Petition for Writ of Certiorari — Levine v. United Healthcare Corp.

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STATEMENT OF THE CASE

Petitioner Jean Levine suffered injuries in a slip-and-

fall accident on an improperly maintained sidewalk on

January 7, 1995. As a result of her injuries, she received

medical treatment, some of which was paid for by respon-

dent United Healthcare Corp. (“United”) under the terms

of a health insurance policy issued in connection with

employment. Levine brought an action for personal inju-

ries against several entities responsible for the sidewalk’s

maintenance, but in that action wes barred by New

Jersey's collateral source statute, N.J.S.A. 2A:15-97, from

recovering any loss insured by a third party — such as the

healthcare expenses covered by her insurance plan.

Notwithstanding this statutory bar to Levine’s own recov-

ery of healthcare expenses, United claimed that its insur-

ance policy gave it a right to demand reimbursement of its

medical expenditures out of any recovery she obtained in

her personal injury action. When her lawsuit was settled

in early 2001, Levine reimbursed $11,000 to United from

her settlement proceeds.

Petitioner Noreen Bogurski was injured in « motor

vehicle accident on July 19, 1997. Part of her resulting

medical treatment was paid for by respondent Horizon

Blue Cross Blue Shield of New Jersey (“Horizon”) under

terms of a health insurance policy provided through her

employment. Bogurski brought suit against the at-fault

drivers for personal injury and consequential losses, but in

that action was barred by New Jersey's collateral source

statute, N.J.S.A. 2A:15-97, from recovering any loss

insured by a third party, including the healthcare ex-

penses covered by her insurance plan. Notwithstanding

this statutory bar to Bogurski’s own recovery of healthcare

expenses, Horizon claimed its insurance policy gave it a

right to demand reimbursement cf its medical expendi-

tures out of any recovery she obtained in her personal

injury action. When her lawsuit was settled in late May of

2001, Bogurski was to reimburse Horizon $11,000 from

her settlement proceeds; those funds are still being held in

escrow pending final resolution of this action.

On June 26, 2001, the New Jersey Supreme Court

ruled that unde New Jersey law, healthcare insurers

never had a right to demand subrogation or reimburse-

ment from their insureds, and that any such contractual

language in a health insurance policy was void where the

state’s collateral source statute applied to an insured’s

civil claims. The court held that the collaterai source

statute specifically determined insurers’ liabilities, and

found that the state’s Insurance Commiysioner had ex-

ceeded his authority in allowing insurers to include any

provision that altered that legislative allocation. Perreira

v. Rediger, 169 N.J. 399, 778 A.2d 429 (2001). As a result,

the Insurance Commissioner directed all health insurers

“immediately to cease all subrogation and recovery efforts

against persons covered by group or individual contracts

or policies issued in New Jersey,” and further announced

that the regulations governing permissible insurance

clauses would be amended to conform to the Perreira

ruling. N.J. Division of Insurance Bulletin No. 01-11,

dated July 5, 2001.

Plaintiffs brought these actions in the Superior Court

of New Jersey on behalf of themselves and all others

similarly situated, asserting that their health insurance

companies had demanded reimbursement for healthcare

expenditures in violation of New Jersey law. In their

Complaints, plaintiffs advanced liability theories of unjust

enrichment, money had and received, and amendment by

operation of law, and sought, inter alia, declaratory judg-

ment, injunctive relief, and compensatory and punitive

damages. Notwithstanding the exclusively state-law

nature of the underlying lawsuits, defendants removed the

cases to federal court, claiming entitlement to federal

jurisdiction by invoking the preemptive effect of the

Employee Retirement Income Security Act of 1974, 29

U.S.C. § 1001, et seg. (“ERISA”), and specifically ERISA

§ 502(a)(1(B), 29 U.S.C. § 1132(a)(1)(B).

Plaintiffs moved for remand of these cases to the state

court on the grounds that federal jurisdiction was lacking

because they pleaded no cause of action arising under

federal law, nor did they seek to recover any “benefits due”

or otherwise enforce any plan rights within the meaning of

ERISA. Ruling on the issue in its Opinion and Order of

May 28, 2002, the District Court frankly acknowledged

that this jurisdictional question “presents a conceptually

unclear area of law,” but nevertheless concluded that

plaintiffs’ claims were “actually claims for benefits” under

their ERISA-governed health plans and so were properly

removed to federal court. Carducci v. Aetna U.S. Health-

care, 204 F.Supp.2d 796, 798 (D.N.J. 2002), App. 128, 130-

131, 144-145.

Plaintiffs filed a motion to amend the District Court’s

Order denying remand to include language that would

permit interlocutory appeal under 28 U.S.C. § 1292(b). The

District Court denied that application without prejudice in

an Opinion and Order dated July 24, 2002, App. 118, 120,

126-127. Subsequently, the District Court considered

defendants’ respective motions to dismiss plaintiffs’ ac-

tions. The dismissal motions were denied in an Opinion

and Order dated March 4, 2003, in which the court ex-

pressly found, inter alia, that the New Jersey collateral

source statute was a law that regulates insurance and

therefore saved from preemption by ERISA. Carducci v.

Aetna U.S. Healthcare, 247 F.Supp.2d 596 (D.N.J. 2003),

App. 64, 91-96.

Thereafter, defendants sought certification for inter-

locutory appeal of the District Coirt’s rulings on dismissal,

and plaintiffs renewed their motion for certification of the

jurisdictional issue decided previously. In an Opinion and

Order dated October 6, 2003, the District Court noted.that

in the intervening period since plaintiffs’ last application

for certification for interlocutory appeal, a number of cases

had been reported that indicated there are “substantial

grounds for debate about this Court’s ‘benefits due’ deci-

sion.” Levine v. United Healthcare Corp., 285 F.Supp.2d

552 (D.N.J. 2003), App. 34, 58-60.

The Third Circuit granted both defendants’ petition

and plaintiffs’ cross-petition for leave to appeal in an

Order dated January 14, 2004. On March 16, 2005, two of

the three judges on a panel of the court ruled that the

actions should be dismissed because the New Jersey

collateral source statute was not a law that regulates

insurance within the intendment of ERISA’s savings

clause, and was therefore preempted and could not be

applied to modify the insurance policies at issue. Levine v.

United Healthcare Corp., 402 F.3d 156 (3d Cir. 2005), App.

1, 16-19. The third judge dissented, writing that he would

find the New Jersey statute to be specifically directed

toward the insurance industry and therefore saved from

preemption. App. 19-30. Plaintiffs petitioned for rehearing

or rehearing en banc, which was denied in an Order dated

June 24, 2005. App. 146-148.

ARGUMENT

I. THE THIRD CIRCUIT COURT OF APPEALS

HAS DECIDED AN IMPORTANT FEDERAL

QUESTION IN A WAY THAT CONFLICTS WITH

A DECISION BY THE NEW JERSEY SUPREME

COURT.

The ruling by the Third Circuit panel majority that

the New Jersey collateral source statute is not a law that

“regulates insurance” within the meaning of ERISA is

directly contrary to the state Supreme Court’s description

of the statute as specifically targeted to affect the insur-

ance industry. As Judge Garth spelled out in his dissent

from the panel opinion, “This case involves a statutory

enactment, which, according to the New Jersey Supreme

Court, was clearly rooted in legislative concerns about

spiraling insurance costs. The New Jersey Supreme Court

was emphatic in emphasizing insurance in its opinion [in

Perreira).” App. 26 (block quotation omitted; emphasis in

the original).

Here, the District Court had properly determined that

~the New Jersey collateral source statute regulates insur-

ance and is therefore saved from ERISA’s preemptive

effect. The public policy and legislative history of the

statute clearly demonstrate that it falls squarely under

the protections of ERISA’s savings clause. The savings

clause “saves” from ERISA preemption any state law

regulating insurance:

Except as provided in subparagraph (B) [the

‘deemer’ clause], nothing in this subchapter shall

be construed to exempt or relieve any person

from any laws of any state which regulates in-

surance, banking or securities.

—— eee _ oe

ERISA § 514(bX2)(A), 29 U.S.C. § 1144(b)(2)(A).

In interpreting and applying the collateral source

statute, New Jersey’s courts have expressly and repeatedly

noted that it was specifically aimed at the insurance

industry. The measure was intended to contain spiraling

liability insurance costs and to allocate the burden of

losses within the insurance industry, shifting ultimate

responsibility for healthcare expenditures from liability

and casualty insurers to health and disability third-party

payers. See Perreira, 169 N.J. at 410-411, 778 A.2d at 436

and cases cited therein (also noting that the legislative

history of the statute revealed an express public policy

choice to favor liability insurers over health insurers). In

Perreira, the New Jersey Supreme Court explained the

history of the statute and its intended effect on insurance.

It quoted the Passed Bill memo prepared by the Gover-

nor’s counsel, which stated:

This bill attempts to reduce the cost of liability

insurance by reducing the likelihood of a “double

recovery” in a liability award for items which

were already compensated by insurance or by

other “collateral” sources, other than a tortfeasor.

Id. at 410, 778 A.2d at 436. ‘The court concluded that the

statute had more than one purpose, including: 1) disallow-

ing double recovery to plaintiffs; and 2) containing spiral-

ing insurance costs. Jd. The court observed that the

legislature made a “separate legislative decision” as to which

“segment of the insurance industry” would be the benefici-

ary of the disallowance of double recoveries, and noted

that the legislature decided to favor the liability insurance

carriers by preventing health insurers from collecting on

subrogation and reimbursement’ claims. Jd. at 410-411,

778 A.2d at 436. As pointed out in numerous prior opinions

of New Jersey courts, the legislative history of the collat-

eral source statute plainly demonstrates that it was

specifically directed toward insurance. See Kiss v. Jacob,

138 N.J. 278, 282, 650 A.2d 336 (1994) (statute’s legisla-

tive history “strongly suggests that the Legislature’s

essential concern was with insurance-type benefits” and

intent of the legislature was to control spiraling automo-

bile-insurance costs); Fayer v. Keene Corp., 311 N.J. Super.

200, 208, 709 A.2d 808 (1988) (purpose of the statute is to

shift the burden from liability and casualty industry to

health and disability third-party payors); Parker uv.

Esposito, 291 N.J. Super. 560, 565, 677 A.2d 1159 (1996)

(purpose of collateral source statute is to prevent double

recovery, thereby giving relief from increasing costs of

liability insurance); Lusby v. Hitchner, 273 N.J. Super.

578, 591, 642 A.2d 1055 (App. Div. 1994) (legislative

determination was not only to prevent plaintiffs from

obtaining a double recovery but also to shift burden from

liability and casualty insurance to health and disability

third-party payors). In furtherance of this plainly articu-

lated policy, the Perreira court found that the collateral

source statute embodied an antisubrogation rule geared

toward regulating the insurance industry, invalidating

insurance clauses that contravened the statute’s legisla-

tive purpose. The statute thus controls the terms of

insurance policies, broadly prohibiting enforcement of

subrogation and reimbursement clauses in health con-

tracts and requiring that health insurers cover r injuries for

which there may be tort liability.

As further proof of the statute’s direct effect on the

insurance industry, in immediate response to the Perreira

decision, the New Jersey Insurance Commissioner issued

a directive enjoining subrogation recovery activity by

health insurers. Ins«:rance Commissioner Bulletin No. 01-

11, issued July 5, 2001. The state Division of Banking and

Insurance has now fully reversed its pre-Perreira position

and promulgated new regulations as a result of the case,

expressly prohibiting the subrogation and reimbursement

clauses the state Supreme Court found to be in conflict

with the collateral source statute. See N.J.A.C. 11:4-42.10

(effective August 5, 2002).

In dismissing the New Jersey courts’ interpretation of

its own state law, the panel majority's decision in this case

represents an unwarranted federal intrusion into a well-

established area of state police power and regulatory

authority. As a consequence, it is now unclear whether

health insurers may once again assert the very subroga-

tion and reimbursement claims that the state Supreme

Court has found to be prohibited. By ruling that the

collateral source statute is not a “law regulating insur-

ance,” the panel’s decision in this case may have exempted

all but a handful of health insurance policies from confor-

mance with the state law articulated in Perreira; health

policies that are provided in connection with employment,

because they are also governed by ERISA, may now be

freed from the state’s antisubrogation rule by virtue of

federal preemption. New Jersey has no express antisubro-

gation statute governing insurers; the state’s rule derives

only from the legislative policies animating the collateral

source statute. With the panel’s decision that the collateral

source statute is preempted by ERISA, health insurers

may now challenge the state’s authority to disallow or

otherwise regulate these clauses. Such a confrontation

could be avoided simply by recognizing that the New

Jersey collateral source statute and its antisubrogation

rule are in fact laws regulating insurance.

Il. THE THIRD CIRCUIT COURT OF APPEALS

HAS £NTERED A DECISION IN CONFLICT

WITH DECISIONS OF OTHER UNITED STATES

COURTS OF APPEALS ON THE SAME IM-

PORTANT MATTER.

The panel's decision in this case conflicts with deci-

sions of courts of appeals in at least three other circuits, as

well as prior Third Circuit case law. In Medical Mutual of

Ohio v. DeSoto, 245 F.3d 561 (6th Cir. 2001), the Sixth

Circuit held that a California antisubrogation statute

prohibiting a health insurer from recouping payments

made on a participant’s behalf — incorporating features

similar to New Jersey's law — regulated insurance and

thus was not preempted by ERISA:

By preventing any such recovery or subrogation

the terms of section 3333.1 govern the relation-

ship between the insurer and the insured. As

such, it is “specifically directed toward [the in-

surance] industry.” ... Supreme Court precedent

supports our view. In FMC, the Supreme Court

held that a common se” > reading of the Penn-

sylvania antisubrogation statute, with language

similar to [the California statute] indicated that

the statute regulated insurance.

245 F.3d at 573 (footnote and citations omitted).’

* In attempting to distinguish DeSoto from this case, the panel

overlooked the actual tanguage of Section 3333.1, which provides that it

regulates insurance as well as other contributions or sources of

collateral benefits, including “any contract or agreement of any group

... to provide, pay for, or reimburse the cost of medical, hospital,

dental, or other health care services ... ” 245 F.3d at 569. Thus,

contrary to the panel opinion, the California statute also included

situations where the statute may affect entities other than insurers.

The Fourth Circuit has ruled similarly, notably in

Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278

(4th Cir. 2003), finding the antisubrogation provision of

the Maryland HMO Act is saved from preemption as a

state regulation of insurance; see also Hampton Indus. v.

Sparrow, 981 F.2d 726, 729-30 (4th Cir. 1991) (North

Carolina statute limiting subrogation was within ERISA

savings clause). In Singh, the Maryland HMO Act regu-

lated persons or orgar.:\ations that provided “prepaid

healthcare.” The Maryland Court of Appeals construed the

Act to prohibit an HMO from pursuing its members for

reimbursement. 335 F.3d at 281. The Fourth Circuit

rejected the insurer’s “overly formalistic” argument,

similar to the panel’s decision here, that the HMO Act was

outside the reach of the ERISA savings clause because it

was located in the state statutes separate from the general

insurance statutes and because HMOs were not classified

as “insurers.” Jd. at 284-85. Instead, the Fourth Circuit

found that the HMO law could provide its own form of

insurance law and recognized that the savings clause

analysis involved not a formalistic classification of an

entity, but “whether the state law is aimed at the provision

of insurance.” Jd. Since the Maryland law, like the New

Jersey law at issue here, addresses “who pays in a given

set of circumstances,” it was “difficult to imagine an

antisubrogation law of this type as anything other than an

insurance regulation.” Jd. at 286.

The Ninth Circuit has also found that state antisub-

rogation rules are insurance regulations saved from

ERISA preemption. United Food & Commercial Workers &

Employers Health & Welfare Trust v. Pacyga, 801 F.2d

1157, 1161 (9th Cir. 1986) (Arizona common law disallow-

ing subrogation is law regulating insurance and within the

protection of ERISA’s savings clause).

Likewise, the Third Circuit itself has previously found

that state law limits on subrogation recoveries appear to

be directly aimed at the insurance industry and therefore

fall within the savings clause. Bill Gray Enterprises, Inc.

Employee Health & Welfare Plan v. Gourley, 248 F.3d 206

(3d Cir. 2001) (Pennsylvania antisubrogation statute

regulates insurance and is thus within savings clause); see

also FMC Corp. v. Holliday, 885 F.2d 79, 85-86 (3d Cir.

1989), rev'd on other grounds, 498 U.S. 52 (1990) (“Both

parties and the amicus agree that the type of antisubroga-

tion provision found in the Pennsylvania Financial Re-

sponsibility Law ‘regulates insurance’ within the meaning

of the savings clause.”).

Furthermore, District Courts — including the District

Court im this case — have regularly found both common

law and statutory antisubrogation provisions to be within

the scope of the ERISA savings clause. See, e.g., Carducci

v, Aetna U.S. Healthcare, 247 F. Supp.2d 596 (D.N.J. 2003),

App. 91-96; Donlan v. Greater Cleveland Reg Transit

Auth., 2000 WL 485268 (N.D. Ohio 2000) (Ohio antisubro-

gation statute is within ERISA’s savings clause); Blue

Cross and Blue Shield of Alabama v. Fondren, 966 F.Supp.

1093, 1097 (M.D. Ala. 1997) (Alabama law of subrogation

is saved from preemption); Health Cost Controls v. Ross,

1997 WL 222877 at *6 (N.D. Ill. 1997) (“consensus in this

jurisdiction is ... that Illinois’ anti-subrogation law is

saved from preemption by the savings clause”); Health

Cost Controls v. Whalen, 1996 WL 787163, *2 (E.D.

Va. 1996) (insured group insurance plan is subject to

direct state law regulation by Virginia antisubrogation

statute); Blue Cross and Blue Shield of Alabama v. Lewis,

754 F.Supp. 849 (N.D. Ala. 1991); Board of Trustees of

Montana Teamsters Employers v. Coyne, 628 F.Supp. 561

(D.Mont. 1986) (Montana common law voiding subrogation

clause in group health policy is saved from preemption).

It is clear that antisubrogation law by its very nature

is insurance regulation, as it addresses which entities

provide benefits to cover losses in a given set of circum-

stances. By ruling to the contrary in this case, the panel

decision is anomalous and in conflict with other federal

courts.

Ill, THE THIRD CIRCUIT COURT OF APPEALS

HAS DECIDED AN IMPORTANT FEDERAL

QUESTION IN A WAY THAT CONFLICTS WITH

RELEVANT DECISIONS OF THIS COURT.

The pane] decision in this case is contrary to decisions

of the United States Supreme Court, including (without

limitation) Kentucky Assn. of Health Plans, Inc. v. Miller,

538 U.S. 329 (2003), FMC Corp. v. Holliday, 498 U.S. 52

(1990) and Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

(1987). The panel simply did not address Supreme Court

cases that establish a presumption against preemption of

areas of traditional state regulation, or that defer to a

state court’s interpretation of its own state law; nor did the

panel give proper consideration to Supreme Court cases

holding that state antisubrogation laws are saved from

ERISA preemption.

For example, this Court has held that under ERISA

§ 514(b)(2A) there is a presumption against preemption.

Metropolitan Life Ins. Co. v. Massachusetts Travelers Ins.

Co., 471 U.S. 724, 741 (1985). The Supreme Court has

long observed that, in determining the preemptive effect of

federal law, the “ultimate touchstone” is congressional

intent. See, e.g., Cippolone v. Liggett Group, Inc., 505 U.S.

504, 516 (1992). This inquiry is “guided by respect for the

separate spheres of governmental authority preserved in

our federalist system.” Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 522 (1981). Construction of a federal

statute begins “with the assumption that the historic

police powers of the States [are] not to be superceded ...

unless that [is} the clear and manifest purpose of Con-

gress.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230

(1947). Thus, it must be presumed that Congress did not

intend to preempt areas of traditional state regulation,

such as the New Jersey law at issue here. See Metropoli-

tan Life, 471 U.S. at 741, citing Jones v. Rath Packing Co.,

430 U.S. 519, 525 (1977).

The test for deciding whether a state law regulates

insurance asks (1) whether the law is “specifically directed

toward” entities that engage in insurance; and (2) whether

the law “substantially affects the risk pooling arrange-

ment between the insurer and the insured.” Kentucky

Assn. of Health Plans, Inc. v. Miller, 538 U.S. 329, 341-342

(2003).* The test focuses on whether a state law is specifi-

cally directed at the provision of insurance, and not on

how or where an entity is classified in a statutory scheme.

* The panel here recognized that the first factor of the Miller test

was consistent with prior law, but that the second factor differed

somewhat from earlier Supreme Court jurisprudence, which had used a

three-factor test derived from case law interpreting the McCarran-

Ferguson Act, 14 U.S.C. § 1101 et seg. The panel majority did not,

however, apply the second factor at all in its decision, while the dissent

pointed out that “there is no serious dispute” that state law at issue in

fact spread policyholder risk. See App. 22 (Garth, dissenting).

The panel majority here found that the New Jersey

collateral source statute had its primary effect on insurers

and was intended to affect the insurance industry, but

nevertheless was not “specifically directed” toward the

insurance industry because its language was not limited

solely to insurers; thus, it might sometimes encompass

“benefits” received from entities other than insurers, and

might sometimes profit self-insured or uninsured tortfea-

sors. However, despite such over-inclusiveness, the law

always precludes any health insurer’s subrogation or

reimbursement claim against its insured.

The majority decision here failed to accord due regard

to the New Jersey Supreme Court’s explicit determination

that the state statute was expressly enacted to address

legislative concerns about insurance costs and to allocate

responsibility for coverage within the insurance industry.

See Perreira, 169 N.J. at 410-11, 778 A.2d at 436. The

Supreme Court has consistently held that determinations

of a state court concerning state policy and analysis of

state statutes are highly relevant. See Bush v. Palm Beach

County Canvassing Bd., 531 U.S. 70, 76 (2000) (“As a

general rule, this Court defers to a state court’s interpreta-

tion of a state statute”); UNUM Life Ins. Co. of America v.

Ward, 526 U.S. 358, 372 (1999) (finding that a California

statute was “grounded in policy concerns specific to the

insurance industry” after reviewing state court decisions

regarding public policy behind the statute); Mullaney v.

Wilbur, 421 U.S. 684, 691 (1975) (“This Court, however,

repeatedly has held that state courts are the ultimate

expositors of state law, ... and that we are bound by their

constructions except in extreme circumstances”) (internal

citations omitted); Missouri v. Hunter, 459 U.S. 359, 368

(1983) (where state supreme court had construed state

statutes at issue, Court “was bound to accept the [state

supreme] court’s construction of that State’s statutes”)

(internal citation omitted).

The New Jersey Supreme Court's decision in Perreira

interpreted the New Jersey statute, examined its legisla-

tive history and made clear that the statute focused on

insurance issues. In this case, however, the panel’s inquiry

centered on the breadth of the statute’s wording and relied

on the location and heading of the statute in deciding its

meaning.“ But contrary to the panel majority's decision,

the title of a statute and the heading of a section cannot

limit the law’s plain meaning, and are merely among the

many tools available for resolving doubt about an ambigu-

ous word or phrase. Curri v. Reno, 86 F.Supp.2d 413, 417-

418 (D.N.J. 2000); see also Brotherhood of R.R. Trainmen

v. Baltimore & O.R. Co., 331 U.S. 519, 528-29 (1947)

(headings and titles are not meant to take the place of the

detailed provisions of the text).

In addition, the majority decision failed to give weight

to Supreme Court cases examining provisions limiting

subrogation recoveries, which have consistently found

them to fall within ERISA’s savings clause. For example,

in FMC Corporation v. Holliday, 498 U.S. 52 (1990), the

Supreme Court examined whether ERISA preempted a

Pennsylvania antisubrogation statute which, like the New

Jersey statute at issue in this case, precluded an insurer’s

reimbursement from a claimant's tort recovery. The Court

* Specifically, the panel emphasized the placement of the statute in

Title 2A of the New Jersey statutes, which generally concerns the

administration of justice, as well as the applicability of the statute to

plaintiffs in “any civil action” who receive benefits from “any source”

other than a joint tortfeaser, to cugpert Hts cqncuston Cant Gis ctetute ts

not specifically directed at the insurance industry.

found “that there was no dispute” that the antisubrogation

statute was within the scope of the savings clause:

[The statute] directly controls the terms of insur-

ance contracts by invalidating any subrogation

provisions that they contain. It does not merely

have an impact on the insurance industry; it is

aimed at it. This returns the matter of subroga-

tion to state law.

498 U.S. at 60-61 (citations omitted).°

The Court has also found statutes to feil within the

protection of the savings clause despite the fact that the

law reaches beyond the insurance context alone. In Metro-

politan Life Ins. Co. v. Massachusetts Travelers Ins. Co.,

471 U.S. 724 (1985), for example, the Court considered

whether a Massachusetts statute setting forth mandatory

minimum mental healthcare benefits for insurance poli-

cies was saved from ERISA preemption. The insurers had

argued that the Massachusetts statute was really a health

law that operated on insurance contracts to accomplish its

end and that it was not the traditional kind of insurance

law intended to be subject to the savings clause. The Court

rejected the attempt to draw a distinction between laws

* The panel majority misses the point in attempting to distinguish

FMC from the instant case by observing that the Pennsylvania statutes

at issue there, 75 Pa. C.S. §§ 1719 and 1720, “explicitly regulated

insurance,” while here the statute might in some ways apply to both

insurance and non-insurance entities. App. 18. However, Section 1720

of the Pennsylvania statute provides that in actions arising out of the

use of a motor vehicle, there is no right of subrogation from a recovery

with respect to the benefits payable under, inter alia, Section 1719. In

turn, Section 1719 (entitled “coordination of benefits”) refers to benefit

payments by “any program, group contract other arrangements” for

payment of benefits. 498 U.S. at 55. Thus, the statute on its face is not

limited only to insurance.

that directly regulate only the insurer or the way insur-

ance may be sold, and laws that regulate the substantive

terms of insurance contracts. The Court concluded that

almost every tribunal considering the issue has deter-

mined that mandated benefits laws, or laws regulating the

substantive terms of insurance contracts, are laws that

regulate insurance, and thus are within the scope of the

savings clause. Id. at 741-42 & n.18. See also UNUM Life

v. Ward, supra (California’s notice-prejudice rule, under

which an insurer must show that it was prejudiced by

untimely proof of a claim before it can avoid liability, is

saved from ERISA preemption); Kentucky Assn. of Health

Plans v. Miller, supra (rejecting argument that effect of

law on non-insurers put statute beyond reach of savings

clause, and holding that ERISA’s savings clause does not

require that a state law regulate “insurance companies” or

even “the business of insurance” to be saved from preemp-

tion; it only need be a “law,” “which regulates insurance.”);

Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 366,

370 (2002) (fact that the statute at issue was-drawn to

encompass entities other than insurers did not serve to

take the statute out of the reach of the savings clause).

The majority decision here does not address why the

principles of these cases should not apply to the New

Jersey statute it considered, and it improperly limits the

reach of the savings clause in a manner inconsistent with

these precedents.

While the majority decision ostensibly relies on Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987), that case

actually compels the opposite ruling here. In Pilot Life, the

Supreme Court considered a Mississippi common law

action for bad faith that provides for punitive damages in

any case where a party to a contract acted in bad faith in

breaching that contract. An ERISA plan participant who

had been denied benefits sued in state court seeking, inter

alia, punitive damages under the state’s bad faith law. The

Court found that the law was not specifically directed

toward the business of insurance because it was generally

applicable to all contract and tort actions, whether insur-

ance-related or not. 481 U.S. at 50. As the Court ex-

plained, “in contrast to the mandated-benefits law in

Metropolitan Life, the common law of bad faith does not

define the terms of the relationship between the insurer

and the insured; it declares only that, whatever terms

have been agreed upon in the insurance contract, a breach

of that contract may in certain circumstances allow the

policyholder to obtain punitive damages.” Jd. at 51. Thus,

the Court concluded that the state common law of bad

faith was no more integral to the insurer-insured relation-

ship than any state’s general contract law is integral to

contracts made in that state.

Significantly, in Pilot Life the Mississippi Supreme

Court had not ruled that the common law of bad faith was

directed to the insurance industry, but only that it was

applied in the insurance context. By contrast, the New

Jersey Supreme Court in Perreira defined the statute at

issue here as one specifically directed toward the insur-

ance industry. 169 N.J. at 410-11, 778 A.2d at 436. More-

over, the panel majority here ignores the significant

difference between the “general principles of tort and

contract law available in any Mississippi breach of con-

tract case” at issue in Pilot Life, 481 U.S. at 51, and the

specific legislative enactment targeting the insurance

industry, as interpreted by the New Jersey Supreme Court

in Perreira. See App. 25-26 (Garth dissenting).

IV. THE THIRD CIRCUIT COURT OF APPEALS

HAS DECIDED IMPORTANT QUESTIONS OF

FEDERAL LAW THAT HAVE NOT BEEN, BUT

SHOULD BE, SETTLED BY THIS COURT.

In addition to the issues of “conflict preemption”

presented by ERISA §514, the Third Circuit panel's

decision also touches on the doctrine of “complete preemp-

tion” of state law actions under ERISA § 502..This Court

has not yet ruled on whether state-law claims such as

those brought against the defendant health insurance

companies here should be re-characterized as claims for

“benefits due” under the plans, giving rise to federal

jurisdiction and resulting in complete preemption of the

claims pursuant to the civil enforcement provisions of

ERISA § 502(a)(1XB), 29 U.S.C. § 1132(a)(1B). While

frankly acknowledging that this matter “presents a con-

ceptually unclear area of the law,” the District Court in

this case likened plaintiffs’ claims to complaints regarding

the administration of benefits, “because they relate to the

amount of benefits to which they are due under the ERISA

plan.” Carducci v. Aetna U.S. Healthcare, 204 F.Supp.2d

796, 800 (D.N.J. 2002), App. 131-136. Yet it is undisputed

that the sums plaintiffs seek to recover in their actions are

not benefits that wer: due under their ERISA-governed

plans, nor did they originate from those plans: The monies

were in fact plaintiffs’ property, received from third-party

tortfeasors in settlement of personal injury claims other

than plan-covered medical expenses. Thus, plaintiffs’

actions here are not claims for plan benefits, but for

damages resulting from the defendant insurers’ unlawful

conduct with respect to the entirely unrelated proceeds of

plaintiffs’ tort actions.

Whether the doctrine of “complete preemption” gives

rise to federal jurisdiction in these cases depends on

determining whether Congress intended its statutury

scheme to completely occupy the field with respect to the

law at issue, thereby rendering an action exclusively

federal in character. Metropolitan Life Ins. Co. v. Massa-

chusetts Travelers Ins. Co., 471 U.S. 724, 747 (1985). Thus,

a civil action must have some basis in this “select group of

claims” in order to be considered “necessarily federal in

character.” Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 354

(3d Cir. 1995), citing Metropolitan Life Ins. Co. v. Taylor,

481 U.S. 58, 63-64 (1987).

The statutory subsection at issue here provides:

A civil action may be brought by a participant or

beneficiary .. . to recover benefits due to him un-

der the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify his

rights to future benefits under the plan.

ERISA § 502(a)(1B), 29 U.S.C. § 1132(a)(1)(B). Citing the

Supreme Court’s decision in Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133 (1990), the Third Circuit has

held that “preemption occurs when a state statute pur-

ports to provide a remedy for the violation of a right

expressly guaranteed by [a section of ERISA) and exclu-

sively enforced by § 502(a) [of ERISA].” PAS v. Travelers

Ins. Co., 7 F.3d 349, 356 (3d Cir. 1993).

Here, a straightforward reading of the plain text of

the statute demonstrates that these matters fall com-

pletely outside the ambit of ERISA’s civil enforcement

clauses: Plaintiffs make no claim that defendants have

failed to provide benefits, have denied plaintiffs’ rights

under their plans, or are withholding future benefits.

Quite to the contrary, plaintiffs seek only to recover

monies taken by defendants out of their third-party

recoveries for other losses, in contravention of New Jersey

law.

The Third Circuit has held that in determining

whether a plaintiff is seeking to “recover benefits due”

under the terms of a plan, the statute “is concerned

exclusively with whether or not the benefits due under the

plan were actually provided.” Dukes, 57 F.3d at 357.

Plaintiffs here do not dispute that they received the plan

benefits to which they were entitled.

Similarly, plaintiffs here are not seeking to enforce

their rights under the terms of their plans. The Third

Circuit has opined that this phrase in the statute was

meant to encompass plan-created rights of plan partici-

pants other than the right to the benefits themselves, such

as rights to the plan’s benefit-claim and benefit-eligibility

procedures. Id.

Finally, plaintiffs are not seeking to clarify rights to

future benefits under their plans. There is no allegation

that the plan has withheld or will withhold any benefits

due under the plan. Plan participants are unquestionably

entitled to future medical benefits under the plans,

whether or not they initiate a third-party claim for their

illness or injuries and whether or not the plans may make

any claim for reimbursement .

Furthermore, a generalized characterization of a

claim as broadly having something to do with “plan

administration” does not result in complete federal pre-

emption under § 502; instead, as articulated by the Third

Circuit. the claim must specifically concern the admini-

stratio; of plan benefits and claims procedures to which

participants or beneficiaries are entitled. See, e.g., Dukes,

57 F.3d at 357-58. In Pryzbowski v. U.S. Healthcare, 245

F.3d 266 (3d Cir. 2001), the Third Circuit noted that claims

falling within the preemptive scope of § 502 include a

beneficiary's action to obtain “accrued benefits due, a

declaratory judgment about entitlement of benefits, or an

injunction to require an administrator to pay benefits.” Jd.

at 272, citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53

(1987). The Pryzbowski court noted that to determine

whether a claim is preempted by reason of being based on

the administration of benefits, the test is whether the

action concerns “eligibility decisions’ which ‘turn on the

plan’s coverage of a particular condition or medical proce-

dure for its treatment.’” 245 F.3d at 273, quoting Pegram

v. Hedrich, 530 U.S. 211 (2000). “[T]}he ultimate distinction

to make for purposes of complete preemption is whether

the claim challenges the administration of or eligibility for

benefits, which falls within the scope of § 502(a) and is

completely preempted... .” Jd. Again, nothing in plaintiffs’

complaints here touches on any decisions about eligibility

for coverage of any condition or medical procedure, and the

claims raised therefore fall outside the scope of § 502(a).

Instead, these cases concern defendants’ wrongful

demands for money recovered by plaintiffs in their third-

party tort cases, where New Jersey iaw guarantees that

plaintiffs are to be free of such claims. As was the case in

PAS, the defendant insurers in this case “do[} not, and

could not reasonably, contend that any provision of ERISA

expressly guarantees this same right,” and accordingly, “a

necessary requirement for preemption is missing here.”

PAS v. Travelers Ins. Co., 7 F.3d at 356.

Significantly, the civil enforcement provisions of

ERISA provide that an action may be brought by a plan

participant “to recover benefits due to Aim under the

terms of his plan, to enforce Ais rights under the terms of

the plan, or to clarify Ais rights to future benefits” (em-

phasis added). However, at the core of these actions is the

defendant insurers’ exercise of a purported contractual

right under their plans to demand subrogation or reim-

bursement against their insureds. Plaintiffs here are not

attempting to enforce any plan participants’ rights under

the plans; to the contrary, they are seeking redress for the

defendant insurers’ assertion of their contract rights

created under unlawful portions of the plans.

The Supreme Court has held that ERISA plans have

no such contractual rights guaranteed by the civil en-

forcement provisions of ERISA, ruling that ERISA

§ 502(a)\(3) supplies no federal cause of action for a health

plan’s claimed contractual right of reimbursement. Great-

West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204

(2002). Thus, where no such right lies within the contem-

plation of ERISA’s civil enforcement section, any claims

relating to such a right cannot be deemed to be so exclu-

sively federal in character as to require the preemption of

state law. If Congress had intended ERISA to completely

“occupy the field” with respect to a plan’s contractual

reimbursement and subrogation rights, it is nonsensical

that actions regarding such rights should be confined to a

state court’s jurisdiction when brought by a health plan

(as in Great-West) but be considered “completely pre-

empted” by federal law when brought by a plan partici-

pant or asserted as a health plan’s defense.

In fact, the concept of reimbursement or subrogation

for medical expense claims has no support whatsoever in

ERISA’s statutory scheme. It exists because it has been

unilaterally implanted by insurers in plan documents.

“ERISA says nothing about subrogation provisions. ERISA

neither requires a welfare plan to contain a subrogation

clause nor does it bar such clauses or otherwise regulate

their content.” Ryan v. Fed. Express Corp., 78 F.3d 123,

127 (3d Cir. 1996). Commentators have urged that the

spirit and purpose of ERISA actually provide greater

support for the outright prohibition of reimbursement

than for its authorization, especially when viewed in light

of considerations of equity and fairness (such as to a

catastrophically injured plaintiff who must pay back all or

most of a tort recovery to an insurer). See, e.g., Baron, RM:

Public Policy Considerations Warranting Denial of Reim-

bursement to ERISA Plans: It’s Time to Recognize the

Elephant in the Courtroom, 55 Mercer Law Review 595,

619, 633 (2004).

Further, this matter involves a significant question of

the scope of federal preemptive power, in that the panel

decision seriously undermines the New Jersey Supreme

Court’s ability to interpret its own state law, to regulate

insurance contracts in accordance with that law, and to

hold insurance companies accountable for breach of their

state law duties. In reritlering its decision in this case, the

Third Circuit panel majority has effectively eviscerated

the New Jersey Supreme Court’s ruling in Perreira,

usurping its authority to require the state’s health insur-

ers to conform their contracts to New Jersey law where

coverage is provided as an incident to employment, and

depriving New Jersey citizens of redress in state courts

pursuant to state law.

CONCLUSION

For al] the reasons set forth above, petitioners respect-

fully request that this petition for writ of certiorari should

be granted.

Respectfully submitted,

FRANKLIN P. SOLOMON

(Counsel of Record)

WEITZ & LUXENBERG, PC

210 Lake Drive East, Suite 101

Cherry Hill, NJ 08002

(856) 755-1115

DONNA SIEGEL MOFFA

TRUJILLO RODRIGUEZ & RICHARDS, LLC

8 Kings Highway West

Haddonfield, NJ 08033

(856) 795-9002

NATALIE FINKELMAN BENNETT

SHEPHERD FINKELMAN MILLER

& SHAH, LLC

475 White Horse Pike

Collingswood, NJ 08107

(856) 858-1770

App. 1

402 F.3d 156

United States Court of Appeals, Third Circuit.

Jean LEVINE, On behalf of herself and all others

similarly situated

UNITED HEALTHCARE CORPORATION

(DC NJ 01-cv-04964)

Noreen Bogurski

Horizon Blue Cross Blue Shield of New Jersey

(DC NJ 01-cv-05339)

Benjamin Edmonson, On behalf of

himself and all others similarly situated

Horizon Healthcare Services, Inc.,

dba Horizon Blue Cross Blue Shield of New Jersey

(DC NJ 01-cv-05812)

United Healthcare Corporation Horizon Blue Cross

Blue Shield of New Jersey, Appellants at

No. 04-1224

Jean Levine, On behalf of herself and

all others similarly situated

United Healthcare Corporation (DC NJ 01-cv-04964)

Noreen Bogurski

Horizon Blue Cross Blue Shield of New Jersey

(DU NJ 01-cv-05339)

Jean Levine, Noreen Bogurski,*Benjamin Edmonson,

Appellants at No. 04-1225.

*(Dismissed pursuant to Court’s order of 11/17/04).

Nos. 04-1224, 04-1225.

Argued Dec. 15, 2004.

March 16, 2005.

App. 2

William F. Hanrahan, (Argued), Edward A. Scallet,

Jason H. Ehrenberg, Groom Lew Group Chartered, Wash-

ington, DC, for Appellants/Cross Appellees United Health-

care Corp.

Edward S. Wardell, (Argued), Kelley Wardell & Craig,

Haddonfield, NJ, for Appellants/Cross Appellees Horizon

Blue Cross, etc., et. al.

Donna Siegel Moffa, (Argued), Trujillo Rodriguez &

Richards, Haddonfield, NJ, and Franklin P. Solomon,

(Argued), Weitz & Luxenberg, Cherry Hill, NJ, for Appel-

lees/Cross Appellants Noreen Bogurski.

Natalie Finkelman Bennett, Shepherd Finkelman

Miller & Shah, Washington Professional Campus, Turners-

ville, NJ, for Appellees/Cross Appellants Jean Levine, etc.

Before NYGAARD and GARTH, Circuit Judges and

POLLAK,* District Judge.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

These interlocutory cross-appeals require us to ad-

dress two different facets of the preemptive power of the

Employee Retirement Income Security Act of 1974 (ER-

ISA), 29 U.S.C. §§ 1001, et seq., as it applies to the instant

dispute over an insurer’s claimed right of subrogation from

an insured’s third-party tort recovery. First, the insured

ERISA plan participants, plaintiffs below, argue that the

* Honorable Louis H. Pollak, District Judge for the United States

District Court for the Eastern District of Pennsylvania, sitting by

designation.

App. 3

District Court should have remanded their claims to state

court for lack of federal subject matter jurisdiction. Sec-

ond, the insurance providers, defendants below, maintain

that the District Court should have dismissed the claims

entirely, as they depend on state law that is expressly

preempted by ERISA § 514, 29 U.S.C. § 1144. Finally, the

insurance providers argue that the District Court should

have dismissed the claims because the state law decision

on which they rely, Perreira v. Rediger, 169 N.J. 399, 778

A.2d 429 (2001), should not apply retroactively. All three

questions raise issues of first impression in this circuit. We

find the insurance providers’ arguments more persuasive

as to the first two issues, rendering consideration of

Perreira’s retroactivity unnecessary. Jurisdiction is proper

in the District Court, but the underlying claims are

preempted by ERISA and must be dismissed.

Jean Levine, Noreen Bogurski, and Benjamin

Edmondson (the “Insureds”) were injured by third-parties

in separate, unrelated events and are the Appellees/Cross-

Appellants in this appeal. Their health insurance provid-

ers, United Healthcare Corporation and Horizon Blue

Cross and Blue Shield of New Jersey,’ are the Appel-

lants/Cross-Appellees (the “Providers”). At the time of the

injuries, the Providers fulfilled their responsibilities to the

Insureds under each health insurance policy by paying at

least a portion of the Insureds’ medical expenses.

’ Horizon Blue Cross and Blue Shield of New Jersey was the

health insurance provider for both Bogurski and Fdmonson. With

respect to Edmonson, they were Horizon Healthcare Services, Inc.,

doing business as, Horizon Blue Cross and Blue Shield.

App. 4

Each Insured then filed suit against the third party

responsible for his or her injury. At that time, a New

Jersey Department of Insurance Regulation permitted

health insurance policies to include reimbursement and

subrogation clauses. N.J. Admin. Code tit. 11, § 4-42.10

(1993) (repealed August 5, 2002). Each of the relevant

* The relevant regulation that provided for reimbursement and

subrogation was repealed oh August 5, 2002 and replaced with a

“Prohibition on subrogation/third party liability provisions.” The Regula-

tion, prior to its repeal, was as follows:

11:.4-42.10 Provisions for subrogation and repayment

of benefits

(a) Group policies and certificates providing health insur-

ance may contain subrogation provisions that require the

return to the insurer by a covered person of benefits paid for

illness or injury up to the amount a covered person received

from a third party through settlement, a satisfied judge-

ment or other means, as compensation for the medica! costs

of such illness or injury, subject to the following:

1. Repayment of benefits shal] be required only where the

amount received for the third party through settlement,

judgment or other means are specifically identified as

amounts paid for health benefits which have been paid by

the insurer under the group policy or certificate.

2. The repayment shall not exceed the amount of benefits

paid hy the insurer under the group policy or certificate for

the particular iliness or injury.

3. The group policy and certificate shall allow the covered

person to deduct from the repayment to the insurer the rea-

sonable pro-rata expenses incurred in effecting the third

party payment.

(b) Group policies and certificates providing health insur-

ance may exclude or reduce the héa!th benefits payable to or

on behalf of a covered person to the extent that the covered

person has already received payment from a third party for

past or future health care costs for an illness or injury re-

sulting from the negligence or intentional act of such third

party.

(Continued on following page)

App. 5

health insurance policies had such a clause. Consequently,

when the Insureds sued their respective tortfeasors, the

Providers acted within the bounds of both the health

insurance policies and the Department of Insurance

regulation by seeking reimbursement from the Insureds

for benefits paid under the health insurance policies. The

Insureds then paid a portion of their tort settlement to the

Providers to settle the reimbursement claims.’

Subsequent to these settlements between the Insureds

and the Providers, the New Jersey Supreme Court an-

nounced a decision in Perreire v. Rediger, 169 N.J. 399,

778 A.2d 429 (2001), holding that the Department of

Insurance regulation conflicted with a New Jersey statute,

and thus, was invalid.‘ As a result, subrogation and

reimbursement provisions are no longer permitted in New

Jersey health insurance policies. Notwithstanding their

providing group health insurance shal] limit or exclude

health benefits as the result of the covered person's sustain-

ing a loss attributable to the actions of a third party.

(d) Notwithstanding (a) or (b) above, disability income,

long term care and accidental loss benefits and blanket in-

surance shall not be subject to subrogation or repayment of

benefits received.

(e) Subrogation shall only be applicable when third party

liability benefits may exist, subject to the restrictions set

forth above.

* Levine paid $11,000 to settle her reimbursement claim, Bogurski

placed $11,000 in escrow to settle her reimbursement claim, and

Edmondson paid $1,383.43 to settle his claim.

* The Perreira decision held that the Department of Insurance

Regulation, N.J. Admin. Code tit. 11 § 4-42.10 (the “regulation”),

directly conflicted with the statute regulating deductions from plain-

tiff’s awards in personal injury and wrongful death actions, N.J. Stat.

Ann. § 2A:15-97 (2000) (the “statute”).

App. 6

earlier settlements, the Insureds sued the Providers in

New Jersey state court to recover the amounts they paid

to reimburse the Providers.

II. The District Court Proceedings

After being sued in New Jersey state court, the

Providers removed the cases to federal court claiming

complete ERISA preemption under section 502(a)(1)(B) of

ERISA. The District Court denied the Insureds’ motion to

remand to state court. Concluding that the question of

removal was a “conceptually unclear area of law,” the

District Court nonetheless determined that the Insureds

sought to “recoup a benefit due under the plan,” and thus,

their claim was properly removed. The Court also denied

the Insureds’ request to certify the issue for appeal at that

time.

The Providers also filed a motion to dismiss the

claims. First, the Providers claimed that ERISA pre-

empted New Jersey’s statute; therefore, the statute did not

apply to ERISA-governed plans. Second, they argued that

the Perreira decision should not be applied retroactively.

The District Court concluded that the New Jersey

statute was a statute “regulating insurance,” and thus,

was “saved” from ERISA preemption. First, as directed by

the Supreme Court in Pilot Life Insurance Co. v. Dedeaux,

481 U.S. 41, 50, 107 S.Ct. 1549 95 L.Ed.2d 39 (1987), the

District Court made the “common sense determination”

that the law was specifically directed toward the insurance

industry because it was intended to directly affect and

regulate that industry. Second, the Court tested the

App. 7

results of its common sense determination by examining

the three factors listed in the McCarran-Ferguson Act’ and

found that these factors supported the conclusion that the

law regulated insurance. See Moran, 536 U.S. at 366, 122

S.Ct. 2151. Thus, the District Court found that the law

was “saved” from ERISA preemption.

Having determined that New Jersey's statute applied

to ERISA-governed plans, the District Court turned to the

question of whether the Perreira decision should be ap-

plied retroactively. The District Court determined that,

under New Jersey law, prospective application® is appro-

priate only if: “(1) the parties and the community justifia-

bly relied on the prior rule, (2) the purpose of the new rule

will not be advanced by retroactive application, and (3)

retroactive application of the rule may have an adverse

effect on the administration of justice.” (App. at 40 (citing

Coons v. American Honda Motor Co., 96 N.J. 419, 476 A.2d

763, 767 (1984))). Here, the District Court concluded that

the Perreira decision reflected New Jersey's existing law

* The three McCarran-Ferguson factors are (1) whether the

practice has the effect of transferring or spreading a policyholder's risk;

(2) whether the practice is an integral part of the policy relationship

between the insurer and the insured; and, (3) whether the practice is

limited to entities within the insurance industry. See Rush Prudential

HMO, Inc. v. Moran, 536 U.S. 355, 366, 122 S.Ct. 2151, 153 L.Ed.2d 375

(2002). These factors are no longer used in determining whether a law

is saved from ERISA preemption. Kentucky Assoc. of Health Plans Inc.

v. Miller, 538 U.S. 329, 341-42, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003).

* Under New Jersey law, all opinions are applied retroactively

unless prospective application is deemed appropriate. See, e.g., Hender-

son v. Camden County Mun. Util. Auth., 176 N.J. 554, 826 A.2d 615,

620 (2003). Thus, absent a specific finding that the Perreira opinion

should be limited to prospective application, the opinion would be

applied retroactively.

¥ App. 8 :

and was not new and unanticipated. Consequently, it held

that the Perreira decision applied retroactively.

Following the denial of the motion to dismiss, the

District Court certified three issues for interlocutory

appeal pursuant to 28 U.S.C. § 1292(b):

(1) whether the antisubrogation rule contained

in N.J.S.A. 2A:15-97, as interpreted by the New

Jersey Supreme Court in Perreira v. Rediger, 169

N.J. 399, 778 A.2d 429 (2001), applies to defen-

dant health insurers because it is not conflict

preempted under ERISA section 514(a) because

it is “saved” as a state law that regulates insur-

ance;

(2) whether Perreira v. Rediger, 169 N.J. 399,

778 A.2d 429 (2001), applies retroactively to

plaintiffs’ pre-Perreira health insurance plans;

and,

(3) whether plaintiffs’ unjust enrichment claims

for monies taken pursuant to subrogation and re-

imbursement provisions in their ERISA health

plans are claims for “benefits due” within the

meaning of ERISA section 502(a).’

We granted permission for the appeal (issues one and two)

and cross-appeal (issue three) on January 16, 2004 and

have jurisdiction pursuant to 28 U.S.C. § 1292(b).

" Although the District Court cited to the New Jersey Reports, we

cite to the Atlantic Reporter for the Perreira decision throughout this

opinica. It should also be noted that the correct citation to the New

Jersey Reports for the Perreira decision is 169 N.J. 399, 778 A.2d 429.

App. 9

Ill. The Removal Claim: Preemption under Section

502(a)

We address the cross-appeal first because it requires

us to examine our jurisdiction. We exercise plenary review

over challenges to our subject matter jurisdiction. Pryz-

bowski v. U.S. Healthcare Inc., 245 F.3d 266, 268 (3d

Cir.2001). See also Arana v. Ochsner, 338 F.3d 433, 437

(5th Cir.2003) (en banc).

The Insureds brought their claims in New Jersey

state court as state claims for unjust enrichment. There-

fore, they claim, federa: jurisdiction is inappropriate and

the cases should be remanded to state court. In general,

under the well-pleaded complaint rule, it is true that the

* federal courts have federal question jurisdiction only when

a federal claim appears in the complaint, and not when a

federal preemption defense may eventually be raised in

litigation. Pryzbowski, 245 F.3d at 271. Certain federal

laws, however, including ERISA, so sweepingly occupy a

field of regulatory interest that any claim brought within

that field, however stated in the complaint, is in essence a

federal claim. In such cases, the doctrine of complete

preemption provides federal jurisdiction and allows

removal to federal court. See Metro. Life Ins. Co. v. Taylor,

481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987).

State law claims seeking relief within the scope of section

502(a) of ERISA are within this select group of cases

where Congress has completely preempted an area of law.’

* When addressing preemption under section 502(a) we are dealing

with “complete preemption,” as opposed to “express preemption” which

arises under section 514 of ERISA. Pryzbowski, 245 F.3d at 270.

Compete [sic] preemption is a jurisdictional concept, and is distinguish-

able from questions which arise under section 514. Id. See also, Barber

(Continued on following page)

App. 10

Metro. Life, 481 U.S. at 62-66, 107 S.Ct. 1542; Pryzbowski,

245 F.3d at 271-72. Thus, if the claim is one that falls

within section 502(a) of ERISA, removal to federal court is

proper. Jd.

Section 502(a) allows a participant in an ERISA plan

to bring a civil action to “recover benefits due to him under

the terms of his plan, to enforce his rights under the terms

of the plan, or to clarify his rights to future benefits under

the terms of the plan.” 29 U.S.C. § 1132(aX1)(B). The

District Court found that the Insureds’ claims were actu-

ally claims for benefits due: “[e]ssentially plaintiffs seek to

regain the whole benefit provided to them by defendants,

including those amounts paid in subrogation pursuant to

the terms of the plans.... [T]his Court must determine

the content of the ERISA plan and whether the New

Jersey Supreme Court case in Perreira applies to the

subrogation provision in plaintiffs’ ERISA plans.” (App. at

193).

In Pryzbowski, we laid out a framework for determin-

ing whether a case is completely preempted under section

502(a) of ERISA. In order to ensure that Congress’s intent

of giving section 502(a) “extraordinary preemptive force”

was fulfilled, we utilized the two categories of ERISA

cases, originally set out by the Supreme Court in Pegram

v. Herdrich, 530 U.S. 211, 120 S.Ct. 2143, 147 L.Ed.2d 164

(2000). Pryzbowski, 245 F.3d at 271. The first category

involves cases where the claim challenges the administra-

tion of, or eligibility for, benefits. These cases fall within

the scope of 502(a) and are preempted. Jd. at 273. The

v. UNUM Life Ins. Co., 383 F.3d 134, 141 (3d Cir.2004) (explaining

express preemption under ERISA § 514(a)).

App. 11

second group of cases challenges the quality of the medical

treatment performed and is not preempted. Jd. As noted by

the District Court, this case does not fall squarely within

either category. Thus, we must look beyond the framework

set out in Pryzbowski to determine whether this case falls

within section 502(a).

At the time of the District Court's ruling on the

removal question, May 28, 2002, no Court of Appeals had

considered whether the type of case before us was pre-

empted under section 502(a) of ERISA. Since the District

Court’s initial ruling, however, the Fourth and Fifth

Circuits have considered whether similar cases are subject

to preemption under ERISA. Arana, 338 F.3d 433; Singh v.

Prudential Health Care Plan Inc., 335 F.3d 278 (4th

Cir.2003). Both Courts of Appeal held that the federal

courts are the proper forums for these disputes. In Arana,

the Fifth Circuit held that federal jurisdiction was proper

in a case strikingly similar to the one here. There, the

plaintiff claimed that under Louisiana law his health

insurance company had no right to reimbursement of

health benefits after the plaintiff recovered in a tort

action. The Court held that the plaintiff's claim was

properly characterized as a claim for “benefits due” or to

“enforce his rights under the plan,” either of which would

provide jurisdiction. Arana, 338 F.3d at 438. It described

the situation as follows:

As it stands, Arana’s benefits are under some-

thing of a cloud, for OHP is asserting a right to

be reimbursed for the benefits it has paid for his

account. It could be said, then, that although the

benefits have already been paid, Arana has not

fully ‘recovered’ them because he has not ob-

tained the benefits free and clear of OHP’s

claims. Alternatively, one could say that Arana

App. 12

seeks to enforce his rights under the terms of the

plan, fer he seeks to determine his en itlement to

retain the benefits based on the terms of the

plan. Id.

In Singh, the Fourth Circuit addressed whether claims of

unjust enrichment and negligent misrepresentation

relating to subrogation and reimbursement actions of the

insurer were claims for “benefits due.” Like the Fifth

Circuit, the Fourth Circuit found that ERISA controlled

and removal was appropriate because subject matter

jurisdiction is not affected by “the fortuity.of when a plan

term was misapplied to diminish the benefit.” Singh, 335

F.3d at 291 (emphasis in original).

Here, the Insureds claim that they were entitled to

certain health benefits and that the Providers wrongly

sought the return of those benefits. Even more than in

Arana, the Insureds’ claim here is for benefits due. The

Insureds have already paid back a portion of their bene-

fits. Thus, they claim essentially that they are entitled to

have certain health insurance claims paid under their

ERISA plans. It is impossible to determine the merits of

the Insureds’ claims without delving into the provisions of

their ERISA-governed plans.

We agree with the reasoning of the Courts of Appeal

for the Fourth and Fifth Circuits. Where, as here, plain-

tiffs claim that their ERISA plan wrongfully sought

reimbursement of previously paid health benefits, the

claim is for “benefits due” and federal jurisdiction under

section 502(a) of ERISA is appropriate. Such a rule com-

ports with our earlier jurisprudence because, although not

directly analogous, such claims are more like challenges to

the “administration of benefits” than challenges to the

App. 13

“quality of benefits received.” See Pryzbowski, 245 F.3d at

273.

Although the Insureds have attempted to characterize

their claim as one looking only at state law, the essence of

the claim concerns an ERISA plan. Therefore, we conclude

that federal subject matter jurisdiction is appropriate.

IV. Express Preemption Under Section 514 of

ERISA

Next, we turn to the District Court’s denial of the

Providers’ motion to dismiss. Our review of the District

Court’s decision is plenary. Pryzbowski, 245 F.3d at 268.

We accept all factual allegations in the complaint as true

and draw reasonable inferences from those allegations. /d.

The first issue is whether ERISA preempts the New

Jersey statute on which the Insureds’ claims rely. If ERISA

preempts the New Jersey statute, then the reimbursement

provisions in the Insureds’ health insurance policies stand,

and the Insureds’ claims must be dismissed. Because we

find that this is indeed the case, this issue is dispositive.

New Jersey Statute, section 2A:15-97, essentially

reverses the common law collateral source doctrine by

requiring a plaintiff who receives benefits from any source

other than a joint tortfeasor to deduct that amount from

his or her recovery in any civil action.’ Thus, payments

* The New Jersey Statute, N.J. Stat. Ann. § 2A: 15-97, reads:

In any civil action brought for personal injury or death, except actions

brought pursuant to the provisions of P.L.1972, c.70 (C.39:6A-1 et seq.),

if a plaintiff receives or is entitled to receive benefits for the injuries

allegedly incurred from any other source other than a joint tortfeasor,

the benefits, other than workers’ compensation benefits or the proceeds

(Continued on following page)

App. 14

made by health care providers are deducted from a plain-

iuff’s tort recovery under New Jersey law.”

Generally, a state law that “relates to” an ERISA-

governed plan is preempted by ERISA. 29 U.S.C.

§ 1144(a). ERISA’s expansive express preemption rule — as

distinguished from the jurisdictional question of complete

preemption discussed above — is set forth in Section 514(a)

of the Act, and provides that ERISA’s regulatory structure

“shall supersede any and all State laws insofar as they

may now or hereafter relate to any employee benefit plan

[subject to ERISA).” 29 U.S.C. § 1144(a) (emphasis added).

The District Court has determined that the state law on

which the Insureds rely “relates to” the Insureds’ ERISA

plans. That ruling is not before us for review. The Insur-

eds’ claims are thus preempted unless they fall within an

exception to Section 514(a).

The relevant exception here is Section 514(b\2)A), or

the “savings clause.” The savings clause provides that,

apart from particular scenarios not presented here,”

from a life insurance policy, shall be disclosed to the court and the

amount thereof wh ‘\ duplicates any benefit contained in the award

shall be deducted from any award recovered by the plaintiff, less any

premium paid to an insurer direct!y by the plaintiff, or any member of

the plaintiff's family on behalf of the plaintiff for the policy period

during which the benefits are payable. Any party to the action shall be

permitted to introduce evidence regarding any of the matters described

in this act.

" The Insureds failed to plead in their complaint whether such

amounts were withheld from their settlements. Because all of the

Insureds settled their tort actions, we assume that such deductions

would have been made if they had proceeded to trial.

" These excluded scenarios are set forth in the “deemer” clause,

and exempt certain self-funded ERISA plans from the reach of state

(Continued on following page)

App. 15

“nothing in [ERISA’s preemption provisions] shall be

construed to exempt or relieve any person from any law of

any state which regulates insurance, banking or securi-

ties.” 29 U.S.C. § 1144(b 2A) (emphasis added). Accord-

ingly, the key question before us is whether the New

Jersey law underlying the Insureds’ claims is a law “which

regulates insurance.”

The Supreme Court recently clarified the appropriate

test for determining whether a state law that relates to

employee benefit plans falls within the savings clause. In a

2003 decision, issued after the District Court had made its

preemption ruling in this case, the Court directed that for

a “state law to be deemed a ‘aw ... which regulates

insurance’ under § 1144(bX2)(A), it must satisfy two

requirements.” Miller, 538 U.S. at 341-42, 123 S.Ct. 1471.

First, the state law must be “specifically directed toward

entities engaged in insurance.” Jd. Second, the state law

must “substantially affect the risk pooling arrangement

between the insurer and the insured.” Jd.”

The Providers argue that the New Jersey statute

applies to “any civil action” and funds from “any other

source,” and thus, it is not specifically directed toward

insurance. In Pilot Life Insurance Co. v. Dedeaux, 481 U.S.

41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), the Supreme

Court addressed a similar case where a state law had its

primary effect on insurers but was not limited to insurers.

At issue in Pilot was Mississippi's law of bad faith. Even

laws otherwise saved from preemption under the savings clause. The

deemer clause is not at issue here. See 29 U.S.C. § 1144(bX 2B).

" This second factor, of course, marks a departure from the Court's

earlier jurisprudence concerning the three McCarran-Ferguson factors,

on which the District Court's decision was based.

App. 16

though the Mississippi Supreme Court had identified its

law of bad faith with the insurance industry, the Supreme

Court found that the law was based in general tort and

contract law, not insurance law. Jd. at 49-50, 107 S.Ct.

1549. The law could apply in any breach of contract case,

not merely a breach of an insurance contract. Jd. As a

result, the law did not fall within the savings clause. /d.

Here, the District Court found, and the Insureds

argue, that the New Jersey statute is distinguishable from

Pilot because it was specifically intended to benefit the

liability insurance industry. Terming the statute an “anti-

subrogation law,” the Insureds contend that the statute is

the result of a conscious tort reform effort by the legisla-

ture that shows a choice to shift the burden for tort recov-

ery from liability insurers to health insurers. Although the

legislative history and the Perreira decision do indicate an

intent to lighten the burden on the liability insurance

industry, we cannot say that the New Jersey statute is

“specifically directed toward the insurance industry” for

the purpose of the savings clause.

Before turning to the effect the statute has on New

Jersey insurance law, an examination of the statute itself

indicates that it is more than just an insurance regulation.

New Jersey did not define section 2A:15-97 as an “antisub-

rogation law,” nor did New Jersey place this statute among

the statutes regulating insurance. Rather, the statute is

entitled, “Personal injury or wrongful death actions;

benefits from sources other than joint tortfeasor; disclo-

sure; deduction from plaintiff's award,” and is included in

the portion of New Jersey's statutes dealing with civil

actions. The plain language of the statute reveals that this

statute is not limited to regulating either health insurance

or liability insurance providers.

App. 17

Additionally, examination of the driving intent behind

the statute shows that this case parallels the analysis in

Pilot. As in Pilot, a state supreme court described the law

as one intended to affect the insurance industry. Perreira,

778 A.2d at 436. Despite this finding, the law here is a

general law of civil procedure. The New Jersey statute

governs all civil actions, not merely those involving insur-

ance entities. Furthermore, even the Perreira Court

recognized that the primary purpose of the law was to

disallow double recovery by tort plaintiffs, not to regulate

insurance contracts. Jd.

The statute’s general applicability is further exempli-

fied by its plain language. The statute applies in “any civil

action” to benefits received from “any other source.” As in

Pilot, the New Jersey law regulates non-insurance parties

as well as insurance entities. For example, a plaintiff

would be required to report any contribution, such as a

private indemnity agreement, under the statute. Conse-

quently, in some circumstances the statute wiil have no

effect on health insurers at all. Furthermore, the Insureds

heavily rely on the New Jersey legislature’s intent to

reduce the expense of liability insurance as evidence of the

statute’s specific intent to regulate the insurance industry.

The statute, however, applies in all civil actions, not

merely those in which liability insurers will pay the

judgment. Thus, in some cases the statute will benefit

private tortfeasors, and not insurance entities. Accord-

ingly, as the Court found in Pilot, the New Jersey statute

is merely one that will usually, although not exclusively, be

applied to regulate insurance entities. See Pilot, 481 U.S.

at 49-50, 107 S.Ct. 1549. This is not sufficient to avoid

preemption under ERISA.

App. 18

The Insureds argue that because the statute is “aimed

at” insurance entities, the requirements under the savings

clause are satisfied, even if in some cases the statute

regulates non-insurance entities. They direct us to several

cases where the fact that a statute is “aimed at” the

insurance industry or intended to affect that industry

supports the conclusion that it is specifically directed

toward the industry. See, e.g, FMC Corp. v. Holliday, 498

U.S. 52, 61, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990) (“[IIt

does not merely have an impact on the insurance industry;

it is aimed at it.”). Examination of these cases, however,

reveals a key difference from the case here: they explicitly

regulated insurance. Miller, 538 U.S. at 331-32, 123 S.Ct.

1471 (“a health insurer shall not discriminate against .. .

"); Moran, 536 U.S. at 359, 122 S.Ct. 2151 (involving a

section of Illinois’ss HMO Act where Congress specifically

determined that HMOs were insurance entities); Holliday,

498 U.S. at 55, n. 2, 111 S.Ct. 403 (defining “coordination

of benefits” as “a policy of insurance”); Medical Mutual of

Ohio v. deSoto, 245 F.3d 561, 569 (6th Cir.2001) (examin-

ing California’s antisubrogation statute that was limited

to cases against a health care provider and contributions

paid as the result of “health, sickness or income-disability

insurance, accident insurance”). Although New Jersey's

statute may have been “aimed at” shifting the burden of

tort expenses from the liability insurance industry to the

health insurance industry, the statute explicitly regulates

both insurance and non-insurance entities. As in Pilot, we

are faced with a state statute that, although commonly

identified with the insurance industry, is not “specifically

directed toward the insurance industry.”

To avoid ERISA preemption a state law must be

“specifically directed” toward the insurance industry. The

App. 19

New Jersey statute is not. Because the New Jersey statute

could be applied to any contributor in any civil action, it is

merely a statute that has a significant impact on the

insurance industry. As in Pilot, this is not sufficient.

ERISA preempts the application of New Jersey's statute;

therefore, the District Court erred in denying the Provid-

ers’ motion to dismiss.

Vv.

Because we conclude that ERISA preempts applica-

tion of New Jersey’s statute, we need not address the

retroactivity of the New Jersey Supreme Court’s decision

in Perreira v. Rediger, 169 N.J. 399, 778 A.2d 429 (2001).

We hold that the Insureds’ claims are for benefits due, and

thus were properly removed to federal court. We also hold,

however, that ERISA preempts application of New Jersey’s

statute, and thus the District Court erred in denying the

Providers’ motion to dismiss. We reverse and remand with

instructions for the District Court to dismiss the cause.

GARTH, Circuit Judge, dissenting.

This appeal, consisting of three consolidated actions,

principally concerns two separate preemption issues:

express preemption under §514(a) of the Employee

Retirement Income Security Act of 1974, 29 U.S.C.

§ 1144(a) (“ERISA”), and complete preemption under

§ 502(a) of ERISA, 29 U.S.C. § 1132. While I join Part III

of the majority opinion because I agree that § 502(a)

complete preemption exists, thereby establishing federal

; App. 20

subject-matter jurisdiction,” I must respectfully dissent

from Parts IV and V of the majority opinion because, in

my view, the New Jersey collateral source statute, N.J.S.A.

2A:15-97," is saved from express preemption under

§ 514(a) of ERISA as a state regulation of insurance.

Three provisions of ERISA § 514 speak directly to the

question of express preemption,” the méchanics of which

have been neatly summarized by the Supreme Court:

" See generally Arana v. Ochsner Health Plan, 338 F.3d 433 (5th

Cir.2003); Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278 (4th

Cir.2003).

* The statute provides:

In any civil action brought for personal injury or death, ex-

cept actions brought pursuant to the provisions of P.L.1972,

c. 70 (C. 39:6A-1 et seq.), if a plaintiff receives or is entitled

to receive benefits for the injuries allegedly incurred from

any other source other than a joint tortfeasor, the benefits,

other than workers’ compensation benefits or the proceeds

from a life insurance policy, shall be disclosed to the court

and the amount thereof which duplicates any benefit con-

tained in the award shall be deducted from any award re-

covered by the plaintiff, less any premium paid to an

insurer directly by the plaintiff or by any member of the

plaintiff's family on behalf of the plaintiff for the policy pe-

riod during which the benefits are payable. Any party to the

action shal] be permitted to introduce evidence regarding

any of the matters described in this act.

N.J.S.A. 2A:15-97.

“ Of the three provisions of § 514, which are set forth below, the

first and third are not involved in this appeal. It is the second provision,

§ 514(bK 2A), which concerns the regulation of insurance, that this

appeal focuses upon.

“Except as provided in subsection (b) of this section (the saving

clause}, the provisions of this subchapter and subchapter III of this

(Continued on following page)

App. 21

If a state law “relate(s) to ... employee benefit

plan(s],” it is pre-empted. § 514(a). The saving

clause excepts from the pre-emption clause laws

that “regulatie) insurance.” § 514(b)\(2\A). The

deemer clause makes clear that a state law that

“purport(s] tc regulate insurance” cannot deem

an employee benefit plan to be an insurance com-

pany. § 514(b\2\B).

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct.

1549, 95 L.Ed.2d 39 (1987). Although the express preemp-

tion analysis normally requires the application of the

three relevant provisions of § 514, the sole issue in this

appeal is whether the District Court erred as to the second

step in the analysis in finding that N.J.S.A. 2A:15-97 is

“saved” from preemption as a state statute that regulates

insurance under § 514(b)(2\(A). Accordingly, I confine my

discussion to that narrow issue.

chapter shall supersede any and al] State laws insofar as they may now

or hereafter relate to any employee benefit plan... .” § 514(a), as set

forth in 29 U.S.C. § 1144(a) (pre-emption clause). “Except as provided in

subparagraph (B) [the deemer clause), nothing in this subchapter shall

be construed to exempt or relieve any person from any law of any State

which regulates insurance, banking, or securities.” § 514(b\(2XA), as set

forth in 29 U.S.C. § 1144(b)(2XA) (saving clause).

“Neither an employee benefit plan ... nor any trust established

under such a plan, shall be deemed to be an insurance company or

other insurer, bank, trust company, or investment company or to be

engaged in the business of insurance or banking for purposes of any law uf

any State purporting to regulate insurance companies, insurance contracts,

banks, trust companies, or investment companies.” § 514(bX2XB), 29

U.S.C. § 1144(bX 2B) (deemer clause).

* The two other clauses of § 514 — the “preemption clause” and the

“deemer clause” are not the subject of the certified questions in this

appeal. See supra note 3.

App. 22

II.

In Kentucky Ass’n of Health Plans, Inc. v. Miller, 538

U.S. 329, 341-42, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003),

the Supreme Court rejected the previous use of the

McCarran-Ferguson factors, and instead enunciated two

requirements for a state law to be deemed a “law ...

which regulates insurance” under § 514(b)(2)(A). First, the

state law must “be specifically directed toward entities

engaged in insurance.” Jd. at 342, 123 S.Ct. 1471 (citing

Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549; UNUM Life Ins.

Co. of Am. v. Ward, 526 U.S. 358, 368, 119 S.Ct. 1380, 143

L.Ed.2d 462 (1999); Rush Prudential HMO, Inc. v. Moran,

536 U.S. 355, 366, 122 S.Ct. 2151, 153 L.Ed.2d 375

(2002)). Second, the state law must “substantially affect

the risk pooling arrangement between the insurer and the

insured.” Id.

Here, there is no serious dispute that state antisubro-

gation laws spread policyholder risk and therefore satisfy

the second Miller requirement.” See Singh, 335 F.3d at

286 (noting that “it is difficult to imagine an antisubroga-

tion law ... as anything other than an insurance regula-

tion, as it addresses who pays in a given set of

circumstances and is therefore directed at spreading

policyholder risk”); Med. Mut. of Ohio v. deSoto, 245 F.3d

561, 574 (6th Cir.2001) (“The logical effect of [antisubroga-

tion laws] ... is to decrease the premiums of health care

providers’ insurance and increase the premiums of health

insurance — i.e., spread risks.”). What concerns us in this

appeal, then, is whether the New Jersey collateral source

" Indeed, United and Horizon do not attempt such an argument.

App. 23

statute satisfies the first Miller requirement, i.e., that it is

specifically directed towards the insurance industry.

Focusing solely upon the statutory language, the

majority concludes that the New Jersey collateral source

statute is not specifically directed to the insurance indus-

try because its definitions sweep too broadly and thereby

encompass organizations or entities that do not provide

insurance. To be sure, the collateral source statute does

not specifically refer to health insurance or to subrogation

and reimbursement clauses. It is contained in Title 2A of

the New Jersey Statutes, which regulates the administra-

tion of civil and criminal justice. Moreover, the statute

applies to plaintiffs “in any civil action” who receive

benefits for their injuries from “any other source other

than a joint tortfeasor.” N.J.S.A. 2A:15-97. As the majority

opinion notes, the term “benefits received” thus encom-

passes more than just insurance proceeds.

On the surface, therefore, this case would appear to

present a paradigmatic example of a law of general appli-

cation that has some bearing on insurers. Such laws do not

qualify under the “saving” clause jurisprudence. See

Miller, 538 U.S. at 334, 123 S.Ct. 1471. However, the

inquiry does not end here, for the New Jersey Supreme

Court has spoken in a rather definitive way as to the

legislative purpose of the collateral source statute. See

Perreira v. Rediger, 169 N.J. 399, 778 A.2d 429 (2001).

While recognizing that “[o]n its face, N.J.S.A. 2A:15-

97 ... is silent regarding any right to subrogation or

reimbursement on the part of health insurers,” id. at 409,

778 A.2d 429, the Supreme Court in Perreira determined

that the statute had more than one purpose: “To be sure,

its primary purpose was to disallow double recovery to

App. 24

plaintiffs, but a secondary goal was clearly the contain-

ment of spiraling insurance costs.” Id. at 410, 778 A.2d 429

(emphasis added). In enacting N.J.S.A. 2A:15-97, the

Court noted that the legislature made a “separate legisla-

tive decision” as to which “segment of the insurance

industry” would be the beneficiary of the double recovery

disallowance. Id. As the legislative history reveals, the

Court noted, the choice was made to favor liability carri-

ers.” Id. at 411, 778 A.2d 429 (citing cases agreeing that

purpose of statute was to shift burden from casualty and

liability insurance industry).

Il.

I am persuaded that the foregoing statutory interpre-

tation, coming, as it does, from the State’s highest tribu-

nal, compels the conclusion that the New Jersey collateral

source statute is “specifically directed” towards the insur-

ance industry. In my view, the majority opinion accords too

little weight to such statements from the New Jersey

Supreme Court, focusing instead on the admittedly broad

statutory language. Our difference, then, is mostly an

hermeneutical one, centering on the interpretive import of

Perreira in ascertaining the aim of the statute.

* In reviewing the legislative history, the Court placed particular

emphasis on the Passed Bill Memo prepared by Governor’s counsel:

This bill attempts to reduce the cost of liability insurance by

reducing the likelihood of a ‘double recovery’ in a liability

award for items which were already compensated by insur-

ance or by other ‘collateral’ sources other than a tortfeasor.

Id. at 410, 778 A.2d 429 (quoting Passed Bill Memo to Governor Thomas

H. Kean (Dec. 7, 1987)).

App. 25

In assigning minimal value to Perreira, the majority

opinion states that the mere fact that the New Jersey

statute has an impact on insurance, as settled in Perreira,

is not enough to satisfy the “specifically directed” require-

ment of the saving clause. Even if, the majority argues,

the New Jersey Supreme Court has identified N.J.S.A.

2A:15-97 with the insurance industry, that does not

change the actual terms of the statute. See Pilot Life, 481

U.S. at 50, 107 S.Ct. 1549 (holding common law of bad

faith not saved from preemption “[e]ven though the Mis-

sissippi Supreme Court has identified its law of bad faith

with the insurance industry”). According to the majority

opinion, the collateral source statute thus resembles the

Mississippi law at issue in Pilot Life. This analogy, how-

ever, misses the critical distinction between the two

provisions.

Under the relevant state law in Pilot Life, punitive

damages could be sought for “bad faith” in denying claims

without any reasonably arguable basis for the refusal to

pay. 481 U.S. at 50, 107 S.Ct. 1549. The Supreme Court

determined that although Mississippi had “identified its

law of bad faith with the insurance industry, the roots of

this law are firmly planted in the general principles of

Mississippi tort and contract law.” Jd. “Any breach of

contract,” the Court observed, “and not merely breach of

an insurance contract, may lead to liability for pwnitive

damages under [the Mississippi common law of bad

faith].” Id. Accordingly, the Court concluded that the

Mississippi law did not “regulat{e] insurance” within the

meaning of ERISA’s saving clause. /d.

The holding in Pilot Life was premised upon the

finding that “the roots of [the common law of bad faith

were] firmly planted in the general principles of .. . tort

App. 26

and contract law.” Jd. at 50. Pilot Life, contrary to the

majority's reading, did not involve a situation where “a

state supreme court described the law as one intended to

affect the insurance industry.” Majority Op. at 165. The

Mississippi Supreme Court never stated that its common

law of bad faith was specifically directed towards the

insurance industry; it merely applied that longstanding

law to the insurance context. Pilot Life, 481 U.S. at 49-50,

107 S.Ct. 1549. Under these circumstances, the Supreme

Court quite properly held that “a common-sense under-

standing of the phrase ‘regulates insurance’ does not

support the argument that the Mississippi law of bad faith

falls under the saving clause.” Jd. at 50, 107 S.Ct. 1549.

Common sense dictates otherwise here. This case

involves a statutory enactment, which, according to the

New Jersey Supreme Court, was clearly rooted in legis/la-

tive concerns about spiraling insurance costs. The New

Jersey Supreme Court was emphatic in emphasizing

insurance in its opinion:

The effectuation of no-double-reco-ery [by

N_J.S.A. 2A:15-97] therefore required a separate

legislative decision regarding which segment of

the insurance industry would be the beneficiary

of that disallowance. The Legislature had two

choices: to benefit health insurers by allowing

repayment of costs expended on a tort plaintiff,

or to benefit liability carriers by reducing the tort

judgment by the amount of health care benefits

received. As the legislative history reveals, the

choice was made to favor liability carriers. See

Kiss v. Jacob, 138 N.J. 278, 282 [650 A.2d 336]

(1994) (stating that intent of the legislature was

to control spiraling automobile-insurance costs),

App. 27

Fayer v. Keene Corp., 311 N.J.Super. 200, 208,

709 A.2d 808 (App.Div.1998) (agreeing that pur-

pose of statute is to shift burden to health indus-

try); Parker v. Esposito, 291 N.J.Super. 560, 565,

677 A.2d 1159 (1996) (stating that purpose of col-

lateral source statute is to prevent double recovery

thereby giving relief from increasing costs of liabil-

ity insurance); Lusby v. Hitchner, 273 N.J.Super.

578, 591, 642 A.2d 1055 (App.Div.1994) (stating

that legislative determination “was apparently

not only to prevent plaintiffs from obtaining a

double recovery but also, except where PIP pay-

ments are involved, to shift the burden, at least

to some extent, from the liability and casualty

insurance industry to health and disability third-

party payers”).

Perreira, 169 N.J. at 410-11, 778 A.2d 429.

While the Supreme Court has held that “laws of

genera! application that have some bearing on insurers do

not qualify,” Miller, 538 U.S. at 334, 123 S.Ct. 1471, the

New Jersey collateral source statute presents the inverse

proposition — it is a law specifically directed towards the

insurance industry that has some bearing on non-insurers.

As such, it “homes [sic] in on the insurance industry and

does ‘not just have an impact on [that] industry.” Ward,

526 U.S. at 368, 119 S.Ct. 1380 (quoting Pilot Life, 481

U.S. at 50, 107 S.Ct. 1549). Because the New Jersey

statute had its genesis in specific legislative action, as

opposed to general principles of tort or contract law, the

majority opinion’s reliance on Pilot Life is entirely mis-

placed.

For these reasons, I believe that this case more closely

resembles FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct.

App. 28

403, 112 L.Ed.2d 356 (1990), where the Supreme Court

dealt precisely with the question of whether a state anti-

subrogation law" was saved from preemption under

§ 514(bX 2X A). There, the Court held that:

There is no dispute that the Pennsylvania [anti-

subrogation] law falls within ERISA’s insurance

saving clause ... [The antisubrogation law] di-

rectly controls the terms of insurance contracts

by invalidating any subrogation provisions that

they contain. It does not merely have an impact

on the insurance industry; it is aimed at it. This

returns the matter of subrogation to state law.

Unless the statute is excluded from the reach of

the saving clause by virtue of the deemer clause,

therefore, it is not pre-empted.

498 U.S. at 60-61, 111 S.Ct. 403 (citations omitted).

Likewise, the Sixth and Fourth Circuits reached the

same conclusion in considering whether similar state

antisubrogation laws regulated insurance. See Singh, 335

F.3d at 286 (holding that subrogation prohibition of the

Maryland HMO Act is a siate-law regulation of insurance);

deSoto, 245 F.3d at 573 (holding that California’s antisub-

rogation statute regulated insurance); see also Hampton

Indus., Inc. v. Sparrow, 981 F.2d 726, 729-30 (4th

Cir.1992) (noting that “limits on subrogation recoveries

* The relevant statute — Section 1720 of the Pennsylvania Motor

Vehicle Financia) Responsibility Law — “prohibits insurance providers

from obtaining reimbursement payments from recoveries an insured

receives from third parties in a motor vehicle accident.” Bill Gray

Enters., Inc. Employee Health & Welfore Plan v. Gourley, 248 F.3d 206,

213 n. 4 (3d Cir.2001).

App. 29

appear to be aimed at the insurance industry, and there-

fore would also appear to come within the scope of the

saving clause”).

Contrary to the majority, I conclude that our under-

standing of the New Jersey collateral] source statute must

be informed by the New Jersey Supreme Court's interpre-

tation. In the interpretive light cast by the Supreme Court

in Perreira, the New Jersey collateral source statute is, in

all essential respects, similar to those statutes already

held to regulate insurance by the United States Supreme

Court (FMC Corp.) and our two sister courts of appeals

(Singh and de Soto ).

Accordingly, I conclude that the New Jersey collateral

source statute is saved from ERISA preemption.”

* Because I would hold that the New Jersey collateral source

statute is saved from ERISA preemption, I would be obliged to reach

the third certified question for interlocutory appeal. That question

concerns whether Perreira, which held that the statutory collateral

source rule prohibits health insurers from filing reimbursement or

subrogation liens against individual settlements or recoveries from

third-party tortfeasors, applies retroactively to the health insurance

plans at issue in this appeal.

This is a difficult issue, and more than that, the resolution of it

could be outcome determinative in this appeal. As a result, I believe

that the proper course for this Court to take would be to certify the

issue of retroactivity to the New Jersey Supreme Court. Under New

Jersey Court Rule 2:12A-1., the New Jersey Supreme Court may

answer such a question if “there is no controlling appellate decision,

constitutional provision or statute in this State.” N.J. Ct. R. 2:12A-1.

The use of certification “rests in the sound discretion of the federal

courts.” Lehman Bros. v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 40

L.Ed.2d 215 (1974). Such discretion, in my judgment, would be war-

ranted here.

App. 30

Because I would affirm the District Court’s holding

that § 514 of ERISA does not preempt N.J.S.A. 2A:15-97, I

respectfully dissent from Part IV of the majority opinion,

and from Part V of the majority opinion, which directs the

District Court to dismiss the Insureds’ claims.

App. 31

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 04-1224 and 04-1225

JEAN LEVINE, On behalf of herself

and all others similarly situated

UNITED HEALTHCARE CORPORATION

(DC NJ 01-cv-04964)

NOREEN BOGURSKI

HORIZON BLUE CROSS

BLUE SHIELD OF NEW JERSEY

(DC NJ 01-cv-05339)

BENJAMIN EDMONSON, On behalf of

Himself and All Others Similarly Situated

Vv.

HORIZON HEALTHCARE SERVICES, INC.,

dba Horizon Blue Cross Blue Shield of New Jersey

(DC NJ 01-cv-0582)

United Healthcare Corporation

Horizon Blue Cross Blue Shield

of New Jersey,

Appellants at No. 04-1224

App. 32

JEAN LEVINE, On behalf of herself

and all others similarly situated

UNITED HEALTHCARE CORPORATION

(DC NJ 01-cv-04964)

NOREEN BOGURSKI

HORIZON BLUE CROSS

BLUE SHIELD OF NEW JERSEY

(DC Nd 01-cv-05339)

Jean Levine, Noreen Bogurski

*Benjamin Edmonson,

Appellants at No. 04-1225

*(Dismissed pursuant to

Court's order of 11/17/04)

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Nos. 01-cv-04964, 01-cv-05339, 01-cv-05812)

District Judge: Honorable Jerome B. Simandle

Argued December 15, 2004

BEFORE: NYGAARD and GARTH, Circuit Judges

and POLLAK*

* Honorable Louis H. Pollak, District Judge for the United States

District Court for the Eastern District of Pennsylvania, sitting by

designation

App. 33

JUDGMENT

This cause came on toe be considered on the record

from the United States District Court for the District of

New Jersey and was argued on December 15, 2004.

On consideration whereof, it is now hereby AD-

JUDGED and ORDERED that the judgment of the Dis-

trict Court entered May 28, 2002 is AFFIRMED. The

judgment of the District Court entered March 4, 2003 is

REVERSED AND REMANDED with instructions to the

District Court to dismiss the matter.

Each party to bear their own costs.

All of the above in accordance with the opinion of this

Court.

Attest:

/s/ Kathleen Brower

Chief Deputy Clerk

DATED: March 16, 2005

App. 34

285 F.Supp.2d 552

United States District Court, D. New Jersey.

Jean LEVINE, Plaintiff,

UNITED HEALTHCARE CORP, Defendant.

Noreen Bogurski, Plaintiff,

Horizon Blue Cross Blue Shield of New Jersey,

Defendant.

Benjamin Edmonson, Plaintiff,

Horizon Blue Cross Blue Shield of New Jersey,

Defendant.

Nos. Civ.A. 01-4964(JBS), Civ.A. 01-5339(JBS),

Civ.A. 01-5812(JBS).

Oct. 6, 2003.

Frank P. Solomon, Weitz & Luxenberg, P.C., Cherry

Hill, Nu, and Donna Siegel Moffa, Lisa Rodriguez, Trujillo,

Rodriguez & Richards, LLC, Haddonfield, NJ, and Natalie

Finkelman Bennett, James C. Shah, Shepherd, Finkel-

man, Miller & Shah, LLC, Turnersville, NJ, Attorneys for

Plaintiffs Levine, Bogurski, and Edmonson.

Edward A. Scallet, William F. Hanrahan, Jason H.

Ehrenberg, Groom Law Group, Chartered, Washington,

DC, and Theodore D. Aden, Leboeuf, Lamb, Greene &

Macrae, LLP, Newark, NJ, Attorneys for Defendant United

Healthcare Corporation.

Edward S. Wardell, Kelley, Wardell & Craig, LLP,

Haddonfield, NJ, Attorney for Defendant Horizon Health-

care Services, Inc. d/b/a Horizon Blue Cross and Blue

Shield of New Jersey.

App. 35

OPINION

SIMANDLE, District Judge.

The present consolidated cases are before the Court on

the motions of the parties for this Court to certify three

issues for interlocutory appeal to the United States Court

of Appeals for the Third Circuit pursuant to 28 U.S.C.

§ 1292(b). Defendants seek to appeal the Court's determi-

nation regarding two issues in the March 4, 2003 motion

to dismiss decision, see Carducci v. Aetna U.S. Healthcare,

247 F.Supp.2d 596 (D.N.J.2003), and the plaintiffs seek to

appeal the Court’s determination regarding one issue in

the May 28, 2002 motion to remand decision, see Carducci

v. Aetna U.S. Healthcare, 204 F Supp.2d 796 (D.N.J.2002)."

Defendants wish to appeal the Court’s finding that (1)

the antisubrogation rule included in New Jersey's collat-

eral source statute, as interpreted by the New Jersey

Supreme Court in Perreira v. Rediger, 169 NJ. 399, 778

A.2d 429 (2001), applies to defendant health insurers

because it is not conflict preempted under ERISA section

514(a) because it is “saved” as a state law that regulates

insurance, and (2) that the Perreira decision applies

* The pertinent previous opinions bear the name of the previous

lead case, Carducri vu. Aetna U.S. Healthcare, Civ. No. 01-4675(JBS).

The Carducci case was closed on April 17, 2003 after this Court

approved a Rule 68, Fed R.Civ.P., Offer of Judgment which was

accepted by the named plaintiffs in the Carducci case Levine v. United

Healthcare Corp., Civ. No. 01-4964(JBS8), is now the lead case in this

matter

> The Court considered three ERISA clauses to determine that the

Perreira antusubrogation rule was not conflict preempted under section

514(a). Defendants only seek appeal on the savings clause issue,

namely that the savings clause of section 514(bX2XA), which “saves”

‘Conunved on following page)

App. 36

retroactively to plaintiffs’ pre-Perreira health insurance

plans. Plaintiffs seek to appeal the Court's finding that

due” within the meaning of ERISA section 502(a), and

therefore were properly removed to federal court.

The Court has considered the motions and has de-

cided, for the reasons explained herein, to certify these

three issues for interlocutory appeal. The Court will stay

further proceedings before this Court pending resolution of

this matter with the United States Court of Appeals for

the Third Circuit.

Il. BACKGROUND

The plaintiffs and defendants in these consolidated

Employee Retirement Income Security Act of 1974 (“ER-

ISA”) cases seek leave to file an interlocutory appeal of

three issues determined by this Court in two prior deci-

sions, namely the motion to remand decision dated May

28, 2002, and the motion to dismiss decision dated March

4, 2003." The contested issues involve complicated issues

state laws from preemption if they govern insurance, saves the New

Jersey antisubrogation rule.

Defendants do not request certification of the Court's finding that the

antisubrogation rule relates to employee benefit plans under ERISA

section 514(a), or that the antisubrogation rule applies here 11. spite of

the “deemer clause” of ERISA section 514(bX 2B), which removes self-

funded employee benefit plans from the application of state laws that

regulate insurance.

* The procedural history of the cases is lengthy and need not be

recounted in full in this background section, except as it relates to the

present motions. The Court wil] summarize the disposition of the

various cases here, though, which reduced the cases involved in the

present motions to three, namely Levine v. United Healthcare Corp.,

(Continued on following page)

App. 37

Civ. No. 01-4964(JBS), Borgurski v. Horizon Blue Cross Blue Shield of

New Jersey, Civ. No. 01-533&%JBS), and Edmonson v. Horizon Blue

Cross Blue Shield of New Jersey, Civ. No. 01-5812(JBS).

On January 25, 2002, the Court consolidated Levine, Bogurshi, and

Edmonson with Carducci, et al. v. Aetna U.S. Healthcare, No. 01-

4675\JBS), West v. Health Net of the Northeast, Civ. No. 01-5217(JBS);

and Collins v. Oxford Health Plans, Civ. No. 01-5237(JBS). The

plaintiffs in the consolidated cases submitted a motion to remand to

state court, which was denied on May 28, 2002. See Carducci v. Aetna

U.S. Healthcare, 204 F Supp.2d 796 (D.N.J.2002).

The defendants in the consolidated cases then filed a motion to

dismiss, and the parties in two additional cases joined the motion. See

Bibbs v. AmeriHealth, Inc., Civ. No. 02-1155(JBS); Barbour v. Cigna

Corp., Civ. No. 02-417(JBS). The motion to dismiss was denied on

March 4, 2003. See Carducci v. Aetna U.S. Healthcare, 247 F Supp.2d

596 (D.N.J.2003).

Two other motions were also decided on March 4, 2003. The first

was defendant Amernhealth’s motion for summary judgment in Bibbs,

asserting that there was no case or controversy because Amerihealth

had never asserted a subrogation lien against the named plaintiff and

had withdrawn its liens after Perreira. The Court granted the motion

for summary judgment on March 4, 2003, and closed the Bibbs case.

The second motion was Cigna Corp.'s motion to dismiss and compel

artitration in Barbour The Court agreed that arbitration was required

pursuant to the arbitration clause in the insurance agreement, granted

the motion to dismiss and to compel arbitration on March 4, 2003, and

closed the case

While the motions to dismiss were pending, on August 29, 2002,

defendant Aetna made an offer of judgment to the named plaintiffs in

Carduce: for the maximum monetary relief that plaintiffs could obtain

for their individua! claims if they won on the merits. Plaintiffs accepted

the offers on August 30, 2002, and on April 16, 2003, the Court ap-

proved the judgments pursuant to Rule 23(e), Fed. R.Civ.P., and closed

the case

After defendants in the remaining cases had filed the present

motion for certification of an interlocutory appeal, and the plaintiffs

had filed their cross-motion, defendants Health Net and Oxford Health

in West and Collins sought leave to file motions for summary judgment

before this Court's decision on the present motions to assert thet their

plaintiffs’ cases had become moot because they had withdrawn their

lens and had never asserted them against the named plaintiffs. All

(Continued on following page)

App. 38

regarding ERISA, a 2001 New Jersey Supreme Court case

Perreira v. Rediger, 169 N.J. 399, 778 A.2d 429 (2001), and

New Jersey's law of retroactivity.

The New Jersey Supreme Court, in Perreira uv.

Rediger held that New Jersey's collateral source statute,

N.J.S.A. 2A:15-97,° includes an antisubrogation rule

which prevents health insurers who have expended funds

on behalf of their insureds from recouping the funds

through a subrogation or reimbursement liens in the

event that an insured recovers from a third-party tortfea-

sor. The plaintiffs, who were insureds under employee

benefit health plans, assert that their plans paid health

benefits for their personal injuries and then placed

parties agreed to the adjournment of the present motions, and on May

14, 2003, Health Net and Oxford Health filed their motions for sum-

mary judgment. Plaintiffs then requested additional time for discovery,

which was granted. After receiving supplemental submissions from the

parties, the Court granted summary judgment in favor of Health Net

and Oxford Health on August 7, 2003 and closed the West and Collins

cases. See West v. Health Net of the Northeast, 217 F.R.D. 163 (2003).

Remaining before the Court for the present motions, therefore, are

solely the Levine, Borgurski, and Edmonson cases.

* NJ.S.A. 2A:15-97 provides, in pertinent part:

In any civil action brought for personal injury or death, except ac-

tions brought pursuant to ... 39:6A-1 et seq., if a plaintiff re-

ceives or is entitled to receive benefits for the injuries allegedly

incurred from any other source other than a joint tortfeasor, the

benefits, other than workers’ compensation benefits or the pro-

ceeds from a life insurance policy, shall be disclosed to the court

and the amount thereof which duplicates any benefit contained in

the award shal] be deducted from any award recovered by the

plaintiff, less any premium paid to an insurer directly by the

plaintiff or by any member of the plaintiff's family on behalf of the

plaintiff for the policy period during which the benefits are pay-

able. Any party to the action shall be permitted to introduce evi-

dence regarding any of the matters described in this act.

App. 39

subrogation or reimbursement liens on their tort recover-

ies should they recover from a third party tortfeasor. The

plaintiffs alleged that the defendant health insurers were

unjustly enriched by the liens since the liens are not

permitted by New Jersey's collateral source statute as

interpreted by Perreira.

In early 2002, the Court considered motions to re-

mand which were filed by the plaintiffs. The issue before

the Court was whether the monies that plaintiffs sought —

which were monies that the insurers took pursvant to the

subrogation clauses in the employee benefit healthcare

contracts — were “benefits due” under ERISA section

502(aX 1B). This Court, in an Opinion and Order dated

May 28, 2002, determined that the monies were “benefits

due” under section 502(aX1XB), so that the state law

unjust enrichment claims were completely preempted by

federal law and were properly removed to federal court.

See Carducci, et al. v. Aetna US. Healthcare, 204

F.Supp.2d 796 (D.N.J.2002). Plaintiffs presently seek to

file an interlocutory appeal of the Court’s determination of

this issue."

Following the remand decision, the Court considered

the consolidated defendants’ motion to dismiss, which it

denied on March 4, 2003. Carducci v. Aetna U.S. Health-

care, 247 FSupp.2d 596 (D.N.J.2003). Defendants pres-

ently seek to file an interlocutory appeal of two of the

* Plaintffs previously sought to file an interlocutory appeal! of ths

issue in June 10, 2002. The Court denied their motion without preju-

dice in a July 24, 2002 Opinion and Order because plaintiffs had not

shown a substantial ground for difference of opinion on the issue or that

an interlocutory appeal would materially advance the ultimate termi-

nation of the litigation.

App. 40

Court’s findings. The first is the Court's determination

that plaintiffs’ claims were not conflict preempted by

ERISA section 514(a) because the New Jersey antisubro-

gation rule is saved from ERISA preemption as a state law

regulating insurance. The second is the Court's finding

that the New Jersey Supreme Court's 2001 decision in

Perreira applies retroactively to plaintiffs’ pre-Perreira

insurance policies because it represents the prior law of

New Jersey.

Defendants filed their present motion to certify the

two motion to dismiss issues on March 18, 2003. Plaintiffs

then filed their cross-motion to certify the motion to

remand issue on April 7, 2003. The Court has considered

the submissions of the parties, including their oral argu-

ments on April 24, 2003, and finds, for the following

reasons, that the three issues should be certified for

interlocutory appeal.

Il. DISCUSSION

The district court has discretion, pursuant to 28

U.S.C. § 1292(b), to certify issues for interlocutory appeal

to the United States Court of Appeals, provided that

“exceptional circumstances” jstify the departure from the

general rule that appellate review is only available after

a final order. 28 U.S.C. § 1292(b);* (see also Coopers &

* 28 U.S.C. § 1292(b) provides, in part:

When a district judge, in making in a civil action an order not

otherwise appealable under this section, shall be of the opinion

that such order involves a controlling question of law as to which

there is a substantial ground for difference of opinion and that an

immediate appeal from the order may meterially advance the ul-

timate termination of the litigation, he shall so state in writing in

(Continued on following page)

App. 41

Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457,

57 L.Ed.2d 351 (1978); Hulmes v. Honda Motor Co., Ltd.,

936 F.Supp. 195, 208 (D.N.J.1996), aff’d, 141 F.3d 1154

(3d Cir.1998)); Carducci v. Aetna U.S. Healthcare, 2002

WL 31262100 (D.N.J. Jul.24, 2002). To show that “excep-

tional circumstances” justify certification, the moving

party bears the burden of showing (1) that the order at

issue involves a controlling issue of law, which if errone-

ously decided, would result in reversible error on final

appeal, (2) that there is substantial ground for difference

of opinion about the resolution of the issue, and (3) that an

immediate appeal will materially advance the ultimate

termination of litigation. See Katz v. Carte Blanche Corp.,

496 F.2d 747, 754-55 (3d Cir.1974); Waldorf v. Borough of

Kenilworth, 959 F.Supp. 675, 679 (D.N.J.1997).

A. Defendants’ Motion to Certify Two Issues in the

March 4, 2003 Motion to Dismiss Decision

Defendants seek certification to appeal this Court’s

decision regarding two legal issues in the March 4, 2003

Opinion and Order, namely: (1) that the antisubrogation

rule contained in New Jersey’s collateral source statute, as

interpreted by the New Jersey Supreme Court in Perreira

v. Rediger, 169 N.J. 399, 778 A.2d 429 (2001), applies to

defendant health insurers because it is “saved” from

conflict preemption under ERISA section 514(a) as a state

such order. The Court of Appeals which would have jurisdiction of

an appeal of such action may thereupon, in its discretion, permit

an appeal to be taken from such order, if application is made to it

within ten days after the entry of the order: Provided, however,

That application for an appeal hereunder shall not stay proceed-

ings in the district court unless the district judge or the Court of

Appeals or a judge thereof shall so order.

App. 42

law that regulates insurance, and (2) that the Perreira

decision applies retroactively to the pre-Perreira health

insurance policies at issue in this case.

It is clear that these two issues are controlling issues

in this matter and that certification of their appeal now

could materially advance the termination of this litigation

because an incorrect decision on either issue would result

in reversible error on appeal. If, contrary to this Court's

decision, the antisubrogation rule of N.J.S.A. 2A:15-97 is

preempted by ERISA section 514(a), then the New Jersey

antisubrogation rule would not apply to the defendant

health insurers’ ERISA plans and plaintiffs would be

unable to assert rights arising under New Jersey law.

Likewise, if the 2001 Perreira decision were to apply

prospectively only, contrary to this Court's decision, then

the plaintiffs could not obtain the protection of the

Perreira antisubrogation rule because it would not apply

to plaintiffs’ pre-Perreira health insurance plans.

As a result, the main issue on this motion is whether

defendants have shown that there are substantial grounds

for difference of opinion regarding the Court's decision on

these issues. The Court finds that there are, so that all

three section 1292(b) requirements for interlocutory

certification have been met and this Court will certify

these issues for appeal.

1. Savings clause issue

There is a substantial ground for a difference of

opinion on this Court’s ERISA’s insurance savings clause

ruling, which is based on, what the United States Su-

preme Court has described as, “statutorily complex [/"

App. 43

preemption provisions. See Pilot Life Ins. Co. v. Dedeaux,

481 US. 41, 47, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987).

This Court, in its March 4, 2003 Opinion, explained

then-existing law which was pertinent to the determina-

tion about whether a law “regulates insurance” under

ERISA’s savings clause. 29 U.S.C. § 1144(bX2XA);’ Car-

ducci, 247 FSupp.2d at 614-17. The law has since

changed. At the time of this Court’s March 4, 2003 deci-

sion, the Supreme Court required an inquiry which

“start(ed] with a common-sense view of the matter under

which a law must not just have an impact on the insur-

ance industry, but must be specifically directed toward

that industry,” focusing on the “primary elements of an

insurance contract(|, which] are the spreading and un-

derwriting of a policyholder’s risk.” Rush Prudential

HMO, Inc. v. Moran, 536 U.S. 355, 365-66, 122 S.Ct.

2151, 153 L_Ed.2d 375 (2002) (quoting Metropolitan Life

Ins. Co., 471 U.S. at 740, 195 S.Ct. 2380; Pilot Life Ins.

Co. v. Dedeaux, 481 US. 41, 50, 107 S.Ct. 1549, 95

L.Ed.2d 39 (1987)). Then the court was to “test the

results of the common-sense inquiry” by considering the

" The savings clause “saves” state laws regulating insurance from

the effect of the express preemption clause which broadly preempts

state regulations of employee benefit plans, meaning that employee

benefit plans may be subject to the particular state law. See 29 U.S.C.

§ 1144(a). The savings clause, states:

Except as provided in subparagraph (B) [the deemer clause],

nothing in this subchapter shall be construed to exempt or relieve

any person from any law of any State which regulates insurance,

banking or secunties.

29 USC. §1144(DK2KA) The deemer clause, ERISA section

514bX 2B), then removes self-funded employee benefit plans from the

application of state lawe that regulate insurance. 29 U.S.C.

§ 1144(bX 2B).

App. 44

three McCarran-Ferguson Act’ factors which determine

whether a law is an insurance law, namely whether the

law targets practices that (1) have the “effect of transfer-

ring or spreading a policyholder’s risk,” (2) are an “integral

part of the policy relationship between the insurer and the

insured,” and (3) are “limited to entities within the insur-

ance industry.” Rush Prudential, 122 S.Ct. at 2163, 122

S.Ct. 2151 (quoting Union Labor Life Ins. Co. v. Pireno,

458 U.S. 119, 129, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982)).

Since this Court’s March 4th decision, the Supreme

Court on April 2, 2003, issued its decision in Kentucky

Association of Health Plans, Inc. v. Miller, 538 U.S. 229,

123 S.Ct. 1471, 155 L.Ed.2d 468 (2003). There, the Court

decided to make a “clean break from the McCarran-

Ferguson factors” because “our use of the McCarran-

Ferguson case law in the ERISA context has misdirected

attention, failed to provide clear guidance to lower federal

courts, and . . . added little to the relevant analysis.” Jd. at

1478-79. As a result, the Court enunciated two require-

ments needed “for a state law to be deemed a ‘law ...

which regulates insurance’ under section 1144(bX2)(A).”

Id. at 1479. First, the “state law must be specifically

directed toward entities engaged in insurance.” Jd. Second,

the “state law must substantially affect the risk pooling

arrangement between the insurer and the insured.” /d.

* The McCarran-Ferguson Act requires that the business of

insurance be subject to state regulation, and, subject to few exceptions,

provides requires that “[njo Act of Congress shall be construed to

invalidate any law enacted by any State for the purpose of regulat-

ing the business of insurance ... " Moran, 122 S.Ct. at 2159 n. 4

(quoting 15 U.S.C. § 1012(b))

App. 45

This Court’s decision is supportable under both the

law as it existed on March 4, 2003, and the law as it exists

after the Miller decision. First, under the law of Rush

Prudential and Pilot Life, the antisubrogation rule con-

tained in the New Jersey collateral source statute is a

state law directed toward the insurance industry because,

according to the Perreira court, it was enacted to contain

“spiraling insurance costs.” The McCarran-Ferguson

factors also support its status as a state insurance law

because the antisubrogation rule (1) spreads a policy-

holder’s risk by ensuring that health insurers will pay for

medical costs arising from an insured’s tort damages, (2) is

an integral part of the policy relationship between the

insurer and the insured because it “requires plan provid-

ers to calculate benefit levels and premium amounts with

the knowledge that they will be unable to recover monies

expended for injuries caused to their insured by a third

person,” and (3) only affects entities within the insurance

industry because the New Jersey Supreme Court found

that it targets the insurance industry and only applies to

the insurance industry. Carducci, 247 F.Supp.2d at 616-17.

Second, under the law of Miller, the antisubrogation rule is

a law regulating insurance because it (1) is specifically

dirented toward entities engaged in insurance as it en-

sures that the health insurers, and not the liability insur-

ers, pay for tort injuries, and (2) substantially affects the

risk pooling arrangement between the insurer and the

insured because the Court has held that a rule which

“governs whether or not an insurance company must cover

[certain] claims . . . dictates to the insurance company the

conditions under which it must pay for the risk it has

App. 46

assumed [and] certainly qualifies as a substantial effect on

the risk pooling arrangement between the insurer and

insured.” See Miller, 123 S.Ct. at 1478 n. 3.”

Even though the Court's decision is supportable, the

Court recognizes that the issues involved in this case are

complex and subject to debate. Defendants assert that this

Court erred by isolating the antisubrogation provision

from the rest of the collateral source statute. According to

their argument, if the “state law” at issue here were the

collateral source statute in its entirety, instead of just the

antisubrogation provision within it, this Court would have

erred under either savings clause analysis. Under the law

of Rush Prudential and Pilot Life, the collateral source

statute would not be considered an insurance law because

it is not specifically directed toward the insurance indus-

try since it “applies in every case in which a plaintiff

might obtain a double recovery, even when the rule has no

impact whatsoever on the insurance industry,” and be-

cause, under the McCarran-Ferguson factors, it (1) may

not spread a policyholder's risk because health insurers

accept the risk that an insured will be injured when they

arrangement between insurer and insured.” 123 S.Ct. at 1477. Thus, it

found that a notice-prejudice rule, which governs whether an insurance

company must cover late claims, had an effect on the risk pooling

arrangement. Jd. at 1478.

App. 47

contract with the insured, regardless of the collateral

source statute,” (2) it may not be an integral part of the

policy relationship between the insurer and the insured if

” Defendants argue that the collateral source statute does not

spread risk because the insurance company contracted to reimburse the

insured for al] medical expenses and will continue to do so regardless of

the effect of the collateral source statute. Their argument ignores

though, that, “when looking to see if a particular practice statute acts to

spread the risk,” the court should “focus upon the actual risks that were

transferred from the insured to the insurer and determine if the

practice statute acts to alter the contractual apportionment of those

risks.” Tingle v. Pac. Mut. ins. Co., 996 F.2d 105, 108 n. 13 (5th

Cir.1993). Here, the parties contracted for the health insurer to

reimburse the insured for all medical expenses subject to the health

insurer's right to recover for the payments from the insured’s tort

settlement. The antisubrogation rule alters that contractual arrange-

ment; now the insurer must reimburse the insured for al] medical

expenses, retaining no right to recover.

Moreover, defendants have supported this arguments [sic] with

citations to Tingle, 996 F.2d at 198 and Smith v. Jefferson Pilot Life Ins.

Co., 14 F.3d 562, 569 (1ith Cir.1994), cases which involved insurance

practice statutes, rather than mandated benefits statutes. Mandated

benefits statutes “force incurers to provide coverage to all policyholders

for medical expenses stemming from illnesses the insured contracted

(such as cancer) ... while under coverage of an insurance policy,” and

thus spread the risk of that certain illness to all policyholders in the

state. Tingle, 996 F.2d at 108-09. “Nearly every court that has ad-

dressed the question” has found that “mandated benefits” statutes

regulate insurance and are within the scope of the insurance

clause. Metro. Life Ins. Co. v. Mass. Travelers Ins. Co., 471 U.S. 724,

729, 742 n. 18, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). Insurance

practice statutes, on the other hand, require insurers to follow proper

imsurance procedures, and thus do not “affect the apportionment of

risks” because they do not change the originally contracted-for medical

coverage. Smith, 14 F.3d at 570.

Here, the statute can be classified as a mandated benefit statute,

which would be considered one that spreads risk, because it forces

health insurers to provide coverage for medical expenses stemming

from tortuous conduct. Pursuant to the law, policyholders statewide

health insurance premi'ims.

App. 48

its only impact is on health insurance premiums,” and (3)

it affects entities beyond the insurance industry because it

applies in “all civil actions” to benefits from “any other

source.”” Under the law of Miller, defendants’ arguments

are basically the same, namely that the collateral source

rule (1) is not specifically directed toward entities engaged

in insurance because, by its express terms, it applies in

“all civil actions” to amounts obtained from “any other

source,” and (2) does not substantially affect the risk

pooling arrangement between the insurer and the insured

because the insurer is required to provide benefits in the

first instance regardless of the rule.

The Court can distinguish defendants’ arguments and

still concludes that its decision bears the correct analysis

" Defendants argue that this Court’s decision would lead to the

conclusion that state laws that impose “stiffer licensing requirements

for health care providers, sales taxes on prescription drugs, ... or

prohibit [ ] assisted suicide,” would be considered insurance laws simply

because they may raise insurance premiums. (Defs.’ Br. at 21.) The

Supreme Court, though, has held that a law which “limit/s) the type of

insurance that an insurer may sell to the policyholder” regulates “an

integral part of the relationship between the insurer and the policy-

holder.” Metropolitan Life, 471 U.S. at 743, 106 S.Ct. 2380. If a rule

“effectively creates a mandatory contract term,” then it “dictates the

terms of the relationship between the insurer and the insured, and

consequently, is integra] to that relationship.” Cisneros, 134 F.3d at

946. Here, the law dictates the clauses that a health insurer may insert

in its insurance contracts, and thus is integral to their policy relation-

ship, and defendants’ examples are inapposite because they reiate to

health care rather than to the balance between premiums and benefits.

* Defendants’ argument for this prong focuses on whether the

appropriate law to consider is the collateral source statute in its

entirety, which is not limited to entities within the insurance industry,

or is the antisubrogation law within the collateral source statute, which

is limited to entities within the insurance industry. This Court has

previously detailed its reasons for considering the antisubrogation law

separately. \

App. 49

and result. See notes 10, 11, 12, supra. However, the issue

on this motion is whether there is substantial ground for

debate on this issue and this Court finds that the question

involved here is admittedly complicated and sufficiently

close that reasonable minds could disagree with this

Court’s conclusion. Therefore, this Court finds that it is

appropriate to certify this issue for an interlocutory appeal

to the Third Circuit at this point in the litigation.

2. Issue regarding retroactivity

The Court also finds that there is a substantial

ground for disagreement about this Court’s March 4, 2003

finding that the 2001 Perreira v. Rediger decision applies

retroactively to govern the terms of the pre-Perreira

insurance policies at issue here.

The Court, in its March 4th Opinion, explained New

Jersey's law regarding the retrospective application of

judicial decisions. See Carducci, 247 F.Supp.2d at 617-19.

In New Jersey, judicial decisions apply retrospectively

unless the decision establishes a new rule of law that is a

“sudden and generally unanticipated repudiation of a long-

standing practice” and (1) the parties and the community

justifiably relied on the prior rule, (2) the purpose of the

new rule will not be advanced by retroactive application,

and (3) retroactive application of the rule may have an

adverse effect on the administration of justice. Reuter v.

Borough Council of the Borough of Fort Lee, 167 N.J. 38,

42, 768 A.2d 769 (2001); State v. Afanador, 151 N.J. 41, 58,

697 A.2d 529 (1997); Coons v. Am. Honda Motor Co., 96

N.J. 419, 426, 476 A.2d 763 (1984).

The Court found that the antisubrogation rule, as

interpreted by the Perreira court, should be applied

App. 50

retrospectively because the Perreira court found that the

law of New Jersey regarding subrogation has always been

reflected by the antisubrogation rule, and not by the

contradictory insurance regulation considered in the

opinion.” Thus, this Court found that the antisubrogation

" The New Jersey Supreme Court issued a lengthy opinion that

traced the history of the collateral source rule in New Jersey and

detailed its effect on the insurance industry. Perreira v. Rediger, 169

N.J. 399, 778 A.2d 429 (2001). The court explained that the common

law collateral source rule, cited in decisions as early as 1854, allowed

an injured party to recover from his tortfeasor the total amount of his

damages, even if he had already recovercd health insurance proceeds.

Id. at 406, 778 A.2d 429. The theory was that a tortfeasor should not

enjoy any benefit for his wrong. Jd. Under the common law, though, the

health insurance company did not nave an equitable right to recover

the amounts that it paid and the injured party could recover for his

injuries twice — once from his health insurance company and once from

the tortfeasor. Jd. at 406-07, 412, 778 A.2d 429.

In the mid-1980s, states began to statutorily revise the common

law collateral] source rule to combat rising irsurance costs (since both

health insurers and liability insurers were paying for the same injuries)

and to eliminate double recovery to injured parties. Jd. at 407, 778 A.2d

429. Some states provided that the tortfeasor could reduce his payment

by amounts paid by the injured party's health insurer unless the health

insurer had a contractual right to subrogation or reimbursement. Jd. at

408, 778 A.2d 429. Others provided that juries could consider and

deduct moneys expended by health insurance from their tort judgment

award. /d. Others required that tortfeasors pay the total judgment and

gave health insurers the right of subrogation to recover any amounts

they paid. Jd. New Jersey provided still another option; with its

enactment of N.J.S.A. 2A:15-97 in 1987, New Jersey made the “legisla-

tive determination” that the tortfeasor can reduce his payment by

amounts received from collatera] sources, including amounts received

from the injured party’s health insurance. Jd. at 411, 778 A2d 429.

“By that action, the Legislature eliminated double recovery to plaintiffs,

reduced the burden on the tortfeasors’ liability carriers and left health

insurers in the same position as they were prior te the enactment of

N.J.S.A. 2A:15-97.” Jd. In other words, under the common law, the health

insurers paid for the medical expenses of their insureds and were not

able to recoup the payments via subrogation or reimbursement;

(Continued on following page)

App. 51

rule was not a sudden departure from the long-standing

law of New Jursey because the New Jersey Supreme Court

had found that the antisubrogation rule was the long-

standing law of New Jersey. See Carducci, 247 F.Supp.2d

at 618.

Defendants have now presented additional arguments

to support their argument that Perreira should not be

applied retrospectively, arguing first that it is a sudden

departure from existing jaw, and second that the other

three requirements for prospective application have been

met. While the Court’s decision is still supportable in spite

of the new arguments, the Court recognizes that they do

likewise, under N.J.S.A. 2A:15-97, the health insurers were in the same

position - they must pay the medical expenses and cannot recoup their

payments. Jd. Health insurance companies could not ~“rcome this

antisubrogation rule by including a contractual provision in their

policies. Jd. at 415, 778 A.2d 429.

Then, in 1993, the Department of Insurance mistakenly “allowed

the inclusion of subrogation and reimbursement provisions in health

insurance policies provided through the Small Employer Health

Benefits Program and the Individual Health Coverage Program.

N.J.A.C. 11:20[and) later, the Commissioner promulgated regulations

that for the first time permitted such provisions in large group health

insurance policies.” See id.; N.J.A.C. 11:4-42:10.

In Perreira, the New Jersey Supreme Court considered this

insurance regulation and found tiat it was inconsistent with the New

Jersey collateral source statute, and unenforceable. Id. at 416, 778 A.2d

429. The health insurer involved in Perreira had relied on the insurance

regulation, but the New Jersey Supreme Court reinstated judgments

against it which barred the insurer from asserting its subrogation liens.

Id. at 404, 418, 778 A.2d 429.

Based on this history, and on the fact that the Perreira court

applied its own decision retrospectively, this Court decided that the

Perreira rule was not a “sudden departure” from the long-standing law

of New Jersey. —

App. 52

raise substantial questions that should be determined by

an interlocutory appeal at this time.

Defendants first argue that the Perreira decision

should be considered a sudden departure from existing law

because this Court “overlooked a well-settled element of

New Jersey's doc rine on the retroactive application of

judicial decisions” which allows for prospective application

when “a court renders a first-instance or clarifying deci-

sion in a murky or uncertain area of the law, or when a

member of the public could reasonably have relied on a

different conception of the state of the law.” SASCO uv.

Zudkewich, 166 N J. 579, 594, 767 A.2d 469 (2001) (quot-

ing Montells v. Haynes, 133 N.J. 282, 298, 627 A.2d 654

(1993)); see also Reuter v. Borough Council of Borough of

Fort Lee, 167 N.J. 38, 768 A.2d 769 (2001).”

“ In Reuter, the New Jersey Supreme Court applied their new

interpretation of a statute prospectively because many had relied on a

different interpretation. The statute in Reuter stated, in part, that

“(t)he governing body of any municipality, by ordinance, may create and

establish ... a police force.” 167 N.J. at 40, 768 A.2d 769 (quoting

N.J.S.A. 40A:14-118). The municipality had then enacted an ordinance

providing that police force positions could be established by resolution.

Reuter, 167 NJ. at 40, 768 A.2d 769. When competitors contested the

appointment of a deputy chief because his position was created by

resolution, and not by ordinance, the New Jersey Supreme Court found

that the statute required that police positions be created by ordinance.

Id. The court further found, though, that there had been a “long-term

interpretation of the law to the effect that an ordinance was not

required to create new police positions” by other municipalities in New

Jersey and by the Attorney General of New Jersey, and that “there has

been reliance on the notion that police positions can be established by

resolution,” provided the resolution process was established by ordi-

nance. Id. at 42-43, 768 A.2d 769. For that reason, the New Jersey

Supreme Court allowed the municipality's deputy chief to remain in

office, but held that “from today forward no appointment may be made

(Continued on following page)

App. 53

There are substantial questions about the retrospec-

tive application of the Perreira decision because it, like

SASCO, overturned a regulation that defendants relied on

and considered common practice in their industry. See

N.J.A.C. 11:4-42.10. In SASCO, though, unlike here, the

New Jersey Supreme Court applied its decision in a

“purely prospective” manner so that it would not affect the

parties before it who had relied on industry practice.

SASCO, 166 NJ. at 594, 767 A.2d 469. In Perreira, the

Supreme Court of New Jersey recognized that the defen-

dant insurers had relied on the erroneous insurance

regulation and still applied its decision retrospectively to

the insurers before it.”

Defendants argue, though, that this Court should not

consider the fact that the Perreira court applied its deci-

sion retrospectively to the parties before it because New

Jersey courts can follow one of four options when deter-

mining questions of retrospectivity, namely:

to any police department position not created” by ordinance. Jd. at 43,

768 A.2d 769.

Defendants do not explain, though, why Reuter should apply to this

case when the Reuter court explicitly limited its decision to “today

forward” and the Perreira court applied its decision to the parties before

it. The court was clearly aware of the Reuter decision, which was issued

on March 29, 2001, eee nee epee Oo orae

2001.

Secaucatan den cakes ea? ale-a emdation Ot ot 416, 778

A.2d 429.

App. 54

(1) make the new rule of law purely prospective, ap-

plying it only to cases whose operative facts arise af-

ter the new rule is announced;

(2) apply the new rule to future cases and to the

parties in the case announcing the new rule, while

applying the old rule to all other pending and past

litigation;

(3) grant the new rule limited retroactivity, applying

it to cases in (1) and (2) as well as to pending cases

where the parties have not yet exhausted all avenues

of direct review; and

(4) give the new rule complete retroactive effect, ap-

plying it to all cases, even these where final judg-

ments have been entered and all avenues of direct

review exhausted.

Coons, 96 N.J. at 425, 476 A.2d 763. The approach taken

depends largely on “the court’s view of what is just and

consonant with public policy in the particular situation

presented.” Jd. (quoting State v. Nash, 64 NJ. 464, 469,

317 A.2d 689 (1974)). Here, herefore, the New Jersey

Supreme Court may have intended that option (2) be

followed, in other words, that the Perreira decision be

applied retrospectively to the Perreira parties, but not be

applied to other pending cases.

Although this Court continues to believe that the

Perreira court spoke definitively to apply its antisubroga-

tion decision retrospectively, the Court finds that defen-

dants have shown that its decision regarding the long-

standing law of New Jersey and whether Perreira was a

departure from that law, are close issues that should be

clarified at this point.

App. 55

Defendants also argue that there are substantial

questions about this Court’s findings on the other three

factors required to justify prospective application. For the

first prong, they argue that they justifiably relied on the

prior law of New Jersey when they relied on the insurance

commissioner’s regulation.This raises a question because

the insurance companies had reason to believe that the

insurance regulation was appropriate since administrative

regulations are generally accorded a high degree of defer-

ence, see Perreira, 169 N.J. at 415, 778 A.2d 429.” For the

second prong, defendants argue that the purpose of the

Perreira rule will not be advanced by retroactive applica-

tion because requiring the health insurers to pay plaintiffs

for amounts taken will not “shift the burden of health

costs away from liability insurers and onto health insur-

ers” because the money is being returned to the plaintiffs

and not to the liability insurers.” This argument, though

“ As explained supra, prospective application is only appropriate if

the decision is a sudden departure from long-standing law and (1) the

parties and the community justifiably relied on the price state law, (2)

the purpose of the new law will not be advanced by retroactive applica-

tion, and (2) the retroactive application of the new law may have an

adverse effect on the administraticn of justice. See Reuter, 167 NJ. at

42, 768 A.2d 769; Coons, 96 N.J. at 426, 476 A.2d 763.

" This Court based its holding that they did not rely on the prior

law of the state because the Perreira court found that the regulation did

not reflect the prior law of the state. The prior law, indeed, was the

1987 enactment of N.J.S.A. 2A:15-97, and not the subsequent insurance

regulations in N.J.A.C. 11:4-42:10, supra. Given the antisubrogation

provisions of the statute, any reliance on the contrary regulation is

weak.

“ Defendants did not present this argument in support of their

motion to dismiss. Instead, there they argued that the purpose of the

Perreira rule would be hampered by retroactive application because it

would allow insureds to double recover by allowing them to retain

amounts recovered from liability insurers while receiving amounts from

(Continued on following page)

App. 56

valid, does assume that the liability insurers paid plaintiffs

for the medical expenses that piaintiffs received health

insurance coverage for, and the plaintiffs here have as-

serted that they were injured because they were not com-

pensated for their injuries by either the liability insurer or

the health insurer which, though it originally compensated

them, took the compensation back via the reimbursement

or subrogation lien.” For the third prong, defendants argue

that there are substantial questiors with the Court's

decision because retroactive application of Perreira would

have an adverse effect on the administration of justice

health insurers. The Court found that this argument assumed that the

health insurers took amounts they paid, retroactive application was

the plaintiffs did not receive from the liability imsurers, it would “not

change the equation” because then, the liability insurers must have

thought that the insurance regulation permitting subrogation and

reimbursement was not valid, because they otherwise would have

calculated their settlement offers based on it. (Defs.’ Br. at 29 n. 3.)

Then, if they thought that the regulation was invalid, it “would logically

have had no adverse impact on liability insurance premiums [and]

returning the money now to plaintiffs would do nothing to advance the

statutory purpose.” (/d.) This argument again ignores the effect of the

App. 57

because it will raise a “judicial mare's nest” of factual

issues in every case about whether Perreira applies or

whether the voluntary payment doctrine removes a prior

settlement agreement from its reach.” It is true that the

adminis<ration of justice may become more complicated if

Perreira is applied retrospectively, but it is also clear that

justice may require retrospective application to ensure

that plaintiffs’ medical expenses are compensated.

While the Court has considered defendants’ argu-

ments and has pointed out their weaknesses, the Court

acknowledges that the issues here are complex and subject

to debate, especially because of defendants’ reliance on the

permissive insurance regulation. “Questions of retroactiv-

ity for years have been considered ‘among the most diffi-

cult’ problems that engage the attention of the courts, both

state and federal.” Coons, 96 N.J. at 424-25, 476 A.2d 763

(quoting Chicot County Drainage Dist. v. Baxter State

App. 58

B. Plaintiffs’ Motion to Certify the May 28, 2002

Order Denying Their Motion to Remand

Plaintiffs have not opposed defendants’ motion to

certify this Court’s March 4, 2003 order; instead, they seek

certification at the same time of this Court’s May 28, 2002

decision which denied their motion to remand based un the

Court's finding that plaintiffs’ claims, although expressed

under state law, are in fact for “benefits due” under the

terms of their ERISA plan, and thus must be considered in

federal court. See Carducci v. Aetna U.S. Healthcare, 204

F.Supp.2d 796 (D.N.J.2002); 29 U.S.C. § 1132(a)(1\B).”

Plaintiffs previously sought certification of the May

28, 2002 Opinion and Order, which was denied without

prejudice in this Court’s July 24, 2002 Opinion and Order.

rSee Carducci v. Aetna U.S. Healthcare, 2002 WL 31262100

(D.N.J. Jul. 24, 2002). There, the Court found that the

issue decided in the motion was a controlling question of

law, but that plaintiffs failed to show that there was a

substantial ground for disagreement about the issue or

that certification of the issue would advance che ultimate

termination of the litigation.” Plaintiffs assert that the

*” ERISA section 502(aX1XB), 29 U.S.C. § 1132(aX 1B), provides,

in relevant part:

A civil action may be brougi:t -

(1) by a participant or beneficiary ~...

(B) to recover benefits due to him under the terms of his

plan, to enforce his rights under the terms of the plan, or to

clarify his rights to future benefits under the terms of the

plan.

™ As noted supra, for exceptional circumstances to justify certifica-

tion, the moving party must show (1) that the order at issue involves a

controlling issue of law, which if erroneously decided, would result in

reversible error on final appeal, (2) that there is substantial ground for

(Continued on following page)

App. 59

calculus has changed at this stage of the litigation and

that this issue should now be certified for interlocutory

appeal. This Court agrees and will certify the issue.

Again the issue here revolves around whether there

are substantial grounds for disagreement on this issue. It

is again clear that the issue presented for review is a

controlling question of law because if, contrary to this

Court’s decision, plaintiffs’ claims are not claims for

benefits due under their ERISA plans within the meaning

of ERISA section 502(a)(1)(B), then this Court lacks

federal jurisdiction over the action. Likewise, it is clear

that certifying this issue now, in conjunction with the

certification of defendants’ appeal, would materially

advance the ultimate termination of the litigation by

providing the Third Circuit with all pertinent, and dis-

puted, issues at once.

The principal issue, thus, is whether there are sub-

stantial grounds for debate about this Court’s “benefits

due” decision. Plaintiffs argue that “the situation now is

very different than at the time of their original § 1292(b)

motion” because subsequent decisions have shown that

“substantial ground for difference does indeed exist with

regard to this important jurisdictional issue.” (Pls.’ Br. at

difference of opinion about the resolution of the issue, and (3) that an

immediate app ~. . " materially advance the ultimate termination of

litigation. See . ai v. Carte Blanc! Corp., 496 F.2d 747, 754-55 (3d

Cir.1974).

"In the Court’s prior section 1292(b) decision, it found that

plaintiffs had shown personal disagreement with the Court’s decision,

but not a substantial ground for difference of opinion about it. Plaintiffs

had not pointed to any precedent which indicated that there was a split

of authority on the issue. To the contrary, the Court found that its

decision aligned with the decisions of other courts which had considered

(Continued on following page)

App. 60

4 (citing Arana v. Ochsner Health Plan, Inc., 302 F.3d 462

(5th Cir.2002), rehearing en banc granted, 319 F.3d 205

(2003)); McKandes v. Blue Cross and Blue Shield Assoc.,

243 F.Supp.2d 380 (D.Md.2003); Popoola v. MD-Individual

Practice Assoc., 244 F.Supp.2d 577 (D.Md.2003)).

The Court finds that these subsequent cases can be

distinguished from the present case,” but that they still

the same issue. See Carducci, 2002 WL 31262100 at *2 (citing Franks v.

Prudential Health Care Plan, Inc, 164 F.Supp.2d 865, 873

(W.D.Tex.2001); Riemer v. Columbia Medical Plan, Inc., 1997 WL

33126252, at *1-2 (D.Md. Mar.28, 1997); Kaszula v. Parker, 1997 WL

106267 (N.D.Ill. Feb.13, 1997)).

™ In Arana, the health insurance company had not filed a formal

claim for subrogation or reimbursement, as defendants did here, so the

plaintiff's suit was solely for a declaration that the company was not

entitled te do so. 302 F.3d at 470. The Fifth Circuit, in a decision that

the court has since agreed to rehear, found that the claim was not one

for benefits due because the plaintiff did not seek additional benefits

from the health insurer. Jd. The court specifically distinguished this

Court's decision in Carducci, stating that the plaintiff's “case therefore

does no* present a situation ... in which a participant or beneficiary

seeks to recover benefits she claims were wrongly reimbursed to an

ERISA plan out of funds recovered by a third party, e.g. Carducci v.

Aetna U.S. Healthcare, 204 F.Supp.2d 726, 803 (D.N.J.2002).” Id. at 470

n. 9.

In McKandes, the plaintiff had paid amounts to her health insurer

to settle a subrogation lien, but then filed her complaint seeking only

class relief for persons who had “been notified by [tne defendant health

insurer) that it had a lien against or a subrogation interest in any

monies that the members or insureds had received or would receive

from a third party.” McKandes, 243 F.Supp.2d at 384. The court,

following Arana, found that the action was not one to seek “benefits

due” because plaintiff also sought only declaratory relief.

In Popoola, the plaintiff paid a settlement to her health insurer to

satisfy a subrogation lien and then filed suit alleging that the health

insurer was “unjustly enriched by its practice of claiming and receiving

asserted liens against and subrogation interests in monies that its

members and insureds received from third parties.” 244 F.Supp.2d at

579. The defendants asserted that the action was to “enforce rights”

(Continued on following page)

App. 61

show that the issue here is complex, controversial, pivotal

to this Court’s subject matter jurisdiction, and subject to

debate. Therefore, the Court will also certify this issue for

interlocutory appeal.

Ill. CONCLUSION

This Court has considered the motions of the parties

seeking the certification of three issues for interlocutory

appeal to the United States Court of Appeals for the Third

Circuit and has found, for the foregoing reasons, that the

three issues, namely

(1) whether the antisubrogation rule contained in

N.J.S.A. 2A:15-97, as interpreted by the New Jersey

Supreme Court in Perreira v. Rediger, 169 N.J. 399,

778 A.2d 429 (2001), applies to defendant health in-

surers because it is not conflict preempted under ER-

ISA section 514(a) because it is “saved” as a state law

that regulates insurance;

(2) whether Perreira v. Rediger, 169 N.J. 399, 778

A.2d 429 (2001), applies retroactively to plaintiffs’

pre-Perreira health insurance plans; and

(3) whether plaintiffs’ unjust enrichment claims for

monies taken pursuant to subrogation and reira-

bursement provisions in their ERISA health plans are

claims for “benefits due” within the meaning of ER-

ISA section 502(a);

under the benefit plan, instead of, as here, one seeking “benefits due.”

Id. at 580. Thus, the court did not consider whether the claim was a

“claim for benefits.” Instead, the court found the . case challenging a

provision in the health plan was not an action to enforce a provision in

a health plan. Jd. at 581.

App. 62

are controlling issues of law, around which there are

substantial grounds for disagreement which should be

resolved at this stage in the litigation. Thus, this Court

will certify these three issues for appeal and will stay

further action in these three consolidated cases pending

the resolution of this matter before the United States

Court of Appeals for the Third Circuit.

The accompanying Order is entered.

ORDER CERTIFYING QUESTIONS

FOR INTERLOCUTORY APPEAL

This matter having come before the Court on the

motion of defendants for this Court to certify for interlocu-

tory appeal two issues determined in this Court’s March 4,

2003 decision denying defendants’ motion to dismiss,

[Docket Item 27-1], and the motion of plaintiffs for this

Court to certify for interlocutory appeal one issue deter-

mined in this Court’s May 28, 2002 decision denying

plaintiffs’ motion to remand, [Docket Item 29-1], and the

Court having considered the submissions of the parties

and their oral arguments on April 24, 2003, and having

found, for the reasons expressed in an Opinion of today’s

date, that the issues should be certified for interlocutory

appeal pursuant to 28 U.S.C. § 1292(b);

IT IS this ___ day of October, 2003 hereby:

ORDERED that defendants’ motion for this Court to

certify for interlocutory appeal two issues determined in

this Court’s March 4, 2003 decision denying defendants’

motion to dismiss, [Docket Item 27-1], be, and hereby is,

GRANTED, and the following two issues are certified for

interlocutory appeal:

App. 63

(1) whether the antisubrogation rule contained in

N.J.S.A. 2A:15-97, as interpreted by the New Jersey

Supreme Court in Perreira v. Rediger, 169 N.J. 399,

778 A.2d 429 (2001), applies to defendant health in-

surers because it is not conflict preempted under ER-

ISA section 514(a) because it is “saved” as a state law

that regulates insurance; and

(2) whether Perreira v. Rediger, 169 N.J. 399, 778

A.2d 429 (2001), applies retroactively to plaintiffs’

pre-Perreira health insurance plans; and

IT IS FURTHER ORDERED that plaintiffs’ motion

for this Court to certify for interlocutory appeal one issue

determined in this Court’s May 28, 2002 decision denying

plaintiffs’ motion to remand, [Docket Item 29-1], be, and

hereby is, GRANTED and the following issue is certified

for interlocutery appeal:

whether plaintiffs’ unjust enrichment claims for mon-

ies taken pursuant to subrogation and reimbursement

provisions in their ERISA health plans are claims for

“benefits due” within the meaning of ERISA section

502(a); and

IT IS FURTHER ORDERED that proceedings in

Levine v. United Healthcare Corp., Civil No. 01-4964(JBS);

Bogurski v. Horizon Blue Cross Blue Shield of New Jersey,

Civil No. 01-5339(JBS); and Edmonson v. Horizon Blue

Cross Blue Shield of New Jersey, Civil No. 01-5812(JBS),

be, and hereby are, STAYED pending disposition of these

issues before the United States Court of Appeals for the

Third Circuit.

App. 64

247 F.Supp.2d 596

United States District Court, D. New Jersey.

Caroline CARDUCCI and David Labinski, Plaintiffs,

AETNA U.S. HEALTHCARE, Defendant.

Jean Levine, Plaintiff,

Vv.

United Healthcare Corp., Defendant.

Carole West, Plaintiff,

Vv.

Health Net of the Northeast, Defendant.

David Collins, Plaintiff,

Vv.

Oxford Health Plans, Defendant.

Noreen Bogurski, Plaintiff,

Vv.

Horizon Blue Cross Blue Shield of New Jersey,

Defendant.

Benjamin Edmonson, Plaintiff,

Vv.

Horizon Blue Cross Blue Shield of New Jersey,

Defendant.

Dellece L. Barbour, Plaintiff,

Vv.

CIGNA Healthcare of New Jersey, Inc., Defendant.

William Bibbs, Plaintiff,

AmeriHealth, Inc., Defendant.

App. 65

Civil Action Nos. 01-4675 (JBS), 01-4964(JBS),

01-5217(JCL), 01-5237(JWB), 01-5339(JBS),

01-5812(JBS), 02-417(JBS), 02-1155(JBS).

March 4, 2003.

Frank P. Solomon, Esquire, Weitz & Luxenberg, P.C.,

Cherry Hill, NJ, and Donna Siegel Moffa, Esquire, Lisa

Rodriguez, Esquire, Nicole M. Miles, Esquire, Trujillo,

Rodriguez & Richards, LLC, Haddonfield, NJ, and Carl D.

Poplar, Esquire, Jeffrey Ahren, Esquire, Poplar & East-

lack, Turnersville, NJ, and Roberta D. Liebenberg, Es-

quire, Fine, Kaplan And Black, R.P.C., Philadelphia, PA,

and Marc H. Edelson, Hoffman & Edelson, Doylestown,

PA, and Natalie Finkelman Bennett, Esquire, James C.

Shah, Esquire, Shepherd, Finkelman, Miller & Shah, LLC,

Turnersville, NJ, and Scott R. Shepherd, Esquire, Shep-

herd, Finkelman, Miller & Shah, LLC, Media, PA, and

John W. Trimble, Jr., Esquire, Morrison & Trimble, LLC,

Turnersville, NJ, and Mitchel! A. Toups, Esquire, Weller,

Green, Toups & Terrell, LLP, Beaumont, TX, for Plaintiffs

Carducci, Labinski, Levine, West, Collins, Bogurski,

Edmonson, and Barbour.

Philip Stephen Fuoco, Esquire, Joseph A. Osefchen,

Esquire, Law Firm of Philip Stephen Fuoco, Haddonfield,

NJ, for Plaintiff Bibbs.

Burt M. Rublin, Esquire, Raymond A. Quaglia, Es-

quire, Ballard, Spahr, Andrews & Ingersoll, LLP, Philadel-

phia, PA, for Defendant Aetna U.S. Healthcare.

Edward S. Wardell, Esquire, Kelley, Wardell *. Craig,

LLP, Haddonfield, NJ, for Defendant Horizon Healthcare

Services, Inc. d/b/a Horizon Blue Cross and Blve Shield of

New Jersey and for Defendant Aetna U.S. Healthcare.

App. 66

Edward A. Scallet, Esquire, William F. Hanrahan,

Esquire Jason H. Ehrenberg, Esquire, Groom Law Group,

Chartered, Washington, DC, and Theodore D. Aden,

Esquire, Leboeuf, Lamb, Greene & Macrae, LLP, Newark,

NJ, for Defendant United Healthcare Corporation.

B. John Pendleton, Jr., Esquire, McCarter & English,

LLP, Newark, NJ, for Defendant Health Net of the North-

east, Inc.

William J. O’Shaughnessy, Esquire, McCarter &

English, LLP, Newark, NJ, for Defendant Oxford Health

Plans, Inc.

Douglas Arpert, Esquire, Norton, Arpert, Sheehy &

Higgins, P.C., West Patterson, NJ, and Brian D. Boyle,

Esquire, Martha Dye, Esquire, William J. Stuckwisch,

Esquire, O’Melveny & Myers, LLP, Washington, DC, for

Defendant CIGNA HealthCare of New Jersey, Inc.

Thomas S. Biemer, Esquire, John J. Higson, Esquire,

Dilworth Paxson, LLP, Cheriy Hill, NJ, for Defendant

AmeriHealth, Inc.

SIMANDLE, District Judge:

TABLE OF CONTENTS

I. BACKGROUND. .604

II. DISCUSSION. .605

A. Motion to Dismiss Standard of Review. .605

B. Motion to Dismiss Analysis. .606

1. Comlete Preemption Dismissal under

Section 502(a). .606

App. 67

(a) Failure to allege ERISA cause of

action. .606

(b) Failure to plead plan as section

502(a)(1)B) defendant. .607

remedies. .609

2. Conflict Preemption Dismissal under

Section 514(a). 611

(a) Whether N.J.S.A. 2A:15-97 “relates

to” plaintiffs’ employee benefit

plans. .612

(b) Whether NwJ.S.A. 2A:15-97 is

“saved” as a state law that regu-

lates insurance. .614

in spite of the deemer clause. 617

C. Additional Arguments for Motion to Dis-

miss. : .617

1. Retrospective effect of Perreira v. Re-

_ diger, 169 N.J. 399 (2001). .617

2. Voluntary payment doctrine as ap-

plied to Levine, Bogurski, and Ed-

monson claims. .619

3. Standing doctrine as applied to

Collins and West claims. .620

D. Bibbs v. AmeriHealth, Inc., Civ. No. 02-

1155 (JBS) Summary Judgment Motion. .622

1. Compensatory Relief Claims. .622

2. Prospective Relief Claims. .624

III. CONCLUSION. .625

App. 68

Under New Jersey law, a health insurer which paid

benefits on behalf of an insured may not recoup those

funds through a subrogation or reimbursement lien upon

the insured’s recovery from a third-party tortfeasor, and

any such subrogation provision in a New Jersey insurance

contract is therefore void. Perreira v. Rediger, 169 NJ.

399, 778 A.2d 429 (2001) (interpreting N.J.S.A. 2A:15-97).

The principal issues in the present consolidated cases

involve whether this prohibition of subrogation arising at

state law applies to the health insurance contracts of New

_ Jersey employee benefit plars governed under federal law

through the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. §§ 1001, et seg., and thus

whether the plaintiff-insureds are entitled to repayment of

such subrogated funds, or whether such a claim is pre-

empted by ERISA section 502(a), 29 U.S.C. § 1132(a)

(complete preemption) or by ERISA section 514(a), 29

U.S.C. § 1144(a) (conflict preemption).

The present motion to dismiss thus requires the Court

to consider the doctrines of complete preemption and

conflict preemption under ERISA. Congress passed ERISA

to “safeguard the establishment, operation, and admini-

stration of employee benefit plans,” and included the

statute’s two preemption provisions to ensure that the

federal ERISA statute would set “minimum standards [to]

assurle] the equitable character of such plans and their

financial soundness.” Rush Prudential HMO, Inc. v.

Moran, 536 U.S. 355, 122 S.Ct. 2151, 153 L.E

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