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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0210%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2006
- **Citation:** 547 U.S. 677

## Text

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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.

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TABLE OF CONTENTS
Page
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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

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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

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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

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Cited Authorities

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OMI 25 a os re a ae
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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0210%3A09. Public record. Not legal advice.