Alberts, Trustee v. Galen Hospital Illinois, Inc. et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
GREATER SOUTHEAST COMMUNITY
HOSPITAL CORP. I, et al.,
Debtors.
____________________________
SAM J. ALBERTS, TRUSTEE FOR
THE DCHC LIQUIDATING TRUST,
Plaintiff,
v.
HCA INC., et al.,
Defendants.
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Case No. 02-02250
(Chapter 11)
(Jointly Administered)
Adversary Proceeding No.
04-10366
MEMORANDUM DECISION REGARDING MOTION FOR SUMMARY JUDGMENT
HCA Inc. (“HCA”) and Galen Hospital Illinois, Inc. (“GHI,”
and collectively the “Defendants”) seek summary judgment against
the plaintiff Sam J. Alberts, trustee for the DCHC Liquidating
Trust (the “Trust”), with respect to Counts III and IV of his
Second Amended Complaint (D.E. No. 56, filed July 21, 2005) (the
The decision below is hereby signed. Dated: January
2, 2007.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 	On August 29, 2006, Alberts requested leave to file a
third amended complaint adding Western Plains Capital, Inc.
(“Western”) as a defendant and adding language regarding certain
“Obligations” incurred by Michael Reese in connection with its
allegedly fraudulent transfers. 	The court granted this request
in part by permitting Alberts to add Western as a defendant in a
decision and accompanying order entered on October 12, 2006. 	The
balance of Alberts’s request was resolved by a stipulation
entered into between the parties on October 18, 2006. 	HCA and
GHI are the only party defendants seeking summary judgment in the
instant motion, presumably because Western had not yet responded
to the Third Amended Complaint by the date on which the motion
was filed.
2
“Complaint”). 1 	In the Complaint, Alberts seeks to avoid and
recover certain allegedly fraudulent transfers (the “Michael
Reese Transfers”) from Michael Reese Medical Center Corporation
(“Michael Reese”), as well as other debtors in these jointly
administered bankruptcy cases (collectively the “Debtors”), to
the Defendants. 	Alberts asserts that he is entitled to avoid and
recover the Michael Reese Transfers under the Illinois Uniform
Fraudulent Transfer Act, 740 Ill. Comp. Stat. 160/1 et seq.
(1990) (the “IUFTA”), pursuant to 11 U.S.C. § 544.
The Defendants argue that there is no genuine factual
dispute that the Michael Reese Transfers were made in exchange
for reasonably equivalent value, which Alberts must disprove to
succeed under Counts III and IV of his complaint. 	They seek
summary judgment as a consequence. 	For the reasons that follow,
the court will grant in part and deny in part the Defendants’
motion and grant summary judgment in favor of Alberts sua sponte
on one discrete issue.
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2 	The facts set forth above are deemed to be admitted
pursuant to this court’s memorandum decision entered on December
6, 2006.
3
I
The following facts are undisputed. 2 	Michael Reese was
formed as a wholly-owned subsidiary of Doctors Community Hospital
Corporation (“DCHC”), a privately-held healthcare management
company organized under the laws of Delaware. 	On July 8, 1998,
Michael Reese entered into an asset purchase agreement (the
“APA”) with GHI, a corporate subsidiary of fellow defendant HCA,
for the purchase of Columbia Michael Reese Hospital and Medical
Center (“Michael Reese Hospital”). 	Also on July 8, 1998, Grant
Hospital Corporation, another subsidiary of DCHC, signed a
separate asset purchase agreement with Columbia Grant Hospital
Inc. for the purchase of Grant Hospital. 	On November 9, 1998,
the parties signed the “Sixth Amendment” to the APA--the last
such document signed prior to the purchase of the hospital. 	The
sale of both hospitals closed on November 12, 1998.
Michael Reese and its affiliated Debtors filed for chapter
11 relief on November 20, 2002. 	After protracted proceedings
lasting almost 18 months, the Debtors achieved confirmation of
their second amended plan of reorganization (the “Plan”) on April
5, 2004, and their operations were taken over by entities known
as the “Reorganized Debtors.” 	Section 6.6 of the Plan provides
for the creation of the Trust, which is charged with liquidating
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3 Section 6.6(a) of the Plan specifies that the Trust “shall
be for the benefit of the holders of the NCFE Claim, Allowed
General Unsecured Claims and Allowed Patient Refund Claims.”
Other creditors’ claims were discharged by the Plan (e.g., if no
timely claim was filed) or assumed by the Reorganized Debtors (as
in the case of allowed medical malpractice claims). 	(See
generally Plan Art. IV).
4 	The Defendants’ motion to dismiss the original complaint
was denied without prejudice in an order entered March 31, 2005.
4
certain assets of the Debtors and distributing the proceeds to
certain classes of creditors (including certain unsecured
creditors). 3 	Among the assets transferred to the Trust were
fraudulent conveyance and other actions authorized under chapter
5 of the Bankruptcy Code.
Alberts initiated the instant adversary proceeding on
November 18, 2004. 	After Alberts filed an amended complaint
(while at the same time opposing the Defendants’ motion to
dismiss the original complaint), 4 the Defendants filed a second
motion to dismiss. 	The court denied the second motion to
dismiss, but ordered Alberts to file a second amended complaint
alleging facts that would justify his “lumping” together of the
debtors in his complaint or specify which of the debtors
consummated the allegedly fraudulent conveyance.
Alberts amended his complaint again on July 21, 2005, and
moved for partial summary judgment on March 9, 2006. 	The
Defendants filed an initial opposition to this motion under Fed.
R. Civ. P. 56(f) and then filed a supplemental opposition, which
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5 	The court ultimately denied Alberts’s motion to strike,
but did award him attorneys’ fees and costs for expenses incurred
in drafting and prosecuting the motion.
6 	The court did not determine whether additional transfers
totaling $5,571,381.00 were made as alleged by Alberts. 	(Order
at 2 (D.E. No. 155, entered June 2, 2006)). 	The existence of
those transfers is one of the issues before the court as part of
the instant motion.
5
Alberts moved to strike. 5
The parties appeared before the court on April 4, 2006, for
a hearing on Alberts’s motion for partial summary judgment, at
which time the court ruled from the bench that the motion should
be granted in part and denied in part. 	The court subsequently
entered an order reciting that Michael Reese transferred
$66,048,840.00 towards the purchase of Michael Reese Hospital. 6
Alberts filed a motion for partial summary judgment on July
27, 2006, on the discrete issue of whether the Complaint is
barred by the IUFTA’s statute of repose. 	See 740 Ill. Comp.
Stat. § 160/10(a). 	The Defendants responded by filing both an
opposition and a cross-motion for summary judgment. 	The
Defendants filed the instant motion while those motions were
still pending before the court. 	On December 6, 2006, the court
entered a memorandum decision and accompanying order resolving in
part the motion for partial summary judgment filed by Alberts and
the cross-motion for summary judgment filed by the Defendants.
Alberts v. HCA Inc. (In re Greater Southeast Cmty. Hosp. Corp.
I), slip op. (Bankr. D.D.C. Dec. 6, 2006), available at 2006 WL
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6
3519298 (“HCA I”). 	The balance of those motions will be decided
based upon the parties’ responses to an order to show cause also
entered by the court on December 6, 2006.
II
Pursuant to Fed. R. Civ. P. 56 (as incorporated by Fed. R.
Bankr. P. 7056), summary judgment will be granted where “there is
no genuine issue as to the material fact and the . . . moving
party is entitled to judgment as a matter of law.” 	Fed. R. Civ.
P. 56©. 	The court must deny summary judgment where there is a
genuine issue as to any material fact. 	Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986). 	If the movant makes a
properly supported motion, the burden shifts to the opposing
party to demonstrate specific facts showing that there is a
genuine issue for trial. 	Id.
If the moving party does not bear the burden of proof at
trial on an issue, summary judgment may be granted if the moving
party shows “that there is an absence of evidence to support the
nonmoving party’s case.” 	Celotex Corp. v. Catrett, 477 U.S. 317,
325 (1986). 	When a movant points to such a lack of evidence, the
non-moving party must come forward with evidence that supports
its case. 	Id. 	The court must view the opposing party’s evidence
in the light most favorable to non-movant’s position and draw
inferences in favor of that party, provided such inferences are
justifiable or reasonable. 	Matsushita Elec. Indus. Co., Inc. v.
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7
Zenith Radio Corp., 475 U.S. 574, 587-88 (1986).
The only issue presented by the instant motion is whether
Michael Reese received reasonably equivalent value as
contemplated by the IUFTA for its transfers to the Defendants.
“What constitutes ‘reasonably equivalent value’ for purposes of
the [IUFTA] has not been defined by Illinois case law,” Helms v.
Roti (In re Roti), 271 B.R. 281, 303 (Bankr. N.D. Ill. 2002).
Consequently, “[r]easonably equivalent value is interpreted the
same way under both [11 U.S.C.] § 548 and the [IUFTA] because the
term, as used in the [IUFTA], is derived from § 548(a)(2).”
Official Comm. of Unsecured Creditors of Crystal Med. Products,
Inc. v. Pedersen & Houpt (In re Crystal Med. Products, Inc.), 240
B.R. 290, 300 (Bankr. N.D. Ill. 1990).
“The test used to determine reasonably equivalent value in
the context of a fraudulent conveyance [as contemplated by § 548]
requires the court to determine the value of what was transferred
and to compare it to what was received.” 	Barber v. Golden Seed
Co., Inc., 129 F.3d 382, 387 (7th Cir. 1997). 	In addition to
comparing the fair market value of the challenged transfer
against the fair market value of the consideration received in
exchange for the transfer, courts determine whether these values
are reasonably equivalent by looking for “the existence of an
arm’s-length relationship between the debtor and the transferee”
and good faith on the part of the transferee. 	Mellon Bank, N.A.
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7 	Alberts argues that the arm’s-length nature of the
parties’ transaction is immaterial or, at most, minimally
relevant in considering whether Michael Reese received reasonably
equivalent value for the Michael Reese Transfers. 	(Pl. Opp’n
¶¶ 55, 57 (D.E. No. 315, filed November 27, 2006)). 	The court
agrees that this fact is not dispositive by itself, but it is one
factor to be considered in assessing the totality of the
circumstances surrounding the transaction in question.
8
v. Official Comm. of Unsecured Creditors (In re R.M.L., Inc.), 92
F.3d 139, 149 (3d Cir. 1996). 	The issue “must be evaluated as of
the date of the transaction.” 	Daley v. Chang (In re Joy Recovery
Tech. Corp.), 286 B.R. 54, 75 (Bankr. N.D. Ill. 2002). 7
A. 	Value of the Michael Reese Transfers
The court fixed in part the value of the Michael Reese
Transfers in its June 2, 2006 order. 	In that order, the court
ruled that there was no genuine dispute of material fact that
Alberts transferred $66,048,840.00 of the $71,620,221.00 listed
as the closing price for the purchase of Michael Reese Hospital.
(Order at 2). 	The court reserved judgment on the balance of the
closing price--$2,000,000.00 allegedly paid by Michael Reese in
consideration for the delay in the closing date, and
$3,571,381.00 allegedly paid in connection with certain Medicare
receivables--for trial. 	(Order at 2).
Notwithstanding the court’s prior order, the Defendants not
only seek summary judgment with respect to the transferred
amounts not decided in the court’s June 2, 2006 order, but also
seek to re-argue the value of the other transfers made by
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9
Alberts. 	The court considers their arguments first with respect
to the value of the transfers already decided by the court, and
then with respect to the value of the transfers yet to be
decided.
1. 	Law of the case
The Defendants argue that “the parties and the [c]ourt agree
that [Michael] Reese Corporation transferred to defendant GHI no
more than the $71,620,221 purchase price set forth on the Michael
Reese Hospital Closing Statement, dated November 12, 1998.”
(Def. Mem. at 8 (D.E. No. 263, filed November 6, 2006)) (emphasis
added). 	As the Defendants are fully aware, the court did not
rule only that the purchase price set forth in the November 12,
1998 closing statement was the uppermost limit for the value of
the Michael Reese Transfers. 	Rather, it concluded that with the
exception of the amounts explicitly carved out of the purchase
price by the court (i.e., the $2,000,000.00 allegedly paid in
consideration for the delay in closing and the $3,571,381.00
allegedly paid in connection with Medicare receivables), that
purchase price constituted the actual value of the transfers.
Blithely ignoring the court’s June 2, 2006 order, the
Defendants now seek to carve out additional items from the
purchase price. 	The court’s ruling is clear from both the June
2, 2006 order and the court’s oral decision announced from the
bench on April 4, 2006. 	The June 2, 2006 order states:
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10
1. 	Plaintiff 	is 	entitled 	to 	judgment 	as 	a
matter of law on the following issues:
. . .
b. 	GHI received the following transfers
for the purposes of Bankruptcy Code
sections 544 and 550 and applicable
state 	law: 	$66,048,840.00, 	which
amount 	comprises 	a 	$71,620,221.00
purchase 	price 	provided 	under 	a
certain 	Closing 	Statement 	dated
November 	12, 	1998, 	less 	the
following amounts still in dispute:
(I) 	$2,000,000 	relating 	to 	an
alleged 	delay 	in 	the 	sale 	closing
date, and (ii) $3,571,381.00 related
to certain Medicare receivables.
(Order at 2) (emphasis added). 	The court’s oral decision was
equally specific and unambiguous:
The [c]ourt will grant in part the
Trustee/Plaintiff’s motion for partial
summary judgment and deny that motion in
part.
The Trustee seeks partial summary judgment as
to four elements of his claim that there was
a fraudulent conveyance in this case. 	The
first element is that there was a transfer in
exchange for the purchase by the Debtor,
Michael Reese . . ., of $72,198,693.22, in
exchange for the purchase of Michael Reese
Hospital and related assets. 	The court will
grant the Trustee partial summary judgment as
to part of that $72 million.
. . .
There is a genuine dispute regarding whether
that purchase price [i.e., the $72,198,693.22
set forth above] ought to be reduced with
respect to certain Medicare receivables that
had belonged to the seller, one of the
Defendants in this proceeding, Galen Hospital
Illinois, Inc. . . . The question is whether
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11
the purchase price ought to be reduced to
reflect that one of the credits towards the
purchase price listed on the closing
statement was the $3,571,281.00 amount of
Medicare receivables for which Michael Reese
was acting as Galen’s collection
agent. . . . [T]he court agrees with the
Defendants that the $71,620,221.00 purchase
price ought to be reduced by $3,571,281.00 in
granting partial summary judgment to the
Trustee as to what the Trustee has
successfully showed was transferred.
. . .
The third issue, third item, was a $2 million
item for a delay in closing. . . . I don’t
think the record is sufficiently developed
for the [c]ourt to feel fully confident that
this $2 million for the delay in closing
should be treated as an element of a transfer
by Michael Reese for the assets it was
acquiring as opposed to simply consideration
for the delay in closing the
transaction. . . . So I’ll deny it without
prejudice to renewal. 	Deny motion for
partial summary judgment as to that portion
of the purchase price, without prejudice to
renewal.
So those are the adjustments to the purchase
price and how the [c]ourt resolves them.
(Apr. 4, 2006 Hr’g Tr. at 138:4-15, 19-23, 139:2-7, 18-22, 143:5-
6, 18-23, 144:1-5 (D.E. No. 145, filed May 12, 2006)) (emphasis
added).
The court further clarified the nature of its ruling in a
later colloquy with counsel for both sides and Alberts himself:
MR. LAU: 	Could you clarify? 	We don’t quite
understand how you want that adjusted, Your
Honor.
THE COURT: 	Well, I’m going to grant partial
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12
summary judgment that there was a transfer of
[$]71,620,221 less the amount that was
charged for the delay in closing.
MR. ALBERTS: 	But that issue hasn’t been
dispositively decided in their favor. 	It’s
just an issue--
THE COURT: 	You’re not being granted partial
summary judgment on it.
MR. ALBERTS: 	On that point. 	It’s not that
they’re being granted summary judgment on
that point.
THE COURT: 	No, I haven’t granted them
summary judgment on that.
. . .
MR. KILDUFF: 	Your Honor, what do you want
to do with the Medicare receivables issue?
I’m not sure where that falls in the proposed
order. 	That’s the 3.6 and the working
capital issue.
THE COURT: 	Oh, yes. 	That’s another
adjustment to the purchase price. 	I’m sorry.
You’re right. 	I just was forgetting it. 	I
overlooked it. 	So that’s another reduction
to the purchase price that the Plaintiff is
not entitled to partial summary judgment on
at this stage.
(Apr. 4, 2006 Hr’g Tr. at 157:5-17, 158:13-21) (emphasis added).
When a court grants summary judgment on a particular factual
issue, its ruling constitutes the law of the case with respect to
that issue. 	See Thorne v. Alexander, 782 F. Supp. 677, 681
(D.D.C. 1992) (refusing to “tolerate any attempts to relitigate
allegations” already decided in prior motion for summary
judgment). 	“Under this doctrine, when the same issue is
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8 	“Reconsideration of the law of the case is appropriate
where there are ‘unusual’ circumstances, ‘extraordinary’
circumstances, ‘exceptional’ circumstances, to prevent a ‘grave
injustice,’ and the like.” 	Pogue, 238 F. Supp. 2d at 262.
Needless to say, the Defendants have not suggested that there are
any “extraordinary” or “exceptional” circumstances present with
respect to this issue.
13
presented to the same court, in the same case, the results should
be the same.” 	Feirson v. District of Columbia, 362 F. Supp. 2d
244, 247 (D.D.C. 2005). 	“The law of the case applies even to a
non-final, non-appealable decision; it seeks ‘to minimize
expenditure of judicial resources and energy on matters already
decided,’ and is triggered by a final decision on a particular
issue.” 	United States ex rel. Pogue v. Diabetes Treatment
Centers of Am., Inc., 238 F. Supp. 2d 258, 262 (D.D.C. 2002)
(quoting United States v. Eilberg, 553 F. Supp. 1, 4 (D.D.C.
1981)). 8
The court’s oral decision rendered on April 4, 2006, and the
order memorializing that decision entered on June 2, 2006,
established the minimum value of the Michael Reese Transfers as
$66,048,840.00. 	To the extent that the Defendants disagreed with
that holding, they could have (1) filed a motion for leave to
file interlocutory appeal, (2) filed a motion for reconsideration
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9 	The only novel argument raised by the Defendants in
connection with the value of the Michael Reese Transfers is their
argument that DCHC re-allocated a portion of the closing price
for the purchase of Grant Hospital to the closing price on the
purchase of Michael Reese Hospital for unknown reasons. 	(Def.
Mem. at 9-11). 	Theoretically, the Defendants could still file a
motion for partial reconsideration with respect to that argument
(an argument that could lead to a $5,000,000.00 deduction from
the value ascribed to the Michael Reese Transfers), but they
would need to demonstrate that (1) the evidence in support of
this argument was not available to the Defendants when the court
issued its oral decision and entered the order memorializing that
decision, and (2) there is good cause for the apparent seven-
month delay in the presentation of that evidence to the court.
10 	The closest that the Defendants come to actually
addressing the court’s April 4, 2006 oral decision and June 2,
2006 order is when they argue that the value of the Michael Reese
Transfers should be reduced by a subsequent refund sent to
Michael Reese based on an accounting reconciliation performed by
PriceWaterhouseCoopers pursuant to §§ 2.07 and 2.08 of the APA
(the “Final Purchase Price Adjustment”). 	In raising this
argument, the Defendants acknowledge that the court previously
held that the Final Purchase Price Adjustment could not be
included in assessing the value of the Michael Reese Transfers.
(Def. Mem. at 13). 	The court’s ruling that the Final Purchase
Price Adjustment should not be included in assessing the value of
the Michael Reese Transfers is law of the case and, more
importantly, remains the right conclusion in this court’s view.
14
with this court, 9 or (3) requested reconsideration of the court’s
prior order as part of the instant motion. 	The one thing that
they should not have done is the exact thing that they did:
namely, pretend that the June 2, 2006 order says something that
it does not and ignore the court’s rulings from the bench on
April 4, 2006. 	Summary judgment with respect to the minimum
value of the Michael Reese Transfers is denied based on the law
of the case as set forth in the court’s April 4, 2006 oral
decision and June 2, 2006 order. 10
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Upon further review, however, the court has serious doubts
as to whether the Final Purchase Price Adjustment should be an
issue reserved for damages as stated in the court’s decision.
(Apr. 4, 2006 Hr’g Tr. at 141:5-142:2). 	As the court observed
earlier in that same decision:
It 	seems 	to 	me 	what 	this 	[i.e., 	the 	Final
Purchase 	Price 	Adjustment] 	really 	can 	be
viewed 	as 	is 	an 	element 	of 	what 	the 	Michael
Reese 	entity 	was 	purchasing 	when 	it 	went 	to
closing. 	It was purchasing the right to have
a 	refund 	of 	the 	purchase 	price 	to 	the 	extent
that 	there 	was 	this 	later 	audit 	to 	determine
what adjustments ought to be made in light of
better information at a later date. 	This goes
to the valuation question of what the [d]ebtor
Michael Reese received, namely, an obligation
for 	the 	seller 	to 	make 	a 	payment 	back 	to
Michael 	Reese 	to 	the 	extent 	that 	a 	fuller
evaluation 	of 	what 	was 	being 	exchanged
permitted an adjustment of the purchase price.
(Apr. 4, 2006 Hr’g Tr. at 141:15-25).
If the court does not consider the Final Purchase Price
Adjustment as part of the value transferred to Michael Reese, it
may conclude that the discrepancy between the value transferred
by Michael Reese and the value received by Michael Reese is so
large that the exchange was not for reasonably equivalent value
when the court would have found the discrepancy so small as to be
a reasonable exchange of value if the Final Purchase Price
Adjustment had been included. 	Even if the Final Purchase Price
Adjustment is applied to the final damages calculation, Alberts
would benefit in that scenario because he would recover a reduced
amount of damages where he would have recovered nothing had the
court considered the adjustment in its initial determination of
reasonably equivalent value.
Through no fault of their own, the parties have not framed
this specific issue in a manner that would permit the court to
decide it one way or the other on the papers before it. 	Instead,
the court will consider the issue at the hearing on any
unresolved portions of this motion currently scheduled for
January 4, 2006. 	The parties should be prepared to address
whether the Final Purchase Price Adjustment is a component of the
value received by Michael Reese or a matter to be reserved for
the damages portion of trial at that time.
15
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2. 	Alleged extension fee
In its prior oral decision, the court opined that it did not
believe that the record was “sufficiently developed for the
[c]ourt to feel fully confident that” $2,000,000.00 transferred
by Michael Reese was “an element of a transfer by Michael Reese
for the assets it was acquiring as opposed to simply
consideration for the delay in closing the transaction.” 	(Apr.
4, 2006 Hr’g Tr. at 143:18-23). 	This analysis requires some
refinement. 	There is no question that Michael Reese transferred
$2,000,000.00 to the Defendants on the closing date. 	The only
question is whether Michael Reese received reasonably equivalent
value in exchange for that transferred amount. 	Consequently, the
court will grant summary judgment to Alberts sua sponte on the
limited factual issue of whether Michael Reese transferred
$2,000,000.00 to the Defendants.
The question of reasonably equivalent value is a more
difficult one. 	The Defendants have produced extrinsic evidence
in the form of a witness declaration and deposition testimony
that the $2,000,000.00 transfer was made in exchange for an
extension of the closing date on the purchase of Michael Reese
Hospital. 	(Gerken Decl. ¶ 11 (D.E. No. 130, filed April 3,
2006); Kilduff Decl. Exs. H, Q, S, U-V (D.E. Nos. 265-67, filed
November 7, 2006)). 	Alberts argues that this evidence cannot be
considered under the parol evidence rule, and submits that the
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11 	Alberts has filed a motion in limine seeking to exclude
certain parol evidence produced by the Defendants. 	The court
will decide that motion in a separate memorandum decision.
17
APA itself does not mention any additional consideration received
by Michael Reese in the form of closing extensions. 	(Pl. Opp’n
¶ 24).
Even if Alberts is right and the parol evidence rule applies
in this case, 11 he will still need to demonstrate that the other
assets transferred by the Defendants to Michael Reese were not
reasonably equivalent to the value transferred by Michael Reese
(i.e., the $66,048,840.00 in transfers established in the court’s
June 2, 2006 order and the $2,000,000.00 at issue here). 	Alberts
has not requested summary judgment on this point, let alone
demonstrated that such relief is warranted.
By the same token, the evidence submitted by the Defendants
(if admissible) establishes only that additional consideration
was provided to Michael Reese for the $2,000,000.00 transfer, not
that the additional consideration constitutes reasonably
equivalent value. 	If Alberts can establish that the rest of the
assets transferred to Michael Reese were not reasonably
equivalent in value to the $66,048,840.00 transferred by Michael
Reese (i.e., the transferred amounts less the $2,000,000.00 at
issue here), it stands to reason that the value of any extension
of time in which to close on that lopsided deal would not be
reasonably equivalent in value to the additional $2,000,000.00
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18
transferred by Michael Reese on November 12, 1998. 	In short, the
issue cannot be resolved on a motion for summary judgment.
3. 	Medicare receivables
The Sixth Amendment to the APA inserted a new section in the
APA (“§ 2.09A”) entitled “Collection Procedures for Medicare
Patient Receivables.” 	(Alberts Decl. at Ex. 16). 	That section
states in pertinent part:
Seller 	[i.e., 	GHI] 	hereby 	appoints 	Buyer
[i.e., 	Michael 	Reese], 	and 	Buyer 	agrees 	to
act, as Seller’s collection agent with respect
to 	the 	Medicare 	Patient 	Receivables 	relating
to the rendering of services and provision of
medicine, 	drugs 	and 	supplies 	by 	Seller
(“Medicare 	Transition 	Services”) 	to 	patients
admitted to the Hospital [i.e., Michael Reese
Hospital] 	on 	or 	before 	the 	Closing 	Date
including 	patients 	who 	are 	not 	discharged
until after the Closing (“Medicare Transition
Patients”).
At 	the 	date 	which 	is 	one 	hundred 	and 	eighty
(180) days from the Closing Date, Seller shall
calculate 	the 	amount 	of 	cash 	receipts 	from
Medicare Patient Receivables actually received
by Seller. 	If such cash receipts, as finally
determined, is not an amount which is at least
equivalent 	to 	the 	amount 	of 	Medicare 	Patient
Receivables calculated in accordance with this
Section 2.09A at the time the Closing Balance
Sheet is delivered (the “Collection Incentive
Amount”), 	then 	Buyer 	shall 	remit 	the
difference 	between 	the 	amount 	of 	the
Collection 	Incentive 	Amount 	and 	the 	actual
amount of cash receipts from Medicare Patient
Receivables 	actually 	received 	by 	Seller 	(the
[“]Collection Shortfall Amount”). 	Buyer shall
remit the Collection Shortfall Amount, if any,
within 	ten 	(10) 	days 	of 	receipt 	of 	Seller’s
calculation thereof.
(Alberts Decl. at Ex. 16).
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19
In other words, the Sixth Amendment provides that GHI would
retain ownership over Medicare receivables relating to patients
admitted or otherwise assisted prior to Michael Reese’s takeover
of Michael Reese Hospital, and that Michael Reese would (1)
collect those receivables on GHI’s behalf and (2) make up the
difference for any shortfall between the receivables expected by
GHI (the “Collection Incentive Amount”) and the receivables
actually collected by Michael Reese. The parties agree that the
Collection Incentive Amount corresponds to an amount totaling
$3,571,281.00 that was deducted from the purchase price of
Michael Reese Hospital as reflected by the closing statement for
that transaction (the “Michael Reese Closing Statement”).
(Alberts Decl. at Ex. 10).
Without question, Michael Reese incurred separate
obligations within the meaning of § 5 of the IUFTA when it agreed
to collect accounts receivables on GHI’s behalf and when it
agreed to satisfy any difference between the anticipated accounts
receivables and the amounts collected by Michael Reese. 	See 740
Ill. Comp. Stat. 160/5(a) (providing for avoidance of
“obligation[s] incurred”). 	But the value of these obligations is
unknown. 	There is no evidence in the record that Michael Reese
actually paid anything to GHI to make up for a Collection
Shortfall Amount, nor is there any evidence in the record from
which the court can ascertain how much it cost Michael Reese to
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20
collect accounts receivables on GHI’s behalf.
Had the Defendants argued that there is no such evidence in
the record, Alberts, as the party with the burden of proof on
this issue, would have been obligated to produce some evidence
demonstrating that the obligations incurred by Michael Reese
pursuant to § 2.09A held some value. 	Celotex, 477 U.S. at 325.
His failure to provide such evidence would have been fatal. 	But
the Defendants argue only that Alberts did not incur any
obligations with respect to Medicare receivables, not that those
obligations lacked value. 	(Def. Mem. at 12).
The court has previously declined to grant summary judgment
in the Defendants’ favor when the court has identified a
deficiency in the record that was not brought to Alberts’s
attention in the Defendants’ memoranda of law or by the court
itself. 	See HCA I, slip op. at 38-39. 	Consistent with that
approach, the court cannot grant the Defendants summary judgment
with respect to the value of the obligations incurred by Michael
Reese relating to the accounts receivables owned by GHI. 	But the
court sees no worth in permitting this issue to go to trial if
there is no evidence for Alberts to present. 	Accordingly, the
court will enter a separate order directing Alberts to show cause
why summary judgment ought not be granted to the Defendants on
this issue unless he submits evidence demonstrating that the
obligations incurred by Michael Reese pursuant to the Sixth
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12 	The Defendants also cite to portions of a transcript of
a deposition taken of former DCHC employee Laurie Taylor and
documents bearing the Bates labels EY-000836 and EY-000837, but
the court was unable to locate these items in the record created
by the parties.
21
Amended had some value by January 16, 2006. 	If they deem it
appropriate, the Defendants may file a memorandum in reply to
Alberts’s response at any time prior to the commencement of
trial.
B. 	Value Received by Michael Reese
The Defendants have produced evidence tending to show that
the assets transferred to Michael Reese by GHI (namely, Michael
Reese Hospital along with its equipment and net working capital)
were at least equal in value to the Michael Reese Transfers.
(Kilduff Decl. at Exs. C-G, I, S, Q, AE). 12 	Alberts has produced
evidence to the contrary. 	(Demchick Decl. at Ex. A (D.E. No.
316, filed November 27, 2006); Alberts Decl. at Exs. 24-31, 36).
Consequently, the Defendants seek to winnow the record before the
court by arguing that the valuation of Michael Reese Hospital’s
property, equipment, and net working capital conducted by Neil
Demchick is an impermissible exercise in “hindsight” analysis,
(Def. Mem. at 20-24), and that many of the other exhibits
attached to Alberts’s declaration concerning the value of these
assets are unauthenticated and/or hearsay evidence. 	(Def. Reply
at 37, Kilduff Decl. at Ex. V (D.E. No. 359, filed December 14,
2006)). 	The Defendants also seek summary judgment on the factual
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22
issue of whether Michael Reese assumed a managed care contract
with Humana (the “Humana Contract”) that resulted in a liability
of $24,677,570.00 for Michael Reese. 	(Def. Mem. at 24-29; Def.
Reply at 3-25).
1. 	Value of assets transferred by GHI
The court agrees with the Defendants that “in the analysis
of reasonably equivalent value it is necessary to keep in mind
that ‘reasonably equivalent value is a question of fact that must
be evaluated as of the date of the transaction.’” Creditor’s
Comm. of Jumer’s Castle Lodge, Inc. v. Jumer (In re Jumer’s
Castle Lodge, Inc.), 329 B.R. 837, 845 (Bankr. C.D. Ill. 2005)
(quoting In re Joy Recovery Tech. Corp., 286 B.R. at 75). 	But
that does not mean that the evaluation itself must have taken
place at the time of the transfer. 	See, e.g., Sharp v. Chase
Manhattan Bank USA, N.A. (In re Commercial Fin. Services, Inc.),
350 B.R. 559, 585-86 (Bankr. N.D. Okla. 2005) (refusing to
exclude expert testimony rendered years after challenged
transaction); Hirsch v. Steinberg (In re Colonial Realty Co.),
226 B.R. 513, 523 (Bankr. D. Conn. 1998) (crediting expert’s
valuation report rendered years after fraudulent transfer).
Demchick’s expert report renders an opinion with respect to
the value of Michael Reese Hospital at the time of the Michael
Reese Transfers, not the value of the hospital now. 	(Demchick
Decl. ¶ 13, Ex. A). 	Nevertheless, the court cannot make any
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13 	It is unclear whether the Defendants seek to strike the
Demchick declaration in toto or only insofar as that declaration
concerns the Humana Contract. 	Because of that ambiguity, the
court will defer ruling on the discrete factual issue of the
value of the assets transferred by GHI until it resolves the
motion to strike, but the Defendants will need to clarify whether
and why the Demchick declaration should be stricken in its
entirety at the hearing on their motion to strike currently
scheduled for January 4, 2006.
14 	Exhibits 24 and 31 to the Alberts declaration are not
subject to the Defendants’ evidentiary objections, but these
exhibits do not create a genuine dispute of material fact with
respect to the value of the assets transferred by GHI, either.
23
rulings with respect to the value of the assets transferred by
GHI because the Defendants have filed a separate motion to strike
Demchick’s declaration on the ground that it relies heavily on
other declarations that are inadmissible. 13 	If the court grants
the motion to strike Demchick’s declaration, the only evidence in
the record supporting Alberts’s view of the assets transferred by
GHI would be the exhibits subject to the Defendants’ evidentiary
objections. 14
On the other hand, those objections will be rendered moot if
the Demchick declaration is not stricken because that declaration
is enough by itself to create a genuine issue of material fact
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15 	Demchick’s declaration creates a genuine dispute of
material fact with respect to the value of the assets transferred
by GHI even if the court grants the Defendants summary judgment
with respect to the factual issue of whether Michael Reese
assumed the Humana Contract at a loss of $24,677,570.00. 	Even by
the Defendants’ reckoning, Demchick values the assets transferred
by GHI at $48,428,754.00 without accounting for the liability
incurred in connection with the Humana Contract. 	(Def. Mem. at
24). 	That valuation, if construed as accurate, would result in a
net loss of $17,620,086.00 or $19,620,086.00 (depending on
whether the court considers the $2,000,000.00 allegedly
transferred by Michael Reese in exchange for their delay in
closing), or 26.67% or 29.71% of the purchase price for Michael
Reese Hospital. 	An exchange of value that one-sided can hardly
be deemed “reasonable.”
24
with respect to the value of the assets transferred by GHI. 15
The court declines to render what could turn out to be an
advisory opinion on the myriad evidentiary objections raised by
the Defendants with respect to the exhibits attached to the
Alberts declaration. 	The court will defer consideration of this
issue until it resolves the Defendants’ motion to strike.
2. 	Liability arising from the Humana Contract
The Defendants also seek to strike declarations filed by
DCHC Vice-Presidents Donna Talbot and Erich Mounce that support
Demchick’s conclusion that Michael Reese assumed GHI’s liability
on the Humana Contract. 	Even if the court were to discount this
evidence, there is still some evidence in the record suggesting
that Michael Reese assumed the Humana Contract, albeit at a
slightly lesser cost of $24,369,100.00 (as opposed to the
$24,677,570.00 estimate made by Demchick). 	(Alberts Decl. at
Exs. 5, 9). 	Although this evidence, which consists of deposition
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16 	The Defendants argue that the deposition testimony of
Mounce and Talbot supports their alternative theory that Michael
Reese terminated its contract with Humana shortly after it
acquired Michael Reese Hospital. 	(Def. Reply at 5-6 (D.E. No.
353, filed December 13, 2006)). 	The court does not necessarily
disagree with this analysis, but the questions of whether an
assumed contract that is subsequently terminated constitutes a
liability as of the date of valuation and how one determines the
scope of liability in such circumstances is a mixed question of
expert methodology and law that is better left for determination
at trial, not on a motion for summary judgment. 	The Defendants’
argument that Demchick’s expert analysis is inadmissible because
his analysis does not conform to the applicable Statement of
Financial Accounting Standards fails for the same reason. 	(Def.
Mem. at 25; Def. Reply at 14-17). 	The court will adjudicate the
“battle of experts” between the parties regarding proper
accounting methodologies, which present a genuine dispute of
material fact, at trial.
The court does not mean to suggest that the factual issue of
whether Michael Reese terminated the Humana Contract is or could
be irrelevant to the parties’ dispute. 	It may well be the case
that Demchick’s methodology in estimating the liability on the
Humana Contract is correct, but that the damages sought by
Alberts on that liability will be lessened by the termination of
that contract. 	Insofar as the instant motion is concerned,
however, the deposition testimony of Mounce and Talbot in
particular suffices to carry the day for Alberts.
17 	Because the Defendants are not entitled to summary
judgment with respect to the factual issue of whether Michael
Reese assumed the Humana Contract even if their motion to strike
is granted, the court will deny their motion to strike as moot
insofar as it seeks to strike the Mounce and Talbot declarations.
It will not deny the motion to strike as moot with respect to the
Demchick declaration because that declaration is relevant in
other ways to the instant motion, see part II.B.1, supra, and
because Demchick calculates the liability incurred on the Humana
Contract as being some $308,470.00 more than the liability set
forth in the Talbot declaration.
25
testimony from Mounce and Talbot, is far from dispositive, 16 it
is enough to defeat the Defendants’ motion for summary
judgment. 17
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18 	The only evidence Alberts points to in his opposition as
suggesting bad faith on the part of the Defendants is (1) the
Michael Reese Closing Statement, which, according to Alberts,
establishes that the Defendants knew that Michael Reese borrowed
more money from its lenders to purchase Michael Reese Hospital’s
accounts receivables than the receivables were worth, (Pl. Opp’n
¶¶ 51-52; Alberts Decl. at Ex. 10), and (2) a newspaper article
chronicling the financial woes of DCHC, the parent company of
Michael Reese that purportedly was sent to in-house counsel for
HCA. 	(Pl. Opp’n ¶ 53; Alberts Decl. at Ex. 20). 	The former
piece of “evidence” is persuasive only if the court assumes the
very thing that Alberts must prove (i.e., that Michael Reese did
not receive reasonably equivalent value for the Michael Reese
Transfers). 	The latter argument is sound in theory but
unsupported by the record, which reveals only that someone named
“David Hill” at “Columbia/HCA Healthcare Corporation” received a
copy of the article in question. 	Without some testimonial or
documentary evidence demonstrating that Hill was (1) an agent of
one or more of the Defendants that (2) was acting within the
scope of his authority when he received the article, there is no
basis for imputing knowledge of the article to the Defendants.
Etshokin v. Texasgulf, Inc., 612 F. Supp. 1212, 1217-18 (N.D.
Ill. 1984).
26
C. 	Other Factors
There is no evidence in the record created in connection
with the instant motion that the Defendants acted in bad faith in
entering into the APA with Michael Reese. 18 	Nevertheless, the
court cannot award summary judgment to the Defendants with
respect to the issue of good faith because Alberts has produced
evidence in connection with a separate motion for summary
judgment filed by Western that appears to demonstrate that Carl
V. George, an officer for all three defendants, knew that Michael
Reese’s corporate parent DCHC was in financial distress. 	(Pl.
Corrected Opp’n ¶¶ 30-32 (D.E. No. 378, filed December 20, 2006);
Alberts Decl. at Ex. 4 (D.E. No. 380, filed December 20, 2006).
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27
Alberts contends in both motions that the Defendants could
not have acted in good faith in entering into the APA if they
knew or should have known that Michael Reese was insolvent when
it entered into the APA. 	(Pl. Opp’n ¶¶ 49-53; Pl. Corrected
Opp’n ¶¶ 34-37). 	While the court is skeptical as to whether the
case law cited by Alberts, which pertains to the “good faith”
defense under 11 U.S.C. § 550, should apply with equal force to
the totality of the circumstances inquiry demanded by the IUFTA,
it will not rule on this issue if there is no evidence to support
Alberts’s contention. 	The court will therefore reserve judgment
on this issue until it has completed a more thorough
investigation of the record presented in connection with the
motion for summary judgment filed by Western and given the
parties an opportunity to articulate their positions with respect
to the legal issue of whether a transferee that knows or should
have known of a transferor’s insolvency can receive the disputed
transfer in good faith.
Finally, there is no evidence in the record that the APA, as
amended on November 9, 1998, was the result of anything other
than an arm’s-length negotiation between the parties. 	The court
will therefore grant summary judgment to the Defendants with
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19 	Alberts suggests that the APA was not negotiated at
arm’s length because National Century Financial Enterprises, the
primary if not sole lender to DCHC and Michael Reese, placed
considerable pressure on Michael Reese to purchase Michael Reese
Hospital, (Pl. Opp’n ¶ 56), but the arm’s-length separation
required here is between the transferor (Michael Reese) and the
transferee (the Defendants), not the transferor and the
transferor’s lender. 	In re R.M.L., Inc., 92 F.3d at 148-49.
28
respect to that factual issue. 19
III
For the reasons set forth above, the court will grant
summary judgment to the Defendants with respect to the factual
issue of whether the Defendants the APA, as amended on November
9, 1998, was the result of arm’s-length negotiations between the
parties. 	It will defer ruling on the factual issues of (1) the
value of the assets transferred by GHI and (2) whether the
Defendants entered into the APA in good faith until the court
rules with respect to the separate motion to strike filed by the
Defendants and the separate motion for summary judgment filed by
Western. 	It will deny the instant motion in all other respects.
The court will also enter a separate order directing Alberts
to show cause why summary judgment ought not be granted in favor
of the Defendants sua sponte on the factual issue of whether the
obligations incurred by Michael Reese pursuant to the Sixth
Amendment to the APA had any value unless Alberts submits
evidence demonstrating that the obligations had some value by
January 16, 2007. 	It will enter yet another order denying in
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29	O:\Andrew Fausett Temp Docs\Decisions with Related Orders\Alberts v. HCA, Inc. (In re Greater Southeast Cmty. Hosp. Corp. I)\decision_summary judgment_reasonably equivalent value_Alberts v. HCA_v2.wpd
part the motion to strike filed by the Defendants as moot.
Finally, the court will grant summary judgment to Alberts sua
sponte with respect to the factual issue of whether Michael Reese
transferred $2,000,000.00 to the Defendants in addition to the
$66,048,840.00 identified by the court in its April 4, 2006 oral
decision and June 2, 2006 order.
Separate orders follow.
[Signed and dated above.]
Copies to:
Lucius B. Lau
Jeffrey E. Schmitt
White & Case LLP
701 Thirteenth Street, N.W.
Washington, DC 20005
Counsel for the plaintiff
Jeffrey W. Kilduff
Lani R. Miller
Stephen D. Brody
O’Melveny & Myers LLP
1625 Eye Street, NW
Washington, DC 20006
Counsel for the defendants
HCA Inc. and
Galen Hospital Illinois, Inc.
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