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Home / Case News / More than 300 Clawback Actions Initiated in Verity Health System of California, Inc. Bankruptcy Case

More than 300 Clawback Actions Initiated in Verity Health System of California, Inc. Bankruptcy Case

September 1, 2020, California –  Recently, the plaintiffs in the bankruptcy case of Verity Health System of California Inc., et al ( the “Debtors”) initiated more than 300 adversary proceedings against several defendants to set aside and recover alleged “preferential transfers” for the benefit of the Debtors’ estate.

According to the court papers, the plaintiffs allegedly seek return of more than $48 million from approximately 326 lawsuits, that had been filed against several vendors, creditors, suppliers and distributors that provided goods and/or services to or for the Debtors.

Prior to the bankruptcy filing, the Debtors maintained business relationships with various business entities, through which the Debtors regularly purchased, sold, received, and/or delivered goods and services. The largest case in the group is allegedly filed against McKesson Specialty Distribution LLC for return of $4,163,552.98, Touchpoint Support Services, LLC for avoidance of $1,439,678.51 and Microsoft Corporation for $1,405,729.51

The Debtors’ financial difficulties that led to the decision to file for bankruptcy petition is attributable to a combination of factors, all of which placed significant stress on the Debtors’ liquidity position in the months leading up to the petition date. These factors included, among other things: the legacy burden of more than a billion dollars of bond debt and unfunded pension liabilities; an inability to renegotiate collective bargaining agreements or payor contracts; the continuing need for significant capital expenditures for seismic obligations and gaining infrastructure; and the general headwinds facing the hospital industry.

Each of the 17 Debtors filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code two years ago in August 2018. The cases are jointly administered under case No. 18-20151 before the Honorable Ernest M. Robles, in the United States Bankruptcy Court for the Central District of California.