Nurses' Registry & Home Health Corp. v. Burwell (In re Nurses' Registry & Home Health Corp.)
533 B.R. 590
Bankr. E.D. Ky.2015Background
- Debtor (a Medicare provider) filed for Chapter 11 and sought emergency preliminary injunctive relief and interim use of cash collateral after Medicare suspended payments. The bankruptcy court granted a 28‑day injunction preventing suspension of certain payments and authorized interim use of cash collateral pending a July 30 final hearing.
- Defendants (including the United States/Medicare) appealed both orders and moved to stay the injunction and the cash‑collateral order pending appeal. The motions primarily argued lack of federal jurisdiction over unexhausted Medicare claims and risk to the Medicare Trust Fund.
- The bankruptcy court based the injunction on irreparable harm to the Debtor and its patients, the balance of harms, and the public interest, not on likelihood of success on the merits.
- The court held it has jurisdiction under 28 U.S.C. § 1334 and rejected the view that 42 U.S.C. § 405(h) bars bankruptcy jurisdiction over unexhausted Medicare disputes. It also ruled § 542 turnover relief may be available even when title is contested.
- The court denied both stay motions, concluding Defendants had not shown a likelihood of success on appeal and that harms to the Debtor, its patients, and employees outweighed potential harm to Medicare.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a stay pending appeal should issue | Stay would cause irreparable harm to Debtor/patients; injunction protects public interest | Defendants likely to succeed on appeal; Medicare’s financial interest outweighs Debtor’s harms | Denied — Defendants did not show sufficient likelihood of success and harms/public interest favor Debtor |
| Whether 42 U.S.C. § 405(h) bars bankruptcy jurisdiction over unexhausted Medicare claims | §405(h) does not bar §1334 bankruptcy jurisdiction; exception where agency channeling would foreclose any review | §405(h) (as amended) should be read to bar all federal jurisdiction over unexhausted Medicare claims (legislative‑history/drafting‑error argument) | Denied — plain text and Congress’s 1984 amendment foreclose reading §405(h) as barring §1334; legislative‑error argument unpersuasive |
| Whether MCorp compels dismissal of bankruptcy‑based injunctive relief | Bankruptcy jurisdiction under §1334 can coexist with other statutory bars unless statute explicitly precludes it | MCorp establishes bankruptcy jurisdiction cannot override an explicit statutory bar to injunctions | Denied — MCorp inapplicable because §405(h) does not explicitly forbid bankruptcy jurisdiction as the statute in MCorp did |
| Whether §542 turnover may be used when title is disputed | §542 authorizes turnover to a debtor in possession; courts (including Supreme Court) have resolved title disputes within turnover actions | Defendants contend §542 cannot be used to demand assets when title is contested | Denied — Supreme Court and Sixth Circuit precedent permit turnover claims even when title is contested; remediable on the merits rather than jurisdictional bar |
Key Cases Cited
- Russell v. Lundergan‑Grimes, 769 F.3d 919 (6th Cir. 2014) (stay‑pending‑appeal factors align with injunction factors)
- Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (U.S. 1986) (Medicare exhaustion/channeling doctrine)
- Shalala v. Illinois Council on Long Term Care, 529 U.S. 1 (U.S. 2000) (explaining exception where agency channeling would mean no review at all)
- United States v. Whiting Pools, Inc., 462 U.S. 198 (U.S. 1983) (§542 turnover available and title disputes can be resolved in turnover actions)
- Board of Governors v. MCorp Financial Services, 502 U.S. 32 (U.S. 1991) (statutory bar that expressly precludes all jurisdiction cannot be overridden by §1334)
- Lamie v. United States Trustee, 540 U.S. 526 (U.S. 2004) (courts should not rewrite statutes to correct perceived drafting errors)
- BP Care, Inc. v. Thompson, 398 F.3d 503 (6th Cir. 2005) (discussion of §405(h) history and scope)
- Lawrence v. Commonwealth of Ky. Trans. Cabinet (In re Shelbyville Road Shoppes, LLC), 775 F.3d 789 (6th Cir. 2015) (Sixth Circuit resolving contested turnover on the merits)