Thursday, February 16, 2017

Delaware Judge Swiftly Transfers Hospital Case

By Stephen W. Sather
Barron & Newburger, P.C.
Austin, TX

I recently wrote about a case that could not escape Delaware's gravity here.   However, a new decision from Judge  Laurie Selber Silverstein shows that it is possible to gain a transfer of venue out of The First State.    Case No. 17-10201, In re LMCHH PCP, LLC (Bankr D. Del).     

The case involved two jointly administered entities.   Louisiana Medical Center and Heart Hospital, LLC operated a hospital in Lacombe, Louisiana near New Orleans.   LMCHH PCP, LLC was the entity formed as a Physicians Group.   The hospital saw a surge in business after it was spared by the surging waters of Hurricane Katrina.  Unfortunately, when the hospital underwent a $40 million expansion, it could not cover its cost of operations.  When it could not locate a buyer outside of bankruptcy, it chose to file chapter 11.

The Debtors filed their petitions on January 31, 2017.    Two days later, on February 2, 2017, McKesson Corporation filed a Motion to Transfer Venue.   The Motion stated that  
This Court should transfer venue to the Louisiana Court because it is in the best interests of patients and the other stakeholders to have the local bankruptcy court handle the wind down, closure and potential sale/liquidation of this single hospital located in Lacombe, Louisiana. In single-location hospital and healthcare bankruptcy cases, the local bankruptcy court always is the best venue to oversee the myriad of issues that arise in these types of healthcare bankruptcy cases.

 The motion identified four other healthcare cases that had been transferred out of Delaware as support. 

McKesson also requested that the Court shorten the time for the hearing on the motion.   The next day the Court obliged, setting a hearing for February 15, 2017.    The Debtors elected not to contest the motion and it was granted on February 14, 2017, just fifteen days after the case was filed.

This case offers several lessons for parties wishing to have a case filed in Delaware heard closer to home.   First, speed in filing the motion is essential.    McKesson was ready with its motion just two days after the case was filed.   Second, McKesson obtained an expedited hearing.   The longer a case is pending before the motion to transfer is heard, the more likely that it will put down roots and resist being moved.   Finally, McKesson succeeded in showing local concerns unique to a single location hospital and prior Delaware precedent.    

This was a good example of a case that needed to come home.  On the one hand, it was not a particularly large case nor was it unusually complicated.   On the other hand, its single location fell under the regulatory jurisdiction of the State of Louisiana.    While this was undoubtedly a good result, it does raise the question of why it was ever filed in Delaware in the first place.


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