Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Cabrini Medical Center

December 20, 2012

IN RE CABRINI MEDICAL CENTER, DEBTOR.
THIS DOCUMENT RELATES TO:
MANNUCCIO MANNUCCI, GUIDO PADULA, DILVA SALVIONI, AND ANGELO TARANTA, PLAINTIFFS-APPELLANTS,
v.
CABRINI MEDICAL CENTER, ET AL., DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

OPINION AND ORDER

I. INTRODUCTION

Three doctors - Mannuccio Mannucci, Angelo Taranta, and Guido Padula - as well as Dilva Salvioni, the widow of a fourth doctor, Daniele Salvioni ("Appellants") appeal a Bankruptcy Court decisioin refusing to lift the automatic stay instituted by the bankruptcy proceedings of Cabrini Medical Center ("Cabrini"). Appellants allege that Cabrini is an alter-ego of the Missionary Sisters of the Sacred Heart of Jesus ("Missionary Sisters"), and seek to lift the stay so that they may add Cabrini as a nominal defendant in a state court action against Missionary Sisters.*fn1

II. BACKGROUND*fn2

A. The State Court Complaints

Cabrini is a domestic not-for-profit corporation organized under the laws of New York that operated a hospital in New York but in March 2008 ceased

hospital operations.*fn3 Mannucci, Padula, Salvioni and Taranta worked for Cabrini until retiring in 2000, 1980, 1980, and 1995 respectively.*fn4 Between 1967 and 1978, Cabrini set up Deferred Compensation Plans (the "Plans") for each of the Doctors.*fn5 None of the Plans had trustees.*fn6 Cabrini deposited the monies subject to the Plans into a variety of brokerage accounts.*fn7 In 1997, citing a tax problem, Cabrini transferred the funds from these accounts into four accounts with Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch").*fn8 On November 16, 2006, Cabrini's then-president and CEO Robert Chaloner sent a letter to the doctors informing them that, as part of a "major restructuring project[,]" their money would be "temporarily" moved.*fn9

Between 2006 and 2007, Cabrini transferred the funds from the Merrill Lunch accounts (totaling roughly $2.9 million dollars) into its general operating account.*fn10 Not surprisingly, Cabrini did not have the doctors' authorization to make these transfers.*fn11

On August 6, 2008, the Appellants commenced an action in the Supreme Court of the State of New York, New York County, against Cabrini, Missionary Sisters, and Merrill Lynch, seeking to recover the funds allegedly looted from the Plans.*fn12 The complaint alleged that the Plans were qualified ERISA plans, and that the defendants were liable under ERISA and a variety of New York common law theories.*fn13 The complaint further alleged that Cabrini was dominated, controlled, and ultimately looted by Missionary Sisters.*fn14

After the Chapter 11 proceedings and the automatic stay (discussed below) were instituted, the state court action was dismissed with leave to re-plead and, on March 1, 2010, the Appellants filed an amended complaint, which was substantially identical to the earlier complaint but dropped Cabrini as a defendant.*fn15

Missionary Sisters moved to dismiss on the basis that Cabrini was a necessary party not named in the complaint, and their motion was granted on January 5, 2011, and affirmed on appeal on April 5, 2012.*fn16

B. The Bankruptcy Proceedings

On July 9, 2009, Cabrini filed for bankruptcy under Chapter 11.*fn17 At the petition date, Cabrini had only two hundred thousand dollars cash on hand. The Bankruptcy Court therefore approved debtor-in-possession ("DIP") financing in an Interim Order dated July 30, 2009.*fn18 Under this Order, the Illinois Missionary Sisters, the largest secured creditor of Cabrini and an Illinois arm of the Missionary Sisters, provided DIP financing in return for Cabrini's agreement not to challenge the liens of the Missionary Sisters or otherwise assert any claims against them.*fn19 However, the Creditors' Committee and other parties in interest were given standing and authority for ninety days to challenge the liens or otherwise bring claims against the Missionary Sisters.*fn20

Appellants did not file a complaint during this ninety day window. The Creditors' Committee, though, filed a complaint against Missionary Sisters in the Bankruptcy Court on October 28, 2009, seeking to set aside and/or subordinate various claims of the Missionary Sisters.*fn21 Like the amended state court complaint that would be filed later, the Committee's complaint alleged that the Missionary Sisters had dominated, controlled, and extracted resources from Cabrini.*fn22

On November 19, 2009, the doctors each filed proof of claims in the bankruptcy case reflecting the monies they asserted they were owed under the Plans.*fn23 The doctors did not check any of the boxes that would have indicated that their claims were secured or otherwise entitled to priority over general unsecured claims.*fn24 After an auction process, on February 11, 2010, the Bankruptcy Court approved the sale of Cabrini's assets -- mostly real-estate -- for $83.1 million dollars.*fn25 Subsequently, the Creditors' Committee's adversary proceeding settled, and, after the relevant parties were noticed, the settlement (the "Settlement") was approved -- without any objection by Appellants -- on November 19, 2010.*fn26

Through the Settlement Agreement, the Missionary Sisters renounced a portion of their secured claims for the benefit of the unsecured creditor class, and in exchange received a release from all claims against it by Cabrini, its estate, or the Creditors' Committee.*fn27 The Settlement also included an injunction (the "Plan Injunction") that would prevent any creditor who received a distribution under a plan of reorganization "from pursuing claims against [the Missionary Sisters] that arise out of the creditors' dealings with the debtor."*fn28

With all loose ends seemingly tied up, Cabrini and the Creditors' Committee filed a joint plan of reorganization, incorporating the Settlement, and sought approval of a disclosure statement on December 22, 2010.*fn29 On January 19, 2011, the Appellants timely objected to the disclosure statement, seeking full disclosure of their claims and alleging that: (1) the funds taken from the Plans should be excluded from the estate, under either an ERISA or trust theory; and (2) the Bankruptcy Court was not justified in issuing the Plan Injunction against them.*fn30 Cabrini then modified the plan and the disclosure statement to fully disclose the Appellants' reservations, and on January 26, 2011, the Bankruptcy Court entered an Order approving the First Amended Disclosure Statement.*fn31

That same day -- twenty-one days after their state court action had been dismissed -- the Appellants moved the Bankruptcy Court to lift the automatic stay to allow them to add Cabrini as a defendant in the state court action.*fn32

However, on February 4, 2011, Cabrini filed a motion in the Bankruptcy Court to fix the amounts of the Appellants claims and classify them as general unsecured claims, and in a hearing on March 23, 2011 the Bankruptcy Court decided to hold Appellants' motion to lift the stay in abeyance pending resolution of Cabrini's motion.*fn33

On March 30, 2011, the plan confirmation hearing went forward, opposed only by Appellants.*fn34 After negotiations between the parties over the scope of the Plan Injunction, the Court entered a Confirmation Order on April 13, 2011.*fn35 This Order enjoined those who held claims against Cabrini from "commencing or continuing in any manner any action or other proceeding with respect to a claim against the debtor or based upon a theory which arises out of such holder's Claim against the Debtor."*fn36 The Order further states that "the injunction precludes only those causes of action that ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.