In re Fundamental Long Term Care, Inc.
ORDER: This case is REMANDED to the Bankruptcy Court to determine at the earliest practicable time whether THMI is to be treated as the same entity as the debtor and, if so, whether THMI should be brought into the bankruptcy case as a debtor. The Clerk is directed to terminate all pending motions and close this file. Signed by Judge James S. Moody, Jr on 9/3/2013. (LN)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FUNDAMENTAL LONG TERM CARE
HOLDINGS, LLC and FUNDAMENTAL
ADMINISTRATIVE SERVICES, LLC,
Case No: 8:13-cv-603-T-30
TRANS HEALTH MANAGEMENT,
ORDER OF REMAND
THIS CAUSE comes before the Court upon the appeal of Fundamental Long
Term Care Holdings, LLC and Fundamental Administrative Services, LLC’s
(Appellants) from the Bankruptcy Court’s Order denying their Motion to Disqualify
Shumaker, Loop & Kendrick, LLP, as counsel for Trans Health Management, Inc.
(THMI), entered on January 30, 2013. After reviewing the briefs and the supplemental
filings, and hearing oral argument on August 28, 2013, the Court concludes this matter
should be remanded for further proceedings.
Appellants contend the trustee has a direct conflict with making decisions for
Trans Health Management, Inc. (“THMI”) even though the debtor owns 100% of the
stock in THMI. Because of this asserted conflict, Appellants contend trustee’s counsel,
Shumaker, Loop & Kendrick, LLP, also has a conflict. Appellants request this Court to
disqualify Shumaker, Loop & Kendrick, LLP, which would require the trustee to obtain
new counsel for THMI.
This asserted conflict is occasioned because of the unusual posture of this case.
This is an involuntary bankruptcy brought by a creditor of THMI’s parent corporation.
By putting THMI’s parent corporation in bankruptcy rather than THMI, the creditors are
allowed to continue to pursue litigation against THMI.
Since THMI is not the debtor, it does not receive any of the benefits of
bankruptcy, such as an automatic stay of civil litigation against it. Therefore, civil
litigation has been proceeding against THMI outside the control of the Bankruptcy Court.
The trustee has been making decisions (such as allowing “claims”) for THMI as if THMI
were in bankruptcy.
It is apparent that a decision needs to be made whether in fact THMI and the
Debtor should be treated as the same entity under theories of alter ego, substantive
consolidation, or other legal or equitable theory. If so, THMI should be brought into the
bankruptcy as a debtor which would afford it the benefits of bankruptcy as well as the
burdens. If THMI is not to be treated as the same entity as the debtor, then the litigation
against THMI may be moot in this bankruptcy estate and the issues involved in this
appeal may become moot.
It is therefore ORDERED AND ADJUDGED that:
This case is REMANDED to the Bankruptcy Court to determine at the
earliest practicable time whether THMI is to be treated as the same entity as the debtor
and, if so, whether THMI should be brought into the bankruptcy case as a debtor.
The Clerk is directed to terminate all pending motions and close this file.
DONE and ORDERED in Tampa, Florida, this 3rd day of September, 2013.
Copies furnished to:
U. S. Bankruptcy Judge Michael Williamson (case #8:11-bk-22258-MGW)
Counsel/Parties of Record
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