The U.S. Department of Labor (DOL) failed to block a $56 million deal between Pennsylvania operator Comprehensive Healthcare Management Services and Kadima Healthcare Group for seven properties, according to court documents.

The parties convened before the U.S. District Judge William Stickman IV in September when Acting Secretary of Labor Julie Su had asked for a preliminary injunction, asserting that Comprehensive sought to “opportunistically offload” assets to an “insider” in order to frustrate, if not fully thwart, Su’s ability to recover a judgment.

The DOL alleged that Comprehensive wanted to unload assets before its trial regarding back wages and overtime. This case has been pending since 2018, Stickman wrote in the Court decision.

Comprehensivelooks to sell seven of its 15 nursing homes to Kadima Healthcare Group for a total of 747 beds. Comprehensive has been in talks for a sale since February, Court documents show.

Ephram Lahasky, an owner of Comprehensive, has a separate business relationship as a 5% owner in six facilities operated by Kadima in eastern Pennsylvania. But, Lahasky has no direct equity interest in any of the purchasing limited liability companies (LLCs), the court found.

In his decision, Judge Stickman outlined a number of factors when considering an injunction: whether the Court in question can grant the injunction, if there’s a likelihood of success on the merits, if irreparable harm will be caused should the injunction be denied, granting preliminary relief won’t cause greater harm to the unmoving party, and that the public interest favors an injunction.

Stickman made it clear that the Court had the power to grant the injunction, and that the DOL has demonstrated a reasonable likelihood of success on the merits – the agency will likely recover some if not all of funds owed in back wages and overtime.

However, the DOL failed to demonstrate a sufficient need for injunctive relief, adding that potential harm imposed by an injunction denial is “neither irreparable nor immediate.”

“The Acting Secretary acknowledged that she has two remedies available, should she be unable to recover on whatever judgment the Court enters in her favor: (1) successor liability under the FLSA, and (2) clawback measures under the Pennsylvania Uniform Voidable Transactions Act,” Stickman wrote.

The Court considered a “balance the hardships” – those the DOL may suffer without an injunction, and those Comprehensive may suffer if its sale is blocked. Still, it’s uncertain what would happen if the sale were to proceed, according to court documents.

Comprehensive’s financial resources and ability to keep their doors open to patients is “uncertain but looks bleak,” said Stickman. The facilities had been losing money “for some time” and seemingly don’t have substantial funds to continue operations.

“Additionally, Defendants have defaulted on their approximately $46 million loan with CIBC, even though the bank has not exercised its default rights,” according to court documents.

Stickman continued: “If the Court were to grant the requested injunctive relief, Defendants may face a more dire financial situation than they already find themselves in now, but absent more information as to the impending nature of their financial future, the Court cannot find this to be true.”

In terms of public interest one way or the other, the Court found an injunction would not make a heavy impact.

“The Court’s refusal to grant injunctive relief would not forestall Defendant’s attempts to keep Facility Defendants open to provide the necessary services for their patients without interruption,” said Stickman. “Thus, the Court finds that this final factor is also neutral.”

Skilled Nursing News reached out to Comprehensive for comment but did not hear back in time for publication.