Farmer v. United States ( 2019 )

In the United States Court of Federal Claims
No. 18-1484C
(E-filed: October 31, 2019)
)
RAYMOND G. FARMER, in his )
capacity as Liquidator of Consumers’ )
Choice Health Insurance Company, )
and MICHAEL J. FITZGIBBONS, in )
his capacity as Special Deputy ) Claim for Payments under the Patient
Liquidator of Consumers’ Choice ) Protection and Affordable Care Act
Health Insurance Company, ) Reinsurance Program, 42 U.S.C. §
) 18061 (2012); Motion to Dismiss,
Plaintiffs, ) RCFC 12(b)(1); Insolvent Health
) Insurer; No Jurisdiction Over State
v. ) Law Claims; Stay Warranted Pending
) Supreme Court Review.
THE UNITED STATES, )
)
Defendant. )
)
)
C. Mitchell Brown, Columbia, SC, for plaintiffs. Thad H. Westbrook and Miles E.
Coleman, of counsel.
Terrance A. Mebane, with whom were Joseph H. Hunt, Assistant Attorney General, Ruth
A. Harvey, Director, Kirk T. Manhardt, Deputy Director, Civil Division, Commercial
Litigation Branch, United States Department of Justice, Washington, DC, for defendant.
Frances M. McLaughlin and Christopher VanDeusen, of counsel.
OPINION
CAMPBELL-SMITH, Judge.
On September 26, 2018, plaintiffs Raymond G. Farmer and Michael J.
FitzGibbons, in their capacity as liquidators of Consumers’ Choice Health Insurance
Company (Consumers’ Choice), a failed health insurer, filed a ten-count complaint in this
court. 1 Currently before the court in this matter is defendant’s motion to dismiss, which
is brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court
of Federal Claims (RCFC). See ECF No. 11. Plaintiffs filed a response to the motion to
dismiss and also requested oral argument. See ECF No. 12 at 10. The government filed
a reply brief in support of its motion. See ECF No. 13.
Upon review of the complaint, ECF No. 1, and the parties’ briefs, the court
determined that oral argument is unnecessary. Accordingly, plaintiffs’ request for oral
argument is DENIED. For the reasons stated below, defendant’s motion is GRANTED
in part, as to Counts VII, VIII, and IX of the complaint. Because the court STAYS this
matter pending a decision by the Supreme Court of the United States in the matters of
Land of Lincoln Mutual Health Insurance Co. v. United States, 892 F.3d 1184 (Fed. Cir.
2018), cert. granted, 139 S. Ct. 2744 (U.S. June 24, 2019) (No. 18-1038), and Moda
Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018), cert. granted, 139 S.
Ct. 2743 (U.S. June 24, 2019) (No. 18-1028), defendant’s motion to dismiss is DENIED
in part, as premature, regarding the remaining counts of the complaint.
I. Background
The facts recounted in this section are derived from the complaint and exhibits that
were attached to the complaint and the parties’ filings. Only the facts which are relevant
to either defendant’s jurisdictional challenge to Counts VII, VIII, and IX, or to the court’s
decision to stay the remainder of this action, are provided. The facts recited here appear
to be undisputed, at least for the purposes of the resolution of defendant’s motion to
dismiss. See ECF No. 12 at 12 n.3 (“The material facts regarding the [legislation and
government programs at issue in this case] do not appear to be in dispute.”). The court
makes no findings of fact in this opinion.
A. The Affordable Care Act and the Health Insurer Consumers’ Choice
The Patient Protection and Affordable Care Act (ACA) became law in 2010. Pub.
L. No. 111-148, 124 Stat. 119 (2010). According to plaintiffs, one of the goals of the
initiative was to “protect health insurers formed under the ACA, like Consumers’ Choice
Health Insurance Company.” ECF No. 1 at 2. Consumers’ Choice was formed as a non-
profit mutual benefit corporation, under South Carolina state law, and also qualified,
under the ACA, as a Consumer Operated and Oriented Plan (CO-OP). Id. at 4, 12. A
CO-OP was required to certify that its insurance plans were “qualified health plans,” or
QHPs, under the ACA. Id. at 4. Through its Centers for Medicare and Medicaid
1
Although the terms “first cause of action,” “second cause of action,” etc. appear in the
complaint, the court adopts the more succinct terminology that defendant uses —Count I, Count
II, etc.
2
Services (CMS), the United States Department of Health and Human Services (HHS)
exercised oversight of the initiative. Id. at 3-4.
Plaintiffs state that two types of loans were provided by HHS/CMS to Consumers’
Choice. The first was a start-up loan “‘to provide assistance to such person in meeting its
start-up costs.’” Id. at 5 (quoting 42 U.S.C. § 18042(b)(1) (2012)). The second type of
loan was a solvency loan “‘to provide assistance to such person in meeting any solvency
requirements of States in which the person seeks to be licensed to issue qualified health
plans.’” Id. (quoting 42 U.S.C. § 18042(b)(1)). For Consumers’ Choice, the start-up
loan was in the amount of $18,709,800 and the solvency loan was in the amount of
$68,868,408. Id. at 13.
The complaint also discusses at some length three programs of the ACA which
“facilitate[d] the formation, operation and funding of insurers like Consumer’s Choice.”
Id. at 4. Plaintiffs’ complaint describes these three programs as “risk mitigation”
programs, and also uses the shorthand descriptor “the 3Rs” for these programs. Id. at 5.
The 3Rs were the Reinsurance, Risk Adjustment, and Risk Corridor programs. Id.
The primary focus in this suit is on the ACA’s Reinsurance program. As
explained by plaintiffs, the Reinsurance program, established by 42 U.S.C. § 18061
(2012), was “intended to stabilize individual market premiums during the early years of
the ACA’s new market reforms.” ECF No. 1 at 6. For policy year 2015 (the insurance
coverage year central to this dispute), Consumers’ Choice was due to receive
$36,976,345 from HHS/CMS under the Reinsurance program. Id. at 19. It should be
noted as well that a CO-OP could also owe payments to HHS/CMS under another of the
3Rs, the Risk Adjustment program. Id. at 9-10.
B. Insolvency and Liquidation of Consumers’ Choice
There were only two full policy years, 2014 and 2015, during which Consumers’
Choice was able to provide health insurance in South Carolina. ECF No. 1 at 13-14, 17-
18. By October 2015, Consumers’ Choice was in financial distress, and over the next
few months was obliged to cease operations. Id. at 14, 17-18. South Carolina insurance
authorities and Consumers’ Choice instituted the procedures for the supervision,
rehabilitation, and eventual liquidation of the health insurer. Id. at 17-18. A state court
issued orders during this time-frame that were designed, in part, to conserve the assets of
Consumers’ Choice. Id. The two plaintiffs in this suit are the liquidators of Consumers’
Choice. Id. at 3.
C. Offset of Reinsurance Program Payments
Meanwhile, HHS/CMS began a series of actions which were focused on
Consumers’ Choice’s outstanding start-up loan, and other amounts due to HHS/CMS,
and which also targeted the Reinsurance program payments that were due to Consumers’
3
Choice for the policy year 2015. HHS/CMS placed an “administrative hold” on
Reinsurance funds for 2015, and then effectuated a series of offsets, against those
Reinsurance funds, to recoup the start-up loan amount and other payments due from
Consumers’ Choice. Id. at 19-20. Because of these actions, Consumers’ Choice received
no Reinsurance funds for 2015, as the government had offset almost the entire amount of
the start-up loan, and other amounts, against those Reinsurance payments. Id. at 19, 32.
In plaintiffs’ view, the offset by HHS/CMS in the total amount of $36,976,345 was
invalid for reasons which are separately set forth in their ten-count complaint.
D. South Carolina Insurers’ Rehabilitation and Liquidation Act
One source of law relied upon by plaintiffs is the South Carolina Insurers’
Rehabilitation and Liquidation Act (Liquidation Act). ECF No. 1 at 16 (citing S.C. Code
Ann. Tit. 38, chap. 27 (2014)). As described below, various sections of the Liquidation
Act are cited as support for plaintiffs’ claims. In essence, plaintiffs argue that the offsets
conducted by HHS/CMS against Consumers’ Choice’s Reinsurance program payments
violated certain provisions of the state’s Liquidation Act, or can be voided pursuant to the
state’s Liquidation Act.
E. Plaintiffs’ Claims for Reinsurance Program Payments in the Amount of
$36,976,345, Counts I-X of the Complaint
In their complaint, plaintiffs pled in the alternative seeking either monetary
damages or just compensation in the amount of $36,976,345 for each of the enumerated
counts. ECF No. 1 at 24, 26, 28-29, 32, 34, 36-39. The court summarizes the legal basis
for each count below.
1. Count I
The legal basis for Count I is “Violation of Federal Statute or Regulation.” ECF
No. 1 at 23. According to plaintiffs, HHS/CMS’s failure to make Reinsurance payments
to Consumers’ Choice for the 2015 policy year violated 42 U.S.C. § 18061 and 45 C.F.R.
§§ 153.200-153.270 (2018). Id.
2. Count II
The legal basis for Count II is “Violation of Federal Statute or Regulation,” in the
context of “Exercising an Offset and Imposing an Administrative Hold in Violation of
Federal and State Law.” ECF No. 1 at 24. According to plaintiffs, HHS/CMS’s
utilization of an administrative hold for Consumers’ Choice’s Reinsurance payments for
the 2015 policy year was “an unlawful application of federal law to the priority of
4
claims” and was “contrary to . . . the federal netting regulation which HHS/CMS claims
applies.” 2 Id. at 26.
3. Count III
The legal basis for Count III is “Breach of Contract.” ECF No. 1 at 27. The
agreements alleged to have been breached relate to QHPs provided by Consumers’
Choice in the 2014 and 2015 policy years (QHP Agreements). Id.; see also ECF No. 1-3
at 2-11; ECF No. 1-4 at 2-12. According to plaintiffs, when HHS/CMS failed to make
Reinsurance payments to Consumers’ Choice for the 2015 policy year, the QHP
Agreements were breached. ECF No. 1 at 28.
4. Count IV
The legal basis for Count IV is “Breach of Contract.” ECF No. 1 at 28. The
agreement alleged to have been breached is the loan agreement which sets forth the terms
for the start-up and solvency loans provided to Consumers’ Choice by HHS/CMS (Loan
Agreement). Id. at 28-29; see also ECF No. 1-2 at 2-76; ECF No. 11-1 at 2-3. According
to plaintiffs, when HHS/CMS failed to make Reinsurance payments to Consumers’
Choice for the 2015 policy year, the Loan Agreement was breached. ECF No. 1 at 29.
5. Count V
The legal basis for Count V is “Breach of Implied-in-Fact Contract.” ECF No. 1
at 29. The implied-in-fact contract identified by plaintiffs is as follows: “Consumers’
Choice entered into a valid implied-in-fact contract with the Government regarding the
Government’s obligation to make full and timely Reinsurance payments to Consumers’
Choice in exchange for Consumers’ Choice’s agreement to become a QHP and
participate as a CO-OP in the ACA.” Id. at 30. According to plaintiffs, when HHS/CMS
failed to make Reinsurance payments to Consumers’ Choice for the 2015 policy year, the
implied-in-fact contract was breached. Id. at 32.
6. Count VI
The legal basis for Count VI is “Breach of the Implied Covenant of Good Faith
and Fair Dealing.” ECF No. 1 at 32. This covenant allegedly provided Consumers’
Choice with “reasonable expectations . . . that full and timely Reinsurance payments for
the 2015 policy year would be paid by the Government to QHPs.” Id. at 33. According
to plaintiffs, when HHS/CMS failed to make Reinsurance payments to Consumers’
2
State law is also referenced in this count, regarding an obligation allegedly established by
the ACA that HHS/CMS must respect state insolvency law. See infra note 4.
5
Choice for the 2015 policy year, the covenant of good faith and fair dealing was
breached. Id. at 34.
7. Count VII
The legal basis for Count VII is “Violation of S.C. Code Ann. § 38-27-510.” ECF
No. 1 at 35. This provision, according to plaintiffs, requires that “the amount recoverable
by the Liquidator [of a failing health insurer] from reinsurers may not be reduced as a
result of delinquency proceedings.” Id. at 17. Plaintiffs allege that HHS/CMS, acting as
a reinsurer, “reduce[d] the amount recoverable by the Liquidator from the Government as
a result of delinquency proceedings by paying itself for the Risk Adjustment balances and
the Start Up Loan.” Id. at 35. Thus, in plaintiffs’ view, the government violated S.C.
Code Ann. § 38-27-510 when HHS/CMS failed to make Reinsurance payments to
Consumers’ Choice for the 2015 policy year. Id. at 36.
8. Count VIII
The legal basis for Count VIII is “Violation of S.C. Code Ann. § 38-27-610.”
ECF No. 1 at 36. This provision, according to plaintiffs, mandates that “policyholder
level claims[] [be] recognized as higher priority claims than claims asserted by the
[federal] Government.” Id. at 17. Plaintiffs allege that HHS/CMS’s “use of
administrative holds and offsetting in regard to the reinsurance payments owed to
Consumers’ Choice has circumvented the priority of distribution established and
mandated by S.C. Code Ann. § 38-27-610.” Id. at 37. Thus, in plaintiffs’ view, the
government violated S.C. Code Ann. § 38-27-610 when HHS/CMS failed to make
Reinsurance payments to Consumers’ Choice for the 2015 policy year. Id.
9. Count IX
The legal basis for Count IX is “Voidable insider preferences under S.C. Code
Ann. § 38-27-470.” ECF No. 1 at 37. This provision, according to plaintiffs, operates to
void “any transfer of an insolvent insurer’s property to a creditor” — when certain
conditions are met — because such a transfer is a “voidable preference.” Id. at 17.
Plaintiffs allege that HHS/CMS “engaged in insider preferences made voidable by the
Liquidation Act.” Id. at 37. Thus, in plaintiffs’ view, the offsets used by HHS/CMS to
withhold Reinsurance payments for the 2015 policy year from Consumers’ Choice are
now voidable under S.C. Code Ann. § 38-27-470. Id.
10. Count X
For Count X, the last count of the complaint, the legal basis is the Takings Clause
of the Fifth Amendment to the United States Constitution. ECF No. 1 at 38. According
to plaintiffs, “[t]he Government expressly and deliberately interfered with and has
deprived Consumers’ Choice of [its] property interests and its reasonable investment-
6
backed expectations to receive full and timely Reinsurance payments for the 2015 policy
year.” Id. Thus, in plaintiffs’ view, the offsets used by HHS/CMS to withhold
Reinsurance payments for the 2015 policy year from Consumers’ Choice constitute a
taking of plaintiffs’ property by the federal government. Id. at 39.
II. Legal Standards
A. Dismissal under RCFC 12(b)(1)
When reviewing a complaint to determine its jurisdiction over a plaintiff’s claims,
this court must presume all undisputed factual allegations to be true and construe all
reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236
(1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982);
Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988) (citations
omitted). Plaintiff bears the burden of establishing subject matter jurisdiction by a
preponderance of the evidence. Reynolds, 846 F.2d at 748 (citations omitted). If
jurisdiction is found to be lacking, this court must dismiss the action. RCFC 12(h)(3).
The Tucker Act delineates this court’s jurisdiction. 28 U.S.C. § 1491 (2012).
That statute “confers jurisdiction upon the Court of Federal Claims over the specified
categories of actions brought against the United States.” Fisher v. United States, 402
F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) (citations omitted). These include money
damages claims against the federal government founded upon the Constitution, an act of
Congress, a regulation promulgated by an executive department, any express or implied
contract with the United States, or any claim for liquidated or unliquidated damages in
cases not sounding in tort. Id. (citing 28 U.S.C. § 1491(a)(1)).
B. Stay of Proceedings
The court’s discretion to stay its proceedings is broad and well-established. See
Cherokee Nation of Oklahoma v. United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997)
(“The power of a federal trial court to stay its proceedings, even for an indefinite period
of time, is beyond question.”) (citing Landis v. North Am. Co., 299 U.S. 248, 254-55
(1936))). This discretion is not without bounds, however. See id. (citing Hendler v.
United States, 952 F.2d 1364, 1380 (Fed. Cir. 1991)). A “stay is immoderate and hence
unlawful unless so framed in its inception that its force will be spent within reasonable
limits, so far at least as they are susceptible of prevision and description.” Landis, 299
U.S. at 257. A court may only properly exercise its discretion to grant an indefinite stay
if there is a pressing need for such action. Id. at 255.
III. Analysis
Defendant’s only jurisdictional challenge to the complaint is to Counts VII, VIII,
and IX, the state law claims. ECF No. 11 at 38-39. Jurisdiction is a threshold issue that
7
this court addresses before any challenge to the merits of the claims in the complaint.
E.g., Dell Fed. Sys., L.P. v. United States, 906 F.3d 982, 991 n.8 (Fed. Cir. 2018)
(citation omitted); Doe v. United States, 95 Fed. Cl. 546, 553 (2010) (citation omitted).
The court’s analysis turns first, therefore, to Counts VII, VIII, and IX of the complaint,
before considering defendant’s challenge to plaintiffs’ remaining claims.
A. Plaintiffs’ State Law Claims – Counts VII, VIII, and IX
It is beyond cavil that claims founded on state law are not within the ambit of this
court’s jurisdiction under the Tucker Act. See, e.g., Souders v. S.C. Pub. Serv. Auth.,
497 F.3d 1303, 1307 (Fed. Cir. 2007) (“Claims founded on state law are . . . outside the
scope of the limited jurisdiction of the Court of Federal Claims.”) (citations omitted).
Further, the statute that permits federal district courts to decide state law claims, 28
U.S.C. § 1367 (2012), does not apply to this court. E.g., Hall v. United States, 69 Fed.
Cl. 51, 57 (2005) (citing Trek Leasing, Inc. v. United States, 62 Fed. Cl. 673, 678
(2004)). The only question here, then, is whether the court may, through the assertion of
pendent jurisdiction, entertain plaintiffs’ state law claims to serve the interests of
“judicial economy, convenience and fairness.” Kennedy v. United States, 19 Cl. Ct. 69,
76 (1989) (citing United Mine Workers v. Gibbs, 383 U.S. 715, 725-26 (1966)).
The judges of this court rarely assert pendent jurisdiction over claims primarily
involving state law; indeed, the authority for doing so is the subject of some dispute.
Compare ATL, Inc. v. United States, 4 Cl. Ct. 672, 676 (stating that “it is fair to infer that
Congress did not intend for us to have” pendent jurisdiction) (citations omitted), aff’d,
735 F.2d 1343 (Fed. Cir. 1984), with Trek Leasing, 62 Fed. Cl. at 677-83 (using pendent
jurisdiction to resolve a threshold issue of copyright ownership, under state law, to
resolve a challenge to the plaintiff’s standing to bring suit in this court), with Liberty
Ammunition, Inc. v. United States, 101 Fed. Cl. 581, 589-92 (2011) (noting the limits of
the doctrine of pendent jurisdiction, and declining to assert pendent jurisdiction over a
state law claim in that case). Plaintiffs urge the court to exercise pendent jurisdiction
over Counts VII-IX here. ECF No. 12 at 44-45. The court declines to do so, for the
following reasons.
As the Claims Court noted thirty-five years ago, this court has no statutory grant
of pendent jurisdiction. ATL, 4 Cl. Ct. at 676. Thirty years ago, the Claims Court
observed that no case had been found where our predecessor courts exercised pendent
jurisdiction. Kennedy, 19 Cl. Ct. at 76. Today, according to the court’s research, there is
still no statutory grant of jurisdiction, or binding precedent, that permits this court to
assert pendent jurisdiction over claims chiefly involving state law.
The Court of Claims, the predecessor court whose decisions are binding here,
described the role of pendent jurisdiction in this forum as “uncertain.” Lockridge v.
United States, 218 Ct. Cl. 687, 689 (1978) (citation omitted). Plaintiff bears the burden
8
of establishing jurisdiction over its state law claims. Reynolds, 846 F.2d at 748 (citations
omitted). Because the validity of the exercise of pendent jurisdiction by this court has not
been established, plaintiff has not satisfied the court that it may exercise subject matter
jurisdiction over the state law claims in Counts VII-IX of the complaint. 3
Even if the court were convinced that it could assert pendent jurisdiction over
some state law claims, this case does not provide an appropriate opportunity for such an
undertaking. First, this case is distinguishable from Trek Leasing, where an ownership
issue needed to be resolved before a copyright claim, within this court’s jurisdiction,
could be decided. 62 Fed. Cl. at 677-83. Second, the Trek Leasing court did not address,
as would be relevant to the instant case, claims that the United States itself had violated
the laws of a state, or that the federal government’s use of offsets could be voided under
state law. Rather, in Trek Leasing, an ownership dispute between private parties, which
involved state law, was the subject of the court’s inquiry. Id.; see also Vermont Yankee
Nuclear Power Corp. v. United States, 84 Fed. Cl. 339, 342 (2008) (asserting pendent
jurisdiction to decide which of two entities owned certain claims against the United
States). Thus, the differences between this case and Trek Leasing counsel against the
exercise of pendent jurisdiction here. See Liberty Ammunition, 101 Fed. Cl. at 592
(distinguishing the state law claim in that case from the state law issue in Trek Leasing,
and declining to exercise pendent jurisdiction over the plaintiff’s state law claim).
Further, the court is mindful of the concerns about pendent jurisdiction expressed
in the Kennedy opinion. 19 Cl. Ct. at 76. In that case, the court was reluctant to opine
on matters of state law, which were beyond its expertise, because this court might
misinterpret state law and prevent the fair and consistent application of such law. Id.
Here, similarly, the court has little familiarity with the litigation and adjudication of
claims founded on South Carolina’s Liquidation Act. Informed by Kennedy, the court
declines to rule on the state law claims that are identified in Counts VII-IX of the
complaint.
3
Defendant has argued that the United States has not waived its sovereign immunity so as
to permit a South Carolina state court to compel HHS/CMS to comply with South Carolina laws.
ECF No. 11 at 29 & n.30. Sovereign immunity may also serve as a bar to the exercise of
pendent jurisdiction. See Ware v. United States, 626 F.2d 1278, 1287 (5th Cir. 1980) (stating
that “‘(t)his court cannot, by using the judge-made doctrine of pendent jurisdiction waive the
immunity of the United States where Congress, [the] constitutional guardian of this immunity,
has declined to do so’” (quoting Sanborn v. United States, 453 F. Supp. 651, 655 (E.D. Cal.
1977)). Because plaintiffs have not alleged that the United States has waived its sovereign
immunity with respect to the state law claims in Counts VII-IX of the complaint, the rule stated
in Ware would also counsel against the exercise of pendent jurisdiction here.
9
Finally, and perhaps most importantly, the factual and legal bases of the state law
claims presented in Counts VII-IX of the complaint are also included in the remaining
counts of plaintiffs’ complaint. If plaintiffs’ arguments regarding the relationship
between the ACA, contract provisions, property interests, and state insolvency law
eventually prevail in this suit, any violations of the state law code sections cited in Counts
VII-IX of the complaint may inform plaintiffs’ monetary recovery. Because the
remaining counts in the complaint also rely on and reference the code sections and
analysis provided in Counts VII-IX, 4 there will be no injury to “judicial economy,
convenience and fairness,” Kennedy, 19 Cl. Ct. at 76, in the dismissal now, under RCFC
12(b)(1), of the claims chiefly involving state law that are set forth in Counts VII-IX of
the complaint.
For these reasons, defendant’s motion to dismiss is GRANTED in part as to
Counts VII, VIII, and IX of plaintiffs’ complaint.
B. Whether the Remaining Counts of the Complaint, Counts I-VI, and Count
X, Should Be Stayed
In the briefing currently before the court, the parties rely extensively on two
companion opinions issued on the same day by the United States Court of Appeals for the
Federal Circuit: Land of Lincoln Mutual Health Insurance Co. v. United States, 892 F.3d
1184 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2744 (U.S. June 24, 2019) (No. 18-1038),
and Moda Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018), cert.
granted, 139 S. Ct. 2743 (U.S. June 24, 2019) (No. 18-1028). When the parties reference
the holdings of Land of Lincoln and Moda, they do so, most specifically, in reference to
plaintiffs’ claims in Count III, Count V, and Count X of the complaint. See ECF No. 11
at 31-32, 34, 43-44; ECF No. 12 at 35-36, 38 n.14, 48 & n.16; ECF No. 13 at 11, 15 n.10.
However, because the decisions in Land of Lincoln and Moda are binding precedent
discussing contract and takings claims brought by health insurers asserting claims
founded on the ACA, these two decisions are, in the court’s view, relevant to all of the
claims in this suit that are within this court’s jurisdiction.
There is substantial factual overlap in the operative facts for each of the ten counts
asserted in the complaint, and the amount of the monetary relief requested for each of the
ten counts is identical. The parties’ briefing repeatedly acknowledges the commonalities
4
For example, Count II of the complaint references the South Carolina code sections that
are alleged to have been violated in the claims presented in Counts VII and VIII. Compare ECF
No. 1 at 25, with id. at 35-37. Similarly, the references in Count II of the complaint to
HHS/CMS “acting as an insider” and acting “contrary to South Carolina insolvency law” are
clearly meant to evoke the right to undo “insider preferences made voidable by the Liquidation
Act,” as presented in the claim found in Count IX of the complaint. Compare id. at 25, with id.
at 37.
10
that link the various counts in the complaint. Plaintiffs, for example, clearly label Counts
III-VI as their “contract claims.” ECF No. 12 at 34. Defendant notes that these four
contract claims, the takings claim (Count X), and the statutory/regulatory claims (Counts
I-II) are all challenges to the offsets exercised by HHS/CMS. ECF No. 13 at 6. The
holdings in Land of Lincoln and Moda are relevant to each of these counts in the
complaint because plaintiffs’ legal theories founded on statute, regulation, contract, and
the Fifth Amendment are intertwined and largely inseparable.
The Supreme Court will consider whether the holdings in Land of Lincoln and
Moda are correct; the Court granted certiorari on June 24, 2019. This development
occurred after the parties had completed their briefing of defendant’s motion to dismiss.
Numerous cases before this court are now stayed pending the Supreme Court’s review of
Land of Lincoln and Moda. 5
Defendant’s assertion that the Land of Lincoln and Moda decisions bind this court
was made before the Supreme Court granted certiorari. ECF No. 13 at 15 n.10. The
government is correct, of course, that these Federal Circuit decisions constitute binding
precedent. E.g., Crowley v. United States, 398 F.3d 1329, 1335 (Fed. Cir. 2005). To
conserve the parties’ resources, however, this court may stay proceedings to avoid trying
the same case twice. See, e.g., Sam v. United States, 682 F.2d 925, 929 (Ct. Cl. 1982)
(staying that case once the Supreme Court granted certiorari to review pay claims of
similarly-situated individuals); Lower Brule Sioux Tribe v. United States, 102 Fed. Cl.
421, 423 (2011) (continuing the stay in that case after the Supreme Court granted
certiorari to review a question of law that would be dispositive in the matter); Coast Fed.
Bank, FSB v. United States, 49 Fed. Cl. 11, 15 (2001) (granting a stay pending an
interlocutory appeal because “[t]rying the case under one set of assumptions, then
retrying it under a different set of assumptions due to a reversal on appeal, would be
inconsistent with judicial economy”).
Guidance from the Supreme Court, once Land of Lincoln and Moda have been
decided, will aid in the resolution of defendant’s challenge to Counts I-VI and Count X of
the complaint. Further, given the parties’ reliance on the Federal Circuit’s decisions in
Land of Lincoln and Moda in their briefing, moving forward with this litigation before
such guidance has been received is not a judicious use of either the parties’ or the court’s
resources. The court concludes, therefore, that it is appropriate to stay this litigation for
the delimited period necessary to allow the Supreme Court to speak to the law relevant to
plaintiffs’ claims.
5
These cases are member cases consolidated for the purposes of briefing and oral
argument under the lead case Maine Community Health Options v. United States, 729 F. App’x
939 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2743 (U.S. June 24, 2019) (No. 18-1023).
11
Defendant’s motion to dismiss, therefore, is DENIED in part, as premature,
regarding the remaining counts in plaintiffs’ complaint. The court STAYS the remaining
claims in this litigation, namely, Counts I-VI and Count X of plaintiffs’ complaint,
pending the Supreme Court’s clarification of binding precedent.
IV. Conclusion
For the reasons stated in this opinion, plaintiffs’ state law claims cannot be
litigated in this court. As to the remaining claims in the complaint, defendant’s challenge
to those claims must await the Supreme Court’s decisions in Land of Lincoln and Moda.
Accordingly,
(1) Defendant’s motion to dismiss, ECF No. 11, is GRANTED in part, as to
Counts VII, VIII, and IX, and DENIED in part, as premature, in all other
aspects;
(2) As there is no just reason for delay, pursuant to RCFC 54(b), the clerk’s
office is directed to ENTER judgment DISMISSING Counts VII, VIII,
and IX of plaintiffs’ complaint for lack of subject matter jurisdiction,
without prejudice;
(3) The clerk’s office is directed to STAY this matter until further order of the
court; and
(4) Within forty-five days of the issuance of a decision by the Supreme Court
of the United States in the matters of Land of Lincoln Mutual Health
Insurance Co. v. United States, 892 F.3d 1184 (Fed. Cir. 2018), cert.
granted, 139 S. Ct. 2744 (U.S. June 24, 2019) (No. 18-1038), and Moda
Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018), cert.
granted, 139 S. Ct. 2743 (U.S. June 24, 2019) (No. 18-1028), consolidated
under Maine Community Health Options v. United States, 729 F. App’x
939 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2743 (U.S. June 24, 2019)
(No. 18-1023), the parties are directed to FILE a joint status report
recommending a schedule for further proceedings in this case.
IT IS SO ORDERED.
s/Patricia E. Campbell-Smith
PATRICIA E. CAMPBELL-SMITH
Judge
12