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No. 05-200

In the Supreme Court of the United States

EMPIRE HEALTHCHOICE ASSURANCE, INC., DBA
EMPIRE BLUE CROSS BLUE SHIELD, PETITIONER

v.

DENISE F. MCVEIGH, AS ADMINISTRATRIX
OF THE ESTATE OF JOSEPH E. MCVEIGH

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER

PAUL D. CLEMENT
Solicitor General
Counsel of Record
PETER D. KEISLER
Assistant Attorney General
EDWIN S. KNEEDLER
Deputy Solicitor General
JAMES A. FELDMAN
Assistant to the Solicitor
General
MARK B. STERN
ALISA B. KLEIN
SCOTT A. HERSHOVITZ
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

MARK A. ROBBINS
General Counsel
KATHIE ANN WHIPPLE
Deputy General Counsel
JAMES S. GREEN
Associate General Counsel
JILL GERSTENFIELD
SUSAN WHITMAN
Attorneys
Office of Personnel
Management
Washington, D.C. 20415

QUESTION PRESENTED

Whether federal question jurisdiction exists over a suit by afederalgovernment contractor to enforce a provision in a health benefits planforfederal employees that is part of a government contract under theFederalEmployees Health Benefits Act of 1959, 5 U.S.C. 8901 et seq.

In the Supreme Court of the United States

No. 05-200

EMPIRE HEALTHCHOICE ASSURANCE, INC., DBA
EMPIRE BLUE CROSS BLUE SHIELD, PETITIONER

v.

DENISE F. MCVEIGH, AS ADMINISTRATRIX
OF THE ESTATE OF JOSEPH E. MCVEIGH

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER

INTEREST OF THE UNITED STATES

Pursuant to the Federal Employees Health Benefits Act of 1959(FEHBA),5 U.S.C. 8901 et seq., the United States enters into contracts withcarriersto provide health benefits to federal employees, annuitants, and theirdependents. The question presented in this case is whether there isfederal jurisdictionover a suit by a FEHBA carrier against an enrollee to enforce a term ofa FEHBA contract. The federal government has a substantial interest inthe uniform enforce ment of FEHBA contracts, in the costs of FEHBA, inthe terms and conditions of federal employment, and in the wel fare offederalemployees. At the Court's invitation, the Solicitor General filed anamicus brief on behalf of the United States atthe petition stage of this case.

STATEMENT

1. Congress enacted the Federal Employees Health Ben efits Act of1959,5 U.S.C. 8901 et seq., to establish a compre hensive program that would"assure maximum health benefits for employees at the lowest possiblecost to themselves and to the Government." H.R. Rep. No. 957, 86thCong. 1st Sess. 4 (1959). Today, approximately eight million federalemployees,retirees, and their dependents receive health insurance through plansunderFEHBA, at a total cost of about $31 bil lion per year in premiums, $22billionof which is paid by the federal government. OPM Announces SmallestAverageFEHB Premium Increase in Nine Years (Sept. 15, 2005)<http://www.opm.gov/news/opm-announces-smallest-average-FEHB-premium-increase-in-nine-years,961.aspx>.

FEHBA confers broad authority on the Office of Person nelManagement(OPM) to administer the Federal Employees Health Benefits Program, see5U.S.C. 8901-8913, and to pro mulgate regulations necessary to carry outthe statute's ob jectives, see 5 U.S.C. 8913. The statute gives OPMauthorityto contract with carriers to offer health benefits plans to fed eralemployees,annuitants, and dependents. 5 U.S.C. 8902, 8903. Such plans must meetcriteria established by OPM, and each contract must contain "a detailedstatement of benefits offered and shall include such maximums,limitations,exclu sions, and other definitions of benefits as the Office considersnecessaryor desirable." 5 U.S.C. 8902(d).

Federal employees may "elect to enroll or not to enroll within60 days after becoming eligible." 5 C.F.R. 890.301(a); see 5 U.S.C.8905(a). Employees enroll pursuant to the con tract between the carrierand OPM, Pet. App. 3a n.1, and they are bound by the terms of thatcontract. See Christiansen v. National Sav. & Trust Co., 683 F.2d520, 530 (D.C.Cir. 1982). Each enrollee must be issued an "appropriate document"set ting forth or summarizing the "(1) services or benefits, including maximums, limitations, and exclusions, to which the enrollee or theenrollee and any eligible family members are entitled thereunder; (2)procedurefor obtaining benefits; and (3) principal provisions of the planaffectingthe enrollee and any eligible family members." 5 U.S.C. 8907(b).

By statute, the government and the enrollee share respon sibilityforpremiums payable to the plan. 5 U.S.C. 8906 (2000 & Supp. II 2002).The employing agency (or OPM for annu itants) pays approximately 75% ofthe individual plan's pre mium as part of its payroll costs funded bygeneralappropria tions. 5 U.S.C. 8906(b)(1) and (2); 5 U.S.C. 8906(f) (Supp.II2002). Premiums are deposited into a special fund called the EmployeesHealth Benefits Fund (Fund) in the United States Treasury. 5 U.S.C.8909(a).

Under the type of fee-for-service plan at issue in this case, thecarrierdraws against the Fund on a "checks-presented" basis to pay forcovered health care services. 5 U.S.C. 8909(a); 48 C.F.R. 1632.170(b).Any balances in the Fund are not the property of the carriers. Rather,a carrier's profit, if any, comes from a negotiated service charge. SeeNational Ass'n of Postal Supervisors v. United States, 21 Cl. Ct. 310,315(1990) ("The service charge is the only profit element of FEHBA. ** * [The] carrier may not make a profit on the premium chargesthemselves."),aff'd, 944 F.2d 859 (Fed. Cir. 1991); see also 48 C.F.R. 1615.902. Anysurplus attributable to a plan may be used, at OPM's discretion, toreducefuture government and employee contributions, increase plan bene fits,ormake a refund to the government and plan enrollees. 5 U.S.C. 8909(b); 5C.F.R. 890.503(c)(2).

The government ultimately decides whether a claim for medicalservicesshould be paid under the program. 5 U.S.C. 8902(j). If a carrier deniespayment of a claim, the plan enrollee or other covered individual mayseekOPM review. 5 C.F.R. 890.105(a)(1). OPM's final determination regardingthe claim is subject to judicial review in federal court under theAdministrativeProcedure Act, 5 U.S.C. 701, 706. See, e.g., Muratore v. OPM, 222 F.3d918, 920 (11th Cir. 2000).

FEHBA includes an express preemption provision, which states that"[t]heterms of any contract under this chapter which relate to the nature,provision,or extent of coverage or benefits (including payments with respect tobenefits)shall supersede and preempt any State or local law, or any regula tionissuedthereunder, which relates to health insurance or plans." 5 U.S.C.8902(m)(1). The provision was originally enacted "to establishuniformityin Federal employee health benefits and coverage." H.R. Rep. No. 282,95th Cong., 1st Sess. 1 (1977). It was broadened in 1998, Pub. L. No.105-266,§ 3(c), 112 Stat. 2366, "to strengthen the ability of nationalplans to offer uniform benefits and rates to enrollees regard less ofwherethey may live," to "strengthen the case for try ing FEHB programclaims disputes in Federal courts rather than state courts," and to"prevent carriers' cost-cutting ini tiatives from being frustratedby State laws." H.R. Rep. No. 374, 105th Cong., 1st Sess. § 3,at 9 (1997).

2. The largest plan in the FEHBA program is the Blue Cross BlueShieldService Benefit Plan. Pursuant to 5 U.S.C. 8902(a), OPM has enteredintoannual contracts with the Blue Cross Blue Shield Association, acting onbehalf of petitioner and other participating local Blue Cross BlueShieldaffiliates. The contract provides that "[b]y enrolling or acceptingser vices under this contract, [enrollees and their eligible dependents]are obligated to all terms, conditions, and provisions of thiscontract." J.A. 90.

The contract also provides that "[t]he Carrier shall pro vide thebenefits as described in the Certified Brochure Text found in AppendixA,"J.A. 89, and that "[t]he Carrier's subrogation rights, procedures,and policies, including recov ery rights, shall be in accordance withtheCertified Brochure Text," J.A. 100. The Certified Brochure Text isidentical, other than in format, to the Statement of Benefits suppliedtoeach enrollee. See 5 U.S.C. 8907(b). Indeed, the Certified BrochureTextrecites that it "is based on text incorporated into the contractbetweenOPM and [the carrier]." J.A. 128.

The Statement of Benefits has a reimbursement provision requiringplanparticipants to repay benefits if they receive compensation from athirdparty for an injury or illness for which benefits were paid.1 If theparticipantdoes not volun tarily reimburse the plan, the contract requires thecarrierto make a "reasonable effort to seek recovery of amounts to which itis entitled to recover in cases which are brought to its attention,"and to "subrogate under a single, nation-wide pol icy to ensureequitableand consistent treatment for all Mem bers under the contract," J.A.95. Amounts received as reim bursement must be credited to the TreasuryFund, either through a cost reduction or a cash refund to the Fund. See48 C.F.R. 31-201.5, 1631.201-70; see also C.A. App. A876-A877 ¶ 7.

3. Joseph E. McVeigh was an enrollee in the FEHBA plan administeredby petitioner. McVeigh suffered injuries in an automobile accident in1997and received approximately $157,309 in FEHBA benefits prior to hisdeathin 2001. In 2003, respondent Denise McVeigh (as administratrix ofMcVeigh'sestate) recovered $3,175,000 in settlement of the estate's tort suitarisingout of the accident. Pet. App. 3a.

When it learned of the settlement, petitioner sought reim bursementfor the benefits it had provided to McVeigh. Re spondent agreed toplace$100,000 in escrow pending litiga tion. See Pet. App. 3a. In April2003,petitioner commenced this action against respondent in the UnitedStatesDistrict Court for the Southern District of New York, seeking reimbursementof the $157,309 in benefits it had paid. See ibid. The complaintinvokedthe district court's federal question jurisdiction, alleging that the"actionis founded on [FEHBA]; on federal contracts and regulations establishedpursuant to FEHBA; and on federal common law." J.A. 41. The com plaintsought declaratory relief, a judgment for $157,309, and ordersrequiringrespondent to pay the $100,000 in escrow and an additional $57,309 topetitioner. J.A. 47. The district court granted respondent's motion todismiss thecomplaint for lack of subject matter jurisdiction. Pet. App. 54a-62a.

4. a. A divided panel of the court of appeals affirmed, holdingthat"[petitioner's] claims are breach-of-contract claims arising understate law." Pet. App. 24a. Because FEHBA does not provide an expressstatutory cause of action for a carrier suit against an enrollee, thecourtconcluded that "federal jurisdiction exists over this dispute onlyif federal common law governs [petitioner's] claims." Id. at 5a. Citingand quoting Boyle v. United Technologies Corp., 487 U.S. 500, 507(1988), the court stated that federal common law governs only when "theoperation of state law would (1) significant[ly] conflict with (2)uniquelyfederal interests." Pet. App. 6a.

The court did not dispute petitioner's contention that itsreimbursementaction "directly affects the United States Treasury and the cost ofproviding health benefits to federal employees." Pet. App. 6a. Thecourt also did not dispute peti tioner's contention that "Congresshas expressed its interest in maintaining uniformity among the stateswithrespect to the benefits of its health plans." Ibid. The courtconcluded,however, that petitioner failed to show that the operation of New Yorkstatelaw creates 'an actual, significant conflict' with those interests."Id. at 6a-7a. In the court's view, the fact that "uncertaintiesassociatedwith the application of state law 'might'" impose fiscal costs on thefederal govern ment and the fact that "enrollees in some states 'might'suc cessfully avoid reimbursement while others would have to repay"were "speculations" that "do not suffice to satisfy the conflictprong of Boyle." Id. at 7a.

The court also rejected the suggestion that federal ques tionjurisdictionexists by virtue of FEHBA's preemption provision, 5 U.S.C. 8902(m)(1),which provides that "[t]he terms of any contract under [FEHBA] whichrelateto the nature, provision, or extent of coverage or benefits (includingpaymentswith respect to benefits)" preempt "any State or local law * ** which relates to health insurance or plans." Pet. App. 10a &n.5. The court found "highly problematic" constitutional difficultieswere raised by the fact that Section 8902(m)(1)'s "plain languagediffersfrom typical preemption provisions by unambiguously providing forpreemptionby contract," rather than preemption by federal statutory or commonlaw. Id. at 11a. The court concluded that Section 8902(m)(1) could besaved by narrowly construing it to require that "[t]he federal lawpreempting state law may be federal common law or the FEHBA statuteprovisionsthemselves, but it must be law-not contract terms." Id. at 14a.

The court's ultimate holding on preemption, however, did notconcernany distinction under Section 8902(m)(1) between federal contract termsand federal statutory or common law. Instead, opining that "thepresumptionagainst federal pre emption * * * should guide our analysis," Pet.App. 15a, the court offered a narrow view of the preemption provisionina different respect. Addressing the clause providing that Sec tion8902(m)(1)preempts only state laws that "relate[] to health insurance or plans,"the court held that there was no showing that the dispute in this case"implicatesa specific state law or state common-law principle" that "relate[s]to health insurance" under Section 8902(m)(1). Id. at 15a.

b. Judge Sack concurred, acknowledging that petitioner had "madea substantial showing that * * * this case impli cates 'uniquelyfederalinterests.'" Pet. App. 25a (quoting Boyle, 487 U.S. at 504). Hesuggestedthat if, in a future case, a carrier could identify significant ways inwhich state law would conflict with the policies underlying FEHBA,federalquestion jurisdiction would exist. See ibid.

c. Judge Raggi dissented. See Pet. App. 27a-45a. She explained that"FEHBA contracts are enforceable through common-law breach of contractactions." Id. at 29a-30a. In her view, because petitioner broughtthis action and in its pleadings "relies exclusively upon federal law,"the court needed to decide "only whether federal common law does infact govern claims to enforce rights under a FEHBA plan." Id. at 34a.She concluded that it does, explaining that FEHBA's preemptionprovisioncontemplates that the terms of a FEHBA plan "will uniformly beconstruedand enforced according to federal common law," id. at 44a.

5. Petitioner filed a petition for panel rehearing and re hearingenbanc. In an amicus brief filed in support of the petition, the UnitedStatesargued that federal jurisdiction exists in this case, both because theclaimis based on a fed eral cause of action under the analysis in JacksonTransitAuthority v. Local Division 1285, 457 U.S. 15, 22 (1982), and becausefederallaw is in any event a "necessary element" of petitioner's claim,see City of Chicago v. International Coll. of Surgeons, 522 U.S. 156(1997). Pet. App. 72a-76a.

In an opinion denying panel rehearing, the court acknowl edged thatthe "critical factor" in the Jackson Transit analy sis congressionalintent. Pet. App. 48a. In the court's view, FEHBA's preemptionprovision"addresses the extent to which federal law will govern FEHBA-relatedclaims" and establishes that state law controls. Id. at 48a-49a. Thecourt also rejected the contention that federal law is a "necessaryelement" of petitioner's claim for relief, although the court providedno separate analysis of that point. Id. at 49a n.4. Finally, the courtstated that its "discussion of the constitu tional difficultiesinherentin a literal reading of § 8902(m)(1) was not an essentialcomponentof [its] holding that § 8902(m)(1) does not authorizejurisdiction." Id. at 49a. The court stated that even if the provision"posed noconstitutional concern," its analysis of the "relates to healthinsurance or plans" language "makes clear that the provision doesnot cre ate jurisdiction here." Id. at 49a-50a. The court concludedthat "[r]econsideration of the constitutional issue therefore couldnot affect the outcome of the case." Id. at 50a.

Judge Raggi noted that she would vote to grant rehearing for thereasonsstated in her original dissent. Pet. App. 51a. The petition forrehearingen banc was denied without opin ion. Id. at 52a-53a.

SUMMARY OF ARGUMENT

Under long-familiar principles, a case "arises under fed eral law"within the meaning of 28 U.S.C. 1331 if "a well- pleaded complaintestablishes either that federal law creates the cause of action or thatthe plaintiff's right to relief neces sarily depends on resolution of asubstantial question of fed eral law." Franchise Tax Bd. v.ConstructionLaborers Vaca tion Trust, 463 U.S. 1, 27-28 (1982). Under either ofthosealternatives, this case arises under federal law.

I. Jackson Transit Authority v. Local Division 1285, 457 U.S. 15(1982),presented the question whether a suit to en force a contractcontemplatedby a federal statute states a federal claim. The Court held that, ifCongressintended "that the rights and duties contained in th[e] contracts befederal in nature," then suits to enforce them "state[] federalclaims" and may be brought in federal court. Id. at 23.

Suits to enforce FEHBA contract terms may be brought in federalcourt,because Congress clearly intended the rights and duties in FEHBAcontractsto be federal in nature. The government is a party to a FEHBA contract,and it has long been settled that construction of government contractspresents "questions of federal law not controlled by the law of any State."United States v. County of Allegheny, 322 U.S. 174, 183 (1944),limitationon other grounds recognized, United States v. County of Fresno, 429U.S.452, 462 n.10 (1978).

The structure of FEHBA leads to the same conclusion. The federalgovernmenthas an overwhelming interest in at tracting able workers to the federalworkforce and, therefore, in the terms and conditions of federalemployment,including the FEHBA program. The government has a similarly substantialinterest in the health and welfare of the federal work ers upon whom itrelies to carry out its functions. In addition, the federal governmenthas a direct financial interest in the operation of the FEHBA programand,specifically, in the reimbursement provisions of a FEHBA contract.Petitionerpaid the benefits in this case out of a fund in the United StatesTreasury,and reimbursements are likewise credited to that fund. Indeed, becausethe carrier's profits are based solely on a negotiated service charge,theUnited States-and not the carrier-is the sole beneficiary of asuccessfulreim bursement action. FEHBA's preemption provision, which broadlypreemptsstate laws that affect "benefits" or "pay ments with respectto benefits" under FEHBA, 5 U.S.C. 8902(m)(1), further reinforces theconclusion that Congress intended the rights and obligations underFEHBAcontracts to be entirely federal in nature. Accordingly, there isfederaljurisdiction over disputes concerning those rights.

II. Federal jurisdiction also lies in this case because, even iftheCourt concludes that it is necessary to look to state law to supply thecause of action, all elements of the claim on the merits arenonethelessfederal in character. The case seeks to enforce the terms of agovernmentcontract whose con struction and application is governed wholly byfederallaw.

Recognizing federal jurisdiction over suits to enforce thereimbursementor other provisions of FEHBA contracts would not disturb Congress'sapprovedbalance between state and federal judicial remedies. Congress should bepresumed to be aware of the basic rule that the validity andconstructionof federal contracts present questions of federal law, and FEHBA'spreemptionprovision confirms that understanding. Congress therefore would haveassumedthat federal courts would have jurisdiction over suits to enforce FEHBAcon tracts. Indeed, the congressionally approved federal-state balancewould be upset by requiring suits to enforce FEHBA contracts to belitigatedin state courts.

The federal issues are actually disputed and substantial. The casewas decided on respondent's motion to dismiss peti tioner's complaint.In those circumstances, unless the plead ings demonstrate a narrowerscopeof dispute, a court should assume that respondent disputes petitioner'sassertions that federal law entitles it to relief. Moreover, all of thesignifi cant legal issues that could arise would likely involve the construction and application of a FEHBA contract, and they would thereforepresent substantial questions of federal law.

ARGUMENT

I. A CARRIER'S SUIT FOR REPAYMENT OF FEHBA BEN EFITS STATES AFEDERALCLAIM

A. Under Jackson Transit, A Suit To Enforce A Contract ContemplatedBy A Federal Statute States A Federal Claim If Congress Intended TheContractualRights And Duties To Be Federal In Nature

Where Congress has enacted a statute that contemplates theformationof contracts, this Court has explained that the question whether suitsto enforce such contracts arise under federal law turns on whetherCongressintended that the rights and duties arising from the contracts befederalin na ture. If Congress intended that those rights and duties befederal,then a suit under the contract arises under federal law.

Under the statute at issue in Jackson Transit Authority v. LocalDivision1285, 457 U.S. 15 (1982), a state or local government, as a conditionofreceiving federal assistance for acquisition of a private transitcompany,was required to make "fair and equitable arrangements * * * to protectthe interests of employees affected by such assistance," including"the preservation of rights * * * under existing collective bargaining agreements." Id. at 17-18 & n.2 (quoting 49 U.S.C. 1609(c)(1976)). A local government that received federal funds for acquiring aprivate bus company entered into a contract with its employees underthatprovision. When the local govern ment later attempted to terminate thecontract, the union filed suit in federal court, alleging, inter alia,thatthe com pany had violated the federal statute and the collective-bargainingagreement. Id. at 19. The question presented was whether there wasfederaljurisdiction over the union's claims. Jackson Transit, 457 U.S. at 19.

The Court concluded in Jackson Transit that, because the statute"contemplates"contracts between local governments and their unions, "it is reasonableto conclude that Congress expected [those contracts], like ordinarycontracts,to be en forceable by private suit upon a breach." 457 U.S. at 20-21.The availability of a federal forum for such a suit, however, turned onwhether the suit would be federal or state in na ture-i.e., "whetherCongress intended" actions under the transit contracts "to setforth federal, rather than state, claims." Id. at 21; see ibid.("precisequestion" is "whether the union's contract actions are federalcauses of action").

The Court explained that the absence of an express cause of actioninthe statute does not establish that Congress in tended to forecloseone,because "on several occasions the Court has determined that a plaintiffstated a federal claim when he sued to vindicate contractual rights setforth by fed eral statutes, despite the fact that the relevant statuteslacked express provisions creating federal causes of action." 457U.S. at 22 (citing International Ass'n of Machinists v. Cen tralAirlines,Inc., 372 U.S. 682, 692 (1963) (a contract made pursuant to a federalstatute"has * * * the imprimatur of the federal law upon it" and is therefore"enforceable by federal law, in the federal courts."); Norfolk& W. R.R. v. Nemitz, 404 U.S. 37 (1971); Transamerica MortgageAdvisors,Inc. v. Lewis, 444 U.S. 11, 18-19 (1979); Mills v. Electric Auto-LiteCo.,396 U.S. 375 (1970); and American Surety Co. v. Shulz, 237 U.S. 159(1915)). Those cases, the Court continued, "dem onstrate that suits toenforcecontracts contemplated by fed eral statutes may set forth federalclaimsand that private parties in appropriate cases may sue in federal courttoen force contractual rights created by federal statutes." JacksonTransit,457 U.S. at 22. The "critical factor" in determining whethersuch suits set forth federal claims is the "congressio nal intentbehind the particular provision at issue." Ibid. If Congress intendedthatthe contracts under the statute "be creations of federal law"and "that the rights and duties con tained in those contracts befederalin nature," then suits un der the contracts "state[] federal claims."Id. at 23. If not, such suits "present[] only state-law claims." Ibid.

Applying that analysis in Jackson Transit itself, the Courtconcludedthat the contract was governed by state law. The court noted that"laborrelations between local governments and their employees are the subjectof a longstanding statu tory exemption from the National LaborRelationsAct" and that the transit funding statute "evinces no congressionalintent to upset the decision in the National Labor Relations Act topermitstate law to govern the relationships between local governmentalentitiesand the unions representing their employees." 457 U.S. at 23-24. Inaddition, the Court's re view of the legislative history of the transitstatute made it "absolutely clear that [Congress] did not intend tocreate a body of federal law applicable to labor relations betweenlocalgovernmental entities and transit workers," id. at 27. The court thusheld that the union's claim was not based on a fed eral cause ofaction,and that Congress had intended the con tracts required by the transitfundingstatute "to be governed by state law applied in state court." Id. at29.2

B. Congress Intended That Rights And Duties Under FEHBA ContractsBe Governed By Federal Law

Under the Jackson Transit analysis, the rights and duties createdbyFEHBA contracts are federal in nature. That is generally true of rightsand obligations under any contract to which the federal government is aparty. It is particularly true of FEHBA contracts, given the paramountand pervasive federal interest in FEHBA and the lack of any evidencethatCongress intended state law to play any role in defining FEHBA benefitsor construing FEHBA contracts. While the statutory structure implicatedby Jackson Transit included a clear contrary indication in the NLRA's"anti-preemption"provision for local governments, FEHBA includes an equally clearreinforcingindication in its preemption provision. An action to enforce a FEHBAcontractthus sets forth a federal claim, and it arises under federal law.

1. It has long been settled that "[t]he validity and con structionof contracts through which the United States is ex ercising itsconstitutionalfunctions, their consequences on the rights and obligations of theparties,the titles or liens which they create or permit, all present questionsoffederal law not controlled by the law of any State." County ofAllegheny,322 U.S. at 183 (citing cases); Clearfield Trust Co. v. United States,318U.S. 363, 366-367 (1943); cf. Boyle, 487 U.S. at 504 ("[O]bligationsto and rights of the United States under its contracts are governedexclusivelyby federal law."). A FEHBA contract is a federal contract throughwhich the United States exercises its power to provide for a federalworkforceto carry out its other constitutional functions. A FEHBA contractthereforeaddresses the "uniquely federal interests," ibid., in the relationshipbetween the United States and its employees, through whom the UnitedStatespursues its fundamental "interest in getting the Government's workdone," id. at 505. Moreover, the reimbursement clause at issue hereinures directly to the benefit of the Treasury. Ac cordingly, therightsand duties created by a FEHBA contract "present questions of federallaw not controlled by the law of any State." Allegheny County, 322U.S. at 183. Although Congress could provide that state law governsparticularrights and duties under a federal contract, it has not done so here.

2. An examination of the FEHBA program reinforces the distinctlyfederalnature of the rights and duties under a FEHBA contract. Because thegovernment'sability to hire and retain employees is a prerequisite to its abilitytocarry out all of its other constitutional functions, the establishment,organization, and governance of the federal workforce is a corefunctionof the federal government. The federal govern ment has a self-evidentinterestin the terms and conditions of federal employment, because it dependsonattracting able employees to the federal workforce. Moreover, FEHBA contracts serve to maintain the health of the federal workforce. Thefederalgovernment has a great interest in the health and welfare of those uponwhom it relies to carry out its functions.

The FEHBA program was established to serve those in terests. It wasdesigned as a part of the compensation pack age offered to federalemployees,in an effort to "bring the Government abreast of most privateemployers"and to "improv[e] the competitive position of the Government withrespectto private enterprise in the recruitment and retention of competentcivilianpersonnel." H.R. Rep. No. 957, 86th Cong. 1st Sess. 2 (1959). Itwas also based on a "recognition on the part of the public that bothbasic health and major medical insurance coverages are essential toprotectwage- earners and their families." Id. at 2. FEHBA's ultimate goalis "to facilitate and strengthen the administration of the activ itiesof the government generally." Id. at 1.

The mechanics of the FEHBA program also reflect the strength andpervasivenessof the federal interest. Benefit payments derive from accounts that arefunded and adminis tered by the United States and maintained on thebooksof the United States Treasury. See p. 3, supra. Benefit determina tionsunder the plans established by the contracts between OPM and carriersaremade by the carrier in the first in stance, but are subject toadministrativereview by OPM and to judicial review in an APA action against OPM, notasuit against the private carrier. See pp. 3-4, supra. In promulgat ingregulations in 1995 to clarify the administrative and judi cialprocedurefor review of claims, OPM explained that "[h]ealth insurance contractsunder the FEHB Program are federal contracts under 5 U.S.C., Chapter89,"and that, "[a]ccordingly, legal actions concerning disputes arisingor relating to those contracts are controlled by federal, rather thanStatelaw." 60 Fed. Reg. 16,037 (1995).

The federal government has a direct interest in any action broughtbythe United States or a carrier to enforce the con tract, particularly areimbursement action like this case. Any repayment of benefits pursuantto a reimbursement clause such as the one at issue in this case must becredited to the Treasury account. FEHBA carriers have no property interest in any balance remaining in the Treasury fund after bene fits arepaidout and reimbursements received. Any surplus may be used by thegovernment,at OPM's discretion, to lower future rates, reduce future governmentandemployee contri butions, increase plan benefits, or make a refund tothegov ernment and plan enrollees. See p. 3, supra. Accordingly, thecarrierhas no direct stake in a reimbursement suit, although it fulfills acontractualobligation to the government. The proceeds of the suit belong to theUnitedStates.

In short, there is a strong federal connection with and interest inall aspects of the FEHBA program. Those fea tures strongly reinforcetheapplicability of the general rule that the rights and obligationscreatedby contracts entered into by the federal government are federal innature. Under the Jackson Transit analysis, a suit to enforce a term ina FEHBAcontract therefore states a federal claim.

3. Although the United States is not a party to this suit,petitioner'sclaim plainly seeks to enforce a term in a FEHBA contract. FEHBAcarriersare obligated under their con tracts with the government to providehealthbenefits to FEHBA enrollees and their eligible dependents. See Pet.App.3a n.1. Conversely, FEHBA enrollees and those who accept FEHBA benefitsare subject to the conditions on those benefits stated in the contractbetweenthe carrier and the government. See J.A. 90 ("By enrolling or acceptingservices under this contract, [participants] are obligated to allterms,conditions, and provisions of this contract."); see also Restate ment(Second) of Contracts § 309 cmt. (c) (1979) ("The con duct ofthe beneficiary, * * * like that of any obligee, may give rise toclaimsand defenses which may be as serted against him by the obligor.").3 Oneof the condi- tions to which participants are subject is thereimbursementprovision, which requires that all tort recoveries "must be used toreimburse [the carrier] in full for benefits [the car rier] paid." Pet.App. 4a. And the carrier is obligated under the FEHBA contract topursue reimbursement claims against participants, although the directbenefitsof any recovery flow to the United States. See J.A. 19. Because thiscaseis a suit to enforce provisions in the FEHBA contract between OPM andthecarrier, petitioner's complaint states a federal claim.

C. FEHBA's Preemption Provision Confirms That Federal Law GovernsThis Suit

1. Congress's intent that rights and duties under a FEHBA contractbe federal in nature is strongly reinforced by FEHBA's preemptionprovision,5 U.S.C. 8902(m)(1). As its history makes clear, see p. 4, supra,Section8902(m)(1) was designed to ensure that "[f]ederal employees indifferentstates would [not] have different reimbursement obligations and hencedifferentnet benefits," a result that would be "con trary to the uniformitygoal of FEHBA in general and its preemption provision in particular."Blue Cross & Blue Shield v. Cruz, 396 F.3d 793, 799 (7th Cir.2005),petition for cert. pending, No. 04-1657; see Pet. App. 34a-44a (Raggi,J.,dissenting); Botsford v. Blue Cross & Blue Shield of Montana, Inc.,314 F.3d 390, 394 (9th Cir. 2002).

Section 8902(m)(1) mandates that FEHBA contract provi sions that"relateto the nature, provision, or extent of cover age or benefits (includingpayments with respect to benefits) shall supersede and preempt anyStateor local law or any regulation issued thereunder, which relates tohealthinsur ance or plans." 5 U.S.C. 8902(m)(1). By virtue of Section8902(m)(1),any state law that purports to limit, expand, or in any way affectcoverageor benefits (or payments with respect to benefits) under FEHBA plans ispreempted. Even apart from the fact that state law concerning thereimbursementissue would be preempted by this provision, the preemption provisionreinforcesthe pervasively federal nature of the un derlying contracts forpurposesof the Jackson Transit analy sis. But there is no doubt that thereimbursementprovisions of FEHBA contracts in particular have preemptive force underSection 8902(m)(1), and their preemptive force displaces state lawsthatwould affect the right to reimbursement. FEHBA contract terms thatrequirereimbursement "relate to the * * * extent of coverage or benefits"(because they limit benefits by requiring reimbursement from any tortrecovery)and they specifically "relate to * * * payments with respect tobenefits"(because they require such payments to be returned to the carrier underthe specified circumstances). Any state laws that would affectreimbursementrights "relate to health insurance or plans," because they wouldaffect the plan's rights to reimbursement under the FEHBA contract. Cf.FMC Corp. v. Holliday, 498 U.S. 52, 58-60 (1990) (state stat utebarringsubrogation or reimbursement from claimant's tort recovery, is coveredbyERISA's preemption clause, 29 U.S.C. 1144(a), because it "relate[s]to" ERISA plan).

Because there can be no state law to apply, it follows thatreimbursementmust be governed by federal law, including FEHBA itself, the terms oftheFEHBA contracts, and fed eral common law where necessary to fill in theinterstices. In short, Section 8902(m)(1) unambiguously confirms thattherights and obligations under FEHBA contracts are governed by federallaw. Under Jackson Transit, that is sufficient to establish that a suitto enforcethose rights or obligations states a federal claim. The preemptionprovisionreinforces the federal nature of those suits, just as the"anti-preemption"policy of the NLRA pointed in the opposite direction in Jack sonTransit.

2. The court of appeals committed two errors in address ing Section8902(m)(1). First, it misapprehended the signifi cance of Section8902(m)(1)in this case. Second, its statement that the provision is "highlyproblematic, and probably uncon stitutional," Pet. App. 11a, iserroneous.

a. The court misapprehended the significance of Section 8902(m)(1)in stating that "[w]ithout any showing that the dispute [in this case]implicates a specific state law or state common-law principle'relat[ing]to health insurance,' § 8902(m)(1) does not authorize federalpreemptionof state law in this case." Pet. App. 15a. Here, Section 8902(m)(1)categorically ousts state law in the field of health insurance orplans,leaving no state law to apply.

Moreover, the Jackson Transit analysis does not turn on whether theplaintiff can identify a particular provision of state law that wouldbeapplicable to a particular federal con tract and would be preempted.Instead,under Jackson Tran sit, the existence of a federal claim turns onwhetherCon gress intended that "the rights and duties contained in * * *contracts[contemplated by FEHBA] be federal in nature." 457 U.S. at 23. Thebreadth of Section 8902(m)(1) confirms what would follow in any eventfroman analysis of the rest of the FEHBA scheme: that the federal interestinrights and duties under FEHBA contracts is predominant and pervasive,thatthere is nothing to suggest that Congress intended state law to haveanyrole in the FEHBA scheme, and that the rights and duties under FEHBAcontracts-especiallyrights and duties having to do with benefits and payments with re spectto benefits-are therefore "federal in nature."

The court of appeals recognized that this Court has con strued theterm"relates to" in other preemption provisions "quite broadly." Pet. App.18a. See, e.g., Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,139 (1990) (concluding in ERISA case that "a state law may 'relateto' a benefit plan, and thereby be pre-empted, even if the law is notspecificallyde signed to affect such plans, or the effect is only indirect");Moralesv. TWA, 504 U.S. 374, 383 (1992) (concluding that words "relating to"in the Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat.1705,"express a broad pre-emp tive purpose"). The court concluded,however, that it should adopt a narrower interpretation of FEHBA'spreemptionprovision, see Pet. App. 19a-20a, thus leaving more scope for state lawunder FEHBA. That was error. ERISA regulates the benefits plans thatprivateemployers offer their employ ees. FEHBA governs the health benefitplansthat the fed eral government provides its own employees. It is exceedinglyunlikely that Congress intended a broader role for state law in thecaseof federal employees, relative to private em ployees.

b. As to the court's constitutional doubts, there is no basis foranydoubt about the constitutionality of Section 8902(m)(1) when it isgiventhe comprehensive construction its express terms require.4 FEHBA is avalidexercise of Congress's power under the Spending Clause, U.S. Const.Art.I, § 8, Cl. 1, to provide for the maintenance of the FederalGovernmentitself, as well as its power under the Necessary and Proper Clause,Art.I, § 8, Cl. 18. A FEHBA contract is a govern ment contract, madepursuantto federal statute and regula tions. Congress may provide that statelawhas no role in the construction or application of such a contract.M'Cullochv. Maryland, 17 U.S. (4 Wheat.) 316, 427 (1819) ("It is the veryessenceof supremacy * * * to modify every power vested in subordinategovernments,as to exempt its own operations from their own influence."). Indeed,it is long established that the terms of a government contract may begovernedby fed eral common law (and thus displace state law) just as surely asifthose terms were reflected in a statute or regulation. See, e.g.,Boyle,487 U.S. at 512 (finding preemption based on conflict between state lawand the terms of a federal procure ment contract); County of Allegheny,322 U.S. at 183 (holding that the terms of a federal contract underwhichmachinery in a private factory would be property of the United Statespreempted state laws under which factory owner would have been found toownthe machinery).

D. Neither The Result In Jackson Transit Itself Nor The Result InMiree v. DeKalb County Supports The Court Of Appeals' Holding

1. The Court's holding in Jackson Transit itself, that the contractbetween the municipality and the union in that case was governed bystatelaw, casts no doubt on the conclusion that a FEHBA contract is governedby federal law. First, although the federal funding statute in JacksonTransit re quired the formation of the contract as a condition ofreceiving funds, the federal government itself was not a party to thecontract. The federal government is a party to a FEHBA contract.Second, the resultin Jackson Transit turned on an "anti-preemption" provision ina separate statute making clear Congress's intent that contractsbetweenmunicipalities and their unions should be governed by state, notfederal,law, and on legislative history showing clearly that state law shouldgovern. There is no federal law or legislative history demonstratingthat Congressintended that the rights and duties under FEHBA contracts should begovernedby state, not federal, law; to the contrary, the preemption provisioninFEHBA itself makes it clear that such contracts are governed by federallaw, and the legislative history of that provision shows that it wasenactedto promote uniformity under na tional benefit plans and "to strengthenthe case for trying FEHB program claims disputes in federal courtsratherthan State courts." H.R. Rep. No. 374, supra, at 9. Finally, thefederal government's ongoing interests in most of the rights and dutiescreated by the contract between the municipality and the union inJacksonTransit were minimal. The federal government's interests in the rightsand duties created by a FEHBA contract-and in their uniform applicationthrough out the country-are predominant and pervasive. Indeed, thefederalgovernment, not the carrier, would be the direct bene ficiary of anyrecoveryin the suit.

2. In its opinion on the petition for rehearing, the court ofappealsalso sought support (Pet. App. 49a) in this Court's decision in Mireev.DeKalb County, 433 U.S. 25, 30 (1977). In that case, a contract betweenthe Federal Aviation Adminis tration (FAA) and the County required theCountyto restrict land adjacent to an airport to uses compatible with airportoperations. Certain parties who were the victims of an air planeaccidentsued the County in a diversity action in federal court, alleging thattheaccident was caused by the County's breach of the provision in itscontractwith the FAA and that they were third-party beneficiaries entitled toenforcethat provision. This Court held that state law, not federal law,governedthe question "whether private parties may, as third- partybeneficiaries,sue a municipality for breach of the FAA contracts." Id. at 32.

Miree does not support the court of appeals' holding here. Mireeinvolvedonly the "narrow" question, 433 U.S. at 29, whether state or federallaw governed the question of third- party beneficiary status in adiversitycase otherwise properly brought in federal court, where the federalcontractsaid noth ing about any such beneficiary. By contrast, this case involvesenforcement for the benefit of the United States of a right toreimbursementfrom a third-party beneficiary that is an express provision in a FEHBAcontractand that implicates the core subject matter of the contract. Inaddition,the Court concluded in Miree that "[t]he operations of the UnitedStates"would not "be burdened or subjected to uncertainty" by "variantstate-law interpretations" on the narrow question of third-partybeneficiarystatus. Id. at 30. Indeed, the Court relied on the fact that resolutionof that question would "have no direct effect upon the United Statesor its Treasury." Id. at 29. By contrast, the "operations"and financial interests of the United States are closely tied to theuniformconstruction and application of the rights and duties created by FEHBAcontracts-and, in particular, to the reimbursement provi sions in thosecontracts. Although the government's interests in Miree were "toospeculative" and "far too remote * * * to justify the applicationof federal law," id. at 32-33, the govern ment's interests in therightsand duties created under FEHBA contracts and their reimbursementprovisionsare direct, clear, and substantial. They are far more than suffi cientto require the application of federal law.

II. FEDERAL LAW IS A NECESSARY ELEMENT OF THE CARRIER'S CLAIM.

Although "federal-question jurisdiction is invoked by and largeby plaintiffs pleading a cause of action created by fed eral law,"there is "another longstanding, if less frequently encountered, varietyof federal 'arising under' jurisdiction." Grable & Sons MetalProds., Inc. v. Darue Eng'g & Mfg., 125 S. Ct. 2363, 2366-2367(2005). Thus, "a claim arises under federal law if federal law providesanecessary element of the plaintiff's claim for relief." Jones v. R.R.Donnelley & Sons Co., 124 S. Ct. 1836, 1842 (2004). In Grable, forexample, the Court explained that where "a state-law claim necessarilyraise[s] a stated federal issue, actually disputed and substan tial,whicha federal forum may entertain without disturbing any congressionallyapprovedbalance of federal and state judicial responsibilities," then federaljurisdiction is war ranted. 125 S. Ct. at 2368. See City of Chicago v.Interna tional Coll. of Surgeons, 522 U.S. 156 (1997); Merrell DowPharms.,Inc. v. Thompson, 478 U.S. 804, 808-809 (1986); Smith v. Kansas CityTitle& Trust Co., 255 U.S. 180 (1921). Petitioner's claim forreimbursementarises under federal law on this basis as well.

1. Even if this Court determined that petitioner's claim is notbasedon a federal cause of action, it nonetheless would necessarily raise afederalissue. Petitioner's complaint at tempts to enforce the reimbursementprovisionin petitioner's contract with the government; it invokes a federalstatute(FEHBA), a federal contract, and federal common law. Any questionconcerningthe interpretation or application of the reimbursement provisionnecessarilypresents a question of federal law. That is because, as explainedabove,the validity and construction of a federal contract necessarily presentquestions of "federal law not controlled by the law of any State."County of Allegheny, 322 U.S. at 183. Any divergence from thattime-honoredprinciple in this case would not be warranted, because, as alsoexplainedabove, the federal gov ernment has an overriding interest (and theStateshave no interest) in the FEHBA program and in its uniform applica tionacrossthe country. Further, the pervasive federal inter est in mattersarisingunder FEHBA contracts is expressly confirmed by FEHBA's preemptionprovision,which estab lishes that state law has no role in resolving questionsaboutbenefits and payments for benefits under the FEHBA pro gram. See pp.15-18,19-22, supra.

2. Recognizing federal jurisdiction in this case would not"disturb[]any congressionally approved balance of federal and state judicialresponsibilities." Grable, 125 S. Ct. at 2363. Congress has neversuggested that FEHBA contractdisputes should be litigated in state court, and there is nolongstandinghistory of state-court resolution of FEHBA disputes. To the contrary,Congressshould be presumed to have been aware of the settled principle thatfederalcontracts are construed and applied in accordance with federal law, andFEHBA's preemption provision confirms that understanding. Congressthereforewould have assumed that federal courts would be open to suits underFEHBAcontracts, and indeed that was one of the reasons for the expansion ofthepreemption provi sion in 1998. See p. 4, supra.5

This case is also poles apart from Merrell Dow Pharma ceuticalsInc.v. Thompson, 478 U.S. 804 (1986), in which rec ognizing federaljurisdictionwould have disturbed the federal-state balance intended by Congress.SeeGrable, 125 S. Ct. at 2369-2370. In Merrell Dow, the Court held thatfederal jurisdiction did not lie over plaintiff's state-law tort claimagainsta drug company alleging that the firm's violation of federalmisbrandingprohibitions constituted negligence per se under state law. In thatcase,the application of federal law to resolve the case was not the productofany decision by Congress; rather, state common law simply borrowedfederalstandards. As the Court explained in Grable, Merrell Dow viewed "thecombination of no federal cause of action and no preemption of stateremediesfor misbranding as an important clue to Congress's conception of thescopeof jurisdiction to be exercised under § 1331." Id. at 2370.Indeed, "[a] general rule of exercising federal jurisdiction over stateclaims resting on federal mislabeling and other statutory violationswould* * * have heralded a potentially enormous shift of tradition allystatecases into federal courts." Id. at 2370-2371.

In Merrell Dow, Congress's failure to preempt state-law actionsbasedon a misbranding theory indicated Congress's intent that such actionsshouldproceed essentially as state- law suits in state courts. By contrast,inthis case Congress's enactment of Section 8902(m)(1) broadly to preemptany state law applicable to health insurance or plans establishes thatCongressdid not intend that actions concerning rights and duties under FEHBAcontractsshould proceed essentially as state-law actions in state court.Similarly,while recognizing federal jurisdiction in Merrell Dow would have causeda huge shift of cases traditionally litigated in state court intofederalcourt, there is no substantial tradition of enforcing reimburse ment(orany other) provisions in FEHBA contracts in state court. Thus, torequirelitigation about rights and duties un der FEHBA contracts to beconductedin state court would upset the federal-state balance that Congressintended.

3. The federal issues in this case are "actually disputed andsubstantial" within the meaning of Grable. Respondent has not yetfiled an answer in this case, because respondent successfully moved todismissthe complaint before the an swer was due. In those circumstances, itshouldbe assumed as a general matter under Grable that respondent disputesallof the elements necessary for petitioner to prevail; otherwise, a partycould always obtain a dismissal of a case on jurisdic tional grounds,solong as it had not yet filed an answer or other pleading indicating thescope of the actual dispute. Accordingly, unless the pleadingsdemonstratethat the defen dant has limited the dispute to issues solely of statelaw,a court should ordinarily assume that a complaint that bases its rightto relief on application of federal law presents questions of federallawthat are "actually disputed."

Even if state law provides the bare cause of action, federal lawwouldoverwhelmingly predominate. This is not a case like those discussed inGrable, in which there is some present dispute about title to land thatwould otherwise be governed entirely by state law, and in which thesolepotential federal issue in the particular case involves the federalstatutesunder which the title was originally granted decades previously by theUnitedStates. 125 S. Ct. at 2369 n.3 (citing Shulthis v. McDougal, 225 U.S.561(1912)). In that situation, concerns about transforming a broad rangeofwhat are fundamentally state-law cases into federal cases has led theCourtto impose the "actually disputed and substantial" limitation toensure that the suit is genuinely federal in character.

No such concerns are present here. Even if state law pro vided thebare cause of action, all of the significant legal is sues that couldarisewould likely involve the construction and application of a FEHBAcontractprovision, which would nec essarily present questions of federal law.Courtsaddressing reimbursement questions in other cases have had to decidesuchissues as the scope of the reimbursement obligation and extent, if any,to which the reimbursement should take ac count of attorney's feesexpendedby participant to obtain the tort recovery. See, e.g., Arkansas Dep'tofHealth & Human Servs. v. Ahlborn, cert. granted, No. 04-1506 (Sept.27, 2005). Those types of questions, which are likely to predominate ina case such as this, present substantial issues of federal law.

Furthermore, this is not a context in which factual issues arelikelyto predominate. The potential factual questions in this case would haveto do with the amount of FEHBA bene fits paid and the amount of tortrecoveryMcVeigh actually received. There is no reason to believe that either ofthose relatively easily ascertainable figures is likely to be the subjectof any significant dispute. But even if there is such a factual disputein a particular case-and even if there is no dispute about theinterpretationof federal law or the FEHBA contract in the case-federal jurisdictionisproper because the factual issues arise in the application of thefederalcon tract, the suit seeks to recover benefits whose payment in thefirstinstance is governed by federal law, the suit is perva sively federalincharacter on the merits, and the direct finan cial and other interestsofthe United States in the dispute make it especially appropriate thatthecourts of the United States should be open to its resolution. Cf. 28U.S.C.1345.

In short, permitting such cases to proceed in federal court isconsistentwith the paramount federal interest in the FEHBA program. Thus, evenassumingthat such claims are not based on a federal cause of action,recognizingfederal jurisdiction is consistent with "the commonsense notion thata federal court ought to be able to hear claims recognized under statelawthat nonetheless turn on substantial questions of federal law, and thusjustify resort to the experience, solici tude, and hope of uniformitythata federal forum offers on federal issues." Grable, 125 S. Ct. at 2367.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

PAUL D. CLEMENT
Solicitor General
PETER D. KEISLER
Assistant Attorney General
EDWIN S. KNEEDLER
Deputy Solicitor General
JAMES A. FELDMAN
Assistant to the Solicitor
General
MARK B. STERN
ALISA B. KLEIN
SCOTT A. HERSHOVITZ
Attorneys

MARK A. ROBBINS
General Counsel
KATHIE ANN WHIPPLE
Deputy General Counsel
JAMES S. GREEN
Associate General Counsel
JILL GERSTENFIELD
SUSAN WHITMAN
Attorneys
Office of Personnel
Management

FEBRUARY 2006

1 The provision states in relevant part:

If another person or entity . . . causes you to suffer an injury orillness, and if we pay benefits for that injury or illness, you mustagreeto the following:

All recoveries you obtain (whether by lawsuit, settlement, orotherwise),no matter how described or designated, must be used to reimburse us infullfor benefits we paid. Our share of any recovery extends only to theamountof benefits we have paid or will pay to you or, if applicable, to yourheirs,administrators, successors, or assignees.

Pet. App. 4a.

2 The Court observed that, strictly speaking, the district court hadjurisdiction under 28 U.S.C. 1331 to hear the union's suit, because itallegeda violation of the agreement contemplated by the transit fundingstatuteand prayed for relief under federal law, and because the union'sassertedfederal claims were not "wholly insubstantial and frivolous." 457 U.S.at 21 n.6 (quoting Bell v. Hood, 327 U.S. 678, 681 (1946)). "Thus," theCourt concluded, "the District Court had jurisdictionfor the purposes of determining whether the union stated a cause ofactionon which relief could be granted." Ibid. On similar reasoning, thedistrict court had jurisdiction here. And for the reasons stated in thetext, petitioner does have a cause of action under federal law.

3 The right to reimbursement that petitioner seeks to enforce arisesfrom the FEHBA contract. The most accurate way to describe therelationshipbetween the parties is that the FEHBA participant is a third-partybeneficiaryof the FEHBA contract, and his conduct in enrolling in FEHBA oracceptingFEHBA benefits has subjected him and his eligible dependents to thereimbursementcondition. Alternatively, however, the same result would follow if (a)the participant were viewed as having entered into an independentcontract,committing him to make reimbursement, when enrolling in a FEHBA plan oraccepting benefits, or (b) the action is viewed as an action forrestitution(legal and/or equitable) for sums withheld in violation of the terms ofthe FEHBA contract, see Great-West Life & Annuity Ins. Co. v.Knudson,534 U.S. 204, 213 (2002); County of Allegheny, 322 U.S. at 183 ("thetitles or liens which [federal contracts] create or permit * * *presentquestions of federal law") (emphasis added). Cf. Sereboff v.Mid-AtlanticMedical Servs., Inc., No. 05-260 (to be argued Mar. 28, 2006). Forpresentpurposes, what is important is that Congress intended that theprovisions in a federal FEHBA contractbe enforceable, and this is an action to enforce them.

4 It was in any event inappropriate for the court to addressquestionsabout the constitutionality of a federal statute in a case where thecourt'sresult in the end did not hinge on those doubts or their resolution.SeePet. App. 49a-50a; United States v. Raines, 362 U.S. 17, 21 (1960);Ashwanderv. TVA, 297 U.S. 288, 347 (1936) (Brandeis, J., concurring) ("[I]fa case can be decided on either of two grounds, one involving aconstitutionalquestion, the other a question of statutory construction or generallaw,the Court will decide only the latter").

5 It is true that Congress did not create an express cause of actionfor reimbursement under FEHBA. Cf. 5 U.S.C. 8912 (granting federalcourtsjurisdiction "of a civil action or claim against the United Statesfounded on" FEHBA) (emphasis added). But that is insufficient to defeatfederal jurisdiction; the same was true in Grable itself, whereCongresshad similarly created a cause of action against the federal governmenttoquiet title, but had not expressly provided for such an action betweenprivateparties. See 125 S. Ct. at 2369 n.4; cf. Verizon Md.,Inc. v. PublicServ.Comm'n, 535 U.S. 635, 643 (2002) ("The mere fact that some acts aremade reviewable should not suffice to support an implication ofexclusionas to others.") (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 141(1967)).