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7th Circuit rejects hospital's claims for $20M more in federal aid

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Columbus Regional Hospital, which was flooded following heavy rains in southern Indiana in 2008, is not entitled to an additional $20 million in disaster relief funds from the Federal Emergency Management Agency in addition to the $70 million it already received, the 7th Circuit concluded Wednesday.

In Columbus Regional Hospital v. Federal Emergency Management Agency, 12-2007, the federal appellate court tackled two issues: whether the District Court was the proper venue for the lawsuit and the merits of the suit.

The lawsuit was filed in the Southern District of Indiana, but under the Tucker Act, suits seeking more than $10,000 in monetary damages are to move before the Court of Federal Claims. The judges concluded that the District Court was the right venue because it’s the only court that can serve as a forum for all of the hospital’s legal theories, which include claims under the Stafford Act and the Federal Tort Claims Act.

The 7th Circuit rejected FEMA’s claim that everything it does is a “discretionary function” so there can never be an obligation to pay more than the agency decides is due. Switching focus to the lawsuit, the hospital contended that FEMA must cover the replacement cost of equipment and supplies destroyed by the flood, and that includes new equipment. The court found FEMA’s approach – to value property lost as cost (basis) less depreciation – to make sense in that it gives all victims the value of what they lost, and no more.

“Disaster benefits are a subsidy, and no one is entitled to a greater subsidy than the statute mandates,” Chief Judge Easterbrook wrote. “If a fast-food restaurant gets the depreciated value of a fryer or milkshake mixer, a hospital gets the depreciated value of a magnetic resonance imager.”

The second issue involves the proceeds the hospital received from insurance. FEMA concluded property damage represented roughly two-thirds of the hospital’s losses within the policy’s scope, so it attributed around $16 million of the $25 million in insurance proceeds to the property damage and deducted that amount from the federal funds. The hospital claims that no deductions should be made because it used the $25 million to cover expenses such as salaries and the cost of moving patients.

“ … as far as we can see nothing in the Stafford Act or any regulation prevents the agency from imputing all insurance proceeds to covered claims. FEMA did the Hospital a favor when it allocated a third of the proceeds to losses outside the scope of the Stafford Act, and thus deducted only $16 million rather than $25 million from the Hospital’s claim,” Easterbrook wrote.

“The Hospital tells us that it now has pursued its administrative remedies and filed a second suit under the FTCA. We expect it to be met with a defense of claim preclusion (res judicata) as well as the observation that the suit is substantively feeble, but we leave that to the court where the FTCA litigation is pending.”
 

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  2. Seventh Circuit Court Judge Diane Wood has stated in “The Rule of Law in Times of Stress” (2003), “that neither laws nor the procedures used to create or implement them should be secret; and . . . the laws must not be arbitrary.” According to the American Bar Association, Wood’s quote drives home this point: The rule of law also requires that people can expect predictable results from the legal system; this is what Judge Wood implies when she says that “the laws must not be arbitrary.” Predictable results mean that people who act in the same way can expect the law to treat them in the same way. If similar actions do not produce similar legal outcomes, people cannot use the law to guide their actions, and a “rule of law” does not exist.

  3. Linda, I sure hope you are not seeking a law license, for such eighteenth century sentiments could result in your denial in some jurisdictions minting attorneys for our tolerant and inclusive profession.

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  5. My daughter was taken from my home at the end of June/2014. I said I would sign the safety plan but my husband would not. My husband said he would leave the house so my daughter could stay with me but the case worker said no her mind is made up she is taking my daughter. My daughter went to a friends and then the friend filed a restraining order which she was told by dcs if she did not then they would take my daughter away from her. The restraining order was not in effect until we were to go to court. Eventually it was dropped but for 2 months DCS refused to allow me to have any contact and was using the restraining order as the reason but it was not in effect. This was Dcs violating my rights. Please help me I don't have the money for an attorney. Can anyone take this case Pro Bono?

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