El Rio Santa Cruz Neighborhood Health Center, Inc. v. U.S. Department of Health & Human Services

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 5, 2004 Decided February 8, 2005

No. 04-5089

EL RIO SANTA CRUZ NEIGHBORHOOD
HEALTH CENTER, INC., ET AL.,
APPELLEES

V.

U. S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
AND
TOMMY G. THOMPSON, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
APPELLANTS

Appeal from the United States District Court
for the District of Columbia
(No. 03cv01753)

Howard S. Scher, Attorney, U.S. Department of
Justice, argued the cause for appellants. With him on the
briefs were Peter D. Keisler, Assistant Attorney General,
Kenneth L. Wainstein, U.S. Attorney, Jeffrey S. Bucholtz,
 2

Deputy Assistant Attorney General, and Robert S.
Greenspan, Attorney.

James L. Feldesman argued the cause for appellees.
With him on the brief were Khatereh S. Ghiladi and Robert
A. Graham.

Before: HENDERSON and ROGERS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

Concurring opinion filed by Circuit Judge
HENDERSON.

ROGERS, Circuit Judge: The Federally Supported
Health Centers Assistance Act of 1995 (“FSHCAA”), Pub.
L. No. 104-73, 109 Stat. 777 (codified as amended at 42
U.S.C. § 233), makes federally-funded community health
centers and their employees, officers, and individual
contractors eligible for medical malpractice coverage
under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. §
1346 (2000), to the same extent as federal employees of
the United States Public Health Service. See 42 U.S.C. §
233(g). The El Rio Santa Cruz Neighborhood Health
Center, Inc. (“the Center”) in Arizona and physicians
before the court provide obstetric and gynecological
services for patients of the Center. As a non-profit clinic
that receives federal funds, the Center receives
professional liability coverage from the federal
government pursuant to the FSHCAA. See id. When the
physicians were sued in the Arizona State court for
malpractice, the Center notified the United States
Department of Health and Human Services (“HHS”) of the
suit and submitted information for a determination of the
 3

physicians’ coverage under the FTCA. HHS denied the
physicians coverage because they had contracted with the
Center through their professional corporations. Joined by
the Center, the physicians filed a separate lawsuit
challenging the denial of coverage under the
Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701-
706, and the district court ruled in their favor.

HHS appeals the grant of summary judgment to the
Center and the physicians, challenging both the district
court’s jurisdiction under the APA and its findings that
HHS failed to examine relevant evidence, namely the
physicians’ separate guarantees to the Center of their
personal performance, and to treat similar cases similarly.
Upon de novo review, we hold that the district court had
jurisdiction of the APA claim because the removal remedy
under the FSHCAA was not an adequate remedy that
precluded APA review, and that HHS was arbitrary and
capricious in failing to address evidence before it in
concluding that the physicians were ineligible for medical
malpractice coverage pursuant to the FSHCAA.
Accordingly, we affirm the grant of summary judgment
remanding the matter to HHS.

I.
A.
Under the FTCA, 28 U.S.C. §§ 1346(b), 2672-80, and
Public Health Service Act (“PHSA”), 42 U.S.C. § 233
(2000), Congress protected officers and employees of the
Public Health Service from personal liability for the
negligent or wrongful act or omission while acting within
the scope of their employment by providing that the United
States may assume any such liability. 28 U.S.C. § 2672.
In enacting the FSHCAA, 42 U.S.C. § 233(g), Congress
extended FTCA coverage for Public Health Service
 4

employees to public or non-profit private entities receiving
federal funds under the PHSA, 42 U.S.C. § 254b, and to
their officers, board members, employees, and contractors
who are physicians or other licensed or certified health
care practitioners, and meet certain criteria. Id. §
233(g)(1)(A); see id. § 233(e), (h), (i). Upon approval by
the HHS Secretary of an application, such individual is
“deemed to be an employee of the Public Health Service.”
Id. § 233(g)(1)(F). The Attorney General, upon notice
from a deemed defendant, shall defend against, or
compromise, civil actions or proceedings for such damage
or injury. Id. § 233(b), (d). The remedy against the United
States, as relevant here, for “damages for personal injury,
including death, resulting from the performance of
medical, surgical, dental, or related functions . . . by any
commissioned officers or employee of the Public Health
Service” is “exclusive.” Id. § 233(g)(1)(A). Congress
enacted the FSHCAA to relieve publicly funded health
centers of the burden of rising malpractice insurance costs.
H.R. Rep. No. 104-398, at 5-6 (1995), reprinted in 1995
U.S.C.C.A.N. 767, 769; H.R. Rep. No. 102-823(II), at 5-6
(1992).

In order to be considered for FTCA coverage, a health
center must submit an application to the HHS Secretary
verifying that the health center, and the appropriate
officer, board member, employee, or contractor of the
health center, meet FSHCAA requirements. 42 U.S.C. §
233(g)(1)(D); see id. § 233(g)(1)(B)-(C), (h). The
Secretary is required to determine within 30 days of
receipt of the application whether the applicant is to be
deemed covered by the FTCA. Id. § 233(g)(1)(E). Once
the Secretary has determined that an applicant is covered,
this determination is final and binding upon the Secretary,
Attorney General, and other parties to a civil action or
 5

proceeding. Id. § 233(g)(1)(F). However, the Attorney
General, in consultation with the Secretary, and after
notice and opportunity for a hearing, may determine, based
on five criteria, that covering an individual health care
professional “would expose the Government to an
unreasonably high degree of risk of loss,” and that the
individual “shall not be deemed to be an employee of the
Public Health Service” for FSHCAA purposes. Id. §
233(i).

Once a civil action or proceeding is filed in state or
local court against a public health or non profit entity or its
officers or employees or contractors, the statute provides
for two circumstances in which the case can be removed to
the federal district court. First, if the Attorney General
appears in state or local court within 15 days after being
notified of the filing of the case and advises that the
Secretary has deemed the defendant to be a Public Health
Service employee, the case shall be removed to the federal
district court. Id. § 233(l)(1); see id. § 233(c). Second, if
the Attorney General fails timely to appear, the case shall
be removed to federal district court upon petition by a
defendant. Id. § 233(l)(2). The case then shall be stayed
until the district court conducts a hearing and determines
the appropriate forum or procedure for the assertion of the
claim. Id.

B.
The undisputed facts are that in January 2002, the
physicians were sued for medical malpractice by Sergio
Puig and others (“plaintiffs”) in State court in Arizona.
The complaint and summonses were served on the
physicians on July 17, 2002. By letter of January 23, 2003
(“Gianturco letter”), Elizabeth Jordan Gianturco, Chief of
the Claims and Employment Branch, denied El Rio’s
 6

request for representation pursuant to the FSHCAA
“because [the individual physicians] cannot be deemed
employees of the Public Health Service because their
contracts were between the health center and a professional
corporation,” and therefore did “not meet the criteria under
the FSHCAA for coverage under the [] FTCA.”

On March 21, 2003, the physicians removed the
malpractice action to the federal district court in Arizona
pursuant to 28 U.S.C. § 1441 and 42 U.S.C. § 233. They
filed two pleadings on May 14, 2003 in the Arizona district
court. The first was a complaint for declaratory and
injunctive relief that they were covered by the FTCA. The
second was a petition pursuant to 42 U.S.C. § 233(l)(2) for
determination of their FTCA coverage. On June 5, 2003,
the Arizona federal district court ruled that the physicians’
notice of removal was untimely and remanded the case to
the State court; the court also ruled that the remand
rendered the complaint for declaratory and injunctive relief
moot.

On August 18, 2003, the physicians and the Center
(hereinafter “the physicians”) filed a complaint for
declaratory and injunctive relief against HHS and its
Secretary under 28 U.S.C. §§ 1331, 1346(a), 1361, and the
APA, 5 U.S.C. §§ 701-06 in the district court in the
District of Columbia. Ten days later they filed in the
Arizona State court a motion to dismiss the malpractice
lawsuit for lack of subject matter jurisdiction on the
ground that the plaintiffs had admitted the physicians’
status as federal employees. The Arizona State court, on
October 7, 2003, denied the physicians’ motion to dismiss,
and, according to the parties’ briefs, stayed the malpractice
action pending resolution of their APA claim in federal
court in the District of Columbia.
 7

On January 15, 2004, the district court in the District
of Columbia ruled that it had federal question jurisdiction
under 28 U.S.C. § 1331 to entertain the physicians’
challenge to HHS’s coverage determination, and that no
statute barred its review under the APA of the negative
coverage decision. On the merits, the district court granted
the physicians’ motion for summary judgment and
remanded for want of reasoned decisionmaking. The court
reversed HHS’s refusal to deem the physicians as Public
Health Service employees, which contradicted HHS’s
position in a similar case, because HHS had ignored each
physician’s contractual liability as guarantors.

On appeal, HHS challenges the grant of summary
judgment to the physicians on three principal grounds,
each of which the physicians dispute. Our review is de
novo. See DBI Architects v. Am. Express Travel-Related
Servs. Co., 388 F.3d 886 (D.C. Cir. 2004). We first
address HHS’s contention that the district court lacked
jurisdiction under the APA because the removal remedy
under the FSHCAA § 233(l)(2) is adequate. We then
address HHS’s contention that the APA action was barred
under the Rooker-Feldman1 doctrine. Finally, because we
conclude that HHS’s first two contentions are
unpersuasive, we address the merits of HHS’s denial under
the FSHCAA of FTCA coverage for the physicians and
affirm the grant of summary judgment remanding the
matter to HHS.

II.
Section 704 of the APA provides that “[a]gency action

1
D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker
v. Fidelity Trust Co., 263 U.S. 413 (1923); Gray v. Poole, 275 F.3d
1113, 1119 (D.C. Cir. 2002).
 8

made reviewable by statute and final agency action for
which there is no other adequate remedy in a court are
subject to judicial review.” 5 U.S.C. § 704. HHS contends
that the district court lacked jurisdiction of the physicians’
APA claim because the FSHCAA provides removal as the
means of obtaining access to a federal forum to determine
the federal status of federally supported health centers and
their employees or contractors, and removal is an adequate
remedy precluding APA review. HHS maintains that the
physicians waived their opportunity to challenge HHS’s
negative coverage determination because their petition for
removal was, in HHS’s view, untimely. Against the
background of Supreme Court and our caselaw defining the
nature of an adequate remedy, we hold that any remedy
afforded by the FSHCAA is too doubtful to constitute an
adequate remedy precluding APA review.

The Supreme Court has long instructed that the
“generous review provisions” of the APA must be given “a
hospitable interpretation” such that “only upon a showing
of ‘clear and convincing evidence’ of a contrary legislative
intent should the courts restrict access to judicial review.”
Abbott Labs. v. Gardner, 387 U.S. 136, 141 (1967)
(quoting Shaughnessy v. Pedreiro, 349 U.S. 48, 51 (1955);
Rusk v. Cort, 369 U.S. 367, 379-380 (1962)). In Abbott
Laboratories, the Court allowed pre-enforcement review
of agency regulations under the APA, rejecting the
argument that statutory provision for review of some
matters necessarily implied that Congress intended to deny
judicial review of other matters. Id. The Court pointed
out that its inquiry turned on “whether in the context of the
entire legislative scheme the existence of that
circumscribed remedy evinces a congressional purpose to
bar agency action not within its purview from judicial
review.” Id. Observing that the legislative history evinced
 9

no such intent, id. at 142, and that the statute itself
provided its remedies were not in lieu of others, id. at 144,
the Court adopted a literal reading of the statutory
language. It rejected an interpretation that the savings
clause was limited to review of regulations enumerated in
the statute as “requir[ing] a considerable straining both of
language and of common understanding.” Id. at 145.

In Bowen v. Massachusetts, 487 U.S. 879, 901 (1988),
the Supreme Court addressed the meaning of “adequate
remedy” under § 704 of the APA. While observing that §
704 was not intended to provide additional judicial
remedies “where the Congress has provided special and
adequate review procedures,” the Court explained that
“[t]he exception that was intended to avoid such
duplication should not be construed to defeat the central
purpose of providing a broad spectrum of judicial review
of agency action.” Id. at 903-04. In that case, the Court
concluded that relief in the Claims Court “is plainly not
the kind of ‘special and adequate review procedure’ that
will oust a district court of its normal jurisdiction under
the APA.” Id. at 904. Not only was reviewability of a
disallowance decision by the Claims Court “doubtful,” the
Claims Court lacked equitable jurisdiction to grant
prospective relief, which the Court considered appropriate
in light of the interaction between the states’
administration of an approved Medicaid plan and the HHS
Secretary’s regulatory interpretation. Id. at 905. The
Court was unwilling to assume a money judgment “will
always be an adequate substitute for prospective relief . .
. .” Id.

This court, in turn, in determining whether an adequate
remedy exists, has focused on whether a statute provides
an independent cause of action or an alternative review
 10

procedure. See, e.g., Envtl. Def. Fund v. Reilly (“EDF”),
909 F.2d 1497, 1501 (D.C. Cir. 1990); Nat’l Wrestling
Coaches Ass’n v. Dep’t of Educ., 366 F.3d 930, 945 (D.C.
Cir. 2004); Council of & for the Blind v. Regan
(“Council”), 709 F.2d 1521, 1527, 1531-32 & n.75 (D.C.
Cir. 1983) (en banc). Succinctly put, where a statute
affords an opportunity for de novo district-court review,
the court has held that APA review was precluded because
“Congress did not intend to permit a litigant challenging
an administrative denial . . . to utilize simultaneously both
[the review provision] and the APA.” EDF, 909 F.2d at
1501; see Wright v. Dominguez, 2004 WL 1636961 (D.C.
Cir. 2004) (per curiam). In a distinct line of cases, the
court also has held APA review is unavailable where there
is a private cause of action against a third party otherwise
subject to agency regulation. See Nat’l Wrestling Coaches
Ass’n, 366 F.3d at 945; Godwin v. Sec’y of Hous. & Urban
Dev., 356 F.3d 310, 312 (D.C. Cir. 2004); Wash. Legal
Found. v. Alexander, 984 F.2d 483, 485 (D.C. Cir. 1993);
Women’s Equity Action League v. Cavazos (“WEAL”), 906
F.2d 742, 751 (D.C. Cir. 1990); Coker v. Sullivan, 902
F.2d 84, 89-90 (D.C. Cir. 1990); Council, 709 F.2d at
1531. While originally deferring to congressional intent to
provide a remedy for an acknowledged problem, Council,
709 F.2d at 1532 n.75, this court later embraced the
doctrinal view disfavoring suits directly against federal
enforcement authorities administering anti-discrimination
laws, holding that remedies against the discriminating
entity were of “the same genre” as that which the court in
Council had held were adequate so as to preclude APA
review, WEAL, 906 F.3d at 751 (citing Council, 709 F.2d
at 1531-33).

A review of the removal remedy under the FSHCAA
indicates Congress almost certainly did not intend for the
 11

FSHCAA removal provisions of § 233(l)(2) to provide a
review procedure for a negative deeming determination by
the Secretary. The plain text of the FSHCAA speaks only
to the final and binding nature of the Secretary’s
affirmative coverage determinations, and not to negative
coverage determinations. 42 U.S.C. § 233(g)(1)(F). The
removal of a state or local court action to the federal
district court is mentioned in connection with the Attorney
General’s appearance to certify that the defendant was
acting in the scope of his employment and assumes the
Secretary already has made a positive determination as to
his status as a Public Health Service employee. Id. §
233(c). The statute later provides for the removal of a
state or local court action when either the Attorney General
timely appears and advises that the Secretary has deemed
the defendant to be a Public Health Service employee with
respect to the particular action or omission at issue, or the
Attorney General does not timely appear and the defendant
petitions for removal, and a hearing is held in the federal
district court to determine the appropriate forum or
procedure for the damages claim. Id. § 233(l)(1), (2).

When the Attorney General does not timely appear, the
legislative history indicates that Congress intended the
removal section of the FSHCAA to apply only where the
Secretary already has determined that a defendant is
covered by the FTCA. The House Report states that the
1995 amendment to the FSHCAA:

includes a provision requiring that, if a civil
action or proceeding is filed in a [s]tate or local
court against any covered health center or its
covered personnel, the Attorney General, within
15 days after being notified of such filing, shall
make an appearance in such case and advise such
 12

court as to whether the defendant . . . is covered
under the FTCA . . . . [I]f the Attorney General
fails to appear [timely], upon petition of the
covered health center or its covered personnel, the
civil action proceeding shall be removed to the
appropriate United States district court, and the
civil action or proceeding shall not be acted on
until a hearing is conducted . . . .

H.R. Rep. No. 104-398, at 12 (emphasis added).
Consistent with Congress’s concern with the length of time
being taken to process malpractice claims, id. at 7, the
House Report also noted that under then current law, there
was a void such that if the Attorney General’s response
was not timely, a default judgment could be filed against
the covered Center or covered individual. See id. at 11-12.

Thus, the FSHCAA text and legislative history show
that the removal remedy under § 233(l)(2) was not
designed to afford independent district court review of the
Secretary’s negative coverage determinations. The
FSHCAA is silent regarding negative coverage
determinations. The removal section neither authorizes the
federal district court to make the deeming determination
itself de novo, or to overturn a negative coverage
determination. Although the text of § 233(l)(2), when the
Attorney General does not timely appear, references a
post-removal hearing by the district court to determine the
proper forum or procedure for the assertion of the claim,
the legislative history indicates this was intended to
protect a covered defendant against a default judgment due
to the Attorney General’s untimeliness, rather than a
negative coverage determination.

Congress’s silence on the question of review of a
 13

negative coverage determination is understandable upon
review of the statutory scheme. As the 1995 amendment
makes clear, Congress envisioned eliminating front-end
delays in malpractice litigation by enacting provisions
requiring the Secretary to act promptly on a defendant’s
application for FTCA coverage, 42 U.S.C. § 233(g)(1)(E),
requiring the Attorney General to appear promptly in state
or local court, id. § 233(l)(1), and by affording a covered
defendant protection against a default judgment when the
Attorney General failed timely to appear, id. § 233(l)(2).
Where the Secretary makes a prompt negative coverage
determination in accordance with § 233(g)(1)(E) prior to
the filing of a malpractice action in state court, but see
infra p. 15, the defendant could challenge the denial of
coverage as final agency action in a separate action under
the APA, 5 U.S.C. § 704. See Bennett v. Spear, 520 U.S.
152, 177-78 (1997). Under the scenario that Congress
evidently envisioned, a defendant physician in a state court
malpractice action would have no occasion to invoke §
233(l)(2) when the Attorney General failed to appear,
unless the Secretary had deemed the physician covered by
the FTCA. The hearing in federal district court following
§ 233(l)(2) removal was designed simply to assure that the
United States was substituted as the defendant in place of
the Center and/or its personnel and that the case proceeded
as a tort action, unless “such a remedy is precluded”
because compensation or other benefits were available
against the United States under other laws, in which event
the case would be dismissed. 42 U.S.C. § 233(c).

In other words, there was no need for Congress to
address review of negative coverage decisions. By
requiring the Secretary to act within 30 days of receiving
an application for coverage, Congress could reasonably
contemplate that physicians seeking to associate with
 14

public health care centers would have an incentive to apply
promptly to the Secretary and to know, prior to being sued
for malpractice, whether or not they were covered by the
FTCA. If HHS rendered a negative coverage
determination, they could challenge the decision directly
under the APA, or purchase private medical malpractice
insurance.

The question remains whether the relief potentially
available for uncovered defendants under the removal
section, § 233(l)(2), is of “the same genre,” WEAL, 906
F.2d at 751, as that available under the APA or other
remedies held sufficient to preclude APA review. Id. For
reasons similar to those stated in WEAL, the fact that
Congress may not have intended § 233(l)(2) to be a remedy
for reviewing negative coverage decisions is not
dispositive. See id. However, Congress’s lack of intent to
provide a remedy, coupled with the uncertainty of the
availability of a remedy in the statute, leads us to conclude
that APA review is not precluded.

There is facial attractiveness to treating § 233(l)(2) as
an adequate remedy for an uncovered FSHCAA defendant.
Doing so would mean that all coverage issues under the
FSHCAA would be addressed in the same removal
procedure, and all questions relating to the proper
procedure would be before a single federal judge. The
legislative history of the FSHCAA indicates that when
Congress added the removal section it was “concerned
about the length of time it takes for medical malpractice
actions to be processed.” H.R. Rep. No. 104-398, at 7.
While the focus of that concern was on executive agency
processing, see id., and the possibility that default
judgments could be rendered against covered health
centers and/or their covered personnel, id. at 12, requiring
 15

a malpractice defendant to use the removal procedure
under § 233(l)(2) to seek judicial review of a negative
coverage decision would not be inconsistent with reducing
delays. Were the district court to make a de novo
determination of whether the defendant should be deemed
a Public Health Service employee, as the Arizona federal
district court suggested it would have done, then the
physicians would have a federal forum to obtain the relief
that they seek in their APA action. Cf. Wright, 2004 WL
1636961. It also is conceivable that the district court
might stay the malpractice action until the Secretary has
made a determination if one had not been made, although
this would tend further to delay resolution of the
malpractice action. Or the district court might review the
negative coverage determination under a standard
comparable to the deferential standard of the APA, and
then there would be no difference between the removal
remedy and the APA remedy.

Nevertheless, there are fundamental problems with this
approach. The first relates to the manner in which HHS
has implemented the Secretary’s deeming responsibilities
under § 233(g)(1)(E). Although the statute provides that
the Secretary “shall” make a determination of whether an
applicant is deemed a member of the Public Health Service
covered by the FTCA “within 30 days after the receipt of
an application,” 42 U.S.C. § 233(g)(1)(E), the Bureau of
Primary Health Care (“BPHC”) has issued a Policy
Information Notice (“PIN”) stating that it does not
maintain any database of individual providers covered by
the FTCA. See BPHC PIN 99-08 (April 12, 1999), at §§
XII & XIX. Rather, as the physicians allege in their
complaint, and HHS admits in its answer to the complaint,
“coverage determinations for individuals are not made in
advance but, instead, only after a lawsuit is filed against
 16

such individuals and is reported to HHS.” The effect of
postponing the coverage decision is that an individual
physician providing services to a publicly funded health
center cannot be certain of protection from medical
malpractice liability - subject to possible review by the
Attorney General, 42 U.S.C. § 233(i) - until after being
sued. At least where a physician has not insisted on being
hired as an employee of a center, the physician must either
risk exposure to personal liability, incur or require the
health center to incur potentially redundant medical
malpractice insurance costs, contrary to the purpose of the
FSHCAA, or forego providing services to the health center
altogether. If not for HHS’s manner of implementing the
application provision, it is unlikely that § 233(l)(2) would
have been available as an option for review of HHS’s
negative coverage determination because such decisions
likely would have been challenged before § 233(l)(2) could
be invoked.

Second, the removal section is silent on the time frame
within which a defendant must petition for removal.
Several approaches are possible. HHS’s approach would
import the 30-day limit of the general removal statute, 28
U.S.C. § 1446(b), triggered after the expiration of the
Attorney General’s 15-day period to appear. The Arizona
federal district court, ruling that until the date of the
Gianturco letter, there was no diversity and no federal
question and hence no basis for removal, applied the 30-
day limit of the general removal statute from the date of
the letter. The doctrine of laches, barring removal for
unreasonable delay, also might be an appropriate vehicle.
Cf. Nat’l Ass’n for the Advancement of Colored People v.
NAACP Legal Def. & Educ. Fund, Inc., 753 F.2d 131, 136-
39 (D.C. Cir. 1985). Whichever analysis is correct, the
point is that the absence of a time limit in § 233(l)(2)
 17

underscores the uncertainty of the availability of the
removal remedy. The risk is that, as here, the physicians
unknowingly may lose any opportunity to challenge a
negative coverage determination.

Under HHS’s implementation of the application
process under § 233(g)(1)(E), therefore, the text and
legislative history of the FSHCAA left the uncovered
physicians, upon being sued for malpractice, with a void.
As such, § 233(l)(2) as a remedy for review of a negative
deeming decision is fraught with uncertainty. The
FSHCAA does not authorize the district court upon
removal to overturn a negative deeming determination or
set a deadline for petitioning for removal. HHS itself is
unclear on appeal whether the district court is to make a de
novo coverage determination after a § 233(l)(2) removal,
arguably contrary to Congress’s decision to place that
responsibility in the Secretary, or to apply a deferential
standard, in which event there would be little reason to bar
an APA action seeking the same relief. Therefore, to
afford the physicians a remedy for negative deeming
determinations in § 233(l)(2), HHS’s approach would
require some recrafting of the removal section. By
contrast, by its silence on judicial review, there is no
reason to conclude that in enacting the FSHCAA Congress
intended to bar APA review of a negative coverage
determination.

HHS’s reliance on the dictum in Allen v.
Christenberry, 327 F.3d 1290, 1295-96 (11th Cir. 2003),
regarding the limited circumstances for removal under §
233(l)(2), is misplaced. In a subsequent decision,
Christenberry v. Thompson (“Christenberry II”), No. 03-
14703, at 6 (11th Cir. July 30, 2004) (unpublished), the
Eleventh Circuit acknowledged that physicians whom the
 18

Secretary had determined were not Public Health Service
employees could challenge the Secretary’s negative
determination in an APA action, but held that the suit was
barred under the Rooker-Feldman doctrine in light of the
State court’s “express finding that the FTCA was not
applicable.” Id. at 9. To the extent HHS relies on our
decisions in National Wrestling Coaches, 366 F.3d at 930,
and Godwin, 356 F.3d at 310, standing for the principle
that a distinct right of action against the regulated third
party may be an adequate remedy precluding an APA claim
against the regulating agency for the same concern, HHS
makes no attempt to show that the supposed remedy under
§ 233(l)(2) is adequate under the APA or the standards of
adequacy implied by those cases.

For these reasons, we conclude that any remedy
afforded by § 233(l)(2) is too “doubtful,” Bowen, 487 U.S.
at 901, to constitute an adequate remedy sufficient to
preclude the physicians’ APA action challenging the
Secretary’s negative coverage determination. As the
physicians maintain, § 233(l)(2) “do[es] not and w[as]
never intended to apply to an individual’s action to compel
HHS to accept his/her coverage application.” Appellees’
Br. at 17. Moreover, APA jurisdiction would not
“duplicate” § 233(l)(2), because the APA action is for the
purpose of reviewing a negative coverage determination,
while § 233(l)(2) is to protect a covered defendant against
a default judgment when the Attorney General fails timely
to appear. See H.R. Rep. No. 104-398, at 9. Given that §
233 does not provide for judicial review, the reason
articulated by the Supreme Court for the adequate remedy
doctrine - to avoid duplication of “special statutory
procedures for review of agency actions,” Darby v.
Cisneros, 509 U.S. 137, 146 (1993); see Bowen, 487 U.S.
at 903 - does not arise here. Nor do other reasons that this
 19

court has relied upon to find an adequate remedy apply
here, as district court proceedings pursuant to § 233(l)(2)’s
removal option are not “of the same genre” as a “special
statutory procedure for review of agency action” or a
private right of action, see WEAL, 906 F.2d at 751, and the
APA action does not put the court in the inappropriate
position of overseeing federal agency enforcement, cf.
Coker, 902 F.2d at 89, but presents a question of statutory
interpretation. Much as the Supreme Court concluded in
Abbott Laboratories, a statute that provides a specific
review procedure under certain conditions, namely, when
the Attorney General does not appear and the Secretary has
deemed the defendant to be covered by the FTCA, but not
where the Secretary has made a negative coverage
determination, does not offer the requisite “clear and
convincing evidence” from which to conclude that
Congress intended to bar APA review. 387 U.S. at 141.
Where such uncertainty exists regarding the availability
and nature of review upon removal on petition by a
defendant, APA review is not precluded by § 704. See id.
at 140-41; Bowen, 487 U.S. at 901. To so hold would deny
the physicians an APA remedy because the Secretary’s
negative coverage determination was made other than at
the time contemplated by the FSHCAA.

III.
Under the Rooker-Feldman doctrine,2 a federal district
court is precluded from exercising jurisdiction in an APA
action where the action “amount[s] to the functional
equivalent of an appeal from a state court.” Gray v. Poole,
275 F.3d 1113, 1119 (D.C. Cir. 2002). HHS contends that
the physicians’ APA lawsuit is barred because it is the
functional equivalent of an appeal from the Arizona State

2
See supra n.1.
 20

court, for that court denied the physicians’ motion to
dismiss for lack of subject matter jurisdiction and directed
the physicians to answer the complaint. The premise of
HHS’s contention is flawed.

The record demonstrates that the Arizona State court
did not rule on the specific issue presented by the APA
complaint. While the physicians’ motion to dismiss the
malpractice lawsuit raised the question whether they were
covered by the FTCA, the physicians properly characterize
their motion to dismiss, and the State court’s denial, as
relating solely to the question of whether the malpractice
plaintiffs’ filing of an FTCA claim amounted to an
acknowledgment that their lawsuit was more properly
against the United States. The court minutes indicate that
the State court responded only to the question of whether
the plaintiffs had admitted defendants’ federal status. The
minutes state:

[The physicians] . . . moved in this Court to
dismiss the instant case, claiming [the
malpractice] Plaintiffs should be bound by their
“admission” in the protective notice of federal
claim that [the physicians] are employees of the
federal government and the [FTCA] applies . . . .

[Plaintiffs’] alleged “admission” is not binding on
them. Therefore, the Defendant’s motion to
dismiss is denied.

Appellant’s Br. Addendum B, 2-4.

In sum, the State court did not address whether HHS
erred in refusing to afford the physicians FTCA coverage.
The APA and State malpractice proceedings are properly
 21

viewed as two parallel proceedings. This conclusion is
consistent with the Eleventh Circuit’s decision in
Christenberry II, in which the court held that the Rooker-
Feldman doctrine barred APA review, because the State
court had expressly found that the FTCA was inapplicable,
Christenberry II, at 8-9, and a determination by the district
court that the physicians were covered by the FTCA would
necessarily reverse the State court’s denial of the motion
to dismiss. Id. at 9. Here, because the Arizona State court
did not rule on the question whether the physicians are
covered by the FTCA, we hold that the Rooker-Feldman
doctrine does not bar review of the physicians’ APA claim
to FTCA coverage, and we turn to the merits of HHS’s
challenge to the district court’s conclusion that it acted
arbitrarily and capriciously in denying the physicians
FTCA coverage.

IV.
HHS contends that it properly denied FTCA coverage
to the physicians. Its argument is that the physicians’
contracts with the Center were not as employees but
through corporate entities, and whatever effect their
personal guarantees had under state law was irrelevant
because FTCA coverage is a federal question and
administrative convenience outweighed any reason to
inquire into the laws of the several states in applying the
FSHCAA coverage provision. The physicians respond that
“[t]he Gianturco letter rests completely on the assumption
that [the] physician[s’] ‘contracts were between the health
center and a professional corporation,’” ignoring that
“there is a separate set of contracts (the Guarantees) for
[the] physician[s’] services . . . [and thus] the requirement
for a direct contract between health center and individual
. . . is fully satisfied.” Appellees’ Br. at 40.
 22

In order for the court to uphold an agency’s action or
conclusion as not “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law,” 5
U.S.C. § 706(2)(A), the court must be able to conclude that
the agency “examine[d] the relevant data and articulate[d]
a satisfactory explanation for its action including a
‘rational connection between the facts found and the
choice made.’” Motor Vehicle Mfrs. Ass’n v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting
Burlington Truck Lines, Inc. v. United States, 371 U.S.
156, 168 (1962)); see Lozowski v. Mineta, 292 F.3d 840,
845 (D.C. Cir. 2002). Appellate counsel's post hoc
rationalizations are not a substitute, for “an agency's
discretionary order [will] be upheld, if at all, on the same
basis articulated in the order by the agency itself.”
Burlington Truck Lines, 371 U.S. at 168-69.

The FSHCAA defines an employee of a public or
non-profit entity receiving federal funds under 42 U.S.C.
§ 254b, as “any officer, governing board member, or
employee of such an entity, and any contractor of such an
entity who is a physician or other licensed or certified
health care practitioner." Id. § 233(g)(1)(A) (emphasis
added). This includes “a licensed or certified provider of
services in the fields of family practice, general internal
medicine, general pediatrics, or obstetrics and
gynecology.” Id. § 233(g)(5). The contracts between the
physicians and the Center were titled the “Agreement for
Management and Medical Services,” and state, for
example, that:
the “Agreement”[] is made effective . . . by and
between El Rio Santa Cruz Neighborhood Health
Center, Inc., an Arizona non-profit corporation
(“El Rio”) and [name of physician], M.D., P.C., an
 23

Arizona professional corporation (“Contractor”).
The Agreement is signed by the named physician as
“President.” In addition, the district court found that each
Agreement was accompanied by a separately signed
guarantee of the individual physician, stating, for example:
The undersigned hereby accepts and agrees to
perform and be bound by the terms and conditions
of the Agreement for Management of Medical
Services made on February 12, 1999 by and
between El Rio Santa Cruz Neighborhood Center,
Inc., an Arizona non-profit corporation and J.
Manuel Arreguin M.D., P.C., an Arizona
corporation, and guarantees the performance by
the Contractor of the terms and conditions
thereof.
The guarantees are signed by each individual practitioner.

HHS denied the physicians medical liability coverage
under the FTCA because the physicians contracted with the
Center through their individual professional corporations
(“eponymous corporations”) instead of as individual
employees of the Center. The Gianturco letter stated, in
relevant part:
[The physicians] cannot be deemed employees of
the Public Health Service because their contracts
were between the health center and a professional
corporation. See BPHC Policy Information
Notice 99-08, Section IV. Based upon the above,
this agency has determined that this matter does
[not] meet the criteria under the FSHCAA for
coverage under the . . . FTCA[] and for
representation by the United States government.
The PIN cited in the letter stated, in relevant part, that “[a]
 24

contract between a deemed Health Center and a provider’s
corporation does not confer FTCA coverage on the
provider.” BPHC PIN 99-08 (April 12, 1999), at § IV.

Thus, as the district court found, there was relevant
evidence before HHS that it does not appear to have
examined. The record supports the district court’s finding
that the guarantees, which were signed by the individual
practitioner and provided that the undersigned “guarantees
the performance by the Contractor of the terms and
conditions,” functioned as direct contracts between each
physician and the Center. As such, the district court
concluded they satisfied HHS’s interpretation of § 233(g)
as requiring a contractual relationship between the
individual health care provider and the clinic. The
Gianturco letter provided no explanation for ignoring these
direct contractual obligations assumed by each physician,
for neither the text of the letter nor the referenced PIN
addresses the fact that the physicians had a direct contract
between the health center and themselves as individuals.

In the district court, HHS argued that because there
had been no discovery it did not know whether the
eponymous professional corporations were “solely-
owned,” and that the terms of each physician’s contract
were different. Also, HHS stated that “[n]either can
[HHS] agree that the ‘Guarantee’ signed by each
[p]hysician[] is a ‘legally separate’ contract,” for in HHS’s
view, “the latter statement of fact [is] ambiguous [and] it
is not legally material.” HHS has abandoned these
arguments on appeal, and instead, discusses the
physicians’ individual guarantees only to dispute the
district court’s reliance on state law to find a direct
contractual relationship between the physician and health
 25

center. HHS has therefore missed the point of the district
court’s finding with respect to the guarantee. In denying
the coverage to the physicians, HHS never explains why it
did not find the individually signed guarantees sufficient
to create a direct contract between the Center and the
physicians, and its failure to provide a satisfactory
explanation renders its decision to deny FTCA coverage
based on their contractual relationship with the Center
arbitrary and capricious.

Accordingly, we hold that the district court had
jurisdiction of the physicians’ APA challenge to HHS’s
denial of FTCA coverage, that the Rooker-Feldman
doctrine is no bar to that challenge, and that the denial of
FTCA coverage was arbitrary and capricious because HHS
failed adequately to address relevant evidence before it,
and we affirm the grant of summary judgment remanding
the matter to HHS.

So ordered.
 KAREN LECRAFT HENDERSON, concurring:
I write separately because I believe that the United States
Department of Health and Human Services (HHS) violated the
Administrative Procedure Act, 5 U.S.C. § 706(2)(A), in two
ways rather than one: in denying the physicians medical
malpractice liability coverage under the Federal Tort Claims Act
(FTCA), 28 U.S.C. § 1346, I believe the HHS acted arbitrarily
and capriciously and contrary to law. In my view, the HHS
erred in concluding that the physicians do not qualify as
“contractor[s]” under the Federally Supported Health Centers
Assistance Act of 1995 (FSHCAA), 42 U.S.C. § 233(g)(1)(A),
merely because they contracted with the El Rio Santa Cruz
Neighborhood Health Center through their respective
eponymous—and solely-owned—professional corporations,
Joint Appendix (J.A.) 19. See El Rio Santa Cruz Neighborhood
Health Ctr., Inc. v. HHS, No. 03CV1753, slip op. at 13 (D.D.C.
Jan. 15, 2004) (mem.) (finding physicians’ “solely-owned
eponymous corporations functioned as mere alter egos”),
reprinted in J.A. 332. The FSHCAA extends FTCA coverage
to “any contractor” of a federally-funded community health
center “who is a physician.”1 42 U.S.C. § 233(g)(1)(A). While
the contractor must be an “individual” to receive coverage, id.
§ 233(g)(5)(A)-(B); see Dedrick v. Youngblood, 200 F.3d 744,
746 (11th Cir. 2000) (“[S]trict interpretation requires that a
contractor be an ‘individual’ who contracts with an eligible
entity.”), nowhere does the FSHCAA elevate contractual form
above substance. Cf. 42 U.S.C. § 233(g). Of course, statutes
that expand government liability—like the FSHCAA—must be
construed strictly, see Dep’t of the Army v. Blue Fox, Inc., 525
1
To qualify as a contractor, moreover, the “individual” must either
“normally perform[] on average at least 32 1/2 hours of service per
week for the entity for the period of the contract” or, “in the case of an
individual who normally performs an average of less than 32 1/2 hours
of services per week for the entity for the period of the contract,” must
be “a licensed or certified provider of services in the fields of family
practice, general internal medicine, general pediatrics, or obstetrics
and gynecology.” 42 U.S.C. § 233(g)(5)(A)-(B).
 2

U.S. 255, 261 (1999), but, as in Shakespeare’s play,2 a physician
who signs his name to a professional services contract followed
by “P.C.”—manifesting his business name—is no less an
individual under the FSHCAA than one who signs his name
followed simply by “M.D.” See Alexander v. Mt. Sinai Hosp.
Med. Ctr. of Chicago, 165 F. Supp.2d 768, 772 (N.D. Ill. 2001)
(holding physician who performed services at federally-funded
health center “under a contract he himself signed on behalf of an
eponymous professional corporation he founded and of which
he is the sole shareholder and employee” qualified as
“contractor” under FSHCAA) (emphasis in original); cf.
Dedrick, 200 F.3d at 747 n.4 (holding physician employed by
entity that contracted with federally-funded health center did not
qualify as “contractor” under FSHCAA, but declining to address
“whether an individual doctor who contracts with an eligible
entity through his professional corporation would be
protected.”).

2
WILLIAM SHAKESPEARE , ROMEO AND J ULIET , act 2, sc. 2 (“What’s
in a name? That which we call a rose/ By any other word would smell
as sweet.”).