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B | K Wins Summary Disallowance of over $6 Million in Senior Claims

Thu 18th Apr 2019, Blogs

Bienert | Katzman has successfully litigated the rejection of over 95% of the senior claims asserted against bankrupt Gardens Regional Hospital and Medical Center, Inc. (“Gardens”) on behalf of its client, Michael R. Lane, the Liquidating Trustee of Gardens.  The disallowed senior claims totaled over $6 million. The U.S. Bankruptcy Court disallowed the claims on a summary basis, without requiring a trial.

On February 4, 2019, the Liquidating Trustee filed his multiple objections to over $6 million in priority claims against Gardens, which are a high-ranking type of claim that is entitled to be paid first in a bankruptcy case and, to the extent there are sufficient assets, is paid in full.  Unless these claims were disallowed, there would likely be no recovery for Gardens’ other creditors. Therefore, it was critical to obtain the disallowance of the claims.

On March 6, 2019, the U.S. Bankruptcy Court overruled all of the creditors’ oppositions and sustained every one of the claim objections.  This reduced the administrative expense claims against Gardens by over 95%, and cleared the path to allow other creditors of Gardens to obtain a recovery on their claims.  Notably, Bienert | Katzman successfully litigated: the complete disallowance on the merits of a $5 million fraud claim arising out of a spinal surgery; the complete disallowance of contract claims on the basis that the claimants failed to establish value to Gardens, regardless of what they might be entitled to under their contracts; and the complete disallowance of contract claims because the claims arose under the contract after it was rejected in the bankruptcy case by Gardens.  

Steven Jay Katzman and Anthony Bisconti represent the Liquidating Trustee in the Gardens case, together with Andrew Sherman and Boris Mankovetskiy of Sills Cummis & Gross P.C.* In re Gardens Regional Hospital and Medical Center, Inc., Case No. 2:16-bk-17463-ER (United States Bankruptcy Court for the Central District of California, Los Angeles Division)