Joel Freedman ended the bankruptcy of Hahnemann University Hospital on Wednesday, sacking Hahnemann’s restructuring director and two outside directors who had overseen a company’s structure for the past two years.
A lawyer involved in the bankruptcy case called Freedman’s move in retaliation for a lawsuit brought against Freedman on Tuesday night to seek the return of an unknown sum of money to the bankruptcy estate. The lawsuit against Freedman, filed in the US Delaware District Bankruptcy Court, has been sealed, so the amount is not public.
“What has happened in the last few hours is just detrimental to this estate, was completely retaliatory,” Andrew Sherman, lawyer at Sills Cummis & Gross PC, told Judge Mary F. Walrath in a abridged hearing Wednesday. Sherman represents Hahnemann’s unsecured creditors.
Sherman feared that Freedman could, in theory at least, “compel debtors to dismiss the lawsuit just filed” against him, potentially reducing the amount of money that will be available to sellers and other Sherman representatives. Claims in this case are expected to be around $ 300 million, but it is too early to say how much money will be available to pay.
By firing the directors overseeing the remains of the hospitals he bought in 2018, Freedman has introduced uncertainty as to who is responsible as the case progresses.
Also on Wednesday, Freedman filed a sealed petition asking the court to appoint a bankruptcy trustee to oversee the case as it comes to an end. The trustee would replace Saul Ewing Arnstein & Lehr LLP, the firm Freedman chose two years ago to handle the bankruptcy. This would reduce costs for Saul Ewing, who sued Freedman and, in April alone, billed $ 450,000 in fees and expenses for working on the case.
The key issue on the agenda for Wednesday’s hearing was whether Harrison Street Real Estate, Freedman’s partner and lead lender in the $ 170 million purchase of Hahnemann and St. Christopher’s Children’s Hospital , should be allowed to participate in talks between the shells of bankrupt companies, unsecured creditors and Freedman over whether the proceeds from the eventual sale of certain properties will be available to pay bankruptcy claims.
The judge agreed to delay dealing with this difficult issue, giving bankruptcy lawyers time to resolve Freedman’s unusual decision.
“To be quite frank, your honor,” Saul Ewing judge Mark Minuti told judge, “this is a first for me in my career. I don’t really know what the rules are in light of what happened this morning.
An attorney for Freedman pointed out that the California businessman remains the owner and chairman of the board of the bankrupt entities. The real estate, owned separately by Freedman and Harrison Street, was separated from the operating companies.
“We are not trying to damage the domain. We are one of the estate’s largest creditors, ”said Suzzanne Uhland, of Latham & Watkins LLP, to Judge. “We are doing this in the best interests of the creditors, all creditors.”
His argument was that this move should end the deadlock in the case.
Uhland also told the judge Freedman would not do anything else that would set off the alarm bells while lawyers work out what to do next with the help of the mediator in the case, the retired judge of the Delaware, Kevin J. Carey.
Hahnemann closed in stages during the summer of 2019. It was a North Broad Street staple for over 90 years.