ROBERT H. JACOBVITZ, United States Bankruptcy Judge.
THIS MATTER is before the Court for a trial on the merits.
Prior to the trial, the Court entered its Order Granting, in Part, and Denying, in Part, Defendants' Motion for Summary Judgment (Partial) (Docket No. 25) (the "Summary Judgment Order"). In the Summary Judgment Order, the Court held: (i) the language of Section 14.20 of the Plan (the "Plan Injunction") is broad enough to bar Plaintiff's claims against Dr. Moolamalla asserted in the State Court Action if Dr. Moolamalla was an employee of the Debtor when he performed the medical procedure on Plaintiff; and (ii) Plaintiff received actual notice of the commencement of the Bankruptcy Case, the hearing on confirmation of the Plan (which included notice of the Plan Injunction), confirmation of the Plan, and the bar date for filing administrative claims in the Bankruptcy Case. The remaining issue for trial is whether the content of the notices Plaintiff received satisfied the requirements of due process. For the reasons explained below, the Court holds that the notices Plaintiff received satisfied the requirements of due process.
The Hospital operates the Gerald Champion Regional Medical Center ("GCRMC") in Alamogordo, New Mexico. See Pre-Trial Order, p. 7. The Hospital commenced the Bankruptcy Case on August 16, 2011 (the "Petition Date") by filing a voluntary petition under Chapter 11 of not the Bankruptcy Code. The Hospital filed the Plain on June 20, 2012. The Plan included the Plan Injunction, which provides as follows:
Id. The Court entered the Order Confirming Chapter 11 Plan (Bankruptcy Case Docket No. 712) (the "Confirmation Order") confirming the Plan on August 7, 2012. The Confirmation Order contains language that is effectively the same as the Plan Injunction. See id. The Plan became effective September 19, 2012 (the "Effective Date"). See id.
Plaintiff had actual notice of the Bankruptcy Case no later than January 2012. Plaintiff was included on the confidential service list filed in the Chapter 11 Case (the "Patient Service List"). See id. Plaintiff's address on the Patient Service List was listed as P.O. Box 897, La Luz, New Mexico 88337. See id. Plaintiff that used and regularly received mail at that P.O. Box. See id. The Court appointed Kurtzman Carson Consultants LLC ("KCC") to serve as the claims, noticing, and balloting agent in the Chapter 11 Case. See id. at p. 8. KCC mailed the following notices given in the Chapter 11 Case to Plaintiff:
Id.
The Confirmation Notice, which is just over two pages exclusive of the signature blocks, provided notice of the final confirmation hearing date scheduled for August 3, 2012, and included the following language in boldface type:
Id. at pp. 8-9.
The Bar Date Notice set a bar date of October 29, 2012 for asserting administrative claims against OCHA (the "Administrative Claims Bar Date"). The Bar Date Notice included notice of the following:
Id. at p. 9. The Bar Date Notice "encouraged [recipients of the Bar Date Notice] to review each of the Confirmation Order and the Plan in its entirety and consult with your own legal advisors should you have any questions in respect thereof." Id. Plaintiff denies having received any mail concerning the Chapter 11 Case, but she cannot recall any interruption in mail service to her P.O. Box from the Petition Date through the Administrative Claims Bar Date. See id. OCHA published notice of the Plan confirmation hearing date, the Plan effective date and the Administrative Claims Bar Date in the Alamogordo Daily News, the Albuquerque Journal, and the El Paso Times newspapers. See id. Plaintiff did not file a proof of claim in the Chapter 11 Case nor did she assert an administrative claim in the Chapter 11 Case. See id. at p. 10.
Dr. Moolamalla is a physician licensed to practice medicine in the State of New Mexico. Dr. Moolamalla provided medical services at GCRMC including at the Center for Women's Health and Specialty Services (the "Center"). See Pre-Trial Order, p. 10. In the summer of 2011, Plaintiff made an appointment through the Center to discuss birth control options with Dr. Moolamalla. See id. Plaintiff went to her appointment with Dr. Moolamalla at the Center. Plaintiff decided to obtain a birth control implant, which is supposed to prevent Plaintiff from becoming pregnant for a specified period of time. See id. In late August 2011, Plaintiff visited Dr. Moolamalla at the Center at which time he performed a medical procedure through which he was supposed to insert the birth control implant into Plaintiff (the "Medical Procedure"). See id.
The Center is a service line provided by GCRMC that provides female patients with medial services related to reproductive health. The Center has no independent legal status and does not function autonomously. The Center is managed and administered entirely within GCRMC's corporate structure. All accounting for the Center is performed by GCRMC's accounting department. All billing for the Center is performed by GCRMC's billing department. All staffing and personnel decisions for the Center are made by GCRMC's human resources department. The Center is located on the GCRMC campus immediately adjacent to the GCRMC main building.
Ms. Landrum believed all doctors performing medical procedures at a hospital are self-employed. She formed this belief after her brother, who received a medical procedure in a Georgia hospital, was billed separately by the hospital and the doctor.
Based on the foregoing, any reasonable person in Ms. Landrum's situation would have been aware that there is a strong possibility that Dr. Moolamalla was an employee of GCRMC. In fact, Ms. Landrum's attorney sent a letter on August 24, 2012 to "Center for Women's Health, Gerald Champion Regional Medical Center" requesting Ms. Landrum's medical records. See Exhibit P. That letter included a medical release form signed by Ms. Landrum. The medical release form authorized the following organization to release medical records: "Center for Women's Health, Gerald Champion Regional Medical Center, 2559 Medical Drive Suite D, Alamogordo, NM 88310." At the time Ms. Landrum sought treatment from Dr. Moolamalla, she believed he was self-employed.
In November 2011, Plaintiff learned she was pregnant. Plaintiff filed the State Court Action against Dr. Moolamalla asserting a claim for medical malpractice arising from the failure of the Medical Procedure to prevent Ms. Landrum from becoming pregnant. Dr. Moolamalla gave notice of the State Court Action to the Hospital. The Hospital's insurance carrier has assumed the defense of Ms. Landrum's claims in the State Court Action. On February 9, 2015, counsel for the Hospital sent
Ms. Landrum held a claim for medical malpractice against the Hospital and Dr. Moolamalla arising from the Medical Procedure and Plaintiff's subsequent pregnancy. Ms. Landrum held and could have asserted an administrative claim against the Hospital in the Bankruptcy Case arising from the Medical Procedure. Ms. Landrum's claim was an administrative claim because it arose during the pendency of the Bankruptcy Case but prior to confirmation of the Plan. See 11 U.S.C. § 503(b)(1)(A) (allowance of administrative expenses); Redmond v. NCMIC Fin. Corp. (In re Brooke Corp.), 485 B.R. 650, 659 (Bankr. D. Kan. 2013) ("the scope of § 503(b)(1)(A) ... encompass[es] tort claims arising from postpetition conduct undertaken in the operation of the estate's business.") (citing Reading Co. v. Brown, 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968)). Ms. Landrum's claim was against the Hospital as well as Dr. Moolamalla because Dr. Moolamalla performed the Medical Procedure while he was an employee of the Hospital and in the ordinary course of his employment.
Ms. Landrum asserts that the injunction contained in the Plan by its own terms does not apply to her State Court Action. The Court disagrees. In construing the injunction language, the Court applies general rules of contract interpretation.
The injunction language in the Plan unambiguously states that the injunction extends to "all Persons who have been, are,
The injunction language in the Plan unambiguously applies to claims that could be asserted against not only the Hospital, but also an employee of the Hospital. The plain language of Section 14.20 of the Plan permanently enjoins all persons who may have claims against the Hospital from asserting claims against its current or former employees related to such claims. See Plan, ¶ 14.20 ("all Persons ... shall be permanently enjoined from taking any ... actions against ... any of their current or former ... employees"). Regardless of whether she asserted her claim against the Hospital, Section 14.20 enjoins Ms. Landrum from asserting a claim against the Hospital's then employee, Dr. Moolamalla, based on the Medical Procedure.
Section 14.20 further enjoins all persons from commencing any action "affecting the Debtor," its assets, or the estate. Id. Because the Hospital's insurance carrier has assumed the defense of the claims against Dr. Moolamalla in the State Court Action, the State Court Action affects the Hospital. The Court infers based on the undisputed fact that the Hospital's insurance carrier is defending the claims in the State Court Action, that the State Court Action will have an effect on the Hospital's insurance premiums. Ms. Landrum argues that she did not cause the State Court Action to affect the Hospital, but rather, Dr. Moolamalla caused the State Court Action to affect the Debtor by providing notice of the State Court Action to the Hospital. That argument is not persuasive. The filing of the State Court Action triggered the events affecting the Hospital.
In sum, because the State Court Action against a former employee of the Hospital relates to a claim that arose prior to confirmation that Ms. Landrum could have asserted against the Hospital, and because such action affects the Hospital, it is enjoined by the unambiguous language of Section 14.20.
Ms. Landrum also contends that the language of Section 14.20 is contrary to the requirements of the Bankruptcy Code. Under 11 U.S.C. § 524(e), the "discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. § 524(e). This section "makes clear that the bankruptcy discharge of a debtor, by itself, does not operate to relieve non-debtors of their liabilities." Gillman v. Continental Airlines (In re Continental Airlines), 203 F.3d 203, 211 (3d Cir. 2000) (citations omitted). In the Tenth Circuit, it may be impermissible for a debtor to obtain a non-debtor release of liability or permanent injunction of suits against non-debtor third parties through a confirmed Chapter 11 plan. See Landsing Diversified Properties-II v. First Nat'l Bank and Trust Co. of Tulsa (In re Western Real Estate Fund, Inc.), 922 F.2d 592, 601-02 (10th Cir. 1990) (holding that, "while a temporary stay prohibiting a creditor's suit against a nondebtor ... during the bankruptcy case may be permissible to facilitate the reorganization process.... the stay may not be extended
In Espinosa, the Supreme Court held that a party adversely affected by the terms of a confirmed Chapter 13 plan who received notice of the plan's contents but failed to object before the expiration of the time to appeal was not entitled to relief, even though the plan contained a provision contrary to the requirements of the Bankruptcy Code and Bankruptcy Rules. See Espinosa, 559 U.S. at 276, 130 S.Ct. 1367 ("where ... a party is notified of a plan's contents and fails to object to confirmation of the plan before the time for appeal expires, that party has been afforded a full and fair opportunity to litigate, and the party's failure to avail itself of that opportunity will not justify Rule 60(b)(4) relief."). The Supreme Court further held that the bankruptcy court has an obligation to ensure that a confirmed plan complies with the requirements of the Bankruptcy Code, but that, even so, the offending provision did not render the confirmation order void. Id. at 277, 130 S.Ct. 1367 (finding that prior to confirmation of a plan the bankruptcy court has the authority to direct a debtor to conform the plan to the requirements of the Bankruptcy Code, but declining to declare the order void).
Thus, so long as Ms. Landrum received adequate notice, the injunction contained in Section 14.20 of the Plan is enforceable as it applies to claims against third parties regardless of whether the Plan would have been confirmed with that provision if a timely objection had been made.
The binding effect of a confirmed Chapter 11 plan is subject to the requirements of due process. See In re Unioil, 948 F.2d 678, 683 (10th Cir. 1991) ("The confirmation of a Chapter 11 plan of reorganization cannot discharge the claim of a creditor who has not received constitutionally
Long standing Supreme Court precedent holds that "[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust, Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (citations omitted). The constitutional requirements of due process are satisfied if the notice reasonably conveys the required information, provides reasonable time to the affected party to respond, and the method used to provide the notice is aimed at providing actual notice by means "reasonably certain to inform those affected." Id. at 315, 70 S.Ct. 652.
Ms. Landrum contends that she cannot be bound by the Plan because did not receive notice sufficient to satisfy her constitutional due process rights for two reasons. First, she argues that she did not receive any notice. Second, she urges that, in any event, the notice was inadequate. The Court will address each argument in turn.
The Hospital's transmission of notice to Ms. Landrum satisfies the requirements of due process. "[W]hen the name and address of an interested party is known, due process requires notice by mail or other means as certain to ensure actual notice." In re Blinder, Robinson & Co., Inc., 124 F.3d 1238, 1243 (10th Cir. 1997) (internal quotation marks and citations omitted). The Hospital sent notice of the commencement of the Bankruptcy Case, notice of the hearing on confirmation, and notice of the bar date for filing administrative
Moreover, proof that a notice was properly addressed and mailed is entitled to the presumption of receipt. See Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 76 L.Ed. 861 (1932) ("proof that a letter properly directed was placed in a post office crates a presumption that it reached its destination in usual time and was actually received by the person to whom it was addressed.") (citing Rosenthal v. Walker, 111 U.S. 185, 193, 4 S.Ct. 382, 28 L.Ed. 395 (1884)).
The final element necessary to satisfy due process is whether the content
The Confirmation Notice included the Plan Injunction language in bold type. The Bar Date Notice and Confirmation Notice together gave Ms. Landrum notice that apprised her that failure to assert her administrative claim in the Bankruptcy Case would bar her from asserting her claim based on the Medical Procedure against the Hospital and its employees. Whether the content of these notices adequately conveyed the required information to render the Plan Injunction enforceable consistent with the due process clause turns on whether Ms. Landrum knew or had reason to investigate the relationship between the Hospital and Dr. Moolamalla.
As a potential creditor, Ms. Landrum had "a responsibility to take an active role in protecting [her] claim[]." Cf. Barton Indus., 104 F.3d at 1246 (citing In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1267 (10th Cir. 1988)). In this context, Ms. Landrum's responsibility would oblige her to investigate whether the Plan Injunction would affect her claim against Dr. Moolamalla if she was on inquiry notice that Dr. Moolamalla may have been an employee or otherwise connected with the Hospital. See In re Coastal Alaska Lines, Inc., 920 F.2d 1428, 1431 (9th Cir. 1990) (holding that due process was satisfied where creditor "received information about the bankruptcy proceedings that was sufficient to put it on inquiry notice."); DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 871 F.Supp.2d 143, 158 (E.D.N.Y. 2012) (holding that creditors have a "responsibility to diligently investigate what claims they may have against the debtor."). A person is on inquiry notice where a reasonably prudent person with knowledge of particular facts would make inquiry into the existence of other facts. See Cities Serv. Oil Co. v. Adair, 273 F.2d 673, 676 (10th Cir. 1959) (defining inquiry notice as "when a party has knowledge of facts which would lead an ordinarily prudent person to make inquiry which would disclose the existence of other facts, the knowledge amounts to notice of those other facts."). See also Sw. Petroleum Corp. v. Udall, 361 F.2d 650, 657 (10th Cir. 1966) (holding that "the test for imputing notice of a superior right is generally whether facts are sufficient to put an ordinarily prudent man on inquiry, an inquiry which, if followed with reasonable diligence, would lead to the discovery of defects in the title or of equitable rights of others affecting the property."); In re Archibald, 482 B.R. 378, 397-98 (Bankr. D. Utah 2012) ("Inquiry notice occurs `when circumstances arise that should put a reasonable person on guard so as to require further inquiry on his part.'" (quoting First American Title Insurance Co. v. J.B. Ranch, Inc., 966 P.2d 834, 838 (Utah 1998))).
Ms. Landrum believed that all doctors worked independently of all hospitals based on an experience where her brother paid a hospital bill but was still billed separately by the doctor. Based on this mistaken belief, Ms. Landrum concluded there was no reason to inquire into whether the Plan Injunction affected her claim against Dr. Moolamalla. A reasonably prudent person who had visited the Center and interacted with the staff and Dr. Moolamalla as much as Ms. Landrum would
Based on the foregoing, GCRMC's notice to Ms. Landrum of the Plan and the Plan Injunction satisfied due process. Ms. Landrum's claim against Dr. Moolamalla asserted in the State Court Action is barred by the Plan Injunction.
The Court has the authority to hold parties before it in civil contempt where "necessary or appropriate." See 11 U.S.C. § 105(a); In re C.W. Min. Co., 477 B.R. 176, 194 (10th Cir. BAP 2012), aff'd, 749 F.3d 895 (10th Cir. 2014) ("A bankruptcy court may exercise its civil contempt power for violation of the automatic stay so long as doing so is consistent with the purposes of civil contempt orders and doing so is within the limits of the bankruptcy court's § 105(a) powers."). The Court's use of its civil contempt powers may be used "(1) to compel or ensure compliance with a court order; and (2) to compensate parties for losses caused by the contemnor's refusal to abide by a court order." In re C.W. Min. Co., 477 B.R. at 194-95. Here, Ms. Landrum genuinely did not believe her claim against Dr. Moolamalla or the State Court Action was barred by the Plan Injunction. While that belief may have been unreasonable in light of Ms. Landrum's experience with Dr. Moolamalla, her visits to the GCRMC campus, and the notices she received of the Plan and Plan Injunction, the belief was sincerely held. The Court is confident that Ms. Landrum will not pursue the State Court Action further or otherwise attempt to assert her claim against Dr. Moolamalla absent reversal of this Court's decision on appeal. Accordingly, it is neither necessary nor appropriate for the Court to use its civil contempt powers to compel compliance with the Court's orders. Further, Ms. Landrum and the Hospital had a genuine dispute regarding whether the Plan Injunction could and did bar Ms. Landrum's claim against Dr. Moolamalla. Once the Hospital's counsel informed Ms. Landrum that it believed her claim was barred by the Plan Injunction, she immediately agreed to a stay of the State Court Action and filed this adversary proceeding. In light of these facts, the Court concludes it is neither necessary nor appropriate for the Court to compensate the Hospital for is losses incurred in defending the State Court Action or this adversary proceeding.
Based on the foregoing, the Court will enter an order granting in part and denying in part Ms. Landrum's request for declaratory judgment and granting in part