Mariner Health Central, Inc. – Operator of Hayward, California Skilled Nursing Facility Files Chapter 11 Ahead of September 22nd Expiration of Stay of Enforcement of $14.7mn Patient Litigation Award

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September 19, 2022 – Privately held Mariner Health Central, Inc. and two affiliated debtors (dba Parkview Healthcare, together “Mariner Health” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. (Judge TBA). The Debtors*, are part of the Mariner Health Care group of healthcare services providers, consultants and holding companies (collectively, the “Mariner Companies”), all of which are direct or indirect subsidiaries of Mariner Corp., are represented by Laura Davis Jones of Pachulski Stang Ziehl & Jones LLP. Further board-authorized engagements include: (i) Raines Feldman LLP as general bankruptcy counsel, (ii) SierraConstellation Partners LLC as restructuring advisors (and to provide a CRO, ie Lawrence Perkins) and (iii) Kurtzman Carson Consultants LLC as claims agent. 

*The Debtor central to these cases is Parkview Operating Company, LP (“Parkview”) which opeartes a skilled nursing facility with 121 beds located in Hayward, California (the “Parkview Facility”).

The Debtors’ lead petition notes between 100 and 200 creditors; estimated assets between $1.0mn and $10.0mn; and estimated liabilities between $10.0mn and $50.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Marciela Ledesma, et al. c/o Law Office Of Susan Kang Gordon ($14.7mn disputed litigation claim), (ii) Integra Med Analytics, LLC ($10.0mn disputed litigation claim) and (iii) Tampa Avenue Property LLC ($3.9mn rent claim).

Goals of the Chapter 11 Filing

The Perkins Declaration (defined below) provides: "…the Debtors’ present need for bankruptcy relief was precipitated by the recent entry of the Ledesma Judgment …which is against the Debtors in an amount that far exceeds the Debtors financial capacity to satisfy the judgment. While the Debtors pursue an appeal from this judgment on various grounds, the Debtors cannot risk an interruption in care to the residents of the Parkview skilled nursing facility, or to the residents of the other skilled nursing facilities that rely on services provided by Mariner Central, that may result from judgment enforcement efforts. Therefore, the Debtors were compelled to file these Chapter 11 Cases to protect their residents and their medical care, and to preserve value for their estates and creditors, while addressing the Ledesma Judgment and the Debtors’ other obligations in an orderly manner."

Events Leading to the Chapter 11 Filings

In a declaration in support of first day filings (the “Perkins Declaration") [Docket No. 12], Lawrence Perkins, the Debtors' CRO provides: "Parkview has experienced significant decreases in resident occupancy and revenues during the pandemic, and has had substantial increases in operating expenses, particularly for labor
costs, personal protective equipment, and facility improvements or modifications. These developments have strained Parkview’s liquidity, and efforts in recent months to improve occupancy levels, realize staffing efficiencies and otherwise reduce operational costs have not been sufficient to offset the adverse operational environment.

 While significant, these headwinds have been manageable and did not precipitate the commencement of these Chapter 11 Cases. Rather, the Debtors have been forced to commence these cases because they lack the assets or the liquidity to satisfy the Ledesma Judgment, which in my opinion exceeds the value of the Debtors’ assets and operations multiple times over.

The Debtors have been compelled to commence these Chapter 11 Cases because of adverse litigation outcomes in Ledesma et al. v. Mariner Health Care, Inc., et al., Case No. RG19-025110, Superior Court of State of California, County of Alameda (the 'Ledesma Action'). This is an action brought by 10 disparate plaintiffs and consolidated into a single case against the Debtors based on widely-varying allegations pertaining to their various residencies at the Parkview Facility and seeking a range of compensatory damages, attorney fees, statutory remedies and punitive damages based on widely-varying factual circumstances and liability theories that do not apply equally for all plaintiffs.

On December 30, 2021, judgment was entered in favor of the Ledesma Action plaintiffs against the Debtors in the aggregate amounts of approximately $4.5 million in compensatory damages plus more than $9 million in punitive damages (the 'Ledesma Judgment').

Since entry of the Ledesma Judgment, the plaintiffs have been subject to a stay on enforcement while the parties have engaged in post-trial motion practice. On March 21, 2022, the trial court granted in part and denied in part the Debtors’ motion for judgment notwithstanding the verdict and seeking a new trial. As a result, the trial court reduced the Ledesma Judgment to $8,072.860.08. Plaintiffs’ counsel also filed a motion seeking fees and costs in the amount of $13.9 million dollars. Plaintiffs subsequently were awarded $6.6 million dollars for attorneys’ fees and costs. According to the reduced judgment, in the aggregate, Parkview is liable for
approximately $6.02 million and Mariner Central is liable for approximately $8.7 million of the judgment. The stay of enforcement on the Ledesma Judgment is to expire on September 22, 2022.

Further, the claims of the six additional plaintiffs are scheduled to be arbitrated in mid-2023."

About the Debtors

The three Debtors, Mariner Central, Parkview Holdco and Parkview, are part of the Mariner Health Care group of healthcare services providers, consultants and holding companies (collectively, the “Mariner Companies”), all of which are direct or indirect subsidiaries of Mariner Corp.3 Each of the Debtor entities was formed in Delaware. Currently, the Mariner Companies’ operations primarily relate to 20 skilled nursing facilities (each, a “Facility” and collectively, the “Mariner Facilities”), located in southern and northern California with approximately 2,190 licensed beds. The Mariner Facilities generally range in size from 100 to 200 licensed resident
beds, with an average of 109 beds, and serve residents with shorter-term rehabilitation needs and with longer-term nursing care needs. The Mariner Companies and their predecessors have been operating for over 30 years, and the Mariner Facilities have consistently provided quality accessible healthcare to the public, including to the underserved homeless community, during that time.

…Debtor……Parkview operates a skilled nursing facility with 121 beds located in Hayward, California (the “Parkview Facility”), while Mariner Central provides administrative, clinical and operational support services to Parkview and the other Operators."

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