Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ---------------------------------------------------------------x In re RESTORA HEALTHCARE HOLDINGS, LLC, et al., 1 Chapter 11 Case No. 14-10367 (PJW) (Jointly Administered) Debtors. Related D.I. 182 ---------------------------------------------------------------x DEBTORS OBJECTION TO THE MOTION OF THE UNITED STATES TRUSTEE TO SHORTEN TIME ON MOTION OF DEBTORS AND DEBTORS IN POSSESSION TO SELF-REPORT IN LIEU OF THE COURT S APPOINTMENT OF A PATIENT CARE OMBUDSMAN Restora Healthcare Holdings, LLC and certain of its subsidiaries and affiliates, as debtors and debtors in possession (collectively, the Debtors ), by and through their undersigned attorneys, hereby object to the Motion Of The United States Trustee To Shorten Time On Motion Of Debtors And Debtors In Possession To Self-Report In Lieu Of The Court s Appointment Of A Patient Care Ombudsman [D.I. 182] (the Motion to Expedite ). In support of this Objection, the Debtors respectfully represent as follows LIMITED BACKGROUND 1. On February 24, 2014 (the Petition Date ), each of the Debtors filed a voluntary petition with this Court under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 1 The Debtors in these chapter 11 cases, together with the last four digits of each Debtor s federal tax identification number, are Restora Healthcare Holdings, LLC (2837); Restora Hospital of Mesa, LLC (8773); and Restora Hospital of Sun City, LLC (1028). The mailing address for the Debtors, solely for purposes of notices and communications, is 2550 Northwinds Parkway, Suite 160, Alpharetta, Georgia 30009.
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 2 of 8 2. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases. On March 6, 2014, an official committee of unsecured creditors (the Committee ) was appointed in these cases. 3. On March 14, 2014, counsel for the Debtors and counsel for the United States Trustee spoke telephonically and, during such call, Debtors counsel informed counsel for the United States Trustee of the Debtors intent to file a motion seeking authorization to self-report in lieu of the appointment of a patient care ombudsman in these cases. 4. On March 17, 2014, the Debtors timely filed the Motion Of Debtors And Debtors In Possession To Self-Report In Lieu Of The Court s Appointment Of A Patient Care Ombudsman [D.I. 144] (the Motion to Self-Report ). 5. On March 19, 2014, the Debtors were before the Court at an omnibus hearing scheduled in these Chapter 11 Cases. Counsel for the United States Trustee was present at the hearing and did not raise any issue with the Debtors or the Court respecting the scheduling of the hearing on the Motion to Self-Report or an objection deadline respecting the Motion to Self- Report. 6. On March 21, 2014, the United States Trustee filed an objection to the Motion to Self-Report [D.I. 176] (the Objection ). 7. On March 24, 2014, the United States Trustee filed the Motion to Expedite, by which the United States Trustee seeks to have the Motion to Self-Report, and its Objection, heard on an expedited basis on March 26, 2014, less than 48 hours after filing the Motion to Expedite. 8. For the reasons explained below, the Motion to Expedite should be denied, and the Motion to Self-Report should be heard as originally scheduled, at the next omnibus hearing on April 23, 2014.
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 3 of 8 OBJECTION 9. The Motion to Expedite fails for at least three reasons (i) the plain language of the Bankruptcy Code does not require that an order appointing a patient care ombudsman be entered within 30 days of the Petition Date, if a motion for relief from section 333 is timely filed; (ii) the applicable Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) do not direct that the Court conduct and conclude a hearing within 30 days of the Petition Date, if a motion seeking relief from section 333 is timely filed; and (iii) the filing of the Motion to Self- Report automatically extended the thirty day deadline until a proper evidentiary hearing can be conducted. 10. Rule 9006-1(e) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ) provides that in order to support the Motion to Expedite, the United States Trustee must [specify] the exigencies justifying shortened notice. 11. The United States Trustee has not identified any exigencies to support the Motion to Expedite, other than the United States Trustee s efforts to force this Court to hear and determine the Motion to Self-Report in order to meet the statutory deadline the United States Trustee argues is mandated by section 333 of the Bankruptcy Code, requiring that the Court enter an order appointing a patient care ombudsman within thirty (30) days of the Petition Date. 12. The United States Trustee has been aware of the Debtors intention to file the Motion to Self-Report since no later than March 14, 2014. As of the omnibus hearing held on Wednesday, March 19, no hearing had been set on the Motion to Self-Report and the United States Trustee raised no issue or concern with respect to the timing of any hearing on the Motion to Self-Report.
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 4 of 8 13. While the United States Trustee has known since March 14, 2014 that the Debtors were filing the Motion to Self-Report, it is only now that the United States Trustee insists on a hearing prior the 30th day from the Petition Date, a date which has been fixed since the moment the Debtors filed these cases. 14. In its Motion to Expedite, the United States Trustee argues that shortening time so as to comply with a deadline in the Bankruptcy Code constitutes exigent circumstances and that section 105(a) of the Bankruptcy Code authorizes the issuance of an order expediting the hearing on the [Motion to Self-Report], as such an order would be necessary or appropriate to carry out the deadline prescribed in Section 333(a). See Motion to Expedite, at 16. 15. Contrary to the United States Trustee s assertion, the Bankruptcy Code and the Bankruptcy Rules do not direct the Court to consider any motion filed under section 333 of the Bankruptcy Code and Bankruptcy Rule 2007.2 within 30 days of the Petition Date. Bankruptcy Rule 2007.2(a) governs the timing of motions seeking a finding that the appointment of a patient care ombudsman under section 333 is unnecessary under the circumstances, and provides that the court shall order the appointment of an ombudsman, unless the court, on motion of a party in interest filed no later than 21 days after the commencement of the case or within another time fixed by the court, finds that the appointment of a patient care ombudsman is not necessary under the specific circumstances of the case for the protection of patients. (emphasis added). This Bankruptcy Rule clearly dictates the timing for filing the Motion to Self-Report, but makes no requirement for the expedited consideration demanded by the United States Trustee. 16. If Congress had intended for Bankruptcy Rule 2007.2 or section 333 of the Bankruptcy Code to require a hearing within 30 days of commencement of a bankruptcy case, it would have expressly directed the Court to commence and conclude a hearing within such time. Congress has provided this direction to the Court in other sections of the Bankruptcy Code.
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 5 of 8 Contrast 11 U.S.C. 333(a) with 11 U.S.C. 362(e)(1) (expressly providing a strict timeframe for hearings on motions respecting relief from the automatic stay). 17. The cases cited in paragraph 14 of the United States Trustee s Motion to Expedite are inapposite to the issue sub judice, as the courts in those cases do not rule on the timing under which a court must hear a motion to excuse the appointment of a patient care ombudsman. To the extent such cases discuss any deadline for appointment of an ombudsman, it is only as part of a recitation of section 333 before moving on to other findings. See In re Synergy Hematology-Oncology Medical Associates, Inc., 433 B.R. 316, 319 (Bankr. C.D. Cal. 2010) (finding that appointment of counsel for patient care ombudsman was appropriate under facts of case); In re North Shore Hematology-Oncology Associates, P.C., 400 B.R. 7, 10-13 (Bankr. E.D.N.Y. 2008) (finding that while the debtor was a health care business, given the facts of the case appointment of a patient care ombudsman was unnecessary); and In re Alternate Family Care, 377 B.R. 754, 756 (Bankr. S.D. Fla. 2007) (making a similar finding). 18. The Debtors interpretation of Bankruptcy Rule 2007.2 is supported by the Advisory Committee s description of the interplay between such rule and section 333 of the Bankruptcy Code Section 333 of the Code, added by the 2005 amendments, requires the court to order the appointment of a health care ombudsman within the first 30 days of a health care business case, unless the court finds that the appointment is not necessary for the protection of patients. The rule recognizes this requirement and provides a procedure by which a party may obtain a court order finding that the appointment of a patient care ombudsman is unnecessary. In the absence of a timely motion under subdivision (a) of this rule, the court will enter an order directing the United States trustee to appoint the ombudsman. Fed. R. Bankr. P. 2007.2 advisory committee s note (emphasis added). The deadline under section 333 is not implicated because, as the United States Trustee admits in its motion, the
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 6 of 8 Debtors have filed a timely motion to excuse appointment of an ombudsman. See Objection, at 16. 19. In addition, discussing the timeline anticipated by section 333, Collier on Bankruptcy explains that the bankruptcy court presumably will appoint an ombudsman unless, before the appointment, the debtor or another party in interest files a timely motion requesting a determination that the appointment is not necessary. 3 Collier on Bankruptcy 333.02 (16th ed. 2011). This interpretation is consistent with the statutory language the appointment of an ombudsman will be made within 30 days of the Petition Date unless a timely motion is filed seeking to excuse such appointment. There is no requirement in either the Bankruptcy Code or the Bankruptcy Rules that a hearing be held on such motion within 30 days of the Petition Date. 20. Moreover, an expedited hearing on the Motion to Self-Report would be inappropriate, given the factual nature of the Motion to Self-Report. Indeed, any hearing on the Motion to Self-Report would require testimony and the submission of other factual evidence regarding whether an ombudsman is necessary in light of the Debtors specific circumstances, and the Debtors, and other parties in interest, simply would not have adequate time to prepare on the expedited schedule requested by the United States Trustee. See Id. ( Any hearing on the motion should be an evidentiary hearing because the bankruptcy court could not, without specific evidence, decide that the facts do not warrant the appointment of an ombudsman. ). 21. In the event the Court determines that section 333 does set a fixed deadline for a hearing on the Motion to Self-Report and it does not the hearing date initially requested by the Debtors is appropriate under Local Rule 9006-2, which provides that if a motion to extend the time to take any action is filed before the expiration of the period prescribed the time shall automatically be extended until the Court acts on the motion, without the necessity for the entry of a bridge order. The Motion to Self-Report requests interim and final relief, and in
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 7 of 8 accordance with the plain language of section 333 of the Bankruptcy Code acts as a request for extension of the 30 day deadline, until such time as the Court is able to make a final determination on the necessity of a patient care ombudsman. See Motion to Self-Report, at p. 12 22. Finally, in its Objection and the Motion to Expedite, the United States Trustee largely ignores the fact that the Debtors hospitals are already under substantial oversight, including, without limitation, that of the Arizona Long Term Care Ombudsman (the ALTCO ). 23. The Debtors submit that the continued oversight of the ALTCO, and that of the various other agencies already and continuously supervising the Debtors, is more than sufficient to bridge the gap between March 26 and April 23, obviating any asserted exigencies supporting the Motion to Expedite. 24. For these reasons, the Debtors believe that the United States Trustee s allegations set forth in its Motion to Expedite represent nothing more than an attempt to legislate what the United States Trustee desires section 333 to provide, and not what the plain language of the statute states, and, therefore, an immediate hearing on the Debtors Motion to Self-Report is not required by the Bankruptcy Code and is inappropriate given the nature of the Motion to Self- Report. [Text continues on next page.]
Case 14-10367-PJW Doc 183 Filed 03/25/14 Page 8 of 8 WHEREFORE, the Debtors respectfully request that this Court (i) deny the Motion to Expedite and (ii) grant such other and further relief as the Court may find just and equitable. Dated March 25, 2014 Wilmington, Delaware DLA PIPER LLP (US) /s/ Stuart M. Brown Stuart M. Brown (DE 4050) Daniel N. Brogan (DE 5723) 1201 N. Market Street, Suite 2100 Wilmington, DE 19801 Telephone (302) 468-5700 Facsimile (302) 394-2341 Email Stuart.Brown@dlapiper.com Daniel.Brogan@dlapiper.com -and- Thomas R. Califano (admitted pro hac vice) Daniel G. Egan (admitted pro hac vice) 1251 Avenue of the Americas New York, New York 10020 Telephone (212) 335-4500 Facsimile (212) 335-4501 Email Thomas.Califano@dlapiper.com Daniel.Egan@dlapiper.com Attorneys for the Debtors and Debtors in Possession