Amicus Curiae Brief — Empire Healthchoice Assurance, Inc. v. McVeigh

Fe eee eee

BEST AVAILABLE COPY . Satna CUE

— \ Pd ; { f= D

MAR 3 1

No. 05-200 ! 3} 2006

LEAK |

iden aa

IN THE

Supreme Court of the United States

EMPIRE HEALTHCHOICE ASSURANCE, INC.,

d/b/a EMPIRE BLUE CROSS BLUE SHIELD,

Petitioner,

v.

DENISE FINN McVEIGH, as administratrix of the

Estate of JOSEPH E. McVEIGH,

Respondent.

On WRIT OF CERTIORARI TO THE

UNITED STATES Court OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR AMICUS CURIAE JULIA CRUZ,

AS REPRESENTATIVE OF JOSE S. CRUZ,

IN SUPPORT OF RESPONDENT

CLINTON A. KRISLOV

Counsel of Record

MICHAEL R. KARNUTH

Kristov & Associates, LTp.

20 NorTH WACKER DRIVE

Suite 1350

CHICAGO, ILLINOIS 60606

(312) 606-0500

Attorneys for Amicus Curiae

200439 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTION PRESENTED

Whether this Court should expand the Federal Employees

Health Benefits Act’s jurisdictional provision, 5 U.S.C.

§ 8912, to include reimbursement claims brought by private

insurers against insureds arising under the terms of private

contracts issued to federal employees, where the dispute

arises from a tort recovery obtained by the insured in state

court, where the contract terms at issue do not involve health

coverage or benefits, where there is no demonstrated conflict

between federal and state law on the issue, and where

resolution of the claim does not substantially turn on

interpretation of federal law.

il

TABLE OF CONTENTS

Page

Se EE Vi dan kSca sud oewa ceeds uaseRe i

WT Oe SE Bodo cadre kis biseexavkien ss il

ey Ge Se INNS 6 5. o-5 3 v0 560s 5554 5558

PURGOGEE GE FUE CATER oc ccc cee scntens l

Se aU PES Vi oi vecuwesbaciteusteys l

et Gr EIS bbb ao wine's G4dA ba s0nse eee 3

IE: ha Se re D eh ope RECEKES Vtwee eeae ese 5

I. Congress Did Not Intend Reimbursement

Claims Between Private Parties To Be

astigated In Federal COmt .. 0.6.6 eececees 6

A. FEHBA’s Jurisdictional Provision,

Granting Federal Court Jurisdiction To

Claims Against the United States, Should

Not Be Judicially Expanded ......... 6

B. Congress Did Not Intend FEHBA’s

Preemption Provision To Cover Insurer

Reimbursement Claims Against Enrollees.

(etl WeeNead Shays eked tonsa ane 10

1. FEHBA’s Statutory Scheme Shows

That “Benefits”, As Described

Under FEHBA, Do Not Include

Reimbursements Against Third-Party

ON ee a 12

il

Contents

2. FEHBA’s Legislative History Further

Shows That Congress Did Not Intend

To Preempt Areas Involving

I ere ee

C. Federal Common Law Should Not Be

Created To Resolve A Contract Dispute

Between Private Parties .............

1. No “Unique Federal Interest” Exists

U2 282.8 2 Oe 26 828 024 & CC 2 2-2 S86 6 6 6 &

2. No Significant Actual State Law

RG TEED SuvGes che eh eene«

Il. Petitioner’s And The Government’s

Alternative Argument For Federal Jurisdiction

PE 64544 9-00 Wk eK Cdk a

TES EE TE ae Eg Ea aan eA eS PLS Nay om

Page

19

19

24

25

iv

TABLE OF CITED AUTHORITIES

Page

CASES

American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) ———

+ bod p's Sb 0 bb abe e ee be ee oe eee 15

Atherton v. F-D.1.C., 519 U.S. 213 (1997) ........ 24

Botsford v. Blue Cross & Blue Shield of Mont., 314

fF]. ft | err eer 8

Boyle v. United Tech. Corp., 487 U.S. 500 (1987) ... 19,22

Bragdon v. Abbott, 524 U.S. 624 (1998) ......... 7

Bread Political Action Committee, et al. v. Federal

Election Commission, 455 U.S. 577 (1982) ..... a

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987) ... 5

City of Kenosha, Wisconsin et al. v. Bruno, 412 U.S.

DET EPERE kos utkinrdbaedckeeneneee )

Clearfield Trust Co. v. United States, 318 U.S. 363

CTE .cntivdsed twieedonules eee 23

Clinton v. City of New York, 524 U.S. 417 (1998) .. 16

CSX Transportation v. Easterwood, 507 U.S. 658

COUNOe cht avec as etvce cee eee erin 17

Doe v. Devine, 703 F.2d 1319 (D.C. Cir. 1983) .... 10, 22

Cited Authorities

Page

Empire Healthchoice Assurance, Inc. v. McVeigh, 396

8 i re passim

Empire Healthchoice Assurance, Inc. v. McVeigh, 402

CC ED. oc. cla ckccceecsccevee |

Evanns v. AT&T Corp., 229 F.3d 837 (9th Cir. 2000)

SEU RUEGUE Ob wes ceeSddcncieedteccoensece 16

Finley v. United States, 490 U.S. 545 (1989) ...... 7,8

FMC Corp. v. Holliday, 498 U.S. 52 (1990) ...... 18

Franchise Tax Bd. of Cal. v. Construction Laborers

Vacation Trust for S. Cal. et al., 463 U.S. 1 (1983)

he iie a uid cet 4606's 6 0:6'0-0 a eae 6s 5

Goepel v. Ntl. Postal Mail Handlers Union, 36 F.3d

I or eee a ia ta sg 9

Grable & Sons Metal Products, Inc. v. Darue

Engineering & Manufacturing, — U.S. -, 125

AS SS ee 25, 26

Great Northern Ry. Co. v. Merchants Elevator Co..,

ek ck Secgu cic dese cs 24

Great-West Life v. Knudson, 534 U.S. 204 (2002) .. 6, 18, 19

Gully v. First Nat. Bank in Meridian, 299 U.S. 109

Ed Gd 4 vin aden’ dace 5

vi

Cited Authorities

Page

Howard v. Group Hospital Sve., 739 F.2d 1508 (10th

Se EE vineesnccaaéccasasaaeasetreeeen 9,2]

Kokkonen v. Guardian Life Ins. Co. of America, 5\1

Pas POPE 0S 240 ob 0k 0s cache eee eeeess 7

Lingle v. Magic Chef, Inc., 486 U.S. 399 (1988) ... 1]

Mackey et al. v. Lanier Collection Agency & Service,

Rs GaP as GSP EE 6 ci weep tr Weecinanes 17

Merrell Dow Pharmaceuticals Inc. v. Thompson, 478

De PUD 6 04b-000.6 i505 scauenke eieeee 5, 26

Miree v. DeKalb County, Georgia, 433 U.S. 25 (1977)

pe Meenthys Cewek ante an Kis kien eae cee 23

Mooney v. Blue Cross of Western Penn., 678 F. Supp.

Pe CG is ED 0 u'n6 0d Sab 6400540848084) 9

Nevada vy. Hicks, 533 U.S. 353 (2001) ........... 21

New York City Transit Authority v. Beazer, 440 U.S.

DP UEOe.. car «4 deb kee yakdsnb us oehha ewes 16

O'Melveny & Myers v. F-D..C., 512 U.S. 79 (1994)

Pein hc paces ca Chk weew ON eens ae wnat 25

Pan American Petroleum Corp. v. Superior Ct. of

Delaware, 366 U.S. 656 (1961) .............. 17, 24

Ramirez v. Humana, Inc., 119 F. Supp. 2d 1307 (M.D.

PS een er Ee os eee n- )

vil

Cited Authorities

Page

Sereboff v. Mid-Atlantic Medical Services, Inc., 126 |

De Geh FO Ge BERD ov es cuavateiecvecs 19

Smith v. Kansas City Title & Trust Co., 255 U.S. 180

SOD Si 6% Wea bbb nes > Akos dees 25

Taflin v. Levitt, 493 U.S. 455 (1990) ............ 21

Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S.

PEE ‘Swi kek U0 54 ee oka ewe kanes 19, 23,24

United States v. Erika, 456 U.S. 201 (1982) ...... 9, 2]

United States v. New Mexico, 455 U.S. 720 (1982)

PUT weer nerd b4Grbbeswhns 06406400060 8ES AS 16

United States v. Sherwood, 312 U.S. 584 (1941) ... Y

Verizon Maryland, Inc. v. Public Service Commission

of Maryland, 535 U.S. 635 (2002) ............ 9,10

Woodward Gov Co., v. Curtiss-Wright Flight Sys..

Inc., 164 F.3d 123 (2d Cir. 1999) .......0..... 22

CONSTITUTION STATUTES AND REGULATIONS

IEEE ae a cet eeeuns be eee 5

MRE. Wadd gadis bed ob pee ke oea, |

ein OO oo ora ce a passim

vill

Cited Authorities

OEE 6 wadsccdicdducciwietwudekcee

Ps ME knw dk ba ce whee wakeé de ak i

PI bo vcidescaleawieeehesienas;

SEED. dacudecserasnesieis tea vakeds

IRS Bere ee

OMI 25 a os re a ae

I, icc i ee ees for eo

UNS fo fide cet A a ee

aE Ce en ar

4 | YS i SET ES

LEGISLATIVE HISTORY

Fas CS CE DEPOSED ce cvcccovecwosetecucevws

H.R. Rep. No. 95-282 (1977) ..............000-

Se Ses SE eked d odd dace eeeeeeaeoen

ix

Cited Authorities

Page

OTHER AUTHORITIES

Federal Employee’s Health Plans, Premium Growth

and OPM’s Role in Negotiating Benefits,

December, 2002, www.gao.gov/new.items/

ES kk wd ney ic owes des eVures eens cen 2, 20

Leishman, Adding Insult to Injury: ERISA, Knudson,

and the Error of the Possession Theory, 89 Minn.

of A yr rerryre eer ree 20-21

INTEREST OF AMICUS CURIAE

The law firm of Krislov & Associates, Ltd. is counsel to

Petitioner, Julia Cruz, as Representative of Jose S. Cruz, in the

petition pending before this Court in Cruz v. Blue Cross Blue

Shield of Illinois et al., No. 04-1657. The Seventh Circuit's

decision in the Cruz case created a circuit split with the Second

Circuit’s decision being reviewed here. Empire Healthchoice

Assurance, Inc. v. McVeigh, 402 F.3d 107, 110 (2d Cir. 2005)

(“we note our disagreement with the conclusions reached in

[Cruz], which the Seventh Circuit decided ten days after we

issued our original decision”). Cruz and her counsel thus have

a direct and substantial interest in the outcome of this case.

Record counsel for both Petitioner and Respondent have

consented to the request of the Krislov firm, on behalf of Mrs.

Cruz, to file an Amicus brief. This brief is filed in support of

Respondent to assist in explaining why Petitioner’s and the

Government's arguments cannot be squared with congressional

intent, this Court's jurisprudence, or federalism concerns. The

Krislov firm, as amicus curiae, asks the Court to hold that Blue

Cross’s reimbursement claim does not arise under federal law

and affirm the Second Circuit’s decision holding that no federal

subject matter jurisdiction exists over that claim. !

STATEMENT OF THE CASE

In this case, as in many others, a beneficiary of a federal

government-sponsored medical plan, covered by the Federal

Employees Health Benefits Act of 1959 (“FEHBA”), 5 U.S.C.

$8901 ef seq., was injured in an accident. The FEHBA Plan,

administered here by Empire HealthChoice Assurance, |nc.,

d/b/a Empire Blue Cross Blue Shield (*“*Petitioner” or “Blue

1. No counsel for any party authored any portion of this brief. No

party other than amicus curiae or their counsel made a monetary

contribution to the preparation or submission of this brief.

2

Cross’), paid his medical expenses.’ The beneficiary filed and

pursued a state-court tort action against tortfeasors to recover

damages. Neither the FEHBA Plan nor its representatives

assisted or participated in the state-court action. Instead,

Petitioner initiated a second action, in federal court, invoking a

reimbursement provision contained in the Statement of Benefits

document prepared and issued by Blue Cross to beneficiaries,

to demand payment from the injured beneficiary of the amount

the Plan had expended for his medical care.

The nature of reimbursement claims, such as Blue Cross’s

here, is that they attach to third-party recoveries obtained through

the efforts and expense of others, such as Respondent. The

tortfeasor’s money, not Blue Cross’s or the Government's, is at

issue. Had Respondent not pursued the third-party tort action,

Blue Cross would have been unable to assert its reimbursement

right and would, instead, have had to resort to either its

subrogation right (requiring Blue Cross to expend its own effort

and expense for recovery) or forgo any recovery. Additionally,

Blue Cross’s reimbursement claim by definition must arise long

after an insureds’ coverage and benefit determinations have been

resolved and benefit payments made. Notably, a substantial

source of those benefit plan payments (at least 25% of all

premium dollars) are derived from the insured. Thus, the

reimbursement claim is, in part, recovering funds that originated

from the insured.

Blue Cross rejected offers to resolve its reimbursement

claim in Respondent's state court litigation, instead opting to

file the case below. The district court granted Respondent's

motion to dismiss, holding that federal subject matter

2. According to a December 2002 report by the United States

General Accounting Office, approximately 8.3 million individuals were

covered by FEHBA-governed health plans. Federal Employee's Health

Plans, Premium Growth and OPM’'s Role in Negotiating Benefits,

December 2002, www. gao.gov/new. items/d0 3236. pdf, p.1 (visited March

30, 2006) (the “GAO's December 2002 FEHBA Premium Growth

Report”).

3

jurisdiction does not exist over Blue Cross’s reimbursement

claim. The Second Circuit affirmed and denied Blue Cross’s

motions for rehearing and en banc review.

SUMMARY OF ARGUMENT

Blue Cross has been the Government’s sole insurance carrier

under the Service Benefit Plan since FEHBA’s inception in 1959.

Over the past forty years there have been numerous

reimbursement claims asserted by Blue Cross and addressed,

adjudicated, and resolved by state courts. Despite that long

history, Blue Cross and the Government fail to present to this

Court any evidence supporting their contention that state

adjudication of these claims adversely affects the feceral

treasury, that state law significantly conflicts with these claims,

that state courts, who are experienced and capable of resolving

contract disputes and reimbursement claims, cannot adequately

protect Blue Cross’s interests, or that Congress has any concern

about this issue.

Blue Cross and the Government do not contend that the

FEHBA statute addresses reimbursement. Indeed, they do not

even point to a stray remark about reimbursement anywhere in

FEHBA's legislative history. Nor do they contest that the O*fice

of Personnel Management (“OPM”), which is authorized to

“prescribe regulations necessary to carry out [FEHBA]”,

5 U.S.C. § 8913, has not issued regulations addressing

reimbursement. Blue Cross fuils to support its position with

any explicit showing within FEHBA or its legislative history

(except for a tortured interpretation of FEHBA’s preemption

provision) that Congress intended federal courts to adjudicate

reimbursement claims.

Blue Cross supports its argument for federal subject matter

jurisdiction with only general assertions that uniformity is

needed in applying plan terms and that the federal treasuvy is

affected. Blue Cross ignores, however, that the reimbursement

lerms it relies on are contained in the Statement of Benefits, a

document Blue Cross prepared and issued to insureds, and not

4

in the contract between it and OPM. The Blue Cross/OPM

contract only addresses subrogation rights, not reimbursement,

and, notwithstanding, both concepts are outside Congress's

explicit jurisdictional scope for FEHBA. And with respect to

reimbursement matters, Blue Cross, not OPM, authors the terms

and directs how to proceed.’

Allowing federal jurisdiction here would unnecessarily

burden federal employees and the courts with duplicitous

litigation, requiring state and federal courts to resolve different

parts of the same case. State courts are well-qualified to handle

contract issues and, given that the funds Blue Cross seeks to

lien against are obtained in state court, the reimbursement

question should be resolved there as well.

Petitioner and the Government offer no controlling authority

that even resembles the record and issue we have here, where

3. Set forth in Cruz’s pending certiorari petition is the Department

of Justice’s concession that Blue Cross has sole authority over

reimbursement decisions:

Medicare is a health insurance program maintained and

underwritten by the Federal Government itself, in which

carriers and fiscal intermediaries act as agents of the

Government and perform functions that would otherwise

be performed by the Government. In contrast, FEHBA

carriers do not perform outsourced governmental tasks, are

not agents of the Government, and do not act on behalt of

OPM. Rather, they function as independent cconomic

entities that offer and run their own health insurance plans,

performing a role that is not governmental in nature but,

instead, is akin to their activities as insurers in the private

sector marketplace. An extension of the principle in the

cases cited by BCBS beyond the Medicare context to the

FEHBA context would be unwarranted and would distor

OPM’s relationship with BCBS.

Cruz, No, 04-1657 (petition pending), at 6 (Excerpt from “Statement of

Interest of the United States of America” at 19-20, filed July 30, 2004,

in Doyle, Cruz et al. v. Blue Cross Blue Shield of Illinois, No. 00 CH

14182 (Cir. Ct. of Cook County, Hlinois, Chancery Div.) Judge Peter

Flynn, presiding )).

5

the Court found subject matter jurisdiction exists. Finding

jurisdiction on the issue raised here would significantly loosen

the federal question jurisdictional standards and call into

question this Court’s jurisprudence.

ARGUMENT

Absent diversity jurisdiction, a federal court’s power to hear

cases 1s limited to those “arising under” the Constitution, Federal

law, or treaties. U.S. Const. Art. III, § 2; 28 U.S.C. § 1331. The

term “arising under” has been clarified in the development of

the “well-pleaded complaint rule,” which limits the types of

cases that arise under the federal Constitution and laws of the

United States. Franchise Tax Bd. of Cal. v. Construction

Laborers Vacation Trust for S. Cal. et al., 463 U.S. 1, 9-10

(1983). This rule provides that “federal jurisdiction exists only

when a federal question is presented on the face of the plaintiff's

properly pleaded complaint.” Caterpillar, Inc. v. Williams, 482

U.S. 386 (1987).

In order to avoid being strictly bound by the language of

the complaint, courts have relied on the “artful pleading

doctrine” to look beyond a plaintiff's characterization of a claim

to determine whether the claim truly arises under federal ‘aw.

This doctrine is applicable where, as here, the plaintiff purports

to assert a federal claim where none exists. Merrell Dow

Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 807-8 (1986)

(remanding case to state court for lack of federal question

jurisdiction even though complaint asserted allegations under

federal law); Gully v. First Nat. Bank in Meridian, 299 U.S.

109, 114(1936) (“A suit to enforce a right which takes its origin

in the laws of the United States is not necessarily, or for that

reason alone, one arising under those laws, for a suit does not

SO arise unless it really and substantially involves a dispute or

controversy respecting the validity, construction, or effect of

such a law, upon the determination of which the result

depends.”).

6

Petitioner argues that federal question jurisdiction exists

Over its reimbursement claim under FEHBA, the contracts and

regulations established pursuant to FEHBA, and federal

common law. Pet. Br. 14. For the reasons set forth herein, Blue

Cross’s “artfully pled” complaint fails to (and indeed cannot)

plead a valid federal claim and, thus, federal question jurisdiction

does not exist.

I. CONGRESS DID NOT INTEND REIMBURSEMENT

CLAIMS BETWEEN PRIVATE PARTIES TO BE

LITIGATED IN FEDERAL COURT

A plain reading of the entire FEHBA statute and its

legislative history, coupled with the statute’s purpose to protect

federal employees against increased costs, strongly suggests that

Congress did not intend for state court litigants to be forced

into federal court to resolve reimbursement claims.

A. FEHBA’s Jurisdictional Provision, Granting

Federal Court Jurisdiction To Claims Against the

United States, Should Not Be Judicially Expanded

Where a federal statute expresses the parameters of district

court jurisdiction, that expression is “strong evidence that

Congress did not intend to authorize other remedies that it simply

forgot to incorporate expressly.” Great-West Life v. Knudson,

534 U.S. 204, 209 (2002) (emphasis in original) (citing, Mertens

. Hewitt Assocs., 508 U.S. 248, 254 (1993)).

A plain reading of FEHBA’s jurisdictional provision clearly

shows that FEHBA does not create a private right of action for

a health insurer to sue its members in federal court. That

provision states that district courts have jurisdiction over

“a civil action or claim against the United States founded on

this chapter.” 5 U.S.C. §8912. (Emphasis supplied).

Petitioner and the Government argue that FEHBA’s

jurisdictional provision does not bar the kind of claims Petitioner

brought or the parties that Petitioner sued in this case. (Pet. Br.

29-30 tn2; Govt. Br. 27fn5). However, had Congress intended

7

federal courts to have jurisdiction over all civil actions arising

under FEHBA, it could have easily provided for exclusive

jurisdiction of all claims arising under that legislation (as it did

when enacting, among others, ERISA legislation), rather than

limiting jurisdiction solely to claims against the United States.

See, Bread Political Action Committee, et al. v. Federal Election

Commission, 455 U.S. 577, 580 (1982) (“Jurisdictional statutes

are to be construed with precision and with fidelity to the terms

by which Congress has expressed its wishes’”). Expanding

jurisdiction to include disputes between parties violates this

Court’s instruction to not expand federal court powers “by

judicial decree”. Kokkonen v.Guardian Life Ins. Co. of America,

511 U.S. 375, 377 (1994); Finley v. United States, 490 U.S.

545, 547 (1989) (“courts which are created by law, and whose

jurisdiction is defined by written law, cannot transcend that

jurisdiction.”).

Petitioner’s and the Government's expansive interpretation

of FEHBA conflicts with an analogous situation addressed by

this Court in Finley. In Finley, a widow sought to amend her

federal action against the United States, brought under the

Federal Tort Claims Act (“FTCA”), to add state law claims

against non-federal parties. 490 U.S. at 546-47. In declining

jurisdiction over non-federal parties, this Court held that the

text of the FTCA, which provides that “the district courts . . .

shall have exclusive jurisdiction of civil actions on cliims

against the United States”, 28 U.S.C. §1346(b), “means aguinst

the United States and no one else.” /d. at 552.

The text of the FTCA’s and FEHBA’s jurisdictional

provisions are substantially the same, cf., 28 U.S.C. 1346(b),

with 5 U.S.C. 8912, and, thus, should be similarly applied.

See, Bragdon v. Abbott, 524 U.S. 624, 645 (1998) (when

“judicial interpretations have settled the meaning of an existing

statutory provision, repetition of the same language in a new

Statute indicates, as a general matter, the intent to incorporate

its .. . judicial interpretations as well.”). To allow Blue Cross

to sue a plan member in federal court under FEHBA would

8

require an extremely liberal interpretation of FEHBA’s

jurisdictional provision which Congress clearly did not intend.

See, Finley, 490 U.S. at 552 (indicating that if Congress wanted

to, it could have easily worded the statute to broaden its reach

beyond only actions against the United States).

Moreover, limiting federal jurisdiction to claims against

the United States comports with other FEHBA provisions, its

legislative history, and OPM’s regulations. Indeed, actions

against the United States encompass enrollee claims against

OPM for coverage and benefit denials, and benefit cost disputes.

These sort of claims are addressed in FEHBA’s preemption

provision, 5 U.S.C. §8902(m)(1) (allowing “provisions of any

contract under this chapter which relate to the nature or extent

of coverage or benefits . . . [to] preempt any State or local law

. .. Which relates to health insurance or plans”), and the meaning

of the coverage and benefit terms can be gleaned throughout

the FEHBA statute and its legislative history. Those sources

show that Congress’s interest in this area was limited to medical

care issues, such as the type of procedures covered and the cost

of those benefits. Furthermore, the FEHBA regulation requiring

that “denial of health benefits must be brought against OPM

and not against the carrier or carrier’s subcontractors, 5 C.F.R.

$890.107, further supports the federal jurisdiction limitation

argued by Respondent, to only suits by beneficiaries against

OPM. See, McVeigh, 396 F.3d at 145 fn7 (holding that the OPM’s

lack of regulations “to open the federal courts to insurance

carriers seeking reimbursement from beneficiaries” signifies

what Congress did not intend).*

4. Numerous courts agree with the Second Circuit's literal, narrow

interpretation of FEHBA’s jurisdictional provision. See, McVeigh, 396

F.3d 136, 145 (2d Cir. 2005) (“$8912 does demonstrate that Congress

considered jurisdictional issues in enacting FEHBA and did not hesitate

expressly to confer federal jurisdiction where it found it necessary to

do so.”); Botsford v. Blue Cross & Blue Shield of Mont., 314 F.3d 390,

398-99 (9" Cir. 2002) (“FEHBA provides tederal courts with jurisdiction

solely over suits against the United States”. further stating: “we conclude

(Cont'd)

9

In contrast, expanding federal jurisdiction beyond claims

against the United States would violate Congressional intent

and “overload{] the [federal] courts” with matters that are and

can be easily addressed by state courts. See, United States v.

Erika, 456 U.S. 201, 209-10 (1982) (strictly construing medicare

statute and its legislative history which precluded federal

question jurisdiction over Medicare part B claims). Without any,

let alone clear, Congressional intent that insurer reimbursement

claims were meant to be resolved in federal court, this Court

must refrain from judicially expanding FEHBA’s jurisdictional

provision. /d.; see also, United States v. Sherwood, 312 U.S.

584 (1941) (holding that suits under the Tucker Act, 28 U.S.C.

1346(a)(2), can only be brought in federal court and only aguinst

the United States); City of Kenosha, Wisconsin et al. v. Bruno,

412 U.S. 507, 513 (1973) (holding no federal jurisdiction existed

over civil rights action against municipalities because the Court

found that “the legislative history” and “the language actually

used by Congress” did not “bring municipal corporations within

the ambit of s1983.”).°

(Cont'd)

that Congress intended to limit suits over benefits under a FEHBA plan

to only one defendant: United States.”); Goepel v. Ntl. Postal Mail

Handlers Union, 36 F.3d 306, 307 (3d Cir. 1994) (remanding insured’ s

suit against insurer because, among other reasons, “the United States is

not a party to this action.”); Howard v. Group Hospital Svc., 739 F.2d

1508, 1511 (10" Cir. 1984) (holding that district court lacked federal

jurisdiction on claims brought by FEHBA plan insured against insurer

because “the United States here acts as the agent, not the insurer of

health benetits.”); Ramirez v. Humana, inc., 119 F. Supp. 2d 1307, 1312

(M.D. Fla. 2000) (acknowledging jurisdiction under FEHBA is limited

to suits against the United States); Mooney v. Blue Cross of Western

Penn., 678 F. Supp. 565, 566 (W.D. Pa. 1988) (“[ijf Congress had

intended . . . district courts to have jurisdiction over private actions by

|FEHBA| plan participants against plan providers, we believe it woud

have explicitly stated so.”).

5. The Petitioner's reliance on Verizon Maryland. Inc. °. Pablic

Service Commission of Maryland, 535 U.S. 635 (2002), is misplaced.

(Coad)

10

B. Congress Did Not Intend FEHBA’s Preemption

Provision To Cover Insurer Reimbursement Claims

Against Enrollees.

Petitioner and the Government ignore FEHBA’s express

preemption limitations in arguing that this provision supports

federal jurisdiction over Blue Cross’s reimbursement claim.

FEHBA’s preemption provision states, in relevant part:

The terms of any [|FEHBA] contract. . . which relate

to the nature, provision or extent of coverage or

benefits (including payments with respect to

benefits) shall supercede and preempt any State or

local law ... which relates to health insurance or

plans.

5 U.S.C. § 8902(m)(1).

Petitioner and the Government make several errors in

contending that FEHBA’s preemption provision covers this

dispute. First, Blue Cross filed suit against Mc Veigh in federal

court based upon reimbursement language contained in the

Statement of Benefits that Blue Cross prepared and issued to

FEHBA plan enrollees. That reimbursement provision was not

mandated by OPM, which merely authorizes the distribution of

that document. See, Cruz petition (pending) at 6 (identifying

the Government's concession that Blue Cross operates

independently); Doe v. Devine, 703 F.2d 1319, 1333 fn62 (D.C.

Cir. 1983) (J. Ginsburg) (“OPM can negotiate, but cannot

‘iMpose’, contract terms.”). No express terms of the OPM/Blue

Cross contract, a separate document from the Statement of

(Cont'd)

(Pet. Br. 29-30 tn2). That decision did not address a jurisdictional

provision or language even close to that contained in FEHBA.

Verizon addressed the Telecommunications Act of 1996, 47 U.S.C. 251,

et seq. and, specifically, 47 U.S.C. 252(e (6), which set forth “procedures

for negotiation, arbitration, and approval of agreements”. The Court

unsurprisingly found that the provision’s language did not “eliminate

jurisdiction under $1331". Jd. at 643.

1]

Benefits, is at issue in this case. See, Lingle v. Magic Chef, inc.,

486 U.S. 399, 407 (1988) (declining to preempt state tort law

under LMRA, where claim did not require interpretation of

collective bargaining agreement).

Next, the reimbursement language on which Petitioner and

the Government rely does not “relate[{] to” “coverage or benefits

(including payments with respect to benefits)”. The Government

distorts the plain meaning of “coverage or benefits” under

FEHBA in defining a carrier's reimbursement lien as part of

the “net benefits” an enrollee receives from the carrier. (Govt.

Br. 19). This strained interpretation is made without any

reference to the description of benefits set forth in FEHBA and

its legislative history. This position stretches FEHBA’s “relate

to” clause further than Congress intended and distorts the

meaning of “benefits” under FEHBA, and is based upon a

tenuous, indirect connection between money paid by the plan

(which were funded in large part by premiums paid by insureds)

and a recovery received by Respondent from a third-party

tortfeasor. Petitioner’s and the Government's rationale — that a

plan’s reimbursement reduces the “benefit” provided to the

insured — ignores the fact that carrier coverage and benefit

determinations, and payments with respect to those, are

completed long before reimbursements are asserted and

recovered.

A plain reading of the FEHBA statute and its legislative

history shows no direct connection exists linking “coverage or

benefits” with Congressional intent to apply preemption here,

and that no material link or relation should be implied.

12

1. FEHBA’s Statutory Scheme Shows That

“Benefits”, As Described Under FEHBA, Do

Not Include Reimbursements Against Third-

Party Recoveries

Section 8903 of FEHBA identifies four types of health

benefit plans that OPM may contract for or approve. 5 U.S.C.

$8903. Plaintiff was a member of the Service Benefit Plan, which

is described in subsection 8903(1). That subsection, like the

other three, refer to FEHBA section 8904 to describe the

“benefits” covered under each plan. Section 8904, titled “Types

of benefits”, states, in relevant part:

(a) The benefits to be provided under plans

described by section 8903 of this title may be of the

following types:

(1) Service Benefit Plan. —

(A) Hospital benefits.

(B) Surgical benefits.

(C) In-hospital medical benefits.

(D) Ambulatory patient benefits.

(E) Supplemental benefits.

(F) Obstetrical benefits.

lt »s clear that this FEHBA section, which provides guidance

on Congress's intent regarding the scope of the word “benefits”,

does nol cncompass a private carrier's reimbursememt clainn

against an insured.

13

2. FEHBA’s Legislative History Further Shows

That Congress Did Not Intend To Preempt Areas

Involving Reimbursement

In 1977, eighteen years after its enactment, Congress

amended FEHBA to add a preemption provision, § 8902(m (1).

This provision was intended, designed and drafted to be a very

narrow, surgical response to a specific conflict which bothered

federal officials. The problem involved some states attempting

to require federal government health insurance plans to include

certain types of coverage (specifically, treatment by

chiropractors) which the federal plans did not then include. Thus,

5 U.S.C. § 8902(m)(1) was created to preempt state laws only

to the extent that state laws attempted to force federal health

plans to include benefits other than those chosen by the federal

plan. See, e.g., House Report No. 95-282 (1977), pp. 4-5:

Some States have established health insurance

requirements that conflict with the provisions of the

FEHB contracts, such as requiring recognition of

certain practitioners not covered by Federal

employee's health benefits plans.

* co *

For example, the Indemnity Benefit Plan (Aetna)

pays for chiropractic services in Nevada, as required

by State law, but does not pay for such services in

any other State. Six employee organization plans pay

for chiropractic services only in New York and

Montama where State law requires coverage for such

Services.

* * x

The effect of this amendment is to preempt

apphcation of State laws or regulations which specify

types of medical care, providers of care, extent of

benefits, coverage of family members, age limits for

family members, or other matters relating to health

benefits or coverage . . .

14

Petitioner's contention that Congress intended to preempt

all state laws related to FEHBA plan contract terms is belied by

statements made by the agency overseeing this statute. In a letter

to Congress from the United States Civil Service Commission

(“USCSC”), the predecessor of OPM, which was attached to

House Report No. 95-282, the USCSC acknowledged the

narrow scope of FEHBA’s preemption:

It is a form of limited preemption.

a

more and more States have legislated the kinds of

benefits and medical practitioners that carriers doing

business in these States must cower. These laws in

effect presented serious problems from the

standpoint of the uniformity of bemefits under the

program. It also placed carrmers in semeus jeopardy

of loss of thear license in a State unless they were to

approve pay for a benefit not provided under our

contract but required bw State law.

Id. at 6.

In 1998, Congress amended FEHBA’s preemption provision

to broaden its reach over benefits and coverage issues by merely

deleting the phrase “to the extent that such law or regulation is

inconsistent with the provisions of the Federal employees’ health

benefits contract”. 5 U.S.C. §8902(m)(1) (1997). Significantly,

Congress, in amending the provision, did not delete the limiting

phrase “coverage or benefits”. The legislative history of this

amendment, which was part of the passage of the Federal

Employees Health Care Protection Act of 1997, further shows

that the amended preemption provision still solely focused on

preventing State laws addressing benefits and coverage issues

that were surviving under the old provision.

These changes would affect states that have

requirements governing what types of organization

can provide health care when those requirements are

15

different from those under federal contracts. This

preemption would be considered a mandate under

UMRA. However, because the only effect of the

preemption would be to limit the application of state

law in some circumstances, CBO estimates that any

costs to state or local governments arising from this

mandate would be minimal.

S. Rep. No. 105-257, pt. V (1998).

Congress expressed its limited expansion of the statute to

capture other pure benefit and coverage issues in its description

of the amendment as “technical changes”, /d. at pt. 1, and in its

statement that costs to state or local governments “would be

minimal”. See also, H.R. Rep. No. 105-374, pt. 2, at p. 8 (1998)

(“For example, a carriers effort to establish a preferred provider

organization (PPO) across the country would not be jeopardized

by State-mandated ‘any willing provider’ statutes.”). Nothing

in the legislative history of FEHBA’s preemption provision

suggests that Congress was concerned with allowing state courts

to adjudicate carrier reimbursement claims asserted against third-

party tort recoveries. See, McVeigh, 396 F.3d at 149 (finding no

indication from the statute’s words or its legislative history “that

Congress meant to channel into federal courts the business of

resolving, pursuant to judicially fashioned federal common Jaw,

the range of contract claims relating to” a plan’s reimbursement

lien) (citing, American Airlines, Inc. v. Wolens, 513 U.S. 219,

232 (1995) (rejecting carrier's argument that Air ine

Deregulation Act barred state breach of contract claim)).”

6. Although it did not reach the issue, the Second Circuit's coreerm

over the constitutionality of FEHBA’s preemption provision is valid.

McVeigh, 396 F 3d at 143 (questioning whether “contract terms’ written

by Blue Cross can “preempt state law because, as it believed, * only

federal jaw meay preempt state and local law”). The Second Circuit

reasoned that the “FEHBA-authorized contracts ... are not” federal

laws becawse “Whe govermment does not impose contract terms as it

would umpese a law, {rjather, the OPM negotiates the contract terms

(Cont'd)

16

This review of the text and legislative history of FEHBA’s

preemption provision shows that Petitioner's and the

Government’ $ position violates this Court’s standard for

(Cont'd)

privately with insurance providers ... who are under no obligation to

emer into the contracts in the first place.” /d. at 144 (distinguishing

contracts and tariffs by recognizing that a “tariff, required by law to be

filed, is not a mere contract, [i}t is the law”; citing, Evanns v. AT&T

Corp., 229 F.3d 837, 840 fn 9 (9" Cir. 2000)). In refusing to reach the

constitutional issue, the court narrowly construed the provision making

it clear that its construction required that the federal law preempting

state law may be federal common law or the FEHBA statute provisions

themselves, but it must be law — not contract terms. /d. at 145.

This Court is certainly able to address the constitutional issue if it

deems necessary, especially since the Government raised it in their brief

(Govt. Br. 22-23). See, New York City Transit Authority v. Beazer, 440

U.S. 568, 583 fn24 (1979) (“The failure of the Court of Appeals to

address the statutory issue decided by the District Court does not, of

course, prevent this Court from reaching the issue.”). Moreover, this

Court’s precedent support’s the Second Circuit's concern. See, Wolens,

513 U.S. at 229 fn5 (“the word series ‘law, rule, regulation, standard,

or other provision, ... connotes official, government-imposed policies,

not the terms of a private contract.”); /d. at 241 (J. O’Connor, concurring

in the judgment in part and dissenting in part) (“To be sure, the terms

of private contracts are not “laws,” any more than the guidelines at issue

in Morales were ‘laws.””); Clinton v. City of New York, 524 U.S. 417,

448-49 (1998) (holding “Line Item Veto Act” unconstitutional, stating:

“Something that might be known as ‘Public Law 105-33 as modified by

the President’ may or may not be desirable, but it is surely not a document

that may “become a law’ pursuant to the procedures designed by the

Framers of Article I, §7, of the Constitution”); United States v. New

Mexico, 455 U.S. 720, 737 (1982) (rejecting immunity shield for

government contractor despite them having “modified their agreements

two years into the litigation in an obvious attempt to strengthen the

cause for nonliability”, further stating: “We cannot believe that an

immunity of constitutional stature rests on such technical considerations,

for that approach allows any government functionary to draw the

constitutional line by changing a few words in a contract.”) (internal

quotes and citation omitted).

17

applying preemption statutes. See, CSX Transportation v.

Easterwood, 507 U.S. 658, 664 (1993) (holding that courts

should only preempt when it is the “clear and manifest purpose

of Congress” to do so). Long before the preemption provision

was added to FEHBA, state courts were well-versed in

adjudicating subrogation and reimbursement claims. See, Pan

American Petroleum Corp. v. Superior Ct. of Delaware, 366

U.S. 656, 663 (1961) (finding that claims for restitution are

“traditional common-law [state] claims” that “do not lose their

character because ... of federal regulation”). Blue Cross and

the Government do not offer any support for their argument

that Congress intended to wrest away this traditional state court

function.

Moreover, Petitioner and the Government fail to identify

any specific state law “which relates to health insurance or plans”

that conflicts with Blue Cross’s right to reimbursement. New

York does not have an anti-subrogation or anti-reimbursement

law. Any law that Petitioner attempts to raise in reply or at oral

argument would at best be a law of general application not

specifically targeted to health insurance or plans: See, Mackey

et al. v. Lanier Collection Agency & Service, Inc., 486 U.S.

825, 846 (1988) (refusing to preempt “run-of-the-mill state law

claims such as unpaid rent, failure to pay creditors, or even torts

committed by an ERISA plan ... [even though these suits]

obviously affect{] and involv[e] ERISA plans and treir

trustees”); McVeigh, 396 F.3d at 146 fn10 (finding no state law

conflict existed, further stating: “|i]f Congress had not wished

to limit the types of state laws subject to preemption, it could

have quite easily provided that ‘federal law shall govern the

interpretation and enforcement of contract terms””’). Thus, even

if Congress intended FEHBA to preempt the reimbursement

field, there still is no showing that Congress intended to preclude

State courts from addressing those issues.

Finally, the Petitioner's and the Government's comparison

to ERISA’s preemption provision and this Court's interpretation

of that provision is misplaced. FEHBA’s provision, unlike

18

ERISA’s, states that only plan terms that relate to “coverage or

benefits” preempts state law. Cf. 5 U.S.C. 8912(m)(1) with

29 U.S.C. 1144(a). No such limitation is contained in ERISA

and no coverage or benefit dispute is at issue in this case. See,

FMC Corp. v. Holliday, 498 U.S. 52, 62, 64 (1990) (instructing

courts to give life to “distinction[s]" in statutes where Congress

is aware of those differences and “has chosen not to alter”,

further instructing courts to find meaning in the words Congress

uses in “preemption clause[s]”). Moreover, as the Second Circuit

found in declining to extend ERISA precedent, ERISA is

“significantly more comprehensive than FEHBA, in that it

contains multiple preemption provisions and a detailed civil

enforcement scheme intended to completely supplant state law.”

McVeigh, 396 F.3d at 147-48 & fn13 (“reject{ing]. . . suggestion

that we should rely on ERISA-related precedent to determine

the preemptive reach of FEHBA” and recognizing FEHBA’s

limiting term not found in ERISA’s preemption provisions,

“which requires that the preempting contract term ‘relate to. . .

[health] coverage or benefits”). Furthermore, this Court has

already construed ERISA narrowly with respect to a plan’s

asserted reimbursement claim, as here, and held that such a claim

does not arise under federal law. See, Great West, 534 U.S. at

221 fn5 (construing the phrase “appropriate equitable relief” to

exclude a Plan's reimbursement claim and rejecting plan’s

argument that jurisdiction is warranted because it “is consistent

with ERISA’s purposes”).’ Petitioner offers no support for

7. The Government's reliance on FMC Corp., is misplaced. In

FMC, this Court addressed whether ERISA’s broader preemption

provision applied to prempt “Pennsylvania’s anti-subrogaton law”,

which “[did] not merely have an impact on the insurance industry, it

[was] aimed at it.” 498 U.S. at 61. That state law prohibited benefit

“plans from being structured in a manner requiring reimbursement in

the event of recovery trom a third-party.” /d. Unlike in FMC, here the

Government tails to point to amy state law that prevents Blue Cross

from asserting its reimbursement claim against Respondent, let alone

any state law that ts targeted at this plan’s reimbursement provision.

19

extending FEHBA’s much narrower preemption provision

further than ERISA’s reach.“

C. Federal Common Law Should Not Be Created To

Resolve A Contract Dispute Between Private Parties

Judicial creation of federal common law is limited to those

“narrow areas .. . concerned with the rights and obligations of

the United States, interstate and international disputes

implicating the conflicting rights of States or our relations with

foreign nations, and admiralty cases.” Texas Indus., Inc. v.

Radcliff Materials, Inc., 451 U.S. 630, 641 (1981). The standards

for creating such laws were set forth by this Court in Boyle v.

United Tech. Corp., 487 U.S. 500 (1987). Neither pronz of

Boyle's two-part test are met, however, to support creation of

federal common law here. Blue Cross’s reimbursement claim

simply does not implicate a “uniquely federal interest”, nor does

it involve a “significant conflict” between an identifiable “feceral

policy or interest and the operation of state law”. /d. at 504-07.

1. No “Unique Federal Interest” Exists

Petitioner's and the Government's contentions that the

impact of reimbursement on the federal treasury creates a

substantial, unique federal interest and that the federal pclicy

of uniform health benefits for FEHBA plan enrollees is in

conflict with state law. (Pet. Br. 22; Govt. Br. 7, 25) are

unsupported and erroneous. The United States General

Accounting Office’s (“GAO”) December 2002 report, analyzing

premium growth in FEHBA plans, undercuts Petitioner's

position. In that report, the GAO indicates that most of the

increases in FEHBA plan premiums were a result of higher

%. Amicus are aware that this Court is presently addressing whether

the Great West decision lett the federal door open to an ERISA plan

asserting a limited type of reimbursement claim. Sereboff v.Mid Atlantic

Medical Services, Ince., 126 8. Ct. 735 (Nov. 28, 2005) (cert. granted).

Given the material differences in the language of the ERISA and FEHBA

Statutes, the outcome of that decision, even if the Plan prevails there,

will not be dispositive here.

20

prescription drugs and hospital care expenses. GAO’s December

2002 FEHBA Premium Growth Report, at 2, www.gao.gov/

new. items/d03236.pdf, (visited March 30, 2006). Nowhere in

the thirty-one page report and appendixes does it suggest that

carrier reimbursements have had or will have a material affect

on premiums. Indeed, reimbursements from third-party

recoveries is not even mentioned in the report.

Moreover, Petitioner and the Government ignore the

inherent nature of Blue Cross’s claim. Petitioner's

reimbursement claim does not involve any further “payments

with respect to benefits” (as FEHBA’s preemption provision

addresses), but rather seeks reimbursement from a third-party

recovery that Respondent, not Petitioner, pursued and obtained

in a State court action.

Contrary to Petitioner’s and the Government's suggestion,

litigating reimbursement claims in federal court may have the

opposite, adverse affect on the Federal Treasury. If injured

_insureds are required to litigate in two, rather than one legal

forum (initiating the tort action in state court only to be later

dragged into federal court to resolve the carrier's reimbursement

claim), the costs of litigation would increase and would likely

result in some litigants deciding against pursuing a third-party

case. This chilling effect on certain tort actions will reduce Blue

Cross’s reimbursement recoveries and/or increase its costs in

pursuing subrogation claims.’ It would also result in flooding

9. It is undisputed that this case raises a reimbursement claim, not

a subrogation claim. The distinction between subrogation and

reimbursement should be noted if any importance ts given to the

subrogation provisions contained in OPM’s contract with Blue Cross.

That contract is silent on reimbursement, which ts only contained in the

Statement of Benefits authored and issued by Blue Cross.

Several important distinctions exist between the two concepts.

Subrogation allows Blue Cross to step into the shoes of the injured

party and assert its recovery nghts directly against the tortfeasor. In a

subrogation setting Blue Cross initiates the action and advances the

effort and expense to secure a recovery. See, Leishman, Adding Insult

(Cont'd)

21

the federal courts and thereby increasing federal court expense

with matters that can and should be adjudicated by state courts.

See, Erika, Inc., 456 U.S. at 209-10 (cautioning against

unnecessarily burdening the federal court system); see also,

Nevada v. Hicks, 533 U.S. 353, 366 (2001) (“It is certainly true

that state courts of ‘general jurisdiction’ can adjudicate cases

invoking federal statutes, such as §1983, absent congressional

specification to the contrary. ‘Under [our] system of dual

sovereignty, we have consistently held that state courts have

inherent authority, and are thus presumptively competent, to

adjudicate claims arising under the laws of the United States*”

(citing, Taflin v. Levitt, 493 U.S. 455, 458 (1990)).'° Here,

(Cont'd)

to Injury: ERISA, Knudson, and the Error of the Possession Theory, 89

Minn. L. Rev. 1214, 1215-16 (2005). In contrast, with reimbursements,

Blue Cross does nothing to secure the third-party recovery, which is

pursucd solely by the injured insured in state court (or by way of

negotiated settlement). /d. Instead, Blue Cross asserts a contractual right

to repayment from the insured’s third-party recovery. /d. Thus, even if

a plausible rationale exists, pursuant to the OPM/Blue Cross contract,

to allow these subrogation matters to be heard in federal court, that

same reasoning would not apply to reimbursement situations.

10. The Government's position in this case is curious since it is

undercut by the contrary position it took in Howard v. Group Hospital

Service, 739 F.2d 1508 (10" Cir. 1984), where the court addressed an

insured’s tort and breach of contract action arising from an insurer's

failure to pay claims under a FEHBA plan. There the Tenth Circuit

concluded that the insureds claims “would have no direct effect upon

the United States or its Treasury” because “[t]he Solicitor General,

waiving his right to respond in these cases, advised us:

In the course of the proceedings below, the United States

determined that its interests would not be directly affected

by the resoluuion of these issue|s} and therefore did not

participate in bricting or argument in the court of appeals.

In view of these considerations, the United States does not

intend to respond to the petitions unless it is requested to

do so by the Court.

Id. at 1510.

i

nothing in FEHBA suggests that Congress intended to bar state

courts from hearing these matters, even if a federal interest is

involved.

The Government’s suggestion that the federal courts would

not be burdened with factual disputes with respect to

reimbursement matters (Govt. Br. 30) is belied by ample

evidence to the contrary. According to a 1993 article in the New

York Times, the “General Accounting Office has estimated that

99 percent of hospital bills contain overcharges”. Elisabeth

Rosenthal, Confusion and Error Are Rife In Hospital Billing

Practices, N.Y. Times, January 27, 1993. A recent Chicago

Tribune article confirmed similar results. Lorene Yue, “Examine

hospital bills for mistakes that can ail you”, Chicago Trib.

Online Ed., February 20, 2005 (“Medical claims advocates

estimate that 8 of 10 bills contain some kind of mistake, ranging

from data-entry errors and duplicate charges to failure to provide

group discounts for related services”). Resolving these and other

factual disputes should be given to the state courts who would

already be intimately familiar with the underlying case and Blue

Cross’s claim.

Additionally, Petitioner’s and the Government's “vague

assertions about the need for uniformity” and “generalized pleas

for uniformity” are insufficient to support a federal interest. See,

Woodward Gov Co., v. Curtiss-Wright Flight Sys. -Inc., 164 F.3d

123, 129 (2d Cir. 1999) (citing, U.S. v. Kimbell Foods, Inc.,

440 U.S. 715, 730 (1979)). Petitioner's claim against Mc Veigh

is based upon the alleged breach of the terms of the Statement

of Benefits, a document written and issued by Blue Cross, and

does not involve any terms contained in the OPM/Blue Cross

contract. Unlike in Boyle, neither the OPM or the Government

mandates the language contained in the Statement of Benefits

issued by Blue Cross to insureds. See, Boyle, 487 U.S. at 507

(finding that a uniquely federal interest is established where the

“terms of Government contracts ... specified by the

Government” are affected); cf. Devine, 703 F.2d at 1333 tn62

(“OPM can negotiate, but cannot ‘impose,’ contract terms.”);

23

see also, Cruz, No. 04-1657 (petition pending) at 6 (conceding

that Blue Cross “function[s] as [an] independent economic

entit[y]”).

In Miree v. DeKalb County, Georgia, 433 U.S. 25 (1977), a

plaintiff brought a third-party beneficiary claim pursuant to a

contract between a County and the Federal Aviation

Administration (“FAA”) that was federally authorized by the

Airport and Airway Development Act of 1970. The contract

required the County to restrict the area around the airport to

only those activities suitable for airport operations. /d. at 27.

Plaintiff asserted that the County breached the contract by

allowing a garbage dump adjacent to the airport which attracted

birds and caused a plane crash. /d. Despite the contract being

authorized by federal law and the Court acknowledging that

“the operation of the United States in connection with FAA

grants such as these are undoubtedly of considerable magnitude

(similar to the arguments by Petitioner), the Court denied federal

jurisdiction because it found no clear Congressional mandate

to displace state law in these types of cases where private parties

are involved. /d. at 32. Furthermore, as Blue Cross fails to

establish here, the Miree Court also found “no direct effect upon

the Federal Treasury”. /d. at 29."'

This Court's decision_in 7exas Indus. is also applicable.

There this Court addressed a party's suit brought under the

federal antitrust laws, asserting a third-party action for

11. Petitioner's and the Government's reliance on Clearfield Trust

Co. v. United States, 318 U.S. 363 (1943) is misplaced. There, unlike

here, the United States was a party. The Government sued a bank seeking

recovery on a check it issued that the bank paid on a forged indorsement.

Id. at 365-66. The act of issuing the check, unlike the reimbursement

claim raised here, directly arose from federal law. /d. at 365. In contrast,

the reimbursement claim here arose only after Respondent achieved a

tort recovery in state court and then only trom Blue Cross’s Statement

of Benefits document. Also, in Clearfield, unlike here, there were

“[vJarious treasury regulations govern{ing] the payment and endorsement

of government checks”. /d. at 367 fn2.

24

contribution against respondents if petitioner was found liable.

The Court concluded that federal courts lacked jurisdiction to

hear petitioner's contribution claim because, based on its review

of the language of the Sherman and Clayton Acts, Congress did

not address or otherwise imply that a right to contribution exists

under those statutes. /d. 451 U.S. at 639-40. Despite the

existence of a federal interest — in that a contribution claim would

supplement federal enforcement and fulfill the objects of the

statutory scheme ~ and despite Congress “expect{ing] the courts

to give shape to the statute’s broad mandate by drawing on

common-law tradition”, this Court held that creating federal

common law was not appropriate because there was never a

mention of the contribution issue during the statutes’ “90 years”

of existence, during which numerous amendments occurred.

Id. at 642-45. The same reasoning equally applies here. FEHBA

and its legislative history omit any mention of reimbursement

issues, even after numerous amendments since the statute was

enacted in 1959.

Finally, even if a federal interest exists here, “uniformity”

would not be lost by allowing state courts to decide the

reimbursement question. “[T]he route to review by this Court

is Open to parties aggrieved by adverse state-court decisions of

federal questions.” Pan American Petroleum, 366 U.S. at 665

(citing, Great Northern Ry. Co. v. Merchants Elevator Co., 259

U.S. 285 (1922). “If the parties properly preserve their rights, a

construction given by any court, whether it be federal or state,

may ultimately be reviewed by this court either on writ of error

or on writ of certiorari, and thereby uniformity in construction

may be secured.” /d.

2. No Significant Actual State Law Conflict Exists

“|W |hen courts decide to fashion rules of federal common

law, the guiding principle is that a significant conflict between

some federal policy or interest and the use of state law. . . must

first be specifically shown.” Atherton v. F-D.LC., 519 U.S. 213,

218 (1997). As explained herein, “[w]hat is fatal to [Blue

25

Cross’s] position in the present case is that it has identified no

significant conflict with an identifiable federal policy or

interest.” O'Melveny & Myers v. F.D.1.C., 512 U.S. 79, 88

(1994).

Il. PETITIONER’S AND THE GOVERNMENT'S

ALTERNATIVE ARGUMENT FOR FEDERAL

JURISDICTION IS UNAVAILING

Conscious of the difficulty to show that FEHBA prov:des

federal question jurisdiction over the parties’ dispute, Petitioner

and the Government rely on a narrow body of caselaw allowing

federal jurisdiction where, despite the absence of a federal cause

of action, the claim turns substantially on questions of federal

law. (Govt. Br. 25-29; Pet. Br. 41 fn5). As this Court has

instructed, however, this doctrine applies only in narrow, limited

situations. See, Grable & Sons Metal Products, Inc. v. Derue

Engineering & Manufacturing, — U.S. —, 125 S. Ct. 2363 (June

13, 2005).

Petitioner and the Government heavily rely on this Court's

Grable decision, which involved a former landowner suing in

state court to quiet title against a tax sale purchaser, alleging

that the Internal Revenue Service had given him inadequate

notice of sale. /d. at 2366. Significantly, the Grable Court

rejected previous loose interpretations of this doctrine that

suggested an “expansive view that mere need to apply federal

law in a state-law claim will suffice to open the ‘arising under’

door.” /d. at 2367 (referring to interpretations under Smiih v.

Kansas City Title & Trust Co., 255 U.S. 180 (1921), relied on

by the Government here). The Court confirmed instead “that

federal jurisdiction demands not only a contested federal issue,

but a substantial one, indicating a serious federal interest in

claiming the advantages thought to be inherent in a federal

forum.” /d. Further, even if established, the Court instructed

that “the exercise of federal jurisdiction is subject to a possible

veto. For the federal issue will ultimately qualify for a federal

forum only if federal jurisdiction is consistent with congressional

26

judgment about the sound division of labor between state and

federal courts governing the application of $1331.” /d.

In Grable, unlike here, the plaintiff premised its superior

title claim solely on interpretation of federal law, the federal

tax statute. /d. at 2368 (“Whether Grable was given notice within

the meaning of the federal statute is thus an essential element

of its quiet title claim, and the meaning of the federal statute is

actually in dispute”). Here, Petitioner and the Government do

not rely on FEHBA, its legislative history or its contract. Rather,

they solely rely on the Statement of Benefits that Blue Cross

authored and issued to insureds. More importantly, Blue Cross

does not, nor can it, argue that the reimbursement provision in

that document needs interpretation or is in dispute. There simply

is NO existence of, or need to interpret, a substantial federal law

in this case. This case is therefore weaker than the issue this

Court held was outside of federal jurisdiction in Merrell Dow.

See, Grable, 125 S.Ct. at 2369 (citing, Merrell Dow, 478 U.S.

at 806 (rejecting federal jurisdiction even though “federal law

would have to be applied to resolve the claim”)).'”

At bottom, Grable is a rule for hard cases, that allows the

Court the flexibility to recognize federal jurisdiction in unusual

situations which present a supervening need for federal

jurisdiction over a state-created cause of action. The rarity with

which those cases arise 1s evidenced by the fact that this Court

has rarely exercised such power. The record in this case clearly

does not fit within this extraordinary exception.

12. The lack of any Congressional indication of concern over

reimbursement issues in FEHBA, and the burdensome effect m would

have on federal courts to hear matters that state courts are cable of

hearing, also strongly weigh against applying this doctrine. See, Grable,

125 8.Ct. at 2370-71.

27

CONCLUSION

Wherefore, amicus curiae, in support of Respondent,

respectfully request that this Court affirm the judgment of the

Court of Appeals.

Respectfully submitted,

CLINTON A. KRISLOV

Counsel of Record

MicHAeL R. KARNUTH

Kristov & Associates, Lip.

20 NortH WACKER DRIVE

Suite 1350

Cuicaco, ILLinois 60606

(312) 606-0500

Attorneys for Amicus Curiae