• Jacks v. Meridian Resource Co., LLC & Blue Cross Blue Shield of Kansas City
  • March 11, 2013
  • Law Firm: Crowell Moring LLP - Washington Office
  • Appellant Blue Cross Blue Shield of Kansas City ("BCBS-KC") is a Federal Employee Health Benefit ("FEHB") plan or "carrier," which contracted with appellant Meridian Resource Company, LLC ("Meridian"), a Wisconsin vendor, for subrogation and reimbursement services. The appellee, Shannon Jacks, was in a car accident in 2007, received benefits from BCBS-KC for treatment of her injuries, then recovered funds for her injuries through a settlement with the third-party tortfeasor responsible for the accident. BCBS-KC asserted a lien on a portion of that settlement award equal to what it had paid for Jacks' benefits and Jacks sued - on her own behalf and on behalf of others similarly situated - on the grounds that Missouri state law prohibits such subrogation.

    BCBS-KC removed Jacks' suit to federal court, citing three separate grounds for doing so: (1) the Class Action Fairness Act ("CAFA") permits such removal; (2) federal question jurisdiction obtains because Jacks' claims turn on a question of federal common law; and/or (3) the case is appropriate for federal officer removal (summarized below) - the federal officer in this case being the Director of the Office of Personnel Management, which is responsible for implementing the FEHB Act. The federal district court granted Jacks' motion to remand the case to Missouri state court. BCBS-KC appealed that decision to the Eighth Circuit, which found that it had jurisdiction to review the appeal, except as it related to federal common law.

    The Eighth Circuit panel's review of the merits did not reach the question of removal under CAFA and only addressed federal officer removal under 28 U.S.C. § 1442(a). Federal officer removal is available to a defendant who can make a showing of each of four elements: (1) the defendant acted under the direction of a federal officer; (2) a causal connection relates the defendant's action to the officer's authority; (3) the defendant has a colorable federal defense to the claim at issue; and (4) the defendant is a "person" as the statute defines the term. Regarding elements (2) and (4), the panel made perfunctory observations that BCBS-KC met the "person" requirement and had pursued subrogation "because of" the health benefits plan it had contracted with OPM to perform. The panel also noted - without addressing its ultimate merits- BCBS-KC's "colorable federal defense" of preemption.

    The panel addressed the first element at greater length after noting that at least one district court in the Eighth Circuit had found that a FEHBA carrier does not act under the direction of OPM when pursuing subrogation rights because the terms of the FEHBA Plan that guide a carrier's conduct makes subrogation discretionary. The panel grounded its analysis of that element in the leading Supreme Court case on point, Watson v. Philip Morris Cos., Inc., 551 U.S. 142 (2007), which distinguished a private contractor's "simple compliance with the law" from its "direction" by a federal officer. Under Watson, the latter arises where there is "detailed regulation, monitoring, or supervision," and where the contractor "is helping the Government to produce an item that it needs." The panel found that BCBS-KC performance of its contract with OPM fit those criteria and also rejected Jacks' suggestion that such a conclusion would expand the scope of federal officer removal beyond what Watson prescribes.