Health Diagnostic files lawsuit tied to receivables collection issues

By Caroline Salls

Pittsburgh, Feb. 1 – Health Diagnostic Laboratory, Inc. filed a lawsuit Monday against asset buyer True Health Diagnostics, LLC and True Health vice president of sales Jeffrey P. “Boomer” Cornwell, seeking an injunction related to the defendants’ alleged interference with Health Diagnostics’ collection of estate assets, according to a filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

The company is also asking the court to hold the defendants in contempt for continuing to violate the automatic stay under the Bankruptcy Code and is seeking specific performance of some of True Health’s contractual obligations, as well as damages for breach of contract, tortious interference with contract, violations of the automatic stay and violations of the Code of Virginia.

Health Diagnostic said the assets purchased by True Health included accounts receivable, but Health Diagnostic retained ownership of some accounts receivable aged 180 days or more as of the closing date. The excluded receivables included amounts owed to Health Diagnostic by patients for laboratory testing.

Although Health Diagnostic said True Health was given the option to acquire the excluded receivables, they were ultimately not purchased.

According to the complaint, “millions of dollars of excluded receivables remain outstanding.”

The company said a promissory note from True Health calls for contingent principal that is 85% of all collections on the purchased receivables in excess of the $10 million initial principal amount of the note.

Since purchased receivables remain outstanding that True Health is obligated to collect under the note, Health Diagnostic said True Health still owes it contingent principal. The company said an event of default has occurred on the note.

“Collections on the excluded receivables have slowed as a direct and proximate result of defendants’ efforts to prevent [Health Diagnostic] from collecting on the excluded receivables,” the company said in the lawsuit.

Health Diagnostic, a Richmond, Va.-based blood testing company, filed for bankruptcy on June 7, 2015. The Chapter 11 case number is 15-32919.

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