Opinion ID: 583437
Heading Depth: 2
Heading Rank: 3

Heading: Exclusive Remedies

Text: 38 With respect to T & C's state-law tort and contract claims arising out of the government's setoff of Medicare overpayments, the Secretary contends that these claims would be barred even if the government had waived sovereign immunity in bankruptcy court because T & C's failure to exhaust administrative remedies under the Medicare Act would have precluded T & C from asserting its state-law claims outside bankruptcy. 39 The Secretary observes that the Medicare Act bars review of claims arising thereunder until administrative procedures have been exhausted. See 42 U.S.C. 405(h) (made applicable to the Medicare Act by 42 U.S.C. § 1395ii); Daniel Freeman Mem. Hosp. v. Schweiker, 656 F.2d 473, 475-76 (9th Cir.1981). 4 The Secretary argues that no cognizable claim arising under the Medicare Act may be asserted except as a challenge to a final agency decision. The Secretary further contends that even if a tort claim not subject to this exhaustion requirement could be asserted with respect to Medicare reimbursement, such an action could be brought only under the FTCA. The FTCA defines the government's limited waiver of immunity for tort liability, and the remedies provided in the statute are exclusive. See 28 U.S.C. § 1346(b). The Secretary argues that in defining the limits of the government's tort liability, Congress established as a jurisdictional prerequisite that tort claims be presented to the appropriate federal agency before being raised in federal court. 28 U.S.C. § 2675(a). The Secretary concludes that this threshold requirement of administrative exhaustion precludes T & C's claims. 40 T & C, on the other hand, contends that the bankruptcy court had a separate and distinct basis for exercising jurisdiction because T & C's counterclaims related to property of the estate, see 28 U.S.C. § 1334(b), and were within the jurisdiction of the bankruptcy court, see 28 U.S.C. § 157(b). As the BAP noted, the courts have divided on this question. Some have held that the exhaustion requirements of statutes such as the FTCA and the Medicare Act bar bankruptcy court review. See, e.g., In re St. Mary Hosp., 123 B.R. 14, 16-18 (E.D.Pa.1991); In re Berger, 16 B.R. 236, 237-38 (Bankr.S.D.Fla.1981). Other courts have held that bankruptcy jurisdiction is not precluded. See, e.g., Ashbrook v. Block, 917 F.2d 918, 921-23 (6th Cir.1990) (holding that section 106(a) mandates an automatic waiver of sovereign immunity and thereby impliedly repeals the FTCA's exhaustion requirement); In re Shelby County Healthcare Servs., 80 B.R. 555, 559-61 (Bankr.N.D.Ga.1987) (Medicare Act); In re Kenny, 75 B.R. 515, 521 (Bankr.E.D.Mich.1987) (FTCA). 41 The BAP rejected the Secretary's arguments and found the better reasoned position to be that where there is an independent basis for bankruptcy court jurisdiction, exhaustion of administrative remedies pursuant to other jurisdictional statutes is not required. 112 B.R. at 334. We agree. 42 The Secretary objects to the BAP's holding on the ground that T & C could not have obtained new remedies for Medicare claims simply by filing a bankruptcy petition. The Secretary claims that, in essence, the BAP created a novel rule that a Medicare-provider in bankruptcy acquires statelaw causes of action unavailable to providers who do not file bankruptcy petitions. The Secretary further argues that under the BAP's ruling T & C is not required to comply with the jurisdictional prerequisites of the FTCA, a result which the Secretary says vitiates Congress's intention to limit the government's tort liability. In this vein, the Secretary urges that a statute governing specific subject matter must trump a broad, general statute unless Congress has explicitly articulated a contrary intent. See Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445, 107 S.Ct. 2494, 2499, 96 L.Ed.2d 385 (1987). 43 Reasoning that the broad grants of jurisdiction found in 28 U.S.C. §§ 157 and 1334 give district courts and bankruptcy courts original and exclusive jurisdiction over actions related to bankruptcy for which they otherwise would not have jurisdiction, the BAP found section 106(a) to be an independent grant of jurisdiction to the bankruptcy court regardless of the applicability of other statutes. The BAP's conclusions are consistent with our prior decisions. In Kaonohi Ohana, Ltd. v. Sutherland, 873 F.2d 1302 (9th Cir.1989), we stated: 44 The district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11, of the bankruptcy code. 28 U.S.C. § 1334(b).... The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.... An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon handling and administration of the bankrupt estate. 45 Id. at 1306 (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir.1984)) (emphasis in original). The Secretary's argument--that the filing of a bankruptcy petition does not confer federal jurisdiction over claims for which there would otherwise be no jurisdiction--has already been rejected in this circuit. 46 The Secretary's argument based on 42 U.S.C. § 405(h) is likewise unpersuasive. Section 405(h) only bars actions under 28 U.S.C. §§ 1331 and 1346; it in no way prohibits an assertion of jurisdiction under section 1334. See, e.g., Shelby County, 80 B.R. at 560. The rationale underlying section 1334's broad jurisdictional grant over all matters conceivably having an effect on the bankruptcy estate is clear. This section allows a single court to preside over all of the affairs of the estate, which promotes a congressionally-endorsed objective: the efficient and expeditious resolution of all matters connected to the bankruptcy estate. In re Fietz, 852 F.2d 455, 457 (9th Cir.1988) (citing H.R.Rep. No. 595, 95th Cong., 1st Sess. 43-48, reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6004-08). The language of section 1334(b) grants jurisdiction to the district court, and therefore to the bankruptcy court, over civil proceedings related to bankruptcy and accords with the intent of Congress to bring all bankruptcy-related litigation within the umbrella of the district court, at least as an initial matter, irrespective of congressional statements to the contrary in the context of other specialized litigation. 1 L.King, Collier on Bankruptcy, p 3.01[c][ii], at 3-22 (15th ed. 1991). 47 In enacting section 106, Congress intended to effect a limited change from the result that would prevail in the absence of bankruptcy. S.Rep. No. 989, 95th Cong., 2d Sess. 29, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5815. At the time of the Bankruptcy Code's passage, Congress was aware that its prior enactments, such as the FTCA, had already prescribed certain conditions for the government's waiver of sovereign immunity. The legislative history of section 106 indicates that Congress meant to alter this landscape by subjecting the government to an automatic exposure to liability as the price of its participation in the distribution of the bankruptcy estate. See id. 48 AFFIRMED.