North Shore Manor seeks dismissal of its bankruptcy action

LOVELAND — The attorney for North Shore Manor Inc. in its bankruptcy case has asked the judge to dismiss the case because the majority owners have accomplished much of what they wanted and because Columbine Management Services Inc., NSM’s primary creditor, intends to file “extensive litigation” that can be handled outside of bankruptcy court.

The case has been slowly approaching dismissal, with Judge Joseph Rosania already asking the parties why he shouldn’t dismiss the case. Arguments to support why he shouldn’t dismiss were to be filed by Nov. 3.

In a motion filed 3:15 p.m. Thursday, attorney Aaron Garber wrote that the debtors filed the original bankruptcy case in March to head off issues related to two bank loans that were coming due, to secure new management of the nursing home facility at 1365 W. 29th St. in Loveland, and to secure new vendors unaffiliated with Columbine Management Services.

A debt to BOKF, secured by real estate owned by related company North Shore Associates Inc., has been held in abeyance pending arbitration.

“…(T)he FNB (First National Bank of Omaha) debt obligation was resolved by a new entity formed by certain insiders related to the debtor purchasing the note… (T)he debtor has a new management company in place and new vendors and the company has stabilized,” Garber wrote.

“What remains to be completed in this case is confirmation of a plan of reorganization,” which the company and the U.S. Trustee believe will be “marred in expensive and lengthy litigation.

“Whether or not a plan is confirmed, the debtor and (J. Robert) Wilson and his related entities are headed to additional litigation.”

Further, he said, “it is appropriate at this time to remove this case from the oversight of the bankruptcy process and allow authorities specializing in these issues, including state agencies, to consider and resolve these issues.”

Garber’s motion follows a status conference conducted Tuesday at which time Judge Rosania held in abeyance a request from accounting firm Eisner Advisory Group for compensation. The judge also ordered Columbine to turn over additional books and records sought by North Shore and provide an accounting of those efforts by Nov. 3. 

About an hour after Garber’s motion was filed Thursday, he filed a response to the judge’s inquiry about why the case should or shouldn’t be dismissed. 

In a lengthy, 30-page statement, Garber again reviewed the circumstances of the bankruptcy and refuted the court’s concerns.

He noted that concerns raised by the state ombudsman show an improvement in care at the North Shore facility, not a decline. Garber wrote that there were 49 citations between November 2019 and March 2022, when Columbine managed the facility, and some of those included “physical abuse, sexual abuse, diversion of drugs, neglect and misappropriation of property.” 

In the time that the nursing home has been managed by a new operator, only one serious case has been noted, and it was later determined by outside parties to be unfounded.

Garber also reviewed his involvement with North Shore Manor; he reiterated that he represents the operating entity, not its stockholders, although in some cases interests overlap.

“The ‘impartiality’ assertion is nothing more than a smear tactic that should be summarily rejected by the court,” he wrote.

Garber noted that the stockholders engaged a company called SAK Healthcare LLC, an Illinois-based consulting firm, to assess the facility and its operations. It found, among other things, that Columbine was not using a competitive bid process and that certain Columbine vendors were charging between 44% and 154% more than comparative vendors.

“The bankruptcy case was filed for legitimate reasons to preserve assets and protect residents; the case was not filed as a ‘litigation tactic’ and is not a ‘two-party dispute,’” Garber wrote.

Given the circumstances, “bankruptcy was the only forum in which a light could be shed on the debtor’s past, present and future operations.”

“There is no factual basis to derail or short circuit that process (certification of the reorganization plan). 

The bankruptcy action helped “return the company to profitability” and “largely achieved its goals. And it did so in the face of Wilson’s unrelenting campaign to put the company out of business. … Cause does not exist to dismiss this case … however, … the debtor, in consultation with the U.S. Trustee, has agreed to dismissal.”

An email to John O’Brien of the firm Spencer Fane, attorney for Columbine, to secure a reaction to the motion for dismissal, was not returned as of publication time.

The related bankruptcy cases 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.

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