Case wlh Doc 943 Filed 06/14/18 Entered 06/14/18 14:43:59 Desc Main Document Page 1 of 16

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1 Document Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION IN RE: CLAYTON GENERAL, INC., f/k/a Southern Regional Health System, Inc. d/b/a Southern Regional Medical Center, et al., Debtors. CHAPTER 11 Jointly Administered Under CASE NO wlh NOTICE OF HEARING ON MOTION TO APPROVE COMPROMISE AND SETTLEMENT WITH DELL FINANCIAL SERVICES, L.L.C. PLEASE TAKE NOTICE that the above-captioned Debtors have filed a Motion to Approve Compromise and Settlement with Dell Financial Services, L.L.C. (the Motion in which the Debtors have requested that the Court approve a settlement of certain avoidance action claims with the recipient thereof. A copy of the Motion is available at regional or upon request to the undersigned. PLEASE TAKE FURTHER NOTICE that the Court will hold a hearing on the Motion in Courtroom 1403, United States Courthouse, 75 Ted Turner Drive, SW, Atlanta, Georgia at 1:30 p.m. on July 17, PLEASE TAKE FURTHER NOTICE that your rights may be affected by the Court s ruling on this Motion. You should read this Motion carefully and discuss it with your attorney, if you have one in this bankruptcy case. (If you do not have an attorney, you may wish to consult one. If you do not want the Court to grant the relief sought in the Motion, or if you want the Court to consider your views, then you and/or your attorney should attend the hearing. You may also file a written response to the Motion with the Clerk at the address stated below, but you are not required to do so. If you file a written response, you must attach a certificate stating when, how and on whom (including addresses you served the response. The address of the Clerk s Office is: Clerk, U.S. Bankruptcy Court, Suite 1340, 75 Ted Turner Drive, SW, Atlanta, Georgia You should also mail a copy of your response to the undersigned at the address stated below. Respectfully submitted, this 14th day of June, SCROGGINS & WILLIAMSON, P.C Northside Parkway Suite 450 Atlanta, Georgia T: ( F: ( E: rwilliamson@swlawfirm.com mlevin@swlawfirm.com By: /s/ Matthew W. Levin J. ROBERT WILLIAMSON Georgia Bar No MATTHEW W. LEVIN Georgia Bar No Counsel for the Debtor

2 Document Page 2 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION IN RE: CLAYTON GENERAL, INC., f/k/a Southern Regional Health System, Inc. d/b/a Southern Regional Medical Center, et al., Debtors. CHAPTER 11 Jointly Administered Under CASE NO wlh MOTION TO APPROVE COMPROMISE AND SETTLEMENT WITH DELL FINANCIAL SERVICES, L.L.C. COME NOW Clayton General, Inc. f/k/a Southern Regional Health System, Inc. d/b/a Southern Regional Medical Center ( CGI, Clayton General Group, Inc. f/k/a Southern Crescent Physicians Group, Inc., Clayton General Real Estate, Inc. f/k/a Southern Crescent Real Estate, Inc., Clayton General ASC, Inc. f/k/a Southern Regional Ambulatory Surgery, Inc., Southlake ASC, LLLP f/k/a Southlake Ambulatory Surgery Center, L.L.L.P. d/b/a Mount Zion Surgery Center a/k/a Spivey Station Surgery Center and Clayton General Services, Inc. f/k/a Southern Regional Medical Services, Inc., debtors and debtors-in-possession (collectively, the Debtors and their respective bankruptcy estates, collectively, the Bankruptcy Estates in the abovestyled jointly administered case (the Bankruptcy Case, and file this Motion for Approval of Compromise and Settlement with Dell Financial Services, L.L.C. (the Motion, and in support thereof, would respectfully show the Court as follows: SUMMARY OF SETTLEMENT 1. On July 30, 2015 (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. The

3 Document Page 3 of 16 Debtors assert that during the ninety (90 days preceding the Petition Date, Dell Financial Services, L.L.C. ( Dell received certain transfers from one or more of the Debtors in the aggregate amount of $110, (the Transfers, which the Debtors may be entitled to avoid and recover as preferential transfers pursuant to Sections 547 and 550 of the Bankruptcy Code. By this Motion, the Debtors seek to resolve any and all of their and the Bankruptcy Estates claims against Dell related to the Transfers with the execution of mutual releases, and a lump sum payment by Dell of $55, JURISDICTION AND VENUE 2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b(2(A. Venue before this Court is proper pursuant to 28 U.S.C and The statutory predicate for the relief requested in the Motion is Fed. R. Bankr. P BACKGROUND 3. As noted above, on the Petition Date, the Debtors each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Debtors are authorized to operate their businesses as debtors and debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. 4. No trustee or examiner has been appointed in the Bankruptcy Case. No request has been made for the appointment of a trustee or examiner. On August 11, 2015, the United States Trustee appointed the Official Committee of Unsecured Creditors for the Bankruptcy Estates (the Committee

4 Document Page 4 of 16 FACTS SPECIFIC TO THIS COMPROMISE MOTION 5. Prior to the sale of substantially all of the Debtors assets, the Debtors operated a family of healthcare providers servicing residents of Clayton County and others throughout the region south of Atlanta through traditional hospital, outpatient clinic and ambulatory care services. Dell was a vendor of certain products to the Debtors. 6. The Debtors records reflect that the Debtors paid Dell no less than $110, during the ninety (90 days preceding the Petition Date, which payments may constitute preferential transfers and may be avoided and recovered for the benefit of the Bankruptcy Estates, depending on the strength of any affirmative defenses asserted by Dell. 7. In addition, prior to the Petition Date, Dell and CGI were parties to one or more contracts whereby Dell leased certain software to CGI (collectively, the Pre-Petition Contracts. On or about April 11, 2016, Dell filed a proof of claim against the Debtors asserting a claim in the total amount of $250, [Claim No. 199, per the claims docket maintained by the Debtors authorized claims agent] (the Dell Claim, comprised of (a past due amounts accrued prior to the Petition Date under the Pre-Petition Contracts, and (b damages arising from the rejection of the Pre-Petition Contracts. 8. On July 28, 2017, the Debtors filed an adversary proceeding against Dell (Adv. Pro. No wlh, which asserted certain preference claims against Dell (the Adversary Proceeding. COMPROMISE AND SETTLEMENT 9. The Debtors are responsible for investigating, evaluating, analyzing, and determining if a resolution was possible with regard to any claims it may assert against Dell. The Debtors have conducted due diligence and have analyzed the applicable legal issues pertaining to: - 3 -

5 Document Page 5 of 16 (i the Transfers; (ii Dell s and the Debtors prepetition business relationship; (iii possible claims related to the Transfers that may be asserted by the Debtors; (iv Dell s potential defenses thereto, including the new value and ordinary course defenses; and (v the value of the Dell Claim. 10. The Dell Settlement (as defined below is the product of the Debtors and Dell s arms-length negotiations. Below is a summary of settlement terms between the Debtors and Dell (the Dell Settlement, as more fully set forth in the Settlement Agreement attached hereto as Exhibit A: A. Subject to the occurrence of the Effective Date, and no later than ten (10 business days after Effective Date, Dell shall pay to CGI, in immediately available funds, the sum of Fifty-Five Thousand Dollars ($55, (the Settlement Payment ; B. Subject to the occurrence of the Effective Date, and the receipt by CGI of the Settlement Payment, the Dell Claim shall be deemed disallowed, and Dell shall have and file no further claims in the Bankruptcy Case including, but not limited to, any claims arising under Section 502(h of the Bankruptcy Code; C. Subject to the occurrence of the Effective Date and the Debtors receipt of the Settlement Payment, the Debtors and Dell shall be deemed to have released all claims arising under Chapter 5 of the Bankruptcy Code, and all claims arising under non-bankruptcy law related to the Transfers or the Pre- Petition Contracts; and D. Such other terms and agreements as are more fully set forth in the Settlement Agreement, which all parties-in-interest are encouraged to read in full. AUTHORITY AND ANALYSIS 11. This Court has the right and the power to approve the Dell Settlement. See 11 U.S.C. 105; Fed. R. Bankr. P Bankruptcy Rule 9019(a provides, in pertinent part, [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Fed. R. Bankr. P. 9019(a

6 Document Page 6 of The Debtors believe that the Dell Settlement is in the best interests of the Bankruptcy Estates and the creditors thereof under the circumstances; thus, it should be approved. Settlements and compromises are a normal part of the process of reorganization. Case v. Los Angeles Lumber Prods. Co., 308 U.S. 106, 130 (1939. The Supreme Court of the United States has further said: [i]n administering [Bankruptcy] Proceedings in an economical and practical manner, it will often be wise to arrange the settlement of claims as to which there are substantially and reasonable doubts. Protective Comm. of Stockholders of TMT Trailer Ferry, Inc. v. Anderson (In re TMT Trailer Ferry, Inc., 390 U.S. 414, 424 (1968, on remand, TMT Trailer Ferry, Inc. v. Kirkland, 471 F.2d 10 (5th Cir Settlements are desirable and wise methods of bringing [closure] to... proceedings otherwise lengthy, complicated and costly. Matter of Jackson Brewing Co., 624 F.2d 599, 602 (5th Cir Under Bankruptcy Rule 9019(a, this Court may approve a compromise or settlement on motion by the trustee and after a hearing on notice to creditors, the debtor and indenture trustee.... Protective Comm. For Indep. Stockholders of TMT Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968. In conducting a hearing under Rule 9019(a, the bankruptcy court is to determine whether the proposed compromise is fair and equitable, and in the best interests of the bankruptcy estate. Id. In making this determination, a bankruptcy court is required to apprise itself of all facts necessary for an intelligent and objective opinion of the probabilities of ultimate success should the claim be litigated. Id. To determine whether a settlement should be approved under 9019, the Court should: form an educated estimate of the complexity, expense, and likely duration of such litigation, the possible difficulties of collecting on any judgment which might be obtained, and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise. Basic to this process in every instance, of course, is - 5 -

7 Document Page 7 of 16 Id. at the need to compare the terms of the compromise with the likely rewards of the litigation. 14. The decision whether to approve a particular settlement is within the discretion of the bankruptcy court. It must be remembered that the evaluation of any lawsuit is quite problematic and calls for a significant degree of speculation. Texas Extrusion Corp. v Lockheed Corp. (In re Texas Extrusion Corp., 844 F.2d 1142, 1159 (5th Cir A reviewing court will uphold the approval of a settlement if it is the result of an adequate and intelligent consideration of the merits of the claims, the difficulties of pursuing them, the potential harm to the debtor s estate caused by delay, and the fairness of the terms of the settlement. TMT Trailer Ferry, Inc., 390 U.S. at The Eleventh Circuit has adopted the following factors to consider in evaluating the propriety of a proposed settlement or compromise: a. The probability of success in the litigation; b. The difficulties, if any, to be considered in the matter of collection; c. The complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and d. The paramount interest of creditors and a proper deference to their reasonable views in the premises. In re Chira, 567 F.3d 1307, 1312 (11th Cir See also In re Justice Oaks II, Ltd., 898 F.2d 1544, 1549 (11th Cir Probability of Success on the Merits. While the Debtors are confident in their chances of success prevailing on the merits of a preference action against Dell, the Debtors believe the proposed result is certainly within the realm of potential litigation results, but without having to spend the funds necessary to litigate. In order to recover the Transfers from Dell, the Debtors - 6 -

8 Document Page 8 of 16 would have to engage in costly and time-consuming preference litigation in the Adversary Proceeding as to which Dell has asserted defenses which have some merit. 17. Difficulty in Collection and Complexity, Expense, and Likely Duration of the Litigation. There does not appear to be a difficulty of collection should the Debtors prevail on the Adversary Proceeding. However, if the matters subject to the Dell Settlement are litigated, that litigation would be expensive and time consuming. Such a cost and delay in the administration of the Bankruptcy Cases would be burdensome to the Bankruptcy Estates. The Bankruptcy Estates would bear substantial litigation expenses e.g., the employment of expert witnesses, depositions, pretrial-motions and brief preparation, together with the preparation for and participation in a trial. The Bankruptcy Estates possesses limited funds. Accordingly, one of the significant advantages of the Dell Settlement is to save significant administrative costs of litigating. 18. Paramount Interest of Creditors. By virtue of the proposed settlement, Dell will pay $55, to the Bankruptcy Estates, which will allow additional funds to be available for distribution to creditors, and release all of its claims (which are in excess of $250,000 against the Debtors. NOTICE 19. Notice of this Motion is being provided to the Office of the United States Trustee, counsel for Dell, counsel for the Committee, and the Master Service List established in these bankruptcy cases. In light of the nature of the relief requested, the Debtors respectfully request that the Court find that no further notice is necessary. WHEREFORE, the Debtors request that the Court: (a enter an order approving the Settlement Agreement; and (b grant such other and further relief as is just and proper

9 Document Page 9 of 16 Dated: June 14, SCROGGINS & WILLIAMSON, P.C Northside Parkway Suite 450 Atlanta, GA T: ( F: ( E: rwilliamson@swlawfirm.com mlevin@swlawfirm.com By: /s/ Matthew W. Levin J. ROBERT WILLIAMSON Georgia Bar No MATTHEW W. LEVIN Georgia Bar No Counsel for the Debtors - 8 -

10 Document Page 10 of 16 EXHIBIT A Settlement Agreement

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16 Document Page 16 of 16 CERTIFICATE OF SERVICE This is to certify that on this date I served a true and correct copy of the foregoing Motion to Approve Compromise and Settlement with Dell Financial Services, L.L.C. and the Notice of Hearing regarding same by causing same to be deposited in the United States Mail with adequate postage affixed thereon and addressed to the following persons: Francis J. Lawall Pepper Hamilton LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA J. Michael Lamberth Lamberth Cifelli Ellis & Nason PA 1117 Perimeter Center West Suite W212 Atlanta, GA Will B. Geer Wiggam & Geer, LLC 333 Sandy Springs Circle, NE Suite 225 Atlanta, GA Donald J. Detweiler Pepper Hamilton LLP Hercules Plaza, Suite N. Market Street Wilmington, DE Thomas W. Dworschak Office of The United States Trustee 75 Ted Turner Drive, SW Room 362 Atlanta, GA Sabrina L. Streusand Rich Villa Streusand, Landon & Ozburn, LLP 811 Barton Springs Road, Suite 811 Austin, TX This 14th day of June, SCROGGINS & WILLIAMSON, P.C Northside Parkway Suite 450 Atlanta, GA T: ( F: ( E: rwilliamson@swlawfirm.com mlevin@swlawfirm.com By: /s/ Matthew W. Levin J. ROBERT WILLIAMSON Georgia Bar No MATTHEW W. LEVIN Georgia Bar No Counsel for the Debtors