pre hearing statement re: stay of ny malpractice cases - doc 298

8/2/2019 Pre Hearing Statement re: Stay of NY Malpractice cases - Doc 298

1/23

UNITED STATES BANKRUPTCY COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE

IN RE: )

) Case No. 3:12-bk-01573

CHURCH STREET HEALTH )

MANAGEMENT, LLC, et al1

) Chapter 11) Jointly Administered

Debtors ) Judge Keith M. Lundin

)

TIMOTHY ANGUS, et al )

Movants ) Contested Motion for Relief from

) Automatic Stay

v.

CHURCH STREET HEALTH

MANAGEMENT, LLC, et al

Respondents

JOINT PREHEARING STATEMENT

Timothy Angus, as parent and natural guardian of infant Jacob Angus, et al, Movants in

this contested matter, and Respondents Church Street Health Management LLC (Church

Street) and certain of its subsidiaries and affiliates, as debtors and debtors in possession

(collectively, the Debtors, the Company, and each, a Debtor) in the above-captioned

Chapter 11 cases (the Chapter 11 Cases) respectfully submit this Prehearing Statement

pursuant to the Notice of Preliminary Hearing and Prehearing Order dated April 3, 2012, in

connection with the Motion of Timoth Angus, et al for Relief from the Automatic Stay (the

Motion).

1The Debtors are Church Street Health Management, LLC (Case No. 12-01573), Small Smiles Holding

Company, LLC (Case No. 12-01574), FORBA NY, LLC (Case No. 12-10575), EEHC, Inc. (Case No. 12-

01576) and FORBA Services, Inc. (Case No. 12-01577). Only two of the Debtors are Respondents to this

Motion.

Case 3:12-bk-01573 Doc 298 Filed 04/27/12 Entered 04/27/12 15:05:41 Desc MainDocument Page 1 of 23


2/23

2

Movants Theory of Basis for Relief from Stay

1. Section 362(d)(1) provides that the court shall grant relief from the automatic staysuch as by terminating, annulling, modifying, or conditioning such stay . . . for cause, upon

request of a party in interest.

2. The Court has cause to lift the automatic stay to permit Movants to prosecute theirpersonal injury cases in New York state court against Debtors and numerous other parties

because (a) doing so will not interfere with the bankruptcy case since Movants are not seeking to

recover anything directly from Debtors or their bankruptcy estates; (b) the state court litigation

will completely resolve the issues between Debtors and Movants; (c) Movants insurance carrier

has assumed responsibility for defending the Debtors in the New York state court litigation; (d)

the New York state court litigation is coordinated before a single judge with special expertise in

New York personal injury law; (e) the Debtors are only two of the 76 parties in the New York

state litigation; (f) lifting the stay will not prejudice the Debtors other creditors; (g) lifting the

stay will promote judicial economy; and (h) the stay is imposing substantial hardships on the

Movants that far outweigh any hardship the Debtors would suffer if the stay is lifted.

Movants Statement of Facts in Support of Cause for Relief from Stay and

Anticipated Evidence

1. The Movants are plaintiffs in one of four personal injury lawsuits pending againstthe Debtors in the New York state courts.

2. Movants intend to rely upon the following evidence, but reserve the right to offersuch other or additional evidence as may become available or relevant prior to any final hearing

on their motion.

(a) Movants have sued the Debtors in four lawsuits pending in New York.



3/23

3

(b) All but one of the Movants is a minor.(c) Twenty of the Movants filed suit in April, 2011; ten in June, 2011; and

one in November, 2011.

(d) Movants are not seeking to recover any assets directly from the Debtors ortheir estates, but will rely on their insurance proceeds to collect any judgment obtained

against Debtors.

(e) Other than the lawsuits, there is no relationship between the Movants andthe Debtors.

(f) Debtors have insurance coverage with National Union and are beingdefended in the litigation by New York lawyers, Smith Sovik, whose fees and expenses

are being paid by National Union.

(g) The claims and defenses asserted in the New York litigation are based onNew York statutory and common law.

(h) Although the cases were originally filed in four different counties, theyhave been coordinated before a single judge, the Honorable John C. Cherundolo, in

Onondaga County, New York.

(i) New York has special rules regarding pleadings and discovery in medical-related cases.

(j) Judge Cherundolo, the judge assigned to be the coordinating justice, hasover thirty years of experience and familiarity with medical-related claims and applicable

New York law.

(k) In the four cases combined, there are a total of seventy-six parties, onlytwo of whom are in bankruptcy.

(l) The parties in the New York litigation (including the debtors) exchanged



4/23

4

discovery requests in October and December 2011.

(m) In December 2011, the Debtors and many of the other defendants in theNew York litigation, filed motions to dismiss some of the causes of action.

(n) The motions to dismiss are based entirely on New York law.(o) On February 9, 2012, Judge Cherundolo conducted a hearing on the

motions to dismiss.

(p) Besides the Debtors, there are forty defendants in the New York statecourt litigation.

(q) None of the non-Debtor defendants in the New York state court litigationlive in Tennessee.

(r) Fifteen of the twenty-nine dentists who are defendants in the New Yorkstate court litigation live in New York. The other fourteen dentists live in eleven

different states, but none in Tennessee.

(s) Twenty-seven of the thirty-one Movants live in New York.(t) If the stay is not lifted, Movants will have the prosecution of their claims

delayed which may cause the Movants to lose witnesses and evidence to support their

case.



5/23

5

Respondents Theory of Basis for Denial of Motion

1. Movants have failed to satisfy their initial burden to establish cause warrantingrelief from the automatic stay under 11 U.S.C. 362(d)(1), and the Debtors have sustained their

burden of disproving the existence of cause.

2. Movants seek an order permitting them to proceed with the New York Lawsuits(defined below) at a time when these Chapter 11 cases are in their infancy, and just weeks before

a mediation is scheduled to begin (the Mediation) which is designed to resolve both all current

potential tort claims against the Debtors (the Patient Litigation), not just those of the Movants,

as well as the Debtors disputes with their insurance carriers and the carriers agents. Permitting

the New York Lawsuits to proceed at this juncture would interfere with these Chapter 11

proceedings by diverting the Debtors limited personnel from the immediate tasks of facilitating

the proposed sale of substantially all of their assets and formulating a Chapter 11 plan. It would

also would jeopardize the Debtors efforts to achieve a comprehensive resolution of the Patient

Litigation and insurance disputes at the Mediation

3. Moreover, stay relief is at odds with the fundamental bankruptcy principle ofequality of distribution of assets. It could prejudice other patient claimants by depleting estate

assets, i.e., the proceeds of the Debtors insurance policies, and subject the Debtors to multiple

lawsuits in numerous jurisdictions. As such, lifting the stay would not result in a complete

resolution of the Patient Litigation, in that many other actual cases and potential claims would

remain extant. Nor have the Movants even met the standards cited in their moving papers: the

New York Supreme Court is not a specialized tribunal and no specialized tribunal has been

established to consider the Patient Litigation; the Debtors insurers have not assumed full

responsibility for defending the Debtors in the New York Lawsuits; the New York Lawsuits are



6/23


7/23

7

DOJ), began investigations of the Company and the Dental Centers. A number of state

Attorneys General also commenced parallel state investigations of the Company and the

Dental Centers. Additionally, the New York State Office of Medicaid Inspector General

(OMIG) commenced an investigation. (The OIG, DOJ, state Attorneys General and

OMIG investigations, collectively, the Investigations.)

(c) The cumulative effect of the Investigations along with certain negativenews stories placed an extraordinary financial burden on the Company. In January 2010,

without admitting any wrongdoing, the Company entered into a series of settlement

agreements to bring an end to the Investigations (the Settlement Agreements).

(d) The combination of adverse publicity and the Settlement Agreementsdrew the attention of the plaintiffs bar. After the Settlement Agreements were executed,

the Debtors believe that trial lawyers began soliciting patients of the Dental Centers to

become plaintiffs in lawsuits asserting a variety of tort and fraud claims against the

Company, certain Dental Centers and certain individual dentists employed by the Dental

Centers (the Dentists).

(e) Since January 2010, approximately eleven lawsuits on behalf of overseventy-five plaintiffs have been filed in primarily three states, New York, Ohio and

Oklahoma (respectively, the New York Lawsuits, the Ohio Lawsuit and the

Oklahoma Lawsuit),2 plus New Mexico.

(f) As of the commencement of these Chapter 11 Cases, there were thirty-oneindividual plaintiffs in the New York Lawsuits, and forty-four total plaintiffs in the

Oklahoma Lawsuit and the Ohio Lawsuit.

(g) A previously-filed malpractice case in New Mexico was expanded to add2 The term Patient Litigation (defined above) refers to the New York Lawsuits, the Oklahoma Lawsuit, the Ohio

Lawsuit, along with any anticipated future patient personal injury claims.



8/23

8

fraud claims against the Company similar to those asserted in the New York, Ohio and

Oklahoma Lawsuits. That case went to trial in August 2011 and resulted in a jury verdict

in favor of the Company and the applicable Dental Centers and Dentists.

(h) Attorneys for the plaintiffs in the New York, Ohio and OklahomaLawsuits have told the Debtors that they represent numerous former patients and have

requested the charts of those patients, presumably in an effort to file additional lawsuits

against the Company, the Dental Centers and the Dentists.

(i) The attorneys for the New York Plaintiffs requested approximately 750individual patient charts and represent approximately 550 patients.

(j) Counsel for plaintiffs in the Oklahoma Lawsuit requested approximately400 individual patient charts.

(k) Counsel for the plaintiffs in the Ohio Lawsuit requested approximately100 patient charts.

(l) The Debtors estimate that there could be over 1,000 additional PatientLitigation claimants, and possibly many more.

(m) The New York Lawsuits consist of four cases commenced in New YorkSupreme Courts in four counties in New York in 2011. These cases were brought against

two debtor entities Church Street and FORBA NY and forty-three non-debtor entities,

consisting of four New York Dental Centers and thirty-nine individual Dentists.

(n) The New York Lawsuits were consolidated for pre-trial purposes, buteventually will be tried separately.

(o) The defendants will seek to have a separate trial for each plaintiff.(p) In the New York Lawsuits, movants have asserted claims for alleged

dental malpractice, negligence, common law battery, fraud deceptive business practices,



9/23

9

breach of fiduciary duty and lack of informed consent.

(q) The New York Supreme Court, in which the New York Lawsuits arepending, is a court of general jurisdiction.

(r) The New York Supreme Court is not a specialized tribunal with respect tomedical negligence or personal injury cases. No specialized tribunal has been established

to consider the New York Lawsuits.

(s) There are no specialized treatment or unique pleading and discoveryrules that apply to medical negligence cases in New York state court, although there is a

different statute of limitations for medical malpractice claims and certain different

procedures pertaining to expert witnesses.

(t) There are other New York Supreme Court judges, besides JudgeCherundolo, with the expertise and experience to manage complex multi-party medical

negligence cases.

(u) The District Court for the Middle District of Tennessee has substantialexperience managing and trying medical negligence and personal injury cases.

(v) As of the Petition Date, neither the plaintiffs nor the defendants in theNew York Lawsuits had responded to any outstanding discovery requests served by the

other side.

(w) Church Street and FORBA NY are the lead defendants in the New YorkLawsuits.

(x) Church Street is the lead defendant in the Ohio and Oklahoma Lawsuits.(y) Church Street is in possession of the vast majority of the documentary

evidence with respect to the New York Lawsuits.

(z) Church Street manages discovery and coordinates litigation strategy,



10/23

10

including both the defense of the cases and the defendants discovery responses in the

New York Lawsuits.

(aa) The Debtors overwhelmingly would bear the defendants burden indiscovery in the New York Lawsuits.

(bb) The New York Supreme Court already has ordered the Church Street andFORBA NY to produce documents that exceed two million pages.

(cc) As of the Petition Date, no depositions have been scheduled in the NewYork Lawsuits.

(dd) The Debtors anticipate that there will be well over 100 depositions in theNew York Lawsuits, including plaintiffs, guardians, other adults who accompanied

plaintiffs to appointments, and the defendants (including representatives of the Debtors

and the Dental Centers, and the individual Dentists).

(ee) The defendants also will seek to obtain IMEs, or independent medicalexaminations, for each plaintiff.

(ff) Following discovery, motion practice would ensue in advance of the trials,including filing and arguing of dispositive motions.

(gg) The Company, the Dental Centers and the Dentists are beneficiaries ofcertain Dentists Liability Policies (the National Union Policies) purchased by the

Company and issued by National Fire Insurance Company of Pittsburgh, PA (National

Union).

(hh) There are two different National Union Policies one covers the Debtorsand the Dental Centers, the other covers individual Dentists.

(ii) On each of the National Union Policies Declarations, Debtor SmallSmiles Holding Company, LLC is identified as the First Named Insured.



11/23

11

(jj) While the National Union Policies cover some of the Debtors defensecosts, other costs related to the New York Lawsuits are not covered under the National

Union Policies, including a portion of the fees incurred by King & Spalding, LLP, the

Debtors national coordinating counsel for the Patient Litigation.

(kk) The National Union Policies might not cover certain potential judgmentsor awards in the New York Lawsuits based on claims for fraud or to the extent punitive

damages are awarded.

(ll) Most of the defendants in the New York Lawsuits are beneficiaries of theNational Union Policies. A few individual Dentist defendants are covered by insurance

policies issued by other carriers.

(mm) The Company tendered the Patient Litigation to National Union fordefense and indemnity under the National Union Policies. National Union denied

coverage and commenced a lawsuit in 2010 against the Company in the United States

District Court for the Middle District of Tennessee seeking rescission and reformation of

the National Union Policies on a variety of grounds (the Coverage Litigation).

National Union also disputed the aggregate policy limits under certain of the policies.

The Company brought counterclaims against National Union, alleging, among other

things, bad faith refusal to honor the policies.

(nn) The Company impleaded as a third party defendant in the CoverageLitigation Affinity Insurance Services, Inc. (Affinity), the insurance broker that placed

the National Union Policies with the Company.

(oo) After some preliminary litigation and subsequent negotiations, the partiesjointly moved to administratively close the Coverage Litigation, and on October 4, 2011,

the District Court entered an order administratively closing the case without prejudice,



12/23

12

with any party having the right to petition to reopen the Coverage Litigation on 30 days

written notice.

(pp) The number and amount of potential Patient Litigation claims is currentlyundetermined.

(qq) The primary purpose of the Debtors bankruptcy filing was twofold. First,due to the Debtors financial condition, the Debtors are seeking to sell substantially all of

their assets under section 363 of the Bankruptcy Code.

(rr) The second purpose of the Chapter 11 Cases is to achieve a globalresolution of the Patient Litigation and resolve the dispute with National Union over

insurance coverage for those claims. Resolution of both disputes is critical to the ability

of the Debtors and the Dental Centers to continue as viable business entities and of

paramount importance to any buyer of the Debtors business.

(ss) Since the first weeks of these Chapter 11 Cases, the Debtors and theirspecial litigation counsel have engaged with plaintiffs counsel in the Patient Litigation

and counsel to National Union and Affinity in an effort to convene a formal mediation

(the Mediation). About two weeks ago, the Debtors, counsel representing the current

claimants in the Patient Litigation, National Union, Affinity and some of the Debtors

other insurance carriers agreed to participate in the Mediation.

(tt) Shortly after the New York Plaintiffs filed the Motion, the parties selectedPeter H. Woodin, Esq. of JAMS to serve as the mediator in the Mediation. Mr. Woodin

has extensive experience mediating and settling complex multi-party tort litigation,

including in the bankruptcy context. It is anticipated that the formal part of the Mediation

will take place in May. Mr. Woodin has already begun discussions with the parties.

(uu) Lifting the automatic stay and allowing the New York Lawsuits to proceed



13/23

13

would interfere with the Debtors efforts to effectuate the sale of their assets, hinder the

parties attempts to negotiate a global resolution of the Patient Litigation at the

Mediation, and impede the formulation of a plan to exit from Chapter 11.

3. In support of the foregoing, Respondents will rely on the affidavit of MartinMcGahan in support of the Debtors first day pleadings (Docket No. 11); one of the Complaints

filed in the New York Lawsuits, attached as Exhibit A to the Opposition; a declaration of Sheila

W. Sawyer; a declaration of Kevin E. Hulslander; and the National Union Policies.

Admitted Facts

1. The Debtors are parties to a Management Service Agreement (MSA) with eachnon-debtor dental center for which the Debtors provide management services (collectively, the

Dental Centers). Pursuant to each MSA, the Debtors provide the Dental Centers with

management services such as billing and collection, bookkeeping, accounting and tax services,

dentist and staff recruitment, payroll services, human resources, information technology support,

equipment and supplies procurement, leasing, repairs and capital improvements, and assistance

with compliance, legal issues, government affairs, and licensing and permitting.

2. In or around 2007, the Office of Inspector General of the U.S. Department ofHealth and Human Services (OIG) and the United States Department of Justice (the DOJ),

began investigations of the Company and the Dental Centers. A number of state Attorneys

General also commenced parallel state investigations of the Company and the Dental Centers.

Additionally, the New York State Office of Medicaid Inspector General (OMIG) commenced

an investigation. (The OIG, DOJ, state Attorneys General and OMIG investigations,

collectively, the Investigations.)

3. Attorneys for the plaintiffs in the New York, Ohio and Oklahoma Lawsuits havetold the Debtors that they represent numerous former patients and have requested the charts of



14/23

14

those patients, presumably in an effort to file additional lawsuits against the Company, the

Dental Centers and the Dentists.

4. The attorneys for the New York Plaintiffs requested approximately 750 individualpatient charts and represent approximately 550 patients.

5. The Debtors estimate that there could be over 1,000 additional Patient Litigationclaimants, and possibly many more.

6. The New York Lawsuits consist of four cases commenced in New York SupremeCourts in four counties in New York in 2011. These cases were brought against two debtor

entities Church Street and FORBA NY and forty-three non-debtor entities, consisting of four

New York Dental Centers and thirty-nine individual Dentists.

7. The New York Supreme Court, in which the New York Lawsuits are pending, isa court of general jurisdiction.

8. The Movants are plaintiffs in one of four personal injury lawsuits pending againstthe Debtors in the New York state courts.

9. In addition to the Debtors, there are forty non-debtor defendants in the New Yorkstate court litigation.

10. None of the non-Debtor defendants in the New York state court litigation live inTennessee. Fifteen of the twenty-nine dentists who are defendants in the New York state court

litigation live in New York. The other fourteen dentists live in eleven different states, but none

in Tennessee.

11. All but one of the Movants/plaintiffs are minors. Twenty-seven of the thirty-oneMovants live in New York.

12. Twenty of the Movants filed suit in April, 2011; ten in June, 2011; and one inNovember, 2011.



15/23

15

13. Other than the lawsuits, there is no relationship between the Movants and theDebtors.

14. The claims and defenses asserted in the New York litigation are based on NewYork statutory and common law.

15. In the New York Lawsuits, Movants have asserted claims for alleged dentalmalpractice, negligence, common law battery, fraud deceptive business practices, breach of

fiduciary duty and lack of informed consent.

16. Although the cases were originally filed in four different counties, they have beencoordinated by order of the New York Litigation Coordinating Panel before a single judge, the

Honorable John C. Cherundolo, in Onondaga County, New York.

17. There are other New York Supreme Court judges, besides Judge Cherundolo,with the expertise and experience to manage complex multi-party medical negligence cases.

18. In the four cases combined, there are a total of seventy-six parties, only two ofwhom are in bankruptcy.

19. The parties in the New York litigation (including the debtors) exchangeddiscovery requests in October and December 2011. No responses have yet been filed to that

discovery.

20. The New York Supreme Court already has ordered the Church Street and FORBANY to produce documents that exceed two million pages.

21. As of the Petition Date, no depositions have been scheduled in the New YorkLawsuits.

22. The Debtors anticipate that there will be well over 100 depositions in the NewYork Lawsuits, including plaintiffs, guardians, other adults who accompanied plaintiffs to



16/23

16

appointments, and the defendants (including representatives of the Debtors and the Dental

Centers, and the individual Dentists).

23. The defendants also will seek to obtain IMEs, or independent medicalexaminations, for each plaintiff.

24. Following discovery, motion practice would ensue in advance of the trials,including filing and arguing of dispositive motions.

25. In December 2011, the Debtors and many of the other defendants in the NewYork litigation, filed motions to dismiss some of the causes of action.

26. The motions to dismiss are based entirely on New York law.27. On February 9, 2012, Judge Cherundolo heard oral argument on pending motions

to dismiss and conferred with the certain counsel for plaintiffs and defendants on management of

discovery in the New York Lawsuits.

28. The Company, the Dental Centers and the Dentists are beneficiaries of certainDentists Liability Policies (the National Union Policies) purchased by the Company and issued

by National Fire Insurance Company of Pittsburgh, PA (National Union).

29. There are two different National Union Policies one covers the Debtors and theDental Centers, the other covers individual Dentists.

30. On each of the National Union Policies Declarations, Debtor Small SmilesHolding Company, LLC is identified as the First Named Insured.

31. Most of the defendants in the New York Lawsuits are beneficiaries of theNational Union Policies. A few individual Dentist defendants are covered by insurance policies

issued by other carriers.

32. The Company tendered the Patient Litigation to National Union for defense andindemnity under the National Union Policies. National Union denied coverage and commenced



17/23

17

a lawsuit in 2010 against the Company in the United States District Court for the Middle District

of Tennessee seeking rescission and reformation of the National Union Policies on a variety of

grounds (the Coverage Litigation). National Union also disputed the aggregate policy limits

under certain of the policies. The Company brought counterclaims against National Union,

alleging, among other things, bad faith refusal to honor the policies.

33. The Company impleaded as a third party defendant in the Coverage LitigationAffinity Insurance Services, Inc. (Affinity), the insurance broker that placed the National

Union Policies with the Company.

34. After some preliminary litigation and subsequent negotiations, the parties jointlymoved to administratively close the Coverage Litigation, and on October 4, 2011, the District

Court entered an order administratively closing the case without prejudice, with any party having

the right to petition to reopen the Coverage Litigation on 30 days written notice.

35. The number and amount of potential Patient Litigation claims is currentlyundetermined.

36. The primary purpose of the Debtors bankruptcy filing was twofold. First, due tothe Debtors financial condition, the Debtors are seeking to sell substantially all of their assets

under section 363 of the Bankruptcy Code.

37. Since the first weeks of these Chapter 11 Cases, the Debtors and their speciallitigation counsel have engaged with plaintiffs counsel in the Patient Litigation and counsel to

National Union and Affinity in an effort to convene a formal mediation (the Mediation). As of

about February 2012, the Debtors, counsel representing the current claimants in the Patient

Litigation, National Union, Affinity and some of the Debtors other insurance carriers agreed to

participate in a mediation (the Medication) in an effort to reach a global settlement. As of



18/23

18

about the end of March 2012, the parties agreed to hire Peter Woodin, Esq. of JAMS to serve as

the mediator in the Mediation, and formally engaged him about two weeks ago.

38. Mr. Woodin has extensive experience mediating and settling complex multi-partytort litigation, including in the bankruptcy context. Mr. Woodin has already begun discussions

with the parties.

39. It is anticipated that the formal part of the Mediation will take place in May.Contested Facts

1. New York has special rules regarding pleadings and discovery in medical-relatedcases.

2. Judge Cherundolo, the judge assigned to be the coordinating justice, has overthirty years of experience and familiarity with medical-related claims and applicable New York

law.

3. If the stay is not lifted, Movants will have the prosecution of their claims delayedwhich may cause the Movants to lose witnesses and evidence to support their case.

4. The cumulative effect of the Investigations along with certain negative newsstories placed an extraordinary financial burden on the Company. In January 2010, without

admitting any wrongdoing, the Company entered into a series of settlement agreements to bring

an end to the Investigations (the Settlement Agreements).

5. After the Settlement Agreements were executed, the Debtors believe that triallawyers began soliciting patients of the Dental Centers to become plaintiffs in lawsuits asserting

a variety of tort and fraud claims against the Company, certain Dental Centers and certain

individual dentists employed by the Dental Centers (the Dentists).



19/23

19

6. Since January 2010, approximately eleven lawsuits on behalf of over seventy-fiveplaintiffs have been filed in primarily three states, New York, Ohio and Oklahoma (respectively,

the New York Lawsuits, the Ohio Lawsuit and the Oklahoma Lawsuit), plus New Mexico.

7. As of the commencement of these Chapter 11 Cases, there were thirty-oneindividual plaintiffs in the New York Lawsuits, and forty-four total plaintiffs in the Oklahoma

Lawsuit and the Ohio Lawsuit.

8. A previously-filed malpractice case in New Mexico was expanded to add fraudclaims against the Company similar to those asserted in the New York, Ohio and Oklahoma

Lawsuits. That case went to trial in August 2011 and resulted in a jury verdict in favor of the

Company and the applicable Dental Centers and Dentists.

9. Counsel for plaintiffs in the Oklahoma Lawsuit requested approximately 400individual patient charts.

10. Counsel for the plaintiffs in the Ohio Lawsuit requested approximately 100patient charts.

11. The New York Lawsuits were consolidated for pre-trial purposes, but eventuallywill be tried separately.

12. The defendants will seek to have a separate trial for each plaintiff.13. The New York Supreme Court is not a specialized tribunal with respect to

medical negligence or personal injury cases. No specialized tribunal has been established to

consider the New York Lawsuits.



20/23

20

14. There are no specialized treatment or unique pleading and discovery rulesthat apply to medical negligence cases in New York state court, although there is a different

statute of limitations for medical malpractice claims and certain different procedures pertaining

to expert witnesses.

15. The District Court for the Middle District of Tennessee has substantial experiencemanaging and trying medical negligence and personal injury cases.

16. As of the Petition Date, neither the plaintiffs nor the defendants in the New YorkLawsuits had responded to any outstanding discovery requests served by the other side.

17. Church Street and FORBA NY are the lead defendants in the New York Lawsuits.18. Church Street is the lead defendant in the Ohio and Oklahoma Lawsuits.19. Church Street is in possession of the vast majority of the documentary evidence

with respect to the New York Lawsuits.

20. Church Street manages discovery and coordinates litigation strategy, includingboth the defense of the cases and the defendants discovery responses in the New York Lawsuits.

21. The Debtors overwhelmingly would bear the defendants burden in discovery inthe New York Lawsuits.

22.

While the National Union Policies cover some of the Debtors defense costs,

other costs related to the New York Lawsuits are not covered under the National Union Policies,

including a portion of the fees incurred by King & Spalding, LLP, the Debtors national

coordinating counsel for the Patient Litigation.



21/23

21

23. The National Union Policies might not cover certain potential judgments orawards in the New York Lawsuits based on claims for fraud or to the extent punitive damages

are awarded.

24. The second purpose of the Chapter 11 Cases is to achieve a global resolution ofthe Patient Litigation and resolve the dispute with National Union over insurance coverage for

those claims. Resolution of both disputes is critical to the ability of the Debtors and the Dental

Centers to continue as viable business entities and of paramount importance to any buyer of the

Debtors business.

25. Lifting the automatic stay and allowing the New York Lawsuits to proceed wouldinterfere with the Debtors efforts to effectuate the sale of their assets, hinder the parties

attempts to negotiate a global resolution of the Patient Litigation at the Mediation, and impede

the formulation of a plan to exit from Chapter 11.

Contested Legal Issues

Whether the Movants are entitled to relief from the automatic stay?

Respectfully submitted,

/s/ Glenn B. Rose

Glenn B. Rose

Harwell Howard Hyne Gabbert & Manner

315 Deaderick Street, Suite 1800Nashville, Tennessee 37238

Telephone: (615) 251-1971Facsimile: (615) 251-1059

[email protected]

Attorneys for Movants



22/23

22

By /s/ Jason W. Callen__________________

Robert J. Walker (#2498)

J. Mark Tipps (#11710)Jason W. Callen (#26225)WALKER, TIPPS & MALONE, PLC

2300 One Nashville Place

150 Fourth Avenue, NorthNashville, TN 37219-2424

Telephone: 615. 313.6000

Email:[email protected]

Counsel for the Debtors

-and-

/s/ Kenneth S. Leonetti

Kenneth S. Leonetti, Esq.*FOLEY HOAG LLP

Seaport World Trade Center West

155 Seaport BoulevardBoston, MA 02210-2600

Telephone: 617.832.1000

Facsimile: 617.832.7000

Email: [email protected]

Special Litigation Counsel to the Debtors

*Admitted Pro Hac Vice



23/23

CERTIFICATE OF SERVICE

I hereby certify that on this 27th day of April, 2012 a true and correct copy of the

Prehearing Statement was filed electronically. Notice of this filing was sent by operation of the

Courts electronic filing system to all parties indicated on the electronic filing receipt. Partiesmay access this filing through the Courts electronic filing system.

/s/ Kenneth S. LeonettiKenneth S. Leonetti

pre hearing statement re: stay of ny malpractice cases - doc 298

Documents