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Last week the Third Circuit became the first federal appellate court to decide the question of whether federal courts have jurisdiction over COVID-related tort litigation.  It concluded they did not.  Maglioli v. Alliance HC Holdings LLC, — F.4th –, 2021 WL 4890189 (3d. Cir. Oct. 20, 2021).  A decision directly at odds with the broad scope of tort immunity conferred by the March, 2020 Notice of Declaration under the Public Readiness & Emergency Preparedness Act (“PREP Act”), 42 U.S.C. §247d-6d and the even broader immunity extended by its many amendments since then.  Our prior discussions of the declaration and amendments can be found here and here.  In reaching its conclusion, the court refused to afford deference to the declarations of the Secretary of the Department of Health and Human Services (“HHS”), refused to find nursing homes were entitled to federal officer jurisdiction, determined the PREP Act did not confer complete immunity, and ruled there was no federal question jurisdiction under Grable & Sons Metal Prod. Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005).

The underlying facts are not unique.  Families of residents of two New Jersey nursing homes who died from COVID-19 filed negligence and wrongful death lawsuits against the nursing homes.  The cases were filed in state court but were removed by the defendants asserting all of the above bases for federal jurisdiction.  The appellate decision starts off by acknowledging that the PREP Act’s “scope of immunity is broad.”  The act provides “immunity from all claims arising under federal or state law that relate to the use of a covered countermeasure.”  Id. at *2.  Rather than allowing such claims, the Act establishes a fund to compensate “eligible individuals for covered injuries.”  Id. Essentially, this sets up an administrative remedy as the only recourse for these types of injuries.  There is one exception to the administrative remedy.  The PREP Act provides “an exclusive Federal cause of action against a covered person for death or serious physical injury proximately caused by willful misconduct.”  Id.  The intent of the PREP Act is expressly set forth in the Fourth Amendment:

[T]here are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable & Sons Metal Products, Inc. v. Darue Eng’g. & Mf’g., 545 U.S. 308 (2005), in having a uniform interpretation of the PREP Act.  Under the PREP Act, the sole exception to the immunity from suit and liability of covered persons under the PREP Act is an exclusive Federal cause of action against a covered person for death or serious physical injury proximately caused by willful misconduct by such covered person. In all other cases, an injured party’s exclusive remedy is an administrative remedy.

Fourth Amendment, at part XI (emphasis added).  This would seem not only to answer the federal jurisdiction question but also the question of whether the current suit is permissible at all.  If you are alleging serious injury or death as a result of “willful misconduct” you can bring a federal lawsuit.  Otherwise, you may bring a claim for compensation from the fund.  That is it.  No state claim for negligence is contemplated.  But, in deciding the federal jurisdiction question, the Third Circuit essentially inverted the PREP Act finding that by creating a federal cause of action for willful misconduct, Congress left open the door for plaintiffs to pursue negligence claims in state court.

The court’s analysis began with rejecting defendant’s request to give deference to the HHS Secretary’s declaration that they sought to confer federal question jurisdiction over COVID-related tort litigation under a Grable rationale – namely the above quoted language.  The court found that “HHS is not delegated authority under the PREP Act to interpret the scope of federal courts’ jurisdiction.”  Id. at *4.  Since the court found the agency’s interpretation to be beyond its power, it was unwilling to provide it any deference.

That left the court to examine defendants’ three arguments in support of federal jurisdiction.  The first was federal-officer jurisdiction.  To qualify, the claims brought against the defendant must be “based upon the defendant acting under the United States, its agencies, or its officers.”  Id. at *5.  This type of jurisdiction extends to private parties if they were “acting under” federal officers.  The defendant nursing homes argued that they qualified because they are heavily regulated by the federal government.  The court did not find that was sufficient.  Offering a comparison to government contractors, the nursing homes do not “assist or help carry out the duties of a federal superior.”  Id. at *5-6.

Skipping to the third argument, and without regard to the HHS secretary’s declaration, the decision finds no federal question jurisdiction under Grable because the complaints never mentioned the PREP Act, which is merely a defense.  Id. at *12.

But the worst part of the decision is the court’s discussion on complete preemption.  Normally, we address preemption as a defense to state-law claims.  As a defense, it is usually not considered grounds for removal because the defense “does not appear on the face of the well-pleaded complaint.”  Id. at *7. However,

The complete-preemption doctrine provides that a federal question does appear on the face of the complaint when Congress “so completely pre-empt[s] a particular area that any civil complaint raising [the] select group of claims is necessarily federal in character.”

Id. (citations omitted, emphasis in original).  So, if removal is proper where a federal statute “wholly displaces” a state law cause of action, then the current case is removable.  The Third Circuit disagreed in a contradictory two-part discussion.  Part one says everything we say above.  The PREP Act “unambiguously creates an exclusive federal cause of action.”  Id. at *9.  The opinion describes that exclusive federal cause of action as — for injuries caused by covered countermeasures, HHS has “the sole authority” to provide compensation from the designated fund.  Id.  The PREP Act carved out a single exception — where a plaintiff is alleging willful misconduct for serious harm or death, he may bring a federal lawsuit in the District of Columbia after first exhausting all administrative remedies.  Id.  The willful misconduct claim is an exception to the general rule that the only remedy for covered claims is the administrative claim.

But in part two, the court pulls a fast u-turn.  The court posits that the question they need to decide for removal purposes is whether plaintiffs’ state-law claims fall within the scope of the exclusive federal cause of action.  Id.  The court does not find that the nursing homes are not covered individuals or that plaintiffs are not alleging harm from covered countermeasures.  So, the answer should be that plaintiffs’ claims do fall within the exclusive federal cause of action – the administrative remedy.  However, despite its prior definition of the PREP Act’s “exclusive federal cause of action,” just two paragraphs earlier, the court framed the question as whether plaintiffs could bring their negligence cause of action under the PREP Act’s cause of action for willful misconduct.  Id.

 Of course, the answer is no.  Plaintiffs do not allege the defendant nursing homes acted “intentionally” or “without legal or factual justification.”  Id. at *10.  In fact, the PREP Act expressly provides that willful misconduct is something “more stringent than a standard of negligence in any form or recklessness.”  Id. But that is not the issue.

Having focused only on the willful misconduct action, the court views the PREP Act as creating a separate federal cause of action that is different from the state law claims brought by plaintiffs.  In fact, the court goes on to say “Congress could have created a cause of action for negligence or general tort liability.  It did not.”  Id.  But it did.  It created an administrative claim that is solely administered by the HHS.  The purpose of the PREP Act is to funnel all pandemic claims into a federal administrative claim program, except for egregious intentional conduct for which a federal cause of action was provided.  The combination of an administrative compensation fund and a federal claim are historically where courts have found complete preemption because such provisions wholly displace state law.  Instead, here, the Third Circuit determined that because the limited federal cause of action is not complete, state law negligence-based claims remain unaffected — meaning that nobody will ever bother pursuing the much more difficult to prove federally provided claim.

Having ignored the federal compensation scheme, intended to embrace what was not to be litigated, as a basis for complete preemption, the court effectively neutered it.  While the court said it was only deciding the jurisdiction issue, not whether a New Jersey state court would or should find plaintiffs’ claims preempted – the Third Circuit certainly made that defense more difficult with sound bites we are sure plaintiffs will wholeheartedly embrace.