Bankr. E.D.N.C.: In re Branch- Sanctions for Disclosure of Personal and Medical Information in Proof of Claim

Summary:

Following the disclosure in more than 4,200 Proofs of Claim by Wake Med of personal identifying information, several Debtors sought sanctions for violations of Federal Rule of Bankruptcy Procedure 9037, HIPAA, and 11 U.S.C. §107.

The bankruptcy court held that it was not a “HIPAA compliance tribunal” and might not have jurisdiction to decide such claims. Further, “[t]he case law overwhelmingly holds that there is no private right of action under HIPAA or §107 ”, leaving Rule 9037 as the primary remedy. Where, however, ““it was shown that a creditor flaunted the law with knowledge of its proscriptions, failed to take remedial action once violations were discovered, or acted deliberately as opposed to mistakenly or inadvertently”, Carter v. Flagler Hospital, Inc. (In re Carter), 411 B.R. 730 (Bankr. M.D. Fla. 2009)(quoting Newton v. ACC of Enter. (In re Newton), A.P. No. 08-1106-DHW, 2009 WL 277437, *5 (Bankr. M.D. Ala. Jan. 29, 2009), the bankruptcy court held that § 105(a) provided authority to sanction parties for contempt.

Following a review of the procedures and failures by Wake Med, the bankruptcy court held that based on “the magnitude of the violation, and the fact that there was no supervision or training, indicates that Wake Med was more than negligent” and was, in fact, “unforgivable.” Accordingly, in additional requiring payment of damages to the Debtors and attorneys’ fees (totaling more than $80,000), Wake Med was required to pay $50,000 to the Clerk of Court and is subject to on-going reporting and training requirements under the supervision of the Bankruptcy Administrator.

Commentary:

While the bankruptcy court held that is no private right of action under HIPAA, this only partially accurate in North Carolina. In Acosta v. Byrum, 638 SE 2d 246 (N.C. Ct. App. 2006), a HIPAA violation was found to be a breach of the standard of care and thus actionable, basically as medical malpractice. Further, it is not clear what court would constitute a “HIPAA compliance tribunal” with greater jurisdiction over Proofs of Claim than the bankruptcy court. There does not appear to have been a request that the reference of this case be withdrawn back to the federal district court or that the North Carolina Board of Medical Examiners was alerted to this serious violation.

For a copy of the opinion, please see:

Branch- Sanctions for Disclosure of Personal and Medical Information in Proof of Claim

Acosta v. Byrum- HIPAA Violation as Medical Malpractice

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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