St. Charles Surgical Hosp., L. L.C. v. La. Health Serv. & Indem. Co.
935 F.3d 352
| 5th Cir. | 2019Background
- St. Charles Surgical Hospital sued Blue Cross (Louisiana Health Service & Indemnity Co.) in state court for violating La. R.S. § 40:2010 by paying federally covered patients rather than honoring assignments and paying the hospital.
- Blue Cross removed under the federal officer removal statute, 28 U.S.C. § 1442(a)(1), claiming it acted as an agent/claims administrator for the Office of Personnel Management (OPM) under the Federal Employees Health Benefits Act (FEHBA).
- The Brochure (OPM contract statement of benefits) required Blue Cross to pay non-participating providers by reimbursing patients rather than paying providers directly.
- The district court remanded the case to state court and awarded attorney’s fees to St. Charles; Blue Cross appealed.
- The Fifth Circuit considered whether Blue Cross met the four-part test for “person acting under” a federal officer: (1) person status, (2) acted under federal direction, (3) causal nexus between federal direction and plaintiff’s claims, and (4) a colorable federal defense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Blue Cross acted “under” a federal officer | Blue Cross was not sufficiently controlled by OPM to qualify as acting under a federal officer | OPM’s contract and oversight (Brochure, Treasury fund, regulatory control, dispute resolution) subject Blue Cross to OPM direction and control | Blue Cross acted under OPM; requirement satisfied |
| Whether a causal nexus exists between federal direction and the state-law claim | No federal directive prevented Blue Cross from paying the hospital; removal improper under Bartel causal-nexus standard | The Brochure’s payment rules required Blue Cross to pay patients for non-participating providers, so federal directive caused the conduct at issue | Causal nexus satisfied because Brochure prevented paying St. Charles directly |
| Whether Blue Cross has a colorable federal defense | Preemption and other federal defenses are speculative or insufficient | FEHBA preemption of state laws relating to coverage/payment is a non-frivolous federal defense | Colorable federal defense exists (FEHBA preemption) |
| Whether remand and attorney’s fees were proper | Remand and fees appropriate because federal-removal requirements not met | Removal was objectively reasonable; fees improper | Court reversed remand and vacated fee award; award of fees was abuse of discretion |
Key Cases Cited
- Goncalves ex rel. Goncalves v. Rady Children’s Hosp. San Diego, 865 F.3d 1237 (9th Cir. 2017) (allows FEHBA carriers to remove under federal officer statute in similar circumstances)
- Jacks v. Meridian Res. Co., LLC, 701 F.3d 1224 (8th Cir. 2012) (permits federal-officer removal where contractor operates under federal control)
- Bartel v. Alcoa S.S. Co., Inc., 805 F.3d 169 (5th Cir. 2015) (articulates causal-nexus requirement for § 1442 removal)
- Watson v. Philip Morris Cos., Inc., 551 U.S. 142 (2007) (defines "acting under" as relationship involving subjection, guidance, or control)
- Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006) (explains FEHBA framework and that carriers act as processors under OPM contracts)
- Zeringue v. Crane Co., 846 F.3d 785 (5th Cir. 2017) (discusses standards for colorable federal defenses in § 1442 context)
- Martin v. Franklin Capital Corp., 546 U.S. 132 (2005) (standards for awarding fees on removal litigation)