Third Circuit Court of Appeals Renders Jurisdictional Opinion on PREP Act in COVID-19 Case Involving Nursing Home

Written by: Sandra Mekita Cianflone, Esq.

On October 20, 2021, the Third Circuit Court of Appeals issued their ruling in Maglioli v. Alliance HC Holdings LLC, Nos. 20-2833, relative to federal jurisdiction under the PREP Act.

Maglioli is one of the first COVID-19 nursing home cases filed in 2020. The estates claim negligence and wrongful death for failing to protect the residents against COVID-19. In affirming the District Court of New Jersey’s remand back to state court, the Court of Appeals found the following:

• Deference to HHS: Although Congress did delegate legislative authority to  HHS to invoke the powers under the PREP Act in scope, it does not empower HHS to infringe upon the role of the judiciary. As such, HHS opinion as to federal jurisdiction, whether directed through Declaration or Advisory Opinion, is not afforded any deference under Chevron nor Skidmore. As such, the Court’s opinion as to jurisdiction is exclusive of any HHS authority or guidance.
• Federal Officer Jurisdiction: Compliance with federal law/regulation does not confer federal officer status.
• Complete Preemption: The Court relied on the “exclusive federal cause of action” test for determining whether a statute creates federal jurisdiction through complete preemption. Although the PREP Act creates an exclusive federal cause of action for willful misconduct, the plaintiff did not claim willful misconduct in this case. They reasoned that the pleadings did not allege the elements of a willful misconduct claim, even though their punitive damages claim includes the term “willful” and included allegations of “recklessness”.
• Substantial Federal Issue under the Grable Doctrine: The Court briefly concluded that the argument as to the Grable Doctrine fails as the PREP Act was not “necessarily raised” in the Complaint.

Importantly, we note that the Court of Appeals explicitly limited their opinion to the issue of whether the federal courts have jurisdiction under the PREP Act and stated,

“[w]e do not hold that all state-law causes of action are invulnerable to complete preemption under the PREP Act. Conceivably, some state-law claims could fall within Congress’s narrow cause of action for willful misconduct. We also do not address whether the PREP Act preempts’ the estates’ claims under ordinary preemption rules. That is for the state court to determine on remand.”

Significantly, a consistent argument from the plaintiffs’ bar and the basis of the District Court’s decision was premised on “action versus inaction.” However, this argument was neither adopted nor rejected by the Third Circuit.

This is a significant development in COVID-19 Litigation. However, this determination is limited to the jurisdictional question and does not preclude application in state court. In fact, the language used by the Third Circuit continues to support a broad application of the PREP Act.

The Hall Booth Smith COVID-19 Taskforce has been working non-stop on the defense of COVID-19 cases since the beginning of the pandemic. Please do not hesitate to contact us should you have any questions or require additional information.