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Goncalves v. Rady Children's Hospital San Diego

United States Court of Appeals, Ninth Circuit

August 2, 2017

Lucas Goncalves, a minor, by and through his Guardian Ad Litem, Tony Goncalves, Plaintiff-Appellee,
v.
Rady Children's Hospital San Diego; Does, 1 through 30, Inclusive, Defendants, and Blue Cross & Blue Shield of Massachusetts; Anthem Blue Cross Blue Shield of New Hampshire; Blue Cross of California, Movants-Appellants.

          Argued and Submitted November 7, 2016 Pasadena, California

         Appeal from the United States District Court for the Southern District of California Gonzalo P. Curiel, District Judge, Presiding D.C. No. 3:14-cv-01774-GPC-BGS

          Anthony F. Shelley (argued) and Dawn E. Murphy-Johnson, Miller & Chevalier Chartered, Washington, D.C., for Movants-Appellants.

          Victoria E. Fuller (argued) and David Niddrie, Niddrie Addams Fuller LLP, San Diego, California; Amy R. Martel and Cynthia R. Chihak, Cynthia Chihak & Associates, San Diego, California; for Plaintiff-Appellee.

          Steven M. Bronson, The Bronson Firm APC, San Diego, California; David M. Arbogast, Arbogast Law, Playa Del Rey, California; for Amicus Curiae Consumer Attorneys of California.

          Before: Kim McLane Wardlaw and Jay S. Bybee, Circuit Judges, and Robert Holmes Bell, [*] Senior District Judge.

         SUMMARY[**]

         Federal Court Jurisdiction

         The panel reversed the district court's order remanding to state court an action that had been removed to federal court under the federal officer removal statute.

         Insurance companies asserted a lien against the plaintiff's putative future settlement proceeds in an ongoing California state court medical negligence action. The plaintiff moved to expunge the lien, which was asserted pursuant to a subrogation clause in a Federal Employee Health Benefit Act health insurance plan that the insurance companies administered.

         The panel held that the insurance companies properly removed the action to federal court under the federal officer removal statute, 28 U.S.C. § 1442(a)(1). The panel concluded that the insurance companies were a "person" within the meaning of the statute. Agreeing with the Eighth Circuit, the panel held that the insurance companies' actions seeking subrogation from the plaintiff by pursuing a lien were "actions under" a federal officer because the insurance companies administered the FEHBA health insurance plan on behalf of the Office of Personnel Management. The insurance companies' actions were causally connected to the dispute over the validity of the lien. In addition, the insurance companies had a colorable federal defense to the plaintiff's motion to expunge their lien-the defense that California law is preempted by FEHBA's express preemption provision. Finally, the insurance companies' motion to expunge the lien was a "civil action" within the meaning of the statute.

         The panel held that the probate exception to federal jurisdiction did not apply. Agreeing with other circuits, the panel held that following Marshall v. Marshall, 547 U.S. 293 (2006), the probate exception does not apply unless a federal court is endeavoring to probate or annul a will, administer a decedent's estate, or assume in rem jurisdiction over property that is in the custody of a probate court.

         The panel held that the prior exclusive jurisdiction doctrine, prohibiting federal and state courts from concurrently exercising jurisdiction over the same res, also did not apply.

         Dissenting, Judge Wardlaw wrote that she would affirm the district court's remand order on the ground that the prior exclusive jurisdiction doctrine barred the exercise of federal jurisdiction. She wrote that both the state and the federal actions were at least quasi in rem because the plaintiff's settlement funds formed the basis of both actions.

          OPINION

          BELL, SENIOR DISTRICT JUDGE

         Blue Cross Blue Shield of Massachusetts, Anthem Blue Cross Blue Shield of New Hampshire, and Blue Cross of California (collectively, "the Blues") asserted a lien against Lucas Goncalves's putative future settlement proceeds in an ongoing medical negligence action in California Superior Court to satisfy a subrogation clause in a Federal Employee Health Benefit Act ("FEHBA") health insurance plan that the Blues administer. When Goncalves asked the Superior Court to expunge the lien, the Blues removed the action to federal court under the federal officer removal statute. See 28 U.S.C. § 1442(a)(1). The district court held that the probate exception precluded federal court jurisdiction and remanded the action back to state court.

         The sole issue on appeal is whether Goncalves's motion to expunge the Blues' subrogation lien is properly in state or federal court. We have jurisdiction to review the remand order under 28 U.S.C. § 1447(d), see Cabalce v. Thomas E. Blanchard & Assocs., Inc., 797 F.3d 720, 727 n.1 (9th Cir. 2015), and, holding that the action was properly in federal court, we reverse.

         I

         Shortly after he was born in October 2007, Lucas Goncalves was transferred to Rady Children's Hospital of San Diego. While receiving treatment at Rady Children's Hospital, Goncalves suffered internal injuries from alleged medical negligence.

         Goncalves was covered by his father's FEHBA health insurance plan administered by the Blues on behalf of the U.S. Office of Personnel Management ("OPM"). Pursuant to the plan's coverage, the Blues paid $459, 483.57 for Goncalves's medical treatment in connection with his alleged negligently afflicted injuries from Rady Children's Hospital. The plan has a subrogation clause, [1] allowing the Blues to recover from Goncalves any monies he receives to reimburse the Blues for any benefits paid under the plan. In relevant part, the plan states:

(a) The [Blues'] subrogation rights, procedures and policies, including recovery rights, shall be in accordance with the provisions of the agreed upon brochure text . . . . [The Blues], in [their] discretion, shall have the right to file suit in federal court to enforce those rights.
. . . .
(c). . . The obligation of the [Blues] to recover amounts through subrogation is limited to making a reasonable effort to seek recovery of amounts to which it is entitled to recover in cases which are brought to [their] attention. . . .
(d)The [Blues] may also recover directly from [Goncalves] all amounts received by [Goncalves] by suit, settlement, or otherwise from any third party or its insurer . . . for benefits which have been paid under this contract.
(e) [Goncalves] shall take such action, furnish such information and assistance, and execute such papers as the [Blues] or [their] representatives believe[] are necessary to facilitate enforcement of [their] rights, and shall take no action which would prejudice the interests of the [Blues] to subrogation.
(f) . . . [A]ll Participating Plans shall subrogate under a single, nation-wide policy to ensure equitable and consistent treatment for all Members under the contract.

         In February 2011, Goncalves, through a guardien ad litem, filed a state-court action alleging medical malpractice against Rady Children's Hospital and other defendants. In November 2013, the Blues placed a lien of $459, 483.57 on any funds Goncalves receives from the suit to recover earlier benefits paid by the Blues under the plan. In April 2014, the California Superior Court approved a settlement between Goncalves and the non-Rady Children's Hospital defendants, leaving Rady Children's Hospital as the sole defendant. Sometime in June 2014, Goncalves and Rady Children's Hospital entered into a settlement agreement; because Goncalves is a minor, the California Probate Code requires the Superior Court's approval of any settlement. See, e.g., Cal. Prob. Code §§ 3500(b), 3600; Schultz v. Harney, 33 Cal.Rptr.2d 276, 278 (Ct. App. 1994).

         In July 2014, Goncalves filed a motion in state court to expunge the Blues' lien on the ground that the Blues' "claims of lien are subject to the anti-subrogation provision . . . and are therefore unenforceable" because "FEBHA [sic] does not preempt state anti-subrogation laws." The Blues removed this action under the federal officer removal statute, 28 U.S.C. § 1442(a)(1), to the U.S. District Court for the Southern District of California. Goncalves asked the district court to remand the case to state court on, inter alia, two grounds: (1) the Blues could not remove the case under § 1442(a)(1) and (2), even if removal was otherwise proper, the probate exception barred federal jurisdiction. The district court held that the Blues had acted pursuant to a federal officer's direction and could remove the case pursuant to § 1442(a)(1). The district court, however, agreed with Goncalves that any exercise of federal jurisdiction would interfere with the probate proceedings in California. The district court remanded the case back to state court.

         The Blues filed this appeal, arguing that the district court erred because the probate exception did not bar federal jurisdiction. In response, Goncalves continues to argue that the probate exception bars federal jurisdiction, but argues alternatively that even if it does not, the action was not properly removed under § 1442(a)(1). We ordered supplemental briefing as to whether the prior exclusive jurisdiction doctrine barred federal court jurisdiction; the Blues contend that it does not, and Goncalves contends that it does.

         II

         We address first whether the Blues properly removed the action to federal court under 28 U.S.C. § 1442(a)(1). We then address whether either the probate exception or the prior exclusive jurisdiction doctrine bars the exercise of federal jurisdiction.

         A. The Action Is Removable Under the Federal Officer Removal Statute

         The federal officer removal statute provides, in relevant part:

(a) A civil action . . . that is commenced in a State court and that is against or directed to [the following] may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
(1) The 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, in an official or individual capacity, for or relating to any act under color of such office . . . .

28 U.S.C. § 1442 (emphasis added). The statute defines a "civil action" to "include any proceeding (whether or not ancillary to another proceeding) to the extent that in such proceeding a judicial order . . . is sought or issued." Id. § 1442(d)(1).

         The purpose of the federal officer removal statute is "to ensure a federal forum in any case where a federal official is entitled to raise a defense arising out of his duties." Arizona v. Manypenny, 451 U.S. 232, 241 (1981). The right of removal is "absolute for conduct performed under color of federal office, " and the "policy favoring removal 'should not be frustrated by a narrow, grudging interpretation of § 1442(a)(1).'" Id. at 242 (quoting Willingham v. Morgan, 395 U.S. 402, 407 (1969)).

         An entity seeking removal under § 1442(a)(1) bears the burden of showing "that (a) it is a 'person' within the meaning of the statute; (b) there is a causal nexus between its actions, taken pursuant to a federal officer's directions, and plaintiff's claims; and (c) it can assert a 'colorable federal defense.'" Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1251 (9th Cir. 2006) (quoting Jefferson Cty. v. Acker, 527 U.S. 423, 431 (1999)). We address each of these three prongs in turn, followed by another consideration raised by the rare procedural posture of this action. Throughout our analysis, we pay heed to our duty to "interpret Section 1442 broadly in favor of removal." Id. at 1252.

         1. "Person" under § 1442(a)(1)

         The Blues and Goncalves do not dispute that the Blues are a "person" within the meaning of § 1442(a)(1). Nonetheless, we must assure ourselves of our own jurisdiction. The courts of appeals have uniformly held that corporations are "person[s]" under § 1442(a)(1). See In re Commonwealth's Motion to Appoint Counsel Against or Directed to Def. Ass'n of Phila., 790 F.3d 457, 467-68 (3d Cir. 2015) (holding that § 1442(a)(1)'s use of the term "person" includes corporations); Bennett v. MIS Corp., 607 F.3d 1076, 1085 (6th Cir. 2010) (same); Isaacson v. Dow Chem. Co., 517 F.3d 129, 135-36 (2d Cir. 2008) (same). We agree and, therefore, the Blues have satisfied the first requirement for removal under § 1442(a)(1). See 1 U.S.C. § 1 (defining "person" to include, unless the context indicates otherwise, "corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals"); see also Watson v. Phillip Morris Cos., 551 U.S. 142, 152-54, 157 (2007) (using the term "private person" and "company" interchangeably in the context of ยง 1442(a)(1), but holding that the defendant-company could not remove the ...


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