Amedisys, Inc. v. Suzanne Hosch , 497 F. App'x 491 ( 2012 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a0957n.06
FILED
No. 10-4194
Aug 29, 2012
UNITED STATES COURT OF APPEALS LEONARD GREEN, Clerk
FOR THE SIXTH CIRCUIT
In re: National Century Financial Enterprises,
Inc., Investment Litigation
______________________________________
AMEDISYS, INC., et al., ON APPEAL FROM THE
UNITED STATES DISTRICT
Plaintiff-Appellant, COURT FOR THE SOUTHERN
DISTRICT OF OHIO
and
CITY OF CHANDLER ARIZONA, et al.,
Plaintiffs,
v.
SUZANNE K. HOSCH, et al.,
Defendants,
and
JP MORGAN CHASE BANK, et al.,
Defendants-Appellees.
/
Before: MARTIN and MCKEAGUE, Circuit Judges; CALDWELL, District Judge*
BOYCE F. MARTIN, JR., Circuit Judge. Amedisys, Inc., filed suit against JPMorgan Chase
Bank, N.A. in Ohio federal district court (the first suit), alleging various contract, fiduciary duty, and
*
Judge Karen K. Caldwell, United States District Judge for the Eastern District of Kentucky,
sitting by designation.
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 2
fraud claims regarding JPMorgan’s role in a dispute about receivables and funds that Amedisys
claimed it owned. These assets are potentially the property of the bankruptcy estate of National
Century Financial Enterprises. After National Century filed for bankruptcy (the bankruptcy case),
the first suit was referred, on a motion by Amedisys, to the Ohio bankruptcy court. Amedisys
separately filed a subsequent suit (the second suit) in Louisiana state court against JPMorgan and
certain of JPMorgan’s executives alleging similar claims under Louisiana law; this second suit was
removed, on a motion by JP Morgan, to the United States District Court for the Middle District of
Louisiana. The second suit was then stayed pending proceedings in the bankruptcy case and
transferred to the Ohio district court. The district court granted judgment in favor of JPMorgan on
the Ohio claims raised in the first suit. This Court affirmed in part and reversed in part this judgment
against Amedisys.
JPMorgan moved for summary judgment on the Louisiana claims raised in the second suit
on the grounds that they were barred by res judicata due to the resolution of the first suit. The district
court granted JPMorgan’s summary judgment motion in the second suit, and Amedisys appeals. For
the reasons that follow, we AFFIRM the judgment of the district court.
I.
This is a case about claim preclusion. JPMorgan seeks to use this Court’s decision in the first
suit to preclude claims made by Amedisys in the subsequent second suit brought under Louisiana
state law. The underlying facts of the first suit were recounted by this Court in its prior decision in
that case, In re Nat’l Century Fin. Enters., Inc., 377 F. App’x 531, 533-35 (6th Cir. 2010) (citations
and internal footnotes omitted):
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 3
[National Century] supplied accounts receivable financing to healthcare
providers, including Amedisys. Under a series of identical Sale and Subservicing
Agreements . . . with Amedisys, [National Century] was given the right to purchase
insurance payments owed to Amedisys for services already rendered, termed
“Eligible Receivables.” The arrangement gave Amedisys, and companies like it,
access to immediate funding based on anticipated future collections. [National
Century] affiliate NPF VI financed the purchases of the receivables by raising money
from investors in exchange for promissory notes secured by the receivables. These
notes were issued in accordance with a Master Indenture Agreement with JPMorgan.
JPMorgan established accounts to handle the collection and distribution of funds
payable to the healthcare providers that contracted with NPF VI.
Amedisys first entered into a Sale Agreement with [National Century] in
December of 1998. Under the terms of the Sale Agreement, Amedisys sent a weekly
list of all its receivables to [National Premier Financial Services, Inc]. [National
Premier] then determined which receivables were eligible for purchase, and
calculated the “Purchase Price,” based on the net value of the receivables less fees,
program costs, and other adjustments. Payment of the Purchase Price was made from
the Purchase Account through [National Premier]’s instructions to JPMorgan.
According to the Sale Agreement, “[f]ollowing payment of the Purchase Price on any
Purchase Date, ownership of each Purchased Receivable will be vested in the
Purchaser.” The [sale] agreement required that Amedisys set up lockbox accounts
and instruct payors of receivables sold to NPF VI to deposit their payments into the
appropriate account. The lockbox accounts were swept daily into the Collection
Account.
While [National Century] was not obligated to purchase all eligible
receivables submitted, Amedisys was required to notify commercial payors that all
payments should be sent to the lockbox account. The notice sent to payors stated that
Amedisys would “sell to NPF from time to time certain of our Receivables of which
you are the obligor” and that payment into the lockbox account “will operate to
discharge your obligation . . . whether or not ownership has been transferred to NPF.”
Because funds other than payments on purchased receivables could be swept into the
Collection Account, the Sale Agreement recognized that “certain amounts deposited
in the Collection Account may relate to Receivables other than Purchased
Receivables and that such amounts continue to be owned by the Seller.”
While [National Century] was not required to purchase every eligible
receivable, its practice was to do so. Through April 2002, [National Century]
routinely purchased all of Amedisys’s eligible receivables. In April 2002, Amedisys
and [National Century] altered the arrangement established by the Sale Agreement,
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 4
allowing Amedisys to request a specific amount of funding each week, rather than
receive full payment for its receivables. The record does not reveal the precise
understanding reached between the parties. James Dierker, an [National Century]
employee who was Amedisys’s primary contact at the company, testified that
Amedisys’s [Chief Financial Officer] at the time, John Joffrion, first discussed
decoupling the value of Eligible Receivables from the amount sent to Amedisys in
2000. Dierker testified that he passed the request along to his superiors and that
eventually [National Century]’s funding department and Amedisys “put together the
mechanical details.” Dierker noted that, at the time, Amedisys owed [National
Century] a significant outstanding balance, and neither he nor Joffrion contemplated
Amedisys amassing a net-credit position. After the change was instituted in April
2002, Amedisys occasionally requested more money than supported by their
receivables, but more often took less, reducing their balance owing to around $1.6
million at the end of September 2002.
For the first three weeks in October 2002, Amedisys made no requests for
funding, which resulted in its accruing a substantial credit balance. Unbeknownst to
Amedisys, [National Century] was by then on the brink of financial collapse. On
October 22, 2002, Amedisys requested a $2.8 million payment. The funding was not
paid immediately and was eventually paid in installments over two days. On October
29, 2002, Amedisys made another funding request, which yielded only $38,000.00.
[National Century] and Amedisys then entered into negotiations. A “buyout
reconciliation” was prepared by [National Century]’s accounting department, which
showed that collections from Amedisys’s lockbox accounts exceeded payments to
Amedisys by roughly $7.3 million. [National Century] and Amedisys initially agreed
to a proposal to offset $6 million Amedisys owed another [National Century] affiliate
on a separate capital note . . . against the $7.3 million that the parties agreed NPF VI
owed to Amedisys, and to have JPMorgan send Amedisys the remaining $1.3
million. However, JPMorgan, which was not a party to the [c]apital [n]ote
agreement, did not honor the transfer request. Amedisys filed a complaint seeking
injunctive relief forcing JPMorgan to authorize payment of the entire $7.3 million on
November 8, 2002. [National Century] filed for relief under Chapter 11 of the
United States Bankruptcy Code shortly thereafter, and the district court referred
Amedisys’s lawsuit to the bankruptcy court.
Amedisys’s Second Amended Complaint asserted thirteen counts: Count One
sought a declaratory judgment clarifying the ownership of the $7.3 million and
confirming that the Sale Agreement and Master Indenture created one contractual
relationship between [National Century], Amedisys and JPMorgan; Count Two
alleged breach of fiduciary trust on the part of JPMorgan for failure to perform its
duties as an escrow agent; Counts Three through Five sought imposition of a trust in
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 5
favor of Amedisys on various trust theories; Count Six sought turnover of the
disputed funds; Counts Seven through Ten alleged breach of the Sale Agreement,
breach of fiduciary duty, and fraud against [National Century], and sought specific
performance mandating the return of the disputed funds; Count Eleven requested an
order for an accounting; Count Twelve sought removal of NPFS as Servicer of the
Sale Agreement; and Count Thirteen alleged conversion by [National Century].
On February 21, 2003, Amedisys filed a separate complaint against JPMorgan in Louisiana
state court, which opened the second suit. The claims in the second suit are similar to those in the
first suit. This second suit was removed, on a motion by JP Morgan, to the United States District
Court for the Middle District of Louisiana. The second suit was then stayed pending proceedings
in the bankruptcy case and transferred to the Ohio district court. Meanwhile, the first case against
National Century and JPMorgan, which had been referred to the bankruptcy court handling the
bankruptcy case, moved forward, id. at 535:
[National Century] and JPMorgan filed motions for summary judgment,
which the bankruptcy court granted on all counts, except Count Seven. The parties
entered into a stipulated agreement dismissing Count Seven, and Amedisys appealed
to the district court. The district court affirmed the decision of the bankruptcy court.
Amedisys timely appealed the grant of summary judgment as to Counts One through
Six and Thirteen.
This Court then affirmed the district court’s order adopting the bankruptcy court’s grant of
summary judgment in the first case against Amedisys on Counts Two and Six; affirmed for
JPMorgan on Count One; reversed summary judgment on Counts Three, Four, Five, and Thirteen;
and reversed in part on Count One. After the second suit was transferred to an Ohio district court,
JPMorgan moved for summary judgment in this case, arguing that the Louisiana state law claims in
the second suit were precluded by this Court’s decision in the first suit. The district court granted
JPMorgan’s motion for summary judgment on the second suit. Amedisys appeals, arguing that the
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 6
Ohio district court erred in finding the Louisiana state law claims were precluded and in finding that
JPMorgan did not acquiesce to Amedisys’s litigation of similar claims in two fora.
II.
This Court reviews “a district court’s grant of summary judgment de novo.” Binay v.
Bettendorf, 601 F.3d 640, 646 (6th Cir. 2010) (citation omitted). Summary judgment is proper if the
materials in the record “show[] that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “In deciding a motion for
summary judgment, the court must view the factual evidence and draw all reasonable inferences in
favor of the nonmoving party.” Banks v. Wolfe Cnty. Bd. of Educ., 330 F.3d 888, 892 (6th Cir. 2003)
(citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
III.
Claim preclusion “refers to the effect of a judgment in foreclosing litigation of a matter that
never has been litigated, because of a determination that it should have been advanced in an earlier
suit.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984). “[A] claim will be
barred under the doctrine of claim preclusion if the following four elements are present: (1) a final
decision on the merits; (2) a subsequent action between the same parties or their privies; (3) an issue
in a subsequent action which should have been litigated in the prior action; and (4) an identity of the
causes of action.” Wilkins v. Jakeway, 183 F.3d 528, 532 (6th Cir. 1999). Amedisys argues that the
district court erred in deciding the second suit was precluded by the result of the first suit because
it erroneously found that the first and third prongs of the claim preclusion test were met.
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 7
1. First prong: Final decision on the merits
As discussed above, this Court previously reversed the trial court’s grant of summary
judgment against Amedisys in the first suit as to Counts Three, Four, Five, and Thirteen, and in part
as to Count One. Each claim in the second suit is assessed below with respect to the first prong’s
requirement that there be a final decision on the merits of the claim for claim preclusion to apply.
The defendants first argue claim preclusion as to ownership of the $7.3 million and the nature
of any contractual relationship among National Century, Amedisys, and JPMorgan, claims raised in
Count One in the first suit. As to the claims raised in Count One, there exists a final decision on the
merits because this Court previously affirmed summary judgment for JPMorgan on the claims raised
under Count One in the first suit. In Count One, Amedisys sought a declaratory judgment that “the
Sale Agreement and Master Indenture form a single contractual relationship between [National
Century], Amedisys and JPMorgan or, alternatively, that Amedisys is a third-party beneficiary of the
Master Indenture, and that JPMorgan owed it a fiduciary duty.” In re Nat’l Century Fin. Enters.,
Inc., 377 F. App’x at 539. We held that “JPMorgan had no contact at all [with Amedisys] prior to
Amedisys failing to receive its requested funding in November 2002 [and that there is] no evidence
that the parties understood or intended the two separate contracts to constitute one tri-party contract.”
Id. at 540. Further, this Court held that “Amedisys cannot be an intended beneficiary under the
Master Indenture, and JPMorgan owes it no fiduciary duty.” Id. Based on these rulings, there has
been a final decision on the merits as to the claims raised in Count One with respect to JPMorgan.
The defendants next argue claim preclusion on the claim that the relevant funds were held
by National Century or JPMorgan in trust. These claims were raised as Counts Three, Four, and Five
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 8
in the first suit. JPMorgan is a named defendant in Counts Four and Five; it is not a named
defendant in Count Three. The Ohio district court noted that “[t]hough JPMorgan is named as a
defendant on these claims, it is clear that JPMorgan has never asserted an ownership interest in the
funds; the bankruptcy estate is the party in interest.” The true dispute, as outlined by this Court in
its decision in the first suit, at the center of the arguments about whether the funds were held in trust,
is between Amedisys and National Century, not between Amedisys and JPMorgan. See id. at 537-39(noting that summary judgment was inappropriate where genuine issues of material fact existed
about the ownership of the receivables in question—and whether they were traceable to
Amedisys—and noting that Amedisys would be required to show “that the monies claimed are the
proceeds of the receivables at issue, and not simply the commingled balance of the funds still in the
debtor’s possession”). JPMorgan did not assert an ownership interest in the funds or the receivables,
and JPMorgan does not have an interest in the claims addressed in these Counts. No matter that this
claim was decided in the first suit with regard to other co-defendants, JPMorgan is not liable on this
claim in either the first or second suits. Further, this Court noted that the reason it overturned
summary judgment against Amedisys on these counts in the first suit was because “the intention of
the parties in modifying performance under the Sale Agreement is in genuine dispute. If the parties
agreed that the money flowing through the lockbox would remain Amedisys’s, a trust may have
arisen. Therefore, if Amedisys is not, as the bankruptcy court assumed, a simple creditor of [National
Century] owed funds for purchased receivables, summary judgment is inappropriate.” Id. at 538.
Further, JPMorgan no longer holds any funds claimed by any party. For these reasons, though this
Court remanded these Counts in the first suit, the claims therein do not actually relate to JPMorgan.
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 9
This Court’s previous remand and reversal on these claims does not bar JPMorgan’s claim
preclusion defense because this Court’s decision found that those claims did not relate to JPMorgan.
Finally, JPMorgan is not a defendant with regard to the claims raised in Count Thirteen of
the first case. Thus, this Court’s reversal of summary judgment on that Count, against National
Century and in Amedisys’s favor, does not affect JPMorgan’s argument for claim preclusion in the
second suit.
In sum, none of these reversed rulings affect Amedisys’s claims in the second suit against
JPMorgan. Those rulings that are relevant are in JPMorgan’s favor and thus satisfy the first prong
of the claim preclusion test. The district court did not err in finding that the first prong was met.
2. Third prong: Issue in subsequent action which should have been litigated in prior action
The third prong of the claim preclusion test requires that, for claim preclusion to apply to an
issue in a subsequent action, the issue could have been litigated in a prior action. Wilkins, 183 F.3d
at 532. The parties’ arguments regarding this prong center on whether the Ohio bankruptcy court
had competent jurisdiction to rule on the first case. If it did have competent jurisdiction, then this
prong is satisfied because any claims brought in the subsequent second suit could have been litigated
before the Ohio bankruptcy court. If the bankruptcy court did not have jurisdiction, this prong is not
satisfied and JPMorgan’s claim preclusion defense is barred. This Court already implicitly decided
that the bankruptcy court had competent jurisdiction when it affirmed in part and reversed in part
the district court’s order affirming the bankruptcy court’s grant of summary judgment. In re Nat’l
Century Fin. Enters., Inc., 377 F. App’x at 533. Under the law of the case doctrine, an issue that has
been ruled on in a prior stage of a case is ordinarily considered settled and not subsequently
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 10
reconsidered by the court; such settled issues are considered the “law of the case.” However, the law
of the case doctrine does not bar this Court from reconsidering jurisdictional issues. “We recognize
that the law of the case doctrine is discretionary when applied to a coordinate court or the same
court’s own decisions . . . .” Bowling v. Pfizer, Inc., 132 F.3d 1147, 1150 (6th Cir. 1998). We have
noted in an unpublished decision that “[i]ssues such as subject matter jurisdiction or appellate
jurisdiction may be particularly suitable for reconsideration.” In re LWD, Inc. 335 F. App’x 523, 526
(6th Cir. 2009) (quoting Kennedy v. Lubar, 273 F.3d 1293, 1299 (10th Cir. 2001) (alteration in
original) (internal quotation marks omitted)). For these reasons, we address the jurisdictional issue
here.
“Bankruptcy courts have original jurisdiction over all claims arising under the Bankruptcy
Code. Such claims, referred to as ‘core’ proceedings, either invoke[] a substantive right created by
federal bankruptcy law or . . . could not exist outside of the bankruptcy.” Browning v. Levy, 283
F.3d 761, 772-73 (6th Cir. 2002) (alteration in original) (citation omitted). Under the Bankruptcy
Code, a bankruptcy court may also hear proceedings on non-core claims that are “otherwise related
to a case under title 11.” 28 U.S.C. § 157(c)(1). We have held that a claim is “related to” the
bankruptcy proceeding “if the outcome could alter the debtor’s rights, liabilities, options, or freedom
of action (either positively or negatively) and which in any way impacts upon the handling and
administration of the bankrupt estate.” In re Dow Corning Corp., 86 F.3d 482, 489 (6th Cir. 1996)
(quoting In re Pacor, 743 F.2d 984, 994 (3d Cir. 1984) (internal quotation marks omitted)). Further,
we have held that cases decided under the “related to” bankruptcy jurisdiction may be used to assert
claim preclusion. See Browning, 283 F.3d at 773 (noting that this Court has “applied res judicata
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 11
to a non-core claim”); Sanders Confectionary Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 482 (6th
Cir. 1992) (“[I]n certain circumstances bankruptcy proceedings can also be binding on non-core
proceedings.”).
While Amedisys admits that JPMorgan could raise contribution and indemnification claims
that would qualify as claims to the bankruptcy estate, Amedisys argues that these claims would have
such low priority as to render their practical effect on the estate so negligible as to exclude them from
“related to” bankruptcy jurisdiction. Amedisys also argues that JPMorgan, as a non-debtor, cannot
avail itself of the “related to” jurisdiction of the bankruptcy court. Both of these arguments are
unconvincing: “The potential for [defendant’s] being held liable to the nondebtors in claims for
contribution and indemnification, or vice versa, suffices to establish a conceivable impact on the
estate in bankruptcy.” In re Dow Corning, 86 F.3d at 494. Based upon our holding in In re Dow
Corning, Amedisys’s arguments regarding the supposedly negligible impact of the claims on the
estate and regarding JPMorgan’s status as a non-debtor fail.
Amedisys’s arguments about whether such claims for contribution and indemnification
would be “allowable” as claims against the bankruptcy estate are not relevant—as stated by this
Court in In re Dow Corning, id., the “conceivable impact” of a claim on a bankruptcy estate, rather
than its allowability as a claim on the estate’s assets, is the touchstone of “related to” jurisdiction.
Amedisys argues that underlying this Court’s decision in In re Dow Corning is the fact that the
contribution claims would have numbered in the thousands; a finding that the bankruptcy court
lacked subject matter jurisdiction over those thousands of claims would have jeopardized the
debtor’s reorganization plan. While we noted our concern for this issue in that case, see id., we did
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 12
not base our holding solely on that consideration. See id. (holding that “[t]he potential for Dow
Corning's being held liable to the nondebtors in claims for contribution and indemnification, or vice
versa, suffices to establish a conceivable impact on the estate in bankruptcy”).
The standard for determining a bankruptcy court’s jurisdiction is whether a case could
“conceivably have any effect on the estate,” not whether it would definitely affect it in a material
way. Id. at 489 (internal quotation marks omitted). Our Circuit “does not require a finding of
definite liability of [an] estate as a condition precedent to holding an action related to a bankruptcy
proceeding.” Id. at 491 (alteration in original) (internal quotation marks omitted).
Finally, and separately, it was Amedisys who, after filing the first lawsuit, moved to have the
case referred to bankruptcy court. Amedisys has previously argued that the claims were core, or at
least “related to,” claims falling under the bankruptcy court’s jurisdiction. Whether the bankruptcy
court has competent jurisdiction is a separate issue, but barring claim preclusion on the basis of
incompetent jurisdiction would reward Amedisys for first moving to refer the case to bankruptcy
court and then arguing that the bankruptcy court does not have competent jurisdiction over the case.
The district court did not err in finding that the third prong of claim preclusion is met. For these
reasons, we affirm the district court’s judgment that claim preclusion applies.
IV.
Finally, Amedisys contends that JPMorgan waived its claim preclusion defense by failing to
“seek an order of reference to the bankruptcy court once this matter transferred to the Southern
District of Ohio,” and, by such failure, acquiesced to Amedisys’s decision to litigate similar claims
in two separate fora. Simultaneously maintaining separate actions, or claim-splitting, is generally
No. 10-4194
Amedisys, Inc., et al. v. Suzanne Hosch, et al.
Page 13
prohibited, but Amedisys relies on a Fifth Circuit case holding that it is permitted where the
“defendant[ has] agree[d] or acquiesce[d] in the splitting of the claim.” Matter of Super Van, Inc.,
92 F.3d 366, 371 (5th Cir. 1996). The court in Super Van noted that it was joining “the First, Fourth,
Seventh, and Ninth Circuits in adopting Section 26(1)(a) of the Restatement [(Second) Judgments].”
Id. The Super Van court noted further that “[d]espite being fully informed and having ample
opportunity to do so, none of the defendants objected to the splitting of the claims. In fact, they,
through counsel, actually stated a preference for the splitting.” Id. The logical corollary to Super
Van is that lodging an objection to claim-splitting is sufficient to overcome an argument that the
defendant acquiesced to the splitting.
Here, JPMorgan moved to transfer the second case to the Ohio district court; in so doing,
JPMorgan objected to Amedisys’s attempted claim-splitting. Amedisys argues that this motion was
insufficient to defeat Amedisys’s argument that JPMorgan had acquiesced to simultaneous litigation,
and that JPMorgan also should have sought “an order of reference transferring [the second case] to
the bankruptcy court.” Amedisys seeks to have this Court impose an additional affirmative duty on
JPMorgan beyond the mere objection required by Super Van and the Restatement. Neither authority
is binding on this Court, but the policy of requiring only objection by a defendant in order to defeat
claim-splitting is a natural complement to the background principle that claim-splitting is generally
prohibited. Because JPMorgan did object to the second suit, we affirm the district court’s judgment.
V.
This Court’s decision on the Ohio claims precludes Amedisys’s second suit raising Louisiana
state law claims. We AFFIRM the judgment of the district court.