Mannucci v. Cabrini Medical Center (In re Cabrini Medical Center)

489 B.R. 7
CourtDistrict Court, S.D. New York
DecidedDecember 20, 2012
DocketBankruptcy No. 09-14398 (AJG); Adversary No. 11-02407 (ALG); No. 12 Civ. 6661 (SAS)
StatusPublished
Cited by9 cases

This text of 489 B.R. 7 (Mannucci v. Cabrini Medical Center (In re Cabrini Medical Center)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mannucci v. Cabrini Medical Center (In re Cabrini Medical Center), 489 B.R. 7 (S.D.N.Y. 2012).

Opinion

OPINION AND ORDER

SHIRAA. SCHEINDLIN, District Judge.

I. INTRODUCTION

Three doctors — Mannuccio Mannucci, Angelo Taranta, and Guido Padula — as well as Dilva Salvioni, the widow of a fourth doctor, Daniele Salvioni (“Appellants”) appeal a Bankruptcy Court decision refusing to lift the automatic stay instituted by the bankruptcy proceedings of Cabrini Medical Center (“Cabrini”). Appellants allege that Cabrini is an alter-ego of the Missionary Sisters of the Sacred Heart of Jesus (“Missionary Sisters”), and seek to lift the stay so that they may add Cabrini as a nominal defendant in a state court action against Missionary Sisters.1

II. BACKGROUND2

A. The State Court Complaints

Cabrini is a domestic not-for-profit corporation organized under the laws of New York that operated a hospital in New York but in March 2008 ceased hospital operations.3 Mannucci, Padula, Salvioni and Taranta worked for Cabrini until retiring in 2000, 1980, 1980, and 1995 respectively.4 Between 1967 and 1978, Ca[10]*10brini set up Deferred Compensation Plans (the “Plans”) for each of the Doctors.5 None of the Plans had trustees.6 Cabrini deposited the monies subject to the Plans into a variety of brokerage accounts.7 In 1997, citing a tax problem, Cabrini transferred the funds from these accounts into four accounts with Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”).8 On November 16, 2006, Cabrini’s then-president and CEO Robert Chaloner sent a letter to the doctors informing them that, as part of a “major restructuring project[,]” their money would be “temporarily” moved.9 Between 2006 and 2007, Cabrini transferred the funds from the Merrill Lunch accounts (totaling roughly $2.9 million dollars) into its general operating account.10 Not surprisingly, Cabrini did not have the doctors’ authorization to make these transfers.11

On August 6, 2008, the Appellants commenced an action in the Supreme Court of the State of New York, New York County, against Cabrini, Missionary Sisters, and Merrill Lynch, seeking to recover the funds allegedly looted from the Plans.12 The complaint alleged that the Plans were qualified ERISA plans, and that the defendants were liable under ERISA and a variety of New York common law theories.13 The complaint further alleged that Cabrini was dominated, controlled, and ultimately looted by Missionary Sisters.14

After the Chapter 11 proceedings and the automatic stay (discussed below) were instituted, the state court action was dismissed with leave to re-plead and, on March 1, 2010, the Appellants filed an amended complaint, which was substantially identical to the earlier complaint but dropped Cabrini as a defendant.15 Missionary Sisters moved to dismiss on the basis that Cabrini was a necessary party not named in the complaint, and their motion was granted on January 5, 2011, and affirmed on appeal on April 5, 2012.16

B. The Bankruptcy Proceedings

On July 9, 2009, Cabrini filed for bankruptcy under Chapter 11,17 At the petition date, Cabrini had only two hundred thou[11]*11sand dollars cash on hand. The Bankruptcy Court therefore approved debtor-in-possession (“DIP”) financing in an Interim Order dated July 30, 2009.18 Under this Order, the Illinois Missionary Sisters, the largest secured creditor of Cabrini and an Illinois arm of the Missionary Sisters, provided DIP financing in return for Cabrini’s agreement not to challenge the hens of the Missionary Sisters or otherwise assert any claims against them.19 However, the Creditors’ Committee and other parties in interest were given standing and authority for ninety days to challenge the liens or otherwise bring claims against the Missionary Sisters.20

Appellants did not file a complaint during this ninety day window. The Creditors’ Committee, though, filed a complaint against Missionary Sisters in the Bankruptcy Court on October 28, 2009, seeking to set aside and/or subordinate various claims of the Missionary Sisters.21 Like the amended state court complaint that would be filed later, the Committee’s complaint alleged that the Missionary Sisters had dominated, controlled, and extracted resources from Cabrini.22

On November 19, 2009, the doctors each filed proof of claims in the bankruptcy case reflecting the monies they asserted they were owed under the Plans.23 The doctors did not check any of the boxes that would have indicated that their claims were secured or otherwise entitled to priority over general unsecured claims.24 After an auction process, on February 11, 2010, the Bankruptcy Court approved the sale of Cabrini’s assets — mostly real-estate — for $83.1 million dollars.25 Subsequently, the Creditors’ Committee’s adversary proceeding settled, and, after the relevant parties were noticed, the settlement (the “Settlement”) was approved — without any objection by Appellants — on November 19, 2010.26

Through the Settlement Agreement, the Missionary Sisters renounced a portion of their secured claims for the benefit of the unsecured creditor class, and in exchange received a release from all claims against it by Cabrini, its estate, or the Creditors’ Committee.27 The Settlement also includ[12]*12ed an injunction (the “Plan Injunction”) that would prevent any creditor who received a distribution under a plan of reorganization “from pursuing claims against [the Missionary Sisters] that arise out of the creditors’ dealings with the debtor.”28

With all loose ends seemingly tied up, Cabrini and the Creditors’ Committee filed a joint plan of reorganization, incorporating the Settlement, and sought approval of a disclosure statement on December 22, 2010.29 On January 19, 2011, the Appellants timely objected to the disclosure statement, seeking full disclosure of their claims and alleging that: (1) the funds taken from the Plans should be excluded from the estate, under either an ERISA or trust theory; and (2) the Bankruptcy Court was not justified in issuing the Plan Injunction against them.30 Cabrini then modified the plan and the disclosure statement to fully disclose the Appellants’ reservations, and on January 26, 2011, the Bankruptcy Court entered an Order approving the First Amended Disclosure Statement.31

That same day-twenty-one days after their state court action had been dismissed — the Appellants moved the Bankruptcy Court to lift the automatic stay to allow them to add Cabrini as a defendant in the state court action.32

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Bluebook (online)
489 B.R. 7, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mannucci-v-cabrini-medical-center-in-re-cabrini-medical-center-nysd-2012.