Judge may dismiss North Shore Manor bankruptcy case

LOVELAND — North Shore Manor, the nursing-home operation at 1365 W. 29th St. in Loveland, has until Nov. 3 to show the judge overseeing NSM’s bankruptcy case why he shouldn’t dismiss the case.

In an order filed Tuesday, Judge Joseph Rosania wrote of his frustrations with a case that has dragged on for months, involved multiple emergency hearings and motions, and has continued to be a “bitter, two-party dispute between one group of shareholders and J. Robert Wilson,” the owner of Columbine Health Systems, which previously managed the facility.

The judge’s order stems from two concerns: Reports of patient care filed by the ombudsman from the Colorado Department of Health and Environment, and a potential conflict of interest of the counsel for North Shore Manor who previously represented majority shareholders in an effort to compel fellow shareholder Wilson to buy out the others. North Shore is represented by Aaron Garber of Wadsworth Garber Warner Conrardy PC. Wilson is represented by Spencer Fane LLP.

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The judge said that a dismissal would permit the state to enforce its rules regarding patient care without bankruptcy court intervention and would force the nursing home owners and creditors to take their disputes to other venues for resolution.

Rosania wrote that the ombudsman’s reports show “a decreasing level of care for the residents and most recently (the fourth report) referenced obstruction from an employee into the efforts of the ombudsman to monitor the care.”

He also noted that concerns cited in the second report were corrected by the time of the third report. The fourth report, the judge said, cited “serious concerns about the safety of residents, whether there had been mandatory reporting of instances of abuse and neglect, the quality of care, the quality of life, and willful interference in the ombudsman carrying out the monitoring duties.”

When hearing that description, John Matis, the husband of a patient at the nursing home, told BizWest “that’s not true.” He said he has seen improvements in the facility in his two-year experience with it, especially since the change in management control.
“Management has become very efficient; it’s much improved. It’s cleaner, better maintained, the food is better, the staff is credentialed. I’m here all the time,” he said.

He said the facility is “vital to the entire Northern Colorado area. Whatever happens, this facility needs to remain open,” Matis said.

Judge Rosania detailed the dispute.

“The court has conducted multiple emergency hearings and a still pending discovery dispute arising out of the replacement of CMS as manager of the facility.

“The debtor filed a (bankruptcy) plan on July 12 to which the United States trustee, Wilson and Wilson’s companies filed extensive objections. The plan is an unconfirmable plan, which provides for extensive third-party releases to the other shareholders, retains all claims against Wilson, indicates that the debtor has not paid rent for the facility for one year, does not identify potential avoidance claims and appoints current counsel for the debtor as counsel to pursue any avoidance actions.

“The debtor has incurred hundreds of thousands of dollars in professional fees … and faces a contested confirmation hearing, which will dramatically increase such fees, all while the level of care to the residents has significantly decreased. Further, the court is concerned about the impartiality of debtor’s counsel because of its previous representation of the other shareholders prior to the bankruptcy filing in negotiations attempting  to compel Wilson, who is both a shareholder and the primary creditor of the estate, to buy out the other shareholders’ interests. …The plan is illustrative of this potential conflict.”

Rosania said he has begun to question whether bankruptcy court is the proper venue for resolution of the disputes. 

Dismissing the case would permit the health department to carry out its duties “and permit the parties to continue their litigation in another forum.”

“The court views this case as a two-party dispute with interminable litigation and the filing of the bankruptcy case as a litigation tactic. The debtor alleges Wilson is withholding documents required to manage the facility, while Wilson alleges the remaining shareholders are mismanaging the facility and evading subpoenas. …”

The parties have until Nov. 7 to respond to both the fourth ombudsman report and to the judge’s inclination to dismiss the case. 

Meanwhile, the related bankruptcy case involving North Shore Associates LLP, the owners of the real estate on which North Shore Manor operates, continues to be held in abeyance as the parties move through arbitration over the corporate authority of North Shore Associates — essentially whether majority owners had authority under the partnership agreement to file bankruptcy.

The attorney for North Shore Associates, Keri Riley of Kutner Brinen Dickey Riley PC, filed a motion to seal Columbine’s motion requesting arbitration. She claimed that Columbine’s counsel defamed her in that document. 

“On multiple occasions (the filing) makes objectively false, blatantly incorrect and defamatory statements not against the partners (her clients) … but against undersigned counsel. … (A)t their core, (they) appear to be an attempt to intimidate and harass NSA’s duly appointed and authorized counsel, and to damage her reputation and the reputation of her firm.”

Judge Rosania sealed the arbitration request document and gave Spencer Fane an opportunity to object. Spencer Fane did object, saying that court proceedings and documents should remain open to the public under the First Amendment’s “right to know about the administration of justice.” They contended in their objections that Riley should have known that the partnership agreement between the owners of the real estate did not give her clients authority to file bankruptcy.

The judge has not ruled on Spencer Fane’s objection, which was filed Oct. 2.

The actions filed in U.S. Bankruptcy Court in Denver are North Shore Manor Inc., case number 23-10809, and North Shore Associates LLC, case number 23-10808.