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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. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  3. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  4. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  5. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

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