Opinion

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

STATE OF LOUISIANA CASE NO. 6:25-CV-01130

VERSUS JUDGE DAVID C. JOSEPH

CAREMARK P C S HEALTH LLC ET MAGISTRATE JUDGE CAROL B.

AL WHITEHURST

REPORT AND RECOMMENDATION

Before the Court is the Motion to Remand filed by Plaintiff, State of

Louisiana. (Rec. Doc. 19). Defendant, CaremarkPCS Health, LLC (“Caremark”),

opposed the Motion (Rec. Doc. 22). The motion was referred to the undersigned

magistrate judge for review, report, and recommendation in accordance with the

provisions of 28 U.S.C. §636 and the Court’s standing orders. Considering the

evidence, the law, and the parties’ arguments, and for following the reasons, the

Court recommends that Louisiana’s Motion to Remand be denied.

Facts and Procedural History

Louisiana filed this civil enforcement action under the Louisiana Unfair

Trade Practices Act (LUPTA) in state court in June 2025. The state seeks an

injunction, restitution, and civil penalties against CVS Health Corp. (“CVS”) and

Caremark, a CVS pharmacy benefit manager (PBM). (Rec. Doc. 1-1). The Supreme

Court helpfully explained the PBM industry as follows:

Pharmacy benefit managers (PBMs) are a little-known but

important part of the process by which many Americans get their

prescription drugs. Generally speaking, PBMs serve as intermediaries

between prescription-drug plans and the pharmacies that beneficiaries

use. When a beneficiary of a prescription-drug plan goes to a pharmacy

to fill a prescription, the pharmacy checks with a PBM to determine

that person's coverage and copayment information. After the

beneficiary leaves with his or her prescription, the PBM reimburses the

pharmacy for the prescription, less the amount of the beneficiary's

copayment. The prescription-drug plan, in turn, reimburses the PBM.

The amount a PBM “reimburses” a pharmacy for a drug is not

necessarily tied to how much the pharmacy paid to purchase that drug

from a wholesaler. Instead, PBMs’ contracts with pharmacies typically

set reimbursement rates according to a list specifying the maximum

allowable cost (MAC) for each drug. PBMs normally develop and

administer their own unique MAC lists. Likewise, the amount that

prescription-drug plans reimburse PBMs is a matter of contract

between a given plan and a PBM. A PBM's reimbursement from a plan

often differs from and exceeds a PBM’s reimbursement to a pharmacy.

That difference generates a profit for PBMs.

Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80, 83–84, 141 S. Ct. 474, 478

(2020).

Louisiana alleges that Caremark’s control over all stages of the

pharmaceutical supply chain, including insurance, drug pricing, distribution, and

dispensing, violates Louisiana’s PBM regulatory statutes and has harmed

independent pharmacies and the public. (Rec. Doc. 1-1, ¶13-58). Caremark removed

the case to this Court asserting federal jurisdiction under the federal officer removal

statute, 28 U.S.C. §1442. Caremark asserts that it provides services to clients who

offer health plans through the Federal Employee Health Benefits Act (FEHBA) to

federal employees and that these FEHBA clients contract with the federal Office of

Personnel Management (OPM), which, in turn, requires certain contractual terms

governing pharmacy services. (See Rec. Doc. 22-1). As bound by such federal

contracts, Caremark argues that the federal officer removal statute permits federal

court jurisdiction over Louisiana’s state law claims. Louisiana contends Caremark’s

relationship with OPM and its federal contracts are insufficient to confer jurisdiction

and that, regardless, the state’s sovereignty over its citizens’ health, safety, and

welfare precludes federal court involvement.

Law and Analysis

I. Jurisdiction under the Federal Officer Removal Statute.

28 U.S.C. §1442(a)(1) confers federal court jurisdiction and authorizes

removal of a civil action commenced in a state court that is against or directed to

“the 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…” “The statute’s basic

purpose is to protect the federal government from interference with its operations

that would ensue if a state were able to arrest federal officers or agents acting within

the scope of their authority and bring them to trial in state court on state-law

charges.” Plaquemines Par. v. BP Am. Prod. Co., 103 F.4th 324, 333 (5th Cir. 2024),

cert. granted sub nom. Chevron USA Inc. v. Plaquemines Par., Louisiana, 145 S.

Ct. 2792 (2025), and cert. dismissed in part sub nom. Chevron USA Inc. v.

Plaquemines Par., 145 S. Ct. 2290 (2025).

Unlike other removal doctrines, federal officer removal is not

narrow or limited. However, it remains the removing party’s burden to

establish federal jurisdiction exists. And if the removing party

establishes that one claim satisfies the requirements under § 1442(a)(1),

the entire case is deemed removable.

Id.

“[T]o remove under section 1442(a), a defendant must show (1) it has asserted

a colorable federal defense, (2) it is a ‘person’ within the meaning of the statute, (3)

that has acted pursuant to a federal officer’s directions, and (4) the charged conduct

is connected or associated with an act pursuant to a federal officer’s directions.” St.

Charles Surgical Hosp., L.L.C. v. Louisiana Health Serv. & Indem. Co., 990 F.3d

447, 454 (5th Cir. 2021) (“St. Charles II”), quoting Latiolais v. Huntington Ingalls,

Inc., 951 F.3d 286, 296 (5th Cir. 2020).

A. Whether Caremark is a person.

The “person” inquiry is the easiest, as “the Supreme Court has long

recognized that the removal statute applies to private persons and corporate entities

who lawfully assist the federal officer in the performance of his official duty.”

Savoie v. Huntington Ingalls, Inc., 817 F.3d 457, 461–62 (5th Cir. 2016) (cleaned

up), (overruled on other grounds by Latiolais v. Huntington Ingalls, Inc., 951 F.3d

286 (5th Cir. 2020)), citing Watson v. Philip Morris Cos., 551 U.S. 142, 151, 127 S.

Ct. 2301, 2301 (2007). Although Louisiana agrees that Caremark is a juridical

person, the state argues that Caremark “was not the person contracting with the

federal government.” (Rec. Doc. 19-1, p. 10, emphasis as written). Louisiana

suggests that Caremark is a federal subcontractor, whose relationship with OPM is

too attenuated to confer federal court jurisdiction. The argument is better addressed

in analyses of the other elements for §1442 removal, discussed below. The Court

finds that Caremark, a corporate entity, is a person to which the statute applies.

B. Whether Caremark acted pursuant to a federal directive.

To satisfy the “pursuant to” [a federal directive] requirement, a

private actor must go beyond mere compliance with the law and instead

help the government fulfill other basic governmental tasks.

Importantly, acting “pursuant to” a federal officer’s directive does not

include simply complying with the law, even if the law involves intense

governmental regulations. Stated differently: acting pursuant to a

federal officer’s directions means that the relationship between the

government and the private entity extends beyond a regulator/regulated

relationship and will typically involve a contractual agreement or

agency relationship.

Martin v. LCMC Health Holdings, Inc., 101 F.4th 410, 414–15 (5th Cir. 2024), citing

Watson.

Defendants rely on a FEHBP Standard Contract for Experience-Rated Health

Maintenance Organization Carriers. (Rec. Doc. 1-3). Louisiana maintains the

FEHBA contract does not encompass Caremark, a subcontractor for PBM services,

and is thus too attenuated to meet the fourth requirement for federal officer

jurisdiction. The Court disagrees. The contract includes Section 1.28—Standards for

Pharmacy Benefit Management Company Arrangements, which requires that

carriers’ subcontracts with PBM vendors, like Caremark, include certain standards,

terms, and conditions. (Rec. Doc. 1-3, p.25-30). As the Fourth Circuit noted in a

substantially similar case, “[t]hough FEHBA carriers are the middlemen between

OPM and PBMs, like Caremark in this arrangement, the absence of a direct

contractual relationship with the federal government is not a bar to removing an

action under § 1442(a)(1).” W. Virginia ex rel. Hunt v. CaremarkPCS Health, L.L.C.,

140 F.4th 188, 198 (4th Cir. 2025) (internal quotes omitted). Hence, Caremark’s

contracts with any carrier for federal employee health benefits are “pursuant to” a

federal directive, satisfying the third element.

C. Whether Caremark’s alleged conduct is connected or associated

with an act pursuant to a federal officer’s directions.

The fourth element is often the most contentious in federal officer removal

cases. Plaquemines Parish v. BP is the Fifth Circuit’s most recent instruction on the

issue:

Private persons, including corporations, may invoke the federal

officer removal statute only if they were “acting under” a federal officer

or agency. The phrase “acting under” describes the triggering

relationship between a private entity and a federal officer. In describing

the “acting under” inquiry, the Supreme Court in Watson acknowledged

that it is a broad phrase that must be liberally construed, but is not

limitless.

In cases involving a private party, the “acting under” relationship

must involve an effort to assist, or to help carry out, the duties or tasks

of the federal superior. And although a removing defendant need not

show that its alleged conduct was precisely dictated by a federal

officer’s directive, it must show that a federal officer exerted a

sufficient level of subjection, guidance, or control over the private

actor. However, the help or assistance necessary to bring a private

person within the scope of the statute does not include simply

complying with the law. This is true even if the regulation is highly

detailed and even if the private firm’s activities are highly supervised

and monitored.

Plaquemines Par. v. BP Am. Prod. Co., 103 F.4th at 334 (cleaned up; emphasis in

original), citing Watson, supra. See also St. Charles Surgical Hosp., L.L.C. v.

Louisiana Health Serv. & Indem. Co., 990 F.3d 447, 454-55 (5th Cir. 2021) (“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…Instead, the ‘acting under’ inquiry examines the relationship between the

removing party and the relevant federal officer, requiring courts to determine

whether the federal officer exerts a sufficient level of subjection, guidance, or control

over the private actor.”)

In Plaquemines Parish, the Court considered whether oil companies who had

contracted with the federal government could invoke §1442 jurisdiction based on

contracts to refine oil. Plaquemines Par., 103 F.4th at 338–39. The court emphasized

that the source of the federal directive must be the contracts at issue. Id. Mere

compliance with federal regulations, guidance or expectation—even if the private

party is a federal contractor—is insufficient. Id. “To the contrary, in cases involving

private federal contractors, courts look to the contents of the relevant federal

contracts in determining whether the challenged conduct was ‘connected or

associated with’ acts taken under color of federal office.” Id.1

The FEHBA contract dictates required contents of PBM subcontracts (e.g.

Transparency Standards regarding certain costs and fees, Integrity Standards

requiring adherence to a code of ethics, and Performance Standards, inter alia). (Rec.

Doc. 1-3, p. 25-30). The contract imposes affirmative duties on PBMs, such as

developing and applying a quality assurance program and submitting reports to the

carrier on their performance (p. 28). The contract requires PBMs to utilize a specific

protocol for certain drug interchanges (p. 29) and to establish a drug utilization

management system for consumer safety (p. 30). The contract further dictates the

terms and conditions of PBM contracts, such as the required term (not to exceed

three years) and provisions addressing material breach (p. 30).

The Court must next identify Caremark’s challenged conduct and determine

whether that conduct falls within the scope of federal directives. Louisiana alleges

that together CVS and Caremark “impose crippling fees on independent pharmacies”

1 Ultimately, the Fifth Circuit affirmed the district court’s remand order, finding that the

defendants did not satisfy the “connected to or associated with” element of federal officer

removal. The Supreme Court granted the defendants’ writ of certiorari, which argued that

the Fifth Circuit’s application of the test was too confined and urged a broader application.

The facts and contract at issue in the case at bar are distinguishable from Plaquemines Par.,

and, as discussed below, the Court finds sufficient association under the fourth element.

Thus, a Supreme Court ruling reversing Plaquemines Par. would not likely affect the

outcome of this case. In any event, other Fifth Circuit precedent supplies the applicable

test. Latiolais, St. Charles II.

and charge pharmacies various remuneration, claw back, and administrative fees

which harm independent pharmacies, who lack bargaining power in the allegedly

CVS-controlled market. (Rec. Doc. 1-1, ¶29; 33-40). The FEHBA contract dictates

specific rules—including rules affecting pricing and fees—which the PBM and

carrier must follow. (Rec. Doc. 1-3, p. 26, (a)Transparency Standards). Contracts

between Caremark and its FEHBA clients, must contain certain requirements

regarding pharmacy reimbursement, fees, and pricing. (Rec. Doc. 22-1, ¶5). By

virtue of the FEHBA contract, Caremark is subject to OPM monitoring, oversight,

and audits. (¶6-7). In fact, OPM, through the Inspector General Officer of Audits,

has audited Caremark’s PBM services and published audit reports. (¶7). Considering

Louisiana’s specific challenge and Caremark’s federally-dictated contracts, the

Court finds that Caremark was “acting under” a federal directive vis-à-vis pricing

and fees, at least insofar as Caremark provided PBM services pursuant to carriers’

contracts with OPM. See also Gov't of Puerto Rico v. Express Scripts, Inc., 119 F.4th

174, 190 (1st Cir. 2024) (affirming federal officer jurisdiction on similar facts

involving Caremark and OPM FEHBA contracts, despite the plaintiff-government’s

disclaimer that its claims did not apply to federal contracts); and Hunt, 140 F.4th at

197 (same).

D. Whether Caremark asserts a colorable federal defense.

Having found that Caremark meets the second, third, and fourth elements for

federal officer removal, the Court last considers the first element—whether

Caremark has asserted 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. Instead, an asserted federal defense is colorable unless it is

immaterial and made solely for the purpose of obtaining jurisdiction or

wholly insubstantial and frivolous. Certainly, if a defense is plausible,

it is colorable.

Latiolais, 951 F.3d at 296–97 (cleaned up).

Caremark contends that Louisiana’s claims are preempted by FEHBA, which

authorizes OPM to contract with health carriers subject to the statute’s requirements.

5 U.S.C. §8902. FEHBA explicitly preempts any state or local law or regulation

which relates to health insurance or plans. §8902(m)(1). The contract discussed

above, which dictates terms and provisions of any PBM subcontract, is an OPM

contract contemplated by FEHBA. The Louisiana statute upon which the state relies,

La. R.S. 22:1860.3, is a state law which relates to health insurance. FEHBA

expressly preempts it, thereby presenting a colorable federal defense. See also

Puerto Rico, 119 F.4th at 190, and Hunt, supra, agreeing with Puerto Rico.

Caremark has met its burden to show federal jurisdiction under the federal officer

removal statute.

II. State Sovereignty.

Louisiana maintains that its parens patriae duty to assert quasi-sovereign

claims to protect its citizens’ health, safety, and welfare overcomes Defendants’

position. Whether a state may exercise its parens patriae right answers questions

regarding the propriety of the state’s presence in a suit, such as questions on issues

of standing (e.g. Alfred L. Snapp & Son, Inc. v. Puerto Rico, ex rel., Barez, 458 U.S.

592, 601, 102 S. Ct. 3260, 3265 (1982)), and Harrison v. Jefferson Par. Sch. Bd., 78

F.4th 765, 769 (5th Cir. 2023)) and indispensability (e.g. Hood ex rel. Mississippi v.

Microsoft Corp., 428 F. Supp. 2d 537, 542 (S.D. Miss. 2006)). Defendants have not

challenged Louisiana’s standing or its right to bring the suit.

Nevertheless, Louisiana argues that whether Defendants acted pursuant to

federal officer direction is irrelevant, because it is not stepping into the shoes of any

citizen in this suit, but rather, Louisiana brings the suit on its own behalf. (See

discussion in Harrison, 78 F.4th at 769.) Thus, the state argues, a favorable ruling on

its claims would not affect Defendants’ federal contractual obligations, such that

federal officer removal cannot apply. The state’s logic is unpersuasive. A judgment

that Caremark violated Louisiana’s PBM statute or otherwise engaged in unfair

practices regarding its drug pricing and fees would necessarily call into question

Caremark’s actions vis-à-vis the FEHBA contract or at least pit the state’s PBM laws

against FEHBA. The effect of the FEHBA contract on Caremark’s actions is an

essentially federal question unaffected by the nature of the state’s suit or the capacity

in which it sues.

Louisiana also attempts to assert its Eleventh Amendment immunity. “The

Eleventh Amendment grants a State immunity from suit in federal court by citizens

of other States, and by its own citizens as well.” Union Pac. R. Co. v. Louisiana Pub.

Serv. Comm'n, 662 F.3d 336, 340 (5th Cir. 2011), citing Lapides v. Bd. of Regents,

535 U.S. 613, 616, 122 S.Ct. 1640 (2002). As evidenced by the clear language of the

amendment, the Eleventh Amendment is inapplicable where a state is the plaintiff.

See Huber, Hunt & Nichols, Inc. v. Architectural Stone Co., 625 F.2d 22, 24, fn. 6

(5th Cir. 1980); Illinois v. City of Milwaukee, Wis., 406 U.S. 91, 100–01, 92 S. Ct.

1385, 1391, 31 L. Ed. 2d 712 (1972), (abrogated on other grounds), discussing Ames

v. Kansas, 111 U.S. 449, 470—472, 4 S.Ct. 437, 447—448 (1884). Accordingly,

Louisiana cannot rely on Eleventh Amendment immunity to prevent removal.

Conclusion

For the foregoing reasons, the Court recommends that the State of Louisiana’s

Motion to Remand (Rec. Doc. 19) be DENIED.

Under the provisions of 28 U.S.C. § 636(b)(1)(C) and Fed. R. Civ. P. 72(b),

parties aggrieved by this recommendation have fourteen days from service of this

report and recommendation to file specific, written objections with the Clerk of

Court. A party may respond to another party’s objections within fourteen days after

being served with of a copy of any objections or responses to the district judge at the

time of filing.

Failure to file written objections to the proposed factual findings and/or the

proposed legal conclusions reflected in the report and recommendation within

fourteen days following the date of its service, or within the time frame authorized

by Fed. R. Civ. P. 6(b), shall bar an aggrieved party from attacking either the factual

findings or the legal conclusions accepted by the district court, except upon grounds

of plain error. See Douglass v. United Services Automobile Association, 79 F.3d

1415 (5 Cir. 1996) (en banc), superseded by statute on other grounds, 28 U.S.C.

$636(b)(1).

THUS DONE in Chambers, Lafayette, Louisiana on this 29" day of October,

CAROL B.WHITEHURST

UNITED STATES MAGISTRATE JUDGE

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