BLOCK v. OCONEE REGIONAL MEDICAL CENTER INC
5:17-cv-00470
| M.D. Ga. | May 2, 2018Background
- Plaintiffs Deborah and Jeffery Block sued Navicent Health Oconee, LLC (Purchaser) and others seeking a declaration that Purchaser must provide COBRA continuation coverage.
- Multiple defendants (the "Defendant Debtors") are debtors in a Chapter 11 bankruptcy (Bankr. Case No. 17-51005) in the Middle District of Georgia.
- The Bankruptcy Court entered a Sale Order under 11 U.S.C. § 363 approving Purchaser’s acquisition of substantially all assets free and clear of liens, and enjoining assertion of such liens.
- Purchaser argues the Blocks’ COBRA claim implicates the Sale Order and thus arises in or is related to the bankruptcy case, so the matter belongs in bankruptcy court.
- The district court found the action could conceivably affect the bankruptcy estate (e.g., requiring payments that reduce funds available to creditors) and that interpretation/enforcement of the Sale Order falls within bankruptcy court competence.
- The district court therefore referred the case in its entirety to the Bankruptcy Court and terminated pending dismissal motions as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the civil action "arises in" or "is related to" a bankruptcy case | The Blocks seek a straightforward declaration of COBRA obligations against Purchaser, implying a separate federal suit | The claim requires interpretation/enforcement of the Bankruptcy Court’s Sale Order and could affect distributions in the bankruptcy estate | Referred: the action is related to the bankruptcy because outcome could conceivably affect the estate |
| Whether the Bankruptcy Court’s Sale Order and its injunction preclude Plaintiffs’ claim | Blocks contend COBRA claim stands on statutory/contractual grounds independent of sale protections | Defendants assert the Sale Order’s injunction bars pursuing claims that are liens or claims against the acquired assets and that bankruptcy court must interpret the order | Held for Defendants on forum: bankruptcy court is the proper forum to interpret/enforce its Sale Order |
| Whether district court has jurisdiction to refer the matter | Blocks implicitly rely on district adjudication | Defendants rely on 28 U.S.C. § 1334(b) and § 157(a) and the bankruptcy court’s exclusive power to interpret its orders | Held: District court has jurisdiction and properly exercised its statutory authority to refer the case to bankruptcy court |
| Effect of referral on pending motions to dismiss | Blocks sought dismissal rulings in district court | Defendants asked referral; dismissal motions awaited | Held: Referral terminated district-court dismissal motions as moot; matter goes to Bankruptcy Court |
Key Cases Cited
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (articulates the test for when a civil proceeding is "related to" a bankruptcy case)
- Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995) (overruled some aspects of prior precedent on bankruptcy jurisdiction issues)
- In re Brickell, [citation="142 F. App'x 385"] (11th Cir. 2005) (applies the Pacor/related-to test in the Eleventh Circuit)
- Travelers Indemnity Co. v. Bailey, 557 U.S. 137 (2009) (a bankruptcy court has authority to interpret and enforce its own prior orders)