No. 09-38

~n ~e

l’" Supreme Court, U.S.

FtLED

AUG ? :- 2009OFF~CEOF’rHEC~.E~K

~upreme E;eurt of the ~nitel~ ~tatee

HEALTHCARE SERVICE CORPORATION,

Petitioner,

v.

JULIA. POLLITT and MICHAEL A. NASH,

Respondents.

On Petition For A Writ Of CertiorariTo The United States Court Of Appeals

For The Seventh Circuit

BRIEF IN OPPOSITION

JULIA. POLLITT1800 Wedgewood Drive,

Apt. 109Gurnee, IL 60031847-293-7020

MICHAEL A. NASH12538 W. Bairstow AvenueBeach Park, IL 60087847-263-9504

Pro Se Respondents

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QUESTIONS PRESENTED

Respondents agree that question 2 of the Petition is

at issue. Question 1, however, assumes facts that arestill at issue themselves.

1. Whether Respondents’ lawsuit is preemptedunder the Federal Employees Health Benefits Act

("FEHBA"), 5 U.S.C. § 8902(m)(1).

la. Whether Respondents’ lawsuit challenges anyenrollment and or health benefit determination.

lb. Whether the Federal Employees Health Benefits

Act ("FEHBA"), 5 U.S.C. §§ 8901-14, establishes anexclusively federal remedial scheme for Respondents’complaints.

2. Whether Petitioner was a federal officer forpurposes of the Federal Officer Removal Statute, 28U.S.C. § 1442(a)(1), when it took the actions for whichit was sued.

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TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..................................i

TABLE OF CONTENTS .........................................ii

TABLE OF AUTHORITIES ...................................iv

I. STATEMENT OF THE CASE .....................1

A. Overview ................................................1

B. Fact At Issue ..........................................1

C. The Lawsuit ...........................................2

II. REASONS FOR DENYING THE WRIT ..... 5

A. Respondents’ Complaint Is Not Pre-empted Under The Federal EmployeesHealth Benefits Act ...............................5

1. FEHBA Preemption Is Limited .......5

2. Respondents’ Complaint ChallengesNo Coverage Determination ............5

3. Respondents’ Complaint ChallengesNo Benefits Determination ..............6

4. Respondents’ Complaint Does NotConcer:a Payments With Respect ToBenefits .............................................7

5. There Is No Circuit Split On Com-plete Preemption In The FEHBASetting ..............................................8

ooo111

III.

Bo

Co

Do

TABLE OF CONTENTS - Continued

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Page

2. Congress Never Intended To Elimi-nate Estoppel Or Bad Faith Claims.. 14

CONCLUSION .............................................15

FEHBA Establishes No Exclusive Rem-edy For Respondents’ Complaints .........9

FEHBA Establishes No ExclusiveRemedy For Respondent JuliPollitt’s Complaint ............................9

FEHBA Provides No Remedy At AllFor Respondent Michael A. Nash’sComplaint .........................................10

There Is No Circuit Split On TheTest For Complete Preemption ........11

Petitioner Was Not A Federal Officer ForPurposes Of Removal Jurisdiction .........12

1. This Case Is Not Inconsistent WithWatson v. Phillip Morris Cos ............12

There Is No Circuit Split OnApplication Of The Federal OfficerRemoval Statute To GovernmentContractors .......................................13

The Court Of Appeals Decision InNo Way Undermines The FEHBAProgram .................................................13

1. Respondents’ Complaint Does NotUndermine The Uniformity OfFEHBA Benefits ...............................13

iv

TABLE OF AUTHORITIES

CASES

Aetna Health Inc. v. Davila, 542 U.S.

Page

200(2004) .........................................................................9

Beneficial National Bank v. Anderson, 539 U.S.1 (2003) ................................................................9, 11

Blue Cross Blue Shield of Illinois v. Cruz, 495F.3d 510 (7th Cir. 2006) ....................................13, 14

Botsford v. Blue Cross Blue Shield of Montana,314 F.3d 390 (9th Cir. 2002) .....................................8

Bridges v. Blue Cross and Blue ShieldAssociation, 935 F. Supp. 37 (D.D.C. 1996) ..............9

Cedars-Sinai Med. Ctr. v. National League ofPostmasters, 497 F:3d 972 (9th Cir. 2007) ..............10

Empire Health Assurance, Inc. v. McVeigh, 547U.S. 677 (2006) ..................................................5, 7, 8

Houston Comrnuni#J Hospital v. Blue CrossBlue Shield of Texas, 481 F.3d 265 (5th Cir.2007) ..................................................................12, 13

Isaacson v. Dow Chem. Co., 517 F.3d 129 (2dCir. 2008) ...........................................................12, 13

Pollitt v. Health Care Service Corporation, 558F.3d 616 (7th Cir. 2009) ............................................8

Sullivan v. American. Airlines, 424 F.3d 267 (2dCir. 2005) ....................................................... 9, 10, 11

Watson v. Phillip Morris Cos., 551 U.S. 142(2007) .................................................................12, 13

V

TABLE OF AUTHORITIES - Continued

Page

STATUTES AND REGULATIONS

5 U.S.C. § 8902(m)(1) ...................................................5

28 U.S.C. § 1442(a)(1) .................................................12

5 C.F.R. § 890.101(a) ...................................................11

5 C.F.R. §§ 890.105 and 890.107 ............................6, 10

5 C.F.R. § 890.105(a)(1), (b)(2) ....................................11

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I. STATEMENT OF THE CASE

A. Overview

This is a case where Petitioner, an entity

operating on a fixed fee to administer a program ofinsurance, streamlined its operations to the pointwhere Respondents suffered injury as a result. Itfailed to reconcile its coverage records on a regularbasis and recklessly launched collection effortswithout proper justification. These were not fiduciaryduties but common law tort duties to persons towhom harm was foreseeable. The power to offsetrecoverable amounts against current payments tomedical providers was an instrumentality with whichany reasonable and prudent person would havebehaved more carefully than Petitioner did here.Respondents’ complaint is a tort action that does not

attempt to enforce any contract.

The fact that Petitioner may have been fulfillinga contractual obligation to the federal governmentwhen it did those things is of no importance. As longas Petitioner was not a federal officer, as it clearlywas not, its tort obligations to innocent parties had tocome before the contract. The damages thatRespondents seek will not be taken from any fundmaintained on behalf of the people of the UnitedStates but from Petitioner’s profits.

B. Fact At Issue

The question still at issue in this lawsuit is thedegree of control, if any, exercised by the United

2

States Department of Labor (DOL) over Petitioner’sactions. Petitioner alleges that it was only followingorders. Respondents argue that the weight of evi-dence available so t~r, including a very ambiguoussworn declaration by an employee of Petitioner,points to there having been no such orders.Respondents have twice requested evidence ofcorrespondence between Petitioner and other partiesthat might shed more light on the matter, but therequests, along with a motion for discovery to theDistrict Court, have not yet been honored. The

Seventh Circuit has ordered the District Court to holdan evidentiary hearing on the matter.

C. The Lawsuit

On July 31, 201)7 Petitioner began withholdingmoney otherwise due to ten medical providers forRespondents’ son. Letters to the providers explainedthat Respondents’ son had been uninsured since 2004and payments made on his behalf would have to berecovered. The money at stake was over $30,000.Petitioner sent Respondent Juli Pollitt copies of theletters, a "New" benefits card backdated to 2004, andthat was all. She received no other correspondence atthat time from any party. She was not told that therehad been a "benefits denial" or an "enrollmentdetermination," and was given no explanation of howthis happened or how to challenge it. Petitioneroffered providers the opportunity to appeal this actionbut made no such otter to her.

On September 10, Respondents sued Petitionerin state court for bad faith and for estoppel, based onRespondents’ reliance on payments made byPetitioner. They did not raise the question of whether

the son had been properly enrolled or whether suchpayments were ever correct. The son was not a partyto the suit. Respondents were not asserting his rightsbut their own. Respondent Michael A. Nash, who wasnot insured under this plan, joined in the suitbecause of his obligation, by court order, to pay half ofhis son’s uninsured medical expenses.

The prayer for relief in this lawsuit demandednot only damages for Petitioner’s bad faith but alsoreenrollment of Respondents’ son. No specialjustification was given for this latter demand, otherthan the same tort and estoppel theories as the restof the complaint. Respondents did not invoke anycontract language to support it.

After Respondents sued, Petitioner, for the firsttime, sought an enrollment determination from DOL,the federal agency offering the plan. DOL informedPetitioner that the boy had been insured all along.

Petitioner reenrolled the boy on October 3, 2007and informed Pollitt of this on October 5. They thenmoved the case to federal court, informed the Courtthat the matter was moot and motioned to have itdismissed. The Court dismissed Respondents’ com-plaint without prejudice and offered them theopportunity to submit an amended one.

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Respondents took time to verify that, as of lateNovember 2007, their credit standing was still atrisk. None of the providers that they contacted hadbeen repaid or even informed that they were goingto be repaid. The providers continued to holdRespondents accountable for that money. Respon-dents then filed a hastily written amended complaint,which they replaced five days later with a morecarefully worded one. It focused entirely on theallegations of bad faith in the first complaint, and leftout the claim of estoppel and the demand forreenrollment. Once again, the injuries alleged wereentirely to Respondents and their son was not aparty.

The Court held no evidentiary hearing on thesubject of federal direction, which Respondents hadquestioned, both in their amended complaint and in alater motion, and ignored Respondents’ motion fordiscovery on that issue. Ten months later, inSeptember of 2008, after many docket events, few ofthem initiated by Respondents, the Court issued anorder of dismissal. This order contained a statementthat Respondents had filed their first complaint onOctober 22, 2007, and that this was after they had

been notified of their son’s reenrollment. In fact,Respondents had filed nearly a month before suchnotification. That one statement was the majorreason for Respondents’ appeal.

II. REASONS FOR DENYING THE WRIT

A. Respondents’ Complaint Is Not Pre-empted Under The Federal EmployeesHealth Benefits Act

1. FEHBA Preemption Is Limited

The FEHBA preemption provision 5 U.S.C.§ 8902(m)(1), requires that "The terms of any contractunder this chapter which relate to the nature,provision, or extent of coverage or benefits (includingpayments with respect to benefits) shall supersedeany State or local law or any regulation issued thereunder which relate to health insurance or plans."

In Empire Health Choice Assurance, Inc. v.McVeigh, 547 U.S. 677 (2006), this Court noted that"Section 8902(m)(1)’s text does not purport to renderinoperative any and all state laws that in some waybear on federal employee-benefit plans ... and giventhat 8902(m)(1) declares no federal law preemptive,but instead, term of an OPM-BCBSA negotiatedcontract, a modest reading of the provision is inorder." 547 U.S. at 689.

2. Respondents’ Complaint ChallengesNo Coverage Determination

There is no coverage question at issue inRespondents’ lawsuit. All parties now agree thatRespondents’ son was always insured during the fouryears in question.

Petitioner cites 5 C.F.R. § 890.107(a) to arguethat the demand for re-enrollment in Respondents’original complaint meant that their suit should havebeen brought against "the employing office that madethe enrollment decisions," which Petitioner’s arguedwas DOL. However, DOL had made no such decision.Respondents sued the party that was taking moneyfrom their son’s doctors, for which the doctors weredunning them, because of that party’s own enrollmentdecision.

3. Respondents’ Complaint ChallengesNo Benefits Determination

This case is not a dispute over benefits. It is notabout those things to which one may be entitledunder the terms of a contract of insurance. Theamount of damages Respondents seek does notdepend in any way on what benefits might be due ormight have been due to them or their son.

In fact, the case has never involved a denial ofbenefits. Petitioner acknowledged this fact when itoffered Respondents no opportunity to appeal such adenial. At no time during the dispute have Respon-dents ever asked for a benefits determination. Theyhave never asked any party, any court of law or anyother party, to read any contract of insurance forthem and tell them what they or their son might beentitled to under its provisions. They have also neverasked for anything that might be theirs or their son’sby virtue of how an insurance plan is written. The

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estoppel recovery that they sought relied on benefitdeterminations made long ago and would have been the

same, had those determinations been correct or not.

4. Respondents’ Complaint Does NotConcern Payments With Respect ToBenefits

This is the area where this case most resemblesEmpire and where FEHBA preemption might apply.Both cases stemmed from carriers seeking reim-bursement from third parties that might be seen as"payments with respect to benefits." The sameargument to the contrary, however, suggested by thisCourt in Empire would apply here as well.

... a claim for reimbursement ordinarilyarises long after "coverage" and "benefits"questions have been resolved, and corre-sponding "payments with respect to benefits"have been made ... 8902(m)(1)’s words maybe read to refer to entitlement (or lackthereof) to Plan payment for certain health-care services ... and not to terms relatingto the carrier’s post payments right toreimbursement.

547 U.S. at 689.

In one respect, this case is even less of a federalmatter than that one. In Empire, the subrogationrecovery would have gone into a fund maintained onbehalf of the federal government. In this case,Respondents’ damages would come from Petitioner’sprofits and not from the fund.

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The most important similarity with Empire,however, involved the final resolution of the matter.In that case this Court decided that even if pre-emption applied in reimbursement situations, it was"not sufficiently broad to confer federal jurisdiction,"547 U.S. at 689, and remanded the question ofwhether it applied to the state court. That is exactlywhat the 7th Circuit did here, "Whether 5 U.S.C.8902(m)(1)... affects the suit, would be subject to thestate court’s consideration." Pollitt v. Health CareService Corporation, 558 F.3d at 616 (7th Cir. 2009).

5. There Is No Circuit Split On Com-plete Preemption In The FEHBASetting

The cases cited by Petitioner to support its viewof FEHBA preemption usually have one thing incommon. Someone received a benefits determinationthat he did not like and asked a court to read thecontractual provision, at issue and interpret it in adifferent way. Petitioner relies on one in particular toshow a supposed circuit split, Botsford v. Blue CrossBlue Shield of Montana, 314 F.3d 390 (9th Cir. 2002).In that case, plaintiff wanted more reimbursementthan the plan allowed for non-participating providers.Bruce Botsford was clearly asking the Court to givehis insurance contract a different interpretation thanthe carrier had given it. Respondents are not doingthat here.

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Similar facts were present in other cases cited byPetitioner. In Aetna Health Inc. v. Davila, 542 U.S.200 (2004), where plaintiffs sought reimbursement

for certain non-covered medical services, and inBridges v. Blue Cross and Blue Shield Association,935 F. Supp. 37 (D.D.C. 1996), where plaintiff wanteda smaller co-insurance charge than he had paid.Those cases are all entirely consistent with this one.The law is the same. The facts are different.

B. FEHBA Establishes No Exclusive Rem-edy For Respondents’ Complaints

1. FEHBA Establishes No ExclusiveRemedy For Respondent JuliPollitt’s Complaint

In Beneficial National Bank v. Anderson, 539U.S. I (2003), this Court stated the test for completepreemption was "whether Congress intended thefederal cause of action to be exclusive." 539 U.S. at 7.This Court stated that only three statutes met thistest, The Labor Management Relations Act of 1947,The Employee Retirement Income Security Act of1974 and the National Bank Act of 1863, 539 U.S. at7. Nowhere did it mention anything about FEHBA,which had been modified into its present form fiveyears earlier in 1998.

In Sullivan v. American Airlines, 424 F.3d 267(2d Cir. 2005), the Court further clarified the holding

in Beneficial. Preemption was never intended to denyplaintiffs a forum for their complaints, and it is

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essential that a statute allow them a federal one if itis going to be considered completely preemptive.

"When a state-law claim is removed to federal court,because a section of the LMRA, ERISA or theNational Bank Act preempts it, the district court maythen adjudicate the claim on the merits under therelevant preemptive statute." 424 F.3d at 276.

The authority of the federal courts in disputesbetween FEHBA Carriers and covered persons islimited to reviewing OPM determinations 5 C.F.R.

§890.105(a)(1), 5 C.F.R. §890.107(a), (c), (d)(3).OPM’s authority, in turn, is limited to reviewingbenefits denials by carriers. 5 C.F.R. § 890.105(a)(1),(e)(1). OPM has no authority to deal with tort claimsor questions of estoppel, and therefore those kinds ofdisputes could not have been heard originally infederal court. As the Court put it in Sullivan,"Because such disputes cannot be brought in federalcourt in the first instance, federal courts may nottake jurisdiction over them simply to dismiss them."424 F.3d at 276. FEHBA therefore offered no ex-clusive remedy for Respondents’ complaints.

2. FEHBA provides No Remedy At AllFor Respondent Michael A. Nash’sComplaint

Respondent Michael A. Nash is in many wayssimilar to the plaintiff in Cedars-Sinai Med. Ctr. v.National League of Postmasters, 497 F.3d 972 (9thCir. 2007). His financial interest in this matter is the

11

same as those of his Co-Respondent. He is not actingon behalf of anyone other than himself. However,because he is not a plan "covered individual" 5 C.F.R.§ 890.101(a), he has no access to the FEHBA enforce-ment mechanism, 5 C.F.R. §890.105(a)(1), (b)(1).Even if it is found that FEHBA somehow provides aremedy to his Co-Respondent it would still providenone to him and FEHBA preemption would not applyto him.

3. There Is No Circuit Split On TheTest For Complete Preemption

The standard for complete preemption applied by

the Seventh Circuit in this matter is the same as wasapplied in Beneficial and in all of the six circuits citedby Petitioner. Whether it is called "exclusive remedy"or "completely occupy," neither was met in thismatter. None of the six cases actually found completepreemption. Sullivan was a perfect example. Itdenied removal in a case involving the Railway LaborAct, stating that no form of preemption, complete orany other, was appropriate in that matter. FEHBAdoes not offer an exclusive remedy for RespondentJuli A. Pollitt’s complaint and none at all forRespondent Michael A. Nash. This case would havebeen decided the same way in any one of the circuits.

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C. Petitioner Was Not A Federal OfficerFor Purposes Of Removal Jurisdiction

1. This Case Is Not Inconsistent WithWatson v. Phillip Morris Cos.

The Federal Officer Removal Statute, 28 U.S.C.§ 1442(a)(1) specifies that actions are removable ifthey are against "any officer (or any person actingunder that officer).., sued.., for any act under color

of such office."

In Watson v. Pl~illip Morris Cos., 551 U.S. 142(2007), this Court discussed how one becomes such anofficer. This Court said that a private firm’s activitiesdo not necessarily fall under this statue even if theyare "highly supervised and monitored." 551 U.S. at147. It defined "acting under" to include "helping theGovernment produce an item that it needs ...performing a job that in the absence of a contractwith a private firm, the government would have hadto perform." 551 U.S. at 148.

Such "acting under" was found in Isaacson v.Dow Chem. Co., 517 F.3d 129, 136 (2d Cir. 2008). Thecontractor’s production of "Agent Orange" to win awar was considered a necessary government function.

Although it is a case dealing with immunity andnot removal, Respondents are persuaded by the

reasoning in Houston Community Hospital v. BlueCross Blue Shield of Texas, 481 F.3d 265 (5th Cir.2007). The Court cautioned that "Not every activity inwhich government might decide to engage is afunction of government in private hands," 481 F.3d at

13

272, and that FEHBA Carriers (are) not exercisingany governmental function because "it is notapparent that [the carriers] themselves perform anyfunction that OPM is itself charged with performing."481 F.3d at 270. Petitioner had no "official" duties anddid nothing in any "official" capacity.

2. There Is No Circuit Split OnApplication Of The Federal OfficerRemoval Statute To GovernmentContractors

The standard the Seventh Circuit applied for

who was a federal officer was consistent with Watson,Isaacson and Houston. The holding in Isaacson differsfrom this case for the same reason that it does fromthat in Houston. It applies the same law to a verydifferent set of facts, one in which a necessarygovernment function was being performed.

D. The Court Of Appeals Decision In NoWay Undermines The FEHBA Program

1. Respondents’ Complaint Does NotUndermine The Uniformity Of FEHBABenefits

In Blue Cross Blue Shield of Illinois v. Cruz, 495F.3d 510 (7th Cir. 2006), the Court examined thepublic policy issues Congress considered when itcreated preemption. It "wanted federal employees tohave the same benefits under their health plan nomatter what state they were in." 495 F.3d at 513. It

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stated that the fact that one insured might receivemore money from a provider because of a tort claim inaddition to his benefit claim did not make thebenefits any less uniform. "The benefits are uniform,though the net financial position of an insured whohas a potential tort claim is not." 495 F.3d at 513.

The fact that some other state might havedifferent rules on either bad faith or estoppel did notmake benefits provided under this plan any less

uniform. Nor is a state court determination on thesesubjects a benefits determination just because itmight improve the financial position of a beneficiary.

2. Congress Never Intended To Elimi-nate Estoppel Or Bad Faith Claims

Respondents were never entirely certain exactlywhat happened here or that their son’s disenrollmentmight not have been somehow justified under theterms of the plan. Estoppel is the obvious remedy inthis kind of situatiorL. It avoids all such questions. IfCongress had intended to deny it to people inRespondents’ position, and require them to confrontthat uncertainty, it would have said so when itestablished FEHBA preemption. The same can besaid of Respondents’ claim of bad faith. If Congresshad intended to allow FEHBA carriers to conducttheir business entirely without regard for those whomight be injured by that conduct, it would have saidthat as well.

III.

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CONCLUSION

Petitioner should be denied a writ of certiorari.

Respectfully submitted,

JULIA. POLLITT1800 Wedgewood Drive,

Apt. 109Gurnee, IL 60031847-293-7020

MICHAEL A. NASH12538 W. Bairstow AvenueBeach Park, IL 60087847-263-9504

Pro Se Respondents

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