The U.S. Court of Appeals for the Fifth Circuit, reversing a trial court’s decision, has ruled that a health insurer could remove a hospital’s lawsuit under the federal officer removal statute on the ground that the insurer was sued in its capacity as an administrator of health care benefits for federal employees.
The Case
St. Charles Surgical Hospital, L.L.C., sued Louisiana Health Service & Indemnity Company, d/b/a Blue Cross/Blue Shield of Louisiana and Blue Cross & Blue Shield of Louisiana, Inc., in Louisiana state court for violating Louisiana law. St. Charles alleged that Blue Cross violated the Louisiana assignment statute by paying benefits directly to patients rather than to St. Charles, despite the fact that Blue Cross had notice that the patients had assigned those benefits to the hospital.
Blue Cross removed the case to federal court based on the federal officer removal statute, 28 U.S.C. § 1442(a)(1).
St. Charles moved to remand and also sought attorneys’ fees.
The U.S. District Court for the Eastern District of Louisiana granted both motions, and Blue Cross appealed to the Fifth Circuit.
The Fifth Circuit’s Decision
The Fifth Circuit reversed, concluding that Blue Cross satisfied all conditions for removal under the federal officer removal law.
In its decision, the circuit court explained that the federal officer removal statute allowed a defendant to remove a state court action to federal court if the state court action was brought against:
The United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under color of such office or on account of any right, title or authority claimed under any Act of Congress for the apprehension or punishment of criminals or the collection of the revenue.
28 U.S.C. § 1442(a)(1) (emphasis added).
The Fifth Circuit added that, to claim removal as a “person acting under” an officer of the United States, Blue Cross had to show (1) that it was a person within the meaning of the statute; (2) that it acted under the direction of a federal officer; (3) that a causal nexus existed between its actions under color of federal office and St. Charles’ claims; and (4) that it had a colorable federal defense.
The circuit court noted that St. Charles agreed that Blue Cross satisfied the first condition of removal – that Blue Cross was a “person” under the federal officer removal statute.
The circuit court then addressed the remaining three conditions.
First, it ruled that Blue Cross demonstrated that it “acted under the direction of a federal officer” – the Office of Personnel Management (the “OPM”) – when it paid the patients directly, rather than the hospital, notwithstanding its awareness of the patients’ assignment of benefits to the hospital.
The circuit court pointed out that, under the Federal Employees Health Benefits Act (“FEHBA“), 5 U.S.C. § 8901 et seq., OPM contracted with Blue Cross to provide health benefits to federal employees and established the rules regarding that coverage.
The Fifth Circuit next decided that Blue Cross demonstrated a “causal nexus” between its actions under color of federal office and St. Charles’ claims. It reasoned that the statement of benefits (known as the “Brochure”) that Blue Cross provided to its insureds specified how it must direct payments. According to the Brochure, for non-participating providers such as St. Charles, Blue Cross had to pay patients directly.
The circuit court declared that, based on the Brochure, Blue Cross demonstrated that it was prevented by federal directive from paying St. Charles directly.
Finally, the Fifth Circuit concluded that Blue Cross demonstrated that it had a colorable federal defense to St. Charles’ claim sufficient for purposes of the federal officer removal statute, given that FEHBA contained “a preemption clause . . . displacing state law on issues relating to ‘coverage or benefits’” afforded by health care plans.
The case is St. Charles Surgical Hospital, L.L.C. v. Louisiana Health Service & Indemnity Co., No. 18-30957 (5th Cir. Aug. 15, 2019). Attorneys involved include: For St. Charles Surgical Hospital, L.L.C., Plaintiff – Appellee: Matthew Arthur Sherman, Meghan Elizabeth Ruckman, James McClendon Williams, Chehardy Sherman Williams, L.L.P., Metairie, LA. For Louisiana Health Service & Indemnity Company, doing business as: Blue Cross Blue Shield of Louisiana, Blue Cross & Blue Shield of Louisiana, Incorporated, Defendant – Appellant: Anthony F. Shelley, Adam P. Feinberg, Esq., Miller & Chevalier Chartered, Washington, DC; Michael Christopher Drew, Esq., Jones Walker, L.L.P., New Orleans, LA.
Insurance Coverage Law Center Comment
Three other circuit courts have allowed removal under similar circumstances. See Goncalves ex rel. Goncalves v. Rady Children’s Hosp. San Diego, 865 F.3d 1237, 1247 (9th Cir. 2017); Jacks v. Meridian Res. Co., LLC, 701 F.3d 1224, 1235 (8th Cir. 2012); Anesthesiology Assocs. of Tallahassee v. Blue Cross Blue Shield of Fla., Inc., No. 03-15664 (11th Cir. Mar. 18, 2005).
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].