Court Opinion

ID: 9380697
Source: CourtListenerOpinion
Date Created: 2023-03-21 00:00:24.745566+00
Date Added: 2024-06-11T17:17:26.804639
License: Public Domain

Case: 22-10414         Document: 00516682566             Page: 1      Date Filed: 03/20/2023

              United States Court of Appeals
                   for the Fifth Circuit                                         United States Court of Appeals
                                                                                          Fifth Circuit

                                                                                         FILED
                                                                                      March 20, 2023
                                        No. 22-10414
                                                                                      Lyle W. Cayce
                                                                                           Clerk
   Trinity Home Dialysis, Incorporated,

                                                                    Plaintiff—Appellant,

                                             versus

   WellMed Networks, Incorporated,

                                                                   Defendant—Appellee.

                      Appeal from the United States District Court
                          for the Northern District of Texas
                               USDC No. 3:20-CV-2112

   Before Elrod, Haynes, and Willett, Circuit Judges.
   Per Curiam:*
          Trinity Home Dialysis sued WellMed Networks in state court,
   alleging that WellMed failed to reimburse Trinity for services it provided to
   Medicare enrollees. WellMed removed the action to federal court, invoking
   federal officer jurisdiction, then moved to dismiss under Federal Rule of Civil
   Procedure 12(b)(1), urging that Trinity failed to exhaust its administrative
   remedies prior to filing suit. Trinity moved to remand. The district court

          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
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   denied the remand motion and granted the motion to dismiss. For the
   reasons discussed below, we AFFIRM.
                               I.   Factual Background
            This case involves the Medicare Act and its supporting regulations,
   so, we begin with an overview of several relevant provisions. The Centers
   for Medicare and Medicaid Services (“CMS”) is a branch of the Department
   of Health and Human Services responsible for administering Medicare
   benefits. See 42 U.S.C. § 1395w-21–29. Under Medicare Part C, CMS may
   delegate its statutory obligation to provide Medicare benefits to private
   sector insurers, called Medicare Advantage Organizations (“MA
   Organizations”). Id. CMS pays the MA Organizations for each enrollee they
   cover, and the Organizations then assume all financial risk for servicing those
   enrollees. See id. § 1395w-24–25. MA Organizations may either directly
   provide benefits to enrollees, or they may subcontract that duty to third-party
   providers. See id. § 1395w-22(d)(1); 42 C.F.R. § 422.214.
            MA Organizations must make “determinations” regarding which
   treatments the Medicare Act covers, which treatments are not covered, and
   at what rate certain claims may be reimbursed.             42 U.S.C. § 1395w-
   22(g)(1)(A). These decisions are known as “organization determinations.”
   Id.     If an entity wishes to challenge any aspect of an organization
   determination, it must first exhaust its administrative remedies by following
   the process prescribed by the Medicare Act and its implementing regulations.
   See id. § 1395w-22(g); 42 C.F.R. §§ 422.560–422.622. An entity may not
   maintain a suit in federal court to challenge an organization determination
   until it has followed that process. See 42 U.S.C. § 405(g); Heckler v. Ringer,
   466 U.S. 602, 617 (2013).
            With this overview in mind, we turn to the entities and claims in this
   case.      CMS contracted with UnitedHealthcare Benefits of Texas

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   (“UnitedHealthcare”).            UnitedHealthcare,     operating   as   an   MA
   Organization, agreed to provide benefits to Medicare enrollees.
   UnitedHealthcare subcontracted a portion of those duties to one if its
   indirect subsidiaries, WellMed.
          Trinity is a provider of in-home kidney dialysis services. From 2014
   to 2019, Trinity provided its services to WellMed’s enrollees. For the first
   two years, WellMed reimbursed Trinity in full. However, from 2016 to 2019,
   WellMed declined to reimburse Trinity, reasoning that the services did not
   qualify for full reimbursement under the Medicare Act. Instead, WellMed
   offered a settlement value based on the rate set by the standard Medicare fee
   schedule. Trinity rejected WellMed’s offer and subsequently filed suit in
   Texas state court, seeking a declaratory judgment and damages for unjust
   enrichment.
          WellMed removed the case to federal court, invoking federal officer
   jurisdiction under 28 U.S.C. § 1442(a), then moved to dismiss under Federal
   Rules of Civil Procedure 12(b)(1) and 12(b)(6). Trinity moved to remand.
   Before ruling on the motions, the district court ordered the parties to engage
   in limited jurisdictional discovery and held a hearing to determine whether it
   had jurisdiction.   The district court then denied the remand motion,
   concluding that removal was proper. However, it granted the Rule 12(b)(1)
   motion because Trinity failed to exhaust its administrative remedies prior to
   filing suit. It accordingly dismissed Trinity’s claims without prejudice, and
   Trinity timely appealed.
                              II.    Standard of Review
          On appeal, Trinity argues that the district court erred by (1) denying
   its remand motion; (2) dismissing its claims under Rule 12(b)(1); and
   (3) ordering jurisdictional discovery. We review the denial of the remand
   motion and the Rule 12(b)(1) dismissal de novo. See Allen v. Walmart Stores,

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   L.L.C., 907 F.3d 170, 182 (5th Cir. 2018) (denial of remand motion); Ernst v.
   Methodist Hosp. Sys., 1 F.4th 333, 337 (5th Cir. 2021) (dismissal for failure to
   exhaust). In reviewing a motion to dismiss, “we must take all of the factual
   allegations in the complaint as true, but we are not bound to accept as true a
   legal conclusion couched as a factual allegation.” Machete Prods., L.L.C. v.
   Page, 809 F.3d 281, 287 (5th Cir. 2015) (quotation omitted). Importantly,
   though, “in examining a Rule 12(b)(1) motion, a district court is empowered
   to find facts as necessary to determine whether it has jurisdiction.” Id.
   Accordingly, in our review, we defer to those factual findings. See id. We
   review the district court’s grant of jurisdictional discovery only for an abuse
   of discretion. See Davila v. United States, 713 F.3d 248, 263–64 (5th Cir.
   2013). We address each of Trinity’s challenges, in turn, below.
                            III.    Motion to Remand
          We begin with the district court’s denial of Trinity’s remand motion.
   The federal officer removal statute permits the United States, its agencies,
   its officers, and “any person acting under that officer” to remove a civil
   action to federal court. 28 U.S.C. § 1442(a)(1); see also Watson v. Philip
   Morris Cos., Inc., 551 U.S. 142, 145 (2007). Unlike other removal statutes,
   federal officer jurisdiction is not “narrow or limited.” Texas v. Kleinert, 855
   F.3d 305, 311 (5th Cir. 2017) (internal quotation marks and citation omitted).
   Accordingly, we review “without a thumb on the remand side of the scale,”
   Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286, 290 (5th Cir. 2020) (en
   banc) (quotation marks omitted), and we “broadly construe[]” the statute
   “in favor of a federal forum,” Williams v. Lockheed Martin Corp., 990 F.3d
   852, 859 (5th Cir. 2021) (quotation omitted).
          To remove under § 1442(a), a removing party must only show that:
   (1) it is a “person” within the meaning of the statute; (2) it has asserted a
   “colorable federal defense”; (3) it acted “pursuant to a federal officer’s

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   directions”; and (4) there is a connection or association between its acts
   under color of federal office and the plaintiff’s claims. Latiolais, 951 F.3d at
   291 (quotation omitted).
          Turning to this case, we analyze whether WellMed satisfies these
   requirements here. At the start, we conclude that WellMed easily meets the
   first two prongs. There is no debate that WellMed is a “person” within the
   meaning of the federal officer statute.             See id. (recognizing that even
   corporate entities can remove under § 1442(a) so long as they are acting
   under guidance of a federal officer or agency). Additionally, (as we discuss
   below) WellMed avers that Trinity failed to exhaust its administrative
   remedies prior to filing suit. This is plainly a colorable, and ultimately
   successful, federal defense.
          The crux of the dispute then is whether WellMed can establish the
   third prong—the “acting under” requirement. WellMed urges that it does
   because it acted pursuant to CMS’s directions. We construe the “acting
   under” requirement broadly. See Watson, 551 U.S. at 147 (recognizing liberal
   nature of “acting under” requirement). Accordingly, WellMed does not
   need to prove that its “conduct was precisely dictated by a federal officer’s
   directive.” St. Charles Surgical Hosp., L.L.C. v. La. Health Serv. & Indem.
   Co., 990 F.3d 447, 454 (5th Cir. 2021). Rather, our analysis focuses on the
   “relationship between the removing party and the relevant federal officer.”
   Id. at 455 (emphasis in original).
          In evaluating that relationship, we are guided by several general
   principles. First, our court has rejected the theory that a removing party
   “acts under” a federal officer merely because it operates in a field that is
   “subject to pervasive federal regulation.” See, e.g., Glenn v. Tyson Foods, Inc.,
   40 F.4th 230, 235 (5th Cir. 2022), cert. denied, No. 22-455, 2023 WL 2123755
   (Feb. 21, 2023) (quotation omitted). Second, a removing party’s mere status

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   as a subcontractor on its own is similarly insufficient to establish the requisite
   relationship. See, e.g., Plaquemines Parish v. Chevron USA, Inc., No. 22-
   30055, 2022 WL 9914869, at *3 (5th Cir. Oct. 17, 2022), cert. denied, No. 22-
   715, 2023 WL 2227757 (Feb. 27, 2023). Rather, there must be something
   “more” to satisfy that relationship. See id.
          For instance, the Supreme Court has instructed that an “unusually
   close” relationship can satisfy the “acting under” requirement if (1) the
   removing party engages in “an effort to assist, or to help carry out, the duties
   or tasks of the federal superior,” and (2) the federal officer exercises
   “subjection, guidance, or control” over the removing party. Watson, 551
   U.S. at 151–52 (emphasis in original).
          With these principles in mind, we consider whether the relationship
   between CMS and WellMed was “unusually close” and therefore sufficient
   to support federal officer jurisdiction here. We conclude that it was. On the
   facts before us, WellMed has demonstrated that it assisted CMS in
   administering Medicare benefits on behalf of the federal government. As
   discussed above, CMS is required to either provide Medicare benefits
   directly to enrollees or to contract with third parties to provide those services
   instead. See 42 U.S.C. § 1395w-21–29. CMS chose the latter option,
   contracting with UnitedHealthcare, and, in turn, UnitedHealthcare then
   subcontracted with WellMed. So, WellMed was performing obligations that
   CMS would have otherwise been required to provide “in the absence of [the]
   contract.” See Watson, 551 U.S. at 154.
          The fact that WellMed was a mere subcontractor and not in direct
   privity of contract with CMS does not undermine that conclusion, in this
   particular case. Rather, WellMed goes a step further in demonstrating that
   “unusually close relationship” by also showing that it was subject to
   extensive “detailed regulation, monitoring, [and] supervision” by the federal

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   government while it was assisting the government in carrying out its delegated
   duties. See id. at 153; see also Cnty. Bd. of Arlington Cnty., Va. v. Express Scripts
   Pharmacy, Inc., 996 F.3d 243, 252–53 (4th Cir. 2021). WellMed does not
   simply rely on an assertion that it was entitled to removal because it
   voluntarily complied with federal regulations. 1 Cf. Tyson Foods, Inc., 40 F.4th
   at 236 (rejecting the argument that acting under requirement was satisfied
   merely because the entity “was subject to heavy regulation”). Instead, it
   cites to specific means by which CMS exercised guidance and control over
   WellMed as it executed its delegated duties: (1) the contract with
   UnitedHealthcare and (2) the Medicare statutory scheme.
           First, the contract between CMS and UnitedHealthcare not only
   expressly contemplated the use of subcontractors; it also required that CMS
   retain supervision and control over subcontractors like WellMed.                      For
   instance, under the contract, CMS retained the rights to audit, inspect, and
   evaluate subcontractors’ accounting records. Additionally, the contract
   included specific requirements for how UnitedHealthcare’s subcontractor

           1
             The relationship here is unlike the relationship between the removing party and
   the federal government in Tyson Foods. 40 F.4th at 230, 235. In that case, Tyson argued
   that it “acted under” the directions of the federal government because the government
   directed it to “continue operations” in order to “ensur[e] continuity of functions critical
   to public health and safety” during the COVID-19 pandemic. Id. at 234–35. In particular,
   Tyson cited to the fact that it worked alongside the federal government “to ensure that on-
   site inspections could continue while mitigating the danger to Tyson employees and
   [federal] inspectors.” Id. Therefore, it averred that it sufficiently “acted under” the
   government. See id.
           We rejected Tyson’s argument, concluding that those facts only “show[ed] that
   Tyson was subject to heavy regulation—not that it was an agent of the federal
   government.” Id. at 235. At bottom, there was nothing demonstrating “any evidence of
   delegated authority or a principal/agent relationship at all.” Id. at 236. But, here, as
   discussed in this section, WellMed sufficiently establishes the evidence of delegated
   authority that was absent in Tyson. See id. at 235–36. Given that delegation, our reasoning
   in Tyson does not extend here.

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   agreements were written and executed. Most importantly, however, the
   contract explicitly provided that subcontractors were required to comply with
   all applicable Medicare laws, regulations, and CMS instructions. Second,
   Part C of the Medicare Act—authorizing CMS to contract out its duties—
   subjects MA Organizations to extensive federal statutes and regulations. See
   generally, e.g., 42 U.S.C. § 1395w-21–28.                Since those provisions also
   specifically contemplate the use of subcontractors, see 42 C.F.R. § 422.504,
   they too extend to WellMed. Therefore, WellMed was subject to CMS’s
   supervision and control via the contract and this detailed statutory and
   regulatory scheme.
           Taken together, these facts illustrate a sufficiently close relationship
   between CMS and WellMed to satisfy the “acting under” prong. Even as a
   subcontractor, WellMed was both carrying out the delegated duties of CMS
   and, “at all times, subject to the federal government’s guidance and
   control.” Express Scripts, 996 F.3d at 253; see also St. Charles Surgical Hosp.,
   990 F.3d at 455. The third requirement is, thus, satisfied. 2
           Finally, under the fourth prong, WellMed must establish a connection
   or association between its acts under color of federal office and Trinity’s
   claims. Latiolais, 951 F.3d at 291. It has also made this showing. Trinity
   seeks to hold WellMed liable for its failure to reimburse Trinity for services
   it provided. But WellMed made this decision based on its determination that
   Trinity’s claims were not eligible for full reimbursement under the Medicare
   Act. WellMed’s discretion to determine whether a claim is covered or

           2
             We note, however, that our holding is limited to the specific facts of this case. We
   do not reach any conclusion as to whether subcontractors in other contexts may satisfy the
   “acting under” requirement. Nor do we express any opinion regarding the requisite
   amount of guidance and control needed generally to confer federal officer jurisdiction. We
   hold only that the specific relationship between CMS and WellMed, based on the record
   before us here, is sufficient.

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   uncovered arises from the authority expressly delegated to it by CMS. See
   42 U.S.C. § 1395w-22(g)(1)(A). Accordingly, the conduct Trinity challenges
   is directly tied to actions WellMed took under color of federal office. See St.
   Charles Surgical Hosp., 990 F.3d at 454.
           Because WellMed has established all four elements of federal officer
   jurisdiction, we conclude that removal was proper. 3 The district court then
   did not err in denying the remand motion.
                                 IV.      Motion to Dismiss
           We next address the district court’s dismissal of Trinity’s claims
   under Rule 12(b)(1). WellMed moved to dismiss, arguing that, while removal
   jurisdiction was proper under § 1442(a), the district court lacks subject
   matter jurisdiction at this time because Trinity failed to exhaust its
   administrative remedies prior to filing suit. We agree.
           As discussed above, the Medicare Act contains an exhaustion
   requirement. If an entity wishes to challenge an organization determination,
   it must first follow the prescribed appeal process. See 42 U.S.C. § 1395w-
   22(g); 42 C.F.R. § 422.622. This administrative process is the “sole avenue

           3
              Trinity argues that our decision in Rencare, Ltd. v. Humana Health Plan of Texas,
   Inc., 395 F.3d 555 (5th Cir. 2004) controls the outcome here. We disagree—Rencare is
   distinguishable on several grounds. Unlike here, the parties in Rencare had an express
   contractual agreement to provide services. Id. at 557. Therefore, the claims necessarily
   implicated matters of state law. See id.; see also Tenet Healthsys. GB v. Care Improvement
   Plus S. Cent. Ins. Co., 875 F.3d 584, 591 (11th Cir. 2017) (“[A] contract provider’s claims
   are determined entirely by reference to the written contract, not the Medicare Act.”
   (emphasis added)). Moreover, Rencare dealt with federal question jurisdiction, 395 F.3d at
   557–58, not federal officer jurisdiction, which is notably broader, see Latiolais, 951 F.3d at
   292. Finally, Rencare’s reasoning was based on the Medicare regulatory framework in
   effect at that time, which has since been replaced by a new framework altering the way MA
   Organizations are paid. See 395 F.3d at 555, 557. Thus, even if Rencare was not factually
   inapposite, it still would not bind our decision—we would still be able to analyze the effect
   of that new regulatory framework on the issues here.

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   for judicial review” of claims “arising under the Medicare Act.” Heckler,
   466 U.S. at 614–15 (internal quotation marks and citation omitted).
   Accordingly, a party may not bring suit in federal court to challenge an
   organization determination until it has exhausted its administrative remedies.
   42 U.S.C. § 405(g); see also Physician Hosps. of Am. v. Sebelius, 691 F.3d 649,
   653 (5th Cir. 2012) (observing that the Medicare Act’s mandatory exhaustion
   requirement “severely restricts the authority of federal courts”).
          Trinity’s claims for failure to reimburse challenge “organization
   determinations” and thus clearly arise under the Medicare Act. See Heckler,
   466 U.S. at 615 (concluding that a suit seeking declaration regarding whether
   certain claims were reimbursable “arose under” the Medicare Act); see also
   Tenet Healthsys. GB v. Care Improvement Plus S. Cent. Ins. Co., 875 F.3d 584,
   590 (11th Cir. 2017) (observing that suits related to organization
   determinations arise under the Medicare Act); Nichole Med. Equip. & Supply,
   Inc. v. TriCenturion, Inc., 694 F.3d 340, 347–49 (3d Cir. 2012). Therefore, as
   the party carrying the burden at the Rule 12(b)(1) stage, see Physician Hosps.
   of Am., 691 F.3d at 652, Trinity was required to offer proof of its compliance
   with the exhaustion requirement. Yet it wholly failed to do so. Therefore,
   the district court did not err in dismissing Trinity’s claims without prejudice.
                          V.     Jurisdictional Discovery
          Finally, although not entirely clear, Trinity seems to argue that the
   district court abused its discretion in ordering the parties to engage in limited
   jurisdictional discovery. We disagree. Rather, WellMed “ma[de] a factual
   attack on [the] court’s subject-matter jurisdiction.” Arena v. Graybar Elec.
   Co., 669 F.3d 214, 223 (5th Cir. 2012) (internal citation and quotation
   omitted). So, the district court was “free to weigh the evidence and satisfy
   itself as to the existence of its power to hear the case.” Id. (quotation
   omitted).

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           In similar situations, we have permitted district courts to order
   jurisdictional discovery, see Freeman v. United States, 556 F.3d 326, 342 (5th
   Cir. 2009), and to consider “the complaint,” the “complaint supplemented
   by the undisputed facts as evidenced in the record,” and also “the court’s
   resolution of disputed facts,” In re FEMA Trailer Formaldehyde Prods. Liab.
   Litig., 668 F.3d 281, 287 (5th Cir. 2012), to determine whether it possessed
   jurisdiction. The district court did just that here. Accordingly, we conclude
   there was no abuse of discretion. See also Machete Prods., 809 F.3d at 287
   (giving deference to factual findings made by district court in order to
   determine jurisdiction).
                                      VI.
           For the aforementioned reasons, we AFFIRM the district court in
   full.

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