Free Letter - District Court of Delaware - Delaware

Case 1 :04-cv-00910-GMS Document 84 Filed 07/08/2005 Page 1 of 3
F I L E D ATT vs AT LAW
, "'é "*‘ ‘"‘ V
" J wig Robert E. Grossman
J¤w,2<><>5 .,.s. ca..:.T il$:3‘2?·1€333 Eff"
gI'OSS¥T121i'l.l'()b€H@}TCD[f0X.COm
VIA FEDEX
The Honorable Gregory M. Sleet
United States District Court
District of Delaware
J. Caleb Boggs Federal Building
844 N. King Street
Room 4324, Lockbox 19
Wilmington, DE 19801.
Re: Integrated Health Services of Cliff Manor, Inc. v. THCI Company LLC, Index No. 04-
M
Dear Judge Sleet:
This law firm is counsel to THCI Company LLC ("Defendant") in the above referenced action.
We write to bring to your attention the latest developments in this case, which have dramatically
changed the status quo and require your prompt intervention.
As you know, this matter involves a dispute over the validity of a master lease agreement
("Master Lease") for nine nursing homes ("Facilities") owned by Defendant, which are currently
leased to, and operated by, the subsidiaries ("Subsidiaries") of IHS Long Term Care, Inc.
("LTC" and, collectively with the Subsidiaries, "Plaintiffs"). In August 2003, the Subsidiaries
and their then parent company Integrated Health Services, Inc. appealed to this Court from the
Bankruptcy Court’s April 2003 ruling upholding the validity of the Master Lease. This appeal is
currently pending before the Court, and there was no stay pending appeal. In addition, Plaintiffs
brought a lawsuit against Defendant in state court in Missouri, which was transferred to this
Court ("Missouri Action").
On March 15, 2005, Plaintiffs moved this Court for 1) Leave to Make a Deposit in Court
("Deposit Motion") and 2) a Temporary Restraining Order (collectively with the Deposit
Motion, "Plaintiffs’ Motions"). By these Motions, Plaintiffs sought, inter alia, the Court’s
permission to deposit the rent due under the Master Lease with the Court pending the outcome of
their appeal and the disposition of the Missouri Action, and to enjoin Defendant fiom pursuing
its remedies under the Master Lease. On April 19, 2005, Defendant objected to the Plaintiffs’
Motions, and on May 6, 2005, Plaintiffs filed their reply brief.
Pivotal to the Plaintiffs’ Motions was the assumption that unless the Court granted relief,
Plaintiffs were obligated to pay, and would continue to pay the rent due under the Master Lease
to Defendant. Plaintiffs never indicated that they would stop paying rent to Defendant, nor do
they have the right to do so (unless this Court grants relief). Indeed, a failure to pay rent would
have mooted Plaintiffs’ Motions ab initio.
Nevv voak wAsHrNoToN. oc
YOFh, NY 100196820 212,41%.,3990 mx www_3rgnttO>;_

Case 1:04-cv-00910-Gl\/IS Document 84 Filed 07/08/2005 Page 2 of 3
‘ . .. __ ___ .,_ r Q -. __ _ _
{QQ I$f’§§§‘§b“’ G"’g‘”y M‘ Sm i eaaaa l
Page 2 AT _ _jYS AT LAW
Despite the fact that this Court has not granted any relief sought by the Plaintiffs’ Motions,
Plaintiffs unilaterally decided to exercise self-help and failed to pay rent for June 2005 in the
amount of $709,1 71 .88 in breach of the Master Lease. Defendant provided written notice of that
breach to Plaintiffs on June 3, 2005; the time to cure expired on June 10, 2005. Plaintiffs also
failed to pay rent for July 2005 in the amount of $709,171 .88; Defendant provided written notice
of that breach to Plaintiffs on July 6, 2005; the time to cure this default expires on July 13, 2005.
To date, including June and July rent, past due real estate taxes and other charges, Plaintiffs have
accrued almost $2,000,000.00 in monetary defaults to Defendant. Plaintiffs owe additional
amounts to third parties, including state regulatory agencies. These monetary defaults indicate
Plaintiffs’ inability or unwillingness to adequately fund the Facilities’ operations, which could
potentially threaten the well being of residents of the Facilities. Plaintiffs have also committed
numerous non-monetary defaults, including their refusal to provide important financial and
operational information (such as insurance information) about the Facilities. These defaults
completely inhibit Defendant’s ability to determine whether the Plaintiffs are operating the
Facilities competently and safely.
These breaches, of course, have a material financial impact on Defendant. Most importantly,
these breaches have forced Defendant to consider its alternatives, including eviction of the
Subsidiaries. Defendant is a solvent and experienced operator of long-term care facilities, and
could take over the Facilities quickly and smoothly if needed, subject only to obtaining the
necessary state licenses. Plaintiffs’ cooperation would be essential in order to ensure continuous
and proper care for the residents during the transitional stage. Indeed, Defendant would prefer
that Plaintiffs simply honor their obligations under the Master Lease.
In light of these unfortunate issues, we respectfully request a conference with the Court on an
expedited basis to explore all avenues of maintaining the status quo, and, absent immediate
payment of all outstanding rent and other charges, to provide for an expeditious and amicable
surrender of the Facilities to Defendant.
Robert E. Grossiman
REG/imt
cc. Michael R. Lastowski, Esq.
Richard W. Riley, Esq.
Christopher M. Winter, Esq.
Duane Morris LLP
1100 North Market Street, Suite 1200
Wilmington, DE 19801-1246.
·‘` · New voak wAsH•NeroN. oc
‘/ork, NY 100'I96820 2l2.484.13Q0 212.484.39QO mx wwwarentfox.coni

Case 1:04-cv-00910-G|\/IS Document 84 Filed 07/08/2005 Page 3 of 3
The Honorable Gregory M. Sleet J
Page 3 MSM
Amos Alter Esq.
Troutman Sanders LLP
The Chrysler Building
405 Lexington Avenue,
New York, NY 10174.
moron. oc
.l,---.--. ; mwar@nit¤X_COrn