Empire Healthchoice Assur., Inc. v. McVeigh

• Decision Date: 14 January 2005
• Docket Number: No. 03-9098.,03-9098.
• Citation: 396 F.3d 136
• Parties: EMPIRE HEALTHCHOICE ASSURANCE, INC., doing business as Empire Blue Cross and Blue Shield, Plaintiff-Appellant, v. Denise Finn MCVEIGH, as administratrix of the Estate of Joseph E. McVeigh, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

396 F.3d 136

EMPIRE HEALTHCHOICE ASSURANCE, INC., doing business as Empire Blue Cross and Blue Shield, Plaintiff-Appellant, v. Denise Finn MCVEIGH, as administratrix of the Estate of Joseph E. McVeigh, Defendant-Appellee.

No. 03-9098.

United States Court of Appeals, Second Circuit.

Argued: May 15, 2004.

Decided: January 14, 2005.

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Howard S. Wolfson, Morrison Cohen Singer & Weinstein, New York, New York (Anthony F. Shelly, Miller & Chevalier Chartered, Washington, D.C., on the brief), for Plaintiff-Appellant.

Thomas J. Stock, Stock & Carr, Mineola, New York, for Defendant-Appellee.

Before: SACK, SOTOMAYOR and RAGGI, Circuit Judges.

Judge SACK concurs in Judge SOTOMAYOR's opinion and in a separate opinion.

Judge RAGGI dissents in a separate opinion.

SOTOMAYOR, Circuit Judge.

Empire HealthChoice Assurance, Inc. ("Empire") appeals from a judgment entered in the United States District Court for the Southern District of New York (Cote, J.) dismissing for lack of subject matter jurisdiction Empire's contract action against Denise McVeigh, as administratrix of Joseph McVeigh's estate, for reimbursement of insurance benefits. Because the Federal Employees Health Benefits Act, 5 U.S.C. §§ 8901-8914, does not affirmatively authorize the creation of federal common law in this case, federal common-law rule-making is only appropriate if the operation of state law would "`significant[ly] conflict'" with "uniquely federal interest[s]." Boyle v. United Techs. Corp., 487 U.S. 500, 507, 508, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988). Because no such conflict has been demonstrated in this dispute, Empire's action arises under state, not federal, law. Accordingly, we affirm the district court's dismissal of the action for lack of subject matter jurisdiction. See 28 U.S.C. § 1331; Empire HealthChoice Assurance v. McVeigh, No. 03 Civ. 2728, 2003 WL 22171693 (S.D.N.Y. Sept.18, 2003).

BACKGROUND

The Federal Employees Health Benefits Act ("FEHBA") charges the United States Office of Personnel Management ("OPM") with negotiating and regulating health benefits plans for federal employees. See 5 U.S.C. § 8902(a). Pursuant to FEHBA, OPM entered into a contract in 1960 with the Blue Cross and Blue Shield Association ("BCBSA") to establish a nationwide fee-for-service health plan (the "Plan"), the terms of which are renegotiated annually.¹ Plaintiff-appellant Empire is the entity that administers the Plan to federal employees in New York State.

Defendant-Appellee Denise Finn McVeigh ("McVeigh") administers the estate of Joseph E. McVeigh ("Decedent"), a former enrollee in the Plan. The Decedent suffered injuries in an accident in 1997 and received $157,309.06 in benefits from the Plan between 1997 and 2001, the year of his death. McVeigh subsequently brought state tort actions on behalf of herself, the Decedent and a minor child against the parties who had allegedly caused Decedent's injuries. McVeigh received $3,175,000 when the lawsuit settled in 2003.

Prior to the entry of the settlement, Empire became aware of the agreement and notified McVeigh that it had a lien on the Decedent's share of the settlement for $157,309.06. McVeigh agreed to place $100,000 of the Decedent's share of the settlement funds into escrow pending resolution of Empire's claims.

On April 18, 2003, Empire filed suit against McVeigh for $157,309.06 in the United States District Court for the Southern District of New York. The complaint was based on a subrogation and reimbursement provision contained in the Statement of Benefits of the Plan. Under this provision, an enrollee who receives benefits in connection with an injury in addition to compensation from a third party must reimburse the Plan the amount of benefits paid.² Empire's complaint alleged that McVeigh breached this provision and sought a judgment declaring that pursuant to the Plan, FEHBA, its regulations and federal common law, Empire was entitled to reimbursement from McVeigh for the amount of benefits paid for Decedent's injuries.

McVeigh moved for dismissal of the action on the grounds that, inter alia, the district court lacked subject matter jurisdiction. In response, Empire claimed that the court had jurisdiction under 28 U.S.C. § 1331 because federal common law governed its reimbursement claim. In the alternative, Empire argued that the Plan itself constituted federal law. District Court Judge Denise Cote rejected both of Empire's theories and granted McVeigh's motion to dismiss for lack of subject matter jurisdiction on September 18, 2003. See Empire HealthChoice Assur., 2003 WL 22171693, at * 3-*5.

DISCUSSION

A.

We review de novo a district court's legal conclusions with respect to its subject matter jurisdiction. Gualandi v. Adams, 385 F.3d 236, 240 (2d Cir.2004). Empire claims that federal jurisdiction exists pursuant to 28 U.S.C. § 1331, which grants federal district courts original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." Section 1331 jurisdiction — that is, federal question jurisdiction — "exists where 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.'" Greenberg v. Bear, Stearns & Co., 220 F.3d 22, 25 (2d. Cir.2000) (quoting Franchise Tax Bd. v. Const. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)); see also Marcus v. AT & T Corp., 138 F.3d 46, 52 (2d Cir.1998). Though the plaintiff is generally "the master of the complaint," id., a plaintiff cannot create federal jurisdiction under § 1331 simply by alleging a federal claim where in reality none exists. See Perpetual Securities, Inc. v. Tang, 290 F.3d 132, 137 (2d Cir.2002). Subject matter jurisdiction will lie only where the court determines that "`the substance of [the plaintiff's] allegations raises a federal question.'" D'Alessio v. New York Stock Exchange, Inc., 258 F.3d 93, 100 (2d Cir.2001) (emphasis omitted) (citation omitted). The existence of a federal question must be determined solely by reference to the plaintiff's own claim — not by reference to "statements raised in anticipation or avoidance of possible defenses that may be interposed." Briarpatch Ltd., L.P v. Phoenix Pictures, Inc., 373 F.3d 296, 304 (2d Cir.2004); see also Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

FEHBA does not provide a federal statutory cause of action for insurance carriers to vindicate their rights under FEHBA-authorized contracts. Thus, federal jurisdiction exists over this dispute only if federal common law governs Empire's claims. See Woodward Governor Co. v. Curtiss-Wright Flight Sys., Inc., 164 F.3d 123, 126 (2d Cir.1999) ("It is beyond dispute that if federal common law governs a case, that case presents a federal question within the subject matter jurisdiction of the federal courts, just as if the case were governed by a federal statute."). The ability of federal courts to fashion federal common law, however, is "severely limited." In re Gaston & Snow, 243 F.3d 599, 606 (2d Cir.2001); see also O'Melveny & Myers v. FDIC, 512 U.S. 79, 87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994) (stating that the "cases in which judicial creation of a special federal rule would be justified ... are ... few and restricted" (citation and internal quotation marks omitted)). Absent congressional authorization, see Texas Indus. v. Radcliff Materials, Inc., 451 U.S. 630, 641, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981), courts may only create federal common law where the operation of state law would (1) "`significant[ly] conflict'" with (2)" `uniquely federal interests,'" Boyle v. United Techs. Corp., 487 U.S. 500, 507, 508, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988); see also O'Melveny, 512 U.S. at 87, 114 S.Ct. 2048; Woodward, 164 F.3d at 127. These circumstances were present, for instance, in Boyle, where the Supreme Court held that federal common law provided a defense shielding a federal defense contractor from liability under state law for defective design. 487 U.S. at 509-12, 108 S.Ct. 2510. The "state-imposed duty of care," the Court found, was "precisely contrary" to a duty imposed by the government contract. Id. at 509, 108 S.Ct. 2510.

Empire argues that its contract dispute with McVeigh satisfies the "uniquely federal interests" prong of Boyle. Reimbursement, Empire explains, directly affects the United States Treasury and the cost of providing health benefits to federal employees. Moreover, Empire contends, Congress has expressed its interest in maintaining uniformity among the states with respect to the benefits of its health plans.

We need not address these arguments, because we find that regardless of the strength or importance of the federal interests at stake, Empire has failed to demonstrate that the operation of New York state law creates an "an actual, significant conflict" with those interests. Woodward, 164 F.3d at 127; see also id. ("[I]n disputes between two private parties, federal courts ... have shown a marked reluctance to displace state law by finding a significant conflict with a federal interest."). Tellingly, Empire's briefs on appeal fail to mention a single state law or state-imposed duty that runs contrary to the federal interests asserted in this case.

Because it cannot identify any way in which the operation of state law creates an actual conflict, Empire is left to speculate about the various harms that "might" result from state-by-state adjudication of suits brought by insurance carriers under FEHBA-authorized contracts. Empire argues, for example, that state law would undermine the federal interest in uniformity because enrollees in some states "might" successfully avoid reimbursement while others would have to repay. Empire also contends that uncertainties associated with the application of...