In re APF Co.
| Decision Date | 27 June 2001 |
| Docket Number | Bankruptcy No. 98-1596 PJW. Adversary No. 00-848. |
| Citation | 264 BR 344 |
| Parties | In re APF CO., et al., Debtors. Joseph A. Pardo, Trustee of FPA Creditor Trust, and Plan Administrator for APF Co., et al., Plaintiffs, v. Pacificare of Texas, Inc., Pacificare of Arizona, Inc., Pacificare of Nevada, Inc. and Pacificare of California, a California corporation, Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
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Seth J. Reidenberg, White and Williams, Wilmington, DE, Karl E. Block, Jean Morris, Paul A. Blechner, Greenberg Glusker Fields Claman & Machtinger LLP, Los Angeles, CA, for defendants Pacificare of Texas, Inc., Pacificare of Arizona, Inc., Pacificare of Nevada, Inc., and Pacificare of California.
Dennis J. O'Grady, Joseph L. Schwartz, Riker, Danzig, Scherer, Hyland & Perretti LLP, Morristown, NJ, Neil B. Glassman, Jeffrey M. Schlerf, Elio Battista, Jr., The Bayard Firm, Wilmington, DE, co-counsel for co-plaintiff, Joseph A. Pardo, Trustee of FPA Creditor Trust.
John Wm. Butler, Jr., J. Eric Ivester, J. Gregory St. Clair, Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, IL, Gregg M. Galardi, Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, DE, for co-plaintiff, Plan Administrator for APF Co., et al.
Before the Court are two motions by the defendants, Pacificare of Texas, Inc., Pacificare of Arizona, Inc., Pacificare of Nevada, Inc., and Pacificare of California (collectively, "Pacificare"). The first (Doc. # 4) is a Motion to Dismiss for Lack of Standing F.R.C.P. 12(b)(1) and Failure to State a Claim Upon Which Relief Can Be Granted F.R.C.P. 12(b)(6), or, Alternatively, for a More Definite Statement F.R.C.P. 12(e). The second (Doc. # 7) is a Motion to Compel Arbitration and Stay Adversary Proceeding Pending Arbitration. I will deny both motions for the reasons discussed below.
This dispute concerns medical management contracts between the debtors, APF Co. and its affiliates ("APF" or "Debtors") and Pacificare, a health maintenance organization ("HMO"). Before filing for voluntary chapter 11 relief in mid-July 1998, APF was a national physician practice management company.1 APF's contracts with Pacificare required APF to make medical services available to enrollees of the Pacificare HMO. In return, Pacificare paid APF a monthly capitation fee. The contracts required APF to pay medical service providers directly. Pacificare began reducing the capitation payments when APF's financial difficulties prevented APF from making direct payments to the medical service providers.
The plaintiffs in this proceeding are the Trustee of the FPA Creditor Trust ("Trustee") and the Plan Administrator of APF's confirmed chapter 11 plan ("Plan Administrator"). Plaintiffs' complaint (Doc. # 1) ("Complaint") seeks recovery of the withheld capitation payments. As to each defendant, Plaintiffs request an accounting of missing payments; turnover of property of the estate under § 542;2 avoidance of invalid prepetition setoffs under §§ 553(b) and 550; avoidance of preferential transfers under §§ 547 and 550; and avoidance of unauthorized postpetition transfers of property of the estate under §§ 549 and 550. Plaintiffs also allege Pacificare willfully violated the automatic stay and is liable for compensatory and punitive damages under § 362(h) and § 105(a).
In lieu of an answer, Pacificare filed the pending motions seeking alternatively dismissal for lack of standing under Fed. R.Civ.P. 12(b)(1)3, failure to state a claim under Fed.R.Civ.P. 12(b)(6), or abstention in favor of arbitration.
Pacificare argues that Plaintiffs fail to allege a sufficient legal basis for individual standing. Dismissal is appropriate in such circumstances because a court lacks subject matter jurisdiction if a party lacks standing as there is no case or controversy, or injury in fact, upon which relief can be granted. Burlington Motor Carriers v. MCI Telecommunications (In re Burlington Motor Holdings), 231 B.R. 874, 878 (Bankr.D.Del.1999) citing Fair Hous. Council of Suburban Philadelphia v. Montgomery Newspapers, 141 F.3d 71, 74 (3d Cir.1998).
According to Pacificare, the Trustee and Plan Administrator cannot jointly assert each count because they do not both have standing to pursue all counts. Thus, for example, the Trustee may only plead those counts for which the Trustee, and only the Trustee, has standing. Pacificare maintains that doing otherwise renders the Complaint fatally contradictory and ambiguous. I disagree.
The legal character of Pacificare's withholdings from APF's capitation payments is not yet determined. The possibility that some recoveries may prove mutually exclusive, however, does not prevent the Trustee or Plan Administrator from pleading all legal theories under which either or both may be entitled to recovery. Fed.R.Civ.P. 8(e)(2) ().
I find the Complaint adequately states grounds for Plaintiffs' standing. It identifies the Trustee and Plan Administrator as individuals authorized to act pursuant to APF's confirmed chapter 11 plan ("Plan"). As to the Trustee, the Complaint alleges that a trust ("Trust") was created and established for the benefit of APF's unsecured creditors and that the Trust's Advisory Board designated the Trustee as successor trustee of the Trust which the Trustee acknowledged and accepted on July 20, 1999. Complaint at ¶¶ 17-19. As to the Plan Administrator, the Complaint identifies him as an individual appointed under APF's confirmed chapter 11 plan to administer the rights, remedies, obligations and liabilities imposed on the Debtors and Reorganized FPA not assigned to the Trust. Id. at ¶ 20.
Regarding the Trustee claims, the Complaint alleges APF transferred certain assets to the Trust, including "Trust Claims," pursuant to Article XI, § 11.2 of the Plan, "Trust Claims" include "Avoidance Claims" as defined in the Plan, Article I, § 1.126, which the Plan further defines to include "Causes of Action against Persons arising under sections . . . 542 . . . 547 . . . through 551 and 553 of the Bankruptcy Code, or under similar state or federal statutes . . ." Complaint at ¶¶ 40-42. The Complaint then alleges that "some or all of the funds withheld, reduced and/or set off by Pacificare from payments otherwise due to the Debtors, both pre- and postpetition, fall within the definition of `Trust Claims' under the Plan and are recoverable by the Trustee." Id. at ¶ 43.
As to the Plan Administrator's claims, the Complaint states that Article VII of the Plan authorizes the Plan Administrator to liquidate "Rights of Action" which include "Causes of Action . . . for recovery in respect of the Debtors' accounts receivable or other receivables or rights to payment created or arising in the ordinary course of the Debtors' business, including, without limitation, withheld capitation payments . . ." Complaint at ¶ 44. Plaintiffs aver certain funds Pacificare withheld from the capitation payments are "Rights of Action" and thus recoverable by the Plan Administrator. Complaint at ¶ 45.
11 U.S.C. § 1123(b).
Thus, a party who is neither the debtor nor the trustee but who seeks to enforce a claim must establish (1) that it has been appointed, and (2) that it is a representative of the estate. Retail Mktg. Co. v. King (In re Mako, Inc.), 985 F.2d 1052, 1054 (10th Cir.1993); Citicorp Acceptance Co. v. Robison (In re Sweetwater), 884 F.2d 1323, 1327-28 (10th Cir.1989); see also McFarland v. Leyh (In re Texas Gen. Petroleum Corp.), 52 F.3d 1330, 1335 (5th Cir.1995).
The first element requires that the court approve the appointed party, as for example, through plan confirmation. Sweetwater, 884 F.2d at 1326. The second element generally requires a court to decide "whether a successful recovery by the appointed representative would benefit the debtor's estate and particularly, the debtor's unsecured creditors." Id. at 1327.
As detailed above, Plaintiffs plead an adequate factual premise for standing under § 1123(b). The Complaint sets forth how the Trustee and Plan Administrator were appointed, pursuant to which Plan provision, and that both are estate representatives. I therefore hold that dismissal under Rule 12(b)(1) is not warranted.
Pacificare next moves to dismiss all Counts for failure to state a claim upon which relief can be granted. A Fed. R.Civ.P. 12(b)(6) motion serves to test the sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993); Loftus v. Southeastern Pennsylvania Transp. Auth., 843 F.Supp. 981, 984 (E.D.Pa.1994). When deciding such a motion, I accept as true all allegations in the complaint and all reasonable inferences drawn from it which I consider in a light most favorable to the plaintiffs. Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir.1997); Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir.1989).
I should not grant a Rule 12(b)(6) motion "unless it appears beyond doubt that plaintiffs can prove no set of facts in support of their claim which would entitle them to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). I need not, however, "credit a complaint's `bald assertions' or `legal conclusions' when deciding a motion to dismiss....
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