235 F. Supp. 3d 724
D. Maryland2017Background
- GHMSI is a congressionally chartered nonprofit health services plan domiciled in D.C., operating in D.C., Maryland, and Virginia; its charter was amended by Congress in 2015 to require the "express agreement" of D.C., Maryland, and Virginia before any surplus (for years after 2011) may be divided, attributed, distributed, or reduced.
- D.C. (DISB) determined GHMSI’s 2011 surplus was excessive and ordered dedication of a portion (~$56M) attributable to D.C.; Maryland and Virginia regulators issued orders warning GHMSI not to distribute or reduce surplus without their approval.
- Plaintiffs (CareFirst, CareFirst Maryland, and GHMSI) sued the D.C. Insurance Commissioner (official capacity) in Maryland federal court seeking declaratory and injunctive relief, asserting the Commissioner’s order is preempted by GHMSI’s federal charter and violates the Supremacy Clause.
- Procedural motions: Commissioner moved to transfer venue to D.C., to substitute the District of Columbia as defendant, to dismiss Count I for lack of jurisdiction and failure to state a claim, and opposed plaintiffs’ summary judgment motion; the court heard argument and denied all four motions.
- The court held (1) venue in Maryland was proper under 28 U.S.C. § 1391 because substantial events (Maryland Commissioner’s orders/omissions) occurred there; (2) substitution of the District for the Commissioner was not warranted; (3) federal-question jurisdiction exists because GHMSI’s charter is a federal law, and plaintiffs may proceed under Ex parte Young for prospective relief; and (4) summary judgment was denied because the charter’s subsection (b) unambiguously limits the "express agreement" requirement to surplus "for any year after 2011," so disputed statutory-construction issues remained.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue (transfer under §1406/§1404) | Maryland proper: substantial events/omissions (Maryland Consent Order and refusal to agree) occurred in Maryland | D.C. is proper/ more convenient; no substantial events in Maryland | Venue proper in Maryland under §1391(b)(2); §1404 transfer denied (plaintiff's forum entitled to substantial weight) |
| Substitution of party | Plaintiffs opposed substitution; want Commissioner as named defendant and protections against new defenses | Commissioner sought substitution of the District of Columbia for him in official-capacity suit for clarity | Motion denied; suing official in official capacity is proper and Ex parte Young context counsels against substitution |
| Federal-question jurisdiction (is GHMSI charter federal law) | Charter is federal law enacted by Congress; §1331 jurisdiction exists | Charter is a local D.C. law enacted by Congress acting as D.C. legislature, invoking 28 U.S.C. §1366 exclusion | Court held GHMSI’s charter is federal law (not exclusively local D.C. law); federal-question jurisdiction under §1331 exists |
| Ability to proceed under Ex parte Young / sufficiency of claim | Plaintiffs seek prospective injunctive and declaratory relief to prevent enforcement of a state order that conflicts with federal charter; Ex parte Young applies | Commissioner argued plaintiffs need an underlying private right of action (statutory or §1983) and cited Sixth Circuit authority limiting Ex parte Young | Court followed Verizon Md. and held Ex parte Young permits prospective relief here; Count I survives dismissal; merits may be adjudicated in federal court |
| Summary judgment on Count I (charter construction) | The 2015 charter’s "express agreement" applies to surplus generally (surplus is dynamic), so DISB cannot proceed without D.C./MD/VA consent | Subsection (b) limits the "express agreement" requirement to surplus "for any year after 2011," so Commissioner may act as to 2011 surplus | Summary judgment denied: statutory text is unambiguous favoring defendant’s interpretation that subsection (b) limits requirement to post-2011 years; factual/administrative issues remain for further proceedings |
Key Cases Cited
- Mitrano v. Hawes, 377 F.3d 402 (4th Cir. 2004) (prima facie showing suffices on venue when court does not hold evidentiary hearing)
- Verizon Maryland Inc. v. Public Service Comm’n of Maryland, 535 U.S. 635 (2002) (Ex parte Young permits prospective relief to enjoin state action allegedly contrary to federal law)
- Ex parte Young, 209 U.S. 123 (1908) (equitable exception allowing injunctions against state officers to vindicate federal law)
- Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983) (standard for when a claim "arises under" federal law)
- District Props. Assocs. v. District of Columbia, 743 F.2d 21 (D.C. Cir. 1984) (test for whether a congressional enactment governing D.C. is "local law")
- Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015) (Supremacy Clause does not itself create a private cause of action; Ex parte Young limited where statute precludes private enforcement)
- United States v. Ron Pair Enters., 489 U.S. 235 (1989) (courts may depart from plain text only when literal application is contrary to clear legislative intent)
- Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474 (4th Cir. 2005) (Ex parte Young may be unavailable where Congress intended to foreclose private enforcement)