Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18

Size: px

Start display at page:

Download "Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18"

Gervase Robbins
5 years ago
Views:

1 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 GARFUNKEL WILD, P.C. 111 Great Neck Road Great Neck, New York Telephone: (516) Fax: (516) Burton S. Weston Adam T. Berkowitz Counsel for Lori Lapin Jones, Esq., as the Plan Administrator for Long Beach Medical Center and Long Beach Memorial Nursing Home, Inc. d/b/a The Komanoff Center for Geriatric and Rehabilitative Medicine UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK x In re: LONG BEACH MEDICAL CENTER, et al., 1 Debtors x Chapter 11 Case No (AST) (Jointly Administered) PLAN ADMINISTRATOR S OBJECTION TO PROOF OF CLAIM NOS. 139, 140, 544, 545, 546 AND 547 FILED BY BERNADETTE A. RILEY Lori Lapin Jones, Esq., as Plan Administrator (the Plan Administrator ) for the postconfirmation chapter 11 estates of Long Beach Medical Center and Long Beach Memorial Nursing Home, Inc. d/b/a The Komanoff Center for Geriatric and Rehabilitative Medicine (together, the Estates ), by and through her counsel, hereby submits this objection (the Objection ) seeking entry of an Order pursuant to 11 USC 105, 502, and 503, and Fed. R. Bankr. P disallowing and expunging the proofs of claim filed by Dr. Bernadette A. Riley ( Dr. Riley ), a former LBMC employee, which are designated as claim numbers 140, 544, 545, 546, and 547 on the Debtors official claims register, and fixing the liability for claim number 139, the proposed surviving claim (each a Claim, and collectively, the Claims ), and which 1 The debtors in these chapter 11 cases, along with the last four digits of each debtor s federal tax identification number include: Long Beach Medical Center (5084) and Long Beach Memorial Nursing Home, Inc. d/b/a The Komanoff Center for Geriatric and Rehabilitative Medicine (3422) v.6

2 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 are annexed hereto as Exhibit B. In support of the Objection, the Plan Administrator represent as follows: BACKGROUND 1. On February 19, 2014 (the Petition Date ), the Debtors each filed a voluntary petition for relief under chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ) in the United States Bankruptcy Court for the Eastern District of New York (the Court ). The Debtors continue in possession of their remaining assets as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. On February 19, 2014, the Court entered an order consolidating the Debtors cases for procedural purposes only and ordering their joint administration under the caption above [Docket No. 30]. 3. On February 26, 2014, the Court entered an Order (the Bar Date Order ) setting April 25, 2014 as the general bar date for creditors of the Debtors Estates to file proofs of claim relating to the pre-petition period and August 18, 2014 for governmental units to file proofs of claim against the Debtors estates (collectively, the Claims Bar Date ) [Docket No. 41]. 4. The Bar Date Order states that pursuant to Bankruptcy Rule 3003(c)(2), all holders of claims that fail to comply with this Order by timely filing a proof of claim in appropriate form shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution. 5. On February 27, 2014, this Court entered an order authorizing the Debtors to employ Garden City Group, Inc. as the Debtors Claims and Noticing agent [Docket No. 43] v.6 2

3 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 6. On February 28, 2014, the United States Trustee appointed 1199SEIU United Healthcare Workers East, ChemRx and Atlantic Dialysis Management Services, LLC, to the Official Committee of Unsecured Creditors (the Committee ). [Docket No. 67]. 7. On June 28, 2013, the Debtors filed their respective schedule of assets and liabilities and statement of financial affairs (the Schedules ) [Docket Nos. 125, 127, 129, 131, 133, 135, 137]. 8. By Order dated August 18, 2016 (the Administrative Bar Date Order ), the Court established October 19, 2016 (the Administrative Bar Date ) as the deadline for the filing of all Administrative Claims against the Debtors [Docket No. 523]. 9. Dr. Riley was employed by LBMC prior to the Petition Date through March 28, 2014, approximately five weeks after the Petition Date. 10. Dr. Riley has filed the following Claims in these cases: Claim No. 139 ( Claim 139 ): Filed on March 31, 2014 as a general unsecured claim in the amount of $9, for amounts allegedly owed by LBMC to Dr. Riley for unpaid wages and wage related benefits, and for reimbursement of malpractice tail coverage and membership dues. 2 Claim No. 140 ( Claim 140 ): Filed on March 31, 2014 as a general unsecured claim in the amount of $65,764 for amounts allegedly owed by LBMC for Dr. Riley s malpractice tail coverage. Claim No. 547 ( Claim 547 ): Filed on August 30, 2016 as an administrative claim in the amount of $61,446 asserted for amount allegedly owed by LBMC for Dr. Riley s malpractice tail coverage. Claim No. 544 ( Claim 544 ): Filed on August 30, 2016 as an administrative claim in the amount of $61,446 which is duplicative of Claim 547. Claim No. 546 ( Claim 546 ): Filed on August 30, 2016 as an administrative claim in the amount of $11, asserted for amounts allegedly owed by LBMC 2 Attached to Claim 139 is a letter from Dr. Riley asserting amounts allegedly owed by LBMC to Dr. Riley for malpractice tail coverage and membership dues. These amounts are not included on the proof of claim form Dr. Riley submitted to the Debtors claims agent v.6 3

4 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 to Dr. Riley for unpaid wages and accrued, but unused, vacation, sick, and continuing medical education time. Claim No. 545 ( Claim 545 ): Filed on August 30, 2016 as an administrative claim in the amount of $11, which is duplicative of Claim 546. The LBMC Employee Fund 11. In connection with the sale of LBMC s assets to South Nassau Communities Hospital ( SNCH ) earlier in these chapter 11 cases, SNCH agreed to assume up to $1 million of LBMC s employee obligations. SNCH satisfied that obligation by the establishment of a fund for the sole and exclusive benefit of LBMC s former employees (the LBMC Employee Fund ), which the Debtors agreed to manage. 12. To distribute the LBMC Employee Fund pro-rata among former LBMC employees, in August 2015, LBMC mailed letters (each a LBMC Employee Letter ) to former employees confirming the amounts owed by LBMC s estate to each such former employee, based on LBMC s books and records, on account of accrued, but unpaid, vacation, holiday, personal time, and severance. 3 The LBMC Employee Letter to Dr. Riley provided in relevant part: [W]e are writing to confirm the amount of your aggregate claim, as per the Debtors books and records which indicate that as of December 31, 2014, you are owed the amount of $15, representing hours of accrued and unpaid vacation, holiday and/or personal time together with severance in the amount of $5,244, for an aggregate claim of $20, Please note, LBMC s employee benefit policy does not provide for the payment of sick time. If you have included amounts for sick time in calculating your total claim amount or with respect to any claim filed against the bankruptcy estate, those amounts will not be paid or otherwise honored. 3 Pursuant to the Debtors handbook, the Debtors employees were not entitled to payment on account of accrued, but unpaid, sick time. Accordingly, such amounts were not included in the amount stated in any former employee s LBMC Employee Letter v.6 4

5 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46: A true and correct copy of Dr. Riley s LBMC Employee Letter is annexed hereto as Exhibit A. The Debtors did not receive a response from Dr. Riley disputing the amount set forth in the LBMC Employee Letter and the letter was not returned as undelivered. 14. Accordingly, the Debtors fixed Dr. Riley s Claims at $20, To date, Dr. Riley has received $6, from the LBMC Employee Fund, thereby reducing any amount she may be entitled to for accrued, but unpaid, vacation, holiday, personal time, and severance to $14, JURISDICTION 15. This Court has jurisdiction over this Objection pursuant to 28 U.S.C This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(B). The statutory predicates for the relief requested herein are Section 105, 502, and 503 of the Bankruptcy Code and Rules 3003 and 3007 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). RELIEF REQUESTED 16. The Plan Administrator seeks entry of an Order, pursuant to sections 105, 502, and 503 of the Bankruptcy Code, and Bankruptcy Rule 3007, disallowing and expunging Claims 140, 544, 545, 546, and 547 and fixing Claim 139, the claim the Plan Administrator seeks to designate as the surviving claim, for the reasons set forth below. 17. LBMC has no obligation with respect to the Claims other than as previously fixed by the LBMC Employee Letter sent to Dr. Riley. LBMC has no liability with respect to Claim 140, Claim 547, Claim 544, and the portion of Claim 139 asserting entitlement to malpractice tail coverage (collectively, the Tail Coverage Claims ). There is no provision in Dr. Riley s employment agreement (the Employment Agreement ), annexed hereto as Exhibit C, or the LBMC Employee Handbook (the Handbook ) stating that LBMC is obligated to provide Dr. Riley with malpractice tail coverage upon her resignation or termination as an employee of v.6 5

6 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 LBMC. Additionally, the Plan Administrator objects to Claim 545, Claim 546, and the remaining portion of Claim 139 (collectively, the Wage Claims ) to the extent such Claims are for paid time off ( PTO ), and/or severance in an amount different than that set forth in Dr. Riley s LBMC Employee Letter because: (i) such Claims do not comport with the Estates books and records, and (ii) Dr. Riley s Claim was fixed when she failed to respond to the LBMC Employee Letter and subsequently accepted the initial distribution from the LBMC Employee Fund. Furthermore, the Plan Administrator seeks to expunge and disallow the Wage Claims to the extent they seek amounts that are not for PTO or severance, as the Estates have no obligation with respect to such asserted amounts. 18. Accordingly, the Claims should be expunged and disallowed, except to the extent of the unpaid amounts Dr. Riley is entitled to pursuant to her LBMC Employee Letter. The Tail Coverage Claims 19. Prior to the Petition Date, and through Dr. Riley s last date of employment after the Petition Date, LBMC was a policy holder with respect to a certain claims-made medical malpractice insurance policy which covered Dr. Riley and certain other covered medical professionals (the Insurance Policy ). After the Petition Date, and the ultimate sale of LBMC s assets, LBMC made a determination, pursuant to its business judgment, to cancel, or otherwise let lapse, its Insurance Policy, as LBMC no longer employed the medical professionals covered under such policy. Additionally, LBMC determined that purchasing an extended reporting period ( Tail Coverage ) for the Insurance Policy would be burdensome to the estate and without concomitant benefit. 20. The Tail Coverage Claims filed by Dr. Riley are duplicative claims seeking reimbursement for amounts Dr. Riley claims to have personally paid to acquire Tail Coverage v.6 6

7 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 The Estates have no obligation, contractual or otherwise, to provide and/or reimburse for the provision of such Tail Coverage. 21. Section 7 of the Employment Agreement entitled Malpractice Insurance, in relevant part, provides: [LBMC] will provide you with professional liability insurance coverage in the amounts required for all members of the Medical Staff of [LBMC] and approved by the Board of Trustees of [LBMC]. Such coverage shall, at [LBMC] s option, be provided through a commercial carrier or the [LBMC] s existing or future self retention program. Such coverage shall be provided only for professional services in connection with your employment hereunder, on behalf of [LBMC], and shall not be provided for services performed on behalf of third parties, regardless of whether [LBMC] has approved or consented to such outside activities during the time of employment. Any commercial insurance covering your professional activities shall be deemed primary insurance and [LBMC] s self retention program shall be deemed excess. Nowhere in Section 7 of the Employment Agreement, or anywhere else in such agreement, does LBMC agree to provide Tail Coverage to Dr. Riley upon the cessation of her employment. 22. Additionally, the Handbook does not contain any provision providing or governing medical malpractice insurance or Tail Coverage for medical professionals and such coverage was not purchased or provided for any other medical professionals. 23. Accordingly, the Estate have no liability to provide Tail Coverage or to reimburse Dr. Riley for Tail Coverage she independently purchased, and, therefore, the Plan Adminstrator objects and seek to have the Tail Coverage Claims disallowed and/or expunged. The Wage Claims 24. As noted above, the Debtors and Dr. Riley previously fixed her Wage Claims. Nonetheless, this Objection will analyze the components of the Wage Claims, which assert liability against LBMC for sick time ( Asserted Sick Time ), continuing medical education time ( Asserted CME Time ), unpaid wages from February 20, 2014 through Dr. Riley s last date of employment on March 24, 2014 ( Asserted Back-Pay ), and twenty (20) days of vacation time v.6 7

8 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 ( Asserted Vacation Time ). As set forth more fully below, the Estates have no obligation to Dr. Riley for Asserted CME Time and Asserted Sick Time. The Asserted Back-Pay was previously satisfied by payment to Dr. Riley, and the Asserted Vacation Time does not comport with the Estates books and records and should not be entitled to administrative priority. Asserted Sick Time 25. The Handbook provides for certain sick leave benefits which accrue at the rate of one (1) day for each month of employment. However, Section III.A.3 of the Handbook states, [i]f you resign or are terminated, unused sick time will not be paid. 26. Accordingly, the Estates have no liability for the payment of Asserted Sick Time, and therefore, the Plan Administrator objects to and seeks to disallow and expunge the PTO Claims to the extent they are based on Asserted Sick Time. Asserted CME Time 27. To the extent the PTO Claims assert amounts owed for CME days, the Plan Administrator assume that Dr. Riley is asserting amounts owed in connection with continuing medical education. The Estates books and records, including, without limitation, the Handbook and the Employment Agreement do not provide compensation for Asserted CME Time. 28. Accordingly, LBMC has no liability for the payment of Asserted CME Time, and therefore, the Plan Administrator objects and seeks to disallow and expunge the PTO Claims to the extent they are based on Asserted CME Time. 29. To the extent CME days refer to something other than amounts for continuing medical education, the Plan Administrator objects to such portions of the PTO Claims for lack of sufficient supporting documentation v.6 8

9 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 Asserted Back-Pay 30. The PTO Claims assert, in part, amounts allegedly owed to Dr. Riley for the entire post-petition pay period, February 20, 2014 though Dr. Riley s last date of employment on March 28, Dr. Riley has attached paystubs to Claim 545 covering the pay periods of March 2, 2014 through March 15, 2014, and March 18, 2014 through March 29, Those paystubs reflect those dates on which wages were direct deposited to Dr. Riley s bank account. 31. To the extent the PTO Claims assert unpaid wages for the period of February 20, 2014 through March 1, 2014, annexed hereto as Exhibit D is LBMC s payroll journal demonstrating that Dr. Riley was paid on March 5, 2014, by direct deposit, for wages earned between February 16, 2014 and March 1, Accordingly, the Estates have satisfied any obligation for Asserted Back-Pay, and, therefore, object and seek to have the PTO Claims disallowed and expunged to the extent they are based on Asserted Back-Pay. Asserted Vacation Time 33. The PTO Claims assert, in part, that LBMC owes Dr. Riley for twenty (20) vacation days as an administrative expense. As Dr. Riley worked for approximately one month post-petition, the maximum post-petition vacation days she could have accrued would have been between one and two days. At a daily rate of approximately $525, the maximum amount of any administrative claim would be capped at $1,050. Moreover the aggregate claim does not comport with the Estates books and records and was fixed in connection with the LBMC Employee Letter. The Proposed Surviving Claim 34. Because the Estates only liabilities to Dr. Riley were fixed as set forth in the LBMC Employee Letter mailed to her earlier in these cases, which Dr. Riley was deemed to v.6 9

10 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 have consented to when she accepted the distribution from the LBMC Employee Fund, the Plan Administrator seeks to fix Dr. Riley s claim accordingly. As set forth above, the LBMC Employee Letter fixed Dr. Riley s total claims at $20, In reliance on the LBMC Employee Letter, LBMC distributed $6, to Dr. Riley from the LBMC Employee Fund. Accordingly, the Plan Administrator seeks to fix Claim 139 as a general unsecured claim in the amount of $14,316.12, the unpaid portion of Dr. Riley s fixed claim, which shall be further reduced, dollar for dollar, on account of any future distributions from the LBMC Employee Fund. BASIS FOR RELIEF REQUESTED 35. Section 502 of the Bankruptcy Code provides, in pertinent part: 11 U.S.C. 502(a). (a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general partner in a partnership that is a debtor in a case under chapter 7 of this title, objects. 36. Bankruptcy Rule 3007 provides, in relevant part: Fed. R. Bankr. P (a) An objection to the allowance of a claim shall be in writing and filed. A copy of the objection with notice of the hearing thereon shall be mailed or otherwise delivered to the claimant, the debtor or debtor in possession and the trustee at least 30 days prior to the hearing. 37. As set forth in Bankruptcy Rule 3001(f), a properly executed and filed proof of claim constitutes prima facie evidence of the validity and the amount of the claim under section 502(a) of the Bankruptcy Code. See In re Herz, 556 B.R. 537, 542 (Bankr. E.D.N.Y. 2016). To receive the benefit of prima facie validity, however, the proof of claim must set forth facts v.6 10

11 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 necessary to support the claim. In re Marino, 90 B.R. 25, 28 (Bankr. D. Conn. 1988) (internal quotations omitted). 38. The burden of proof for entitlement to an administrative expense is on the claimant and the measure of proof is a preponderance of the evidence. In re Drexel Burnham Lambert Grp. Inc., 134 B.R. 482, 489 (Bankr.S.D.N.Y.1991); In re Kmart Corp., 290 B.R. 614, 621 (Bankr. N.D. Ill. 2003) ( The claimant has the burden of proving entitlement to an administrative expense by preponderance of the evidence. ) (citing In re Party Masters, Inc., 1992 WL (Bankr. N.D. Ill. Apr. 23, 1992)). 39. Section 503 of the Bankruptcy Code, in relevant part, affords administrative expense priority for the actual, necessary costs and expenses of preserving the estate U.S.C. 503(b)(1)(A). 40. Courts in the Second Circuit use a two-part test to determine whether a specific claim qualifies as an administrative expense under section 503(b)(1)(A): first, there must be a postpetition transaction, making it a transaction between the debtor-in-possession and the creditor; and second, the estate must receive a benefit from the transaction. In re Grubb & Ellis Co., 478 B.R. 622, 624 (Bankr. S.D.N.Y. 2012) (citing Trustees of the Amalgamated Ins. Fund v. McFarlin s, Inc., 789 F.2d 98, 101 (2d Cir.1986)). Additionally, [t]he services performed by the claimant must have been induced by the debtor-in-possession, not the pre-petition debtor. In re Enron Corp., 279 B.R. 79, 85 (Bankr. S.D.N.Y. 2002). RESERVATION OF RIGHTS 41. The Plan Administrator reserves all rights to object to any surviving claim against the Estates, whether asserted or unasserted by Dr. Riley, and to further object to any surviving claim on any other grounds discovered by the Plan Administrator during the pendency of these cases. Should the objection addressed herein be denied or dismissed, the Plan Administrator v.6 11

12 Case ast Doc 673 Filed 01/22/18 Entered 01/22/18 17:46:18 reserves her rights to further object to the disputed Claims on any other grounds discovered by the Plan Administrator during the pendency of these cases. NOTICE 42. Notice of this Objection will be given by mailing a copy of such Objection and the proposed order to (i) the Office of the United States Trustee for this district, (ii) counsel for the Post Effective Date Committee, and (iii) Dr. Riley. Entities who have filed a notice of appearance in accordance with Bankruptcy Rule 2002 shall receive notice through ECF. WHEREFORE, the Plan Administrator respectfully requests that the relief requested herein be granted and this Court enter an order, substantially in the form annexed hereto as Exhibit E, and grant such other and further relief as is just and proper. Dated: Great Neck, New York January 22, 2018 GARFUNKEL WILD, P.C. Counsel for Lori Lapin Jones, Esq., as the Plan Administrator for Long Beach Medical Center and Long Beach Memorial Nursing Home, Inc. d/b/a the Komanoff Center for Geriatric and Rehabilitative Medicine By: /s/ Adam T. Berkowitz Burton S. Weston Adam T. Berkowitz 111 Great Neck Road Great Neck, NY Telephone: (516) Fax: (516) v.6 12

rdd Doc 1548 Filed 12/20/18 Entered 12/20/18 14:11:26 Main Document Pg 1 of 7

13-22840-rdd Doc 1548 Filed 12/20/18 Entered 12/20/18 14:11:26 Main Document Pg 1 of 7 GARFUNKEL WILD, P.C. 111 Great Neck Road Great Neck, New York 11021 Telephone: (516) 393-2200 Facsimile: (516) 466-5964