Robert Frank Anderson, Columbia, SC, pro se.
Marilyn E. Gartley, Richard I. Simons, Anderson & Associates, P.A., Columbia, SC, for Plaintiff.
Gregory Wenzl Brown, Amy R. Holbrook, Brown Law LLP, Raleigh, NC, for Defendants.
ORDER DENYING MOTION TO DISMISS
David R. Duncan, Chief US Bankruptcy Judge, District of South Carolina
THIS MATTER comes before the Court on a Motion to Dismiss (“Motion”) filed by Rajesh Bajaj, M.D., John Culleton, M.D., Vinod K. Jona, M.D., Zothanmawii Khiangte, M.D., H. Stuart Markwell, M.D., Heather F. McCown, M.D., Gerald B. Miele, M.D., F.A.C.E., Jeffrey P. Muha, D.P.M., F.A.C.P.A.S., Meenakshi A. Pande, M.D., Supen R. Patel, M.D., Michael D. Pavy, M.D., F.A.C.P., Sreenivas V. Rao, M.D., William D. Remmes, Kevin W. Shea, M.D., F.A.C.P., James C.H. Smith, M.D., Robert E. Turner, III, M.D., F.A.C.P., and Richard D. Weber, D.P.M., F.A.C.F.A.S., (“Defendants”), and the response of Robert F. Anderson, chapter 7 trustee for Medical Management Group, LLC (“Plaintiff” or “Trustee”). The Court held a hearing on the Motion on July 16, 2015. Having read the papers, heard the arguments of counsel, and considered the applicable law and evidence, the Court denies the Motion.1 Defendants shall file an answer to the complaint within fourteen (14) days of the entry of this order, in accordance with Fed. R. Bankr. P. 7012(a).
I. Summary of Facts and Procedural History
The facts underlying this adversary proceeding are complex and extend back nearly eight years. Fortunately the disposition
of this Motion does not require recitation of them at length.2 Defendants are a group of doctors3 that either were or are members and/or managers of Medical Management Group, LLC (“Debtor”). Comp. ¶¶ 2–19.4 Debtor provided management services to Carolina Health Services, P.A.,5 a private physician group in Florence, South Carolina (“Carolina Health”).6 Def. Mot. Dismiss, p. 3–4. Defendants were, at varying points, also shareholders in Carolina Health. Compl. ¶ 37. For the majority of the time period relevant to this adversary proceeding, Debtor's primary source of revenue was the fees paid to it by Carolina Health. Compl. ¶ 30.
Carolina Health's most profitable physician practice was oncology. See Compl. ¶ 145. Debtor provided Carolina Health with oncology drugs by purchasing the drugs from a company called Oncology Supply. Def. Mot. Dismiss, p. 4. After buying the drugs, Debtor would transfer them to Carolina Health for Carolina Health's doctors to dispense and administer. Id ., p. 5. After administering the drugs, Carolina Health would then receive payments from patients, insurance providers, Medicare, and/or Medicaid, and remit funds to the Debtor for the costs of the drugs plus a percentage fee; keeping the remaining profit.Id . This system is referred to as a “buy and bill” model. Id .
Debtor allegedly became insolvent in 2007. Compl. ¶¶ 44–49. At some point, Debtor began to accumulate debt to Oncology Supply when Carolina Health failed to reimburse the Debtor for the cost of the drugs. Id . ¶¶ 81–103. The financial difficulties of the Debtor and Carolina Health escalated in early 2010, when Oncology Supply sent the Debtor an email stating that Debtor had an overdue balance with Oncology Supply totaling $658,415.44 and demanding payment. Compl. ¶ 98. Shortly thereafter, Debtor's managers renegotiated Debtor's management agreement with Carolina Health. Id . ¶¶ 69–72. This new agreement did not address the outstanding debt owed from Carolina Health. Id . ¶ 71. As a result, Plaintiff alleges, by July 2, 2010, the Debtor's overdue balance had increased to $1,015,159.62, and Oncology Supply required the Debtor to sign a promissory note in lieu of legal action. Id . ¶ 99.
Despite these problems, Debtor did not attempt to recoup the losses it was incurring from Carolina Health. Id . ¶¶ 59–62, 71, 72. Debtor continued to purchase oncology drugs and transfer them to Carolina Health without receiving reimbursement. Id . ¶ 81. Defendants all continued to receive their membership distributions from the Debtor, never voted to change the management of the Debtor, and never forced Carolina Health to pay the Debtor
for the drugs, despite also being shareholders and board members of Carolina Health. Id . ¶¶ 59–62, 76–80. Defendants allegedly received distributions from the Debtor from 2008 through the petition date totaling nearly half a million dollars. Id . ¶ 76. They also received payments on debts owed to them by Carolina Health, and salaries from Carolina Health. Compl. ¶¶ 157–161.
By September of 2010, Carolina Health's oncology group was struggling to maintain services to its patients because Oncology Supply was no longer providing a steady supply of drugs due to the Debtor's outstanding debt. Id . ¶¶ 109, 110. On September 23, 2010, the Debtor held a members meeting. Id . ¶ 110. At that meeting, one of the member-oncologists informed the other members he had spoken with McLeod Regional Medical Center (“McLeod”) about assisting with Carolina Health's cancer patients. Id . McLeod agreed to loan Carolina Health the cancer drugs their patients needed until the end of the week, and take over patient care starting the following week. Id . Later on that year, the Carolina Health oncologists and oncology staff left Carolina Health and the Debtor to join McLeod. Id . ¶¶ 120–123, 138. Debtor also subleased the portion of the Carolina Health facility that had been used by the oncology department, along with the equipment, to McLeod. Id . ¶ 126, 139.
Debtor never recovered from the departure of the oncology department. See id . ¶¶ 74, 127–132; Def. Mot. Dismiss p. 7. By 2012, it had also lost its pulmonology department and only had six members. Def. Mot. Dismiss, p. 6–8. Carolina Health and the Debtor both began discussions with potential buyers, but were unable to finalize a sale or merger. Id ., p. 8. Carolina Health closed on December 31, 2012, and filed for protection under chapter 7 of the Bankruptcy Code on March 1, 2013. Id . The Debtor filed its petition that same date. Id .
II. Summary of the Complaint
Trustee initiated this adversary proceeding seeking recovery from the Defendants for their actions and/or inactions that allegedly contributed to the financial demise of the Debtor. Trustee's complaint states eight causes of action and corresponding requests for relief. Two of the causes of action involve avoiding the transfers of the oncology drugs from the Debtor to Carolina Services, which the Trustee argues ultimately benefited the Defendants, and are thus recoverable from them. Five of the causes of action relate to whether the Defendants breached their duties as members of the LLC under state law, and whether the Trustee can recover damages. The final cause of action asks the Court to equitably subordinate the claims of the Defendants filed in the bankruptcy case pursuant to 11 U.S.C. § 510(c)7 .
III. Legal Standard
Fed. R. Civ. Pro. 8(a)(2)8 requires a pleading requesting relief to contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” A party may challenge the sufficiency of this pleading by filing a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6)9 . Edwards v. City Goldsboro, 178 F.3d 231, 243 (4th Cir.1999). “To survive
a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). “Determining whether a complaint states a plausible claim for relief [is] ... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937 ; see also Harman v. Unisys Corp., 356 Fed.Appx. 638, 640 (4th Cir.2009). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to...
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