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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2005
- **Citation:** 546 U.S. 1054

## Text

5

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

6

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

7

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

8

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.

+

9

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

10

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

11

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

12

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.

13

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.

ae

14

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

15

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

16

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

17

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).

18

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

19

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.

20

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.

21

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

22

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).

23

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.

24

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.

25
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

26

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

27

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.

28

“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.

29

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
Vv
UNITED HEALTHCARE CORPORATION
(DC NJ 01-cv-04964)

Noreen Bogurski
v.

Horizon Blue Cross Blue Shield of New Jersey
(DC NJ 01-cv-05339)

Benjamin Edmonson, On behalf of
himself and all others similarly situated
v.

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
v.

United Healthcare Corporation (DC NJ 01-cv-04964)
Noreen Bogurski
v.

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.

I.

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

(c) Except as set forth in (b) above, no policy or certificate
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.

I.

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

v.
UNITED HEALTHCARE CORPORATION
(DC NJ 01-cv-04964)

NOREEN BOGURSKI
v.

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

v.
UNITED HEALTHCARE CORPORATION
(DC NJ 01-cv-04964)

NOREEN BOGURSKI
v.

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,

v.
UNITED HEALTHCARE CORP, Defendant.
Noreen Bogurski, Plaintiff,
Vv

Horizon Blue Cross Blue Shield of New Jersey,

Defendant.
Benjamin Edmonson, Plaintiff,
v

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0252%3A1. Public record. Not legal advice.