Below is Dechert’s press release about the recent lawsuit involving Murray Forman and Leonard Grunstein for ownership and operational control of the national for profit chains Sava Senior Care, Mariner Health Care, Inc., and Fundamental Long Term Care.

“Following a two-week bench trial before Justice O. Peter Sherwood of the New York Supreme Court, Dechert achieved a victory today on behalf of Rubin Schron and Cammeby’s Equity Holdings with the court’s ruling that Cam Equity may acquire SavaSeniorCare LLC, a national nursing-home company, through the assumption of $100 million in outstanding debt.  In so doing, Justice Sherwood rejected the claims of Sava’s owners, Leonard Grunstein and Murray Forman, that Schron had fallen $120 million short on his lending commitments as a “prevarication” and concluded that the “mendacity of Grunstein and Forman” entitled their story to be given no weight.

In its decision, the court ruled that Cam Equity “is entitled to reap the benefit of its bargain now” and ordered Grunstein, Forman, and their companies “without further delay” to move forward with transferring control of the company to Cam Equity.

The trial ruling represents the latest victory for Dechert in its longstanding representation of Schron, Cam Equity and affiliated companies in litigation regarding the control of a multi-billion nursing-home company and related fiduciary duty and malpractice claims brought by Schron against the operating company’s owners and Schron’s former attorneys and investment banker.

The victory follows a series of rulings that Dechert has won on behalf of Cam Equity and affiliated companies in seeking to vindicate their rights to acquire SavaSeniorCare and two other nursing-home companied controlled by Grunstein and Forman. Previously, the New York Supreme Court’s Appellate Division, First Department, affirmed an earlier victory before the New York Supreme Court (Commercial Division) upholding the validity of the Sava option. The First Department issued an order resolving another Schron-related lawsuit, concerning a separate option that a Schron company, Cammeby’s Funding LLC, has to acquire one-third of the shares of Fundamental Long Term Care Holdings LLC.  The New York Supreme Court has also granted summary judgment in favor of Cam Equity’s right to acquire two-thirds of Mariner Health Care, Inc.

“We are extremely pleased with the court’s decision,” said Dechert chairman and litigation partner Andrew J. Levander, who led the representation of Schron and Cam Equity along with partner Steven A. Engel. “Today’s ruling confirms that Mr. Schron fulfilled all of his commitments in connection with these transactions and squarely rejects the incredible stories that the defendants have advanced to obstruct Mr. Schron’s contractual rights. Per the court’s decision, Cam Equity should now be able to move forward with acquisition.”

Caption: Schron et al. v. Grunstein et al., case number 650702/2010, in the Supreme Court of the State of New York, County of New York.

The Gainesville Sun reported another verdict against Trans Health Management–this one for $900 million.  Collecting the judgment is the difficult part.  A jury’s civil judgment is the third since 2010 worth more than $100 million that law firm Wilkes & McHugh has won against Delaware corporations that owned or operated 220 nursing homes nationwide — Trans Health Management and its parent Trans Healthcare.   Trans Health Management Inc., meanwhile, has since folded, and its parent, Trans Healthcare Inc., is in receivership in Maryland. Trans Healthcare’s receivership stopped defending Webb’s case in 2010 after years of delay and obstruction.  Because the defense refused to appear, the jury heard unrebutted testimony about what Webb suffered between 2001 and 2005 — the last part of his 10-year stay at University Place.

"The 25-page complaint against the company details how, after entering the nursing home following a stroke, Webb was paralyzed and needed 24-hour care. As the company charged with taking care of him doubled in size, he suffered multiple pressure sores to his right foot, right calf, right heel, coccyx and left buttock, the complaint stated. He suffered multiple infections, septicemia and unexplained weight loss, the complaint said. All the while, the corporations were draining money out of the nursing homes, instead of providing decent care, the complaint said."

"Defendants … acted and failed to act in … their duties to Joseph Webb … for their own gain, to increase their net worth and consolidated revenues, in direct and substantial breach of their duties," the complaint reads   "As a result of these companies’ care, the Rev. Joseph Webb suffered pressure sores and infections that required surgeries, including an above-the-knee amputation of his right leg, attorney Bennie Lazzara Jr. told the jury."

"The family was grateful to have a chance to have the story told for Rev. Webb," Lazzara said. "The main reason the family brought the suit was so that this wouldn’t happen to anyone else."

"Wilkes & McHugh, the law firm for Webb’s family, has yet to collect on either the $114 million judgment a Polk County jury awarded in 2010 in the death of a nursing home patient or a $200 million verdict a Pinellas County jury returned last month after a woman in a wheelchair toppled to her death. Both were cases against this same set of corporations, which at their peak generated $1 billion in revenues, according to Wilkes & McHugh."

"We believe that the assets of these companies have been transferred to other companies," he said. "It’s our intention to follow this company until we find out where the assets are and then we’re going to collect them."

 

The Tampa Bay Times reported that for the third time in two years, the law firm of Wilkes & McHugh has won a nursing home verdict against THI entities, the predecessor of Fundamental Long Term Care Holdings.  In 2010, a Polk County jury awarded $114 million in a nursing home resident’s death. Then, a Pinellas County jury awarded $200 million after a woman in a wheelchair toppled to her death in a stairwell. Now, a Gainesville jury handed down a $900 million verdict, including $700 million in punitive damages — half again more than Wilkes & McHugh had even asked for.

"What is drawing so much outrage from juries is unrebutted testimony that the controlling interests behind these companies were hedge funds and banks that allegedly siphoned money out of nursing home operations by cutting staff, loading up on debt, letting care decline and shuffling funds between corporations to buffer them from lawsuits."

"We are showing the sums of money being looted,” James Wilkes said. "We think total profits were about $2 billion that was sucked out of the system.”

"The Trans Health companies do not appear to have much in the way of assets. But Wilkes & McHugh is trying to collect from a few hedge funds and financial institutions such as GE Capital Corp., saying they colluded to pull money out of nursing home operations and should now be forced to return it."

 

SAVA is a company owned and operated by the infamous Murray Forman–well-known for kickbacks, shell companies, and cost cutting to the detriment of residents.  The West Virginia Record had articles about the lawsuits against SAVA and Canyon Sudar Partners.  See articles here and here.

Two more individuals are suing Canyon Sudar Partners for family members’ abuse and neglect resulting in deaths in separate cases.  Defendants include SVCare Holdings, LLC; Sava Senior Care, LLC; SSC Equity Holdings, LLC; SMV Management Company, LLC; SMV Huntington, LLC; Seventeenth Street Associates, LLC; Annica Stansberry; John Does 1 through 10; and Unidentified Entities 1 through 10 (as to Huntington Health and Rehabilitation).

On May 15, Donald Rein Brooks was admitted to Huntington Health & Rehabilitation, where he remained until July 10.  Tracey Handley claims during her father’s residency at the nursing home, Brooks sustained physical and emotional trauma, including pneumonia, sepsis, falls, bleeding and aspiration.

Bonnie Smith was a resident from 2008 until Sept. 5, according to two complaints filed Nov. 7 in Cabell Circuit Court.  Harold Hanshaw claims the defendants caused Smith physical and emotional trauma, including sexual abuse and contracting genital herpes.

Defendants caused Brooks and Smith to lose their personal dignity and extreme and unnecessary pain; degradation; anguish; other unnecessary hospitalizations; disfigurement; emotional trauma; and ultimately death, according to the suits.

 

A Michigan jury in Macomb County compensated the family of a resident $2.35 million after he
died from choking on a meatball in a Sava nursing home. After an eight day trial and careful
deliberations, the jury concluded that Sava Senior Care Inc., which owned and operated Nightingale Nursing Center, was negligent and caused the death of Walter Polomski, 56, who choked on a golf ball-sized meatball and died after going 15 to 30 minutes gasping for oxygen.  Sava is owned by Murray Forman who also owns and operates the Fundamental Long Term Care Holdings chain of nursing homes.

Sava claimed their subsidiary, SSC Warren Woods Operating, the name on the license, should be
the only Sava entity responsible.  The family’s attorney, John Perrin, said “People need to know that the name on the building isn’t always the company that’s operating the facility,” Perrin said. “There are a lot of shell companies.  Because the real owners don’t put their name on the building, they don’t provide good care.”

Walter Polomski died March 23, 2008, four hours after a meatball got stuck in his trachea
instead of going down his esophagus about 11:35 a.m. at lunch. Polomski never should have had
been given the meatball because he had swallowing problems with doctor’s order for altered
foods. The sole nursing home staffer in the dining room didn’t know the Heimlich maneuver and
instead wheeled him 40 feet or more to a nurse’s station. Another nurse unsuccessfully
performed the Heimlich maneuver on Polomski in the wheelchair then placed him on the ground.
Then another poorly trained nurse tried to force air into his lungs with an “ambu bag,” which
exacerbated the problem. The nursing home failed to call 911 for at least 12 minutes, or properly
staff the dining room, where there should have been at least five staffers. EMS arrived quickly,
and a paramedic removed the meatball with forceps. Polomski died at the hospital on Easter Sunday.

The jury awarded $1.5 million for Polomski’s pain and suffering, $750,000 for the family’s past
“loss of society and companionship” and $100,000 for future loss of companionship. Two jurors
said they agreed Sava was negligent but disagreed with the amount awarded.

The victim’s brother, Richard Polomski was emotional following the verdict.  “I’m ecstatic because my brother’s story was told and I got to find out what exactly happened to him,” Polomski said. “The nursing home was not telling me what EMS was telling me. That’s what prompted me to file a lawsuit.”

Defendants tried to ignore their responsibility by claiming that Polomski’s life expectancy was
only about four to 10 years.

Nursing homes have a fiduciary relationship to nursing home residents.  By law, these are vulnerable adults.  Recently a national debate was ignited following Fundamental Long Term Care’s decision to evict two married residents who wanted to die in peace and dignity.  They had to leave the facility to die.  The New York Times had an interesting article on the issue.  Below are some excerpts:

Armond and Dorothy Rudolph had a mutual horror of a lingering decline in their final years. They’d joined an organization that supports the right to end life when illness or pain becomes overwhelming; they’d attended meetings and given both their children literature on the subject. They’d drafted advance directives.  As it happened, the elder Rudolphs had a long and satisfying old age in Albuquerque, N.M., where they lived for 60 years; they gardened and volunteered with the Boy Scouts and served as leaders in their Presbyterian church. When their large house and gardens became difficult to maintain, they built a smaller one in a neighboring town, then moved again to a retirement community.

In October, they entered an assisted living facility called The Village at Alameda, thinking it would be their last home. Both showed symptoms of early dementia. So in January, they set in motion their plan to stop eating and drinking.  The facility tried to evict the couple. The administrators, apparently on orders from the corporate legal department in Sparks, Maryland, told the family the Rudolphs had to leave the next day.

Their son Neil Rudolph protested that the couple — already on Day 4 of their fast — had nowhere to go. He also pointed out that their contract required 30 days’ notice of discharge. The following day, administrators called 911, reported a suicide attempt and told the paramedics to take the elder Rudolphs to a hospital.

So much for the peaceful passage.

Shortly thereafter, two emergency squads, from the Albuquerque Fire Department and Albuquerque Ambulance Services, converged on the scene. Neil Rudolph’s wife called a reporter from The Albuquerque Journal, to whom the elder Rudolphs gave outraged and lucid interviews. The emergency crews soon called a doctor at the University of New Mexico’s emergency medicine department, part of a consortium that consults when a 911 call brings a situation outside the norm — and this certainly qualified.

Reassured that they understood the ramifications of their decision.  The Rudolphs signed papers showing they had declined transport.  Their children transferred the Rudolphs to a rented house in Albuquerque and moved in themselves.  Neil Rudoplh has launched a campaign with Compassion & Choices to inform people about voluntarily stopping eating and drinking. The organization is circulating a rider to assisted living contracts that states, in part, “Facility will respect Resident’s end-of-life choices and will not impede any course of treatment, or non-treatment, freely and rationally chosen by Resident.”
 

Wisconsin has reached a settlement with Mariner Health Care, Inc. (“Mariner’) and Sava Senior Care Administrative Services, LLC (“Sava”), two nursing home chains operating out of Atlanta, Georgia and their principals, Murray Forman and Leonard Grunstein who also own the chain of Fundamental Long Term Care Holdings, L.L.C.

The settlement terms include the payment of $182,370.97 to the state as part of $422,419.08 attributable to Wisconsin Medicaid.  The settlement relates to the defendants solicitation and receipt of kickback payments from Omnicare, Inc. (“Omnicare”), the nation’s largest pharmacy that specializes in dispensing drugs to long term care facilities.

The settlement is based on a complaint filed in March 2009 in the United States District Court for the District of Massachusetts under state and federal false claims statutes, in which the plaintiffs allege that Omnicare, Mariner, Sava, and three individual investors conspired to arrange for Omnicare to pay $50 million in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for a 15 year period. The states and federal government have received a total of $14 million in civil damages from Mariner and Sava to compensate Medicaid and Medicare programs for harm suffered as a result of this conduct.

In November 2009, the United States government and several states also entered into a $98 million settlement agreement with Omnicare that, among a variety of kickback claims in several cases, resolved Omnicare’s liability for the allegations in this matter.
 

 

 

See articles from Wisconsin Business and Wisonsin Journal Sentinel.

 

The Wall Street Journal had a recent article on the litigation between Reuben Schron and Murray Forman and Leonard Grunstein, the owner/operator of hundreds of nursing homes under SavaSeniorCare and Fundamental.  Lakewood Voice’s and MultiFamilyInvestor had articles based on the Wall Street Journal article.

Real-estate mogul Rubin Schron is fighting his former lawyer for control of a national nursing-home company in a battle that pits one of the city’s largest and most secretive landlords against an attorney who was a trusted adviser and business partner for years.  The fight involves SavaSeniorCare, an Atlanta-based nursing-home chain with 18,000 patients and 20,000 employees that Mr. Schron says he has the right to buy for $100 million—far less than what it’s worth—from his former lawyer, Leonard Grunstein, and banker, Murray Forman.

But the rift between Messrs. Schron and Grunstein runs deeper. Mr. Grunstein first represented Mr. Schron in the 1980s. Today the two sides can’t even seem to agree on whether they used to be friends.  Mr. Schron in court filings has said that their relationship ruptured after he realized that Mr. Grunstein’s interests in their real-estate deals were running counter to his own. Mr. Grunstein says he arranged some of Mr. Schron’s most lucrative acquisitions and that his former client is now trying to take a bigger piece of the pie than he’s entitled to.

The deal for the nursing-home chain was funded by Mr. Schron and devised by Messrs. Grunstein and Forman, according to court filings by both sides. Like other buyouts of big nursing home companies in the mid-2000s, the deal essentially split the chain, a publicly traded company called Mariner Health Care, into two pieces: one operated the facilities and paid rent to the other, which owned the real estate.

Mr. Schron owned the real estate company; Messrs. Grunstein and Forman eventually took control of the operating company, Sava, which paid rent to Mr. Schron for the right to operate those homes.  Mr. Schron claims in his complaint that the deal gave him the option to buy the operating company for $100 million.   Mr. Grunstein later told him the option was worthless and that he could use it “as toilet paper.”

Complicating the case is the tangled relationship between Mr. Schron and Mr. Grunstein, a partner in the New York office of Troutman Sanders LLP who has been on leave from the Atlanta-based law firm since last year. Troutman has filed claims in court for $1.5 million in attorneys’ fees it says are owed to the firm by Mr. Schron. Mr. Schron, in his complaint, said that many of the Troutman invoices are bogus.

Mr. Grunstein’s side says that the nursing-home deal, which the lawyer helped devise, enriched Mr. Schron to the tune of hundreds of millions of dollars, mostly from taxpayers via Medicare and Medicaid.

The spokesman also said that Mr. Schron demanded a rent increase that Messrs. Grunstein and Forman rejected because it would have affected patient care.  The money siphoned away from the nursing homes already affect patient care in short staffing and poor supplies.

 

 

Congratulations to Tom Rhodes and Beth Janicek, who received a $592,439 jury verdict after a 6 day trial against SavaSeniorCare and related entities represented by Lori Proctor (national trial counsel for SSC/SAVA).   Unfortunately, because of arbitrary limits imposed in Texas, the family will not be adequately compensated and will recieve a fraction of the amount the jury awarded.   The case involved a 76 year old nursing home resident who was neglected and developed avoidable bilateral decubitus ulcers on his hips which became infected.

 

The following article appeared in the San Antonio Express-News today regarding the verdict:

 

After more than a day of deliberation, a civil jury found a San Antonio nursing home negligent Wednesday in its care of a now-deceased resident who developed severe, infected bedsores.

Jurors ordered Retama Manor Nursing Center to pay the estate of Emilio Gonzalez $250,000 for his physical pain and suffering, $150,000 for mental pain and anguish and $192,439.88 in medical bills. But the nearly $600,000 verdict is expected to be reduced substantially after state District Judge Victor Negrón applies Texas tort reform caps that have been in place since 2003. Under Texas law, Gonzalez’s family is likely to receive $250,000 in damages and $75,000 in medical expenses to be paid to Medicare.

Mary Koenig, who filed the suit on behalf of her father, said she hopes the judgment sends nursing homes a message. “We wanted to make some changes in my dad’s name,” she said. “We just didn’t want him to be another statistic. We needed to bring attention to the problems that are out there.”

Gonzalez was a resident at Retama Manor from 2001 until months before his death in 2007 at the age of 76.

In closing arguments Tuesday, plaintiffs attorneys Tom Rhodes and Beth Janicek said the nursing home was intentionally understaffed in order to make more money, often leaving nurses with up to 60 residents to oversee at a time.

By the time Gonzalez was taken to Southwest General Hospital in August 2007, two bedsores had rotted to the bone, requiring an extended stay at a hospital specializing in wound treatment, they said.

Attorney Lori Proctor, who represented the nursing home, pointed out that Gonzalez’s bedsores had always healed before in the six years he spent at the nursing home. The difference this time, she said, was that he had recently been diagnosed with terminal lung cancer that was making it impossible for him to heal.

 

 

Levin and Associates had an interesting article in The Senior Care Investor discussing the bankruptcy and sale of IHS to THI and eventually Fundamental long Term Care Holdings LLc, owned and operated by Murray Forman and Leonard Grunstein.  Below are excerpts from the article:

Very few people remember what happened a little more than seven years ago, but in early
2003, an unknown entity (at least to the senior care world) stepped in at the last minute and snatched the remaining assets of a bankrupt Integrated Health Services (IHS) from the presumed
buyer, literally on the steps of the court house. Trans Healthcare Inc. (THI) thought it had the deal wrapped up for $97.5 million, but an entity called Abe Briarwood, backed by Cammeby’s
International, swooped in for $114 million in cash and was willing to assume the post-petition Medicaid and Medicare billing liabilities, something that made the court very happy.

We are certain that the founder of Cammeby’s, one Rubin Schron, had no idea where this initial acquisition would take him in the rough and tumble skilled nursing industry….  And, most certainly, he never thought he would now be in court pitted against a man he trusted with everything. After Cammeby’s made the winning bid at the 11th hour, THI at first tried to fight it, but then the two sides settled their differences when Cammeby’s hired THI to run the newly acquired IHS assets.  Then, in May 2004, we caught wind of an acquisition offer that was brewing for the former Mariner Health Care from none other than Cammeby’s, but under the name National Senior Care, and separate from its Integrated Health.  The purchase price for Mariner was just under $1.0 billion, and when you capitalized the lease payments, the total transaction value increased to about $1.25 billion. This resulted in a price per bed of $38,800 and a 9.2x multiple of annualized EBITDAR.  The
deal closed at the end of 2004, but perhaps the most longlasting impact on the target entity, which some time later had a name change to Sava SeniorCare, was the role that Mr. Schron’s attorney, Leonard Grunstein, came to play.
There were really two sets of problems that began to emerge. One was what transpired with the original acquisition of the Integrated Health assets and the role of Trans Healthcare, which eventually came to be known as Fundamental Long Term Care when Fundamental purchased the assets of THI, the sale of which some claim was under duress and fraudulent.  There is a separatelawsuit filed on July 1, 2010, against Leonard Grunstein, his brother Harry, Murray
Forman alleging, among other things, fraudulent conveyance, unjust enrichment, legal malpractice, fraud, breach of fiduciary duty, breach of lease agreements, tortious interference and aiding and abetting fraud. The lawsuit was filed by Allen Bodner and DMV Funding LLC and is seeking no less than $150 million in damages and no less than $300 million in punitive damages.
According to the complaint, Bodner owned 100% of DMV which purchased Cammeby’s loan to the Abe Briarwood/IHS deal, and there are 30 more pages as to what transpired among the various parties. The long and short of the complaint was that the plaintiffs believe they got screwed, to
put it bluntly, by people who were partnering with them and advising them
.
The more interesting lawsuit, but sort of related, was filed on June 22, 2010, with Rubin Schron and his various holdings as the plaintiffs against a similar cast of characters including Leonard Grunstein, Murray Forman, the law firm Troutman Sanders, and the various Sava and Mariner
affiliates. To fully appreciate how unusual this lawsuit is, one must always keep in mind that Leonard Grunstein was Rubin Schron’s attorney. ….Mr. Grunstein did much of the legal work involved in the Mariner acquisition and subsequent Opco and Propco set-ups that evolved over time.
The relationship between Mr. Schron and Mr. Grunstein dates back to the 1980s, and according to the complaint, he apparently has referred to himself as Mr. Schron’s “general counsel.” According to the complaint, Mr Schron relied on legal advice from his attorney who began to organize things to the benefit of the attorney, and on financial advisory services from Mr. Forman, who was allegedly in cahoots with Mr. Grunstein. Mr. Schron never wanted to have anything to do with operating the nursing facilities; he just wanted a steady, but increasing, rental stream from the
real estate. In the case of the Mariner acquisition, according to the complaint, Mr. Schron put all the money up and ended up owning the real estate in Propco, while Grunstein/Forman retained ownership of the operating entity created to run the facilities, and all the excess cash flow, plus they received a small share of Propco—all without investing any of their own money.  In addition, according to the complaint filed, Mr. Schron was charged $14 million for financial advice in the Mariner deal by MetCap Advisory Services, which was 25% owned by Mr. Grunstein and 25% owned by Mr. Forman.   Other allegations in the nearly 100-page complaint include loans made to Opco that were never paid back to Mr. Schron, distributions taken by the Grunstein/Forman group
totaling more than $70 million, Grunstein billing Schron for non-existent legal work, and for allegedly not giving Schron the final closing documents for the original Mariner acquisition.
One also needs to remember that all of this recent legal action is on top of several issues earlier this year, when Mr. Grunstein and Mr. Forman sued Mr. Schron for more than $100 million for allegedly misappropriating significant sums of money from various partnerships in which they all had a stake.

And don’t forget that all three of them were defendants together when the Department of Justice charged them all with accepting kickbacks from Omnicare in return for pharmacy contracts. Without admitting guilt, they settled and agreed to pay the federal government $7.8 million
and $6.1 million to certain states.

Over the past two years the owners of Sava (Mariner) have been trying to sell off various pieces of the company (or the whole thing), notably the portfolio of mostly leased assets in California, but with little success. The obvious problems were pricing and financing.  Currently, Sava is the seventh largest skilled nursing company in the country with 184 facilities and 21,279 skilled
beds, and it is larger than half of the publicly traded skilled nursing companies.   Still, we believe that selling the assets is a real outcome, especially for Mr. Schron who we assume wants to be done with his relationship with his former attorney and financial advisor, and may even want to be out of the skilled nursing real estate business altogether. The other side, however, may
still not want to give up their cash cow, but the courts and the credit markets may make the decision for them.