Trustee Will Oversee Bankrupt-Unbuilt Texas Cancer Center
By Jess Davis
Law360, Dallas (April 25, 2016, 9:08 PM EDT) — A Texas bankruptcy judge on Friday appointed a Chapter 11 trustee to oversee a planned Dallas cancer treatment facility after billionaire Kelcy Warren alleged his $20 million investment had been diverted to two other facilities owned by the same parent company.
U.S. Bankruptcy Judge Stacey Jernigan signed off on the appointment of a trustee for Dallas Proton Treatment Holdings LLC and Dallas Proton Treatment Center LLC’s Ch. 11 cases after Warren, an energy tycoon, alleged the debtors had not acted to recoup purported loans made by the centers to related entities. Warren and his Dallas Proton LLC in March alleged the debtors were stalling any action against their insiders, in violation of their fiduciary duties.
The Dallas center is an affiliate of Advanced Particle Therapy LLC, which through affiliates is also developing proton therapy cancer treatment centers in San Diego, Atlanta and Baltimore, all plagued with financial problems. Warren alleged money invested in the Dallas center was diverted to APT’s Atlanta and Baltimore projects, and accused the Dallas entities of purposefully failing to prosecute the bankruptcy estate’s claims against insiders.
The debtors officially took no position regarding the trustee appointment, but dispute all allegations made in Warren’s motion, according to court records.
According to the order, the creditors, which include Dallas Proton, Warren, the unsecured creditors’ committee, Zeitgeist Capital LLC and Lulu Ltd., all support the appointment of a trustee.
On March 28, Dallas Proton Treatment Center filed an adversary proceeding against Warren, saying he gained unfair leverage over the business when his original $20 million promissory note was amended to provide him a security interest.
Warren fired back days later, calling the adversary proceeding a last-ditch effort to avoid appointment of a trustee.
Warren said in a court filing the debtors “never had any realistic ability to reorganize,” claiming “no reasonable investor is going to invest money into the debtors given the fraud perpetrated on Warren.” He characterized APT’s track record with proton therapy developments as “abysmal,” saying the San Diego location was effectively turned over to lenders under a forbearance agreement.
He claimed the Baltimore location was only able to be completed because that affiliate took “loans” from Dallas Holdings that were not repaid.
“The Dallas project is effectively, and literally, a hole in the ground,” Warren said.
Warren requested the appointment of a trustee in September, about a week after the Dallas entities filed voluntary Ch. 11 proceedings.
APT’s Georgia affiliate was hit with an involuntary bankruptcy proceeding by creditors, but on April 15 told a Delaware court it was near a new financing deal that would allow it to complete the project and exit bankruptcy.
Georgia Proton Treatment Holdings LLC and creditors Zeitgeist, Gryphon Resources Inc. and Cobalt LLC told a Delaware federal court they were negotiating a permanent financing arrangement with Lulu Inc. that would allow the center to open, maximizing value and increasing potential recovery for creditors. The trio of creditors, who had claimed they were collectively owed $8.3 million, entered a confidential agreement with Lulu, according to court records.
Attorneys for the parties did not immediately respond to requests for comment Monday.
Warren and Dallas Proton are represented by Kevin Lippman and Davor Rukavina of Munsch Hardt Kopf & Harr PC.
The official committee of unsecured creditors is represented by Gerrit Pronske and Jason Kathman of Pronske & Kathman PC.
Lulu Ltd. is represented by Marty Sosland of Weil Gotshal & Manges LLP.
Zeitgeist Capital is represented by Michael J. Collins of Brewer, Attorneys & Counselors.
The debtors are represented by Marcus Helt and Mark Moore of Gardere Wynne Sewell LLP.
The case is In re: Dallas Proton Treatment Center LLC, et al., case number 3:15-bk-33783, in the U.S. Bankruptcy Court for the Northern District of Texas.
— Additional reporting by Jonathan Randles. Editing by Ben Guilfoy.