Case 21-03426 Document 1 Filed in TXSB on 05/17/21 Page 1 of 10
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`IN THE UNITED STATES BANKRUPTCY COURT
`FOR THE SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
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`Debtor.
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`In re:
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`PROVIDENCE HOSPITAL OF NORTH
`HOUSTON LLC,
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`ALLISON D. BYMAN,
`CHAPTER 7 TRUSTEE,
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`Plaintiff,
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`v.
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`DOCTORS HOSPITAL 1997 LP D/B/A
`UNITED MEMORIAL MEDICAL CENTER,
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`Defendant.
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`Case No. 20-34238
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`Chapter 7
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`Adv. Pro. No. _____________ ____
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`ORIGINAL COMPLAINT
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`Plaintiff Allison D. Byman, in her capacity as the Chapter 7 Trustee of the above-
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`referenced case (“Plaintiff” or the “Trustee”), by and through the undersigned counsel, hereby files
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`this Original Complaint (the “Complaint”) against Defendant Doctors Hospital 1997 LP d/b/a
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`United Memorial Medical Center (“Defendant” or “UMMC”) for breach of contract and
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`declaratory judgment, and would respectfully show the Court as follows:
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`I.
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`INTRODUCTION
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`1.
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`This Adversary Proceeding is brought to obtain turnover of payments that UMMC
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`owes to Debtor Providence Hospital of North Houston LLC (“Providence” or the “Debtor”) under
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`a Memorandum of Understanding (the “MOU”) and Bill of Sale (the “Bill of Sale”) (the MOU
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`and Bill of Sale are collectively, the “Contracts”) for UMMC to purchase the Debtor’s hospital
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`and operations. Under these Contracts, UMMC agreed to assume responsibility for the hospital
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`operations and staff of the Debtor in exchange for an initial deposit of $1.5 million, which was to
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`be paid in three equal installment payments, and payment of all debts and liabilities incurred by its
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`operations on and after September 1, 2019.
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`2.
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`After the Debtor transferred its operations to UMMC, UMMC failed to make the
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`final $500,000 installment payment for the $1.5 million deposit and failed to reimburse the Debtor
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`for numerous operating expenses totaling $971,328.06.
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`3.
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`The Trustee seeks a judgment from this Court that finds (a) UMMC materially
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`breached the Contracts, (b) UMMC is subject to all terms and conditions of the Contracts, and (c)
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`pursuant to the Contracts, UMMC must make the final $500,000 installment payment for the $1.5
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`million deposit and reimburse the Debtor for unpaid operating expenses totaling $971,328.06.
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`4.
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`The Trustee further seeks an award of all attorneys’ fees and costs incurred in
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`enforcing the terms of the Contracts and obtaining turnover of the above-referenced damages
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`pursuant to the terms of the Contracts and Section 38.001 of the Texas Civil Practices and
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`Remedies Code.
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`II.
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`JURISDICTION AND VENUE
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`5.
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`The Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on
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`August 22, 2020 (the “Petition Date”).
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`6.
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`The Debtor is the debtor in the above-captioned Chapter 7 proceeding In re
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`Providence Hospital of North Houston LLC, Case No. 20-34238 (the “Case”), pending in the
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`United States Bankruptcy Court for the Southern District of Texas, Houston Division (the
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`“Court”).
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`Case 21-03426 Document 1 Filed in TXSB on 05/17/21 Page 3 of 10
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`7.
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`This Court has jurisdiction over the Case and this Complaint pursuant to 28 U.S.C.
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`§§ 157(a) and 1334(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (E), & (O).
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`8.
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`Jurisdiction to grant the relief requested herein exists pursuant to 28 U.S.C. §§ 2201
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`and 2202, 11 U.S.C. §§ 105 and 542, and Fed. R. Bankr. P. 7001(1) and 7001(9).
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`9.
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`Venue of the Case and this Adversary Proceeding in this district is proper under 28
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`U.S.C. §§ 1408 and 1409.
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`III.
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`PARTIES
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`10.
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`Plaintiff Allison D. Byman was appointed as the Chapter 7 Trustee for the Debtor’s
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`estate in this Case on September 22, 2020.
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`11.
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`Defendant Doctors Hospital 1997 LP d/b/a United Memorial Medical Center is a
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`limited partnership organized and existing under the laws of the State of Texas with its principal
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`place of business in Houston, Texas. UMMC may be served through its registered agent,
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`Ravishanker Mallapuram, 510 W. Tidwell Road, Houston, Texas 77091.
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`A.
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`The Contracts.
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`IV.
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`BACKGROUND
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`12.
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`The Debtor and UMMC entered into the MOU on August 16, 2019. The MOU
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`provided the terms for a proposed purchase agreement of the Debtor’s assets and operations in a
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`medical facility located at 16750 Red Oak Drive, Houston, TX 77090.
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`13.
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`The MOU states, in relevant part:
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`UMMC shall deposit to Providence Hospital the amount of one million five
`hundred thousand dollars and zero cents ($1,500,000) (“The Deposit”). The parties
`agree that UMMC will maintain full management authority of Providence Hospital
`during the Pre-Closing Period. The Deposit shall be paid in three equal payments
`with the first payment due upon signing and the second payment due on or before
`the effective date of the Pre-Closing Period and the final payment within 30 days.
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`MOU at § 2.
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`14.
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`The MOU further provides, in relevant part:
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`UMMC is liable for all operating expenses of the business, including but not limited
`to salaries, leases, loans, software, supply, insurance and all other expenses required
`for successful operation. UMMC shall execute a lease/sublease at all Locations
`where hospital operates. . . . UMMC will be responsible for all debts and liabilities
`incurred by its operations beginning September 1, 2019 during the Pre-Closing
`Period and will retain all accounts receivable and revenues earned for services
`provided during the Pre-Closing Period until the termination of this Agreement.
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`MOU at § 3.
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`15.
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`Lastly, the MOU provides, in relevant part:
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`In the event that UMMC’s breach of this Agreement leads to the termination of
`this Agreement, UMMC shall be liable for all direct and indirect damages flowing
`from UMMC’s breach, including but not limited to consequential damages, lost
`profits, recovery for any diminution in the enterprise value of Providence Hospital,
`and all attorney’s fees, expenses and costs necessary to enforce Providence
`Hospital’s rights under this Agreement. Notwithstanding the foregoing, in the
`event UMMC breaches this Agreement, Providence Hospital shall have all
`remedies available at law and equity under the controlling law. UMMC shall have
`10 days after it receives notice from Providence Hospital to cure the breach.
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`MOU at § 14.
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`16.
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`The Debtor and UMMC executed the Bill of Sale on September 1, 2019. The Bill
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`of Sale provides that “the MOU defines the purchase terms due to” the Debtor. Bill of Sale at § 4.
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`17.
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`The effective date of the contractual obligations described in the MOU was
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`September 1, 2019—the date the Bill of Sale was executed by the parties. Accordingly, the first
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`payment was due when the MOU was signed on August 16, 2019, the second payment was due on
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`or before September 1, 2019, and the final payment was due on October 1, 2019.
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`18.
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`The Debtor received the first $500,000 installment on August 16, 2019. For the
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`second $500,000 installment, the Debtor directed UMMC to make that payment directly to its
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`affiliate, 1960 Physicians Associates, for payroll costs to which UMMC complied.
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`B.
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`The Operating Expenses.
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`19.
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`The Debtor filed its voluntary Chapter 7 case on the Petition Date. In the Debtor’s
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`Schedule A/B, it listed accounts receivable from UMMC as an asset in the amount of
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`$1,053,538.00, and Debtor provided a breakdown of the accounts receivable under Exhibit A/B
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`#11b. See Dkt. No. 1 at 10. The Debtor identified $553,536.02 that was due and owing from
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`UMMC for reimbursement of various operating expenses and also scheduled the outstanding
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`$500,000 final installment payment for the deposit under the MOU. See id.
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`20.
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`On October 14, 2020, the Trustee sent UMMC informal discovery requests seeking
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`evidence that UMMC had paid any portion of the $1,053,536.02 identified in the Debtor’s
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`schedules at Exhibit A/B #11b.
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`21.
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`On November 23, 2020, UMMC responded to the Trustee’s requests and stated that
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`it paid a total amount of $1,928,073.66 to the Debtor through 7 wire transfers and 1 check.
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`22.
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`The Trustee reviewed UMMC’s responses, compared them against the Debtor’s
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`books and records, and discussed the UMMC receivables with the Debtor’s accounting
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`department. The payments detailed in UMMC’s responses to the Trustee’s discovery requests were
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`for (i) the first $500,000 payment due under the MOU and (ii) payroll, employee benefits, rent,
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`and other operating expenses that were UMMC’s responsibility under the MOU. Based on the
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`Trustee’s investigation, none of the receivables listed on Exhibit A/B #11b of the Debtor’s
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`schedules have been paid by UMMC.
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`23.
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`Further, the Trustee identified additional operating expenses beyond those
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`identified in the Debtor’s schedules that are the responsibility of UMMC under the MOU.
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`24.
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`On March 26, 2021, counsel for the Trustee sent a notice of default and demand for
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`payment letter to UMMC in compliance with paragraph 14 of the MOU (the “Demand Letter”).
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`The Demand Letter included a full accounting that detailed all of the outstanding operating
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`expenses that UMMC owed to the Debtor as of the Petition Date, which totals $971,328.06.
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`C.
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`UMMC Materially Breached the Contracts.
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`25.
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`UMMC failed to cure the breaches identified above or respond to the Demand
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`Letter within 10 days of its receipt of the Demand Letter or prior to the filing of this Adversary
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`Proceeding.
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`26.
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`UMMC’s failure to make the final $500,000 installment payment for the deposit to
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`the Debtor by October 1, 2019 was a material breach of the Contracts.
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`27.
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`UMMC’s failure to reimburse the Debtor for the $971,328.06 in operating expenses
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`is also a material breach of the Contracts.
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`28.
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`Pursuant to paragraph 14 of the MOU, the Trustee is entitled to recover not only
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`the amount due under the Contracts, but also court costs, attorneys’ fees, interest, and other
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`expenses resulting from UMMC’s failure to cure its default within 10 days of the notice of default
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`in the Demand Letter.
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`V.
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`A.
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`Count 1 – Breach of Contract
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`CAUSES OF ACTION
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`The Trustee incorporates by reference each of the allegations contained in
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`29.
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`Paragraphs 1 through 28, above as if fully set forth herein.
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`30.
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`The Debtor and UMMC entered into the Contracts, which were valid and
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`enforceable contracts for the sale of the Debtor’s assets and operations at its medical facility.
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`31.
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`The Debtor fully performed its obligations under the Contracts. All conditions
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`precedent have been performed or have occurred.
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`32.
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`UMMC breached its obligations under the Contracts by failing to comply with
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`sections 2 and 3 of the MOU. More specifically, UMMC’s failure to make the final $500,000
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`installment payment for the deposit on or before October 1, 2019 and failure to reimburse the
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`Debtor for $971,328.06 in operating expenses were material breaches of the Contracts.
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`33.
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`UMMC’s breaches of the Contracts caused damages to the Debtor’s estate in the
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`amount of $1,471,328.06.
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`34.
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`In addition, the Trustee has had to engage the undersigned counsel to pursue
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`payment of UMMC’s obligations under the Contracts. Pursuant to the Contracts and Section
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`38.001 of the Texas Civil Practices & Remedies Code, the Trustee is also entitled to an award of
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`all reasonable and necessary attorneys’ fees and costs incurred due to UMMC’s breaches of the
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`Contracts.
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`B.
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`Count 2 – Declaratory Judgment
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`The Trustee incorporates by reference each of the allegations contained in
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`35.
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`Paragraphs 1 through 28 above as if fully set forth herein.
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`36.
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`Pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, “[i]n a case
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`of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of
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`an appropriate pleading, may declare the rights and other legal relations of any interested party
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`seeking such declaration, whether or not further relief is or could be sought. Any such declaration
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`shall have the force and effect of a final judgment or decree and shall be reviewable as such.”
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`37.
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`Upon information and belief, UMMC disputes whether it has materially breached
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`the Contracts.
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`38.
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`Based on the foregoing, an actual controversy exists under 28 U.S.C. § 2201.
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`39.
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`The Trustee is therefore entitled to a declaratory judgment of the rights and other
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`legal relations as between the Debtor’s estate and UMMC.
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`40.
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`The Trustee seeks an Order of the Court declaring as follows:
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`a.
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`b.
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`c.
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`d.
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`e.
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`The Contracts required UMMC to pay the Debtor a total purchase price of
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`$1,500,000 on or before October 1, 2019;
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`The Contracts required UMMC to pay for all debts and liabilities incurred
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`by its operations on and after September 1, 2019;
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`UMMC materially breached the Contracts by failing to make the final
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`$500,000 installment payment for the $1.5 million deposit under the MOU;
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`UMMC materially breached the Contracts by failing to reimburse the
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`Debtor for numerous operating expenses totaling $971,328.06;
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`Pursuant to the Contracts, UMMC’s breaches of the Contracts entitles the
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`Trustee to recover “all attorney’s fees, expenses and costs necessary to
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`enforce Providence Hospital’s rights” under the Contracts.
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`41.
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`A declaration as to the above-listed matters will put an end to the controversy.
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`Accordingly, the controversy is ripe for determination.
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`VI. RELIEF REQUESTED
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`WHEREFORE, the Trustee respectfully requests:
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`i.
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`Entry of a judgment against UMMC on all claims, respectively, finding and
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`declaring that:
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`(a) UMMC materially breached the Contracts by failing to make the final
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`$500,000 installment payment for the $1.5 million deposit under the MOU;
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`(b) UMMC materially breached the Contracts by failing to reimburse the
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`Debtor for numerous operating expenses totaling $971,328.06;
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`(c)
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`Pursuant to the Contracts, UMMC must make the final $500,000 installment
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`payment for the $1.5 million deposit and reimburse the Debtor for unpaid operating
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`expenses totaling $971,328.06; and
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`(d)
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`Pursuant to the Contracts, UMMC’s breach of the Contracts entitles the
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`Trustee to an award of “all attorney’s fees, expenses and costs necessary to enforce
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`Providence Hospital’s rights” under the Contracts, and also pursuant to Texas Civil
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`Practice & Remedies Code § 38.001;
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`ii.
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`An award of damages and order to turn over $1,471,328.06 to the Trustee, plus all
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`reasonable and necessary attorneys’ fees as permitted under the Contracts and
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`applicable law; and
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`iii.
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`Such other relief as the Court may deem just and proper.
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`HUSCH BLACKWELL LLP
`111 Congress Avenue, Suite 1400
`Austin, Texas 78701
`(512) 472-5456
`(512) 479-1101 (fax)
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`Dated: May 17, 2021
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`By: /s/ Jameson J. Watts
`Jameson J. Watts
`Texas Bar No. 24079552
`jameson.watts@huschblackwell.com
`Lynn H. Butler
`Texas Bar No. 03527350
`lynn.butler@huschblackwell.com
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`-And-
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`Case 21-03426 Document 1 Filed in TXSB on 05/17/21 Page 10 of 10
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`HUSCH BLACKWELL LLP
`600 Travis St., Suite 2350
`Houston, Texas 77002
`713-647-6800
`713-647-6884 (fax)
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`Timothy A. Million
`State Bar No. 24051055
`tim.million@huschblackwell.com
`Randall A. Rios
`State Bar No. 16935865
`randy.rios@huschblackwell.com
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`COUNSEL FOR PLAINTIFF ALLISON D.
`BYMAN, CHAPTER 7 TRUSTEE
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