In re 710 Long Ridge Rd. Operating Co.

• Decision Date: 01 January 2014
• Docket Number: Case No.: 13–13653 (DHS)
• Citation: 505 B.R. 163
• Parties: In re: 710 Long Ridge Road Operating Company, II, LLC, et al., Debtors.
• Court: U.S. Bankruptcy Court — District of New Jersey

505 B.R. 163

In re: 710 Long Ridge Road Operating Company, II, LLC, et al., Debtors.

Case No.: 13–13653 (DHS)

United States Bankruptcy Court, D. New Jersey.

Filed 02/06/2014

Cole Schotz Meisel Forman & Leonard, Michael D. Sirota, Esq., Gerald Gline, Esq., David Bass, Esq., Ryan T. Jareck, Esq., 25 Main Street, Hackensack, New Jersey 07601, Counsel for Debtor.

Levy Ratner, Suzanne Hepner, Esq., Ryan J. Barbur, Esq., 80 Eighth Avenue, New York, New York 10011, Counsel for New England Health Care Workers, District 1199 SEIU.

National Labor Relations Board, Special Litigation Branch, Abby Propis Simms, Esq., Julie L. Kaufman, Esq., Nancy E. Kessler Platt, Esq., Dawn Goldstein, Esq., Marissa Wagner, Esq., Laura Bandini, Esq., Nina Schichor, Esq., 1099 14th Street, NW, Suite 8600, Washington, D.C. 20570, Counsel for National Labor Relations Board.

Porzio, Bromberg & Newman, P.C., Robert M. Schechter, Esq., Rachel Segall, Esq., 100 Southgate Parkway, Morristown, New Jersey 07962, Counsel for the Official Committee of Unsecured Creditors.

OPINION

THE HONORABLE DONALD H. STECKROTH, BANKRUPTCY JUDGE

The Court is presented with a motion (“Motion”) filed by the Debtors that seeks an order pursuant to 11 U.S.C. § 502(b) and Rules 2019, 3001, and 3007 of the Federal Rules of Bankruptcy Procedure granting the Debtors' omnibus objection to the claims filed by the New England Health Care Employees Union, District 1119, SEIU (the “Union”) (the “Union Claims”) and the National Labor Relations Board (the “NLRB” or “Board”) (collectively, the “Claimants”) (the “Board Claims”) (collectively, the “Claims”) on the grounds that the Claims are not entitled to administrative priority pursuant to 11 U.S.C. § 503(b)(1)(A) or wage priority pursuant to either 11 U.S.C. § 507(a)(4) or 11 U.S.C. § 507(a)(5).¹

This Court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 1334 and 157(b) and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984 as amended September 18, 2012. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (O). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory and legal predicates for the relief sought are Sections 503(b)(1)(A), 507(a)(4), and 507(a)(5) of title 11 of the United States Code (the “Bankruptcy Code”). The following shall constitute the Court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.

The Debtors first argue that the administrative expense claims attributable to the time period in which they were in full compliance with the injunction ordered by the United States District Court for the District of Connecticut should be expunged, and the administrative expense claims attributable to the period during which the interim relief ordered by this Court pursuant to 11 U.S.C. § 1113(e) was in effect should be expunged pursuant to the law of the case doctrine.

The Debtors contend that the Claims are not entitled to priority status because the claims being adjudicated before the NLRB have not yet been awarded and because the claims will substantially increase the probability of layoff or termination of employees. Additionally, the Debtors argue that the prepetition back pay Claims are not entitled to wage priority because they were not earned within the statutory 180–day period prior to February 24, 2013 (the “Filing Date”). Because the claims for back pay arose from an alleged unfair labor practice (“ULP”) committed by the Debtors on June 17, 2012, Debtors assert the Claimants' rights to wages arose on that date; and thus, their Claims accrued prior to the 180–day statutory period for priority claims. Thus, the Debtors seek to classify the Claims as general unsecured claims.

The Claimants assert they are unaware of whether the Debtors complied with the injunction ordered by the United States District Court for the District of Connecticut, and thus, they may have a claim for one or two days. In addition, the Claimants assert that the law of the case doctrine is inapplicable because the Claimants plan to file a motion for reconsideration of the District Court's decisions denying leave to appeal this Court's 1113(e) interim relief orders.

The Claimants argue further that because they have a pending claim in a NLRB proceeding which may be awarded in the future, the Claims should be given administrative priority at this time. They also assert that their cooperation in organizing a payment plan with the Debtor will prevent any concerns about the probability of layoffs or termination of employees. The Claimants additionally assert that the prepetition back pay Claims accrued during the 180–day period prior to the Filing Date because a Union employee incurs a right to payment for every day that the employer fails to reinstate the employee.

RELEVANT FACTS

Debtors' Facts

Each Debtor operates a sub-acute and long-term nursing care facility (each a “Facility” and collectively, the “Facilities”) for the elderly in Connecticut. The Facilities are: (i) Long Ridge of Stamford, (ii) Newington Health Care Center, (iii) Westport Health Care Center, (iv) West River Health Care Center, and (v) Danbury Health Care Center. The Facilities are managed by HealthBridge Management, LLC (“HealthBridge”), a non-debtor national healthcare management company.

The Facilities are skilled nursing facilities that provide long-term care and short-term rehabilitation services. For long-term-care patients who have medical needs, the Facilities provide 24–hour–a–day nursing care, nutritional monitoring and planning, medication management, and personal care. For individuals in need of nursing and/or rehabilitation services following a recent hospitalization for orthopedic surgery, stroke, oncology care, cardiac care, general surgery, and other diagnoses, the Facilities offer medical and physical rehabilitation including physical, occupational and speech therapy, rehabilitative nursing, and physician directed rehabilitationplans, IV therapy, wound care, and other services.

Each Facility is supervised by a licensed administrator and the nursing staff is supervised by a director of nursing. Each Facility also engages the services of a medical director to oversee the delivery of care to patients. The Debtors receive revenue from Medicare and Medicaid, patients who pay privately, and from other third-party payors. The sources and amounts of each Debtor's revenues are determined by, among other things, the census at the applicable Facility, the “case mix” of its patients, and reimbursement rates.

The Facilities were staffed by service and maintenance employees, 700 represented by the Union (“Union Employees”) and 432 non-union. Each Debtor Facility entered into a separate collective bargaining agreement (“CBA”) with its employees. The terms of the CBAs were similar between the Facilities and the Union and required the Debtors to make payments to employees for wages and benefits, including, but not limited to, accrued sick and vacation time, and to make payments for health coverage, pensions, and other benefits. The CBAs were effective from December 31, 2004 through March 16, 2011 and are expired.

Upon time for renegotiation of the CBAs, the Debtors contend they were faced with the need to make cost saving benefit reductions to both Union and non-union employees. During a 16–month period and 36 bargaining sessions, the Debtors and Union negotiated but came to no resolution. After the Debtors felt that they had reached an impasse in June of 2012, the Debtors implemented their “Last, Best and Final” proposals as new terms (“Implemented Terms”) on June 17, 2012. Following the Implemented Terms, the Union Employees went on strike on July 3, 2012, and the Debtors hired replacement workers. The Debtors have operated the Facilities since June 2012 under the Implemented Terms.

The failed negotiations, strike, and replacement of the workforce led to a variety of actions by both the Union and the Debtors. The Debtors instituted an action for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO Act”) for the Union Employees' alleged wrongdoing in disrupting treatment of patients and damaging the Facilities in protest. The action is pending in the United States District Court for the District of New Jersey. The NLRB, on behalf of the Union, brought a claim against the Debtors in the office of Administrative Law before Administrative Law Judge Kenneth Chu (“ALJ Chu”) asserting unfair labor practices and unlawful imposition of the Implemented Terms in the absence of a genuine, lawful impasse (the “ALJ Proceedings”). The hearing in the ALJ Proceedings began on September 10, 2012, and has continued post-petition. There have been twenty-eight days of testimony. Ten additional days of testimony were scheduled through January 2014. It is not anticipated that a decision will be rendered before late 2014.

Additionally, there were ULPs relating to some of the Debtors tried before Administrative Law Judge Steven Fish (“ALJ Fish”). On August 1, 2012, ALJ Fish rendered a decision (the “ALJ Fish Decision”), which the Debtors have appealed by filing exceptions to the Board.

Pending the outcome of the ALJ proceedings, the United States District Court for the District of Connecticut, on request of the NLRB, issued injunctive relief in favor of the Union pursuant to section 10(j) of the National Labor Relations Act (“NLRA”). The section 10(j) relief provided that the Debtors were required to reinstate all of the Union Employees and providethe benefits and compensation set forth in the expired CBAs pending the outcome of the unfair labor practice allegations (the “10(j) Injunctive Relief” or “10(j) Injunction”). The Debtors appealed the 10(j) Injunction to the Second Circuit Court of Appeals (the “Appeal”). The Debtors obtained an interim stay pending appeal of that Order from the Second...