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et al1 Debtors TIMOTHY ANGUS, et al Movants v. CHURCH STREET HEALTH MANAGEMENT, LLC, et al Respondents ) ) ) ) ) ) ) ) ) )
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).
1 The 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. 1201576) and FORBA Services, Inc. (Case No. 12-01577). Only two of the Debtors are Respondents to this Motion.
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Movants Theory of Basis for Relief from Stay 1. Section 362(d)(1) provides that the court shall grant relief from the automatic stay
such 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 their
personal 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 against
the Debtors in the New York state courts. 2. Movants intend to rely upon the following evidence, but reserve the right to offer
such 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.
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(b) (c)
All but one of the Movants is a minor. 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 or
their estates, but will rely on their insurance proceeds to collect any judgment obtained against Debtors. (e) the Debtors. (f) Debtors have insurance coverage with National Union and are being Other than the lawsuits, there is no relationship between the Movants and
defended 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 on
New York statutory and common law. (h) Although the cases were originally filed in four different counties, they
have been coordinated before a single judge, the Honorable John C. Cherundolo, in Onondaga County, New York. (i) related cases. (j) Judge Cherundolo, the judge assigned to be the coordinating justice, has New York has special rules regarding pleadings and discovery in medical-
over 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, only
two of whom are in bankruptcy. (l) The parties in the New York litigation (including the debtors) exchanged
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discovery requests in October and December 2011. (m) In December 2011, the Debtors and many of the other defendants in the
New York litigation, filed motions to dismiss some of the causes of action. (n) (o) The motions to dismiss are based entirely on New York law. 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 state
court litigation. (q) None of the non-Debtor defendants in the New York state court litigation
live in Tennessee. (r) Fifteen of the twenty-nine dentists who are defendants in the New York The other fourteen dentists live in eleven
state court litigation live in New York. different states, but none in Tennessee. (s) (t)
Twenty-seven of the thirty-one Movants live in New York. 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.
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Respondents Theory of Basis for Denial of Motion 1. Movants have failed to satisfy their initial burden to establish cause warranting
relief 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 of
equality 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
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not trial ready; and the lead defendants in the New York Lawsuits are two of the Debtors -Church Street and FORBA NY, LLC (FORBA). 4. Finally, the Debtors are not seeking to continue the stay indefinitely, but seek a
brief respite of a few months from the New York Lawsuits and other litigations in order to complete the sale of their assets and explore a global settlement of the Patient Litigations. Movants have demonstrated no quantifiable harm that would result from this brief hiatus. In contrast, lifting the stay now would jeopardize the primary purposes of these Chapter 11 cases. Thus, the balance of the harms weighs heavily in favor of denying the Motion. Respondents Statement of Facts in Support of Defenses and Anticipated Evidence 1. Debtors Church Street and FORBA are defendants in four personal injury
lawsuits commenced in the New York state courts. 2. Respondents intend to rely upon the following evidence, but reserve the right to
offer such other or additional evidence as may become available or relevant prior to any final hearing on their motion. (a) The Debtors are parties to a Management Service Agreement (MSA)
with each non-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. (b) In or around 2007, the Office of Inspector General of the U.S. Department
of Health and Human Services (OIG) and the United States Department of Justice (the
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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 negative
news 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 Agreements
drew 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 over
seventy-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-one
individual plaintiffs in the New York Lawsuits, and forty-four total plaintiffs in the Oklahoma Lawsuit and the Ohio Lawsuit. (g)
2
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.
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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 Oklahoma
Lawsuits 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 750
individual patient charts and represent approximately 550 patients. (j) Counsel for plaintiffs in the Oklahoma Lawsuit requested approximately
400 individual patient charts. (k) Counsel for the plaintiffs in the Ohio Lawsuit requested approximately
100 patient charts. (l) The Debtors estimate that there could be over 1,000 additional Patient
Litigation claimants, and possibly many more. (m) The New York Lawsuits consist of four cases commenced in New York
Supreme 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, but
eventually will be tried separately. (o) (p) The defendants will seek to have a separate trial for each plaintiff. In the New York Lawsuits, movants have asserted claims for alleged
dental malpractice, negligence, common law battery, fraud deceptive business practices,
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breach of fiduciary duty and lack of informed consent. (q) The New York Supreme Court, in which the New York Lawsuits are
pending, is a court of general jurisdiction. (r) 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. (s) There are no specialized treatment or unique pleading and discovery
rules 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 Judge
Cherundolo, with the expertise and experience to manage complex multi-party medical negligence cases. (u) The District Court for the Middle District of Tennessee has substantial
experience managing and trying medical negligence and personal injury cases. (v) As of the Petition Date, neither the plaintiffs nor the defendants in the
New York Lawsuits had responded to any outstanding discovery requests served by the other side. (w) Lawsuits. (x) (y) Church Street is the lead defendant in the Ohio and Oklahoma Lawsuits. Church Street is in possession of the vast majority of the documentary Church Street and FORBA NY are the lead defendants in the New York
evidence with respect to the New York Lawsuits. (z) Church Street manages discovery and coordinates litigation strategy,
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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 in
discovery in the New York Lawsuits. (bb) The New York Supreme Court already has ordered the Church Street and
FORBA NY to produce documents that exceed two million pages. (cc) As of the Petition Date, no depositions have been scheduled in the New
York Lawsuits. (dd) The Debtors anticipate that there will be well over 100 depositions in the
New 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 medical
examinations, 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 of
certain 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 Debtors
and the Dental Centers, the other covers individual Dentists. (ii) On each of the National Union Policies Declarations, Debtor Small
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(jj)
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. (kk) The National Union Policies might not cover certain potential judgments
or 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 the
National 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 for defense 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 Coverage
Litigation 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 parties
jointly moved to administratively close the Coverage Litigation, and on October 4, 2011, the District Court entered an order administratively closing the case without prejudice,
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with any party having the right to petition to reopen the Coverage Litigation on 30 days written notice. (pp) undetermined. (qq) The primary purpose of the Debtors bankruptcy filing was twofold. First, The number and amount of potential Patient Litigation claims is currently
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 global
resolution 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 their
special 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 selected
Peter 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
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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 Martin
McGahan 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 each
non-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 of
Health 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 have
told the Debtors that they represent numerous former patients and have requested the charts of
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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 individual
patient charts and represent approximately 550 patients. 5. The Debtors estimate that there could be over 1,000 additional Patient Litigation
claimants, and possibly many more. 6. The New York Lawsuits consist of four cases commenced in New York Supreme
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. 7. The New York Supreme Court, in which the New York Lawsuits are pending, is
a court of general jurisdiction. 8. The Movants are plaintiffs in one of four personal injury lawsuits pending against
the Debtors in the New York state courts. 9. In addition to the Debtors, there are forty non-debtor defendants in the New York
state court litigation. 10. None of the non-Debtor defendants in the New York state court litigation live in
Tennessee. 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-one
Movants live in New York. 12. Twenty of the Movants filed suit in April, 2011; ten in June, 2011; and one in
November, 2011.
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Other than the lawsuits, there is no relationship between the Movants and the
The claims and defenses asserted in the New York litigation are based on New
York statutory and common law. 15. In the New York Lawsuits, Movants have asserted claims for alleged dental
malpractice, 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 been
coordinated 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 of
whom are in bankruptcy. 19. The parties in the New York litigation (including the debtors) exchanged
discovery 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 FORBA
NY to produce documents that exceed two million pages. 21. Lawsuits. 22. The Debtors anticipate that there will be well over 100 depositions in the New As of the Petition Date, no depositions have been scheduled in the New York
York Lawsuits, including plaintiffs, guardians, other adults who accompanied plaintiffs to
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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 medical
examinations, 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 New
York litigation, filed motions to dismiss some of the causes of action. 26. 27. The motions to dismiss are based entirely on New York law. 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 certain
Dentists 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 the
Dental Centers, the other covers individual Dentists. 30. On each of the National Union Policies Declarations, Debtor Small Smiles
Holding Company, LLC is identified as the First Named Insured. 31. Most of the defendants in the New York Lawsuits are beneficiaries of the
National 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 and
indemnity under the National Union Policies. National Union denied coverage and commenced
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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 Litigation
Affinity 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 jointly
moved 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. undetermined. 36. The primary purpose of the Debtors bankruptcy filing was twofold. First, due to The number and amount of potential Patient Litigation claims is currently
the 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 special
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). 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
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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-party
tort 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. cases. 2. Judge Cherundolo, the judge assigned to be the coordinating justice, has over New York has special rules regarding pleadings and discovery in medical-related
thirty 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 delayed
which may cause the Movants to lose witnesses and evidence to support their case. 4. The cumulative effect of the Investigations along with certain negative news
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). 5. 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).
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6.
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), plus New Mexico. 7. As of the commencement of these Chapter 11 Cases, there were thirty-one
individual 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 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. 9. Counsel for plaintiffs in the Oklahoma Lawsuit requested approximately 400
individual patient charts. 10. patient charts. 11. The New York Lawsuits were consolidated for pre-trial purposes, but eventually Counsel for the plaintiffs in the Ohio Lawsuit requested approximately 100
will be tried separately. 12. 13. The defendants will seek to have a separate trial for each plaintiff. 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.
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14.
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. 15. The District Court for the Middle District of Tennessee has substantial experience
managing and trying medical negligence and personal injury cases. 16. As of the Petition Date, neither the plaintiffs nor the defendants in the New York
Lawsuits had responded to any outstanding discovery requests served by the other side. 17. 18. 19. Church Street and FORBA NY are the lead defendants in the New York Lawsuits. Church Street is the lead defendant in the Ohio and Oklahoma Lawsuits. 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, including
both 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 in
the 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.
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23.
The National Union Policies might not cover certain potential judgments or
awards 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 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. 25. Lifting the automatic stay and allowing the New York Lawsuits to proceed 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. 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 1800 Nashville, Tennessee 37238 Telephone: (615) 251-1971 Facsimile: (615) 251-1059 glenn.rose@h3gm.com Attorneys for Movants
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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, North Nashville, TN 37219-2424 Telephone: 615. 313.6000 Email: jcallen@walkertipps.com Counsel for the Debtors -and/s/ Kenneth S. Leonetti Kenneth S. Leonetti, Esq.* FOLEY HOAG LLP Seaport World Trade Center West 155 Seaport Boulevard Boston, MA 02210-2600 Telephone: 617.832.1000 Facsimile: 617.832.7000 Email: kleonetti@foleyhoag.com Special Litigation Counsel to the Debtors *Admitted Pro Hac Vice
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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. Parties may access this filing through the Courts electronic filing system.
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