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Skyline Manor, Inc., Ch. 11, BK14-80934 (Dec. 17, 2014)

The state Department of Health and Human Services objected to the Chapter 11 trustee's proposed sale of a health care facility free and clear because when such a facility is sold, state law allows the department to recapture depreciation payments made to the facility as part of its Medicaid reimbursements. The court ruled that the right to recapture the payments was an "interest in property" as contemplated by § 363(f)(5), so the trustee can sell the property free of the department's recapture right as long as the trustee provides a monetary satisfaction of its interest. Here, the buyer's agreement to create an indemnification fund for such expenses provides sufficient satisfaction of the department's interest. Any other damages caused by the trustee's rejection of the current Medicaid provider agreement would not be a property interest, but would be general unsecured claims under § 365(g)(1).

Date: 
Wednesday, December 17, 2014
Judge: 
Judge Thomas L. Saladino