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Horn v. Arkansas Blue Cross and Blue Shield

October 31, 2007


The opinion of the court was delivered by: Garnett Thomas Eisele United States District Judge


Presently before the Court is Plaintiff's Objection to Removal and Motion to Remand.

I. Background

Plaintiff states that on July 10, 2006, he was injured in a motor vehicle accident in California. Plaintiff also states that he filed a personal injury action in California against Jorge Paris, the party at fault in the accident, and that GMAC, Paris' insurer, settled the litigation for the limits of the policy maintained for Paris. Additionally, Plaintiff states that he maintained under-insured motor vehicle insurance through State Farm Insurance Company ("State Farm"), and obtained the limits of the under-insured coverage after State Farm determined that the limits paid by GMAC were insufficient to compensate him for his damages.

On February 23, 2007, Plaintiff filed this declaratory judgment action in the Circuit Court of Craighead County, Arkansas. Plaintiff states that Arkansas Blue Cross Blue Shield (directly and through its agents and affiliates, Blue Cross of California and Blue Shield of California), which paid $130,240.37 to various medical providers who treated the plaintiff for the injuries he suffered from the motor vehicle accident, claims entitlement to subrogation for payment of said medical expenses. Plaintiff argues that he has not been made whole because his present and future damages cause by the motor vehicle accident exceed the limits of the GMAC policy and the limits of the State Farm under-insured coverage. Therefore, Plaintiff asserts that the Court should enter an order declaring that the Defendants have no right of subrogation or other interest in settlement proceeds from the personal injury action or from the under-insured coverage maintained by the Plaintiff.

In the motion presently before the Court, Plaintiff asserts that this Court lacks subject-matter jurisdiction, and the case should be remanded to state court pursuant to Empire Healthchoice v. McVeigh, 126 S.Ct. 2121, 2126 (2006). Defendants assert that this Court has federal question jurisdiction because this case is governed by federal common law under Empire and Boyle v. United Technologies Corp., 487 U.S. 500 (1988). Defendants also assert that removal is proper under the Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1).

II. Motion to Remand

A. Federal Common Law and Empire

"The Federal Employees Health Benefits Act of 1959 (FEHBA), 5 U.S.C. § 8901 et seq. (2000 ed. and Supp. III), establishes a comprehensive program of health insurance for federal employees." Empire Healthchoice v. McVeigh, 126 S.Ct. 2121, 2126 (2006). "The Act authorizes the Office of Personnel Management (OPM) to contract with private carriers to offer federal employees an array of health-care plans." Id. (citing 5 U.S.C. § 8902(a) (2000 ed.)). "Largest of the plans for which OPM has contracted, annually since 1960, is the Blue Cross Blue Shield Service Benefit Plan (Plan), administered by local Blue Cross Blue Shield companies."

Id. at 2126-27.

"Title 28 U.S.C. § 1331 vests in federal district courts 'original jurisdiction' over 'all civil actions arising under the Constitution, laws, or treaties of the United States.'" Id. at 2131. "A case 'aris[es] under' federal law within the meaning of § 1331, . . . if 'a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.'" Id. (citing Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).

In Empire, the United States Supreme Court considered the "proper forum for reimbursement claims when a plan beneficiary, injured in an accident, whose medical bills have been paid by the plan administrator, recovers damages (unaided by the carrier-administrator) in a state-court tort action against a third party alleged to have caused the accident." Id. at 2127. The Court noted the preemption clause of the FEHBA, found at 5 U.S.C. § 8902(m)(1), displacing state law on issues relating to "coverage or benefits" afforded by health-care plans, which states:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

Id. However, the Court found that 28 U.S.C. § 1331 did not encompass the carrier's action seeking reimbursement of the amount paid for the beneficiary's medical care, stating, "[N]othing in FEHBA's text prescribes a federal rule of decision for a carrier's claim against its insured or an alleged tortfeasor to share in the proceeds of a state-court tort action." Id. at 2127-29.

The Court also reviewed the appeals court's decision, which concluded that "federal jurisdiction exists over this dispute only if federal common law governs Empire's claims," and "courts may create federal common law only when 'the operation of state law would (1) significantly conflict' with (2) 'uniquely federal interest[s].'" Id. at 2130 (citing 396 F.3d 136, 140 (2d Cir. 2005) (quoting Boyle v. United Technologies Corp., 487 U.S. 500 (1988))). The Court noted that while the Second Circuit "acknowledged that the case involved distinctly federal interests," it found that "Empire had not identified 'specific ways in which the operation of state contract law, or indeed of other laws of general application, would conflict materially with the federal policies underlying FEHBA in the circumstances presented.'" Id. (citing 396 F.3d at 150 (Sack, J., concurring) ("Empire has made a substantial showing that the first part of the Boyle test has been met because this case implicates 'uniquely federal interests,' . . . in providing uniform healthcare coverage for federal employees and in decreasing the administrative costs associated with such insurance."); Id. at 142.). The Supreme Court specifically stated that "the appeals ...

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