United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
March 9, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-50454
HOUSTON COMMUNITY HOSPITAL,
Plaintiff-Appellee,
versus
BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.,
Defendant-Appellant.
Appeal from the United States District Court
For the Western District of Texas, Austin
(USDC No. 1:04-CV-288)
Before GARWOOD, HIGGINBOTHAM, and CLEMENT, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
Houston Community Hospital admitted and treated three federal
employees covered by health benefits plans administered by Blue
Cross and Blue Shield of Texas, Inc. under the Federal Employees
Health Benefits Act. BCBST allegedly misrepresented the level of
health care coverage of each patient and then refused to pay
accordingly. In March 2004, Houston Community Hospital filed three
separate state actions against BCBST for negligent
misrepresentation and violations of the Texas Deceptive Trade
Practices Act and the Texas Insurance Act. BCBST removed the cases
to federal court and moved for summary judgment claiming official
immunity, federal sovereign immunity, and preemption. The district
court denied the motion and BCBST appealed the now consolidated
cases.
I
The Federal Employees Health Benefits Act1 (“FEHBA”) charges
the United States Office of Personnel Management (“OPM”) with
negotiating contracts with private insurance carriers to provide
health benefit plans to federal employees who may enroll in a
Service Benefit Plan (“the Plan”) pursuant to OPM regulations.2
OPM issues all enrollees a Statement of Benefits (“the Brochure”).
Blue Cross and Blue Shield Association, a private insurance
carrier, entered into a contract, known as CS 1039, and which
incorporated the Brochure, with OPM to provide the Plan to
enrollees.3 Appellant Blue Cross and Blue Shield of Texas
(“BCBST”) administers the Plan in Texas. As appellee Houston
Community Hospital (“the Hospital”) is not a party to the contract
and has no contractual agreement with BCBST; it is not a
1
5 U.S.C. §§ 8901-14.
2
The government and the enrollees are responsible for the premiums and
Blue Cross draws its funds directly from the Federal Employees Health Benefits
Fund. The Fund is not the property of Blue Cross and any surplus is placed in
the Plan’s contingency reserves, which may be used only at OPM’s discretion.
Blue Cross is paid from a negotiated service charge. See Empire Healthchoice
Assurance, Inc. v. McVeigh, 126 S.Ct. 2121, 2126 (2006).
3
See 5 U.S.C. § 8903.
2
participating provider. This means that under FEHBA, BCBST
reimburses the Hospital up to a federal employee’s coverage level,
costs of medical care above that level to be paid by the employee.
According to the hospital, in 2003, three federal employees
covered by a FEHBA health insurance plan issued by BCBST sought
medical treatment at the Hospital. Before treating each patient,
the Hospital contacted BCBST to verify the patients’ coverage. On
each occasion, BCBST allegedly represented to the Hospital that:
(1) the patient’s $300 deductible was met; (2) the patient was
covered at either 70% or 100% up to an unlimited lifetime maximum
amount; and (3) no preexisting conditions applied to the patient’s
admission. After the patients were admitted and treated, BCBST
refused to pay the Hospital more than a fraction of the bill.4
BCBST refused requests for payment and the Hospital filed three
suits against BCBST in Texas state court for damages resulting from
each misrepresentation made by BCBST. In addition to negligent
misrepresentation, the Hospital alleged violations of the Texas
Deceptive Trade Practices Act and the Texas Insurance Code.
In May 2004, BCBST removed all three cases to federal court.
Although BCBST is a private insurance carrier, BCBST asserted that
in performing the contract with OPM to provide health coverage to
4
Patient Services Payment:
Paula V. Jackson: $8,688.12 of $89,021.00;
Elizabeth A. Jones: $8,688.12 of $50,487.96;
Carol Wilkerson: $8,688.14 of $56,775.38.
3
federal employees in Texas, it is an arm of the federal government
vested with governmental immunity. BCBST moved for summary
judgment based on: (1) official immunity; (2) sovereign immunity
of the United States; and (3) preemption of the state torts by
FEHBA.
The district court denied summary judgment, and BCBST timely
filed a notice of appeal. Not seeking leave from the district
court to file an interlocutory appeal under 28 U.S.C. § 1292(b),
BCBST maintains that we have jurisdiction under the collateral
order doctrine as well as pendent appellate jurisdiction.
II
The collateral order doctrine is a “practical construction” of
the final judgment rule of 28 U.S.C. § 1291.5 This narrow doctrine
permits a federal appellate court to review the “small category of
decisions that, although they do not end the litigation, must
nonetheless be considered ‘final.’”6 That small category “includes
only decisions that are conclusive, that resolve important
questions separate from the merits, and that are effectively
unreviewable on appeal from the final judgment in the underlying
action.”7
5
Swint v. Chambers County Comm’n, 514 U.S. 35, 41–42 (1995).
6
Id.
7
Id.; Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546
(collateral order review for orders “too important to be denied review and too
independent of the cause itself to require that appellate consideration be
deferred until the whole case is adjudicated”).
4
Of course we have jurisdiction to determine our jurisdiction,8
and we must, then, first determine whether BCBST’s claims of either
official or sovereign immunity are sources of jurisdiction. BCBST
asks for even more. It urges that having asserted a substantial
claim of immunity, it is entitled to invoke our pendent appellate
jurisdiction over its preemption claim. Whatever the merits of
this hook-and-ladder approach, it fails at the outset: we find no
substantial claim of immunity, and we dismiss for lack of
jurisdiction.
A. Official Immunity9
8
Cerveceria Cuauhtemoc Moctezuma S.A. de C.V. v. Mont. Bev. Co., 330
F.3d 284, 286 (5th Cir. 2003) (noting the “universally recognized truism that
we have jurisdiction to determine our own jurisdiction”).
9
There is disagreement over whether BCBST’s claim is for absolute
official immunity or qualified immunity. The disagreement is semantic.
Westfall can be read as providing either (1) absolute immunity, to the extent
that the official could reasonably have believed her conduct was within the
scope of her duty or (2) qualified immunity for conduct reasonably within the
scope of a federal official’s duties. See Seth P. Waxman & Trevor W.
Morrison, What Kind of Immunity?, 112 YALE L.J. 2195, 2243 (2003). We must
also distinguish the present immunity question, federal immunity from state
tort, from our qualified- and absolute-immunity doctrine as it applies to
state actors sued under section 1983 for violations of the federal law, as
well as from our congruent doctrine that applies to federal officials sued for
constitutional violations under Bivins. See Butz v. Economou, 438 U.S. 478,
495 (1978). Our Westfall doctrine pre-dates section 1983, see Spalding v.
Vilas, 161 U.S. 483 (1896), and sounds in implied conflict preemption. See
Waxman & Morrison, supra.
5
While a denial of official immunity is an appealable order,10
the claim of immunity must be “substantial” to justify an appellate
court’s collateral order review.11
Federal officials long enjoyed immunity from suit based on
state-law torts when their conduct was “within the scope of their
official duties and . . . discretionary in nature.”12 The
application of this Westfall test to federal officials was
superseded by Congress’s passage in 1988 of the Federal Employees
Liability Reform and Tort Compensation Act, also known as the
Westfall Act, which eliminated the requirement that the acts be
discretionary.13 The Westfall test, with the stricture of
discretionary acts, remains the framework for determining when
non-governmental persons or entities are entitled to the same
10
See Westfall v. Erwin, 484 U.S. 292 (1988); Shanks v. AlliedSignal,
Inc., 169 F.3d 988, 991 (5th Cir. 1999).
11
There is confusion about whether a claim, in order to sustain an
interlocutory appeal, need be “substantial” or merely “colorable.” Citing
Malina, BCBST suggests that the standard is colorable. Malina v. Gonzales,
994 F.2d 1121, 1124 (5th Cir. 1993). This is an error. The Malina court
borrowed this incorrect standard from a case applying the officer removal
statute, section 1442(a)(1), which requires the assertion of a colorable
federal defense. Williams v. Brooks, 945 F.2d 1322,1325 (5th Cir. 1991).
However, the Supreme Court and earlier panels of the Fifth Circuit have
required a “substantial” claim of official immunity. Mitchell v. Forsyth, 472
U.S. 511,525 (1985); NF Indus., Inc. v. Export-Import Bank of the United
States, 846 F.2d 998, 1000 (5th Cir. 1988).
12
Westfall, 484 U.S. at 297-98; Evans v. Wright, 582 F.2d 20, 21 (5th
Cir. 1978).
13
See 28 U.S.C. § 2679(d).
6
immunity.14 The Hospital contends that BCBST, as a private
insurance carrier, has no substantial defense of official
immunity. We agree.
1
The Hospital first argues that BCBST was not here performing
an official government function.15 The district court agreed, first
acknowledging that “a number of courts have held private
contractors may enjoy official immunity when performing official
14
See Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 73 (2d Cir.
1998) (citing Mangold v. Analytic Servs., Inc., 77 F.3d 1442, 1446-50 (4th
Cir. 1996); Slotten v. Hoffman, 999 F.2d 333, 336 (8th Cir. 1993)).
15
The Hospital does not contest that BCBST acted within the scope of
its discretionary duty as an insurance carrier. In considering whether a
claim is based on acts taken within a federal official’s scope of authority,
we have held that it is only necessary that the conduct be “within the outer
perimeter of the line of duty.” Norton v. McShane, 332 F.2d 855, 859 (5th
Cir. 1964). Here, the Hospital’s focus is upon on two acts: first, the
alleged relaying of guidance on coverage in a phone call and, second, paying
the claims in a manner inconsistent with the oral guidance. There are
provisions in the Plan requiring that providers contact the carrier to
precertify hospital stays (2003 Statement of Benefits at 12-13, 113), as well
as terms in the Plan requiring carrier responsiveness to inquiries about the
Plan (2002 CS 1039 § 1.9(b)). Given these provisions, BCBST acts within the
perimeter of its duties in responding to an inquiry about coverage; and, given
that the carrier’s main task is to determine and pay claims, a carrier’s act
of paying a claim (whether for the right or wrong amount) constitutes its
duties.
With respect to discretion, BCBST argues that the carrier must assess
the facts and apply the Plan provisions when answering questions about
coverage; it must do the same when ultimately deciding the amount to pay. As
a result, BCBST contends that its acts are “more or less connect[ed] with the
general matters committed by law” to BCBST’s discretion. Norton, 332 F.2d at
859. Whether the conduct at issue in the instant case, simply relaying
coverage information, constitutes discretionary action is not clear, but we
will assume so for purposes of our analysis. Thus, the present dispute does
not present the question of whether BCBST acted beyond the scope of its
authority in allegedly misrepresenting coverage information.
7
functions,”16 but then explaining that no controlling authority
provides blanket immunity for actions taken in the course of
performing government contracts,17 and finally rejecting BCBST’s
argument to extend immunity here, ruling that BCBST is not entitled
to official immunity because “carriers do not perform ‘official
functions’ in administering FEHBA benefits.” The District court
concluded that OPM’s duties comprised “the approval of and
contracting for benefits plans,” not the actual administration of
the Plan and that FEHBA carriers were not exercising any
governmental function because “it is not apparent that they
themselves perform any functions the OPM is itself charged with
performing.”
BCBST acknowledges that we have previously granted immunity to
private entities and, in so doing, emphasized the entity’s
“quasi-governmental” capacity.18 BCBST contends that FEHBA carriers
exercise just such a “governmental function” for the purpose of
official immunity. We are not persuaded.
16
See Mangold v. Analytic Servs., Inc., 77 F.3d 1442, 1446-48 (4th Cir.
1996) (deciding that immunity shields a government contractor from liability
arising from statements it made in response to government investigators during
an official investigation); see also Slotten v. Hoffman, 999 F.2d 333, 335-37
(8th Cir. 1993).
17
See Boyle v. United Techs Corp., 487 U.S. 500, 505 n.1 (1988)
(declining to extend official immunity to all government contractors).
18
Austin Munic. Secs., Inc. v. Nat’l Ass’n of Secs. Dealers, Inc., 757
F.2d 676, 689 (5th Cir. 1985) (granting official immunity to administrative
prosecutors and the nonprofit agency for which they work); cf. NF Indus.,
Inc., 846 F.2d at 1000 (dismissing the interlocutory appeal from a denial of
official immunity because private party had not sufficiently proved “that it
was serving a governmental function”).
8
Our extension of official immunity to contractors and other
private parties is an application of the presumption that “immunity
attaches to particular official functions, not to particular
offices.”19 We recognize that “[i]f absolute immunity protects a
particular governmental function, no matter how many times or to
what level that function is delegated, it is a small step to
protect that function when delegated to private contractors,
particularly in light of the government’s unquestioned need to
delegate governmental functions,” and that those functions are “no
‘less important simply because they are exercised by officers of
lower rank in the executive hierarchy.’”20
BCBST contends that the issue is not whether it performs
functions that Congress delegated to OPM, but whether “the
functions which the private parties performed pursuant to contract
are functions which governmental employees would perform had the
government not contracted them out.”21 In support, BCBST points to
19
Westfall, 484 U.S. at 296 n.3.
20
Mangold, 77 F.3d at 1447-48 (quoting Barr v. Mateo, 360 U.S. 564,
572-73 (1959)).
21
DeVargas v. Mason & Hanger-Silas Mason Co., 844 F.2d 714, 722 (10th
Cir. 1988) (holding that a private corporation performing under a contract
with a federal government agency may bring an interlocutory appeal from a
denial of qualified immunity and that such a corporation is entitled to
qualified immunity from an alleged constitutional deprivation compelled by
contractual obligation), distinguished in NF Indus., Inc., 846 F.2d at 1001
(“But in Devargas, the company was performing security services at an army
installation-a function that is undeniably governmental and that, absent the
private contract, would have been performed by a governmental agency.”); see
also Boyle, 487 U.S. at 512 (“To put it differently: It makes little sense to
insulate the government against finiancial liability for the judgment that a
particular feature of military equipment is necessary when the Government
produces the equipment itself, but not when it contracts for the
9
FEHBA’s legislative history, which shows that Congress’s purpose
was “to establish a health benefits program for Federal employees,”
so as to compete for the best talent with private companies.22 To
achieve that end, Congress sought to set up a partnership between
OPM and private carriers. OPM is “responsible for the overall
administration of the program while sharing the day-to-day
operating responsibilities with the employing agencies and the
insurance carriers.”23 In Doe v. Devine, then-Judge Ginsburg
examined Congress’s choice to use government contractors, rather
than the government itself, to provide FEHBA health benefits and
determined that Congress designed the program as it did in order to
“ensure maximum health benefits for employees ‘at the lowest
possible cost to themselves and to the Government.’”24 With a
number of options offered by different carriers, rather than one
plan administered solely by the government, Congress created a
production.”).
22
H.R. Rep. No. 86-957, at 2 (1959). Congress stated:
Availability of this health protection program to Government
employees will be of material assistance in improving the
competitive position of the Government with respect to
private enterprise in the recruitment and retention of
competent civilian personnel so urgently needed to assist in
maintaining and improving our strong national defense and in
the operation of other essential Government programs.
Id.
23
Id.
24
703 F.2d 1319, 1330 n.41 (D.C. Cir. 1983)(quoting H.R. Rep. No. 86-
957, at 4).
10
“system in which insurers compete vigorously for employees’
subscription dollars.”25 Thus, Congress intended for there to be
a national health benefits program to serve the public interest of
attracting the best possible workforce. BCBST argues that carriers
have an official role in the government program because Congress
thought that delegating responsibility to carriers was the most
efficient means to achieve the necessary ends. Furthermore, BCBST
notes that had it been more efficient to provide the benefits
directly, Congress would have employed the federal workforce itself
to do the task. In short, BCBST argues that the District court’s
approach violated Westfall’s rule that official immunity attaches
to functions, not particular offices.
But the district court ruled against BCBST because it
disagreed that theirs was a government function. As we see it,
Congress did not with the FEHBA hand off a government function;
rather Congress decided to get into the insurance business. Not
every activity in which government might decide to engage is a
function of government in private hands.26 BCBST’s argument would
extend official immunity to all contractual delegations of
authority by the government. The district court correctly assessed
the function assigned to OPM by Congress.
25
Id. at n.43 (internal quotations omitted).
26
Cf. Reeves v. William Stake, 447 U.S. 429 (1980).
11
Nor is this conclusion in tension with Austin Municipal
Securities, in which we held that a private, nonprofit organization
policing the securities field, including the stock exchanges,
enjoyed immunity.27 In that case, Congress delegated the authority
to enforce securities laws directly to the non-governmental
organizations, such as the NASD, pursuant to the Maloney Act.28
Here Congress granted to the OPM, not the private carrier,
authority to regulate. And while NASD performs a
quasi-prosecutorial function in enforcing compliance with SEC
regulation and related ethical standards,29 BCBST cannot be viewed
as a quasi-judicial entity in making underwriting decisions. Our
case law frustrates the premise that insurance policy writing by a
private insurer amounts to governmental policymaking.30
We also have denied official immunity to a consortium of
private companies providing insurance to American exporters under
an affiliation with a federal government agency.31 BSBST urges that
the same characteristics of the insurance relationship that were
dispositive in that case lead to the opposite result here. Finding
27
757 F.2d 676.
28
Id. at 679-80 (citing 15 U.S.C. § 78o-3).
29
Id. at 693.
30
NF Indus., 846 F.2d at 1001 (stating “FCIA has made no showing here
that its duties require the exercise of governmental policymaking as
distinguished from insurance policy-writing”).
31
846 F.2d at 1002.
12
that the private companies had “made no showing . . . that its
duties require the exercise of governmental policymaking,” the
Court in NF Industries stated:
FCIA [i.e., the insurers] is engaged primarily, if not
exclusively, in the private business of insurance for
profit. Its companies are paid by its customers, the
insureds. The companies appear to act only as insurers,
sharing in the profits and losses generated by the sale
of their policies. They sell policies like those sold by
other companies, not in privity with Eximbank, with whom
they compete. And unlike most governmental agencies,
which have mandated duties and a fixed “clientele,” they
are free (like any private company) to choose with whom
they shall deal.32
BCBST argues that, in contrast to NF Industries, BCBST does not
operate a “private business of insurance,”33 but instead administers
a federal program based on terms set by OPM, and profits solely
through a service charge that OPM establishes. Rather than being
“paid by its customers, the insureds,”34 BCBST is paid from a
Treasury account in which the government pools premium funds.
Also, unlike the insurer in NF Industries, BCBST contends that it
has “a fixed ‘clientele’” and is not “free . . . to choose with
whom they shall deal,”35 for the Plan and OPM’s regulations mandate
32
NF Indus., 846 F.2d at 1001-02.
33
Id. at 1001.
34
Id. at 1002.
35
Id.
13
that BCBST provide benefits to all who meet eligibility
requirements and enroll.36
But the fact that BCBST operates for profit, although not
under the typical paradigm, only weakens its argument, further
distinguishing it from the caselaw on which it relies. BCBST
freely enters into the market, in which, by its own admission,
carriers “compete vigorously” with other providers for customers
within the pool of federal employees.37
BCBST’s reliance upon the Medicare line of cases is also
misplaced. As the district court noted, the governing statutes
differ in a significant respect. The Center for Medicare and
Medicaid Services (“CMS”) delegates a portion of its statutory
functions to private carriers under 42 C.F.R. § 421.5(b), which
provides, for example, that “CMS is the real party of interest in
any litigation involving the administration of the program.”38 No
analogous delegation of authority exists here. Second, even
assuming that BCBST and Medicare intermediaries are similarly
situated — i.e. the Congressional grant of authority via the
relevant administrative agency is analogous — BCBST fails to
36
CS 1039 § 2.1(a)(2); 5 C.F.R. § 890.101.
37
See supra note 25.
38
42 C.F.R. § 421.5(b)
14
persuade us that providing it with official immunity would do more
good than harm, as we will explain.39
Finally, BCBST cites a recent unpublished decision, which
purportedly confirms that FEHBA carriers should be treated the same
for official immunity purposes as Medicare carriers.40 The Eleventh
Circuit relied on our Medicare immunity case law to hold that a
FEHBA carrier is an agent of the government, so as to permit the
carrier to remove its case under the officer-removal statute.41
Finding itself bound by our earlier precedent on Medicare carriers,
the Eleventh Circuit stated:
A health plan insurer contracting with a government
agency under a federal benefits program is considered a
‘person acting under’ a federal officer. See Peterson,
508 F.2d at 56-58 (finding § 1442(a)(1) jurisdiction over
a claim by a physician against a health insurer operating
under Medicare”).42
BCBST, thus, contends that because the Eleventh Circuit has
concluded, for the purpose of the officer removal statute, that
they are “a person acting under a federal officer,” then we should
conclude, for the purpose of official immunity, that they perform
a government function.
39
Westfall, 484 U.S. at 299.
40
Anesthesiology Assocs. of Tallahassee, Fla., P.A. v. Blue Cross Blue
Shield of Fla., Inc., 133 Fed. Appx. 738 (11th Cir. 2005) (unpublished).
41
28 U.S.C. § 1442(a)(1); Id. at 4.
42
Id.
15
To the extent that our officer-removal doctrine is relevant to
the instant question, we are still unpersuaded. Indeed, our
Peterson case, on which the Eleventh Circuit relied, extended
“federal officer” status to a BCBST employee who was sued for
malicious prosecution, in discharging a function that, as we have
explained, enjoys a long tradition of immunity.43 The unpublished
Eleventh-Circuit opinion falls well short of demanding that we
extend official immunity to every FEHBA insurer contracting with
the government.
2
Even if BCBST performs a governmental function for purposes of
official immunity, the district court independently concluded that
the “costs of granting official immunity to FEHBA carriers would
outweigh the potential benefit.” The district court’s ruling
followed the Supreme Court’s holding in Westfall that “absolute
immunity for federal officials is justified only when ‘the
contributions of immunity to effective government in particular
contexts outweigh the perhaps recurring harm to individual
citizens.’”44
BCBST argues, contrary to the District court’s holding, that
a weighing of the costs and benefits of immunizing FEHBA carriers
from similar suits favors official immunity. BCBST offers three
43
Peterson v. Weinberger, 508 F.2d 45, 51–52 (5th Cir. 1975).
44
Westfall, 484 U.S. at 295-96 (quoting Doe v. McMillan, 412 U.S. 306,
320 (1973)).
16
justifications of immunity. First, it argues that immunity would
preserve the incentive enrollees have to use preferred and
participating providers that save the government money. It
explains that the availability of negligent misrepresentation
actions would threaten to erase any requirement that the enrollee
pay the difference between the Plan’s payment and the
non-participating provider’s charge, since that difference would be
obtained from the carrier in successful litigation. We are not
persuaded. Any such hypothetical enrollee could seek remuneration
only to the extent represented by BCBST, independent of the plan’s
payment scheme. Indeed, here the hospital seeks only the
remuneration that it says was explicitly promised.
Second, BCBST contends that official immunity would benefit
enrollees. Absent immunity, carriers may become “unduly timid in
carrying out their official duty” and, as a result, might respond
in only a limited way or not at all to provider inquiries about
coverage.45 As a consequence, without sufficient information from
the carrier to determine future payment terms, the provider might
refuse to perform services or the provider might compel the
enrollee to agree in advance to immediate payment. Again, we are
not persuaded. Carriers such as BCBST compete for federal
employees’ subscription dollars. This profit motive is sufficient
to mitigate any timidity that might result from legal
45
Pani, 152 F.3d at 74.
17
responsibility.46 Indeed, as the district court noted, “FEHBA
carriers receive their contracts as a result of a competitive
bidding process” and “competition between carriers is sufficient to
protect th[e government’s monetary] interest.”
Third and most persuasively, BCBST argues that immunity would
further FEHBA’s goal of uniformity in plan administration, since it
would negate the prospect of state law establishing the standards
for carrier conduct, leaving that task solely to OPM. As BCBST
explains, “[P]roviders would not be permitted to pursue lucrative
state law remedies for alleged negligent misrepresentations during
coverage inquiries.” Providers still would have a remedy, however,
potentially available to them: an appeal at OPM, followed by
judicial review, based on an assignment from an enrollee.
Moreover, any wrongful actions on the part of a carrier could also
be corrected through OPM’s police power, with OPM using its
expertise to weigh the potential benefits and burdens to the
program of penalizing a carrier and affording relief to the
enrollee or provider. This benefit is far from controlling, but we
will credit it in our balancing. BCBST has not persuaded us that
uniformity would be exceptionally beneficial to the discharge of
its purported governmental function. And whatever unexceptional
benefits attend uniformity are inherent in every use of official
46
See Austin Munic. Securities, 757 F.2d at 693 (stating “[u]ntil this
potential disincentive is proven to be more than a possibility, it is too
tenuous to warrant the grant to these firms of absolute immunity”).
18
immunity to displace state tort law through implied conflict
preemption and are properly excluded from our balance. The Supreme
Court could not have intended, by its directive to balance the
costs and benefits of official immunity, for this court to rehash
Professor Shapiro’s Federalism: A Dialogue.
A final consideration, Congressional intent, also weighed
heavily in the District court’s denial of official immunity. The
District court opined that, since Congress did not indemnify the
carriers for torts, such as the one the Hospital alleges, it also
must have intended to deny official immunity. This reasoning
follows from, and situates our case in contrast to, the Medicare
cases. The Medicare regulations indemnify intermediaries and
interpose CMS as the real party of interest. BCBST argues that it
would be reimbursed for a judgment in this case,47 but that fact is
unclear. In the absence of clear expression of Congressional
intent, we decline to make the policy decision to extend official
immunity to BCBST on these facts.
The Supreme Court has counseled that a court should not expand
the scope of governmental immunity unless the interests involved
47
BCBST argues that it may charge the government for all reasonable
costs incurred while administering the plan, without exception for court
judgments. Under the reimbursement rules applicable to the Service Benefit
Plan, the carrier draws from the Treasury amounts to cover “cost[s] . . .
[that are] actual, allowable, allocable, and reasonable.” 48 C.F.R. §
1652.216-71(b); see also 2002 CS 1039 § 3.2(b). In particular, the governing
regulations and the contract provisions permit the carrier to charge to the
government “payments made and liabilities incurred for covered health care
services” as well as “legal expenses incurred in the litigation of benefit
payments.” 48 C.F.R. § 1652.216-71(b)(2)(i)-(ii) (emphasis added); see also
2002 CS 1039 § 3.2(b)(2)(i)-(ii).
19
greatly outweigh the costs.48 Immunity comes at a “great cost”
because an “injured party with an otherwise meritorious tort claim
is denied compensation simply because he had the misfortune to be
injured by a federal official.”49 The Hospital argues that this
cost would clearly outweigh any potential benefits from extending
official immunity to protect private insurance carriers like BCBST.
That under the FEHBA preemption clause, BCBST is already protected
from any claims by plan participants who have been denied health
benefits under the plan cuts in favor of both parties.50 The only
claims to be protected by an extension of immunity are the claims
filed against BCBST resulting from its tortious conduct. Not
protecting BCBST from liability for tort claims will indirectly
increase the costs of BCBST’s services, and BCBST will shift these
costs to its customers. That is to say, BCBST has the usual market
incentives to keep its negligence to a minimum and its costs low.
These incentives animated the outsourcing at issue.
Finally, we note that the district court’s ruling also
reflects the public policy considerations that underpin the
assertion of immunity. BCBST is not entitled to assert official
immunity because it does not establish a “firmly rooted” tradition
of immunity for private insurance carriers who provide health
48
See Westfall, 484 U.S. at 295-96.
49
Id. at 295.
50
See 5 C.F.R. 890.107(c).
20
benefit plans to federal employees. There is no evidence that
insurance companies were immune from suit at common law.
This is in contrast with the Medicare cases. Courts have
extended official immunity to carriers and intermediaries
administering Medicare,51 but those cases have involved the
reporting of Medicare fraud, which implicates common law principles
of immunity protecting witnesses in government-sponsored
investigations and adjudications.52 In Seiler, for example, the
question presented was whether a Medicare consultant could be
accountable for libel in reporting potential Medicare fraud.53 And
in Pani, the Second Circuit considered whether a nonprofit
corporate insurance carrier investigating Medicare fraud could
assert official immunity. Pani’s holding, explicitly constrained
to the case’s unique facts,54 depended on the nature of the conduct,
the investigation of Medicare fraud, which more readily aligns with
51
See Pani, 152 F.3d at 72-74 (citing Peterson, 508 F.2d at 58);
Midland Psych. Assocs., Inc. v. United States, 145 F.3d 1000, 1003-05 (8th
Cir. 1998); Bushman v. Seiler, 755 F.2d 653, 655-56 (8th Cir. 1985).
52
See Mangold, 77 F.3d at 1448; see also Group Health Inc. v. Blue
Cross Ass’n., 625 F. Supp. 69, 78 (S.D.N.Y 1985) (“These cases demonstrate
that a court must scrutinize the particular conduct at issue and weigh whether
it is appropriate under the circumstances to protect the private party. In
each case where a government contractor was involved such status was not
significant in the outcome. Rather, the circumstances surrounding the
particular conduct at issue were important to the determination that official
immunity would apply.”).
53
755 F.2d 653.
54
“Because our review is limited to the allegations made in Pani’s
complaint pertaining to the reporting of fraud, we do not reach the issue of
whether official immunity would apply to other conduct of a Medicare carrier
or fiscal intermediary.” Id. at 74.
21
the traditionally protected prosecutorial function of government.
Unlike these Medicare defendants, BCBST’s function is not
prosecutorial or testimonial, both government functions that, in
several different contexts, have been held to cover the social cost
of immunity.
Likewise, the public policy underlying official immunity for
federal officials is not implicated here. The Supreme Court
identified two public policy justifications for the doctrine of
official immunity: (1) the injustice, particularly in the absence
of bad faith, of subjecting to liability an officer who is
required, by the legal obligations of his position, to exercise
discretion; and (2) the danger that the threat of such liability
would deter his willingness to execute his office with the
decisiveness and judgment required by the public good.55 Neither
of these public policy goals are furthered by extending official
immunity to BCBST. Private parties are not required to enter into
contracts with the federal government. They do so for a profit
and, thus, are not required to use discretion in a way that might
unfairly expose them to lawsuits. And, unlike the federal
government, a private party is governed by self interest, not the
public interest. BCBST does not face the dilemma of being required
55
Scheuer v. Rhodes, 416 U.S. 232, 240 (1974), overruled on other
grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982); Davis v. Scherer, 468
U.S. 183 (1984).
22
by law to use its verification-of-coverage discretion in a
policymaking manner that might unfairly expose it to lawsuits.
Ultimately, BCBST does not make a substantial claim. Thus,
the order denying BCBST the protections of official immunity cannot
be reviewed under the collateral order doctrine.
B. Federal Sovereign Immunity
Again invoking the collateral order doctrine, BCBST attempts
to rely on the denial of its assertion of federal sovereign
immunity in order to create both a substantial claim of immunity56
and jurisdiction in this Court. A threshold issue arises: whether
the denial of sovereign immunity is amenable to interlocutory
appeal.
BCBST argues that the circuits are divided over whether a
denial of sovereign immunity is immediately appealable.57 If true,
such a split would provide good evidence of a substantial claim of
immunity. The Hospital contends nevertheless that BCBST is not
entitled to appeal the district court’s adverse ruling on sovereign
56
The Hospital argues that FEHBA waives sovereign immunity and that the
government is not the real party in interest. Four dissenting Justices have
recently expressed the opinion that the federal government is the real party
in interest under FEHBA. See Empire Healthchoice Assurance, Inc., 126 S.Ct.
at 2142 (BREYER, J., dissenting).
57
Compare MCI Telecomms. Corp. v. Alhadhood, 82 F.3d 658, 661 (5th Cir.
1996) (holding that the denial of a sovereign immunity defense under the
Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2), is a collateral
order subject to interlocutory appeal) and In re Sealed Case No. 99-3091, 192
F.3d 995, 999 (D.C. Cir. 1999) (holding that where a district court rejects a
federal agency’s “claim of sovereign immunity,” the “district court’s ruling
is immediately appealable as a collateral order”) with Alaska v. United
States, 64 F.3d 1352, 1356 (9th Cir. 1995) and Pullman Constr. Indus. v.
United States, 23 F.3d 1166, 1168 (7th Cir. 1994).
23
immunity because the sovereign immunity of the United States is not
“a right not to be sued” and may be effectively reviewed on
appeal.58
It is, of course, axiomatic under principles of federal
sovereign immunity “that the United States may not be sued without
58
The Hospital also asserts that BCBST is not asserting a right not to
be sued. This assertion is unavailing. The Hospital argues that BCBST does
not assert an immunity from suit because BCBST asserts that the Hospital
should have to pursue “an administrative appeal at OPM raising a grievance,
with judicial review against OPM after the agency reaches a final decision.”
BCBST contends that the Hospital is required to follow its administrative
claims process:
Federal Employees Health Benefits (FEHB) carriers resolve
FEHB claims under authority of Federal statute (5 U.S.C.
chapter 89). A covered individual may seek judicial review
of OPM’s final action on the denial of a health benefits
claim. A legal action to review final action by OPM
involving such denial of health benefits must be brought
against OPM and not against the carrier or the carrier’s
subcontractors.
5 C.F.R. § 890.107(c). In addition, BCBST’s Service Benefit Plan expressly
provides for judicial review:
If you do not agree with OPM’s decision, your only recourse
is to sue. If you decide to sue, you must file the suit
against OPM in Federal court by December 31 of the third
year after the year in which you received the disputed
services, drugs, or supplies or from the year in which you
were denied precertification or prior approval.
Thus, BCBST actually argues that the Hospital should be permitted judicial
review in federal court—just not at this time. The Hospital argues that this
is not an immunity from suit and maintains that the plain language of the
regulation only permits a “covered individual” to seek administrative and
judicial review—not a third party such as the Hospital. The immunity asserted
by BCBST, the Hospital contends, is akin to “a failure-to-exhaust-
administrative-remedies defense,” not an absolute right not to be sued at all.
See Lauro Lines, 490 U.S. at 501.
This argument is problematic in that the statute authorizes suit against
OPM, not BCBST; it expressly exempts the carrier from suit. Though the point
is well taken that the Hospital would have a remedy if the contested issue
were a standard coverage dispute and that no immunity exists for claims that
fit properly within the statutory framework, the argument is not dispositive
as to whether a suit against BCBST may proceed in an alternate forum; it
clearly cannot. This last argument does not assist the Hospital in defeating
BCBST’s assertion of federal sovereign immunity.
24
its consent and that the existence of consent is a prerequisite for
jurisdiction.”59 Yet the Hospital contends that unlike a state’s
Eleventh Amendment immunity or a foreign sovereign’s immunity from
suit, the sovereign immunity of the United States is not a right
not to be sued.60 In Pullman Construction Industries, Inc. v.
United States,61 the Seventh Circuit reviewed whether an order
denying federal sovereign immunity constituted a collateral order
subject to immediate review under Cohen. In that case, a
bankruptcy debtor brought an adversary proceeding against the
United States to recover, as preferential transfers, approximately
$500,000 in federal taxes paid to the United States during the
90-day period before bankruptcy.62 The United States moved to
dismiss the claim based on its federal sovereign immunity.63 The
district court denied the motion, and the United States filed an
appeal.
On appeal, the Seventh Circuit considered the nature of the
immunity of the United States to determine whether it was an
59
See United States v. Mitchell, 463 U.S. 206, 212 (1983).
60
See Alaska, 64 F.3d 1352; Pullman Constr. Indus., Inc., 23 F.3d 1166;
see also CSX Transp., Inc. v. Kissimmee Util. Auth., 153 F.3d 1283, 1286 (11th
Cir. 1998) (“Because Florida’s state sovereign immunity is only immunity from
liability, it is analogous to federal sovereign immunity. . . . To be
immediately appealable, [the] denial of immunity must have been a denial of an
immunity from suit.”); but see In re Sealed Case No. 99-3091, 192 F.3d 995.
61
23 F.3d 1166.
62
Id. at 1167.
63
Id.
25
absolute right not to be sued, subject to immediate review under
the collateral order doctrine. The United States insisted that its
right not be sued was well settled. The court of
appeals disagreed:
If this is all so clear, one wonders why, in the entire
existence of the United States, the federal government
has never before taken an interlocutory appeal to assert
sovereign immunity. Our case appears to be the first.
Before today the United States has occasionally sought
and received permission to take an interlocutory appeal
on this question under 28 U.S.C. § 1292(b), a puzzling
step if the federal government could appeal of right.64
The Seventh Circuit concluded that federal sovereign immunity from
damages is all that remains:
[T]he United States is no stranger to litigation in its
own courts. Congress has consented to litigation in
federal courts seeking equitable relief from the United
States, . . . and U.S.C. § 106 gives consent in limited
circumstances to litigation seeking money. Indeed, the
United States Code is riddled with statutes authorizing
relief against the United States and its agencies—the
Federal Tort Claims Act, 28 U.S.C. §§ 2671-80; the Tucker
Act, 28 U.S.C. §§ 1346(a), 1491(c); the whole
jurisdiction of the Court of Federal Claims, 28 U.S.C. §§
1491-1509; dozens if not hundreds of sue-and-be-sued
clauses; the list can be extended without much effort.
Now that 5 U.S.C. § 702 exposes the United States to
equitable relief, it is difficult to speak of federal
sovereign immunity as a “right not to be sued.” It is
quite unlike the eleventh amendment . . . . The only
portion of the United States’ original immunity from suit
that Congress continues to assert is a right not to pay
damages-a right circumscribed by statutes such as §
106.65
64
23 F.3d at 1168.
65
Id. at 1168.
26
The court concluded that federal sovereign immunity “today is
nothing but a condensed way to refer to the fact that monetary
relief is permissible only to the extent Congress has authorized
it” and “does not imply that the United States retains a general
‘right not to be sued’ in its own courts for civil litigation in
general or taxation in particular.”66 The court dismissed the
interlocutory appeal for want of jurisdiction.67
In Alaska v. United States, the Ninth Circuit reached an even
stronger conclusion.68 In that case, the state of Alaska filed an
action to quiet title to three river beds against the United
States.69 The United States moved to dismiss the action based on
its sovereign immunity. On appeal, the court noted that “[a]t first
glance, federal sovereign immunity seems to fit comfortably among
the types of immunities for which immediate appeal is
appropriate.”70 However, upon closer inspection, the court found
otherwise:
We hold that, despite the label “immunity,” federal
sovereign immunity is not best characterized as a “right
not to stand trial altogether.” . . . Like immunity from
service of process (leading to lack of personal
jurisdiction), federal sovereign immunity is better
viewed as a right not to be subject to a binding
66
Id.
67
Id. at 1170.
68
64 F.3d 1352 (9th Cir. 1995).
69
Id. at 1353-54.
70
Id. at 1355.
27
judgment. Such a right may be vindicated effectively
after trial.71
The court then dismissed the United States’s appeal for want of
jurisdiction.
The Court of Appeals for the District of Columbia has reached
the opposite conclusion, yet under circumstances too
distinguishable to create a circuit split. When a district court
ordered the Department of Justice to prosecute the Office of
Independent Counsel (“OIC”) for criminal contempt,72 the In re
Sealed Case court held that an order denying federal sovereign
immunity may be reviewed under the collateral order doctrine.73
There the OIC allegedly violated the federal grand jury secrecy
rules by leaking information regarding a possible indictment of
President Clinton for perjury and obstruction of justice in the
Paula Jones case. In its ruling, the D.C. Circuit distinguished
Pullman Construction and Alaska. First, the court noted that
Pullman Construction and Alaska were civil cases (for which
Congress has extensively waived federal sovereign immunity). As
the court of appeals observed, “it is far from clear that Congress
has waived federal sovereign immunity in the context of criminal
71
Id.
72
See In re Sealed Case No. 99-3091, 192 F.3d 995, 997 (D.C. Cir. 1999).
73
Id.
28
contempt.”74 Second, after discussing the rationale that federal
sovereign immunity can no longer be considered an absolute right
not to be sued, the court openly doubted “that federal sovereign
immunity is so limited, especially in the unique circumstances
presented here.”75
We are persuaded by Pullman Construction and find In re Sealed
Case distinguishable for the very reasons identified by the D.C.
Circuit. The federal government’s extensive waiver of forum
immunity, as detailed in Pullman Construction, simply does not
extend to criminal proceedings against federal officers.
Moreover, the special considerations at play in In re Sealed Case
— a special prosecutor facing down the justice department — do not
exist in the instant case. Indeed, Congress has waived sovereign
immunity in the FEHBA context as to coverage disputes brought by
federal employee patients.
Finally, BCBST draws our attention to this court’s recent en
banc decision in In re Supreme Beef Processors, where we
interpreted a provision of the bankruptcy code purporting to waive
federal immunity as a waiver of forum immunity only. BCBST argues
that Supreme Beef’s recognition of federal immunity from suit
forecloses our reliance on Alaska. We agree that our reasoning in
74
Id. at 999-1000 (“We know of no statutory provision expressly waiving
federal sovereign immunity from criminal contempt proceedings.”).
75
Id. at 1000 (emphasis added).
29
Supreme Beef is in tension with Alaska’s holding that Federal
sovereign immunity is an immunity from damages only. However,
Supreme Beef is consistent both with Pullman Construction and In re
Sealed Case. Indeed, the Congressional waiver of forum immunity
identified in Supreme Beef is but one of many provisions in the
U.S. Code authorizing suit against the United States. And as the
Seventh Circuit explained in Pullman Construction, these waivers,
in aggregate, have overwhelmed the United States’ forum immunity,
such that “the only portion of the United States’ original immunity
from suit that Congress continues to assert is a right not to pay
damages.”76 Hence, in accord with the Seventh Circuit, we hold that
a denial of federal sovereign immunity is not subject to immediate
review under the collateral order doctrine in the present context.
We pass no judgment on the merits of BCBST’s assertion of sovereign
immunity.
C. Pendent Appellate Jurisdiction
Since neither assertion of immunity creates an independent
basis for review — no substantial claim of official immunity and
no presently justiciable claim of federal sovereign immunity — we
need not entertain BCBST’s invitation to exercise pendent appellate
jurisdiction over any claim not otherwise amenable to interlocutory
appeal.
DISMISSED.
76
Pullman Construction, 23 F.3d at 1168.
30
31