Mid-Island Hospital, Inc. v. Empire Blue Cross and Blue Shield

Appeal from a grant of summary judgment. AFFIRMED. Chief Judge Walker concurs in a separate opinion.

This appeal requires us once more to address the meaning of “property of the estate”as it is used in the Bankruptcy Code. Plaintiffs Mid-Island Hospital, Inc. (the “Hospital”) and Official Committee of Unsecured Creditors of Mid-Island Hospital, Inc. (the “Committee”) (collectively, “Mid-Island”) claim that because funds that state regulation required Empire Blue Cross and Blue Shield (“Empire”) to withhold from payments otherwise due to the Hospital are property of the Hospital’s estate in bankruptcy, Empire is obligated to pay interest on the withheld funds to the estate. We agree that the Hospital had a limited, contingent interest in the withheld funds when it filed its petition for reorganization. However, we find that Empire had no obligation to pay Mid-Island interest or invest the funds for Mid-Island’s benefit and therefore affirm the district court’s judgment dismissing Mid-Island’s adversary complaint.