Empire Healthchoice Assurance, Inc. v. McVeigh
The Supreme Court ruled that an insurance company's contract-based claim to be reimbursed from a federal employee's state-court accident settlement does not belong in federal court, even though the company administers a health plan created by federal law.
The decision narrows when disputes connected to federal programs can be heard in federal court, sending this kind of routine reimbursement dispute back to state court and requiring a clearer signal from Congress before such claims count as federal cases.
How it got here: A federal trial court dismissed Empire's reimbursement suit for lack of jurisdiction, the Second Circuit affirmed, and the Supreme Court agreed to review the jurisdictional question.
The Case in Depth
What happened
Joseph McVeigh, a federal employee covered by the Blue Cross Blue Shield health plan for government workers, was injured in an accident. Empire, the company that administers that plan in New York, paid $157,309 for his medical care. After McVeigh died and his estate settled a state-court lawsuit against the people blamed for the accident, Empire wanted to be repaid out of the settlement money, with no deduction for the estate's legal costs.
The question before the Court
Could a health insurer that administers a federal employees' health plan sue a beneficiary's estate in federal court to get repaid out of a state-court accident settlement?
The Court's answer
No — the Court ruled that Empire's reimbursement claim does not belong in federal court under 28 U.S.C. §1331. FEHBA's own jurisdiction provision opens federal court only to suits against the United States itself, and nothing in the statute or the contract shows Congress meant reimbursement disputes between insurers and beneficiaries to be federal cases. The Court also found FEHBA's preemption clause too ambiguous and too narrow to create federal jurisdiction on its own.
The Court further rejected the argument that this case resembled Grable, where a lawsuit turned entirely on one recurring question of federal statutory meaning. Empire's claim, by contrast, depended on fact-specific, state-law-governed questions about the settlement and attorney's fees, so it did not qualify for the narrow federal-jurisdiction exception that Grable represents.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Federal employees and the insurers who administer their health plans will generally have to fight over reimbursement money in state court, not federal court, unless Congress says otherwise. The ruling also sharply limits how far a narrow exception for embedded federal issues can stretch, guiding lower courts on when claims touching federal programs still belong in state court.
What changes now
The judgment against Empire's federal lawsuit stands, so Empire must pursue any reimbursement claim in state court rather than federal court. The ruling is a final decision on the jurisdictional question, though it does not resolve whether Empire can succeed on the merits of its reimbursement claim under state law, nor does it decide whether FEHBA's preemption clause covers reimbursement claims at all.
What this does not decide
The Court expressly declined to decide whether FEHBA's preemption clause actually covers contract-based reimbursement claims like Empire's at all. It also left open whether, and how, state law might limit or reduce what Empire can recover, since those questions belong to whatever court eventually hears the reimbursement dispute.
Concurrences and dissents
Dissent — Justice Breyer
“There is little about this case that is not federal.”The dissent's opening argument that the case's pervasive federal character supports federal jurisdiction.
Justice Breyer argued the case was pervasively federal: a federal statute created the health plan, a federal agency negotiated the contract, federal funds paid the benefits, and any reimbursement would flow back to the federal Treasury. He would have applied Clearfield Trust's federal-common-law doctrine to govern the contract's meaning, and reasoned that because federal common law controlled, the claim necessarily arose under federal law for jurisdictional purposes, entitling Empire to sue in federal court.
How the Court got there
The legal reasoning, step by step
- The Court applied the standard test for federal-question jurisdiction: a case belongs in federal court only if federal law itself creates the lawsuit, or the outcome necessarily turns on resolving a real dispute over federal law.
- The Court rejected the idea that a 1943 precedent, Clearfield Trust Co. v. United States (a case about forged government checks), automatically supplies federal jurisdiction here, because in that case the United States itself was suing, which is what put the case in federal court in the first place; nothing like that applies to a private insurer's reimbursement claim.
- Looking to its 1982 decision in Jackson Transit Authority v. Transit Union, the Court asked whether Congress meant the reimbursement right in this federal contract to be treated as a creature of federal law. It found that FEHBA's own jurisdiction provision opens federal court only to suits against the United States itself, showing Congress knew how to grant federal jurisdiction when it wanted to and chose not to for reimbursement disputes between insurers and beneficiaries.
- The Court considered whether FEHBA's preemption clause, which displaces state law on plan 'coverage or benefits,' might itself hand this dispute to federal court, but found the clause ambiguous and, even if it applies to reimbursement claims at all, too narrow to convert them into automatic federal lawsuits.
- Finally, the Court compared this case to Grable & Sons Metal Products v. Darue, where a quiet-title suit qualified for federal court because it turned on one pure, recurring question of federal statutory meaning. Empire's claim, by contrast, was fact-specific and turned on ordinary state-law questions about the settlement and attorney's fees, so it fell outside that narrow category.
Doctrinal impact
Cases affected by this decision
Distinguishes Clearfield Trust Co. v. United States (318 U. S. 363)
The Court said this 1943 case doesn't apply because there the United States itself was the plaintiff, unlike here.
Distinguishes Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg. (545 U. S. 308)
The Court said Empire's fact-bound claim is unlike Grable's pure, recurring legal question, so it doesn't qualify for federal court.
Reaffirms Boyle v. United Technologies Corp. (487 U. S. 500)
The Court relied on Boyle's test for when state law must be displaced by federal common law.