HHMH. Photo by Jenny Mendolla Arbizu.

On May 23 the San Benito Health Care District (SBHCD) filed a petition for Chapter 9 relief in the United States Bankruptcy Court for the Northern District of California.

Since then, there have been repeated demands during SBHCD board meetings and at a town hall sponsored by the nurses union that both Mary Casillas, interim CEO, and the hospital district board be terminated. The board has maintained its support of Casillas

It is highly unlikely either will happen, according to Ralph Guenther, the principal of Guenther Law Group, a Salinas-based bankruptcy attorney. If it were, though, it would only be after a thorough investigation by an examiner appointed by Judge Steven L. Johnson, to whom the case has been assigned. Johnson is looking into the dealings of the debtor (San Benito Health Care District), both pre and post petition (May 23) and will report back to the court.

According to its website, the Department of Justice, through its U.S. Trustee Program, has authority to assign a trustee to step in to represent the debtor. Presently, this is Casillas’ function because the board gave her sole authority to represent the district during the bankruptcy and to sign any resulting documents.

“A judge is not going to put himself or herself in the place of the group that is managing the debtor, whether it’s an individual or a board,” Guenther said. “The trustees’ office has oversight for that case and sometimes they take an active role. You could conceivably see the U.S. Trustee office coming in and saying, ‘Judge, there has been a significant amount of mismanagement associated with this particular entity. We have grave concerns about the individuals who are in charge of managing the affairs of the debtor and we think that the court should take some kind of action.’”

Guenther said if there is a demand to have someone else take control of the management of the hospital the judge might be reluctant to do so because “the judge is concerned about having any of his decisions set aside because there’s oversight by way of the bankruptcy appellate panel or district court, or court of appeals.”

“He’s going to be very careful if that type of situation comes up when there is a push being made to take the controls away from the board in terms of managing the hospital,” he continued. “Someone would have to be nominated to take over the responsibility and they’d have to have a pretty good resume for the judge to sign off on that.”

In any case, he said, “You’re not going to replace the board. The remedy would be to put a trustee to oversee the operations of the hospital in terms of making day-to-day decisions as it relates to the bankruptcy.”

Guenther said another scenario could involve groups of secured and unsecured creditors, such as the nurses’ union, which may have claims, as the representative of union members, with the debtor who could form an unsecured creditors committee. Once a committee is formed, he said, the U.S. Trustee’s office provides oversight by examining regular reports from the debtor on its continuing management as the case moves forward. He said the committee can hire attorneys, who would be paid for by the debtor.

He added if the unions or other parties wanted to pursue actions outside the normal bankruptcy scenario, such as terminating the CEO, they could ask the judge to grant them an order, called a relief motion from automatic stay, that would cancel protections that the bankruptcy filing gave the debtor, and they could pursue other legal actions. However, according to the Department of Justice website, as the “debtor in possession,” which is the district’s legal position in the bankruptcy filing, the board, or more correctly Casillas, would continue to retain management authority throughout the bankruptcy.

According to the commercial website omni agent solutions, the district has 86 filings or dockets as of July 17, which includes filings by the National Union of Healthcare Workers and the California Nurses Association complaining about contract negotiations and the “unreliability” of the district’s monthly finance reports, which BenitoLink reported July 10.         

On July 12 the hospital announced that it had received unanimous approval from the Engineers and Scientists of California Local 20 regarding its labor contract. What was not in the HHMH press release, but was included in the docket, is that on July 5, the hospital rejected collective bargaining agreements with the California Nurses Association, the National Union of Healthcare Workers, and the California Licensed Vocational Nurses Association, Inc.    

Related BenitoLink articles:

Hazel Hawkins to consider bankruptcy | BenitoLink

Healthcare District declares Chapter 9 bankruptcy | BenitoLink

Hazel Hawkins authorizes Chapter 9 bankruptcy filing | BenitoLink

RNs at Hazel Hawkins demand transparency as board considers Chapter 9 bankruptcy | BenitoLink

Hazel Hawkins says it has not filed for bankruptcy | BenitoLink

BenitoLink to livestream hospital public forum | BenitoLink

Board of Supervisors to consider financial assistance to hospital | BenitoLink

Hospital says three factors led to financial emergency | BenitoLink

Hazel Hawkins seeking $10 million loan from County | BenitoLink

We need your help. Support local, nonprofit news! BenitoLink is a nonprofit news website that reports on San Benito County. Our team is committed to this community and providing essential, accurate information to our fellow residents. It is expensive to produce local news and community support is what keeps the news flowing. Please consider supporting BenitoLink, San Benito County’s public service, nonprofit news.

John Chadwell worked as a feature, news and investigative reporter for BenitoLink on a freelance basis for seven years, leaving the role in Sept. 2023. Chadwell first entered the U.S. Navy right out of...