Case 1:19-cv-01446-AJT-JFA Document 74 Filed 05/03/21 Page 1 of 23 PageID# 3034
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`PUBLISHED
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`UNITED STATES COURT OF APPEALS
`FOR THE FOURTH CIRCUIT
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`No. 20-1031
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`THE COUNTY BOARD OF ARLINGTON COUNTY, VIRGINIA,
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`EXPRESS SCRIPTS PHARMACY, INC.; ESI MAIL PHARMACY SERVICE,
`INC.,
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`and
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`MALLINCKRODT PLC; MALLINCKRODT LLC; SPECGX LLC; ENDO
`HEALTH SOLUTIONS INC.; ENDO PHARMACEUTICALS INC.; PAR
`PHARMACEUTICAL COMPANIES, INC.; PAR PHARMACEUTICAL, INC.;
`TEVA PHARMACEUTICALS USA,
`INC.; CEPHALON,
`INC.; BARR
`LABORATORIES,
`INC.; WATSON LABORATORIES,
`INC.; ACTAVIS
`PHARMA, INC.; ACTAVIS, LLC; ALLERGAN PLC; ALLERGAN FINANCE,
`LLC; MYLAN PHARMACEUTICALS, INC.; MYLAN INSTITUTIONAL INC.;
`INDIVIOR INC.; MCKESSON CORPORATION; MCKESSON MEDICAL-
`SURGICAL INC.; CARDINAL HEALTH, INC.; AMERISOURCEBERGEN
`DRUG CORPORATION; GENERAL INJECTABLES & VACCINES, INC.;
`INSOURCE, INC.; CVS HEALTH CORPORATION; CVS PHARMACY, INC.;
`CVS TN DISTRIBUTION, L.L.C.; WALGREENS BOOTS ALLIANCE, INC.;
`WALGREEN CO.; WALGREEN EASTERN CO., INC.; EXPRESS SCRIPTS
`HOLDING COMPANY; EXPRESS SCRIPTS, INC.; CAREMARK RX, L.L.C.;
`CAREMARKPCS HEALTH, L.L.C.; CAREMARK, L.L.C.; CAREMARKPCS,
`L.L.C.; UNITEDHEALTH GROUP
`INCORPORATED; OPTUM,
`INC.;
`OPTUMRX, INC.; WALMART, INC.; RITE AID CORP.; RITE AID OF
`VIRGINIA, INC.; RITE AID MID-ATLANTIC; RITE AID OF MARYLAND,
`INC.; ECKERD CORPORATION; DOES 1 -100; HENRY SCHEIN, INC.,
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`Plaintiff - Appellee,
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`v.
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`Defendants - Appellants,
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`Defendants.
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`Case 1:19-cv-01446-AJT-JFA Document 74 Filed 05/03/21 Page 2 of 23 PageID# 3035
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`Appeal from the United States District Court for the Eastern District of Virginia, at
`Alexandria. Anthony J. Trenga, District Judge. (1:19-cv-01446-AJT-JFA)
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`Argued: March 9, 2021
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`Decided: May 3, 2021
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`Before WILKINSON, NIEMEYER, and QUATTLEBAUM, Circuit Judges.
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`Reversed and remanded by published opinion. Judge Quattlebaum wrote the opinion, in
`which Judge Wilkinson and Judge Niemeyer joined.
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`ARGUED: Adriana Riviere-Badell, KOBRE & KIM LLP, Miami, Florida, for Appellants.
`R. Johan Conrod, Jr., SANFORD HEISLER SHARP, LLP, Nashville, Tennessee, for
`Appellee. ON BRIEF: Matthew I. Menchel, Miami, Florida, Julian W. Park, KOBRE &
`KIM LLP, San Francisco, California, for Appellants. Grant Morris, Kevin Sharp, Andrew
`Miller, SANFORD HEISLER SHARP, LLP, Nashville, Tennessee; Joanne Cicala, THE
`CICALA LAW FIRM PLLC, Dripping Springs, Texas; W. Edgar Spivey, KAUFMAN &
`CANOLES, P.C., Norfolk, Virginia, for Appellee.
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`2
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`Case 1:19-cv-01446-AJT-JFA Document 74 Filed 05/03/21 Page 3 of 23 PageID# 3036
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`QUATTLEBAUM, Circuit Judge:
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`This appeal involves the application of 28 U.S.C. § 1442(a)(1)—commonly referred
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`to as the “federal officer removal statute”—to private actors. Under the statute, private
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`actors can remove a case to federal court when they show that they: (1) acted under the
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`direction of a federal officer; (2) possess a colorable federal defense; and (3) engaged in
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`government-directed conduct that was causally related to the plaintiff’s claims. See Sawyer
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`v. Foster Wheeler LLC, 860 F.3d 249, 254 (4th Cir. 2017).1
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`Here, the County Board of Arlington County, Virginia (“Arlington”) sued a host of
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`opioid manufacturers, distributers and pharmacies, including Express Scripts Pharmacy,
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`Inc. and ESI Mail Pharmacy Service, Inc. (collectively the “ESI Defendants”), in state court
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`for causing, or contributing to, the opioid epidemic in Arlington County, Virginia. The ESI
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`Defendants removed the case to federal court pursuant to the federal officer removal
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`statute. They claimed their operation of the TRICARE Mail Order Pharmacy (“TMOP”)
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`1 “The federal officer removal statute has had a long history.” Willingham v.
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`Morgan, 395 U.S. 402, 405 (1969). The original removal statute was enacted “near the end
`of the War of 1812,” which was unpopular in New England due to a trade embargo with
`England. Watson v. Philip Morris Cos., Inc., 551 U.S. 142, 147 (2007). As a result, New
`England shipowners “filed many state-court claims against federal customs officials
`charged with enforcing [the embargo].” Id. Congress responded by passing a statute “that
`permitted federal customs officers and ‘any other person aiding or assisting’ those officers
`to remove a case filed against them ‘in any state court’ to federal court.” Id. at 148 (quoting
`Customs Act of 1815, ch. 31, § 8, 3 Stat. 198 (emphasis added)). Since that time, Congress
`has passed various iterations of the federal officer removal statute. The “basic purpose” of
`these enactments was to prevent state courts from interfering with the federal government’s
`operations. See id. at 150 (internal quotation marks omitted). For example, “[s]tate-court
`proceedings may reflect ‘local prejudice’ against unpopular federal laws or federal
`officials.” Id. (quoting Maryland v. Soper (No. 1), 270 U.S. 9, 32 (1926)). Therefore, the
`statute provides “a federal forum for a federal defense.” Ripley v. Foster Wheeler LLC, 841
`F.3d 207, 210 (4th Cir. 2016).
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`3
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`as a subcontractor to a contract between their corporate affiliate, Express Scripts, Inc.,2 and
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`the Department of Defense (“DOD”) satisfied each of the statute’s requirements. Arlington
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`moved to remand the case to state court, contending that the ESI Defendants cannot satisfy
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`the requirements of the federal officer removal statute. The district court granted the
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`motion, emphasizing that the ESI Defendants operated the TMOP as subcontractors of
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`Express Scripts, Inc. and that their interactions with DOD were “too attenuated, infrequent,
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`and peripheral to satisfy the ‘acting under’ requirement.” J.A. 823.
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`We disagree. The ESI Defendants met their burden of showing that they were
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`“acting under” DOD in operating the TMOP in accordance with the DOD contract.
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`Furthermore, while the district court did not address the other two requirements of the
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`federal officer removal statute—possession of a colorable federal defense and a causal
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`relationship between the government-directed conduct and the plaintiffs’ claims—we find
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`that judicial economy favors resolution of those questions without a time-consuming and
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`costly remand. On the merits, we hold that the ESI Defendants satisfy those two
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`requirements. Accordingly, we reverse the district court’s ruling, hold that removal was
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`proper and remand for further proceedings.
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`2 Express Scripts, Inc. is a distinct entity from the ESI Defendants. Express Scripts,
`Inc. is the contracting party with DOD, while the ESI Defendants are subcontractors who
`administer the TMOP pursuant to the requirements of the contract.
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`4
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`Case 1:19-cv-01446-AJT-JFA Document 74 Filed 05/03/21 Page 5 of 23 PageID# 3038
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`Arlington sued a large number of manufacturers, distributors and pharmacies that
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`I.
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`dispense opioid medications in state court seeking to recover financial costs incurred as a
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`result of widespread opioid use. This case is not unusual, as over 2,000 cases filed by
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`governmental entities have been consolidated into a federal multidistrict litigation case in
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`the Northern District of Ohio (the “Opiate MDL”). See In re Nat’l Prescription Opiate
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`Litig., 290 F. Supp. 3d 1375, 1378 (J.P.M.L. 2017).
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`Later, Arlington amended its Complaint, adding the ESI Defendants. Arlington
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`alleges that the defendants, including the ESI Defendants, “have caused an opioid epidemic
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`that has resulted in economic, social and emotional damage to virtually every community
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`in the United States and tens of thousands of Americans.” J.A. 53. According to Arlington,
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`“Arlington County has been hit hard by the opioid epidemic,” with increasing rates of
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`neonatal abstinence syndrome and Hepatitis C since 2011. J.A. 55. Moreover, the rate of
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`overdose deaths in Arlington County has approximately tripled during the period of 1999
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`to 2016.
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`Arlington has asserted claims against three groups of defendants: (1) opioid
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`manufacturers; (2) opioid distributors; and (3) pharmacies that fill opioid prescriptions.
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`The ESI Defendants fall into the third category, as they operate mail order pharmacies that
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`distribute opioid medications to patients both nationally and in Arlington County. To that
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`end, Arlington seeks to impose liability on the ESI Defendants because they were “keenly
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`aware of the oversupply of prescription opioids through the extensive data and information
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`5
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`they developed and maintained” but failed to “tak[e] any meaningful action to stem the
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`flow of opioids into the communities . . . .”3 J.A. 152.
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`The ESI Defendants removed the case under the federal officer removal statute.4 In
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`support of removal, the ESI Defendants claimed that “Express Scripts holds a contract with
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`[DOD] to provide services to members of the DOD health care program, TRICARE, across
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`the country, including in Arlington County, Virginia.” J.A. 22. TRICARE is a federal
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`health insurance program administered by DOD to “provide[] medical care to current and
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`retired service members and their families . . . .” United States ex rel. Lutz v. United States,
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`853 F.3d 131, 140 n.2 (4th Cir. 2017) (citing 32 C.F.R. § 199.17). TRICARE is extensively
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`governed by various federal statutes and regulations. See, e.g., 10 U.S.C. § 1071 (providing
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`for “an improved and uniform program of medical and dental care for members and certain
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`former members of [the armed] services, and for their dependents”); 32 C.F.R. § 199.17
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`(establishing regulations for operating TRICARE). The ESI Defendants operate the TMOP
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`as subcontractors for their corporate affiliate, Express Scripts, Inc. Therefore, “Express
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`Scripts, Inc. provides pharmacy benefit management services and [the ESI Defendants]
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`3 Arlington alleged eight causes of action against the ESI Defendants—statutory
`public nuisance, common law public nuisance, common law civil conspiracy, negligence
`per se, negligence, gross negligence, willful and wanton negligence and unjust
`enrichment—and seeks compensatory damages of at least $150,000,000 and punitive
`damages of $350,000 per defendant.
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`4 This was not the first Notice of Removal filed in this case. After Arlington filed
`its initial Complaint, Defendants Actavis LLC, Express Scripts Holding Company and
`Express Scripts, Inc. removed the case on diversity of citizenship grounds. But, the district
`court determined that diversity of citizenship did not exist and remanded the case to state
`court.
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`6
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`administer the TRICARE Mail Order Pharmacy under the detailed requirements of the
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`contract . . . .” J.A. 22–23. Furthermore, the ESI Defendants contended that Arlington’s
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`allegations that they “maintained formularies and dispensed opioids cannot be separated
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`from [their] services provided under the DOD contract.” J.A. 24. Finally, the ESI
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`Defendants asserted that they could assert two colorable federal defenses—the government
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`contractor defense and federal preemption.
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`Arlington promptly moved to remand the case to state court, claiming that the ESI
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`Defendants’ reliance on the federal officer removal statute was improper because they were
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`not parties to the DOD contract and were not registered to contract with the federal
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`government. Therefore, according to Arlington, the ESI Defendants were not “acting
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`under” the direction of a federal officer—i.e., DOD. Furthermore, Arlington argued that
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`there was no causal nexus between its claims against the ESI Defendants and their
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`administration of the TMOP. Emphasizing that point, Arlington claimed that it “has not
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`made any allegations about injuries to veterans.” J.A. 250. Finally, Arlington argued that,
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`because “there is no direct contractual relationship or detailed control by a federal officer,
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`the government contractor defense is unavailable” and federal preemption does not apply.
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`J.A. 251–52.5
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`5 Although not critical to our decision, the Opioid MDL adds some wrinkles to the
`removal issues presented here. The ESI Defendants filed a Motion for a Temporary Stay
`Pending the Judicial Panel on Multidistrict Litigation’s (“JPML”) Final Transfer Decision.
`Upon removal, the ESI Defendants tagged this case for potential inclusion in the Opiate
`MDL. The JPML entered a conditional transfer order (“CTO”), and a hearing was
`scheduled. The CTO did not prevent the district court from ruling on the pending Motion
`to Remand. By making this request, the ESI Defendants asked the district court to defer
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`7
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`The district court granted the motion to remand. It noted that neither of the ESI
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`Defendants is “an actual party to the [DOD] contract and neither is registered to contract
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`with the federal government.” J.A. 818. Nonetheless, the district court rejected Arlington’s
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`argument that the absence of a contractual relationship is a bar to federal officer removal.
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`Instead, the district court looked to “whether there otherwise exists a sufficiently close,
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`direct relationship between the non-government entity and a federal officer or agency.”
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`J.A. 818. In that analysis, the district court acknowledged that the ESI Defendants
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`administered TMOP, were required to use DOD’s formulary, served as a fiscal
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`intermediary for DOD’s purchase of drugs, could not modify the contract without express
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`authorization from DOD and, without the ESI Defendants’ services, DOD “would have to
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`administer the mail order pharmacy program itself.” J.A. 820–21. Ultimately, however, the
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`district court emphasized that “there has never been any direct interaction between DOD’s
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`deciding any jurisdictional issues so that “the Opiate MDL Court [can] decide the
`jurisdictional issues collectively with other opioid cases raising similar issues.” See J.A.
`274 (noting that “at least 25 other opioid cases [] have been removed since 2018 under the
`federal officer statute,” many of which have been transferred, or are awaiting transfer, to
`the Opiate MDL). Additionally, the ESI Defendants filed a Conditional Motion for an
`Order Implementing an Automatic Stay Under Federal Rule of Civil Procedure 62(a),
`seeking a “30-day stay of any execution of any remand order under Federal Rule of Civil
`Procedure 62(a) so that [the ESI Defendants] may seek appellate review under 28 U.S.C.
`§ 1447(d).” J.A. 463. The district court first gave special consideration to the Motion to
`Remand in light of the related Opiate MDL proceedings to determine whether the Opiate
`MDL court would be better suited to rule on the jurisdictional issue. To that end, the district
`court made a preliminary determination that “removal was improper” and “there are no
`legal or factual issues sufficiently difficult to counsel against a final ruling on the merits of
`th[e] jurisdictional issue.” J.A. 815. Therefore, the district court determined that a stay—
`and an almost-certain final transfer order from the JPML—“would needlessly burden the
`Opiate MDL court with an action over which it has no jurisdiction . . . .” J.A. 815.
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`8
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`representative and the [ESI Defendants].” J.A. 823. Instead, the district court concluded,
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`“[a]t most, there is limited, direct interaction between the DOD and the [ESI Defendants]
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`in connection with audits performed under the [Statement of Work], but it appears that this
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`interaction is too attenuated, infrequent, and peripheral to satisfy the ‘acting under’
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`requirement.” J.A. 823 (internal citation omitted). Therefore, the district court held that the
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`ESI Defendants “do not have a sufficiently direct relationship with a federal officer or
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`agency to support federal officer jurisdiction.”6 J.A. 824. In light of this holding, the district
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`court declined to address whether there was a nexus between the ESI Defendants’ actions,
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`taken under a federal officer’s directions, and Arlington’s claims or a colorable federal
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`defense to Arlington’s claims. But, after remanding the case, the district court entered a
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`thirty-day stay so that the ESI Defendants could file an appeal. The ESI Defendants then
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`timely appealed.
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`II.
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`We begin with the standards by which we review the district court’s order.
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`Generally, an order remanding a case to state court is not appealable. See 28 U.S.C.
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`§ 1447(d). Congress, however, created an exception to this rule for cases involving the
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`federal officer removal statute. See id. When such a case is appealed, we review the issue
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`6 The district court relied heavily on cases from the Sixth Circuit—in which the
`Opiate MDL Court resides—in analyzing whether removal was proper. Notably absent
`from the district court’s analysis, however, was any discussion of this Court’s precedent
`on the issue.
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`9
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`of subject-matter jurisdiction de novo. Mayor & City Council of Baltimore v. BP P.L.C.,
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`952 F.3d 452, 461 (4th Cir. 2020), cert. granted, 141 S. Ct. 222 (2020) [hereinafter
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`Baltimore] (quoting Ripley, 841 F.3d at 209).7 Further, the Supreme Court has provided
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`clear instructions about removals under the federal officer removal statute. “Although
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`Defendants bear the burden of establishing jurisdiction as the party seeking removal, the
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`federal officer removal statute must be ‘liberally construed.’” Id. (quoting Watson, 551
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`U.S. at 150 ) (internal citation omitted); see also Willingham, 395 U.S. at 407 (noting that
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`the liberal policy in favor of federal officer removal “should not be frustrated by a narrow,
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`grudging interpretation of § 1442(a)(1)”). “As such, the ordinary ‘presumption against
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`removal’ does not apply.” Id. (quoting Betzner v. Boeing Co., 910 F.3d 1010, 1014 (7th
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`Cir. 2018)).
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`III.
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`With those standards in mind, we turn to the ESI Defendants’ two arguments raised
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`on appeal. First, they argue that the district court erred in finding that they were not “acting
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`under” DOD’s direction in administering and operating the TMOP. Second, the ESI
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`Defendants contend that we should address the remaining two requirements for federal
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`7 The Supreme Court of the United States issued a writ of certiorari in Baltimore to
`resolve the following question: “Whether 28 U.S.C. 1447(d) permits a court of appeals to
`review any issue encompassed in a district court’s order remanding a removed case to state
`court where the removing defendant premised removal in part on the federal-officer
`removal statute, 28 U.S.C. 1442, or the civil-rights removal statute, 28 U.S.C. 1443.”
`Petition for Writ of Certiorari, BP P.L.C. v. Mayor & City Council of Baltimore, No. 19-
`1189 (March 31, 2020). The case was argued on January 19, 2021.
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`10
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`officer removal and conclude that they have met their burden of establishing subject-matter
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`jurisdiction.
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`A.
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`As noted above, the district court concluded that the ESI Defendants’ interaction
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`with DOD “is too attenuated, infrequent, and peripheral to satisfy the ‘acting under’
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`requirement” and did not address the remaining two requirements for federal officer
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`removal jurisdiction. J.A. 823–24. Accordingly, we must first determine whether the
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`district court erred in finding the ESI Defendants were not “acting under” a federal officer.
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`“The statutory phrase ‘acting under’ describes ‘the triggering relationship between
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`a private entity and a federal officer.’” Baltimore, 952 F.3d at 462 (quoting Watson, 551
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`U.S. at 149). Although that phrase is broad, “the Supreme Court has emphasized that [it is]
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`not ‘limitless.’” Id. (quoting Watson, 551 U.S. at 147). “In cases involving a private entity,
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`the ‘acting under’ relationship requires that there at least be some exertion of ‘subjection,
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`guidance, or control’ on the part of the federal government.” Id. (quoting Watson, 551 U.S.
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`at 151). Moreover, the private entity must be engaging in “an effort to assist, or to help
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`carry out, the duties or tasks of the federal superior.” Watson, 551 U.S. at 152. Indeed, a
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`private contractor may “act under” a federal officer when the relationship “is an unusually
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`close one involving detailed regulation, monitoring, or supervision.” Id. at 153.
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`In interpreting that general guidance, we have some guideposts. The Supreme Court
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`has emphasized that “simply complying with the law” is not sufficient. Id. at 152. Thus,
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`businesses that operate in fields subject to stringent federal regulations cannot use their
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`compliance with federal law—without more—to invoke the federal officer removal statute.
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`See id. at 153 (“A private firm’s compliance (or noncompliance) with federal laws, rules,
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`and regulations does not by itself fall within the scope of the statutory phrase ‘acting under’
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`a federal ‘official.’”). Likewise, a private company selling “standardized consumer
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`product[s]” to the federal government does not implicate the federal officer removal statute.
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`See Baltimore, 952 F.3d at 464. Even when a contract specifies the details of the sales and
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`authorizes the government to supervise the sale and delivery, the simple sale of contracted
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`goods and services is insufficient to satisfy the federal officer removal statute. See id. On
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`the other hand, courts, like this one, “have unhesitatingly treated the ‘acting under’
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`requirement as satisfied where a contractor seeks to remove a case involving injuries
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`arising from equipment that it manufactured for the government.” Sawyer, 860 F.3d at 255.
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`With those guideposts in mind, we turn to the relationship of the ESI Defendants to
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`the federal government. The ESI Defendants offered a Declaration from William T. Cahill,
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`Express Scripts, Inc.’s Vice President of Government Markets – Federal and DOD, in
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`support of removal. Cahill explained that “Express Scripts, Inc. contracts with [DOD]
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`through the Express Scripts Military Health Statement of Work (‘SOW’)” and that “DOD
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`is currently Express Scripts’ second-largest client.” J.A. 552.8
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`Cahill further explained that, “Express Scripts, Inc. provides pharmacy benefit
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`management services, and [the ESI Defendants] administer[] the [TMOP] under the
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`8 As of September 30, 2018, DOD accounted for approximately twelve percent of
`the revenue of Express Scripts, Inc., Express Scripts Holding Company and the ESI
`Defendants. The following year, after the companies merged with Cigna Corporation,
`DOD accounted for eight percent of the combined companies’ health services revenue.
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`12
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`detailed requirements of the [DOD] contract.” J.A. 553–54. In order to satisfy the
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`contractual requirements, the ESI Defendants “operate the TMOP under a shared service
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`agreement” and process and dispense prescriptions to TRICARE members. J.A. 554. In
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`doing so, the DOD contract “requires the exclusive use of the DOD formulary created by
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`the DOD’s own Pharmacy & Therapeutics [] Committee.” J.A. 554. Thus, prescriptions
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`are dispensed in accordance with the guidelines promulgated by DOD. Moreover, the SOW
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`dictates how the ESI Defendants must operate the TMOP. Pricing, eligibility verification,
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`shipping, payment and many other specifications are detailed in the SOW. Importantly, the
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`ESI Defendants are required to comply with all of these contractual requirements along
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`with the statutes, regulations and policy manuals governing the TRICARE program.
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`To ensure that Express Scripts, Inc. is complying with the terms of the contract,
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`DOD has designated a contracting officer who is charged with managing the SOW.
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`Representatives of Express Scripts, Inc. are in regular contact with the contracting officer,
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`including weekly briefings and formal program reviews three times per year. Express
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`Scripts, Inc., in turn, regularly interacts with the ESI Defendants. Express Scripts, Inc.
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`“communicates guidance and instruction from the [contracting officer] or other
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`Government representatives” to the ESI Defendants in order to “execute the SOW.” J.A.
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`556. Although the ESI Defendants do not regularly coordinate with the contracting officer
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`or DOD, there is some direct interaction. “For example, DOD representatives interact
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`directly with ESI Mail Pharmacy employees during some audits that are performed under
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`the contract.” J.A. 557. Thus, while the ESI Defendants were not signatories to the DOD
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`contract, they performed the day-to-day management of the TMOP under the terms of the
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`contract and were subject to extensive oversight by the federal government.
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`The district court, while acknowledging the ESI Defendants’ role in administering
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`the TMOP, seemingly misunderstood this relationship and further misapprehended the
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`language and meaning of the DOD contract. Illustrating this, the district court stated: “[The
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`DOD] contract and Statement of Work [] make no mention of, and impose no obligations
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`on, anyone other than prime contractor, Express Scripts, Inc. And from the face of the
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`contract and SOW, [the ESI Defendants’] involvement was not required, suggested, or
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`anticipated.” J.A. 822 (footnote omitted). Furthermore, the district court stated, in a
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`footnote, that “[t]he SOW does not expressly anticipate that Express Scripts, Inc. would
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`select a subcontractor . . . to administer the [TMOP] . . . .” J.A. 822 n.6.
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`The DOD contract provides otherwise. The SOW expressly contemplates the
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`involvement of subcontractors. See J.A. 675 (“The Contractor shall ensure that its staff and
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`subcontractors (if any) are thoroughly trained and knowledgeable regarding the
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`requirements of this contract.”); 676 (“The Contractor shall report all Contractor labor
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`hours (including subcontractor labor hours) required for performance of services provided
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`under this contract via a secure data collection site.”). Not only does the SOW contemplate
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`the use of subcontractors, it requires that they be “thoroughly trained and knowledgeable
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`regarding the requirements of this contract.” J.A. 675. And, of course, the DOD contract
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`specifies, in detail, the requirements and oversight of the federal government.
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`Beyond these contractual provisions, Express Scripts, Inc. “is not itself a mail order
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`pharmacy, but instead, is a pharmacy benefits manager [] that administers prescription drug
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`benefits for health plan sponsors.” Appellants’ Br. at 25. Therefore, the government had to
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`anticipate that Express Scripts, Inc. would use subcontractors to operate and administer the
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`TMOP.
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`The DOD contract not only contemplated the use of subcontractors; it also made
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`them directly accountable to the federal government. The contract specifies that “[a]ny
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`discrepancies identified by the Government . . . shall be subject to Contractor desktop
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`audits and, if necessary, on-site audits at the direction of the Government.” J.A. 664. It also
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`states that “[i]nspections will be performed at the TRICARE Management Activity (TMA),
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`the Contractor’s and/or subcontractor’s facilities, or any other locations at which work is
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`performed.” J.A. 680.
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`What’s more, Cahill’s affidavit indicates the government actually exercised its audit
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`and inspection rights with respect to the ESI Defendants. The affidavit states that the
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`government performed some audits and had direct contact with the ESI Defendants’
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`employees.
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`Last, as referenced above, DOD is required by law to enter into contracts for the
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`provision of healthcare services to TRICARE members. See 10 U.S.C. § 1073a. And by
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`operating various TRICARE programs, such as the TMOP, these contractors and
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`subcontractors are providing healthcare services that DOD must, by law, provide. See id.
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`§ 1073a. In this way, the ESI Defendants are assisting DOD in fulfilling “basic
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`governmental tasks” that “the Government itself would have had to perform” if it had not
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`contracted with a private firm. See Watson, 551 U.S. at 153–54.
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`Taken as a whole, the ESI Defendants, by operating the TMOP, were carrying out
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`the duties of DOD by operating the TMOP and were, at all times, subject to the federal
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`government’s guidance and control. This is the type of “unusually close [relationship]
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`involving detailed regulation, monitoring, or supervision” sufficient to satisfy the “acting
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`under” requirement. See Watson, 551 U.S. at 153. Further, the ESI Defendants’
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`performance of the requirements outlined in the DOD contract is substantially different
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`than the simple sale of commercial goods to the government. Nothing about the ESI
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`Defendants’ obligations could fairly be characterized as “standardized consumer
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`product[s].” Baltimore, 952 F.3d at 464. In fact, the ESI Defendants were essentially acting
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`as the statutorily authorized alter ego of the federal government, as the TRICARE statute
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`requires the Secretary of Defense to contract out the administration of the TMOP program.
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`See 10 U.S.C. § 1073a. The ESI Defendants largely performed the day-to-day
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`administration of the TMOP pursuant to a lengthy and detailed SOW. In light of the liberal
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`policy in favor of federal officer removal, the ESI Defendants have met their burden of
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`showing they were “acting under” a federal officer.
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`Consistent with that, the absence of privity of contract between the ESI Defendants
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`and the government does not lead to a different result. As the district court properly
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`concluded, “the absence of a direct contractual relationship with the federal government
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`is not a bar to removing an action under § 1442(a)(1).” J.A. 818. Indeed, if this were not
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`the case, the availability of the federal officer removal statute would be significantly
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`curtailed as federal contracts are often carried out, at least in part, through subcontractors.
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`Thus, courts must look beyond whether the ESI Defendants are parties to a contract with
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`DOD to the nature of the relationship between them. When we do that, as described above,
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`the ESI Defendants meet the statute’s “acting under” requirement.
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`B.
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`Having determined that the ESI Defendants meet the first requirement of the federal
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`officer removal statute, we turn to whether the case should be remanded to the district court
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`for a ruling on the remaining two requirements for federal officer removal. Generally,
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`federal appellate courts should not consider issues that were not first addressed by the
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`district court. Bakker v. Grutman, 942 F.2d 236, 242 (4th Cir. 1991) (citing Singleton v.
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`Wulff, 428 U.S. 106, 120 (1976)). However, “[t]he matter of what questions may be taken
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`up and resolved for the first time on appeal is one left primarily to the discretion of the
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`courts of appeals, to be exercised on the facts of individual cases.” Id. (quoting Singleton,
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`428 U.S. at 121). Under the unique circumstances of this case, we find that judicial
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`economy favors our resolution of the remaining issues. The issues have been fully briefed
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`and resolving them without a remand will allow Arlington to litigate the merits of its case
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`as swiftly as possible without the possibility of another appeal based solely on jurisdictional
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`grounds. Therefore, we will consider the second requirement of the federal officer removal
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`statute—whether the ESI Defendants have a colorable federal defense—before evaluating
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`the third requirement—whether the conduct about which the plaintiffs complain is
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`sufficiently connected with the government-directed conduct.
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`1.
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