TAMPA, Fla. — After years of intense research and legal action, a bankruptcy lawsuit jointly litigated by a Shumaker, Loop & Kendrick, LLP team led by partner Steven M. Berman and attorneys from Wilkes & McHugh, P.A. goes to trial before United States Bankruptcy Court Judge Michael G. Williamson beginning on Monday, Sept. 22 at 8:15 am EST.
Potentially at stake: hundreds of millions of dollars of assets that plaintiffs say were fraudulently transferred in a complicated scheme to avoid liabilities from judgments in a series of high-profile wrongful death and negligence lawsuits related to shoddy nursing home care.
The labyrinthine case involves dozens of companies, subsidiaries and assets spread out throughout the U.S., but the core of the litigation involves Trans Healthcare, Inc. (THI), a Maryland-based company founded in 1995 that owned and operated hundreds of nursing homes and assisted living facilities, along with a complex series of subsidiaries and affiliates. By early 2006, the company and subsidiaries had been named as defendants in more than 150 lawsuits in at least 15 states, most of them brought by nursing home residents accusing THI of negligence, neglect and abuse.
According to the plaintiffs’ complaint, with THI facing insolvency, the company and other related parties hatched an unlawful scheme to split up the company to conceal and secret assets in an effort to remove them from the reach of lawful creditors. Those parties include the Chicago-based private equity firm GTCR, ABE Briarwood, Inc., a real estate investment company that owned assets leased to THI, as well as a host of other interrelated businesses.
THI’s valuable assets, employees and companies were transferred to a bundle of companies who still operate at least 75 healthcare facilities around the U.S. Through concealed affiliate relationships, it is likely the successor companies actually operate hundreds of healthcare facilities. THI’s enormous liabilities, meanwhile, were diverted to Fundamental Long Term Care, Inc., a shell company created by a team of lawyers and investors who funneled money through an elderly man who had never even heard of the companies involved, according to the complaint.
As a result of the intentional separation of operating business assets from their corresponding liabilities, several plaintiffs who have successfully sued THI for wrongful death and negligence have been unable to collect the large sums awarded them. In 2013, for example, a Polk County jury awarded Gary Townsend $1.2 billion after his mother, Arlene, died in a THI facility in 2007. She had fallen 17 times due to improper supervision.
The bankruptcy proceeding that will be heard in court Monday began when the shell company created to house THI’s liabilities, Fundamental Long Term Care, was involuntarily petitioned into bankruptcy. Appointed as the Chapter 7 Trustee for the company, Beth Ann Scharrer quickly realized the magnitude of the corporate fraud at stake, and sought assistance from the Tampa office of Shumaker, Loop & Kendrick, LLP.
Shumaker attorney Berman has taken the lead in the case, assisted by attorneys Seth P. Traub, Jaime Austrich and G. Thomas Curran, Jr. Attorneys from Wilkes & McHugh, P.A., meanwhile, are representing those plaintiffs who have successfully sued THI for negligence and wrongful death. The case will be heard in the Tampa Division of the U.S. Bankruptcy Court’s Middle District of Florida; the case number is 8:11-bk-22258-MGW along with related adversary proceeding number 8:13-ap-00893-MGW.
“We have worked around the clock to get to the bottom of what happened,” says Berman. “We’ve combed through literally tens of thousands of documents comprising millions of pages, and have spent more than 90 days on depositions alone, just to learn the truth. Getting to the truth, preventing continuing fraud and compensating nursing home victims in the line with the requirements of the Bankruptcy system is paramount and guides us through this process.” Berman credits a phenomenal team at Shumaker and tremendous legal efforts from Wilkes & McHugh as having allowed the creditors and the Trustee to get to this point and be able to try this case to the Bankruptcy Court.
Berman has focused his practice as a business bankruptcy litigator in representing creditors, distressed debt lenders, trustees, committees and business entities litigating disputes in bankruptcy court. But even with his years of experience, he says he’s never seen a case this complicated and far-reaching: “There’s really no case like this.”
“Shumaker has devoted tremendous resources for us to delve deeply into this matter,” says Berman. If his team recovers no money, the firm will not earn anything from the case. “Without the firm’s support and the commitment of the Trustee, Beth Ann Scharrer, it’s possible that what we’ve now discovered may never have come to light.”
The Tampa trial is scheduled to last a full 12 days. Other litigation related to the case remains pending. Berman challenged the conduct of attorneys in the affair in a proceeding before The Florida Bar; that case will eventually go before the Florida Supreme Court. Another lawsuit, challenging the conduct of attorneys at the global law firm Troutman Sanders, will begin with pretrial conferences scheduled for December.
“There are bad actors out there who are dedicated to committing fraud, and it takes extraordinary effort and tenacity to bring those actions to light,” says Berman. “However long it may take, the system works, and the case we’ll bring forward beginning Monday will show that. It’s not an easy task, but it’s the right thing to do.”
About Shumaker, Loop & Kendrick, LLP
Shumaker, Loop & Kendrick, LLP is a full-service business law firm with more than 235 lawyers, 60 paralegals and 495 employees in five offices: Toledo and Columbus, Ohio; Tampa and Sarasota, Florida; and Charlotte, N.C. In each of its markets, Shumaker is the premier provider of quality legal services to individuals, small businesses, healthcare providers, nonprofits and Fortune 500 and international corporations.