Main Document Page of SAMUEL R. MAIZEL (Bar No. 0) samuel.maizel@dentons.com JOHN A. MOE, II (Bar No. 0) john.moe@dentons.com TANIA M. MOYRON (Bar No. ) tania.moyron@dentons.com 0 South Figueroa Street, Suite 00 Los Angeles, California 00-0 Tel: () -00 / Fax: () - Attorneys for the Chapter Debtors and Debtors In Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA - LOS ANGELES DIVISION 0 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 In re VERITY HEALTH SYSTEM OF CALIFORNIA, INC., et al., Debtors and Debtors In Possession. Affects All Debtors Affects Verity Health System of California, Inc. Affects O Connor Hospital Affects Saint Louise Regional Hospital Affects St. Francis Medical Center Affects St. Vincent Medical Center Affects Seton Medical Center Affects O Connor Hospital Foundation Affects Saint Louise Regional Hospital Foundation Affects St. Francis Medical Center of Lynwood Foundation Affects St. Vincent Foundation Affects St. Vincent Dialysis Center, Inc. Affects Seton Medical Center Foundation Affects Verity Business Services Affects Verity Medical Foundation Affects Verity Holdings, LLC Affects De Paul Ventures, LLC Affects De Paul Ventures - San Jose Dialysis, LLC Debtors and Debtors In Possession. Lead Case No. :-bk-0-er Jointly Administered with: Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-0-er Case No. :-bk-00-er Case No. :-bk-0-er Chapter Cases Hon. Judge Ernest M. Robles DEBTORS RESPONSE TO MOTION FOR RELIEF FROM THE AUTOMATIC STAY FILED ON BEHALF OF AIDA INIQUEZ AND FRANCISCO INIQUEZ [DOCKET NO. ] Hearing: DATE: November, 0 TIME: 0:00 a.m. PLACE: Courtroom E. Temple St., Los Angeles, CA - - 00\V-
Main Document Page of 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 0 Verity Health System of California, Inc., and St. Francis Medical Center, debtors and debtors in possession in the above-captioned chapter bankruptcy cases (collectively, the Debtors ), hereby respond to the Motion For Relief From Stay (the Motion ) filed on behalf of Aida Iniquez And Francisco Iniquez (the Movants ) [Docket No. ]. I. INTRODUCTION The Motion seeks relief from the automatic stay so that a complaint filed on May, 0, in the Los Angeles Superior Court, Case No. BC0, can proceed to adjudication. According to the Motion, Movants (i) assert a tort claim against the Debtors, (ii) seek recovery only from applicable insurance, if any, and (iii) waive any deficiency or other claim against the Debtors or property of the Debtors bankruptcy estates. For the reasons set forth below, the Debtors respectfully request that the Court deny the Motion. II. STATEMENT OF RELEVANT FACTS A. Brief Description Of The Debtors Business And Their Operations.. On August, 0 ( Petition Date ), the Debtors each filed a voluntary petition for relief under chapter of the Bankruptcy Code. The Debtors continue to operate their businesses and manage their properties as debtors in possession as authorized by 0(a) and 0.. The Debtor VHS, a California nonprofit public benefit corporation, is the sole corporate member of the following five Debtor California nonprofit public benefit corporations that operate six acute care hospitals: O Connor Hospital, Saint Louise Regional Hospital, St. Francis Medical Center, St. Vincent Medical Center, Seton Medical Center, and Seton Medical Center Coastside (collectively, the Hospitals ) and other facilities in the state of California.. VHS, the Hospitals, and their affiliated entities operate as a nonprofit health care system, with approximately,0 inpatient beds, six active emergency rooms, a trauma center, eleven medical office buildings, and a host of medical specialties, including tertiary and 00\V-
Main Document Page of 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 0 quaternary care. Declaration Of Richard G. Adcock In Support of Emergency First-Day Motions, at, (the First Day Declaration ) [Docket No. ]. On the Petition Date, the Debtors had approximately 0 inpatients. Id., at,. The scope of the services provided by the Verity Health System exemplified by the fact that in 0, the Hospitals provided medical services to over 0,000 inpatients and approximately 0,000 outpatients. Id., at,.. On August, 0, this Court entered an order authorizing the joint administration of the Debtors chapter cases (the Cases ) pursuant to Bankruptcy Rule 0(b) and LBR 0- and 0-(q).. A detailed description of the Debtors businesses, capital structure, and the events leading to the commencement of these Cases is contained in the First Day Declaration.. On September, 0, the U.S. Trustee appointed a statutory creditors committee pursuant to 0 (the Committee ) [Docket No. ]. B. The Debtors Bankruptcy Cases And Sale Of Assets.. As set forth in the Debtors Notice Of Motion And Motion For The Entry Of (I) An Order () Approving Form Of Asset Purchase Agreement For Stalking Horse Bidder And For Prospective Overbidders To Use, () Approving Auction Sale Format, Bidding Procedures And Stalking Horse Bid Protections, () Approving Form Of Notice To Be Provided To Interested Parties, () Scheduling A Court Hearing To Consider Approval Of The Sale To The Highest Bidder And () Approving Procedures Related To The Assumption Of Certain Executory Contracts And Unexpired Leases; And (Ii) An Order (A) Authorizing The Sale Of Property Free And Clear Of All Claims, Liens And Encumbrances; Memorandum Of Points And Authorities In Support Thereof [Docket No. ], on which the Court entered an Order on October, 0 [Docket No. ], the Debtors are fully engaged in the sale of O Connor Hospital and Saint Louise Hospital, among an array of other tasks, exemplified by the Docket in these cases. The Debtors are also exploring aggressively the sales of St. Vincent Medical Center, St. Francis Medical Center and Seton Medical Center. 00\V-
Main Document Page of 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 0 III. ARGUMENT IN OPPOSITION TO MOTION Whether stay relief should be granted or denied is committed to the sound discretion of the Bankruptcy Court. Benedor Corp. v. Conejo Enterprises, Inc. (In re Conejo Enterprises, Inc.), F.d (th Cir. ). Upon a showing of cause, a bankruptcy court shall grant relief from the automatic stay. Id. at. Cause has no clear definition and is determined on a caseby-case basis. Id. However, the Movants have not actually demonstrated cause to grant relief from stay. For the reasons set forth herein, the Motion should be denied. A. Cause Does Not Exist To Grant the Motion. Courts typically look at twelve nonexclusive factors to determine whether the stay should be lifted (the Plumberex factors ). See Truebro, Inc. v. Plumberex Speicalty Products, Inc. (In re Plumberex Specialty Products, Inc.), B.R., (Bankr. C.D. Cal. 00). See, also: Sonnax Indus., Inc., v. Tri Component Prods. Corp. (In re Sonnax Indus., Inc.), 0 F.d 0, ( nd Cir. 0); In re Curtis, 0 B.R. (Bankr. D. Utah ). Here, the Plumberex factors weigh in favor of denial of the Motion. Here, the litigation will interfere with the Debtors bankruptcy cases, and the Debtors managements efforts to close sales and address post-closing matters. There is no reason to believe that these claims will be resolved speedily and effectively in the pending litigation. These factors include: () whether the relief will result in a partial or complete resolution of the issues; () the lack of any connection with or interference with the bankruptcy case; () whether the foreign proceeding involves the debtor as a fiduciary; () whether a specialized tribunal has been established to hear the particular cause of action and whether that tribunal has the expertise to hear such cases; () whether the debtor s insurance carrier has assumed full financial responsibility for defending the litigation; () whether the action essentially involves third parties, and the debtor functions only as a bailee or conduit for the goods or proceeds in question; () whether the litigation in another forum would prejudice the interests of other creditors, the creditors committee and other interested parties; () whether the judgment claim arising from the foreign proceeding would result in a judicial lien avoidable by the Debtor under section (f); () whether movant s success in the foreign proceeding would result in a judicial lien avoidable by the debtor under section (f); (0) the interests of judicial economy and the expeditious economical determination of litigation for the parties; () whether the foreign proceedings have progressed to the point where the parties are prepared for trial; and () the impact of the stay on the parties and the balance of hurt. 00\V-
Main Document Page of 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 0 Additionally, (a) the nature of the proceedings is not fiduciary duty claims asserted by Movants against Debtors, and (b) the litigation would be disruptive to the Debtors operations and detrimental to the Debtors estates, particularly at a time when the Debtors are fully engaged in the sale of O Connor Hospital and Saint Louise Hospital, and exploring aggressively the sales of St. Vincent Medical Center, St. Francis Medical Center, Seton Medical Center and Seton Coastside. Allowing the State Court Action to proceed at this time would be detrimental to the Debtors prospects for success at these early stages of this Bankruptcy Case. Bankruptcy courts have found that granting relief from the automatic stay is inappropriate in situations such as the present case, where the bankruptcy proceeding has only just commenced and substantial actions must be taken to ensure a successful conclusion. Truebro, B.R. at (relief from stay denied where [i]t is undeniable that the federal district court action is connected to, and would interfere with the bankruptcy case ); In re Plastech Engineered Prod., Inc., B.R. 0, 0, (Bankr. E.D. Mich. 00) (denial of relief from stay where bankruptcy was in its early stages); Curtis, 0 B.R. at 0 ( The most important factor in determining whether to grant relief from the automatic stay to permit litigation against the debtor in another forum is the effect of such litigation on the administration of the estate. Even slight interference with the administration may be enough to preclude relief in the absence of a commensurate benefit ); Crocker National Bank v. American Mariner Industries (In re American Mariner), B.R. 00, 0 (BAP th Cir. ), reversed on other grounds ( The policy of the code, in the litigation involving the automatic stay, particularly in a Chapter or reorganization setting, is to place matters in a holding pattern so as to permit an opportunity, where there are prospects for survival, for time to allow the reorganization to develop for the benefit of the debtor and its creditors ). It is well established that the reorganization of a debtor may include cases where the debtor sells all or substantially all of its assets pre-confirmation under section or pursuant to confirmation of a plan of reorganization that results in the liquidation of the debtor s assets. See, e.g., USC (a)()(d) (allowing plans of reorganization that provide for the sale of any or all of the debtor s property); USC (d)() (a corporate debtor will not receive a discharge if the 00\V-
Main Document Page of plan calls for a liquidation of substantially all of the debtor s assets); see generally Ali M. M. Mojdehi & Janet Dean Gertz, The Implicit Good Faith Requirement in Chapter Liquidations: A Rule in Search of a Rationale, Am. Bankr. Inst. L. Rev., (00) ( section sales of the entire business have become quite common in under chapter ). Consequently, the Motion should not be granted. IV. CONCLUSION The Debtors focus needs to remain on the bankruptcy case. Accordingly, the Debtors request relief from the automatic stay be denied. 0 SOUTH FIGUEROA STREET, SUITE 00 LOS ANGELES, CALIFORNIA 00-0 () -00 0 Dated: November, 0 SAMUEL R. MAIZEL TANIA M. MOYRON JOHN A. MOE, II By /s/john A. Moe, II JOHN A. MOE, II Attorneys for the Debtor, Verity Health System of California, Inc., and St. Francis Medical Center 0 00\V-