Childers v. MEDIFIS, INC. et al

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF IOWA
IN RE:
Mercy Hospital, Iowa City, Iowa, et
al.
Debtor
______________________________
Dan R. Childers, in his sole capacity
as Liquidation Trustee,
Plaintiff
vs.
MEDIFIS, INC., FUSION MEDICAL
STAFFING LLC, TRIAGE, LLC,
HEALTH CAROUSEL TRAVEL
NETWORK, LLC, MEDICAL
SOLUTIONS L.L.C., TRAVEL
NURSE ACROSS AMERICA LLC,
NOMAD NURSES INC., TITAN
MEDICAL GROUP, LLC, TRUSTED
HEALTH INC., AUREUS
NURSING, LLC, ATLAS
MEDSTAFF, LLC, READY TECH-
GO, INC., STAFFNDA LLC,
FLEXCARE, LLC, CROSSMED
HEALTHCARE STAFFING
SOLUTIONS, INC., PRN HEALTH
SERVICES LLC, VENTURAL
MEDSTAFF, LLC, SKYBRIDGE
HEALTHCARE, LLC, MARVEL
MEDICAL STAFFING, LLC, CELL
STAFF, LLC, CONCENTRIC
HEALTHCARE SOLUTIONS LLC,
AEQUOR, SUPPLEMENTAL
HEALTH CARE, UNITIMED LLC,
HOST HEALTHCARE, LLC,
MEDNINJAS LLC, GETMED
Chapter 11
Bankruptcy No. 23-00623
Adversary No. 25-09123
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STAFFING, INC., STABILITY
HEALTHCARE INC., AUREUS
RADIOLOGY, LLC, ALLIED
RESOURCES MEDICAL
STAFFING CORPORATION,
TOTALMED INC., CENTRA
HEALTHCARE SOLUTIONS, INC.,
R VISIONS LLC, RELIANT CARE
REHABILITATIVE SERVICES,
L.L.C., TRUSTAFF TRAVEL
NURSES, LLC, GENIE
HEALTHCARE INC., VINANI INC.,
STAFFINGMEDICAL USA INC.,
VITAL NURSE STAFFING LLC,
LIQUIDAGENTS HEALTHCARE,
LLC, VITAL HEALTHCARE
STAFFING, INC., MANAGEMENT
HEALTH SYSTEMS, LLC,
MEDICALPEOPLE STAFFING
LLC, WELLSPRING NURSE
SOURCE, LLC
Defendants
OPINION AND ORDER ON M OTIONS TO DISMISS
The matters before the Court are Motions to Dismiss filed by Triage, LLC
(Doc. 163), Medical Solutions L.L.C. (Doc. 164), Aureus Nursing, LLC (Doc. 165),
Host Healthcare, LLC (Doc. 166), Trusted Health Inc. (Doc. 167), Supplemental
Health Care 	(Doc. 168), Travel Nurse Across America 	LLC (Doc. 169), and
TotalMed Inc. (Doc. 170) (collectively, “Movants”). The Court heard argument and
took the matters under advisement. Abbe M. Stensland appeared for Dan R. Childers,
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in his sole capacity as Liquidation Trustee (“Trustee”). Brian Koenig appeared for
Movants. This is a core proceeding under 28 U.S.C. § 157(b)(2).
I. 	STATEMENT OF THE CASE
Mercy Hospital et al. (“Debtor”) filed a Chapter 11 Petition on August 7, 2023.
The Amended Complaint alleges that before filing, Defendant Medifis, Inc. provided
staffing services to Debtor and contracted with the other Defendants, including
Movants, to place staff with the Debtor. Medifis paid the money it received from
Debtor to the Defendants, minus a commission that Medifis retained. The Amended
Complaint seeks to avoid and recover transfers Debtor made to Medifis and
subsequent transfers Medifis made to the Defendants during the 90-day period
between May 9, 2023, and the August 7, 2023 bankruptcy filing, as preferences
under 11 U.S.C. §§ 547(b) and 550.
Movants seek dismissal of the Amended Complaint under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.
They argue that the Amended Complaint does not satisfy the pleading standard of
Federal Rule of Civil Procedure 8 because Trustee fails to plead the factual basis of
the claim, including the date and amount of the alleged subsequent transfers. Trustee
argues that the Amended Complaint contains sufficient factual detail—including the
date and amount of the initial transfers, as well as the identity of the subsequent
transferees—to give Movants fair notice of the claims against them. For the
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following reasons, the Court concludes that the Amended Complaint adequately
states a claim for relief and the Motions to Dismiss should be denied.
II. 	DISCUSSION
A. Motion to Dismiss - Standard
To satisfy Rule 8, the Amended Complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2), made applicable in this adversary proceeding by Fed. R. Bankr. P. 7008. The
purpose of this pleading standard is to ensure the defendant is given “fair notice of
what the … claim is and the grounds upon which it rests.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957)).
“[T]he pleading standard Rule 8 announces does not require detailed factual
allegations, but it demands more than an unadorned, the-defendant-unlawfully-
harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal
quotations omitted). A complaint will survive a motion to dismiss under Rule
12(b)(6) if it “contain[s] sufficient factual matter, accepted as true, to ‘state a claim
for relief that is plausible on its face.’” Id. “[T]he complaint should be read as a
whole, not parsed piece by piece to determine whether each allegation, in isolation,
is plausible.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009).
“Further, documents attached to or incorporated within a complaint are considered
part of the pleadings, and courts may look at such documents ‘for all purposes,’
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including to determine whether a plaintiff has stated a plausible claim.” Brown v.
Medtronic, Inc., 628 F.3d 451, 459–60 (8th Cir. 2010) (internal citations omitted).
B. 11 U.S.C. § 547 – Preferences
Section 547(b) of the Bankruptcy Code allows a trustee to avoid certain pre-
petition transfers as “preferences.” To state a claim for an avoidable preference, a
complaint must include plausible facts alleging each element of 11 U.S.C. § 547(b),
which provides:
Except as provided in subsections (c) and (i) of this section, the trustee
may, 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), avoid any transfer of an
interest of the debtor in property—
(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—
(A) on or within 90 days before the date of the filing of the
petition; or
(B) between ninety days and one year before the date of
the filing of the petition, if such creditor at the time of such
transfer was an insider; 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.
11 U.S.C. § 547(b). In addition to the statutory elements, a preference complaint must
identify each alleged preferential transfer by the date of the transfer, the name of the
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debtor/transferor, the name of the transferee, and the amount of the transfer.
Sarachek v. Schochet (In re Agriprocessors, Inc.), Bankr. No. 08-02751, Adv. No. 10-
09190, 2012 Bankr. LEXIS 4287 at *16 (Bankr. N.D. Iowa Sept. 14, 2012) (citing
Gellert v. The Lenick Co. (In re Crucible Materials, Corp.), Bankr. No. 09-11582,
Adv. No. 10-55178, 2011 Bankr. LEXIS 2513, 2011 WL 2669113, at *2 (Bankr. D. Del.
July 6, 2011)).
Importantly, this case involves two different types of transfers. First, the
transfers from the Debtor to Medifis. According to the Trustee, Medifis provided the
Debtor with pre-petition staffing services by contracting with Defendants. Debtor
paid Medifis directly for these services. Those payments were the “initial transfers,”
Medifis being the “initial transferee.” Once the initial transfers were made, Medifis
allegedly paid the sums it received from Debtor to Defendants. Those payments were
“subsequent transfers.” The Movants here are among the “subsequent transferees.”
This distinction between initial and subsequent transfers/transferees is important
here because only the initial transfer is subject to avoidance under section 547. See
Spizz v. Goldfarb Seligman & Co. (In re Ampal-American Isr. Corp.), 562 B.R. 601,
613 (Bankr. S.D.N.Y. 2017) (“The initial transfer is the transfer the trustee must
avoid”); Sec. Inv'r Prot. SIPA Liquidation Corp. v. Bernard L. Madoff Inv. Sec. LLC,
480 B.R. 501, 524 (Bankr. S.D.N.Y. 2012) (“[T]he focus of the avoidance and
recovery sections is on the initial transfers that deplete the bankruptcy estate and not
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on the recipient of the transfers or the subsequent transfers”); Bakst v. Sawran (In re
Sawran), 359 B.R. 348, 353 n.2 (Bankr. S.D. Fla. 2007) (“[S]ection 547 applies only
to the initial transferee of the preferential transfer”). Once a transfer is avoided under
section 547, the trustee may recover the property transferred or the value of such
property under section 550 from the initial transferee or any subsequent transferees.
11 U.S.C. § 550(a).
C. 11 U.S.C. § 550
“To plead a subsequent transfer claim, the Trustee must plead that the initial
transfer is avoidable 	[under section 547], and the defendant is a subsequent
transferee of that initial transferee, that is, that the funds at issue originated with the
debtor.” Picard v. BNP Paribas S.A. (In re BLMIS), 594 B.R. 167, 195 (Bankr.
S.D.N.Y. 2018). “However, the plaintiff's burden at the pleading stage does not
require dollar-for-dollar accounting of the exact funds at issue.” Id. See, e.g.
Silverman v. K.E.R.U. Realty Corp. (In re Allou Distribs.), 379 B.R. 5, 30–31
(Bankr. E.D.N.Y. 2007) (finding a subsequent transfer claim adequately pled where
the complaint stated, "at least tens of millions of dollars were fraudulently diverted
from [debtor] to [initial transferees] . . . [and] a portion of these fraudulently diverted
funds was transferred from the [initial transferees] to, or for the benefit of, the
[subsequent transferees]"); Picard v. Estate of Chais (In re BLMIS), 445 B.R. 206,
235–36 (Bankr. S.D.N.Y. 2011) (finding a subsequent transfer claim adequately pled
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where the complaint stated that “some or all of the [initial] transfers were
subsequently transferred … to Defendant … in the form of payment of commissions
or fees, transfers from one account to another, or other means.”).
D. Analysis
Here, Trustee has adequately alleged that the initial transfers from Debtor to
Medifis are avoidable under section 547. Trustee has also adequately alleged that
Medifis subsequently transferred the sums it received from Debtor to Movants to
state a claim under section 550. As previously noted, Debtor did not make direct
payments to Movants. Movants billed Medifis for services and Medifis, in turn,
billed the Debtor for the services provided by all Defendants on a “bulk basis.”
Debtor paid a single invoice to Medifis and Medifis distributed the money to the
Defendants. Exhibit A to the Amended Complaint sets forth the payments made to
Medifis during the preference period, including the relevant invoice numbers, dates,
and amounts. In addition, Exhibit A shows the service providers (including Movants)
included in each “bulk” invoice sent from Medifis to the Debtor, though the dates
and exact amounts paid by Medifis to the Movants are not included. Because Debtor
never 	made 	payments 	directly 	to 	Movants, 	Trustee 	is 	an 	outsider 	to 	these
transactions and will need discovery to uncover those details. At this point, only the
Movants themselves have that information. As such, the Court finds that the
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Amended Complaint has adequately stated a claim for relief and the Motions to
Dismiss should be denied.
CONCLUSION
For the foregoing reasons, the Motions to Dismiss are DENIED.
Ordered:
Thad J. Collins
Chief Bankruptcy Judge
May 29, 2026
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