In re St. Mary Hosp.
| Citation | 97 BR 199 |
| Decision Date | 03 March 1989 |
| Docket Number | Adv. No. 88-0565S.,Bankruptcy No. 88-11421S |
| Parties | In re ST. MARY HOSPITAL, Debtor. Niscasio VELEZ, Megan Hoerauf, Pedro Rodriquez, Maria Saez, Felix SaezCrux, on behalf of themselves and all others similarly situated, Norris Square Civic Assoc., Philadelphia Welfare Rights Organization, New Kensington Neighborhood Advisory Committee, Fishtown Civic Association, Kensington Joint-Action Council, Angel L. Ortiz, James J. Tayoun, David Cohen, Members of Philadelphia City Council, Thomas M. Foglietta, Member of United States Congress, House of Representatives, and Vincent J. Fumo, Member of Pennsylvania Senate, Plaintiffs, v. ST. MARY HOSPITAL, Ronald R. Aldrich, and Franciscan Health System, Defendants. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Henry J. Sommer, Community Legal Services, Inc., Stephen F. Gold, Philadelphia, Pa., for plaintiffs.
Henry F. Siedzikowski, Philadelphia, Pa., for debtor.
David H. Marion, Philadelphia, Pa., for defendants/FHS and Aldrich.
Daniel E. Farmer, Philadelphia, Pa., for Doctors.
Virginia Powel, Asst. U.S. Atty., Philadelphia, Pa., for HHS.
Gary M. Schildhorn, Philadelphia, Pa., for Creditors' Committee.
James J. O'Connell, Philadelphia, Pa., Asst. U.S. Trustee.
David F. Fishbone, Philadelphia, Pa., for trustee.
Roger B. Hiser, East Greenville, Pa., trustee.
Seymour Kurland, City Sol., City of Philadelphia, Philadelphia, Pa., for the City.
W. Jeffrey Garson, Philadelphia, Pa., for Neumann Health Services, Inc.
On January 24, 1989, counsel for the Plaintiffs in the above-captioned adversary proceeding filed a motion seeking substantial attorneys' fees for their services performed in the course of the instant Chapter 11 bankruptcy case.1 This motion is based, alternatively, on 42 U.S.C. § 1988 and 11 U.S.C. §§ 503(b)(3)(D) and (b)(4). We hold that the narrow scope of §§ 503(b)(3)(D) and (b)(4) precludes the very broad interpretation of the term "creditor," submitted by the Plaintiff, such as would be necessary to allow the motion under that Code section. We also find that the Civil Rights Act claims raised by the Plaintiffs were without merit; consequently they played no role whatsoever in the ultimate disposition of this case; and that the claim based upon 42 U.S.C. § 1988 must be rejected as well.
The bankruptcy case underlying this proceeding was filed by the Debtor, the operator of a hospital, on April 27, 1988. The setting which gave rise to the filing of the adversary complaint on April 29, 1988, is recited in our Opinion of May 9, 1988, filed when this case was less than two weeks old and reported at 86 B.R. 393 (Bankr.E.D.Pa. 1988). The adversary complaint was filed simultaneously with the filing of a motion by four doctors working out of the Debtor's hospital (hereinafter referred to as "the Doctors") seeking to enjoin the Debtor from effectively promulgating a plan to close the hospital within 30 days (and, specifically, closing its emergency room that night), and seeking the appointment of a Chapter 11 Trustee. The Plaintiffs' claims were last set forth in the Second Amended Complaint in the adversary proceeding, apparently filed on May 5, 1988.2 The Second Amended Complaint purports to maintain the proceeding as a class action on behalf of "all low income persons residing in or working in the geographical area served by St. Mary Hospital who have been or will be adversely affected by the closing of St. Mary Hospital Emergency Room." Named as defendants are the Debtor, Franciscan Health Systems (hereinafter "FHS"), the parent of the Debtor; and Ronald R. Aldrich, the President of FHS (hereinafter "Aldrich").
The Second Amended Complaint recites four claims or causes of action, based upon the following respective theories: (1) Title VI of the Civil Rights Act of 1964, contending that the closing of the hospital will have a disparate impact on minorities; (2) The Hill-Burton Act, 42 U.S.C. § 291a, et seq., based on the loss of provision of free care otherwise available to the community through the hospital due its closure; (3) A state Regulation preventing hospital closings without notice to the state Department of Health, which was not provided; and (4) A City health regulation requiring written authorization prior to closure of a hospital emergency room, which also was not provided. It is apparent that only the first two claims are based on violations of the Civil Rights Act. The relief sought in the Second Amended Complaint is, essentially, prevention of the closure of the hospital's emergency room and requiring restoration of full services by the hospital to all class members. In addition to the Doctors, the Plaintiffs were joined in their efforts to halt the closure of the hospital by the City of Philadelphia, which filed its own adversary complaint to this end, and the United States Trustee (hereinafter "UST"), who joined the Doctors in pressing for the appointment of a Chapter 11 Trustee.
Our Opinion of May 9, 1988, came several days after our appointment of George L. Miller as an Examiner on May 5, 1988, in partial response to the request of the Doctors and the UST for appointment of a Trustee. See In re Florida Peach Corp. of America, International, 63 B.R. 833, 841 (Bankr.M.D.Fla.1986); In re John Peterson Motors, Inc., 47 B.R. 551, 553 (Bankr.D. Minn.1985); and In re Landscaping Services, Inc., 39 B.R. 588, 590-91 (Bankr.E.D. N.C.1984) (). In that Opinion, we granted certain relief to the Doctors and the Plaintiffs, most notably enjoining the Debtor from taking any further action to close the hospital or discontinue emergency-room services. However, as we stated in that Opinion, the relief granted was solely on the basis of our findings of violation of the City regulation cited in the Plaintiffs' (and the City's) Complaint; violation of a provision of a contract between the Debtor and the City concerning operation of a Women's and Infants Care program in the hospital, an issue raised only by the City; and our belief that the Doctors' motion had merit in that it averred that alternatives to the closure of the hospital had not been fully explored. 86 B.R. at 397.
Our ultimate disposition of the two Civil Rights claims, 86 B.R. at 398-99, was as follows:
we question whether there has sic been any violations of either Title VI of the Civil Rights Act or the Hill-Burton Act which would justify our intervention. There is no question that there will be a disparate impact upon minorities as opposed to whites if the Debtor closes its facility, and Hill-Burton obligations, of which the community is the beneficiary, will obviously go unmet. However, we perceive nothing in either federal Act which would require a facility within the scope of these Regulations to remain open to insure that patients\' rights under these Acts are preserved. As we have learned from the ultimately unsuccessful attempt of community forces to prevent the relocation of the Wilmington Medical Center from a needy, low-income community and into the suburbs, see N.A.A.C.P. v. Medical Center, Inc., 657 F.2d 1322 (3d Cir.1981), there are distinct limitations upon the managerial decisions of hospitals which courts can effect. As the Debtor points out, the Hill-Burton Act contemplates rather than prohibits the closing of hospitals imposed with obligations of that Act. See 42 U.S.C. § 291i; and 42 C.F.R. § 124.704. Therefore, we fail to see how these laws provide a cause of actio to the adversary plaintiffs.
We further stated that "the adversary plaintiffs, unlike the doctors, are not creditors or agents of the Debtor, and may have difficulty meeting the definition of interested parties." Id. at 399. Thus, we concluded that "we are not prepared to act on the basis of these proposed violations of the law," i.e., the Civil Rights Act claims. Id. Rather, we indicated that, while the Plaintiffs were very active and effective in presenting evidence at the hearing of May 4, 1988, which resulted in the Opinion and Order of May 9, 1988, it was the clear standing and claims of the City and Doctors which directly supported our actions. Id. at 399-401.
The May 9, 1988, Opinion was appealed, but not by the Plaintiffs. It was, perhaps, a crucial turning-point in the case, as it halted the efforts of the Debtor to close the hospital. However, the ultimate direction of the case was not established until we received the report of the Examiner on May 13, 1988, and not by reason of any of the claims asserted in the adversary proceeding. The Examiner's recommendation for same led directly to our immediate indication of an intention to appoint a Trustee, which came to fruition in the appointment of Roger B. Hiser as Trustee on May 17, 1988. The Trustee definitively put the Debtor down the path of keeping its hospital open and expanding services, and ultimately allowed the sale of the hospital as a going concern to an entity dedicated to trying to keep it open, Neumann Medical Center, Inc.
With the relief ultimately sought by the Plaintiffs effectively provided, the adversary complaint itself remained in limbo. A motion to dismiss it on the ground that it was moot as filed by all of the Defendants on September 8, 1988. The disposition of this motion and any further action in this proceeding (except the instant motion) has been continued until April 5, 1989, the date of the hearing on Confirmation of the Debtor's Plan. Confirmation of this Plan, apparently supported by all interested parties, will almost certainly render the merits of this proceeding moot.
One basis of the Plaintiffs' motion is 11 U.S.C. §§ 503(b)(3)(D) and (b)(4), which provide as follows:
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