IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION -----------------------------------------------------------------------IN RE: ) ) Chapter

11 CHURCH STREET HEALTH MANAGEMENT, LLC, ) et al. 1 ) Case No. 12-01573 ) Debtors ) (Joint Administration Pending) -----------------------------------------------------------------------EXPEDITED MOTION OF THE DEBTORS FOR ENTRY OF AN EXPEDITED ORDER (I) CONFIRMING ADMINISTRATIVE EXPENSE STATUS OF UNDISPUTED OBLIGATIONS FOR DELIVERY OF GOODS WITHIN TWENTY DAYS OF THE PETITION DATE AND POST-PETITION DELIVERY OF GOODS AND SERVICES; (II) AUTHORIZING, BUT NOT REQUIRING, DEBTORS TO PAY SUCH OBLIGATIONS IN THE ORDINARY COURSE AND (III) DIRECTING FINANCIAL INSTITUTIONS TO HONOR ALL RELATED CHECKS AND ELECTRONIC PAYMENT REQUESTS TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE: Church Street Health Management, LLC (CSHM) and its affiliated debtors, as debtors in possession (collectively, the Debtors), as and for their motion for the relief requested herein, respectfully state as follows: SUMMARY OF RELIEF REQUESTED 1. By this motion (the Motion) 2, the Debtors hereby move this Court, pursuant to

11 U.S.C. 105(a) and 503(b), for entry of an expedited order substantially in the form annexed hereto (i) confirming the administrative expense priority status of undisputed obligations relating
1 The Debtors (with the last four digits of each Debtors federal tax identification number and chapter 11 case number), are: Church Street Health Management, LLC (2335; Case No. 12-01573), Small Smiles Holding Company, LLC (4993; Case No. 12-01574), FORBA NY, LLC (8013; Case No. 12-01575), FORBA Services, Inc. (6506; Case No. 12-01577), EEHC, Inc. (4973; Case No. 12-01576)..
2

The Debtors requested expedited relief on this Motion as more fully set forth in that certain Second Expedited Motion to Shorten Notice and Set Expedited Hearing for Certain Motions filed contemporaneously herewith, which motion supports the request for relief by this Motion and which is incorporated herein by reference.

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to goods received by the Debtors in the twenty (20) days prior to the Petition Date (the Prepetition Goods Obligations), (ii) confirming the administrative expense priority status of undisputed obligations relating to goods and services delivered to the Debtors on or after the Petition Date (the Post-Petition Goods and Services Obligations, and together with the Prepetition Goods Obligations, the Administrative Obligations), (iii) authorizing, but not requiring, the Debtors to pay such obligations in the ordinary course of business, and (iv) honoring such payment checks and issuance of replacement checks, if needed. JURISDICTION AND VENUE 2. This Court has jurisdiction over this Motion under 28 U.S.C. 1334. This is a

core proceeding within the meaning of 28 U.S.C. 157(b)(2). Venue of these proceedings and this Motion is proper in this district pursuant to 28 U.S.C. 1408 and 1409. PROCEDURAL BACKGROUND 3. Commencing on February 20, 2012 and concluding in the early morning hours of

February 21, 2012 (the Petition Date), each of the Debtors filed a voluntary petition with this Court for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. 101-1532, as amended (the Bankruptcy Code). 4. The Debtors continue to manage and operate their businesses as debtors in

possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 5. No creditors committee has yet been appointed in these cases by the United

States Trustee. Further, no trustee or examiner has been requested or appointed in any of the Debtors chapter 11 cases. 6. Concurrently with the filing of this Motion, the Debtors filed a motion with this

Court seeking the joint administration of their chapter 11 cases for procedural purposes only.

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FACTUAL BACKGROUND 7. The factual background relating to the Debtors commencement of these chapter

11 cases is set forth in detail in the Affidavit of Martin J. McGahan, the Chief Restructuring Officer of Church Street Health Management, LLC, in Support of Chapter 11 Petitions and First Day Pleadings (the First Day Affidavit)3 filed contemporaneously herewith. The First Day Affidavit supports the request for relief by this Motion and is incorporated herein by reference. RELIEF REQUESTED 8. The Debtors seek entry of an order (i) authorizing, but not requiring, the Debtors

to pay, in their sole discretion and in the same manner and on the same terms as the Debtors conducted business prior to commencement of these chapter 11 cases, the Administrative Obligations; and (ii) directing the Debtors financial institutions to receive, process, honor and pay all checks presented for payment or electronic payment requests from the Debtors bank accounts and granting authority to reissue any dishonored checks relating to the Administrative Obligations. Such relief will be without prejudice to the Debtors rights to contest the amounts of Administrative Obligations on bankruptcy grounds or on ordinary, non-bankruptcy-related grounds. BASIS FOR RELIEF 9. In connection with the ordinary course of the Debtors business of providing

management services, numerous suppliers and service providers (collectively, the Vendors) provide the Debtors with goods (the Goods) and services (the Services) that are integral to the Debtors ongoing business operations.

3 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the First Day Affidavit.
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Goods Delivered Twenty Days Prior to the Petition Date 10. Prior to the Petition Date, the Debtors placed orders or purchase requests with

certain Vendors for Goods. Certain of these Vendors delivered their respective Goods to the Debtors within twenty (20) days prior to the Petition Date (the 20-Day Goods). The Debtors estimate that as of the Petition Date approximately $1,000,000 in respect of such 20-Day Goods will become due and payable in the next sixty (60) days. 11. As of the Petition Date, certain of such Vendors have not been paid for the 20-

Day Goods. Because the Debtors do not maintain significant warehouse inventory and rely heavily on just in time delivery of supplies to the dental offices to which they provide services (the Centers), timely delivery is critical to the Debtors provision of managing the Centers stock of supplies. Because of the specialized nature of dental services at the Centers, failure of a Vendor to deliver such goods would not only disrupt the Debtors business and interfere with the Centers ability to deliver dental services, but divert the Debtors resources to securing replacement vendors and supplies, many of which may not be readily available for immediate purchase and delivery. 12. The harms resulting from failures in the supply chain include disruption of the

Debtors ability to provide management services, the disruption of the Centers to provide dental services to their patients, and distraction from the navigation of the chapter 11 process, all of which would impair the value and viability of the Debtors business, thus harming the estates and their respective stakeholders. Harm to the Debtors Vendor relationships would also be

undermined and could jeopardize a successful reorganization. 13. The Vendors claims relating to the 20-Day Goods are administrative expenses

entitled to priority under section 503(b)(9) of the Bankruptcy Code. The Debtors believe they

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must pay the claims of the Vendors or such Vendors may refuse to continue to do business with the Debtors. The Debtors are not seeking to change the amounts owed to the Vendors or the priority in which creditors are paid in these chapter 11 cases. Rather, the Debtors are only seeking to process payments, in their discretion, to the Vendors because those claims, as they relate to the 20-Day Goods, are afforded administrative expense priority status. 14. In return for receiving payment on account of obligations arising with respect to

any 20-Day Goods, the Vendors, through endorsement of any check for payment relating to such 20-Day Goods, shall, at a minimum, be deemed to have agreed to continue supplying Goods to the Debtors in accordance with the terms and conditions (including payment terms) pursuant to historical practices in effect between such Vendor and the Debtors for the year period prior to the Petition Date, or such other terms and conditions as agreed upon between the Vendor and the Debtors. Goods and Services Delivered after the Petition Date 15. As of the Petition Date, the Debtors also have outstanding purchase requests that

were made prior to the Petition Date for Goods and Services (collectively the Outstanding Requests). 16. As a result of the commencement of these chapter 11 cases, the Debtors believe

that the Vendors may perceive a risk that they will be treated as prepetition general unsecured creditors for the cost of any shipments made or services provided after the Petition Date pursuant to the Outstanding Requests. As a result, the Vendors may refuse to ship such Goods to the Debtors or provide such Services to the Debtors unless the Debtors issue substitute post-petition purchase requests or provide other assurances of payment.

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17.

Making substitute purchase requests on a post-petition basis would be

administratively burdensome, time-consuming and counterproductive to the Debtors reorganization. Such a requirement imposed by Vendors or other requests for assurance of payment inevitably will lead to delays in the Debtors receipt of Goods and Services, ultimately (i) resulting in the disruption of established schedules and distribution systems and (ii) hindering the Debtors ability to continue their operations uninterrupted and to minimize the impact of these chapter 11 cases on their customers and the Centers. 18. Under these circumstances, the Debtors believe that relief is necessary to permit

the Debtors to obtain the timely delivery of Goods and uninterrupted provision of Services from the Vendors pursuant to the Outstanding Orders. 19. The Debtors submit that the relief sought herein is noncontroversial and entirely

consistent with the applicable provisions of the Bankruptcy Code. Obligations arising out of the post-petition delivery of such goods and provision of such services to the Debtors generally are expenses incurred for the benefit of the Debtors estates and assist in preserving the value of the Debtors business. As such, these costs generally are accorded administrative expense priority status pursuant to section 503(b)(l)(A) of the Bankruptcy Code. See In re Jartran, Inc., 732 F.2d 584, 587 (7th Cir. 1984) (granting administrative priority status when the debt arises from a transaction with a debtor-in-possession and such transaction is beneficial to the debtor in possession in the operation of the business). The requested relief merely confirms the treatment of such post-petition obligations under the Bankruptcy Code, providing necessary assurances of payment to the Venders and ensuring the Debtors ongoing and uninterrupted receipt of essential Goods and Services.

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Payment of Pre-Petition Obligations is Permitted and Appropriate 20. The Debtors believe that the relief requested herein is within the Courts powers Section 105(a) of the Bankruptcy Code

granted by section 105 of the Bankruptcy Code.

provides (t)he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). The purpose of section 105(a) is to assure the bankruptcy courts power to take whatever action is appropriate or necessary in aid of the exercise of their jurisdiction. 2 Collier on Bankruptcy 105.01 (15th rev. ed. 1988). Thus, section 105 essentially codifies the Bankruptcy Courts inherent equitable powers. See Croton River Club, Inc. v. Half Moon Bay Homeowners Assn, (In re Croton River Club, Inc.), 52 F.3d 41, 45 (2d Cir. 1995) (bankruptcy courts equitable power derived from section 105). 21. As noted above, the Debtors ability to provide supplies to its Centers is critical to

the Debtors ability to maintain operations. If checks issued and electronic fund transfers requested in payment of any Administrative Obligations are dishonored, or if such obligations are not timely satisfied post-petition, the Debtors ability to operate may be threatened. These circumstances would undoubtedly adversely impact the Debtors chapter 11 efforts to the detriment of all parties-in-interest. Payment of all Administrative Obligations in accordance with the Debtors pre-petition practices is in the best interests of the Debtors estates, their creditors and all parties-in-interest and will assist in the Debtors efforts to maximize recoveries for all stakeholders. 22. Specifically, timing of the payment of administrative expenses allowed under

section 503(b)(9) is within the discretion of the Court. See In re Tubular Techs., LLC, 372 B.R. 820, 824, n. 4 (Bankr. D.S.C. 2007); In re Bookbinders Rest., Inc., 2006 WL 3858020 at *3-4 (Bankr. E.D. Pa. Dec 28, 2006) (quoting In re Garden Ridge Corp., 323 B.R. 136, 143 (Bankr.

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D. N.J. 2005) (holding that timing of payment is within courts discretion and considering prejudice to creditor, hardship to claimant, and detriment to other creditors). Accordingly, payment of such administrative claims at this point in the case will help preserve value to the Debtors estates and is within the realm of the Courts discretion. The Doctrine of Necessity 23. Courts have developed the doctrine of necessity for use in determining whether

the payment of pre-petition obligations is permissible. See In re Just for Feet, Inc., 242 B.R. 821, 825-26 (Bankr. D. Del. 1999) (developing and discussing the doctrine); In re Federated Dept. Stores, 1990 Bankr. LEXIS 122, at *2-3 (Bankr. S.D. Ohio Nov. 15, 1990); In re Eagle-Picher Indus., Inc., 124 B.R. 1021, 1023 (Bankr. S.D. Ohio 1991) (supporting principle that bankruptcy court can authorize payment of pre-petition claims where such payment is necessary to survival of debtor); In re SIS Corp., 108 B.R. 608, 609-10 (Bankr. N.D. Ohio 1989) (recognizing that courts may authorize payments on account of pre-petition claims premised upon overriding practical and policy reasons); In re Structurlite Plastics Corp., 86 B.R. 922, 931 (Bankr. S.D. Ohio 1988) (agreeing in principle that a bankruptcy court may exercise its equity powers under 105(a) to authorize payment of pre-petition claims where such payment is necessary to permit the greatest likelihood of survival of the debtor and payment of creditors in full or at least proportionately.) (citation omitted). 24. Generally, the doctrine of necessity provides that a debtor may pay pre-petition The

obligations if such payments are critical to the debtors reorganization. Id. at 932.

bankruptcy courts exercise of its authority under the doctrine of necessity is appropriate to carry out specific statutory provisions of chapter 11, specifically sections 1107(a), 1108 and 363(b)(1) of the Bankruptcy Code, which authorize a debtor in possession to maintain and

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operate the debtors business and use estate property outside of the ordinary course of business. Indeed, a debtor in possession operating a business under section 1108 of the Bankruptcy Code has a duty to protect and preserve the going concern value of an operating business, and prepetition claims may be paid if necessary to perform the debtors duty. See In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002) (There are occasions when this duty can only be fulfilled by the preplan satisfaction of a prepetition claim.). A bankruptcy courts exercise of its authority under section 105(a) of the Bankruptcy Code is also appropriate to carry out two central policies underlying chapter 11: (a) to permit the successful rehabilitation of the debtor; and (b) to preserve going concern value and maximize property available to satisfy all creditors. Id. at 493. 25. The Debtors inability to pay any outstanding Administrative Obligations would

severely disrupt the Debtors operations and the continued stability of the operations of their customers Centers. In the event that there is any interruption or confusion surrounding the payment of Administrative Obligations, Vendors refusal to provide Goods and Services could irreparably damage the Debtors estates and would pose significant risk to the Debtors as a going concern. 26. Time is of the essence respecting the relief requested herein, as the Debtors must

avoid the adverse effects likely to result from any interruption or delay (whether actual or perceived) in their ability to satisfy prepetition obligations. Thus, for all of the foregoing reasons, the Debtors submit that it is in the best interests of their estates that they be authorized to make payment of the Administrative Obligations as set forth herein.

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Honoring of Payments in Respect of Authorized Payments 27. In furtherance of the relief requested above, the Debtors respectfully request that

the Court direct the Debtors financial institutions to receive, process, honor and pay all checks presented for payment and electronic payment requests relating to the Administrative Obligations. In the event such checks are dishonored, the Debtors request authority to reissue any such checks to be reconciled through the Debtors post-petition cash management process. 28. Such relief is required in order to insure that there is no interruption in the

provision of Debtors Administrative Obligations. Absent an order granting this relief the Banks may not be certain of the Debtors rights and obligations, causing both confusion and delay in the provision of the Debtors Administrative Obligations. Application of Bankruptcy Rules 6003 & 6004 29. The Debtors further submit that because the relief requested in this Motion is

necessary to avoid immediate and irreparable harm to the Debtors for the reasons set forth herein, Rule 6003 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) has been satisfied to the extent it applies. 30. To successfully implement the foregoing, the Debtors seek a waiver of the notice

requirements under Bankruptcy Rule 6004(a) and the stay under Bankruptcy Rule 6004(h). NOTICE 31. Notice of this Motion has been given to the following parties or, in lieu thereof, to

their counsel, if known, via telephone, e-mail, facsimile, overnight courier, or hand delivery: (a) the Office of the United States Trustee for the Middle District of Tennessee; (b) the Debtors prepetition secured lenders and counsel to the administrative agent for the Debtors prepetition secured lenders; (c) the holders of the fifty (50) largest unsecured claims on a consolidated basis

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against the Debtors; and (d) the Debtors proposed debtor in possession lenders and their counsel. Due to the urgency of the circumstances surrounding this Motion and the nature of the relief requested herein, the Debtors respectfully submit that no further notice of this Motion is required. 32. Court. WHEREFORE, the Debtors respectfully request the entry of an order granting the relief requested in this Motion and granting such other and further relief as Court deems just and proper under the circumstances. Dated: February 21, 2012 Nashville, Tennessee By: /s/ John C. Tishler_____________ John C. Tishler, BPR No. 13441 Katie G. Stenberg, BPR No. 22301 Robert P. Sweeter, BPR No. 28859 WALLER LANSDEN DORTCH & DAVIS, LLP 511 Union Street, Suite 2700 Nashville, TN 37219 Telephone: (615) 244-6380 Facsimile: (615) 244-6804 Email: john.tishler@wallerlaw.com katie.stenberg@wallerlaw.com robert.sweeter@wallerlaw.com Proposed Attorneys for the Debtors and Debtors in Possession

No previous motion for relief sought herein has been made to this or any other

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