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Motion to dismiss North Shore Associates case delayed pending arbitration

LOVELAND — A motion to dismiss the bankruptcy action filed by North Shore Associates was not concluded today. Instead, Judge Joseph Rosania Jr. directed the attorney for J. Robert Wilson, owner of Columbine Health Systems, to file a motion to compel arbitration over partnership issues.

North Shore Associates is one of two related parties to file for Chapter 11 bankruptcy protection in March. North Shore Associates owns the real estate where North Shore Manor operates a nursing home. 

Wilson, represented by John O’Brien of Denver law firm Spencer Fane LLP, contended in filing a motion to dismiss the bankruptcy action filed by North Shore Associates that associates did not have authorization to file such an action and that bankruptcy was not necessary because the NSA partnership agreement requires the partners to pay additional capital — and the partners were financially capable of paying in additional capital — when the need arose.

NSA, represented by Keri Riley of Kutner Brinen Dickey Riley PC, argued that members of the partnership did have standing to seek bankruptcy and that Wilson failed to perform as managing partner to file all the paperwork necessary as shares of the company were inherited after deaths of original partners.

O’Brien argued that no partner can act on behalf of the partnership without the consent of the other partners and that the partnership actions are to be taken on partner meetings, which he contended had not occurred, because Wilson had not been included in those meetings.

He said some actions require approval of 75% of the partners, and only three of multiple shareholders are officially voting members. Those three are Wilson, Beth Radetsky and Mark Kohn. All the other partners, who inherited their shares, were required to take steps within 90 days of inheritance to sign the partnership agreement, which they didn’t, he said.

Rosania said that “bankruptcy court may not be the forum to resolve the partnership issue. I haven’t seen a case in 40 years of my involvement where a bankruptcy court resolves a partnership dispute.”

Still, Riley asked the judge to deny the motion to dismiss today and said a debtor (NSA) “can be heard on any issue before the court.”

She acknowledged ambiguity in relevant documents presented as exhibits and complained that “we seem to see a new partnership document every time there’s a filing.”

She noted that Wilson cited a 2006 amendment to the original partnership agreement as valid, and it was signed by all the partners.

Wilson, she said, “maintained the books and managed the partnership … (he) was handling the transition of people as their interests were inherited.”

She cited another document in which Wilson recognized four partners instead of the three cited by O’Brien.

“There’s no distinction between the parties; all were treated similarly,” she said. Signature lines on documents included all the parties, not the limited number of three. 

Included in the documents filed with the court was a previously undisclosed “stock and partnership interest purchase agreement.”

In October 2022, Wilson and the other shareholders entertained the potential sale of all shares of North Shore. Wilson intended to buy the 85% of the company that he didn’t already own for $7.3 million. He would then sell North Shore and all of his holdings in Columbine Health Systems and related companies to Welltower OP LLC (NYSE: WELL), a real estate investment trust, or REIT, that invests in senior housing and health care real estate. He had a letter of intent with the Toledo, Ohio-based company.

Between October and Feb. 28, 2023, that deal fell through. The bankruptcy was filed in March.

Rosania said that “in lieu of setting an evidentiary hearing, it sounds like Mr. Wilson wants arbitration (on the partnership issues). I think that’s the way we should proceed. Put it on a fast track.”

He said that O’Brien should file a motion to compel arbitration by June 6, that Riley should file objections by June 13, and he would conduct a hearing at 2 p.m. June 22 to rule on the motion to compel.

“I don’t feel I’m in a position to dismiss the case,” Rosania said.

The actions filed in Federal Bankruptcy Court in Denver are North Shore Manor Inc., case number 23-10809, and North Shore Associates LLC, case number 23-10808.

Source: BizWest