PREP Act Preemption: “There is no COVID-19 Exception to Federalism”

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When the estates of nursing home residents who died from COVID-19 brought negligence and wrongful death lawsuits in New Jersey state court, defendant nursing homes removed the suits to federal court under the Public Readiness and Emergency Preparedness Act, 42 U.S.C. §§ 247d-6d, 247d-6e (“PREP Act”), which protects certain covered entities, such as drug manufacturers, from lawsuits during a public health emergency. The federal District Court dismissed the cases for lack of subject matter jurisdiction and remanded them to state court, and an appeal to the Third Circuit ensued. Estate of Maglioli v. Alliance HC Holdings LLC, 2021 U.S. App. LEXIS 31526 (3d Cir. 2021).

The wrongful death actions arose from the treatment of residents at nursing homes where it was alleged that the residents' deaths were a direct result of the nursing homes’ failures to take measures to protect them at the facilities from the coronavirus and/or medical malpractice (including failure to provide personal protective equipment, to timely diagnose and treat the disease and permitting visitors and employees to enter the facilities without taking their temperatures or requiring masks.) The nursing home defendants premised their removal on the basis of a combination of federal officer removal, complete preemption and a substantial federal issue. The nursing homes urged the federal court to defer to PREP Act interpretations of the U.S. Department of Health and Human Services; however, the Third Circuit ruled that deference is not owed to HHS interpretations for the simple reason that HHS is not delegated authority under the PREP Act to interpret the scope of federal courts' jurisdiction.

Additionally, while removal was also premised upon the federal officer removal statute (28 U.S.C. § 1442)a)(1)) the Third Circuit found nursing homes were not "acting under" the United States, its agencies or its officers. The nursing homes did not assist or help carry out the duties of a federal superior and are not government contractors. Finally, the nursing homes argued complete federal preemption of the estates' claims as the PREP Act is so pervasive that the state law negligence claims are in fact federal claims under the Act, and thus removable to federal court. The Third Circuit disagreed, finding that simply making the preemption argument is insufficient to get the nursing homes into federal court. Nevertheless, a state court might find the PREP Act displaces one or more of the estates' state law claims when they adjudicate the issue. But simply raising a defense of federal preemption does not make the case removable.

Here, the estates alleged only negligence, not willful misconduct. The Act creates an exclusive cause of action for willful misconduct, and requires plaintiffs bringing willful misconduct claims to first exhaust administrative remedies and then to bring their claim only in the U.S. District Court for the District of Columbia. In other words, "just because the PREP Act creates an exclusive federal cause of action does not mean it completely preempts the states' state law claims." The Third Circuit also rejected the argument that formation of a compensation fund creates preemption, inasmuch as the compensation fund is not a cause of action. Finally, Federal Question removal was also not appropriate since the estates did not assert a federal cause of action.

The Third Circuit stressed that they are not holding that all state law causes of action are invulnerable to complete preemption under the PREP Act, nor are they holding the PREP Act preempts the estates’ claims under ordinary preemption rules—that is for the state court to decide. Importantly, while the pandemic has tested our federal system, there is no COVID-19 exception to Federalism.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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