On behalf of our clients, Excelas has been closely following COVID cases and the protections of the PREP Act.  This is the first decision by a United States Court of Appeals.  The Third Circuit Court of Appeals affirmed the District Court’s remand to state court.  The Court noted that “There is no COVID-19 exception to federalism” and “nearly every federal district court to confront these cases has dismissed for lack of jurisdiction and remanded to the state court.”

The plaintiffs allege that the residents’ deaths were a direct result of the nursing homes’ negligence by failing to monitor food preparation, failing to provide PPE, failing to diagnose and treat COVID-19 in a timely manner, and permitting visitors and employees to enter facilities without temperature checks or masks.

The 34-page Opinion by the Third Circuit Court outlines why the federal court lacks subject-matter jurisdiction, and these cases should be in state court based on the following excerpts:

• Federal officer removal statute:
  • To remove under this statute, four requirements must be met, including that the defendant is “acting under” the United States, its agencies, or officers. The court notes the nursing homes are private parties, not federal actors.  The nursing homes argument that they are heavily regulated by CMS and the CDC does not rise to the level of being a government contractor or providing a service the government would otherwise provide.
• Complete federal preemption:
  • The nursing homes argued that the estates’ state law negligence claims are really federal claims under the PREP Act. However, the estates alleged only negligence, not willful misconduct, therefore they do not fall within the scope of the exclusive federal cause of action.  Based on this, the Third Circuit determined they are not completely preempted, so the cases belong in state court.
• Willful misconduct:
  • To remove to federal court, the nursing homes also must show that the state-law claims fall within the scope of the exclusive federal cause of action.
  • The PREP Act also provides a rule of construction: the willful misconduct requirement “shall be construed as establishing a standard for liability that is more stringent than a standard of negligence in any form or recklessness.”
  • The estates allege negligence, not willful misconduct. In contrast, a claim for willful misconduct under the PREP Act requires wrongful intent, knowledge that the act lacked legal or factual justification, and disregard of a “known or obvious risk that is so great as to make it highly probable that the harm will outweigh the benefit.”
• Compensation fund:
  • The nursing homes argue that the PREP Act’s compensation fund—not just the willful misconduct cause of action—completely preempts the estates’ negligence claims.
  • The court held only that (1) the estates’ negligence claims based on New Jersey law do not fall under the PREP Act’s narrow cause of action for willful misconduct, and (2) the PREP Act’s compensation fund is not an exclusive federal cause of action triggering removal jurisdiction.
• Federal issue:
  • The nursing homes argue that the estates’ claims raise a substantial federal issue. To remove a case under federal question jurisdiction, a defendant must show the case “aris[es] under” federal law.  The estates do not assert a federal cause of action.

In conclusion, the Third Circuit Court affirmed the District Court’s order, stating, “Federal courts have limited jurisdiction.  We may decide only cases or controversies that the Constitution and Congress say we may decide.  Here, the estates of the deceased filed wrongful death lawsuits against the nursing homes.  They filed in state court and asserted only garden-variety state law claims, so state court is where these cases belong.”

This decision emphasizes the critical nature of the integration of medical record documentation with federal, state, and local guidance, and corporate response to that guidance, to defend cases associated with COVID-19.  Based on this opinion, claims and litigation against long-term care facilities alleging failure to take appropriate action in relation to COVID-19 will most likely fall outside PREP Act protection.  Excelas’ COVID-19 Comprehensive Database integrates federal and state guidance with a health care organization’s protocols, and a patient’s medical records, allowing for a clear chronology of events to assist in the defense of COVID-19 claims.