QHC Litigation Trust Brings $1.21 Billion Lawsuit against Community Health Systems
October 25, 2021, District of Delaware – Plaintiffs Daniel H. Golden., as Litigation Trustee of the QHC Litigation Trust (the “Trust”), and Wilmington Savings Fund Society, FSB (“WSFS”) for the estate of Quorum Health Corporation et al. (“QHC”) brings a $1.21 billion action against Community Health Systems, Inc. (“CHS”) and ten others, to recover “actual and constructive fraudulent transfers” under federal and state law, illegal dividends under Delaware law, “breach of contract” and “unjust enrichment”.
As alleged in the complaint, CHS’ parent company, a publicly-traded owner and operator of US hospitals, was in desperate need of a lifeline, and due to its increasing debt, it “devised a plan” to enable the company to raise the money it needed to pay down its debt. The Trustee asserts that the parent company allegedly caused QHC to raise $1.21 billion in debt, which eventually QHC paid CHS as a tax-free dividend (the “Spin-Off Dividend”).
Specifically, the complaint alleges that QHC transferred $1.21 billion to an entity named, BridgeCo, which later merged with and into Defendant, and contends that QHC “received less than reasonably equivalent value or fair consideration” in exchange for the Spin-Off Dividend. In fact, the Trustee alleges that QHC “did not receive” any value for the Spin-Off Dividend and that it was allegedly a gratuitous transfer from QHC to BridgeCo that conferred no value on QHC.
Accordingly, Plaintiff brings an action, alleging that the Spin-Off Dividend is voidable as “constructively fraudulent transfer” and that he is entitled to set aside, avoid, and recover it under 11 USC §§ 544 and 550 and Delaware, New York, and Tennessee law.