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Chapter 11 § BENEVIS CORP., Et Al.,1 § Case No

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Chapter 11 § BENEVIS CORP., Et Al.,1 § Case No Case 20-33918 Document 150 Filed in TXSB on 08/25/20 Page 1 of 18 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: § Chapter 11 § BENEVIS CORP., et al.,1 § Case No. 20-33918 (MI) § Debtors. § (Jointly Administered) MOTION FOR RELIEF FROM THE AUTOMATIC STAY TO PROCEED WITH PENDING LITIGATION THIS IS A MOTION FOR RELIEF FROM THE AUTOMATIC STAY. IF IT IS GRANTED, THE MOVANT MAY ACT OUTSIDE OF THE BANKRUPTCY PROCESS. IF YOU DO NOT WANT THE STAY LIFTED, IMMEDIATELY CONTACT THE MOVING PARTY TO SETTLE. IF YOU CANNOT SETTLE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY AT LEAST 7 DAYS BEFORE THE HEARING. IF YOU CANNOT SETTLE, YOU MUST ATTEND THE HEARING. EVIDENCE MAY BE OFFERED AT THE HEARING AND THE COURT MAY RULE. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEYS. A HEARING WILL BE CONDUCTED ON THIS MATTER ON SEPTEMBER 18, 2020 AT 9:00 AM (CT) BEFORE THE HONORABLE ISGUR IN COURTROOM 404, 515 RUSK STREET, HOUSTON, TX 77002. IF YOU OBJECT TO THE RELIEF REQUESTED, YOU MUST EITHER APPEAR AT THE HEARING OR FILE A WRITTEN RESPONSE PRIOR TO THE HEARING. OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED. PLEASE NOTE THAT ON MARCH 24, 2020, THROUGH THE ENTRY OF GENERAL ORDER 2020-10, THE COURT INVOKED THE PROTOCOL FOR EMERGENCY PUBLIC HEALTH OR SAFETY CONDITIONS. IT IS ANTICIPATED THAT ALL PERSONS WILL APPEAR TELEPHONICALLY AND ALSO MAY APPEAR VIA VIDEO AT THIS HEARING. AUDIO COMMUNICATION WILL BE BY USE OF THE COURT’S REGULAR DIAL-IN NUMBER. THE DIAL-IN NUMBER IS +1 (832) 917-1510. YOU WILL BE RESPONSIBLE FOR YOUR OWN LONG- DISTANCE CHARGES. YOU WILL BE ASKED TO KEY IN THE CONFERENCE ROOM NUMBER. JUDGE ISGUR’S CONFERENCE ROOM NUMBER IS 954554. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: Benevis Corp. (0242); LT Smile Corporation (2818); Benevis Holding Corp. (0222); Benevis Affiliates, LLC (7420); Benevis, LLC (5524); Benevis Informatics, LLC (7833) (collectively, the “Debtors”). The address of the Debtors’ headquarters is 1090 Northchase Parkway S.E., Suite 150, Marietta, GA 30067. 10702172 Case 20-33918 Document 150 Filed in TXSB on 08/25/20 Page 2 of 18 PARTIES MAY PARTICIPATE IN ELECTRONIC HEARINGS BY USE OF AN INTERNET CONNECTION. THE COURT UTILIZES GOTOMEETING FOR ALL VIDEO HEARING. TO CONNECT TO A HEARING, YOU MAY CONNECT USING THE LINK ON JUDGE ISGUR’S HOMEPAGE ON THE SOUTHERN DISTRICT OF TEXAS WEBSITE OR CONNECT DIRECTLY VIA THE GOTOMEETING APP. TO CONNECT TO A HEARING, YOU SHOULD ENTER THE MEETING CODE “JUDGEISGUR”. IT IS RECOMMENDED THAT YOU DOWNLOAD THE FREE GOTOMEETING APP ON EACH DEVICE THAT WILL BE USED TO CONNECT TO A HEARING. CONNECTING VIA WEB BROWSER ONLY MAY LIMIT THE AVAILABILITY OF SOME GOTOMEETING FEATURES. ONCE CONNECTED TO GOTOMEETING, A PARTICIPANT MUST CLICK THE SETTING ICON IN THE UPPER RIGHT CORNER AND ENTER YOUR NAME UNDER THE PERSONAL INFORMATION SETTING. To the Honorable Marvin Isgur, United States Bankruptcy Judge: Joseph and Veronica Gastelum (collectively, the “Gastelums”) file this Motion for Relief from the Automatic Stay to Proceed with Pending Litigation (the “Motion”). SUMMARY OF THE RELIEF REQUESTED Joseph Gastelum is the plaintiff in a lawsuit pending in the Maricopa County, Arizona Superior Court arising from the wrongful death of his son, Zion Gastelum (hereinafter, the “State Court Lawsuit”).2 Joseph Gastelum has named over 15 defendants responsible for the death of his son, including Debtors Benevis, LLC, Benevis Holding Corp., and Benevis Corp. (the “Debtor Defendants”). The Gastelums ask this Court to lift the automatic stay to allow the State Court Lawsuit to proceed against the Debtor Defendants. The Gastelums do not seek stay relief to enforce their claims against the Debtors but only to proceed with the pending litigation and liquidate their claims, if any, against the Debtors. 2 The State Court Lawsuit is Case No. CV2018-011975 and Case No. CV2019-015618 (consolidated) pending in the Maricopa County, Arizona Superior Court (the “State Court”). 10702172 Case 20-33918 Document 150 Filed in TXSB on 08/25/20 Page 3 of 18 JURISDICTION 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (G) and (O). 2. Venue for this Motion is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The Court may grant the relief requested in this Motion pursuant to 11 U.S.C. §§ 105 and 362(d). FACTUAL BACKGROUND A. The State Court Lawsuit 3. The State Court Lawsuit is a wrongful death suit brought by the father of two-year- old Zion, who died following a dental procedure performed under anesthesia at the Kool Smiles Dental Clinic in Yuma, Arizona.3 The father, Joseph Gastelum is the statutory plaintiff, asserting wrongful death claims on his own behalf and for the Arizona statutory beneficiaries, including Veronica Gastelum, Zion’s mother. 4. Gastelum alleges that the defendants (including the Debtor Defendants) devised and executed a business plan to create a chain of 130 Kool Smiles branded pediatric dental clinics that targeted children receiving government health benefits. Part of the business plan was to reward unnecessary procedures, force dangerous over-scheduling, employ untrained staff to perform medical functions, set production quotas for invasive procedures such as root canals and crowns, terminate and discipline personnel for generating less than a set dollar amount per patient, and encourage the negligent maintenance of essential medical equipment. The Kool Smiles business model targets children in lower-income families throughout the country, because those children are dependent on government-funded SCHIP Programs for their dental care. Kool Smiles 3 Exhibit A is the First Amended Complaint in Case No. 2018-011975. Exhibit B is the Complaint in consolidated Case No. CV2019-015618. 10702172 Case 20-33918 Document 150 Filed in TXSB on 08/25/20 Page 4 of 18 then overtreats, underperforms, and overbills such government-funded SCHIP Programs for the dental services it renders. 5. A key part of the Kool Smiles business model is to maximize the productivity of each clinic by scheduling the child-patients back-to-back, resulting in an insufficient amount of time between each child-patient for cleaning of the stations, monitoring of children who are recovering from various forms of anesthesia, and even to allow time for staff members to use the bathroom facilities. 6. Kool Smiles has a documented history of recommending unnecessary crowns and root canal treatments in small children, instead of less expensive, safer, and more appropriate methods to treat cavities in baby teeth. Upon information and belief, Kool Smiles has ignored such less expensive and less dangerous treatment options for its own financial gain. 7. Operating under this business model, the Yuma Kool Smiles clinic told Zion’s parents that Zion needed pulpotomies (baby root canals) and crowns on three of his baby teeth, and these procedures would require the use of general anesthesia. Kool Smiles made this decision to perform the procedures without truly informed consent of his parents, without any discussion of available, less-invasive (and much less expensive) alternate treatment methods of lesser risk that were the standard of care at the time, and without contemporaneous X-rays to confirm whether the expensive, invasive procedures were necessary. 8. On December 16, 2017, Kool Smiles placed Zion under general anesthesia (rendering him unconscious and unable to breathe on his own) and performed procedures on nine of his baby teeth, which included root canals and crowns on six baby teeth and an enameloplasty procedure (a cosmetic dental procedure – also called tooth recontouring – where the size and/or shape of an existing tooth’s enamel surface is reshaped or recontoured for improved appearance) on three other baby teeth. 10702172 Case 20-33918 Document 150 Filed in TXSB on 08/25/20 Page 5 of 18 9. After the procedure, Zion was taken to a recovery room, left with untrained staff, and hooked up to an empty oxygen tank. Based on records from the Arizona State Board of Dental Examiners, the dentist-anesthesiologist was intubating another child-patient within as little as two minutes after Zion’s extubation. 10. Two-year-old Zion was left alone in the recovery room for 5-10 minutes, or possibly longer. When Veronica, Zion’s mother, was later taken back to the recovery room by a member of the Kool Smiles staff, Veronica observed that Zion had an oxygen mask on his face and his toe was connected to a monitor. The monitor in question was a pulse oximeter device, which is used to monitor the patient’s pulse and oxygen saturations. Veronica heard the sound of the monitor’s alarm as she and the staff member entered the room, which was then immediately silenced by the staff member. Shortly thereafter, the alarm went off an additional three to four times – each time silenced by the Kool Smiles staff member – until the staff member finally removed the monitor from Zion and stated that the device does not work on children. 11. It was then that Veronica first noticed Zion’s chest was not moving. Despite Veronica’s lack of medical training, she grabbed her son’s wrist to check his pulse and found none. At that point, the Kool Smiles staff member finally realized something was amiss and left to get assistance. Zion was later diagnosed with severe hypoxic ischemic encephalopathy (brain damage caused by a lack of oxygen).
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