Case Information
*1 Before P OSNER , K ANNE , and W ILLIAMS , Circuit Judges . K ANNE , Circuit Judge
. Jоse S. Cruz was injured in a car accident. Cruz’s insurer, Blue Cross and Blue Shield of Illinois, a division of Health Care Service Corporation (“Blue Cross”), paid for the treatment of his injuries. Cruz was enrolled in Blue Cross’s Service Benefit Plan provided for government employees and their dependents under the Federal Employees Health Benefits Act (“FEHBA”). Cruz sued the tortfeasor responsible for his injuriеs and recov- ered money in excess of his medical expenses in a settle- ment agreement. Pursuant to the Statement of Benefits in the Service Benefit Plan, Blue Cross filed suit demanding reimbursement for the benefits paid to Cruz. The district court dismissed the suit for lack of subject matter jurisdic- tion. Because we find that FEHBA preempts state law on this matter, we reverse.
I. History
FEHBA was enacted in 1959 to provide health insurance to federal employees, bridging the gap between the govern- ment and private employers with respect to healthcare benefits. The current version of FEHBA (effective in 1998) authorizes the United States Office of Personnel Management (“OPM”) to contract with qualified insurance carriers for coverage of federal employees and their depend- ents under various health benefits plans. OPM contracted with Blue Cross and Blue Shield Association (“Blue Cross Association”) to create the Service Benefit Plan, which is ad- ministered by Blue Cross in Cruz’s home state of Illinois. FEHBA requires that the contracts between insurance carriers and OPM contain a detailed Statement of Benefits including maximums, limitations, and other tеrms related to benefits. The Statement of Benefits is incorporated into the federal contracts by reference and is the official de- scription of benefits and Plan terms.
The Statement of Benefits in the Service Benefit Plan contains a provision regarding subrogation and right-of- recovery as follows:
The Plan has the right to recover payments the Plan has made to you or your dependent from a third party or third party’s insurer because of illness or injury caused by a third party. In addition to its right of re- covery, the Plan is subrogated to you and your depend- ent’s present and future claims against a third party.
The Plan does not include a provision for sharing fees asso- ciated with recovery. Under Illinois law, however, the com- mon fund doctrine рrovides that parties recovering money from a common fund are to share any fees associated with recovery on a pro rata basis.
We now return to the specifics of Cruz’s case. Blue Cross paid $4,682.20 in benefits to cover the injuries resulting from his May 9, 1998, car accident. Cruz hired his own attorney to bring the lawsuit, and recovered $30,000 in a settlement agreement. Cruz paid оne-third of this amount ($10,000) in attorney’s fees.
As mandated by the Service Benefit Plan, Cruz notified Blue Cross of his settlement agreement in March 2000. Cruz and Blue Cross were unable to agree on the amount that Blue Cross should be reimbursed. Cruz believed that the Illinois common fund doctrine should be applied, and thus that Blue Cross was entitled to $3,121.47 and a pro rata reduction for out-of-pocket costs. In Aрril 2000, Blue Cross sent Cruz a letter demanding $3,500 as its net share of the recovery. In September 2000, Blue Cross sent another letter demanding the total amount of the benefits paid to Cruz, namely, $4,682.20. To date, Blue Cross has not been reimbursed for any benefits paid to Cruz.
On October 10, 2000, Cruz and two other individuals filed a state court action against Blue Cross in the Circuit Court of Cook County, Illinois. Cruz and the other plaintiffs sоught recovery against Blue Cross under both the Illinois common fund doctrine and the Illinois Consumer Fraud and Deceptive Practices Act. Blue Cross removed the action to federal court on November 1, 2001. The Northern District of Illinois then granted Cruz’s motion to remand the case to state court based on lack of subject matter jurisdiction.
Cruz’s suit in state court is still pending. The suit giving rise to this aрpeal was commenced on December 21, 2001, when Blue Cross and Blue Cross Association filed a com- plaint in federal court demanding reimbursement for the benefits paid to Cruz. The district court dismissed for lack of subject matter jurisdiction.
Plaintiffs contend on appeal that the district court erred in granting Cruz’s motion to dismiss, claiming that subject matter jurisdiction exists because state lаw is preempted by FEHBA and thus federal common law controls.
II. Analysis
We review a district court’s decision as to whether subject
matter jurisdiction exists
de novo
and its factual findings
for clear error.
See Scott v. Trump Ind., Inc.
,
A. The Remand Order
Cruz first argues that the instant suit was improperly
filed in the district court because it was really an appeal of
the Remand Order sending Cruz’s state court action (which
had been removed by Blue Cross) back to state court. Such
appeаls are prohibited under 28 U.S.C. § 1447(d). The dis-
trict court correctly rejected this argument, stating that
“ ‘the [Remand] [O]rder doesn’t conclude the issue whether
the district court has jurisdiction over [Plaintiffs’] new and
materially identical suit.’ ”
Blue Cross & Blue Shield of Ill.
v. Cruz
, No. 01 C 9821,
B. Cause of Action under FEHBA
Cruz also argues that because FEHBA explicitly creates
a cause of action against the United States, it forecloses
federal subject matter jurisdiction over actions against any
other party. FEHBA does contain a provision granting fed-
eral jurisdiction over suits against the United States.
5 U.S.C. § 8912 (“The district courts of the United States
have original jurisdiction, concurrent with the United States
Court of Federal Claims, of a civil action or claim against
the United States founded on this chapter.”). Contrary to
Cruz’s assertion, howevеr, FEHBA’s jurisdictional provision
for suits against the United States is not automatically a bar
to federal jurisdiction over actions brought against other
parties.
See Teamsters Nat’l Auto. Transporters Indus.
Negotiating Comm. v. Troha
, 328 F.3d 325, 330 (7th Cir.
2003) (“[T]he limitation [of the jurisdictional provision of
the Labor Management Relations Act] is more aptly de-
scribed not in terms of parties but in terms of the purposе
of a lawsuit.”) (citations omitted),
cert. denied
,
Under Cruz’s theory, the federal courts would never have
subject matter jurisdiction over any suits against a private
party, including those brought by enrollees against carriers.
This position has been rejected by other courts.
See
,
e.g. Botsford v. Blue Cross & Blue Shield of Mont., Inc.
, 314
F.3d 390, 397-99 (9th Cir. 2002) (holding that the district
court had jurisdiction over enrollee’s claim against carrier
because FEHBA preempted state lаw claim),
amended by
319 F.3d 1078 (9th Cir. 2003);
McCoy v. Unicare Life &
Health Ins. Co.
, No. 04 C 1126,
C. FEHBA’s Preemption Provision
Section 1331 of 28 U.S.C. confers federal question subject
matter jurisdiction on cases that arise “under the
Constitution, laws, or treaties of the United States.” Even
if a federal statute does not explicitly create a cause of ac-
tion, a claim may arise under federal law if the statute com-
pletely preempts state law in a particular area.
See
U.S.
Const. art. VI, cl. 2;
see also Metro. Life Ins. Co. v. Taylor
We start our preemption analysis with the presumption
that Congress does not intend to supplant state law.
See
N.Y. State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co.
,
The starting point in assessing Congress’s intent is the text of the statute in question. See , e.g. , Time Warner Cable v. Doyle , 66 F.3d 867, 875 (7th Cir. 1995). FEHBA does have an explicit preemption provision. The language of the preemption provision is as follows:
The terms of any contract under this chapter which re- late 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.
5 U.S.C. § 8902(m)(1) (2000).
In this case, Blue Cross and Blue Cross Association have filed a complaint demanding reimbursement for benefits paid pursuant to the Statement of Benefits, part of the FEHBA-authorized Service Benefit Plan contract. The FEHBA preemption provision dictates that the contract terms trump state law when they relate to the nature, pro- vision, or extent of coverage or benefits including payments with respect to benefits. Whether there is federal subject matter jurisdiсtion, then, depends on whether the reim- bursement provision of the Statement of Benefits “relates to” the nature, provision, or extent of coverage or benefits.
The Supreme Court interpreted the words “relate to” in
the context of the ERISA preemption provision in
Travelers
.
As originally enacted in 1978, § 8902(m)(1) only required federal preemрtion of state or local laws “to the extent that such law[s] or regulation[s] [were] inconsistent with such contractual provisions.” 5 U.S.C. § 8902(m)(1) (1994). Congress broadened the preemption provision in 1998, in- tending to expand federal jurisdiction over FEHBA claims even when state law does not conflict with FEHBA contract provisions. The broadening of the preemption provision was meant to “strengthen the ability of national plans to offer uniform benefits and rates to enrollees regardless of where they may live.” H.R. Rep. No. 105-374, at 9 (1998) (emphasis added). Congress also wanted to “strengthen the case for trying FEHBA program claims disputes in Federal courts rather than State courts.” Id. Uniform administration and cost-savings were major goals of Congress in initially en- acting FEHBA as well. H.R. Rep. No. 86-957, at 1 (1959).
If FEHBA contract provisions do not preempt state law regarding subrogation, the practical effect is that federal employees in different states paying the same premiums would not be required to repay benefits after recovery from third parties according to the same rules. Federal employ- ees in different states would have different reimbursement 9 obligations аnd hence different net benefits. This is con- trary to the uniformity goal of FEHBA in general and its preemption provision in particular. The cost-savings goal of Congress would also be thwarted, because reimbursements from enrollees end up in the federal fund used to pay FEHBA plan premiums. Reimbursements ultimately keep costs down for both the government and enrollees.
Because Congress’s clear intent was to make benefits uni-
form for FEHBA plan enrollees of different states, state law
regarding subrogation is preempted by the reimbursement
provision in the Service Benefit Plan. We note that the same
result has been reached by this court and others when con-
fronted by the subrogation question in the ERISA context.
See Admin. Comm. of the Wal-Mart Stores, Inc. Assocs.
Hеalth & Welfare Plan v. Varco
,
The district court and the parties addressed the question
of whether federal common law should be applied in this
case under the
Boyle
test.
Boyle
states that fеderal common
law should be created if “uniquely federal interests” are in-
volved and if state law “significantly conflicts” with federal
policy or objectives.
See Boyle v. United Techs. Corp.
, 487
U.S. 500, 507 (1987). We believe that this case satisfies the
Boyle
test: the impact of reimbursement on the federal trea-
sury creates a significantly federal interest,
see
,
e.g. Caudill v. Blue Cross & Blue Shield of N.C., Inc.
, 999 F.2d
74, 78 (4th Cir. 1993), and, as discussed above, the federal
policy of uniform healthсare benefits for FEHBA plan en-
rollees is in conflict with state law. Because we hold that
the FEHBA-created contract provision preempts state sub-
rogation law, however, the
Boyle
analysis is unnecessary.
We are not required to imply a “new” cause of action under
FEHBA, but simply to “fill in [FEHBA’s] interstices with
federal common law.”
See UIU Severance Pay Trust Fund v.
Local Union No. 18-U, Unitеd Steelworkers
,
D. The
Colorado River
Doctrine
Finally, we do not believe that the district court could
properly accept Cruz’s invitation to abstain from exercising
jurisdiction in favor of the state court suit under the
Colorado River
doctrine. In
Colorado River
, the Supreme
Court held that a federal court may dismiss a suit in ex-
ceptional circumstances where there is a concurrent state
proceeding.
See Colo. River Water Conservation Dist. v.
United States
,
1) whether the state has assumed jurisdiction over property; 2) the inconvenience of the federal forum; 3) the desirability of avoiding piecemeal litigation; 4) the order in which jurisdiction was obtained by the concur- rent forums; 5) the source of governing law, state or federal; 6) the adequacy of state-court actiоn to protect the federal plaintiff’s rights; 7) the relative progress of state and federal proceedings; 8) the presence or ab- sence of concurrent jurisdiction; 9) the availability of removal; and 10) the vexatious or contrived nature of the federal claim.
LaDuke v. Burlington N. R.R. Co.
,
Of these ten factors, “[p]articular weight must be given to the presence of a federal question in the case[.]” Sverdrup Corp. v. Edwardsville Cmty. Unit Sch. Dist. No. 7 , 125 F.3d 546, 549 (7th Cir. 1997). We have already determined that the FEHBA contract provision preempts state law with re- spect to subrogation, so a federal question does exist in this case. The rest of the Colorado River factors also weigh in favor of exercising jurisdiction.
The state court has not assumed jurisdiction over any property, and the federal court in the Northern District of Illinois cannot be more inconvenient for the pаrties than the state forum (Circuit Court of Cook County). Abstention would not necessarily lead to “piecemeal litigation,” because the issue in the state court suit brought by Cruz is whether he is entitled to keep some of the benefits paid to him to offset his attorney’s fees, not whether he must reimburse Blue Cross based on the subrogation clause in the Service Benefit Plan. Because there are no compulsory counter- claims in Illinois, see Wilson v. M.G. Gulo & Assocs., Inc. , 691 N.E.2d 875, 877-78 (Ill. App. Ct. 1998), Blue Cross’s claim for the principal amount of reimbursement would not necessar- ily be resolved in Cruz’s state court suit.
The order in which jurisdiction was obtained and the rela- tive progress of the state and federal proceedings might initially seem to favor abstention. Cruz filed his state court action more than a year рrior to the commencement of this action. As Blue Cross and Blue Cross Association point out, however, the state court suit is essentially a defense to their claim for reimbursement. We agree that it would be more logical for Cruz to raise his offset claim in response to Blue Cross’s and Blue Cross Association’s suit for reimbursement as a partial defense. Also, the state suit has been stayed at its preliminary stages, so its progress is not so great as to merit abstention.
The state court action will not adequately protect Blue Cross’s and Blue Cross Association’s interests, in part be- cause Cruz’s state court action seeks to declare illegal the Service Benefit Plan terms regarding subrogation that OPM promulgated. OPM would be unable to participate as a party in a state court suit under 5 U.S.C. § 8912. Resolving the case in federal court would eliminate this potential problem because it would allow OPM to participate in the event that Cruz raises the legality of the contract subrogation provi- sion.
In sum, the
Colorado River
doctrine is to be invoked only
in exceptional cases, and this is not such a case.
Sverdrup
III. Conclusion
With FEHBA, Congress intended to create cost-efficient and uniform health insurance benefits for employees of the United States and their dependents throughout the country. The Act’s express preemption provision dictates that the terms of contracts created under FEHBA preempt state law when such terms are related to benefits and coverage. Congress intended for terms related to subrogation to be included in this realm. Thus, the FEHBA-created contract provision in the Statement of Benefits preempts state law with respect to reimbursement for benefits paid to Cruz. The district court has federal question subject matter juris- diction over this case under 28 U.S.C. § 1331. Accordingly, we R EVERSE the district court’s finding to the contrary and R EMAND for further proceedings consistent with this opinion. A true Copy:
Teste:
________________________________ Clerk of the United States Court of Appeals for the Seventh Circuit USCA-02-C-0072—1-24-05
Notes
[1]
Goepel v. Nat’l Postal Mail Handlers Union
,
[2] We disagree with the district court’s view that “FEHBA’s pre-
emption provision is much more narrow [than ERISA’s].”
Cruz