In re: NATIONAL MEDICAL IMAGING LLC.

• Decision Date: 28 December 2009
• Docket Number: No. 08-17351JKF,08-17348JKF.,08-17351JKF
• Parties: In re: NATIONAL MEDICAL IMAGING, LLC, Putative Debtor. In re: National Medical Imaging Holding Company, LLC, Putative Debtor.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

439 B.R. 837

In re: NATIONAL MEDICAL IMAGING, LLC, Putative Debtor.

In re: National Medical Imaging Holding Company, LLC, Putative Debtor.

Nos. 08-17351JKF, 08-17348JKF.

United States Bankruptcy Court,E.D. Pennsylvania.

Dec. 28, 2009.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

National Medical Imaging, LLC, pro se.

MEMORANDUM OPINION

RICHARD E. FEHLING, Bankruptcy Judge.

I. INTRODUCTION

Before me is the Motion of National Medical Imaging, LLC (“NMI”) and National Medical Imaging Holding Company, LLC (“NMIH”) for a Determination of Collateral Estoppel and Postponement of Evidentiary Hearing on Motion To Dismiss (the “Motion”) ¹ (docket entry no. 140). ² NMI and NMIH (together, the “Putative Debtors”) contend that the dismissal with prejudice of a closely related involuntary bankruptcy petition in the Bankruptcy Court in the Southern District of Florida by Judge A. Jay Cristol on August 21, 2009, warrants dismissal of these involuntary petitions pursuant to the doctrine of issue preclusion, formerly known as collateral estoppel. ³ The creditors who filed the petitions oppose the relief sought and contend that factual and legal differences require that I deny the Motion. See Memorandum of Law in Opposition to (1) Motion of the Putative Debtors for a Determination of Collateral Estoppel and (2) Motion for Reconsideration of Bench Order on Judicial Estoppel, together, the “Opposition Memorandum,” docket entry no. 159. For the reasons discussed below, I will grant the Motion. Because collateral estoppel applies, I will dismiss with prejudice both involuntary petitions.

II. PROCEDURAL AND FACTUAL BACKGROUND

A. Procedural Background

On November 7, 2008 (the “Petition Date”), six creditors ⁴ (together, including replacement parties, the “Creditors”) filed two involuntary bankruptcy petitions in this Court against the Putative Debtors. The Creditors amended the involuntary petitions three times: On November 10, 2008; April 10, 2009; and August 26, 2009. ⁵

On the Petition Date, the same Creditors also filed an involuntary petition in this court against Maury Rosenberg, ⁶ the Managing Member of both Putative Debtors and a co-guarantor of the obligations of the Putative Debtors in a settlement agreement ⁷ dated August 12, 2005. On December 3, 2008, Rosenberg moved to dismiss or, alternatively, to transfer venue to his domicile in southern Florida (docket entry no. 7 in the Rosenberg Case). The Creditors agreed to the change of venue and, by Order dated January 30, 2009, Judge Jean K. FitzSimon ⁸ transferred the Rosenberg Case to the Southern District of Florida (docket entry no. 22). The Rosenberg Case was then closed in this Court. Judge Cristol held a trial on the Rosenberg motion to dismiss in the Florida Court on April 20, 2009. As I discuss below, on August 21, 2009, Judge Cristol issued his opinion granting Mr. Rosenberg's motion to dismiss with prejudice. See In re Rosenberg, 414 B.R. 826 (Bankr.S.D.Fla.2009) (the “Opinion”).

The Putative Debtors had also filed motions to dismiss the involuntary petitions against them on December 4, 2008 (the “Motions To Dismiss,” docket entry no. 10). The Creditors opposed the Motions To Dismiss (docket entry no. 16) and the Putative Debtors filed a reply brief (docket entry no. 23). The parties conducted discovery in the pending matters-apparently with numerous and sundry disputes-and trial on the merits was scheduled to begin before me in Reading, Pennsylvania, on August 25, 2009. On August 24, 2009, I conducted a preliminary hearing to determine certain pretrial issues, including a motion in limine (docket entry no. 136) and a motion to determine judicial notice (docket entry no. 139). At the August 24, 2009 hearing, I entered a bench order denying both parties' requests to exclude certain evidence at the trial pursuant to the doctrine of judicial estoppel (docket entry no. 137).

The night before commencement of the trial on August 25, 2009, the parties received notice that Rosenberg's involuntary bankruptcy petition in Florida had been dismissed with prejudice by Judge Cristol. In the early hours of the morning on August 25, 2009, the Putative Debtors filed the pending Motion. Although Judge Cristol issued his Opinion on August 21, 2009, the accompanying order had not been docketed until August 24, 2009, the day of the preliminary hearing. On August 25, 2009, I therefore heard the Motion on an expedited basis, in lieu of starting the trial.

At the hearing on the Motion, I took under advisement whether collateral estoppel should apply and allowed both parties to brief the issue. Judge Cristol based his decision, in part, on his determination that judicial estoppel precluded the Creditors from prosecuting the involuntary petition against Rosenberg. I therefore invited the parties to move for reconsideration of my August 24, 2009 bench order insofar as I denied the parties' requests to apply judicial estoppel to these cases. Both parties have sought reconsideration of my ruling on that issue. I heard oral argument on September 22, 2009 (“Oral Argument”), and the parties have filed their briefs. This matter is therefore ripe for adjudication.

This Memorandum Opinion constitutes my findings of fact and my conclusions of law.

B. Factual Background

I find the following, uncontested, facts from the Amended Joint Pretrial Statement (docket entry no. 83), the case docket, and the pleadings. DVI Financial Services, Inc., (“DVI Financial”) was a finance company that provided loans and lease financing to health care providers. Beginning in November 2000, certain Lessees (the “NMI LPs”) (defined and listed more specifically on page two of NMI's motion to dismiss (docket entry no. 10)) entered into various master leases (the “Master Leases”) to finance the acquisition of medical imaging and PET scanning equipment used for MRIs. NMI is a service company that performs management, billing, and collection services for diagnostic imaging centers. NMI is the limited partner of each of the NMI LPs. NMIH is a general partner of each NMI LP. Maury Rosenberg is the Managing Member of both NMI and NMIH.

The Master Leases were part of a securitization transaction between DVI Financial, U.S. Bank, N.A. as Trustee, and Lyon Financial Services, Inc. (“Lyon”) d/b/a/ U.S. Bank Portfolio Services (“USBPS”), as agent for U.S. Bank (the “Agent”). The Master Leases were transferred and or assigned by DVI Financial to other DVI related entities. The Master Leases were pledged to investors as collateral with USBPS acting as agent for U.S. Bank. As security for the payment of the obligations of the NMI LPs under the Master Leases, Rosenberg was required to execute and deliver an individual limited guaranty to DVI Financial. The Putative Debtors were also required to execute and deliver separate guarantees to DVI Financial.

At various times from 2000 to 2003 and pursuant to the terms of certain Contribution and Servicing Agreements, DVI Financial transferred and assigned the Master Leases and related assets to the DVI entities identified as the original creditors in footnote 5, above. In 2003, DVI Financial's parent company, DVI, Inc., began experiencing financial difficulties. Certain DVI companies filed Chapter 11 bankruptcy petitions on August 3, 2003, in Delaware (consolidated cases nos. 03-12656 through 03-12658); the companies filing for protection were DVI Financial, DVI, Inc., and DVI Business Credit Corp. On February 3, 2004, the Delaware Bankruptcy Court approved a settlement agreement in which DVI Financial, among other things, assigned its rights to service the Master Leases to Lyon, which is owned by USBPS.

While in bankruptcy on November 5, 2003, DVI, Inc., filed an adversary proceeding in the Delaware Bankruptcy Court against the Putative Debtors and Rosenberg, alleging that they had defaulted on certain of the Master Leases (adversary no. 03-57568). The Delaware Bankruptcy Court dismissed the complaint (granting a motion to dismiss). In re DVI, Inc., 305 B.R. 414 (Bankr.D.Del.2004).

Beginning on or about December 19, 2003, and following a settlement approved by the Delaware Bankruptcy Court, Lyon (as servicer to the DVI entities) declared the Master Leases to be in default and initiated state court proceedings against each of the NMI LPs and Rosenberg in the Court of Common Pleas of Bucks County, Pennsylvania, alleging breach of contract, breach of guaranties, and replevin (the “Original Bucks County Action”). On March 3, 2005 (while the Original Bucks County Action was pending), three creditors filed involuntary Chapter 11 petitions against the Putative Debtors in the Eastern District of Pennsylvania. ⁹

On August 12, 2005, the Putative Debtors, National Medical Imaging of Broad Street, L.P. (“Broad Street”), Rosenberg, Lyon d/b/a USBPS, and others entered into a settlement (the “Settlement Agreement”) ¹⁰ (docket entry no. 158-“Main Document”). Pursuant to the terms of the Settlement Agreement, the Master Leases were consolidated into a single obligation. SA, p. 3. The Settlement Agreement further provides that the total amount due and owed by the NMI LPs to Lyon and USBPS is $23,881,557. ¹¹ SA, § 2(i). The Settlement Agreement required the Putative Debtors, Broad Street, and Rosenberg to execute a new guaranty, SA, § 2(a)(iv), and cancelled the Original Bucks County Action. SA, § 4(h).

In connection with the Settlement Agreement, the Putative Debtors executed an Unconditional Continuing Guaranty (the “NMI Guaranty”) for the Master Leases, as modified and consolidated by the Settlement Agreement (docket entry no. 158, Exhibit 1-B). Paragraph 16 of the NMI Guaranty required the Putative Debtors to execute a confession of judgment in the amount owed to Lyon as the agent.

In further connection with the Settlement Agreement, Rosenberg executed an Individual Limited Guaranty (the “Rosenberg Guaranty”) for the Master Leases, as modified by the...