Holber v. Nikparvar (In re Incare, LLC)
| Decision Date | 07 May 2018 |
| Docket Number | Bky. No. 13-14926 ELF,Adv. No. 14-0248 |
| Parties | IN RE: INCARE, LLC, Debtor. ROBERT H. HOLBER, Chapter 7 Trustee, Plaintiff, v. MEHDI NIKPARVAR, MD a/k/a Medhi Nikparvarfard, et al. Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Incare, LLC ("Incare" or "the Debtor") was a medical care provider that provided hospitalist services to various hospitals and medical facilities throughout central and eastern Pennsylvania. In this adversary proceeding, Robert H. Holber, the chapter 7 trustee ("the Trustee"), seeks to avoid certain transfers made by the Debtor to various insider entities. The Trustee invokes the actual and constructive fraudulent transfer provisions of the Bankruptcy Code, 11 U.S.C. §§544(b) and 550, and the Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA"), 12 Pa. C.S. §§5104 and 5105.
Based on the evidence presented during a two (2) day bench trial, I find that the Trustee cannot recover from the Defendants and I will enter judgment in the Defendants' favor.
The Debtor filed a voluntary petition under chapter 11 on June 3, 2013. By Order dated July 25, 2013, the case was converted to chapter 7.
On May 27, 2014, the Trustee commenced this adversary proceeding by filing the Complaint against the following Defendants: Dr. Mehdi Nikparvar (the managing and sole member of Incare), his wife Niusha Houshmand, Merck Real Estate, LLC, the Nikparvar Family Trust and several urgent care entities related to Incare:
(collectively, "the Urgent Care Entities").1
In the Complaint, the Trustee requested avoidance of certain transfers as fraudulent pursuant to 11 U.S.C. §544 and recovery under 11 U.S.C. §550.2
On October 14, 2015, the Trustee filed a motion for partial summary judgment to which the Defendants responded on November 4, 2015. I denied the Trustee's motion on April 6, 2016. Thereafter, pre-trial proceedings were delayed by the retirement of the Trustee's attorney and his retention of new counsel.
The trial was conducted on March 23 and 24, 2017. The parties filed post-trial proposed findings of fact and conclusions of law with supporting memorandum; the last of the submissions was filed on August 9, 2017.
I make the following findings of fact based upon the testimonial and documentary evidence presented at trial and the undisputed facts set forth in the parties' Joint Pretrial Statement ("JPS").
1. Dr. Medhi Nikparvar ("Dr. Nikparvar") is a physician who practices internal medicine. (Notes of Testimony, 3/24/17, at 5).3
2. Dr. Nikparvar graduated medical school in Iran in 1995. (2 N.T. at 5).
3. Dr. Nikparvar came to the United States from Iran in 2000 and completed his residency in 2004. (Id.).
4. Following the completion of his residency, Dr. Nikparvar worked as both an emergency
room doctor and as a hospitalist. (1 N.T. at 156-57).
5. Starting in 2009, Dr. Nikparvar formed at least fifteen (15) entities, including the eleven (11) non-Debtor Urgent Care Entities that are Defendants in this adversary proceeding, as well as Merck Real Estate LLC, Express Construction LLC, Express Medical Supply LLC, and Advanced Dentistry of City Line LLC. (JPS at 3; 1 N.T. at 162-64).
6. Every urgent care center was formed as a separate limited liability company and operated separately. (1 N.T. at 161).
7. As of November 2014, seven (7) Advanced Urgent Care facilities were still active:
(JPS at 3).
8. Dr. Nikparvar is the 100% owner of the Debtor, Incare. (JPS at 2; 1 N.T. at 59, 125; Ex.14.).4
9. Dr. Nikparvar formed Incare in 2004, along with Dr. Jeffrey Narmi. (1 N.T. at 155, 158; 2 N.T. at 6).
10. Subsequently, Dr. Nikparvar became the sole owner of Incare (after Jeff Narmi resigned). (1 N.T. at 158; 2 N.T. at 6).
11. For tax purposes, Incare's income passed through to Dr. Nikparvar. (1 N.T. at 58-59).
12. Incare provided hospitalist services to various hospitals in Ohio, Pennsylvania, and New York, through which the hospitals outsourced to Incare the care of its in-patients. (1 N.T. at 156; 2 N.T. at 7-8).
13. Incare had a contract with each hospital it serviced. (2 N.T. at 8, 10).
14. Incare served as a "kind of manager" for each hospital, hiring and staffing the physicians, providing hospitalist services, scheduling the doctors, obtaining malpractice insurance, billing and collecting from patients. (2 N.T. at 8-9).
15. Incare engaged up to 40 physicians in its hospitalist staffing services, including Dr. Nikparvar. (2 N.T. at 15).
16. By the middle to end of 2010, due to changes in the reimbursement and insurance environment, Dr. Nikparvar realized that Incare's business model could not be sustained and needed to be changed. (2 N.T. at 89).
17. As a result, Dr. Nikparvar decided to turn Incare into an urgent care provider instead of ahospitalist service provider. (2 N.T. at 89; 1 N.T. at 161).5
18. Beginning in 2010, Incare opened, or attempted to open, five (5) free standing urgent care facilities in New Jersey and Pennsylvania, spending considerable amounts of capital on these new businesses. (2 N.T. at 52-6).
19. Incare was the owner as well as real estate lessee of these urgent care facilities. (2 N.T. at 56).
20. Dr. Nikparvar and his wife provided personal guarantees for Incare's urgent care facilities. (2 N.T. at 57-8).
21. Dr. Nikparvar decided to have Incare be the owner of the stand alone urgent care LLCs (as opposed to opening the facilities in his name) for two reasons:
22. The locations in Feasterville and Levittown, Pennsylvania never opened. (2 N.T. at 61-2).
23. Incare was evicted from the facility space in Langhorne, Pennsylvania (2 N.T. at 63).
24. Urgent Care of Lawrenceville, in New Jersey, was financed by Incare, Dr. Nikparvar, and by "other entities." It closed in 2011 or 2012. (2 N.T. at 54).
25. Incare filed for chapter 11 bankruptcy on June 3, 2013.
26. Incare's bankruptcy case was converted to chapter 7 on June 25, 2013.
27. At the end of 2008, Incare maintained $672,917.00 in cash on its books and the gross amount of Incare's depreciable assets at the end of 2008 was $4,000.00. (1 N.T. at 57; Ex. 14).
28. Incare's liabilities at the end of 2008 totaled $29,935.00. (1 N.T. at 58; Ex. 14).
29. Incare generated $3,705,525.00 in gross income and $399,483.00 in net taxable income in 2008, which was attributed as income to Dr. Nikparvar. (1 N.T. at 59, 125-126; Ex. 14).
30. Incare was able to pay its bills in 2008 as they fell due. (2 N.T. at 21).
31. On its 2009 federal income tax return, Incare reported that:
32. Incare was able to pay its bills in 2009. (2 N.T. at 29-31).
33. On its 2010 federal income tax return, Incare reported that:
34. The mortgages for which Incare reported liability on its tax return in 2010 were liabilities incurred in the purchase of parcels of real property in South Carolina that Dr. Nikparvar owned personally.7 (1 N.T. at 63-64, 94, 183; 2 N.T. at 52; Ex.12).8
35. At the end of 2010, Medicare and Medicaid stopped recognizing Incare's hospitalist services and reduced payments to Incare. (2 N.T. at 46-7, 49, 83). Dr. Nikparvar became aware ofthis at the end of 2010 or in early 2011. (Id. at 83).
36. Incare applied for a line of credit in 2010 but was denied. (1 N.T. at 196).
37. Incare was generally able to pay its debts as they fell due in 2010. (1 N.T. at 128-29; 192).9
38. In 2010, Incare made transfers to Advanced Urgent Care P.C. ("Advanced") totaling $1,779,191.51. (See 2 N.T. at 77-78; Exs. 19 & 21).10
39. In 2010, Advanced made transfers to Incare totaling $1,779,738.95. (See 1 N.T. at 180; Exs. 19,...
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