Antitrust Law Daily Wrap Up, ANTITRUST—D. Me.: Bankrupt hospital could not withdraw reference of its adversary proceeding, (Feb 25, 2016)

By Linda O’Brien, J.D., LL.M.

The federal district court in Portland, Maine has declined to withdraw the reference of the adversary proceeding in a bankruptcy case where a debtor hospital claimed that an affiliated health system used its control over the debtor to divert revenue and eliminate the debtor as a competitor, in violation of antitrust law (Parkview Adventist Medical Center v. Central Maine Healthcare Corporation, February 23, 2016, Levy, J.).

In 2008, faith-based community hospital Parkview Adventist Medical Center executed an agreement to join Central Maine Healthcare Corporation (CMHC), a multi-hospital integrated health system. Subsequently, Parkview received loans from and transferred real estate assets to CMHC. In June 2015, Parkview filed a voluntary petition for bankruptcy under Chapter 11 of the bankruptcy code and initiated an adversary proceeding against CMHC. Disputing that CMHC was a priority secured creditor, Parkview sought in its complaint to avoid the transfers to CMHC as fraudulent or preferred transfers, to recharacterize its debt obligation to CMHC, and to obtain a judgment that CMHC violated federal and state antitrust laws.

Before the court was Parkview’s motion to withdraw the reference of the adversary proceeding.

Federal law prong. The court determined that Parkview failed to demonstrate that “substantial and material consideration” of the Sherman Act would be required to resolve the adversary proceeding. Parkview alleged that CMHC sought to acquire ownership and obtained de facto control of Parkview in order to divert patients and attendant revenue from Parkview to CMHC’s facilities and eliminate Parkview as a competitor in the Maine mid-coast region. The court noted that, although the issues of relevant product and geographic market area and whether the relationship between Parkview and CMHC unreasonably restrained competition may be complex, they relate to factual determinations and the application of long established antitrust principles.

For cause prong. Furthermore, the interests of judicial economy and an expeditious bankruptcy process were best achieved by not withdrawing the adversary proceeding. According to the court, the bankruptcy court should continue to manage the adversary proceeding, along with the bankruptcy case, and would promptly decide a partial motion to dismiss, which had been fully briefed and was ready for decision. Finally, the court would benefit from the bankruptcy judge’s initial assessment of the question of core versus noncore claims.

The case is No. 2:15-mc-00304-JDL.

Attorneys: David C. Johnson (Marcus, Clegg & Mistretta, P.A.) for Parkview Adventist Medical Center. Amy P. Dieterich (Skelton, Taintor & Abbott) and Jeremy R. Fischer (Drummond Woodsum) for Central Maine Healthcare Corp., Central Maine Medical Center, and Bridgton Hospital.

Companies: Parkview Adventist Medical Center; Central Maine Healthcare Corp.; Central Maine Medical Center; Central Maine Medical Center; Bridgton Hospital

Cases: Antitrust MaineNews