Nat'l Med. Imaging, LLC v. U.S. Bank, Nat'l Ass'n, Bky. No. 08-17351 (ELF)
| Docket Number | Bky. No. 08-17351 (ELF), Bky. No. 08-17348 (ELF),Adv. No. 14-250, Adv. No. 14-251 |
| Decision Date | 02 September 2022 |
| Citation | 644 B.R. 94 |
| Parties | IN RE: NATIONAL MEDICAL IMAGING, LLC, National Medical Imaging Holding Company, LLC, National Medical Imaging, LLC, National Medical Imaging Holding Company, LLC, Plaintiffs, v. U.S. Bank, National Association, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Steven M. Coren, David M. Devito, Janice Daul Felix, Melissa C. Mazur, Kaufman, Coren & Ress, P.C., Philadelphia, PA, Aris J. Karalis, Karalis PC, Philadelphia, PA, for Plaintiffs National Medical Imaging Holding Company, LLC, National Medical Imaging, LLC.
Steven J. Adams, Stevens & Lee, Reading, PA, Peter H. Levitt, Shutts & Bowen, LLP, Miami, FL, for Defendants DVI Funding, LLC, DVI Receivables XIV, LLC, DVI Receivables XIX, LLC, DVI Receivables XVI, LLC, DVI Receivables XVII, LLC, DVI Receivables XVIII, LLC, Lyon Financial Services, Inc. d/b/a U.S. Bank Portfolio Services, U.S. Bank, N.A., Jane Fox.
Amy E. Vulpio, White and Williams LLP, Philadelphia, PA, for Defendant Ashland Funding, LLC.
The Plaintiffs in these adversary proceedings are two (2) affiliated, putative debtors, National Medical Imaging, LLC and National Medical Imaging Holding Company, LLC ("the Debtors"). The involuntary petitions filed in 2008, were dismissed by the bankruptcy court in 2009.
In this adversary proceeding,1 filed in 2014, the Debtors seek an award of attorney's fees and costs under 11 U.S.C. § 303(i)(1) from the petitioning creditors, Defendant U.S. Bank, National Association ("U.S. Bank") and several related Defendants ("the U.S. Bank Related Defendants"),2 and Ashland Funding, LLC ("Ashland") (when referred to collectively, "the Defendants").3
Section 303(i)(1) provides that "[i]f the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment — (1) against the petitioners and in favor of the debtor for — (A) costs; or (B) a reasonable attorney's fee."
Also playing a central role in this adversary proceeding is 11 U.S.C. § 303(i)(2), which provides that after dismissal of a petition, other than on consent and in the absence of waiver, the court may grant judgment "against any petitioner that filed the petition in bad faith, for ... any damages proximately caused by such filing; or ... punitive damages."
Presently before the court are: (1) a motion for partial summary judgment filed by the U.S. Bank Related Defendants ("the U.S. Bank Motion") and (2) a motion for summary judgment filed by Ashland ("the Ashland Motion").
The primary issues raised by these motions are whether, as a result of the dismissal of the involuntary petitions, the Debtors are entitled to an award of counsel fees under § 303(i)(1) for services other than those directly rendered in obtaining dismissal of the involuntary petitions and defending the dismissal order on appeal. Those other services include services rendered in connection with:
U.S. Bank has moved only for partial summary judgment. It requests that the court determine that U.S. Bank is not liable for § 303(i)(1) costs and attorney's fees that Debtors seek in connection with four (4) categories of legal expenditures stated above. U.S. Bank has not moved for summary judgment on the Debtors’ request for costs and attorney's fees incurred in obtaining dismissal of the involuntary petitions. That issue remains for trial.
Ashland also joins U.S. Bank in asserting that the fees and costs incurred in connection with the Debtors’ failed § 303(i)(2) claims must be denied as unreasonable. But in contrast to U.S. Bank's limited motion, Ashland has moved for summary judgment with respect to all § 303(i)(1) costs and attorney's fees that Debtors seek. It argues that, in light of the failing nature of their businesses, none of the costs and attorney's fees the Debtors incurred in their § 303 defense against the involuntary petition were reasonable.
Finally, Ashland argues that even if the court views some attorney's fees and costs as reasonable, the court should grant summary judgment in Ashland's favor. Ashland asserts that it played a minimal role in the involuntary proceedings, being substituted in for an original petitioning creditor six months into the cases. Ashland also did not take part in many of the legal skirmishes between U.S. Bank and the Debtors in other fora. Based on these facts, Ashland urges the court to exercise its discretion and deny or drastically limit any § 303(i)(1) award against Ashland.
For the reasons stated below, while the scope of the relief available to the Debtors may be narrower than they request, nevertheless, U.S. Bank's Motion and Ashland's Motion's must be denied because there are disputed issues of material fact that require trial and fact finding by the court.
In a prior reported decision, I described in excruciating detail the procedural history of this long running dispute between the parties. See In re Nat'l Med. Imaging, LLC, 627 B.R. 73, 84–87 (Bankr. E.D. Pa. 2021). Here, I will limit the discussion to the procedural history most closely related to this adversary proceeding.
On November 7, 2008, U.S. Bank's predecessors in interest filed involuntary bankruptcy petitions against the Debtors and their principal, Maury Rosenberg ("Rosenberg") in this court.
This court transferred the involuntary petition against Rosenberg to the Southern District of Florida, where it was dismissed. Thereafter, Rosenberg commenced an adversary proceeding in the Florida bankruptcy court asserting claims under 11 U.S.C. § 303(i).
On December 28, 2009, on motion of the Debtors, this court dismissed the bankruptcy cases against the Debtors and retained jurisdiction to determine claims under 11 U.S.C. § 303(i). In re Nat'l Med. Imaging, Inc., 439 B.R. 837 (Bankr. E.D. Pa. 2009) (per Fehling, J.). The order dismissing the case was affirmed on appeal. DVI Receivables XIV, LLC v. Nat'l Med. Imaging, Holding Co., LLC, 529 B.R. 607 (E.D. Pa. 2015), aff'd sub nom. Nat'l Med. Imaging, LLC v. Ashland Funding LLC, 648 F. App'x 251 (3d Cir. 2016).
This court's December 28, 2009 order dismissing the bankruptcy cases set a deadline of January 4, 2010 for the Debtors to seek relief under 11 U.S.C. § 303(i). They did so by filing a motion for sanctions on January 4, 2010.
Without going through, in detail, the numerous filings that followed the dismissal of these bankruptcy cases it is sufficient to say that the court deferred further litigation on the Debtors’ sanctions motion while the Defendants in both Pennsylvania and Florida filed motions for reconsideration. . The stay of the sanctions motion was finally terminated on May 6, 2014. (Bky. No. 08-17351, Doc. # 280). The Debtors then commenced these adversary proceedings on May 27, 2014.4
The adversary complaints initially asserted claims under 11 U.S.C. § 303(i)(1). On May 14, 2015, the Debtors amended the complaints to add a claim for damages (both compensatory and punitive) under § 303(i)(2).5
On September 16, 2016, the District Court withdrew the reference of the § 303(i)(2) claim (but not the § 303(i)(1) claim). See Nat'l Med. Imaging, LLC v. U.S. Bank, N.A., 2019 WL 4076768, at *3 n.16. (E.D. Pa. Aug. 28, 2019).
The Defendants filed motions to dismiss the § 303(i)(1) claims in this court, which were denied on June 30, 2017.
On August 9, 2017, the bankruptcy court entered an order staying further proceedings in the adversary proceedings pending resolution of the § 303(i)(2) claim then pending in the district court. (Adv. No. 14-250, Doc. # 110).
On August 28, 2019, the District Court entered summary judgment in favor of U.S. Bank on the Debtors’ § 303(i)(2) claims. See Nat'l Med. Imaging, LLC v. U.S. Bank, N.A., 2019 WL 4076768.
The Debtors appealed the District Court's decision to the Third Circuit. On August 28, 2020, after the Court of Appeals panel initially affirmed the District Court but then granted rehearing, the panel again affirmed the decision of the District Court. In re Nat'l Med. Imaging, LLC, 818 F. App'x 129, 130 (3d Cir. 2020). The Debtors sought Supreme Court review, but their request for a writ of certiorari was denied on March 21, 2021. Nat'l Med. Imaging, LLC v. U.S. Bank, N.A., ––– U.S. ––––, 141 S. Ct. 1693, 209 L.Ed.2d 468 (2021).
On March 26, 2021, this court vacated all prior orders staying these adversary proceedings, (Adv. No. 14-250, Doc. # 120), and, shortly thereafter, entered an order setting pretrial deadlines, (Id., Doc. # 126). On October 7, 2021, at the request of the parties, certain pretrial deadlines were extended. (Id., Doc. # 140).
On December 6, 2022, the U.S. Bank Related Defendants filed a motion for partial summary judgment and Ashland filed a motion for summary judgment, each accompanied by a supporting memorandum. Thereafter, the Debtors filed a response to each motion and all the...
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