In re Cloward
| Decision Date | 19 November 2019 |
| Docket Number | Bankruptcy Number: 18-24837 |
| Citation | 608 B.R. 759 |
| Parties | IN RE: Jennifer Marie CLOWARD, Debtor |
| Court | U.S. Bankruptcy Court — District of Utah |
William P. Morrison, Morrison Law Office, Inc., Salt Lake City, UT, for Debtor.
In this case, the Debtor seeks sanctions against a hospital for an alleged stay violation arising from the hospital's post-petition filing of a notice of a hospital lien arising from emergency medical services it provided to the Debtor before her bankruptcy filing. While bankruptcy courts routinely encounter matters involving the automatic stay, this Motion presents an issue of first impression in Utah; namely, does a Utah hospital lien attach when a hospital provides medical services or when it files a notice of lien?
On September 6, 2019, the Court conducted a hearing on the Debtor's motion, at which William P. Morrison appeared for the Debtor. Matthew Cox and Nathan Mitchell appeared on behalf of the Intermountain Medical Center and MedData, Inc. After carefully considering the Debtor's motion, oral argument, and supplemental briefing, and after conducting its own independent research of applicable law, the Court hereby issues the following Memorandum Decision denying the Debtor's motion.
The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(2). Venue is appropriate in this District under 28 U.S.C. §§ 1408 and 1409, and notice of the motion was properly served on all parties in interest.
1. While riding a motorcycle on May 23, 2018, the Debtor was involved in a collision with a car. The Debtor was taken to Intermountain Medical Center (the "Hospital") and treated for serious injuries, including a partial amputation of her leg.
2. On June 12, 2018, the Debtor was discharged from the hospital, even though she continued to incur medical expenses with the Hospital through June 30, 2018.1
3. After being discharged by the Hospital, the Debtor retained the law firm of Robert J. DeBry to represent her in a personal injury claim against the driver of the car.
4. On June 28, 2018, the Debtor filed a Chapter 7 petition.2
5. On July 12, 2018, the Debtor filed her Statement of Financial Affairs, wherein she represented she was not a party to any lawsuit within the year prior to the date of the petition, and that none of her property was in the possession of an assignee for the benefit of creditors.3 The Debtor did, however, disclose a "[b]odily injury claim for compensatory damages from auto-motorcycle accident of May 2018 (claim is pending – value unknown)."4
6. While the amount of her hospital bills were unknown at the time of her bankruptcy filing, the Debtor listed her total, non-priority unsecured debts at $32,667.19.5
7. On September 11, 2018, the Hospital, through its agent Med-Data Inc.,6 filed a notice of hospital lien in the Third District for the State of Utah (the "State Court"), case no. 18-0906607.7 The State Court docket for the hospital lien lists as defendants Emily Fisher (the car's driver) and "Progressive" (the driver's insurance company). The notice lists the Debtor as the "Other Party."8 The hospital lien amount is stated as $300,952.69 (the "Hospital Lien").
8. Neither the Trustee nor the Debtor engaged in actions regarding the disposition of the Hospital Lien, and on September 13, 2018, the Trustee filed a Report of No Distribution.
9. On October 3, 2018, and the Court entered an Order of Discharge for the Debtor.9
10. The Debtor asserts that after her discharge, her personal injury attorney made many unsuccessful attempts to obtain the release of the Hospital Lien. The Debtor further asserts that the Hospital Lien has prevented her from receiving exempt funds for her personal injury claim. However, at this time, the Court has not received any evidence to support these allegations.
11. On February 22, 2019, Debtor's counsel sent the Hospital a letter demanding that the Hospital immediately release its lien and pay $1,500 in damages by March 8, 2019.10
12. On March 1, 2019, the Hospital released its lien.11
13. On March 8, 2019, the Hospital's attorney responded in writing to Debtor's counsel, stating the Hospital had a good-faith basis for not releasing the lien. Further, because the Hospital had not violated the stay, but had nonetheless released it lien, it declined to pay the requested $1,500.12
14. On March 11, 2019, Debtor's counsel responded to the Hospital with an e-mail saying the Debtor would proceed to prosecute her claim for damages in the bankruptcy court.13
15. On May 13, 2019, the Debtor filed a motion against Intermountain Medical Center and Med-Data, Inc. seeking the following relief: (1) holding the Hospital in civil contempt for willfully violating the stay and discharge; (2) awarding $15,000 in punitive damages, or such higher amount as the Court deems appropriate; (3) requiring the Hospital to reimburse the Debtor for all of monetary damages sustained as a result of the violation of the stay and discharge, including Debtor's costs and reasonable attorney fees; and, (4) requiring the Hospital to immediately purge themselves from contempt by forthwith abiding by the terms of the stay and discharge and by promptly satisfying all monetary judgments entered against them.14
The Debtor asserts that the plain language of Utah's Hospital Lien Law15 creates only a permissive and conditional right to a lien that does not attach until the hospital complies with the notice requirements of the statute. And because the Hospital did not file its notice of lien until after the Debtor's bankruptcy filing, its actions are a willful violation of the stay that caused the Debtor injury.
In counterpoint, the Hospital asserts that its lien attached pre-petition at the time it rendered medical services to the Debtor, and that its post-petition filing of a notice of lien in the State Court was permissible under the Bankruptcy Code as an act to perfect a pre-existing lien.
Thus, a dispositive issue in this case is whether the Hospital's lien attached at the time it rendered emergency medical services to the Debtor, or when it filed its notice of lien with the State Court.
Utah's Hospital Lien Law provides that a hospital that furnishes medical services "to a patient injured by reason of an accident is entitled to assert a lien upon that portion of the judgment, settlement, or compromise going or belonging to the patient ...."16 The Hospital Lien Law further provides that a "hospital lien ... shall be effective " if (1) a notice of lien is filed in the district court where the hospital is located; (2) a copy of the notice is sent to the person(s) alleged to be liable to the injured individual; and (3) a copy of the notice is sent to the insurance carrier for the liable person(s).17
The parties disagree whether the statutory phrase "is entitled to assert a lien" means a hospital lien "attaches" when medical services are rendered or when the notice of lien is given. However, the parties and the Court agree that the term "shall be effective" relates to the perfection of a hospital lien.
Property rights in bankruptcy are determined according to state law.18 Utah courts have not ruled on when a hospital lien attaches to the patient's right to compensation for an injury. When federal courts are required to interpret a state statute, they "must look to rulings of the highest state court, and if no such rulings exist, must endeavor to predict how the high court would rule."19 Federal courts are then to "interpret state laws according to state rules of statutory construction."20 Fortunately, there is the recent Utah Supreme Court decision of Bryner v. Cardon Outreach21 that provides guidance on the interpretation of Utah's Hospital Lien Law.
In Bryner , patients filed a class action suit arguing that the Hospital Lien Law required a hospital to pay a pro rata share of litigation costs incurred in the recovery of compensation for the injured patient. The hospitals countered that the Hospital Lien Law contained no such language and instead operated "to establish a priority system as to entitlement to settlement funds to allow hospitals to get paid."22
The Utah Supreme Court explained that statutes should be interpreted according to their plain language when read in harmony with other text in the same chapter.23 Further, while there may be competing interpretations, a statute is unambiguous "if the text of the act as a whole, in light of related statutory provisions, makes all but one of those meanings implausible."24 Based on the "whole-text canon"25 approach to statutory interpretation, the court found no ambiguity in the Hospital Lien Law, and while both parties offered possible interpretations, only the hospital's interpretation was plausible, given the text of the act as a whole.
At issue in this case is the temporal, operative effect of the statutory text stating that a hospital "is entitled to assert a lien." The Debtor argues there is nothing in the text to suggest the "automatic" attachment of the lien. Rather, the phrase "entitled to assert a lien" is permissive and conditional in that the lien does not attach until the hospital takes action to assert its lien by complying with the notice requirements of UTAH CODE ANN. § 38-7-2. This section directs the hospital to file a notice of lien in the applicable state court and to serve a copy on persons liable for the patient's injuries. The Debtor further argues that the Hospital's interpretation would require the statute to use the phrase "the hospital has a lien" or to include some temporal modifier such as "the hospital has an immediate lien" or "has an automatic lien."26...
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