Veneruso Ex Rel. Community Choice Health Plan of Westchester, Inc. v. Mount Vernon Neighborhood Health Center

13-1572-cv
Veneruso v. Mount Vernon Neighborhood Health Center
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 6th day of May, two thousand fourteen.
PRESENT: BARRINGTON D. PARKER,
GERARD E. LYNCH,
CHRISTOPHER F. DRONEY,
Circuit Judges.
———————————————————————
JAMES J. VENERUSO, as Temporary Receiver for
Community Choice Health Plan of Westchester, Inc.,
Plaintiff -
Counter-Defendant -
Appellee,
v. No. 13-1572-cv
MOUNT VERNON NEIGHBORHOOD
HEALTH CENTER,
Defendant -
Counter-Claimant,
Appellant.
———————————————————————
FOR APPELLANT: James L. Feldesman, Feldesman Tucker Leifer
Fidell LLP, Washington, DC (Matthew S.
Freedus, Feldesman Tucker Leifer Fidell LLP,
Washington, DC, David A. Koenigsberg, Menz
Bonner Komar & Koenigsberg, New York, New
York, on the brief).
FOR APPELLEE: Michael G. Berger (Adam W. Waite, of counsel)
Law Offices of Michael G. Berger, New York,
New York.
Appeal from the United States District Court for the Southern District of New
York (Kenneth M. Karas, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED.
Appellant Mount Vernon Neighborhood Health Center (“Mount Vernon”) appeals
from the opinion and order of the district court for the Southern District of New York
(Karas, J.) dated March 22, 2013, remanding this action to state court for lack of subject
matter jurisdiction. We assume the parties’ familiarity with the facts and record of prior
proceedings, which we reference only as necessary to explain our decision to affirm.
Mount Vernon, a New York not-for-profit corporation, entered into a Joint
Venture Agreement with a nonparty medical center to establish and operate Community
Choice Health Plan of Westchester (“CCHP”). CCHP was a New York not-for-profit
corporation that provided comprehensive health services on a pre-paid basis to an
enrolled population made up primarily of Medicaid recipients. Mount Vernon is also a
federal grant recipient under the Public Health Service Act (“Section 330 grantee”). 42
U.S.C. § 254b. The Act provides grants to health centers that meet certain requirements,
including a requirement that the center provide specified health services to a medically
underserved population. 42 U.S.C. § 254b(a)(1). Around 1997, CCHP entered a
2
Medicaid managed care contract with New York that was approved by the federal
government pursuant to 42 U.S.C. § 1396b(m)(2)(G) in connection with the federal
Medicaid program, which provides federal financial assistance to States participating in
the program. See generally Three Lower Counties Cmty. Health Servs., Inc. v. Maryland,
498 F.3d 294, 297-300 (4th Cir. 2007) (describing the federal Medicaid program and its
interaction with the Public Health Services Act). A condition of the contract’s approval
was that CCHP be primarily owned by Section 330 grantees, like Mount Vernon. J.
Appx. 99.
CCHP operated a pre-paid comprehensive health services plan until December
2007, when the New York State Department of Health directed it to terminate operations
and commence dissolution proceedings. In the dissolution proceeding, the Attorney
General of the State of New York took the position that certain payments made by CCHP
to Mount Vernon between 2003 and 2005 totaling $987,000 (the “Surplus Distributions”)
violated section 515(a) of the New York Not-for-Profit Corporation Law. That provision
prohibits a not-for-profit corporation from “pay[ing] dividends or distribut[ing] any part
of its income or profit to its members, directors, or officers.” N.Y. Not-For-Profit Corp.
L. § 515(a).
On September 14, 2009, after Mount Vernon declined to return the Surplus
Distributions to CCHP, Appellee James Veneruso, the temporary receiver for CCHP,
appointed in connection with the dissolution proceeding (the “Receiver”), initiated an
action in New York Supreme Court, asserting three causes of action: (1) declaratory
3
judgment that the Surplus Distributions were unlawful; (2) unjust enrichment; and (3)
money had and received. Mount Vernon removed the action to the United States District
Court for the Southern District of New York, invoking a number of grounds for removal,
including 28 U.S.C. § 1442. On March 22, 2014, the district court granted the Receiver’s
motion to remand the action to state court for lack of subject matter jurisdiction.
On appeal, Mount Vernon contends that removal was proper under either 28
U.S.C. § 1442(a)(1), because it acted under a federal officer in receiving the Surplus
Distributions, or 28 U.S.C. § 1442(a)(2), because it derived title to the funds from a
federal officer. For reasons described below, we conclude that neither section justifies
removal of this action and we affirm the decision of the district court.
I. Appellate Jurisdiction
“The authority of appellate courts to review district-court orders remanding
removed cases to state court is substantially limited by statute.” Powerex Corp. v. Reliant
Energy Servs., Inc., 551 U.S. 224, 229 (2007); see 28 U.S.C. § 1447(d).1 Ordinarily, the
courts of appeals lack jurisdiction to review a district court’s decision to remand a case
for lack of subject matter jurisdiction. See Thermtron Prods., Inc. v. Hermansdorfer, 423
U.S. 336, 345-46 (1976).
The plain language of § 1447(d), however, exempts from this general rule appeals
in cases removed pursuant to § 1442. The Receiver argues that, notwithstanding that
1
That statute provides that “[a]n order remanding a case to the State court from
which it was removed is not reviewable on appeal or otherwise, except that an order
remanding a case to the State court from which it was removed pursuant to section 1442
. . . of this title shall be reviewable by appeal or otherwise.”
4
Mount Vernon sought to remove this case pursuant to § 1442, the Court lacks jurisdiction
to review the district court’s remand order because appellate review is available only
where there is a colorable or non-frivolous basis for removal under that statute. While we
agree that a removing defendant cannot create appellate jurisdiction through mere citation
to § 1442, and while we conclude that this case was not properly removed pursuant to that
section, we do not believe this case presents the kind of bare or frivolous invocation that
would require us to dismiss the appeal for lack of appellate jurisdiction. Accordingly, we
proceed to consider whether this action was properly removed pursuant to § 1442. See
Shapiro v. Logistec USA, Inc., 412 F.3d 307, 314-15 (2d Cir. 2005) (“[W]e review the
district court’s remand order by direct appeal because our ability to entertain the appeal is
not barred here by section 1447(d).”).
II. Removal Under 28 U.S.C. § 1442(a)(1)
The removing defendant bears the burden of demonstrating that removal of the
action is proper. United Food & Comm. Workers Union v. CenterMark Props. Meriden
Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994). Pursuant to § 1442(a)(1), a defendant in a
civil action filed in state court may remove the action to federal court if the defendant is
“[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,” and the action against the
defendant is “for or relat[es] to any act under color of such office.” 28 U.S.C.
§ 1442(a)(1); see also Watson v. Philip Morris Co., 551 U.S. 142, 145 (2007); Issacson v.
Dow Chem. Co., 517 F.3d 129, 135 (2d Cir. 2008).
5
When the removing defendant is not the United States, an agency of the United
States, or a federal officer – and Mount Vernon concedes it is none of these things2 – it
must satisfy a three-pronged test to properly effect removal under § 1442(a)(1):
First, it must show that it is a “person” within the meaning of
the statute. Second, it must establish that it was “acting
under” a federal officer, which subsumes the existence of a
“causal connection” between the charged conduct and
asserted official authority. Finally, the defendant must raise a
colorable federal defense.
In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 124 (2d Cir. 2007)
(“In re MTBE Prods. Liab. Litig.”) (internal quotation marks and citation omitted); see
also Issacson, 517 F.3d at 135. “Critical under the statute is to what extent defendants
acted under federal direction at the time they were engaged in conduct now being sued
upon.” In re MTBE Prods. Liab. Litig., 488 F.3d at 124-25 (internal quotation marks
omitted). Although the words “acting under” are to be liberally construed, they are not
limitless. Watson, 551 U.S. at 147. In order to establish that it is “acting under” a federal
officer, the private party must do more than show that it complies with highly detailed
federal regulations, or functions under the extensive supervision or monitoring of the
federal government. “A private firm’s compliance (or noncompliance) with federal laws,
2
In the district court, Mount Vernon argued that it was an agency of the United
States, see Veneruso v. Mount Vernon Neighborhood Health Ctr., 933 F. Supp. 2d 613,
631 (S.D.N.Y. 2013), but it does not press this argument on appeal. Accordingly, we
need not address it. See Schaefer v. Town of Victor, 457 F.3d 188, 208 n.24 (2d Cir.
2006) (“[A]n argument not raised on appeal is deemed abandoned and lost, and . . . a
court of appeals will not consider the argument unless it has reason to believe that
manifest injustice would result otherwise.” (internal quotation marks omitted)).
6
rules, and regulations does not by itself fall within the scope of the statutory phrase
‘acting under’ a federal ‘official.’ And that is so even if the regulation is highly detailed
and even if the private firm’s activities are highly supervised and monitored.” Id. at 153.
Rather, it must demonstrate that the assistance it provides to a federal officer “goes
beyond simple compliance with the law and helps officers fulfill other basic
governmental tasks.” Id.In the instant case, Mount Vernon has failed to demonstrate that it was acting
under the direction of a federal officer when it received Surplus Distributions from
CCHP. To be sure, as a federal grant recipient, Mount Vernon is subject to a host of
federal requirements and regulations pertaining to the health services it provides, and the
manner in which it expends its funds. Relying on this body of federal regulation, Mount
Vernon insists that “it was acting under the authority and auspices of [the Department of
Health and Human Services] and consistently with a comprehensive statutory scheme
intertwining the Medicaid and Section 330 programs” when it received Surplus
Distributions from CCHP. Appellant’s Br. at 16. It is well established, however, that
“[r]emoval will not be proper where a private party establishes only that the acts
complained of were performed under the ‘general auspices’ of a federal officer.” In re
MTBE Prods. Liab. Litig., 488 F.3d at 125. Moreover, Mount Vernon does not and
cannot contend that any of the many federal regulations to which it is subject directed it to
receive (or to cause CCHP to make) the Surplus Distributions that form the basis for the
Receiver’s suit.
7
As a result, it is plain that the requisite “causal connection” between the acts for
which Mount Vernon is being sued and the asserted federal authority is lacking.
Compare Issacson, 517 F.3d at 137 (finding that non-governmental corporate defendants
demonstrated that “the acts for which they are being sued – here, the production of dioxin
in Agent Orange – occurred because of what they were asked to do by the Government”),
with In re MTBE Prods. Liab. Litig., 488 F.3d at 126-30 (concluding that defendants
were not acting under direction of federal officer when they blended MTBE into their
gasoline because the Clean Air Act and its regulations did not require the use of MTBE,
and the mere fact that the EPA “may have expected that the defendants would use
MTBE” was insufficient). Because Mount Vernon has failed to demonstrate that it acted
under a federal officer in receiving the Surplus Distributions, it was not entitled to remove
the Receiver’s action pursuant to § 1442(a)(1).
III. Removal Under 28 U.S.C. § 1442(a)(2)
Under the seldom-invoked federal-title-dispute removal provision, a property
holder whose title is derived from any federal officer is permitted to remove a state court
action brought against it to federal court where such action affects the validity of any law
of the United States. 28 U.S.C. § 1442(a)(2). Mount Vernon contends that removal is
proper under § 1442(a)(2) because it obtained the Surplus Distributions as an indirect
result of the decision of the Regional Administrator for the Centers for Medicare &
Medicaid Services to approve CCHP’s Medicaid managed care contract pursuant to
§ 1396b(m)(2)(G).
8
We need not decide whether Mount Vernon derived title to the Surplus
Distributions from a federal officer because even if it did, the Receiver’s suit plainly does
not challenge the validity of any federal law. Instead, the Receiver merely contends that
the various federal statutes and regulations Mount Vernon has identified do not provide a
defense to the Receiver’s claims that the Surplus Distributions violated New York law.
See Town of Stratford v. City of Bridgeport, 434 F. Supp. 712, 715 (D. Conn. 1977)
(holding that defendant could not remove under § 1442(a)(2) where plaintiff’s suit did
“not attack the validity of any [federal law]”). In sum, Mount Vernon has also failed to
demonstrate that removal of this action is appropriate under § 1442(a)(2).
Accordingly, the order of the district court remanding this action to state court is
AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
9