In re: Peoria Regional Medical Center, LLC ( 2019 )

FILED
AUG 2 2019
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. AZ-18-1317-LBF
PEORIA REGIONAL MEDICAL Bk. No. 2:17-bk-11742-SHG
CENTER, LLC,
Debtor.
NAT PALANIAPPAN, a/k/a Raj
Palaniappan,
Appellant,
v. MEMORANDUM*
PEORIA REGIONAL MEDICAL
CENTER, LLC,
Appellee.
Argued and Submitted on July 18, 2019
at Phoenix, Arizona
Filed – August 2, 2019
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Appeal from the United States Bankruptcy Court
for the District of Arizona
Honorable Scott H. Gan, Bankruptcy Judge, Presiding
Appearances: Appellant Nat Palaniappan argued pro se; Heather Macre
of Aiken Schenk Hawkins & Ricciardi P.C. argued for
Appellee.
Before: LAFFERTY, BRAND, and FARIS, Bankruptcy Judges.
INTRODUCTION
Appellant Nat Palaniappan entered into a prepetition employment
contract (“MOU”) with Peoria Regional Medical Center, LLC (“PRMC”) to
act as its CFO and to obtain financing to complete construction of a hospital
on real property owned by PRMC. After PRMC filed its chapter 111
petition, it terminated Mr. Palaniappan’s employment. Mr. Palaniappan
filed a claim for severance pay under the MOU. After a hearing, the
bankruptcy court entered an order disallowing Mr. Palaniappan’s claim for
severance pay and ruling that under the MOU he was entitled to
compensation of only $15.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
Finding no error in the bankruptcy court’s interpretation of the MOU,
we AFFIRM.
FACTUAL BACKGROUND
PRMC was formed in 2007 to own real property in Peoria, Arizona
(the “Property”) on which a hospital would be built and operated. PRMC
began construction, but it ran out of money in 2012. PRMC’s management
sought outside financing to complete the construction, and PRMC’s
manager, Timothy A. Johns, M.D. engaged Mr. Palaniappan to help find
financing.
In March 2017, Mr. Palaniappan drafted, without the assistance of
legal counsel, a document entitled “AGREEMENT FOR NORTH WEST
MEDICAL CENTER DBA PEORIA REGIONAL MEDICAL CENTER.”
Dr. Johns reviewed the document and made several changes to it,
including changing the word “AGREEMENT” to “MOU” (memorandum
of understanding). Dr. Johns then initialed and dated the MOU.
The MOU provided that “CFO Mr. Palaniappan N.” would be
responsible for procuring construction financing, working capital and
equipment financing and overseeing all fiscal and fiduciary responsibilities
for the “organization.” Additionally, he was to lead the finance department
and oversee “Information Systems, Banking Relationships and Patient
Financial arrangements.”
Paragraph 1 of the MOU provided, somewhat confusingly, that
3
Mr. Palaniappan would be paid “$1 per month pre loan procurement may
be canceled with 30 days written [sic] if foreclosed by New Vision Health
or City mandate. Equity shares will be offered instead of Compensation.”
The MOU provided for “post loan funding and commencement of
construction compensation” of $100,000 annually plus health insurance, to
be increased upon the occurrence of certain events.
The MOU contained two alternative severance provisions, which
depended upon the procurement of financing and the party who procured
it. Specifically, if Mr. Palaniappan procured financing,
[a]t the end of employment? [sic] as agreed upon by the Board
of Directors, Investors and Operating Manager for any reason
other than malfeasance, at the time of separation, you will be
provided with separation package of one year’s current salary
and keep [sic] any equity shares issued to you, unless you are
CFO of NWMC/PRMC plus an additional hospital where Tim
Johns is manager, your severance will be one year of the current
salary you are receiving for your dual role.
Alternatively, if Dr. Johns secured funding, and Mr. Palaniappan was
terminated for any reason,
severance will be the sum total of 9 months of the 185,000 or
any current salary whichever is highest and any equity shares
assigned to Mr. Palaniappan. N. [sic]
No financing was secured, and on August 30, 2017, the City of Peoria
issued a notice to abate code violations at the Property, setting a deadline
of September 27, 2017 for PRMC to obtain a permit to demolish the
4
partially constructed structure. As this apparently did not occur, on
October 3, 2017, the City of Peoria notified PRMC of its intent to demolish
the structure immediately. Around the same time, secured creditor Gilbert
Hospital began foreclosure proceedings on its note secured by a deed of
trust against the Property.
PRMC filed a chapter 11 petition on October 4, 2017.
Dr. Johns terminated Mr. Palaniappan’s employment with PRMC in
May 2018.2 In July 2018, PRMC filed a motion to approve a sale of the
Property to ADB Investments, LLC, subject to overbid. The terms of the
sale included a right of first offer to PRMC to rent space in the hospital
building to be constructed on the Property. Mr. Palaniappan objected to the
sale on the grounds that he was owed an administrative claim pursuant to
the MOU, specifically, a separation package, health insurance, equity
shares in the hospital, and compensation for “lost fees from not accepting
comprehensive overseas funding.” He also filed a motion for relief from
stay to permit him to go to state court to adjudicate the amount of his
claim.
At the hearing on the sale motion, the court explained to
2
The parties seem to disagree on the exact date of termination. PRMC asserts that
Dr. Johns sent Mr. Palaniappan a “termination email” on May 3, 2018. In his appellate
brief, Mr. Palaniappan contends he was served a formal notice of termination on
August 30, 2018, and at oral argument in the bankruptcy court he disputed that he was
terminated in May 2018, but in his motion for relief from stay he stated he was
“terminated abruptly” in May 2018.
5
Mr. Palaniappan that the issue before the court was whether it should
approve a sale that would pay the liens and taxes on the Property and that
Mr. Palaniappan’s entitlement to payment of a claim was not a basis to
disapprove the sale. The court overruled his objection and approved the
sale. The court then stated:
What I wanted to explain is that, if you think you have a claim,
which you’ve seemingly started to assert in this case, you need
to file an application to be paid as an administrative expense
claimant in this case. It needs to set forth not just the reasons
why you think you could be paid, but also what amount you
believe is an administrative expense of this estate and why. You
need to file it, and you need to serve it in accordance with the
rules.
Then Ms. Macre [PRMC’s counsel] will have an opportunity to
object, and then we’ll set some kind of a hearing if necessary to
either argue the merits or to determine what the next step will
be. I would suggest that you hire someone to help you. I can’t
make you go out and get someone and I don’t know whether
you can financially afford it, but it would be of significant
assistance to you to have someone work with you to help you
prepare this and get it on file.
On September 20, 2018, Mr. Palaniappan filed a proof of claim listing
an unsecured claim of $138,750 with the notation “+ * Equity Shares in
P.R.M.C./N.W.M.C. Peoria or Proxy[.]” He listed “separation and severance
package” as the basis for the claim. He did not attach the MOU to his proof
of claim, but he did attach it to his concurrently filed “Motion to Set
6
Hearing on Severance Claim Due to Plaintiff,” asserting that the basis for
the claim was the MOU. In that motion, he requested an evidentiary
hearing “if Court felt [sic] it is necessary.”
PRMC filed an opposition, asserting that the MOU was not
enforceable, and in any event, no events had occurred that triggered the
severance provisions. Alternatively, PRMC argued that Mr. Palaniappan
was entitled under the MOU to no more than $15.
At the hearing on the severance claim, the court permitted
Mr. Palaniappan to argue at length. Mr. Palaniappan conceded that his
claim was based on the MOU, but he essentially argued that there were
terms incorporated into the MOU that were not plainly spelled out. For
example, he claimed that he was entitled to compensation for developing a
business model, dealing with the City of Peoria in requesting an extension
on the demolition deadline, and for other duties he performed as CFO. He
stated that he would bring in evidence of his dealings with the City if the
court permitted an evidentiary hearing.
He also seemed to argue that the term “funding” as required under
the MOU included selling the Property, building a hospital, and then
leasing it back, such that the sale to ADB fulfilled that definition. But the
bankruptcy court correctly observed that none of those terms appeared in
the MOU.
Ultimately, the court concluded that although the MOU met the
7
requirements of an enforceable contract under Arizona law,
under the terms of [the MOU], nothing was ever performed by
[Mr. Palaniappan] or Dr. Johns that would result in the
payment of a severance claim greater than the dollar a month
that you’re entitled to under the original paragraph of [the
MOU], which is unfortunate, but that’s the way the agreement
is written.
The court also denied Mr. Palaniappan's motion for relief from stay,
finding that his claim had to be adjudicated in the bankruptcy court.
On November 6, 2018, the bankruptcy court entered an order (“Claim
Order”) finding that: (1) the MOU was a binding agreement; (2) the terms
contained in Paragraph 1 of the MOU controlled the outcome of the
severance claim; (3) Mr. Palaniappan is entitled to a claim for $1 per month
from March 6, 2017, through May 2018, for a total of $15. The order
required PRMC to pay Mr. Palaniappan $15 to satisfy the claim and
disallowed the remainder of the claim.3
On November 13, 2018, Mr. Palaniappan moved for reconsideration.
The bankruptcy court promptly denied the motion without a hearing.
Mr. Palaniappan timely appealed, referencing only the Claim Order. He
also moved for a stay pending appeal, but the bankruptcy court docket
3
It is not clear why the court apparently treated the entire amount as an
administrative claim, given that part of the claim was incurred pre-petition. However,
no party has raised this as an issue, and the amount at issue is de minimis.
8
does not reflect that the matter was ever set for hearing or ruled upon.4
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court erred in disallowing
Mr. Palaniappan’s claim for severance pay.
STANDARDS OF REVIEW
An order sustaining or overruling a claim objection “can raise legal
issues (such as the proper construction of statutes and rules) which we
review de novo, as well as factual issues (such as whether the facts
establish compliance with particular statutes or rules), which we review for
clear error.” Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 918
(9th Cir. BAP 2011) (citations omitted).
“De novo review requires that we consider a matter anew, as if no
decision had been made previously.” Francis v. Wallace (In re Francis), 505
B.R. 914, 917 (9th Cir. BAP 2014) (citations omitted).
Factual findings are clearly erroneous if they are illogical,
implausible, or without support in the record. Retz v. Samson (In re Retz),
606 F.3d 1189, 1196 (9th Cir. 2010). If two views of the evidence are
possible, the court’s choice between them cannot be clearly erroneous.
4
Mr. Palaniappan did not appeal the denial of his motion for relief from stay.
9
Anderson v. City of Bessemer City, 470 U.S. 564, 573-75 (1985).
DISCUSSION
A. We need not dismiss this appeal for Mr. Palaniappan’s failure to
comply with applicable rules of appellate procedure.
PRMC requests that we dismiss this appeal based on
Mr. Palaniappan’s failure to comply with several rules of appellate
procedure. Specifically, PRMC points out that Mr. Palaniappan failed to
submit a coherent statement of issues or to sufficiently articulate error by
the bankruptcy court to permit PRMC to respond. In addition,
Mr. Palaniappan did not provide a complete record, nor did he reference
the record in his opening brief. That brief does not comply with Rule 8014,
as it lacks a jurisdictional statement, statement of issues and standard of
review, a concise statement of the case, and a certificate of compliance, and
the brief does not comply with the formatting requirements of Rule 8015,
nor does it include the certificate of interested parties or related cases
required by Ninth Circuit BAP Rule 8015(a)-1. Finally, PRMC notes that
the brief lacks a proof of service as required by Rule 8011, and that the
notice of appeal did not list PRMC or its counsel.
Pro se litigants are not excused from complying with the rules of
appellate procedure. Clinton v. Deutsche Bank Nat'l Trust Co. (In re Clinton),
449 B.R. 79, 83 (9th Cir. BAP 2011). And we have discretion to dismiss the
appeal or summarily affirm based on these rules violations. See N/S Corp. v.
10
Liberty Mut. Ins. Co., 127 F.3d 1145, 1146 (9th Cir. 1997) (striking appellant’s
brief and dismissing appeal based on numerous violations of appellate
rules); In re Clinton, 449 B.R. at 82-83 (summarily affirming bankruptcy
court’s orders due to appellant’s failure to file an adequate record to permit
meaningful review).
But we need not dismiss this appeal. We note that Mr. Palaniappan
did provide a copy of the October 25, 2018 transcript, and PRMC has
provided sufficient excerpts to complete the record and permit us to review
the bankruptcy court’s ruling. As discussed below, more problematic is
Mr. Palaniappan’s failure to address exactly how he believes the
bankruptcy court erred in its ruling. He instead attempts to reargue his
case before this Panel, presumably in the hope that we will view the matter
differently. We do not.
B. Mr. Palaniappan has not shown that the bankruptcy court erred in
disallowing his severance claim.
Despite Mr. Palaniappan’s lengthy recitation of alleged facts
regarding his relationship with PRMC and Dr. Johns, this appeal turns
solely on the interpretation of the MOU Mr. Palaniappan drafted. As noted,
there were two alternative severance provisions in the MOU, neither of
which would be triggered unless Mr. Palaniappan or Dr. Johns secured
funding for PRMC. The bankruptcy court correctly found that this
condition did not occur. The sale to ADB was just that–a sale–and not the
11
procurement of financing. And the granting to PRMC of a right of first
offer to rent space in the new hospital building did not transform the sale
into financing, despite Mr. Palaniappan’s argument that this was the
“business model” employed with other hospital properties in which he and
Dr. Johns had been involved.
Mr. Palaniappan agreed that his claim was based on the MOU, but
his arguments were focused on matters outside the contract, such as
Dr. Johns’ transactions with officers of other hospitals and how those other
hospitals obtained funding. Under Arizona law, however, if a contract is
not reasonably susceptible to the interpretation offered by a party to the
contract, that party may not introduce extrinsic evidence contradicting the
written language. Birdsell v. Fort McDowell Sand & Gravel (In re Sanner), 218
B.R. 941, 945 (Bankr. D. Ariz. 1998) (citing Taylor v. State Farm Mut. Auto.
Ins. Co., 854 P.2d 1134, 1139 (Ariz. 1993)). In any event, Mr. Palaniappan’s
assertions are barely comprehensible, and even if they were plausible, there
is no evidence that PRMC agreed to any terms other than what was
contained in the MOU.
Nevertheless, Mr. Palaniappan argues that he should have been
granted an evidentiary hearing and that his due process rights were
violated when that did not occur. But the bankruptcy court carefully
considered Mr. Palaniappan’s filings and patiently permitted him to
present his arguments, none of which raised any relevant issue of material
12
fact sufficient to require an evidentiary hearing regarding the
interpretation of the MOU.
Mr. Palaniappan’s remaining arguments on appeal are difficult to
discern, but appear to be completely irrelevant to whether the bankruptcy
court erred in interpreting the MOU to disallow his severance claim. As he
did in the bankruptcy court, Mr. Palaniappan recites his history of working
with Dr. Johns at other hospitals. He alleges that Dr. Johns used the
business model Mr. Palaniappan developed to obtain a sale agreement
with ADB. His argument seems to be that the definition of “funding” as
used in the MOU included an investor commitment to complete the
hospital, then lease it to Dr. Johns or PRMC, and that ADB is committed to
doing so. But the MOU did not reflect that this was what the parties
intended when executing the MOU. Moreover, as the bankruptcy court
pointed out, ADB is not committed under the sale agreement to leasing the
Property to PRMC; rather, as noted, PRMC has the right of first offer to
lease space in the new building. And, as PRMC points out, the sale
agreement does not require ADB to complete construction of a hospital at
all.
Mr. Palaniappan also recites numerous tasks he performed in his
capacity as CFO of PRMC and points out that he had some discussions
regarding financing with an overseas investor. But, as the bankruptcy court
found, the plain language of the MOU limits Mr. Palaniappan’s
13
compensation to $1 per month “pre loan procurement” if no financing is
obtained. Although this figure seems shockingly low, that is what the
contract–which was drafted by Mr. Palaniappan–provides. The bankruptcy
court did not err in so concluding.
Finally, Mr. Palaniappan complains that the bankruptcy court “took
no time to deny his reconsideration request,” but he did not include the
order on reconsideration in his notice of appeal. Although this does not
necessarily preclude our review of the order on reconsideration, see United
States v. Arkison (In re Cascade Roads, Inc.), 34 F.3d 756, 761-62 & n.5 (9th Cir.
1994), Mr. Palaniappan did not present any argument as to how the
bankruptcy court failed to properly apply the standard for
reconsideration.5 Accordingly, we need not consider the matter. See Jodoin
v. Samayoa (In re Jodoin), 209 B.R. 132, 143 (9th Cir. BAP 1997) (“We ‘will not
ordinarily consider matters on appeal that are not specifically and
distinctly argued in appellant’s opening brief.’” (citing Miller v. Fairchild
Indus., 797 F.2d 727, 738 (9th Cir. 1986))).6
5
Reconsideration under Civil Rule 59(e), applicable via Rule 9023, is appropriate
only if the moving party demonstrates (1) manifest error of fact; (2) manifest error of
law; or (3) newly discovered evidence. Hansen v. Moore (In re Hansen), 368 B.R. 868, 878
(9th Cir. BAP 2007) (citing Hale v. U.S. Trustee (In re Basham), 208 B.R. 926, 934 (9th Cir.
BAP 1997), aff'd, 152 F.3d 924 (9th Cir. 1998) (table).
6
Mr. Palaniappan requests as alternative relief that we lift the automatic stay to
permit him to go to state court. But we have no jurisdiction to provide this relief, even if
we believed it was warranted. Moreover, to the extent he is arguing that the bankruptcy
(continued...)
14
CONCLUSION
For these reasons, we AFFIRM.
6
(...continued)
court erred in denying stay relief, we have no jurisdiction over that order as it was not
timely appealed.
15