Jump To

Top Caption Trial Court Document The text of this document was obtained by analyzing a scanned document and may have typos.

Support FLP

CourtListener is a project of Free
Law Project, a federally-recognized 501(c)(3) non-profit. Members help support our work and get special access to features.

Please become a member today.

Join Free.law Now

Feb. 13, 2026 Get Citation Alerts Download PDF Add Note

Lake Shore Healthcare & Rehabilitation Centre, LLC v. Winnie Moore, New York Healthcare Insurance Company, Inc., and Jamie Koziol Delaney

District Court, N.D. Illinois

• Citations: None known
• Docket Number: 1:25-cv-14952

• Precedential Status: Unknown Status

• Opinion

• Authorities (4)

• Cited By (0)

• Summaries (0)

• Similar Cases (0)

• PDF

Trial Court Document

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LAKE SHORE HEALTHCARE & )

REHABILITATION CENTRE, LLC, )

)

Debtor-Appellant, )

) Case No. 25-cv-14952

v. )

) Judge Sharon Johnson Coleman

WINNIE MOORE, NEW YORK )

HEALTHCARE INSURANCE COMPANY, )

INC., and JAMIE KOZIOL DELANEY, )

)

Creditor-Appellees. )

       MEMORANDUM OPINION AND ORDER                              

Before the Court is a motion from Lake Shore Healthcare & Rehabilitation Centre, LLC
(Debtor-Appellant) seeking leave to file an interlocutory appeal [2]. For the foregoing reasons, the
Court denies Debtor-Appellant’s motion and remands the case back to the bankruptcy court for
further proceedings.

BACKGROUND

Debtor-Appellant is the debtor in an involuntary chapter 7 bankruptcy proceeding pursuant
to 11 U.S.C. § 303. As Bankruptcy Judge Slade found, the three petitioners (Creditor-Appellees) have
been “candid” about the fact that they filed their petition for involuntary bankruptcy because they
sought “to take advantage of the tolling provision in the Bankruptcy Code” so as to avoid a looming
statute of limitations deadline for their collection efforts. In re Lake Shore Healthcare & Rehab. Ctr. LLC,
No. 25-10064, 2025 WL 3304827, at *3 (Bankr. N.D. Ill. Nov. 25, 2025). Debtor-Appellant believes
that this constitutes an admission of bad faith and it moved to dismiss the petition on that basis.
Debtor-Appellant also argued that, in the alternative, the bankruptcy court should abstain from
hearing the petitioners’ claims (owing to their alleged bad faith) in favor of state court proceedings.
In its motion before the bankruptcy court, Debtor-Appellant cited to a Third Circuit case
holding that bad faith is a proper basis for dismissing an involuntary petition. In re Forever Green Athletic
Fields, Inc., 804 F.3d 328 (3d Cir. 2015). However, all parties conceded that there is no applicable
Seventh Circuit precedent on this question.

The bankruptcy court denied Debtor-Appellant’s motion. In his ruling, Judge Slade disagreed
with the Third Circuit and held that the plain text of the bankruptcy code does not permit dismissal

on the basis of bad faith. Id. at *5–7. Instead, bad faith comes in as a consideration only when issuing
judgment after a dismissal has already occurred. Id.; see 11 U.S.C. § 707 (a). Judge Slade also found,
regardless of the question of law, that Creditor-Appellees’ behavior did not constitute bad faith, but
rather legitimate maneuvers under the law to maximize Debtor-Appellant’s estate for distribution.
Lake Shore Healthcare, 2025 WL 3304827, at *6. Finally, Judge Slade held that abstention in this case
would be “nonsensical,” because if he abstained, then “any fraudulent conveyance claims [Debtor-
Appellant] owns would be lost”; consequently, he “would be ‘abstaining’ in favor of nothing.” Id. at
*4. Following the bankruptcy court’s ruling, Debtor-Appellant timely filed the instant motion before
this Court, seeking leave for an interlocutory appeal.

                  DISCUSSION                                     

Under 28 U.S.C. § 158 (a), a party to a bankruptcy proceeding may seek leave from a district
court to file an interlocutory appeal of a bankruptcy judge’s order, and courts in this district
“traditionally turn[] to 28 U.S.C. § 1292 (b)—the general interlocutory appeal standard—for guidance.”
In re Pullman Const. Indus., Inc., 143 B.R. 497, 498 (N.D. Ill. 1992) (Aspen, J.). Under 28 U.S.C. § 1292 (b),
“there are four statutory criteria for the grant of a section 1292(b) petition to guide the district court:
(i) there must be a question of law, (ii) it must be controlling, (iii) it must be contestable, and (iv) its
resolution must promise to speed up the litigation. Ahrenholz v. Bd. of Trustees of Univ. of Illinois, 219 F.3d
674, 675 (7th Cir. 2000).

Without clear Seventh Circuit precedent on the issue, and given Judge Slade’s disagreement
with the Third Circuit, the Court surmises that the question of whether bad faith is appropriate
grounds for dismissal or abstention of an involuntary petition is a question of law that may be
contestable. See Flynn v. Exelon Corp., No. 19 C 8209, 2022 WL 267915, at *3 (N.D. Ill. Jan. 28, 2022)
(Kendall, J.).(“[An] order is contestable if there are substantial conflicting decisions regarding the
claimed controlling issue of law, or the question is not settled by controlling authority and there is a

substantial likelihood that the… ruling will be reversed on appeal.” (citations and internal quotation
marks omitted)). But regardless of whether the question is contestable, Judge Slade also found that
Creditor-Appellees did not act in bad faith. A determination of whether a party’s actions constitute
bad faith under an established standard is a determination of fact. See, e.g., In re McKay, No. 18-31088, 2019 WL 3294081, at *1 n.2 (Bankr. S.D. Ill. July 22, 2019); Cummins-Allison Corp. v. Glory, Ltd., No.
02 C 7008, 2003 WL 22169756, at *2 (N.D. Ill. Sept. 18, 2003) (Guzman, J.) (“The determination of
bad faith is a question of fact which is determined on a case by case basis.”) (citing Zenith Elec. Corp. v.
Exzec, Inc. 182 F.3d 1340, 1355 (Fed.Cir.1999)). Debtor-Appellant admits as much when it states that
this Court may need to order an evidentiary hearing if it disagrees with the bankruptcy court’s reading
of the bankruptcy code. Dkt. 2 at *4; see Ahrenholz v. Bd. of Trs. of Univ. of Illinois, 219 F.3d 674, 676–77
(7th Cir. 2000) (a question of law suitable for interlocutory appeal is “something the court of appeals
could decide quickly and cleanly without having to study the record”).

Judge Slade’s determination that Creditor-Appellees did not act in bad faith is not a question
of law: it is a finding of fact that is inappropriate for reconsideration in an interlocutory appeal. Cf. Ahrenholz at 676 (“We think ‘question of law’ as used in section 1292(b) has reference to a question of
the meaning of a statutory or constitutional provision, regulation, or common law doctrine rather than
to whether the party opposing summary judgment had raised a genuine issue of material fact.”) As
such, the question of law as to whether bad faith is grounds for dismissal or abstention, while possibly
contestable, is not controlling, nor would its resolution hasten the ultimate termination of the case.
See id. at 675 (interlocutory review only appropriate when it will speed up litigation). Even if the Court
determined that Judge Slade was incorrect on the law, and that the Third Circuit’s approach should
be adopted here, that would not mandate dismissal or abstention, given Judge Slade’s finding that
Creditor-Appellees did not act in bad faith. Jd, Consequently, Debtor-Appellant has not met the
criteria in 28 U.S.C. § 1292 (b) for an interlocutory appeal.
CONCLUSION
The Court denies Debtor-Appellant’s motion [2| and remands this case back to the bankruptcy
court for further proceedings.

IT IS SO ORDERED.
Date: 2/13/2026 YOLLE
Entered:

SHARON JOHNSON COLEMAN
United States District Judge

                            □□□