United States District Court, D. South Carolina, Columbia Division
RAYMOND G. FARMER, in his capacity as Liquidator of Consumers' Choice Health Insurance Company, and MICHAEL J. FITZGIBBONS, in his capacity as Special Deputy Liquidator of Consumers' Choice Health Insurance Company, Plaintiffs,
THE UNITED STATES OF AMERICA, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, CENTERS FOR MEDICARE & MEDICAID SERVICES, ALEX M. AZAR II, in his capacity as Secretary of the United States Department of Health and Human Services, and SEEMA VERMA, in her capacity as Administrator for the Centers for Medicare & Medicaid Services, Defendants.
MEMORANDUM OPINION AND ORDER GRANTING THE
GOVERNMENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER
GEIGER LEWIS UNITED STATES DISTRICT JUDGE
Raymond G. Farmer, in his capacity as Liquidator of
Consumers' Choice Health Insurance Company
(Consumers' Choice or the Company), a now defunct South
Carolina insurance company, and Michael J. Fitzgibbons, in
his capacity as Special Deputy Liquidator of the Company
(collectively, the liquidators), filed this case as a
declaratory action in accordance with 28 U.S.C. 2201. They
brought the lawsuit against Defendants the United States of
America, the United States Department of Health and Human
Services (HHS), the Centers for Medicare & Medicaid
Services (CMMS), Alex M. Azar II, in his capacity as
Secretary of the HHS, and Seema Verma, in her capacity as
Administrator for the CMMS (collectively, the government).
before the Court is the government's motion to dismiss
for lack of subject matter jurisdiction, Fed.R.Civ.P.
12(b)(1), or, in the alternative, for failure to state a
claim, Fed.R.Civ.P. 12(b)(6). Having carefully considered the
Rule 12(b)(1) portion of the motion, the response, and the
reply, the Court will grant the government's motion to
dismiss for lack of subject matter jurisdiction. As such, the
Court need not reach the parties' arguments as to the
government's alternative request to dismiss for failure
to state a claim.
BRIEF FACTUAL AND PROCEDURAL HISTORY
approximately two years, Consumers' Choice provided
health insurance plans on the health insurance marketplaces
created by the Patient Protection and Affordable Care Act
(the Affordable Care Act or the Act). As is pertinent here,
the Act allows for a system of payments by the government,
which serve to minimize the risk to insurance companies of
furnishing insurance to persons who were previously without
insurance and have unknown health risks.
March 2012, the government and Consumers' Choice closed
on a Loan Agreement, which included Promissory Notes for a
Start-up Loan to Consumers' Choice in the amount of $18,
709, 800 and Solvency Loans to the Company in the amount of
$68, 868, 408.
September 11, 2013, Consumers' Choice and the government
entered into an Agreement regarding Consumers'
Choice's provision of insurance in calendar year 2014 and
the payment of various amounts between Consumers' Choice
and the government. The parties renewed the Agreement on
October 28, 2014.
Choice eventually failed. The liquidators blame the
government's alleged breach of its promise to dispense
funding in accordance with the Affordable Care Act for the
demise of the Company. The state court ultimately placed the
Company into liquidation. According to the liquidators, the
government then commenced an array of inappropriate setoffs
devised to elevate its priority of payment from the estate of
the Company above the claims of others who should possess the
higher priority. Consequently, the liquidators claim the
government owes them certain amounts of money; and it is
disallowed from employing setoffs to cover any purported
debts the estate of Consumers' Choice might owe to the
government. In the alternative, the liquidators urge, even if
setoffs are appropriate, the government can employ them only
after the estate of the Company has paid the higher priority
lawsuit, the liquidators ask for a declaration the
government's actions are wrongful and enjoined on the
bases they are violative of South Carolina law, the terms of
the Affordable Care Act, the Loan Agreement, and the January
20, 2017, Presidential Executive Order, which requires the
government and its agencies to “exercise all authority
and discretion available to them to waive, defer, grant
exemptions from, or delay the implementation of any provision
or requirement of the Act that would impose a fiscal burden
on any State[.]” Executive Order 13765 (Jan. 20, 2017).
the liquidators filed their amended complaint, the government
filed its motion to dismiss for lack of subject matter
jurisdiction, or, in the alternative, for failure to state a
claim. The liquidators filed their response to the motion, to
which the government filed its reply. The Court, having been
fully briefed on all of the relevant issues, is now prepared
to adjudicate the government's motion.
STANDARD OF REVIEW
courts are courts of limited jurisdiction. They possess only
that power authorized by Constitution and statute, which is
not to be expanded by judicial decree.” Kokkonen v.
Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). More
specifically, unless a matter involves an area of a federal
court's exclusive jurisdiction, a plaintiff may bring
suit in federal court only if the matter involves a federal
question arising “under the Constitution, laws or
treaties of the United States, ” 28 U.S.C. § 1331,
or if “the matter in controversy exceeds the sum or
value of $75, 000, exclusive of interest and costs, and is
between citizens of different states, ” 28 U.S.C.
§ 1332(a)(1). “It is to be presumed that a cause
lies outside this limited jurisdiction, and the burden of
establishing the contrary rests upon the party asserting
jurisdiction.” Kokkonen, 511 U.S. at 377.
Thus, in this action, the burden of proving subject matter
jurisdiction exists rests on the liquidators. See Evans
v. B.F. Perkins Co., a Div. of Standex Int'l Corp.,
166 F.3d 642, 647 (4th Cir. 1999).
motion to dismiss under Rule 12(b)(1) raises the fundamental
question of whether a court is competent to hear and
adjudicate claims. In reviewing a motion to dismiss under
Rule 12(b)(1), the Court is to “regard the
pleadings' allegations as mere evidence on the issue, and
may consider evidence outside the pleadings without
converting the proceeding to one for summary judgment.”
Richmond, Fredericksburg & Potomac R.R. Co. v. United
States, 945 F.2d 765, 768 (4th Cir.1991).
a waiver, sovereign immunity shields the Federal Government
and its agencies from suit.” F.D.I.C. v.
Meyer, 510 U.S. 471, 475 (1994). This includes
declaratory judgment actions. Goldstein v. Moatz,
364 F.3d 205, 219 (4th Cir. 2004) (“If a declaratory
judgment proceeding actually constitutes a suit against the
sovereign, it is barred absent a waiver of sovereign
immunity.”). A suit is against the sovereign if
“the judgment sought would expend itself on the public
treasury or domain, or interfere with the public
administration.” Dugan v. Rank, 372 U.S. 609,
620 (1963) (quoting Land v. Dollar, 330 U.S. 731,
agency heads are likewise immune from suit. Larson v.
Domestic & Foreign Commerce Corp., 337 U.S. 682, 688
(1949) (In a suit naming a government official in which the
Court is asked to prevent or discontinue a wrong, “the
suit is barred, not because it is a suit against an officer
of the [g]overnment, but because it is, in substance, a suit
against the [g]overnment over which the court, in the absence
of consent, has no jurisdiction.”). “It is not
necessary that the United States be denominated as a
party.” Portsmouth Redevelopment & Hous. Auth.
v. Pierce, 706 F.2d 471, 473 (4th Cir. 1983). The Court
will view a case against a federal agency or official
“as an action against the sovereign if ‘the
judgment sought would expend itself on the public treasury or
domain, or interfere with the public administration, or if
the effect of the judgment would be to restrain the
[g]overnment from acting, or compel it to act.'”
Id. (quoting Dugan v. Rank, 372 U.S. 609,
immunity is not a sword, but a shield; and as a shield it
means simply that ‘the United States cannot be sued at
all without the consent of Congress.'” United
States v. Bankers Ins. Co., 245 F.3d 315, 320 (4th Cir.
2001) (quoting Block v. North Dakota, 461 U.S. 273,
287 (1983)). “[T]he terms of [the United States's]
consent to be sued in any court define that court's
jurisdiction to entertain the suit.” United States
v. Sherwood, 312 U.S. 584, 586 (1941). Such consent must
be “unequivocally expressed in statutory text, and will
not be implied.” Lane v. Peña, 518 U.S.
187, 192 (1996) (internal citations omitted). “[A]
waiver of sovereign immunity is to be strictly construed, in
terms of its scope, in favor of the sovereign.”
Dep't of Army v. Blue Fox, Inc., 525 U.S. 255,
the Tucker Act, 28 U.S.C. § 1491 & §
1346(a)(2), and the Administrative Procedures Act (APA), 5
U.S.C. § 702, “have been construed as waivers by
the United States of sovereign immunity.” Randall
v. United States, 95 F.3d 339, 345 (4th Cir. 1996). The
Supreme Court has concluded “by giving the Court of
[Federal] Claims jurisdiction over specified types of claims
against the United States, the Tucker Act constitutes a
waiver of sovereign immunity with respect to those
claims.” United States v. Mitchell, 463 U.S.
206, 212 (1983). And the Supreme Court, in Bowen v.
Massachusetts, 487 U.S. 879 (1988), recognized
“the 1976 amendment to 5 U.S.C. § 702 was intended
to broaden the avenues for judicial review of agency action
by eliminating the defense of sovereign immunity in cases
covered by the amendment.”) Id. at 891-92
purposes of this lawsuit, if Tucker Act waiver of sovereign
immunity applies, this case must be heard by the Court of
Federal Claims. If the government's sovereign immunity is
waived under the APA, however, the matter belongs here.
CONTENTIONS OF THE PARTIES
government contends this action belongs not in this Court but
in the United States Court of Federal Claims. In support of
its argument, the government asserts this Court lacks
jurisdiction over this matter because the government has
refrained from waiving its sovereign immunity against
monetary disputes in the district court. Specifically, the
government avers the APA does not waive its sovereign
immunity in this Court inasmuch as the Federal Court of
Claims provides an adequate remedy for the liquidator's
claims. The government also maintains it has failed to waive
its sovereign immunity over the liquidators' specific
performance claim, and neither the Declaratory Judgment Act,
the All Writs Act, nor the South Carolina Liquidation Act
give this Court subject matter jurisdiction.
opposing the government's motion, the liquidators contend
their lawsuit should be heard in this Court. One of their
avowed reasons is that the government purportedly waived its
sovereign immunity in the Loan Agreement between the parties.
They also assert the APA provides a waiver of the
government's sovereign immunity in this Court because
they are not seeking monetary damages. The liquidators argue
equitable remedies with a monetary impact do not deprive this
Court of jurisdiction under the APA; and the Court of Federal
Claims does not provide an adequate remedy for their setoff
claims. They rely heavily on the Supreme Court's
Bowen decision for their APA arguments. The
liquidators also contend the Court of Federal Claims lacks
jurisdiction over their state law claims; and the government
waived sovereign immunity over the liquidators' claim for
liquidators agree with the government's statement neither
the Declaratory Judgment Act nor the All Writs Act create
subject matter jurisdiction in this Court.