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In re Oakland Medical Center, LLC

United States District Court, E.D. Michigan, Southern Division

August 13, 2019

IN RE OAKLAND MEDICAL CENTER, LLC d/b/a DOCTOR'S HOSPITAL OF MICHIGAN Debtor,
v.
BASIL SIMON, as Trustee Appellee. YATINDER SINGHAL, Appellant,

          MEMORANDUM AND ORDER ADOPTING BANKRUPTCY COURT'S REPORT AND RECOMMENDATION (Doc. 11)

          AVERN COHN, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This is a bankruptcy case. Basil Simon, as trustee of the Oakland Physician Medical Center, LLC Liquidation Trust (“Trustee”), sued Yatinder Singhal (“Singhal”) in bankruptcy court (Adv. Doc. 102).[1] The second amended complaint contains seven counts:

• Count I: Re-characterization of Any Advances by Defendant
• Count II: Fraudulent Transfers (11 U.S.C. §§544, 548, 550, 551)
• Count III: Avoidance of Fraudulent Transfers (MCL §§566.31 et seq.)
• Count IV: Breach of Statutory Duty (MCL 450.4401 et seq.)
• Count V: Conversion - Common law and Statutory (MCL 600.2919)
• Count VI: Equitable Subordination (11 U.S.C. §510)
• Count VII: Claim Disallowance (11 U.S.C. § 502)

(Adv. Doc. 102). Singhal objected to bankruptcy court jurisdiction and filed a motion to withdraw the reference, which the Court granted as to the Count IV (Breach of Statutory Duty) and Count V (Conversion). Specifically, the Court said:

Singhal has the right to withdraw Counts IV and V because they are “non-core” proceedings that entitle him to an Article III court determination. However, this Court has the authority to direct the bankruptcy court to “recast its judgment as to [the] claims as proposed findings of fact and conclusions of law, which the district court shall review de novo.” Waldman v. Stone, 698 F.3d at 910, 922 (2012); see also Fed.R.Bankr.P. 9033(d); 28 U.S.C. § 157.

(Doc. 10). Accordingly, the bankruptcy court filed a report and recommendation (“R&R”) regarding the withdrawn claims. (Doc. 11). The bankruptcy court's R&R recommends: (1) granting summary judgment in favor of Trustee on Count V (Conversion) in the amount of $1, 078, 500.00; (2) granting summary judgment in favor of Singhal on Count V (Statutory Conversion); and (3) denying Singhal's summary judgment motion on Count IV (Breach of Statutory Duty). (Doc 11).

         Singhal filed objections relating to the bankruptcy court's R&R, specifically, the portion that recommends granting summary judgment on the common law conversion claim. (Doc. 12). Because there are no objections before the Court as to the R&R's other findings, the Court adopts that portion of the R&R verbatim; summary judgment in favor of Singhal on Count V (Statutory Conversion) is GRANTED, and Singhal's summary judgment motion on Count IV (Breach of Statutory Duty) is DENIED. The Court need only decide Singhal's objections to the common law conversion claim.

         The Court held oral argument on the issue of common law conversion. The Court noted that although Singhal says he is entitled to dispute “the quantum of damages for which [he] would be liable, ” he did not submit evidence (or even argument) that contests the amount of damages shown by Trustee. (Doc. 12). Accordingly, the Court permitted Singhal to submit supplemental briefing for the purposes of disputing damages. Singhal submitted a supplemental brief (Doc. 16), and Trustee filed a responsive brief. (Doc. 17).

         Now before the Court is the bankruptcy court's R&R and the related objections. (Docs. 11, 12, 13, 16, 17). For the following reasons, the bankruptcy court's R&R is adopted in full; Trustee's motion for summary judgment for common law conversion in the amount of $1, 078, 500.00 is GRANTED.

         II. BACKGROUND

         Oakland Physicians Medical Center, LLC, d/b/a Doctor's Hospital of Michigan, operated a student program that accepted students from different medical schools for clinical rotations. In return, the medical schools agreed to compensate the Trustee, which was memorialized by several contracts. Relevant here were the Ross University School of Medicine (“Ross”) agreement and the Windsor University School of Medicine (“Windsor”) agreement.[2]

         At all relevant times, Singhal was a member of Trustee's board of directors. Also, Singhal held a 50% interest in two corporate entities with other doctors: American Medical Education Group, LLC (“AMEG”) and DHOM Education. Although Singhal was not authorized to “take action on behalf of the [Trustee] in his [] individual capacity except pursuant to specific authorization by the Board of Directors, ” Singhal redirected payments under the Ross and Windsor agreements to AMEG and DHOM. (Doc. 11, p. 10). Singhal's actions redirecting payments to AMEG and DHOM-in which he had a 50% interest-that the Trustee was entitled to under the Ross and Windsor agreements, forms the basis for Trustee's common law conversion claim.

         III. BANKRUPTCY COURT'S R&R

         The bankruptcy court found no evidence that Singhal had board approval to redirect the payments under the Ross and Windsor agreements. The R&R discusses Singhal's deposition, which Singhal says creates an issue of material fact. The R&R illustrates that nothing Singhal said evidences that he had authorization to redirect the payments. See (Doc. 11, p. 11-12).

         The R&R also addresses the issue of missing board minutes. There are no meeting minutes for the board from October 17, 2011 to December 21, 2012 and from May 13, 2013 to November 27, 2013. There is no evidence that suggests board approval is contained in the missing minutes, however, there is evidence that neither AMEG nor DHOM had authorization to redirect payments. (Doc. 11, p. 13). The R&R says that Singhal cannot point to the absence of evidence to create a factual dispute, especially when there is affirmative evidence to the contrary.

         The R&R engages in a detailed legal discussion and concludes that Singhal's redirection of payments (and/or the right to ...


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