Woodruff v. Humana Pharmacy, Inc.
Filing
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For the reasons set forth in the Memorandum Opinion, the plaintiffs motion to remand 12 is granted, and the defendants motion to dismiss [8-1] is denied as moot. Civil case terminated. ENTER MEMORANDUM OPINION AND ORDER.Mailed notice(slb, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BARBARA WOODRUFF,
Plaintiff,
v.
HUMANA PHARMACY INC.,
Defendant.
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No. 14 C 02311
Judge John J. Tharp, Jr.
MEMORANDUM OPINION ORDER
Plaintiff Barbara Woodruff sued Humana Pharmacy, Inc., in the Circuit Court of Cook
County, alleging that negligence in the untimely filling and shipping of her mail-order
prescription drugs caused her to have a stroke. Humana removed the case to this Court, arguing
that any negligence claim is completely preempted by the Medicare statute and therefore belongs
in federal court, see 28 U.S.C. §1441, and alternatively that Humana is entitled to removal as a
“federal officer” with a federal defense to liability, see 28 U.S.C. §1442(a). Humana further
contends this Court must dismiss the case because Woodruff failed to exhaust her administrative
remedies; that argument is the subject of a separate motion to dismiss. Woodruff now moves to
remand to state court, arguing that her claim for damages for personal injuries is not a claim for
Medicare benefits and that federal officer removal does not apply.
A.
Federal Officer Removal
Humana, a private insurer, is a Medicare Advantage Part D 1 prescription drug provider
that contracts with the Centers for Medicaid and Medicare Services (“CMS”), a federal agency,
to administer Medicare’s prescription drug benefit. Because Humana’s “negligent” conduct
1
Part D is Medicare’s prescription drug benefit program. See 42 U.S.C. § 1395w–115.
Humana is a Prescription Drug Plan (“PDP”) sponsor.
alleged in the state-court complaint is the belated filling and shipping of refill prescriptions—one
of its delegated duties—Humana contends that the case is removable under the federal officer
removal statute, which provides for the removal of actions against “[t]he 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, sued in an official or individual capacity for 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). According to Humana: “As an approved and fully authorized Medicare Advantage
prescription drug provider, [Humana] acts under the direction, governmental supervision, and
control of the Secretary, through CMS, to administer Medicare Advantage Part D benefits to
members, including Barbara Woodruff, subject to the strict rules and guidelines of the Medicare
Act,” and therefore qualifies as a “federal officer” within the meaning of the removal statute.
Mem., Dkt. # 15 at 4. Woodruff, on the other hand, contends that the federal officer removal
statute does not condone removal of this case because, among other things, there is no
connection between plaintiff’s claim and the action by Humana performed under the color of
federal law.
Under the federal officer removal statute, a removing defendant must show that it is a (1)
“person” (2) “acting under” the United States, its agencies, or its officers (3) that has been sued
“for or relating to any act under color of such office,” and (4) has a colorable federal defense to
the plaintiff's claim. 28 U.S.C. § 1442(a); Ruppel v. CBS Corp., 701 F.3d 1176, 1180-81 (7th Cir.
2012) (citing Mesa v. California, 489 U.S. 121, 132-34 (1989)). The plaintiff argues that
Humana fails to meet all but the first criteria.
2
As to the “acting under” prong, the Court disagrees. “Cases in which the Supreme Court
has approved removal involve defendants working hand-in-hand with the federal government to
achieve a task that furthers an end of the federal government.” Ruppel, 701 F.3d at 1181 (further
explaining that “’[a]cting under’covers situations . . . where the federal government uses a
private corporation to achieve an end it would have otherwise used its own agents to complete.”).
Because the Secretary has delegated the task of administering prescription drug benefits to PDP
sponsors like Humana, Humana acts under the authority of a federal officer. Humana is not
merely complying with federal law—such as those requiring testing of products, see Watson v.
Philip Morris Cos., 551 U.S. 142, 151 (2007)—but assisting the federal government in carrying
it out, see Kelly v. Martin & Bayley, Inc., 503 F.3d 584, 587 (7th Cir. 2007) (explaining that a
private person acts under federal law when assisting or carrying out the duties of the federal
officer). This not just a highly regulated industry, which is insufficient to support “acting under”
status; Humana, a PDP sponsor with authority delegated by CMS, a federal agency, is a part of
the federal bureaucracy that administers Medicare Part D.
As to the third element, however, an entity acts “under color of” federal authority only
when its challenged actions were derived from its official duties. Ruppel, 710 F.3d at 1182.
There must be a “causal connection” between the allegedly tortious conduct and the official
authority of the removing defendant. The “under color of” element is analogous to a “scope of
employment” inquiry. See 14B Charles Alan Wright, Arthur R. Miller, et al., Federal Practice
and Procedure § 3726 at 245 (4th ed. 2009). Here, Humana’s federal duties are to administer
prescription drug benefits to Medicare patients. Yet Humana does not contend that CMS controls
the manner in which Humana provides prescription drug refills; there is nothing to suggest that
the manner of physically providing drugs to consumers is controlled by CMS or any federal
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agency. See Orthopedic Specialists of N.J. PA v. Horizon Blue Cross / Blue Shield of N.J., 528 F.
Supp. 2d 128, 137 (D.D.C. 2007) (explaining, in promissory estoppel case against insurer, that
“It is [the] act of purportedly erroneous pre-authorization over which a federal agency or officer
must have exercised ‘direct and detailed’ control if this Court is to exercise jurisdiction over
Defendant under the federal officer removal statute.”). Humana refers generally to “strict rules
and guidelines” to which it is subject but does not cite even one that pertains to the manner in
which it fills and delivers prescriptions. 2 In short, Humana fails to support the implausible
proposition that any federal regulations or “strict rules and guidelines” are causally connected to
its manner of and timeline for processing Woodruff’s prescription refills. The plaintiff’s claims
simply do not implicate actions by Humana “under color” of its role as an ersatz agent of the
federal government.
Even assuming arguendo that Humana also has a colorable federal defense (such as
failure to exhaust), then, it has not shown that it was acting under color of federal authority when
it filled and shipped the plaintiffs’ refills. This result is consistent with the purpose of federal
officer removal. In the case of this contractor, there is no reason to believe there is danger of
state court “prejudice” against this company; nor is a state-court lawsuit likely to disable or deter
2
Where the parties are “at odds about what (if any) directions” a federal officer issued to
Humana, this Court “cannot accept [Humana’s] say-so and use that as the basis of removal”;
rather, “[d]isputes about jurisdictional facts must be resolved after a hearing under Fed. R. Civ.
P. 12(b)(1)” at which the court “must receive evidence, make appropriate findings, and then
either retain or remand the case as the facts require.” Pollit v. Health Care Service Corp., 558
F.3d 615, 616 (7th Cir. 2009). Neither party has requested such a hearing nor any discovery as to
the issue of what, if any, federal directives control how Humana fills prescriptions for its plan
members. Indeed, the Medicare Act expressly prohibits federal intervention—including
“supervision or control”—over the provision of medical services. 42 U.S.C. § 1395. Humana’s
cursory reference to the federal control to which it claims to be subject does not entitle it to an
evidentiary hearing, particularly where the burden of establishing removability has been with
Humana all along, and any applicable federal directives would have been known to Humana to
cite in support of its arguments.
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a federal actor from taking necessary action; nor is there any federal claim of immunity that is
forestalled by proceeding in state court. See Watson v. Philip Morris Companies, Inc., 551 U.S.
142, 153 (2007). With none of these purposes of federal-officer removal at stake, it does not
make sense to interpret the “under color of” element broadly enough to include the type of
private action at issue here. And indeed, the Supreme Court has cautioned that federal-officer
immunity is not meant to apply whenever a state-court action is filed against a private firm in a
highly regulated industry. See id.
Accordingly, the Court concludes that the federal officer removal statute does not permit
removal of this case.
B.
Complete Preemption
Humana alternatively contends that this case is removable under the general removal
statute, § 1441, because federal law completely preempts state law with respect to claims for
Medicare benefits. Ordinarily, the existence of a federal defense—such as preemption—does not
permit removal, but complete preemption is an exception to that rule. Pollitt v. Health Care
Service Corp., 558 F.3d 615, 616 (7th Cir. 2009); see Caterpillar Inc. v. Williams, 482 U.S. 386,
393 (1987); Crosby v. Cooper B-Line, Inc., 725 F.3d 795, 800 (7th Cir. 2013). “Once an area of
state law has been completely pre-empted, any claim purportedly based on that pre-empted state
law is considered, from its inception, a federal claim, and therefore arises under federal law.”
Caterpillar Inc., 482 U.S. at 393. When complete preemption applies, federal law provides the
exclusive cause of action for the claim asserted, no matter how it is labelled.
As an initial matter, Woodruff takes the position that Humana has abandoned its
complete preemption argument by not addressing it in its response to her motion to remand. See
Reply, Dkt # 18 at 1-2. The Court agrees. Humana amended its notice of removal to add federal-
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officer removal as a basis for removal, Dkt. #7, and although it also included its argument that
the case was removable under § 1441 because this Court has original jurisdiction under § 1331
due to the claim arising under the Medicare Act rather than Illinois common law in the notice, it
failed to respond at all to Woodruff’s argument that her state law claim was not preempted and
that removal under § 1441 was therefore improper. Instead, Humana’s response to the remand
motion maintains that it “properly removed” the case pursuant to the Federal Officer Removal
Statute and “other alternative grounds.” Mem., Dkt # 15 at 2. It does not identify any “other
alternative grounds,” however, and develops no argument concerning complete preemption.
Thus, Humana has waived its argument that complete preemption permits removal under § 1331.
See, e.g., C&N Corp. v. Kane, ---F.3d---, 2014 WL 2854487, at *2 (7th Cir. June 24, 2014)
(failure to make argument in response to summary judgment motion constituted waiver; “we will
not find that an argument was adequately preserved solely because a party’s opponent defended
against the argument”); Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“Failure to
respond to an argument ... results in waiver.”). Complicating this analysis, however, is the fact
that federal jurisdiction does not depend on the parties’ complicity; “the jurisdiction of the court
cannot be conferred by consent, and cannot in a certain sense be defeated by waiver.” Adkins. v
Illinois Central R.R. Co., 326 F.3d 828, 833 (7th Cir. 2003) (discussing, but not resolving, the
question of whether waiver of a complete preemption argument deprived the court of
jurisdiction).
The Court need not definitively resolve the question of whether Humana’s waiver of a
complete preemption argument deprives this Court of jurisdiction, however, because the Court
would not have jurisdiction even if the preemption argument has not been waived —indeed, even
if it is correct. Humana’s notice of removal asserts that § 1331 provides the basis for original
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federal jurisdiction because the claim arises under the Medicare Act. Dkt. #14-3 at ¶ 6 (“the
complaint asserts claims arising under ... the Medicare Act”). But if the claim does arise under
the Medicare Act, then § 1331 cannot be the basis of jurisdiction. Under 42 U.S.C. § 405(g) and
405(h), the procedure for judicial review of a decision of the Secretary of Health and Human
Services 3—the very procedure that Humana contends Woodruff improperly bypassed—is the
“sole avenue” for claims arising under the Medicare Act, “to the exclusion of 28 U.S.C. § 1331.”
Heckler v. Ringer, 466 U.S. 602, 615 (1984) (emphasis added). Section 405(g) sets forth a
judicial review process, and section 405(h) provides: “No action against the United States, the
Commissioner of Social Security, or any officer or employee thereof shall be brought under
section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.” That
sentence has been held to be more than a requirement of administrative exhaustion; it deprives
the district courts of federal-question jurisdiction. See Weinberger v. Salfi, 422 U.S. 749, 758-60
(1975). 4 In other words, the statute “strips” the federal courts of primary federal-question
jurisdiction for cases arising under the Medicare Act. Cochran v. U.S. Health Financing Admin.,
291 F.3d 775, 779 (11th Cir. 2002); see Michael Reese Hosp. & Med. Ctr. v. Thompson, 427
F.3d 436, 440 (7th Cir. 2005) (explaining that claims arising under the Medicare Act must “take
a different route” to federal court than general federal-question jurisdiction). And since removal
3
Section 405 is part of the Social Security Act (and therefore refers to “the Commissioner
of Social Security” as the final administrative word), but 42 U.S.C. § 1395ii adopts § 405(h) as
to Medicare claims; and 42 U.S.C. § 1395ff(b)(1) does the same as to § 405(g).
4
Thus, administrative exhaustion in this context is, by statute, jurisdictional and therefore
distinguishable from requirements of administrative exhaustion in other contexts, which have
been held to be non-jurisdictional and waivable. See, e.g., Gray v. United States, 723 F.3d 795,
798 (7th Cir. 2013) (explaining, in suit against IRS for damages, that applicable statute “contains
no language suggesting that Congress intended to strip federal courts of jurisdiction when
plaintiffs do not exhaust administrative remedies”); Glade ex rel. Lundskow v. United States, 692
F.3d 718, 723 (7th Cir. 2012) (explaining as to Federal Tort Claims Act that “the Act's
requirement of exhausting administrative remedies is not jurisdictional,” and therefore “it can be
waived or forfeited, or otherwise forgiven”).
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under § 1441 is permitted only where the district court would have original jurisdiction over the
case, see Caterpillar, 482 U.S. at 392, removal is not permitted when the federal court does not
have jurisdiction of a claim—as it would not with a claim arising under the Medicare Act that
has not been the administratively exhausted. 5
It is difficult to imagine how the plaintiff could present her claim against Humana for
negligent delay in filling her prescription to the Secretary for adjudication and a final decision in
the first instance, but that only goes to show that there is not a persuasive argument that the claim
is preempted. “A claim ‘arises under’ the Medicare Act when both the standing and the
substantive basis for the presentation of the claims stem from the Medicare Act.” Ancillary
Affiliated Health Servs. v. Shalala, 165 F.3d 1069, 1070 (7th Cir. 1998) (internal quotation marks
and citations omitted). The cases that discuss Medicare exhaustion look at payment decisions:
that is, whether the plaintiff is, at bottom, making a claim for benefits, such as complaining about
the lack of coverage for some service or a claim for payment, such as a by a provider seeking
reimbursement. But Woodruff received her benefits —federally subsidized prescription drugs,
which she obtained pursuant to her Part D plan with Humana. She is not seeking an injunction or
declaration regarding the coverage provided by Humana, nor is she attempting to be reimbursed
for out-of-pocket expenses that she believes should have been covered. She alleges that Humana
negligently failed to fill and deliver her medications in a timely way, causing her to suffer a
5
In Ringer, the Court acknowledged that there could be a limited exception to the
jurisdictional requirement of complete exhaustion for claims arising under the Medicare Act,
where the claim is “wholly collateral” to a claim for benefits. See 466 U.S. at 618. That
exception does not appear to apply here, however, because it extends only to the requirement of
“complete” exhaustion; the collateral nature of the claim does not excuse the threshold
requirement of presentation of the claim to the Secretary for an initial decision. See Mathews v.
Eldridge, 424 U.S. 319, 330-32 (1976). That requirement is non-waivable, id. at 330, and has not
been met here, so the exception—which might excuse the requirement to use every available
avenue of internal review—has no application.
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stroke. That is not something she can bring before the Secretary for a “final decision” (as to
what?) that may then be challenged in court under § 405’s judicial review procedure. A lawsuit
against the Secretary would be inapt when the underlying claim is “wholly collateral” to any
decision on a claim for benefits. Cf. Heckler, 466 U.S. at 614 (explaining that the plaintiffs’
claims were not wholly collateral to a statutory scheme of administrative and judicial review of
Medicare payment decisions, because their constitutional and statutory challenge to the
procedure for reaching payment decisions was “at bottom” an attempt to reverse the agency's
decision to deny payment).
In that sense the case is analogous to Ardary v. Aetna Health Plans of California, Inc., 98
F.3d 496 (9th Cir. 1996), in which the Ninth Circuit answered “no” to the question whether
section 405(h) applied “to preclude the heirs of a deceased Medicare beneficiary from bringing
state law claims for wrongful death against a private Medicare provider when those claims do
not seek recovery of Medicare benefits but instead seek compensatory and punitive damages on
the grounds that the provider both improperly denied emergency medical services and
misrepresented its managed care plan to the beneficiary.” Id. at 499. The Court held that the
plaintiffs’ claims were not inextricably intertwined with the denial of benefits, id. at 499-500,
and it further noted that that the “removal of the right to sue the private Medicare provider for its
torts would result in an inequitable and substantial dilution of the rights of patients,” id. at 501.
Thus, either: (1) Woodruff’s claim arises under the Medicare Act (as Humana contends),
and this Court lacks subject-matter jurisdiction because §1331 is abrogated and this is not a suit
against the Secretary for review of a final administrative decision; or (2) the claim does not arise
under the Medicare Act (as Woodruff argues), and this Court lacks subject-matter jurisdiction
because there is no basis such as diversity for bringing her state-law claim in federal court. Either
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way, removal under § 1441 is not proper. See Dial v. Healthspring of Alabama, Inc., 541 F.3d
1044, 1047-48 (11th Cir. 2008).
***
Because Humana has failed to establish that either the federal officer removal statute or
the general removal statute provide a basis for removing Woodruff’s purported negligence claim,
Woodruff’s motion to remand is granted. Humana’s motion to dismiss is denied as moot.
John J. Tharp, Jr.
United States District Judge
Date: August 29, 2014
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