Samaritan Alliance, LLC v. Kentucky Cabinet for Health and Family Services (In re Samaritan Alliance, LLC)

(Bankr. E.D. Ky. Aug. 18, 2014)

The bankruptcy court finds that the Cabinet did not commit fraud on the court when it contended it had overpaid the debtor hospital for Medicaid reimbursements. The debtor alleged the Cabinet had emails reflecting it understood it had actually underpaid the hospital at the time it was alleging the overpayment in court. The court held that this did not constitute fraud on the court such that a five-year old judgment should be overturned. Nevertheless, the bankruptcy court recommends that the district court enter judgment in favor of the debtor hospital for the now undisputed amount of the underpayment from the cabinet. Opinion below.

2014-08-18 – in re samaritan alliance

McKinstry v. Genser (In re Black Diamond Mining Company, LLC)

(E.D. Ky. Aug. 6, 2014)

The district court holds the bankruptcy court incorrectly used the federal “lodestar” method to determine whether attorney fees were reasonable for purposes of a fee-shifting provision of a settlement agreement between the trustee of the unsecured creditors trust and the former restructuring specialists. The trustee argued the Philadephia-based billing rates were unreasonable, and should have been adjusted to be in line with the Kentucky market. The court holds the bankruptcy court should have used Kentucky state law when determining the reasonableness of the fee, as state law controls the interpretation of contracts. The court nevertheless adopts the bankruptcy court’s proposed findings of fact and conclusions of law, because the result was the same under either analysis. The fees were reasonable under the circumstances, even though the rates were higher than those in the local market. Opinion below.

2014-08-06 – in re black diamond mining company

McKinstry v. Genser (In re Black Diamond Mining Company, LLC)

(E.D. Ky. July 22, 2014)

The district court grants the trustee’s motion for sanctions against the defendants for spoliation of evidence. The district court found that there was sufficient evidence to conclude that at least two of the defendants intentionally destroyed relevant documents and others negligently did so, although there was not sufficient evidence to find they did so in bad faith (i.e., with knowledge of the value to the litigation). The court orders that permissive adverse inference jury instructions are appropriate. The jury will decide whether the absence of documents most likely reveals that the trustee should prevail on her claims. Opinion below.

2014-07-22 – in re black diamond mining