Northfield Place of Whitmore Lake was one of four nursing homes statewide under investigation by authorities for allegations ranging from health care fraud to poor patient care, authorities revealed Monday.
The company that owns those nursing homes - and 30 across Michigan - entered into a settlement agreement announced Monday that includes repaying $1.25 million to Medicare and Medicaid and agreeing to outside monitoring.
The settlement resulted from an investigation by the state Attorney General's Office and U.S. Department of Justice that began around 2001, officials said.
Northfield Place, a 114-bed facility, is owned by Southfield-based Ciena Healthcare Management. The other three nursing homes that were investigated are located in Detroit. Locally, Ciena also owns Riverview of Ann Arbor on Huronview Boulevard.
Harry Slater, administrator for Northfield Place, referred a call from The News to the company's legal counsel. The company issued a statement Monday denying any wrongdoing and said a settlement was reached to avoid expensive and time-consuming litigation.
Gina Balaya, a spokeswoman for the U.S. Attorney's Office in Detroit, and Matt Frendewey, a spokesman for the Attorney General's Office, said they could not reveal specifics on what was alleged or found at Northfield Place.
Friday, August 24, 2007
NY: Home care industry riddled with fraud
New York Attorney General Andrew M. Cuomo is on the warpath when it comes to home health care agencies. The AG issued subpoenas to nearly 60 home health agencies this week, suggesting that not only these agencies, but many others, may be committing fraud.
The investigation previously focused on home health aide training, and vendors who set up contracts between aides and agencies. That investigation found evidence of major fraud within training schools and vendors that link graduates with agencies, Cuomo's office said. The agency arrested several managers and employees associated with Borina Home Care on civil and criminal charges.
Now Cuomo's office is examining whether agencies are billing Medicaid for aides who aren't qualified or are billing for too many hours of service. The probe also targets the vendors supplying the aides' services.
To learn more about the investigation:
- read this piece from The New York Times
The investigation previously focused on home health aide training, and vendors who set up contracts between aides and agencies. That investigation found evidence of major fraud within training schools and vendors that link graduates with agencies, Cuomo's office said. The agency arrested several managers and employees associated with Borina Home Care on civil and criminal charges.
Now Cuomo's office is examining whether agencies are billing Medicaid for aides who aren't qualified or are billing for too many hours of service. The probe also targets the vendors supplying the aides' services.
To learn more about the investigation:
- read this piece from The New York Times
January 2004, through in or around February 2005, United Life billed approximately $7,785,856 ..NOT BAD FOR ONE YEAR..HUH?
MIAMI—A federal grand jury has returned an indictment charging defendants Lester Miranda, 31, of Miami Beach; Ariel Estevez, 32, of Hialeah, Luis Garcia Higgins, 46, of Sunny Isles and Karina Estevez, 32, also of Hialeah with conspiracy to commit health care fraud and substantive health care fraud.
In addition, defendants Miranda and Ariel Estevez are charged with conspiracy to commit money laundering and substantive money laundering.
The defendants are also charged jointly and severally in an accompanying forfeiture count.
The U.S. Attorney’s Office also filed a related criminal information charging defendant Rupert Francis, 66 of Davie, FL, with one count of conspiracy to commit health care fraud. Francis has agreed to waive indictment and plead guilty. As part of his agreement, Francis agreed to voluntarily relinquish his medical license to the State of Florida.
According to the indictment, the above co-defendants established a medical clinic in Hialeah known as United Life Corp., which was used to defraud the Medicare program. Lester Miranda owned the clinic. Ariel Estevez oversaw the operation of the clinic on a day to day basis. Karina Estevez, wife to Ariel, helped manage the business and was a medical assistant.
Luis Garcia Higgins was the physician’s assistant employed by the clinic and Rupert Francis served as the clinic’s physician. Garcia Higgins and Francis had been employed full-time by the U.S. Bureau of Prisons. Francis was employed as a staff physician and Garcia Higgins was employed as a physician’s assistant at the Federal Detention Center-Miami until their resignations in April 2006.
Initially, the United Life clinic saw various patients who were treated for a wide range of ailments and complaints. In or around September 2004, the clinic saw an influx of HIV patients, and eventually HIV patients became the only patients treated at the clinic. The clinic stopped treating patients in February 2005.
Prosecutors say that from in or around January 2004, through in or around February 2005, United Life billed approximately $7,785,856 and received approximately $2,042,633 in Medicare reimbursements based upon claims for alleged treatments of intravenous immune globulin medications that purportedly were administered to treat the HIV patients who attended the clinic. 9-22-07
In addition, defendants Miranda and Ariel Estevez are charged with conspiracy to commit money laundering and substantive money laundering.
The defendants are also charged jointly and severally in an accompanying forfeiture count.
The U.S. Attorney’s Office also filed a related criminal information charging defendant Rupert Francis, 66 of Davie, FL, with one count of conspiracy to commit health care fraud. Francis has agreed to waive indictment and plead guilty. As part of his agreement, Francis agreed to voluntarily relinquish his medical license to the State of Florida.
According to the indictment, the above co-defendants established a medical clinic in Hialeah known as United Life Corp., which was used to defraud the Medicare program. Lester Miranda owned the clinic. Ariel Estevez oversaw the operation of the clinic on a day to day basis. Karina Estevez, wife to Ariel, helped manage the business and was a medical assistant.
Luis Garcia Higgins was the physician’s assistant employed by the clinic and Rupert Francis served as the clinic’s physician. Garcia Higgins and Francis had been employed full-time by the U.S. Bureau of Prisons. Francis was employed as a staff physician and Garcia Higgins was employed as a physician’s assistant at the Federal Detention Center-Miami until their resignations in April 2006.
Initially, the United Life clinic saw various patients who were treated for a wide range of ailments and complaints. In or around September 2004, the clinic saw an influx of HIV patients, and eventually HIV patients became the only patients treated at the clinic. The clinic stopped treating patients in February 2005.
Prosecutors say that from in or around January 2004, through in or around February 2005, United Life billed approximately $7,785,856 and received approximately $2,042,633 in Medicare reimbursements based upon claims for alleged treatments of intravenous immune globulin medications that purportedly were administered to treat the HIV patients who attended the clinic. 9-22-07
Thursday, August 23, 2007
SIX INDICTED FOR HEALTH CARE FRAUD SCHEME IN SOUTHEAST TEXAS
(BEAUMONT, TX) United States Attorney John L. Ratcliffe announced today that six Southeast Texans have been indicted for health care fraud in the Eastern District of Texas.
The federal indictment was returned this week naming the following individuals:
BRIAN KEITH WILSON, 34, of Orange, Texas
JOSEPH DUANE ARMSTRONG, 58, of Orange, Texas
KENESAW LANDUS BERNSEN, JR., 56, of Beaumont, Texas
ARMANDO MARTINEZ CARMONA, 52, of Vidor, Texas
NICOLA JANE HOLTZMAN, 39, of Beaumont, Texas
JIMMIE ADAMS, 56, of Beaumont, Texas
According to information presented in court, from September 2004 until August 2005, Assessment Professionals, owned by Armstrong, submitted claims to Medicaid for individual and group therapeutic sessions allegedly conducted and provided to Medicaid-eligible adolescents for drug and alcohol abuse. Under the direction of manager, Wilson, parties were held in low income neighborhoods, complete with food and entertainment, where Wilson and employees of Assessment Professionals would obtain the Medicaid numbers of attendees. Those numbers were then used to fraudulently bill Medicaid for drug and alcohol counseling. Assessment Professionals billed Medicaid $3,500,972.93 and was paid $1,789,333.94. Wilson and Armstrong used this money, in part, to buy things for themselves, such as Rolex watches and cosmetic surgery.
In an effort to make the billing appear legitimate, Wilson had counselors, Adams, Carmona, Bernsen, and Holtzman create and sign progress notes for each patient. When the Texas Attorney General Medicaid Fraud Control Unit began an audit of Assessment Professionals, copies of these files were turned over to investigators.
All six defendants were indicted on 29 counts of health care fraud. Wilson, Adams, Carmona, Bernsen and Holtzman were indicted on one count of obstruction of a health care investigation. Wilson and Armstrong were indicted on two counts of money laundering.
If convicted, the defendants each face up to 10 years in federal prison for each count and a fine of up to $250,000.00, as well as restitution.
This case is being investigated by the Texas Attorney General’s Office and the Federal Bureau of Investigation and prosecuted by Special Assistant United States Attorney Christopher T. Tortorice.
The federal indictment was returned this week naming the following individuals:
BRIAN KEITH WILSON, 34, of Orange, Texas
JOSEPH DUANE ARMSTRONG, 58, of Orange, Texas
KENESAW LANDUS BERNSEN, JR., 56, of Beaumont, Texas
ARMANDO MARTINEZ CARMONA, 52, of Vidor, Texas
NICOLA JANE HOLTZMAN, 39, of Beaumont, Texas
JIMMIE ADAMS, 56, of Beaumont, Texas
According to information presented in court, from September 2004 until August 2005, Assessment Professionals, owned by Armstrong, submitted claims to Medicaid for individual and group therapeutic sessions allegedly conducted and provided to Medicaid-eligible adolescents for drug and alcohol abuse. Under the direction of manager, Wilson, parties were held in low income neighborhoods, complete with food and entertainment, where Wilson and employees of Assessment Professionals would obtain the Medicaid numbers of attendees. Those numbers were then used to fraudulently bill Medicaid for drug and alcohol counseling. Assessment Professionals billed Medicaid $3,500,972.93 and was paid $1,789,333.94. Wilson and Armstrong used this money, in part, to buy things for themselves, such as Rolex watches and cosmetic surgery.
In an effort to make the billing appear legitimate, Wilson had counselors, Adams, Carmona, Bernsen, and Holtzman create and sign progress notes for each patient. When the Texas Attorney General Medicaid Fraud Control Unit began an audit of Assessment Professionals, copies of these files were turned over to investigators.
All six defendants were indicted on 29 counts of health care fraud. Wilson, Adams, Carmona, Bernsen and Holtzman were indicted on one count of obstruction of a health care investigation. Wilson and Armstrong were indicted on two counts of money laundering.
If convicted, the defendants each face up to 10 years in federal prison for each count and a fine of up to $250,000.00, as well as restitution.
This case is being investigated by the Texas Attorney General’s Office and the Federal Bureau of Investigation and prosecuted by Special Assistant United States Attorney Christopher T. Tortorice.
PHYSICIAN SENTENCED TO PRISON FOR DEFRAUDING INSURANCE COMPANIES OF $10 MILLION
(HOUSTON) Dr. Ira Klein, a physician who specialized in treating Hepatitis C patients, has been sentenced to more than 11 years in federal prison, without parole, for health care and mail fraud, United States Attorney Don DeGabrielle announced today.
February 2006, Dr. Klein specialized in treating patients diagnosed with Hepatitis C and billed insurance companies for services he did not provide A federal jury convicted Dr. Ira Klein, 61, of Houston, Texas, in November 2006 of 18 counts of mail fraud and 26 counts of health care fraud in connection with a scheme to defraud various insurance companies of $10 million. Today, U. S. District Judge David Hittner sentenced Dr. Klein to 135 months in prison to be followed by a three-year term of supervised release. Klein was also ordered to pay $11,590,784 in restitution.
At this morning’s hearing, the Court found Dr. Klein had obstructed justice when he allegedly conspired with jailhouse inmates to murder the Assistant United States Attorney prosecuting the case, one of the Federal Bureau of Investigation Special Agents investigating the case and his wife. The court found that while in federal custody Klein met three inmates to discuss his plan. Later, Klein met with an individual and discussed the payment of $250,000 to kill his wife and the payment of an undetermined amount at a later date to kill the agent. Klein wired $250,000 from a bank account to the individual. What Dr. Klein did not know at the time was that the individual he discussed ad sent payment to was a federal undercover agent. Prior to pronouncing sentence, Judge Hittner noted that the state of Florida has a pending indictment against Klein accusing him of arson in an alleged attempted to murder his wife and that Klein could face possible federal charges for the alleged plot to murder the prosecuting AUSA and the FBI agent.
Indicted in February 2006, Dr. Klein specialized in treating patients diagnosed with Hepatitis C and billed insurance companies for services he did not provide to patients and misrepresented services that were actually provided. The fraudulent scheme involved ordering large quantities of medications used to treat Hepatitis C and providing medications to patients to self administer at home and then billing the insurance companies as if the injections had been administered by him or his staff in his office. Trial evidence proved Klein ordered Hepatitis C treatment kits containing both interferon and ribavirin at a cost of $695 each, but would unbundle the kit and submit claims to the insurance company for more than $3,840 for the components of the kits. The majority of the claims filed for services provided were for dates when patients were not in his office.
Klein also billed insurance companies for injecting his patients with the prescription drugs epoetin and neupogen during office visit, but again the evidence proved no office visit had occurred, and his patients were, in fact, self-administering those medications at home. Klein purchased epoetin at a cost of approximately $1,246 for 10 units of medication but in turn billed insurance companies $39,500 for the same 10 units. The Nuepogen was purchased at a cost of $1,885 for 10 units of medication, yet Dr. Klein billed insurance companies $32,700 for the same 10 units.
Former patients testified that when their insurance company refused to pay Klein the exorbitant fees, he cut off their treatment or told them to contact their respective insurance companies and demand that Dr. Klein be paid.
Patient files introduced during the trial showed Klein did not have doctors notes for the majority of the claims submitted for reimbursement. Moreover, where notes existed they uniformly documented the same blood pressure and pulse recorded for every patient -- 120/80 and 80 beats per minute – a virtual impossibility according to several physician’s who testified at the trial.
Representative from the Texas State Board of Medical Examiners and the Texas Board of Pharmacy testified Klein violated board rules and state law by acting as a pharmacy and ordering large quantities of prescription drugs that were available by prescription from a pharmacy. As a result of his fraudulent scheme, Klein billed insurance companies over $16 million and was paid $10 million. Today, U. S. District Judge David Hittner, who presided over the three-week trial in November 2006, also entered a final order directing Dr. Klein forfeit $10 million to the United States.
February 2006, Dr. Klein specialized in treating patients diagnosed with Hepatitis C and billed insurance companies for services he did not provide A federal jury convicted Dr. Ira Klein, 61, of Houston, Texas, in November 2006 of 18 counts of mail fraud and 26 counts of health care fraud in connection with a scheme to defraud various insurance companies of $10 million. Today, U. S. District Judge David Hittner sentenced Dr. Klein to 135 months in prison to be followed by a three-year term of supervised release. Klein was also ordered to pay $11,590,784 in restitution.
At this morning’s hearing, the Court found Dr. Klein had obstructed justice when he allegedly conspired with jailhouse inmates to murder the Assistant United States Attorney prosecuting the case, one of the Federal Bureau of Investigation Special Agents investigating the case and his wife. The court found that while in federal custody Klein met three inmates to discuss his plan. Later, Klein met with an individual and discussed the payment of $250,000 to kill his wife and the payment of an undetermined amount at a later date to kill the agent. Klein wired $250,000 from a bank account to the individual. What Dr. Klein did not know at the time was that the individual he discussed ad sent payment to was a federal undercover agent. Prior to pronouncing sentence, Judge Hittner noted that the state of Florida has a pending indictment against Klein accusing him of arson in an alleged attempted to murder his wife and that Klein could face possible federal charges for the alleged plot to murder the prosecuting AUSA and the FBI agent.
Indicted in February 2006, Dr. Klein specialized in treating patients diagnosed with Hepatitis C and billed insurance companies for services he did not provide to patients and misrepresented services that were actually provided. The fraudulent scheme involved ordering large quantities of medications used to treat Hepatitis C and providing medications to patients to self administer at home and then billing the insurance companies as if the injections had been administered by him or his staff in his office. Trial evidence proved Klein ordered Hepatitis C treatment kits containing both interferon and ribavirin at a cost of $695 each, but would unbundle the kit and submit claims to the insurance company for more than $3,840 for the components of the kits. The majority of the claims filed for services provided were for dates when patients were not in his office.
Klein also billed insurance companies for injecting his patients with the prescription drugs epoetin and neupogen during office visit, but again the evidence proved no office visit had occurred, and his patients were, in fact, self-administering those medications at home. Klein purchased epoetin at a cost of approximately $1,246 for 10 units of medication but in turn billed insurance companies $39,500 for the same 10 units. The Nuepogen was purchased at a cost of $1,885 for 10 units of medication, yet Dr. Klein billed insurance companies $32,700 for the same 10 units.
Former patients testified that when their insurance company refused to pay Klein the exorbitant fees, he cut off their treatment or told them to contact their respective insurance companies and demand that Dr. Klein be paid.
Patient files introduced during the trial showed Klein did not have doctors notes for the majority of the claims submitted for reimbursement. Moreover, where notes existed they uniformly documented the same blood pressure and pulse recorded for every patient -- 120/80 and 80 beats per minute – a virtual impossibility according to several physician’s who testified at the trial.
Representative from the Texas State Board of Medical Examiners and the Texas Board of Pharmacy testified Klein violated board rules and state law by acting as a pharmacy and ordering large quantities of prescription drugs that were available by prescription from a pharmacy. As a result of his fraudulent scheme, Klein billed insurance companies over $16 million and was paid $10 million. Today, U. S. District Judge David Hittner, who presided over the three-week trial in November 2006, also entered a final order directing Dr. Klein forfeit $10 million to the United States.
Couple gets 7 years for fraud
A Wichita couple who ran a drug and alcohol abuse counseling center were sentenced Friday to more than seven years in federal prison for their roles in a health-care fraud case.
Peggy Franklin-El, 50, and her husband, Johnnie Franklin-El, 53, were sentenced to 92 months in prison each by U.S. District Judge Monti Belot, who ordered them to pay $1.24 million in restitution.
In March, federal jurors found the Franklin-Els guilty of making more than $1.24 million in false claims to Medicaid.
The couple operated The Great Meeting Is On For Your Success Inc. at 1015 E. Ninth St. in Wichita. According to the indictment, the couple defrauded Medicaid by submitting false claims for services that were not provided.
The claims named 67 Medicaid beneficiaries who were supposed to have received services.
Among the claims:
** For treatment reportedly provided to infants and children 12 and younger. In one case, the beneficiary was 36 days old.
** For beneficiaries who had no history of drug or alcohol use and had not been diagnosed as needing community-based drug and alcohol abuse services.
** For services not authorized before claims were submitted and for which they could not bill Medicaid, such as tutoring, anger management counseling, transportation, feeding and baby-sitting.
** For services not documented and for which required assessment tools were not completed.
The couple started the drug and alcohol treatment center, frequently referred to as Success Inc., in the early 1990s. They were credited for helping diminish the drug problem in an area once known as 'crack alley.'
Their work didn't go unrecognized.
For example, in 1994, Peggy Franklin-El was the recipient of the Intrust Bank First Citizen award, for which she received a $6,000 check for Success Inc.
But U.S. Attorney Eric Melgren said in a statement that the couple 'preyed on a community of economically deprived, vulnerable individuals who were lured into giving the defendants their Medicaid numbers, without which the fraud could not have been successful.'
Peggy Franklin-El was convicted on 52 counts of Medicaid fraud and one count of obstruction of justice. Johnnie Franklin-El was convicted on 17 counts of Medicaid fraud and one count of obstruction of justice.
Copyright © 2007 The Wichita Eagle, All Rights Reserved.
Peggy Franklin-El, 50, and her husband, Johnnie Franklin-El, 53, were sentenced to 92 months in prison each by U.S. District Judge Monti Belot, who ordered them to pay $1.24 million in restitution.
In March, federal jurors found the Franklin-Els guilty of making more than $1.24 million in false claims to Medicaid.
The couple operated The Great Meeting Is On For Your Success Inc. at 1015 E. Ninth St. in Wichita. According to the indictment, the couple defrauded Medicaid by submitting false claims for services that were not provided.
The claims named 67 Medicaid beneficiaries who were supposed to have received services.
Among the claims:
** For treatment reportedly provided to infants and children 12 and younger. In one case, the beneficiary was 36 days old.
** For beneficiaries who had no history of drug or alcohol use and had not been diagnosed as needing community-based drug and alcohol abuse services.
** For services not authorized before claims were submitted and for which they could not bill Medicaid, such as tutoring, anger management counseling, transportation, feeding and baby-sitting.
** For services not documented and for which required assessment tools were not completed.
The couple started the drug and alcohol treatment center, frequently referred to as Success Inc., in the early 1990s. They were credited for helping diminish the drug problem in an area once known as 'crack alley.'
Their work didn't go unrecognized.
For example, in 1994, Peggy Franklin-El was the recipient of the Intrust Bank First Citizen award, for which she received a $6,000 check for Success Inc.
But U.S. Attorney Eric Melgren said in a statement that the couple 'preyed on a community of economically deprived, vulnerable individuals who were lured into giving the defendants their Medicaid numbers, without which the fraud could not have been successful.'
Peggy Franklin-El was convicted on 52 counts of Medicaid fraud and one count of obstruction of justice. Johnnie Franklin-El was convicted on 17 counts of Medicaid fraud and one count of obstruction of justice.
Copyright © 2007 The Wichita Eagle, All Rights Reserved.
TEXAS Judge Lynn Hughes awarded $391,000 to an Oklahoma attorney
Judge Lynn Hughes awarded $391,000 to an Oklahoma attorney to cover part of his defense costs after being wrongly prosecuted on 54 counts of health insurance fraud. The court criticized prosecutors for misleading the grand jury and a "reckless disregard for the truth." Again, the government will appeal. (AP/Tulsa World, "U.S. ordered to pay OKC attorney", Aug. 13).
Medicaid Fraud Recovery Announced by Missouri Attorney General. Medicaid Fraud Investigation Into Fraudulent Pharmacy Billings
Posted On: August 13, 2007 by Finch McCranie, LLP
Whistleblower Lawyer Update: Medicaid Fraud Investigation Into Fraudulent Pharmacy Billings Produces Recovery in Missouri
Medicaid Fraud Recovery Announced by Missouri Attorney General
False and fraudulent billings were uncovered in a Missouri Medicaid fraud investigation that has produced a recovery by the Missouri Attorney General's Office's Medicaid Fraud Control Unit. Billings like this typically violate the False Claims Act or the various state False Claims Acts.
Prescriptions that had not been authorized by physicians were submitted and paid for by the Medicaid program. Once the suspicious activity was reported, the Attorney General's Office's investigation followed and produced a recovery of $462,926 from apparently a single pharmacy in DeKalb County, Missouri, the Randolph Drug Store in Maysville.
The Attorney General's press release does not make clear whether a whistleblower other than the owner of the pharmacy was involved in reporting this health care fraud. We commend the Missouri Attorney General and the Medicaid Fraud Control Unit on their successful effort to stop fraud against taxpayers.
Whistleblower Lawyer Update: Medicaid Fraud Investigation Into Fraudulent Pharmacy Billings Produces Recovery in Missouri
Medicaid Fraud Recovery Announced by Missouri Attorney General
False and fraudulent billings were uncovered in a Missouri Medicaid fraud investigation that has produced a recovery by the Missouri Attorney General's Office's Medicaid Fraud Control Unit. Billings like this typically violate the False Claims Act or the various state False Claims Acts.
Prescriptions that had not been authorized by physicians were submitted and paid for by the Medicaid program. Once the suspicious activity was reported, the Attorney General's Office's investigation followed and produced a recovery of $462,926 from apparently a single pharmacy in DeKalb County, Missouri, the Randolph Drug Store in Maysville.
The Attorney General's press release does not make clear whether a whistleblower other than the owner of the pharmacy was involved in reporting this health care fraud. We commend the Missouri Attorney General and the Medicaid Fraud Control Unit on their successful effort to stop fraud against taxpayers.
Physician turned the tables on the government & won nearly $300,000 in legal fees
Sunday, August 12, 2007
Judge rules criminal fraud case against Idaho doctor is frivolous ...
In a rare victory, a physician turned the tables on the government and won nearly $300,000 in legal fees for what a Nevada federal trial judge found to be a frivolous health care fraud case.
Judge rules criminal fraud case against Idaho doctor is frivolous ...
In a rare victory, a physician turned the tables on the government and won nearly $300,000 in legal fees for what a Nevada federal trial judge found to be a frivolous health care fraud case.
Where is DOJ....oh, here they are...U.S. Attorney's Office for the District of Nevada declined to comment
GOVERNMENT & MEDICINE
Judge rules criminal fraud case against Idaho doctor is frivolous
A federal judge found the government's case to be without merit. The Nevada U.S. Attorney's Office is pursuing an appeal.
By Amy Lynn Sorrel, AMNews staff. Aug. 20, 2007.
--------------------------------------------------------------------------------
In a rare victory, a physician turned the tables on the government and won nearly $300,000 in legal fees for what a Nevada federal trial judge found to be a frivolous health care fraud case.
The Justice Dept. accused otolaryngologist Mark Capener, MD, now in Idaho Falls, Idaho, of billing for endoscopic sinus surgeries that investigators alleged either were unnecessary or never performed, and of upcoding. Authorities accused the doctor of defrauding eight private health insurers, Medicare and Medicaid through his billing practices.
But the U.S. District Court for the District of Nevada in June found that the government's case "lacked merit" because its main expert witnesses presented testimony at trial that was contradicted by another expert it interviewed beforehand.
"Either the government consciously decided to proffer a theory it knew was false, or it failed to conduct any investigation or inquiry to confirm whether [the principal expert's] contentions ... [were] in fact accurate," U.S. District Judge Robert C. Jones wrote.
The U.S. Attorney's Office for the District of Nevada declined to comment on the ruling. Government officials in July appealed the decision to the 9th U.S. Circuit Court of Appeals.
If the ruling sticks, it could offer some hope for physicians who are caught in similar circumstances and shine the light on the government's often aggressive tactics in health care fraud cases, some experts said.
Doctors often are forced to settle such cases, even when they did nothing wrong, because the financial stakes are so high, said Robert S. Salcido, a Washington, D.C.-based attorney for Akin Gump Strauss Hauer & Feld LLP and a former Justice Dept. civil fraud lawyer. Sometimes doctors also face significant jail time.
The decision could prove to be significant because "even though a lot of cases are similar to this in that the government doesn't always engage in adequate pre-suit investigation, rarely is the government's conduct challenged," he said.
James R. Tate, Dr. Capener's attorney, said the doctor did nothing wrong -- which is why he decided to fight back. "He spent a lot of time and money to defend himself in a case that never should have been brought in the first place," Tate said.
The federal investigation into Dr. Capener's billing practices began in 2002 after authorities learned of several "red flags" that showed up in an independent audit of Dr. Capener's claims by a local health plan, court documents show. The review concluded that there was "huge discrepancy" in the number of sinus surgeries that Dr. Capener billed for in Elko, Nev., a town with a population of 40,000 when compared with the rest of the state, according to the government's brief.
A trial court in 2006 dismissed more than half of the fraud claims, and a jury came up with a "not guilty" verdict on the remaining counts.
Witnesses at odds
At trial, the government's main expert, also an otolaryngologist, had testified that Dr. Capener's pathology slides showed no bone fragments, a necessary condition to justify the sinus procedures at issue. Therefore, the expert concluded that Dr. Capener did not perform the surgeries for which he billed. Nor could he have completed that many surgeries within the time limits shown in his claims, according to the expert.
But a defense expert witness, a pathologist, testified and presented contradicting evidence that all of Dr. Capener's records showed bone fragments. The government interviewed the pathologist before trial but did not present his findings when making its case.
In addition, the government failed to share with Dr. Capener the evidence it had to support its argument, the judge said. "Taken together, these facts indicate that the government had reason to believe their lack of bone theory was without support."
The court awarded Dr. Capener $175,000 for expert witness expenses, and $104,000 in attorneys' fees. Still, that represents only a portion of the more than $1 million it cost the doctor to defend the case, Tate said.
Dr. Capener sued federal investigators for legal fees under the Hyde Amendment, which allows individuals to recoup litigation expenses when they prevail in federal criminal cases that a court finds to be frivolous or pursued in bad faith. But that is a difficult standard to prove, Tate warned.
Jeffrey S. Parker, a criminal law professor at George Mason University School of Law in Arlington, Va., said cases like the one against Dr. Capener -- prosecuted under a general 1996 health care fraud statute -- are not unusual. The statute sets a standard for criminal violations that requires the government to show that the doctor acted deliberately.
Instead, in many cases, "[the government] is just looking at CPT code usage and anybody out on the tail of the distribution is targeted for criminal prosecution," Parker said. "And that's not the same thing as intentional wrongdoing." If found guilty, doctors could face 10 years in prison, noted Parker, who assisted in Dr. Capener's suit.
Tate said that although Dr. Capener may have done more surgeries than what might be considered "normal" among other doctors, he did what was best for his patients.
Though it is difficult to prevent an unwarranted investigation, Parker recommended that doctors at least use a coding expert to help them accurately file claims and track their billing patterns.
Judge rules criminal fraud case against Idaho doctor is frivolous
A federal judge found the government's case to be without merit. The Nevada U.S. Attorney's Office is pursuing an appeal.
By Amy Lynn Sorrel, AMNews staff. Aug. 20, 2007.
--------------------------------------------------------------------------------
In a rare victory, a physician turned the tables on the government and won nearly $300,000 in legal fees for what a Nevada federal trial judge found to be a frivolous health care fraud case.
The Justice Dept. accused otolaryngologist Mark Capener, MD, now in Idaho Falls, Idaho, of billing for endoscopic sinus surgeries that investigators alleged either were unnecessary or never performed, and of upcoding. Authorities accused the doctor of defrauding eight private health insurers, Medicare and Medicaid through his billing practices.
But the U.S. District Court for the District of Nevada in June found that the government's case "lacked merit" because its main expert witnesses presented testimony at trial that was contradicted by another expert it interviewed beforehand.
"Either the government consciously decided to proffer a theory it knew was false, or it failed to conduct any investigation or inquiry to confirm whether [the principal expert's] contentions ... [were] in fact accurate," U.S. District Judge Robert C. Jones wrote.
The U.S. Attorney's Office for the District of Nevada declined to comment on the ruling. Government officials in July appealed the decision to the 9th U.S. Circuit Court of Appeals.
If the ruling sticks, it could offer some hope for physicians who are caught in similar circumstances and shine the light on the government's often aggressive tactics in health care fraud cases, some experts said.
Doctors often are forced to settle such cases, even when they did nothing wrong, because the financial stakes are so high, said Robert S. Salcido, a Washington, D.C.-based attorney for Akin Gump Strauss Hauer & Feld LLP and a former Justice Dept. civil fraud lawyer. Sometimes doctors also face significant jail time.
The decision could prove to be significant because "even though a lot of cases are similar to this in that the government doesn't always engage in adequate pre-suit investigation, rarely is the government's conduct challenged," he said.
James R. Tate, Dr. Capener's attorney, said the doctor did nothing wrong -- which is why he decided to fight back. "He spent a lot of time and money to defend himself in a case that never should have been brought in the first place," Tate said.
The federal investigation into Dr. Capener's billing practices began in 2002 after authorities learned of several "red flags" that showed up in an independent audit of Dr. Capener's claims by a local health plan, court documents show. The review concluded that there was "huge discrepancy" in the number of sinus surgeries that Dr. Capener billed for in Elko, Nev., a town with a population of 40,000 when compared with the rest of the state, according to the government's brief.
A trial court in 2006 dismissed more than half of the fraud claims, and a jury came up with a "not guilty" verdict on the remaining counts.
Witnesses at odds
At trial, the government's main expert, also an otolaryngologist, had testified that Dr. Capener's pathology slides showed no bone fragments, a necessary condition to justify the sinus procedures at issue. Therefore, the expert concluded that Dr. Capener did not perform the surgeries for which he billed. Nor could he have completed that many surgeries within the time limits shown in his claims, according to the expert.
But a defense expert witness, a pathologist, testified and presented contradicting evidence that all of Dr. Capener's records showed bone fragments. The government interviewed the pathologist before trial but did not present his findings when making its case.
In addition, the government failed to share with Dr. Capener the evidence it had to support its argument, the judge said. "Taken together, these facts indicate that the government had reason to believe their lack of bone theory was without support."
The court awarded Dr. Capener $175,000 for expert witness expenses, and $104,000 in attorneys' fees. Still, that represents only a portion of the more than $1 million it cost the doctor to defend the case, Tate said.
Dr. Capener sued federal investigators for legal fees under the Hyde Amendment, which allows individuals to recoup litigation expenses when they prevail in federal criminal cases that a court finds to be frivolous or pursued in bad faith. But that is a difficult standard to prove, Tate warned.
Jeffrey S. Parker, a criminal law professor at George Mason University School of Law in Arlington, Va., said cases like the one against Dr. Capener -- prosecuted under a general 1996 health care fraud statute -- are not unusual. The statute sets a standard for criminal violations that requires the government to show that the doctor acted deliberately.
Instead, in many cases, "[the government] is just looking at CPT code usage and anybody out on the tail of the distribution is targeted for criminal prosecution," Parker said. "And that's not the same thing as intentional wrongdoing." If found guilty, doctors could face 10 years in prison, noted Parker, who assisted in Dr. Capener's suit.
Tate said that although Dr. Capener may have done more surgeries than what might be considered "normal" among other doctors, he did what was best for his patients.
Though it is difficult to prevent an unwarranted investigation, Parker recommended that doctors at least use a coding expert to help them accurately file claims and track their billing patterns.
In New York City, Medicaid spending on home health care aides totaled $1.3 billion last year.
Can you imagine what is going on in the rest of OUR country?
Cuomo, Investigating Medicaid Fraud, Issues Subpoenas to 59 Home Care Agencies
August 21, 2007
NICHOLAS CONFESSORE
ALBANY, Aug. 20 - Attorney General Andrew M. Cuomo issued subpoenas on Monday to dozens of agencies that provide home health care aides to Medicaid patients in the New York City area, saying preliminary evidence suggested that the home aide industry was rife with fraud.
Fifty-nine such agencies were sent the subpoenas, representing nearly all of those operating in the metropolitan region. The subpoenas mark the latest stage of a two-year investigation into the industry, begun under Mr. Cuomo's predecessor, Gov. Eliot Spitzer. That investigation has until now focused primarily on schools that train and certify the aides, and on vendors who contract the aides' services out to the agencies.
Mr. Cuomo's investigators are now seeking to verify the qualifications of aides for whose services the agencies billed Medicaid, as well as the schedules for the hours they billed and the names of the vendor companies that supplied their services.
"We're finding increasingly that home health care seems to offer crooks many opportunities to exploit loopholes and oversights in the regulations," Mr. Cuomo said in a news release. "The early stages of our investigation showed us where to look and gave us an idea of what we'd find. We continue to press deeper into the corruption plaguing the home health care industry, and will continue to prosecute wrongdoers at all levels of these criminal operations."
Several of the agencies named in the subpoenas, including Excellent Home Care Services, Girling Health Care of New York, and Personal Touch Home Aides of New York, did not respond to calls seeking comment. A spokeswoman for another, Revival Home Health Care, said that the agency had not received a subpoena.
Aides to Mr. Cuomo said the investigation had already found evidence of significant fraud among the training schools and the roughly 1,000 vendor companies that link the schools' graduates with the agencies. That part of the investigation began with tips from three anonymous sources about two vendors based in New York City. Based on those tips, law enforcement officials arrested managers, nurses and more than 20 health aides associated with one of the vendors, Borina Home Care Inc., on criminal and civil charges last December.
That and subsequent investigations uncovered a variety of abuses, a Cuomo aide said. Some of the training schools sold home health aide certification to individuals with no training. Under state law, home health aides must go through 75 hours of training at a school and 16 hours of practical training with a registered nurse. Some aides received no-show jobs but later caused Medicaid to be billed for their services. One vendor hired marketers to identify individuals who would qualify for home health services paid by Medicaid, the aide said, and then split any Medicaid billings for those individuals with the marketer.
It was unclear on Monday whether the investigation had unearthed any cases in which patients were harmed as a result of the fraud, but the Cuomo aide said investigators believed the potential for such harm was high. Aspects of the investigation were reported in The New York Post on Monday.
The Cuomo aide declined to name other vendors and schools under Mr. Cuomo's microscope, saying it might compromise investigations that were at various stages. The attorney general's office expects to recover as much as $100 million in fraudulent Medicaid billing when the investigation is concluded, the aide said.
Under an agreement reached with federal officials in 2006, New York must recover $1.6 billion worth of fraudulent Medicaid dollars over five years to help qualify for hundreds of millions of dollars in federal financing.
The president of the Home Care Association of New York State, a trade association for the agencies and the vendors who supply them with home aides, said that the association supported Mr. Cuomo's efforts to uncover fraud but that there was a danger that investigators would "inadvertently characterize nonfraudulent activities as fraud."
"Last year's budget deal certainly has put incredible pressure on the state to recover Medicaid dollars under the auspices of fraud," said the association's president, Joanne Cunningham.
Home health care is a fast-growing segment of the health care industry, as federal and state officials seek to reduce health spending by providing care to elderly patients in their own homes rather than at institutions. In New York City, Medicaid spending on home health care aides totaled $1.3 billion last year. About 54,000 city residents receive some sort of Medicaid-financed home health services, from help getting dressed in the morning to dressing wounds and other kinds of care.
The agencies and their vendors are certified by the state's Department of Health, which also certifies the schools that train aides. But the schools themselves certify the aides as having completed the required training. Because there is no central registry for those certifications, state officials do not know how many home health aides are working in the state at any given time.
Cuomo, Investigating Medicaid Fraud, Issues Subpoenas to 59 Home Care Agencies
August 21, 2007
NICHOLAS CONFESSORE
ALBANY, Aug. 20 - Attorney General Andrew M. Cuomo issued subpoenas on Monday to dozens of agencies that provide home health care aides to Medicaid patients in the New York City area, saying preliminary evidence suggested that the home aide industry was rife with fraud.
Fifty-nine such agencies were sent the subpoenas, representing nearly all of those operating in the metropolitan region. The subpoenas mark the latest stage of a two-year investigation into the industry, begun under Mr. Cuomo's predecessor, Gov. Eliot Spitzer. That investigation has until now focused primarily on schools that train and certify the aides, and on vendors who contract the aides' services out to the agencies.
Mr. Cuomo's investigators are now seeking to verify the qualifications of aides for whose services the agencies billed Medicaid, as well as the schedules for the hours they billed and the names of the vendor companies that supplied their services.
"We're finding increasingly that home health care seems to offer crooks many opportunities to exploit loopholes and oversights in the regulations," Mr. Cuomo said in a news release. "The early stages of our investigation showed us where to look and gave us an idea of what we'd find. We continue to press deeper into the corruption plaguing the home health care industry, and will continue to prosecute wrongdoers at all levels of these criminal operations."
Several of the agencies named in the subpoenas, including Excellent Home Care Services, Girling Health Care of New York, and Personal Touch Home Aides of New York, did not respond to calls seeking comment. A spokeswoman for another, Revival Home Health Care, said that the agency had not received a subpoena.
Aides to Mr. Cuomo said the investigation had already found evidence of significant fraud among the training schools and the roughly 1,000 vendor companies that link the schools' graduates with the agencies. That part of the investigation began with tips from three anonymous sources about two vendors based in New York City. Based on those tips, law enforcement officials arrested managers, nurses and more than 20 health aides associated with one of the vendors, Borina Home Care Inc., on criminal and civil charges last December.
That and subsequent investigations uncovered a variety of abuses, a Cuomo aide said. Some of the training schools sold home health aide certification to individuals with no training. Under state law, home health aides must go through 75 hours of training at a school and 16 hours of practical training with a registered nurse. Some aides received no-show jobs but later caused Medicaid to be billed for their services. One vendor hired marketers to identify individuals who would qualify for home health services paid by Medicaid, the aide said, and then split any Medicaid billings for those individuals with the marketer.
It was unclear on Monday whether the investigation had unearthed any cases in which patients were harmed as a result of the fraud, but the Cuomo aide said investigators believed the potential for such harm was high. Aspects of the investigation were reported in The New York Post on Monday.
The Cuomo aide declined to name other vendors and schools under Mr. Cuomo's microscope, saying it might compromise investigations that were at various stages. The attorney general's office expects to recover as much as $100 million in fraudulent Medicaid billing when the investigation is concluded, the aide said.
Under an agreement reached with federal officials in 2006, New York must recover $1.6 billion worth of fraudulent Medicaid dollars over five years to help qualify for hundreds of millions of dollars in federal financing.
The president of the Home Care Association of New York State, a trade association for the agencies and the vendors who supply them with home aides, said that the association supported Mr. Cuomo's efforts to uncover fraud but that there was a danger that investigators would "inadvertently characterize nonfraudulent activities as fraud."
"Last year's budget deal certainly has put incredible pressure on the state to recover Medicaid dollars under the auspices of fraud," said the association's president, Joanne Cunningham.
Home health care is a fast-growing segment of the health care industry, as federal and state officials seek to reduce health spending by providing care to elderly patients in their own homes rather than at institutions. In New York City, Medicaid spending on home health care aides totaled $1.3 billion last year. About 54,000 city residents receive some sort of Medicaid-financed home health services, from help getting dressed in the morning to dressing wounds and other kinds of care.
The agencies and their vendors are certified by the state's Department of Health, which also certifies the schools that train aides. But the schools themselves certify the aides as having completed the required training. Because there is no central registry for those certifications, state officials do not know how many home health aides are working in the state at any given time.
The Blue Cross and Blue Shield Association Press Room
Thursday, August 16, 2007
FBI’s “Top Ten Stories
Interesting, then, how the FBI’s “Top Ten Stories For the Week Ending August 10, 2007,” places the “number one domestic terrorist threat” at… number two. Second to a health care fraud case.
1. Houston: Six Indicted for Health Care Fraud in Southeast Texas
Assessment Professionals submitted claims in the amount of $3,500,972.93 to Medicaid from September 2004 until August 2005 for individual and group therapeutic sessions to Medicaid-eligible adolescents for drug and alcohol abuse. Parties, complete with food and entertainment, were held in low-income neighborhoods and employees of Assessment Professionals would obtain the Medicaid numbers of the attendees. Progress notes were created and signed for each patient in order to make the billings appear legitimate. Full Story
1. Houston: Six Indicted for Health Care Fraud in Southeast Texas
Assessment Professionals submitted claims in the amount of $3,500,972.93 to Medicaid from September 2004 until August 2005 for individual and group therapeutic sessions to Medicaid-eligible adolescents for drug and alcohol abuse. Parties, complete with food and entertainment, were held in low-income neighborhoods and employees of Assessment Professionals would obtain the Medicaid numbers of the attendees. Progress notes were created and signed for each patient in order to make the billings appear legitimate. Full Story
Friday, August 10, 2007
Lobbying-HEALTH CARE IN AMERICA
From the 4 p.m. ET hour of the August 8 edition of CNN's The Situation Room:
CAROL COSTELLO (guest host): A big issue in the presidential race right now also has been a big concern on Capitol Hill. As we have reported, Democratic rivals are accusing Hillary Clinton of being too cozy with lobbyists. Congress has passed new lobbying reform legislation. Our congressional correspondent Jessica Yellin is here. Jessica, is this attempt at reform actually going to make a difference?
YELLIN: Well, Carol, reasonable people disagree. Democrats say it's intended to clean up the culture of corruption in Washington, but it's certainly not going to keep money out of politics.
[begin video clip]
YELLIN: Dave Hoppe is president of one of Washington's elite lobbying firms.
Are you part of the problem with American politics?
J. DAVID HOPPE (Quinn Gillespie and Associates president): I don't think so. What lobbyists do is provide information.
YELLIN: Hoppe worked for decades as a Republican aide on Capitol Hill. He says the ethics and lobbying bill is not going to send tremors through the halls of Congress.
HOPPE: The job we do is not going to change fundamentally because of this.
YELLIN: The bill was pushed by Democratic leadership in response to scandals involving Jack Abramoff and Congressmen Duke Cunningham and Bob Ney, and outrage over figures like this: $1 billion -- that's how much the health care industry spent lobbying the year of the Medicare debate.
.........
CAROL COSTELLO (guest host): A big issue in the presidential race right now also has been a big concern on Capitol Hill. As we have reported, Democratic rivals are accusing Hillary Clinton of being too cozy with lobbyists. Congress has passed new lobbying reform legislation. Our congressional correspondent Jessica Yellin is here. Jessica, is this attempt at reform actually going to make a difference?
YELLIN: Well, Carol, reasonable people disagree. Democrats say it's intended to clean up the culture of corruption in Washington, but it's certainly not going to keep money out of politics.
[begin video clip]
YELLIN: Dave Hoppe is president of one of Washington's elite lobbying firms.
Are you part of the problem with American politics?
J. DAVID HOPPE (Quinn Gillespie and Associates president): I don't think so. What lobbyists do is provide information.
YELLIN: Hoppe worked for decades as a Republican aide on Capitol Hill. He says the ethics and lobbying bill is not going to send tremors through the halls of Congress.
HOPPE: The job we do is not going to change fundamentally because of this.
YELLIN: The bill was pushed by Democratic leadership in response to scandals involving Jack Abramoff and Congressmen Duke Cunningham and Bob Ney, and outrage over figures like this: $1 billion -- that's how much the health care industry spent lobbying the year of the Medicare debate.
.........
Thursday, August 9, 2007
Amedisys NCFE COURT OF APPEALS LOUISIANA
File Name: 05a0388p.06UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT_________________In re: NATIONAL CENTURY FINANCIAL ENTERPRISES,INC.,Debtor.__________________________________________AMEDISYS, INC., et al.,Appellants,v.NATIONAL CENTURY FINANCIAL ENTERPRISES, INC.,Appellee.X---->,----------NNo. 04-3365Appeal from the United States District Courtfor the Southern District of Ohio at Columbus.No. 03-00947—James L. Graham, District Judge.Argued: June 1, 2005Decided and Filed: September 13, 2005 Before: MARTIN and ROGERS, Circuit Judges; FORESTER, District Judge.*_________________COUNSELARGUED: Stephen E. Chiccarelli, BREAZEALE, SACHSE & WILSON, Baton Rouge, Louisiana,for Appellants. Matthew A. Kairis, JONES DAY, Columbus, Ohio, for Appellee. ON BRIEF:Daniel A. DeMarco, HAHN, LOESER & PARKS, Cleveland, Ohio, Marc J. Kessler, HAHN,LOESER & PARKS, Columbus, Ohio, for Appellants. Matthew A. Kairis, Chad A. Readler, RyanD. Walters, JONES DAY, Columbus, Ohio, for Appellee.1
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 21The related entities are Amedisys Home Health, Inc. of Alabama; Clinical Arts Home Care Services, Inc.;Central Home Health Care; Togaloo Home Health Agency; North Georgia Home Health Agency; Coosa Valley HomeHealth; Amedisys Home Health, Inc. of Louisiana; Amedisys Home Health, Inc. of North Carolina; Amedisys HomeHealth, Inc. of Oklahoma; Amedisys HomeHealth, Inc. of Tennessee; Amedisys HomeHealth, Inc. of Virginia; SuperiorHome Health Care; Amedisys Northwest Home Health, Inc.; Northwest Home Health; Amedisys Specialized MedicalServices, Inc.; Precision / Amedisys Specialized Medical Services; Amedisys Alternate-Site Infusion Therapy Services,Inc.; Home Health of Alexandria, Inc.; Cornerstone Home Health; Quality Home Health Care, Inc.; PRN, Inc. d/b/aAmedisys Alternate-Site Infusion Therapy Services; and Amedisys Surgery Centers, L.C._________________OPINION_________________ROGERS, Circuit Judge. Amedisys, Inc., and its related entities1appeal an order enforcingthe automatic stay in bankruptcy, 11 U.S.C. § 362(a), against a civil action in which Amedisys isthe plaintiff. National Century Financial Enterprises, Inc. (“NCFE”), the debtor, before itsbankruptcy, supplied financing to the health care industry. NCFE bought accounts receivable fromhospitals and other health care providers. The arrangement shortened the providers’ waiting periodfor payment by insurance companies, Medicare, andMedicaid. Amedisysisa Louisiana corporationsupplying home nursing services. Amedisys participated in a financing plan sponsored by one ofNCFE’s subsidiaries. NCFE and its subsidiaries, including National Premier Financial Services(“NPFS”), NPF VI, and NPF XII (collectively, “the NCFE entities”), filed for Chapter 11bankruptcy in November 2002. In February 2003, Amedisys sued JP Morgan Chase ManhattanBank (“JP Morgan”) in Louisiana, seeking to recover about $7.3 million in accounts receivable heldin a JP Morgan collection account in the name of NPF VI. Upon NCFE’s motion, the bankruptcycourt applied the automatic stay in bankruptcy, 11 U.S.C. § 362(a), to the Louisiana action. Amedisys appealed this decision; the district court affirmed. Because the Louisiana action is an “actto obtain possession of property of the [bankruptcy] estate,” 11 U.S.C. § 362(a)(3), we affirm thebankruptcy court’s and district court’s conclusions that the automatic stay applies.I.The appeal hinges on the questions of (1) whether Amedisys, through the Louisiana action,seeks to obtain possession of accounts receivable funds that NPF VI, an NCFE entity, held in a JPMorgan account; and (2) whether in fact these accounts receivable constitute property of thebankruptcy estate. NCFE is an Ohio Corporation which, until its bankruptcy, was, along with itssubsidiaries, the country’s largest provider of healthcare accounts receivable financing. JA 556.The district court fully described the contractual relationship between Amedisys and the NCFEentities:Amedisys, Inc., and its corporate subsidiaries provide home nursing servicesthroughout the southeastern United States. Amedisys participated in a fundingprogram operated by [NCFE], a company that finances health care providers bypurchasing . . . their accounts receivable at a discount. NCFE purchased thereceivables with funds raised through selling notes that were backed by thereceivables themselves.NCFE created numerous wholly-owned subsidiaries, known as “programs,”for the purpose of issuing notes that were secured by pools of receivables and othercollateral. The two largest such programs were NPF VI, administered by JP MorganChase Bank as indenture trustee, and NPF XII, administered by Bank One, N.A. asindenture trustee. Under the sale and subservice agreements into which NCFEprograms and health care providers entered, receivables would be remitted directly
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 3into lockbox accounts and the NCFE program would advance funds to the provideron a weekly basis in payment of the receivables.Amedysis participated in the NPF VI program, and its accounts receivablewent into lockbox accounts at Huntington National Bank. The lockbox accountswere in the name of [NPFS]—an NCFE entity—and Amedisys or one of itssubsidiaries. Those funds were then swept into a Collection Account at JP Morganin the name of NPF VI. Though accounts receivable went into the CollectionAccount, NPF VI did not purchase every account receivable it collected. Section 6.1of the Sale and Subservice Agreement provided:The Purchaser and the Seller acknowledge that certain amountsdeposited in the Collection Account may relate to Receivables otherthan Purchased Receivables and that such amounts continue to beowned by the Seller. All such amounts shall be returned to the Sellerin accordance with Section 6.3.The amounts in the Collection Account representing receivables that NPF VI did notpurchase were called “overage funds.” The Trustee (JP Morgan) was supposed totransfer such funds to Amedisys on NPFS’s instruction. Amedisys states that itnormally would receive electronic notice of the amount of any overage funds onTuesdays. In late October 2002, Amedisys became concerned after hearing reports thatNCFE was experiencing financial difficulties. On the final Thursday of the month,Amedisys did not receive the overage funds it expected NPF VI would transfer to it.On November 6, 2002, the Chief Financial Officer of Amedisys performed anaccounting and determined that NPF VI owedAmedisysapproximately $7.3 million.Dist. Ct. Op. at 3–5, JA 515–517. JP Morgan’s duties as trustee of the collection accounts wereoutlined in Section 6.5 of the Sale and Subservice Agreement (“the sale agreement”), whichprovided, “On each purchase date for [Amedisys] . . ., [NPF VI] shall deliver to [JP Morgan] awritten statement setting forth the amount to be paid to [Amedisys] from the purchased account inrespect of the purchased receivables and [JP Morgan] shall make such payment in accordance with[NPF VI’s] instructions.” Supp. JA 13. JP Morgan was labeled a trustee in this arrangement onlybecause of its fiduciary duty toward holders of the notes. The bankruptcy court, in a differentdecision from the one appealed here, has determined that JP Morgan bore no fiduciary duty towardAmedisys.On November 8, 2002, Amedisys sued JP Morgan, NPF VI, NPFS, NCFE, and LancePoulsen, the president of NFP VI, in the United States District Court for the Southern District ofOhio (“the Ohio action”). In the complaint, Amedisys demanded the return of the $7.3 million inaccounts receivable held in the JP Morgan collection account. On November 18, 2002, NCFE and its subsidiaries filed for chapter 11 bankruptcy. OnDecember 19, 2002, the district court transferred the Ohio action to the bankruptcy court, as anadversary proceeding in the bankruptcy case. On January 16, 2004, Amedisys filed a secondamended complaint in the bankruptcy court naming JP Morgan, NPF VI, NCFE, and NPFS asdefendants, asserting the following claims:I.Actual controversies exist between Amedisys and JP Morgan, and betweenAmedisys and NCFE, concerning Amedisys’ right to have a total of morethan $7.3 million in accounts receivable returned to it. Amedisys seeks adeclaratory judgment holding that the sale agreement and trust indenture
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 42The parties disagree over whether, as NCFE argues, NPF VI had earmarked the $7.3 million in accountsreceivable for purchase, and had simply not yet paid Amedisys for the accounts; or whether, as Amedisys argues, theaccounts were not designated for purchase, but had merely been swept into the JP Morgan account. See Appellant’s Br.at 28; Appellee’s Br. at 20.represent one contractual relationship among Amedisys, JP Morgan, andNCFE. II.Amedisys seeks a declaratory judgment stating that JP Morgan, as an escrowagent, owed fiduciary obligations to Amedisys and violated thoseobligations. III.The $7.3 million in accounts receivable is subject to an express trustestablished by the sale agreement.IV.Amedisys’ cash in the possession or control of the NCFE entities,approximately $7.3 million, is an unjust enrichment occurring by mistake orfraud. The funds should be impressed with a constructive trust requiring thatthe funds be returned to Amedisys. V.The $7.3 million in accounts receivable is subject to a resulting trust.VI.Amedisys is entitled to an immediate turnover of its property under 11 U.S.C.§ 542.VII.NCFE breached the Amedisys-NCFE sales agreement by failing to returntimely and properly non-purchased receivables. NCFE also breached theagreement by failing to maintain a detailed accounting record. VIII. Amedisys is entitled to specific performance of the agreement mandatingNCFE to remit $7,337,569 to Amedisys.IX.NCFE owed to Amedisys a fiduciary duty pursuant to the sale agreement toensure that Amedisys’ interests in the accounts were properly protected.NCFE breached this duty.X.NCFE repeatedly made intentional misrepresentations to Amedisys, statingthat it would ensure that Amedisys’ funds would be timely released to it.Amedisys justifiably relied on these misrepresentations and has been directlyinjured as a result of the reliance.On May 27, 2004, the bankruptcy court granted NCFE’s and JP Morgan’s motions forsummary judgment as to all counts in the adversary proceeding except for Count VII (alleging thatNCFE breached the sale agreement). The bankruptcy court determined that although NCFE did notpay for the disputed $7.3 million in accounts receivable, it “did actually purchase Amedisys’saccounts receivable.” Therefore, Amedisys would have only a “general contractual claim [againstNCFE] for nonpayment”; Amedisys’ assertions that it owned the accounts receivable at the time ofNCFE’s bankruptcy, and therefore that the $7.3 million in the JP Morgan collection account was notpart of the bankruptcy estate, were unfounded.2By joint agreement of the parties, Count VII wasdismissed on April 14, 2005. At this point, the bankruptcy court’s grant of partial summaryjudgment became a final, appealable order. Amedisys filed a notice of appeal on April 22, 2005,and the appeal is now before the United States District Court for the Southern District of Ohio.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 53The parties noted at oral argument that the action has since been consolidated into a multidistrict litigation inthe United States District Court for the Southern District of Ohio. 4The motion argued, inter alia, that the Louisiana action “plainly violates section 362(a)(3) of the BankruptcyCode.” JA 576. The prayer for relief sought an order (i) finding that the automatic stay has been violated by the Louisiana action; (ii) declaring the filingof the Louisiana action to be invalid and void, as violative of the automatic stay; (iii) directing theAmedisys Entities to immediately cease and desist from any further prosecution of the LouisianaAction, absent further order of this court. . . .On February 21, 2003, Amedisys brought a state court action in Louisiana against JPMorgan, certain JP Morgan employees, and NCFE’s insurer (“the Louisiana action”). JA 559. OnMarch 24, 2003, the defendants removed the action to the United States District Court for theMiddle District of Louisiana.3Amedisys asserted the following claims in the Louisiana action: I.The sale agreement between NPF VI and Amedisys created an impliedcontract relating to the course of dealing among JP Morgan, NPF VI, andAmedisys. Amedisys seeks specific performance, including “refund of thenonpurchased receivables and overage funds.” II.Amedisys was a third-party beneficiary of the trust indenture between NPFVI and JP Morgan. JP Morgan had a duty to return to Amedisys “receivablesand overage funds that were never purchased by NPF VI in the first place.”III.JP Morgan breached its fiduciary duty to Amedisys to ensure that Amedisys’rights in the accounts at JP Morgan were adequately protected. IV.JP Morgan intentionally misrepresented the truth to Amedisys when itclaimed that it had taken all actions necessary to release the $7.3 million inaccounts receivable. V.Amedisys detrimentally relied on JP Morgan’s agreement to comply withNPF VI’s instructions to wire Amedisys’ funds to it. Amedisys is thereforeentitled to all damages attributable to JP Morgan for Amedisys’ detrimentalreliance. VI.JP Morgan wrongfully converted the funds owned by Amedisys when itrefused to remit the funds following Amedisys’ request. Amedisys is“entitled to any and all damages resulting in [sic] the conversion of itsfunds.” VII.“[T]he funds owned by the Amedisys Entities, over which [JP Morgan] hasdominion and control, are impressed with a constructive trust in favor ofAmedisys.” VIII. JP Morgan’s conduct violated the Louisiana Fair Trade Practices Act. IX.JP Morgan was unjustly enriched by its wrongful retention of the $7.3million in accounts receivable belonging to Amedisys. Complaint at 17–23, Supp. JA 22–28. On June 23, 2003, NCFE moved the bankruptcy court for an order enforcing the BankruptcyAct’s automatic stay, 11 U.S.C. § 362(a), against the Louisiana action. JA 569–580.4The motion
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 6JA 579-80.alleged, “The actions taken by the Amedisys Entities in connection with the commencement of theLouisiana Action plainly suggest a coordinated strategy to forum shop and to avoid the applicationof the automatic stay.” JA 575. NCFE noted that Amedisys’ claims in the Louisiana action werevirtually identical to those in the Ohio action, save for the omission of NCFE and its subsidiaries asdefendants in the Louisiana action. Id. The bankruptcy court, in an opinion dated August 19, 2003,ordered that Amedisys immediately cease and desist from any further prosecution of the Louisianaaction. The court gave two reasons. First, all of the claims in Amedisys’s complaint “require adetermination of ownership of funds alleged to be [NCFE’s] funds.” JA 564. Therefore, a findingfor Amedisys would result in the “automatic creation of liability against the debtor because of ajudgment against [JP Morgan].” Id. Second, the court found, “the involvement in the LouisianaAction effectively will act to diminish this bankruptcy estate by causing a duplication of efforts anda waste of judicial time and resources.” JA 564.Amedisys appealed the bankrupty court’s determination to the United States District Courtfor the Southern District of Ohio. The district court affirmed the bankruptcy court. The districtcourt, noting that “it is the bankruptcy court’s province to determine whether [the $7.3 million inaccounts receivable] is part of the estate,” concluded that the Louisiana action amounted to no morethan an attempt to prove that Amedisys owned the accounts at the time of NCFE’s bankruptcypetition. Assuming that Sixth Circuit precedent requires “unusual circumstances” in order to extendthe scope of the automatic stay to an action against a non-debtor, the court found that requirementmet here, because NCFE constituted the real party in interest in the Louisiana action. JA 541.Amedisys timely appealed the district court’s decision.II.Weaffirmthe decision of the district court. The bankruptcy court had jurisdiction to enforcethe automatic stay against the Louisiana action because, as Amedisys concedes in its brief, themotion to enforce constitutes a “core proceeding” as defined in 28 U.S.C. § 157(b)(2). Further, thebankruptcy court correctly concluded that the automatic stay in bankruptcy, 11 U.S.C. § 362(a),applies to the Louisiana action.A.Amedisys first argues that, in globally staying the Louisiana action, the bankruptcy courtexceeded its jurisdiction. The bankruptcy court held that it had jurisdiction to enforce the staybecause the matter was a core proceeding. JA 554. Amedisys argues that in order for jurisdictionto be proper, the bankruptcy court was required to find that the Louisiana action was “related to” thebankruptcy case. See 28 U.S.C. § 1334(b). Further, Amedisys urges, in the event of a judgmentagainst JP Morgan in the Louisiana action, JP Morgan likely would not obtain indemnity fromNCFE or its subsidiaries; therefore the Louisiana action is not related to the bankruptcy case. The bankruptcy court had jurisdiction to enforce the stay, because NCFE’s motion to enforceconstituted a core proceeding. 28 U.S.C. § 1334(b) provides exclusive district court jurisdictionover “all cases under title 11,” and concurrent jurisdiction over “civil proceedings arising under title11, or arising in or related to cases under title 11.” In turn, 28 U.S.C. § 157(a) permits district courtsto refer bankruptcy cases brought under their original jurisdiction to bankruptcy courts. Section157(b) of the samechapter defines “core proceedings arising under title 11, or arising in a case undertitle 11” to include “matters concerning the administration of the estate,” “motions to terminate,annul, or modify the automatic stay,” and “other proceedings affecting the liquidation of assets of
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 75Amedisys argues that in order to find that the bankruptcy court had jurisdiction, this court must analyzewhether the subject matter of the Louisiana action is “related to” the bankruptcy case. This would be the proper inquiryin evaluating whether the Louisiana action itself could be transferred to the bankruptcy court, in order for the bankruptcycourt to hear the claims and submit proposed findings of fact to the district court. 28 U.S.C. § 157(c)(1); cf. Lindsey v.O’Brien (In re Dow Corning), 86 F.3d 482, 489-91 (6th Cir. 1996) (setting forth factors to be used in determiningwhether a civil case is sufficiently “related to” the bankruptcy case to give the district court subject-matter jurisdictionover state law tort claims pending against nondebtor defendants). Here, because this appeal concerns only theenforcement of the automatic stay, and because the parties concede that a motion to enforce the stay constitutes a coreproceeding, it is unnecessary to assess the relatedness of the Louisiana action to the bankruptcy case. the estate or the adjustment of the debtor-creditor or the equity security holder relationship. . . .”28 U.S.C. § 157(b)(2)(A), (G), (O).Amedisys concedes in its jurisdictional statement,“Thismatter isa core proceeding pursuantto § 157(b)(2)(G).” Appellant’s Br. at 1. Therefore, NCFE’s motion to enforce the automatic stayby definition met a narrower jurisdictional test than the “related to” basis for jurisdiction over non-core proceedings. See In re Combustion Eng’g, Inc., 391 F.3d 190, 225-26 (3d Cir. 2004) (“Casesunder title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 arereferred to as ‘core’ proceedings; whereas proceedings ‘related to’ a case under title 11 are referredto as ‘non-core’ proceedings.”).5NCFE’s motion to enforce arose under title 11, and thebankruptcy court therefore had jurisdiction to enforce the stay.B.Amedisys argues that the Louisiana action does not fall within the automatic stay provisionsof 11 U.S.C. § 362(a). In order to enjoin the Louisiana action against JP Morgan, Amedisys argues,the bankruptcy court necessarily relied upon its equitable powers under 11 U.S.C. § 105(a) to issueorders “necessary or appropriate to carry out the provisions of [chapter 11].” Amedisys also arguesthat the bankruptcy court failed to identify “unusual circumstances” justifying a preliminaryinjunction under § 105(a), and that NCFE improperly failed to initiate an adversary proceeding toobtain an injunction under § 105(a). These arguments lack merit, because the stay fell within§ 362(a). The bankruptcy court observed the correct procedures in enforcing the stay.The courts below properly held that the Louisiana action is covered by the automatic stayin bankruptcy. Under 11 U.S.C. § 362(a), a bankruptcy petition operates as a stay, applicable to all entities, of . . . (1) the commencement orcontinuation . . . of a judicial, administrative, or other action or proceeding againstthe debtor that was or could have been commenced before the commencement of thecase under this title, or to recover a claim against the debtor that arose before thecommencement of the case under this title; . . . (3) any act to obtain possession ofproperty of the estate or of property from the estate or to exercise control overproperty of the estate.“Property of the estate” includes “all legal or equitable interests of the debtor in the property as ofthe commencement of the case.” 11 U.S.C. § 541(a)(1). The bankruptcy court also has the authorityto “issue any order, process, or judgment that is necessary or appropriate to carry out the provisionsof [the Bankruptcy Code].” Id. § 105(a).Because the Louisiana action seeks to obtain the accounts receivable held in a JP Morganaccount in the name of NPF VI, and because the accounts receivable likely constitute property ofthe bankruptcy estate, the bankruptcy court properly enforced the automatic stay under 11 U.S.C.§ 362(a)(3). The district court held that “the Louisiana complaint, though naming non-debtor JPMorgan as a defendant, seeks a determination that the money in the Debtors’ bank accounts belongs
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 86It is unclear whether, if Amedisys were allowed to proceed with its constructive trust claim in the Louisianaaction and prevailed on it, such a judgment would result in the exclusion of the disputed accounts receivable from thebankruptcy estate. This court has criticized constructive trust claims in the bankruptcy context as a backdoor means fora creditor to avoid waiting for ratable distribution of the estate, by characterizing common contract claims as fraud. SeeXL/Datacomp, Inc. v. Wilson (In re Omegas Group), 16 F.3d 1443, 1449-50 (6th Cir. 1994). Since constructive trustclaimsinvolve assertions of fraud, an allegedly defrauded creditor should more properly initiate an adversary proceedingto except from discharge, under 11 U.S.C. § 523, a debt procured by fraud. In re Omegas Group, 16 F.3d at 1451. Onlyif a creditor has obtained prepetition a judgment imposing a constructive trust, see In re Omegas Group, 16 F.3d at 1449,or if state law clearly gave the creditor, prepetition, a right to conveyance of the property, see In re Morris, 260 F.3d at668, may the property be excluded from the bankruptcy estate. A judgment in Amedisys’ favor in the Louisiana actionwould not fall under the former category, but could conceivably fall under the latter one. Notably, however, in neitherOmegas Group nor Morris did the creditor seek to make an end run around the bankruptcy process to obtain aconstructive trust judgment. In Omegas Group, the creditor initiated an adversary proceeding to assert the constructivetrust claim; in Morris, the creditor moved the bankruptcy court to lift the automatic stay in order for the creditor tocomplete state court proceedings on a constructive trust claim against the debtor. In re Omegas Group, 16 F.3d at 1446;In re Morris, 260 F.3d at 659. It is unnecessary to determine whether Amedisys, if it prevailed in the Louisiana action,could successfully obtain exclusion of the accounts receivable from the bankruptcy estate. A separate civil action forconstructive trust, initiated postpetition, is an inappropriate forum for Amedisys’ assertion that it has a rightful claim toto Amedisys.” JA 525. The bankruptcy court similarly concluded that Amedisys, through theLouisiana action, sought to obtain ownership rights of the disputed accounts receivable. Amedisys,on appeal, contends that these holdings were misguided, because the Louisiana action concerns onlyJP Morgan’s failure to follow NPFS’s instructions to remit $7.3 million to Amedisys. Amedisysargues that it merely seeks money damages from JP Morgan, because JP Morgan breached a dutyto transfer the property to Amedisys.This argument is unpersuasive. While NCFE is a named defendant only in the adversaryproceeding, and not in the Louisiana action, this is irrelevant, because Amedisys in both actionsseeks to obtain possession of the disputed accounts receivable. Count I of the Louisiana actionasserts that the Amedisys-NCFE sales agreement created duties in JP Morgan and seeks specificperformance of that agreement, including “refund of the nonpurchased receivables.” Supp. JA 25.Similarly, Count II avers that Amedisys is a third-party beneficiary of the JP Morgan-NCFE trustindenture, and that therefore JP Morgan has a duty to return the receivables to Amedisys. Count VIIrequests the court to impress the funds in the collection account with a constructive trust in favorof Amedisys. Supp. JA 26. The district court correctly found that while only some counts in thecomplaint pray the court to order JP Morgan to remit the disputed accounts receivable to Amedisys,every count in the complaint requires the court to adjudicate whether Amedisys had a rightful claimto that property. Further, the district court properly concluded that Amedisys’ offer voluntarily tostay prosecution of Counts I and VII of the Lousiana action, would not cure the violation of§ 362(a). As the district court aptly noted, unless Amedisys voluntarily dismissed the allegations inits complaint seeking refund of the accounts receivable, any judgment in Amedisys’ favor in theLouisiana action would potentially deplete the property of the bankruptcy estate. JA 524.The district court properly concluded that in the Louisiana action, Amedisys used aconstructive trust theory to “assert[] dominion over money in the Debtors’ accounts.” JA 523. IfAmedisys succeeded on a constructive trust theory, the value of the bankruptcy estate would bereduced. This is because property in which the debtor holds legal but not equitable title as of thecommencement of the case—for example, property impressed with a constructive trust under statelaw—is property of the estate only to the extent of the debtor’s legal title. 11 U.S.C. § 541(d); seePoss v. Morris (In re Morris), 260 F.3d 654, 666 (6th Cir. 2001) (holding that a creditor’s mereclaimof a constructive trust does not constitute an equitable interest in property otherwise belongingto the estate; instead, “state law [must have] impressed property with a constructive trust prior to itsentry into bankruptcy”);cf. Stevenson v. J.C. Bradford & Co. (In re Cannon), 277 F.3d 838, 849 (6thCir. 2002) (quoting Begier v. IRS, 496 U.S. 53, 59 (1990)) (holding that the § 541(a) definition of“property of the estate” excludes property held in trust).6Amedisys contends that its constructive
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 9the funds held in bank accounts owned by the NCFE entities.trust claim concerns only its prebankruptcy ownership of the disputed accounts receivable, and thatthis issue is entirely independent of whether the funds currently form part of the bankruptcy estate.This argument is meritless, because the issues are not independent. Whatever determination is madein the Louisiana action concerning the prebankruptcy ownership of the accounts receivable willnecessarily be relevant to postbankruptcy ownership as well. In the Louisiana action, Amedisysalleges that during the period of November 7-12, 2002, JP Morgan wrongfully failed to comply withNCFE’s instructions to refund to Amedisys the disputed amount. Supp. JA 20-21. The fact that thecomplaint asserts wrongs occurring before the NCFE entities filed for bankruptcy on November 18,2002, does not alter our conclusion that the complaint demands the return of funds alleged to formpart of the bankruptcy estate. See 11 U.S.C. § 541(a)(1) (property of the estate is determined as ofthe moment the debtor files for bankruptcy). Further, it appears likely that the disputed accounts receivable to which Amedisys claimsownership do formpart of the bankruptcy estate. Amedisys does not dispute that in November 2002,when the NCFE entities filed for bankruptcy, the disputed accounts receivable were located in a JPMorgan collection account held by NPF VI, an NCFE entity. Thus, presumptively, NPF VI holdslegal title to these funds. No party has made a plausible claimthat JP Morgan, rather than the NCFEentities, owns the funds. See Complaint in Louisiana Action at 8, Supp. JA 13 (“JP Morgan . . . hasno claim, title, or other interest in any nonpurchased receivables or overage funds of the AmedisysEntities now held by it.”); JP Morgan’s Application for Order Authorizing Compensation at 11, JA727 (“[T]he Amedisys receivables were owned . . . by NPF VI, which had purchased thosereceivables from Amedisys.”). Finally, the bankruptcy court, in a final order currently on appeal to the United States DistrictCourt for the Southern District of Ohio, has held that the accounts receivable held in the JP Morgancollection account form property of the bankruptcy estate. In granting summary judgment todefendants NCFE and JP Morgan on Amedisys’ claimsin the adversary proceeding, the bankruptcycourt held that the NCFE entities purchased the $7.3 million in accounts receivable fromAmedisys.The bankruptcy court found that although NCFE had never paid Amedisys for the disputed accountsreceivable, this was merely because Amedisys had waived its right under the sale agreement toimmediate payment. The bankruptcy court rejectedwith equal force the argument that either NCFEor JP Morgan held the receivables in an express or constructive trust for Amedisys. The bankruptcycourt noted that NCFE bore merely a contractual duty to pay Amedisys for purchased receivables;NCFE did not hold a fiduciary duty to transfer title in the receivables to Amedisys. Further, thecourt held, JP Morgan was not even in contractual privity with Amedisys; much less did it bear anyfiduciary duty to Amedisys.We do not purport at this time to resolve in a controlling fashion the issues raised in thatappeal. But the bankruptcy court’s determination that the accounts receivable are part of thebankruptcy estate strongly supports the conclusion that the automatic stay was properly enforced.It is the bankruptcy court’s province to identify the property of the bankruptcy estate. Thebankruptcy court, in its summary judgment decision, persuasively marshaled the complex factualrecord in this case to conclude that the accounts receivable whose ownership forms the crux of theLouisiana action, are property of the estate. Reversing the lower courts’ conclusions that theautomatic stay applies, at a time when the bankruptcy court’s determination of the ownership of theaccounts receivable remains a live issue in the summary judgment appeal, would impede thebankruptcy court’s role in managing the bankruptcy case.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 107The bankruptcy court’s holding did rely on one case, C.H. Robinson Co. v. Paris &Sons, 180 F. Supp. 2d 1002(N.D. Iowa 2001), which held that a creditor is required to seek a preliminary injunction in order to expand the scopeof a § 362(a)(1) stay to cover solvent codefendants. However, like Parry, C.H. Robinson did not involve entitlement toproperty allegedly part of the bankruptcy estate. The court’s conclusion was that “the automatic stay under section362(a)(1) of the Bankruptcy Code is not truly automatic when invoked against nondebtor codefendants.” Id. at 1018.The analysis certainly does not preclude the conclusion that a stay against a nondebtor under § 362(a)(3) is trulyautomatic.C.The fact that the Louisiana action did not name NCFE as a defendant does not renderenforcement ofthe automatic stay improper. Amedisys argues that “the automatic stay under section362(a) applies only to the bankrupt debtor,” and therefore that § 362(a) did not support thebankruptcy court’s decision in this case. Appellant’s Br. at 18. To buttress this assertion, Amedisyscites two decisions of this court for the proposition that a bankruptcy court must find unusualcircumstances, justifying a preliminary injunction under 11 U.S.C. § 105(a), in order to extend thescope of a § 362(a)(1) automatic stay to encompass claims against not only a debtor defendant, butalso nondebtor codefendants. See Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993); Parry v.Mohawk Motors of Mich., Inc., 236 F.3d 299, 314-315 (6th Cir. 2001). These cases note that, byextending the stay beyond its statutory terms, the bankruptcy court is not acting under § 362(a), butis instead issuing an order in equity “necessary or appropriate to carry out the provisions of [theBankruptcy Code].” 11 U.S.C. § 105(a); Patton, 8 F.3d at 349. The district court, citing Parry,found that unusual circumstances were present in this case because NCFE, rather than JP Morgan,was the real party in interest in the Louisiana action. Therefore, the district court concluded, thebankruptcy court properly exercised its “necessary or appropriate” powers to issue a § 105(a)preliminary injunction. Amedisys’ argument is not persuasive. The district court appears unnecessarily to haveassumed that the bankruptcy court entered a preliminary injunction extending the automatic staybeyond its statutory terms, rather than merely enforcing the automatic stay as provided by statute.The automatic stay of § 362(a) applies by its terms not only to actions against the debtor, see§ 362(a)(1), but also to actions seeking to obtain property of the bankruptcy estate, see § 362(a)(3).In Patton and Parry, this court found insufficient basis to extendthe automatic stay beyond the termsof § 362(a)(1). In Parry, there was no contention that the automatic stay applied by its terms to anaction against non-debtors; in Patton, the court rejected such a contention because the action did notseek property of the estate. Here, unlike in Patton and Parry, the bankruptcy court determined thatthe automatic stay already covered the action. JA 563-4. As a sister circuit has held, “[A]n actiontaken against a nondebtor which would inevitably have an adverse impact upon the property of theestate must be barred by the [§ 362(a)(3)] automatic stay provision.” Licensing by Paolo, Inc. v.Sinatra (In re Gucci),126 F.3d 380, 392 (2d Cir. 1997) (citing In re 48th St. Steakhouse, Inc., 835F.2d 427, 431 (2d Cir. 1987)). This court’s decision in Patton, 8 F.3d 343, further supports thisconclusion. In Patton, this court analyzed separately the applicability of stays under § 362(a)(1)and under § 362(a)(3). As part of the § 362(a)(1) analysis, the court noted that a debtor mustdemonstrate unusual circumstances in order to extend the automatic stay to nondebtor codefendants.8 F.3d at 349. Under the § 362(a)(3) inquiry, the court merely analyzed whether a judgment againstthe solvent codefendants would actually deplete the bankruptcy estate. Id. The bankruptcy court, in its opinion, stated that it was enforcing the automatic stay, not thatit was exercising its equitable powers under § 105(a).7Further, it held that the Louisiana actionsought a determination that the disputed accounts receivable did not form part of the bankruptcyestate. JA 563. Accepting Amedisys’ argument that the bankruptcy court failed to find unusualcircumstances justifying a preliminary injunction would require an unwarranted limiting of§ 362(a)(3), a subsection that requires application ofthe automatic stay without reference to whether
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 11the debtor is the defendant in the stayed action. Because the Louisiana action seeks to obtainproperty of the bankruptcy estate, we affirm the order enforcing the stay. D.Amedisys’ remaining grounds for asserting that the bankruptcy court improperly stayed theLouisiana action are all rooted in the assumption that the stay constituted a preliminary injunctionunder § 105(a), expanding the automatic stay. Amedisys argues (1) that NCFE failed to initiate anadversary proceeding in order to request a preliminary injunction, and that the enforcement of theautomatic stay was invalid because of this procedural error; (2) that the bankruptcy court failed toconsider the four factors determining whether a preliminary injunction is appropriate; and (3) thatthe bankruptcy court improperly imposed a preponderance-of-the-evidence burden of proof onNCFE, rather than a clear-and-convincing-evidence burden of proof. Appellant’s Br. at 21-28.Amedisys forfeited these arguments by failing to raise them in its appeal brief before the districtcourt. See Thurman v. Yellow Freight Sys., 97 F.3d 833, 835 (6th Cir. 1996) (holding that argumentsnot raised before the district court are waived). Even if these arguments had been properlypreserved, they would nonetheless fail, because the bankruptcy court’s action was supported by theautomatic stay of § 362(a)(3). Normally, a debtor initiates an adversary proceeding in order torequest a § 105(a) preliminary injunction. See Amer. Imaging Servs. v. Eagle-Pitcher Indus., Inc.(In re Eagle-Picher Indus., Inc)., 963 F.2d 855, 857-59 (6th Cir. 1992). On the other hand, a debtoris not required to initiate an adversary proceeding in order to move the bankruptcy court to enforcethe automatic stay. In re LTV Steel Co., Inc., 264 B.R. 455, 462-63 (Bankr. N.D. Ohio 2001).Similarly, as Amedisys concedes, only when the bankruptcy court enjoins an action under § 105(a)must it consider the four preliminary injunction factors, and apply a standard of clear and convincingevidence. Because these arguments rely upon Amedisys’ assertion that § 362(a) did not support thebankruptcy court’s holding, and because we hold, to the contrary, that enforcement of the automaticstay under § 362(a)(3) was proper, the arguments fail.III.For the foregoing reasons, we AFFIRM the judgment of the district court enforcing theautomatic stay in bankruptcy, 11 U.S.C. § 362(a), against the Louisiana action.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 21The related entities are Amedisys Home Health, Inc. of Alabama; Clinical Arts Home Care Services, Inc.;Central Home Health Care; Togaloo Home Health Agency; North Georgia Home Health Agency; Coosa Valley HomeHealth; Amedisys Home Health, Inc. of Louisiana; Amedisys Home Health, Inc. of North Carolina; Amedisys HomeHealth, Inc. of Oklahoma; Amedisys HomeHealth, Inc. of Tennessee; Amedisys HomeHealth, Inc. of Virginia; SuperiorHome Health Care; Amedisys Northwest Home Health, Inc.; Northwest Home Health; Amedisys Specialized MedicalServices, Inc.; Precision / Amedisys Specialized Medical Services; Amedisys Alternate-Site Infusion Therapy Services,Inc.; Home Health of Alexandria, Inc.; Cornerstone Home Health; Quality Home Health Care, Inc.; PRN, Inc. d/b/aAmedisys Alternate-Site Infusion Therapy Services; and Amedisys Surgery Centers, L.C._________________OPINION_________________ROGERS, Circuit Judge. Amedisys, Inc., and its related entities1appeal an order enforcingthe automatic stay in bankruptcy, 11 U.S.C. § 362(a), against a civil action in which Amedisys isthe plaintiff. National Century Financial Enterprises, Inc. (“NCFE”), the debtor, before itsbankruptcy, supplied financing to the health care industry. NCFE bought accounts receivable fromhospitals and other health care providers. The arrangement shortened the providers’ waiting periodfor payment by insurance companies, Medicare, andMedicaid. Amedisysisa Louisiana corporationsupplying home nursing services. Amedisys participated in a financing plan sponsored by one ofNCFE’s subsidiaries. NCFE and its subsidiaries, including National Premier Financial Services(“NPFS”), NPF VI, and NPF XII (collectively, “the NCFE entities”), filed for Chapter 11bankruptcy in November 2002. In February 2003, Amedisys sued JP Morgan Chase ManhattanBank (“JP Morgan”) in Louisiana, seeking to recover about $7.3 million in accounts receivable heldin a JP Morgan collection account in the name of NPF VI. Upon NCFE’s motion, the bankruptcycourt applied the automatic stay in bankruptcy, 11 U.S.C. § 362(a), to the Louisiana action. Amedisys appealed this decision; the district court affirmed. Because the Louisiana action is an “actto obtain possession of property of the [bankruptcy] estate,” 11 U.S.C. § 362(a)(3), we affirm thebankruptcy court’s and district court’s conclusions that the automatic stay applies.I.The appeal hinges on the questions of (1) whether Amedisys, through the Louisiana action,seeks to obtain possession of accounts receivable funds that NPF VI, an NCFE entity, held in a JPMorgan account; and (2) whether in fact these accounts receivable constitute property of thebankruptcy estate. NCFE is an Ohio Corporation which, until its bankruptcy, was, along with itssubsidiaries, the country’s largest provider of healthcare accounts receivable financing. JA 556.The district court fully described the contractual relationship between Amedisys and the NCFEentities:Amedisys, Inc., and its corporate subsidiaries provide home nursing servicesthroughout the southeastern United States. Amedisys participated in a fundingprogram operated by [NCFE], a company that finances health care providers bypurchasing . . . their accounts receivable at a discount. NCFE purchased thereceivables with funds raised through selling notes that were backed by thereceivables themselves.NCFE created numerous wholly-owned subsidiaries, known as “programs,”for the purpose of issuing notes that were secured by pools of receivables and othercollateral. The two largest such programs were NPF VI, administered by JP MorganChase Bank as indenture trustee, and NPF XII, administered by Bank One, N.A. asindenture trustee. Under the sale and subservice agreements into which NCFEprograms and health care providers entered, receivables would be remitted directly
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 3into lockbox accounts and the NCFE program would advance funds to the provideron a weekly basis in payment of the receivables.Amedysis participated in the NPF VI program, and its accounts receivablewent into lockbox accounts at Huntington National Bank. The lockbox accountswere in the name of [NPFS]—an NCFE entity—and Amedisys or one of itssubsidiaries. Those funds were then swept into a Collection Account at JP Morganin the name of NPF VI. Though accounts receivable went into the CollectionAccount, NPF VI did not purchase every account receivable it collected. Section 6.1of the Sale and Subservice Agreement provided:The Purchaser and the Seller acknowledge that certain amountsdeposited in the Collection Account may relate to Receivables otherthan Purchased Receivables and that such amounts continue to beowned by the Seller. All such amounts shall be returned to the Sellerin accordance with Section 6.3.The amounts in the Collection Account representing receivables that NPF VI did notpurchase were called “overage funds.” The Trustee (JP Morgan) was supposed totransfer such funds to Amedisys on NPFS’s instruction. Amedisys states that itnormally would receive electronic notice of the amount of any overage funds onTuesdays. In late October 2002, Amedisys became concerned after hearing reports thatNCFE was experiencing financial difficulties. On the final Thursday of the month,Amedisys did not receive the overage funds it expected NPF VI would transfer to it.On November 6, 2002, the Chief Financial Officer of Amedisys performed anaccounting and determined that NPF VI owedAmedisysapproximately $7.3 million.Dist. Ct. Op. at 3–5, JA 515–517. JP Morgan’s duties as trustee of the collection accounts wereoutlined in Section 6.5 of the Sale and Subservice Agreement (“the sale agreement”), whichprovided, “On each purchase date for [Amedisys] . . ., [NPF VI] shall deliver to [JP Morgan] awritten statement setting forth the amount to be paid to [Amedisys] from the purchased account inrespect of the purchased receivables and [JP Morgan] shall make such payment in accordance with[NPF VI’s] instructions.” Supp. JA 13. JP Morgan was labeled a trustee in this arrangement onlybecause of its fiduciary duty toward holders of the notes. The bankruptcy court, in a differentdecision from the one appealed here, has determined that JP Morgan bore no fiduciary duty towardAmedisys.On November 8, 2002, Amedisys sued JP Morgan, NPF VI, NPFS, NCFE, and LancePoulsen, the president of NFP VI, in the United States District Court for the Southern District ofOhio (“the Ohio action”). In the complaint, Amedisys demanded the return of the $7.3 million inaccounts receivable held in the JP Morgan collection account. On November 18, 2002, NCFE and its subsidiaries filed for chapter 11 bankruptcy. OnDecember 19, 2002, the district court transferred the Ohio action to the bankruptcy court, as anadversary proceeding in the bankruptcy case. On January 16, 2004, Amedisys filed a secondamended complaint in the bankruptcy court naming JP Morgan, NPF VI, NCFE, and NPFS asdefendants, asserting the following claims:I.Actual controversies exist between Amedisys and JP Morgan, and betweenAmedisys and NCFE, concerning Amedisys’ right to have a total of morethan $7.3 million in accounts receivable returned to it. Amedisys seeks adeclaratory judgment holding that the sale agreement and trust indenture
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 42The parties disagree over whether, as NCFE argues, NPF VI had earmarked the $7.3 million in accountsreceivable for purchase, and had simply not yet paid Amedisys for the accounts; or whether, as Amedisys argues, theaccounts were not designated for purchase, but had merely been swept into the JP Morgan account. See Appellant’s Br.at 28; Appellee’s Br. at 20.represent one contractual relationship among Amedisys, JP Morgan, andNCFE. II.Amedisys seeks a declaratory judgment stating that JP Morgan, as an escrowagent, owed fiduciary obligations to Amedisys and violated thoseobligations. III.The $7.3 million in accounts receivable is subject to an express trustestablished by the sale agreement.IV.Amedisys’ cash in the possession or control of the NCFE entities,approximately $7.3 million, is an unjust enrichment occurring by mistake orfraud. The funds should be impressed with a constructive trust requiring thatthe funds be returned to Amedisys. V.The $7.3 million in accounts receivable is subject to a resulting trust.VI.Amedisys is entitled to an immediate turnover of its property under 11 U.S.C.§ 542.VII.NCFE breached the Amedisys-NCFE sales agreement by failing to returntimely and properly non-purchased receivables. NCFE also breached theagreement by failing to maintain a detailed accounting record. VIII. Amedisys is entitled to specific performance of the agreement mandatingNCFE to remit $7,337,569 to Amedisys.IX.NCFE owed to Amedisys a fiduciary duty pursuant to the sale agreement toensure that Amedisys’ interests in the accounts were properly protected.NCFE breached this duty.X.NCFE repeatedly made intentional misrepresentations to Amedisys, statingthat it would ensure that Amedisys’ funds would be timely released to it.Amedisys justifiably relied on these misrepresentations and has been directlyinjured as a result of the reliance.On May 27, 2004, the bankruptcy court granted NCFE’s and JP Morgan’s motions forsummary judgment as to all counts in the adversary proceeding except for Count VII (alleging thatNCFE breached the sale agreement). The bankruptcy court determined that although NCFE did notpay for the disputed $7.3 million in accounts receivable, it “did actually purchase Amedisys’saccounts receivable.” Therefore, Amedisys would have only a “general contractual claim [againstNCFE] for nonpayment”; Amedisys’ assertions that it owned the accounts receivable at the time ofNCFE’s bankruptcy, and therefore that the $7.3 million in the JP Morgan collection account was notpart of the bankruptcy estate, were unfounded.2By joint agreement of the parties, Count VII wasdismissed on April 14, 2005. At this point, the bankruptcy court’s grant of partial summaryjudgment became a final, appealable order. Amedisys filed a notice of appeal on April 22, 2005,and the appeal is now before the United States District Court for the Southern District of Ohio.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 53The parties noted at oral argument that the action has since been consolidated into a multidistrict litigation inthe United States District Court for the Southern District of Ohio. 4The motion argued, inter alia, that the Louisiana action “plainly violates section 362(a)(3) of the BankruptcyCode.” JA 576. The prayer for relief sought an order (i) finding that the automatic stay has been violated by the Louisiana action; (ii) declaring the filingof the Louisiana action to be invalid and void, as violative of the automatic stay; (iii) directing theAmedisys Entities to immediately cease and desist from any further prosecution of the LouisianaAction, absent further order of this court. . . .On February 21, 2003, Amedisys brought a state court action in Louisiana against JPMorgan, certain JP Morgan employees, and NCFE’s insurer (“the Louisiana action”). JA 559. OnMarch 24, 2003, the defendants removed the action to the United States District Court for theMiddle District of Louisiana.3Amedisys asserted the following claims in the Louisiana action: I.The sale agreement between NPF VI and Amedisys created an impliedcontract relating to the course of dealing among JP Morgan, NPF VI, andAmedisys. Amedisys seeks specific performance, including “refund of thenonpurchased receivables and overage funds.” II.Amedisys was a third-party beneficiary of the trust indenture between NPFVI and JP Morgan. JP Morgan had a duty to return to Amedisys “receivablesand overage funds that were never purchased by NPF VI in the first place.”III.JP Morgan breached its fiduciary duty to Amedisys to ensure that Amedisys’rights in the accounts at JP Morgan were adequately protected. IV.JP Morgan intentionally misrepresented the truth to Amedisys when itclaimed that it had taken all actions necessary to release the $7.3 million inaccounts receivable. V.Amedisys detrimentally relied on JP Morgan’s agreement to comply withNPF VI’s instructions to wire Amedisys’ funds to it. Amedisys is thereforeentitled to all damages attributable to JP Morgan for Amedisys’ detrimentalreliance. VI.JP Morgan wrongfully converted the funds owned by Amedisys when itrefused to remit the funds following Amedisys’ request. Amedisys is“entitled to any and all damages resulting in [sic] the conversion of itsfunds.” VII.“[T]he funds owned by the Amedisys Entities, over which [JP Morgan] hasdominion and control, are impressed with a constructive trust in favor ofAmedisys.” VIII. JP Morgan’s conduct violated the Louisiana Fair Trade Practices Act. IX.JP Morgan was unjustly enriched by its wrongful retention of the $7.3million in accounts receivable belonging to Amedisys. Complaint at 17–23, Supp. JA 22–28. On June 23, 2003, NCFE moved the bankruptcy court for an order enforcing the BankruptcyAct’s automatic stay, 11 U.S.C. § 362(a), against the Louisiana action. JA 569–580.4The motion
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 6JA 579-80.alleged, “The actions taken by the Amedisys Entities in connection with the commencement of theLouisiana Action plainly suggest a coordinated strategy to forum shop and to avoid the applicationof the automatic stay.” JA 575. NCFE noted that Amedisys’ claims in the Louisiana action werevirtually identical to those in the Ohio action, save for the omission of NCFE and its subsidiaries asdefendants in the Louisiana action. Id. The bankruptcy court, in an opinion dated August 19, 2003,ordered that Amedisys immediately cease and desist from any further prosecution of the Louisianaaction. The court gave two reasons. First, all of the claims in Amedisys’s complaint “require adetermination of ownership of funds alleged to be [NCFE’s] funds.” JA 564. Therefore, a findingfor Amedisys would result in the “automatic creation of liability against the debtor because of ajudgment against [JP Morgan].” Id. Second, the court found, “the involvement in the LouisianaAction effectively will act to diminish this bankruptcy estate by causing a duplication of efforts anda waste of judicial time and resources.” JA 564.Amedisys appealed the bankrupty court’s determination to the United States District Courtfor the Southern District of Ohio. The district court affirmed the bankruptcy court. The districtcourt, noting that “it is the bankruptcy court’s province to determine whether [the $7.3 million inaccounts receivable] is part of the estate,” concluded that the Louisiana action amounted to no morethan an attempt to prove that Amedisys owned the accounts at the time of NCFE’s bankruptcypetition. Assuming that Sixth Circuit precedent requires “unusual circumstances” in order to extendthe scope of the automatic stay to an action against a non-debtor, the court found that requirementmet here, because NCFE constituted the real party in interest in the Louisiana action. JA 541.Amedisys timely appealed the district court’s decision.II.Weaffirmthe decision of the district court. The bankruptcy court had jurisdiction to enforcethe automatic stay against the Louisiana action because, as Amedisys concedes in its brief, themotion to enforce constitutes a “core proceeding” as defined in 28 U.S.C. § 157(b)(2). Further, thebankruptcy court correctly concluded that the automatic stay in bankruptcy, 11 U.S.C. § 362(a),applies to the Louisiana action.A.Amedisys first argues that, in globally staying the Louisiana action, the bankruptcy courtexceeded its jurisdiction. The bankruptcy court held that it had jurisdiction to enforce the staybecause the matter was a core proceeding. JA 554. Amedisys argues that in order for jurisdictionto be proper, the bankruptcy court was required to find that the Louisiana action was “related to” thebankruptcy case. See 28 U.S.C. § 1334(b). Further, Amedisys urges, in the event of a judgmentagainst JP Morgan in the Louisiana action, JP Morgan likely would not obtain indemnity fromNCFE or its subsidiaries; therefore the Louisiana action is not related to the bankruptcy case. The bankruptcy court had jurisdiction to enforce the stay, because NCFE’s motion to enforceconstituted a core proceeding. 28 U.S.C. § 1334(b) provides exclusive district court jurisdictionover “all cases under title 11,” and concurrent jurisdiction over “civil proceedings arising under title11, or arising in or related to cases under title 11.” In turn, 28 U.S.C. § 157(a) permits district courtsto refer bankruptcy cases brought under their original jurisdiction to bankruptcy courts. Section157(b) of the samechapter defines “core proceedings arising under title 11, or arising in a case undertitle 11” to include “matters concerning the administration of the estate,” “motions to terminate,annul, or modify the automatic stay,” and “other proceedings affecting the liquidation of assets of
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 75Amedisys argues that in order to find that the bankruptcy court had jurisdiction, this court must analyzewhether the subject matter of the Louisiana action is “related to” the bankruptcy case. This would be the proper inquiryin evaluating whether the Louisiana action itself could be transferred to the bankruptcy court, in order for the bankruptcycourt to hear the claims and submit proposed findings of fact to the district court. 28 U.S.C. § 157(c)(1); cf. Lindsey v.O’Brien (In re Dow Corning), 86 F.3d 482, 489-91 (6th Cir. 1996) (setting forth factors to be used in determiningwhether a civil case is sufficiently “related to” the bankruptcy case to give the district court subject-matter jurisdictionover state law tort claims pending against nondebtor defendants). Here, because this appeal concerns only theenforcement of the automatic stay, and because the parties concede that a motion to enforce the stay constitutes a coreproceeding, it is unnecessary to assess the relatedness of the Louisiana action to the bankruptcy case. the estate or the adjustment of the debtor-creditor or the equity security holder relationship. . . .”28 U.S.C. § 157(b)(2)(A), (G), (O).Amedisys concedes in its jurisdictional statement,“Thismatter isa core proceeding pursuantto § 157(b)(2)(G).” Appellant’s Br. at 1. Therefore, NCFE’s motion to enforce the automatic stayby definition met a narrower jurisdictional test than the “related to” basis for jurisdiction over non-core proceedings. See In re Combustion Eng’g, Inc., 391 F.3d 190, 225-26 (3d Cir. 2004) (“Casesunder title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 arereferred to as ‘core’ proceedings; whereas proceedings ‘related to’ a case under title 11 are referredto as ‘non-core’ proceedings.”).5NCFE’s motion to enforce arose under title 11, and thebankruptcy court therefore had jurisdiction to enforce the stay.B.Amedisys argues that the Louisiana action does not fall within the automatic stay provisionsof 11 U.S.C. § 362(a). In order to enjoin the Louisiana action against JP Morgan, Amedisys argues,the bankruptcy court necessarily relied upon its equitable powers under 11 U.S.C. § 105(a) to issueorders “necessary or appropriate to carry out the provisions of [chapter 11].” Amedisys also arguesthat the bankruptcy court failed to identify “unusual circumstances” justifying a preliminaryinjunction under § 105(a), and that NCFE improperly failed to initiate an adversary proceeding toobtain an injunction under § 105(a). These arguments lack merit, because the stay fell within§ 362(a). The bankruptcy court observed the correct procedures in enforcing the stay.The courts below properly held that the Louisiana action is covered by the automatic stayin bankruptcy. Under 11 U.S.C. § 362(a), a bankruptcy petition operates as a stay, applicable to all entities, of . . . (1) the commencement orcontinuation . . . of a judicial, administrative, or other action or proceeding againstthe debtor that was or could have been commenced before the commencement of thecase under this title, or to recover a claim against the debtor that arose before thecommencement of the case under this title; . . . (3) any act to obtain possession ofproperty of the estate or of property from the estate or to exercise control overproperty of the estate.“Property of the estate” includes “all legal or equitable interests of the debtor in the property as ofthe commencement of the case.” 11 U.S.C. § 541(a)(1). The bankruptcy court also has the authorityto “issue any order, process, or judgment that is necessary or appropriate to carry out the provisionsof [the Bankruptcy Code].” Id. § 105(a).Because the Louisiana action seeks to obtain the accounts receivable held in a JP Morganaccount in the name of NPF VI, and because the accounts receivable likely constitute property ofthe bankruptcy estate, the bankruptcy court properly enforced the automatic stay under 11 U.S.C.§ 362(a)(3). The district court held that “the Louisiana complaint, though naming non-debtor JPMorgan as a defendant, seeks a determination that the money in the Debtors’ bank accounts belongs
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 86It is unclear whether, if Amedisys were allowed to proceed with its constructive trust claim in the Louisianaaction and prevailed on it, such a judgment would result in the exclusion of the disputed accounts receivable from thebankruptcy estate. This court has criticized constructive trust claims in the bankruptcy context as a backdoor means fora creditor to avoid waiting for ratable distribution of the estate, by characterizing common contract claims as fraud. SeeXL/Datacomp, Inc. v. Wilson (In re Omegas Group), 16 F.3d 1443, 1449-50 (6th Cir. 1994). Since constructive trustclaimsinvolve assertions of fraud, an allegedly defrauded creditor should more properly initiate an adversary proceedingto except from discharge, under 11 U.S.C. § 523, a debt procured by fraud. In re Omegas Group, 16 F.3d at 1451. Onlyif a creditor has obtained prepetition a judgment imposing a constructive trust, see In re Omegas Group, 16 F.3d at 1449,or if state law clearly gave the creditor, prepetition, a right to conveyance of the property, see In re Morris, 260 F.3d at668, may the property be excluded from the bankruptcy estate. A judgment in Amedisys’ favor in the Louisiana actionwould not fall under the former category, but could conceivably fall under the latter one. Notably, however, in neitherOmegas Group nor Morris did the creditor seek to make an end run around the bankruptcy process to obtain aconstructive trust judgment. In Omegas Group, the creditor initiated an adversary proceeding to assert the constructivetrust claim; in Morris, the creditor moved the bankruptcy court to lift the automatic stay in order for the creditor tocomplete state court proceedings on a constructive trust claim against the debtor. In re Omegas Group, 16 F.3d at 1446;In re Morris, 260 F.3d at 659. It is unnecessary to determine whether Amedisys, if it prevailed in the Louisiana action,could successfully obtain exclusion of the accounts receivable from the bankruptcy estate. A separate civil action forconstructive trust, initiated postpetition, is an inappropriate forum for Amedisys’ assertion that it has a rightful claim toto Amedisys.” JA 525. The bankruptcy court similarly concluded that Amedisys, through theLouisiana action, sought to obtain ownership rights of the disputed accounts receivable. Amedisys,on appeal, contends that these holdings were misguided, because the Louisiana action concerns onlyJP Morgan’s failure to follow NPFS’s instructions to remit $7.3 million to Amedisys. Amedisysargues that it merely seeks money damages from JP Morgan, because JP Morgan breached a dutyto transfer the property to Amedisys.This argument is unpersuasive. While NCFE is a named defendant only in the adversaryproceeding, and not in the Louisiana action, this is irrelevant, because Amedisys in both actionsseeks to obtain possession of the disputed accounts receivable. Count I of the Louisiana actionasserts that the Amedisys-NCFE sales agreement created duties in JP Morgan and seeks specificperformance of that agreement, including “refund of the nonpurchased receivables.” Supp. JA 25.Similarly, Count II avers that Amedisys is a third-party beneficiary of the JP Morgan-NCFE trustindenture, and that therefore JP Morgan has a duty to return the receivables to Amedisys. Count VIIrequests the court to impress the funds in the collection account with a constructive trust in favorof Amedisys. Supp. JA 26. The district court correctly found that while only some counts in thecomplaint pray the court to order JP Morgan to remit the disputed accounts receivable to Amedisys,every count in the complaint requires the court to adjudicate whether Amedisys had a rightful claimto that property. Further, the district court properly concluded that Amedisys’ offer voluntarily tostay prosecution of Counts I and VII of the Lousiana action, would not cure the violation of§ 362(a). As the district court aptly noted, unless Amedisys voluntarily dismissed the allegations inits complaint seeking refund of the accounts receivable, any judgment in Amedisys’ favor in theLouisiana action would potentially deplete the property of the bankruptcy estate. JA 524.The district court properly concluded that in the Louisiana action, Amedisys used aconstructive trust theory to “assert[] dominion over money in the Debtors’ accounts.” JA 523. IfAmedisys succeeded on a constructive trust theory, the value of the bankruptcy estate would bereduced. This is because property in which the debtor holds legal but not equitable title as of thecommencement of the case—for example, property impressed with a constructive trust under statelaw—is property of the estate only to the extent of the debtor’s legal title. 11 U.S.C. § 541(d); seePoss v. Morris (In re Morris), 260 F.3d 654, 666 (6th Cir. 2001) (holding that a creditor’s mereclaimof a constructive trust does not constitute an equitable interest in property otherwise belongingto the estate; instead, “state law [must have] impressed property with a constructive trust prior to itsentry into bankruptcy”);cf. Stevenson v. J.C. Bradford & Co. (In re Cannon), 277 F.3d 838, 849 (6thCir. 2002) (quoting Begier v. IRS, 496 U.S. 53, 59 (1990)) (holding that the § 541(a) definition of“property of the estate” excludes property held in trust).6Amedisys contends that its constructive
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 9the funds held in bank accounts owned by the NCFE entities.trust claim concerns only its prebankruptcy ownership of the disputed accounts receivable, and thatthis issue is entirely independent of whether the funds currently form part of the bankruptcy estate.This argument is meritless, because the issues are not independent. Whatever determination is madein the Louisiana action concerning the prebankruptcy ownership of the accounts receivable willnecessarily be relevant to postbankruptcy ownership as well. In the Louisiana action, Amedisysalleges that during the period of November 7-12, 2002, JP Morgan wrongfully failed to comply withNCFE’s instructions to refund to Amedisys the disputed amount. Supp. JA 20-21. The fact that thecomplaint asserts wrongs occurring before the NCFE entities filed for bankruptcy on November 18,2002, does not alter our conclusion that the complaint demands the return of funds alleged to formpart of the bankruptcy estate. See 11 U.S.C. § 541(a)(1) (property of the estate is determined as ofthe moment the debtor files for bankruptcy). Further, it appears likely that the disputed accounts receivable to which Amedisys claimsownership do formpart of the bankruptcy estate. Amedisys does not dispute that in November 2002,when the NCFE entities filed for bankruptcy, the disputed accounts receivable were located in a JPMorgan collection account held by NPF VI, an NCFE entity. Thus, presumptively, NPF VI holdslegal title to these funds. No party has made a plausible claimthat JP Morgan, rather than the NCFEentities, owns the funds. See Complaint in Louisiana Action at 8, Supp. JA 13 (“JP Morgan . . . hasno claim, title, or other interest in any nonpurchased receivables or overage funds of the AmedisysEntities now held by it.”); JP Morgan’s Application for Order Authorizing Compensation at 11, JA727 (“[T]he Amedisys receivables were owned . . . by NPF VI, which had purchased thosereceivables from Amedisys.”). Finally, the bankruptcy court, in a final order currently on appeal to the United States DistrictCourt for the Southern District of Ohio, has held that the accounts receivable held in the JP Morgancollection account form property of the bankruptcy estate. In granting summary judgment todefendants NCFE and JP Morgan on Amedisys’ claimsin the adversary proceeding, the bankruptcycourt held that the NCFE entities purchased the $7.3 million in accounts receivable fromAmedisys.The bankruptcy court found that although NCFE had never paid Amedisys for the disputed accountsreceivable, this was merely because Amedisys had waived its right under the sale agreement toimmediate payment. The bankruptcy court rejectedwith equal force the argument that either NCFEor JP Morgan held the receivables in an express or constructive trust for Amedisys. The bankruptcycourt noted that NCFE bore merely a contractual duty to pay Amedisys for purchased receivables;NCFE did not hold a fiduciary duty to transfer title in the receivables to Amedisys. Further, thecourt held, JP Morgan was not even in contractual privity with Amedisys; much less did it bear anyfiduciary duty to Amedisys.We do not purport at this time to resolve in a controlling fashion the issues raised in thatappeal. But the bankruptcy court’s determination that the accounts receivable are part of thebankruptcy estate strongly supports the conclusion that the automatic stay was properly enforced.It is the bankruptcy court’s province to identify the property of the bankruptcy estate. Thebankruptcy court, in its summary judgment decision, persuasively marshaled the complex factualrecord in this case to conclude that the accounts receivable whose ownership forms the crux of theLouisiana action, are property of the estate. Reversing the lower courts’ conclusions that theautomatic stay applies, at a time when the bankruptcy court’s determination of the ownership of theaccounts receivable remains a live issue in the summary judgment appeal, would impede thebankruptcy court’s role in managing the bankruptcy case.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 107The bankruptcy court’s holding did rely on one case, C.H. Robinson Co. v. Paris &Sons, 180 F. Supp. 2d 1002(N.D. Iowa 2001), which held that a creditor is required to seek a preliminary injunction in order to expand the scopeof a § 362(a)(1) stay to cover solvent codefendants. However, like Parry, C.H. Robinson did not involve entitlement toproperty allegedly part of the bankruptcy estate. The court’s conclusion was that “the automatic stay under section362(a)(1) of the Bankruptcy Code is not truly automatic when invoked against nondebtor codefendants.” Id. at 1018.The analysis certainly does not preclude the conclusion that a stay against a nondebtor under § 362(a)(3) is trulyautomatic.C.The fact that the Louisiana action did not name NCFE as a defendant does not renderenforcement ofthe automatic stay improper. Amedisys argues that “the automatic stay under section362(a) applies only to the bankrupt debtor,” and therefore that § 362(a) did not support thebankruptcy court’s decision in this case. Appellant’s Br. at 18. To buttress this assertion, Amedisyscites two decisions of this court for the proposition that a bankruptcy court must find unusualcircumstances, justifying a preliminary injunction under 11 U.S.C. § 105(a), in order to extend thescope of a § 362(a)(1) automatic stay to encompass claims against not only a debtor defendant, butalso nondebtor codefendants. See Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993); Parry v.Mohawk Motors of Mich., Inc., 236 F.3d 299, 314-315 (6th Cir. 2001). These cases note that, byextending the stay beyond its statutory terms, the bankruptcy court is not acting under § 362(a), butis instead issuing an order in equity “necessary or appropriate to carry out the provisions of [theBankruptcy Code].” 11 U.S.C. § 105(a); Patton, 8 F.3d at 349. The district court, citing Parry,found that unusual circumstances were present in this case because NCFE, rather than JP Morgan,was the real party in interest in the Louisiana action. Therefore, the district court concluded, thebankruptcy court properly exercised its “necessary or appropriate” powers to issue a § 105(a)preliminary injunction. Amedisys’ argument is not persuasive. The district court appears unnecessarily to haveassumed that the bankruptcy court entered a preliminary injunction extending the automatic staybeyond its statutory terms, rather than merely enforcing the automatic stay as provided by statute.The automatic stay of § 362(a) applies by its terms not only to actions against the debtor, see§ 362(a)(1), but also to actions seeking to obtain property of the bankruptcy estate, see § 362(a)(3).In Patton and Parry, this court found insufficient basis to extendthe automatic stay beyond the termsof § 362(a)(1). In Parry, there was no contention that the automatic stay applied by its terms to anaction against non-debtors; in Patton, the court rejected such a contention because the action did notseek property of the estate. Here, unlike in Patton and Parry, the bankruptcy court determined thatthe automatic stay already covered the action. JA 563-4. As a sister circuit has held, “[A]n actiontaken against a nondebtor which would inevitably have an adverse impact upon the property of theestate must be barred by the [§ 362(a)(3)] automatic stay provision.” Licensing by Paolo, Inc. v.Sinatra (In re Gucci),126 F.3d 380, 392 (2d Cir. 1997) (citing In re 48th St. Steakhouse, Inc., 835F.2d 427, 431 (2d Cir. 1987)). This court’s decision in Patton, 8 F.3d 343, further supports thisconclusion. In Patton, this court analyzed separately the applicability of stays under § 362(a)(1)and under § 362(a)(3). As part of the § 362(a)(1) analysis, the court noted that a debtor mustdemonstrate unusual circumstances in order to extend the automatic stay to nondebtor codefendants.8 F.3d at 349. Under the § 362(a)(3) inquiry, the court merely analyzed whether a judgment againstthe solvent codefendants would actually deplete the bankruptcy estate. Id. The bankruptcy court, in its opinion, stated that it was enforcing the automatic stay, not thatit was exercising its equitable powers under § 105(a).7Further, it held that the Louisiana actionsought a determination that the disputed accounts receivable did not form part of the bankruptcyestate. JA 563. Accepting Amedisys’ argument that the bankruptcy court failed to find unusualcircumstances justifying a preliminary injunction would require an unwarranted limiting of§ 362(a)(3), a subsection that requires application ofthe automatic stay without reference to whether
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 11the debtor is the defendant in the stayed action. Because the Louisiana action seeks to obtainproperty of the bankruptcy estate, we affirm the order enforcing the stay. D.Amedisys’ remaining grounds for asserting that the bankruptcy court improperly stayed theLouisiana action are all rooted in the assumption that the stay constituted a preliminary injunctionunder § 105(a), expanding the automatic stay. Amedisys argues (1) that NCFE failed to initiate anadversary proceeding in order to request a preliminary injunction, and that the enforcement of theautomatic stay was invalid because of this procedural error; (2) that the bankruptcy court failed toconsider the four factors determining whether a preliminary injunction is appropriate; and (3) thatthe bankruptcy court improperly imposed a preponderance-of-the-evidence burden of proof onNCFE, rather than a clear-and-convincing-evidence burden of proof. Appellant’s Br. at 21-28.Amedisys forfeited these arguments by failing to raise them in its appeal brief before the districtcourt. See Thurman v. Yellow Freight Sys., 97 F.3d 833, 835 (6th Cir. 1996) (holding that argumentsnot raised before the district court are waived). Even if these arguments had been properlypreserved, they would nonetheless fail, because the bankruptcy court’s action was supported by theautomatic stay of § 362(a)(3). Normally, a debtor initiates an adversary proceeding in order torequest a § 105(a) preliminary injunction. See Amer. Imaging Servs. v. Eagle-Pitcher Indus., Inc.(In re Eagle-Picher Indus., Inc)., 963 F.2d 855, 857-59 (6th Cir. 1992). On the other hand, a debtoris not required to initiate an adversary proceeding in order to move the bankruptcy court to enforcethe automatic stay. In re LTV Steel Co., Inc., 264 B.R. 455, 462-63 (Bankr. N.D. Ohio 2001).Similarly, as Amedisys concedes, only when the bankruptcy court enjoins an action under § 105(a)must it consider the four preliminary injunction factors, and apply a standard of clear and convincingevidence. Because these arguments rely upon Amedisys’ assertion that § 362(a) did not support thebankruptcy court’s holding, and because we hold, to the contrary, that enforcement of the automaticstay under § 362(a)(3) was proper, the arguments fail.III.For the foregoing reasons, we AFFIRM the judgment of the district court enforcing theautomatic stay in bankruptcy, 11 U.S.C. § 362(a), against the Louisiana action.
'Lockbox accounts'
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The related entities are Amedisys Home Health, Inc. of Alabama; Clinical Arts Home Care Services, Inc.;Central Home Health Care; Togaloo Home Health Agency; North Georgia Home Health Agency; Coosa Valley HomeHealth; Amedisys Home Health, Inc. of Louisiana; Amedisys Home Health, Inc. of North Carolina; Amedisys HomeHealth, Inc. of Oklahoma; Amedisys HomeHealth, Inc. of Tennessee; Amedisys HomeHealth, Inc. of Virginia; SuperiorHome Health Care; Amedisys Northwest Home Health, Inc.; Northwest Home Health; Amedisys Specialized MedicalServices, Inc.; Precision / Amedisys Specialized Medical Services; Amedisys Alternate-Site Infusion Therapy Services,Inc.; Home Health of Alexandria, Inc.; Cornerstone Home Health; Quality Home Health Care, Inc.; PRN, Inc. d/b/aAmedisys Alternate-Site Infusion Therapy Services; and Amedisys Surgery Centers,
L.C._________________OPINION_________________ROGERS, Circuit Judge. Amedisys, Inc., and its related entities 1 appeal an order enforcingthe automatic stay in bankruptcy, 11 U.S.C. § 362(a), against a civil action in which Amedisys isthe plaintiff. National Century Financial Enterprises, Inc. (“NCFE”), the debtor, before itsbankruptcy, supplied financing to the health care industry. NCFE bought accounts receivable fromhospitals and other health care providers. The arrangement shortened the providers’ waiting periodfor payment by insurance companies, Medicare, andMedicaid. Amedisysisa Louisiana corporationsupplying home nursing services. Amedisys participated in a financing plan sponsored by one ofNCFE’s subsidiaries. NCFE and its subsidiaries, including National Premier Financial Services(“NPFS”), NPF VI, and NPF XII (collectively, “the NCFE entities”), filed for Chapter 11bankruptcy in November 2002. In February 2003, Amedisys sued JP Morgan Chase ManhattanBank (“JP Morgan”) in Louisiana, seeking to recover about $7.3 million in accounts receivable heldin a JP Morgan collection account in the name of NPF VI. Upon NCFE’s motion, the bankruptcycourt applied the automatic stay in bankruptcy, 11 U.S.C. § 362(a), to the Louisiana action. Amedisys appealed this decision; the district court affirmed. Because the Louisiana action is an “actto obtain possession of property of the [bankruptcy] estate,” 11 U.S.C. § 362(a)(3), we affirm thebankruptcy court’s and district court’s conclusions that the automatic stay applies.I.The appeal hinges on the questions of (1) whether Amedisys, through the Louisiana action,seeks to obtain possession of accounts receivable funds that NPF VI, an NCFE entity, held in a JPMorgan account; and (2) whether in fact these accounts receivable constitute property of thebankruptcy estate. NCFE is an Ohio Corporation which, until its bankruptcy, was, along with itssubsidiaries, the country’s largest provider of healthcare accounts receivable financing. JA 556.The district court fully described the contractual relationship between Amedisys and the NCFEentities:Amedisys, Inc., and its corporate subsidiaries provide home nursing servicesthroughout the southeastern United States. Amedisys participated in a fundingprogram operated by [NCFE], a company that finances health care providers bypurchasing . . . their accounts receivable at a discount. NCFE purchased thereceivables with funds raised through selling notes that were backed by thereceivables themselves.NCFE created numerous wholly-owned subsidiaries, known as “programs,”for the purpose of issuing notes that were secured by pools of receivables and othercollateral. The two largest such programs were NPF VI, administered by JP MorganChase Bank as indenture trustee, and NPF XII, administered by Bank One, N.A. asindenture trustee. Under the sale and subservice agreements into which NCFEprograms and health care providers entered, receivables would be remitted directly
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 3into lockbox accounts and the NCFE program would advance funds to the provideron a weekly basis in payment of the receivables.Amedysis participated in the NPF VI program, and its accounts receivablewent into lockbox accounts at Huntington National Bank. The lockbox accountswere in the name of [NPFS]—an NCFE entity—and Amedisys or one of itssubsidiaries. Those funds were then swept into a Collection Account at JP Morganin the name of NPF VI. Though accounts receivable went into the CollectionAccount, NPF VI did not purchase every account receivable it collected. Section 6.1of the Sale and Subservice Agreement provided:The Purchaser and the Seller acknowledge that certain amountsdeposited in the Collection Account may relate to Receivables otherthan Purchased Receivables and that such amounts continue to beowned by the Seller. All such amounts shall be returned to the Sellerin accordance with Section 6.3.The amounts in the Collection Account representing receivables that NPF VI did notpurchase were called “overage funds.” The Trustee (JP Morgan) was supposed totransfer such funds to Amedisys on NPFS’s instruction. Amedisys states that itnormally would receive electronic notice of the amount of any overage funds onTuesdays. In late October 2002, Amedisys became concerned after hearing reports thatNCFE was experiencing financial difficulties. On the final Thursday of the month,Amedisys did not receive the overage funds it expected NPF VI would transfer to it.On November 6, 2002, the Chief Financial Officer of Amedisys performed anaccounting and determined that NPF VI owedAmedisysapproximately $7.3 million.Dist. Ct. Op. at 3–5, JA 515–517. JP Morgan’s duties as trustee of the collection accounts wereoutlined in Section 6.5 of the Sale and Subservice Agreement (“the sale agreement”), whichprovided, “On each purchase date for [Amedisys] . . ., [NPF VI] shall deliver to [JP Morgan] awritten statement setting forth the amount to be paid to [Amedisys] from the purchased account inrespect of the purchased receivables and [JP Morgan] shall make such payment in accordance with[NPF VI’s] instructions.” Supp. JA 13. JP Morgan was labeled a trustee in this arrangement onlybecause of its fiduciary duty toward holders of the notes. The bankruptcy court, in a differentdecision from the one appealed here, has determined that JP Morgan bore no fiduciary duty towardAmedisys.On November 8, 2002, Amedisys sued JP Morgan, NPF VI, NPFS, NCFE, and LancePoulsen, the president of NFP VI, in the United States District Court for the Southern District ofOhio (“the Ohio action”). In the complaint, Amedisys demanded the return of the $7.3 million inaccounts receivable held in the JP Morgan collection account. On November 18, 2002, NCFE and its subsidiaries filed for chapter 11 bankruptcy. OnDecember 19, 2002, the district court transferred the Ohio action to the bankruptcy court, as anadversary proceeding in the bankruptcy case. On January 16, 2004, Amedisys filed a secondamended complaint in the bankruptcy court naming JP Morgan, NPF VI, NCFE, and NPFS asdefendants, asserting the following claims:I.Actual controversies exist between Amedisys and JP Morgan, and betweenAmedisys and NCFE, concerning Amedisys’ right to have a total of morethan $7.3 million in accounts receivable returned to it. Amedisys seeks adeclaratory judgment holding that the sale agreement and trust indenture
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 42The parties disagree over whether, as NCFE argues, NPF VI had earmarked the $7.3 million in accountsreceivable for purchase, and had simply not yet paid Amedisys for the accounts; or whether, as Amedisys argues, theaccounts were not designated for purchase, but had merely been swept into the JP Morgan account. See Appellant’s Br.at 28; Appellee’s Br. at 20.represent one contractual relationship among Amedisys, JP Morgan, andNCFE. II.Amedisys seeks a declaratory judgment stating that JP Morgan, as an escrowagent, owed fiduciary obligations to Amedisys and violated thoseobligations. III.The $7.3 million in accounts receivable is subject to an express trustestablished by the sale agreement.IV.Amedisys’ cash in the possession or control of the NCFE entities,approximately $7.3 million, is an unjust enrichment occurring by mistake orfraud. The funds should be impressed with a constructive trust requiring thatthe funds be returned to Amedisys. V.The $7.3 million in accounts receivable is subject to a resulting trust.VI.Amedisys is entitled to an immediate turnover of its property under 11 U.S.C.§ 542.VII.NCFE breached the Amedisys-NCFE sales agreement by failing to returntimely and properly non-purchased receivables. NCFE also breached theagreement by failing to maintain a detailed accounting record. VIII. Amedisys is entitled to specific performance of the agreement mandatingNCFE to remit $7,337,569 to Amedisys.IX.NCFE owed to Amedisys a fiduciary duty pursuant to the sale agreement toensure that Amedisys’ interests in the accounts were properly protected.NCFE breached this duty.X.NCFE repeatedly made intentional misrepresentations to Amedisys, statingthat it would ensure that Amedisys’ funds would be timely released to it.Amedisys justifiably relied on these misrepresentations and has been directlyinjured as a result of the reliance.On May 27, 2004, the bankruptcy court granted NCFE’s and JP Morgan’s motions forsummary judgment as to all counts in the adversary proceeding except for Count VII (alleging thatNCFE breached the sale agreement). The bankruptcy court determined that although NCFE did notpay for the disputed $7.3 million in accounts receivable, it “did actually purchase Amedisys’saccounts receivable.” Therefore, Amedisys would have only a “general contractual claim [againstNCFE] for nonpayment”; Amedisys’ assertions that it owned the accounts receivable at the time ofNCFE’s bankruptcy, and therefore that the $7.3 million in the JP Morgan collection account was notpart of the bankruptcy estate, were unfounded.2By joint agreement of the parties, Count VII wasdismissed on April 14, 2005. At this point, the bankruptcy court’s grant of partial summaryjudgment became a final, appealable order. Amedisys filed a notice of appeal on April 22, 2005,and the appeal is now before the United States District Court for the Southern District of Ohio.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 53The parties noted at oral argument that the action has since been consolidated into a multidistrict litigation inthe United States District Court for the Southern District of Ohio. 4The motion argued, inter alia, that the Louisiana action “plainly violates section 362(a)(3) of the BankruptcyCode.” JA 576. The prayer for relief sought an order (i) finding that the automatic stay has been violated by the Louisiana action; (ii) declaring the filingof the Louisiana action to be invalid and void, as violative of the automatic stay; (iii) directing theAmedisys Entities to immediately cease and desist from any further prosecution of the LouisianaAction, absent further order of this court. . . .On February 21, 2003, Amedisys brought a state court action in Louisiana against JPMorgan, certain JP Morgan employees, and NCFE’s insurer (“the Louisiana action”). JA 559. OnMarch 24, 2003, the defendants removed the action to the United States District Court for theMiddle District of Louisiana.3Amedisys asserted the following claims in the Louisiana action: I.The sale agreement between NPF VI and Amedisys created an impliedcontract relating to the course of dealing among JP Morgan, NPF VI, andAmedisys. Amedisys seeks specific performance, including “refund of thenonpurchased receivables and overage funds.” II.Amedisys was a third-party beneficiary of the trust indenture between NPFVI and JP Morgan. JP Morgan had a duty to return to Amedisys “receivablesand overage funds that were never purchased by NPF VI in the first place.”III.JP Morgan breached its fiduciary duty to Amedisys to ensure that Amedisys’rights in the accounts at JP Morgan were adequately protected. IV.JP Morgan intentionally misrepresented the truth to Amedisys when itclaimed that it had taken all actions necessary to release the $7.3 million inaccounts receivable. V.Amedisys detrimentally relied on JP Morgan’s agreement to comply withNPF VI’s instructions to wire Amedisys’ funds to it. Amedisys is thereforeentitled to all damages attributable to JP Morgan for Amedisys’ detrimentalreliance. VI.JP Morgan wrongfully converted the funds owned by Amedisys when itrefused to remit the funds following Amedisys’ request. Amedisys is“entitled to any and all damages resulting in [sic] the conversion of itsfunds.” VII.“[T]he funds owned by the Amedisys Entities, over which [JP Morgan] hasdominion and control, are impressed with a constructive trust in favor ofAmedisys.” VIII. JP Morgan’s conduct violated the Louisiana Fair Trade Practices Act. IX.JP Morgan was unjustly enriched by its wrongful retention of the $7.3million in accounts receivable belonging to Amedisys. Complaint at 17–23, Supp. JA 22–28. On June 23, 2003, NCFE moved the bankruptcy court for an order enforcing the BankruptcyAct’s automatic stay, 11 U.S.C. § 362(a), against the Louisiana action. JA 569–580.4The motion
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 6JA 579-80.alleged, “The actions taken by the Amedisys Entities in connection with the commencement of theLouisiana Action plainly suggest a coordinated strategy to forum shop and to avoid the applicationof the automatic stay.” JA 575. NCFE noted that Amedisys’ claims in the Louisiana action werevirtually identical to those in the Ohio action, save for the omission of NCFE and its subsidiaries asdefendants in the Louisiana action. Id. The bankruptcy court, in an opinion dated August 19, 2003,ordered that Amedisys immediately cease and desist from any further prosecution of the Louisianaaction. The court gave two reasons. First, all of the claims in Amedisys’s complaint “require adetermination of ownership of funds alleged to be [NCFE’s] funds.” JA 564. Therefore, a findingfor Amedisys would result in the “automatic creation of liability against the debtor because of ajudgment against [JP Morgan].” Id. Second, the court found, “the involvement in the LouisianaAction effectively will act to diminish this bankruptcy estate by causing a duplication of efforts anda waste of judicial time and resources.” JA 564.Amedisys appealed the bankrupty court’s determination to the United States District Courtfor the Southern District of Ohio. The district court affirmed the bankruptcy court. The districtcourt, noting that “it is the bankruptcy court’s province to determine whether [the $7.3 million inaccounts receivable] is part of the estate,” concluded that the Louisiana action amounted to no morethan an attempt to prove that Amedisys owned the accounts at the time of NCFE’s bankruptcypetition. Assuming that Sixth Circuit precedent requires “unusual circumstances” in order to extendthe scope of the automatic stay to an action against a non-debtor, the court found that requirementmet here, because NCFE constituted the real party in interest in the Louisiana action. JA 541.Amedisys timely appealed the district court’s decision.II.Weaffirmthe decision of the district court. The bankruptcy court had jurisdiction to enforcethe automatic stay against the Louisiana action because, as Amedisys concedes in its brief, themotion to enforce constitutes a “core proceeding” as defined in 28 U.S.C. § 157(b)(2). Further, thebankruptcy court correctly concluded that the automatic stay in bankruptcy, 11 U.S.C. § 362(a),applies to the Louisiana action.A.Amedisys first argues that, in globally staying the Louisiana action, the bankruptcy courtexceeded its jurisdiction. The bankruptcy court held that it had jurisdiction to enforce the staybecause the matter was a core proceeding. JA 554. Amedisys argues that in order for jurisdictionto be proper, the bankruptcy court was required to find that the Louisiana action was “related to” thebankruptcy case. See 28 U.S.C. § 1334(b). Further, Amedisys urges, in the event of a judgmentagainst JP Morgan in the Louisiana action, JP Morgan likely would not obtain indemnity fromNCFE or its subsidiaries; therefore the Louisiana action is not related to the bankruptcy case. The bankruptcy court had jurisdiction to enforce the stay, because NCFE’s motion to enforceconstituted a core proceeding. 28 U.S.C. § 1334(b) provides exclusive district court jurisdictionover “all cases under title 11,” and concurrent jurisdiction over “civil proceedings arising under title11, or arising in or related to cases under title 11.” In turn, 28 U.S.C. § 157(a) permits district courtsto refer bankruptcy cases brought under their original jurisdiction to bankruptcy courts. Section157(b) of the samechapter defines “core proceedings arising under title 11, or arising in a case undertitle 11” to include “matters concerning the administration of the estate,” “motions to terminate,annul, or modify the automatic stay,” and “other proceedings affecting the liquidation of assets of
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 75Amedisys argues that in order to find that the bankruptcy court had jurisdiction, this court must analyzewhether the subject matter of the Louisiana action is “related to” the bankruptcy case. This would be the proper inquiryin evaluating whether the Louisiana action itself could be transferred to the bankruptcy court, in order for the bankruptcycourt to hear the claims and submit proposed findings of fact to the district court. 28 U.S.C. § 157(c)(1); cf. Lindsey v.O’Brien (In re Dow Corning), 86 F.3d 482, 489-91 (6th Cir. 1996) (setting forth factors to be used in determiningwhether a civil case is sufficiently “related to” the bankruptcy case to give the district court subject-matter jurisdictionover state law tort claims pending against nondebtor defendants). Here, because this appeal concerns only theenforcement of the automatic stay, and because the parties concede that a motion to enforce the stay constitutes a coreproceeding, it is unnecessary to assess the relatedness of the Louisiana action to the bankruptcy case. the estate or the adjustment of the debtor-creditor or the equity security holder relationship. . . .”28 U.S.C. § 157(b)(2)(A), (G), (O).Amedisys concedes in its jurisdictional statement,“Thismatter isa core proceeding pursuantto § 157(b)(2)(G).” Appellant’s Br. at 1. Therefore, NCFE’s motion to enforce the automatic stayby definition met a narrower jurisdictional test than the “related to” basis for jurisdiction over non-core proceedings. See In re Combustion Eng’g, Inc., 391 F.3d 190, 225-26 (3d Cir. 2004) (“Casesunder title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 arereferred to as ‘core’ proceedings; whereas proceedings ‘related to’ a case under title 11 are referredto as ‘non-core’ proceedings.”).5NCFE’s motion to enforce arose under title 11, and thebankruptcy court therefore had jurisdiction to enforce the stay.B.Amedisys argues that the Louisiana action does not fall within the automatic stay provisionsof 11 U.S.C. § 362(a). In order to enjoin the Louisiana action against JP Morgan, Amedisys argues,the bankruptcy court necessarily relied upon its equitable powers under 11 U.S.C. § 105(a) to issueorders “necessary or appropriate to carry out the provisions of [chapter 11].” Amedisys also arguesthat the bankruptcy court failed to identify “unusual circumstances” justifying a preliminaryinjunction under § 105(a), and that NCFE improperly failed to initiate an adversary proceeding toobtain an injunction under § 105(a). These arguments lack merit, because the stay fell within§ 362(a). The bankruptcy court observed the correct procedures in enforcing the stay.The courts below properly held that the Louisiana action is covered by the automatic stayin bankruptcy. Under 11 U.S.C. § 362(a), a bankruptcy petition operates as a stay, applicable to all entities, of . . . (1) the commencement orcontinuation . . . of a judicial, administrative, or other action or proceeding againstthe debtor that was or could have been commenced before the commencement of thecase under this title, or to recover a claim against the debtor that arose before thecommencement of the case under this title; . . . (3) any act to obtain possession ofproperty of the estate or of property from the estate or to exercise control overproperty of the estate.“Property of the estate” includes “all legal or equitable interests of the debtor in the property as ofthe commencement of the case.” 11 U.S.C. § 541(a)(1). The bankruptcy court also has the authorityto “issue any order, process, or judgment that is necessary or appropriate to carry out the provisionsof [the Bankruptcy Code].” Id. § 105(a).Because the Louisiana action seeks to obtain the accounts receivable held in a JP Morganaccount in the name of NPF VI, and because the accounts receivable likely constitute property ofthe bankruptcy estate, the bankruptcy court properly enforced the automatic stay under 11 U.S.C.§ 362(a)(3). The district court held that “the Louisiana complaint, though naming non-debtor JPMorgan as a defendant, seeks a determination that the money in the Debtors’ bank accounts belongs
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 86It is unclear whether, if Amedisys were allowed to proceed with its constructive trust claim in the Louisianaaction and prevailed on it, such a judgment would result in the exclusion of the disputed accounts receivable from thebankruptcy estate. This court has criticized constructive trust claims in the bankruptcy context as a backdoor means fora creditor to avoid waiting for ratable distribution of the estate, by characterizing common contract claims as fraud. SeeXL/Datacomp, Inc. v. Wilson (In re Omegas Group), 16 F.3d 1443, 1449-50 (6th Cir. 1994). Since constructive trustclaimsinvolve assertions of fraud, an allegedly defrauded creditor should more properly initiate an adversary proceedingto except from discharge, under 11 U.S.C. § 523, a debt procured by fraud. In re Omegas Group, 16 F.3d at 1451. Onlyif a creditor has obtained prepetition a judgment imposing a constructive trust, see In re Omegas Group, 16 F.3d at 1449,or if state law clearly gave the creditor, prepetition, a right to conveyance of the property, see In re Morris, 260 F.3d at668, may the property be excluded from the bankruptcy estate. A judgment in Amedisys’ favor in the Louisiana actionwould not fall under the former category, but could conceivably fall under the latter one. Notably, however, in neitherOmegas Group nor Morris did the creditor seek to make an end run around the bankruptcy process to obtain aconstructive trust judgment. In Omegas Group, the creditor initiated an adversary proceeding to assert the constructivetrust claim; in Morris, the creditor moved the bankruptcy court to lift the automatic stay in order for the creditor tocomplete state court proceedings on a constructive trust claim against the debtor. In re Omegas Group, 16 F.3d at 1446;In re Morris, 260 F.3d at 659. It is unnecessary to determine whether Amedisys, if it prevailed in the Louisiana action,could successfully obtain exclusion of the accounts receivable from the bankruptcy estate. A separate civil action forconstructive trust, initiated postpetition, is an inappropriate forum for Amedisys’ assertion that it has a rightful claim toto Amedisys.” JA 525. The bankruptcy court similarly concluded that Amedisys, through theLouisiana action, sought to obtain ownership rights of the disputed accounts receivable. Amedisys,on appeal, contends that these holdings were misguided, because the Louisiana action concerns onlyJP Morgan’s failure to follow NPFS’s instructions to remit $7.3 million to Amedisys. Amedisysargues that it merely seeks money damages from JP Morgan, because JP Morgan breached a dutyto transfer the property to Amedisys.This argument is unpersuasive. While NCFE is a named defendant only in the adversaryproceeding, and not in the Louisiana action, this is irrelevant, because Amedisys in both actionsseeks to obtain possession of the disputed accounts receivable. Count I of the Louisiana actionasserts that the Amedisys-NCFE sales agreement created duties in JP Morgan and seeks specificperformance of that agreement, including “refund of the nonpurchased receivables.” Supp. JA 25.Similarly, Count II avers that Amedisys is a third-party beneficiary of the JP Morgan-NCFE trustindenture, and that therefore JP Morgan has a duty to return the receivables to Amedisys. Count VIIrequests the court to impress the funds in the collection account with a constructive trust in favorof Amedisys. Supp. JA 26. The district court correctly found that while only some counts in thecomplaint pray the court to order JP Morgan to remit the disputed accounts receivable to Amedisys,every count in the complaint requires the court to adjudicate whether Amedisys had a rightful claimto that property. Further, the district court properly concluded that Amedisys’ offer voluntarily tostay prosecution of Counts I and VII of the Lousiana action, would not cure the violation of§ 362(a). As the district court aptly noted, unless Amedisys voluntarily dismissed the allegations inits complaint seeking refund of the accounts receivable, any judgment in Amedisys’ favor in theLouisiana action would potentially deplete the property of the bankruptcy estate. JA 524.The district court properly concluded that in the Louisiana action, Amedisys used aconstructive trust theory to “assert[] dominion over money in the Debtors’ accounts.” JA 523. IfAmedisys succeeded on a constructive trust theory, the value of the bankruptcy estate would bereduced. This is because property in which the debtor holds legal but not equitable title as of thecommencement of the case—for example, property impressed with a constructive trust under statelaw—is property of the estate only to the extent of the debtor’s legal title. 11 U.S.C. § 541(d); seePoss v. Morris (In re Morris), 260 F.3d 654, 666 (6th Cir. 2001) (holding that a creditor’s mereclaimof a constructive trust does not constitute an equitable interest in property otherwise belongingto the estate; instead, “state law [must have] impressed property with a constructive trust prior to itsentry into bankruptcy”);cf. Stevenson v. J.C. Bradford & Co. (In re Cannon), 277 F.3d 838, 849 (6thCir. 2002) (quoting Begier v. IRS, 496 U.S. 53, 59 (1990)) (holding that the § 541(a) definition of“property of the estate” excludes property held in trust).6Amedisys contends that its constructive
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 9the funds held in bank accounts owned by the NCFE entities.trust claim concerns only its prebankruptcy ownership of the disputed accounts receivable, and thatthis issue is entirely independent of whether the funds currently form part of the bankruptcy estate.This argument is meritless, because the issues are not independent. Whatever determination is madein the Louisiana action concerning the prebankruptcy ownership of the accounts receivable willnecessarily be relevant to postbankruptcy ownership as well. In the Louisiana action, Amedisysalleges that during the period of November 7-12, 2002, JP Morgan wrongfully failed to comply withNCFE’s instructions to refund to Amedisys the disputed amount. Supp. JA 20-21. The fact that thecomplaint asserts wrongs occurring before the NCFE entities filed for bankruptcy on November 18,2002, does not alter our conclusion that the complaint demands the return of funds alleged to formpart of the bankruptcy estate. See 11 U.S.C. § 541(a)(1) (property of the estate is determined as ofthe moment the debtor files for bankruptcy). Further, it appears likely that the disputed accounts receivable to which Amedisys claimsownership do formpart of the bankruptcy estate. Amedisys does not dispute that in November 2002,when the NCFE entities filed for bankruptcy, the disputed accounts receivable were located in a JPMorgan collection account held by NPF VI, an NCFE entity. Thus, presumptively, NPF VI holdslegal title to these funds. No party has made a plausible claimthat JP Morgan, rather than the NCFEentities, owns the funds. See Complaint in Louisiana Action at 8, Supp. JA 13 (“JP Morgan . . . hasno claim, title, or other interest in any nonpurchased receivables or overage funds of the AmedisysEntities now held by it.”); JP Morgan’s Application for Order Authorizing Compensation at 11, JA727 (“[T]he Amedisys receivables were owned . . . by NPF VI, which had purchased thosereceivables from Amedisys.”). Finally, the bankruptcy court, in a final order currently on appeal to the United States DistrictCourt for the Southern District of Ohio, has held that the accounts receivable held in the JP Morgancollection account form property of the bankruptcy estate. In granting summary judgment todefendants NCFE and JP Morgan on Amedisys’ claimsin the adversary proceeding, the bankruptcycourt held that the NCFE entities purchased the $7.3 million in accounts receivable fromAmedisys.The bankruptcy court found that although NCFE had never paid Amedisys for the disputed accountsreceivable, this was merely because Amedisys had waived its right under the sale agreement toimmediate payment. The bankruptcy court rejectedwith equal force the argument that either NCFEor JP Morgan held the receivables in an express or constructive trust for Amedisys. The bankruptcycourt noted that NCFE bore merely a contractual duty to pay Amedisys for purchased receivables;NCFE did not hold a fiduciary duty to transfer title in the receivables to Amedisys. Further, thecourt held, JP Morgan was not even in contractual privity with Amedisys; much less did it bear anyfiduciary duty to Amedisys.We do not purport at this time to resolve in a controlling fashion the issues raised in thatappeal. But the bankruptcy court’s determination that the accounts receivable are part of thebankruptcy estate strongly supports the conclusion that the automatic stay was properly enforced.It is the bankruptcy court’s province to identify the property of the bankruptcy estate. Thebankruptcy court, in its summary judgment decision, persuasively marshaled the complex factualrecord in this case to conclude that the accounts receivable whose ownership forms the crux of theLouisiana action, are property of the estate. Reversing the lower courts’ conclusions that theautomatic stay applies, at a time when the bankruptcy court’s determination of the ownership of theaccounts receivable remains a live issue in the summary judgment appeal, would impede thebankruptcy court’s role in managing the bankruptcy case.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 107The bankruptcy court’s holding did rely on one case, C.H. Robinson Co. v. Paris &Sons, 180 F. Supp. 2d 1002(N.D. Iowa 2001), which held that a creditor is required to seek a preliminary injunction in order to expand the scopeof a § 362(a)(1) stay to cover solvent codefendants. However, like Parry, C.H. Robinson did not involve entitlement toproperty allegedly part of the bankruptcy estate. The court’s conclusion was that “the automatic stay under section362(a)(1) of the Bankruptcy Code is not truly automatic when invoked against nondebtor codefendants.” Id. at 1018.The analysis certainly does not preclude the conclusion that a stay against a nondebtor under § 362(a)(3) is trulyautomatic.C.The fact that the Louisiana action did not name NCFE as a defendant does not renderenforcement ofthe automatic stay improper. Amedisys argues that “the automatic stay under section362(a) applies only to the bankrupt debtor,” and therefore that § 362(a) did not support thebankruptcy court’s decision in this case. Appellant’s Br. at 18. To buttress this assertion, Amedisyscites two decisions of this court for the proposition that a bankruptcy court must find unusualcircumstances, justifying a preliminary injunction under 11 U.S.C. § 105(a), in order to extend thescope of a § 362(a)(1) automatic stay to encompass claims against not only a debtor defendant, butalso nondebtor codefendants. See Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993); Parry v.Mohawk Motors of Mich., Inc., 236 F.3d 299, 314-315 (6th Cir. 2001). These cases note that, byextending the stay beyond its statutory terms, the bankruptcy court is not acting under § 362(a), butis instead issuing an order in equity “necessary or appropriate to carry out the provisions of [theBankruptcy Code].” 11 U.S.C. § 105(a); Patton, 8 F.3d at 349. The district court, citing Parry,found that unusual circumstances were present in this case because NCFE, rather than JP Morgan,was the real party in interest in the Louisiana action. Therefore, the district court concluded, thebankruptcy court properly exercised its “necessary or appropriate” powers to issue a § 105(a)preliminary injunction. Amedisys’ argument is not persuasive. The district court appears unnecessarily to haveassumed that the bankruptcy court entered a preliminary injunction extending the automatic staybeyond its statutory terms, rather than merely enforcing the automatic stay as provided by statute.The automatic stay of § 362(a) applies by its terms not only to actions against the debtor, see§ 362(a)(1), but also to actions seeking to obtain property of the bankruptcy estate, see § 362(a)(3).In Patton and Parry, this court found insufficient basis to extendthe automatic stay beyond the termsof § 362(a)(1). In Parry, there was no contention that the automatic stay applied by its terms to anaction against non-debtors; in Patton, the court rejected such a contention because the action did notseek property of the estate. Here, unlike in Patton and Parry, the bankruptcy court determined thatthe automatic stay already covered the action. JA 563-4. As a sister circuit has held, “[A]n actiontaken against a nondebtor which would inevitably have an adverse impact upon the property of theestate must be barred by the [§ 362(a)(3)] automatic stay provision.” Licensing by Paolo, Inc. v.Sinatra (In re Gucci),126 F.3d 380, 392 (2d Cir. 1997) (citing In re 48th St. Steakhouse, Inc., 835F.2d 427, 431 (2d Cir. 1987)). This court’s decision in Patton, 8 F.3d 343, further supports thisconclusion. In Patton, this court analyzed separately the applicability of stays under § 362(a)(1)and under § 362(a)(3). As part of the § 362(a)(1) analysis, the court noted that a debtor mustdemonstrate unusual circumstances in order to extend the automatic stay to nondebtor codefendants.8 F.3d at 349. Under the § 362(a)(3) inquiry, the court merely analyzed whether a judgment againstthe solvent codefendants would actually deplete the bankruptcy estate. Id. The bankruptcy court, in its opinion, stated that it was enforcing the automatic stay, not thatit was exercising its equitable powers under § 105(a).7Further, it held that the Louisiana actionsought a determination that the disputed accounts receivable did not form part of the bankruptcyestate. JA 563. Accepting Amedisys’ argument that the bankruptcy court failed to find unusualcircumstances justifying a preliminary injunction would require an unwarranted limiting of§ 362(a)(3), a subsection that requires application ofthe automatic stay without reference to whether
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 11the debtor is the defendant in the stayed action. Because the Louisiana action seeks to obtainproperty of the bankruptcy estate, we affirm the order enforcing the stay. D.Amedisys’ remaining grounds for asserting that the bankruptcy court improperly stayed theLouisiana action are all rooted in the assumption that the stay constituted a preliminary injunctionunder § 105(a), expanding the automatic stay. Amedisys argues (1) that NCFE failed to initiate anadversary proceeding in order to request a preliminary injunction, and that the enforcement of theautomatic stay was invalid because of this procedural error; (2) that the bankruptcy court failed toconsider the four factors determining whether a preliminary injunction is appropriate; and (3) thatthe bankruptcy court improperly imposed a preponderance-of-the-evidence burden of proof onNCFE, rather than a clear-and-convincing-evidence burden of proof. Appellant’s Br. at 21-28.Amedisys forfeited these arguments by failing to raise them in its appeal brief before the districtcourt. See Thurman v. Yellow Freight Sys., 97 F.3d 833, 835 (6th Cir. 1996) (holding that argumentsnot raised before the district court are waived). Even if these arguments had been properlypreserved, they would nonetheless fail, because the bankruptcy court’s action was supported by theautomatic stay of § 362(a)(3). Normally, a debtor initiates an adversary proceeding in order torequest a § 105(a) preliminary injunction. See Amer. Imaging Servs. v. Eagle-Pitcher Indus., Inc.(In re Eagle-Picher Indus., Inc)., 963 F.2d 855, 857-59 (6th Cir. 1992). On the other hand, a debtoris not required to initiate an adversary proceeding in order to move the bankruptcy court to enforcethe automatic stay. In re LTV Steel Co., Inc., 264 B.R. 455, 462-63 (Bankr. N.D. Ohio 2001).Similarly, as Amedisys concedes, only when the bankruptcy court enjoins an action under § 105(a)must it consider the four preliminary injunction factors, and apply a standard of clear and convincingevidence. Because these arguments rely upon Amedisys’ assertion that § 362(a) did not support thebankruptcy court’s holding, and because we hold, to the contrary, that enforcement of the automaticstay under § 362(a)(3) was proper, the arguments fail.III.For the foregoing reasons, we AFFIRM the judgment of the district court enforcing theautomatic stay in bankruptcy, 11 U.S.C. § 362(a), against the Louisiana action.
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The related entities are Amedisys Home Health, Inc. of Alabama; Clinical Arts Home Care Services, Inc.;Central Home Health Care; Togaloo Home Health Agency; North Georgia Home Health Agency; Coosa Valley HomeHealth; Amedisys Home Health, Inc. of Louisiana; Amedisys Home Health, Inc. of North Carolina; Amedisys HomeHealth, Inc. of Oklahoma; Amedisys HomeHealth, Inc. of Tennessee; Amedisys HomeHealth, Inc. of Virginia; SuperiorHome Health Care; Amedisys Northwest Home Health, Inc.; Northwest Home Health; Amedisys Specialized MedicalServices, Inc.; Precision / Amedisys Specialized Medical Services; Amedisys Alternate-Site Infusion Therapy Services,Inc.; Home Health of Alexandria, Inc.; Cornerstone Home Health; Quality Home Health Care, Inc.; PRN, Inc. d/b/aAmedisys Alternate-Site Infusion Therapy Services; and Amedisys Surgery Centers,
L.C._________________OPINION_________________ROGERS, Circuit Judge. Amedisys, Inc., and its related entities 1 appeal an order enforcingthe automatic stay in bankruptcy, 11 U.S.C. § 362(a), against a civil action in which Amedisys isthe plaintiff. National Century Financial Enterprises, Inc. (“NCFE”), the debtor, before itsbankruptcy, supplied financing to the health care industry. NCFE bought accounts receivable fromhospitals and other health care providers. The arrangement shortened the providers’ waiting periodfor payment by insurance companies, Medicare, andMedicaid. Amedisysisa Louisiana corporationsupplying home nursing services. Amedisys participated in a financing plan sponsored by one ofNCFE’s subsidiaries. NCFE and its subsidiaries, including National Premier Financial Services(“NPFS”), NPF VI, and NPF XII (collectively, “the NCFE entities”), filed for Chapter 11bankruptcy in November 2002. In February 2003, Amedisys sued JP Morgan Chase ManhattanBank (“JP Morgan”) in Louisiana, seeking to recover about $7.3 million in accounts receivable heldin a JP Morgan collection account in the name of NPF VI. Upon NCFE’s motion, the bankruptcycourt applied the automatic stay in bankruptcy, 11 U.S.C. § 362(a), to the Louisiana action. Amedisys appealed this decision; the district court affirmed. Because the Louisiana action is an “actto obtain possession of property of the [bankruptcy] estate,” 11 U.S.C. § 362(a)(3), we affirm thebankruptcy court’s and district court’s conclusions that the automatic stay applies.I.The appeal hinges on the questions of (1) whether Amedisys, through the Louisiana action,seeks to obtain possession of accounts receivable funds that NPF VI, an NCFE entity, held in a JPMorgan account; and (2) whether in fact these accounts receivable constitute property of thebankruptcy estate. NCFE is an Ohio Corporation which, until its bankruptcy, was, along with itssubsidiaries, the country’s largest provider of healthcare accounts receivable financing. JA 556.The district court fully described the contractual relationship between Amedisys and the NCFEentities:Amedisys, Inc., and its corporate subsidiaries provide home nursing servicesthroughout the southeastern United States. Amedisys participated in a fundingprogram operated by [NCFE], a company that finances health care providers bypurchasing . . . their accounts receivable at a discount. NCFE purchased thereceivables with funds raised through selling notes that were backed by thereceivables themselves.NCFE created numerous wholly-owned subsidiaries, known as “programs,”for the purpose of issuing notes that were secured by pools of receivables and othercollateral. The two largest such programs were NPF VI, administered by JP MorganChase Bank as indenture trustee, and NPF XII, administered by Bank One, N.A. asindenture trustee. Under the sale and subservice agreements into which NCFEprograms and health care providers entered, receivables would be remitted directly
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 3into lockbox accounts and the NCFE program would advance funds to the provideron a weekly basis in payment of the receivables.Amedysis participated in the NPF VI program, and its accounts receivablewent into lockbox accounts at Huntington National Bank. The lockbox accountswere in the name of [NPFS]—an NCFE entity—and Amedisys or one of itssubsidiaries. Those funds were then swept into a Collection Account at JP Morganin the name of NPF VI. Though accounts receivable went into the CollectionAccount, NPF VI did not purchase every account receivable it collected. Section 6.1of the Sale and Subservice Agreement provided:The Purchaser and the Seller acknowledge that certain amountsdeposited in the Collection Account may relate to Receivables otherthan Purchased Receivables and that such amounts continue to beowned by the Seller. All such amounts shall be returned to the Sellerin accordance with Section 6.3.The amounts in the Collection Account representing receivables that NPF VI did notpurchase were called “overage funds.” The Trustee (JP Morgan) was supposed totransfer such funds to Amedisys on NPFS’s instruction. Amedisys states that itnormally would receive electronic notice of the amount of any overage funds onTuesdays. In late October 2002, Amedisys became concerned after hearing reports thatNCFE was experiencing financial difficulties. On the final Thursday of the month,Amedisys did not receive the overage funds it expected NPF VI would transfer to it.On November 6, 2002, the Chief Financial Officer of Amedisys performed anaccounting and determined that NPF VI owedAmedisysapproximately $7.3 million.Dist. Ct. Op. at 3–5, JA 515–517. JP Morgan’s duties as trustee of the collection accounts wereoutlined in Section 6.5 of the Sale and Subservice Agreement (“the sale agreement”), whichprovided, “On each purchase date for [Amedisys] . . ., [NPF VI] shall deliver to [JP Morgan] awritten statement setting forth the amount to be paid to [Amedisys] from the purchased account inrespect of the purchased receivables and [JP Morgan] shall make such payment in accordance with[NPF VI’s] instructions.” Supp. JA 13. JP Morgan was labeled a trustee in this arrangement onlybecause of its fiduciary duty toward holders of the notes. The bankruptcy court, in a differentdecision from the one appealed here, has determined that JP Morgan bore no fiduciary duty towardAmedisys.On November 8, 2002, Amedisys sued JP Morgan, NPF VI, NPFS, NCFE, and LancePoulsen, the president of NFP VI, in the United States District Court for the Southern District ofOhio (“the Ohio action”). In the complaint, Amedisys demanded the return of the $7.3 million inaccounts receivable held in the JP Morgan collection account. On November 18, 2002, NCFE and its subsidiaries filed for chapter 11 bankruptcy. OnDecember 19, 2002, the district court transferred the Ohio action to the bankruptcy court, as anadversary proceeding in the bankruptcy case. On January 16, 2004, Amedisys filed a secondamended complaint in the bankruptcy court naming JP Morgan, NPF VI, NCFE, and NPFS asdefendants, asserting the following claims:I.Actual controversies exist between Amedisys and JP Morgan, and betweenAmedisys and NCFE, concerning Amedisys’ right to have a total of morethan $7.3 million in accounts receivable returned to it. Amedisys seeks adeclaratory judgment holding that the sale agreement and trust indenture
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 42The parties disagree over whether, as NCFE argues, NPF VI had earmarked the $7.3 million in accountsreceivable for purchase, and had simply not yet paid Amedisys for the accounts; or whether, as Amedisys argues, theaccounts were not designated for purchase, but had merely been swept into the JP Morgan account. See Appellant’s Br.at 28; Appellee’s Br. at 20.represent one contractual relationship among Amedisys, JP Morgan, andNCFE. II.Amedisys seeks a declaratory judgment stating that JP Morgan, as an escrowagent, owed fiduciary obligations to Amedisys and violated thoseobligations. III.The $7.3 million in accounts receivable is subject to an express trustestablished by the sale agreement.IV.Amedisys’ cash in the possession or control of the NCFE entities,approximately $7.3 million, is an unjust enrichment occurring by mistake orfraud. The funds should be impressed with a constructive trust requiring thatthe funds be returned to Amedisys. V.The $7.3 million in accounts receivable is subject to a resulting trust.VI.Amedisys is entitled to an immediate turnover of its property under 11 U.S.C.§ 542.VII.NCFE breached the Amedisys-NCFE sales agreement by failing to returntimely and properly non-purchased receivables. NCFE also breached theagreement by failing to maintain a detailed accounting record. VIII. Amedisys is entitled to specific performance of the agreement mandatingNCFE to remit $7,337,569 to Amedisys.IX.NCFE owed to Amedisys a fiduciary duty pursuant to the sale agreement toensure that Amedisys’ interests in the accounts were properly protected.NCFE breached this duty.X.NCFE repeatedly made intentional misrepresentations to Amedisys, statingthat it would ensure that Amedisys’ funds would be timely released to it.Amedisys justifiably relied on these misrepresentations and has been directlyinjured as a result of the reliance.On May 27, 2004, the bankruptcy court granted NCFE’s and JP Morgan’s motions forsummary judgment as to all counts in the adversary proceeding except for Count VII (alleging thatNCFE breached the sale agreement). The bankruptcy court determined that although NCFE did notpay for the disputed $7.3 million in accounts receivable, it “did actually purchase Amedisys’saccounts receivable.” Therefore, Amedisys would have only a “general contractual claim [againstNCFE] for nonpayment”; Amedisys’ assertions that it owned the accounts receivable at the time ofNCFE’s bankruptcy, and therefore that the $7.3 million in the JP Morgan collection account was notpart of the bankruptcy estate, were unfounded.2By joint agreement of the parties, Count VII wasdismissed on April 14, 2005. At this point, the bankruptcy court’s grant of partial summaryjudgment became a final, appealable order. Amedisys filed a notice of appeal on April 22, 2005,and the appeal is now before the United States District Court for the Southern District of Ohio.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 53The parties noted at oral argument that the action has since been consolidated into a multidistrict litigation inthe United States District Court for the Southern District of Ohio. 4The motion argued, inter alia, that the Louisiana action “plainly violates section 362(a)(3) of the BankruptcyCode.” JA 576. The prayer for relief sought an order (i) finding that the automatic stay has been violated by the Louisiana action; (ii) declaring the filingof the Louisiana action to be invalid and void, as violative of the automatic stay; (iii) directing theAmedisys Entities to immediately cease and desist from any further prosecution of the LouisianaAction, absent further order of this court. . . .On February 21, 2003, Amedisys brought a state court action in Louisiana against JPMorgan, certain JP Morgan employees, and NCFE’s insurer (“the Louisiana action”). JA 559. OnMarch 24, 2003, the defendants removed the action to the United States District Court for theMiddle District of Louisiana.3Amedisys asserted the following claims in the Louisiana action: I.The sale agreement between NPF VI and Amedisys created an impliedcontract relating to the course of dealing among JP Morgan, NPF VI, andAmedisys. Amedisys seeks specific performance, including “refund of thenonpurchased receivables and overage funds.” II.Amedisys was a third-party beneficiary of the trust indenture between NPFVI and JP Morgan. JP Morgan had a duty to return to Amedisys “receivablesand overage funds that were never purchased by NPF VI in the first place.”III.JP Morgan breached its fiduciary duty to Amedisys to ensure that Amedisys’rights in the accounts at JP Morgan were adequately protected. IV.JP Morgan intentionally misrepresented the truth to Amedisys when itclaimed that it had taken all actions necessary to release the $7.3 million inaccounts receivable. V.Amedisys detrimentally relied on JP Morgan’s agreement to comply withNPF VI’s instructions to wire Amedisys’ funds to it. Amedisys is thereforeentitled to all damages attributable to JP Morgan for Amedisys’ detrimentalreliance. VI.JP Morgan wrongfully converted the funds owned by Amedisys when itrefused to remit the funds following Amedisys’ request. Amedisys is“entitled to any and all damages resulting in [sic] the conversion of itsfunds.” VII.“[T]he funds owned by the Amedisys Entities, over which [JP Morgan] hasdominion and control, are impressed with a constructive trust in favor ofAmedisys.” VIII. JP Morgan’s conduct violated the Louisiana Fair Trade Practices Act. IX.JP Morgan was unjustly enriched by its wrongful retention of the $7.3million in accounts receivable belonging to Amedisys. Complaint at 17–23, Supp. JA 22–28. On June 23, 2003, NCFE moved the bankruptcy court for an order enforcing the BankruptcyAct’s automatic stay, 11 U.S.C. § 362(a), against the Louisiana action. JA 569–580.4The motion
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 6JA 579-80.alleged, “The actions taken by the Amedisys Entities in connection with the commencement of theLouisiana Action plainly suggest a coordinated strategy to forum shop and to avoid the applicationof the automatic stay.” JA 575. NCFE noted that Amedisys’ claims in the Louisiana action werevirtually identical to those in the Ohio action, save for the omission of NCFE and its subsidiaries asdefendants in the Louisiana action. Id. The bankruptcy court, in an opinion dated August 19, 2003,ordered that Amedisys immediately cease and desist from any further prosecution of the Louisianaaction. The court gave two reasons. First, all of the claims in Amedisys’s complaint “require adetermination of ownership of funds alleged to be [NCFE’s] funds.” JA 564. Therefore, a findingfor Amedisys would result in the “automatic creation of liability against the debtor because of ajudgment against [JP Morgan].” Id. Second, the court found, “the involvement in the LouisianaAction effectively will act to diminish this bankruptcy estate by causing a duplication of efforts anda waste of judicial time and resources.” JA 564.Amedisys appealed the bankrupty court’s determination to the United States District Courtfor the Southern District of Ohio. The district court affirmed the bankruptcy court. The districtcourt, noting that “it is the bankruptcy court’s province to determine whether [the $7.3 million inaccounts receivable] is part of the estate,” concluded that the Louisiana action amounted to no morethan an attempt to prove that Amedisys owned the accounts at the time of NCFE’s bankruptcypetition. Assuming that Sixth Circuit precedent requires “unusual circumstances” in order to extendthe scope of the automatic stay to an action against a non-debtor, the court found that requirementmet here, because NCFE constituted the real party in interest in the Louisiana action. JA 541.Amedisys timely appealed the district court’s decision.II.Weaffirmthe decision of the district court. The bankruptcy court had jurisdiction to enforcethe automatic stay against the Louisiana action because, as Amedisys concedes in its brief, themotion to enforce constitutes a “core proceeding” as defined in 28 U.S.C. § 157(b)(2). Further, thebankruptcy court correctly concluded that the automatic stay in bankruptcy, 11 U.S.C. § 362(a),applies to the Louisiana action.A.Amedisys first argues that, in globally staying the Louisiana action, the bankruptcy courtexceeded its jurisdiction. The bankruptcy court held that it had jurisdiction to enforce the staybecause the matter was a core proceeding. JA 554. Amedisys argues that in order for jurisdictionto be proper, the bankruptcy court was required to find that the Louisiana action was “related to” thebankruptcy case. See 28 U.S.C. § 1334(b). Further, Amedisys urges, in the event of a judgmentagainst JP Morgan in the Louisiana action, JP Morgan likely would not obtain indemnity fromNCFE or its subsidiaries; therefore the Louisiana action is not related to the bankruptcy case. The bankruptcy court had jurisdiction to enforce the stay, because NCFE’s motion to enforceconstituted a core proceeding. 28 U.S.C. § 1334(b) provides exclusive district court jurisdictionover “all cases under title 11,” and concurrent jurisdiction over “civil proceedings arising under title11, or arising in or related to cases under title 11.” In turn, 28 U.S.C. § 157(a) permits district courtsto refer bankruptcy cases brought under their original jurisdiction to bankruptcy courts. Section157(b) of the samechapter defines “core proceedings arising under title 11, or arising in a case undertitle 11” to include “matters concerning the administration of the estate,” “motions to terminate,annul, or modify the automatic stay,” and “other proceedings affecting the liquidation of assets of
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 75Amedisys argues that in order to find that the bankruptcy court had jurisdiction, this court must analyzewhether the subject matter of the Louisiana action is “related to” the bankruptcy case. This would be the proper inquiryin evaluating whether the Louisiana action itself could be transferred to the bankruptcy court, in order for the bankruptcycourt to hear the claims and submit proposed findings of fact to the district court. 28 U.S.C. § 157(c)(1); cf. Lindsey v.O’Brien (In re Dow Corning), 86 F.3d 482, 489-91 (6th Cir. 1996) (setting forth factors to be used in determiningwhether a civil case is sufficiently “related to” the bankruptcy case to give the district court subject-matter jurisdictionover state law tort claims pending against nondebtor defendants). Here, because this appeal concerns only theenforcement of the automatic stay, and because the parties concede that a motion to enforce the stay constitutes a coreproceeding, it is unnecessary to assess the relatedness of the Louisiana action to the bankruptcy case. the estate or the adjustment of the debtor-creditor or the equity security holder relationship. . . .”28 U.S.C. § 157(b)(2)(A), (G), (O).Amedisys concedes in its jurisdictional statement,“Thismatter isa core proceeding pursuantto § 157(b)(2)(G).” Appellant’s Br. at 1. Therefore, NCFE’s motion to enforce the automatic stayby definition met a narrower jurisdictional test than the “related to” basis for jurisdiction over non-core proceedings. See In re Combustion Eng’g, Inc., 391 F.3d 190, 225-26 (3d Cir. 2004) (“Casesunder title 11, proceedings arising under title 11, and proceedings arising in a case under title 11 arereferred to as ‘core’ proceedings; whereas proceedings ‘related to’ a case under title 11 are referredto as ‘non-core’ proceedings.”).5NCFE’s motion to enforce arose under title 11, and thebankruptcy court therefore had jurisdiction to enforce the stay.B.Amedisys argues that the Louisiana action does not fall within the automatic stay provisionsof 11 U.S.C. § 362(a). In order to enjoin the Louisiana action against JP Morgan, Amedisys argues,the bankruptcy court necessarily relied upon its equitable powers under 11 U.S.C. § 105(a) to issueorders “necessary or appropriate to carry out the provisions of [chapter 11].” Amedisys also arguesthat the bankruptcy court failed to identify “unusual circumstances” justifying a preliminaryinjunction under § 105(a), and that NCFE improperly failed to initiate an adversary proceeding toobtain an injunction under § 105(a). These arguments lack merit, because the stay fell within§ 362(a). The bankruptcy court observed the correct procedures in enforcing the stay.The courts below properly held that the Louisiana action is covered by the automatic stayin bankruptcy. Under 11 U.S.C. § 362(a), a bankruptcy petition operates as a stay, applicable to all entities, of . . . (1) the commencement orcontinuation . . . of a judicial, administrative, or other action or proceeding againstthe debtor that was or could have been commenced before the commencement of thecase under this title, or to recover a claim against the debtor that arose before thecommencement of the case under this title; . . . (3) any act to obtain possession ofproperty of the estate or of property from the estate or to exercise control overproperty of the estate.“Property of the estate” includes “all legal or equitable interests of the debtor in the property as ofthe commencement of the case.” 11 U.S.C. § 541(a)(1). The bankruptcy court also has the authorityto “issue any order, process, or judgment that is necessary or appropriate to carry out the provisionsof [the Bankruptcy Code].” Id. § 105(a).Because the Louisiana action seeks to obtain the accounts receivable held in a JP Morganaccount in the name of NPF VI, and because the accounts receivable likely constitute property ofthe bankruptcy estate, the bankruptcy court properly enforced the automatic stay under 11 U.S.C.§ 362(a)(3). The district court held that “the Louisiana complaint, though naming non-debtor JPMorgan as a defendant, seeks a determination that the money in the Debtors’ bank accounts belongs
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 86It is unclear whether, if Amedisys were allowed to proceed with its constructive trust claim in the Louisianaaction and prevailed on it, such a judgment would result in the exclusion of the disputed accounts receivable from thebankruptcy estate. This court has criticized constructive trust claims in the bankruptcy context as a backdoor means fora creditor to avoid waiting for ratable distribution of the estate, by characterizing common contract claims as fraud. SeeXL/Datacomp, Inc. v. Wilson (In re Omegas Group), 16 F.3d 1443, 1449-50 (6th Cir. 1994). Since constructive trustclaimsinvolve assertions of fraud, an allegedly defrauded creditor should more properly initiate an adversary proceedingto except from discharge, under 11 U.S.C. § 523, a debt procured by fraud. In re Omegas Group, 16 F.3d at 1451. Onlyif a creditor has obtained prepetition a judgment imposing a constructive trust, see In re Omegas Group, 16 F.3d at 1449,or if state law clearly gave the creditor, prepetition, a right to conveyance of the property, see In re Morris, 260 F.3d at668, may the property be excluded from the bankruptcy estate. A judgment in Amedisys’ favor in the Louisiana actionwould not fall under the former category, but could conceivably fall under the latter one. Notably, however, in neitherOmegas Group nor Morris did the creditor seek to make an end run around the bankruptcy process to obtain aconstructive trust judgment. In Omegas Group, the creditor initiated an adversary proceeding to assert the constructivetrust claim; in Morris, the creditor moved the bankruptcy court to lift the automatic stay in order for the creditor tocomplete state court proceedings on a constructive trust claim against the debtor. In re Omegas Group, 16 F.3d at 1446;In re Morris, 260 F.3d at 659. It is unnecessary to determine whether Amedisys, if it prevailed in the Louisiana action,could successfully obtain exclusion of the accounts receivable from the bankruptcy estate. A separate civil action forconstructive trust, initiated postpetition, is an inappropriate forum for Amedisys’ assertion that it has a rightful claim toto Amedisys.” JA 525. The bankruptcy court similarly concluded that Amedisys, through theLouisiana action, sought to obtain ownership rights of the disputed accounts receivable. Amedisys,on appeal, contends that these holdings were misguided, because the Louisiana action concerns onlyJP Morgan’s failure to follow NPFS’s instructions to remit $7.3 million to Amedisys. Amedisysargues that it merely seeks money damages from JP Morgan, because JP Morgan breached a dutyto transfer the property to Amedisys.This argument is unpersuasive. While NCFE is a named defendant only in the adversaryproceeding, and not in the Louisiana action, this is irrelevant, because Amedisys in both actionsseeks to obtain possession of the disputed accounts receivable. Count I of the Louisiana actionasserts that the Amedisys-NCFE sales agreement created duties in JP Morgan and seeks specificperformance of that agreement, including “refund of the nonpurchased receivables.” Supp. JA 25.Similarly, Count II avers that Amedisys is a third-party beneficiary of the JP Morgan-NCFE trustindenture, and that therefore JP Morgan has a duty to return the receivables to Amedisys. Count VIIrequests the court to impress the funds in the collection account with a constructive trust in favorof Amedisys. Supp. JA 26. The district court correctly found that while only some counts in thecomplaint pray the court to order JP Morgan to remit the disputed accounts receivable to Amedisys,every count in the complaint requires the court to adjudicate whether Amedisys had a rightful claimto that property. Further, the district court properly concluded that Amedisys’ offer voluntarily tostay prosecution of Counts I and VII of the Lousiana action, would not cure the violation of§ 362(a). As the district court aptly noted, unless Amedisys voluntarily dismissed the allegations inits complaint seeking refund of the accounts receivable, any judgment in Amedisys’ favor in theLouisiana action would potentially deplete the property of the bankruptcy estate. JA 524.The district court properly concluded that in the Louisiana action, Amedisys used aconstructive trust theory to “assert[] dominion over money in the Debtors’ accounts.” JA 523. IfAmedisys succeeded on a constructive trust theory, the value of the bankruptcy estate would bereduced. This is because property in which the debtor holds legal but not equitable title as of thecommencement of the case—for example, property impressed with a constructive trust under statelaw—is property of the estate only to the extent of the debtor’s legal title. 11 U.S.C. § 541(d); seePoss v. Morris (In re Morris), 260 F.3d 654, 666 (6th Cir. 2001) (holding that a creditor’s mereclaimof a constructive trust does not constitute an equitable interest in property otherwise belongingto the estate; instead, “state law [must have] impressed property with a constructive trust prior to itsentry into bankruptcy”);cf. Stevenson v. J.C. Bradford & Co. (In re Cannon), 277 F.3d 838, 849 (6thCir. 2002) (quoting Begier v. IRS, 496 U.S. 53, 59 (1990)) (holding that the § 541(a) definition of“property of the estate” excludes property held in trust).6Amedisys contends that its constructive
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 9the funds held in bank accounts owned by the NCFE entities.trust claim concerns only its prebankruptcy ownership of the disputed accounts receivable, and thatthis issue is entirely independent of whether the funds currently form part of the bankruptcy estate.This argument is meritless, because the issues are not independent. Whatever determination is madein the Louisiana action concerning the prebankruptcy ownership of the accounts receivable willnecessarily be relevant to postbankruptcy ownership as well. In the Louisiana action, Amedisysalleges that during the period of November 7-12, 2002, JP Morgan wrongfully failed to comply withNCFE’s instructions to refund to Amedisys the disputed amount. Supp. JA 20-21. The fact that thecomplaint asserts wrongs occurring before the NCFE entities filed for bankruptcy on November 18,2002, does not alter our conclusion that the complaint demands the return of funds alleged to formpart of the bankruptcy estate. See 11 U.S.C. § 541(a)(1) (property of the estate is determined as ofthe moment the debtor files for bankruptcy). Further, it appears likely that the disputed accounts receivable to which Amedisys claimsownership do formpart of the bankruptcy estate. Amedisys does not dispute that in November 2002,when the NCFE entities filed for bankruptcy, the disputed accounts receivable were located in a JPMorgan collection account held by NPF VI, an NCFE entity. Thus, presumptively, NPF VI holdslegal title to these funds. No party has made a plausible claimthat JP Morgan, rather than the NCFEentities, owns the funds. See Complaint in Louisiana Action at 8, Supp. JA 13 (“JP Morgan . . . hasno claim, title, or other interest in any nonpurchased receivables or overage funds of the AmedisysEntities now held by it.”); JP Morgan’s Application for Order Authorizing Compensation at 11, JA727 (“[T]he Amedisys receivables were owned . . . by NPF VI, which had purchased thosereceivables from Amedisys.”). Finally, the bankruptcy court, in a final order currently on appeal to the United States DistrictCourt for the Southern District of Ohio, has held that the accounts receivable held in the JP Morgancollection account form property of the bankruptcy estate. In granting summary judgment todefendants NCFE and JP Morgan on Amedisys’ claimsin the adversary proceeding, the bankruptcycourt held that the NCFE entities purchased the $7.3 million in accounts receivable fromAmedisys.The bankruptcy court found that although NCFE had never paid Amedisys for the disputed accountsreceivable, this was merely because Amedisys had waived its right under the sale agreement toimmediate payment. The bankruptcy court rejectedwith equal force the argument that either NCFEor JP Morgan held the receivables in an express or constructive trust for Amedisys. The bankruptcycourt noted that NCFE bore merely a contractual duty to pay Amedisys for purchased receivables;NCFE did not hold a fiduciary duty to transfer title in the receivables to Amedisys. Further, thecourt held, JP Morgan was not even in contractual privity with Amedisys; much less did it bear anyfiduciary duty to Amedisys.We do not purport at this time to resolve in a controlling fashion the issues raised in thatappeal. But the bankruptcy court’s determination that the accounts receivable are part of thebankruptcy estate strongly supports the conclusion that the automatic stay was properly enforced.It is the bankruptcy court’s province to identify the property of the bankruptcy estate. Thebankruptcy court, in its summary judgment decision, persuasively marshaled the complex factualrecord in this case to conclude that the accounts receivable whose ownership forms the crux of theLouisiana action, are property of the estate. Reversing the lower courts’ conclusions that theautomatic stay applies, at a time when the bankruptcy court’s determination of the ownership of theaccounts receivable remains a live issue in the summary judgment appeal, would impede thebankruptcy court’s role in managing the bankruptcy case.
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 107The bankruptcy court’s holding did rely on one case, C.H. Robinson Co. v. Paris &Sons, 180 F. Supp. 2d 1002(N.D. Iowa 2001), which held that a creditor is required to seek a preliminary injunction in order to expand the scopeof a § 362(a)(1) stay to cover solvent codefendants. However, like Parry, C.H. Robinson did not involve entitlement toproperty allegedly part of the bankruptcy estate. The court’s conclusion was that “the automatic stay under section362(a)(1) of the Bankruptcy Code is not truly automatic when invoked against nondebtor codefendants.” Id. at 1018.The analysis certainly does not preclude the conclusion that a stay against a nondebtor under § 362(a)(3) is trulyautomatic.C.The fact that the Louisiana action did not name NCFE as a defendant does not renderenforcement ofthe automatic stay improper. Amedisys argues that “the automatic stay under section362(a) applies only to the bankrupt debtor,” and therefore that § 362(a) did not support thebankruptcy court’s decision in this case. Appellant’s Br. at 18. To buttress this assertion, Amedisyscites two decisions of this court for the proposition that a bankruptcy court must find unusualcircumstances, justifying a preliminary injunction under 11 U.S.C. § 105(a), in order to extend thescope of a § 362(a)(1) automatic stay to encompass claims against not only a debtor defendant, butalso nondebtor codefendants. See Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993); Parry v.Mohawk Motors of Mich., Inc., 236 F.3d 299, 314-315 (6th Cir. 2001). These cases note that, byextending the stay beyond its statutory terms, the bankruptcy court is not acting under § 362(a), butis instead issuing an order in equity “necessary or appropriate to carry out the provisions of [theBankruptcy Code].” 11 U.S.C. § 105(a); Patton, 8 F.3d at 349. The district court, citing Parry,found that unusual circumstances were present in this case because NCFE, rather than JP Morgan,was the real party in interest in the Louisiana action. Therefore, the district court concluded, thebankruptcy court properly exercised its “necessary or appropriate” powers to issue a § 105(a)preliminary injunction. Amedisys’ argument is not persuasive. The district court appears unnecessarily to haveassumed that the bankruptcy court entered a preliminary injunction extending the automatic staybeyond its statutory terms, rather than merely enforcing the automatic stay as provided by statute.The automatic stay of § 362(a) applies by its terms not only to actions against the debtor, see§ 362(a)(1), but also to actions seeking to obtain property of the bankruptcy estate, see § 362(a)(3).In Patton and Parry, this court found insufficient basis to extendthe automatic stay beyond the termsof § 362(a)(1). In Parry, there was no contention that the automatic stay applied by its terms to anaction against non-debtors; in Patton, the court rejected such a contention because the action did notseek property of the estate. Here, unlike in Patton and Parry, the bankruptcy court determined thatthe automatic stay already covered the action. JA 563-4. As a sister circuit has held, “[A]n actiontaken against a nondebtor which would inevitably have an adverse impact upon the property of theestate must be barred by the [§ 362(a)(3)] automatic stay provision.” Licensing by Paolo, Inc. v.Sinatra (In re Gucci),126 F.3d 380, 392 (2d Cir. 1997) (citing In re 48th St. Steakhouse, Inc., 835F.2d 427, 431 (2d Cir. 1987)). This court’s decision in Patton, 8 F.3d 343, further supports thisconclusion. In Patton, this court analyzed separately the applicability of stays under § 362(a)(1)and under § 362(a)(3). As part of the § 362(a)(1) analysis, the court noted that a debtor mustdemonstrate unusual circumstances in order to extend the automatic stay to nondebtor codefendants.8 F.3d at 349. Under the § 362(a)(3) inquiry, the court merely analyzed whether a judgment againstthe solvent codefendants would actually deplete the bankruptcy estate. Id. The bankruptcy court, in its opinion, stated that it was enforcing the automatic stay, not thatit was exercising its equitable powers under § 105(a).7Further, it held that the Louisiana actionsought a determination that the disputed accounts receivable did not form part of the bankruptcyestate. JA 563. Accepting Amedisys’ argument that the bankruptcy court failed to find unusualcircumstances justifying a preliminary injunction would require an unwarranted limiting of§ 362(a)(3), a subsection that requires application ofthe automatic stay without reference to whether
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No. 04-3365In re Nat’l Century Financial EnterprisesPage 11the debtor is the defendant in the stayed action. Because the Louisiana action seeks to obtainproperty of the bankruptcy estate, we affirm the order enforcing the stay. D.Amedisys’ remaining grounds for asserting that the bankruptcy court improperly stayed theLouisiana action are all rooted in the assumption that the stay constituted a preliminary injunctionunder § 105(a), expanding the automatic stay. Amedisys argues (1) that NCFE failed to initiate anadversary proceeding in order to request a preliminary injunction, and that the enforcement of theautomatic stay was invalid because of this procedural error; (2) that the bankruptcy court failed toconsider the four factors determining whether a preliminary injunction is appropriate; and (3) thatthe bankruptcy court improperly imposed a preponderance-of-the-evidence burden of proof onNCFE, rather than a clear-and-convincing-evidence burden of proof. Appellant’s Br. at 21-28.Amedisys forfeited these arguments by failing to raise them in its appeal brief before the districtcourt. See Thurman v. Yellow Freight Sys., 97 F.3d 833, 835 (6th Cir. 1996) (holding that argumentsnot raised before the district court are waived). Even if these arguments had been properlypreserved, they would nonetheless fail, because the bankruptcy court’s action was supported by theautomatic stay of § 362(a)(3). Normally, a debtor initiates an adversary proceeding in order torequest a § 105(a) preliminary injunction. See Amer. Imaging Servs. v. Eagle-Pitcher Indus., Inc.(In re Eagle-Picher Indus., Inc)., 963 F.2d 855, 857-59 (6th Cir. 1992). On the other hand, a debtoris not required to initiate an adversary proceeding in order to move the bankruptcy court to enforcethe automatic stay. In re LTV Steel Co., Inc., 264 B.R. 455, 462-63 (Bankr. N.D. Ohio 2001).Similarly, as Amedisys concedes, only when the bankruptcy court enjoins an action under § 105(a)must it consider the four preliminary injunction factors, and apply a standard of clear and convincingevidence. Because these arguments rely upon Amedisys’ assertion that § 362(a) did not support thebankruptcy court’s holding, and because we hold, to the contrary, that enforcement of the automaticstay under § 362(a)(3) was proper, the arguments fail.III.For the foregoing reasons, we AFFIRM the judgment of the district court enforcing theautomatic stay in bankruptcy, 11 U.S.C. § 362(a), against the Louisiana action.
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