In re Gulf States Long Term Acute Care of Covington, LLC
| Citation | 487 B.R. 713 |
| Decision Date | 26 February 2013 |
| Docket Number | No. 09–11116.,09–11116. |
| Parties | In re GULF STATES LONG TERM ACUTE CARE OF COVINGTON, LLC, Debtor. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Eastern District of Louisiana |
OPINION TEXT STARTS HERE
Carolyn S. Cole, New Orleans, LA, Office of the U.S. Trustee, U.S. Trustee.
Glenn K. Schreiber, U.S. Attorney's Office, New Orleans, LA, for Respondent.
REASONS FOR DECISION
On October 1, 2012, the Court held a hearing on the Motion for Relief under 11 U.S.C. § 1144 and for Clarification of the Third Amended Plan 1 filed by David V. Adler, Disbursing Agent for the reorganized debtor, Gulf States Long Term Acute Care of Covington, L.L.C. (hereafter “Debtor” will refer to both the pre-confirmation and reorganized debtor). After the conclusion of the hearing, the parties were allowed time to file supplemental briefs. Upon filing of the briefs, the matter was taken under advisement.
Adler seeks:
1. Withdrawal of Debtor's release of claims against Robert Maurin on the basis of fraud; 2. Clarification that Debtor reserved claims for fraudulent transfer against Maurin; Jamestown, Inc.; Jamestown Gaming, L.L.C.; Gulf States Meadows, LP; Gulf States Healthcare Properties of Dallas, L.L.C.; Gulf States of Dallas Holdings, L.L.C.; New Braunfels Healthcare Properties, L.L.C.; B & G Healthcare Properties, L.L.C.; Jamestown Healthcare Properties, L.L.C.; and Jamestown Healthcare Properties of Dallas, L.L.C.
3. Clarification that Debtor specifically reserved damage claims against Maurin; Gregory Walker; Gregory Frost; Jamestown, Inc.; Jamestown Gaming, L.L.C.; Gulf States Meadows, LP; Gulf States Healthcare Properties of Dallas, L.L.C.; Gulf States of Dallas Holdings, L.L.C.; New Braunfels Healthcare Properties, L.L.C.; B & G Healthcare Properties, L.L.C.; Jamestown Healthcare Properties, L.L.C.; and Jamestown Healthcare Properties of Dallas, L.L.C.
Objections were filed by Maurin; Jamestown, Inc.; Jamestown Gaming, L.L.C.; Gulf States Meadows, LP; Gulf States Healthcare Properties of Dallas, L.L.C.; New Braunfels Healthcare Properties, L.L.C.; Frost; and Breazeale, Sachse & Wilson LLP.2
The parties do not dispute that the Plan gave Adler standing to pursue any claims sufficiently reserved by the Plan.
Debtor owned a long-term healthcare facility in Covington, Louisiana. It leased the facility from MPT of Covington, L.L.C. (“MPT”).
Debtor was a limited liability company whose members were Team Rehab of Covington, L.L.C. (“Team Rehab”) (56.25%); Jamestown Healthcare Properties, L.L.C. (18.75%); Apex Group, II, L.L.C. (10%); David Tran, M.D. (5%); John Simon, M.D. (5%); and Craig Parker, M.D. (5%). Prior to filing for bankruptcy relief, Debtor was co-managed by Gulf States Health Services, Inc. (“GSHS”) and Team Rehab.
GSHS also managed several other healthcare facilities located throughout Louisiana and Texas. Many of these were owned in whole or in part by entities affiliated with GSHS.3
Prepetition, Gemino Healthcare Finance, L.L.C. (“Gemino”) issued a line of credit to Debtor, GSHS, and other entities. Although Debtor was an obligor on the loan and pledged its accounts receivable as collateral, during the administration of its case, John Simon, M.D., a member of Debtor, alleged that Debtor did not receive any funding from Gemino.4
On March 17, 2009, Simon, filed suit against Debtor; GSHS; Gregory M. Walker; Robert A. Maurin; Team Rehab; Jamestown Healthcare Properties, L.L.C.; Gulf States Health Services Management Co., L.L.C.; and Gulf States Staffing and Professional Services, L.L.C. alleging mismanagement, misappropriation of funds, breach of contract, fraud, breach of fiduciary duty and duty of loyalty, and breach of the Louisiana Unfair Trade Practices and Consumer Protection Law Act (“Derivative Action”).5 The suit sought monetary damages and injunctive relief.
On March 31, 2009, pursuant to a consent order issued by the Twenty–Second Judicial District Court, GSHS and Team Rehab withdrew as co-managers, and the Court appointed Richard Daughdrill and Robert A. Maurin as new co-managers of Debtor.
On April 20, 2009, MPT filed suit against Debtor seeking a declaration that the lease terminated due to non-monetary defaults (“MPT suit”).6
On the same day, Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code (“Petition Date”). As a result, the Derivative Action and the MPT suit were stayed.
Shortly after the Petition Date, a Joint Motion to Dismiss the Bankruptcy Case 7 was filed by MPT; Craig Parker, M.D.; David Turner, M.D.; and John Simon, M.D. alleging that the bankruptcy petition was filed without the requisite authority 8 and in bad faith.9 On August 27, 2009, a hearing on the Joint Motion to Dismiss was held concurrently with a hearing on MPT's Motion for Relief from Stay and Debtor's Motion to Use Cash Collateral and Assume Lease.10 Counsel for Debtor, MPT, Gemino, Capital One, Craig Parker, David Turner, and John Simon all appeared at the hearing. 11 After the hearing, the parties were given a briefing schedule. However, the parties contacted the Court a few days later to request mediation before Hon. Douglas D. Dodd.12 The record reflects that counsel for the unsecured creditors committee (“UCC”) notified Judge Dodd of the UCC's intent participate in the mediation.13 The mediation resulted in a settlement.14 Accordingly, the Court entered an Order denying the Joint Motion to Dismiss.15
The Third Amended Disclosure Statement was approved by the Court on December 17, 2009, and provides:
The Third Amended Plan of Reorganization is a direct result of the outcome of the mediation. The Cooperation Agreement, attached hereto as Exhibit “D”, outlines various settlement terms reached by certain participating parties, including an agreement to the Asset Sale by the Debtor to Pam II; settlement of the Claims of [Gemino] and Capital One; payments by PAM II to certain insiders of the Debtor, i.e., Imperial Leasing, L.L.C. and Robert A. Maurin in connection with the purchase of medical equipment for the Facility and reduction of Secured and Administrative Expense Claims; dismissal of pending litigation among various parties; and, liability releases for specified parties, as set forth herein.16
The Third Amended Plan with Immaterial Modification (“Plan”) was approved by the Court on February 22, 2010.17
On March 5, 2012, U.S. District Judge Jane Milazzo dismissed Adler's claims against Gregory Frost; Breazeale, Sachse & Wilson, LLP; Jamestown, Inc.; Jamestown Gaming, L.L.C.; Gulf States Meadows, LP; Gulf States Healthcare Properties of Dallas, L.L.C.; and New Braunfels Healthcare Properties, L.L.C. 18 The ruling is binding on the parties and this Court and cannot be collaterally attacked.19 The request by Adler to bring claims against these parties is denied.
Debtor unequivocally released claims against Maurin. Section 6.05 of the Plan entitled “Release of Claims” provides:
In exchange for the consideration outlined below, the Debtor's claims against MPT, Robert A. Maurin, Gemino and Capital One shall be released on the Effective Date.20 The Debtor believes the best interest of the estate is served through these settlements, negotiated during the mediation which formed the basis of the Plan.
In exchange for the agreement of [Maurin] to the release and/or waiver of the following: (1) the Claim of Covington HealthCare Properties, L.L.C.; included in the Debtor's Schedules as an undisputed Unsecured Claim, (2) the yet to be asserted Administrative Expense Claim of Maurin for indemnity obligations owed in connection with his defense of post-Petition Date claims asserted, in the MPT Lawsuit, against him in his capacity as manager of the Debtor; (3) the yet to be asserted Administrative Expense Claim for compensation of performance of Maurin's duties as co-manager of the Debtor, (4) any objection to the Plan Maurin is entitled to assert by virtue of his interest; (5) the Claim of Jamestown Healthcare Properties, L.L.C. included in the Debtor's Schedules as an undisputed Unsecured Claim, and any and all claims asserted or which could have been asserted against Maurin in the Derivative Action shall be deemed released by the Debtor on the Effective Date.
Other than those Claims (asserted and/or potential) specifically identified above, the Debtor has no existing claims against MPT, [Maurin], Gemino and/or Capital One.21
Adler seeks to withdraw Debtor's release of claims against Maurin on the basis of fraud. Section 1144 of the Bankruptcy Code provides that if an order of confirmation was procured by fraud, it can be revoked within 180 days of entry of the confirmation order. The Plan was confirmed nearly three years ago, and as a result, Adler's motion is untimely. Further, Federal Rule of Civil Procedure 60, is unavailable as it does not apply to a complaint to revoke a confirmation order.22
Adler also avers that the Court can unwind the settlement between Maurin and Debtor because doing so would not upset the Plan. This assertion is inconsistent with the position taken by Debtor at confirmation. The Plan specifically states, “The Debtor believes the best interest of the estate is served through these settlements, negotiated during the mediation which formed the basis of the Plan.” 23
Judicial estoppel “generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” 24 Courts invoke judicial estoppel “to prevent the party from playing fast and loose with the courts, and to protect the essential integrity of the judicial process.” 25 Accordingly, Debtor is judicially estopped from now taking the inconsistent position that the settlement with Maurin was unnecessary to the Plan.26
However, out of an abundance of caution, Adler's assertion that the Settlement was obtained by fraud will be addressed. As with any obligation or...
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