By Bill Wichert

Law360 (June 23, 2021, 4:51 PM EDT) -- A Third Circuit panel on Wednesday challenged New Jersey nursing homes seeking to have suits over COVID-19 deaths unfold in federal court on the grounds they acted under the federal government's authority as part of its pandemic response, questioning whether the facilities were merely complying with federal regulations.

During a hearing on their appeal of a district court ruling sending the matters back to state court, counsel for Andover Subacute Rehabilitation Center I and a sister facility argued that the cases were encompassed by the so-called federal officer removal statute, which confers federal jurisdiction over defendants who were "acting under" a federal officer or agency.

Lann G. McIntyre of Lewis Brisbois Bisgaard & Smith LLP, representing the facilities, told the panel that "these nursing homes were acting under and in assistance to the federal government in the manner in which it responded to the pandemic that swept through these nursing homes."

In an apparent reference to the standard set forth in the U.S. Supreme Court's 2007 Watson v. Phillip Morris Companies opinion, U.S. Circuit Judge David J. Porter then asked McIntyre, "What separates your clients' actions from subjection and control versus compliance with ordinary regulation?"

McIntyre noted that the nursing homes were "designated as part of a critical infrastructure in this country to respond as first responders to this national pandemic." She also stressed the federal government's interest in "ensuring that adequate care is provided to this vulnerable population."

But U.S. Circuit Judge Michael A. Chagares interjected and asked McIntyre, "Is there something more in terms of your relationship with the government that would make ... your clients federal officers?"

"Are they just complying [with] regulations like a lot of businesses do?" Judge Chagares added.

That "something more" includes the federal government's recognition early on in the pandemic that "it needed the assistance of nursing homes and health care providers to protect the welfare of vulnerable populations they serve in the national response to the pandemic," McIntyre replied, adding that the government also directed nursing homes and other health care providers to follow certain directives and regulations aimed at combating COVID-19.

But plaintiffs' attorney Neil R. Lapinski of Gordon Fournaris & Mammarella PA later countered that the nursing homes were not entitled to federal officer jurisdiction, saying they "are not doing a job that the federal government would otherwise have to do."

"I think that is the real Watson standard and that is not a standard that the defendants have met here," Lapinski told the panel.

The instant lawsuits were initially filed in New Jersey state court last year by the estates of residents who died from COVID-19 at the nursing homes, alleging that the facilities failed to protect them from the virus. The nursing homes removed the cases to New Jersey federal court and the estates soon asked U.S. District Judge Kevin McNulty to remand the matters.

In siding with the estates, Judge McNulty in August found that federal officer jurisdiction did not apply. He also rejected the nursing homes' additional argument that the cases belonged in federal court since, they claimed, the plaintiffs' claims are preempted by the federal Public Readiness and Emergency Preparedness Act, or PREP Act.

That statute "provides immunity for a covered person against claims of loss caused by or relating to the manufacture, distribution, administration, or use of medical countermeasures," according to the judge's written opinion. But the act "still leaves room for ordinary claims of negligent or substandard care," the opinion said.

In appealing the judge's ruling, the nursing homes pointed out that following his decision, the U.S. Department of Health and Human Services issued directives that allegedly support their preemption argument.

For example, in a Jan. 8 advisory opinion, the agency's Office of the General Counsel said the PREP act is a "complete preemption" statute, and its immunity provision "triggers exclusive federal jurisdiction." In a Feb. 2 amendment to the HHS secretary's PREP Act declaration in response to the pandemic, the agency said the "plain language of the PREP Act makes clear that there is complete preemption of state law."

During Wednesday's hearing, Judge Chagares questioned the impact of such pronouncements, asking McIntyre, "Are we obligated to defer to HHS' views on jurisdiction?"

McIntyre said Congress gave "very broad powers" to the secretary under the act and "specifically provided that there could be no judicial review of any action taken by the secretary pursuant to this enactment."

But U.S. Circuit Judge Jane R. Roth then noted that "Congress did not bestow a juris doctor degree on the secretary, and it seems to me that preemption is a subject that is more legally focused than health and social services."

U.S. Circuit Judges Michael A. Chagares, Jane R. Roth and David J. Porter sat on the appeal for the Third Circuit.

The estates are represented by Neil R. Lapinski, William M. Kelleher and Phillip A. Giordano of Gordon, Fournaris & Mammarella PA and Daniel G.P. Marchese of The Marchese Law Firm LLC.

The nursing homes are represented by Lann G. McIntyre, Jeffry A. Miller, Salvatore C. Martino and Malinda A. Miller of Lewis Brisbois Bisgaard & Smith LLP.

The cases are Estate of Joseph Maglioli et al v. Alliance HC Holdings LLC et al and Estate of Wanda Kaegi et al v. Alliance HC Holdings LLC et al, case numbers 20-2833 and 20-2834, in the U.S. Court of Appeals for the Third Circuit.

--Editing by Steven Edelstone.

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