In Re: Lemington Home for the Aged, No. 10-4456 (3d Cir. 2011)Annotate this Case
The nonprofit corporation was founded as a home for elderly African-Americans in 1883. In the 1980s its financial condition began to deteriorate and, in 2004, the administrator recommended bankruptcy. The board opted to take a $1 million loan, after which there were two unusual patient deaths; the board and administration fell into disarray. When the board eventually filed Chapter 11 bankruptcy, a committee of unsecured creditors filed claims against directors and officers for breach of the fiduciary duties of care and loyalty and for deepening insolvency. The district court rejected the claims. The Third Circuit vacated, finding genuine disputes of material facts. The court noted evidence that the board and officers had reason to know that its administrators were not reliable and competent and did not act with reasonable diligence. There was evidence that breaches of fiduciary duties benefited defendants' individual interests and that defendants contributed to the deepening insolvency.
The court issued a subsequent related opinion or order on October 20, 2011.