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Judge denies motion to move Cottage bankruptcy proceedings to Peoria

Heather Norman
Tri States Public Radio
A federal judge denied a motion to move bankruptcy proceedings for Cottage Clinics from Michigan to Illinois.

The federal judge overseeing bankruptcy proceedings for Cottage Clinics has denied a motion to move the case from Michigan to Illinois.

CEO Sanjay Sharma filed for chapter 11 bankruptcy for the clinics affiliated with Galesburg’s Cottage Hospital on Jan. 3 in the Eastern District of Michigan.

The hospital suspended operations a few days later as it was set to lose Medicare and Medicaid funding, and the Illinois Department of Public Health later revoked its license.

The clinic remains in operation amid bankruptcy proceedings, though at greatly reduced capacity.

On Feb. 9, former Cottage physicians Greg Schierer, Carl Strauch, and Mark DeYoung filed a motion to change the venue to the U.S. Bankruptcy Court for the Central District of Illinois in Peoria.

They argued the majority of creditors, including the physicians themselves, reside in Illinois and the clinic’s assets and principal place of business are in Illinois, so that is the proper venue.

Sharma and his attorney then filed an objection to the motion, saying Sharma’s home in Michigan is the principal place of business for Cottage’s remaining operations and bookkeeping operations were moved to Michigan in September of 2021.

The objection also stated the clinic is no longer only a brick-and-mortar operation in Galesburg, but includes telehealth services in Illinois, Michigan, and Pennsylvania.

Furthermore, they argued because the bankruptcy hearings are being conducted by telephone and filings are electronic, there is no benefit to changing the venue.

Judge Maria Oxholm sided with Sharma.

“After considering all the evidence, the court holds creditors have not carried their burden by preponderance of the evidence that a transfer of venue is required in the interest of justice or for the convenience of the parties,” Oxholm said in a hearing.

Oxholm also said transferring the case would slow down the administration of the estate.

Tri States Public Radio produced this story.  TSPR relies on financial support from our readers and listeners in order to provide coverage of the issues that matter to west central Illinois, southeast Iowa, and northeast Missouri. As someone who values the content created by TSPR's news department please consider making a financial contribution.

Jane Carlson covers west central Illinois and southeast Iowa for Tri States Public Radio.