Unreported / Non-Citable
Background
Ikechukwu Okorie filed a Chapter 11 bankruptcy petition in 2019, triggering an automatic stay. Later that year, he entered a Physician Agreement with Keystone Healthcare Partners to provide emergency medical services. At Okorie’s request, Keystone sent his compensation to Inland Family Practice, a business he owned, from September 2020 through July 2021.
Keystone later discovered that it had paid Okorie twice for certain shifts, resulting in $151,567.31 in overpayments. The parties negotiated a plan allowing Keystone to recover the money over two and a half years. Near the end of that period, Okorie moved in bankruptcy court for relief based on an alleged violation of the automatic stay and sought summary judgment. The bankruptcy court rejected the stay claim and denied the summary-judgment motion as moot, and the district court affirmed.
The Court’s Holding
The Fifth Circuit held that the bankruptcy court properly exercised jurisdiction. A motion alleging violation of the automatic stay fell within the category of core bankruptcy proceedings concerning the automatic stay under 28 U.S.C. § 157(b)(2)(G). The court also noted that Okorie consented to bankruptcy-court jurisdiction by filing the motion there.
On the merits, the court held that Keystone’s recovery of the duplicate payments qualified as recoupment and therefore was not subject to the automatic stay. The undisputed overpayments and Okorie’s right to compensation arose from the same Physician Agreement. Neither the existence of nine separate overpayments nor Okorie’s instruction to send the money to Inland Family Practice changed that conclusion because the underlying contract was between Keystone and Okorie. The court therefore affirmed the denial of Okorie’s stay-violation motion and the denial of his summary-judgment motion as moot.
Key Takeaways
- Recoupment is not subject to the automatic bankruptcy stay when an overpayment and the debtor’s claim arise from the same contract or transaction.
- The Fifth Circuit construes “transaction” broadly and rejected an attempt to limit recoupment to corrections within the same invoice cycle or contemporaneous account netting.
- Routing contractual payments to a debtor-owned business does not prevent recoupment against the debtor when the governing contract remains between the creditor and the debtor.
Why It Matters
The decision confirms that creditors may recover post-contract overpayments through recoupment without violating an automatic stay when the competing payment obligations arise from a single agreement. Multiple erroneous payments or payment through a debtor’s affiliated entity will not necessarily divide the obligations into separate transactions.
It also underscores that disputes concerning alleged violations of an automatic stay are core bankruptcy matters and that a party who seeks relief from the bankruptcy court may independently consent to that court’s jurisdiction.