In re Boston Regional Medical Center, Inc.
| Decision Date | 04 August 2004 |
| Docket Number | No. 01-10572-MLW.,01-10572-MLW. |
| Citation | 328 F.Supp.2d 130 |
| Parties | In re BOSTON REGIONAL MEDICAL CENTER, INC., Debtor. The Official Committee of Unsecured Creditors for the Bankruptcy Estate of Boston Regional Medical Center, Inc., Plaintiff, v. Charles Ricks, DDS, et al., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Michael R. Coppock, Rubin & Rudman, LLP, Ian Crawford, Todd & Weld LLP, Alan R. Hoffman, Lynch, Brewer, Hoffman & Fink LLP, William Sopp, Finnegan, Hickey, Dinsmoor & Johnson, P.C., Howard M. Brown, Bartlett, Hackett, Feinberg, Gentilli, Liston, Brown, & Phalen, PC, Boston, MA, David M. Nickless, Nickless & Phillips, PC, Fitchburg, MA, for Defendants/Counter-Claimant/Third-Party Plaintiff.
Howard P. Blatchford, Jr., Jager Smith PC, John V. Snellings, Nixon Peabody, LLP, Boston, MA, for Third-Party Defendant.
Cleora S. Anderson, Thomas O. Bean, Nutter, McClennen & Fish, LLP, Boston, MA, for Cross-Defendant.
This is one of several cases resulting from the bankruptcy of Boston Regional Medical Center, Inc. ("BRMC"). In this proceeding, the Official Committee of Unsecured Creditors for the Bankruptcy Estate of BRMC (the "Committee" or "CredComm") alleges corporate mismanagement and malfeasance by former members of BRMC's Board of Trustees (the "Board Members" or "Trustee Defendants") as well BRMC's former president and Chief Executive Officer, Charles Ricks, and former vice-president and Chief Financial Officer, Frances Crunk. The Committee seeks damages for breach of the duties of loyalty, candor, good faith, and due care. It also seeks damages for breach of contract against Ricks and Crunk. In addition, the Committee alleges that the Atlantic Adventist Healthcare Corporation ("AAHC") aided and abetted the other defendants in their various breaches of fiduciary duty to BRMC and received several million dollars in assets in a manner that was fraudulent as to BRMC's creditors. AAHC, which is a non-profit corporation organized under the laws of Massachusetts, counterclaimed for a declaratory judgment establishing that any tort liability it has to the Committee is capped at $20,000 under M.G.L. ch. 231, § 85K.
Now before the court are three motions for judgment on the pleadings filed by AAHC, Ricks and Crunk, respectively, and three motions for summary judgment filed by the Trustee defendants. For the reasons described below, the court is allowing AAHC's motion in part and denying it in part, allowing the motions of the Trustee defendants, and denying the motions of Ricks and Crunk.
The court concludes that it has subject matter jurisdiction over this case and that the Attorney General of Massachusetts does not have exclusive standing to sue for an alleged breach of fiduciary duty to BRMC. Rather, BRMC could have brought a suit for breach of fiduciary duty before it declared bankruptcy and that cause of action passed to BRMC's bankruptcy estate as a result of the bankruptcy filing. However, as described below, there is a serious question as to whether the Committee, as opposed to BRMC's bankruptcy estate itself, is properly the plaintiff in this case. The court is ordering the Committee to address this question further.
For purposes of the motions for judgment on the pleadings, all material allegations in the complaint must be credited in the light most favorable to the Committee. See United States v. United States Currency, $81,000, 189 F.3d 28, 33 (1st Cir.1999). In analyzing the motions for summary judgment, "the court must look at the record in the light most favorable to the party opposing the motion and must indulge all inferences favorable to that party." Stepanischen v. Merchants Despatch Transp. Corp., 722 F.2d 922, 928 (1st Cir.1983); Attallah v. United States, 955 F.2d 776, 779 (1st Cir.1992); Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990). With one exception, however, the arguments pressed by the defendants at this stage of the litigation do not depend on the strength of the plaintiff's evidence. Rather, they present pure questions of law.1 Consequently, the following statement of facts is applicable to both sets of motions.
BRMC is a non-profit corporation organized under the laws of Massachusetts. It was originally incorporated in 1899. It was founded by and has continuously had close ties to members of the Seventh Day Adventist Church ("the Church"). BRMC had, for some time, been operating an acute-care hospital in Stoneham, Massachusetts. Ricks was BRMC's president and Chief Executive Officer. Crunk was its vice-president and Chief Financial Officer. Both Ricks and Crunk received compensation for their services. In addition to his position as an officer, Ricks was also a member of BRMC's Board of Trustees. Crunk was not a member of the Board. Ricks and Crunk are represented by separate counsel.
The Trustee defendants have formed three groups to defend against the Committee's suit. Trustees Charles Case, Harold Grayson, Theodore Jones, Leon Thomassian and Halvard Thomsen are referred to as "the Case Defendants". Trustees Jon Asgeirsson, Mark Hughes, Randy Lapides, Robert Leone, Jose Marcal, Kim O'Neil, and Paul Raslavicus are referred to as "the Hughes Defendants". Trustee Laura Hogan has chosen separate representation. The Case Defendants, the Hughes Defendants and Hogan never received compensation for their services as members of BRMC's Board of Trustees.
The final defendant is AAHC. AAHC is a Massachusetts corporation organized to coordinate activities among charitable institutions affiliated with the Church. "The specific purpose of [AAHC] is to accomplish the goals and objectives of the Church in providing the optimum level of health and medical care to the general public." AAHC's Appx. at 87. Members of AAHC's Board of Directors were the sole members of BRMC. Unlike a for-profit corporation, which has shareholders, a not-for-profit corporation in Massachusetts may, but is not required to, have members. The AAHC board members also sat on BRMC's Board of Trustees. They are Ricks and the Case Defendants.
According to its Articles of Organization, BRMC has several purposes. They include: (1) "founding a hospital or charitable asylum within the State of Massachusetts"; (2) "the care and relief of indigent or other sick or infirm persons...."; (3) "to aid and assist [AAHC] in furtherance of its charitable and corporate purposes, including operation and harmony with the standards, goals and methods established by the Seventh-day Adventist Church"; (4) distributing assets to Church affiliates once creditors are paid in the event of dissolution or liquidation; and (5) "to engage in educational activities for the benefit of the community served by the Corporation." Bennett Aff. Ex. 3.
At least as of 1994, BRMC had been experiencing significant operating losses and cash flow problems. The Committee alleges that BRMC has been insolvent since at least 1996. In 1997, Ricks began to search for a financial partner to save BRMC from what seemed to be certain demise as a standalone entity. After an aborted attempt to sell a substantial portion of its assets to Doctors Community Healthcare Corporation ("DCHC"), BRMC declared bankruptcy. The DCHC asset purchase agreement was to be financed by National Century Financial Enterprises ("NCFE"). NCFE and its president, Lance Poulsen, owned a substantial stake in DCHC.
The plaintiff alleges that Ricks rejected the advice of his outside advisers and pursued the DCHC offer rather than an alternate offer from Tenet Healthcare ("Tenet") in order to protect the interests of the Church at the expense of BRMC and its unsecured creditors. Among other things, the Committee alleges that one of Ricks' motives for choosing DCHC over Tenet was that Ricks wanted an Adventist church and school operating on BRMC's property in Stoneham to be able to continue to exist.
According to the plaintiff, DCHC failed to make good on its promise to purchase BRMC's assets because NCFE never provided the necessary financing — an outcome that the Board should have foreseen. The plaintiff further alleges that DCHC was mismanaging BRMC's affairs under an intertwined management agreement. According to the Committee, the other Board members were either complicit in Ricks' breach of loyalty and good faith or abdicated their responsibilities as Board members. Indeed, the Committee alleges that the failure of the Board members to prevent BRMC's demise constitutes gross negligence or, with regard to Ricks and the Case Defendants, involved an intent to harm BRMC and its creditors in order to benefit the Church.
The plaintiff also alleges that AAHC and members of its Board of Directors controlled Boston Regional Medical Associates, Inc. ("BRMA"), a not-for-profit corporation that owned and managed various medical practices associated with BRMC. According to the plaintiff, BRMC, despite its operating losses, continued to advance funds to AAHC and BRMA. This further weakened BRMC and its ability to satisfy the significant debts it had incurred.
Pursuant to M.G.L. ch. 180, § 8A(d), BRMC was required to submit the DCHC transaction for review by the Attorney General and, ultimately, for approval by the Supreme Judicial Court. BRMC notified the Attorney General of the proposed transaction, and his office began to investigate it. However, the DCHC transaction fell through before the Attorney General completed his investigation.
On February 4, 1999, after the proposed DCHC sale failed to be consummated, BRMC commenced a voluntary case under Chapter 11 of the Bankruptcy Code by filing a petition with the United States Bankruptcy Court...
To continue reading
Request your trial
-
Noonan v. Wonderland Greyhound Park Realty Llc.
...motions are limited to rebuttal of factual and legal arguments raised in the opposition”); In re Boston Regional Medical Center, Inc., 328 F.Supp.2d 130, 142-143 (D.Mass.2004). Noonan is entitled to an opportunity to address the arguments particularly as they apply to the breach of the impl......
-
Veracode, Inc. v. Appthority, Inc.
...parties to incorporate all relevant arguments in the papers that directly address a pending motion"); cf. In re Bos. Reg. Med. Ctr., Inc., 328 F.Supp.2d 130, 142–43 (D.Mass.2004)(declining to consider additional arguments raised in supplemental briefing that were "outside the scope of the c......
-
Flinn v. Santander Bank, N.A.
...nor discussed in the opinion of the Court"); Official Comm. of Unsecured Creditors for the Bankr. Estate of Bos. Reg'l Med. Ctr., Inc. v. Ricks (In re Bos. Reg'l Med. Ctr., Inc.), 328 F.Supp.2d 130, 146 (D. Mass. 2004) (Wolf, J.) ("Questions which merely lurk in the record, neither brought ......
-
DeGiacomo v. City of Quincy
...the general public served by the trust's charitable mission, has standing to bring such an action. See In re Boston Regional Med. Ctr., 328 F.Supp.2d 130, 147 (D.Mass.2004), citing W.F. Fratcher, Scott on Trusts § 391, at 364–365 (4th ed. 1989). Under the law of charitable trusts, a private......
-
Michael D. Sousa, Making Sense of the Bramble-filled Thicket: the "insured vs. Insured" Exclusion in the Bankruptcy Context
...Comm. of Unsecured Creditors for the Bankr. Estate of Boston Reg'l Med. Ctr., Inc. v. Ricks (In re Boston Reg'l Med. Ctr., Inc.), 328 F. Supp. 2d 130, 143 (D. Mass. 2004) (citation omitted). 326 Official Comm. of Unsecured Creditors of Grand Eagle Cos. v. Asea Brown Boveri, Inc., 313 B.R. 2......