Health Care Committee Members Paul Rundell and Bobby Guy advise of 10 jointly administered cases before the U.S. Bankruptcy Court for the Middle District of Tennessee (Middle District) in which the debtors prevailed over arguments by the U.S. Trustee for Region 8 (UST) to the effect that BAPCPA effectively eliminated national health care cases. In those 10 cases, Nashville Senior Living LLC and nine other senior living affiliates of a large national senior living company filed chapter 11 petitions. The debtors owned or operated senior living facilities in Tennessee, North Carolina, South Carolina and Oregon. The UST opposed the debtors' motion for joint administration of the ten cases and filed a motion to transfer the venue of the cases to multiple districts, keeping the Nashville case in Tennessee but sending all the affiliate cases to the home courts where the debtors' long term care facilities were located.
In opposing the motion for joint administration, the UST argued that the venue of the individual cases might be significant because the debtors were directly or indirectly involved in the health care business. In the motion to transfer venue, the UST again focused on the debtors' status as health care businesses. That status, according to the UST, gave rise to "compelling interests not normally present in business bankruptcy cases." For purposes of the venue transfer motion, the most compelling interest was the need to determine, within 30 days after the filing of the chapter 11 petitions, whether Patient Care Ombudsmen needed to be appointed for the debtors pursuant to 11 U.S.C. §333. The need to make such a determination made expeditious consideration of the venue transfer motion crucial.
In support of the venue transfer motion, the UST contended that patient care issues strongly militated in favor of transferring venue of each of the cases in which the debtor operated a facility outside of Tennessee. In that regard, the UST noted that the residents of the debtors' facilities are elderly and suffer from physical or mental infirmity. Centralizing the cases in the Middle District, according the UST, would render resident participation in the bankruptcy cases virtually impossible. The UST also expressed concern that centralizing the cases in the Middle District would greatly inconvenience State Attorneys General and health care regulators who had significant interests in the debtors operating in their states. The UST also noted that it appeared that at least some of the debtors' facilities would be sold and/or closed down and that the states each had their own regulations governing the closing of long term care facilities.
Addressing the long-respected practice of bankruptcy courts centralizing affiliate cases in a single location, the UST argued that, by enacting BAPCPA, "Congress clearly intended to emphasis [sic] the importance of protecting the rights of the residents of long term care facilities." That being the case, because there was no forum that was convenient to all of the parties to the debtors' bankruptcies, transfer of each case to the separate venue in which the health care facilities at issue was located would best serve the interests of the residents of the debtors' facilities, whom the UST characterized as unique constituents. In sum, the UST's position boiled down to an assertion that the perceived patient care issues in the cases should be paramount in any determination of the proper venue of the debtors' cases.
The debtors vigorously opposed the venue transfer motion. Although acknowledging "[t]he centrality of resident care to [the debtors'] enterprise," they also noted that primary issues in their bankruptcy cases arose out of "financial not operational" concerns. Thus, although the debtors' duties with respect to its residents' care and well-being were certainly "weighty," they were not controlling on the issue of venue.
As the debtors noted, the pendency of their bankruptcy cases before the Middle District had no meaningful effect on "[s]tate inspection and enforcement regimes." The automatic stay of the Bankruptcy Code would not prevent the states in which the debtors' facilities were operating from enforcing health care regulations. See 11 U.S.C. §362(b)(4). Moreover, the debtors contended that the enactment of BAPCPA actually ameliorated, rather than heightened, patient care issues in health care business cases. BAPCPA provided for (1) the appointment of a patient care ombudsman where necessary, (2) administrative priority for certain expenses incurred in closing health care facilities and/or transferring patients (see 11 U.S.C. §503(b)(8)) and (c) the requirement that the sale of the property of certain nonprofit entities be "in accordance with applicable nonbankruptcy law." See 11 U.S.C. §363(d)(1). Especially when coupled with state regulatory protections, therefore, BAPCPA actually provides greater protection in health care bankruptcy for patients or residents than they had previously enjoyed.
In that regard, the debtors pointed out that each of their facilities are subject to regular inspections and monitoring by the State Long Term Care Ombudsmen (SLTC Ombudsman) for the states in which they are located and that a specific SLTC Ombudsman volunteer is assigned to each facility. The SLTC Ombudsmen investigate and attempt to resolve complaints made by or on behalf of residents, including elder abuse complaints. "Hot line" telephone numbers for the SLTC Ombudsmen are posted in all of the debtors' facilities for residents and their families to see. It bears noting that none of the SLTC Ombudsmen, or any other state regulators for that matter, had objected to the venue of the debtors' bankruptcy cases in the Middle District.
The debtors also point out that Congress has not enacted a statute providing that maximizing the opportunity for participation by state health care regulators and residents or patients of health care facilities should trump all other considerations in a determination of the proper venue of a health care bankruptcy case. Indeed, the debtors argued, creating special venue rules for health care business bankruptcies would wreak havoc in those bankruptcy cases. The general rule has been for national health care business debtors to file affiliated chapter 11 cases in a single district. Absent Congress' enactment of special venue rules for health care business bankruptcies, according to the debtors, there is no reason to alter this practice.
In response to the concern that residents from facilities located out of the Middle District could not be expected to travel to Nashville to participate in the bankruptcy case involving their facilities, the debtor convincingly pointed out that moving venue closer to their facilities would not necessarily improve the residents' access to the bankruptcy courts. Consistent with the UST's own characterization of the residents of their facilities, the debtors recognize that their residents are elderly, many are infirm and do not drive. Consequently, even were venue of a bankruptcy case transferred to the district in which that debtor's facility is located, it would be unlikely that the residents of the facility would attend the hearings.
Finally, the debtors noted that the transfer of their cases to multiple venues would increase the cost of their reorganizations. Among the potential duplicative costs would be those that would arise from the appointment of different Patient Care Ombudsmen either for each district in which the debtors' cases were filed or for each separate case. Maintaining the debtors' chapter 11 cases as jointly administered proceedings in the Middle District would avoid such duplicative expenses.
The bankruptcy court denied the UST's venue change motion by Order dated Sept. 2, 2008, noting from the bench that decentralizing the cases would be extremely inefficient because of increased professional fees, and if patient care was the main concern, the question was whether the debtors funds should be spent on patients, in a centralized case, or professionals, in a balkanized bankruptcy process. After the venue motion was denied, the UST withdrew its opposition to the debtors' joint administration motion, which was granted by order dated 2008. The cases are now jointly administered under the case styled In re Nashville Senior Living, LLC and numbered 08-07254. A creditor is attempting an appeal of the order denying the venue motion.