main document page 1 of - attorney general of california · attorneys for the chapter 11 debtors...

Case 2:18-bk-20151-ER Doc 5503 Filed 08/14/20 Entered 08/14/20 10:36:17 Desc Main Document of 3

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SAMUEL R. MAIZEL (Bar No. 189301) [email protected] TANIA M. MOYRON (Bar No. 235736) [email protected] NICHOLAS A. KOFFROTH (Bar No. 287854) [email protected] DENTONS US LLP 601 South Figueroa Street, Suite 2500 Los Angeles, California 90017-5704 Tel: (213) 623-9300 / Fax: (213) 623-9924

Attorneys for the Chapter 11 Debtors and Debtors Jn Possession

FILED & ENTERED

AUG 14 2020

CLERK U.S. BANKRUPTCY COURT Central District of California BY gonzalez DEPUTY CLERK

UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA - LOS ANGELES DIVISION

In re

VERITY HEALTH SYSTEM OF CALIFORNIA, INC., et al.,

Debtor and Debtor In Possession.

~ Affects All Debtors

D Affects Verity Health System ofCalifomia, Inc. D Affects O'Connor Hospital □ Affects Saint Louise Regional Hospital D Affects St. Francis Medical Center □ Affects St. Vincent Medical Center D Affects Seton Medical Center D Affects O'Co1mor Hospital Foundation D Affects Saint Louise Regional Hospital

Foundation D Affects St. Francis Medical Center ofLynwood

Foundation D Affects St. Vincent Foundation □ Affects St. Vincent Dialysis Center, Inc. D Affects Seton Medical Center Foundation D Affects Vetity Business Services D Affects Verity Medical Foundation □ Affects Verity Holdings, LLC D Affects De Paul Ventures, LLC □ Affects De Paul Ventures - San Jose Dialysis, LLC

Debtors and Debtors ln Possession.

Lead Case No. 2: 18-bk-20151-ER

Jointly Administered With: Case No. 2: 18-bk-20162-ER Case No. 2:18-bk-20163-ER Case No. 2:18-bk-20164-ER Case No. 2:18-bk-20165-ER Case No. 2: 18-bk-20 167-ER Case No. 2 :18-bk-20 168-ER Case No. 2:18-bk-20 169-ER Case No. 2: 18-bk-20 I71-ER Case No. 2:18-bk-20172-ER Case No. 2:18-bk-20173-ER Case No. 2: 18-bk-20175-ER Case No. 2: 18-bk-20176-ER Case No. 2: 18-bk-20178-ER Case No. 2: 18-bk-20179-ER Case No. 2:18-bk-20180-ER Case No. 2:18-bk-20181-ER

Chapter 11 Cases Hon. Judge Ernest M. Robles

ORDER APPROVING STIPULATION RESOLVING DEBTORS' EMERGENCY MOTION FOR THE ENTRY OF AN ORDER: (I) ENFORCING THE ORDER AUTHORIZING THE SALE TO PRIME HEALTHCARE SERVICES, INC.; (H) FINDING THAT THE SALE IS FREE AND CLEAR OF ADDITIONAL CONDITIONS;· (Ill) FINDING THAT THE ATTORNEY GENERAL ABUSED HIS DISCRETION IN IMPOSING ADDITIONAL CONDITIONS ON THE ST. FRANCIS MEDICAL CENTER SALE; AND (IV) GRANTING RELATED RELIEF Hearing Date and Time: Date: August 12, 2020 Time: 10:00 a.m. (Pacific Time) Location: Cowtroom 1568

255 E. Temple Street Los An eles, CA

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mailto:[email protected]



Case 2:18-bk-20151-ER Doc 5503 Filed 08/14/20 Entered 08/14/20 10:36:17 Desc

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Main Document of 3

The Court, having considered the motion [Docket No. 5199] (the "Motion") filed by Verity

Health System of Californ ia, Inc. and the above-referenced affiliated debtors and debtors in

possession in the above captioned chapter 11 bankruptcy cases (collectively, the "Debto rs"), the

opposition [Docket No. 5388] of the Cal ifornia Attorney General (the "Attorney General"), the

reply [Docket No. 5423] filed by the Debtors, the stipulation [Docket No. 5496] (the "Stipulati on") 1

by and among the Debtors, Prime Healthcare Services, Inc. ("Prime" ), and the Attorney General,

and good cause appearing,

HEREBY ORDERS AS FOLLOWS:

1. The Stipulation is APPROVED.

2. The Motion is GRANTED to the extent set forth herein.

3. The Cou1t's Tentative Ruling, Ruling, and Order are hereby vacated and withdrawn.

4. Sole ly and exclusively for purposes of the APA and the Motion, the Additional

Conditions are an " interest in property" for purposes of 11 U .S.C. § 363(f). The Assets (as defined

in the APA) are sold free and c lear of the Additional Conditions w ithout the imposit ion ofany other

conditions which would adversely affect the Purchaser (as that term is defined in the APA).

5. Notwithstanding the foregoing, the following modifications to the 2020 Conditions

(as that term is defined in the Motion) shall not be deemed Additional Conditions and shall be

accepted by Prime:

a. the annual charity care commitment shall be $9.35 million;

b. the annual community benefit services expenditure sha ll be $ 1,597,077 per

year with no requirement that this amount be exclusive of grants, and may

be satisfied by Prime entirely with grant funds; and

c. there shall be no requirement that P rime maintain the Affiliat ion Agreement.

6. Section 8.3 of the APA shall be deemed satisfied by entry ofthis Order.

7. This Court shall retain exclusive jurisdiction to adjudicate any disputes or

controversies regarding the interpretation or enforcement of this Order. Notwithstanding the

1 Unless otherwise defined here in, a ll capitalized terms have the definitions set forth 111 the Stipulation.

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Main Document of 3

preceding sentence, nothing contained in this Order shall prohibit or limit the authority of the

Attorney General to enforce, in the Californ ia state courts and pursuant to § 5926 of the Californ ia

Corporations Code, the 2020 Conditions that do not constitute Additional Conditions.

8. The Pa1ties to the Stipulation expressly waive any right to appea l this Order.

IT IS SO ORDERED.

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Date: August 14, 2020 ~t'vvt~¥{vv Ernest M. Robles United States Bankruptcy Judge

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Main Document Page 1 of 8

SAMUEL R. MAIZEL (Bar No. 189301) samue [email protected] TANIA M. MOYRON (Bar No. 235736) [email protected] NICHOLAS A. KOFFROTH (Bar. No. 287854) [email protected] DENTONS US LLP 601 South Figueroa Street, Suite 2500 Los Angeles, California 900 17-5704 Tel: (213) 623-9300 / Fax: (2 I 3) 623-9924

Attorneys for the Chapter 11 Debtors and Debtors In Possession


In re

VERITY HEALTH SYSTEM OF CALIFORNIA, INC., et al.,

Debtors and Debtors In Possession.

129 Affects All Debtors

□ Affects Ve1ity Health System ofCalifornia, Inc.

□ Affects O'Connor Hospital □ Affects Saint Louise Regional Hospital □ Affects St. Francis Medical Center □ Affects St. Vincent Medical Center D Affects Seton Medical Center □ Affects O'Connor Hospital Foundation □ Affects Saint Louise Regional Hospital

Fow1dation □ Affects St. Francis Medical Center of

Lynwood Foundation □ Affects St. Vincent Foundation D Affects St. Vincent Dialysis Center, Inc. □ Affects Seton Medical Center Foundation □ Affects Verity Business Services D Affects Ve1ity Medical Fow1dation □ Affects Ve1ity Holdings, LLC □ Affects De Paul Ventures, LLC □ Affects De Paul Ventures - San Jose ASC,

LLC

Debtors and Debtors Tn Possession.

Lead Case No. 2: I8-bk-20151 -ER Jointly Administered With:

CASE NO.: 2 :1 8-bk-20162-ER CASE NO.: 2: 18-bk-20163-ER CASE NO .: 2: l 8-bk-20164-ER CASE NO.: 2: 18-bk-201 65-ER CASE NO.: 2: 18-bk-20167-ER CASE NO.: 2:18-bk-20168-ER CASE NO.: 2:18-bk-20169-ER CASE NO.: 2:18-bk-20171-ER CASE NO.: 2:18-bk-20 172-ER CASE NO.: 2: 18-bk-20 173-ER CASE NO.: 2: 18-bk-20 175-ER CASE NO.: 2:18-bk-20 176-ER CASE NO.: 2: 18-bk-20 178-ER CASE NO. : 2: I 8-bk-20 I 79-ER CASE NO.: 2: 18-bk-20 180-ER CASE NO.: 2:1 8-bk-20181-ER


STIPULATION RESOLVING DEBTORS' EMERGENCY MOTION FOR THE ENTRY OF AN ORDER: (I) ENFORCING THE ORDER AUTHORIZING THE SALE TO PRIME HEALTHCARE SERVICES, INC.; (II) FINDING THAT THE SALE IS FREE AND CLEAR OF ADDITIONAL CONDITIONS; (III) FINDING THAT THE ATTORNEY GENERAL ABUSED HIS DISCRETION IN IMPOSING ADDITIONAL CONDITIONS ON THE ST. FRANCIS MEDICAL CENTER SALE; AND (IV) GRANTING RELATED RELIEF

Hearing Date and Time: Date: August 12, 2020 Time: 10:00 a.m. (Pacific Time) Place: 255 E. Temple St., Courtroom 1568

Los Angeles, CA 90012

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This stipulation is entered into by and between Verity Health System of California, Inc. and

the above-referenced affiliated debtors and debtors in possession in the above-captioned chapter 11

bankruptcy cases ( collectively, the "Debtors"), Prime Healthcare Services, Inc. ("Prime"), and the

California Attorney General (the "Attorney General" and, together with the Debtors and Prime, the

"Parties"), with respect to the following:

A. On July 27, 2020, the Debtors filed the Debtors' Emel'gency Motion for the Ent,y

ofan Order: (I) Enforcing the Order Authorizing the Sale to Prime Healthcare Services, Inc.; (11)

Finding That the Sale Is Free and Clear ofAdditional Conditions: (111) Finding That the Attorney

General Abused His Discretion in Imposing Additional Conditions of the St. Francis Medical

Center Sale; and (JV) Granting Related Relief [Docket No. 5199] (the "Motion"). 1 The Motion

sought entry of an order: (i) enforcing this Comi's previous order [Docket No. 4511 ] (the "Sale

Order") authorizing the sale (the "Sale") of certain assets used in the operation of the general acute

care hospital known as "St. Francis Medical Center" (the "Hospital"), which is owned by St. Francis

Medical Center, a California nonprofit public benefit corporation ("St. Francis"), to Prime;

(ii) finding that the Sale was free and clear of the conditions imposed by the Attorney General that

were not agreed to by Prime in Exhibit 5.8(c) of the asset purchase agreement (the "APA") [Docket

No. 4471] as supplemented or modified by Prime, including, without limitation, the additional

Charity Care expenditures, the additional Community Benefit Services expenditures, and the

Affiliation Agreement (the "Additional Conditions"); (iii) finding that the Attorney General abused

his discretion imposing the Additional Conditions under applicable nonbankmptcy law; and

(iv) granting such other and further relief as the Court deemed just and proper.

B. On August 6, 2020, the Attorney General filed the Opposition ofCalifornia Attorney

General to "Debtors ' Emergency Motion for the Ently of an Order: (I) Enforcing the Order

Authorizing the Sale to Prim,e Healthcare Services, Inc. ; (11) Finding That the Sale Is Free and

Clear ofAdditional Conditions; (Ill) Finding That the Attorney General Abused His Discretion in

Imposing Conditions 011 the St. Francis Medical Center Sale; and (JV) Granting Related Relief

1 Unless othe1wise defined herein, all capitalized tern1s have the definitions set forth in the Motion.

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Case 2:18-bk--20151-ER Doc 5496 Filed 08/13/20 Entered 08/13/20 21:05:48 Desc

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[Docket No. 5388] (the "Opposition").

C. On August 9, 2020, the Debtors filed the Debtors' Reply to Cal~fornia Attorney

General's Opposition to Debtors' lvfotion for the Entry of an Order Enforcing the Order

Authorizing the St. Francis Sale to Prime Healthcare Services, Inc. [Docket No. 5423] (the

D. On August 11, 2020, the Cami issued a tentative ruling (the "Tentative Ruling") to

grant the Motion, which the Court adopted as its final ruling [Docket No. 5477] (the "Ruling").

E. On August 12, 2020, at 10:00 a.m. (Pacific Time), the Comi held a hearing on the

Motion (the "Hearing"). Appearances were as set fo1ih on the record of the Hearing.

F. On August 12, 2020, the Court entered an order [Docket No. 5482] (the "Order")

granting the Motion.

G. On August 13, 2020, Prime and the Attorney General reached an agreement on the

Additional Conditions as follows: (1) the annual charity care commitment shall be $9.35 Million;

(2) the annual community benefit services expenditure shall be $1,597,077 per year with no

requirement that this amount be exclusive of grants, and may be satisfied by Prime entirely with

grant funds; and (3) there shall be no requirement that Prime maintain the Affiliation Agreement

(the "Agreement"). The Agreement requires that the Court vacate the Tentative Ruling, Ruling,

and Order. Prime and the Attorney General requested that the Debtors prepare and file the

Stipulation and request that the Court vacate the Tentative Ruling, Ruling, and Order on their

behalf. The Parties submit that the Agreement is essential to bring finality to the Sale and satisfy

Prime's lenders.

STIPULATION

NOW, THEREFORE, all of the Parties to this Stipulation hereby conditionally stipulate and

agree as follows:

I. The Motion shall be granted by entry of the proposed order, attached hereto as

Exhibit "A", entitled Order Approving Stipulation Resolving Debtors' Emergency Motion for the

Ent,y ofan Order: (I) Enforcing the Order Authorizing the Sale to Prime Healthcare Services, Inc.;

(JI) Finding That the Sale Is Free and Clear of Additional Conditions: (III) Finding That the

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Attorney General Abused His Discretion in Imposing Additional Conditions of the St. Francis

Medical Center Sale; and (JV) Granting Related Relief(the "Stipulated Order").

2. The Attorney General does not agree or concede that the Additional Conditions are

an "interest in property" for purposes of 11 U.S.C. § 363(f), but acknowledges that the Court so

held in the Tentative Ruling, Ruling, and Order (which are to be vacated and withdrawn pursuant

to the Stipulated Order) and that, solely and exclusively for purposes of the APA and the Motion,

the Stipulated Order so states.

3. This Stipulation shall be binding and effective upon, but only upon, entry of the

Stipulated Order in the proposed fonn attached hereto.

Dated: August 13, 2020 DENTONS US LLP

By: Isl Tania M Movron Tania M. Moyron

Counsel to the Debtors and Debtors in Possession

Dated: August 13, 2020 PRIME HEALTHCARE MANAGEMENT, INC.

By: Isl A. Joel Richlin A. Joel Richlin

Counsel to Prime Healthcare Services, Inc.

Dated: August 13, 2020 XAVIER BECERRA, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA

By: Isl David K. Eldan David K. Eldan

Counsel to Xavier Becena, Attorney General of the State ofCalifornia

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Case 2:18-bk-20151-ER Doc 5496 Filed 08/13/20 Entered 08/13/20 21:05:48 Desc Main Document Page 5 of 8

Exhibit A

Proposed Order

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Case 2:18-bk-20151-ER Doc 5496 Filed 08/13/20 Entered 08/13/20 21:05:48 Desc Main Document Page 6 of 8

SAMUEL R. MAIZEL (Bar No. I 89301) [email protected] TANJA M . MOYRON (Bar No. 235736) tania [email protected] NICHOLAS A. KOFFROTH (Bar No. 287854) [email protected] DENTONS US LLP 60 I South Figueroa Street, Suite 2500 Los Angeles, California 90017-5704 Tel: (2 13) 623-9300 / Fax: (213) 623-9924

Attorneys for the Chapter 11 Debtors and Debtors In Possession


In re

VERITY H EALTH SYSTEM OF CALIFORNIA, INC., et al.,

Debtor and Debtor In Possession.

IX! Affects All Debtors

D Affects Vetity Health System ofCalifornia, Inc. LJ Affects O'Connor Hospital □ Affects Saint Louise Regional Hospital D Affects St. Francis Medical Center D Affects St. Vincent Medical Center □ Affects Seton Medical Center D Affects O'Connor Hospital Foundation D Affects Saint Louise Regional Hospital

Foundation D Affects St. Francis Medical Center ofLynwood

Foundation D Affects St. Vincent Foundation D Affects St. Vincent Dialysis Center, Inc. D Affects Seton Medical Center Foundation D Affects Verity Business Services □ Affects Ve1ity Medical Foundation □ Affects Verity Holdings, LLC D Affects De Paul Ventures, LLC D Affects De Paul Ventures - San Jose Dialysis, LLC

Debtors and Debtors In Possession.

Lead Case No. 2: 18-bk-20151 -ER

Jointly Administered With: Case No. 2: I 8-bk-20162-ER Case No. 2: 18-bk-20163-ER Case No. 2: I 8-bk-20164-ER Case No. 2: 18-bk-20 165-ER Case No. 2: l 8-bk-20167-ER Case No. 2: 18-bk-20 168-ER Case No. 2: I 8-bk-20169-ER Case No. 2: 18-bk-20 I 71 -ER Case No. 2: 18-bk-20 172-ER Case No. 2: 18-bk-20 173-ER Case No. 2:18-bk-20 175-ER Case No. 2: l 8-bk-20 I 76-ER Case No. 2: 18-bk-20 178-ER Case No. 2: l 8-bk-20 179-ER Case No. 2: 18-bk-20180-ER Case No. 2: l 8-bk-20 I 81-ER


ORDER APPROVING STIPULATION RESOLVING DEBTORS' EMERGENCY MOTION FOR THE ENTRY OF AN ORDER: (I) ENFORCING THE ORDER AUTHORIZING THE SALE TO PRIME HEALTHCARE SERVICES, INC.; (U) FINDING THAT THE SALE IS FREE AND CLEAR OF ADDITIONAL CONDITIONS; (III) FINDING THAT THE ATTORNEY GENERAL ABUSED HIS DISCRETIO~ IN IMPOSING ADDITIONAL CONDITIONS ON THE ST. FRANCIS MEDICAL CENTER SALE; AND (IV) GRANTING RELATED RELIEF Hearing Date and Time: Date: August 12, 2020 Time: I0:00 a.m. (Pacific Time) Location: Courtroom 1568

255 E . Temple Street Los Anaeles, CA

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The Court, having considered the motion [Docket No. 5199] (the "Motion") filed by Verity

Health System of California, Inc. and the above-referenced affiliated debtors and debtors in

possession in the above captioned chapter 11 bankruptcy cases ( collectively, the "Debtors"), the

opposition [Docket No. 5388] of the California Attorney General (the "Attorney General"), the

reply [Docket No. 5423] filed by the Debtors, the stipulation [Docket No. __J (the "Stipulation") 1

by and among the Debtors, Prime Healthcare Services, Inc. ("Prime"), and the Attorney General,

and good cause appearing,

HEREBY ORDERS AS FOLLOWS:

1. The Stipulation is APPROVED.

2. The Motion is GRANTED to the extent set forth herein.

3. The Court's Tentative Ruling, Ruling, and Order are hereby vacated and withdrawn.

4. Solely and exclusively for purposes of the APA and the Motion, the Additional

Conditions are an "interest in prope1ty" for purposes of 11 U.S .C. § 363(£). The Assets (as defined

in the APA) are sold free and clear of the Additional Conditions without the imposition of any other

conditions which would adversely affect the Purchaser (as that te1m is defined in the APA).

5. Notwithstanding the foregoing, the following modifications to the 2020 Conditions

(as that term is defined in the Motion) shall not be deemed Additiona l Conditions and shall be

accepted by Prime:

a. the annual charity care commitment shall be $9.35 million;

b. the ammal community benefit services expenditure shall be $ 1,597,077 per

year w ith no requirement that this amount be exclusive of grants, and may

be satisfied by Prime entirely with grant funds; and

c. there shall be no requirement that Prime maintain the Affiliation Agreement.

6. Section 8.3 of the APA shall be deemed satisfied by entry of this Order.

7. This Court shall retain exclusive jurisdiction to adjudicate any disputes or

controversies regarding the interpretation or enforcement of this Order. Notwithstanding the

1 Unless otherwise defined herein, all capitalized terms have the definitions set fmth 111 the Stipulation.

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preceding sentence, nothing contained in this Order shall prohibit or limit the authority of the

Attorney General to enforce, in the California state courts and pursuant to § 5926 of the California

Corporations Code, the 2020 Conditions that do not constitute Additional Conditions.

8. The Parties to the Stipulation expressly waive any right to appeal this Order.

IT IS SO ORDERED.

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