Opinion
No. 17 BK 3283-LTS (Jointly Administered) Adv. Proc. No. 17-278-LTS Adv. Proc. No. 17-292-LTS
11-27-2018
IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative of The Commonwealth of Puerto Rico, et al., Debtors. Atlantic Medical Center, Inc., et al., Plaintiffs, v. Commonwealth of Puerto Rico, Defendant. Corporación de Servicios Integrales de Salud del Area de Barranquitas, Comerío, Corozal, Naranjito y Orocovis, Plaintiff, v. Commonwealth of Puerto Rico, Defendant.
MEMORANDUM ORDER OVERRULING OBJECTIONS AND ADOPTING REPORT AND RECOMMENDATION
On August 7, 2018, Magistrate Judge Judith Gail Dein issued a Report and Recommendation (Docket Entry No. 57, the "Report") recommending that the Court grant the Commonwealth of Puerto Rico's Motion to Dismiss Consolidated Complaints under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6) (Docket Entry No. 26, the "Motion to Dismiss") and dismiss the above-captioned adversary proceedings pursuant to Federal Rule of Civil Procedure 12(b)(1). The Court has received two objections to the Report. (See Docket Entry Nos. 58 and 61.) On August 12, 2018, Plaintiff Corporación de Servicios Intergrales de Salud del Area de Barranquitas, Comerío, Corozal, Naranjito y Orocovis (the "Corporación") filed its objection to the Report (Docket Entry No. 58, the "Corporación Objection"). On August 28, 2018, certain other Plaintiffs in the above-captioned adversary proceedings (the "Additional Objectors" and, together with the Corporación, the "Objectors") filed their objection to the Report (Docket Entry No. 61, the "Omnibus Objection" and, together with the Corporación Objection, the "Objections"). The Commonwealth filed an omnibus reply submission on September 18, 2018. (Docket Entry No. 63.) The Court has reviewed all of the submissions of the parties carefully and, for the following reasons, adopts the Report. The Objections are overruled in their entirety.
All docket entry references are to entries in Case No. 17-AP-00278, unless otherwise specified.
BACKGROUND
Plaintiffs are non-profit health centers that operate in the Commonwealth of Puerto Rico (the "Commonwealth" or "Puerto Rico"). (Docket Entry No. 1, the "Atlantic Medical Complaint," ¶¶ 7–16; Docket Entry No. 1 in Case No. 17-AP-00292, the "CSI Complaint," ¶ 11.) In the above-captioned adversary proceedings, they seek two declaratory judgments against the Commonwealth. First, Plaintiffs seek a declaration that their retroactive claims against the Commonwealth for certain payments related to health care provided under the federal Medicaid program are not dischargeable within the Title III restructuring process. (Atlantic Medical Compl. ¶ 84; CSI Compl. ¶ 84.) Second, Plaintiffs seek a declaration that those claims may not otherwise be impaired by the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). (Id. ) On February 2, 2018, Magistrate Judge Judith Gail Dein entered an order consolidating the two adversary proceedings. (Docket Entry No. 25.) Her Report recommends that the adversary proceedings be dismissed for lack of subject matter jurisdiction, concluding that neither demand for declaratory judgment presents issues that are ripe for adjudication.
The Court hereby incorporates by reference the Statement of Facts section of the Report. (See Report at 3–7.)
DISCUSSION
Standard of Review
In reviewing a report and recommendation, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C.A. § 636(b)(1)(C) (West 2018). The court must make a de novo determination insofar as a party makes specific objections to portions of the magistrate judge's report or specified proposed findings or recommendations to which objection is made. Id.; see also Vega-Feliciano v. Doctors' Center Hosp., Inc., 100 F. Supp. 3d 113, 116 (D.P.R. 2015) ("A party that files a timely objection is entitled to a de novo determination of those portions of the report or specified proposed findings or recommendations to which specific objection is made.") (citations omitted).
However, a district court need not consider "frivolous, conclusive, or general objections." Id. at 116 (citations omitted). To the extent that objections to a magistrate judge's report and recommendation are general or conclusory, a de novo review is unwarranted, and the district judge will instead review the report and recommendation for clear error. Id. Objections that do not specify the analytical aspects of the report and recommendation to which the party is objecting are considered "general or conclusory," as are objections that are repetitive of arguments already presented to the magistrate judge. Id. In this case, Plaintiffs have tendered specific objections and the Court has reviewed de novo the Report's analysis of the jurisdictional issues presented by Plaintiffs' claims and recommended conclusions.
The parties have not challenged the Report's conclusion that the Bankruptcy Code does not preclude consideration of the question of dischargeability of a claim in advance of the filing of a plan of adjustment that proposes to discharge the claim. Given that the Court concurs in the Report's conclusion that subject matter jurisdiction is lacking, the Court declines to address the question of procedural propriety of the claim.
Overview of Objections
In its Objection, Corporación argues that the Report errs in its determination that Plaintiffs' claims are not ripe for review. (Corporación Obj. at 2.) Corporación contends that an actual controversy exists, despite a pending appeal relating to the judgment that it has obtained.
Citing Federal Rules of Bankruptcy Procedure 4004 and 4007, Corporación further argues the Court may hear a dischargeability dispute prior to the hearing on confirmation of a plan of adjustment. (Id. at 2–3.) However, Corporación does not challenge the Report's treatment of the procedural timeliness issue.
In the Omnibus Objection, the Additional Objectors argue that the Report contains factual errors. (Omnibus Obj. at 3.) Specifically, the Additional Objectors argue that the Report errs in concluding that all of the Objectors' claims are currently being litigated. (Id. ) Instead, the Additional Objectors contend that certain prepetition judgments are final and that they are therefore entitled to an immediate ruling on whether those claims are dischargeable. (Id. ) The Additional Objectors also argue that they satisfy the hardship prong of the ripeness analysis because a ruling on dischargeability will inform their decision regarding whether to continue litigating their claims. (Id. at 14–15.) With respect to their demand for a declaration that their claims cannot be impaired by PROMESA, Objectors argue that the claim is ripe because certain payments are currently due under the federal Medicaid statute. (Id. at 10–12.)
The Objectors also make arguments relating to the merits of their claims.
Dischargeability Claim
The Report concludes that this Court lacks subject matter jurisdiction to consider Plaintiffs' request for a declaration that Plaintiffs' claims for payment cannot be discharged in a plan of adjustment. (Id. at 9–13.) The Report's conclusion that the "question of dischargeability ... is not fit for review" rests on two determinations. First, the extent of the Commonwealth's monetary obligation, if any, for the reimbursements at issue has not been finally determined. Second, it is uncertain whether a future plan of adjustment will propose to discharge the claims that are at issue. (Id. at 10–11.) The Additional Objectors' argument regarding the alleged "factual errors" is unavailing. Even if certain prepetition judgments held by Additional Objectors are final, the dischargeability question is still unfit for review because it is entirely dependent on a future event that may never occur. Absent the filing of a proposed plan of adjustment, it is unknown whether the Commonwealth will attempt to seek discharge of any of Plaintiffs' claims, and it would be premature for this Court to issue a ruling at this point in the Title III proceedings concerning the dischargeability of those claims. Furthermore, the Report correctly concludes that the Objectors failed to establish the hardship prong of the ripeness analysis. (Report at 12–13.) The Court understands and is sympathetic to the fact that Objectors wish to avoid expending resources in litigating claims that may ultimately be dischargeable. However, that fact alone does not satisfy the hardship prong of the ripeness analysis, as immediate harm to the Objectors will only be in prospect in the event that a plan of adjustment is filed that seeks to discharge the Objectors' claims. See, e.g., ACP Master, Ltd. v. Commonwealth of P.R. (In re The Fin. Oversight and Mgmt. Bd. for P.R.), 300 F. Supp. 3d 328, 337 (D.P.R. 2018) (stating that "[r]ulings on isolated or abstract points that will principally be useful in formulating or litigating future choices that might or might not be made are outside the authorized scope of declaratory relief"). It should be noted, however, that nothing in the Court's conclusion that the hardship prong of the ripeness inquiry is not met in this declaratory judgment proceeding precludes Plaintiffs from conserving resources by seeking to stay their reimbursement litigation until any dischargeability claims are ripe.
Impairment Claim
The Report correctly concludes that the Objectors' request for a declaration that their claims are not impaired by PROMESA fails both the fitness and hardship prongs of the ripeness analysis. (Report at 13–14.) In their Objection to the Report, the Additional Objectors argue that the impairment claim is ripe because certain of the "wraparound" payments are due under the federal Medicaid statute and that Plaintiffs are therefore entitled to a declaration that PROMESA does not impair the payment of such claims. (Id. at 10–12.) However, their Complaints do not allege facts that, even when read in the light most favorable to Plaintiffs, support plausibly a conclusion that PROMESA has caused any impairment of or failure to pay the claims. Similarly, Objectors have failed to establish that significant hardship exists absent a ruling on the issue of impairment.
CONCLUSION
For the foregoing reasons, the Court adopts the thorough and well-reasoned Report and the Objections are overruled. The Motion to Dismiss is granted insofar as it seeks dismissal of the above-captioned consolidated adversary proceedings for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). The Clerk of Court is directed to enter judgment accordingly and close the above-captioned adversary proceedings.
This Order resolves Docket Entry Nos. 26, 57, 58, and 61 in Case No. 17-AP-278.
SO ORDERED.
REPORT AND RECOMMENDATION ON COMMONWEALTH OF PUERTO RICO'S MOTION TO DISMISS
Judith Gail Dein, United States Magistrate Judge
In re: The Financial Oversight and Management Board for Puerto Rico, as Representative of the Commonwealth of Puerto Rico, et al., Debtors.
The Debtors in these Title III Cases, along with each Debtor's respective Title III case number listed as a bankruptcy case number due to software limitations and the last four (4) digits of each Debtor's federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation ("COFINA") (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority ("HTA") (Bankruptcy Case No. 17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of the Commonwealth of Puerto Rico ("ERS") (Bankruptcy Case No. 17 BK 3566-LTS); and (v) Puerto Rico Electric Power Authority ("PREPA") (Bankruptcy Case No. 17 BK 4780-LTS) (Last Four Digits of Federal Tax ID: 9686).
I. INTRODUCTION
Plaintiffs are non-profit health centers in the Commonwealth of Puerto Rico (the "Commonwealth") who are funded by both Medicaid ( 42 U.S.C. § 1396-1(1) ) and Section 330 of the Public Health Service Act ( 42 U.S.C. § 254b ) ("Section 330"). In litigation outside of this adversary proceeding, Plaintiffs have sued the Commonwealth for missed Medicaid-related payments. They have sued for both prospective and retroactive relief. This proceeding is related to their retroactive claims. In 2016, Congress passed the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"). Pursuant to Title III thereof, the Commonwealth entered into a bankruptcy-like restructuring case. Plaintiffs have brought two adversary proceedings within that Title III case, which have been consolidated. Both actions seek two declaratory judgments related to their litigation against the Commonwealth. First, they seek a declaration that their retroactive claims against the Commonwealth are non-dischargeable in the Title III process. Second, they seek a declaration that those claims are otherwise unimpaired by PROMESA in any manner, including by delay in payment or dilution in amount. See, e.g., Atlantic Medical Objection, Dkt. No. 36 at 3.
The plaintiffs in adversary proceeding 17-AP-278 are Atlantic Medical Center, Inc., Camuy Health Services, Inc., Centro de Salud Familiar Dr. Julio Palmieri Ferri, Inc., Centro de Salud de Lares, Inc., Centro de Servicios Primarios de Salud de Patillas, Inc., Ciales Primary Health Care Services, Inc., Corporación de Servicios Médicos Primarios y Prevención de Hatillo, Inc., Costa Salud, Inc., Hospital General Castañer, Inc., and Rio Grande Community Health Center, Inc. (collectively, the "Atlantic Medical Plaintiffs"). The plaintiff in adversary proceeding 17-AP-292 is Corporación de Servicios Integrales de Salud del Area de Barranquitas, Comerío, Corozal, Naranjito y Orocovis ("CSI"). The two actions have been consolidated and the term "Plaintiffs" throughout this opinion will refer to CSI and Atlantic Medical Plaintiffs collectively.
This matter is before the Court on the Commonwealth of Puerto Rico's Motion to Dismiss Consolidated Complaints Under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Dkt. No. 26 in 17-AP-278) (the "Motion to Dismiss"). Plaintiffs have objected to the Motion to Dismiss (Dkt. Nos. 35 and 36) and the Commonwealth has replied (Dkt. No. 38). This Court heard oral argument on the Motion to Dismiss on May 31, 2018. After careful consideration of the arguments made by the parties, both in their briefing and in open court, this Court hereby recommends to the District Judge assigned to this proceeding that the Motion to Dismiss be ALLOWED, as Plaintiffs' claims are not ripe. II. STATEMENT OF FACTS
The facts herein are derived from the complaint in adversary proceeding 17-AP-278 ("Atlantic Medical Compl.") and the complaint in adversary proceeding 17-AP-292 ("CSI Compl.") unless otherwise noted.
The Plaintiffs are non-profit health centers, operating in the Commonwealth, that are federally funded through both Medicaid ( 42 U.S.C. § 1396-1(1) ) and Section 330 of the Public Health Service Act ( 42 U.S.C. § 254b ). Atlantic Medical Compl. ¶¶ 7-16, 26; CSI Compl. ¶ 11. Through Medicaid, the federal government provides grants to states in order to provide healthcare to eligible participants. Atlantic Medical Compl. ¶ 28. Eligible participants are individuals or families who cannot meet the costs of necessary medical services. Id. ¶ 27. The Medicaid grant program is governed by federal law. Id. ¶ 29. Through Section 330, the federal government provides grants to private health centers that provide services to uninsured and underinsured individuals in medically underserved areas. Id. ¶ 34. Section 330 grantees are required by law to serve as Medicaid providers. Id. The Plaintiffs, as Section 330 grantees, are obligated to make "every reasonable effort" to collect reimbursement for care provided to patients covered by health insurance, including Medicaid. Id. ¶ 37 (citing 42 U.S.C. § 254b(k)(3)(G)(ii) ).
The Commonwealth is considered a state for Medicaid purposes. 42 U.S.C. § 1301(a)(1).
The Commonwealth has participated in Medicaid since the mid-1990s. Id. ¶ 47. The Commonwealth's Medicaid system is financed by both Commonwealth and federal funds. Id. The federal government contributes a portion of every dollar spent on Medicaid obligations by the Commonwealth up to a ceiling. Id. ¶ 48. The Commonwealth is then obligated to pay providers the remaining necessary Medicaid funds. Id. Plaintiffs allege that from 1989 through 2010, the Commonwealth has failed to make required payments to them for services covered by Medicaid. Id. ¶ 50.
The Court is aware that it is oversimplifying the Medicaid process as well as the intricate relationship between Section 330 funding and Medicaid funding. The Court has included only those facts that are necessary for this ruling.
Plaintiffs commenced litigation in both federal and Commonwealth courts in order to collect payment from the Commonwealth for future and past rendered Medicaid services. Id. ¶ 55. In 2003 and 2006, several of the Plaintiffs filed suits in federal court, seeking prospective injunctive relief. CSI Compl. ¶ 4; Atlantic Medical Compl. ¶¶ 62, 64. Those cases have been consolidated and are currently pending before Judge Gelpi in the District of Puerto Rico. Atlantic Medical Compl. ¶ 71; Rio Grande Cmty. Health Ctr., Inc. v. Commonwealth of P.R., D.P.R. Case No. 03-1640 (GAG). Judge Gelpi has granted preliminary injunctions in that proceeding, ordering the Commonwealth to make prospective payments. Atlantic Medical Compl. ¶¶ 63, 73. Judge Gelpi has refused to order payment on claims arising before his entry of injunctive relief, ruling that such relief is barred by the Eleventh Amendment. Id. ¶ 74. The prospective claims, and Judge Gelpi's associated injunctive relief, are not at issue in the instant proceeding. CSI and the Atlantic Medical Plaintiffs also filed suit in the Puerto Rico Court of First Instance, San Juan Part (the "State Court") for retroactive relief. Atlantic Medical Compl. ¶ 56; CSI Compl. ¶ 31. The State Court has issued partial judgments on a set of the claims, but has yet to consider Plaintiffs' claims for the years from 1997 to 2000. Atlantic Medical Compl. ¶¶ 57-59; CSI Compl. ¶¶ 31, 32. With respect to the partial judgments that have been entered, the Atlantic Medical Plaintiffs characterize some as being "final and firm," and one as being "final but not firm." Atlantic Medical Compl. ¶¶ 57-58. At oral argument, however, counsel for the Atlantic Medical Plaintiffs and for CSI affirmed that even the cases that are characterized as "final and firm" are not finished and that various issues are pending on appeal in the State Court. See Transcript of Oral Argument at 4, 18. There are no allegations in either complaint that the only impediment to payment of any of the partial judgments is PROMESA and its automatic stay.
The plaintiffs in the consolidated cases before Judge Gelpi moved to have the retroactive claims at issue here consolidated into that litigation, and thus transferred out of the PROMESA proceedings. Judge Gelpi denied that request. Rio Grande Cmty. Health Ctr., Inc., D.P.R. Case No. 03-1640 (GAG), Dkt. Nos. 1080, 1081, 1083.
On June 30, 2016, Congress enacted PROMESA. Plaintiffs contend that three sections of PROMESA control the Commonwealth's obligation related to Medicaid payments, and are particularly relevant for the instant Motion to Dismiss.
First, PROMESA § 7 ( 48 U.S.C. § 2106 ) provides that;
Except as otherwise provided in this chapter, nothing in this chapter shall be construed as impairing or in any manner relieving a territorial government, or any territorial instrumentality thereof, from compliance with Federal laws or requirements or territorial laws and requirements implementing a federally authorized or federally delegated program protecting the health, safety, and environment of persons in such territory.
Second, PROMESA § 304(h) ( 48 U.S.C. § 2164(h) ) provides that;
This chapter may not be construed to permit the discharge of obligations arising under Federal police or regulatory laws, including laws relating to the environment, public health or safety, or territorial laws implementing such Federal legal provisions. This includes compliance obligations, requirements under consent decrees or judicial orders, and obligations to pay associated administrative, civil, or other penalties.
Third, PROMESA § 204(d) ( 48 U.S.C. § 2144(d) ) provides that;
In taking actions under this chapter, the Oversight Board shall not exercise applicable authorities to impede territorial actions taken to – (1) comply with a court-issued consent decree or injunction, or an administrative order or settlement with a Federal agency, with respect to Federal programs; (2) implement a federally authorized or federally delegated program ....
In August 2017, Plaintiffs removed their retroactive State Court claims to this Court (the "Removed Claims"), arguing that the Removed Claims were related to the PROMESA proceedings. Atlantic Medical Compl. ¶ 77; CSI Compl. ¶ 33; Notice of Removal (Dkt. No. 1 in 17-AP-227). The merits of those claims were the subject of adversary proceeding 17-AP-227. In that proceeding, the Commonwealth moved for this Court to abstain. Commonwealth of Puerto Rico's Motion for Abstention (Dkt. No. 29 in 17-AP-227). This Court issued a Report and Recommendation to District Court Judge Swain recommending that the Court abstain from hearing the merits of the Removed Claims and remand those proceedings to the State Court. Report and Recommendation (Dkt. No. 55 in 17-AP-227). Judge Swain adopted this Court's recommendation on July 10, 2018. Memorandum Order (Dkt. No. 64 in 17-AP-227). Thus, in the instant adversary proceedings the Plaintiffs are seeking declaratory judgments as to whether the Commonwealth's obligation with regard to the Removed Claims, which will be determined by the State Court on remand, are dischargeable or unimpaired by PROMESA.
III. LEGAL STANDARD
The Commonwealth has moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6). In evaluating a complaint under either rule, the Court takes as true the factual allegations in the complaint and makes all reasonable inferences in favor of the plaintiffs. Downing/Salt Pond Partners, L.P. v. R.I. & Providence Plantations, 643 F.3d 16, 17 (1st Cir. 2011) ; Cooperman v. Individual Inc., 171 F.3d 43, 46 (1st Cir. 1999). Under Fed. R. Civ. P. 12(b)(1), it is the burden of the parties invoking jurisdiction to prove subject matter jurisdiction. Johansen v. United States, 506 F.3d 65, 68 (1st Cir. 2007). In evaluating the party's claim, the Court may also consider other materials in the record, including materials contradicting the allegations in the complaint. Downing, 643 F.3d at 17. Under Fed. R. Civ. P. 12(b)(6), a complaint can survive a motion to dismiss only where "the combined allegations, taken as true ... state a plausible, not merely conceivable, case for relief." Carrero-Ojeda v. Autoridad de Energia Electrica, 755 F.3d 711, 718 (1st Cir. 2014) (internal citations and quotations omitted). The Court may consider "implications from documents attached to or fairly incorporated into the complaint ... facts susceptible to judicial notice ... [and] concessions in plaintiff's response to the motion to dismiss." Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55-56 (1st Cir. 2012) (internal quotations and citations omitted).
CSI asserts that the Commonwealth's ripeness argument is not properly brought under Fed. R. Civ. P. 12(b)(1), arguing that "defendant does not challenge any of the factual jurisdictional allegations." CSI Response, Dkt. No. 35 ¶ 3. However, ripeness is appropriately considered under Rule 12(b)(1) in connection with the Court's jurisdictional analysis. See Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 534 (1st Cir. 1995).
Where the Court encounters a motion under 12(b)(1) for lack of subject matter jurisdiction and 12(b)(6) for failure to state a claim, the Court should consider the jurisdictional argument first. Deniz v. Municipality of Guaynabo, 285 F.3d 142, 149 (1st Cir. 2002).
IV. DISCUSSION
A. Timeliness of Dischargeability Issue
Even before reaching the jurisdictional issue, the Court must address the Commonwealth's argument that the Plaintiffs' claims are procedurally improper. The Commonwealth contends that Bankruptcy Code § 944 "provides that decisions regarding dischargeability are to be made within the context of a plan of adjustment." Motion to Dismiss at 4. Thus, the Commonwealth argues that since there is not yet a plan of adjustment, Plaintiffs' complaints were filed too early. Id. The Bankruptcy Code, however, is not that explicit. Bankruptcy Code § 944 provides in relevant part that "the debtor is discharged from all debts as of the time when ... the plan is confirmed[.]" It further provides that "[t]he debtor is not discharged ... from any debt ... excepted from discharge by the plan or order confirming the plan[.]" Thus, while the Bankruptcy Code states that debts are discharged at the time of plan confirmation, it says nothing about when decisions about dischargeability can or ought to be made. Courts have considered the question of dischargeability prior to the existence of a plan actually discharging that debt. See Cassim v. Educ. Credit Mgmt. Corp. (In re Cassim ), 594 F.3d 432, 440 (6th Cir. 2010). Since the Bankruptcy Code does not procedurally prohibit the filing of Plaintiffs' suits, the Court engages in the Commonwealth's other arguments in order to determine whether the Court can presently entertain Plaintiffs' claims.
Bankruptcy Code § 944 is explicitly made applicable by PROMESA § 301(a) (48 U.S.C. § 2161 ).
The Court notes CSI's argument that Bankruptcy Rule 4007 allows for flexibility in the timing of filing adversary proceedings seeking rulings on dischargeability. However, Rule 4007 is inapplicable here since it provides for determinations of dischargeability under Bankruptcy Code § 523 – which applies only to individuals. Fed. R. Bank. Pro. 4007 (advisory committee note); Daluz v. Automatic Plating of Bridgeport, Inc. (In re Automatic Plating of Bridgeport, Inc. ), 202 B.R. 540, 542 (Bankr. D. Conn. 1996). Moreover, Bankruptcy Code § 523 is not incorporated into PROMESA. See PROMESA § 301(a) (48 USC § 2161 ).
B. Ripeness
The Commonwealth argues that this Court presently lacks jurisdiction to render a decision on either dischargeability or unimpairment because those claims are not ripe for review. This Court agrees that the Plaintiffs' claims related to dischargeability and unimpairment are not ripe. The consolidated complaints should be dismissed without prejudice to refiling if Plaintiffs later object to the treatment of their claims under a future plan of adjustment, or allege specific impairment due to PROMESA.
The purpose of the ripeness doctrine is "to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements[.]" Abbott Lab. v. Gardner, 387 U.S. 136, 148, 87 S. Ct. 1507, 1515, 18 L. Ed. 2d 681 (1967) (abrogated on other grounds in Califano v. Sanders, 430 U.S. 99, 105, 97 S. Ct. 980, 984, 51 L. Ed. 2d. 192 (1977) ). "[I]f a plaintiff's claim, though predominantly legal in character, depends upon future events that may never come to pass, or that may not occur in the form forecasted, then the claim is unripe." Ernst & Young, 45 F.3d at 537. The jurisdictional ripeness inquiry is no different here than in other cases simply because the nature of the requested relief is declaratory. Altvater v. Freeman, 319 U.S. 359, 363, 63 S. Ct. 1115, 1118, 87 L. Ed. 1450 (1943) ("[t]he requirements of case or controversy are of course no less strict under the Declaratory Judgment Act ... than in [the] case of other suits"); see also Ernst & Young, 45 F.3d at 535 ("a test for ripeness is ... mandated by the constitutional requirement that federal jurisdiction extends only to actual cases or controversies.").
A ripeness inquiry has two components, fitness and hardship. Thus, "[t]o determine whether a case is ripe for review, a federal court must evaluate the fitness of the issue presented and the hardship that withholding immediate judicial consideration will work." Rhode Island Ass'n of Realtors, Inc. v. Whitehouse, 199 F.3d 26, 33 (1st Cir. 1999) "[B]oth prongs of the test ordinarily must be satisfied in order to establish ripeness." Ernst & Young, 45 F.3d at 535. Nevertheless, in some extreme cases a very strong showing of one prong can suffice. Id. (recognizing "the possibility that there may be some sort of sliding scale under which, say, a very powerful exhibition of immediate hardship might compensate for questionable fitness (such as a degree of imprecision in the factual circumstances surrounding the case), or vice versa"). Considering both of these prongs in connection with Plaintiffs' claims compels the conclusion that the claims are not ripe for review. The Court will evaluate each of Plaintiffs' claims under each prong.
Dischargeability
The question of dischargeability of the Removed Claims is not fit for review. A fitness inquiry "typically involves subsidiary queries concerning finality, definiteness, and the extent to which resolution of the challenge depends upon facts that may not yet be sufficiently developed[.]" Rhode Island Ass'n of Realtors, 199 F.3d at 33 (internal citations and quotations omitted). "[T]he critical question concerning fitness for review is whether the claim involves uncertain and contingent events that may not occur as anticipated or may not occur at all." Ernst & Young, 45 F.3d at 536 (internal citations and quotations omitted). Here, Plaintiffs ask the Court to interpret three PROMESA provisions in order to determine if a plan of adjustment can discharge the Removed Claims. As an initial matter, the extent of the Commonwealth's obligation, if any, for the reimbursements demanded in the Removed Claims has not been finally determined. Moreover, whether any future plan of adjustment will even propose discharging the Removed Claims is entirely uncertain. That factual uncertainty renders the dischargeability claim unfit for review at the present time, regardless of the meaning of the three PROMESA sections on which Plaintiffs rely. See Parthenon Metal Works, Inc. v. MordernTables Inc. (In re Modern Tables, Inc. ), 26 B.R. 585, 586 (Bankr. N.D. Al. 1983) (dismissing the complaint in an adversary proceeding under a chapter 11 case because the Court refused to determine the question of dischargeability prior to confirmation of a plan). Plaintiffs' claim regarding dischargeability is not fit, and should await a proposed plan of adjustment that purports to discharge amounts due on the Removed Claims. This conclusion is especially appropriate in the instant case given the complexities of any proposed plan of adjustment and the competing legal issues that will be presented to the Court for resolution in connection with any proposed plan.
The Plaintiffs have also not established that the lack of immediate judicial consideration of their dischargeability claim will cause them significant hardship. The hardship prong of the ripeness inquiry "typically turns upon whether the challenged action creates a direct and immediate dilemma for the parties." Rhode Island Ass'n of Realtors, 199 F.3d at 33 (internal citations and quotations omitted). While the Court in no way diminishes the importance of Plaintiffs' claims for medical funding, rendering a declaratory judgment on dischargeability now would not alleviate significant harm. The harm that would come from a discharge can only occur if the debt is, in fact, discharged. Without any such proposal, there is no immediate harm to prevent.
The Atlantic Medical Plaintiffs argue that they need a declaratory judgment on the issue of dischargeability because they have a duty to make every reasonable effort to recover owed funds, and because their current litigation efforts will no longer be reasonable if the debt can be discharged. Atlantic Medical Objection, Dkt. No. 36 at 3-4. The Court is sympathetic to the fact that the parties will have to spend resources on litigation of this issue in the future, but that alone does not make the dischargeability claim ripe for review. See Bank of New York v. Adelphia Commc'n Corp. (In re Adelphia Commc'n Corp. ), 307 B.R. 432, 440 (Bankr. S.D.N.Y. 2004) (holding that the fact that a resolution might facilitate negotiation or could otherwise affect litigation positions is not enough to render a claim fit for resolution); see also ACP Master, Ltd. v. Commonwealth of P.R. (In re The Fin. Oversight and Mgmt. Bd. for P.R. ), 300 F.Supp.3d 328, 337 (D.P.R. 2018) ("Rulings on isolated or abstract points that will principally be useful in formulating or litigating future choices that might or might not be made are outside the authorized scope of declaratory relief."). The Atlantic Medical Plaintiffs' reliance on Pac. Gas and Elec. Co. v. State Energy Res. Conservation & Dev. Comm'n, 461 U.S. 190, 103 S. Ct. 1713, 75 L. Ed. 2d 752 (1983) goes too far. In that case, the Court decided that determination of the validity of a moratorium on certification of power plants was a ripe issue for review prior to an actual denial of certification because "[t]he construction of new nuclear facilities requires considerable advance planning – on the order of 12 to 14 years." Id. at 201, 1721, 103 S. Ct. 1713. Here, Plaintiffs have already been litigating the Removed Claims for years. The additional hardship of litigating those claims to judgment in the State Court, even if those claims are ultimately found to be dischargeable, is not enough to create ripeness where it otherwise does not exist. Plaintiffs' request for a declaratory judgment related to dischargeability is not ripe and should be dismissed.
Unimpairment
The question of whether the Removed Claims are unimpaired by PROMESA is also not ripe for review. In that request, Plaintiffs seek a declaration that "PROMESA and its [ ] debt restructuring process do not affect Plaintiffs' claims." Atlantic Medical Objection, Dkt. No. 36 at 10. The Atlantic Medical Plaintiffs argue here that "the Commonwealth must meet its obligation to pay Plaintiffs under the federal Medicaid program, not as part of a bankruptcy plan, or after extinguishment of the automatic stay, but according to terms of the Medicaid Act mandating payments to the Plaintiffs in both amount and time." Atlantic Medical Objection, Dkt. No. 36 at 10. As explained herein, neither prong of the ripeness test is fulfilled with respect to this claim.
This position seems inconsistent with the Plaintiffs' position in removing claims to the PROMESA Court that the Removed Claims "relate to the proceeding commenced under Title III of [PROMESA]." Notice of Removal ¶ 5 (Dkt. No. 1 in 17-AP-227). Moreover, Plaintiffs are relying on their interpretation of provisions of PROMESA to support their position that the amounts due them cannot be discharged or impaired: they are not in fact arguing that PROMESA does not affect their claims.
First, the unimpairment question is not fit for review as Plaintiffs have not pled facts to show that PROMESA is currently impairing their claims. As detailed above, while the Removed Claims are at various stages, the Plaintiffs have not alleged that they have not been paid solely because of PROMESA. The Court recently lifted the automatic stay related to the Removed Claims so that those claims could be litigated in the State Court "through the entry, but not the execution or enforcement, of final judgment." Adversary Proceeding 17-AP-227, Dkt. No. 64 at 9-10. Plaintiffs have not presented the Court with any claims ready for disbursement that PROMESA is currently impairing. As made clear during oral argument, the State Court may have reached judgment on certain claims, but none are truly final such that only the PROMESA stay, as modified by this Court, is impairing those claims.
Further, to the extent that Plaintiffs' claim seeks a ruling on unimpairment that goes beyond collecting on the Removed Claims, they have failed to define the parameters of any such claim. It does not appear that the Plaintiffs are seeking a general declaration that Plaintiffs are exempt from the umbrella of PROMESA, since such a declaration would be inconsistent with Plaintiffs' reliance on PROMESA to support their claims that the amounts due cannot be impaired or discharged. Without a more detailed pleading as to how PROMESA is impairing Plaintiffs, there is no fit claim for this Court to review. As noted above, the ripeness doctrine "prevent[s] the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements." Ernst & Young, 45 F.3d at 535.
Plaintiffs also similarly fail to show adequate hardship related to their unimpairment claim. Particularly in light of the modified automatic stay, it is unclear exactly how PROMESA is currently impairing Plaintiffs' claims. Plaintiffs have not provided the Court with facts to show that significant hardship exists absent a ruling on unimpairment. Plaintiffs' request for a declaratory judgment related to unimpairment is not ripe and should be dismissed.
As Plaintiffs' claims are unripe, this Court need not discuss the Commonwealth's remaining arguments.
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V. CONCLUSION
For all of the reasons herein, this Court hereby recommends to the District Court Judge to whom this proceeding is assigned that the Motion to Dismiss be ALLOWED and that the complaints in adversary proceedings 17-AP-278 and 17-AP-292 be dismissed without prejudice to refiling if Plaintiffs later object to the treatment of their claims under a future plan of adjustment, or allege specific impairment due to PROMESA.
SO ORDERED.
DATED: August 7, 2018