Hahnemann University Hospital seeks OK of settlement with law firm

By Sarah Lizee

Olympia, Wash., June 9 – Center City Healthcare, LLC, which does business as Hahnemann University Hospital, is seeking approval of a settlement with Crowell & Moring LLP, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

Prior to the company’s petition date, it entered into an engagement agreement with non-debtor Paladin Healthcare Capital, LLC to provide legal services related to its Project Liberty transaction, under which the debtor would eventually acquire its hospital businesses and some entities controlled by Joel Freedman; and some entities controlled by affiliates of Harrison Street Real Estate Capital LLC would acquire real estate from Tenet Business Services Corp. and some of its affiliates. The transaction closed on Jan. 11, 2018.

Prior to closing, Crowell & Moring issued invoices for about $3.1 million, but ultimately agreed to discount the amount due to about $2.4 million.

On Aug. 31, 2018, Crowell & Moring entered into an engagement agreement with the debtor to provide legal services.

In addition to the pre-closing invoices, Crowell & Moring issued further invoices for services provided after the transaction.

The debtor paid a total of $2.74 million to Crowell & Moring. But on April 12, 2022, the debtor sent a demand/settlement letter to Crowell & Moring asserting that the transfers were constructive fraudulent conveyances according to bankruptcy code.

In the demand letter, the debtor asserted that Crowell & Moring’s services were actually provided to non-debtor Paladin, and the debtor didn’t receive reasonably equivalent value in exchange for the transfers.

Crowell & Moring denied the assertion, and later the parties negotiated in an attempt to resolve the debtor’s claims.

Following those negotiations, the parties agreed to a settlement under which Crowell & Moring will pay to the debtor $1 million.

The settlement also provides for mutual releases relating to the transfers.

A hearing is scheduled for June 29.

Center City is a Philadelphia-based hospital operator. The company filed bankruptcy on June 30, 2019 under Chapter 11 case number 19-11466.

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