Using Government Incentive Funds Does Not Create a Right to Remove: Eighth Circuit

Client Alert

On the second to last business day of last year, the U.S. Court of Appeals for the Eighth Circuit addressed when a private organization can invoke the federal officer removal statute, 28 U.S.C. § 1442. If a private organization is acting under a federal officer, it can invoke this law to remove a lawsuit against it to federal court. Meanwhile, ongoing federal attention to cybersecurity, technology, industrial policy, and critical infrastructure sectors (such as health care) could provide new opportunities for organizations to remove lawsuits by blurring the line between private activity and government action. But, in this decision, the Eighth Circuit read the statute narrowly, deciding that a health care provider was not acting under a federal officer when it accepted incentive funds from the federal government to establish an online patient portal.

Why This Matters

Continuing federal attention in cybersecurity, technology and critical infrastructure brings with it new obligations and expectations on private organizations. Sometimes, as in this case, it is achieved through incentive payments designed to encourage development of a federal objective. Other times, as in the President’s recent Executive Order about artificial intelligence, which invokes the Defense Production Act, it can be more mandatory. Federal court is considered to be a more defendant-friendly forum, and this decision provides additional clarity around when private organizations can take advantage of federal government regulation to move otherwise non-removable cases to federal court.

In the case Doe v. BJC Health System, the defendant, a non-profit health care provider comprising 14 hospitals, was sued over alleged disclosure of patient information through website tracking pixels deployed on its online patient portal. The defendant claimed that because the HITECH Act authorized the federal government to offer payment incentives to providers as part of encouraging “a nationwide health information technology infrastructure that allows for the electronic use and exchange of information” to improve patient outcomes, and the defendant received incentive payments in connection with establishing its online patient portal, it was acting under the direction of a federal officer and therefore able to remove the lawsuit against it to federal court. Both the district court and the court of appeals disagreed, and the case is being remanded to state court.

The federal officer removal statute permits the federal government, federal officers, and persons “acting under” federal officers to remove lawsuits against them from state court to federal court, as a consequence of federal law’s supremacy over state law.” The court examined prior removal cases based on the statute’s “acting under” element and distinguished organizations that received delegated legal authority from a federal agency and when organizations act as an intermediary that delivers federal benefits to federal beneficiaries as constituting as “acting under” from those that were simply acting with “cooperation with and encouragement from the federal government, alone.”

To the Court, the “acting under” element can be invoked only if a party is performing a basic governmental task or helping the government perform federal duties, such as providing health insurance to federal employees and supplying earplugs to military personnel. Here, the defendant did not satisfy the “acting under” element, because it merely accepted federal funds for its own business purposes, not acting as a government intermediary. Just because the federal government designated EHR technology as important, the Court reasoned, does not mean installing or offering EHR technology is fulfilling a basic government task. To the Court,

[the defendant’s EMR] was not a federal government website, it was not a website [the defendant] operated on the federal government’s behalf or for the federal government’s benefit, and it was not a website the federal government directed [the defendant] to create or operate. The design of private websites is not —and has never been —a basic governmental task. When [the defendant] created and operated an online portal for its patients, it was not doing the federal government’s business. It was doing its own.

It was irrelevant that health care is a critical industry sector of great importance to the federal government and the public. As such, the Court affirmed the order remanding the case back to state court.



pursuant to New York DR 2-101(f)

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