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In Re: Thomas Michael Horras v. Thomas Michael Horras

January 26, 2011


Appeal from the United States Bankruptcy Court for the Southern District of Iowa

The opinion of the court was delivered by: Venters, Bankruptcy Judge.

Submitted: January 5, 2011

Before FEDERMAN, VENTERS, and SALADINO, Bankruptcy Judges.

The Debtor-Defendant, Thomas Michael Horras, appeals the bankruptcy court's order granting summary judgment against him as to the dischargeability of certain debts owed to the United States ("Government"). For the reasons set forth below, we affirm the decision of the bankruptcy court.*fn1


The bankruptcy court's grant of summary judgment is reviewed de novo.*fn2


We glean the following facts from the pleadings filed in the bankruptcy court in conjunction with the Government's motion for summary judgment. No further record is available due to the Debtor's failure to provide this panel with a transcript of the hearing on the motion.

The litigation between these parties started approximately eight years ago. In May 2002 the Office of Inspector General of the United States Department of Health and Human Services ("HHS") notified Horras that, as owner and president of Hawkeye Health Services, Inc. ("Hawkeye Health"), he presented or caused to be presented claims for payment to Medicare and Medicaid for medical or other items or services that he knew or should have known were not provided as claimed or were false or fraudulent in violation of the Civil Monetary Penalties Law.*fn3 The notification letter explained that HHS was proposing to exclude him from federal health care programs for seven years and to impose a $784,072 assessment and $38,000 in penalties.

Horras requested a hearing before an administrative law judge of the Civil Remedies Division of the Departmental Appeals Board to contest the proposed sanctions. However, Horras filed a Chapter 7 bankruptcy petition five days before the hearing was to begin on April 28, 2003.

Two days after filing his bankruptcy petition, the Debtor filed an emergency motion to stay the administrative proceeding. The Government resisted the motion, arguing that the Debtor had to exhaust his administrative remedies before the dischargeability of its claim could be reviewed in bankruptcy court and that the administrative proceeding was exempt from the automatic stay under 11 U.S.C. § 362(b)(4) as an exercise of the government's police and regulatory power. The bankruptcy court denied the Debtor's motion on the basis that the stay did not apply to the administrative proceeding, but noted that to the extent it did apply, the stay would be lifted solely to permit findings of fact and conclusions of law to be made. The stay remained in place to bar the enforcement of any monetary penalties or assessments or to impose any sanctions.

The administrative hearing lasted for 11 days. At the hearing, the Government, the Debtor, and his co-defendant presented testimonial and documentary evidence. The administrative law judge ("ALJ") applied the preponderance of the evidence standard,*fn4 had the authority to exclude unreliable evidence,*fn5 and was required to exclude irrelevant, immaterial, or privileged evidence.*fn6

On April 29, 2005, the ALJ issued his opinion sustaining HHS's decision to impose civil monetary penalties and assessments and to exclude Horras from federal health care programs for seven years. The ALJ reduced the initial assessment by a portion of a settlement HHS reached with the successor owners of Hawkeye Health, for a final judgment of $673,212. The ALJ concluded that the Government had "proven, by a preponderance of the evidence, all of the elements required for the imposition of . . . an assessment, penalties, and an exclusion at the levels proposed."

While the ALJ had the case under advisement, the Government filed a motion in the bankruptcy court under Fed. R. Bankr. P. 4007(c) to extend the deadline for filing a complaint objecting to the dischargeability of a debt. The bankruptcy court held a hearing on the motion, and on September 30, 2003, the court extended the deadline to April 1, 2004, and noted that "no further continuance will be granted."

On April 1, 2004, the Government filed a second motion to extend the deadline to file a dischargeability complaint. The motion explained that the Debtor had requested the opportunity for post-hearing oral argument in the administrative proceeding and that until the ALJ rendered his decision, the matter was not ripe for consideration in the bankruptcy court. The bankruptcy court granted the Government's motion over the Debtor's objection and ordered the Government to file quarterly status reports concerning the progress of the administrative proceedings. The order did not set a specific deadline for filing a nondischargeability complaint.

The Government filed nine status reports. In its May 2005 status report, the Government explained that the ALJ had issued his decision. The Government also offered to file its complaint within thirty days after any final decision of the ALJ or an appellate body determining a debt was owed to HHS and requested that the Debtor be required to notify the bankruptcy court if he intended to appeal.

Meanwhile, back in the administrative proceedings, the Debtor and the Government cross-appealed the ALJ's decision. The Departmental Appeals Board ("DAB") affirmed the ALJ's decision on February 24, 2006. The DAB noted that the case was "complex and contentious with a voluminous record and lengthy briefing," and specifically commented about the insufficiency of the Debtor's evidence and arguments:

In six pages of his briefing addressing factual findings against him, Horras does not offer a single citation to any evidence in the record. His broad assertions and unsupported characterizations of the record made without such citations are entitled to little weight in the face of the evidence of record marshaled in the ALJ Decision on each of the contested cost items. . . ...

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