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Sacred Heart Hospital Of Norristown v. Sacred Heart Hospital Of Norristown

January 8, 1997

IN RE: SACRED HEART HOSPITAL OF NORRISTOWN, DBA SACRED HEART HOSPITAL & REHABILITATION CENTER, DEBTOR

SACRED HEART HOSPITAL OF NORRISTOWN, DBA SACRED HEART HOSPITAL & REHABILITATION CENTER

v.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE

IN RE: SACRED HEART HOSPITAL OF NORRISTOWN, D/B/A SACRED HEART HOSPITAL & REHABILITATION CENTER, DEBTOR

(D.C. CIVIL NO. 96-CV-06172)

SACRED HEART HOSPITAL OF NORRISTOWN

v.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE



Sacred Heart Hospital of Norristown, Appellant

(D.C. Civil No. 96-cv-06286) On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Nos. 96-cv-06172 and 96-cv-06286)

BEFORE: COWEN, ROTH and LEWIS, Circuit Judges

COWEN, Circuit Judge.

Filed January 8, 1998

Argued September 25, 1997

OPINION OF THE COURT

This appeal involves a challenge to the constitutionality of section 106(a) of the Bankruptcy Code, 11 U.S.C. Section(s) 106(a). That section purports to abrogate state sovereign immunity in federal court. The defendant-appellee, Commonwealth of Pennsylvania Department of Public Welfare ("DPW"), argued before the bankruptcy court that section 106(a) was not enacted pursuant to a valid exercise of congressional power. Therefore, DPW asserted that the Eleventh Amendment to the United States Constitution bars Debtor-appellant Sacred Heart Hospital of Norristown's ("Sacred Heart") lawsuit against DPW. The bankruptcy court denied DPW's claim of Eleventh Amendment immunity. It also entered an order on the merits granting declaratory judgment for Sacred Heart. The district court reversed the bankruptcy court's order dealing with Eleventh Amendment immunity and thereafter vacated the order of the bankruptcy court concerning the merits of the dispute. We will affirm the district court.

I.

Sacred Heart, an acute care community hospital in Norristown, Pennsylvania, began providing medical treatment to patients under Pennsylvania's Medical Assistance program ("the Program"), 55 Pa. Code Section(s) 1101.11 et seq., in 1967. By May of 1994, however,financial difficulties forced Sacred Heart to cease operations and lay off substantially all of its several hundred employees. Shortly thereafter, Sacred Heart filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

During the course of Sacred Heart's Chapter 11 proceedings, the Commonwealth asserted various claims against the Debtor. The Commonwealth's Department of Labor and Industry ("DLI") asserted claims against the Debtor for amounts claimed to be owed to the

Commonwealth under the Commonwealth's Unemployment Compensation and Workers' Compensation statutes; the Commonwealth's Department of Revenue ("DOR") asserted claims against the Debtor for sales and use taxes; and DPW asserted a claim against the Debtor arising under a lease. *fn1

Earlier in the bankruptcy proceedings, the Debtor submitted invoices to DPW to obtain payment for some of the medical treatments it provided to patients under the Program. The Commonwealth's Office of Inspector General ("OIG") returned the invoices to the Debtor, however, because they were incorrectly completed. The Debtor resubmitted them to OIG in January of 1996, and submitted additional invoices to DPW in May of 1996. DPW denied all of the Debtor's claims because the Debtor failed to comply with 55 Pa. Code Section(s) 1101.68. This statute requires claims to be submitted to DPW within 180 days after the treatment is rendered.

The Debtor subsequently filed in the bankruptcy court the instant adversary proceeding against DPW, demanding judgment against DPW "in the amount to which it is entitled under the Medical Assistance program." Adv. Compl. at 5. The Debtor did not request a declaratory judgment, nor did it request any prospective injunctive relief against any Commonwealth officials.

DPW filed motions to dismiss based principally on the Eleventh Amendment to the United States Constitution. Sacred Heart responded by claiming that no Commonwealth agency was entitled to Eleventh Amendment immunity in these proceedings because the DLI and DOR claims in the bankruptcy proceedings constituted a waiver of the Commonwealth's sovereign immunity. *fn2 Sacred Heart did not argue that the ...


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