Washington, DC, October 13, 2009 -- The Supreme Court granted certiorari in a case involving the Federal Employees Health Benefits Act (FEHBA), Health Care Service Corporation v. Pollitt, No. 09-38 (U.S.).  Health Care Service Corporation (HCSC) is represented by Miller & Chevalier member Anthony Shelley, head of the firm's ERISA and Fiduciary Litigation practice.  HCSC is the Blue Cross and Blue Shield entity that administers for individuals receiving medical services in Illinois a nationwide health benefits plan for federal employees known as the Blue Cross and Blue Shield Service Benefit Plan (the Plan), which was created pursuant to FEHBA by government contract between the federal government and the Blue Cross and Blue Shield Association.

The case concerns a state court suit that had been removed to federal court. In the action, the federal government had instructed the Plan retroactively to terminate the enrollment of a particular federal employee's family coverage and change it to self-only coverage, resulting in the retroactive denial of benefits for a dependent.  Later, the federal government indicated that it had made a mistake and that the family coverage should be re-instated as if never canceled.  The Plan followed the government's directive to terminate family coverage and then immediately re-instated family coverage when the federal government corrected the government's earlier error, including paying all relevant benefits claims.  Nonetheless, the federal employee sued HCSC, not the government, in state court and sought millions of dollars for emotional distress resulting from the temporary termination of coverage.  After removal to federal court, the district court held that HCSC properly removed the case to federal court, that FEHBA preempts the lawsuit, and that the government was the party actually at fault and against whom a remedy (if any) would exist.

But the Seventh Circuit then vacated the district court's decision.  It held first that, under the Supreme Court's prior decision in a FEHBA case regarding subrogation, Empire v. McVeigh, removal under what is known as the "complete preemption" doctrine is unavailable.  It also held that removal under the federal officer removal statute, 28 U.S.C. § 1442(a)(1), could be sustained only if the Plan acted pursuant to direct orders from the federal government.  The federal officer removal statute permits persons acting under federal officers, traditionally including government contractors, to remove a state court case to federal court.  The Seventh Circuit remanded the federal officer removal issue back to the district court for further fact-finding.

In seeking certiorari, HCSC asserted that the Seventh Circuit had erroneously extended Empire v. McVeigh beyond its subrogation setting and that the Seventh Circuit's complete preemption and federal-officer-removal rulings also were inconsistent with other Supreme Court precedent and in conflict with almost all other relevant Circuit court precedent.  The Supreme Court now has granted certiorari, and oral argument likely will be held in February 2010.

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