Supes file court motion to assume or reject lease

By Amanda McBride

The Choctaw Plaindealer

The Choctaw County Board of Supervisors held an emergency meeting Jan. 25 to discuss healthcare issues and immediately entered into executive session.

The board entered into an executive session to discuss current litigation with Brandywine Health Services. In executive session, Peyton Prospere, attorney with Watkins and Eager Law Firm, advised the supervisors of what steps need to be taken, on behalf of Choctaw County, in Brandywine's U.S. Bankruptcy Court-Northern District proceedings.

After hours of discussion, the Board of Supervisors authorized Watkins & Eager Law Firm to submit an emergency motion to require the debtor (Brandywine) to assume or reject the amended (current) lease agreement with Choctaw County.

The U.S. Bankruptcy Court-Northern District will hold a hearing on this motion Feb. 8 in the Thad Cochran U.S. Courthouse in Aberdeen.

The emergency motion states many reasons why the Board of Supervisors for Choctaw County believes the lease should be rejected or terminated. The reasons include:

¥ Brandywine voluntary filed a petition on Dec. 14, 2009 for bankruptcy proceedings. No trustee or examiner has been appointed.

¥ In the lease agreement with Choctaw County, Brandywine agreed to lease a 25 bed rural hospital and skilled nursing facility adjacent to the hospital with 73 authorized beds for subacute and other nursing care patients.

¥ "As of the petition date, there were monetary and non-monetary defaults under the terms of the Amended Lease. Post-petition there are non-monetary defaults on the Amended Lease that cannot be cured. These defaults affect the health and welfare of the citizens of Choctaw County. Specifically, there is a post-petition default under the Amended Lease as a result of Brandywine's loss of its license to operate the twenty-five (25) bed rural hospital and the corresponding loss of its Medicare provider number. Brandywine would have to submit to the application process for a new license with the Mississippi State Department of Health, and be granted such a license, before it could reopen and operate the hospital; there is no guarantee that a new license would be granted. The hospital has been closed almost six (6) weeks and Brandywine has taken no steps toward acquiring a new license, and there is no indication that it will."

¥ Pursuant to paragraph 20 of the Amended Lease, "(iii) the taking, commencement or institution of any action or proceeding, including fast track proceedings, by any state or federal authority having jurisdiction over the Demised Premises as a health care facility to terminate or revoke any license, certification of Lessee which Lessor is not immediately notified or which is not resolved within fifteen (15) days for fast track proceedings or thirty (30) days for any other action or proceedings. . .." is a default. Further, pursuant to paragraph 41(a) of the Amended Lease, it is a default if "the acute care hospital, with laboratory and x-ray, an emergency room (on a 24-hour day basis), and outpatient treatment services . . . operations are ceased for a period of thirty (30) days." Both of these events will not be cured by Brandywine.

¥ "There is an immediate need for the residents of Choctaw County to have an acute care

hospital. Brandywine's defaults under the Amended Lease and expressed intention not to reopen are detrimental to the citizens of Choctaw County."

¥ "Brandywine has indicated that it intends to continue operating the nursing home

facility but not the hospital. Putting aside any issues with respect to whether Brandywine has any chance to reorganize without the cash flow generated from the hospital, Brandywine may not assume only a portion of the Amended Lease. Because the Amended Lease cannot be partially assumed, it must be rejected."

¥ "Even if the Debtor could partially assume the Amended Lease, pursuant to 11 U.S.C.

¤ 365, the Debtor may not assume a lease agreement unless it cures or provides adequate assurance that it will promptly cure defaults under the lease. The failure to operate under the Amended Lease is a breach that cannot be cured by the Debtor and, in fact, the Debtor has indicated that it does not intend to cure the default. For this reason, the Amended Lease must be rejected."

The motion also states that if the lease if rejected, then the supervisors will be "prepared to operate the nursing home so that no patient care will be compromised during the interim period."

The Board of Supervisors is developing a plan of action if granted the ability to take over the hospital and nursing home. (See related article Supervisors make plans).