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Nursing Home Litigation Trends and the PREP Act

Dec. 23, 2021, 9:00 AM

Covid-19 has had a devastating effect on the residents and staff of nursing homes, in part due to their population of elderly residents who are more susceptible to the virus. The Centers for Medicare and Medicaid Services reports that as of Nov. 21, 730,867 nursing home residents have been infected with the coronavirus since the beginning of the Covid-19 pandemic, of whom 140,563 died.

Numbers for nursing home staff are similar, albeit less bleak: CMS reports 682,282 confirmed cases of Covid-19 among staff, of which 2,157 died.

Perhaps unsurprisingly, then, a significant number of lawsuits have been filed against nursing homes throughout the pandemic. Often brought by the estates of deceased residents, these litigations frequently allege negligence, wrongful death, and other state-law tort claims against nursing homes for failing to adequately protect residents from Covid-19 infection.

In responding to such allegations, defendants have turned to a previously relatively uninterpreted law as their first line of defense: the Public Readiness and Emergency Preparedness Act (PREP Act).

The PREP Act authorizes the Department of Health and Human Services secretary to issue declarations in response to public health emergencies. These declarations can provide “covered persons” (including business entities) immunity from claims arising from the administration or use of “covered countermeasures,” including diagnostics, treatments, vaccines, medical devices, or other FDA regulated assets.

The PREP Act further authorizes a compensation fund for injuries or deaths directly caused by administration or use of a covered countermeasure. The only statutory exception to PREP Act immunity is for actions or failures to act that constitute “willful misconduct”—such claims must be filed in the U.S. District Court for the District of Columbia.

Matter of First Impression in the Third Circuit

Few courts had interpreted or applied the PREP Act in any appreciable way prior to the Covid-19 pandemic, leaving litigants with questions concerning the scope of PREP Act immunity from liability and the propriety of defendant nursing homes’ removal of litigations potentially implicating the PREP Act to federal court.

Recently, however, the U.S. Court of Appeals for the Third Circuit ruled on PREP Act jurisdictional issues as a matter of first impression among federal appellate courts in an order that many defense attorneys view as a hit to their ability to keep nursing home Covid-19 cases in federal court.

In Maglioli v. Alliance HC Holdings LLC, the Third Circuit noted that the “story in all of these cases is essentially the same. Estates of deceased nursing-home residents sue the nursing homes in state court, alleging the nursing homes negligently handled Covid-19. The nursing homes remove to federal court based on a combination of federal-officer removal, complete preemption, and a substantial federal issue. Nearly every federal district court to confront these cases has dismissed for lack of jurisdiction and remanded to state court.”

Several of the most powerful arguments for keeping nursing home cases in federal court were thereafter rejected in the Maglioli opinion. The Third Circuit held that HHS advisory opinions interpreting the PREP Act were entitled to no deference; that federal officer removal was improper because nursing homes were not “acting under” a federal officer; that the PREP Act does not completely preempt state law negligence claims—only “willful misconduct” claims; and that there was no federal question jurisdiction pursuant to the Grable test on the grounds that state-law negligence claims do not “necessarily raise” the PREP Act.

For defense attorneys that have raised or planned to raise similar or identical arguments in factually similar litigation, the Maglioli opinion can be read as a blow to their chances of remaining in federal court. However, the door is not shut on the issues ruled upon in Maglioli—and, what’s more, several aspects of the opinion can almost certainly be used in defendants’ favor.

Further, and important for those cases that ultimately are remanded to state court, the Third Circuit’s opinion was limited to the jurisdictional arguments presented: It did not address “whether the PREP Act preempts the estates’ claims under ordinary preemption rules. That is for the state court to determine on remand.”

Consider Viability of Removal for Willful Misconduct Claim

Defense attorneys representing nursing homes in the Third Circuit facing state-law claims that potentially implicate PREP Act immunity would be well served to continue to consider the viability of removal. Maglioli confirmed that the “PREP Act’s language easily satisfies the standard for complete preemption of particular causes of action.”

The Third Circuit made clear that to determine whether removal was proper, courts should assess whether the estate “could have brought their claims under the PREP Act’s cause of action for willful misconduct.” Defense attorneys should carefully examine the allegations in each complaint to discern whether they could have been brought under the PREP Act’s willful misconduct cause of action. If so, those “state-law claims fall within the scope of the exclusive federal cause of action,” and are completely preempted.

For PREP Act litigation outside the Third Circuit, defendants have continued to grapple with Maglioli as negative persuasive authority. However, Maglioli is often overlooked as a source of positive persuasive authority: Defendants can and should use the “willful misconduct” analysis in the opinion as a sword by seeking to box plaintiffs into disclaiming allegations that raise the specter of complete preemption.

Further, it remains important to consider levying similar arguments for removal as those rejected on appeal in Maglioli. Appeals of PREP Act remand orders remain pending in the Second, Fifth, Sixth, Ninth, Eleventh, and D.C. circuits.

There is no obligation on the part of any other federal appellate court to resolve these issues as the Third Circuit did. Careful consideration should be given to the allegations in each complaint to discern whether it is appropriate to seek a stay of a remand order (or of ongoing state or federal court proceedings) pending the resolution of threshold PREP Act jurisdictional and immunity issues by the pertinent federal appellate court with binding authority.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Lisa M. Gilford is a partner with Sidley Austin LLP in Los Angeles. A civil litigator, her a practice is focused on class actions, multi-district litigation, products liability matters, and large-scale commercial disputes.

Christopher M. Griffin is an associate with Sidley Austin LLP in Los Angeles. He is a member of the firm’s Commercial Litigation and Disputes practice.

This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.