In re Orion Healthcorp, Inc.

596 B.R. 228
CourtUnited States Bankruptcy Court, E.D. New York
DecidedJanuary 24, 2019
DocketCase No. 18-71748 (AST); Case No. 18-71749 (AST); Case No. 18-71750 (AST); Case No. 18-71751 (AST); Case No. 18-71752 (AST); Case No. 18-71753 (AST); Case No. 18-71754 (AST); Case No. 18-71755 (AST); Case No. 18-71756 (AST); Case No. 18-71757 (AST); Case No. 18-71758 (AST); Case No. 18-71759 (AST); Case No. 18-71760 (AST); Case No. 18-71761 (AST); Case No. 18-71762 (AST); Case No. 18-71763 (AST); Case No. 18-71764 (AST); Case No. 18-71765 (AST); Case No. 18-71766 (AST); Case No. 18-71767 (AST); Case No. 18-71789 (AST); Case No: 18-74545 (AST) (Jointly Administered)
StatusPublished
Cited by2 cases

This text of 596 B.R. 228 (In re Orion Healthcorp, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Orion Healthcorp, Inc., 596 B.R. 228 (N.Y. 2019).

Opinion

Alan S. Trust, United States Bankruptcy Judge

Summary of dispute and of ruling

On August 21, 2018, the Official Committee of Unsecured Creditors (the "UCC") filed a motion seeking, inter alia , an order authorizing the UCC to issue subpoenas for the production of documents from and to take the oral examination of Elizabeth Kelly ("E Kelly") pursuant to Federal Rule of Bankruptcy Procedure 2004 (the "Motion" and the "Examination"). [dkt item 478] As further detailed below, E Kelly was a principal owner of an entity that was sold to one of the current debtors for a purchase price in excess of $ 70 million.

E Kelly filed a limited objection to the Motion [dkt item 507] and the Court conducted *231a hearing thereon on September 13, 2018. At the hearing, E Kelly expressed concerns about possibly having to submit to multiple examinations. In addition, Kevin Kelly and Edel Kelly ("Kevin and Edel"), children of E Kelly who allege they were minority owners of that same entity and have been embroiled in litigation with her, requested permission to participate in the Examination.

Based thereon, this Court entered an Order which established a protocol for the UCC to serve a subpoena for the production of documents and the Examination, for any notice party to seek to request documents and/or participate in the Examination, for E Kelly to object to any such participation, and for the Court to determine the proper scope and conduct of the Examination. [dkt item 562]

The UCC served the subpoena. Kevin and Edel asked to obtain any documents produced by E Kelly and to examine E Kelly at the Examination. E Kelly objected, and Kevin and Edel responded. [dkt items 631, 636]

For the reasons stated herein, the Court has determined that any documents produced by E Kelly which are not produced under a protective order, as well as the transcript of the Examination, shall be made available to Kevin and Edel at their expense, that Kevin and Edel may attend the Examination, but that they may not ask any questions, state any objections, or otherwise participate in the Examination.

Jurisdiction

This Court has jurisdiction to consider this dispute in accordance with 28 U.S.C. § 1334. This matter presents a core proceeding pursuant to 28 U.S.C. § 157(b)(A). Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

Facts and background: general case issues

On March 16, 2018, a series of related companies filed for relief under chapter 11, with the lead case being Orion Healthcorp, Inc. ("Orion" and collectively, the "Initial Debtors"). The Initial Debtors were primarily involved in back office medical billing services, and were created through a series of transactions involving hundreds of millions of dollars that have spawned multiple lawsuits, a criminal indictment and several forfeiture actions.

Prior to the petition date, on January 30, 2017, Orion along with certain affiliates entered into a credit agreement (the "Credit Agreement") for approximately $ 130 million with Bank of America, N.A. as administrative agent, swing line lender and letter of credit issuer ("BOA"), along with certain lender parties thereto (together with BOA, the "Lenders"). See Declaration of Timothy J. Dragelin in Support of Chapter 11 Petitions and First Day Motions ("Dragelin Decl."), ¶¶ 57, 62.

On April 4, 2018, the Office of the United States Trustee appointed the UCC in the Initial Debtors' chapter 11 cases pursuant to § 1102 of the Bankruptcy Code. [dkt item 82]

On May 3, 2018, the Court entered a final Order, among other things, authorizing the Initial Debtors to obtain post-petition financing, use cash collateral, and granting adequate protection (the "Final DIP Order"). [dkt item 159] The Final DIP Order, among other things, provided the Initial Debtors with authority to obtain $ 7.5 million post-petition financing from certain Lenders and contained the Initial Debtors' acknowledgements of the validity and amount of liens and claims held by the Lenders; as is customary in DIP financing orders, parties in interest other than the Initial Debtors were provided a certain period of time to bring an action to challenge *232the validity of the Lenders' claims and liens, as well as releases they were given and stipulations agreed to by the Initial Debtors; that window of time was set at 90 calendar days from the date of the formation of the UCC (the "Challenge Period").

On June 5, 2018, the Court authorized the UCC to retain the law firm of Pachulski Stang Ziehl & Jones LLP as its counsel. [dkt item 275]

The Initial Debtors engaged in marketing and sale efforts related to a sale of substantially all of their assets. This process resulted in two significant sales the Initial Debtors wished to pursue; a sale of substantially all of their assets for approximately $ 10.6 million subject to higher and better offers (the "Initial Debtors' Assets"), and a potential sale of substantially all of the assets of the then non-debtor affiliate entity New York Network Management, L.L.C. ("NYNM") for $ 16.5 million also subject to higher and better offers. [dkt item 333] On June 29, 2018, the Court entered an Order approving the sale of the Initial Debtors' Assets for $ 12.6 million, which, inter alia , provided for repayment of the DIP loan. [dkt item 354]

On July 5, 2018, NYNM filed its own chapter 11 petition, assigned case number 18-74545-ast (NYNM along with the Initial Debtors are referred to as the "Debtors"). At the time of the NYNM filing, Initial Debtor NYNM Acquisition LLC ("NYNM Acquisition") was the direct parent of NYNM and Initial Debtor Orion was its indirect parent company. See Dragelin Decl. ¶ 33; Supplemental Declaration of Timothy J. Dragelin in Support of Chapter 11 Petition of New York Network Management, L.L.C. and Motions Filed Contemporaneously Therewith ("Dragelin Supp. Decl."), ¶ 11. [dkt items 2, 368] Prior to these bankruptcy filings, in March 2017, Orion, through NYNM Acquisition, had apparently acquired the membership interests in NYNM and its subsidiaries in a transaction predominantly undertaken with E Kelly. Id. ; See E Kelly's Objection to the Notice of Assumption and Assignment of Certain Executory Contracts and Unexpired Leases Pursuant to the Sale of Certain Assets of NYNM.

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Cite This Page — Counsel Stack

Bluebook (online)
596 B.R. 228, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-orion-healthcorp-inc-nyeb-2019.