In re ATLS Acquisition, LLC
| Decision Date | 06 February 2014 |
| Docket Number | Case No. 13-10262(PJW) |
| Parties | In re: ATLS ACQUISITION, LLC, et al., Debtors. |
| Court | U.S. Bankruptcy Court — District of Delaware |
(Jointly Administered)
MEAGHER & FLOM LLP
One Rodney Square
Michael R. Manthei
HOLLAND & KNIGHT LLP
William N. Shepherd
HOLLAND & KNIGHT LLP
Daniel S. Fridman
HOLLAND & KNIGHT LLP
Ted A. Berkowitz
Veronique Urban
FARRELL FRITZ, P.C.
Counsel for Arlene Rodriguez
Adam Hiller
Brian Arban
HILLER & ARBAN, LLC
Mark A. Cullen
The Cullen Law Firm, P.A.
Attorneys for Relators
Counsel to Medco Health
Solutions, Inc.
Jack E. Fernandez
Nathan M. Berman
ZUCKERMAN SPAEDER LLP
Counsel for Carl Dolan
Upon consideration of the Motion of Debtors PolyMedica Corporation, Liberty Healthcare Group, Inc., and Liberty Medical Supply, Inc. for Summary Judgment on Joint Objection to Proofs of Claim 303, 304, and 305 [Dkt. 669] (Doc. # 712)2 ("Summary Judgment Motion") and this being a core proceeding pursuant to 28 U.S.C. § 157(b)(2); and due and adequate notice of the Summary Judgment Motion having been provided to all parties; and the Court having considered the Summary Judgement Motion, the response by Lucas W. Matheny and Deborah Loveland (together "Relators")(Doc. # 769), Debtors' reply, and the evidence submitted, the Court finds that there are no genuine disputes regarding the material facts and that Debtors and the creditors that joined in the Summary Judgment Motion are entitled to judgment as a matter of law on the joint objection to proofs of claim numbers 303, 304, and 305 (Doc. # 669) (the "Joint Objection").3 See Fed. R. Civ. Pro. 56 (a), (c), (e).
Relators' primary allegation is that Liberty received millions of dollars in what they term "Overpayments" from federalhealth care payors (e.g., Medicare, Medicaid) that Liberty allegedly never repaid or reported to the government per Liberty's Corporate Integrity Agreement. Relators also allege that Liberty created false records during the annual paid claims reviews mandated by the Corporate Integrity Agreement (the "CIA") and conducted by independent auditors. The United States Department of Justice spent over a year investigating Relators' claims, at the conclusion of which the Department of Justice declined to intervene in the case.
Relators have received more than four million pages of documents and numerous databases containing reams of data from Debtors; have deposed ten witnesses, including three extensive corporate depositions; and have retained two experts. Yet their claims remain unsubstantiated.
Relators' response to the Summary Judgment Motion is captioned: "RELATOR'S RESERVATION OF RIGHTS ON MOTION OF DEBTORS POLYMEDICA CORPORATION, LIBERTY HEALTHCARE GROUP, INC., AND LIBERTY MEDICAL SUPPLY, INC FOR SUMMARY JUDGMENT." However, the response does not challenge any facts or law addressed in the Summary Judgment Motion. In Relators' reservation of rights document, they make the following assertion: "Any interpretation of the Bankruptcy Code giving [Debtors] authority to do an end-run around Relator's jury trial rights, by constructively putting the matter before this Court with a Rule 3004 substitute claim, is unconstitutional."(Doc. # 769, ¶ 13.) Relators cite to no authority for that proposition. Even if that proposition is correct, and I believe that it is not, Relators would gain nothing. Since they did not timely file a proof of claim, the result would be the same here: No allowed proof of claim, no entitlement to share in the estate.
1. Debtor Liberty Medical Supply, Inc. ("LMS") is a Florida-based corporation that provides durable medical equipment ("DME"), such as diabetes testing meters and strips, to patients at their homes via mail. LMS also has a pharmacy division, known as Liberty Medical Supply Pharmacy ("LMSP"), through which it provides prescription drugs by mail. Declaration of Arlene Rodriguez (October 3, 2013) ("Rodriguez Decl.") (Debtors Ex. 10) ¶ 8. Debtor PolyMedica Corporation ("PolyMedica") is the parent corporation of LMS. Third Amended Complaint at ¶ 10. Debtor Liberty Healthcare Group, Inc. ("LHG") is a holding company for LMS. Deposition of PolyMedica Corp. (Feb. 5, 2013) ("PolyMedica Dep.") (Debtors Ex.14) at 22:17-18. LMS, PolyMedica, and LHG are referred to collectively as "Debtors" or "Liberty."
2. Non-debtor and creditor Arlene (Perazella) Rodriguez currently is Liberty's Executive Vice President of Operations and Chief Operating Officer.5 During the time period at issue here, Ms. Rodriguez was employed by Liberty. Third Amended Complaint at ¶¶ 17, 51, 140; Deposition of Arlene Rodriguez (Oct. 18, 2012) ("Rodriguez Dep.") (Debtors Ex. 13) at 33:1-34:21; Rodriguez Decl. (Debtors Ex. 10) ¶¶ 4-11. Specifically, in 2006 Ms. Rodriguez was employed by LHG as its vice president and controller and later by PolyMedica as its Director of Financial Projects and Controller. Rodriguez Decl. (Debtors Ex. 10) ¶¶ 5-6.6 In 2007 Rodriguez was promoted to Senior Vice President of Operations at Liberty. Id. at ¶ 7. Thereafter, beginning in 2008, Ms. Rodriguez was employed by Liberty as its executive Vice President of Operations. Id. at ¶¶ 8-9. In 2008, Liberty's Revenue Cycle Management ("RCM") Department reported to her. Rodriguez Dep. (Debtors Ex. 13) at 36:3-4.
3. Non-debtor and creditor Carl Dolan is a former Liberty employee. During the time period at issue in the Third AmendedComplaint, Mr. Dolan served as an Assistant Vice President and Vice President in Liberty's Account Services Department (later known as RCM). Deposition of Carl Dolan (Oct. 22, 2012) ("Dolan Dep.") (Debtors Ex. 46) at 13:1-7, 15:6-18:8; Declaration of Carl Dolan (October 3, 2013) ("Dolan Decl.") (Debtors Ex. 2) ¶¶ 4-6. Mr. Dolan left Liberty in 2010. Dolan Dep. (Debtors Ex. 46) at 13:1-6.
4. Non-debtor and creditor Medco is the former parent company of PolyMedica. Medco purchased PolyMedica and its subsidiaries on October 31, 2007. Medco sold all interest in PolyMedica and Liberty on December 3, 2012 to an investment group that includes Liberty's current management. See Declaration of Frank Harvey in Support of Debtors' Motion for Order Under Bankruptcy Code Sections 105(a) and 362 to Extend the Automatic Stay Provisions of Bankruptcy Code 362 to Non-Debtors Arlene Rodriguez, Carl Dolan, and Medco Health Solutions, Inc. (Adv. Doc. # 2-1) ¶¶ 8, 9.
5. Relators are former employees of Liberty. Relator Matheny worked at Liberty for five years. Deposition of Lucas Matheny (Jan. 10, 2013, Feb. 11, 2013) ("Matheny Dep.") (Debtors Ex. 11) at 87:1-16-89:13-15. During that time, he held several posts, including Accounts Receivable representative, assistant to the Accounts Services manager, Posting Manager, and in 2007-2008 he had responsibility for overseeing the automated cash postingprocess. Id. at 64:22-24, 87:24-99:13. He never worked in the Compliance Department. Id. at 332:16-20.
6. Relator Loveland left the employ of Liberty in April 2007 and has no personal knowledge regarding the majority of the substantive allegations of the Third Amended Complaint. Deposition of Deborah Loveland (Sept. 13, 2012) ("Loveland Dep.") (Debtors Ex. 17) at 53:10-13, 151:3-168:10.
7. On June 9, 2008, Relators filed their initial qui tam complaint under seal in the Florida District Court, alleging violations of the reverse false claim provision of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a)(7) (2006), against Debtors and Non-debtors Rodriguez, Dolan, and Medco. The Court refers to the Florida case as the "FCA Case."
8. Debtors filed their chapter 11 petitions on February 15, 2013 in this Court. (Doc. # 1.)
9. At the time the bankruptcy cases were filed, all discovery was completed in the FCA Case. (FCA Case Doc. # 226.) On February 19, 2013, the Florida District Court advised the parties that any party who wanted to preserve the scheduled June 2013 trial date on that court's calendar should seek relief from the automatic stay in these chapter 11 cases prior to April 4, 2013. (FCA Case Doc. # 236.) No party, including Relators, sought relief from the automatic stay. On April 4, 2013, Relators and thenon-debtor defendants ("Non-Debtors") informed the Florida District Court of that fact. (FCA Case Doc. # 262, 263, 266, 267, 268.)
10. On April 4, 2013, this Court entered an order setting May 20, 2013 as the "Bar Date" by which creditors, including Relators, were required to file their proof of claim ("Bar Date Order"). (Doc. # 197.) Timely notice of the Bar Date was sent to creditors, including Relators. (Doc. # 206.) Relators did not object to or appeal entry of the Bar Date Order.
11. On April 24, 2013, Debtors filed an adversary proceeding and motion to extend the protections of the automatic stay to Non-Debtors in the FCA Case. (Adv. Doc. # 1, 2.) On May 7, 2013, Relators filed their opposition to Debtors' motion to extend the scope of the automatic stay to include Non-Debtors. (Adv. Doc. # 9.)
12. On May 10, 2013, this Court extended to the Non-Debtors the automatic stay that was already in effect as to Debtors. (Adv. Doc. # 19). The Florida Court then closed the FCA Case for administrative purposes and denied all pending motions as moot. (FCA Case Doc. # 396.)
13. Three days before the Bar Date, on May 17, 2013, Relators filed in this Court their Motion to Extend the Deadline, nunc pro tunc, for Filing Their Proofs of Claim ("Bar Date Extension Motion") . (Doc. # 329.) Also on May 17, 2013, Relators filed in this Court an adversary proceeding complaint ("DischargeabilityComplaint") requesting a determination by this Court that debts arising from their claims against Debtors are...
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