In re Gyncor, Inc.
| Decision Date | 27 July 2000 |
| Docket Number | 99 B 22207. Adversary No. 00 A 00025.,Bankruptcy No. 99 B 19175 to 99 B 19177 |
| Citation | 251 BR 344 |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | In re GYNCOR, INC., d/b/a The Center for Human Reproduction, a Delaware Corporation, et al., Debtors. Gyncor, Inc., The Center for Human Reproduction — Illinois, M.D., S.C. and The Medical Office for Human Reproduction — New York, P.C., Plaintiffs, v. Healthshield Capital Corporation, f/k/a CMI Capital Corporation and Gersten, Savage & Kaplowitz, LLP, Defendants. |
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Steven Towbin, D'Ancona & Pflaum, Chicago, IL, for Gyncor, Inc. and The Medical Office for Human Reproduction.
Robert M. Fishman, Shaw Guissis Domanskis Fishman & Glantz, Chicago, IL, for Defendants.
Timothy French, Neal Gerber & Eisenberg, Chicago, IL, for AIG-IL, AIG-NY and Dr. Gleicher, Plaintiffs.
Pam Hollis, Hollis & Johnson, Chicago, IL, for Capital Health Care, Plaintiff.
This matter is before the court on the motion to dismiss ("Motion") of Healthshield Capital Corporation ("Healthshield") and Gersten, Savage & Kaplowitz, LLP. ("Gersten Savage") (collectively "Defendants") seeking dismissal of the two count complaint ("Complaint") filed January 12, 2000, by Gyncor, The Center for Human Reproduction — Illinois, M.D., S.C. and The Medical Office of Human Reproduction — New York, P.C. (collectively "Plaintiffs").1 The Defendants are seeking dismissal of the Complaint under Fed. R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction or alternatively, under Fed. R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted.2 The Complaint seeks injunctive relief for violations of the automatic stay, 11 U.S.C. § 362, (Count I) and for damages resulting from a violation of the automatic stay and for the breach of a financing commitment ("Commitment") which would have provided funding for the purchase of the Debtor's assets (Count II). (The Commitment is attached as Appendix A.) After reviewing the Complaint, the parties' briefs, and the relevant case law, the court will grant the Motion.
On June 16, 1999, the Debtor entities filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code ("Code").3 The Debtors are two reproductive practices, one in Chicago and one in New York City, which filed for bankruptcy protection together with the management company which performed the administrative functions for the two practices in question, in addition to other practices. Collectively, they will be referred to as the Debtor. A third, related practice filed for bankruptcy in July and is not involved in the present proceedings. There were other affiliated practices but they have not filed for bankruptcy protection.
No trustee was appointed and, pursuant to § 1107, the Debtor continued to operate in the ordinary course of business.4 In the course of operations, the Debtor determined that it had no realistic prospect of reorganizing and had to either sell the business on a going concern basis or liquidate its assets. On November 9, 1999, the Debtor made application to the court and, after a hearing, the Debtor was authorized to sell its assets at public auction in open court. The assets were to be sold outside of the ordinary course of business and free and clear of all liens and encumbrances. The auction was to take place on December 1, 1999. Accompanying the sale motion was the bid of Dr. Norbert Gleicher. Dr. Gleicher was the Chairman of the Board of Gyncor and of both Debtor practices and thus is considered an insider. The relevant terms of the offer were: (i) a $3.5 million purchase price; (ii) a $25,000 deposit; (iii) $25,000 bidding increments at auction; and (iv) no financing contingencies. The court entered an order incorporating the terms of the offer and providing that any competing bid must be accompanied by a $25,000 deposit, be worth at least $25,000 more in cash to the Debtor, must be received by the Debtor and the court on or before November 26, 1999, and must be free of any financing contingencies. No competitive bids were received by the cut off date. On November 26, 1999, Dr. Gleicher informed the Debtor that he was unable to close under the previously agreed upon terms. The Debtor and Dr. Gleicher agreed to an amended sale agreement. The major change was a decrease in the purchase price to $2.7 million.5 To effectuate the purchase of the assets, Dr. Gleicher formed two new medical corporations, American Infertility Group of New York ("AIG-NY") and American Infertility Group of Illinois ("AIG-IL") (collectively "Purchasers"). It appears that the Purchasers required financing to enable them to close. On December 1, 1999, Healthshield transmitted the Commitment to the Purchasers setting forth the terms and conditions on which it would loan funds to them in order to complete the purchase of the assets. On December 1, 1999, the court approved the sale of the Debtor's assets to the Purchasers. The sale was scheduled to close on or before December 15, 1999.
On December 16, 1999, the Debtor filed a motion seeking emergency relief from this court because the sale transaction was not completed. In its motion the Debtor alleged that Healthshield (formerly CMI) had breached the Commitment to the Purchasers, which meant that the Purchasers were unable to close the purchase of the assets. Also contained in the motion were new terms for the sale of the assets. As part of the new agreement, Capital Healthcare Financing ("Capital"), the lender to the Debtor entities, agreed to finance, in part, the Purchasers' acquisition of the assets and the purchase price was increased to $3 million. The amended terms provided:
(b) Additional Consideration. Any claim which Purchasers may have against CMI Healthshield for breach of its financing commitment to Purchasers shall be prosecuted jointly with the claims of Capital and Sellers Debtor, and 50% of any net recovery (after payment of all attorneys\' fees and other costs of litigation) on account of the Purchasers\' claim shall be paid as additional consideration to Capital for Capital\'s new financing commitment and the other 50% of any such net recovery on the Purchasers\' claim shall be applied against the Purchasers\' then remaining obligation to Capital.6
On December 17, 1999, this court approved the amended sale purchase agreement.
However, the sale did not close on December 17, 1999, and the parties continued to negotiate the terms for the sale of the Debtor's assets. On January 4, 2000, the Debtor filed another motion to approve the sale of the assets to the Purchasers under new terms. On January 5, 2000, the court again entered another order approving the amended sale transaction. This order was the final order and the transaction closed with a purchase price of $3 million.
The Debtor's January 12, 2000, complaint was filed in response to a summons served upon AIG-NY, AIG-IL, and Capital for a lawsuit to be initiated in New York by Healthshield.7 In the Complaint, the Debtor sought to forestall the New York litigation alleging that it violated the automatic stay of § 362 as an attempt to exert control over property of the estate. On January 18, 2000, with the consent of the parties, the court entered a standstill order which prevented any party from taking any action in either the New York or Illinois lawsuits. The standstill order was in effect at least until February 7, 2000, when this court had scheduled a hearing on the Debtor's motion, filed January 14, 2000, seeking a preliminary injunction. During the standstill period, Capital and Dr. Gleicher, AIG-IL, and AIG-NY filed motions to intervene as parties plaintiff in the Debtor's adversary against the Defendants. In the interest of judicial economy and to save costs for the parties, the parties agreed that intervention would be granted for the limited purpose of determining whether the court had subject matter jurisdiction over this adversary proceeding.8 If the court finds it has jurisdiction, the intervention matter will then be before the court. If the court determines that it has no jurisdiction, the intervention matter will be moot. On February 11, 2000, Capital filed a complaint against Healthshield within the above captioned adversary proceeding.9 Finally, on March 8, 2000, the court dissolved the previously enacted standstill agreement.
In their motion to dismiss, the Defendants proffer three arguments. The first is that this court does not have subject matter jurisdiction over the complaint, thus it must be dismissed pursuant to Rule 12(b)(1). The second is that even if this court does have subject matter jurisdiction, that the complaint fails to state a cause of action upon which relief can be granted and therefore it must be dismissed pursuant to Rule 12(b)(6). Last, they argue that if this court does have jurisdiction and the complaint does state a cause of action, that this court should abstain and let the parties litigate in New York where the original summons was filed, albeit without a complaint. The court will not abstain from the proceedings. If jurisdiction does lie with this court, it will hear and adjudicate the issues presented. It is the court's position that the matter is either a core proceeding, meaning that the court has jurisdiction to enter a final order, or that it has no jurisdiction whatsoever. 28 U.S.C. § 157.
SUBJECT MATTER JURISDICTION (Fed.R.Civ.P. 12(b)(1))
Motions to dismiss based upon Fed.R.Civ.P. 12(b)(1) are of two types. The first is based on the failure of the complaint to properly plead the court's jurisdiction. These motions are facial attacks and the court must accept the well pled allegations as true and draw all reasonable inferences therefrom. Villasenor v. Industrial Wire & Cable, Inc., 929 F.Supp. 310 (N.D.Ill.1996). The second type is a factual...
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