Krandle v. Refuah Health Center, Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

REBECCA KRANDLE, individually, and

on behalf of all others similarly situated,

Plaintiff,

No. 22-CV-4977 (KMK)

v.

REFUAH HEALTH CENTER, INC,

Defendant.

DAWN ESPOSITO, and PAOLA

CORTAZAR, individually, and on

behalf of all others similarly situated,

Plaintiffs, No. 22-CV-5039 (KMK)

v. OPINION & ORDER

REFUAH HEALTH CENTER, INC,

Defendant.

Appearances:

Michael M. Liskow, Esq.

Calcaterra Pollack LLP

New York, NY

Counsel for Plaintiff Rebecca Krandle

Anthony Parkhill, Esq.

Barnow and Associates, P.C.

Chicago, IL

Counsel for Plaintiff Rebecca Krandle

Todd S. Garber, Esq.

Andrew C. White, Esq.

Finkelstein, Blankinship, Frei-Pearson & Garber, LLP

White Plains, NY

Counsel for Plaintiffs Dawn Esposito and Paolo Cortazar

Matthew S. Freedus, Esq.

Feldesman Tucker Leifer Fidell LLP

Washington, DC

Counsel for Defendant

James P. Flynn, Esq.

Epstein Becker & Green

Newark, NJ

Counsel for Defendant

KENNETH M. KARAS, District Judge:

Rebecca Krandle (“Krandle”), Dawn Esposito (“Esposito”), and Paola Cortazar

(“Cortazar”, collectively “Plaintiffs”) bring two Actions individually and on behalf of all others

similarly situated against Refuah Health Center, Inc. (“RHC” or “Defendant”) alleging various

tort claims arising out of a data breach of RHC’s network systems. (See generally Not. of

Removal (“Krandle Not. of Removal”) Ex. A (“Krandle Compl.”) (Dkt. No. 1-1, Case No. 22-

CV-4977); Not. of Removal (“Esposito Not. of Removal”) Ex. A (“Esposito Compl.”) (Dkt. No.

1-1, Case No. 22-CV-5039).)1 Before the Court are two Motions to Remand pursuant to 28

U.S.C. § 1447(c). (See Not. of Mot. (“Krandle Mot.”) (Dkt. No. 19, Case No. 22-CV-4977);

Not. of Mot. (“Esposito Mot.”) (Dkt. No. 11, Case No. 22-CV-5039).) For the following

reasons, both Motions are granted in part and denied in part.

1 Given the similarities in the jurisdictional questions presented in both Actions, coupled

with this Court’s determination that the Actions are related, (see Dkt., Case No. 22-CV-5039

(minute entry for June 21, 2022)), the Court will address the pending Motions together in one

Opinion.

I. Background

A. Factual Background

RHC is a not-for-profit healthcare company with its principal place of business in Spring

Valley, New York. (Krandle Compl. ¶¶ 2, 8; see also Esposito Compl. ¶ 9.) As “a full-service,

integrated, multi-specialty healthcare organization with four service sites and a fleet of mobile

units,” RHC collects and maintains the personally identifying information (“PII”) and personal

health information (“PHI”, collectively “sensitive information”) of patients in regular course of

providing patient care. (Krandle Compl. ¶¶ 11–12; see also Esposito Compl. ¶¶ 1–2.) Sensitive

information includes “names, Social Security numbers, driver’s license numbers, state

identification numbers, dates of birth, bank/financial account information, credit/debit card

information, medical treatment/diagnosis information, Medicare/Medicaid numbers, medical

record numbers, patient account numbers, and/or health insurance policy numbers.” (Krandle

Compl. ¶ 1; see also Esposito Compl. ¶ 2.) RHC provides each patient with a “Notice of Privacy

Practices,” which states limited circumstances where RHC will disclose sensitive information,

“including, e.g., for purposes of providing . . . treatment, billing, medical research, and

responding to government requests.” (Esposito Compl. ¶ 41.)

According to a notice posted on Defendant’s website on April 29, 2022, hackers breached

RHC’s network systems between May 31, 2021 and June 1, 2021. (Krandle Compl. ¶¶ 15–16;

see also Esposito Compl. ¶ 32 (stating that Defendant began notifying Plaintiffs “starting on

April 29, 2022”).) After completing its investigation on March 2, 2022, RHC reported that

individuals accessed and acquired certain files on RHC’s computer systems, including extracting

sensitive information. (See Krandle Compl. ¶¶ 16–17.)

Krandle, as a “former employee and patient of RHC,” received a letter from RHC

indicating that her sensitive information was exposed in the breach. (Id. at ¶ 7.) Esposito

received a letter from RHC informing her that her sensitive information may have been

compromised. (Esposito Compl. ¶ 35.) Esposito also alleges that she has “received increased

spam and phishing attempts since the data breach and has to install a spam filter” to address an

uptick in spam calls and texts. (Id.) Cortazar received a letter from RHC informing her that her

sensitive information may have been compromised. (Id. at ¶ 36.) Cortazar also alleges that she

“has experienced several hundred dollars’ worth of suspicious charges to her credit card,”

requiring her to replace her credit card. (Id.)

B. Procedural History

1. Krandle Action

On May 17, 2022, Krandle filed her initial class action lawsuit in New York state court

requesting monetary damages and injunctive relief based on claims for: 1) negligence, (Krandle

Compl. ¶¶ 50–57); 2) negligence per se, (id. at ¶¶ 58–66); 3) breach of fiduciary duty, (id. at ¶¶

67–70); (4) breach of express contract, (id. at ¶¶ 71–76); 5) breach of implied contract, (id. at ¶¶

77–84); 6) unjust enrichment, (id. at ¶¶ 85–91); and 7) violations of N.Y. Gen. Bus. Law § 349,

(id. at ¶¶ 92–101).

On June 14, 2022, RHC removed the case to federal court, pursuant to 42 U.S.C.

§ 233(l)(2) and 28 U.S.C. § 1442. (See Krandle Not. of Removal.) RHC stated that it is immune

from suit pursuant to 42 U.S.C. § 233 as a “‘deemed’ U.S. Public Health Service [(“PHS”)]. . .

employee” and is entitled to a federal forum to determine the availability of a federal immunity

defense. (Id. at ¶ 4.) In the alternative, RHC stated that this Court has jurisdiction under 28

U.S.C. § 1442 as RHC is a federal officer and/or acting under a federal officer, affording a right

of removal for “any officer . . . sued in an official or individual capacity for any act under color

of such office.” (Id. at ¶¶ 5–6.)

Plaintiff subsequently filed the instant Motion to Remand and ancillary papers on July 29,

2022. (See Krandle Mot.; Brief in Supp. of Mot. to Remand (“Krandle Mem.”) (Dkt. No. 20,

Case No. 22-CV-4977).) RHC filed its Opposition on August 29, 2022. (See Def’s Opp. to Pls.’

Mot. to Remand (“Def’s Krandle Opp.”) (Dkt. No. 21, Case No. 22-CV-4977).) Plaintiff filed a

reply on September 12, 2022. (See Reply in Supp. of Mot. to Remand (“Krandle Reply”) (Dkt.

No. 22, Case No. 22-CV-4977).) RHC also filed a Notice of Supplemental Authority on

September 13, 2022. (Def’s Not. of Supp. Authority (Dkt. No. 23, Case No. 22-CV-4977).)2

After several extensions of time, (see Dkt. Nos. 24–34, Case No. 22-CV-4977), the Government

filed a Statement of Interest, (see Statement of Interest of the U.S. (“Gov’t Stmt.”) (Dkt. No. 35,

Case No. 22-CV-4977)).3

2. Esposito Action History

On June 10, 2022, Esposito and Cortazar filed their initial class action lawsuit in New

York state court requesting monetary damages and injunctive relief based on claims for: 1)

negligence, (Esposito Compl. ¶¶ 64–81); 2) breach of express contract, (id. at ¶¶ 82–86); 3)

breach of implied contract, (id. at ¶¶ 87–97); 4) violations of N.Y. Gen. Bus. Law § 899-AA and

§ 349, (id. at ¶¶ 98–114); and 5) invasion of privacy by intrusion, (id. at ¶¶ 115–23).

2 The Court cites to the case page numbers found at the bottom of the supplemental

authority, rather than the listed ECF numbers.

3 The Government filed identical statements of interest in both the Krandle and the

Esposito actions. (Compare Gov’t Stmt. with Statement of Interest of the U.S. (Dkt. No. 31,

Case No. 22-cv-5039).) For ease of review, the Court will cite to one copy of the relevant

statement.

On June 16, 2022, RHC removed the case to federal court, pursuant to 42 U.S.C.

§ 233(l)(2) and 28 U.S.C. § 1442. (See Esposito Not. of Removal.) RHC’s notice of removal in

this Action is almost identical to the notice filed in the Krandle Action. (Compare Krandle Not.

of Removal with Esposito Not. of Removal.) Esposito and Cortazar subsequently filed the

instant Motion to Remand and ancillary papers on July 18, 2022. (See Esposito Mot.; Brief in

Supp. of Mot. to Remand (“Esposito Mem.”) (Dkt. No. 12, Case No. 22-CV-5039).) RHC filed

its Opposition on August 29, 2022. (See Def’s Opp. to Pls.’ Mot. to Remand (“Def’s Esposito

Opp.”) (Dkt. No. 16, Case No. 22-CV-5039).) RHC also filed a Notice of Supplemental

Authority on September 13, 2022. (Def’s Not. of Supp. Authority (Dkt. No. 19, Case No. 22-

CV-5093).) Esposito and Cortazar filed a reply on September 19, 2022. (See Reply in Supp. of

Mot. to Remand (“Esposito Reply”) (Dkt. No. 20, Case No. 22-CV-5039).) After several

extensions of time, (see Dkt. Nos. 21–28, Case No. 22-CV-5039), the Government filed a

Statement of Interest, (see Statement of Interest of the U.S. (Dkt. No. 31, Case No. 22-CV-

5039)).

II. Discussion

A. Standard of Review

“‘Federal courts are courts of limited jurisdiction’ that ‘possess only that power

authorized by Constitution and statute.’” Hendrickson v. United States, 791 F.3d 354, 358 (2d

Cir. 2015) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)).

After a case is removed to federal court, “[i]f at any time before final judgment it appears that the

district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

Defendant bears the burden of demonstrating that federal subject matter jurisdiction exists. See

Wilds v. United Parcel Serv., Inc., 262 F. Supp. 2d 163, 171 (S.D.N.Y. 2003) (“On a motion to

remand, the party seeking to sustain the removal, not the party seeking remand, bears the burden

of demonstrating that removal was proper.” (quotation marks and citations omitted)). “Unless

that burden is met, the case must be remanded back to state court. At [the motion to remand]

stage . . . ., the party seeking remand is presumed to be entitled to it unless the removing party

can demonstrate otherwise.” Id. (quoting Bellido–Sullivan v. Am. Int'l Grp., Inc., 123 F. Supp.

2d 161, 163 (S.D.N.Y. 2000) (quotation marks omitted)). In other words, “federal courts

construe the removal statute narrowly, resolving any doubts against removability.” Sherman v.

A.J. Pegno Constr. Corp., 528 F. Supp. 2d 320, 325 (S.D.N.Y. 2007) (quoting Lupo v. Human

Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir. 1994)).

B. Analysis

In nearly identical memoranda of law, Plaintiffs argue that Defendant’s removals to

federal court are procedurally improper under both 42 U.S.C. § 233(l) and 28 U.S.C. § 1442.

(See generally Krandle Mem.; Esposito Mem.) First, Plaintiffs argue that Defendant failed to

meet the procedural requirements of § 233(l) by removing the cases prior to the statutorily

proscribed 15-day window. (See Krandle Mem. 3–5; Esposito Mem. 3–5.) Plaintiffs also argue

that Defendant cannot remove the instant Actions to federal court under § 1442, because

§ 233(l)(2) exclusively governs removal by entities or individuals covered by the Federally

Supported Health Centers Assistance Act (“FSHCAA”). (See Krandle Mem. 6–8; Esposito

Mem. 5–7.) Finally, Plaintiffs argue that § 233(a) is substantively “inapplicable to Plaintiff’s

claims,” precluding removal under § 233(l)(2). (See Krandle Mem. 8–15; Esposito Mem. 7–14.)

The Court will address these arguments to the extent necessary to decide the instant Motions.

1. Removal Under § 233

a. Applicable Law

Under the Federal Torts Claims Act (“FTCA”), the United States waives sovereign

immunity for certain classes of torts claims, providing federal district courts “exclusive

jurisdiction over damages claims against the United States for injury or loss of property, or for

personal injury or death ‘caused by the negligent or wrongful act or omission of any employee of

the Government while acting within the scope of his office or employment.’” Celestine v. Mount

Vernon Neighborhood Health Ctr., 403 F.3d 76, 80 (2d Cir. 2005) (quoting 28 U.S.C. §

1346(b)(1)). “The FTCA’s purpose is both to allow recovery by people injured by federal

employees or by agents of the Federal Government, and, at the same time, to immunize such

employees and agents from liability for negligent or wrongful acts done in the scope of their

employment.” Id.

As relevant to the instant Action, the FSHCAA “makes the [FCTA] the exclusive remedy

for specified actions against members of the [PHS].” Cuoco v. Moritsugu, 222 F.3d 99, 107 (2d

Cir. 2000). The Act provides, in part:

The remedy against the United States provided by [the FTCA] . . . for damage for personal

injury, including death, resulting from the performance of medical, surgical, dental, or

related functions, including the conduct of clinical studies or investigation, by any

commissioned officer or employee of the Public Health Service while acting within the

scope of his office or employment, shall be exclusive of any other civil action or proceeding

by reason of the same subject-matter against the officer or employee (or his estate) whose

act or omission gave rise to the claim.

42 U.S.C. § 233(a). “In instances where a tort action is brought against a federally funded public

health center (construed as an employee of the United States under . . . the [FSHCAA]) for

conduct within the scope of its federal employment, the Attorney General . . . may certify that

the health center was indeed acting as a federal employee at the time of the incident.” Celestine,

403 F.3d at 80. Upon certification, the action “shall be removed . . . at any time before trial by

the Attorney General” to a federal district court. 42 U.S.C. § 233(c). “Once such a case is

removed, the United States can replace the named defendant as the allegedly liable party—and

the case proceeds as an FTCA suit.” Celestine, 403 F.3d at 80 (citing 42 U.S.C. § 233(b)).

Section 233(l) also provides federally funded health centers with the opportunity to

“hasten the certification process by acting on their own” to remove to federal court if the

Attorney General does not intervene in a timely manner. Id. at 81 (emphasis omitted). The

statute provides:

[T]he Attorney General, within 15 days after being notified of [a civil action in state

court for damages], shall make an appearance in such court and advise such court

as to whether the Secretary has determined . . . that such entity . . . is deemed to be

an employee of the Public Health Service . . . . If the Attorney General fails to

appear in State court within the time period . . ., upon petition of any entity . . .

named, the civil action or proceeding shall be removed to the appropriate United

States district court. The civil action or proceeding shall be stayed in such court

until such court conducts a hearing, and makes a determination, as to the

appropriate forum.

42 U.S.C. § 233(l)(1)–(2). Section 233 only provides for removal to federal court in these two

circumstances. See generally § 233.

b. Removal Under § 233(l): Krandle Motion

Krandle argues that RHC failed to meet the procedural requirements of § 233(l) by

prematurely removing this Action to federal court prior to the statutorily proscribed window.

(See Krandle Mem. 3–5.) RHC disagrees, arguing that the health center provided sufficient

notice to the Attorney General upon notifying the Department of Health and Human Services

(“HHS”) of the pending Action. (Def’s Krandle Opp. 8–11.)

The FSHCAA provides that the “Attorney General shall defend any civil action or

proceeding brough in any court against” a deemed health center brought for damages or injuries

under the scope of employment. 42 U.S.C. § 233(b). To do this, the “United States Attorney,

Attorney General, and Secretary” must receive copies of the pleadings from the health center,

giving notice to the relevant parties of the action. Id. The statute seemingly creates two avenues

to notify the relevant parties in the federal government: a person served with process “shall

deliver . . . all process served upon him” 1) “to his immediate superior” or 2) “to whomever was

designated by the Secretary to receive such papers.” Id. This person, whether a representative at

the deemed health center or a designated HHS official, “shall promptly furnish copies of the

pleading and process therein to the United States attorney . . ., to the Attorney General, and to the

Secretary.” Id. According to the FTCA Health Center Policy Manual created by HHS, the

Office of the General Counsel (“OGC”) is the designated entity tasked with receiving legal

process related to FTCA claims. Federal Tort Claims Act Health Center Policy Manual, U.S.

Dept. of Health & Human Servs. Health Resources & Service Administration 19, 25 (July 21,

2014), https://bphc.hrsa.gov/sites/default/files/bphc/compliance/ftcahc-policy-manual.pdf

(identifying the “Claims and Employment Branch” of OGC as the entity to receive “lawsuit

documentation”).

Here, RHC provided HHS OGC with copies of the Krandle summons and complaint on

May 26, 2022. (Krandle Not. of Removal ¶ 26; Krandle Not. of Removal Ex. D (Dkt. No. 1-4,

Case No. 22-CV-4977).) HHS OGC confirmed receipt that same day. (Krandle Not. of

Removal Ex. D.) As such, RHC properly provided notice to the federal government, by and

through HHS, as required by the statute. Separately, RHC also provided the U.S. Attorney of the

Southern District of New York (“USAO”) with the Krandle summons and complaint on June 3,

2022. (Krandle Not. of Removal ¶ 27; Krandle Not. of Removal Ex. F (“USAO Not.”) (Dkt. No.

1-6, Case No. 22-CV-4977).) RHC removed the case to federal court on June 14, 2022.

(Krandle Not. of Removal.) On June 17, 2022, the USAO as a delegate of the Attorney General

filed a Notice of the United States in federal court, which stated that they received notice from

HHS on June 9, 2022, and advised that HHS and the USAO are in the process of determining

whether certification is proper. (Not. of the U.S. (Dkt. No. 5, Case No. 22-CV-4977).)4

Section 233(l)(1) requires the Attorney General to “make an appearance” in state court

“within 15 days of being notified” of the action, and the Attorney General must “advise such

court as to whether the Secretary has determined . . . that [a health center] is deemed to be an

employee of the [PHS].” Id. If and only if the Attorney General fails to appear within the 15-

day time period, the health center can remove the action to federal court to conduct a hearing to

determine if the health center is indeed protected by the FTCA. Id. at § 233(l)(2). Thus, to

determine whether removal was procedurally proper, it is incumbent upon this Court to calculate

the initial notice date to the Attorney General.

Krandle and RHC stridently argue for different calculations, posing at least three dates of

official notice throughout the briefing. Krandle first asserts that RHC “inexplicably waited until

June 3, 2022 to provide the summons and complaint upon the Attorney General (as required by

the statute),” setting the Attorney General’s notice to that date. (Krandle Mem. 4.) In response,

RHC argues that the statute only creates a single avenue to notify the USAO—through HHS—

and RHC’s email to the USAO containing the notice and summons was done so solely out of

4 In response to the instant Actions, the Government provided its determination on March

23, 2023, “advis[ing] this Court that it and HHS have determined that Refuah was not deemed to

be a Public Health Service employee for the purposes of the acts or omissions giving rise to the

Krandle and Esposito lawsuits, and that [these] action[s] therefore [are] not subject to the

provisions of 42. U.S.C. 233.” (Gov’t Stmt. 10.) Specifically, the Government stated that

“[m]aintaining cybersecurity is a business function for which Refuah remains responsible

regardless of whether it is a Section 330 grantee[,] and thus, the Government “will not intervene

in these actions or move to substitute itself in place of Refuah as the party defendant.” (Id.)

courtesy. (See Def’s Krandle Opp. 10; Krandle Not. of Removal Ex. F (“Even though the

applicable statutory scheme imposes a duty on HHS, not Refuah, to notify your office of such

matters, I am nevertheless doing so here in the hope that it facilitates the requested removal and

substitution.”).) If this were the case, RHC argues, the proper date to calculate the 15-day

requirement would be May 26, 2022, the day RHC notified HHS. (Def’s Krandle Opp. 8–9.) In

reply, Krandle puts forth yet another possible notice date based on the federal court filing by the

USAO: June 9, 2022. (Krandle Reply 3.)

The text of the FSCHAA is instructive in this inquiry. Specifically, the law states that it

is the Attorney General’s notification that governs the 15-day window, dictating that the

Attorney General “shall make an appearance” in state court “after being notified.” § 233(l)(1)

(emphasis added). And “[i]f the Attorney General fails to appear in State court within the time

period prescribed,” RHC is allowed to initiate removal. Id. at (l)(2). Of the three dates provided

by the parties, the Court finds that the Attorney General likely received notice on two of them:

June 3, 2022 and June 9, 2022.

RHC contends that the 15-day period began when it notified HHS of the filed action in

state court on May 26, 2022. However, RHC “has cited to no authority permitting constructive

notice to be attributed to the Attorney General under this theory.” Sherman v. Dignity Health,

No. 19-CV-1584, 2019 WL 2242071, at *2 (C.D. Cal. May 23, 2019). While this Court is

unaware of binding or persuasive authority governing this particular procedural defect in the

Second Circuit, this Court notes that at least four cases in other circuits support this reading of

the statute. See, e.g., id.; K.C. v. Cal. Hosp. Med. Ctr., No. 18-CV-6619, 2018 WL 5906057, at

*4–5 (C.D. Cal. Nov. 8, 2018) (citing Ninth Circuit authority declining to impute the knowledge

of a government agency to the U.S. Attorney or the U.S. Attorney General); Mixon v. CareSouth

Carolina, Inc., No. 22-CV-269, 2022 WL 1810615, at *2 (D.S.C. June 2, 2022) (citing the

USAO’s notice asserting the date it was notified of the action, which was different than the date

of HHS notification); Sherman v. Sinha, 843 Fed. Appx. 870, 873 (9th Cir. 2021) (memorandum

opinion) (finding that “although [a defendant] initially informed HHS of the underlying

complaint on January 31,” the 15-day window did not begin until at least February 26 when she

“provide[d] HHS with critical information” and the Attorney General subsequently appeared in

state court).

Moreover, the Court notes that it agrees with RHC and its cited supplemental authority:

the statute does not require RHC to personally serve the Attorney General. (Def’s Krandle Opp.

10; USAO Not.) See also Doe v. Neighborhood Healthcare, No. 21-CV-1587, slip op. at 8 (S.D.

Cal. Sept. 8, 2022) (“The Court disagrees with the argument that Neighborhood was required to

formally serve the United States with the summons and pleading.”).5 However, the statute does

require specific notice to the Attorney General by someone. Contrary to RHC’s interpretation,

§ 233(b) allows both the health center and HHS to serve papers upon the USAO and the

Attorney General, declining to dictate who bears the ultimate burden. See 42 U.S.C. § 233(b)

(requiring a person to “deliver . . . all process served upon him . . . to his immediate supervisor or

5 The Court also notes that the case that Doe v. Neighborhood Healthcare, Defendant’s

supplemental authority, relies upon to come to this conclusion is not relevant to the instant

Action. The Neighborhood court relies upon C.K. v. United States, No. 19-CV-2492, 2020 WL

6684921 (S.D. Cal. Nov. 12, 2020), as the sole authority governing formal service to the

Attorney General. Doe, slip op. at 8. However, the parties in C.K. did not file their initial

complaint in state court and remove to federal court under § 233. Instead, the plaintiff alleged

civil rights violations under 42 U.S.C. § 1983 and 42 U.S.C. § 1986, granting the plaintiff

independent federal question jurisdiction in federal court. C.K., 2020 WL 6684921, at *2; see

also Barnes v. Sea Mar Community Health Ctrs., No. 22-CV-181, 2022 WL 1541927, at *5

(W.D. Wash. Apr. 27, 2022), report and recommendation adopted 2022 WL 1540462 (W.D.

Wash. May 16, 2022). As such, this case is not helpful.

to whomever was designated by” HHS (emphasis added)). By emailing a copy of the notice and

summons to the USAO, RHC provided the requisite notice to the federal government—as RHC

is allowed to do—at least as to the U.S. Attorney’s Office and the Attorney General.6 Charitably

assuming that notification to the Attorney General on June 3, 2022 was sufficient, RHC

prematurely removed this case by four days, in contravention of the FSCHAA. For these

reasons, RHC improperly removed the Krandle Action to federal court under § 233.

c. Removal Under § 233(l): Esposito Motion

Similarly, RHC prematurely removed the Esposito case to federal court in contravention

of the FSHCAA. RHC provided HHS OGC with copies of the Esposito summons and

complaints on June 15, 2022. (Esposito Not. of Removal ¶ 29; Esposito Not. of Removal Ex. C

(Dkt. No. 1-3, Case No. 22-CV-5039).)7 On the same day, RHC provided notice to the USAO

with a copy of the Esposito summons and complaint. (Esposito Not. of Removal ¶ 29; Esposito

Not. of Removal Ex. D (Dkt. No. 1-4, Case No. 22-CV-5039).) Just one day later, on June 16,

6 As a practical matter, it is clear that HHS must be involved in the certification process

as to whether a deemed health center was acting within the scope of their employment. As the

agency responsible for administering the program created by the FSHCAA, counsel for HHS

must weigh in based on their expertise both with deemed health centers and the scope of such

centers’ care. Indeed, the Chief of the SDNY Civil Division declined to weigh in on the matter

without hearing from HHS. (USAO Not. (“I will keep this matter on our radar but we will have

to wait for a referral from HHS before we take steps to remove the matter and substitute the

United States.”).)

However, given that removal was insufficient under § 233 no matter which date is used

(i.e., June 3, 2022 or June 9, 2022), the Court declines to opine as to whether RHC’s notice to the

U.S. Attorney was sufficient under the statute.

7 While RHC claims that HHS provided a “confirmation of receipt,” RHC failed to

provide a copy to the court. (See generally Esposito Not. of Removal Ex. C.)

2022, RHC removed the Esposito case to federal court. (See Esposito Not. of Removal.) Given

these facts, RHC clearly did not wait for the 15-day removal as required by the statute.8

In the notice of removal, RHC cites the Krandle action as a case “arising out of the same

underlying events and raising substantially similar issues.” (Esposito Not. of Removal ¶ 29.) In

addition, RHC cites the Krandle case in emails notifying HHS and the USAO about the pending

Esposito action, stating that RHC “intends to [remove the case to federal court] with the Esposito

case, as it too arises out of covered conduct within the meaning of 42 U.S.C. § 233(a).”

(Esposito Not. of Removal Ex. D; see also Esposito Not. of Removal Ex. C (“Refuah is

requesting substitution of the United States in both cases, and intends to remove the Esposito

case and ask that it be related to the Krandle case.”).) However, RHC fails to provide any

support for this argument, let alone demonstrate why a potentially related case would be enough

to contravene a statutory requirement.

Moreover, if RHC were to have attempted to bolster its argument, the Court would likely

disagree. In this District, the related-case process is governed by Rule 13 of the Rules for the

8 RHC argues, without citing any authority, that “[w]hen construed in favor of removal

jurisdiction, the 15 days period in § 233(l)(1) does not operate as a barrier to removal” under §

233 and “nothing in § 233(l)(1) precludes removal prior to the expiration of 15 days.” (Def’s

Esposito Opp. 9.) The Court disagrees.

First, “federal courts construe the removal statute narrowly, resolving any doubts against

removability.” Sherman, 528 F. Supp. 2d at 325 (quoting Lupo, 28 F.3d at 274). “In construing

the terms of a statute, [the Court] look[s] first to its language to ascertain its plain meaning.”

Cheung v. United States, 213 F.3d 82, 89 (2d Cir. 2000). As discussed, § 233(l)(1) only provides

for removal in two specific circumstances: by act of the Attorney General after intervening in the

case; or by Defendant, after the proscribed 15-day waiting period, to request a judicial

determination of Defendant’s status as it pertains to the FSHCAA. See § 233(l); Allen v.

Christenberry, 327 F.3d 1290, 1294–95 (11th Cir. 2003) (“The reason the removal by [the

defendants] was improper is that the statute authorizes removal in only two circumstances, and

neither occurred here.”). RHC is effectively asking the Court to read in a provision of the statute

that is not there. However, there is nothing ambiguous about this statute and congressional intent

remains clear. Contrary to RHC’s assertion, there is something that “precludes removal prior to

the expiration of the 15 days” under § 233, and that is § 233(l) itself.

Division of Business Among District Judges (the “RDB”). Moskovits v. Bank of Am. NA, No.

20-CV-10537, 2021 WL 467152, at *2 (S.D.N.Y. Feb. 7, 2021); see also Rules for the Div. of

Bus. Among Dist. Judges (“RBD”) 13(a)(1). But “[a]s their preamble makes clear, the RDB

rules ‘are adopted for the internal management of the case load of the court and shall not be

deemed to vest any rights in litigants or their attorneys.’” United States v. Donziger, Nos. 19-

CR-561, 11-CV-691, 2020 WL 2216556, at *4 (S.D.N.Y. May 7, 2020) (emphasis omitted)

(quoting RBD at 105). “Accordingly, as the RDB clearly state, and as both the Second Circuit

and [other courts in the Southern District] have held, no litigant would have any right” to

deeming a case related for the purposes of this removal statute, which is arguably required to

remove this case prematurely. Chevron Corp. v. Donziger, No. 11-CV-691, 2011 WL 979609, at

*2 (S.D.N.Y. Mar. 7, 2011) (collecting cases); see also United States v. Brennerman, Nos. 17-

CR-155, 15-CV-70, 2017 WL 3421397, at *10 (S.D.N.Y. Aug. 8, 2017) (“[T]he RDB vest no

rights in litigants—they are for internal management only.” (collecting cases)). “[T]hat fact

alone dooms this aspect of [RHC’s] [removal].” Brennerman, 2017 WL 3421397, at *10.

Accordingly, RHC also improperly removed the Esposito Action under § 233.9

2. Removal Under § 1442(a)(1)

In the alternative, RHC sought removal for both Actions under 28 U.S.C. § 1442(a)(1),

which provides that if a civil action is commenced in state court against a federal officer “for or

relating to any act under color of such office,” the federal defendant may remove the action to a

federal district court. 28 U.S.C. § 1442(a)(1). (See also Krandle Not. of Removal ¶¶ 5–9;

Esposito Not. of Removal ¶¶ 6–10.) Plaintiff argues that removal under § 1442 was improper

9 Because the Court finds that removal was improper under § 233 for both Actions, the

Court declines to address the remainder of Plaintiffs’ arguments regarding the applicability of §

233 at this time. (See Krandle Mem. 8–15; Esposito Mem. 7–14.)

because § 233 represents a specific removal statute that governs in this case, rather than a general

removal provision. (Krandle Mem. 6–7; Esposito Mem. 5–6.) Plaintiffs also argue that RHC

cannot be treated as an employee of the federal government for any purpose other than § 233.

(Krandle Mem. 7; Esposito Mem. 6.) Finally, Plaintiffs argue that RHC cannot establish that it

was “acting under” a federal officer. (Krandle Mem. 7–8; Esposito Mem. 7.) The Government

also agrees in its statement, arguing that RHC “incorrectly claims that Krandle and Esposito are

removable under 28 U.S.C. § 1442(a)(1). (Gov’t Stmt. 11.) The Court will address each

argument in turn.

a. Applicable Law

“To invoke [§ 1442], a defendant who is not himself a federal officer must demonstrate

that (1) the defendant is a ‘person’ under the statute, (2) the defendant acted ‘under color of

federal office,’ and (3) the defendant has a ‘colorable federal defense.’” Agyin v. Razman, 986

F.3d 168, 174 (2d Cir. 2021) (quoting Cuomo v. Crane Co., 771 F.3d 113, 115 (2d Cir. 2014)).

The Supreme Court has noted that “the scope of the federal officer removal statute ‘is not narrow

or limited’” but broad to allow a defendant to “have the opportunity to present his vision of the

facts to a federal, not a state, court.” Cuomo, 771 F.3d at 115–16 (quoting Willingham v.

Morgan, 395 U.S. 402, 406, 409 (1969)). As to the “acting under” provision specifically, the

Second Circuit has recently held that this provision “must be read broadly” and “credit [the

defendant’s] theory of the case when evaluating the relationship between the [defendant’s]

actions and the federal officer.” Agyin, 986 F.3d at 175 (quotation marks omitted) (collecting

cases).

b. Availability of 28 U.S.C. § 1442(a) Removal

At the outset, the Court will address Plaintiffs’ argument that removal under § 1442 is

unavailable to RHC because § 233, a specific removal statute, conflicts with the general removal

provision of § 1442. (Krandle Mem. 6–7; Esposito Mem. 5–6.) However, as RHC correctly

points out, the Second Circuit has recently addressed the interplay between § 233 and § 1442 and

ultimately disagreed with Plaintiffs’ view.

In Agyin, the Second Circuit held that “[a]lthough this reading of § 1442 would permit

deemed PHS employees to remove cases under § 1442, in addition to § 233, it would not render

§ 233 superfluous because removal under § 233 provides different rights to the removing party

than does removal under § 1442.” 986 F.3d at 179. In so ruling, the Agyin panel highlighted the

distinctions between the statutes, noting that:

a case may be removed pursuant to § 1442 only within 30 days of receipt of the

initial pleading . . . [and] an untimely removal under § 1442 remains subject to

objection from [parties who may waive this untimely removal]. By contrast, a case

may be removed under § 233 at any time before trial. This extra time allows

defendants to report the case to the Attorney General and to learn whether the

Attorney General will certify their immunity from suit before deciding whether they

must remove the case by themselves.

Id. at 179–80 (citations and quotation marks omitted). In addition, “a party who removed

pursuant to § 1442 is entitled to appeal an order remanding the case for lack of subject matter

jurisdiction,” whereas a party pursuing a § 233 removal does not have the same right. Id. at 180.

Finally, “a party who removed pursuant to § 233(l)(2) is entitled to an automatic stay of

proceedings in the state court, while a party who removed pursuant to § 1442 is not.” Id.

Addressing the “detailed scheme requiring reporting to the Attorney General [and] intervention

by the Attorney General,” the panel noted that “[o]nly one element of that scheme —the first

sentence of § 233(l)(2), permitting removal—might overlap with § 1442.” Id. The panel

ultimately concluded that, due to the distinctions identified, “it is natural to understand § 233 as

providing supplemental removal rights to persons in a specific situation, even though such

persons also may sometimes remove under § 1442.” Id.

Given Agyin, Plaintiffs’ argument regarding the overlap between the two statutes fails,

and the Court must independently determine if RHC can invoke § 1442.

c. Applicability of 28 U.S.C. § 1442(a) Removal

Regarding the merits of the § 1442 analysis, Plaintiffs argue that (1) RHC cannot be

considered a deemed employee of the Public Health Service for the purposes of § 1442 because

of the specific statutory grant in § 233, (see Krandle Mem. 7; Esposito Mem. 6), and (2) that

RHC is not considered a person “acting under” a federal officer because RHC complies with

“certain federal conditions to remain eligible for federal grants,” (see Krandle Mem. 7–8;

Esposito Mem. 7). RHC disagrees, arguing that (1) RHC and its employees were acting under a

federal officer under § 1442(a)(1), (see Def’s Krandle Opp. 18–21; Def’s Esposito Opp. 17–20);

and in the alternative, (2) RHC’s employees are federal officers themselves under § 1442, (see

Def’s Krandle Opp. 21–25; Def’s Esposito Opp. 20–24).

The Parties do not dispute that RHC followed the removal procedure under § 1442: RHC

filed notices of removal in both Actions less than 30 days after receiving a copy of the initial

pleading. 28 U.S.C. § 1446(a), (b), (d). (See also Krandle Not. of Removal, Esposito Not. of

Removal.) It also appears that the Parties do not dispute that RHC is a ‘person’ under the statute

and that RHC has a colorable federal defense. See Agyin, 986 F.3d at 174–75 (“Razmzan is a

‘person,’ and he has raised a colorable federal defense. . . . The only open question therefore is

whether Razmzan ‘acted under color of federal office’—that is, whether he was ‘acting under’ a

federal officer and acted ‘under color of such office’—when he provided medical services at the

clinic and/or the hospital.” (citation omitted)).10 Thus, the Court will focus its analysis on the

“acting under” federal law ambit of the § 1442 analysis.

To this, Agyin again directly addresses the argument between the Parties. In Agyin, the

court found that a deemed community health care center doctor acted within the scope of his

employment while performing services, despite the fact that the doctor privately billed for those

services. Id. at 171. The court found that the doctor was “working hand-in-hand with the federal

government to achieve a task that furthers an end of the federal government,” and later extended

legal immunity under the FSHCAA. Id. at 176–77, 184–87 (quoting Ruppel v. CBS Corp., 701

F.3d 1176, 1181 (7th Cir. 2012).11 Despite this, Plaintiffs attempt to distinguish Agyin by citing

another an unpublished decision also discussed at length in Agyin: Veneruso v. Mount Vernon

Neighborhood Health Center, 586 Fed. Appx. 604 (2d Cir. 2014) (summary order).

10 While not framed in this way, the Court could consider Plaintiffs’ arguments about the

applicability of § 233(a) to the cases at hand as challenging the availability of RHC’s federal

defense. However, “[b]ecause a core purpose of the statute is to let the validity of the federal

defense be tried in federal court, a defendant seeking removal need not ‘virtually . . . win his

case,’ nor must his defense even be ‘clearly sustainable’ on the facts.” Cuomo, 771 F.3d at 116–

17 (citations and quotation marks omitted) (quoting Jefferson County, Ala. v. Acker, 527 U.S.

423, 431 (1999) and then quoting Isaacson v. Dow Chemical Co., 517 F.3d 129, 139 (2d Cir.

2008)). Instead, a “merely ‘colorable’ defense is sufficient to ‘assure the federal court that it has

jurisdiction to adjudicate the case.” Cuomo 771 F.3d at 116 (quoting Kircher v. Putnam Funds

Trust, 547 U.S. 633, 644 n.12 (2006)). RHC has demonstrated this in both Actions through the

various exhibits deeming RHC potentially eligible for § 233 protection. (See, e.g., Krandle Not.

of Removal Ex. C (“Krandle Not. of of Deeming Action”) (Dkt. No. 1-3); Esposito Not. of

Removal Ex. B (“Esposito Not. of Deeming Action”) (Dkt. No. 1-2).)

11 While the Court recognizes the Government’s “respectful[] disagree[ment]” with

Agyin, the Court will remain guided by Agyin’s ambit. (Gov’t Stmt. 8 n.9.) For example, the

Government primarily cites Watson v. Philip Morris Comps., 551 U.S. 142 (2007) to assert that

RHC is not acting under a federal officer, (see Govt. Stmt. 13), however, this case is thoroughly

reviewed and incorporated into Agyin. Agyin, 986 F.3d at 175. In addition, Agyin directly

addresses the specific question of § 1442 removal for deemed health centers, unlike the 1976

Supreme Court case that the Government asks this Court to rely upon. (See Gov’t Stmt. 13–14

(analyzing United States v. Orleans, 425 U.S. 807 (1976)).) As such, the Court does not find the

Government’s arguments persuasive.

In Veneruso, the court found that the health center “failed to demonstrate that it was

acting under the direction of a federal officer” when it received distributions from a joint venture

partner in violation of New York law. Veneruso, 586 Fed. Appx. at 607. The court held that the

health center, “a federal grant recipient under the Public Health Service Act,” could not have

acted under a federal officer while it received the illegal distributions, as the health center “does

not and cannot contend that any of the many federal regulations to which it is subject directed it

to receive . . . the [illegal] [d]istributions.” Veneruso, 586 Fed. Appx. at 605–08; see also Agyin,

986 F.3d at 179. Plaintiffs argue in in their reply memoranda that “[n]one of the regulations that

[RHC] cites to directs [RHC] to inadequately protect Plaintiff[s’] and Class members’ [sensitive

health information].” (Krandle Reply at 11; see also Esposito Reply at 10 (“There was no such

direction here.”).) The Court disagrees.

The Agyin court concluded that “[t]he implication [from Veneruso] is that if federal

regulations had directed the challenged conduct, the clinic would have been acting under a

federal officer and removal would have been appropriate.” Agyin, 986 F.3d at 179. This Court,

following Agyin, as it must, conducts a similar analysis, looking first to the federal regulations

that allow RHC to maintain its “deemed health center” status. Title 42 U.S.C. § 254b defines a

health center as “an entity that serves a population that is medically underserved, or a special

medically underserved population comprised of migratory and seasonal agricultural workers, the

homeless, and residents of public housing, by providing . . . required health services . . . , and as

may be appropriate. . . , additional health services . . . for all residents of the area served by the

center.” 42 U.S.C. § 254b(a)(1); see also 42 U.S.C. § 233(g)(4) (“An entity described in this

paragraph is a public or non-profit entity receiving Federal funds under [§] 254b of this title.”).

More directly, and contrary to Plaintiffs’ contention, RHC allegedly is performing a service

“that—in the absence of the [FSHCAA]—the federal government would have to perform itself.”

Agyin, 986 F.3d at 176. (See also Def’s Krandle Opp. 19; Def’s Esposito Opp. 18.)

Plaintiffs’ assertion in response that no regulation directs RHC to “inadequately protect

Plaintiff[s’] and Class members’” sensitive health information is misplaced. (See Krandle Reply

at 11; see also Esposito Reply at 10 (“There was no such direction here.”).) Of course, the Court

cannot identify—and would not expect to identify—such a statute. But, that is not the point.

Indeed, Plaintiffs fail to acknowledge the statutory requirement imposed on RHC as a condition

to continue receiving grant funds that seemingly governs the protection of patient data at issue.

In particular, Section 254(b)(3)(C) provides that “the Secretary may not approve an application

for a grant . . . unless the Secretary determines that the entity for which the application is

submitted is a health center and . . . the center will have an ongoing quality improvement system

that includes clinical services and management, and that maintains the confidentiality of patient

records.” 42 U.S.C. § 254(b)(3)(C) (emphasis added). As stated in Notices of Deeming Action,

“[d]eemed health centers must continue to receive funding under . . . § 254b, in order to maintain

coverage as a deemed PHS employee.” (Krandle Not. of Deeming Action; Esposito Not. of

Deeming Action.) Thus, in order to “carry out the duties of the federal government to provide

medical care to the indigent,” RHC must keep patient records safe as required by federal statute,

arguably qualifying RHC’s actions as “acting under” color of federal regulations. Agyin, 986

F.3d at 176; see also id. at 179 (finding that the defendant was “directed by federal regulation”

where the clinic was required to provide certain obstetrics and gynecological services to

“maintain coverage as a deemed PHS employee”).

Moreover, while applying data breaches to the regulations of § 233 appears to be one of

first impression in the Second Circuit, three recent district court opinions analyze nearly identical

facts. Each held that the failure to maintain the confidential nature of patient records constituted

a “medical or related function” under the FHSCAA. Doe, slip op. at 13 (holding that “failures by

the health centers to maintain the confidential nature of the records constituted a medical or

related function” under the FSHCAA); see also Ford v. Sandhills Medical Foundation, Inc., No.

21-CV-2307, 2022 WL 1810614, at *4 (D.S.C. June 2, 2022) (“The alleged data breach of such

information arose out of [the defendant’s] performance of medical or related functions within the

scope of its employment as a deemed PHS employee.”); Mixon, 2022 WL 1810615, at *3

(same). Each opinion also highlights 42 U.S.C. § 254b(3)(A), requiring a center to maintain the

confidentiality of patient records. Ford, 2022 WL 1810614, at *5 (“To be eligible for deemed

status and receive federal funds, [the defendant] must show it ‘will have an ongoing quality

improvement system that includes clinical services and management, and that maintains the

confidentiality of patient records.’” (citing 42 U.S.C. § 254b(k)(3)(C)); Mixon, 2022 WL

1810615 at *4 (same), Doe, slip op. at 13–14 (“The health centers in Ford and Mixon, like [the

defendant], were statutorily mandated to preserve and store the requisite information.”).

“Although [RHC’s] failure to maintain and protect the confidential information from

unauthorized access was not done in the actual rendering of medical treatment, it is a related

function because maintaining confidential personal and health information is necessary to

effectively treat patients.” Doe, slip op. at 14.

Accordingly, the Court concludes that RHC appropriately removed both Actions under §

1442 and Plaintiffs’ Motions for Remand on the basis of § 1442 is therefore denied.12

12 Because the Court finds that RHC is “acting under” the federal government for the

purposes of § 1442(a)(1), the Court declines to weigh in as to whether RHC is itself a federal

officer. (See Def’s Krandle Opp. 23; Def’s Esposito Opp. 22; Gov’t Stmt. 11–12.)

III. Conclusion

For the reasons stated above, Krandle’s Motion is granted in part and denied in part, and

Esposito’s Motion is granted in part and denied in part.

The Clerk of Court is respectfully directed to terminate the pending Motions, (Dkt. No.

19, Case No. 22-CV-2877; Dkt. Nos. 10, 11, Case No. 22-CV-5039). The Court will hold a

status conference for both cases on April 14, 2023 at 10:30 AM.

SO ORDERED.

DATED: March 28, 2023

White Plains, New York

____________________________________

KENNETH M. KARAS

United States District Judge