IN RE HEALTH LINK, (Bankr.E.D.Wash. 2001)

PATRICIA C. WILLIAMS, Bankruptcy Judge.

THIS MATTER came on for hearing before the Honorable Patricia C. Williams on October 15, 2001 upon Plaintiffs' Motions for Abstention and Remand. Plaintiffs were represented by Gerald Kobluk; Defendant Aetna U.S. Healthcare of Washington was represented by John Campbell; Defendant Health Net, Inc. and Molina Healthcare of Washington, Inc. were represented by Stevan Phillips; and defendant Pacificare of Washington, Inc. was represented by Edward Johnson. The Court reviewed the tiles and records herein, heard argument of counsel and was fully advised in the premises. The court now enters its Memorandum Decision.

FACTS

Requests for remand to the state court have been made by the plaintiffs in these five adversary proceedings which relate to the three jointly administered bankruptcy proceedings of the related antities collectively referred to as Health Link. The debtor's primary business was to contract with health insurance companies and health maintenance organizations (HMO). By the terms of those contracts, and there are disputes as to whether certain contracts even existed, the health care providers would submit billings for medical services to the insured or member of the HMO to Health Link. The debtor would process the billing and pay the medical service provider on behalf of the health insurance company or HMO. The contracts had varying provisions regarding the reimbursement of the debtor by the health insurance company or HMO. These plaintiffs are health care providers who did not receive payment from Health Link for services provided to insureds or members of HMOs. The plaintiffs brought suit against the insurance company or HMO in state court seeking payment. A more detailed analysis to the factual background and business mileage which gave rise to these five adversaries appears in this court's prior decision entered July 11, 2001 in Empire Health Services v. Aetna U.S. Healthcare of Washington, Inc., AO1-00027 and Empire Health Services v. State of Washington, A01-00028 (hereinafter referred to as the "Prior Decision").

Although this situation involves five adversary proceedings, there are only two plaintiffs. The plaintiff in adversary No. 01-00118 — W1R is Sacred Heart Medical Center, a medical care provider. In state court, it sued Health Net, Inc., a successor-in-interest of QualMed Washington Health Plan, Inc., a health insurance company, to whose insureds the plaintiff provided medical services. Health Link tailed to pay the plaintiff for those medical services and the plaintiff now seeks to directly recover from the health insurance company. Sacred Heart Medical Center is also the plaintiff in adversary No. 01-00121-W1R. It brought suit against Pacificare of Washington, Inc. on the same basis. Sacred Heart Medial Center is also the plaintiff in adversary No. 01-000109-W1R and, again on the same basis, brought suit against Aetna U.S. Healthcare of Washington, Tnc., a successor-of-interest to NYL Care Health Plans Northwest, Inc.

The plaintiff in adversary No. 01-00117-W1R is St. Joseph Care Center, a medical care provider. It also brought suit against Health Net, Inc., as successor-in — interest of QualMed Washington Health Plan, Inc., to whose insureds the plaintiff provided medical services. Health Link failed to pay the plaintiff for those medical services and the plaintiff now seeks to directly recover from the health insurance company. In adversary No. 01-00122-W1R, St. Joseph Care Center brought suit against Pacificare of Washington, Inc. on the same basis.

Although the contracts between the various defendants (or their predecessors) and Health Link varied and the course of dealing between the plaintiffs and Health Link varied, the essential dispute is that each plaintiff provided medical services, each defendant paid sums to Health Link to pay for those services and as Health Link failed to pay the plaintiffs for the services, each defendant should do so. These five adversary proceedings were originally commenced in state court on April 30, 2001 and were removed to this court between May 23, 2001 and June 4, 2001.

Was Removal Proper Under 28 U.S.C. § 1334 (b) and 1452(a)?

If the outcome of these adversaries could conceivably affect the bankruptcy estate, "related to" jurisdiction exists under 28 U.S.C. § 1334 (b). "Related to" jurisdiction is very broad and even includes matters only indirectly related to the bankruptcy proceedings or the bankruptcy estate. In re ACI-HDT Supply Co., 205 B.R. 231, 237 (B.A.P. 9th Cir. 1997). The question of whether "related to" jurisdiction exists is to be determined at the time of the removal. Sparta Surgical Corp. v. National Ass'n of Securities Dealers, Inc., 159 F.3d 1209 (9th Cir. 1998) and In re Carraher, 971 F.2d 327 (9th Cir. 1992). For the reasons. set forth in the Prior Decision, "related to" jurisdiction existed at the time to the removal which occurred between May 23, 2001 and June 4, 2001. The removal of the five state court cases was proper and the question then becomes whether this court should exercise its discretion

Should the Cases Be Remanded Under 28U.S.C. § 45?

Application of the factors to determine whether equitable remand is appropriate is to be made at the time the decision to remand is considered, not at the time the case is removed. Even though the underlying bankruptcy proceeding is dismissed and there is then no bankruptcy estate to which the suit may "relate", the Bankruptcy Court may continue to have jurisdiction. Dismissal of the underlying bankruptcy proceeding is one example of the many types of events or changes in circumstances which may occur between removal and the decision to remand. In re Smith, 866 F.2d 576 580 (3d Cir. Pa. 1989).

The court must apply the same equitable remand factors as applied in the Prior Decision to determine whether it is in the best interest of justice to retain or remand these five adversary proceedings. The factual and legal issues presented by these adversaries only slightly differ from those previously presented. There are, however, some circumstances which have changed since the Prior Decision. The key distinction between The current application of factors and that which occurred in the Prior Decision is that now neither the plaintiffs nor the defendants in these five adversaries may bring claims against the estate due to the existence of settlement agreements.

Between the entry of the Prior Decision and consideration of this request to remand, significant events have occurred in the underlying bankruptcy proceeding and the numerous related adversaries. As was the situation at the time of the Prior Decision, a settlement was reached in case No. CS-99-140-FVS pending in federal district court. The settlement is among the Health Link Chapter 7 Trustee and various parties including these defendants, Pacificare of Washington, Inc. and Aetna U.S. Healthcare of Washington, Inc. (through its predecessor — interest NYL Care). That settlement has now been implemented. The defendants in these adversary proceedings have released all claims against the bankruptcy estate and significant sums were paid to the bankruptcy estate as a result of the settlement. At this time, the defendants in those five adversary Proceedings, even if the plaintiffs prevail against them in these adversary proceedings, have no recourse against the bankruptcy estate.

More importantly, since the Prior Decision, a settlement has been reached among the bankruptcy Chapter 7 Trustee and various medical care providers. These plaintiffs, St. Joseph Care Center and Sacred Heart Medical Center, are parties to the settlement and have released all claims against the estate. That settlement was approved on September 20, 2001. At the time of the Prior Decision, the adversary procceding No. AOO-00244-W1R filed by the Trustee seeking to recover reference payments from Sacred Heart Medical Center, a plaintiff in three of these adversaries, had been filed. That adversary remains open pending resolution of claims against the remaining defendants. That adversary No. AOO-00244-W1R was one of approximately 350 adversary proceedings in which the Chapter 7 Trustee sought recovery of preferences. Since the Prior Decision, a settlement plan has been mediated pursuant to which many of the adversaries have been settled and dismissed. Implementation of that plan continues. It is unknown whether settlement of adversary No. 00-00244-W1R will result from the mediated settlement plan, but the likelihood of a settlement of that voidable preference adversary and indeed, in any of the adversaries, has been greatly increased.

At this time, the likelihood of any conceivable impact on the bankruptcy estate from a final resolution of these adversaries appears de minimis. Regardless of the outcome of these plaintiffs' claims against these defendants, neither these plaintiffs or these defendants may bring a claim against the estate under the settlement agreements and releases. The complicated picture of the disputes and issues involving the Health Link estate has simplified since the Prior Decision and these articular entities have removed many of their overlapping claims and counterclaims from the picture. Records and information held by the estate will certainly be relevant to the resolution of the disputes, but nothing in the Code protects bankruptcy estates or debtors from their obligations to appear as witnesses in proceedings between other parties which have no claims against the debtor or estate.

Therefore, this court determines that application of the equitable factors of remand under the current circumstances requires these five cases to be remanded to the state court for determination of the issues between the plaintiffs and the defendants. Orders will be entered to this effect.

The Clerk of Court is directed to file this Memorandum Decision and provide copies to counsel.