Fifth Circuit Expounds On New Standards For Federal Officer Removal

FEHBA-plan administrators may find additional support for removals to federal court under St. Charles Surgical Hosp., L.L.C. v. La. Health Serv. & Indem. Co., No. 20-30093, 2021 WL 857473 (5th Cir. Mar. 8, 2021). Specifically, the Fifth Circuit’s “context” on the “acting under” and “connection” elements for federal officer removal clarifies the broader standards now applicable for private sector FEHBA-plan administrators invoking federal jurisdiction.

St. Charles Surgical Hospital sued Blue Cross Blue Shield of Louisiana in state court asserting state law claims based on allegations that the insurer failed to pay a reasonable compensation for medical services. The hospital also pleaded an express waiver of recovery on its state-law claims in connection with federally insured patients. A short time later, the hospital produced information that, BCBS alleged, implicated benefits under the Federal Employees Health Benefits Act (“FEHBA”), and BCBS removed the case to federal court under the federal officer removal statute, 28 U.S.C. § 1142(a). The district court remanded due to insufficient evidence on the “acting under” element for removal jurisdiction, without addressing the hospital’s pleaded waiver.

The Fifth Circuit remanded for the district court to assess the “threshold question” of the hospital’s waiver, which was neither briefed extensively nor fully developed in the record. Not stopping at this threshold issue, however, the Fifth Circuit also added “context” to its discussion of the parties’ positions based on two recent cases addressing federal officer removal: St. Charles Surgical Hosp., L.L.C. v. La. Health Serv. & Indem. Co., 935 F.3d 352 (5th Cir. 2019) (“St. Charles I”), and Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286 (5th Cir. 2020) (en banc).

In St. Charles I, between these same parties, the Fifth Circuit held that BCBS satisfied the “acting under” element of the federal officer removal test based on the structure of the relationship between the Office of Personnel Management (“OPM”) and BCBS, and given the “strong level of guidance and control” exercised by OPM over BCBS. Here, the district court read St. Charles I too narrowly because a removing defendant is not required to show that its alleged conduct was “precisely dictated” by a federal officer’s directive. Instead, the “acting under” inquiry examines the relationship between the removing defendant and the federal officer, requiring courts to determine whether the federal officer exerts sufficient “subjection, guidance, or control” over the defendant. And while the “structure of the relationship” between OPM and BCBS was determinative for the “acting under” element in St. Charles I, the Fifth Circuit reiterated here that it did not hold that BCBS was “acting under” OPM for all purposes.

In addition to the “acting under” element, the Fifth Circuit also addressed its recent abandonment of the “causal nexus” requirement in Latiolais, decided after the present case was remanded to state court. Applying Congress’s 2011 amendments to section 1442(a), Latiolais held that removal is no longer limited to actions that are “causally connected” with, but alternatively includes actions “connected or associated” with, acts under color of federal office, and the proper inquiry centers on whether the defendant’s actions are “related to” a federal directive.

Pursuant to Latiolais, the Fifth Circuit here instructed the district court to revisit its analysis under Congress’s 2011 amendments. Despite the district court stating that the “causal nexus” element had no bearing on its decision and focusing only on the “acting under” element, the Fifth Circuit cautioned that the “acting under” and “connection” elements should not be “blurred.” The elements may “often ride in tandem toward the same result,” but they are distinct and must be analyzed as such. Therefore, a defendant may be “acting under” a federal officer even while the specific conduct at issue is not “connected or associated with (or related to)” a federal directive from OPM. Although the hospital’s putative waiver here implicates an additional factor for consideration on remand to the district court, the Fifth Circuit clarified that each element of the federal officer removal statute mandates a distinct analysis.