Judge denies motion to move bankruptcy proceedings from Cottage to Peoria

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The federal judge overseeing Cottage Clinics’ bankruptcy proceedings has denied a motion to move the case from Michigan to Illinois.

On Jan. 3, CEO Sanjay Sharma filed for Chapter 11 bankruptcy for clinics affiliated with Galesburg’s Cottage Hospital in the Eastern District of Michigan.

The hospital suspended operations days later because it was about to lose Medicare and Medicaid funding, and the Illinois Department of Public Health later revoked its license.

The clinic remains in operation amid bankruptcy proceedings, but at significantly reduced capacity.

On February 9, former Cottage doctors Greg Schierer, Carl Strauch and Mark DeYoung filed a petition to change the venue in the United States Bankruptcy Court for the Central District of Illinois in Peoria.

They argued that the majority of creditors, including the doctors themselves, reside in Illinois, and that the clinic’s assets and principal place of business are in Illinois, so this is the appropriate location.

Sharma and his attorney later filed an objection to the motion, saying Sharma’s Michigan home is the principal place of business for Cottage’s remaining operations and accounting operations were transferred to Michigan in September 2021.

The objection also said the clinic is no longer just a physical operation in Galesburg, but includes telehealth services in Illinois, Michigan and Pennsylvania.

Further, they argued that because bankruptcy hearings are conducted by telephone and filings are electronic, there is no benefit in changing locations.

Judge Maria Oxholm sided with Sharma.

“After reviewing all of the evidence, the court finds that the creditors have failed to meet their burden by a preponderance of the evidence that a transfer of venue is necessary in the interests of justice or for the convenience of the parties,” it said. Oxholm told a hearing.

Oxholm also said transferring the case would slow down administration of the estate.

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