Negligence Claims Remain in State Court Despite Nursing Homes’ Defense Based on Federal PREP Act

The United States Court of Appeals for the Third Circuit, applying federal law, affirmed the district court’s dismissal of negligence and wrongful-death claims for lack of subject-matter jurisdiction, remanding the cases back to state court. The negligence and wrongful death complaints stemmed from the deaths of four nursing home residents from COVID-19. After the estates of the four residents filed their complaints in state court, the two nursing home defendants removed the cases to federal court, arguing that the federal Public Readiness and Emergency Preparedness Act (“PREP Act”) established federal court jurisdiction. The Third Circuit rejected the nursing homes’ contention, holding instead that the court had no jurisdiction over ordinary negligence and wrongful death claims, remanding the case back to state court.

At issue was whether the nursing homes’ defense to the state law claims—that they were immune from suit by the PREP Act—warranted removal into federal court. In holding that it lacked jurisdiction, the Third Circuit did not reach the merits of the defense, remanding the question to state court.

Congress passed the Prep Act in 2005. Upon its invocation by the Secretary of the Department of Health and Human Services (“HHS”), the Act protects certain covered individuals from lawsuits during a public health emergency. Indeed, the Act was invoked by the Secretary in March 2020, who declared COVID-19 a public health emergency and recommended certain countermeasures. The Act grants immunity for covered persons from any “claim for loss that has a causal relationship with the administration to or use by an individual of a covered countermeasure.” In addition, the Act creates a fund to compensate “eligible individuals for covered injuries” and one exception to immunity: “an exclusive Federal cause of action against a covered person for death or serious physical injury proximately caused by willful misconduct.”

After dismissing the arguments that the Secretary has the authority to determine the jurisdiction of federal courts and that the court must give deference to HHS on a question of jurisdiction, the Third Circuit examined each of the nursing home defendants’ three grounds for federal jurisdiction.

First, the Third Circuit rejected the nursing homes’ argument that the federal-officer-removal statute permits removal, holding instead that nursing homes were not “acting under” the United States, its agencies, or its officers. Though nursing homes are closely regulated by the federal government, mere compliance with regulation, without a showing that their actions involved an effort to assist the duties or tasks of a federal superior, is insufficient to invoke the federal-officer-removal statute.

Second, the nursing homes argued that the PREP Act is so pervasive that the estates’ state law negligence claims are actually federal claims under the PREP Act, and thus removable. The Third Circuit disagreed with this invocation of the doctrine of “complete preemption.” If federal law provides the exclusive cause of action for the claim asserted, the complete preemption doctrine effectively transforms a state-law claim into a federal claim over which the federal court would have jurisdiction. The Third Circuit held that neither the “exclusive” willful misconduct cause of action nor the fund for covered injuries displaced the estates’ ordinary negligence claims. The first requires a higher standard of liability than was asserted by the estates, and the latter is not a cause of action. Therefore, the PREP Act does not completely preempt the state law claims such that they are indistinguishable from a federal cause of action. As such, they do not create federal jurisdiction.

Finally, the Third Circuit rejected the nursing homes’ third argument that the case raises “significant federal issues” such that a federal court has jurisdiction to hear it. To be a “substantial federal issue,” a federal issue must be necessarily raised, actually disputed, substantial, and capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Because the estates properly pleaded their complaints without reference to the PREP Act, the federal issue was not “necessarily raised,” and, thus, was not a substantial federal issue that creates jurisdiction for federal courts.

In so holding, the Third Circuit emphasized that the issue at hand was removal—whether making the preemption argument gets the nursing homes into federal court. Whether the nursing home’s preemption argument is ultimately successful is for the state court to decide on remand. The Third Circuit cited twenty district court cases that agreed with its holding and one case with a contrary holding and indicated that it was the first federal circuit court to decide this issue with regards to complaints against nursing homes during COVID-19 pandemic. Maglioli v. Alliance HC Holdings LLC, 20-2833, 2021 WL 4890189 (3rd Cir. Oct. 20, 2021).