The Nat'l Labor Relations Bd. v. 710 Long Ridge Rd. Operating Co. II (In re 710 Long Ridge Rd. Operating Co. II)

• Decision Date: 25 October 2022
• Docket Number: 13-13653 (DHS),Civil Action 14-CV-01725 (JXN)(LDW),14-CV-01726 (JXN),14-CV-02057 (JXN),14-CV-02058 (JXN),14-CV-02353 (JXN),14-CV-02354(JXN)
• Parties: In re 710 LONG RIDGE ROAD OPERATING COMPANY II, LLC, et at., Reorganized Debtors. v. 710 LONG RIDGE ROAD OPERATING COMPANY II, LLC, et al. Appellees. THE NATIONAL LABOR RELATIONS BOARD AND THE NEW ENGLAND HEALTH CARE EMPLOYEES UNION, DISTRICT 1199, SEIU, Appellants,
• Court: U.S. District Court — District of New Jersey

1

In re 710 LONG RIDGE ROAD OPERATING COMPANY II, LLC, et at., Reorganized Debtors.

THE NATIONAL LABOR RELATIONS BOARD AND THE NEW ENGLAND HEALTH CARE EMPLOYEES UNION, DISTRICT 1199, SEIU, Appellants, v. 710 LONG RIDGE ROAD OPERATING COMPANY II, LLC, et al. Appellees.

No. 13-13653 (DHS)

Civil Action Nos. 14-CV-01725 (JXN)(LDW), 14-CV-01726 (JXN), 14-CV-02057 (JXN), 14-CV-02058 (JXN), 14-CV-02353 (JXN), 14-CV-02354(JXN)

United States District Court, D. New Jersey

October 25, 2022

OPINION

NEALS District Judge.

THIS MATTER comes before the Court on Appellees 710 Long Ridge Road Operating Company II, LLC d/b/a Long Ridge of Stamford, 240 Church Street Operating Company II, LLC d/b/a Newington Health Care Center, 1 Burr Road Operating Company II, LLC d/b/a Westpoit Health Care Center, 245 Orange Avenue Operating Company II, LLC d/b/a West River Health Care Center and 107 Osborne Street Operating Company II, LLC d/b/a Danbury Health Care Center's (collectively, the "Appellees" or "Debtors") motion for preliminary injunctive relief (1) restraining and enjoining Appellant, the National Labor Relations Board ("NLRB" or "Appellant"), from investigating, pursuing, or otherwise prosecuting certain claims pending final disposition in this matter and the underlying appeals and (2) for sanctions, attorneys' fees and costs; (ECF No, 128), which Appellants oppose (ECF No. 131) to which Appellees replied (ECF No. 133). This matter is decided without oral argument pursuant to Federal Rule of Civil Procedure 78(b) and Local Civil Rule 78.1(b). For the reasons stated herein, Appellees' motion for preliminary injunctive relief and for sanctions as to Appellants is GRANTED in part and DENIED in part.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY^[1]

To provide sufficient context for Appellees' motion, it is necessary to summarize the somewhat complex facts and issues involved in the underlying bankruptcy appeals and subsequent procedural history.^[2] Each Appellee formerly operated an inpatient skilled nursing facility located in the state of Connecticut. See Declaration of Victor Matthew Marcos in Support of Appellees' Motion to Dismiss the Appeals as Equitably Moot,"ECF No. 128-3, "Marcos Declaration", ¶ 1, Due to unsustainable labor costs under collective bargaining agreements ("CBAs") covering their unionized workforce, the Appellees sought Chapter 11 relief in the United States Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court").^[3] See Id. ¶ 7. Following the Petition Date, Appellees moved in the Bankruptcy Court to implement interim modifications to their CBAs with Appellant New England Health Care Employees Union, District 1199, SEIU ("Union") and, with NLRB, ("Appellants") under Section 1113(e) of Title 11 of the United States Code (the "Bankruptcy Code") because Appellees' facilities were unable to sustain themselves given the existence of uneconomic provisions in the CBAs. ECF No. 128-18 at 8-9.

On March 4, 2013, April 10, 2013, July 15, 2013, and November 22, 2013, the Bankruptcy Court entered four successive Orders under Section 1113(e) (the "1113(e) Orders") authorizing the Appellees to implement interim modifications to their CBAs with the Union. See Case No. 13-13653 (DHS), ECF Nos. 66, 230, 424, 706; see also Marcos Declaration, ¶ 4.

After unproductive Union negotiations, Appellees moved to reject the economic terms of the CBAs and implement the Appellees' proposal under Section 1113(b) of the Bankruptcy Code to emerge from Chapter 11. On February 3, 2014, the Bankruptcy Court issued an opinion and an Order under Section 1113(c) (the "1113(c) Order," with the 1113(e) Orders, collectively the "1113 Orders") (i) rejecting the continuing economic terms of the CBAs with the Union under 11 U.S.C. § 1113(c), and (ii) implementing the terms of Appellees' proposal under 11 US.C. § 1113(b). See Case No. 13-13653, ECF Nos. 897, 898; see also Marcos Declaration, ¶ 4. On February 6, 2014, the Bankruptcy Court entered an Order approving the Appellees' objection to various claims (the "Claims Objection Order"), which (i) reclassified as general unsecured claims, if and when awarded in a NLRB proceeding and to the extent that they were filed or asserted as priority claims under 11 U.S.C. § 507(a)(4) and/or 11 U.S.C. § 507(a)(5), the claims of the Appellants that relate to the period preceding the Petition Date, and (ii) expunged the claims attributable to the time period of March 3, 2013 to February 3, 2014, See Civil Action Nos. 14-cv-02057 and 14-cv-02058; see also Marcos Declaration, ¶ 4.

The 1113 Orders and Claims Objection Order enabled the Appellees to proceed with the hearings on confirmation of the Plan and emerge from Chapter 11. The Bankruptcy Court conducted hearings on February 10, 2014, and February 19, 2014, on confirmation of the Plan. On March 5, 2014, the Bankruptcy Court issued an opinion confirming the Plan provided the Appellees made certain modifications thereto. See In re 710 Long Ridge Rd. Op. Co. II, LLC, 2014 WL 886433 (Bankr. D.N.J. March 5, 2014) (the "Opinion on Confirmation," see ECF No. 128-4, Ex. 3 to the Sirota Declaration).^[4] The Bankruptcy Court found that,

The Objecting Parties assert it is beyond this Court's jurisdiction to resolve NLRB claims against non-debtors because "preventing claimants from pursuing their claims is equivalent to issuing a final adjudication of the merits of such claims." See In re Digital Impact, 223 B.R. 1, 12 (Bankr. N.D. Okla. 1998).

While the Plan in its original form may have been read to enjoin the NLRB's rights to fix a claim against any Releasee in the ALJ proceedings, the Debtors' second modifications to the Plan clarify that the Third-Party Releases are not meant to function in this manner. The Debtors' Plan states that

[s]ubject to all provisions of this Article IX, including the releases, neither Section 9.4 of the Plan nor any Confirmation Order shall operate as an injunction with respect to, or otherwise limit or enjoin, the NLRB's rights under the NLRA and any exclusive jurisdiction thereunder to fix a claim against any Releasee in the ALJ Proceedings, (Footnote omitted).

Thus, this portion of the Objecting Parties' argument appears resolved except to the extent third-party releases are permitted which would affect the NLRB's claim of joint and several liability against non-debtors.

710 Long Ridge Rd, 2014 WL 886433, at *11.

In further support of its ruling, the Bankruptcy Court stated, "Whether third-party releases are permissible plan provisions is governed by substantive bankruptcy law and is often litigated. Referring to third-party releases, the Bankruptcy Court for the District of New Jersey has noted that 'such injunctions and releases are customary and ordinary in large Chapter 11 cases.'" Id. at *12 (citing/;? re Am. Family Enters., 256 B.R. 377, 406 (D.N.J. 2000)),^[5] Here, the Bankruptcy Court further added that, "in order to preserve the viability of the Debtors, third parties are contributing significant dollars to fund the potential for a Back Pay Claim award. These funds will be available to satisfy such a claim against the Debtors without the NLRB ever having to prove its case that any of the third parties is liable as a single and/or joint employer." 710 Long Ridge Rd., 2014 WL 886433, at *13. The Bankruptcy Court explained that,

There is no question that there is an identity of interest between the Debtors and Care One and Care Realty. Care One and Care Realty undoubtedly "share the common goal" of confirming the Amended Plan and implementing the transactions contemplated thereunder. See In re Tribune Co., 464 B.R. 126, 187, on reconsideration, 464 B.R. 208 (Bankr. D.Del. 2011) (noting an identity of interest between the debtors and the settling parties where such parties "share[d] the common goal of confirming the [ ] Plan and implementing the [ ] Plan Settlement"). The Debtors also share a unity of identity with the other Releasees because their claims may be of such a nature that they are indemnifiable by the Debtors and therefore would implicate the Debtors and further deplete estate assets. The Objecting Parties acknowledge that actions against the non-debtor affiliates are consolidated with those against the Debtor and arise out of the same alleged conduct.

710 Long Ridge Rd., 2014 WL 886433, at *15.

The Bankruptcy Court similarly found that as to other Releasees, "There is also a direct relationship between the Debtors' reorganization and the nonconsensual releases given in consideration for the contributions by HealthBridge and the Affiliated Landlords. Much of the same reasoning applicable to Care Realty and Care One applies to the management company and the landlords." 710 Long Ridge Rd., 2014 WL 886433, at * 16.

Appellees agreed to the modifications and on March 6, 2014, and the Bankruptcy Court entered an Order confirming the Plan (the "Confirmation Order"); see also Marcos Declaration, ¶ 8. On March 7, 2014, the Plan became effective (the "Effective Date") and shortly thereafter, was substantially consummated. The Union and the NLRB have appealed the 1113 Orders, Claims Objection Order and Confirmation Order to this Court (collectively, the "Appeals").

Subsequent to entry of the Confirmation Order and the Effective Date of the Plan, the NLRB issued at least nine subpoenas (the "Subpoenas") seeking testimony from current and former representatives of the Releasees, including Care Realty, as well as several subpoenas to banks and financial institutions for the production of the Releasees' bank records, financial statements, income tax returns, and other financial information. The Subpoenas sought information and documents in connection with the NLRB's litigation of its joint and single employer...