Migrant Health Center, Inc. v. Commonwealth of Puerto Rico

First Circuit finds no exceptions to the automatic stay under PROMESA subjecting Puerto Rico to ‘ordinary course’ litigation.

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Case Type:
Case Status:
Reversed and Remanded
18-1783 (1st Circuit, Mar 21,2019) Published
The automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (section 362 incorporated through section 301(a), 48 U.S.C. section 2161(a)) applies to certain proceedings to determine the amount of federal court-ordered payments ("prospective wraparound payment") that the Commonwealth of Puerto Rico owes to several federally qualified health centers (" FQHCs") per a 2010 injunction out of a Medicaid Litigation.
Procedural context:
The appeal arises from a parallel federal court litigation (state court litigations were also ongoing) regarding the request from FQHCs for the Commonwealth to make retroactive wraparound payments for reasonable costs of providing services to Medicaid patients, as required under the Medicaid Act. The District Court entered an order in which it ruled that the Automatic Stay did not apply. The Commonwealth asserted that sections 304(h) and section 210(c), 48 U.S.C. 2164(h) and 2150(c) were applicable, while the PQHCs alleged that PROMESA provisions under sections 204(d)(1) and section 7, 48 U.S.C. 2144(d)(1) and 2106 established exceptions to the application of the automatic stay.
In a litigation that began in 2013, several Federally Qualified Health Centers ("FQHCs") sought to enjoin the Department of Health of Puerto Rico from failing to reimburse them, through what are known as "wraparound payments", for their reasonable costs of providing service to Medicaid Patients. when the Title III petition of the Commonwealth was filed, the Fiscal Oversight Board requested the stay of the litigation and the plaintiffs opposed indicating that the case was exempted from the provisions of the automatic stay. After considering its jurisdiction to entertain an appeal from a district court's determination regarding the automatic stay and the sustantive allegations on the parties regarding the applicable PROMESA sections to the specific issue, the Court of Appeals determined that section 362 applied in full force and the plaintiff themselves may seek prompt relief from the stay in the Title III Court.
Lynch, Thompson and Baron

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