Virginia Department of Medical Assistance Services v. Shenandoah Realty Partners, L.P. (In Re Shenandoah Realty Partners, L.P.)

248 B.R. 505, 2000 U.S. Dist. LEXIS 5982, 2000 WL 553912
CourtDistrict Court, W.D. Virginia
DecidedMay 1, 2000
DocketCivil Action 5:00MC00002
StatusPublished
Cited by11 cases

This text of 248 B.R. 505 (Virginia Department of Medical Assistance Services v. Shenandoah Realty Partners, L.P. (In Re Shenandoah Realty Partners, L.P.)) is published on Counsel Stack Legal Research, covering District Court, W.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Virginia Department of Medical Assistance Services v. Shenandoah Realty Partners, L.P. (In Re Shenandoah Realty Partners, L.P.), 248 B.R. 505, 2000 U.S. Dist. LEXIS 5982, 2000 WL 553912 (W.D. Va. 2000).

Opinion

*508 MEMORANDUM OPINION

MICHAEL, Senior District Judge.

The appellants are appealing the October 6, 1999 order of the bankruptcy court overruling all but one of the objections of the Department of Medical Assistance Services (“DMAS”) to confirmation of the modified second amended plan of reorganization (“Aseend’s plan”) proposed by Ascend Healthcare (“Ascend”). The appellants invoke jurisdiction pursuant to 28 U.S.C. § 158(a).

I.

DMAS is the largest unsecured creditor of Shenandoah Realty Partners (the “Debtor”). The Debtor owns and operates a 60-bed nursing home and a 35-bed adult care facility in Virginia and has a Medicaid provider agreement for this nursing home with DMAS. The Debtor is licensed by the Commonwealth of Virginia and subject to the regulatory authority of DMAS pursuant to Title 32.1 of the Virginia Code. The Virginia Medicaid Program provides medical assistance to the medically and financially needy in cooperation with the federal government and is administered by DMAS. Medicaid providers such as the Debtor render medical services to qualified recipients and are compensated for their services through Virginia’s reimbursement plan. The depreciation of a nursing home’s tangible assets is one of the costs reimbursable to providers under Virginia’s Medicaid Program. The Debtor received reimbursement for its depreciation pursuant to provisions of Virginia’s Administrative Code. On May 30, 1996, the Debtor *509 filed a petition for reorganization under Chapter 11 of Title 11 on the United States Code in the U.S. Bankruptcy Court for the Western District of Virginia (the “bankruptcy court”).

DMAS’s claim against the Debtor arises from a statutory provision that allows for depreciation recapture by DMAS upon the sale or transfer of a nursing home. See Va.Code Ann. § 32.1-329(A). This statute further provides that DMAS may recapture such depreciation from the transferee of the Debtor’s nursing home upon the Debtor’s failure to reimburse DMAS in full. See Va.Code Aun. § 32.1-329(0). Pursuant to the statute, DMAS holds an unsecured claim against the Debtor contingent upon the sale (for gain) of the Debt- or’s real and tangible property, comprising its licensed nursing home, for repayment of depreciation paid to the Debtor. DMAS’s claim increases daily and is approximately one million dollars ($1,000,-000). However, on March 28, 1999, the General Assembly of Virginia enacted Chapter 728, which repeals Section 32.1-329, effective July 1, 2000. Therefore, DMAS will be unable to claim a right to recapture depreciation from any “sale” or “transfer” which occurs after July 1, 2000.

The Debtor never filed a plan of reorganization in this proceeding. Instead, three separate entities proposed plans for purchase of the Debtor’s business. Ascend’s plan of reorganization was accepted by the bondholders with the number of votes necessary to fulfill the voting requirement of 11 U.S.C. § 1126(c). Ascend’s plan (which is actually its modified second amended plan of reorganization) proposes to purchase all of the assets of the Debtor, thereby rendering the Ascend plan a liquidating plan of reorganization. It has been offered for confirmation under 11 U.S.C. § 1129. In addition to providing for the purchase of all of the assets of the Debtor, the Ascend plan proposes to pay only a portion of the DMAS claim, 1 and to permanently enjoin DMAS from pursuing, post-confirmation, the Debtor, the Debtor’s principals, or Ascend for collection of any unpaid claim of DMAS. The plan also gives the Debtor and the principals of the Debtor a discharge of any claim that DMAS might have post-confirmation.

On October 9, 1999, a confirmation hearing was held on the plan proposed by Ascend. In an order dated October 16, 1999, the bankruptcy court overruled all of DMAS’s objections to confirmation of the plan except for DMAS’s argument that the plan unlawfully discharged the Debtor under 11 U.S.C. § 1141(d)(2) and (3). On October 18, 1999, DMAS filed an appeal of the October 16, 1999 order. On December 1, 1999, Ascend filed a motion to dismiss the appeal. On March 7, 2000, this court dismissed the appeal on the basis that it was an interlocutory appeal and not ripe for consideration. On March 8, Judge Krumm held a hearing on the confirmation of the Ascend Plan which was confirmed by the bankruptcy court by order dated March 10, 2000. On March 15, DMAS filed a “Motion Seeking a Stay Pending the Appeal of the Confirmation Order” with the bankruptcy court. On March 20, 2000, the bankruptcy court denied DMAS’s Motion for Stay Pending Appeal, but granted a temporary stay until April 3, 2000. On March 23, DMAS filed a motion for stay pending its appeal to this court. By order nun pro tunc, this court extended the temporary stay until the hearing on April 17.

II.

As of this date, the appeal has not been filed with the court. However, in addition to DMAS’s Motion to Stay Pending Appeal, DMAS also has filed a Motion to Expedite the Appeal. This opinion addresses DMAS’s pending motions.

A Stay Pending Appeal

Bankruptcy Rule 8005 states that a stay pending appeal should be *510 granted only to “protect the rights of all parties in interest.” Rule 8005 permits the filing of a motion for stay with the district court, if a party is not granted relief from the bankruptcy court. This court’s decision in the case of In re Skinner, 202 B.R. 867 (W.D.Va.1996), provides the framework for analysis of DMAS’s request for a stay pending appeal. “A party seeking a stay must show: (1) that he will likely prevail on the merits of the appeal; (2) that he will suffer irreparable injury if the stay is denied; (3) that other parties will not be substantially harmed by the stay; and (4) that the public interest will be served by granting the stay.” Id. at 868 (quoting Long v. Robinson, 432 F.2d 977, 979 (4th Cir.1970)). If the harms strongly favor DMAS, then the court need only find that DMAS has raised substantial and serious questions. If the harms are evenly balanced, DMAS must make a stronger showing of success on the merits. See id. at 869. The party moving to stay has the burden on each of these elements. See In re Charter Co., 72 B.R. 70, 72 (Bankr.M.D.Fla.1987).

As the court emphasized during the hearing, the test to determine whether a stay is .proper is substantially similar, though not exactly the same, to the test for preliminary injunction. As such, there is a potential for mischief in granting a stay because the court, “acting on an incomplete record, [must] order a party to act, or refrain from acting, in a certain way.” Hughes Network Sys. v. InterDigital Communications Corp.,

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Bluebook (online)
248 B.R. 505, 2000 U.S. Dist. LEXIS 5982, 2000 WL 553912, Counsel Stack Legal Research, https://law.counselstack.com/opinion/virginia-department-of-medical-assistance-services-v-shenandoah-realty-vawd-2000.