Setting Off – Liquidation

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7^th Circuit Court of Appeals

Case Name: Jennifer Hammer v. United States Department of Health and Human Services

Case No.: 18-2523

Officials: ROVNER, HAMILTON, and ST. EVE, Circuit Judges.

Focus: Setting Off – Liquidation

The Department of Health and Human Services owed millions of dollars to the now‐defunct Land of Lincoln Mutual Health Insurance Company. Likewise, Land of Lincoln owed millions to HHS. As part of its regulatory oversight, HHS has elected to set off its own debt payments by first paying down Land of Lincoln’s debt. The Director of the Illinois Department of Insurance, who is Land of Lincoln’s appointed liquidator, contends that this setoff violates an order issued by the Illinois court overseeing the liquidation proceedings that prevents any creditors from setting off money owed to Land of Lincoln without prior leave of the court. The Director asked the state court for a declaration that HHS violated the order, but HHS removed the motion to federal district court arguing that the federal government was not subject to the state court’s jurisdiction. The district court remanded the case back to state court relying on a narrow reading of 28 U.S.C. § 1442, as well as principles of abstention. We reverse on both grounds and remand to the district court for further proceedings consistent with this opinion.

Reversed and Remanded

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.