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Full title: Motion for leave To Clarify Agreed Order Granting Agreed Motion for Relief from Stay to Pursue Litigation (related document(s) 423 Order on motion for relief from stay) Filed by Creditor Timothy Greene Objections due by 7/30/2021. (Attachments: # 1 Proposed Order) (Headden, Todd)

Document posted on Jul 8, 2021 in the bankruptcy, 7 pages and 0 tables.

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In the State Court Action, the Plaintiffs assert claims of professional negligence, violation of the Georgia Bill of Rights for Residents of Long-Term Care Facilities and assert damages for wrongful death and punitive damages.On September 27, 2019, the Court entered the Agreed Order Granting the Agreed Motion for Relief from Stay to Pursue Litigation (the “Agreed Order”)The Agreed Order authorized, “the automatic stay to be lifted in this case so that the Plaintiffs may establish the Debtor’s liability in the State Court Action as a nominal defendant so that the Plaintiffs may potentially recover against any applicable insurance policy for the personal injury and wrongful death of Ms. Green, without any obligation for the Debtor’s estate to invoke insurance coverage by satisfying a deductible, co-insurance, or any other obligation to trigger coverage.” 8.The language of the Agreed Motion and Agreed Order provide that the relief sought and obtained would allow the Plaintiffs to proceed against the Debtor as a nominal defendant to establish the Debtor’s liability and seek to recover against any applicable insurance policy for the personal injury and death of Mrs. Eula Greene.The second and third assertions are similar in that the Debtor, through the state court counsel, attempts to create an avenue through the Agreed Order to remove the punitive damages claim in the State Court Action despite nothing in the Agreed Motion or Agreed Order stating such.

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Melissa S. Hayward State Bar No. 24044908 MHayward@HaywardFirm.com HAYWARD PLLC 10501 N. Central Expy., Ste. 106 Dallas, Texas 75231 972-755-7100 (telephone/fax) COUNSEL FOR TIMOTHY GREENE AND KAYE SHEETS, PLAINTIFFS UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: § Chapter 7 § THE LASALLE GROUP, INC., § Case No. 19-31484 § Debtor. § AGREED MOTION TO CLARIFY ORDER GRANTING RELIEF FROM AUTOMATIC STAY TO PURSUE LITIGATION TO THE HONORABLE STACEY G. C. JERNIGAN, UNITED STATES BANKRUPTCY JUDGE: Timothy Greene and Kaye Sheets, individually, and Timothy Greene on behalf of the Estate of Eula Greene (the “Plaintiffs”) file this Agreed Motion to Clarify the Agreed Order Granting Agreed Motion for Relief from Stay to Pursue Litigation (the “Motion”), and in support thereof respectfully state as follows.

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I. BACKGROUND 1. Prior to the commencement of the instant bankruptcy case, the Plaintiffs filed suit against The LaSalle Group, Inc. (“Debtor” or “LaSalle”) and others in the State Court of Gwinnett County, State of Georgia, file number 19-C-01084-S2 (the “State Court Action”). In the State Court Action, the Plaintiffs assert claims of professional negligence, violation of the Georgia Bill of Rights for Residents of Long-Term Care Facilities and assert damages for wrongful death and punitive damages. 2. The underlying lawsuit was brought after Ms. Eula Greene passed away under the watch and care of personnel at Autumn Leaves of Stockbridge (“Stockbridge”), an assisted living community in Stockbridge, Georgia. 3. At all times relevant to the allegations in the State Court Action, the Debtor was the employer of employees at Stockbridge. 4. On May 2, 2019, during the pendency of the State Court Action, the Debtor filed its voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). 5. On or about September 5, 2019, the Plaintiffs, along with the Debtor, filed the Agreed Motion for Relief from Stay to Pursue Litigation (the “Agreed Motion”) (Docket No. 376). 6. On September 9, 2019, Plaintiffs filed their unliquidated proof of claim, with attachments, in Debtor’s bankruptcy case. (Claim No. 39). 7. On September 27, 2019, the Court entered the Agreed Order Granting the Agreed Motion for Relief from Stay to Pursue Litigation (the “Agreed Order”) (Docket No. 423). The Agreed Order authorized,

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“the automatic stay to be lifted in this case so that the Plaintiffs may establish the Debtor’s liability in the State Court Action as a nominal defendant so that the Plaintiffs may potentially recover against any applicable insurance policy for the personal injury and wrongful death of Ms. Green, without any obligation for the Debtor’s estate to invoke insurance coverage by satisfying a deductible, co-insurance, or any other obligation to trigger coverage.” 8. On September 16, 2020, Debtor’s case converted from Chapter 11 to chapter 7; Diane G. Reed was appointed the chapter 7 trustee (the “Trustee”). 9. On October 28, 2020, the Court approved the employment of Reed & Elmquist, P.C. as counsel for the Trustee. 10. Early last month in the State Court Action, Debtor filed a Brief in Support of its Motion for Judgment on the Pleadings as to Plaintiff’s Punitive Damages Claim (the “Motion for Judgment”), a copy of which is attached as Exhibit A. Debtor seeks to dismiss the punitive damages claim with prejudice. 11. In the Motion for Judgment, the Debtor asserts that punitive damages against debtors are not allowed and that the Plaintiffs should be barred from seeking punitive damages against the Debtor. 12. Debtor also asserts that the Agreed Order “allow[s] prosecution up to the policy limits of all liability insurance covering LaSalle.” II. ARGUMENTS AND AUTHORITIES 13. Clarification of the Agreed Order, as entered by this Court, is warranted because the Debtor now misconstrues this Court’s order in the State Court Action despite Debtor’s agreement in the filing of the Agreed Order through its bankruptcy counsel. Plaintiffs seek an order from this Court clarifying that the Agreed Order does permit the Plaintiffs to liquidate their claim,

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without limitation, including the punitive damage claim against the Debtor in the State Court Action. 14. The language of the Agreed Motion and Agreed Order provide that the relief sought and obtained would allow the Plaintiffs to proceed against the Debtor as a nominal defendant to establish the Debtor’s liability and seek to recover against any applicable insurance policy for the personal injury and death of Mrs. Eula Greene. So as to not burden the Debtor’s estate, the Agreed Order does not require the Debtor to satisfy a deductible, co-insurance, or any other obligation to trigger coverage. 15. Debtor now makes the following assertions in the State Court Action: a. The automatic stay was “modified to allow prosecution up to the policy limits of all liability insurance covering LaSalle” (emphasis in original). b. That “the [Agreed] Order only allows action under the liability policy limits and would not allow punitive damages against LaSalle as a bankruptcy debtor under insurance.” c. That “Plaintiffs cannot bring a punitive damages claim against a bankrupt entity,” and the Agreed Order “appears to bar” punitive claims. 16. Debtor’s assertions, however, are not accurate under a plain reading of the Agreed Motion and Agreed Order. With respect to the first assertion, the Agreed Order did not include any numerical limits upon the relief obtained and did not make even a passing reference to the “policy limits.” Instead, the Plaintiffs sought, and Debtor agreed, to allow the Plaintiffs to establish Debtor’s liability as a nominal defendant “so that the Plaintiffs may potentially recover against any applicable insurance policy.” That relief is unburdened by any explicit limitations or reference to the “policy limits” of the policies covering LaSalle.

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17. The second and third assertions are similar in that the Debtor, through the state court counsel, attempts to create an avenue through the Agreed Order to remove the punitive damages claim in the State Court Action despite nothing in the Agreed Motion or Agreed Order stating such. 18. Neither the Agreed Motion nor the Agreed Order carve-out punitive damages from the lift stay order, a fact conveniently left out of Debtor’s Motion for Judgment. While ignoring the complete lack of support from the actual language of the Agreed Order, Debtor now relies upon the Matter of GAC Corp. for the proposition that an award for punitive damages is inappropriate in a bankruptcy context. 681 F.2d 1295 (11th Cir. 1982). GAC Corp., however, was decided under the Bankruptcy Act and was based entirely upon an interpretation of public policy. The concern expressed by the Eleventh Circuit in a single paragraph was that if the punitive damages claim were to be allowed, it would “punish innocent third parties, i.e., the other creditors.” Id. at 1301. A more thorough analysis of the considerations of punitive damage claims or penalties and the Bankruptcy Code does not support Debtor’s contention that the punitive damages claim should be disallowed. 19. Also lacking from Debtor’s Motion for Judgment is any reference to the mechanism explicitly provided in the Bankruptcy Code for a party in interest to disallow a claim. See 11 U.S.C. § 502(b).1 A brief review of that section informs the reader that the basis of a claim for punitive damages or penalties is not grounds for disallowance of a claim. 20. Moreover, the precedential value of GAC Corp. is limited even within the Eleventh Circuit where various courts have distinguished the case while allowing a claim for punitive 1 Plaintiff’s Proof of Claim, which has not been objected to, is for an unliquidated amount and explicitly references punitive damages in the attachments.

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damages or penalties. See e.g., In re Friedmans, Inc., 356 B.R. 766 (Bankr. S.D. Ga. 2006)(rejecting categorical disallowance of a claim because it is a penalty/punitive claim); In re Hillsborough Holdings Corp., 247 B.R. 510 (Bankr. M.D. Fla. 2000)(allowing a claim of punitive damages when feasibility and debtor’s ability to confirm a plan was not in jeopardy); In re Allied Mech. Services, Inc., 38 B.R. 959 (Bankr. N.D. Ga. 1984)(allowing a punitive damages claim brought by the Secretary of Labor). In Friedman’s the court carefully considers and compares the ruling of GAC Corp. against both section 502 of the Bankruptcy Code and the Supreme Court’s directive to remain devoted to the provisions passed by Congress as opposed to making decisions based upon equitable grounds. See Friedman’s, 356 B.R. at 771. Debtor’s newfound reading relies upon an incomplete survey of applicable case law and analysis thereof. Further, it does not find a basis in the language of the Agreed Order, therefore necessitating clarification from this Court. 21. The Trustee agrees to such relief requested as evidenced by the Certificate of Conference below, clarifying that the Agreed Order does not limit the relief granted to the policy limits of any insurance policy held by the Debtor or excluding any punitive damages. III. PRAYER BASED UPON THE FOREGOING, the Plaintiffs respectfully request that the Court enter an order: (i) clarifying that the Agreed Order does not disallow the punitive damages claim of the Plaintiffs; (ii) clarifying that the Agreed Order does not provide any limits on the damages that Plaintiffs may prove against the Debtor; and (iii) granting such other and further relief to which the Plaintiffs are justly entitled. [Remainder of Page Intentionally Left Blank]

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DATED: July 09, 2021. Respectfully submitted, HAYWARD PLLC By: /s/ Todd Headden Todd Headden Melissa S. Hayward Texas Bar No. 24044908 MHayward@HaywardFirm.com Todd Headden Texas Bar No. 24096285 THeadden@HaywardFirm.com 10501 N. Central Expy., Ste. 106 Dallas, Texas 75231 Tel: (972) 755-7100 Fax: (972) 755-7110 Counsel for Timothy Green and Kaye Sheets CERTIFICATE OF CONFERENCE I hereby certify that on July 9, 2021, our firm did contact and communicate with a representative of the Trustee. Counsel for the Trustee confirmed that they do not oppose the relief requested herein and has no objection to the entry of the Agreed Order, a copy of which is attached hereto. /s/ Todd Headden Todd Headden CERTIFICATE OF SERVICE I hereby certify that on July 09, 2021, a true and correct copy of the foregoing Motion was served upon the Trustee’s counsel and all other parties receiving electronic notice electronically by the Clerk of Court. /s/ Todd Headden Todd Headden

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