Fla. Agency for Health Care Admin. v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC)

Florida Agency for Health Care Administration, United States of America v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC), Case No. 15-13731 (11th Cir. July 11, 2016).
The Eleventh Circuit held that the bankruptcy court erred as a matter of law when it exercised subject matter jurisdiction over certain provider agreements. By virtue of Medicare’s jurisdictional bar provided by 42 U.S.C. § 405(h), the bankruptcy court could not exercise jurisdiction under 28 U.S.C. § 1334 over claims arising under the Medicare Act and lacked jurisdiction to issue orders enjoining the termination of provider agreements and ordering the assumption of the provider agreements.
Procedural context:
Appeal from the United States District Court for the Middle District of Florida affirmed.
Bayou Shores SNF, LLC (“Bayou Shores”) operates a skilled nursing facility in St. Petersburg, Florida and derives a substantial portion of its revenue from Medicare and Medicaid payments through various provider agreements with the state and federal government. As a result of certain deficiencies identified in a survey performed by the Florida Agency for Health Care Administration (“AHCA”), the United States Department of Health and Human Services (“HHS”) elected to exercise its regulatory discretion to terminate Bayou Shores’ Medicare provider agreement as of August 3, 2014. On August 1, 2014, Bayou Shores sought emergency injunctive relief from the district court. On August 15, 2014, the district court concluded that Bayou Shores had not exhausted its administrative remedies and that § 405(h) prevented the court from exercising jurisdiction over the provider agreements. Immediately after the district court issued its order, Bayou Shores filed a petition seeking relief under chapter 11 of the Bankruptcy Code, in addition to emergency injunctive relief to prevent HHS and AHCA from terminating the provider agreements. The bankruptcy court issued the preliminary injunction, finding that the court had jurisdiction under § 1334 and rejecting HHS and AHCA’s arguments that the § 405(h) bar applied to the bankruptcy court. The bankruptcy court determined that the provider agreements were property of the estate and subject to the protection of the automatic stay. Following an evidentiary hearing, the bankruptcy court entered an order that proscribed AHCA and HHS from terminating the provider agreements, among other things (the “Injunction Order”). The bankruptcy court eventually entered an order confirming Bayou Shores’ chapter 11 plan (the “Confirmation Order”). HHS and AHCA again argued that the § 405(h) bar applied to the bankruptcy court and that the lack of reference to § 1334 is merely the result of a codification error. In rejecting those arguments, the bankruptcy court ruled that the plain language of § 405(h) referred only to 28 U.S.C. §§ 1331 and 1346 and did not preclude the bankruptcy court from exercising jurisdiction under § 1334. The confirmation order permitted Bayou Shores to assume the provider agreements, finding that Bayou Shores provided adequate assurance of future performance by remedying the deficiencies for which it was cited by AHCA. HHS and AHCA each appealed the Injunction Order and the Confirmation Order. In reversing the decisions of the bankruptcy court, the district court held that § 405(h) barred jurisdiction under § 1334. Bayou Shores took an appeal of the district court’s order. Adopting the positions of the Seventh, Eighth, and Third Circuits, the Eleventh Circuit affirmed the decision of the district court, agreeing that bankruptcy court lacked jurisdiction over the termination of provider agreements because § 405(h) barred § 1334 jurisdiction over claims that arise under the Medicare Act. Among other arguments advanced by Bayou Shores, the Eleventh Circuit also rejected Bayou Shores’ position that the appeal was constitutionally or equitably moot. The appeal was not constitutionally moot because meaningful relief was available, and the lack of jurisdiction prevented the Eleventh Circuit from exercising discretionary authority to apply the doctrine of equitable mootness.
Hull, Carnes, and Clevenger, Circuit Judges

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