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In re Adelphi Hospital Corp.

decided: June 26, 1978.

IN RE ADELPHI HOSPITAL CORP., BANKRUPT. LAWRENCE SARF, TRUSTEE IN BANKRUPTCY OF ADELPHI HOSPITAL CORP., APPELLEE,
v.
NEW YORK STATE DEPARTMENT OF HEALTH, APPELLANT



Appeal by the New York State Department of Health from an order of the United States District Court for the Eastern District of New York, George C. Pratt, Judge, authorizing the trustee in bankruptcy of a bankrupt hospital corporation to abandon hospital records.

Feinberg, Mansfield and Oakes, Circuit Judges.

Author: Per Curiam

This appeal presents the question whether the New York State Department of Health (Department of Health) may require of the trustee of a bankrupt hospital corporation that he maintain and store patients' medical records for a prescribed period of time, as it requires of solvent hospitals. The bankruptcy court, Joseph V. Costa, Judge, held that the Department could not, and that the bankruptcy trustee could accordingly abandon the records. In re Adelphi Hospital Corp., No. 74B617 (E.D.N.Y. Mar. 22, 1976); In re Adelphi Hospital Corp., No. 74B617 (E.D.N.Y. May 14, 1976) (order authorizing abandonment). The United States District Court for the Eastern District of New York, George C. Pratt, Judge, affirmed the bankruptcy court. In re Adelphi Hospital Corp., No. 77C243 (E.D.N.Y. Oct. 19, 1977). On appeal by the Department of Health, we affirm.

Under Department of Health regulations operative during the period in question, the "governing authority" of a hospital discontinuing operations is required to maintain, store and service its adult patients' medical records for at least six years,*fn1 and its infant patients' records for at least six years beyond the patients' majority.*fn2 The State contends that 10 N.Y.C.R.R. § 720.20(q), see note 1 supra, authorizes the Department of Health to require a trustee in bankruptcy to maintain these records, and that this regulation is a proper exercise of the State's police power.*fn3 See Munn v. Illinois, 94 U.S. 113, 24 L. Ed. 77 (1876). It further argues, relying on Otte v. United States, 419 U.S. 43, 57, 42 L. Ed. 2d 212, 95 S. Ct. 247 (1974), that expenditures necessarily incurred are expenses of administration, permitted by Sections 62(a)(1) and 64 of the Bankruptcy Act, 11 U.S.C. §§ 102(a)(1), 104.

We agree with the courts below that the Department of Health lacks authority to impose this recordkeeping burden on the trustee in bankruptcy because he is not a "governing authority" within the meaning of the applicable regulations. Accordingly, he is not subject to the dictates of 10 N.Y.C.R.R. § 720.20(q).

10 N.Y.C.R.R. § 600.9 provides:

(a) The governing authority or operator is the party responsible for the operation of a medical facility.

(b) The governing authority or operator shall mean:

(1) the policy making body of a government agency;

(2) the board of directors or trustees of a not-for-profit corporation;

(3) the officers, directors and stockholders of a business corporation; and

(4) the proprietor or proprietors of a proprietary medical facility.*fn4

Since the bankrupt is a not-for-profit corporation, its board of directors or trustees ostensibly constitute its "governing authority." A trustee in bankruptcy is neither a director nor a trustee of a corporation; thus he does not fall within the literal terms of the regulation. More importantly, the definition expressly contemplates individuals responsible for "the operation" of a hospital. Obviously, those with responsibility for the general operating policies of an ongoing facility are intended. The trustee in bankruptcy never assumed such duties, for the hospital ceased operations some six months before he was even appointed.*fn5 His purpose and function, being antithetical to the concept of a "governing authority,"*fn6 preclude his characterization as such.*fn7

Finally, we emphasize that the broad construction urged by the State would not inure to its benefit. It is beyond peradventure that federal law prevails over inconsistent state laws. U.S. Const. art. VI, cl. 2; Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 6 L. Ed. 23 (1824). This fundamental principle of American jurisprudence of course encompasses the bankruptcy laws. U.S. Const. art. I, § 8, cl. 4; see, e.g., International Shoe Co. v. Pinkus, 278 U.S. 261, 263-65, 73 L. Ed. 318, 49 S. Ct. 108 (1929). And under federal law, abandonment in this case is clearly ...


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