The opinion
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TRINITY HOME DIALYSIS, INC., §
§
Plaintiff, §
§
v. § Civil Action No. 3:20-CV-02112-X
§
WELLMED NETWORKS, INC., §
§
Defendant. §
§
MEMORANDUM OPINION AND ORDER
Trinity Home Dialysis (Trinity) sued WellMed Networks, Inc. (WellMed) in
Texas state court. WellMed removed the case to this Court under federal officer
removal. Trinity responded with a motion to remand, arguing the removal was
inappropriate. [Doc. No. 26]. WellMed, meanwhile filed a motion to dismiss under
Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). [Doc. No. 24]. For the reasons
stated below, the Court DENIES Trinity’s motion to remand, GRANTS WellMed’s
motion to dismiss, and DISMISSES WITHOUT PREJUDICE these claims.
I. Factual Background
The Centers for Medicare and Medicaid (the Centers) is the division of the
Department of Health and Human Services that administers Medicare benefits to
Medicare enrollees. Medicare Part C allows the Centers to contract with private
organizations to provide Medicare benefits to enrollees.1 In turn, these private
1 42 U.S.C. §§ 1395w-21 to -28.
organizations, known as Medicare Advantage Organizations, receive fixed monthly
payments from the Centers for each Medicare enrollee they insure. Part C allows the
Centers to contractually transfer their responsibility to provide medical insurance
(along with the corresponding administrative duties and financial risks) to Medicare
enrollees to these third-party Medicare Advantage Organizations.
Medicare Advantage Organizations may fulfill their contractual obligations
either by directly providing benefits to the Medicare enrollees they insure or by
paying third-party care providers for medical services rendered to the Medicare
Advantage Organization’s enrollees.2 If the Medicare Advantage Organization
chooses to deal with the provider rather than with the enrollees directly, it may do so
either by handling claims for reimbursement by a provider on a case-by-case basis or
by entering into a contract with the provider. When a Medicare Advantage
Organization contracts with a provider, it “agrees to pay certain rates for certain
categories of treatment.”3 Meanwhile, non-contract providers are reimbursed for
services they provide to individual enrollees based on the rates set by Medicare
regulations.4
WellMed is an indirect subsidiary of United HealthCare Services, Inc.5 Other
United HealthCare Services subsidiaries contract with the Centers under Medicare
Part C. WellMed, in turn, contracts with these fellow subsidiaries to perform the
2 42 C.F.R. § 422.214.
3 Tenet Healthsystem GB, Inc. v. Care Improvement Plus S. Cent. Ins. Co., 875 F.3d 584, 587–
88 (11th Cir. 2017).
4 42 C.F.R. § 422.214.
5 Doc. No. 25-1 at 1.
contractual obligations they owe to the government. Via these contracts, WellMed
performs actions that would otherwise ultimately have to be performed by the
Centers themselves.
Trinity is a provider of home dialysis services, medication, and medical
treatment provisions and supplies in the Dallas, Texas area. Between 2014 and
October 2016, it provided services to WellMed’s Medicare enrollees, for which
WellMed reimbursed it $388,681. From October 2016 until 2019, Trinity continued
to provide services to WellMed’s Medicare enrollees, for which it sought $2,089,800
in reimbursement from WellMed.6 WellMed, however, declined to fully reimburse
these services after determining that they did not qualify for Medicare
reimbursement. Instead, WellMed offered to pay Trinity $180,632, a figure WellMed
claims to have reached by “[determining] the closest approximation for payment as if
the Services had been subject to the standard Medicare fee schedule.”7
Unsatisfied with WellMed’s settlement offer, Trinity sued WellMed in Texas
state court. WellMed then removed the case to this Court under federal officer
removal and filed a motion to dismiss the case based on Trinity’s failure to exhaust
the administrative remedies made available to it by the Medicare Act, among other
reasons. Trinity filed a motion to remand to state court, arguing that this Court lacks
subject matter jurisdiction.
6 The parties dispute whether a contract existed between them at any point during these
transactions. The parties appeared before the Court for a jurisdictional hearing on the question of
whether such a contract existed and related questions. Doc. Nos. 40, 41.
7 Doc. No. 26-2 at 1.
II. Legal Standards
Federal officer removal is appropriate where suit is brought in state court
against “[t]he United States or any agency thereof or any officer (or any person acting
under that officer) of the United States or of any agency thereof, in an official or
individual capacity, for or relating to any act under color of such office.”8 Because
Congress has extended federal officer removal to “any person acting under [a federal]
officer,”9 private organizations like WellMed may invoke federal jurisdiction where
the requirements for federal officer removal are otherwise satisfied. The en banc
Fifth Circuit, broadening its previous interpretation of section 1442(a), recently
explained that federal officer removal is appropriate if (1) the defendant “is a ‘person’
within the meaning of the statute,” (2) “that has acted pursuant to a federal officer’s
directions,” (3) “the charged conduct is connected or associated with an act pursuant
to a federal officer’s directions,” and (4) the “defendant has asserted a colorable
federal defense.”10
Most removal statutes are strictly construed, with any doubts resolved in favor
of remand.11 But federal officer removal is different: “it is not narrow or limited.”12
And “assessment of whether [federal officer removal] jurisdiction exists must be
without a thumb on the remand side of the scale.”13 Indeed, “[the Supreme] Court
8 28 U.S.C. § 1442(a)(1).
9 Id.
10 Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286, 296 (5th Cir. 2020).
11 See Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281–82 (5th Cir. 2007).
12 St. Charles Surgical Hosp. v. La. Health Serv., 990 F.3d 447 (5th Cir. 2021) (cleaned up).
13 Id. (cleaned up).
has consistently urged courts to avoid ‘a narrow, grudging interpretation of
§ 1442(a)(1).’”14 Rather, “the statute must be liberally construed.”15
Meanwhile, under Rule 12(b)(1), “[a] case is properly dismissed for lack of
subject matter jurisdiction when the court lacks the statutory or constitutional power
to adjudicate the case.”16 “Courts may dismiss for lack of subject matter jurisdiction
on any one of three different bases: (1) the complaint alone; (2) the complaint
supplemented by undisputed facts in the record; or (3) the complaint supplemented
by undisputed facts plus the court’s resolution of disputed facts.”17 And dismissal is
appropriate under Rule 12(b)(6) where the plaintiff fails to state a claim upon which
relief can be granted. “When a Rule 12(b)(1) motion is filed in conjunction with other
Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack
before addressing any attack on the merits.”18
III. Analysis
A. The Motion to Remand
Federal officer removal is appropriate where (1) the defendant “is a ‘person’
within the meaning of the statute,” (2) “that has acted pursuant to a federal officer’s
directions,” (3) the charged conduct is connected or associated with an act pursuant
14 Latiolais, 951 F.3d at 290 (quoting Willingham v. Morgan, 395 U.S. 402, 407 (1969)).
15 Watson v. Philip Morris Cos., Inc., 551 U.S. 142, 150 (2007) (cleaned up).
16 Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
17 Clark v. Tarrant Cnty., 798 F.2d 736, 741 (5th Cir. 1986).
18 Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).
to a federal officer’s directions, and (4) the defendant “has asserted a colorable federal
defense.”19
1. WellMed is a person within the meaning of the statute.
WellMed’s status as a corporate entity satisfies the first requirement for
federal officer jurisdiction.20
2. WellMed has acted pursuant to a federal officer’s directions.
A defendant acts under a federal officer’s direction when, through a contract
with the government, it performs actions that, “in the absence of [the] contract . . .
the Government itself would have had to perform.”21 Accordingly, actions that the
defendant takes to fulfill its contractual obligations to the government are actions
taken under the direction of a federal officer. Even if the defendant has discretion in
fulfilling its contractual obligations to the government, the exercise of discretion in
fulfilling the task that the government has delegated to the defendant still occurs
under a federal officer’s direction: “In order to satisfy the ‘acting under’ requirement,
a removing defendant need not show that its alleged conduct was precisely dictated
by a federal officer’s directive.”22 WellMed, in performing its contractual obligations,
administers the Medicare program on behalf of the federal government pursuant to
stringent regulations. Absent Medicare Advantage Organizations such as WellMed,
the Centers would have to administer Medicare benefits themselves. So, WellMed
19 Latiolais, 951 F.3d at 296.
20 Savoie v. Huntington Ingalls, Inc., 817 F.3d 457, 461 (5th Cir. 2016), overruled on other
grounds by Latiolais, 951 F.3d 286.
21 Watson, 551 U.S. at 154.
22 St. Charles Surgical Hosp., LLC , 990 F.3d 447, 454 (5th Cir. 2021).
has acted pursuant to a federal officer’s directions in performing actions that the
government itself would otherwise have to perform.
While WellMed is a subcontractor and not technically in privity of contract
with the government, that does not change the analysis. After all, while the existence
of a contract between the defendant and the federal government can demonstrate
that the defendant acted under the direction of a federal officer, the federal officer
removal statute imposes no requirement that such a contract exist.23 In any event,
the Court finds persuasive the Fourth Circuit’s reasoning in County Board of
Arlington County, Virginia v. Express Scripts Pharmacy, Inc.24 There, the Fourth
Circuit concluded that a subcontractor could invoke federal officer removal because
the government contract expressly contemplated subcontractors and provided
various mechanisms of government supervision for these subcontractors.25 And even
as subcontractors, they were still responsible for performing actions that the
government would otherwise need to perform itself.26 So, “the absence of privity of
contract between the [subcontractors] and the government [did] not [foreclose
removal under section 1442(a)].”27 Here, the government contract also contemplates
subcontractors such as WellMed and provides various mechanisms of government
supervision and control over them.28 Likewise, WellMed performs actions that the
23 See 28 U.S.C. § 1442(a)(1).
24 996 F.3d 243 (4th Cir. 2021).
25 Id. at 253.
26 Id. at 253–54.
27 Id. at 254.
28 See Doc. No. 1-1 at 78.
government itself would otherwise need to perform. So, WellMed’s status as a
subcontractor does not materially change the analysis.29
3. WellMed’s charged conduct is connected to or associated with an
act pursuant to a federal officer’s directions.
WellMed makes Medicare reimbursement decisions as a Medicare Advantage
Organization based on its contractual obligation to reimburse qualifying Medicare
services. Because of WellMed’s status as a Medicare Advantage Organization,
Trinity submitted claims for Medicare reimbursement to WellMed. Exercising the
authority granted to it by the Centers, WellMed determined that Trinity’s claims
were not eligible for Medicare reimbursement and did not fully reimburse them. As
such, WellMed’s conduct arose from its obligation to determine whether care qualified
for Medicare reimbursement, and to reimburse or not reimburse accordingly. So, the
charged conduct is “connected or associated” with an act pursuant to a federal officer’s
directions.
4. WellMed has asserted a colorable federal defense.
The fourth and final requirement for federal officer removal is that the
defendant raises a colorable federal defense. “To be ‘colorable,’ the asserted federal
defense need not be ‘clearly sustainable,’ as section 1442 does not require a federal
official or person acting under him ‘to win his case before he can have it removed.’”30
29 WellMed’s contracts are with its fellow subsidiaries of the same parent organization,
meaning that an organization operating under the same overarching organizational umbrella as
WellMed is in direct privity of contract with the government. This reality may be an independent
ground for concluding that WellMed’s technical status as a subcontractor does not defeat federal officer
removal.
30 Latiolais, 951 F.3d at 29697 (quoting Jefferson Cnty. v. Acker, 527 U.S. 423, 431 (1999)
(cleaned up)).
WellMed claims three federal defenses: (1) Trinity’s failure to exhaust its
administrative remedies, (2) preemption of Trinity’s claims under the Medicare Act,
and (3) immunity based on WellMed’s status as a Medicare carrier acting in its official
capacity.
In administrating Medicare benefits, Medicare Advantage Organizations like
WellMed are responsible for determining whether a given medical treatment or
procedure qualifies for Medicare coverage, as well as the rate at which qualifying care
is covered or reimbursed.31 The Medicare regulations call these determinations
“organization determinations,” and medical care providers like Trinity are expressly
included as potential parties to these decisions.32 The Medicare regulations outline
a detailed process whereby these organization determinations may be
administratively appealed.33
Often where Congress has provided an administrative appeals process, would-
be plaintiffs must utilize that process before bringing their case to a federal district
court. There is no exception here: an enrollee or a provider like Trinity must exhaust
these administrative remedies before suing in a federal district court to challenge an
organization determination.34 As the Eleventh Circuit explained, “[i]f any one of the
foregoing parties wishes to challenge any aspect of an organization determination,
that party must exhaust its administrative remedies by following a specific procedure
31 42 U.S.C. § 1395w-22(g)(1)(A); Tenet, 875 F.3d at 586.
32 42 C.F.R. §§ 422.566, 422.574.
33 Id. §§ 422.560–422.626.
34 42 U.S.C. § 1395w-22(g)(5).
for administrative appeal prescribed by the Medicare Act and its implementing
regulations.”35
Trinity argues, however, that under RenCare, Ltd. v. Humana Health Plan of
Texas, Inc.,36 their claims are excluded from this administrative review process. The
Medicare regulations have been updated since RenCare was decided in 2004 in ways
that may have superseded it. Indeed, courts in other circuits have concluded just
that.37 Trinity does not address these developments. Because Trinity’s claims are
subject to the administrative review process even under RenCare, however, the Court
need not consider whether RenCare is still good law.
Central to Trinity’s argument is its contention that a contract exists between
Trinity and WellMed. But if such a contract exists, the terms of that contract are
different than the terms of the contract in RenCare in a crucial respect: it does not
waive Trinity’s right to seek payment for its services from the enrollees themselves.
In RenCare, the contract’s waiver of the plaintiff’s right to do so was central to the
Fifth Circuit’s analysis: because of the waiver, no Medicare enrollees were “at risk of
being billed for the services that [the plaintiff] provided them,” so “there [were] no
35 Tenet, 875 F.3d at 587 (citing 42 U.S.C. § 1395w–22(g) and 42 C.F.R. §§ 422.560–422.622);
see also, e.g., Sarene Servs., Inc. v. Empire Blue Cross/Blue Shield, No. 17-CV-5276, 2019 WL 402858
(E.D.N.Y Jan. 29, 2019).
36 395 F.3d 555, (5th Cir. 2004). As WellMed points out, RenCare dealt with federal question
jurisdiction as opposed to federal officer removal. Trinity fails to address this distinction or explain
RenCare’s applicability to this different context. Because, as explained below, the Court concludes
that WellMed’s defense based on Trinity’s failure to exhaust administrative remedies is not just a
potentially colorable defense, but a winning one, the Court need not address this distinction and its
implications.
37 See, e.g., Prime Healthcare Servs., Inc. v. Humana Ins. Co., No. CV 16-1097 BRO 2016 WL
6591768, at *6 (C.D. Cal. Nov. 4, 2016); Assocs. Rehab. Recovery v. Humana Med. Plan, Inc., 76 F.
Supp. 3d. 1388, 1392 (S.D. Fla. 2014).
enrollees seeking Medicare benefits.”38 Because the Medicare administrative review
process did “not extend to claims in which an enrollee has absolutely no interest,” the
Fifth Circuit concluded that the claims in question were not subject to it.39 The
situation here is very different. If a contract exists between Trinity and WellMed, it
does not include a waiver of Trinity’s right to seek payment from the enrollees
themselves.
While Trinity claims that it waived its right to seek payment from the
enrollees, it fails to argue the basis for this claim or point to anything in the record
reflecting such a waiver.40 In fact, the only indication of any sort of waiver in the
record is in the 2016 Single Case Agreement the parties entered into for one patient.41
This waiver—limited by the agreement’s own terms to a single enrollee—cannot be
plausibly read, standing alone, as creating or reflecting a general waiver term
applicable to all of WellMed’s enrollees to whom Trinity provided care from 2014 to
2019. “Dealings between parties may result in an implied contract where the facts
show that the minds of the parties met on the terms of the contract without any
legally expressed agreement.”42 Even if there was a general contract between Trinity
and WellMed requiring reimbursement, nothing suggests that the parties’ minds met
38 RenCare, 395 F.3d at 558.
39 Id. at 559.
40 Doc. No. 26 at 9; Doc. No. 28 at 10.
41 Doc. No. 21-2 at 2.
42 Fraud-Tech, Inc. v. Choicepoint, Inc., 102 S.W.3d 366, 386 (Tex. App.—Fort Worth 2003, pet.
denied) (cleaned up).
on such a waiver term as to all enrollees.43 Because Trinity could seek payment
directly from the enrollees, these enrollees have an interest in the claims in question.
So, even if RenCare is still good law, Trinity’s claims are subject to the administrative
review process under it.44
Trinity does not claim to have exhausted its administrative remedies. Because
Trinity must do so before it may sue WellMed in this Court, WellMed’s federal defense
based on Trinity’s failure to exhaust its administrative remedies is colorable.
B. The Motion to Dismiss
Having concluded that WellMed’s removal to this Court was proper, the Court
turns to WellMed’s motion to dismiss. WellMed argues that this Court should dismiss
the case under Federal Rule of Civil Procedure 12(b)(1) for a lack of subject matter
jurisdiction. Additionally, WellMed argues that the Court should dismiss the case
under Rule 12(b)(6) based on Trinity’s failure to state a claim upon which relief can
be granted.
Dismissal is appropriate under Rule 12(b)(1) where the court lacks subject-
matter jurisdiction to adjudicate the case. As discussed above, the Medicare
regulations provide care providers like Trinity with an administrative appeals
process for resolving reimbursement disputes with Medicare Advantage
43 While Trinity can point to WellMed’s years-long pattern of reimbursement as a course of
conduct arguably reflecting a meeting of the minds on a contract that required such reimbursement,
it cannot point to any course of conduct reflecting a meeting of minds on a waiver term for all enrollees.
44 And if RenCare is no longer good law, Trinity’s claims are of course still subject to the
administrative review process.
Organizations like WellMed.“ By statute, providers must exhaust these
administrative remedies before seeking relief in a federal district court.‘ Trinity
does not claim to have exhausted these remedies. Until Trinity exhausts its
administrative remedies, this Court lacks subject matter jurisdiction over its claims.
Therefore, the Court DISMISSES Trinity’s claims WITHOUT PREJUDICE under
Rule 12(b)(1).47
IV. Conclusion
For the foregoing reasons, the Court DENIES the motion to remand,
GRANTS the motion to dismiss, and DISMISSES the case WITHOUT
PREJUDICE.
IT ISSO ORDERED this 21st day of March, 2022.
UNITED STATES DISTRICT JUDGE
45 42 U.S.C. § 1895w—-22(g); 42 C.FLR. §§ 422.560—-422.622; Tenet, 875 F.3d at 587.
46 42 U.S.C. §§ 405(g), 1895 w-22(g)(5).
47 Tn light of this ruling, the Court need not reach WellMed’s other arguments for dismissal.
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