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Indiana Family and Social Services Administration v. Saint Catherine Hospital Of Indiana, LLC

United States District Court, Southern District of Indiana

February 28, 2014

INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Appellant,
v.
SAINT CATHERINE HOSPITAL OF INDIANA, LLC, Appellee. In re: SAINT CATHERINE HOSPITAL OF INDIANA, LLC, Debtor. Bankruptcy No.12-91316-BHL-11

ORDER ON MOTION TO MODIFY ORDER ON MOTION TO STAY (Dkt. No. 14)

SARAH EVANS BARKER, JUDGE United States District Court

This matter is before the Court on the Motion to Modify Order on Motion to Stay filed by Appellant, Indiana Family and Social Services Administration ("FSSA"), on December 23, 2013. (Dkt. No. 14). An Objection to that Motion was filed by Appellee, Saint Catherine Hospital of Indiana, LLC ("Saint Catherine"), on January 3, 2014. (Dkt. No. 15). FSSA's Response to Objection was filed on January 17, 2014. (Dkt. No. 16).

BACKGROUND

The Bankruptcy Court for this District entered summary judgment in favor of Saint Catherine and against FSSA on September 19, 2013. In relevant part, the Bankruptcy Court ordered FSSA to return $615, 912.64 to Saint Catherine because this amount constituted preferential payments made by Saint Catherine to FSSA. In addition, the Bankruptcy Court found that FSSA owed Saint Catherine $989, 738.78 for post-petition withholdings from payments due Saint Catherine because the underlying obligations arose pre-petition and did not fall under the doctrine of "recoupment."

FSSA filed a Motion for Stay Pending Appeal in the Bankruptcy Court asking the Bankruptcy Court to stay its summary judgment order pending appeal, including staying the required payments from FSSA to Saint Catherine.

On December 5, 2013, the Bankruptcy Court granted in part and denied in part FSSA's Motion for Stay Pending Appeal. Specifically, the Bankruptcy Court found that Saint Catherine did not oppose the request to stay enforcement of the judgment in regard to the $989, 738.78.[1] The Bankruptcy Court then discussed the four-factor test for determining the propriety of a stay pending appeal. The Bankruptcy Court concluded that under this four-factor test: (1) FSSA did not make a strong showing that they were likely to succeed on the merits of the appeal; (2) FSSA had not shown that it would suffer an irreparable injury absent a stay; and (3) "[i]nasmuch as the FSSA is not able to pay the full amount of the judgment, however, there may be important policy reasons for granting a stay." [Order on Motion to Stay at p. 3 (Dkt. No. 15-2).]

The Bankruptcy Court therefore issued a stay as to those parts of the judgment which Saint Catherine "conceded, " but denied the stay as to the balance of the Court's findings.

STANDARD OF REVIEW

Where a bankruptcy court has already denied a stay under Federal Rule of Bankruptcy Procedure 8005, “review is limited to a simple determination of whether the bankruptcy court abused its discretion." In re North Plaza, LLC, 395 B.R. 113, 119 (S.D. Cal. 2008) (citations omitted). “The abuse of discretion standard on review of the bankruptcy court's order denying a stay encompasses a de novo review of the law and a clearly erroneous review of the facts with respect to the underlying issues." Id. (citations omitted).

In this case, the parties agree that the relative factors to determine the propriety of granting a stay pending appeal require the movant to demonstrate that:

(1) it is likely to succeed on the merits of the appeal;
(2) the movant will suffer irreparable injury absent a stay;
(3) a stay would not substantially harm other parties in the ...

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