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Bankrupt Louisiana Heart Hospital Faces WARN Suit

By: Matt Chiappardi
Posted: Feb 6, 2017
Law360

On February 6, 2017, Law360 reported that Louisiana Medical Center and Heart Hospital LLC was hit with class action allegations Saturday that employees were not given proper notification of layoffs, just days after the company filed for Chapter 11 protection and said it will shut down operations at its facility in suburban New Orleans.

A former employee of the hospital filed an adversary action in Louisiana Medical Center's Chapter 11 case in Delaware bankruptcy court, claiming that the debtor violated the Worker Adjustment and Retraining Notification Act by not giving employees 60 days' notice before mass layoffs as required by the law. The lawsuit seeks class action status for the former employees.

"Plaintiff received notice of termination by mail on February 2, 2017, without 60 days' notice as part of, or as the foreseeable result of, a mass layoff or plant shutdown ordered by defendants," the action states. "Such termination fails to give plaintiff and other similarly situated employees of defendants at least 60 days' advance notice of termination, as required by the WARN Act."

The plaintiff is seeking a priority claim in Louisiana Medical Center's case for the entire proposed class of affected employees that amounts to $12,850 per worker, plus the rest of lost wages and benefits as general unsecured claims.

Representatives for Louisiana Medical Center did not immediately respond to requests for comment Monday.

The WARN suit comes just a day after the debtor told the bankruptcy court it plans to move its patients and shut down operations by the middle of February, with plans Friday already in motion to close the emergency room on Sunday morning.

Louisiana Medical Center had filed for Chapter 11 protection Jan. 30, saying the hospital had been unable to generate enough revenue to sustain a $40 million expansion in 2009 that more than tripled the center's patient capacity.

The debtor said it had plans for a bankruptcy sale but could not find a buyer that would agree to keep it operating as a going-concern..

In a first-day declaration, Louisiana Medical Center Chief Restructuring Officer Neil F. Luria said the center is still pursuing a sale transaction, but the specifics of any potential sale remain unclear.

During court testimony, one of the debtor's financial advisers said one suitor is considering a $15 million bid for the hospital, but did not act on the offer in part because of the contracts the hospital had with its physicians. Louisiana Medical Center is seeking the bankruptcy court's permission to reject those contracts in favor of a new pact predicated on post-petition revenues.

Louisiana Medical Center opened in 2003 as a cardiology and spine center and went through a $40 million expansion to keep up with the growing population in the suburban North Shore of the New Orleans area as people left the city proper after Hurricane Katrina. The expansion included the addition of 120 beds; a 109,000-square-foot, four-story patient tower; new operating rooms; twice as many emergency room beds; and new high-tech equipment, according to Luria's declaration.

There is a possibility the case may not remain in Delaware. McKesson Technologies Inc., which licenses intellectual property to the hospital, has asked the bankruptcy court to move the case to Louisiana.

Louisiana Medical Center is represented by Joel A. Waite and Kenneth J. Enos of Young Conaway Stargatt & Taylor LLP and Grant T. Stein, David A. Wender and Sage M. Sigler of Alston & Bird LLP.

The former employee who filed the WARN Act lawsuit is represented by Christopher D. Loizides of Loizides PA and Jack A. Raisner and René S. Roupinian of Outten & Golden LLP.

The adversary case is pending in the U.S. Bankruptcy Court for the District of Delaware.

The bankruptcy case is In re: LMCHH PCP LLC, case number 1:17-bk-10201, in the same venue.

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