Application of Lewis
| Decision Date | 28 April 1981 |
| Docket Number | No. 81 Civ. 2084 (PNL).,81 Civ. 2084 (PNL). |
| Citation | 512 F. Supp. 1146 |
| Parties | In the Matter of the Application of Albert B. LEWIS, as Superintendent of Insurance of the State of New York, for an order to take possession of the property and rehabilitate Manhattan Health Plan, Inc. |
| Court | U.S. District Court — Southern District of New York |
Philip Gassel, Epstein, Becker, Borsody & Green, New York City, for Albert B. Lewis.
Asst. U. S. Atty., Leona Sharpe, New York City, for Secretary of the U. S. Dept. of Health and Human Services.
This action was begun in New York State Supreme Court and removed by the defendant, the Secretary of the United States Department of Health and Human Services "the Secretary", to federal court. The Secretary moves to vacate a temporary restraining order entered in the state court on the application of plaintiff, the Superintendent of Insurance of the State of New York "the Superintendent".
The Superintendent moves to remand the action to the New York state court, and moves also for an injunction restraining the Secretary from revoking the Health Department's certification of Manhattan Health Plan.
The facts are not in dispute. Manhattan Health Plan "MHP" was a federally qualified health maintenance organization "HMO". Through 1979 and 1980 MHP's financial status was investigated, and in 1981 MHP was threatened with revocation of its federal qualification by reason of its inadequate financing. On March 6, 1981 MHP brought suit in this court to enjoin the Secretary from revoking its federal qualification, MHP, Inc. v. Schweiker, 81 Civ. 1312 (PNL). On March 13, 1981 I denied MHP's application for a temporary restraining order and preliminary injunction.
On April 1, the Secretary's representative, the Director of the Office of Health Maintenance Organizations, revoked MHP's federal qualification.
The same day the Superintendent of Insurance of the State of New York filed, in New York State Supreme Court, for an Order of Rehabilitation of MHP under Article 16 of New York State's Insurance Law. The state court adjudged MHP to be insolvent, and granted the Order of Rehabilitation, providing that the Superintendent was to take possession of MHP, conduct its business, and seek to remove the causes of its financial problems. The Order also enjoined all persons from doing or permitting to be done any act or thing which might waste MHP's assets.
On April 6, 1981 in the New York State court the Superintendent applied for and was granted a temporary restraining order enjoining the Secretary from revoking MHP's federal qualification, or from giving effect to any revocation of qualification.
The next day, April 7, the Secretary removed the entire rehabilitation proceedings to this court pursuant to 28 U.S.C. §§ 1441, 1442(a)(1) and 1446. The motions now pending were then made in this court.
On April 13, at oral argument the parties agreed under 28 U.S.C. § 1441(c) to remand to state court the rest of the rehabilitation proceedings, not including the restraining order against the Secretary and the motions addressed to it.
I conclude that the restraining order against the Secretary was properly removed to this court; the Superintendent's motion to remand it is denied. The temporary restraining order is hereby vacated, and the Superintendent's motion for a preliminary injunction against the Secretary is denied.
The Superintendent contends the case was not properly removed to federal court. The Secretary primarily relies on 28 U.S.C. § 1442(a)(1) which provides:
The Secretary argues that the Superintendent's motion for an injunction against the Secretary is a civil action against the Secretary acting as an officer of the United States for an act performed under color of his office and, as such, is removable as of right.
The Superintendent argues that the motion is not a "civil action" against the federal officer, but is rather an order ancillary and incidental to the state rehabilitation proceeding, an in rem action which is within the exclusive jurisdiction of the state court.
The Superintendent supports this argument by the contention that federal qualification is an asset of MHP; it is therefore, like MHP's other assets, under the exclusive administration of the state rehabilitation court; its revocation would affect the value of MHP's other assets and the viability of its business; all leading to the asserted conclusions that the state bankruptcy court has exclusive jurisdiction and that the injunction issued against the Secretary is merely an ancillary act to the state court rehabilitation and not a separate removable action.
These arguments and the cases offered in support of the conclusion are not persuasive. The Secretary's interest in MHP's qualification is not as a claimant to rights in an asset; it is as a federal regulatory official performing a duty of evaluating the financial solidity of a regulated entity to determine whether continued official qualification is appropriate. This is a stubbornly mandated duty; see 42 U.S.C. § 300e-11 (1979 Supp.) In this context the Superintendent's argument makes little sense. Although the qualification might be perhaps properly characterized as an "asset" of the estate in a different kind of a dispute with a third party, such use of labels, wholly inappropriate in any event in this context, does not defeat the right of the federal officer to protective access by removal to federal court when enjoined in state court from performing his duties.
The cases cited by the Superintendent generally involved other bases for removal than the federal officers' statute, and generally involved competing claims for funds under the state court's jurisdiction; see N. Y. v. National Cancer Hospital of America, 153 F.Supp. 484 (S.D.N.Y.1956); Overman v. Overman, 412 F.Supp. 411 (E.D.Tenn. 1976); Nowell v. Nowell, 272 F.Supp. 298 (D.Conn.1967). Western Medical Properties Corp. v. Denver Opportunity, Inc., 482 F.Supp. 1205 (D.Colo.1980) () involved an attempt by a federal agency to remove a garnishment proceeding by virtue of its interest in the garnisheed funds. This case, for the reasons spelled out above, is quite different.
Thus the nature of the action being taken by the Secretary is not of the type which belongs within the exclusive jurisdiction of the state court of rehabilitation. The nature of the relief sought against the Secretary is precisely the type for which removal is provided by § 1442(a)(1) to guarantee to officers of the United States access to a federal court when the lawfulness and propriety of their acts under color of office is challenged.
The fact that the order was ancillary to a state rehabilitation proceeding is of no consequence. To give controlling significance to that fact would put form and procedure over the substance of what the removal statute was designed to protect. Judging the character of the regulatory act which the federal official seeks to undertake and the character of the relief sought and granted against him, I find that the action is removable under the provision of § 1442(a)(1). Whether the same would hold true if the federal official were seeking to perfect a security interest, or to protect rights as a creditor, or as an adverse cl...
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...the valid police power of the states in this manner." (420 F.Supp. at 45-46.) Similar language is also found in Application of Lewis (S.D.N.Y.1981), 512 F.Supp. 1146, 1149, where the court said: "a state's exercise of regulatory or 'police' power is not divested of jurisdiction or authority......
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