THOMAS B. BENNETT, Bankruptcy Judge.
Before the Court are requests for (1) a determination with respect to Jefferson County's hospital property, Cooper Green Mercy Hospital, that the automatic stays of 11 U.S.C. §§ 362(a) and 922(a) (collectively, "the Automatic Stays") do not apply to actions sought to be taken by the City of Birmingham, Alabama, William A. Bell, Sr. in his capacity as the Mayor of Birmingham, and both of them ex rel. the State of Alabama (collectively, "the City Parties"), and alternatively, (2)(a) modification of the Automatic Stays, and (b) abstention from any consideration of underlying Alabama law in making a determination of the applicability of either of the Automatic Stays and their modification. As explained in more detail below, the Court holds that (1) the City Parties lack the requisite legal injury and necessary legally recognized damage to be able to assert the claims they desire to raise under the Alabama Health Care Responsibility Act, Alabama Code §§ 22-21-290, et seq. (1975) ("AHCRA"); (2) abstention is not appropriate with respect to this Court's determination to modify, or not, the Automatic Stays; (3) the automatic stay of 11 U.S.C. § 362(a)(3) stays the City Parties' proposed state court lawsuit; (4) the automatic stay of 11 U.S.C. § 922(a)(1) stays the commencement and maintenance of a suit against Jefferson County's Commissioners David Carrington, Jimmie Stephens, and T. Joe Knight to enforce pre-petition and certain post-petition claims against the County; (5) the police power exception of 11 U.S.C. § 362(b)(4) is not applicable to avoid the Automatic Stays; and (6) the provisions of 28 U.S.C. § 959 are inapplicable to a municipal debtor such as Jefferson County, Alabama, and do not permit, without modification of the Automatic Stays, the bringing of a suit in an Alabama court challenging the Jefferson County Commission's decision to end emergency room and inpatient care at Cooper Green Mercy Hospital. Accordingly, the Automatic Stays preclude the actions sought to be brought in Alabama's courts by the City Parties, and relief from the Automatic Stays is denied.
Cooper Green Mercy Hospital ("Cooper Green") is owned by Jefferson County, Alabama, and functions as one of its departments. The Jefferson County Commission has authority to direct, control, and maintain property of the County, including Cooper Green. Cooper Green has a storied history of caring for Jefferson County residents who are unable to pay for medical care. The subject of this opinion that will add to Cooper Green's history is a portion of a dispute between the City Parties and Jefferson County, Alabama, along with three of its county commissioners (hereinafter, Jefferson County, Alabama and the three commissioners are collectively referred to as "Jefferson County" or "the County"). The dispute revolves around Cooper Green's provision of inpatient and emergency room medical care for indigent residents of the County. Along with providing indigent care, Cooper Green has for a number of years also provided medical care for non-indigents and received payment for this care from either or both the patients and third parties such as private health insurers, Medicare, or Medicaid. Although Cooper Green is the beneficiary of a designated portion of sales tax revenues for payment of indigent care — in the most recent year an amount exceeding forty million dollars — Cooper Green has routinely lost substantial sums of monies. In fiscal year 2011, the losses exceeded ten million dollars and in prior, recent fiscal years the losses were of the same relative magnitude.
Contrary to what many have written and what others have assumed was the sole impetus for Jefferson County's bankruptcy filing — its sewer system indebtedness — a major cause was actually beyond the County's control. In part, the financial decline of Jefferson County and the necessity of its having to file a Chapter 9 bankruptcy case was the decrease in cash flow occasioned by the loss of a tax of approximately one-half of one percent on the gross wages of some of those working in Jefferson County. This revenue source was one of the few not earmarked for other purposes by statute or otherwise that could be used to finance Cooper Green's perpetual over-budget spending and its losses. By mid-2011 when an Alabama court's ruling striking down the occupation tax became final, the largest single source of unearmarked dollars available to the County fully evaporated.
Evaporation occurs over time. The loss of the occupation tax has been no different. The completion of the process was the culmination of years of prior actions. The initiating act was the Alabama Legislature's elimination of a virtually identical tax that had been in place for a number of years and working as designed ("the Original Tax"). Alabama's Legislature repealed this tax in 1999 and enacted another one. The replacement statute for the occupation tax allocated to each member of the delegation of legislators from Jefferson County a portion of the tax revenues for purposes and uses the individual legislators deemed appropriate. The Jefferson County Employees' Association challenged the legality of this occupation tax ("the First Reenacted Tax") and prevailed. Subsequently, the Alabama Legislature enacted another occupation tax ("the Second Reenacted Tax"), which did not permit local legislators to allocate tax money and had a slightly lower tax rate than that of the Original Tax and the First Reenacted Tax. The lower rate was occasioned, in part, by expanding the tax to earnings of those who previously were not subject to the occupation tax, such as lawyers, doctors, and dentists. Unfortunately for the
During and following the appeals process for the Second Reenacted Tax, Jefferson County has sought the assistance of Alabama and its Legislature to enact a replacement occupation tax or other source of unearmarked revenue. The necessity of this legislative action by the County is due to the fact that the State of Alabama has not delegated to Jefferson County the authority to enact various and sundry taxes. Over the extended time these replacement tax activities were ongoing, the County put off filing a Chapter 9 bankruptcy case. Ultimately and as in a business reorganization case, an imbalance between cash inflows and outflows and approaching the point where one may run out of cash is often what often triggers a bankruptcy filing. This triggering point is no different for a municipal debtor.
Both before and after filing its Chapter 9 case, the County's revenue-seeking activities with Alabama have been to no avail. The State has not enacted another occupation tax or other source of revenues for the County to replace the lost occupation tax monies. This is part of what determined when Jefferson County filed its Chapter 9 case.
Along with the disappearance of this source of general revenue funds has been its immediate impact: the County's inability to fund numerous activities including the continued funding of Cooper Green's deficits. A consequence is Jefferson County having to make difficult decisions on the where, when, and how the reduced unearmarked monies it still receives are to be spent. It has made such determinations across all activities of the County including those at Cooper Green.
With respect to Cooper Green, one decision was to prospectively close its emergency room along with ending inpatient hospital services. This determination has not been popular with various segments of the County Commission's constituencies including, among others, patients, the varying, approximately five hundred (500) to seven hundred (700) employees servicing, on average, about forty inpatients in a facility with the capacity for around three hundred (300) inpatients, and the City of Birmingham and its mayor. This is the genesis of the challenges by the City Parties to the County's actions regarding Cooper Green's operations.
As will become apparent, the fight is not truly over Jefferson County's financial responsibility for certain of its indigent residents' medical treatments. Rather, it is about those with no pecuniary interest in the financial responsibility for Jefferson County's indigent residents trying to dictate how the County decides to meet its indigent care payment obligations. At its heart, it is about requiring the County to keep operating both emergency room and inpatient care facilities at the same level and scope where they were when Cooper Green failed to operate within its budget. Should the City Parties prevail, the outcome will be a diversion of monies to Cooper Green's inpatient and emergency room services from other necessary purposes. All of this will take place at a facility that is surrounded by a massive health care infrastructure operated by numerous other medical providers, including the largest in Alabama, the University of Alabama at Birmingham. All of these other medical care providers — hospitals, clinics, and legions
From a dollars and cents perspective, the financial deficiencies in Cooper Green's operations were brought to the forefront — though it took some years — by Alabama's repeal of the Original Tax which had become the traditional source of funding in substantial part, if not totally, for Cooper Green's continual deficits, and by Alabama's repeated inability to enact a valid, replacement occupation tax or other replacement revenue source for the County's lost general revenues. The loss of the occupation tax cannot be attributed to Jefferson County or its commissioners. It rests with the State of Alabama. Likewise, the fact that Jefferson County's unencumbered cash inflow was almost cut in half is not the result of conduct by the County. A cause of Jefferson County's commencing its bankruptcy case when it did flows from the repeal of the Original Tax by the State of Alabama and its legislators and indifference by many to what Alabama and its legislators have wrought over the course of years. One outgrowth of these actions and the inaction is the inability of the County to continue to fund Cooper Green's deficits, forcing Jefferson County to cut back the scope of operation of Cooper Green. All those who attribute Jefferson County's bankruptcy case and Cooper Green's plight only to conduct and actions by the County are ill-informed. The State of Alabama and its legislators are a significant, precipitating cause.
The City Parties claim they are seeking to protect the health care services provided to indigent residents living in the City of Birmingham, as well as the general safety, health, and welfare of all the citizens of the City of Birmingham. Compelling the County not to close inpatient and emergency room services at Cooper Green until it has put into a place a new structure and plan for treating indigent patients who seek health care services is what is supposedly being sought. The timing and tactics underlying the City Parties' actions and the County's reaction are somewhat convoluted.
On August 7, 2012, a committee of the Jefferson County Commission voted to close the inpatient care portion of Cooper Green within thirty (30) days. On August 10, 2012, the City Parties bypassed seeking authorization from this Court and filed a Complaint against the County Commission in the Circuit Court of Jefferson County, Alabama (Case No. CV-2012-902529) (the "State Court Case"), seeking a declaratory judgment, among other relief, that the County is not allowed to close Cooper Green because such action would violate AHCRA. On the same day, the County filed a Notice of Bankruptcy and Suggestion of Stay in the State Court Case.
On August 28, 2012, the County Commission passed a resolution directing Cooper Green to cease admitting persons for inpatient care and operating the emergency room on the first day of a month, no later than December 1, 2012.
Although not settled, the State Court Case was resolved by a procedure not
In the Stay Motion, the City Parties request entry of an order either finding that the Automatic Stays do not apply to the relief sought against the County or, in the alternative, an order granting the City Parties relief from the Automatic Stays, allowing them to proceed in state court with the prosecution of a lawsuit against the Jefferson County Commission and the three County Commissioners who voted to eliminate the Medical Services. The proposed Alabama court suit is to have the same causes of action as those in the Adversary Proceeding. Following the Stay Motion, on September 20, 2012, the City Parties filed another motion suggesting the Court must, or at least should, abstain in the asserted state-law based dispute between them and the County ("the Abstention Motion") with respect to both the Stay Motion and the Adversary Proceeding.
The County filed a response to the Stay Motion and the Abstention Motion on September 25, 2012. Shortly thereafter, this Court entered an order severing count one of the Adversary Proceeding, the stay relief count, and consolidating it with the Stay Motion filed by the City Parties in the bankruptcy case. On October 9, 2012, the County filed a Supplement to Jefferson County's Response to the Stay Motion, and the City Parties filed a Brief in Support of their Stay Motion. At the conclusion of the October 2012 hearing on the Stay Motion, the Court orally informed the City Parties that the automatic stay of 11 U.S.C. § 362(a)(3) applied to the City Parties' proposed state court proceeding and that stay relief would be denied as set forth more fully in a written decision and order. This is the written decision.
The City Parties argue that this Court should abstain from hearing the merits of the dispute between them and the County and permit the merits of their dispute with the County to be heard in an Alabama court based on the assertion, without much more, that their proposed causes of action sound only in equity and are solely premised on state law. All of the proposed state suit causes of action rest on the closing of the Medical Services at Cooper Green constituting a violation of AHCRA. The City Parties' motion is premised on 28 U.S.C. § 1334(c)(1) & (2) and the Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), and Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058
The main argument by the City Parties regarding the Automatic Stays is that they do not apply to the proposed action because the City Parties do not seek to enforce a "claim" against the County or to exercise control over any of the County's property within either 11 U.S.C. §§ 362(a) or 922(a). Further, even if the proposed suit would be a "claim" to which either of the Automatic Stays applies, the City Parties argue that their proposed causes of action fall within the § 362(b)(4) police power exception to the imposition of the automatic stay. In particular, they argue that § 362(b)(4) is an exception not just to the § 362(a) stay, but also to that of § 922(a). Along with the § 362(b)(4) position, the City Parties argue that 28 U.S.C. § 959 allows suits such as their proposed one against a Chapter 9 debtor in the same circumstances it has been utilized in other cases processed under other chapters of the Bankruptcy Code and its predecessor statute. In other words, they contend that their proposed suit is permitted via § 959(a) without stay modification.
The City Parties argue next that should this Court find that either of the Automatic Stays applies, cause exists to lift it to allow the City Parties to proceed with their proposed state court action. The requisite cause is that the state court suit would be founded entirely upon the interpretation of state law, not bankruptcy law. The City Parties also posit that stay modification is necessary because their proposed state court action seeks writs of mandamus and quo warranto, and some federal courts have held that a federal court lacks jurisdiction to enter a writ of mandamus (or similarly, a writ of quo warranto) against a state or county official. See, e.g., Moye v. Clerk, DeKalb Cnty. Superior Court, 474 F.2d 1275, 1276 (5th Cir.1973).
They further maintain that a balancing of the equities between them and the County weighs in their favor and that relief from stay is appropriate because it would not run afoul of the purposes underlying the Automatic Stays. It is asserted that allowing the filing of a suit in an Alabama court would not deplete the assets of the County, would not deprive other creditors from a chance at recovery of their claims, and would not result in wasteful or duplicative proceedings.
In a Supplemental Brief, the City Parties urge that portions of both the Alabama Constitution
As indicated, this Court is asked "to abstain from hearing the merits of the dispute between the City and the County" in conjunction with both their Automatic Stays determination requests and their Adversary Proceeding complaint.
At a hearing in this matter, counsel for the City Parties stated that if abstention is warranted, this Court must grant the City Parties' motion for stay relief. Hearing, Sept. 27, 2012; City Parties' Supplemental Brief at 28-29. This is incorrect. Title 28 U.S.C. § 1334(d) provides that § 1334(c) "shall not be construed to limit the applicability of the stay provided for by section 362 of title 11, United States Code, as such section applies to an action affecting the property of the estate in bankruptcy." As it is used in this section, "property of the estate" includes property of a Chapter 9 municipal debtor. In re Jefferson Cnty., Ala., 474 B.R. 228, 281 n. 22 (Bankr.N.D.Ala.2012). As this Court has previously held, the "permissive and mandatory abstention of § 1334(c) may not be used to avoid the automatic stay[] of § 362(a)." Jefferson Cnty., 474 B.R. at 281; see also Benedor Corp. v. Conejo Enters., Inc. (In re Conejo Enters., Inc.), 96 F.3d 346, 352 (9th Cir. 1996) ("a finding that mandatory abstention applies to the underlying state action does not preclude denial of relief from § 362's automatic stay"). Moreover, as this Court has recognized, it may only abstain from a "proceeding," Jefferson Cnty., 474 B.R. at 280-81, and the only proceeding before the Court at this time is the Stay Motion. So, implementation of either statutory or Case-Based Abstention could only be done with respect to the Stay Motion if the City Parties desire no relief from the Automatic Stays, assuming either is in place precluding their proposed action. See 28 U.S.C. § 1334(d); Jefferson Cnty., 474 B.R. at 280-81.
Section 1334(c)(1) provides that a court may abstain from hearing a particular proceeding "in the interest of justice, or in the interest of comity with State courts or respect for State law." Burford abstention requires a federal court to "decline to interfere with the proceedings or orders of state administrative agencies" involving "difficult questions of state law bearing on policy problems of substantial public import," New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989) (quotations and citation omitted). Similarly, Thibodaux abstention requires suspension of federal proceedings in cases where it would be desirable to allow a state court to decide unsettled questions of state law in areas of particular local concern. See Thibodaux, 360 U.S. at 29-30, 79 S.Ct. 1070. Abstention of any kind is an extraordinary exception to the exercise of jurisdiction and should be applied sparingly and cautiously. See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). Whether or not to abstain under § 1334(c)(1) or the Case-Based Abstention doctrines is committed to the sound discretion of the trial court. See Knudsen Corp. v. Nevada State Dairy Comm'n, 676 F.2d 374, 376 (9th Cir.1982); Carlson v. Attorney Registration and Disciplinary Comm'n of the State of Ill. (In re Carlson), 202 B.R. 946, 949 (Bankr.N.D.Ill. 1996).
Although this Court is not tasked with deciding the merits of the dispute underlying a request for a motion for relief from stay, see, e.g., Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 33-34 (1st Cir.1994), it cannot further decide whether permissive or case law abstention is an appropriate basis for stay modification purposes without a preliminary examination of the state law questions presented by the City Parties' proposed action. Indeed, a primary determinant for abstaining pursuant to § 1334(c)(1) and the case law abstention doctrines is whether a case presents unsettled or difficult questions of state law. See In re Verrazano Holding Corp., 86 B.R. 755, 763 (Bankr.E.D.N.Y.1988); In re Earle Indus., Inc., 72 B.R. 131, 133 (Bankr.E.D.Pa.1987).
As explained below, there are no questions — let alone difficult ones — of state law in the City Parties' proposed state court case that warrant abstention of any kind. While there is no Alabama case law fully addressing the precise question at issue here, the purposes and application of AHCRA are readily apparent, and abstention under either 28 U.S.C. § 1334(c)(1) or the Case-Based Abstention doctrines — assuming they apply to a bankruptcy case — is not appropriate. To know why requires understanding the purpose and scope of AHCRA. The following discussion of AHCRA also facilitates the analysis and holdings of this Court for the other legal arguments presented by the City Parties. In particular, it shows the absence of predicates upon which the City Parties rely and goes to the heart of a missing element for both abstention and stay modification: likelihood of success on the merits of the proposed causes of action.
The cornerstone of the City Parties' stance is that the County will violate AHCRA, Alabama Code § 22-21-290, et seq., if it goes through with its plan to close the Medical Services at Cooper Green without putting "in place a new structure for the funding of the delivery of healthcare services to the indigent." Compl. ¶ 37. Specifically, the City Parties rely on § 22-21-291, which provides that
From this and with disregard for the balance of Title 22, Chapter 21, Article 10, see Ala.Code § 22-21-292-297 (1975), the City Parties extrapolate the espoused necessity of a new structure for funding of the delivery of healthcare service.
Use of Alabama's rules of statutory construction demonstrates why the City Parties' AHCRA position is untenable. In Alabama, "[t]he fundamental rule of statutory construction is that [a] Court is to ascertain and effectuate the legislative intent as expressed in the statute," City of Bessemer v. McClain, 957 So.2d 1061, 1074 (Ala.2006) (citation omitted), which "may be gleaned from the language used, the reason and necessity for the act,
In this case, the plain language of § 22-21-291 does not support the interpretation advanced by the City Parties. There is nothing in the wording of § 22-21-291 that creates an obligation on the part of the County to provide the Medical Services or to have a structure or plan in place for their provision. The statute does not mention a program or a plan to provide health care for indigent residents or a requirement that counties fund such a program or plan, which is distinguishable from an obligation to pay for indigent care. Indeed, the statute sets forth only that the Legislature intends "to place the ultimate financial obligation for the medical treatment of indigents on the county in which the indigent resides" when those costs are not fully reimbursed by other government programs or third-party payers. Section 22-21-291 unmistakably does not require that a county operate a hospital or adopt a specific structure for the provision of indigent health care. Nor does any other provision of AHCRA impose such a requirement on Alabama's counties. See Ala.Code §§ 22-21-292 et seq. (1975). It is a law dealing with a county's reimbursement or payment of others for certain medical care those others provided.
Although unnecessary given this Court's determination of the clear language of § 22-21-291, even assuming an interpretative issue exists does not alter the outcome. This arises from an analysis following other Alabama rules of statutory construction. These rules have been used in cases where the language of a statute, standing alone, is not conclusive of legislative intent, and they allow a court to look at other factors to ascertain intent. See Jefferson Cnty. Comm'n v. Edwards, 32 So.3d 572, 587 (Ala.2009). Three such factors are particularly relevant here.
First, a court is to "look to the entire Act instead of isolated phrases or clauses," City of Bessemer, 957 So.2d at 1074 (citation omitted), and read it "in pari materia in order to produce a harmonious whole," Ex parte Jackson, 625 So.2d 425, 428 (Ala.1992); see also League of Women Voters v. Renfro, 292 Ala. 128, 290 So.2d 167, 169 (1974) ("statutes should be resolved in favor of each other to form one harmonious plan and give uniformity to the law").
Similarly, the principle of generalibus specialia derogant provides that where sections in pari materia are general and specific, the more specific controls the more general. Ex parte Coffee Cnty. Comm'n, 583 So.2d 985, 988-89 (Ala.1991). In Coffee County, the Supreme Court of Alabama noted that where a statute sets forth in general terms the duty of the county to provide jail facilities, the more specific provisions that followed it specifying the amount of the taxes to be used for such purpose and the sources from which it may be derived "further refined" the general statutory provision. Id.
Finally, as this Court has previously noted, the Alabama Constitution requires that an act be limited to one general subject, which is to be fairly disclosed in the act's title, or preamble, and the Supreme Court of Alabama has held that this title may be used as an aid in statutory interpretation. See In re Jefferson County, Ala., 469 B.R. 92, 118 (Bankr.N.D.Ala. 2012) (citing Ala. Const. Article IV, § 45 and Jordan v. Reliable Life Ins. Co., 589 So.2d 699, 702 (Ala.1991)).
The preamble to the bill enacting AHCRA provides as follows:
Act. No. 79-808, 1979 Ala. Acts 1487, 1487 (emphasis added). It sets forth the legislative intent, and there is no mention of an Alabama county having to provide medical services. All that is imposed is "responsibility for the cost of treatment."
Coupled with AHCRA's title making clear that its purpose is to ensure that a county is responsible for reimbursing out-of-county hospitals that provide certain qualified, medical care to its indigent residents is the balance of the sections comprising AHCRA. All of these expressly and only pertain to regional referral hospitals, which AHCRA defines as a "hospital that provides services to [indigent] patients who reside in counties other than the county in which the hospital is located," and the manner by which a county is to reimburse a regional referral hospital. See Ala.Code §§ 22-21-293-297 (1975). AHCRA does not provide procedures for a county to pay for in-county indigent hospital care.
Further evidence that AHCRA's scope is limited to reimbursement for certain out-of-county indigent resident medical care is found in the other the articles of Title 22, Chapter 21 of the Alabama Code that concern indigent care. In particular is the structure of Title 22, Chapter 21, Article 1. One portion sets forth that "... any town or city and the county commission of any county may establish ... hospitals, temporary or permanent, for the reception of the sick or infirm ... and may make all needful rules and regulations for the control and management thereof...." Ala.Code § 22-21-1 (1975) (emphasis added). Nothing cited to this Court in Alabama's Constitution, Title 22, Chapter 21 of the Alabama Code of 1975, or any other statutory provision requires Jefferson County to operate a hospital, let alone provide inpatient and emergency care services.
Another factor disposing of the City Parties' assertions becomes apparent by a review of Title 22, Chapter 21, Article 7 of the Alabama Code of 1975. It is an act captioned "Hospital Service Program for Indigents." Article 7 creates a voluntary program for counties to meet the financial costs of indigent county residents incurred
Moreover, it is significant that Article 7 and the remainder of Chapter 21, with the exception of AHCRA, govern an Alabama county's financial obligations with respect to in-county indigent care. Compare Ala. Code §§ 22-21-1-210-227, 278 and 22-21-310-391 with Ala.Code §§ 22-21-290-297 (1975). Juxtaposed with these is AHCRA, which is designed to clarify that out-of-county qualifying medical care for a county's indigents is the financial responsibility of the indigent person's county of residence. What the relevant portions detailing indigent care financial responsibility that are set forth in Title 22, Chapter 21 do is define the scope of in-county and out-of-county financial responsibility for indigent medical care. AHCRA is the statutory provision dealing solely with payment for qualified out-of-county care.
More simply and when the structure of all of the provisions dealing with indigent care of Title 22, Chapter 21 of the Alabama Code of 1975 are considered, it is evident that AHCRA deals with financial responsibility of a county for treatment of certain of its indigent residents in medical facilities located in other counties. It does nothing more. See Ala.Code §§ 22-21-290-297 (1975).
The County's obligation is payment for rendered medical services only to the extent required by Alabama's laws. In this matter, there is no evidence that Jefferson County has failed to pay to the extent required under Alabama law for indigent medical care. Likewise, there is no evidence that Jefferson County intends to prospectively not pay for such medical care to the extent Alabama law demands.
In sum, and when AHCRA is read as a whole while utilizing Alabama's principles of statutory construction, there is no support for the City Parties' claim that the County is required to either keep open Cooper Green's Medical Services or to provide an ongoing, alternative plan for the provision of indigent health care before termination of the Medical Services.
The proposed mandamus and quo warranto claims also do not present
Under Alabama's laws, quo warranto is a common law writ used to determine whether an official is properly qualified and eligible to hold a public office, see Ex parte Sierra Club, 674 So.2d 54, 56 (Ala.1995), and a quo warranto action lies under Alabama law "[w]hen any person usurps, intrudes into or unlawfully holds or exercises any public office, civil or military, any franchise ... or other legal authorization within this state...." Ala. Code § 6-6-591. In Alabama, quo warranto is not an appropriate device to challenge actions taken by an official who properly holds his office. See Brannan v. Smith, 784 So.2d 293, 296 (Ala.2000). The case relied upon by the City Parties, Tyson v. Jones, 60 So.3d 831 (Ala.2010), is not to the contrary.
In Tyson, there was an allegation that a district attorney for one county was usurping the powers of a district attorney and a sheriff of another county. 60 So.3d at 843. Here, the City Parties are not alleging that the county commissioners usurped another official's office or duties, nor are they arguing that the commissioners unlawfully obtained or hold their public office. In point of fact, the only challenged actions they have taken vis-à-vis Cooper Green were done while performing their duties as validly elected commissioners of Jefferson County. See Compl. ¶¶ 40-45. All that is involved here is the City Parties' not liking the decisions of the properly elected Jefferson County Commissioners, who were acting within the scope of their legitimate powers. These are not the sort of actions for which Alabama's courts allow one to utilize quo warranto. See Brannan, 784 So.2d at 296. Accordingly, the proposed quo warranto claim does not present a question of Alabama law that warrants any form of abstention, and it is, like their mandamus claim, also unsupportive for purposes of stay modification.
Section 1334(c)(2) states that a court shall abstain from hearing a proceeding
This Court sides with the majority of courts that have found World Solar Corp.'s holding to be "inconsistent with the legislative history and the plain language of" § 1334(c)(2). See, e.g., Walter v. Freeway Foods, Inc. (In re Freeway Foods of Greensboro, Inc.), 449 B.R. 860, 877-78 (Bankr.M.D.N.C.2011) (rejecting the World Solar Corp. analysis and noting that "[t]he clear majority of cases supports the position that the cause of action must be pending in state court prior to the bankruptcy for mandatory abstention to apply"). Because there is no pending action in state court, mandatory abstention under § 1334(c)(2) is inapplicable, and, as a consequence, does not support the City Parties' Automatic Stays arguments. Additionally, for § 1334(c)(2), the current progress of the County's Chapter 9 case makes it highly unlikely that any Alabama court proceeding over the Medical Services can be timely adjudicated to a final judgment.
Lastly and in the context of considering application of the Automatic Stays and their modification, where there is no validly arguable nor colorable cause of action such as is the case with the proposed AHCRA claims, mandatory abstention under 28 U.S.C. § 1334(c)(2) simply cannot apply. Otherwise, to apply 28 U.S.C. § 1334(c)(2) would allow nonexistent claims and causes of action to be a basis for stay modification via abstention by cloaking nonexistent causes of action in the veil of state law-premised ones. Accordingly, mandatory abstention does not form a basis for modifying the Automatic Stays.
Title 11 U.S.C. § 362(a)(3) stays "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate."
Here, the City Parties' proposed declaratory judgment, mandamus, and quo warranto actions come within the purview of § 362(a)(3) because the City Parties seek to prevent the County's closing of the Medical Services at Cooper Green, i.e., keeping Cooper Green open to the same extent it has been for many years while it continues to lose millions of dollars each year. See, e.g., B.F. Goodrich Employees Fed. Credit Union v. Patterson (In re Patterson), 967 F.2d 505, 511-12 (11th Cir. 1992) (action to control property of debtor violates § 362(a)(3) automatic stay); In re Saint Vincents Catholic Med. Ctrs. of New York, 429 B.R. 139, 146-47 (Bankr. S.D.N.Y.2010). The proposed lawsuit is nothing more than an attempt to impose the City Parties' desired operation of Cooper Green in lieu of that chosen by the County. Thus, the proposed Alabama court lawsuit by the City Parties is stayed under the provisions of 11 U.S.C. § 362(a)(3) as an attempt to exercise control over the County's hospital property.
Given this Court's holding on the application of 11 U.S.C. § 362(a)(3) to the proposed state court lawsuit, it is unnecessary to address whether the City Parties are asserting a "claim" within the meaning of § 362(a). It is, however, necessary to analyze their post-petition claim argument to determine whether 11 U.S.C. § 922(a)(1) enjoins the filing of the proposed suit.
Added to the automatic stay provisions of § 362(a) is § 922(a)(1), which stays "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against an officer or inhabitant of the debtor that seeks to enforce a claim against the debtor."
The language of § 922(a)(1) imposing an automatic stay is somewhat different than that of § 362(a). In one respect § 922(a)(1) is narrower than § 362(a) because it applies to certain actions and proceedings against an officer or inhabitant of a municipal debtor by one seeking to enforce a claim against the Chapter 9
Restricting § 922(a)(1)'s application to pre-bankruptcy claims against a debtor would effectively make § 922(a)(1) replicate certain of the stay protections already accorded under § 362(a). For instance, § 362(a)(6)'s "any act to collect, assess, or recover a claim against the debtor" is broad enough to encompass actions against third parties who owe monies to a debtor. See, e.g., In re Brilliant Glass, Inc., 99 B.R. 16, 17-18 (Bankr.C.D.Cal.1988). However, it is limited to claims that arose before a bankruptcy case is initiated. Similarly and due to the variances of a state laws — particularly those governing when a property interest is created, the extent of a property interest held, and when and how an enforceable lien comes into existence — application of 11 U.S.C. § 362(a)(3)'s protections against obtaining possession or exercising control over property may not apply with respect to some actions against officers and inhabitants seeking to enforce claims against a Chapter 9 debtor. This factor is part of why § 922(a)(1) was enacted. See 6 Collier on Bankruptcy ¶ 922.02[1] (16th ed. 2009).
Further support for § 922(a)(1)'s sweep not being limited to pre-bankruptcy claims is that while § 922(b) makes subsections (c), (d), (e), (f), and (g) of § 362 applicable to the stays accorded under § 922(a), it does not expressly make applicable other subsections of § 362 — most notably, § 362(b) — that would constrict the automatic stay of § 922(a). Congress clearly knew how to limit what constitutes a "claim" for § 922(a)(1) purposes, but chose not do so. See Barnhart, 534 U.S. at 452, 122 S.Ct. 941. Further evidence that Congress did not intend to limit § 922(a)(1) to pre-bankruptcy claims is 11 U.S.C. § 922(d)'s wording making both § 362(a)'s and § 922(a)'s stays inoperative when it comes to application of pledged special revenues in a fashion consistent with 11 U.S.C. § 928. See Jefferson Cnty., 474 B.R. at 247-48; see also Municipal Bankruptcy Amendments of 1988, H.R. 5347, and S. 1863, from the 100th Congress, 2d session. When Congress desired to limit § 922(a)'s reach, it did so in a subsection of § 922, 11 U.S.C. § 922(d). No similar delimitation of claims has been engrafted onto § 922(a).
Perhaps, the most telling support for what constitutes a "claim" within § 922(a)'s purview is that 11 U.S.C. § 101(5) does not define a claim to be one that arises before commencement of a bankruptcy case. 11 U.S.C. § 101(5)(A) & (B). The limitation of what is a "claim" for automatic stay purposes under 11 U.S.C. § 362(a) is per the express wording of subparts of § 362(a), not § 101(5). Compare 11 U.S.C. § 101(5) with 11 U.S.C. § 362(a)(1)-(2) & (4)-(7); see also In re M. Fabrikant & Sons, Inc., 385 B.R. 87, 96-97 (Bankr.S.D.N.Y.2008). As is discussed more fully in M. Fabrikant & Sons, various portions of the Bankruptcy Code delineate claims to be those existing pre-bankruptcy while others do not. Some parts of the Bankruptcy Code definitively encompass a "claim" as including some that arise post-bankruptcy. Id. at 96-97.
These sections of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq., limiting a "claim" as defined in 11 U.S.C. § 101(5) to one arising pre-petition contain additional limiting language not found in § 922(a). See, e.g., 11 U.S.C. § 362(a)(1) (staying actions to "recover a claim against the debtor that arose before the commencement of the case under this title"), § 362(a)(5) (staying "any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title"), § 362(a)(6) ("any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title"). Section 922(a) does not contain similar restrictive wording. Thus, the stay imposed via § 922(a)(1) encompasses
Knowing why § 922(a)(1)'s stay applies to certain post-petition claims is not the end of the inquiry in this County-City Parties matter. It requires further consideration of what constitutes a claim under 11 U.S.C. § 101(5). See 11 U.S.C. § 901(b) (making the definitions of 11 U.S.C. § 101(5) applicable via 11 U.S.C. 103(f)).
The Supreme Court of the United States and lower federal courts have consistently broadly interpreted what constitutes a "claim" for bankruptcy law purposes. See, e.g., Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991) ("Congress intended by [the § 101(5) ] language to adopt the broadest available definition of `claim.'"); Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35-36 (1st Cir.2009) (same); In re WorldCom, Inc., 546 F.3d 211, 216 (2d Cir.2008) (same). For instance, the concept that a breach of a statutory mandate is not a liability on a claim and that such a breach does not give rise to a right of payment within 11 U.S.C. § 101(5)'s definition of a claim has been rejected. See Ohio v. Kovacs, 469 U.S. 274, 281-83, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985). Likewise, new or continuing acts that occur after the filing of a bankruptcy case that violate a statute can give rise to a post-petition claim. See O'Loghlin v. Cnty. of Orange, 229 F.3d 871, 874-75 (9th Cir.2000).
Applying the Kovacs and O'Loghlin principles along with recalling AHCRA's purpose is to make Alabama's counties liable for the payment, not the provision, of certain out-of-county indigent medical care helps one understand the only colorable claim the City Parties could bring under AHCRA falls within the scope of § 922(a)(1)'s prohibition. This is because on its face, the statute gives rise to a right to payment, see Ala.Code § 22-21-293 (1975), and Alabama's courts have interpreted it as creating an implied contract, the breach of which gives rise to a right to payment, see Ex parte Univ. of S. Alabama, 812 So.2d 341, 345 (Ala.2001); Tuscaloosa County v. Children's Hosp., Inc., 486 So.2d 1302,1303 (Ala.Civ.App.1986), nothing more. Thus, any breach of AHCRA gives a plaintiff, assuming she has standing, only the right to enforce payment for covered medical services rendered, which is a claim within 11 U.S.C. § 101(5).
Taking only that which AHCRA and Alabama's courts' interpretation of AHCRA
All that remains is that the suit be one with respect to the necessary type of claim against Jefferson County. Since, as set forth in this portion of this memorandum opinion, § 922(a) is not limited to pre-petition claims against the County and all that AHCRA creates is an obligation to pay for certain indigent care along with an implied contract for payment, see Ex parte Univ. of S. Alabama, 812 So.2d at 345; Children's Hosp., Inc., 486 So.2d at 1303, the requisites of 11 U.S.C. § 922(a)(1)'s application exist for any claim denominated within AHCRA's reach. Stated differently, a claim premised on AHCRA constitutes a "claim" within the meaning of § 101(5) and is stayed by 11 U.S.C. § 922(a)(1) despite its being a chimerically pleaded version such as that by the City Parties and regardless of whether it arises pre- or post-petition.
Another of the legal skirmishes revolves around the insistence of the City Parties that § 362(a)(3)'s and § 922(a)(1)'s automatic stays are inapt because of the police power exception in § 362(b)(4). Section 362(b)(4) provides that the § 362(a)(3) stay does not apply to "the commencement or continuation of an action or proceeding by a governmental unit ... to enforce such governmental unit's or organization's police and regulatory power, including the enforcement of a judgment other than a money judgment, obtained in an action or proceeding by the governmental unit to enforce such governmental unit's or organization's police or regulatory power."
Congress has directed that the police power exception be construed narrowly. See, e.g., Bd. of Supervisors v. Royal (In re Royal), 137 Fed.Appx. 537, 541 (4th Cir.2005); Schulman v. Cal. State Water Res. Control Bd. (In re Lazar), 200 B.R. 358, 368 (Bankr.C.D.Cal.1996). In determining whether § 362(b)(4) applies, most courts apply one or both of two tests: (1) the pecuniary purpose test, which looks at whether the governmental proceeding at issue relates primarily to the protection of the government's pecuniary interest in the debtor's property, and not to matters of public safety, or (2) the public policy test, which distinguishes between proceedings that adjudicate private rights and those that effectuate public policy. See City & Cnty. of San Francisco v. PG & E Corp., 433 F.3d 1115, 1124-26 (9th Cir. 2006); McAtee v. Fla. Bar (In re McAtee), 162 B.R. 574, 578 (Bankr.N.D.Fla.1993). Actions that are primarily related to public safety or the effectuation of public policy are exempt from the automatic stay. McAtee, 162 B.R. at 578.
As explained supra at IV.B.1., the purpose of AHCRA is payment. It does not require counties to have programs in place for the provision of indigent care. It merely requires that if an indigent resident of a county receives covered, out-of-county hospital services, the county of residence must bear the cost for properly incurred medical expenses of an indigent person to the extent they are not otherwise paid. See Ala.Code § 22-21-293 (1975). Thus, the purpose of the statute is ensuring that the financial burdens of indigent care are properly allocated among counties. See Ala.Code §§ 22-21-290 et seq. It achieves this purpose by adjudicating the private rights of individual regional referral hospitals. See id. Because, at best, AHCRA only imposes a financial obligation on a county for certain out-of-county medical care provided a county's indigent citizens, it is a statute creating a payment obligation of a county to a medical care provider. It does not involve any police or regulatory power as that phrase is used in 11 U.S.C. § 362(b)(4) and fails
Moreover, as noted above, 11 U.S.C. § 922(b) does not incorporate § 362(b) as applying to the § 922(a) stay, although it expressly makes § 362(c), (d), (e), (f), and (g) applicable to § 922(a). The implication is that § 362(b) does not limit § 922(a)'s stay imposition. See Jefferson Cnty., 474 B.R. at 263-64; see also Poulakis v. Rogers, 341 Fed.Appx. 523, 530 (11th Cir. 2009). In short, § 362(b)(4) does not exclude 11 U.S.C. § 362(a)(3)'s or 11 U.S.C. § 922(a)(1)'s staying of the City Parties' proposed state court action.
Equity receiverships evolved prior to the 20th Century merger of courts of equity with those of law. For many jurisdictions, this merger happened on the adoption of rules of civil procedure. See, e.g., Fed.R.Civ.P. 2; Ala. R. Civ. P. 2. Equity receiverships were frequently structured so that the court of equity took possession of property of a person or entity by appointment of a receiver to hold the properties on behalf of the court. See Jefferson Cnty., 474 B.R. at 250; see also Union Nat'l Bank of Chicago v. Bank of Kansas City, 136 U.S. 223, 10 S.Ct. 1013, 34 L.Ed. 341 (1890); Sullivan Timber Co. v. Black, 159 Ala. 570, 48 So. 870 (1909). The property-based jurisdiction of these receivership courts over the property of a person or entity was and is in rem. See Jefferson Cnty., 474 B.R. at 255; Green v. City of Montgomery, 55 So.3d 256, 259-60 (Ala. Civ.App.2009). Along with the use of in
Often coupled with the first-in-time principle was the issuance of an injunction by the receivership court enjoining suits against the receiver and receivership property without prior leave of the appointing court. See Barton v. Barbour, 104 U.S. 126, 136, 26 L.Ed. 672 (1881). Part of the rationale for this first-in-time principle and the injunction issuance on the appointment of a receiver was and has been the necessity for unimpeded control over property in order to fulfill the function of the receivership — be it liquidation of properties to pay creditors and other claimants, to adjudicate conflicting interests in property, or other administration of the property in possession of the receivership court. To allow other courts to adjudicate claims against receivership property or the receiver in a forum other than the receivership court could adversely impact how the receivership court performed its duties and would permit some to advance their position vis-à-vis the res at the expense of others. See id.
This first-in-time principle coupled with an injunction to shield a receiver has two aspects. One is protection of the res. The other is shielding the appointing court's receiver from acts taken when done within her official capacity. However, the necessity of the defensive injunction for a receiver is in significant part attributable to protecting the res. This arises from the receiver being the one legally recognized as the person or entity properly sued for negligent acts while administering the res. Without the injunctive shield, a route to assert and enforce a claim against the res would otherwise be an action against the receiver. See Barton, 104 U.S. at 134; Med. Dev. Int'l v. Cal. Dept. of Corr. & Rehab., 585 F.3d 1211, 1219 (9th Cir.2009). Another part of the justification for the defensive injunction was to ensure that the "appointing" court maintained its control over its receiver to the exclusion of other courts. See Fed. Sav. & Loan Ins. Corp. v. PSL Realty Co., 630 F.2d 515, 521 (7th Cir.1980).
This receivership jurisdiction principle, along with giving recognition to the injunction against actions versus a receiver, was adopted for application in federal courts in Barton. See Barton, 104 U.S. at 136-37. When a receiver is acting within her official capacity, the Barton Doctrine (1) enforces the absence of jurisdiction of other, non-receiver courts over a res in the possession of an equity court, including a bankruptcy court, and (2) recognizes the receivership court's need to shield its receiver
The Barton Court ruling employed the equity receivership principle in the context of a tort action involving a railroad operated by a receiver appointed by a Virginia court. The injured individual, Barton, brought suit in the District of Columbia. As the Supreme Court recognized,
Id. at 136.
The Supreme Court's Barton holding was limited in the last paragraph of the opinion to negligence-based actions against a receiver while performing his receivership duties of carrying on the business to which the property "is adapted." Id. An earlier discussion indicates the Court considered the first-in-time principle applicable to receiverships where no ongoing business was being undertaken by a receiver. Id. at 132-34. Barton has thus been applied to both a receiver who took property on behalf of an equity court and immediately ceased business operations and those in which the business uses of the properties were continued in operation by the receiver. Id. at 136-37; see also In re Crown Vantage, Inc., 421 F.3d 963, 972 (9th Cir.2005) (Barton Doctrine applied to trustee charged only with liquidating assets of the estate).
An outcome of Justice Miller's dissent was Congress' enactment of the forerunner of 28 U.S.C. § 959(a) & (b). See Med. Dev. Int'l v. Cal. Dep't of Corr. and Rehab.,
28 U.S.C. § 959 (emphasis added).
Although there is no question that Congress initially desired to create an exception to the Barton Doctrine for certain receivers and managers of property "... with respect to ... [their] carrying on the business connected with such property...," trustees and debtors in possession were not included within the statute's plain words. See 28 U.S.C. §§ 124 & 125 (1887). This statutory distinction was kept in place in the 1911 version. See 28 U.S.C. §§ 124 & 125 (1911). It was not until enactment of the 1948 version that trustees and debtors in possession were added to receivers and managers of property as being within the scope of both subsections (a) and (b) of 28 U.S.C. § 959, which was carried forward in 1978 to the current version. See 28 U.S.C. § 959 (1948); 28 U.S.C. § 959 (1978).
Superficially, the current version of 28 U.S.C. § 959(a) appears to be applicable to any and all trustees, receivers, or managers of any property, including debtors in possession. A further review of the origins and modifications to this legislation, however, reveals that its perimeter is not
In 1948, Congress deleted the language "appointed by any court of the United States." The altered statute read: "(a) Trustees, receivers or managers of any property, including debtors in possession, may be sued, without leave of the court appointing them...." 28 U.S.C. § 959(a) (1948). The identical wording is in the current statute. 28 U.S.C. § 959(a) (1978).
Despite this change, § 959(a) still literally requires that the trustee, receiver, manager of property, or debtor in possession be appointed by a court of the United States.
There is a beguiling appearance of sameness of how a trustee, receiver, manager of property, and debtor in possession function in a bankruptcy case to that of a Chapter 9 debtor. For instance, each may undertake actions and enter into transactions in connection with a bankruptcy case that often involve property interests. These property interests are frequently utilized in the carrying on of the operations of an entity. The automatic stay of 11 U.S.C. § 362(a) protects the property of an estate and that of a debtor from actions by certain third parties seeking to enforce or collect a claim or exercise control over these property interests. In a Chapter 9 case, 11 U.S.C. § 922(a)(1) does the same with respect to property of a debtor where enforcement of a claim is through an officer or inhabitant of a municipality. Due regard for one or both of these Automatic Stays often necessitates obtaining their modification by a bankruptcy court. Other parallels exist. At first blush, one may easily believe that this sameness supports application of 28 U.S.C. § 959 to a municipal debtor in the manner it has been applied to suits by and against a trustee, receiver, manager of property, and debtors in possession in a bankruptcy case filed under other chapters of the Bankruptcy Code.
Unlike other chapters of the Bankruptcy Code where either the bankruptcy court under 11 U.S.C. § 1104(a) or, in United States Trustee districts, the United States Trustee, "appoint" a trustee, see, e.g., 11 U.S.C. §§ 701, 702, 703, 1104(d), 1163, 1201, & 1302, or there is a debtor in possession, see 11 U.S.C. §§ 1101(1), 1107, 1203, & 1204, or its counterpart in a Chapter 13 case, see 11 U.S.C. §§ 1303, 1304, there is no similar person or entity who is a court officer within the meaning of Title 28, Chapter 57 in a municipal bankruptcy case involving a governmental unit such as Jefferson County. Part of why is that unlike other chapters, there is no bankruptcy estate, which under the case law is considered a separate and distinct entity from a debtor, see, e.g., Katz v. Comm'r of Internal Revenue, 335 F.3d 1121, 1127 (10th Cir.2003); Smith v. Kennedy (In re Smith), 235 F.3d 472, 477-78 (9th Cir. 2000); Prime Healthcare Mgmt. v. Valley Health Sys. (In re Valley Health Sys.), 429 B.R. 692, 714 (Bankr.C.D.Cal.2010), that is being administered by a trustee, receiver, manager of property, or debtor in possession. See In re City of Stockton, Cal., 478 B.R. 8, 18 (Bankr.E.D.Cal.2012); In re New York City Off-Track Betting Corp., 434 B.R. 131, 141-42 (Bankr.S.D.N.Y. 2010); In re JZ L.L.C., 371 B.R. 412, 419 n. 4 (9th Cir. BAP 2007); In re City of Vallejo, 403 B.R. 72, 78 n. 2 (Bankr. E.D.Cal.2009).
One focus of the "officer" and "appointed" inquiries for 28 U.S.C. § 959 purposes is whether a Chapter 9 debtor is an officer of a court of the United States. Decisions of courts of the United States hold that those performing duties in the administration of an estate, which for a bankruptcy case is a bankruptcy estate, are doing so as officers of the court. See, e.g., Callaghan v. Reconstruction Fin. Corp., 297 U.S. 464, 468, 56 S.Ct. 519, 80 L.Ed. 804 (1936); York Int'l Bldg., Inc. v. Chaney, 527 F.2d 1061, 1068 (9th Cir.1975); Official Creditors' Comm. of Fox Markets, Inc. v. Ely, 337 F.2d 461, 465 (9th Cir. 1964); In re Coastal Equities, Inc., 39 B.R. 304, 308 (Bankr.S.D.Cal.1984). These include bankruptcy trustees and debtors in possession. See, e.g., Callaghan, 297 U.S. at 468, 56 S.Ct. 519; In re Weibel, Inc., 176 B.R. 209, 212 (9th Cir. BAP 1994); York Int'l Bldg., Inc., 527 F.2d at 1068; Official Creditors' Comm. of Fox Markets, Inc., 337 F.2d at 465; Power-Pak Prods. v. Royal Globe Ins. Co., 433 F.Supp. 684, 687 (W.D.N.Y.1977); In re Tri-Cran, Inc., 98 B.R. 609, 617 (Bankr.D.Mass.1989); Matter of Tudor Assocs., Ltd., II, 64 B.R. 656, 662 (E.D.N.C.1986); In re Coastal Equities, Inc., 39 B.R. at 308. Also encompassed have been bankruptcy referees, masters, and certain attorneys. See York Int'l Bldg., Inc., 527 F.2d at 1068. Through what the U.S. Court of Appeals for the Eleventh Circuit calls the "functional equivalent" of a court-appointed officer like a trustee, receiver, manager of property, or debtor in possession, others beyond those delineated in § 959(a) have been determined to be an officer of a bankruptcy or federal court. See Lawrence v. Goldberg, 573 F.3d 1265, 1269-70 (11th Cir.2009) (Barton Doctrine applies to officers of the court and those who are approved by the court and function as the equivalent of court-appointed officers, such as the trustee's counsel and investigators); see also Lowenbraun v. Canary (In re Lowenbraun), 453 F.3d 314, 321 (6th Cir.
This is partially caused by the absence of a bankruptcy estate in a Chapter 9 case because 11 U.S.C. § 541, which both creates an estate and specifies the properties in the estate, is not incorporated into Chapter 9 by 11 U.S.C. §§ 103(f) and 901. See New York City Off-Track Betting Corp., 434 B.R. at 141-42; Valley Health Sys., 429 B.R. at 714; 6 Collier on Bankruptcy ¶ 901.04[13][a], [27] (16th ed. 2009). Differently from Chapters 7, 11, 12, and 13 of the Bankruptcy Code and Chapter 15 to a more limited degree, the absence of a bankruptcy estate in a Chapter 9 case results in there being no trustee, receiver, manager of property, or debtor in possession who is an officer of a United States court, let alone someone who is "appointed," within § 959(a)'s requirement. See City of Stockton, Cal., 478 B.R. at 18; New York City Off-Track Betting Corp., 434 B.R. at 141-42. Nor does the functional equivalent expansion of Barton by some federal courts implicate a Chapter 9 debtor because Barton's coverage has always included only those acting on behalf of a bankruptcy estate's representative. See Lawrence, 573 F.3d at 1269-70; Lowenbraun, 453 F.3d at 321; Crown Vantage, Inc., 421 F.3d at 973.
Assuming that § 959 would be interpreted by courts to also include the "functional equivalent" gives the broadest scope for § 959(a)'s exception, yet does not alter the outcome. The absence of such an estate in a Chapter 9 case results in no officer of a United States court performing acts or undertaking transactions in carrying on business connected with such estate property for 28 U.S.C. § 959(a) purposes. A Chapter 9 debtor does not meet the dual requirements of § 959(a) or (b) because it is not such an officer and, therefore, cannot be "appointed" within either subsection of § 959.
Returning for further consideration of the implications of the absence of a bankruptcy estate in a Chapter 9 case allows one to see past the apparent similarities between a municipal and other types of bankruptcy cases that create the appearance of justification for why 28 U.S.C. § 959(a) may be utilized to overcome the Barton Doctrine in an action against a Chapter 9 debtor. As partially discussed, one who is a municipal debtor is unlike a trustee, manager, or debtor in possession under other chapters of the Bankruptcy Code, who are officers of the court.
From the molecular and definitional vantage point, Jefferson County is not an officer of a court of the United States within what is required for § 959(a). Moreover, for purposes of § 922(a)(1), the inapplicability of § 959(a) is more evident with respect to inhabitants of a municipality. Section 959(a)'s language
For 28 U.S.C. § 959(b), the foregoing points for why § 959(a) is inapplicable in a Chapter 9 bankruptcy are augmented by the fact that § 959(b) has retained the "appointed" wording in a different manner: "a trustee, receiver or manager appointed in any cause pending in any court of the United States." A Chapter 9 debtor is simply not appointed by a federal court. Furthermore, the concept that the United States can require a state or its municipal body, which is merely a delegation to a subpart of a state, to comply with a state's laws via a federal statute is, at a minimum, inconsistent with, if not in derogation of, a state's sovereignty, see 11 U.S.C. §§ 903, 904, and the Constitution, specifically the Tenth Amendment. See New York City Off-Track Betting Corp., 434 B.R. at 144.
There is more of a distinction than just "officer" for "appointing" purposes. A debtor in possession, trustee, and others acting as officers of a bankruptcy court in Chapters 7, 11, 12, 13, & 15 of the Bankruptcy Code are at "at all times [subject] to the control of the court. And in operating the business it had to have `authorization by and subject to the control of the court.'" City of New York v. Rassner, 127 F.2d 703, 705-706 (2d Cir.1942) (citations omitted). As the Power-Pak court detailed in its opinion,
Power-Pak, 433 F.Supp. at 687 (emphasis added) (citing Rassner, Moore v. Linahan, 117 F.2d 140 (2d Cir.1941), and In re Standard Commercial Tobacco Co., 34 F.Supp. 304, 308 (S.D.N.Y.1940)). The same is not the case for a Chapter 9 debtor.
A Chapter 9 debtor such as Jefferson County retains not just full title over its property, it also keeps the same degree of control over it in a bankruptcy case along with complete control over its property's operations without restrictions
The municipal debtor's retained authority was considered by the Supreme Court of the United States in United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137 (1938), which upheld the forerunner of the current Chapter 9. As part of its discussion, the Supreme Court in Bekins quoted from the report of the Committee on the Judiciary of the House of Representatives regarding the earlier version of what has, with modifications not relevant for this discussion, become Chapter 9 (Chapter X as it is referenced in Bekins) and set forth that points of the Committee in its report were well taken. In particular, one "well taken" point was "no control ... over that property and those revenues of the petitioning agency necessary for essential governmental purposes is conferred by the bill." Bekins, 304 U.S. at 50-51, 58 S.Ct. 811; see City of Stockton, Cal., 478 B.R. at 18. The absence of such control was and remains pivotal in multiple respects.
Absence of a federal court's control is added evidence that a Chapter 9 debtor is not an officer of the bankruptcy court. Another is that the Bekins Court viewed the restraints on control as an essential justification for upholding the municipal bankruptcy provisions it had under consideration. 304 U.S. at 50-51, 58 S.Ct. 811. This was part of its recognition of our duel sovereignty governmental structure and its Constitutional incorporation.
Consistent with the Tenth Amendment's reservation of powers to states is 11 U.S.C. § 904's demarcation that without a municipal debtor's consent, a bankruptcy court may not interfere with any of its political or governmental powers, any of its property or revenues, or its use or enjoyment of any income-producing properties. 11 U.S.C. § 904(1)-(3). See, e.g., In re Cnty. of Orange, 179 B.R. 185, 189-90 (Bankr. C.D.Cal.1995). Added to § 904 is 11 U.S.C. § 903. Among other things, it restricts a Chapter 9 debtor's ability to consent. 11 U.S.C. § 903; see also Jefferson Cnty., 474 B.R. at 276. All of these have been designed to retain as and to the extent called for in our Constitution the separateness of states and their subdivisions from that of the United States government.
Just why this federalism structure precludes application of 28 U.S.C. § 959 to suits by and against a Chapter 9 debtor is revealed by one example. Should a Chapter 9 debtor be an officer of a federal court, the federal court would, of necessity, have the ability to interfere with, and even exercise control over its properties, see, e.g., Rassner, 127 F.2d at 705-06; Power-Pak, 433 F.Supp. at 687; Standard Commercial Tobacco Co., 34 F.Supp. at 308, in derogation of what § 904 has been designed to avoid and what the Constitution and the Bekins Court require. This control springs from being an officer of a United States court. See Rassner, 127 F.2d at 705-06; Power-Pak, 433 F.Supp. at 687; Standard Commercial Tobacco Co., 34 F.Supp. at 308.
From the bigger picture point of view, it is due to the dual sovereignty structure under the Constitution that 28 U.S.C. § 959(a) is inapplicable to a Chapter 9 municipality's ongoing operations of its properties such as Cooper Green. Jefferson County may not be an officer of this
All of these factors represent why neither portion of 28 U.S.C. § 959 is available for use in a municipal bankruptcy case in the manner courts of the United States have applied it to trustees, receivers, and debtors in possession existing in cases under another chapter of the Bankruptcy Code to allow suits against them without bankruptcy court authorization and without modification of an automatic stay.
Should the 28 U.S.C. § 959(a) be found to apply in the same manner as in a non-municipal debtor context, it does not assist the City Parties in their positing that § 959(a) stands for the proposition that "post petition causes of action against the debtor are not subject to the automatic stay." Doc. 1353 at 20. Section 959(a) does not create such a blanket exception to the Automatic Stays. See, e.g., In re Cinematronics, Inc., 111 B.R. 892, 897-98 (Bankr.S.D.Cal.1990); In re Television Studio Sch. of New York, 77 B.R. 411, 412 (Bankr.S.D.N.Y.1987). At least one court has held that where, as here, the post-petition action seeks to exercise control over property of the estate, § 362(a)(3) continues to apply. Cinematronics, 111 B.R. at 897-98 (obtaining a temporary restraining order in state court and enforcing it against trustee was action to obtain property of the estate subject to § 362(a)(3)).
Further, as the Television Studio court explained, the statute itself gives the court authority to limit suits when they will impede the reorganization proceedings:
77 B.R. at 412 (internal quotations and citations omitted).
In this case, just as in Cinematronics, the City Parties' proposed action seeks to exercise control over property of the debtor. See supra at V.A. Even if it did not, though, under the Television Studio standard, it is clear to the Court that the proposed action, which seeks to pursue an
Similarly, there is no merit to the City Parties' contention that § 959(b) precludes the County from closing the Medical Services at Cooper Green. Section 959(b) mandates only that the debtor in possession operate its property "according to the requirements of the valid laws of the State." As discussed at length elsewhere in this opinion, nothing in the valid laws of Alabama that have been cited by the City Parties requires the County to operate a hospital or a particular program for the provision of indigent health care. See supra at IV.B.1. So too, nothing in AHCRA requires — indeed there is not even a hint — that a "new structure for the funding of the delivery of healthcare services to the indigent" exist or be implemented before a county may cease providing care such as the Medical Services in a county-owned medical facility. The only arguable AHCRA-founded claim that one may assert is for reimbursement or payment of certain medical services provided — not the how, when, and by whom such services are provided. As such, an AHCRA-premised claim or cause of action has nothing to do with the County's management and operation of Cooper Green.
What this recognition regarding AHCRA means is that assuming 28 U.S.C. § 959 applies to a municipal entity, 28 U.S.C. § 959(b) does not pertain to the County's cessation of the Medical Services. The outcome is that no failure by the County to comply with AHCRA exists, and § 959(b) is not a basis on which the City Parties may sidestep the Automatic Stays and file a suit against Jefferson County.
Section 362(d) allows the Bankruptcy Court to grant relief from the automatic stay for "cause." "Cause" is not defined in the Bankruptcy Code. "Because there is no clear definition of what constitutes `cause,' discretionary relief from the stay must be determined on a case by case basis." In re Mac Donald, 755 F.2d 715, 717 (9th Cir.1985); see also In re S. Oakes Furniture, Inc., 167 B.R. 307, 308 (Bankr. M.D.Ga.1994). The party opposing the stay bears the burden of persuasion on all issues except equity. 11 U.S.C. § 362(g); In re Caves, 309 B.R. 76, 79 (Bankr. M.D.Ga.2004); see also In re Allstar Bldg. Prods., Inc., 834 F.2d 898, 900 (11th Cir. 1987). However, the moving party must first make a prima facie showing that it is entitled to the relief requested. See Allstar, 834 F.2d at 900; Caves, 309 B.R. at 79.
To determine whether "cause" exists to lift the stay and allow a suit to proceed in a non-bankruptcy forum, a court typically analyzes whether (1) any great prejudice to either the bankrupt estate or the debtor will result from continuation of a civil suit, (2) the hardship to the non-bankrupt party by maintenance of the
In this case, the debtor would suffer prejudice by allowing the City Parties to bring their proposed action because it would delay the process of formulating and filing a Chapter 9 plan by engaging the County's resources in a state court action designed to restrict the County's ability to control the disposition of Cooper Green. The City Parties, on the other hand, would not suffer hardship from not being permitted to pursue the proposed action because the relief to be sought is simply not available under AHCRA or any other Alabama law relied on by them. See supra at IV. B.1. and 2. Also, there is no evidence that the County has not met or intends to not meet its payment obligation under AHCRA.
With respect to the third factor, and although the weight afforded to each of the three factors varies based on the circumstances of each case, a creditor must have a probability of prevailing on the merits in order for the automatic stay to be lifted to pursue litigation in a non-bankruptcy forum. See Gindi, 642 F.3d at 873; see also In re Veal, 450 B.R. 897, 914-15 (9th Cir. BAP 2011) (party seeking stay relief must have a colorable claim); Grella, 42 F.3d at 34 (on a motion for relief from stay, court looks at whether proposed claim is colorable, or sufficiently plausible, to support relief from stay). Here, the City Parties cannot prevail on the merits of their proposed claims because the relief they seek is simply not available under AHCRA or under Alabama law governing quo warranto and mandamus actions. More basically, their proposed action does not state a claim upon which relief can be granted. See In re Archdiocese of Milwaukee, No. 11-20059-SVK, 2012 WL 6107096, at *2 (Bankr.E.D.Wis. Dec. 10, 2012) ("A claim is colorable if it could survive a motion to dismiss," which means it is "plausible on its face.").
Lastly and importantly, the City Parties lack the legally recognized injury and damages necessary to succeed on their proposed state court claims.
In this matter and as discussed in the portion of this opinion regarding AHCRA, the City Parties propose to bring in an Alabama court a lawsuit founded on claims for which there is no legally accepted injury and hence no liability. AHCRA is a statute that sets forth the payment via reimbursement of specified out-of-county hospitals, those denominated regional referral hospitals, for medical care provided to qualifying resident indigents of a county other than the one in which the hospital is located. See Ala.Code § 22-21-292-297. Once more, it has nothing to do with emergency care or inpatient care for in-county treatments accorded to a county's indigent residents. Nor does it or any other portion of Title 22, Chapter 21 require — as the City Parties urge — a new structure or plan for healthcare for indigent residents to be in place before the Medical Services being eliminated by the County at Cooper Green may be ended. The City Parties' complained of conduct by Jefferson County is not proscribed by any provision of AHCRA, the quo warranto and mandamus case law, or any other Alabama law cited to this Court. More simply, the legally recognized liability part of the equation for maintenance of a lawsuit is missing.
The same is so for the damage or remedy portion of the equation. There is no evidence that Jefferson County has failed to meet or intends to not comply with its payment/reimbursement obligation for medical care for indigent care services to the extent required by AHCRA. In fact, the City Parties admit as much by their argument that what they want is to preempt termination of the emergency and inpatient Medical Services until a replacement structure or plan is implemented. Nor have the City Parties presented any claim for damages under the procedures required by AHCRA. See Health Care Auth. of City of Huntsville v. Madison Cnty., 601 So.2d 459, 462 (Ala.1992) (claims not properly presented were barred). Again, the damage/remedy part of the equation for maintenance of a lawsuit is absent.
Whether one uses the principle of standing or the two parts of what is required to maintain a lawsuit, the outcome is the same. The City Parties have no legally cognizable claim or cause of action under
Courts routinely deny stay relief where, as here, a creditor has little to no probability of success on the merits. See, e.g., Gindi, 642 F.3d at 872, 874-75 (upholding bankruptcy court's refusal to lift stay where creditor had not demonstrated likelihood of success on the merits); In re Flintkote Co., 475 B.R. 400 (Bankr.D.Del. 2012) (because the movant had no viable cause of action against the debtors under any of the theories it planned to pursue, it was not entitled to relief from the automatic stay for purposes of pursuing such causes of action in a non-bankruptcy forum); Caves, 309 B.R. at 80-81 (denying a motion for relief from stay where creditor did not have a probability of succeeding on the merits of its state RICO claims against debtor). The same result is appropriate here because there is no likelihood that the City Parties will prevail on the merits.
The balance of the three factors in this case — particularly the City Parties' inability to show any likelihood of success on the merits of their proposed claims — mandates this Court's conclusion that the City Parties are not entitled to the requested relief. This Court will not modify the Automatic Stays.
Based on the foregoing findings of fact and conclusions of law, the City Parties' Motion for Abstention is denied with respect to the Motion for Relief from Stay. The City Parties' Motion for Determination of Applicability of the Automatic Stay, or, in the Alternative, Motion for Relief from Stay is also denied with respect to modification of the automatic stays of 11 U.S.C. §§ 362(a) and 922(a), and the Court holds that a suit by the City Parties in a court of the State of Alabama seeking a determination of the scope and applicability of AHCRA to Jefferson County's decision to cease providing the Medical Services is stayed under 11 U.S.C. § 362(a)(3) and an AHCRA-based action against the Jefferson County Commissioners is stayed by 11 U.S.C. § 922(a)(1). A separate order incorporating the Court's decision will be entered contemporaneously with this Memorandum Opinion.
None of these mandates that a county operate a hospital or supply any sort of medical care. Amendment 125 only specifies that a county may, among a litany of other ways, make provision for medical care to its indigent residents via a public hospital. Since these Alabama Constitutional provisions do not even arguably support the City Parties' contentions, this Court will not further deal with them separate from the later discussion of the Alabama statute relied upon by the City Parties.
6 Collier on Bankruptcy ¶ 922.02[1] (16th ed. 2009). This discussion is in the context of enforcement of a pre-petition claim against a municipal debtor, but the rationale has equal application to certain claims arising post-bankruptcy.
