United States District Court, N.D. Illinois, Eastern Division
KEVIN FRY, in his capacity as Liquidator of Land of Lincoln Mutual Health Insurance Company, Plaintiff,
CENTERS FOR MEDICARE AND MEDICAID SERVICES, et al., Defendants.
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, UNITED STATES DISTRICT JUDGE
Kevin Fry (“Liquidator”), in his
capacity as Liquidator of Land of Lincoln Mutual Health
Insurance Company, brings the instant suit against the
Centers for Medicare & Medicaid Services
(“CMS”) and the United States of America. On its
face, the Complaint seeks “Declaratory and Injunctive
Relief” in the form of a court order deeming CMS's
offset payment system unlawful. The parties have each filed
dispositive motions, with the Liquidator moving for Summary
Judgment and the United States filing a Motion to Dismiss for
lack of jurisdiction and failure to state a claim. The
parties are no strangers to litigation or to this Court. The
Liquidator originally filed suit in the Circuit Court of Cook
County and the United States responded by removing the action
to this Court. After the Liquidator appealed the Court's
decision to remand and the Seventh Circuit reversed, he filed
this action. The present Complaint claims jurisdiction
is proper under the Administrative Procedure Act. Despite the
form of the Complaint, the substance of the relief the
Liquidator ultimately seeks renders this Court without
jurisdiction. Accordingly, the Government's Motion to
Dismiss for lack of subject-matter jurisdiction is granted
and the Liquidator's Motion for Summary Judgment is
dismissed as moot.
Court accepts the Complaint's well-pleaded facts as true
and draws all reasonable inferences in the Liquidator's
favor. Hecker v. Deere & Co., 556 F.3d 575, 580
(7th Cir. 2009). A brief recitation of the factual and
procedural background is documented below as the Court is
familiar with the relevant facts through the related case,
Dowling v. United States Dep't of Health & Human
Servs. 325 F.Supp.3d 884, 888 (N.D. Ill. July 2, 2018).
Lincoln is a former Illinois health care insurer that became
insolvent in 2016. (Dkt. 1, ¶ 1). Prior to its
insolvency, Land of Lincoln offered health insurance plans on
the Illinois Insurance Exchange for three years pursuant to
the Patient Protection and Affordable Care Act
(“ACA”). (Id. at ¶ 6). As part of
the ACA statutory structure, Land of Lincoln participated in
three risk mitigation programs-the Risk Adjustment Program,
the Reinsurance Program, and the Risk Corridor Program.
(Id. at ¶ 7). Funds related to these programs
flowed between the government and health insurers, including
Land of Lincoln. (Id.). CMS has engaged in a
practice of offsetting payments to Land of Lincoln against
debts owed by Land of Lincoln to CMS since at least July
2016. (Id. at ¶ 36). At the time of the filing
of this Complaint, CMS had offset $27 million. (Id.
at ¶ 39).
Lincoln failed financially and entered state rehabilitation
proceedings on July 14, 2016 (Id. at ¶ 37),
liquidation proceedings on September 29, 2016 (Id.
at ¶ 42), and ceased operations completely on October 1,
2016 (Id.). In December of 2016, the Liquidator
filed a motion in the state court liquidation proceedings
seeking an order that CMS's practice of offsetting of
payments was unlawful. (Id. at ¶ 43). CMS
removed the matter to this Court. (Id.). The case
was ultimately remanded, and the Court denied CMS's
motion for reconsideration. (Id. at ¶¶
44-45). On appeal, the Seventh Circuit found that this Court
construed its removal jurisdiction too narrowly and remanded
for further proceedings. Hammer v. United States
Dep't of Health & Human Servs., 905 F.3d 517,
536 (7th Cir. 2018). As a result, the Liquidator filed the
instant action on February 22, 2019. (Dkt. 1).
reviewing a Motion to Dismiss pursuant to Rule 12(b)(1) for
lack of subject-matter jurisdiction, the plaintiff must carry
his burden of establishing that jurisdiction is proper.
Ctr. for Dermatology & Skin Cancer, Ltd. v.
Burwell, 770 F.3d 586, 588-89 (7th Cir. 2014).
“Federal 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). To determine whether jurisdiction
exists, the court turns to the complaint along with evidence
outside of the pleadings. Apex Digital, Inc. v. Sears,
Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). A
court lacking subject-matter jurisdiction must dismiss the
action without proceeding to the merits. Intec USA, LLC
v. Engle, 467 F.3d 1038, 1041 (7th Cir. 2006).
Sovereign Immunity and the Administrative Procedure
general matter, the United States is immune from suit except
in cases where it has explicitly waived that immunity.
Hercules, Inc., v. United States, 516 U.S. 417, 422
(1996). Any alleged waiver of sovereign immunity must be
explicit and cannot be implied or based upon a strained
parsing of statutory text. F.A.A. v. Cooper, 566
U.S. 284, 290 (2012) (“We have said on many occasions
that a waiver of sovereign immunity must be
‘unequivocally expressed' in statutory
text.”). In line with this, waivers are to be strictly
construed “so that the Government's consent to be
sued is never enlarged beyond what a fair reading of the text
requires.” Id. By its very nature, sovereign
immunity operates to set the bounds of the court's
jurisdiction to hear matters against the United States.
See United States v. Mitchell, 463 U.S. 206, 212
(1983); In re Price, 42 F.3d 1068, 1071 (7th Cir.
Liquidator proceeds under a theory that the United States has
waived its sovereign immunity under the Administrative
Procedure Act. (Dkt. 21, pg. 4). Two provisions of the APA
are at play when considering sovereign immunity. § 702
A person suffering legal wrong because of agency action, or
adversely affected or aggrieved by agency action within the
meaning of a relevant statute, is entitled to judicial review
thereof. An action in a court of the United States seeking
relief other than money damages and stating a claim that an
agency or an officer or employee thereof acted or failed to
act in an official capacity or under color of legal authority
shall not be dismissed nor relief therein be denied on the
ground that it is against the United States or that the
United States is an indispensable party. The United States
may be named as a defendant in any such action, and a
judgment or decree may be entered against the United States:
Provided, That any mandatory or injunctive decree
shall specify the Federal officer or officers (by name of by
title), and their successors in office, personally
responsible for compliance. Nothing herein (1) affects other
limitations on judicial review or the power or duty of the
court to dismiss any action or deny relief on any other
appropriate legal or equitable ground; or (2) confers
authority to grant relief if any other statute that grants
consent to suit expressly or impliedly forbids the relief
which is sought.
5 U.S.C. § 702 (emphasis in original). Essentially,
“§ 702 waives sovereign immunity only with respect
to relief ‘other than money damages'.”
Builders NAB LLC v. Fed. Deposit Ins. Corp., 922
F.3d 775, 777 (7th Cir. 2019). Further narrowing
jurisdiction, waiver pursuant to the APA is limited to
scenarios where there is no other adequate remedy. 5 U.S.C.
§ 704 (“Agency action made reviewable by statute
and final agency action for which there is no other adequate
remedy in a court are subject to judicial review.”).
Importantly, the limitations on waiver “function in the
disjunctive; the application of any one is enough to deny a
district court jurisdiction under the APA.”
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