Ctr. City Healthcare v. McKesson Plasma & Biologics (In re Ctr. City Healthcare)

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In re: CENTER CITY HEALTHCARE, LLC d/b/a HAHNEMANN UNIVERSITY HOSPITAL, et al., Debtors.

CENTER CITY HEALTHCARE, LLC d/b/a HAHNEMANN UNIVERSITY HOSPITAL, ST. CHRISTOPHER'S HEALTHCARE, LLC TPS III OF PA, LLC, TPS IV OF PA, and TPS V OF PA, LLC Plaintiffs, v. MCKESSON PLASMA & BIOLOGICS LLC& MCKESSON MEDICAL-SURGICAL, INC., Defendants.

No. 19-11466 MFW

Adv. Proc. No. 21-50796 (MFW)

United States Bankruptcy Court, D. Delaware

June 13, 2022

Re D.I. 1, 18, 21 & 25

MEMORANDUM OPINION ^[1]

Mary F. Walrath, United States Bankruptcy Judge

Before the Court is a motion to dismiss (the "Motion to Dismiss") a Complaint seeking avoidance of preferential transfers, avoidance of fraudulent transfers, recovery of property, and disallowance of claims. For the reasons stated below, the Court will grant in part, and deny in part, the Motion to Dismiss.

I. BACKGROUND

On June 30 and July 1, 2019, Center City Healthcare, LLC and some of its affiliates (the "Debtors") filed petitions under chapter 11 of the Bankruptcy Code. The Debtors employed EisnerAmper LLP ("EisnerAmper"), with Court approval, to provide interim management and operational services to the Debtors.^[2] As part of this role, EisnerAmper reviewed the Debtors' financials for the ninety days prior to the Petition Date (the "Avoidance Period"). Based on that review, the Debtors concluded that several transfers (the "Transfers") from the Debtors to McKesson Plasma & Biologics LLC ("McKesson Plasma") and McKesson Medical-Surgical Inc. ("McKesson Medical") (collectively, the "Defendants") were avoidable.^[3] On May 7 and May 26, 2021, the Debtors sent offers to the Defendants to settle these claims (the "Demand Letters").^[4] The Defendants did not respond.^[5] On June 23, 2021, the Debtors commenced a Complaint against the Defendants seeking to recover $853, 284 in pre-petition payments made by the Debtors to the Defendants during the Avoidance Period.^[6] The Complaint seeks to avoid and recover those Transfers as preferences under Counts I & III, to avoid and recover those Transfers as fraudulent transfers under Counts II & III, and to disallow any claims that the Defendants may have against the Debtors under Count IV.

On February 7, 2022, the Defendants filed the Motion to Dismiss pursuant to Rules 8 and 12 of the Federal Rules of Civil Procedure.^[7] On February 22, 2022, the Debtors filed a response.^[8]The Defendants filed a reply on March 1, 2022.^[9] The Motion to Dismiss is ripe for decision.

II. JURISDICTION

The Court has subject matter jurisdiction over this adversary proceeding. 28 U.S.C. § 1334(b). This action involves core claims. 28 U.S.C. § 157(b). The Defendants have consented to entry of an order by the Court on the Motion to Dismiss.^[10]

III. DISCUSSION

A. Standard of Review

1. Rule 12(b)(6)

The Motion to Dismiss is brought under Rules 8(a) and 12(b)(6). Rule 8(a) requires a complaint to contain "a short and plain statement of the claim showing that the pleader is entitled to relief."^[11] Rule 12(b)(6) provides for dismissal for "failure to state a claim upon which relief can be granted."^[12] When a complaint is challenged by a motion to dismiss under Rule 12(b)(6), the complaint "does not need detailed factual allegations, [but] a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."^[13] To survive a motion to dismiss, the complaint must contain sufficient factual matter, accepted as true, “to state a claim to relief that is plausible on its face.” ^[14] Two "working principles" underlie this pleading standard:

First, the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements. Second, determining whether a complaint states a plausible claim is context specific, requiring the reviewing court to draw on its experience and common sense.^[15]

Under this standard, a complaint must nudge claims "across the line from conceivable to plausible."^[16] The court must draw all reasonable inferences in favor of the plaintiff, ^[17] and the movant "bears the burden to show that the plaintiff's claims are not plausible."^[18]

In weighing a motion to dismiss, the Third Circuit instructs courts to follow a three-part analysis. "First, the court must 'tak[e] note of the elements a plaintiff must plead to state a claim.'"^[19] Second, the court must separate the factual and legal elements of the claim, accepting all of the complaint's well-pled facts as true and disregarding any legal conclusions.^[20] Third, the court must determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.^[21] After conducting this analysis, the court may conclude that a claim has facial plausibility when the pled factual content allows the court to draw the reasonable inference that the defendant is liable for the alleged misconduct.^[22]

B. Voidable Preferences

The Defendants move to dismiss Count I of the Debtors' Complaint which alleges claims for avoidance of preferential transfers under section 547 of the Bankruptcy Code. The Defendants contend that the Complaint fails to plead the preference claim adequately for multiple reasons.

1. Pleading the Traditional Elements of Section 547

Initially, the Defendants argue that a preference complaint must allege more than the statutory elements of a preference. They assert that the Complaint is merely boilerplate and provides only minimal factual information regarding the alleged Transfers.

In response, the Debtors contend that they have asserted sufficient non-conclusory facts to adequately plead a claim under section 547. Specifically, the Debtors argue that the exhibits attached to the Complaint contain sufficient facts about the alleged Transfers to satisfy the traditional elements of a preference claim.

The traditional elements of an avoidable preference claim as stated in section 547(b) allow a debtor to avoid a transfer of property of the debtor:

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made on or within 90 days before the date of filing the petition; . . . and

(5) that enables such creditor to receive more than such creditor would receive if

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent provided by the provisions of this title.^[23]

To survive a motion to dismiss, a claim for a preferential transfer under section 547 must include the following information: "(a) an identification of the nature and amount of each antecedent debt and (b) an identification of each alleged preference transfer by (i) date [of the transfer], (ii) name of debtor/transferor, (iii) name of transferee and (iv) the amount of the transfer."^[24]

In this case, the Court concludes that the Debtors have alleged all the traditional elements of a voidable preference action. The exhibits attached to the Complaint allege sufficient facts to support the Debtors' claim because they state (1) the applicable payment date and amount, (2) the invoice number, date, and amount to which such payment relates, (3) the Defendant receiving the payment, and (4) the Debtor making the payment.^[25]Thus, the exhibits give enough factual detail that the Defendants have notice of the Transfers alleged to be avoidable preferences and the antecedent debt they pay.

Finally, the Court concludes that the Complaint adequately alleges that the Defendants received more than they would have in a hypothetical chapter 7 case because it alleges that the Debtors have filed a proposed plan of liquidation that will not provide for payment in full of general unsecured claims.^[26]

Consequently, the Court concludes that the Debtors have stated a factually plausible claim that satisfies the traditional elements of an avoidable preference.

2. Additional Due Diligence Requirement

The Defendants argue, however, that the recent amendment to section 547(b)^[27] creates a new element in a preference claim which requires that the Debtors make additional factual allegations in their Complaint, namely that the complaint is based on "reasonable due diligence in the circumstances of the case and taking into account a party's known or reasonably knowable affirmative defenses under subsection (c)."^[28] The Defendants assert that the Complaint's threadbare statement that the Debtors did an inquiry is insufficient to satisfy that additional element.^[29] Instead, the Defendants contend that the Debtors are required to allege in detail what due diligence efforts they made, including their analysis of the Defendants' affirmative defenses.

The Defendants also contend that the Demand Letters the Debtors sent to the Defendants were boilerplate and did not show what independent analysis of "known or reasonably knowable affirmative defenses" the Debtors conducted.^[30] The Defendants assert that the Debtors have the requisite information in their books and records to evaluate the Defendants' ordinary course of business, new value, and contemporaneous exchange defenses, but the Complaint fails to provide any specific information regarding the Debtors' evaluation of those defenses. Thus, the Defendants argue that the Complaint fails to allege specific factual bases to satisfy the pleading requirements of amended section 547(b) and Rule 8.

In response, the Debtors argue that the amendment to section 547(b) did not create a new...