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, until July 2021, when he asked to receive payments directly.
Keystone then discovered that it had paid Okorie for duplicate shifts, resulting in $151,567.31 in overpayments. Keystone and Okorie negotiated an arrangement to recover the money over 2.5 years. Near the end of that period, Okorie moved in bankruptcy court for relief based on an alleged stay violation and sought summary judgment. The bankruptcy court rejected the stay claim and denied summary judgment as moot, and the district court affirmed.
The Court’s Holding
The Fifth Circuit held that the bankruptcy court properly exercised jurisdiction. Okorie’s motion alleging a violation of the automatic stay concerned a core bankruptcy proceeding under 28 U.S.C. § 157(b)(2)(G). The court also agreed that Okorie consented to the bankruptcy court’s jurisdiction by filing the motion there.
On the merits, the court held that Keystone’s recovery of its overpayments constituted recoupment, which is 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 Keystone’s remittance of funds to Okorie’s business changed that conclusion because the governing contract was between Keystone and Okorie. The court therefore affirmed the denial of Okorie’s stay-violation motion and the denial as moot of his summary-judgment motion.
Key Takeaways
- A bankruptcy court may adjudicate a motion alleging violation of the automatic stay as a core bankruptcy proceeding.
- Recoupment is not subject to the automatic stay when the creditor’s claim and the amount owed to the debtor arise from the same contract or transaction.
- Separate payments and payment through a debtor-owned business did not prevent recoupment where all obligations arose under one physician agreement.
Why It Matters
The decision reinforces the Fifth Circuit’s broad, fact-sensitive approach to the “same transaction” requirement for bankruptcy recoupment. A creditor need not limit recoupment to a single invoice cycle or contemporaneous account netting when the competing obligations stem from one contract.
For parties to ongoing contracts with a bankruptcy debtor, the opinion distinguishes permissible adjustment of obligations arising from the same transaction from collection activity that may be barred by the automatic stay.