Chartwell Litigation Trust et al v. Addus Healthcare Inc et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re:
Med Diversified, Inc., et. al.,
Debtors.
___________________________________
CHARTWELL LITIGATION TRUST and
GREGORY L. SEGAL AS TRUSTEE OF
CHARTWELL LITIGATION,
Plaintiffs,
v.
ADDUS HEALTHCARE, INC., an
Illinois Corporation; W. ANDREW
WRIGHT, an Illinois Individual;
MARK S. HEANEY, an Indiana
Individual; COURTNEY E.
PANZER, an Illinois Individual; and
JAMES A. WRIGHT, an Illinois
Individual,
Defendants.
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NOT FOR PUBLICATION
Case No.: 	02-88564
02-88568
02-88570
02-88572
02-88573
Adv. P. No.: 04-08680
Chapter 11
(Jointly Administered)
Appearances:
James M. Sullivan, Esq. (JS-2189)
MCDERMOTT WILL & EMORY LLP
Co-counsel to the Plaintiffs
50 Rockefeller Plaza
New York, New York 10020-1605
Howard J. Steinberg, Esq. (pro hac vice)
Michael H. Strub, Jr., Esq. (pro hac vice)
IRELL & MANELLA LLP
Co-counsel to the Plaintiffs
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Case 8-04-08680-sb Doc 141 Filed 06/30/06 Entered 06/30/06 15:51:51

Robert A. Scher, Esq. (RS-2910)
FOLEY & LARDNER LLP
Counsel for the Defendants
90 Park Avenue
New York, New York 10016
Scott E. Early, Esq. (pro hac vice)
Ellen Wheeler, Esq. (pro hac vice)
Jill L. Murch, Esq. (pro hac vice)
Christopher J. Werner, Esq. (pro hac vice)
FOLEY & LARDNER LLP
Counsel for the Defendants
321 N. Clark Street, Suite 2800
Chicago, Illinois 60610
MEMORANDUM OF DECISION AND ORDER GRANTING
DEFENDANTS’ MOTION TO POSTPONE ENTRY OF FINAL
JUDGMENT UNTIL AFTER JULY 14, 2006
The Court has repeatedly urged the parties to engage in a good faith effort to
settle this litigation. Following a recent joint post-trial conference where the Court
informed the parties it had committed itself to issuing a determination on the
defendants’ motion to strike the report and testimony of plaintiffs’ expert valuation
witness, Robert Cimasi, by July 1, 2006, excluding Cimasi’s expert report and
testimony on the ground that his application of the standard methodologies evinced
repeated instances of bias and therefore unreliability, the Court received a
supplemental memorandum from plaintiffs’ counsel. Today the Court received this
motion in which defendants sought an opportunity for further settlement discussions,
and failing that, a reply to plaintiffs’ most recent supplemental memorandum.
Case 8-04-08680-sb Doc 141 Filed 06/30/06 Entered 06/30/06 15:51:51

Under the circumstances, the Court will grant the ex parte motion on the
ground sufficient cause has been stated for it. The defendants will have until July 14,
2006 to submit a reply memorandum to plaintiffs’ most recent submission of a
supplemental memorandum regarding reasonably equivalent value. The Court will
postpone entry of a final determination until after that date.
In connection with any settlement negotiations, the parties may wish to give
sufficient weight to the following facts:
1. 	The parties stipulated to the efficacy of the Black-Scholes method for
valuing the alleged option granted by Addus to Med Diversified.
2. 	Cimasi valued the option at $2.9 million in his report.
3. 	Under the terms of the Stock Purchase Agreement, any failure on the
part of Med Diversified to close on the transaction would result in $1 million in
stipulated liquidated damages to Addus.
If one were to accept Cimasi’s valuation of the option, notwithstanding the
Court’s own deep reservations about this method as applied to the alleged option
agreement, and add the $1 million in liquidated damages, and set those off against
the $7.5 million transfer from the escrow account to the defendants, and the
plaintiffs’ prevailed on their fraudulent transfer theory, there is a certain logic to a
judgment amount of damages of $3.6 million. The parties should give considerable
thought to a range of settlement that centers on the $3.6 million balance.
Case 8-04-08680-sb Doc 141 Filed 06/30/06 Entered 06/30/06 15:51:51

Nothing in this Order should be considered a ruling on any other pending
motions or on the final determination on the merits.
I trust you and yours will enjoy the July 4th holiday weekend – its time to play
with the children.
SO ORDERED.
Dated: Central Islip, New York
June 30, 2006
s/Stan Bernstein____________
Stan Bernstein
United States Bankruptcy Judge
Case 8-04-08680-sb Doc 141 Filed 06/30/06 Entered 06/30/06 15:51:51