Nurses' Registry & Home Health Corp. v. Burwell (In re Nurses' Registry & Home Health Corp.)

• Decision Date: 09 July 2015
• Docket Number: CASE NO. 15–51278,ADV. NO. 15–5074
• Citation: 533 B.R. 590
• Parties: In re Nurses' Registry and Home Health Corporation, Debtor Nurses' Registry and Home Health Corporation, Plaintiff v. Sylvia Mathews Burwell, in her capacity as Secretary of the United States Department of Health & Human Services; Centers for Medicare and Medicaid Services; and AdvanceMed Corporation, Defendants
• Court: U.S. Bankruptcy Court — Eastern District of Kentucky

533 B.R. 590

In re Nurses' Registry and Home Health Corporation, Debtor

Nurses' Registry and Home Health Corporation, Plaintiff

v.Sylvia Mathews Burwell, in her capacity as Secretary of the United States Department of Health & Human Services; Centers for Medicare and Medicaid Services; and AdvanceMed Corporation, Defendants

CASE NO. 15–51278

ADV. NO. 15–5074

United States Bankruptcy Court, E.D. Kentucky, Lexington Division .

Signed July 9, 2015

Amelia M. Adams, Laura Day DelCotto, Dean A. Langdon, DelCotto Law Group PLLC, Lexington, KY, for Plaintiff.

Brandon L. Fyffe, U.S. Attorney's Office, Paul C. McCaffrey, Christine A. Corndorf, Lexington, KY, for Defendants.

MEMORANDUM OPINION AND ORDER

Gregory R. Schaaf, Bankruptcy Judge

This matter is before the Court on Defendants' Motion to Stay Pending Appeal [AP Doc. 11] and the United States' Motion for Stay Pending Appeal of Order Allowing Interim Use of Cash Collateral [Bk Doc. 68].¹ On July 1, 2015, this Court, in an oral ruling, granted Plaintiff's Emergency Motion for a Preliminary Injunction or Temporary Restraining Order [AP Doc. 2] in part and granted Plaintiff's Expedited Motion for Interim Use of Cash Collateral [Bk. Doc. 7] in full, setting Plaintiff's Motions for a final hearing on July 30, 2015, and enjoining the Defendants from suspending payments up until the date of that final hearing. On July 2, 2015, the Court entered a written order memorializing its oral ruling on the injunction and supplementing its oral findings of fact and conclusions of law with an additional discussion of authorities cited by Defendants for the first time in closing argument. [AP Doc. 5.] It also entered a written order granting the motion for interim use of cash collateral. [Bk Doc. 55.] Defendants appealed both orders. [AP Doc. 7; Bk Doc. 58.]

In entering the preliminary, 28–day injunction, the Court did not make a finding on Plaintiff's likelihood of success on the merits of its claims. As it noted at the hearing, likelihood of success on the merits would become a greater consideration at the final hearing on Plaintiff's Motion, at which Plaintiff must satisfy a heavy burden to show a likelihood of success. Instead, the injunction was based on the irreparable harm Plaintiff would suffer in absence of the injunction, the balance of the harms to Plaintiff and Defendants, and whether the injunction would serve the public interest.

The Defendants' motion to stay pending appeal, however, focuses almost entirely on their likelihood of success on appeal, giving only perfunctory discussion to irreparable harm to Defendants, harms to third parties, and the public interest.² This ignores the central focus of the appealed order, which relied on those three prongs and found they weighed overwhelmingly in favor of granting the injunction. Moreover, Defendants do not persuade the Court that they are likely to succeed on appeal. As this Court explained last week and will explain again in greater detail below, its jurisdiction under 28 U.S.C. § 1334 is unaffected by Medicare's jurisdictional bar on judicial review of unexhausted Medicare disputes under 28 U.S.C. §§ 1331 and 1346.

I. Motion For Stay of Appeal of Preliminary Injunction.

A. Standard of Review.

In determining whether a stay should be granted pending appeal, the Sixth Circuit has instructed lower courts to consider four factors: (1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and (4) the public interest in granting the stay. Russell v. Lundergan–Grimes, 769 F.3d 919, 921 (6th Cir.2014) (per curiam). These factors, notably, are essentially the same factors that a court must consider to grant a preliminary injunction, and that this Court considered last week in entering the appealed orders.

B. Likelihood of Success.

Defendants primarily argue they are entitled to a stay because they are likely to succeed on appeal. [AP Doc. 11 at 6–15.] As noted above, the Court did not rely on Plaintiff's likelihood of success on the merits in granting injunctive relief. It did, however, hold that it had subject-matter jurisdiction to enter its order. Defendants challenge that conclusion and argue that they are likely to succeed on appeal, primarily because they assert this Court's jurisdictional holding is likely to be reversed.

Before considering Defendants' arguments, the Court notes that Defendants will have to overcome a substantial jurisdictional hurdle of their own making in order to succeed on appeal: namely, showing that the Court's preliminary injunction is “final” (and thus appealable) within the meaning of 28 U.S.C. § 158(a). Precedent on the finality of bankruptcy courts' preliminary injunctions is mixed, and appears to largely turn on whether the bankruptcy court manifests an intention to revisit the preliminary injunction at a later date.³ The District Court will make its own decision on jurisdiction, but the uncertain appealability of this Court's order makes it extremely difficult to find Defendants are likely to succeed on appeal.

1. Bankruptcy Jurisdiction over Unexhausted Medicare Act Disputes.

Defendants principally argue that they are likely to succeed because this Court erred in holding it had subject-matter jurisdiction over an unexhausted Medicare Act dispute. In so arguing, they only address one of the three rationales this Court gave for its exercise of jurisdiction—the additional rationale given in its written order.

In its oral ruling, the Court held that it had jurisdiction because, by declining to evaluate Plaintiff's likelihood of success on the merits, it was not adjudicating the merits of Medicare Act claims. The Defendants' arguments on the merits are not relevant at this time; they will become relevant when the Court again takes this matter up on a final hearing in late July.

The Court further held that Plaintiff's claims fit an exception to the bar on federal jurisdiction over Medicare Act claims that was announced in Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986). As the Supreme Court subsequently explained, Michigan Academy held that there was an exception to the statutory bar where applying it “would not lead to a channeling of review through the agency, but would mean no review at all.” Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 17, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000). Had this Court waited for the Medicare process to play itself out while Medicare continued to suspend payments, the Debtor would have become defunct, and the Debtor would never have been heard on its request for turnover. Thus, channeling the Debtor's claims through the agency would mean no judicial review of its claims at all. Defendants do not address these points, and for that reason alone the Court is unable to find Defendants are likely to succeed on their jurisdictional arguments on appeal.

Defendants do, however, address the Court's supplemental reasoning in its written order. The Court, following two courts of appeal and several bankruptcy courts,⁴ held that the statutory bar on federal jurisdiction over unexhausted Medicare Act disputes, codified at 42 U.S.C. § 405(h), did not apply to bankruptcy jurisdiction under 28 U.S.C. § 1334. [AP Doc. 5 at 2–3.] It reached this conclusion for the simple reason that § 405(h) expressly bars only § 1331 and § 1346 jurisdiction over unexhausted Medicare Act disputes. See 42 U.S.C. § 405(h) (“No action against the United States ... or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.”); 42 U.S.C. § 1395ii (applying § 405(h) to the Medicare Act).

Defendants acknowledge that the plain language of § 405(h) does not bar bankruptcy jurisdiction over unexhausted Medicare Act disputes. They argue, however, that the legislative history of § 405(h) shows that § 405(h)'s limitation to § 1331 and § 1346 jurisdiction is a drafting error, and that § 405(h) bars all federal subject-matter jurisdiction over unexhausted Medicare Act claims. The Court did not agree last week, and does not agree this week.

The legislative history of § 405(h) is recounted well in the Sixth Circuit's opinion in BP Care, Inc. v. Thompson, 398 F.3d 503, 514 n.11 (6th Cir.2005) (Rogers, J.).⁵ Section 405(h) was enacted in 1939, as part of the Social Security Act (“SSA”). As written, it barred jurisdiction under 28 U.S.C. § 41. At that time, 28 U.S.C. § 41 contained virtually all the important grants of subject-matter jurisdiction to the district courts, including federal-question, diversity, and bankruptcy. See 28 U.S.C. § 41(19) (1940) (repealed) (granting jurisdiction over “all matters and proceedings in bankruptcy”).

In 1948, however, Congress re-codified Title 28 and separated § 41's twenty-eight subsections into new sections 1331 through 1359. This caused no substantive change in the coverage of the SSA's jurisdictional bar; courts simply referred to § 41 as it existed in 1939. See Weinberger v. Salfi, 422 U.S. 749, 756 n. 3, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975) (holding twenty-seven years after Title 28's re-codification that § 405(h)'s reference to § 41 continued to capture all jurisdictional grants formerly housed within that section).

In 1976, however, only one year after the Supreme Court held that § 405(h)' s reference to § 41 continued to operate, the Office of Law Revision Counsel decided to revise § 405(h)'s reference to § 41, and replaced it in the U.S.Code with a reference to §§ 1331 and 1346. These provisions, respectively, grant subject-matter jurisdiction over federal questions, and over suits against the United States. See 28 U.S.C. §§ 1331, 1346. Clearly the Office of Law Revision Counsel believed that these grants of jurisdiction were the only ones relevant to SSA or Medicare ...