Federal judge won't stop Comprehensive Healthcare's $56 million sale of seven nursing homes

A federal judge on Thursday denied the request of the U.S. Department of Labor to halt the potential $56 million sale of seven nursing homes belonging to an embattled company about to go on trial for violating wage and hour laws.

U.S. District Judge William V. Stickman IV said in a 17-page opinion that the government did not meet its burden to prove Comprehensive Healthcare Management Services was attempting to offload assets to thwart the department’s ability to recover if it wins a judgment at trial.

Labor’s attorneys have said that judgment could be as high as $40 million between wages and damages. The complaint, filed in 2018, alleges that the facilities under Comprehensive failed to pay thousands of employees appropriately under the Fair Labor Stands Act.

The company has admitted liability, and at trial, Stickman will determine what amount of damages should be awarded.

At a hearing last week, an attorney for Comprehensive, which operates 15 nursing homes in Pennsylvania, said that the company is in dire financial straits. If the sale fell through, he said, they might have to close the facilities, potentially displacing hundreds of residents.

He called it a “nightmare scenario.”

The potential sale includes seven locations, The Grove at Irwin, The Grove at Harmony, The Grove at Washington, The Grove at Latrobe, The Grove at New Wilmington, The Grove at New Castle, and The Grove at Greenville. They have, total have 747 beds.

Comprehensive said it reached an agreement with Kadima Healthcare Group to buy the properties and operations.

However, when the Labor Department learned about the potential sale in August, they moved for a preliminary injunction to stop it.

To win a preliminary injunction, the party must show a likelihood they will succeed on the merits of the case at trial, that they will suffer irreparable harm if the injunction is denied, and that the public interest favors the relief.

In this case, Stickman wrote that the Labor Department did show it is likely to win on the merits based on Comprehensive’s admission of liability.

However, Stickman wrote that the government failed to show it would suffer irreparable harm without the injunction.

The potential harm, Stickman said, “is both repairable and speculative.”

Even were the sale to occur, the judge said, the Labor Department could recover damages through other means.

Although Comprehensive argued that Stickman did not have the authority to enjoin the sale of the facilities, the judge disagreed.

Still, he denied the injunction.

Stickman wrote in his opinion that testimony at the Sept. 27 hearing was “less than reliable” that the properties were being sold by Comprehensive to offload liability. He also said the witnesses were “all quite biased,” and “have an ax to grind” against the company.

The judge said he also questioned the reliability of their testimony since the information they provided was relayed to them by a third party. He noted the Department of Labor did not call witnesses with direct knowledge of the proposed sale.

Stickman further said that the timing of the sale dated at least as far back as February, which demonstrates that “eluding judgment in this case” was not the company’s actual intent.

Regarding allegations that Ephram Lahasky, a Comprehensive owner, stands to benefit from the sale based on a 5% ownership interest in Kadima, Stickman found that not to be the case.

The judge wrote in his opinion that it is uncertain what would happen if the sale proceeds.

Prohibiting the sale, he said, could cause Comprehensive to face a more dire financial situation, but conversely, not stopping it could hinder the government’s ability to recover any judgment.

Further, he wrote, there is public interest in allowing the defendants to sell in an attempt to keep the facilities open.

“Thus, the court finds that the balance of equities here is neutral, where both parties may or may not be harmed by the imposition of an injunction, and there is not enough information in the record to definitively tip the scales in either parties’ favor.”