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In re Health Diagnostic Laboratory, Inc.

United States District Court, E.D. Virginia, Richmond Division

May 16, 2017

In re HEALTH DIAGNOSTIC LABORATORY, INC., Debtors.
v.
RICHARD ARROWSMITH, AS LIQUIDATING TRUSTEE OF THE HDL LIQUIDATING TRUST, Appellee. LEMBERG LAW, LLC, et al., Appellants,

          MEMORANDUM OPINION (DENYING MOTION FOR LEAVE TO APPEAL INTERLOCUTORY ORDER)

          Henry E. Hudson United States District Judge.

         THIS MATTER is before the Court on Appellants' Motion for Leave to Appeal an Interlocutory Order entered by the United States Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy Court"). (Mot. Leave Appeal, ECF No. 1-1.) Appellants are seeking leave to appeal the Bankruptcy Court's decision to deny their motion to dismiss a Verified Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

         All parties have filed memoranda supporting their respective positions. (ECF Nos. 1-1, 2, 5.) The Court will dispense with oral argument because the facts and legal contentions are adequately presented in the materials before it, and oral argument would not aid in the decisional process. E.D. Va. Local Civ. R. 7(J).

         For the reasons stated herein, the Court will deny Appellants' Motion.

         I. BACKGROUND

         Health Diagnostic Laboratory ("HDL") filed for chapter 11 bankruptcy in the Eastern District of Virginia on June 7, 2015. On September 17, 2015, the Bankruptcy Court entered an order approving the sale of substantially all of HDL's assets to True Health Diagnostics, LLC. However, HDL retained ownership of accounts receivable aged 180 days or more as of September 29, 2015 (the "Excluded Receivables").

         Prior to declaring bankruptcy, HDL operated an accredited, full-service clinical laboratory that provided testing of biomarkers for the indication of risk for cardiovascular disease, diabetes, and other illnesses. The Excluded Receivables include amounts owed to HDL by patients for processing lab tests that it received from physicians across the country.

         On July 28, 2015, Richard Arrowsmith, the Liquidating Trustee of the HDL Liquidating Trust ("Appellee"), entered into agreements with a number of collection agents (the "Collectors") to pursue collection of certain Excluded Receivables owned by HDL. The Collectors subsequently transmitted notices to certain patients for whom HDL had performed laboratory testing.

         After experiencing difficulty collecting the Excluded Receivables, Appellee filed a seven-count Complaint (the "Verified Complaint") on August 3, 2016, against multiple defendants, including twenty-one of HDL's former consumers[1] and their lawyers, Lemberg Law, LLC (collectively "Appellants"). The Verified Complaint included seven causes of action, all related to Appellants' alleged attempts to interfere with the collection of the Excluded Receivables.

         On September 21, 2016, Appellants filed a Motion to Dismiss pursuant to Federal Rule of Bankruptcy Procedure 7012, which incorporates Federal Rule of Civil Procedure 12(b)(6), asserting that the Verified Complaint failed to allege facts sufficient to state a plausible claim under the standards announced by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).

         A hearing followed on October 20, 2016. And on March 30, 2017, the Bankruptcy Court entered a Memorandum Opinion and Order denying the motion. See In re Health Diagnostics Laboratory, Inc., Case No. 15-32919-KRH, 2017 WL 1194647 (Bankr. E.D. Va. Mar. 30, 2017).

         Appellants timely filed their Motion for Interlocutory Appeal of the Bankruptcy Court's decision to this Court on April 13, 2017. (See Mot. Leave Appeal; see also Fed. R. Bankr. P. 8002, 8004.)

         II. ISSUES ON APPEAL

         Appellants have presented the following issues for interlocutory review:

1. Whether the Bankruptcy Court properly applied the controlling authority of Bell Atlantic Corp. v. Twombly,550 U.S. 544 (2007), and Ashcroft v. Iqbal,556 U.S. 662 (2009) to hold that the Complaint states plausible claims for ...

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