Opinion ID: 2832004
Heading Depth: 2
Heading Rank: 2

Heading: 2013 HAF Subject to Automatic Stay

Text: With this in mind, we turn to the claim at issue in this appeal. The parties agree that the conduct test should apply; however, they quarrel over what conduct gave rise to the 2013 HAF. St. Catherine characterizes the relevant conduct as Indiana’s enactment of Section 281, CMS’s approval of that law, and the meeting of the state’s hospital assessment fee committee for purpose of calculating the HAF. All of this conduct occurred before the hospital’s petition for bankruptcy was filed on June 19, 2012. St. Catherine also emphasizes that the calculation of its HAF (for both 2012 and 2013) was based entirely on cost reports produced on or before February 28, 2012, well before the bankruptcy filing. 8 Nos. 14-2420 & 14-2546 FSSA characterizes the conduct giving rise to the 2013 HAF as St. Catherine’s continued operations as an eligible hospital under Section 281 until July 1, 2012. It argues that pursuant to Provider Bulletin BT201217, any hospital that ceased its operations or failed to qualify as an “eligible hospital” prior to July 1, 2012 (the first day of the 2013 HAF assessment period) would not be liable for the 2013 HAF.3 Based on this, FSSA concludes that its claim for the 2013 HAF arose on July 1, 2012. The determination of what conduct gives rise to a claim will vary depending on the nature of the liability, be it tort, contract, or tax. See Matter of Chicago, Milwaukee, St. Paul & Pac. R. Co., 974 F.2d 775, 781 (7th Cir. 1992). The difficulty here is that the HAF does not fit neatly into any of these categories. St. Catherine submits that Section 281 “is the functional equivalent of a two-year contract between the FSSA and the Debtor.” Since contractual liability is generally thought to arise on the date a contract is signed, see In re Rosteck, 899 F.2d 694, 696 (7th Cir. 1990) (post-petition assessments were to be treated as pre-petition debts where they emanated from pre-petition contract between debtor and condominium association), St. Catherine concludes that the HAF liability arose on the date Section 281 was passed (or, at the latest, approved by CMS). Of course, the contract 3 Provider Bulletin BT201217 explains that only those hospitals licensed under Indiana Code § 16-21-2 are eligible to pay the HAF fee and advises that any hospital that loses its eligibility must notify the state agency within 30 days. Based on this, the district court found that although the Bulletin does not say so explicitly, if St. Catherine had ceased to be an eligible acute care hospital before July 1, 2012, it would not have been subject to the 2013 HAF. Nos. 14-2420 & 14-2546 9 analogy fails for various reasons, the most obvious being that St. Catherine played no role whatsoever in the legislative process that gave rise to Section 281. By contrast, FSSA argues that Section 281 was “akin to a tax” levied annually on eligible hospitals. It furthers this analogy by pointing out that FSSA issued hospitals separate bills for fiscal years 2012 and 2013. But this analogy is also flawed. As FSSA concedes, the HAF is not, in fact, a tax. And it operated very differently from one. The HAF was not calculated on an annual basis, as are taxes typically. Nor was the HAF a fundraising device for the state. Rather, it was a fee imposed on hospitals for the purpose of increasing Medicaid reimbursements for those same hospitals. Admittedly, the claim at issue here is one that does not “lend[] itself to governance by formula.” Fogel v. Zell, 221 F.3d 955, 962 (7th Cir. 2000). But we are not persuaded by FSSA’s argument that Section 281 gave rise to two separate liabilities, one for fiscal year 2012 and the other for fiscal year 2013. The statute made clear that there was one HAF for one “fee period,” and that the entire HAF was set prepetition. Nor is it of particular significance that FSSA sought to collect this fee in two installments and issued two separate bills. Home loans, for example, are assessed over time, but that does not mean that a home loan is many individual debts. Here, the 2013 HAF was assessed based upon the activities reflected in St. Catherine’s cost reports from May 1, 2010 to April 30, 2011, and other financial information on file as of February 28, 2012. These activities—along with the passage of Section 281 and CMS’s approval of that law—all occurred before St. Catherine filed for bankruptcy. Since all of the 10 Nos. 14-2420 & 14-2546 conduct that could have given rise to the 2013 HAF occurred pre-petition, we find that the claim is subject to the automatic stay. That St. Catherine’s continued operation as an eligible hospital on July 1, 2012 may have been required in order for the 2013 HAF to be assessed does not change our analysis. This fact would simply make the claim “contingent” upon the hospital’s continued eligibility on July 1, 2012. A “contingent” claim is one conditioned upon some future event that is uncertain. See In re Rosteck, 899 F.2d at 697 (quoting Grady, 839 F.2d at 200) (defining contingent as “[p]ossible but not assured; doubtful or uncertain; conditioned upon some future event which is itself uncertain or questionable …. impl[ying] that no present interest exists, and that whether such interest or right will ever exist depends upon a future uncertain event”). And as noted above, the Code’s definition of “claim” explicitly includes any “right to payment, whether or not such right is … contingent” upon some future event, which may or may not happen after the filing of a bankruptcy petition. See 11 U.S.C. § 101(5)(A). Thus, assuming FSSA’s reading of Provider Bulletin BT201217 is accurate, it would simply mean that had St. Catherine ceased to be an eligible hospital prior to the beginning of the fiscal year 2013, a contingency for its 2013 HAF liability would not have been met. It would not mean that the underlying claim did not already exist. To conclude, we note that under most circumstances, finding that a claim arose “at the earliest point possible” will best serve the policy goals underlying the bankruptcy process. See Matter of Chicago, 974 F.2d at 782. This is because doing so enables the bankruptcy court to bring before it as Nos. 14-2420 & 14-2546 11 many claims against the debtor as possible, and from there to “equitably distribute property [among the creditors] and assure the debtor a fresh start.” Id. (explaining there is “little benefit” to be “gained by allowing a person who knows it has a claim to pursue the claim outside of bankruptcy or to sit on the claim until after bankruptcy”). To be sure, there are exceptions to this rule—mostly notably, where the claimant is the victim of pre-petition tortious conduct, but does not realize he or she has been a victim until some harm manifests after the bankruptcy. In these situations, a court may be less inclined to conclude that the party had a claim or contingent claim dischargeable in bankruptcy (i.e., subject to the automatic stay), because to do so would forever bar that party from raising the claim against the individual debtor, reorganized company, or its successors. Id. (citing Schweitzer v. Consol. Rail Corp., 758 F.2d 936, 940–44 (3d Cir. 1985), cert. denied, 474 U.S. 864 (1985)). But this exception does not apply here, as FSSA was aware of its claims against St. Catherine—for both fiscal years 2012 and 2013—well before it filed for bankruptcy.