Empire Healthchoice Assurance, Inc. v. McVeigh

(Slip Opinion) OCTOBER TERM, 2005 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

EMPIRE HEALTHCHOICE ASSURANCE, INC. DBA

EMPIRE BLUE CROSS BLUE SHIELD v. MCVEIGH

AS ADMINISTRATRIX OF THE ESTATE OF MCVEIGH

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

No. 05–200. Argued April 25, 2006—Decided June 15, 2006
Under the Federal Employees Health Benefits Act of 1959 (FEHBA),
the Office of Personnel Management (OPM) negotiates and regulates
health-benefits plans for federal employees. See 5 U. S. C. §8902(a).
FEHBA provides for Government payment of about 75% of health-
plan premiums, and for enrollee payment of the rest. §8906(b). Pre
miums thus shared are deposited in a special Treasury Fund, from
which carriers draw to pay for covered benefits, §8909(a). FEHBA
has a preemption provision which provides: “The terms of any con
tract under this chapter which relate to the nature, provision, or ex
tent of coverage or benefits (including payments with respect to bene
fits) shall supersede and preempt any State or local law . . . which
relates to health insurance or plans.” §8902(m)(1). The Act contains
no provision addressing carriers’ subrogation or reimbursement
rights. FEHBA’s sole jurisdictional provision vests federal district
courts with “original jurisdiction . . . of a civil action or claim against
the United States.” §8912. While an OPM regulation channels dis
putes over coverage or benefits into federal court by designating OPM
the sole defendant, see 5 CFR §890.107(c), no law opens federal
courts to carriers seeking reimbursement.
OPM has contracted with the Blue Cross Blue Shield Association
(BCBSA) to provide a nationwide fee-for-service health plan adminis
tered by local companies (Plan). The Plan obligates the carrier to
make “a reasonable effort” to recoup amounts paid for medical care,
and the statement of benefits the carrier distributes alerts enrollees
that recoveries they receive must be used to reimburse the Plan for
benefits paid. Petitioner Empire HealthChoice Assurance, Inc. (Em
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pire), administers the BCBSA Plan as it applies to federal employees
in New York State. Respondent Denise McVeigh (McVeigh) is the
administrator of the estate of Joseph McVeigh (Decedent), a former
Plan enrollee who was injured in an accident. This case originated
when a state-court tort suit brought by McVeigh against third parties
alleged to have caused the Decedent’s injuries terminated in a set
tlement. Empire filed this suit in federal court invoking 28 U. S. C.
§1331, which authorizes jurisdiction over “civil actions arising under
the . . . laws . . . of the United States.” Empire sought reimbursement
of the $157,309 it had paid under the Plan for the Decedent’s medical
care, with no offset for McVeigh’s attorney’s fees or other litigation
costs in the state-court tort action. The District Court granted
McVeigh’s motion to dismiss for want of subject-matter jurisdiction.
The Second Circuit affirmed, holding that Empire’s claim arose
under state law. Observing that FEHBA’s text does not authorize
carriers to vindicate in federal court their rights against enrollees
under FEHBA-authorized contracts, the court concluded that federal
jurisdiction could exist only if federal common law governed Empire’s
claim. Quoting Boyle v. United Technologies Corp., 487 U. S. 500,
507, 508, the appeals court stated that courts may create federal
common law only when state law would (1) “ ‘significant[ly] conflict’ ”
with (2) “ ‘uniquely federal interest[s].’ ” Empire maintained that its
contract-derived reimbursement claim implicated “uniquely federal
interest[s]” because (1) reimbursement directly affects the United
States Treasury and the cost of providing health benefits to federal
employees, and (2) Congress has expressed its interest in maintain
ing uniformity among the States on matters relating to federal
health-plan benefits. The court acknowledged that the case involved
such interests, but found that Empire had not identified specific ways
in which the operation of state law would conflict materially with the
policies underlying FEHBA in the circumstances presented. Also re
jecting Empire’s argument that FEHBA’s preemption provision inde
pendently conferred federal jurisdiction, the court emphasized that
§8902(m)(1) makes no reference to a federal right of action in, or fed
eral jurisdiction over, a contract-derived reimbursement claim.
Held: Section 1331 does not encompass Empire’s suit. Pp. 9–21.
(a) A case “aris[es] under federal law” for §1331 purposes if “a well-
pleaded complaint establishes either that federal law creates the
cause of action or that the plaintiff’s right to relief necessarily de
pends on resolution of a substantial question of federal law.” Fran
chise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for
Southern Cal., 463 U. S. 1, 27–28. Pp. 9–10.
(b) Clearfield Trust Co. v. United States, 318 U. S. 363, does not
provide a basis for federal jurisdiction here. In Clearfield, a Govern
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ment suit against a bank to recover the amount paid on a Govern
ment check on which the payee’s name had been forged, id., at 365,
the Court held that “[t]he rights and duties of the United States on
commercial paper which it issues are governed by federal rather than
[state] law,” id., at 366. In post-Clearfield decisions, however, the
Court made clear that uniform federal law need not always be ap
plied in Government litigation. For example, in United States v.
Kimbell Foods, Inc., 440 U. S. 715, 740, the Court declared that “the
prudent course” is often “to adopt the readymade body of state law as
the federal rule of decision until Congress strikes a different accom
modation.” The reimbursement and subrogation provisions in the
OPM-BCBSA contract are linked together and depend upon a recovery
from a third party under terms and conditions ordinarily governed by
state law. Focusing on reimbursement, the appeals court determined
that Empire has not demonstrated a significant conflict between an
identifiable federal interest and the operation of state law. Unless and
until that showing is made, there is no cause to displace state law,
much less to lodge this case in federal court. Pp. 10–12.
(c) Empire and amicus United States argue that, under Jackson
Transit Authority v. Transit Union, 457 U. S. 15, 22, Empire’s reim
bursement claim, arising under the OPM-BCBSA contract, states a
federal claim because Congress intended all rights and duties stem
ming from that contract to be federal in nature.
The reliance placed on Jackson Transit is surprising, for the Court
there determined that the claim at issue—a union’s suit against a
city agency to enforce agreements the parties had made in light of
§13(c) of the Urban Mass Transportation Act of 1964 (UMTA), which
conditioned the city’s receipt of federal funds on preservation of em
ployees’ collective-bargaining rights—did not arise under federal law,
but was instead “governed by state law [to be] applied in state
cour[t].” Id., at 29. The Court there acknowledged prior decisions
“determin[ing] that a plaintiff stated a federal claim when he sued to
vindicate contractual rights set forth by federal statutes [that] lacked
express provisions creating federal causes of action.” Id., at 22 (em
phasis added). However, the Court held that these cases did not con
trol because “the critical factor” in each of them was “the congres
sional intent behind the particular provision at issue.” Ibid.
Although there were some indications that the UMTA made Ҥ13(c)
agreements and collective-bargaining contracts creatures of federal
law,” id., at 23, countervailing considerations—primarily a long-
standing National Labor Relations Act exemption for labor relations
between local governments and their employees—demonstrated a
congressional intent to the contrary, id., at 23–24.
Measured against Jackson Transit’s discussion of when a claim
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arises under federal law, Empire’s contract-derived reimbursement
claim is not a “creatur[e] of federal law.” Id., at 23. While distinctly
federal elements are involved here, countervailing considerations
control, particularly FEHBA’s jurisdictional provision, §8912, which
opens the federal district-court door to civil actions “against the
United States.” OPM’s regulation, 5 CFR §809.107(c), instructs en
rollees seeking to challenge benefit denials to proceed in federal court
against OPM “and not against the carrier or carrier’s subcontractors.”
Read together, these prescriptions ensure that beneficiaries’ suits
will land in federal court. Had Congress found it necessary or proper
to extend federal jurisdiction to contract-derived reimbursement
claims between carriers and insured workers, it would have been
easy enough to say so. Cf. 29 U. S. C. §1132(a)(3). Jackson Transit
noted that while “private parties in appropriate cases may sue in fed
eral court to enforce contractual rights created by federal statutes,”
457 U. S., at 22, Jackson Transit involved no such right.
Nor can §8902(m)(1), FEHBA’s preemption prescription, be read as
a jurisdiction-conferring provision. That prescription is unusual in
that it renders preemptive contract terms in health insurance plans,
not provisions enacted by Congress. A prescription of that unusual
order warrants cautious interpretation. Section 8902(m)(1) is a puz
zling measure, open to more than one construction, and no prior deci
sion seems to us precisely on point. If §8902(m)(1) does not cover
contract-based reimbursement claims, then federal jurisdiction
clearly does not exist. But even if §8902(m)(1) reaches such claims,
the prescription is not sufficiently broad to confer federal jurisdiction.
If Congress intends a preemption instruction completely to displace
ordinarily applicable state law, and to confer federal jurisdiction
thereby, it may be expected to make that atypical intention clear.
Cf., e.g., Columbus v. Ours Garage & Wrecker Service, Inc., 536 U. S.
424, 432–433. Congress has not done so here. Section 8902(m)(1) does
not purport to render inoperative any and all state laws that in some
way bear on federal employee-benefit plans. Cf. 29 U. S. C. §1144(a).
And, given that §8902(m)(1) declares no federal law preemptive, but
instead, terms of an OPM-BCBSA negotiated contract, a modest
reading of the provision is in order. Furthermore, a reimbursement
right of the kind Empire here asserts stems from a personal-injury
recovery, and the claim underlying that recovery is plainly governed
by state law. This Court is not prepared to say, based on the presen
tations made in this case, that under §8902(m)(1), an OPM-BCBSA
contract term would displace every condition state law places on that
recovery. The BCBSA Plan’s statement of benefits links together the
carrier’s right to reimbursement from the insured and its right to
subrogation. Empire’s subrogation right allows it, once it has paid an
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Syllabus

insured’s medical expenses, to recover directly from a third party re
sponsible for the insured’s injury or illness. Had Empire taken that
course, no access to a federal forum could have been predicated on
the OPM-BCBSA contract right. The tortfeasors’ liability, whether to
the insured or the insurer, would be governed not by an agreement to
which the tortfeasors are strangers, but by state law, and
§8902(m)(1) would have no sway. Pp. 12–18.
(d) Also rejected is the United States’ alternative argument that
Empire’s reimbursement claim arises under federal law for §1331
purposes because federal law is a necessary element of the carrier’s
claim for relief. In making this argument, the Government relies on
Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545
U. S. 308, which involved real property owned by Grable that the In
ternal Revenue Service (IRS) seized to satisfy a federal tax deficiency,
id., at 310. Grable received notice of the seizure by certified mail be
fore the IRS sold the property to Darue. Grable later sued Darue in
state court to quiet title, asserting that Darue’s record title was inva
lid because the IRS had conveyed the seizure notice improperly under
26 U. S. C. §6335(a), which requires that “notice in writing . . . be
given . . . to the owner . . . or . . . left at his usual place of abode or
business.” Darue removed the case to federal court. Alleging that
Grable’s title depended on the interpretation of a federal statute,
§6335(a), Darue invoked federal-question jurisdiction under 28
U. S. C. §1331. This Court held that the removal was proper because
§6335(a)’s meaning was an important federal-law issue that sensibly
belonged in a federal court, and the question whether Grable received
adequate notice was “the only . . . issue contested in the case.” 545
U. S., at 315. This case is poles apart from Grable. Here, the reim
bursement claim was triggered, not by a federal agency’s action, but
by the settlement of a personal-injury action launched in state court,
and the bottom-line practical issue is the share of that settlement
properly payable to Empire. Grable presented a nearly pure issue of
law, the resolution of which would establish a rule applicable to nu
merous tax sale cases. Empire’s reimbursement claim, in contrast, is
fact bound and situation specific. Although the United States is cor
rect that a reimbursement claim may also involve as an issue the ex
tent to which the reimbursement should take account of attorney’s
fees expended to obtain the tort recovery, it is hardly apparent why a
proper federal-state balance would place such a nonstatutory issue
under the complete governance of federal law, to be declared in a fed
eral forum. The state court in which the personal-injury suit was
lodged is competent to apply federal law, to the extent it is relevant,
and would seem best positioned to determine the lawyer’s part in ob
taining, and fair share in, the tort recovery. The Government’s im
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portant interests in attracting able workers and assuring their health
and welfare do not warrant turning into a discrete and costly “federal
case” an insurer’s contract-derived claim to be reimbursed from a
federal worker’s state-court-initiated tort litigation. This case cannot
be squeezed into the slim category Grable exemplifies. Pp. 18–21.
396 F. 3d 136, affirmed.

GINSBURG, J., delivered the opinion of the Court, in which ROBERTS,
C. J., and STEVENS, SCALIA, and THOMAS, JJ., joined. BREYER, J., filed a
dissenting opinion, in which KENNEDY, SOUTER, and ALITO, JJ., joined.
 Cite as: 547 U. S. ____ (2006) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.

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

[June 15, 2006]

JUSTICE GINSBURG delivered the opinion of the Court.
The Federal Employees Health Benefits Act of 1959
(FEHBA), 5 U. S. C. §8901 et seq. (2000 ed. and Supp. III),
establishes a comprehensive program of health insurance
for federal employees. The Act authorizes the Office of
Personnel Management (OPM) to contract with private
carriers to offer federal employees an array of health-care
plans. See §8902(a) (2000 ed.). Largest of the plans for
which OPM has contracted, annually since 1960, is the
Blue Cross Blue Shield Service Benefit Plan (Plan), admin
istered by local Blue Cross Blue Shield companies. This
case concerns the proper forum for reimbursement claims
when a plan beneficiary, injured in an accident, whose
medical bills have been paid by the plan administrator,
recovers damages (unaided by the carrier-administrator)
in a state-court tort action against a third party alleged to
have caused the accident.
FEHBA contains a preemption clause, §8902(m)(1),
displacing state law on issues relating to “coverage or
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benefits” afforded by health-care plans. The Act contains
no provision addressing the subrogation or reimbursement
rights of carriers. Successive annual contracts between
OPM and the Blue Cross Blue Shield Association (BCBSA)
have obligated the carrier to make “a reasonable effort” to
recoup amounts paid for medical care. App. 95, 125. The
statement of benefits distributed by the carrier alerts
enrollees that all recoveries they receive “must be used to
reimburse the Plan for benefits paid.” Id., at 132; see also
id., at 146, 152.
The instant case originated when the administrator of a
Plan beneficiary’s estate pursued tort litigation in state
court against parties alleged to have caused the benefici
ary’s injuries. The carrier had notice of the state-court
action, but took no part in it. When the tort action termi
nated in a settlement, the carrier filed suit in federal court
seeking reimbursement of the full amount it had paid for
the beneficiary’s medical care. The question presented is
whether 28 U. S. C. §1331 (authorizing jurisdiction over
“civil actions arising under the . . . laws . . . of the United
States”) encompasses the carrier’s action. We hold it does
not.
FEHBA itself provides for federal-court jurisdiction only
in actions against the United States. Congress could
decide and provide that reimbursement claims of the kind
here involved warrant the exercise of federal-court juris
diction. But claims of this genre, seeking recovery from
the proceeds of state-court litigation, are the sort ordinar
ily resolved in state courts. Federal courts should await a
clear signal from Congress before treating such auxiliary
claims as “arising under” the laws of the United States.
I
FEHBA assigns to OPM responsibility for negotiating
and regulating health benefits plans for federal employees.
See 5 U. S. C. §8902(a). OPM contracts with carriers,
 Cite as: 547 U. S. ____ (2006) 3

Opinion of the Court

FEHBA instructs, “shall contain a detailed statement of
benefits offered and shall include such maximums, limita
tions, exclusions, and other definitions of benefits as
[OPM] considers necessary or desirable.” §8902(d). Pur
suant to FEHBA, OPM entered into a contract in 1960
with the BCBSA to establish a nationwide fee-for-service
health plan, the terms of which are renegotiated annually.
As FEHBA prescribes, the Federal Government pays about
75% of the premiums; the enrollee pays the rest. §8906(b)
(2000 ed.). Premiums thus shared are deposited in a
special Treasury Fund, the Federal Employees Health
Benefits Fund, §8909(a). Carriers draw against the Fund
to pay for covered health-care benefits. Ibid.; see also 48
CFR §1632.170(b) (2005).
The contract between OPM and the BCBSA provides:
“By enrolling or accepting services under this contract,
[enrollees and their eligible dependents] are obligated to
all terms, conditions, and provisions of this contract.” App.
90. An appended brochure sets out the benefits the carrier
shall provide, see id., at 89, and the carrier’s subrogation
and recovery rights, see id., at 100. Each enrollee, as
FEHBA directs, receives a statement of benefits conveying
information about the Plan’s coverage and conditions. 5
U. S. C. §8907(b). Concerning reimbursement and subro
gation, matters FEHBA itself does not address, the
BCBSA Plan’s statement of benefits reads in part:
“If another person or entity . . . causes you to suffer
an injury or illness, and if we pay benefits for that in
jury or illness, you must agree to the following:
“All recoveries you obtain (whether by lawsuit, set
tlement, or otherwise), no matter how described or
designated, must be used to reimburse us in full for
benefits we paid. Our share of any recovery extends
only to the amount of benefits we have paid or will pay
to you or, if applicable, to your heirs, administrators,
successors, or assignees.”
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. . . . .
“If you do not seek damages for your illness or in
jury, you must permit us to initiate recovery on your
behalf (including the right to bring suit in your name).
This is called subrogation.
“If we pursue a recovery of the benefits we have
paid, you must cooperate in doing what is reasonably
necessary to assist us. You must not take any action
that may prejudice our rights to recover.” App. 165.1
If the participant does not voluntarily reimburse the Plan,
the contract requires the carrier to make a “reasonable
effort to seek recovery of amounts . . . it is entitled to re
cover in cases . . . brought to its attention.” Id., at 95, 125.
Pursuant to the OPM-BCBSA master contract, reim
bursements obtained by the carrier must be returned to
the Treasury Fund. See id., at 92, 118–119.
FEHBA contains a preemption provision, which origi
nally provided:
“The provisions of any contract under this chapter
which relate to the nature or extent of coverage or
benefits (including payments with respect to benefits)
shall supersede and preempt any State or local law, or
any regulation issued thereunder, which relates to
health insurance or plans to the extent that such law
——————
1 The
statement of benefits further provides:
“You must tell us promptly if you have a claim against another
party for a condition that we have paid or may pay benefits for, and you
must tell us about any recoveries you obtain, whether in or out of court.
We may seek a lien on the proceeds of your claim in order to reimburse
ourselves to the full amount of benefits we have paid or will pay.
“We may request that you assign to us (1) your right to bring an
action or (2) your right to the proceeds of a claim for your illness or
injury. We may delay processing of your claims until you provide the
assignment.
“Note: We will pay the costs of any covered services you receive that
are in excess of any recoveries made.” App. 165.
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Opinion of the Court

or regulation is inconsistent with such contractual
provisions.” 5 U. S. C. §8902(m)(1) (1994 ed.).
To assure uniform coverage and benefits under plans OPM
negotiates for federal employees, see H. R. Rep. No. 95–
282, p. 1 (1977), §8902(m)(1) preempted “State laws or
regulations which specify types of medical care, providers
of care, extent of benefits, coverage of family members, age
limits for family members, or other matters relating to
health benefits or coverage,” id., at 4–5 (noting that some
States mandated coverage for services not included in
federal plans, for example, chiropractic services). In 1998,
Congress amended §8902(m)(1) by deleting the words “to
the extent that such law or regulation is inconsistent with
such contractual provisions.” Thus, under §8902(m)(1) as
it now reads, state law—whether consistent or inconsis
tent with federal plan provisions—is displaced on matters
of “coverage or benefits.”
FEHBA contains but one provision addressed to federal-
court jurisdiction. That provision vests in federal district
courts “original jurisdiction, concurrent with the United
States Court of Federal Claims, of a civil action or claim
against the United States founded on this chapter.” §8912.
The purpose of this provision—evident from its reference
to the Court of Federal Claims—was to carve out an excep
tion to the statutory rule that claims brought against the
United States and exceeding $10,000 must originate in the
Court of Federal Claims. See 28 U. S. C. §1346(a)(2) (es
tablishing district courts’ jurisdiction, concurrent with the
Court of Federal Claims, over claims against the United
States that do not exceed $10,000); see also S. Rep. No.
1654, 83d Cong., 2d Sess., pp. 4–5 (1954) (commenting,
with respect to an identical provision in the Federal Em
ployees Group Life Insurance Act, 5 U. S. C. §8715, that
the provision “would extend the jurisdiction of United
States district courts above the $10,000 limitation now in
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effect”).
Under a 1995 OPM regulation, suits contesting final
OPM action denying health benefits “must be brought
against OPM and not against the carrier or carrier’s sub
contractors.” 5 CFR §890.107(c) (2005). While this regula
tion channels disputes over coverage or benefits into fed
eral court by designating a United States agency (OPM)
sole defendant, no law opens federal courts to carriers
seeking reimbursement from beneficiaries or recovery from
tortfeasors. Cf. 29 U. S. C. §1132(e)(1) (provision of the
Employee Retirement Income Security Act (ERISA) vest
ing in federal district courts “exclusive jurisdiction of civil
actions under this subchapter”). And nothing in FEHBA’s
text prescribes a federal rule of decision for a carrier’s
claim against its insured or an alleged tortfeasor to share
in the proceeds of a state-court tort action.
II
Petitioner Empire Healthchoice Assurance, Inc., doing
business as Empire Blue Cross Blue Shield (Empire), is
the entity that administers the BCBSA Plan as it applies
to federal employees in New York State. Respondent
Denise Finn McVeigh (McVeigh) is the administrator of
the estate of Joseph E. McVeigh (Decedent), a former
enrollee in the Plan. The Decedent was injured in an
accident in 1997. Plan payments for the medical care he
received between 1997 and his death in 2001 amounted to
$157,309. McVeigh, on behalf of herself, the Decedent,
and a minor child, commenced tort litigation in state court
against parties alleged to have caused Decedent’s injuries.
On learning that the parties to the state-court litigation
had agreed to settle the tort claims, Empire sought to
recover the $157,309 it had paid out for the Decedent’s
medical care.2 Of the $3,175,000 for which the settlement
——————
2 At oral argument, counsel for respondent McVeigh represented that

“most of the [reimbursement claims] are not of th[is] magnitude”;
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Opinion of the Court

provided, McVeigh, in response to Empire’s asserted reim
bursement right, agreed to place $100,000 in escrow.
Empire then filed suit in the United States District
Court for the Southern District of New York, alleging that
McVeigh was in breach of the reimbursement provision of
the Plan. As relief, Empire demanded $157,309, with no
offset for attorney’s fees or other litigation costs McVeigh
incurred in pursuing the state-court settlement. McVeigh
moved to dismiss on various grounds, among them, lack of
subject-matter jurisdiction. See 396 F. 3d 136, 139 (CA2
2005). Answering McVeigh’s motion, Empire urged that
the District Court had jurisdiction under 28 U. S. C. §1331
because federal common law governed its reimbursement
claim. In the alternative, Empire asserted that the Plan
itself constituted federal law. See 396 F. 3d, at 140. The
District Court rejected both arguments and granted
McVeigh’s motion to dismiss for want of subject-matter
jurisdiction. Ibid.
A divided panel of the Court of Appeals for the Second
Circuit affirmed, holding that “Empire’s clai[m] arise[s]
under state law.” Id., at 150. FEHBA’s text, the court
observed, contains no authorization for carriers “to vindi
cate [in federal court] their rights [against enrollees] under
FEHBA-authorized contracts”; therefore, the court con
cluded, “federal jurisdiction exists over this dispute only if
federal common law governs Empire’s claims.” Id., at 140.
Quoting Boyle v. United Technologies Corp., 487 U. S. 500,
507, 508 (1988), the appeals court stated that courts may
create federal common law only when “the operation of
state law would (1) ‘significant[ly] conflict’ with (2)
‘uniquely federal interest[s].’ ” 396 F. 3d, at 140.
Empire maintained that its contract-derived claim
against McVeigh implicated “uniquely federal interest[s],”
——————

“[m]ost of the cases involve [amounts like] $5,500 and $6,500.” Tr. of

Oral Arg. 52.

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because (1) reimbursement directly affects the United
States Treasury and the cost of providing health benefits
to federal employees; and (2) Congress had expressed its
interest in maintaining uniformity among the States on
matters relating to federal health-plan benefits. Id., at
141. The court acknowledged that the case involved dis
tinctly federal interests, but found that Empire had not
identified “specific ways in which the operation of state
contract law, or indeed of other laws of general application,
would conflict materially with the federal policies underly
ing FEHBA in the circumstances presented.” Id., at 150
(Sack, J., concurring); see id., at 142.
The Court of Appeals next considered and rejected Em
pire’s argument that FEHBA’s preemption provision, 5
U. S. C. §8902(m)(1), independently conferred federal
jurisdiction. 396 F. 3d, at 145–149. That provision, the
court observed, is “a limited preemption clause that the
instant dispute does not trigger.” Id., at 145. Unlike
§8912, which “authoriz[es] federal jurisdiction over
FEHBA-related . . . claims ‘against the United States,’ ”
the court noted, §8902(m)(1) “makes no reference to a
federal right of action [in] or to federal jurisdiction [over]”
the contract-derived reimbursement claim here at issue.
396 F. 3d, at 145, and n. 7.
Judge Raggi dissented. Id., at 151. In her view,
FEHBA’s preemption provision, §8902(m)(1), as amended
in 1998, both calls for the application of uniform federal
common law to terms in a FEHBA plan and establishes
federal jurisdiction over Empire’s complaint.
We granted certiorari, 546 U. S. ___ (2005), to resolve a
conflict among lower federal courts concerning the proper
forum for claims of the kind Empire asserts. Compare
Blue Cross & Blue Shield of Illinois v. Cruz, 396 F. 3d 793,
799–800 (CA7 2005) (upholding federal jurisdiction),
Caudill v. Blue Cross & Blue Shield of North Carolina, 999
F. 2d 74, 77 (CA4 1993) (same), and Medcenters Health
 Cite as: 547 U. S. ____ (2006) 9

Opinion of the Court

Care v. Ochs, 854 F. Supp. 589, 593, and n. 3 (Minn. 1993)
(same), aff’d, 26 F. 3d 865 (CA8 1994), with Goepel v. Nat.
Postal Mail Handlers Union, 36 F. 3d 306, 314–315 (CA3
1994) (rejecting federal jurisdiction), and 396 F. 3d, at 139
(decision below) (same).
III
Title 28 U. S. C. §1331 vests in federal district courts
“original jurisdiction” over “all civil actions arising under
the Constitution, laws, or treaties of the United States.” A
case “aris[es] under” federal law within the meaning of
§1331, this Court has said, if “a well-pleaded complaint
establishes either that federal law creates the cause of
action or that the plaintiff’s right to relief necessarily
depends on resolution of a substantial question of federal
law.” Franchise Tax Bd. of Cal. v. Construction Laborers
Vacation Trust for Southern Cal., 463 U. S. 1, 27–28
(1983).
Empire and the United States, as amicus curiae, present
two principal arguments in support of federal-question
jurisdiction. Emphasizing our opinion in Jackson Transit
Authority v. Transit Union, 457 U. S. 15, 22 (1982), and
cases cited therein, they urge that Empire’s complaint
raises a federal claim because it seeks to vindicate a con
tractual right contemplated by a federal statute, a right
that Congress intended to be federal in nature. See Brief
for Petitioner 14–31; Brief for United States 12–23.
FEHBA’s preemption provision, Empire and the United
States contend, demonstrates Congress’ intent in this
regard. The United States argues, alternatively, that
there is federal jurisdiction here, as demonstrated by our
recent decision in Grable & Sons Metal Products, Inc. v.
Darue Engineering & Mfg., 545 U. S. 308 (2005), because
“federal law is a necessary element of [Empire’s] claim.”
Brief for United States 25; accord Brief for Petitioner 41,
n. 5. We address these arguments in turn. But first, we
10 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

respond to the dissent’s view that Empire and the United
States have engaged in unnecessary labor, for Clearfield
Trust Co. v. United States, 318 U. S. 363 (1943), provides “a
basis for federal jurisdiction in this case.” Post, at 1.
A
Clearfield is indeed a pathmarking precedent on the au-
thority of federal courts to fashion uniform federal common
law on issues of national concern. See Friendly, In Praise of
Erie—and of the New Federal Common Law, 39 N. Y. U.
L. Rev. 383, 409–410 (1964). But the dissent is mistaken in
supposing that the Clearfield doctrine covers this case.
Clearfield was a suit by the United States to recover from a
bank the amount paid on a Government check on which the
payee’s name had been forged. 318 U. S., at 365. Because
the United States was the plaintiff, federal-court jurisdiction
was solidly grounded. See ibid. (“This suit was instituted
. . . by the United States . . . , the jurisdiction of the fed
eral District Court being invoked pursuant to the provi
sions of §24(1) of the Judicial Code, 28 U. S. C. §41(1),”
now contained in 28 U. S. C. §§1332, 1345, 1359). The case
presented a vertical choice-of-law issue: Did state law
under Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), or a
court-fashioned federal rule of decision (federal common
law) determine the merits of the controversy? The Court
held that “[t]he rights and duties of the United States on
commercial paper which it issues are governed by federal
rather than [state] law.” 318 U. S., at 366.
In post-Clearfield decisions, and with the benefit of
enlightened commentary, see, e.g., Friendly, supra, at 410,
the Court has “made clear that uniform federal law need
not be applied to all questions in federal government liti
gation, even in cases involving government contracts,” R.
Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler’s The
Federal Courts and the Federal System 700 (5th ed. 2003)
 Cite as: 547 U. S. ____ (2006) 11

Opinion of the Court

(hereinafter Hart and Wechsler).3 “[T]he prudent course,”
we have recognized, is often “to adopt the readymade body
of state law as the federal rule of decision until Congress
strikes a different accommodation.” United States v. Kim-
bell Foods, Inc., 440 U. S. 715, 740 (1979).
Later, in Boyle, the Court telescoped the appropriate
inquiry, focusing it on the straightforward question whether
the relevant federal interest warrants displacement of state
law. See 487 U. S., at 507, n. 3. Referring simply to “the
displacement of state law,” the Court recognized that prior
cases had treated discretely (1) the competence of federal
courts to formulate a federal rule of decision, and (2) the
appropriateness of declaring a federal rule rather than
borrowing, incorporating, or adopting state law in point.
The Court preferred “the more modest terminology,” ques
tioning whether “the distinction between displacement of
state law and displacement of federal law’s incorporation of
state law ever makes a practical difference.” Ibid. Boyle
made two further observations here significant. First, Boyle
explained, the involvement of “an area of uniquely federal
interest . . . establishes a necessary, not a sufficient, condi
tion for the displacement of state law.” Id., at 507. Second,
in some cases, an “entire body of state law” may conflict with
the federal interest and therefore require replacement. Id.,
at 508. But in others, the conflict is confined, and “only
——————
3 The United States, in accord with the dissent in this regard, see post,

at 6, several times cites United States v. County of Allegheny, 322 U. S.
174 (1944), see, e.g., Brief as Amicus Curiae 10, 15, 26, maintaining that
the construction of a federal contract “necessarily present[s] questions
of ‘federal law not controlled by the law of any State,’ ” id., at 26 (quot
ing 322 U. S., at 183). Allegheny does not stretch as widely as the United
States suggests. That case concerned whether certain property belonged
to the United States and, if so, whether the incidence of a state tax was
on the United States or on a Government contractor. See id., at 181–
183, 186–189. Neither the United States nor any United States agency
is a party to this case, and the auxiliary matter here involved scarcely
resembles the controversy in Allegheny.
12 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

particular elements of state law are superseded.” Ibid.
The dissent describes this case as pervasively federal, post,
at 1, and “the provisions . . . here [as] just a few scattered
islands in a sea of federal contractual provisions,” post, at 9.
But there is nothing “scattered” about the provisions on
reimbursement and subrogation in the OPM-BCBSA master
contract. See supra, at 3–4. Those provisions are linked
together and depend upon a recovery from a third party
under terms and conditions ordinarily governed by state
law. See infra, at 17.4 The Court of Appeals, whose decision
we review, trained on the matter of reimbursement, not, as
the dissent does, on FEHBA-authorized contracts at large.
So focused, the appeals court determined that Empire has
not demonstrated a “significant conflict . . . between an
identifiable federal policy or interest and the operation of
state law.” 396 F. 3d, at 150 (Sack, J., concurring), quoting
Boyle, 487 U. S., at 507)); see 396 F. 3d, at 140–141. Unless
and until that showing is made, there is no cause to displace
state law, much less to lodge this case in federal court.
B
We take up next Empire’s Jackson Transit-derived
argument, which is, essentially, a more tailored variation
of the theme sounded in the dissent. It is undisputed that
Congress has not expressly created a federal right of action
enabling insurance carriers like Empire to sue health-care
beneficiaries in federal court to enforce reimbursement
rights under contracts contemplated by FEHBA. Empire
and the United States nevertheless argue that, under our
1982 opinion in Jackson Transit, Empire’s claim for reim
bursement, arising under the contract between OPM and
BCBSA, “states a federal claim” because Congress in
——————
4 Thedissent nowhere suggests that uniform, court-declared federal
law would govern the carrier’s subrogation claim against the tortfeasor.
Nor does the dissent explain why the two linked provisions—
reimbursement and subrogation—should be decoupled.
 Cite as: 547 U. S. ____ (2006) 13

Opinion of the Court

tended all rights and duties stemming from that contract
to be “federal in nature.” Brief for United States as
Amicus Curiae 12; see Brief for Petitioner 18–29. We are
not persuaded by this argument.
The reliance placed by Empire and the United States on
Jackson Transit is surprising, for that decision held there
was no federal jurisdiction over the claim in suit. The
federal statute there involved, §13(c) of the Urban Mass
Transportation Act of 1964 (UMTA), 78 Stat. 307 (then
codified at 49 U. S. C. §1609(c) (1976 ed.)), conditioned a
governmental unit’s receipt of federal funds to acquire a
privately owned transit company on preservation of collec
tive-bargaining rights enjoyed by the acquired company’s
employees. 457 U. S., at 17–18. The city of Jackson,
Tennessee, with federal financial assistance, acquired a
failing private bus company and turned it into a public
entity, the Jackson Transit Authority. Id., at 18. To sat
isfy the condition on federal aid, the transit authority
entered into a “§13(c) agreement” with the union that
represented the private company’s employees, and the
Secretary of Labor certified that agreement as “fair and
equitable.” Ibid. (internal quotation marks omitted).
For several years thereafter, the transit authority cov
ered its unionized workers in a series of collective-
bargaining agreements. Eventually, however, the Author
ity notified the union that it would no longer adhere to
collective-bargaining undertakings. Id., at 19. The union
commenced suit in federal court alleging breach of the
§13(c) agreement and of the latest collective-bargaining
agreement. Ibid. This Court determined that the case did
not arise under federal law, but was instead “governed by
state law [to be] applied in state cour[t].” Id., at 29.
The Court acknowledged in Jackson Transit that “on
several occasions [we had] determined that a plaintiff
stated a federal claim when he sued to vindicate contrac
tual rights set forth by federal statutes, [even though] the
14 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

relevant statutes lacked express provisions creating fed
eral causes of action.” Id., at 22 (emphasis added) (citing
Machinists v. Central Airlines, Inc., 372 U. S. 682 (1963)
(union had a federal right of action to enforce an airline-
adjustment-board award included in a collective-
bargaining contract pursuant to a provision of the Railway
Labor Act); Norfolk & Western R. Co. v. Nemitz, 404 U. S.
37 (1971) (railroad’s employees stated federal claims when
they sought to enforce assurances made by the railroad to
secure Interstate Commerce Commission approval of a
consolidation under a provision of the Interstate Com
merce Act); Transamerica Mortgage Advisors, Inc. v.
Lewis, 444 U. S. 11, 18–19 (1979) (permitting federal suit
for rescission of a contract declared void by a provision of
the Investment Advisers Act of 1940)). But prior decisions,
we said, “d[id] not dictate the result in [the Jackson Tran
sit] case,” for in each case, “the critical factor” in determin
ing “the scope of rights and remedies under a federal
statute . . . is the congressional intent behind the particu
lar provision at issue.” 457 U. S., at 22.
“In some ways,” the Jackson Transit Court said, the
UMTA “seem[ed] to make §13(c) agreements and collec
tive-bargaining contracts creatures of federal law.” Id., at
23. In this regard, the Court noted, §13(c)
“demand[ed] ‘fair and equitable arrangements’ as pre
requisites for federal aid; it require[d] the approval of
the Secretary of Labor for those arrangements; it
specifie[d] five different varieties of protective provi
sions that must be included among the §13(c) ar
rangements; and it expressly incorporate[d] the pro
tective arrangements into the grant contract between
the recipient and the Federal Government.” Ibid.
(quoting 49 U. S. C. §1609(c) (1976 ed.)).
But there were countervailing considerations. The
Court observed that “labor relations between local gov
 Cite as: 547 U. S. ____ (2006) 15

Opinion of the Court

ernments and their employees are the subject of a long-
standing statutory exemption from the National Labor
Relations Act.” 457 U. S., at 23. “Section 13(c),” the Court
continued, “evince[d] no congressional intent to upset the
decision in the [NLRA] to permit state law to govern the
relationships between local governmental entities and the
unions representing their employees.” Id., at 23–24.
Legislative history was corroborative. “A consistent
theme,” the Court found, “[ran] throughout the considera
tion of §13(c): Congress intended that labor relations be
tween transit workers and local governments would be
controlled by state law.” Id., at 24. We therefore held that
the union had come to the wrong forum. Congress had
indeed provided for §13(c) agreements and collective-
bargaining contracts stemming from them, but in the
Court’s judgment, the union’s proper recourse for enforce
ment of those contracts was a suit in state court.
Measured against the Court’s discussion in Jackson
Transit about when a claim arises under federal law,
Empire’s contract-derived claim for reimbursement is not a
“creatur[e] of federal law.” Id., at 23. True, distinctly
federal interests are involved. Principally, reimburse
ments are credited to a federal fund, and the OPM-BCBSA
master contract could be described as “federal in nature”
because it is negotiated by a federal agency and concerns
federal employees. See supra, at 2–3. But, as in Jackson
Transit, countervailing considerations control. Among
them, the reimbursement right in question, predicated on
a FEHBA-authorized contract, is not a prescription of
federal law. See supra, at 3. And, of prime importance,
“Congress considered jurisdictional issues in enacting
FEHBA[,]. . . confer[ring] federal jurisdiction where it
found it necessary to do so.” 396 F. 3d, at 145, n. 7.
FEHBA’s jurisdictional provision, 5 U. S. C. §8912,
opens the federal district-court door to civil actions
“against the United States.” See supra, at 5. OPM’s regu
16 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

lation, 5 CFR §890.107(c) (2005), instructs enrollees who
seek to challenge benefit denials to proceed in court
against OPM “and not against the carrier or carrier’s
subcontractors.” See supra, at 6. Read together, these
prescriptions “ensur[e] that suits brought by beneficiaries
for denial of benefits will land in federal court.” 396 F. 3d,
at 145, n. 7. Had Congress found it necessary or proper to
extend federal jurisdiction further, in particular, to en
compass contract-derived reimbursement claims between
carriers and insured workers, it would have been easy
enough for Congress to say so. Cf. 29 U. S. C. §1132(a)(3)
(authorizing suit in federal court “by a participant, benefi
ciary, or fiduciary” of a pension or health plan governed by
ERISA to gain redress for violations of “this subchapter or
the terms of the plan”). We have no warrant to expand
Congress’ jurisdictional grant “by judicial decree.” See
Kokkonen v. Guardian Life Ins. Co. of America, 511 U. S.
375, 377 (1994).
Jackson Transit, Empire points out, referred to decisions
“demonstrat[ing] that . . . private parties in appropriate
cases may sue in federal court to enforce contractual rights
created by federal statutes.” 457 U. S., at 22. See Brief for
Petitioner 15. This case, however, involves no right cre
ated by federal statute. As just reiterated, while the OPM
BCBSA master contract provides for reimbursement,
FEHBA’s text itself contains no provision addressing the
reimbursement or subrogation rights of carriers.
Nor do we read 5 U. S. C. §8902(m)(1), FEHBA’s pre
emption prescription, see supra, at 4–5, as a jurisdiction-
conferring provision. That choice-of-law prescription is
unusual in that it renders preemptive contract terms in
health insurance plans, not provisions enacted by Con
gress. See 396 F. 3d, at 143–145; id., at 151 (Sack, J.,
concurring). A prescription of that unusual order warrants
cautious interpretation.
Section 8902(m)(1) is a puzzling measure, open to more
 Cite as: 547 U. S. ____ (2006) 17

Opinion of the Court

than one construction, and no prior decision seems to us
precisely on point. Reading the reimbursement clause in
the master OPM-BCBSA contract as a condition or limita
tion on “benefits” received by a federal employee, the
clause could be ranked among “[contract] terms . . . re
lat[ing] to . . . coverage or benefits” and “payments with
respect to benefits,” thus falling within §8902(m)(1)’s
compass. See Brief for United States as Amicus Curiae
20; Reply Brief 8–9. On the other hand, a claim for reim
bursement ordinarily arises long after “coverage” and
“benefits” questions have been resolved, and corresponding
“payments with respect to benefits” have been made to
care providers or the insured. With that consideration in
view, §8902(m)(1)’s words may be read to refer to contract
terms relating to the beneficiary’s entitlement (or lack
thereof) to Plan payment for certain health-care services
he or she has received, and not to terms relating to the
carrier’s post-payments right to reimbursement. See Brief
for Julia Cruz as Amicus Curiae 10, 11.
To decide this case, we need not choose between those
plausible constructions. If contract-based reimbursement
claims are not covered by FEHBA’s preemption provision,
then federal jurisdiction clearly does not exist. But even if
FEHBA’s preemption provision reaches contract-based
reimbursement claims, that provision is not sufficiently
broad to confer federal jurisdiction. If Congress intends a
preemption instruction completely to displace ordinarily
applicable state law, and to confer federal jurisdiction
thereby, it may be expected to make that atypical inten
tion clear. Cf. Columbus v. Ours Garage & Wrecker Service,
Inc., 536 U. S. 424, 432–433 (2002) (citing Wisconsin Public
Intervenor v. Mortier, 501 U. S. 597, 605 (1991)). Congress
has not done so here.
Section 8902(m)(1)’s text does not purport to render
inoperative any and all State laws that in some way bear
on federal employee-benefit plans. Cf. 29 U. S. C. §1144(a)
18 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

(portions of ERISA “supersede any and all State laws
insofar as they may now or hereafter relate to any em
ployee benefit plan”). And, as just observed, see supra, at
14, given that §8902(m)(1) declares no federal law preemp
tive, but instead, terms of an OPM-BCBSA negotiated
contract, a modest reading of the provision is in order.
Furthermore, a reimbursement right of the kind Empire
here asserts stems from a personal-injury recovery, and
the claim underlying that recovery is plainly governed by
state law. We are not prepared to say, based on the pres
entations made in this case, that under §8902(m)(1), an
OPM-BCBSA contract term would displace every condition
state law places on that recovery.
As earlier observed, the BCBSA Plan’s statement of
benefits links together the carrier’s right to reimburse
ment from the insured and its right to subrogation. See
supra, at 3–4. Empire’s subrogation right allows the
carrier, once it has paid an insured’s medical expenses, to
recover directly from a third party responsible for the
insured’s injury or illness. See 16 G. Couch, Cyclopedia of
Insurance Law §61:1 (2d ed. 1982). Had Empire taken
that course, no access to a federal forum could have been
predicated on the OPM-BCBSA contract right. The tort
feasors’ liability, whether to the insured or the insurer,
would be governed not by an agreement to which the
tortfeasors are strangers, but by state law, and
§8902(m)(1) would have no sway.
In sum, the presentations before us fail to establish that
§8902(m)(1) leaves no room for any state law potentially
bearing on federal employee-benefit plans in general, or
carrier-reimbursement claims in particular. Accordingly,
we extract from §8902(m)(1) no prescription for federal-
court jurisdiction.
C
We turn finally to the argument that Empire’s reim
 Cite as: 547 U. S. ____ (2006) 19

Opinion of the Court

bursement claim, even if it does not qualify as a “cause of
action created by federal law,” nevertheless arises under
federal law for §1331 purposes, because federal law is “a
necessary element of the [carrier’s] claim for relief.” Brief
for United States as Amicus Curiae 25–26 (quoting Grable,
545 U. S., at 312, and Jones v. R. R. Donnelley & Sons Co.,
541 U. S. 369, 376 (2004)). This case, we are satisfied, does
not fit within the special and small category in which the
United States would place it. We first describe Grable, a
recent decision that the United States identifies as exem
plary,5 and then explain why this case does not resemble
that one.
Grable involved real property belonging to Grable &
Sons Metal Products, Inc. (Grable), which the Internal
Revenue Service (IRS) seized to satisfy a federal tax defi
ciency. 545 U. S., at 310. Grable received notice of the
seizure by certified mail before the IRS sold the property
to Darue Engineering & Manufacturing (Darue). Ibid.
Five years later, Grable sued Darue in state court to quiet
title. Grable asserted that Darue’s record title was invalid
because the IRS had conveyed the seizure notice improp
erly. Id., at 311. The governing statute, 26 U. S. C.
§6335(a), provides that “notice in writing shall be given . . .
to the owner of the property . . . or shall be left at his usual
place of abode or business . . . .” Grable maintained that
§6335(a) required personal service, not service by certified
mail. 545 U. S., at 311.
Darue removed the case to federal court. Alleging that
Grable’s claim of title depended on the interpretation of a
federal statutory provision, i.e., §6335(a) of the Internal
Revenue Code, Darue invoked federal-question jurisdiction
under 28 U. S. C. §1331. We affirmed lower court deter
——————
5 As the Court in Grable observed, 545 U. S., at 312, the classic exam
ple of federal-question jurisdiction predicated on the centrality of a
federal issue is Smith v. Kansas City Title & Trust Co., 255 U. S. 180
(1921).
20 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

Opinion of the Court

minations that the removal was proper. “The meaning of
the federal tax provision,” we said, “is an important issue
of federal law that sensibly belongs in a federal court.”
545 U. S., at 315. Whether Grable received notice ade
quate under §6335(a), we observed, was “an essential
element of [Grable’s] quiet title claim”; indeed, “it ap
pear[ed] to be the only . . . issue contested in the case.”
Ibid.
This case is poles apart from Grable. Cf. Brief for
United States as Amicus Curiae 27. The dispute there
centered on the action of a federal agency (IRS) and its
compatibility with a federal statute, the question qualified
as “substantial,” and its resolution was both dispositive of
the case and would be controlling in numerous other cases.
See id., at 313. Here, the reimbursement claim was trig
gered, not by the action of any federal department, agency,
or service, but by the settlement of a personal-injury action
launched in state court, see supra, at 6–7, and the bottom-
line practical issue is the share of that settlement properly
payable to Empire.
Grable presented a nearly “pure issue of law,” one “that
could be settled once and for all and thereafter would
govern numerous tax sale cases.” Hart and Wechsler 65
(2005 Supp.). In contrast, Empire’s reimbursement claim,
McVeigh’s counsel represented without contradiction, is
fact-bound and situation-specific. McVeigh contends that
there were overcharges or duplicative charges by care
providers, and seeks to determine whether particular
services were properly attributed to the injuries caused by
the 1997 accident and not rendered for a reason unrelated
to the accident. See Tr. of Oral Arg. 44, 53.
The United States observes that a claim for reimburse
ment may also involve as an issue “[the] extent, if any, to
which the reimbursement should take account of attor
ney’s fees expended . . . to obtain the tort recovery.” Brief
as Amicus Curiae 29. Indeed it may. But it is hardly
 Cite as: 547 U. S. ____ (2006) 21

Opinion of the Court

apparent why a proper “federal-state balance,” see id., at
28, would place such a nonstatutory issue under the com
plete governance of federal law, to be declared in a federal
forum. The state court in which the personal-injury suit
was lodged is competent to apply federal law, to the extent
it is relevant, and would seem best positioned to determine
the lawyer’s part in obtaining, and his or her fair share in,
the tort recovery.
The United States no doubt “has an overwhelming inter
est in attracting able workers to the federal workforce,”
and “in the health and welfare of the federal workers upon
whom it relies to carry out its functions.” Id., at 10. But
those interests, we are persuaded, do not warrant turning
into a discrete and costly “federal case” an insurer’s con
tract-derived claim to be reimbursed from the proceeds of a
federal worker’s state-court-initiated tort litigation.
In sum, Grable emphasized that it takes more than a
federal element “to open the ‘arising under’ door.” 545
U. S., at 313. This case cannot be squeezed into the slim
category Grable exemplifies.
* * *
For the reasons stated, the judgment of the Court of
Appeals for the Second Circuit is
Affirmed.
 Cite as: 547 U. S. ____ (2006) 1

BREYER, J., dissenting

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

[June 15, 2006]

JUSTICE BREYER, with whom JUSTICE KENNEDY,
JUSTICE SOUTER, and JUSTICE ALITO join, dissenting.
This case involves a dispute about the meaning of terms
in a federal health insurance contract. The contract,
between a federal agency and a private carrier, sets forth
the details of a federal health insurance program created
by federal statute and covering 8 million federal employ
ees. In all this the Court cannot find a basis for federal
jurisdiction. I believe I can. See Clearfield Trust Co. v.
United States, 318 U. S. 363 (1943).
I

A

There is little about this case that is not federal. The
comprehensive federal health insurance program at issue
is created by a federal statute, the Federal Employees
Health Benefits Act of 1959 (FEHBA), 5 U. S. C. §8901 et
seq (2000 ed. and Supp. III). This program provides in
surance for Federal Government employees and their
families. That insurance program today covers approxi
mately 8 million federal employees, retirees, and depend
ents, at a total cost to the Government of about $22 billion
a year. Brief for United States as Amicus Curiae 2.
2 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

To implement the statute, the Office of Personal Manage
ment (OPM), the relevant federal agency, enters into con
tracts with a handful of major insurance carriers. These
agency/carrier contracts follow a standard agency form of
about 38,000 words, and contain the details of the plan of
fered by the carrier. See §8902(d) (2000 ed.) (requiring con
tract between carrier and agency to contain a detailed state
ment of the terms of the plan); see also Federal Employees
Health Benefits Program Standard Contract (CR–2003)
(2005), available at http://www.opm.gov/insure/carriers/sample
contract.doc (sample form agency/carrier contract) (all Inter
net materials as visited June 7, 2006, and available in Clerk
of Court’s case file). The contract lists, for example, the
benefits provided to the employees who enroll. It provides
a patient’s bill of rights. It makes clear that the Govern
ment, not the carrier, will receive the premiums and will
pay the benefits. It specifies that the carrier will adminis
ter the program that the contract sets forth, for which the
carrier will receive an adjustable fee. The contract also
states, “By enrolling or accepting services under this
contract, [enrollees] are obligated to all terms, conditions,
and provisions of this contract.” App. 90.
As the statute requires, §8907(b), the agency/carrier
contract also provides that the carrier will send each
enrolled employee a brochure that explains the terms of
the plan, as set forth in the contract. The brochure ex
plains that it “describes the benefits of the . . . [p]lan
under [the carrier’s] contract . . . with [the federal agency],
as authorized by the [federal statute].” Id., at 158. The
terms of the brochure are incorporated into the
agency/carrier contract. Id., at 89. The carrier distributes
the brochure with a seal attached to the front stating,
“Authorized for distribution by the United States Office of
Personnel Management Retirement and Insurance Ser
vice.” Id., at 155.
The program is largely funded by the Federal Govern
 Cite as: 547 U. S. ____ (2006) 3

BREYER, J., dissenting

ment. More specifically, the Federal Government pays
about 75% of the plan premiums; the enrollee pays the
rest. §8906(b). These premiums are deposited into a
special fund in the United States Treasury. §8909(a). The
carrier typically withdraws money from the fund to pay for
covered health care services, ibid.; however, the fund’s
money belongs, not to the carrier, but to the federal
agency that administers the program. After benefits are
paid, any surplus in the fund can be used at the agency’s
discretion to reduce premiums, to increase plan benefits,
or to make a refund to the Government and enrollees.
§8909(b); 5 CFR §890.503(c)(2) (2005). The carrier is not
at risk. Rather, it earns a profit, not from any difference
between plan premiums and the cost of benefits, but from
a negotiated service charge that the federal agency pays
directly.
Federal regulations provide that the federal agency will
resolve disputes about an enrolled employee’s coverage.
§890.105(a)(1); see also 5 U. S. C. §8902(j) (requiring
carrier to provide health benefit if OPM concludes that
enrollee is entitled to the benefit under the contract). The
agency’s resolution is judicially reviewable under the
Administrative Procedure Act in federal court. 5 CFR
§890.107 (2005).
In sum, the statute is federal, the program it creates is
federal, the program’s beneficiaries are federal employees
working throughout the country, the Federal Government
pays all relevant costs, and the Federal Government re
ceives all relevant payments. The private carrier’s only
role in this scheme is to administer the health benefits
plan for the federal agency in exchange for a fixed service
charge.
B
The plan at issue here, the Blue Cross Blue Shield
Service Benefit Plan, is the largest in the statutory pro
4 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

gram. The plan’s details are contained in Blue Cross Blue
Shield’s contract with the federal agency and in the bro
chure, which binds the enrolled employee to that contract.
In this case, the carrier seeks to require the enrolled em
ployee’s estate to abide by provisions that permit the
carrier to obtain (and require the enrolled employee to
pay) reimbursement from an enrollee for benefits provided
if the enrollee recovers money from a third party (as com
pensation for the relevant injury or illness). The parties
dispute the proper application of some of those provisions.
First, the agency’s contract with the carrier requires the
carrier to “mak[e] a reasonable effort to seek recovery of
amounts to which it is entitled to recover.” App. 95. And
the carrier must do so “under a single, nation-wide policy
to ensure equitable and consistent treatment for all [enrol
lees] under this contract.” Ibid. Any money recovered by
the carrier goes into the statutory fund in the United
States Treasury, and may be spent for the benefit of the
program at the discretion of the federal agency. See su
pra, at 3.
Second, the agency/carrier contract and the brochure set
forth the enrollee’s obligation to reimburse the carrier
under certain circumstances. The contract states, “The
Carrier may . . . recover directly from the [enrollee] all
amounts received by the [enrollee] by suit, settlement, or
otherwise from any third party or its insurer . . . for bene
fits which have also been paid under this contract.” App.
95. The agency/carrier contract also says that the “[c]ar
rier’s subrogation rights, procedures and policies, including
recovery rights, shall be in accordance with the provisions
of the agreed-upon brochure text.” Id., at 100. The rele
vant provisions in the brochure (which also appear in the
appendix to the agency/carrier contract) tell the enrollee:
“If another person or entity, through an act or omis
sion, causes you to suffer an injury or illness, and if
 Cite as: 547 U. S. ____ (2006) 5

BREYER, J., dissenting

we pay benefits for that injury or illness, you must
agree to the following:
“All recoveries you obtain (whether by lawsuit, set
tlement, or otherwise), no matter how described or
designated, must be used to reimburse us in full for
benefits we paid. . . .
“We will not reduce our share of any recovery unless
we agree in writing to a reduction, . . . because you
had to pay attorneys’ fees.” Id., at 165.
The enrollee must abide by these requirements because,
as explained above, the brochure tells the beneficiary that,
by enrolling in the program, he or she is agreeing to the
terms of the brochure, which in turn “describes the bene
fits of the [plan] under [the agency/carrier] contract.” Id.,
at 158.
II

A

I have explained the nature of the program and have set
forth the terms of the agency/carrier contract in some
detail because, once understood, their federal nature
brings this case well within the scope of the relevant
federal jurisdictional statute, 28 U. S. C. §1331, which
provides jurisdiction for claims “arising under” federal
law. For purposes of this statute, a claim arises under
federal law if federal law creates the cause of action.
Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U. S.
804, 808 (1986); see also American Well Works Co. v.
Layne & Bowler Co., 241 U. S. 257, 260 (1916) (opinion of
Holmes, J.) (A “suit arises under the law that creates the
cause of action”). And this Court has explained that
§1331’s “statutory grant of ‘jurisdiction will support claims
founded upon federal common law as well as those of a
statutory origin.’ ” National Farmers Union Ins. Cos. v.
Crow Tribe, 471 U. S. 845, 850 (1985); see also Illinois v.
Milwaukee, 406 U. S. 91 (1972); C. Wright, A. Miller, & E.
6 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

Cooper, Federal Practice and Procedure §4514, p. 455 (2d
ed. 1996) (“A case ‘arising under’ federal common law
presents a federal question and as such is within the
original subject-matter jurisdiction of the federal courts”).
In other words, “[f]ederal common law as articulated in
rules that are fashioned by court decisions are ‘laws’ as
that term is used in §1331.” National Farmers, supra, at
850.
It seems clear to me that the petitioner’s claim arises
under federal common law. The dispute concerns the
application of terms in a federal contract. This Court has
consistently held that “obligations to and rights of the
United States under its contracts are governed exclusively
by federal law.” Boyle v. United Technologies Corp., 487
U. S. 500, 504 (1988). This principle dates back at least as
far as Clearfield Trust, 318 U. S., at 366, where the Court
held that the “rights and duties of the United States on
[federal] commercial paper,” namely a federal employee’s
paycheck, “are governed by federal rather than local law.”
The Court reasoned that “[w]hen the United States dis
burses its funds or pays its debts, it is exercising a consti
tutional function or power,” a power “in no way dependent
on the laws of Pennsylvania or of any other state.” Ibid.
Accordingly, “[i]n [the] absence of an applicable Act of
Congress it is for the federal courts to fashion the govern
ing rule of law.” Id., at 367.
This Court has applied this principle, the principle
embodied in Clearfield Trust, to Government contracts of
all sorts. See, e.g., West Virginia v. United States, 479
U. S. 305, 308–309 (1987) (contract regarding federal
disaster relief efforts); United States v. Kimbell Foods,
Inc., 440 U. S. 715, 726 (1979) (contractual liens arising
from federal loan programs); United States v. Little Lake
Misere Land Co., 412 U. S. 580, 592 (1973) (agreements to
acquire land under federal conservation program); United
States v. Seckinger, 397 U. S. 203, 209 (1970) (Government
 Cite as: 547 U. S. ____ (2006) 7

BREYER, J., dissenting

construction contracts); United States v. County of Alle
gheny, 322 U. S. 174, 183 (1944) (Government procure
ment contracts).
In this case, the words that provide the right to recover
are contained in the brochure, which in turn explains the
provisions of the contract between the Government and
the carrier, provisions that were written by a federal
agency acting pursuant to a federal statute that creates a
federal benefit program for federal employees. At bottom,
then, the petitioner’s claim is based on the interpretation
of a federal contract, and as such should be governed by
federal common law. And because the petitioner’s claim is
based on federal common law, the federal courts have
jurisdiction over it pursuant to §1331. The lower federal
courts have similarly found §1331 jurisdiction over suits
between private parties based on Federal Government
contracts. See, e.g., Downey v. State Farm Fire & Casu
alty Co., 266 F. 3d 675, 680–681 (CA7 2001) (Easterbrook,
J.) (National Flood Insurance Program contracts); Almond
v. Capital Properties, Inc., 212 F. 3d 20, 22–24 (CA1 2000)
(Boudin, J.) (Federal Railroad Administration contract);
Price v. Pierce, 823 F. 2d 1114, 1119–1120 (CA7 1987)
(Posner, J.) (Dept. of Housing and Urban Development
contracts).
B
What might one say to the contrary? First, I may have
made too absolute a statement in claiming that disputes
arising under federal common law are (for jurisdictional
purposes) cases “arising under” federal law. After all, in
every Supreme Court case I have cited (except National
Farmers and Milwaukee, and not including the Court of
Appeals cases), the United States was a party, and that
fact provides an independent basis for jurisdiction. See 28
U. S. C. §§1345, 1346(a)(2), 1491(a)(1). In those cases the
decision to apply federal common law was, therefore, a
8 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

“choice-of-law issue” only, ante, at 10, and the Court conse
quently did not need to address the application of the Clear-
field Trust doctrine to §1331 “arising under” jurisdiction.
But I have found no case where a federal court con
cluded that federal common law governed a plaintiff’s
contract claim but nevertheless decided that the claim did
not arise under federal law. I have found several lower
court cases (cited supra, at 7) where courts asserted §1331
jurisdiction solely on the basis of federal common law.
And in Machinists v. Central Airlines, Inc., 372 U. S. 682,
693, n. 17 (1963), this Court cited the Clearfield Trust
cases in finding §1331 jurisdiction over the contract suit
before it, noting that although those cases “did not involve
federal jurisdiction as such,” nevertheless “they are sug
gestive” on the issue of §1331 jurisdiction over suits in
volving Federal Government contracts “since they hold
federal law determinative of the merits of the claim.”
It is enough here, however, to assume that federal com
mon law means federal jurisdiction where Congress so
intends. Cf. Clearfield Trust, supra, at 367 (“In absence of
an applicable Act of Congress it is for the federal courts to
fashion the governing rule of law according to their own
standards” (emphasis added)). If so, there are strong
reasons for the federal courts, following Clearfield Trust,
to assume jurisdiction and apply federal common law to
resolve this case.
First, although the nominal plaintiff in this case is the
carrier, the real party in interest is the United States.
Any funds that the petitioner recovers here it must pay
directly to the United States, by depositing those funds in
the FEHBA United States Treasury account managed by
the federal agency. The carrier simply administers the
reimbursement proceeding for the United States, just as it
administers the rest of the agency/carrier contract. Ac
cordingly, this case, just like the Clearfield Trust cases,
concerns the “rights of the United States under its con
 Cite as: 547 U. S. ____ (2006) 9

BREYER, J., dissenting

tracts.” Boyle, 487 U. S., at 504.
Second, the health insurance system FEHBA estab
lishes is a federal program. The Federal Government pays
for the benefits, receives the premiums, and resolves
disputes over claims for medical services. Given this role,
the Federal Government’s need for uniform interpretation
of the contract is great. Given the spread of Government
employees throughout the Nation and the unfairness of
treating similar employees differently, the employees’
need for uniform interpretation is equally great. That
interest in uniformity calls for application of federal com
mon law to disputes about the meaning of the words in the
agency/carrier contract and brochure. See Clearfield
Trust, 318 U. S., at 367 (applying federal common law
because the “desirability of a uniform [federal] rule is
plain”); see also Bank of America Nat. Trust & Sav. Assn.
v. Parnell, 352 U. S. 29, 33, 34 (1956) (“[L]itigation with
respect to Government paper . . . between private parties”
may nevertheless “be governed by federal [common] law”
where there is “the presence of a federal interest”). And
that interest in uniformity also suggests that the doors of
the federal courts should be open to decide such disputes.
Third, as discussed above, the provisions at issue here
are just a few scattered islands in a sea of federal contrac
tual provisions, all of which federal courts will interpret
and apply (when reviewing the federal agency’s resolution
of disputes regarding benefits). Given this context, why
would Congress have wanted the courts to treat those
islands any differently? I can find no convincing answer.
Regardless, the majority and the Court of Appeals be
lieve they have come up with one possible indication of a
contrary congressional intent. They believe that the stat
ute’s jurisdictional provision argues against federal juris
diction where the United States is not formally a party.
That provision gives the federal district courts “original
jurisdiction, concurrent with the United States Court of
10 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

Federal Claims, of a civil action or claim against the
United States founded on this chapter.” 5 U. S. C. §8912.
According to the majority, if Congress had wanted cases
like this one to be brought in the federal courts, it would
have extended §8912 to cover them. Ante, at 15–16.
That is not so. Congress’ failure to write §8912 to in
clude suits between carriers and enrollees over plan provi
sions may reflect inadvertence. Or it may reflect a belief
that §1331 covered such cases regardless. Either way,
§8912 tells us nothing about Congress’ intent in respect to
§1331 jurisdiction.
But why then did Congress write §8912 at all? After all,
the cases there covered—contract claims against the Fed
eral Government “founded on” the federal health insur
ance program—would also be governed by federal common
law and (if my view is correct) would have fallen within
the scope of §1331. What need would there have been (if
my view is correct) to write a special section, §8912, ex
panding federal jurisdiction to encompass these claims?
The answer, as the majority itself points out, ante, at 5,
is that Congress did not write §8912 to expand the juris
diction of the federal courts. It wrote that section to trans
fer a category of suits (claims against the United States
exceeding $10,000) from one federal court (the Court of
Federal Claims) to others (the federal district courts).
In sum, given Clearfield Trust, supra, and its progeny,
there is every reason to believe that federal common law
governs disputes concerning the agency/carrier contract.
And that is so even though “it would have been easy
enough for Congress to say” that federal common law
should govern these claims. See ante, at 15. After all, no
such express statement of congressional intent was pre
sent in Clearfield Trust itself, or in any of the cases rely
ing on Clearfield Trust for the authority to apply federal
common law to interpret Government contracts. See, e.g.,
cases cited supra, at 6–7; see also Clearfield Trust, supra,
 Cite as: 547 U. S. ____ (2006) 11

BREYER, J., dissenting

at 367 (“In absence of an applicable Act of Congress it is
for the federal courts to fashion the governing rule of law
according to their own standards”). Accordingly, I would
apply federal common law to resolve the petitioner’s con
tract claim. And, as explained above, when the “governing
rule of law” on which a claim is based is federal common
law, then the federal courts have jurisdiction over that
claim under §1331.
C
The Court adds that, in spite of the pervasively federal
character of this dispute, state law should govern it be
cause the petitioner has not demonstrated a “ ‘significant
conflict . . . between an identifiable federal policy or inter
est and the operation of state law.’ ” Ante, at 12. But as I
have explained, see supra, at 8–9, the Federal Govern
ment has two such interests: (1) the uniform operation of a
federal employee health insurance program, and (2) ob
taining reimbursement under a uniform set of legal rules.
These interests are undermined if the amount a federal
employee has to reimburse the FEHBA United States
Treasury fund in cases like this one varies from State to
State in accordance with state contract law. We have in
the past recognized that this sort of interest in uniformity
is sufficient to warrant application of federal common law.
See, e.g., Boyle, 487 U. S., at 508 (“[W]here the federal
interest requires a uniform rule, the entire body of state
law applicable to the area conflicts and is replaced by
federal rules”); Kimbell Foods, 440 U. S., at 728 (“Un
doubtedly, federal programs that ‘by their nature are and
must be uniform in character throughout the Nation’
necessitate formulation of controlling federal rules”);
Clearfield Trust, supra, at 367 (applying federal common
law because “application of state law . . . would subject the
rights and duties of the United States to exceptional un
certainty” and “would lead to great diversity in results by
making identical transactions subject to the vagaries of
12 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. MCVEIGH

BREYER, J., dissenting

the laws of the several states,” and therefore “[t]he desir
ability of a uniform rule is plain”).
But even if the Court is correct that “ ‘[t]he prudent
course’ ” is “ ‘to adopt the readymade body of state law as
the federal rule of decision until Congress strikes a differ
ent accommodation,’ ” ante, at 11 (quoting Kimbell Foods,
supra, at 740), there would still be federal jurisdiction over
this case. That is because, as Clearfield Trust, Kimbell
Foods, and other cases make clear, the decision to apply
state law “as the federal rule of decision” is itself a matter
of federal common law. See, e.g., Kimbell Foods, supra, at
728, n. 21 (“ ‘Whether state law is to be incorporated as a
matter of federal common law . . . involves the . . . problem
of the relationship of a particular issue to a going federal
program’ ” (emphasis added)); Clearfield Trust, supra, at
367 (“In our choice of the applicable federal rule we have
occasionally selected state law” (emphasis added)); see
also R. Fallon, D. Meltzer, & D. Shapiro, Hart and
Wechsler’s The Federal Courts and the Federal System
700 (5th ed. 2003) (“[T]he current approach, as reflected in
[Kimbell Foods, supra], suggests that . . . while under
Clearfield federal common law governs, in general it will
incorporate state law as the rule of decision”); C. Wright,
A. Miller, & E. Cooper, Federal Practice and Procedure
§4518, at 572–573 (“In recent years, the Supreme Court
has put increasing emphasis on the notion that when
determining what should be the content of federal common
law, the law of the forum state should be adopted absent
some good reason to displace it” (emphasis added; citing
Kimbell Foods, supra, and Clearfield Trust, supra)).
On this view, the Clearfield Trust inquiry involves two
questions: (1) whether federal common law governs the
plaintiff’s claim; (2) if so, whether, as a matter of federal
common law, the Court should adopt state law as the
proper “ ‘federal rule of decision,’ ” ante, at 11 (emphasis
added). See, e.g., Kimbell Foods, supra, at 727 (deciding
 Cite as: 547 U. S. ____ (2006) 13

BREYER, J., dissenting

that “[f]ederal law therefore controls” the dispute but
concluding that state law gives “content to this federal
rule”); United States v. Little Lake Misere Land Co., 412
U. S., at 593–594 (The “first step of the Clearfield analy
sis” is to decide whether “ ‘the courts of the United States
may formulate a rule of decision,’ ” and the “next step in
our analysis is to determine whether” the federal rule of
decision should “ ‘borro[w]’ state law”); see also Friendly,
In Praise of Erie—and of the New Federal Common Law,
39 N. Y. U. L. Rev. 383, 410 (1964) (“Clearfield decided not
one issue but two. The first . . . is that the right of the
United States to recover for conversion of a Government
check is a federal right, so that the courts of the United
States may formulate a rule of decision. The second . . . is
whether, having this opportunity, the federal courts should
adopt a uniform nation-wide rule or should follow state
law” (footnote omitted)). Therefore, even if the Court is
correct that state law applies to claims involving the inter
pretation of some provisions of this contract, the decision
whether and when to apply state law should be made by
the federal courts under federal common law. Accordingly,
for jurisdictional purposes those claims must still arise
under federal law, for federal common law determines the
rule of decision.
Finally, the footnote in Boyle cited by the Court did not
purport to overrule Clearfield Trust on this point. See
Boyle, supra, at 507, n. 3 (“If the distinction between
displacement of state law and displacement of federal
law’s incorporation of state law ever makes a practical
difference, it at least does not do so in the present case”).
With respect, I dissent.