Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

National Medical Imaging, LLC v. U.S. Bank, N.A.

United States District Court, E.D. Pennsylvania

July 12, 2017

U.S. BANK, N.A., ET AL., Defendants.


          RUFE, J.

         As compared to the thorny history underlying this case, the issue before the Court is simple: have Plaintiffs adequately alleged that Defendant Ashland, LLC filed involuntary bankruptcy petitions against them in bad faith pursuant to 11 U.S.C. § 303(i)(2)?[1] Plaintiffs National Medical Imaging, LLC and National Medical Imaging Holding Company, LLC (together, “NMI”) seek to hold ten defendants jointly and severally liable.[2] For the reasons discussed below, the Court will deny Defendant Ashland Funding, LLC's motion to dismiss Plaintiffs' Amended Complaint.[3]


         The parties in this bankruptcy case are familiar foes, having spent over a decade litigating the aftermath of a complex securitization transaction. In 2000, Plaintiffs were affiliated with certain limited partnerships (the “NMI LPs”) that operated diagnostic imaging centers. The NMI LPs entered into master leases and equipment schedules (the “Master Leases”) with DVI Financial Services, Inc. (“DVI Financial”) to finance the purchase of medical diagnostic equipment. The leases were secured by a limited guaranty executed by Maury Rosenberg, the managing member of NMI, and an additional guaranty by NMI.

         DVI Financial then transferred some of the Master Leases to DVI Funding, LLC, which held them directly, and the remainder were securitized and assigned to the DVI Receivables corporations. At the same time, DVI Funding entered into indentures with U.S. Bank, acting as trustee of the transaction, under which notes were issued to investors with the Master Leases serving as collateral. DVI Financial was appointed as servicer for the trustee, U.S. Bank, but after filing for bankruptcy in 2003, DVI Financial transferred its rights as servicer to Lyon Financial Services, a subsidiary of U.S. Bank.

         A. The First Round of Litigation and the Settlement Agreement

         In December 2003, U.S. Bank Portfolio Services, a Lyon subsidiary, filed lawsuits against the NMI LPs, NMI, and Rosenberg in Pennsylvania state court, alleging that the NMI LPs had defaulted on their Master Lease obligations. Several of the DVI entities then filed involuntary Chapter 11 bankruptcy petitions against NMI. On August 12, 2005, Rosenberg, NMI, the NMI LPs, and Lyon entered into a comprehensive Settlement Agreement to resolve these disputes. Pursuant to the Settlement Agreement, the involuntary bankruptcy petitions were dismissed, and Lyon agreed to restructure the repayment obligations of the NMI LPs under the Master Leases and to release NMI from all claims except those arising under the Settlement Agreement. In return, Rosenberg and NMI executed new guaranties of repayment and confessions of judgment in favor of Lyon. On March 2, 2007, DVI Funding sold all of its interests in the Master Leases to Defendant Ashland Funding, LLC (“Ashland”).

         B. Round Two: Judgment is Confessed, the Involuntary Petitions are Filed, and the Rosenberg Bankruptcy is Adjudicated in Florida

         In March 2008, Lyon notified NMI and Rosenberg that the NMI LPs had defaulted on their repayment obligations under the Settlement Agreement, and in July 2008, Lyon filed a confession of judgment against Rosenberg and NMI in Pennsylvania state court. In November 2008, DVI Funding, despite having no remaining interest in the Master Leases, together with five other DVI entities, filed involuntary bankruptcy petitions against NMI and Rosenberg in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Rosenberg moved to dismiss the involuntary petitions against him and to transfer venue to the United States Bankruptcy Court for the Southern District of Florida, where he resides. The Rosenberg bankruptcy proceedings were transferred to that district.

         Following the transfer of venue, and while Rosenberg's motion to dismiss the involuntary petition was still pending, the petitioners filed a second amended petition which substituted Ashland in place of DVI Funding. Rosenberg moved to strike the second amended petition as improperly filed without leave of court. After a hearing on Rosenberg's motion to dismiss the amended involuntary petition, the Florida Bankruptcy Court issued a memorandum opinion and order dismissing the amended involuntary bankruptcy petition against Rosenberg (“Rosenberg I”).[5] In light of this decision, the court dismissed as moot the motion to strike the second amended petition.[6] The Florida Bankruptcy Court reached five alternative holdings: (1) there was no guaranty in favor of the DVI entities or Ashland, and therefore they were not creditors of Rosenberg; (2) the DVI entities and Ashland were not the real parties in interest; (3) the DVI entities were judicially estopped from filing the involuntary bankruptcy petitions because Lyon had claimed that the Rosenberg guaranty was owed to it when filing the confession of judgment in the Bucks County court; (4) Lyon was Rosenberg's only creditor because the Settlement Agreement constituted a novation; and (5) the DVI entities and Ashland held contingent claims subject to a bona fide dispute.[7]

         On September 27, 2011, the United States District Court for the Southern District of Florida issued a memorandum opinion and order substantially affirming the Florida Bankruptcy Court's decision (“Rosenberg II”), [8] and, on July 6, 2012, the Eleventh Circuit issued a per curiam opinion affirming Rosenberg II in full (“Rosenberg III”).[9]

         C. The Eastern District Bankruptcy Court Gives Collateral Estoppel Effect to Rosenberg I

         In the Pennsylvania bankruptcy proceedings, Ashland was added as a petitioner in the Second Amended Petition as successor to DVI Funding, and later joined the other petitioners in filing a Third Amended Petition. After Rosenberg I, the Bankruptcy Court for the Eastern District of Pennsylvania dismissed the involuntary bankruptcy petitions against NMI on the basis of the collateral estoppel effect of Rosenberg I's holdings that (1) the DVI entities and Ashland were not real parties in interest and (2) Lyon was the only creditor because the Settlement Agreement constituted a novation.[10] The DVI entities and Ashland appealed, and this Court affirmed the Pennsylvania Bankruptcy Court's order.[11] The Third Circuit affirmed after Ashland appealed this Court's order.[12]

         D. Rosenberg's § 303(i) Adversary Proceeding

         While the appeals to the Southern District of Florida and Eleventh Circuit were pending, Rosenberg brought a § 303(i) sanctions claim in an adversary proceeding in the Florida Bankruptcy Court.[13] Ashland moved to dismiss, and the Florida Bankruptcy Court granted its motion, finding that because Ashland was not a petitioning creditor in the operative underlying petition, a § 303(i) sanctions claim against it could not stand.[14] After the reference was withdrawn from the Bankruptcy Court, the Florida District Court held a jury trial on Rosenberg's § 303(i)(2) claims for damages. The jury returned a verdict in favor of Rosenberg and against the DVI entities and U.S. Bank, and that verdict was upheld by the Eleventh Circuit.[15]

         E. NMI's § 303(i) Adversary Proceedings

         On May 27, 2014, Plaintiffs brought claims for attorneys' fees and costs under § 303(i)(1) and Bankruptcy Rule 9011 in two adversary proceedings in the Pennsylvania Bankruptcy Court. Plaintiffs also filed a complaint in this Court against Defendants seeking damages under § 303(i)(2). On March 30, 2014, this Court granted Defendants' Motion to Dismiss Plaintiffs' Complaint, holding that § 303(i)(2) does not create an independent cause of action that may be brought directly in the district court. Plaintiffs then filed Amended Complaints in the adversary proceedings, adding claims for damages under § 303(i)(2), and moved to withdraw the references from the Pennsylvania Bankruptcy Court as to the § 303(i)(2) claims. The Court granted Plaintiffs' motion on September 1, 2016.

         NMI filed the instant amended complaint on September 21, 2016, in accordance with the Order of this Court granting NMI's request to withdraw the reference from the Bankruptcy Court. The amended complaint seeks compensatory and punitive damages under 11 U.S.C. §303(i)(2) arising from the involuntary bankruptcy suit brought by Defendants.[16] U.S. Bank, Lyon Financial Services, and the DVI entities filed an answer to the amended complaint, and Ashland moved to dismiss.


         Pursuant to Federal Rule of Civil Procedure 12(b)(6), dismissal of a complaint for failure to state a claim upon which relief can be granted is appropriate where a plaintiff's “plain statement” lacks enough substance to show that he is entitled to relief.[17] In determining whether a motion to dismiss should be granted, the court must consider only those facts alleged in the complaint, accepting the allegations as true and drawing all logical inferences in favor of the non-moving party.[18] Courts are not, however, bound to accept as true legal conclusions couched as factual allegations.[19] Something more than a mere possibility of a claim must be alleged; a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.”[20]


         Ashland argues that its dismissal from this case is warranted for the following five reasons: (1) its dismissal from the Florida bankruptcy action compels its dismissal here; (2) NMI has not alleged that Ashland was a “petitioner” under § 303(i)(2); (3) NMI has not sufficiently pleaded that Ashland acted in bad faith; (4) NMI has failed to plead that its damages were proximately caused by Ashland ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.