In re iHEALTHCARE, Inc. v. Yessenow

• Decision Date: 09 June 2011
• Docket Number: ADVERSARY NO. 09-2079,CASE NO. 07-20612 JPK
• Citation: iHealthcare, Inc. v. Yessenow (In re iHealthcare, Inc.), ADVERSARY NO. 09-2079, CASE NO. 07-20612 JPK (Bankr. N.D. Ind. Jun 09, 2011)
• Court: U.S. Bankruptcy Court — Northern District of Indiana
• Parties: In re: iHEALTHCARE, INC., Debtor. iHEALTHCARE, INC., Plaintiff, v. JEFFREY YESSENOW, LEROY J. WRIGHT, ALFRED SHARP, HILTON HUDSON and PAUL JONES, Defendants.

IN RE: iHEALTHCARE, INC., Debtor iHEALTHCARE, INC., Plaintiff, v. JEFFREY YESSENOW LEROY J. WRIGHT, ALFRED SHARP HILTON HUDSON and PAUL JONES, Defendants.

CASE NO. 07-20612 JPK

ADVERSARY NO. 09-2079

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF INDIANA HAMMOND DIVISION

Dated June 9, 2011.

MEMORANDUM OF DECISION CONCERNING

DEFENDANT JEFFREY YESSENOW'S MOTION TO DISMISS

This adversary proceeding was initiated by a complaint filed by the Debtor-in-Possession, iHealthcare, Inc. ("iHealthcare") on March 13, 2009, against the following defendants: Jeffrey Yessenow, Leroy J. Wright, Alfred Sharp, Hilton Hudson and Paul Jones.¹Subsequently on May 27, 2010, the plaintiff filed a motion to amend the complaint which the court granted, and the amended complaint was deemed filed as of July 14, 2010 ("Complaint").²On August 13, 2010, the defendant Jeffrey Yessenow ("Yessenow") filed a motion to dismiss ("Motion"), along with a memorandum of law in support thereof.³ On August 26, 2010, the court entered an order establishing a briefing schedule. The Plaintiff iHealthcare filed its response tothe foregoing motion on September 27, 2010, and Yessenow filed a reply brief on October 22, 2010.

In entering this order, the court determines that actions asserted by the plaintiff are not within the court's "core proceedings" jurisdiction as provided for by 28 U.S.C. § 157(b), but rather constitute "proceedings . . . related to a case under title 11" under 28 U.S.C. § 157(a). The court's jurisdiction is thus defined as that imparted in "related to" proceedings. Pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and N.D.Ind.L.R. 200.1(a)(1), this court has jurisdiction to fully administer "related to" proceedings to the fullest extent provided for by 28 U.S.C. § 157(c)(1). At a telephonic conference held on May 12, 2011, both the plaintiff and the defendant Jeffrey Yessenow consented to this court's final determination of Yessenow's motion to dismiss pursuant to 28 U.S.C. §157(c)(2) [Record #72]. The court will therefore itself finally determine that motion, and the procedure provided for by 28 U.S.C. § 157(c)(1) for submission of proposed findings of fact and conclusions of law to the district court will not be applied with respect to final determination of the Motion.

Analysis

iHealthcare filed its petition for relief under Chapter 11 of the United States Bankruptcy Code on March 13, 2009. Previously, on January 31, 2007, an involuntary Chapter 7 bankruptcy case [Case No. 07-20188] was filed against Heartland Memorial Hospital, LLC ("Heartland"), a wholly owned subsidiary of iHealthcare. That case was converted to one under Chapter 11 of the United States Bankruptcy Code pursuant to the debtor's request. On October 19, 2008, the court entered an order confirming a plan of liquidation which appointed David Abrams as the liquidating trustee and court-appointed manager of Heartland. On February 28, 2009, Abrams as the liquidating trustee in the Heartland bankruptcy filed two adversary proceedings: Abrams v. Collins, et al., Adversary Proceeding #09-2068; and Abrams v. Munster Medical Holdings, LLC, et al., Adversary Proceeding # 09-02069 (the "HeartlandAdversaries"). In each case Yessenow was named as a defendant, along with others. On March 13, 2009, iHealthcare filed this adversary proceeding against Yessenow, Wright, Sharp, Hudson and Jones (the "iHealthcare Adversary"). Yessenow premises his motion to dismiss on the contention that the Heartland Adversaries raise the same issues and facts as does the iHealthcare Adversary, essentially asserting that all three cases concern the business transactions of Heartland Memorial Hospital, LLC from late 2004 until an involuntary bankruptcy petition was filed against it in early 2007. Yessenow takes the position that since the Heartland Adversaries were filed prior to the filing of the iHealthcare Adversary, the iHealthcare Adversary should be dismissed on the basis that it is a duplicative proceeding.

The Seventh Circuit Court of Appeals in the case of Serlin v. Arthur Anderson & Company, 3 F.3d 221 (7th Cir. 1993) stated the standard for determining whether a case should be dismissed on the basis that it is duplicative. In that case a former employee brought an action under the Age Discrimination in Employment Act against his employer. The first case was filed July 9, 1992, in the United States District Court sitting in the Northern District of Illinois. The defendant filed a motion to dismiss on the basis that the complaint was not served within the time limits of Rule 4(j) of the Federal Rules of Civil Procedure. The plaintiff realized that there was a possibility that by the time the first filed case was dismissed, the statue of limitations would have run, and he would be barred from filing another action. While the motion to dismiss was pending, Serlin filed a second nearly identical action against the defendant in the same district. The court stated:

As a general rule, a federal suit may be dismissed "for reasons of wise judicial administration . . . whenever it is duplicative of a parallel action already pending in another federal court." Ridge Gold Standard Liquors v. Joseph E. Seagram, 572 F. Supp. 1210, 1213 (N.D. Ill. 1983) [**4] (citing Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976); Calvert Fire Ins. Co. v. Am. Mut. Reinsurance Co., 600 F.2d 1228, 1233 (7th Cir. 1979)). District courts are accorded "a great deal of latitude anddiscretion" in determining whether one action is duplicative of another, but generally, a suit is duplicative if the "claims, parties, and available relief do not significantly differ between the two actions." Ridge Gold, 572 F. Supp. at 1213 (citations omitted).

Our analysis is not ended, however, for in Calvert Fire Insurance Co. v. American Mutual Reinsurance Co., 600 F.2d 1228 (7th Cir. 1979), we held that before dismissing a suit as duplicate, "the district judge should consider any special factors counseling for or against the exercise of jurisdiction in the case before him." Calvert Fire, 600 F.2d at 1234. Serlin claims that such a countervailing "special factor" exists in the present case because, if his second suit is dismissed as duplicative of his first, and if his first is dismissed after August 1992 for untimely service under Federal Rule 4(j), then he will be out of court and barred by the statute of limitations from refiling his age-discrimination complaint. In light of this possible consequence, he argues, Judge Aspin abused his discretion in dismissing his complaint as duplicative.

This argument is without merit. We have held that an abuse of discretion is established only where no reasonable man could agree with the district court; if reasonable men could differ as to the propriety of the court's action, no abuse of discretion has been shown." Smith v. Widman Trucking & Excavating, 627 F.2d 792, 795-96 (1980) (citing Beshear v. Weinzapfel, 474 F.2d 127, 134 (7th Cir. 1973)). In this instance, there are a number of reasons why a reasonable person could agree with Judge Aspin's decision to dismiss Serlin's duplicative complaint.

Serlin, 3 F.3d at 223-24 (emphasis supplied).

If the cases are indeed duplicative, there is a rebuttable presumption that the first should proceed and the second case be dismissed; Asset Allocation and Management Co. v. Western Employers Insurance Company, 892 F.2d 566, 573 (7th Cir 1989, as corrected 1990). As aptly summarized in the case of Indianapolis Motor Speedway Corporation v. Polaris Industries, Inc., 2000 U.S. Dist. Lexis 8397 (S.D. Ind. 2000):

There is a strong legal presumption against having related actions pending simultaneously in different courts. "As a general rule, a federal suit may be dismissed 'for reasons of wise judicial administration ... whenever it is duplicative of a parallel action already pending in another federal court.' " Serlin v. Arthur Andersen & Co., 3 F.3d 221, 223 (7th Cir. 1993) (quoting Ridge Gold Standard Liquors, Inc. v. Joseph E. Seagram & Sons, Inc. , 572 F. Supp. 1210, 1213 (N.D. Ill. 1983) (citing Colorado RiverWater Conservation Dist. v. United States, 424 U.S. 800, 817, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976))). A suit is considered duplicative "if the claims, parties, and available relief do not significantly differ between the two actions." Serlin, 3 F.3d at 223.

However, the Seventh Circuit does not espouse a rigid "first-to-file" rule. See Tempco Elec. Heater Corp. v. Omega Eng'g, Inc., 819 F.2d 746, 750 (7th Cir. 1987). To do so would simply encourage "an unseemly race to the courthouse." Id. Instead, there is a rebuttable presumption that the first case should be allowed to proceed and the second case abated. See Asset Allocation and Management Co. v. Western Employers Ins. Co. , 892 F.2d 566, 573 (7th Cir. 1989). This first-to-file rule gives priority, for purposes of venue selection, to the party who first establishes jurisdiction, see Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1004 (8th Cir. 1993); Asset Allocation, 892 F.2d at 572, while recognizing that the rule "yields to the interest of justice." See Applexion S.A. v. Amalgamated Sugar Co., 1995 U.S. Dist. LEXIS 9350, No. 95- C-858, 1995 WL 404843, at *2 (N.D. Ill. July 7, 1995) (citing Asset Allocation, 892 F.2d at 572-73). Thus, the plaintiff bears the burden of showing any compelling circumstance or an imbalance of convenience to overcome the presumption that the second-filed case should be dismissed in favor of the case filed first. See Central States, Southeast and Southwest Areas Pension Fund v. Paramount Liquor Co., 34 F. Supp. 2d 1092, 1094 (N.D. Ill. 1999), app. dismissed, 203 F.3d 442 (7th Cir. 2000); Applexion, 1995 U.S. Dist. LEXIS 9350, 1995 WL 404843, at *2. Such circumstances include a showing: that the plaintiff in the first-filed action raced to the courthouse to avoid litigating in

...