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A Deepening Divide: Fifth Circuit Adds to Split Regarding Bankruptcy Court Jurisdiction over Social Security Claims

Bankruptcy court jurisdiction over Medicare issues is increasingly important given the distressed state of the health care industry and skyrocketing level of bankruptcy filings by health care providers. On May 10, 2019, in Benjamin v. United States (In re Benjamin),[1] the Fifth Circuit rejected the argument that the “recodification canon” deprives bankruptcy courts of the requisite subject-matter jurisdiction to hear Social Security claims, bolstering the minority view previously articulated by only the Ninth Circuit[2] regarding whether Section 405(h) of Title 42 (the “Medicare Act”) bars bankruptcy courts from adjudicating Social Security and/or Medicare disputes. Benjamin involved a specific inquiry into whether 42 U.S.C. § 405(h) divests bankruptcy courts of the jurisdiction to hear Social Security claims. As bankruptcy court jurisdiction over Medicare claims is derived from the same statute, the Fifth Circuit’s decision will likely have further significant implications.

The Social Security Administration (SSA) determined that the debtor in Benjamin received an overpayment of Social Security benefits, thus entitling the SSA to recoup the overpayment from him by withholding some future Social Security benefits.[3] The SSA denied the debtor’s request for waiver, and he properly appealed to an administrative law judge.[4] Before the appeal was decided, the debtor filed for bankruptcy under chapter 7 in May 2017 and initiated an adversary proceeding against the SSA. The debtor alleged that the SSA improperly recouped his benefits and sought recovery of the withheld amounts.[5] The SSA moved to dismiss for lack of subject-matter jurisdiction, arguing that the debtor must first exhaust the administrative appeal process, or alternatively, for failure to state a claim.[6] The district court affirmed the bankruptcy court’s dismissal on jurisdictional grounds, resulting in the debtor’s appeal to the Fifth Circuit.[7]

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