NHB Assignments LLC v. General Atlantic LLC (In re PMTS Liquidating Corp.)

490 B.R. 174, 2013 WL 1561014, 2013 U.S. Dist. LEXIS 54134, 57 Bankr. Ct. Dec. (CRR) 245
CourtDistrict Court, D. Delaware
DecidedApril 15, 2013
DocketNo. 08-11551 (BLS); No. Civ. 12-1020-SLR
StatusPublished
Cited by2 cases

This text of 490 B.R. 174 (NHB Assignments LLC v. General Atlantic LLC (In re PMTS Liquidating Corp.)) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
NHB Assignments LLC v. General Atlantic LLC (In re PMTS Liquidating Corp.), 490 B.R. 174, 2013 WL 1561014, 2013 U.S. Dist. LEXIS 54134, 57 Bankr. Ct. Dec. (CRR) 245 (D. Del. 2013).

Opinion

MEMORANDUM OPINION

ROBINSON, District Judge.

1. INTRODUCTION

The instant action was originally filed as an adversary proceeding1 in the United States Bankruptcy Court for the District of Delaware (“the bankruptcy court”). Plaintiff NHB Assignments LLC (“plaintiff’), as liquidating trustee on behalf of a liquidating trust, alleges that defendants General Atlantic LLC (“GA LLC”) and Braden Kelly (“Kelly”) (collectively, “defendants”) breached their fiduciary duties to ProxyMed, Inc. (“ProxyMed”), formerly the subject of a title 11 bankruptcy case (“the Bankruptcy Case”) in the bankruptcy court. (Adv. Dkt. I)2 The bankruptcy court issued a ruling on defendants’ motion to dismiss on the merits, which dismissed GA LLC from the case but allowed certain claims to go forward against Kelly. (Adv. Dkt. 36, 37)

[178]*178Following that decision, Kelly asserted, for the first time, that the bankruptcy court lacked subject matter jurisdiction. (D.I. 17)3 The jurisdictional issue prompted a slew of filings by both parties, including several proposed amended complaints by plaintiff, as well as a motion to withdraw the reference so that the case could be adjudicated by and tried in this court. (See Adv. Dkt. 53, 57, 61, 70, 72, 89; D.I. 1, 27) The bankruptcy court subsequently issued an order and determination that the matter is a non-core proceeding (D.I. 13), and this court granted plaintiffs motion to withdraw the reference. (D.I. 14)

Currently pending are two motions— Kelly’s motion to dismiss for lack of subject matter jurisdiction and plaintiffs amended motion for leave to file an amended complaint (the “pending motions”). (D.I. 17, 27) Both pending motions were filed in the bankruptcy court but were docketed, along with the corresponding briefing, in this court when the reference was withdrawn. In light of the unusual procedural posture of this case, the parties disagree as to what the court should do at this juncture. However, they agree that both pending motions have been fully briefed and that this court has all of the papers necessary to resolve, them. (See D.I. 40 at 21:2-4, 9-12)

II. BACKGROUND

A. The Former ProxyMed Bankruptcy Case

In 2008, ProxyMed, an electronic healthcare transaction processing services company, and certain of its affiliates (collectively, “the debtors”)4 initiated the Bankruptcy Case by filing a title 11 voluntary petition in the bankruptcy court.5 (Bank. Dkt. 1) On July 7, 2009, the parties filed a plan of liquidation (“the Plan”) that incorporated the terms of a liquidating trust agreement (“the Trust Agreement”), and the bankruptcy court approved the Plan on July 15, 2009. (Bank. Dkt. 620, 679, 696)6

Section 7.4 of the Plan transferred all of the trust assets to the liquidating trust of PTMS Liquidating Corp. (f/k/a ProxyMed), and plaintiff, as the liquidating trustee, was vested with the authority to prosecute “Remaining Actions” on behalf of the liquidating trust. (Bank. Dkt. 620, §§ 7.4, 7.8, 12.24) “Trust Assets” are defined in § 1.84 to be all assets and property of the debtors including all “Remaining Actions,” which are defined as “any and all claims or causes of actions of the Debtors” other than certain “Customer Avoidance Actions” that had been acquired by a third party. (Bank. Dkt. 620, §§ 1.76, 1.84) The Plan authorized the bankruptcy court to retain post-confirmation jurisdiction to the extent legally permissible until such time as “all payments and distributions required to be made and all other obligations required to be performed under the Plan have been made and performed by the Liquidating Trustee and a final decree has been entered closing [ProxyMed’s Bankruptcy] Case.” (Bank. Dkt. 620, § 11.1) The Plan also purported to preserve jurisdiction over, inter alia, “matters ... insti[179]*179tuted in the [Bankruptcy] Case by or on behalf of the Debtors or the Liquidating Trustee, including ... the ‘Remaining Actions.’ ” (Bank. Dkt. 620, § 11.1(f)) The Bankruptcy Case was closed on May 4, 2011.

B. The Premise of the Adversary Proceeding

On December 21, 2010, plaintiff initiated the adversary proceeding by filing a complaint (the “original complaint”) in the bankruptcy court against GA LLC and Kelly. (Adv. Dkt. 1) Plaintiff alleges that it is empowered to pursue the action as a “Remaining Action,” defined by § 1.76 of the Plan. (Id. at ¶ 8) The complaint asserts claims for breach of fiduciary duty against Kelly and claims for breach of fiduciary duty and fraud against GA LLC. (Id. at ¶¶ 9, 10, 122^40) As the merit pleadings are not currently at issue before the court, a brief summary of the factual allegations •will suffice.

GA LLC, a private equity investment firm, acquired a significant ownership interest in ProxyMed in 2002 for $25 million. (Id. at ¶¶ 1,12) Kelly, who was a managing director of GA LLC, served as designee on ProxyMed’s board of directors (“the Board”) and later became chairman of the Board. (Id. at ¶ 4) In and around 2006, while Kelly was on the Board, he allegedly gave ProxyMed false assurances that GA LLC would provide or facilitate financing to enable ProxyMed to pursue investments and acquisitions as part of a growth strategy. (Id. at ¶¶ 1, 49, 52, 55, 66, 85, 91) Meanwhile, GA LLC was allegedly engaged in the “secret pursuit” of making a much larger $1.2 billion investment to obtain a majority interest in one of Prox-yMed’s most significant competitors, Em-deon, Inc. (“Emdeon”). (Id. at ¶¶ 1, 69, 72-78) Although Kelly allegedly knew about GA LLC’s plans, neither Kelly nor GA LLC disclosed the alleged conflict of interest or retracted any of the prior assurances allegedly given to ProxyMed. (Id. at ¶¶ 1, 57-59, 73, 77-78, 88-85) After GA LLC’s investment in Emdeon was publicly announced, to ProxyMed’s surprise, GA LLC advised ProxyMed that it would not provide any of the allegedly promised financing. (Id. at ¶¶ 2,102-06)

Plaintiff asserts that Kelly owed Prox-yMed fiduciary duties as a director and that GA LLC also owed ProxyMed fiduciary duties based on a special relationship of trust and confidence, advice that it gave to ProxyMed, and GA LLC’s role as a controlling shareholder in ProxyMed. (Id. at ¶¶ 3-4) As a result of GA LLC’s and Kelly’s breaches of fiduciary duty and GA LLC’s fraud in deceiving ProxyMed for its own profit, plaintiff claims it was misled into pursuing a financial strategy which it otherwise would not have adopted. (Id. at ¶ 107) Without GA LLC’s financing, Prox-yMed was unable to close on its planned acquisitions and was ultimately forced to file the Bankruptcy Case in 2008. (Id. at ¶¶ 111-17) Plaintiffs adversary proceeding seeks damages in excess of $100 million. (Id. at ¶¶ 107-20,129-30,140)

C. Procedural Background of the Adversary Proceeding in the Bankruptcy Court

Currently at issue are procedural questions regarding the bankruptcy court’s and this court’s subject matter jurisdiction over the instant case. The case has been through prolonged, somewhat confusing, motion practice in the bankruptcy court to now come before this court. A detailed overview of the procedural history will be helpful for understanding the pending motions.

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490 B.R. 174, 2013 WL 1561014, 2013 U.S. Dist. LEXIS 54134, 57 Bankr. Ct. Dec. (CRR) 245, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nhb-assignments-llc-v-general-atlantic-llc-in-re-pmts-liquidating-corp-ded-2013.