EMPIRE HEALTHCHOICE ASSURANCE, INC., dba EMPIRE BLUE CROSS BLUE SHIELD v. McVEIGH, as administratrix of the ESTATE OF McVEIGH

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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). Premiums
thus shared are deposited in a special Treasury Fund, from which carri
ers draw to pay for covered benefits, § 8909(a). FEHBA has a pre
emption provision which provides: “The terms of any contract under
this chapter which relate to the nature, provision, or extent of coverage
or benefits (including payments with respect to benefits) shall super
sede 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 disputes 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 recov
eries they receive must be used to reimburse the Plan for benefits paid.
Petitioner Empire HealthChoice Assurance, Inc. (Empire), administers
the BCBSA Plan as it applies to federal employees in New York State.
Respondent Denise McVeigh (McVeigh) is the administrator of the es
tate 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 settlement. Empire filed this
suit in federal court invoking 28 U. S. C. § 1331, which authorizes juris

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678 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
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diction 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 Mc-
Veigh’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 carri
ers to vindicate in federal court their rights against enrollees under
FEHBA-authorized contracts, the court concluded that federal jurisdic
tion 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 re
imbursement 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 maintaining uniformity among the States
on matters relating to federal health-plan benefits. The court acknowl
edged 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 circum
stances presented. Also rejecting Empire’s argument that FEHBA’s
preemption provision independently conferred federal jurisdiction, the
court emphasized that § 8902(m)(1) makes no reference to a federal right
of action in, or federal jurisdiction over, a contract-derived reimburse
ment claim.
Held: Section 1331 does not encompass Empire’s suit. Pp. 689–701.
(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 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. Pp. 689–690.
(b) Clearfield Trust Co. v. United States, 318 U. S. 363, does not pro
vide a basis for federal jurisdiction here. In Clearfield, a Government
suit against a bank to recover the amount paid on a Government 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

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uniform federal law need not always be applied in Government litiga
tion. 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 accommodation.” 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 condi
tions ordinarily governed by state law. Focusing on reimbursement,
the appeals court determined that Empire has not demonstrated a sig
nificant conflict between an identifiable federal interest and the oper
ation 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. 690–693.
(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 fed
eral claim because Congress intended all rights and duties stemming
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 employees’
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 contrac
tual rights set forth by federal statutes [that] lacked express provisions
creating federal causes of action.” Id., at 22 (emphasis added). How
ever, the Court held that these cases did not control because “the critical
factor” in each of them was “the congressional intent behind the particu
lar provision at issue.” Ibid. Although there were some indications
that the UMTA made Ҥ 13(c) agreements and collective-bargaining
contracts creatures of federal law,” id., at 23, countervailing consid
erations—primarily a longstanding National Labor Relations Act ex
emption 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 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, par
ticularly FEHBA’s jurisdictional provision, § 8912, which opens the fed

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680 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
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eral district-court door to civil actions “against the United States.”
OPM’s regulation, 5 CFR § 890.107(c), instructs enrollees 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 federal 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 pro
visions enacted by Congress. A prescription of that unusual order war
rants cautious interpretation. Section 8902(m)(1) is a puzzling measure,
open to more than one construction, and no prior decision seems to us
precisely on point. If § 8902(m)(1) does not cover contract-based reim
bursement claims, then federal jurisdiction clearly does not exist. But
even if § 8902(m)(1) reaches such claims, the prescription is not suffi
ciently broad to confer federal jurisdiction. If Congress intends a pre
emption 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 Ga
rage & Wrecker Service, Inc., 536 U. S. 424, 432–433. Congress has not
done so here. Section 8902(m)(1) does not purport to render inopera
tive 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 pre
pared to say, based on the presentations made in this case, that under
§ 8902(m)(1), an OPM–BCBSA contract term would displace every condi
tion 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 insured’s medical expenses, to recover directly
from a third party responsible 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’ liabil
ity, whether to the insured or the insurer, would be governed not by an

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agreement to which the tortfeasors are strangers, but by state law, and
§ 8902(m)(1) would have no sway. Pp. 693–699.
(d) Also rejected is the United States’ alternative argument that Em
pire’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 Internal Reve
nue Service (IRS) seized to satisfy a federal tax deficiency, id., at 310.
Grable received notice of the seizure by certified mail before the IRS
sold the property to Darue. Grable later sued Darue in state court to
quiet title, asserting that Darue’s record title was invalid 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 de
pended on the interpretation of a federal statute, § 6335(a), Darue in
voked 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 reimbursement 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 numerous tax sale cases. Empire’s reimbursement claim,
in contrast, is fact-bound and situation-specific. Although the United
States is correct that a reimbursement claim may also involve as an
issue the extent to which the reimbursement should take account of
attorney’s fees expended to obtain the tort recovery, it is hardly appar
ent why a proper federal-state balance would place such a nonstatutory
issue under the complete 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 ob
taining, and fair share in, the tort recovery. The Government’s impor
tant interests in attracting able workers and ensuring 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. 699–701.
396 F. 3d 136, affirmed.

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682 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
Opinion of the Court
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,
post, p. 702.
Anthony F. Shelley argued the cause for petitioner. With
him on the briefs were Alan I. Horowitz, Laura G. Ferguson,
Kathleen M. Sullivan, Roger G. Wilson, Paul F. Brown, and
William A. Breskin.
Sri Srinivasan argued the cause for the United States as
amicus curiae urging reversal. On the brief were Solicitor
General Clement, Assistant Attorney General Keisler, Dep
uty Solicitor General Kneedler, James A. Feldman, Mark
B. Stern, Alisa B. Klein, Mark A. Robbins, and James S.
Green.
Thomas J. Stock argued the cause for respondent. With
him on the brief were Harry Raptakis and Victor A. Carr.*
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 Person
nel 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), administered by local Blue Cross
Blue Shield companies. This case concerns the proper
forum for reimbursement claims when a Plan beneficiary, in
jured 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.
*Clinton A. Krislov and Michael R. Karnuth filed a brief for Julia Cruz,
as representative of Jose S. Cruz, as amicus curiae urging affirmance.

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FEHBA contains a preemption clause, § 8902(m)(1), dis
placing state law on issues relating to “coverage or benefits”
afforded by health-care plans. The Act contains no provi
sion addressing the subrogation or reimbursement rights of
carriers. Successive annual contracts between OPM and
the Blue Cross Blue Shield Association (BCBSA) have obli
gated the carrier to make “a reasonable effort” to recoup
amounts paid for medical care. App. 95, 125. The state
ment 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 beneficiary’s inju
ries. The carrier had notice of the state-court action, but
took no part in it. When the tort action terminated in a
settlement, the carrier filed suit in federal court seeking re
imbursement of the full amount it had paid for the benefici
ary’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”) encom
passes 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 in
volved warrant the exercise of federal-court jurisdiction.
But claims of this genre, seeking recovery from the proceeds
of state-court litigation, are the sort ordinarily resolved in
state courts. Federal courts should await a clear signal
from Congress before treating such auxiliary claims as “aris
ing under” the laws of the United States.
I
FEHBA assigns to OPM responsibility for negotiating and
regulating health-benefits plans for federal employees. See

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Opinion of the Court
5 U. S. C. § 8902(a). OPM contracts with carriers, FEHBA
instructs, “shall contain a detailed statement of benefits of
fered and shall include such maximums, limitations, exclu
sions, and other definitions of benefits as [OPM] considers
necessary or desirable.” § 8902(d). Pursuant 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). 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 informa
tion about the Plan’s coverage and conditions. 5 U. S. C.
§ 8907(b). Concerning reimbursement and subrogation,
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 injury
or illness, you must agree to the following:
“All recoveries you obtain (whether by lawsuit, settle
ment, or otherwise), no matter how described or desig
nated, 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 injury,
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 neces
sary 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 recover in
cases . . . brought to its attention.” Id., at 95, 125. Pursu
ant to the OPM–BCBSA master contract, reimbursements
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 bene
fits (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 or reg
ulation is inconsistent with such contractual provisions.”
5 U. S. C. § 8902(m)(1) (1994 ed.).
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 our
selves 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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To ensure 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 ex
ample, 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 pro
visions.” Thus, under § 8902(m)(1) as it now reads, state
law—whether consistent or inconsistent 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 exception
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) (establishing
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., 4–5 (1954) (commenting, with respect to an identical
provision in the Federal Employees’ 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 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 subcontractors.”
5 CFR § 890.107(c) (2005). While this regulation channels

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disputes over coverage or benefits into federal court by des
ignating 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) vesting in federal district
courts “exclusive jurisdiction of civil actions under this sub
chapter”). And nothing in FEHBA’s text prescribes a fed
eral 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 fed
eral 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, com
menced 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 provided, McVeigh, in response to
Empire’s asserted reimbursement 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 Mc
2 At oral argument, counsel for respondent McVeigh represented that
“most of the [reimbursement claims] are not of th[is] magnitude”; “[m]ost
of the cases involve [amounts like] $5,500 and $6,500.” Tr. of Oral Arg. 52.

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688 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
Opinion of the Court
Veigh 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 Dis
trict 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 consti
tuted federal law. See 396 F. 3d, at 140. The District
Court rejected both arguments and granted McVeigh’s mo
tion 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 vindicate [in fed
eral court] their rights [against enrollees] under FEHBA
authorized contracts”; therefore, the court concluded, “fed
eral jurisdiction exists over this dispute only if federal
common law governs Empire’s claims.” Id., at 140. Quot
ing 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],’ ” because
(1) reimbursement directly affects the United States Treas
ury and the cost of providing health benefits to federal em
ployees; and (2) Congress had expressed its interest in main
taining uniformity among the States on matters relating to
federal health-plan benefits. Id., at 141. The court ac
knowledged that the case involved distinctly federal inter
ests, but found that Empire had not identified “specific ways
in which the operation of state contract law, or indeed of

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other laws of general application, would conflict materially
with the federal policies underlying FEHBA in the circum
stances 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 juris
diction. 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 Uni ted 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 re
imbursement 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 com
mon law to terms in a FEHBA plan and establishes federal
jurisdiction over Empire’s complaint.
We granted certiorari, 546 U. S. 1085 (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 Ill. v. Cruz, 396 F. 3d 793, 799–800
(CA7 2005) (upholding federal jurisdiction), Caudill v. Blue
Cross & Blue Shield of N. C., 999 F. 2d 74, 77 (CA4 1993)
(same), and Medcenters Health 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. National Postal Mail Handlers Union,
36 F. 3d 306, 314–315 (CA3 1994) (rejecting federal jurisdic
tion), 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

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690 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
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case “aris[es] under” federal law within the meaning of
§ 1331, this Court has said, if “a well-pleaded complaint es
tablishes 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.” Fran
chise 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 juris
diction. Emphasizing our opinion in Jackson Transit Au
thority v. Transit Union, 457 U. S. 15, 22 (1982), and cases
cited therein, they urge that Empire’s complaint raises a fed
eral claim because it seeks to vindicate a contractual right
contemplated by a federal statute, a right that Congress in
tended 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, demon
strates 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 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 702.
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.

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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 federal
District Court being invoked pursuant to the provisions of
§ 24(1) of the Judicial Code, 28 U. S. C. § 41(1),” now con
tained in 28 U. S. C. §§ 1332, 1345, 1359). The case pre
sented 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) de
termine 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 en
lightened 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 litigation,
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) (herein
after Hart and Wechsler).3 “[T]he prudent course,” we have
recognized, is often “to adopt the readymade body of state
3 The United States, in accord with the dissent in this regard, see post,
at 707, 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 (quoting
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 resem
bles the controversy in Allegheny.

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law as the federal rule of decision until Congress strikes a
different accommodation.” United States v. Kimbell Foods,
Inc., 440 U. S. 715, 740 (1979).
Later, in Boyle, the Court telescoped the appropriate in
quiry, 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 bor
rowing, incorporating, or adopting state law in point. The
Court preferred “the more modest terminology,” questioning
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 ex
plained, the involvement of “an area of uniquely federal in
terest . . . establishes a necessary, not a sufficient, condition
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 par
ticular elements of state law are superseded.” Ibid.
The dissent describes this case as pervasively federal,
post, at 702, and “the provisions . . . here [as] just a few
scattered islands in a sea of federal contractual provisions,”
post, at 709. But there is nothing “scattered” about the pro
visions on reimbursement and subrogation in the OPM–
BCBSA master contract. See supra, at 684–685. 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 698.4 The Court of
4 The dissent 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.

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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 argu
ment, which is, essentially, a more tailored variation of the
theme sounded in the dissent. It is undisputed that Con
gress has not expressly created a federal right of action en
abling insurance carriers like Empire to sue health-care ben
eficiaries in federal court to enforce reimbursement rights
under contracts contemplated by FEHBA. Empire and the
United States nevertheless argue that, under our 1982 opin
ion in Jackson Transit, Empire’s claim for reimbursement,
arising under the contract between OPM and the BCBSA,
“states a federal claim” because Congress intended all rights
and duties stemming from that contract to be “federal in na
ture.” 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 fed
eral statute there involved, § 13(c) of the Urban Mass Trans
portation 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 collective-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

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and turned it into a public entity, the Jackson Transit Au
thority. Id., at 18. To satisfy 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 covered
its unionized workers in a series of collective-bargaining
agreements. Eventually, however, the Authority notified
the union that it would no longer adhere to collective
bargaining undertakings. Id., at 19. The union com
menced 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 sev
eral occasions [we had] determined that a plaintiff stated a
federal claim when he sued to vindicate contractual rights set
forth by federal statutes, [even though] the relevant statutes
lacked express provisions creating federal causes of action.”
Id., at 22 (emphasis added) (citing Machinists v. Central Air
lines, 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 Commerce
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 Transit] case,” for in
each case, “the critical factor” in determining “the scope of

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rights and remedies under a federal statute . . . is the con
gressional intent behind the particular 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 collective
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 speci
fie[d] five different varieties of protective provisions
that must be included among the § 13(c) arrangements;
and it expressly incorporate[d] the protective arrange
ments 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 govern
ments and their employees are the subject of a longstanding
statutory exemption from the National Labor Relations
Act.” 457 U. S., at 23. “Section 13(c),” the Court contin
ued, “evince[d] no congressional intent to upset the decision
in the [NLRA] to permit state law to govern the relation
ships 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 consideration of § 13(c): Con
gress intended that labor relations between 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 enforcement of those contracts was a suit in
state court.

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Measured against the Court’s discussion in Jackson Tran
sit 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 inter
ests are involved. Principally, reimbursements are credited
to a federal fund, and the OPM–BCBSA master contract
could be described as “federal in nature” because it is negoti
ated by a federal agency and concerns federal employees.
See supra, at 683–684. But, as in Jackson Transit, counter
vailing considerations control. Among them, the reimburse
ment right in question, predicated on a FEHBA-authorized
contract, is not a prescription of federal law. See supra,
at 684. 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 686. OPM’s regulation, 5
CFR § 890.107(c) (2005), instructs enrollees who seek to chal
lenge benefit denials to proceed in court against OPM “and
not against the carrier or carrier’s subcontractors.” See
ibid. 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 encompass 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 partici
pant, beneficiary, 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).

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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
created 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 preemp
tion prescription, see supra, at 685–686, 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 Congress.
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
than one construction, and no prior decision seems to us pre
cisely on point. Reading the reimbursement clause in the
master OPM–BCBSA contract as a condition or limitation on
“benefits” received by a federal employee, the clause could
be ranked among “[contract] terms . . . relat[ing] to . . . cover
age 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 reimbursement ordinarily arises
long after “coverage” and “benefits” questions have been re
solved, and corresponding “payments with respect to bene
fits” 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 enti
tlement (or lack thereof) to Plan payment for certain health
care services he or she has received, and not to terms relat
ing to the carrier’s postpayments right to reimbursement.
See Brief for Julia Cruz as Amicus Curiae 10, 11.

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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 re
imbursement claims, that provision is not sufficiently broad
to confer federal jurisdiction. If Congress intends a pre
emption instruction completely to displace ordinarily appli
cable state law, and to confer federal jurisdiction thereby,
it may be expected to make that atypical intention clear.
Cf. Columbus v. Ours Garage & Wrecker Service, Inc., 536
U. S. 424, 432–433 (2002) (citing Wisconsin Public Interve
nor 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 inop
erative any and all state laws that in some way bear on
federal employee-benefit plans. Cf. 29 U. S. C. § 1144(a)
(portions of ERISA “supersede any and all State laws inso
far as they may now or hereafter relate to any employee
benefit plan”). And, as just observed, see supra, at 697,
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 under
lying that recovery is plainly governed by state law. We
are not prepared to say, based on the presentations 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 bene
fits links together the carrier’s right to reimbursement from
the insured and its right to subrogation. See supra, at 684–
685. 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

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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 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.
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 reimburse
ment 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 exemplary,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 deficiency. 545
U. S., at 310. Grable received notice of the seizure by certi
fied mail before the IRS sold the property to Darue Engi
neering & Manufacturing (Darue). Ibid. Five years later,
5 As the Court in Grable observed, 545 U. S., at 312, the classic example
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).

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Grable sued Darue in state court to quiet title. Grable as
serted that Darue’s record title was invalid because the IRS
had conveyed the seizure notice improperly. 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 determi
nations that the removal was proper. “The meaning of the
federal tax provision,” we said, “is an important issue of fed
eral law that sensibly belongs in a federal court.” 545 U. S.,
at 315. Whether Grable received notice adequate under
§ 6335(a), we observed, was “an essential element of [Gra
ble’s] quiet title claim”; indeed, “it appear[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 “substan
tial,” and its resolution was both dispositive of the case and
would be controlling in numerous other cases. See 545
U. S., at 313. Here, the reimbursement claim was triggered,
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 687–688, 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, Mc

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Veigh’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 acci
dent 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 attorney’s
fees expended . . . to obtain the tort recovery.” Brief as
Amicus Curiae 29. Indeed it may. But it is hardly appar
ent why a proper “federal-state balance,” see id., at 28,
would place such a nonstatutory issue under the complete
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 interest
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 contract
derived claim to be reimbursed from the proceeds of a fed
eral worker’s state-court-initiated tort litigation.
In sum, Grable emphasized that it takes more than a fed
eral 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 Ap
peals for the Second Circuit is
Affirmed.

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702 EMPIRE HEALTHCHOICE ASSURANCE, INC. v. McVEIGH
Breyer, J., dissenting
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, be
tween a federal agency and a private carrier, sets forth the
details of a federal health insurance program created by fed
eral statute and covering 8 million federal employees. 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 insurance for
Federal Government employees and their families. That
insurance program today covers approximately 8 million
federal employees, retirees, and dependents, at a total cost
to the Government of about $22 billion a year. Brief for
United States as Amicus Curiae 2.
To implement the statute, the Office of Personnel 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
statement of the terms of the plan); see also Federal Em
ployees Health Benefits Program Standard Contract (CR–
2003) (2005), online at http://www.opm.gov/insure/carriers/
samplecontract.doc (sample form agency/carrier contract) (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

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rights. It makes clear that the Government, not the carrier,
will receive the premiums and will pay the benefits. It
specifies that the carrier will administer 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 obli
gated to all terms, conditions, and provisions of this con
tract.” App. 90.
As the statute requires, § 8907(b), the agency/carrier con
tract 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 explains that it “de
scribes 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 In
surance Service.” Id., at 155.
The program is largely funded by the Federal Govern
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 typi
cally withdraws money from the fund to pay for covered
health care services, ibid.; however, the fund’s money be
longs, not to the carrier, but to the federal agency that
administers the program. After benefits are paid, any sur
plus 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 premi
ums and the cost of benefits, but from a negotiated service
charge that the federal agency pays directly.

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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 receives
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 program. The
plan’s details are contained in Blue Cross Blue Shield’s con
tract with the federal agency and in the brochure, which
binds the enrolled employee to that contract. In this case,
the carrier seeks to require the enrolled employee’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 compensation for the relevant
injury or illness). The parties dispute the proper applica
tion 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 [enrollees]
under this contract.” Ibid. Any money recovered by the
carrier goes into the statutory fund in the United States

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Treasury, and may be spent for the benefit of the program
at the discretion of the federal agency. See supra, at 703.
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 re
ceived by the [enrollee] by suit, settlement, or otherwise
from any third party or its insurer . . . for benefits which
have also been paid under this contract.” App. 95. The
agency/carrier contract also says that the “[c]arrier’s subro
gation rights, procedures and policies, including recovery
rights, shall be in accordance with the provisions of the
agreed-upon brochure text.” Id., at 100. The relevant pro
visions 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 omission,
causes you to suffer an injury or illness, and if we pay
benefits for that injury or illness, you must agree to
the following:
“All recoveries you obtain (whether by lawsuit, settle
ment, or otherwise), no matter how described or desig
nated, 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 benefits 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

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because, once understood, their federal nature brings this
case well within the scope of the relevant federal jurisdic
tional 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 cre
ates the cause of action. Merrell Dow Pharmaceuticals
Inc. v. Thompson, 478 U. S. 804, 808 (1986); see also Ameri
can 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); 19 C. Wright,
A. Miller, & E. 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 articu
lated 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 appli
cation of terms in a federal contract. This Court has con
sistently held that “obligations to and rights of the United
States under its contracts are governed exclusively by fed
eral 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] com
mercial paper,” namely a federal employee’s paycheck, “are
governed by federal rather than local law.” The Court rea
soned that “[w]hen the United States disburses its funds or

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pays its debts, it is exercising a constitutional function or
power,” a power “in no way dependent on the laws of Penn
sylvania 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 governing rule of law.” Id.,
at 367.
This Court has applied this principle, the principle embod
ied 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 conser
vation program); United States v. Seckinger, 397 U. S. 203,
209 (1970) (Government construction contracts); United
States v. County of Allegheny, 322 U. S. 174, 183 (1944) (Gov
ernment procurement 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 act
ing pursuant to a federal statute that creates a federal bene
fit 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 pur
suant 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 & Casualty Co., 266 F. 3d 675, 680–681
(CA7 2001) (Easterbrook, J.) (National Flood Insurance Pro
gram contracts); Almond v. Capital Properties, Inc., 212
F. 3d 20, 22–24 (CA1 2000) (Boudin, J.) (Federal Railroad Ad

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ministration 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 aris
ing under federal common law are (for jurisdictional pur
poses) cases “arising under” federal law. After all, in every
Supreme Court case I have cited (except National Farmers
and Milwaukee, and not including the Courts of Appeals
cases), the United States was a party, and that fact pro
vides 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 “choice-of-law
issue” only, ante, at 691, and the Court consequently did not
need to address the application of the Clearfield Trust doc
trine to § 1331 “arising under” jurisdiction.
But I have found no case where a federal court concluded
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 707 and this page) 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 ju
risdiction as such,” nevertheless “they are suggestive” on
the issue of § 1331 jurisdiction over suits involving Federal
Government contracts “since they hold federal law determi
native of the merits of the claim.”
It is enough here, however, to assume that federal common
law means federal jurisdiction where Congress so intends.
Cf. Clearfield Trust, supra, at 367 (“In absence of an appli
cable 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

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federal courts, following Clearfield Trust, to assume jurisdic
tion 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 reim
bursement proceeding for the United States, just as it ad
ministers the rest of the agency/carrier contract. Accord
ingly, this case, just like the Clearfield Trust cases, concerns
the “rights of the United States under its contracts.”
Boyle, 487 U. S., at 504.
Second, the health insurance system FEHBA establishes
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 Fed
eral Government’s need for uniform interpretation of the
contract is great. Given the spread of Government employ
ees throughout the Nation and the unfairness of treating
similar employees differently, the employees’ need for uni
form interpretation is equally great. That interest in uni
formity calls for application of federal common law to dis
putes 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 contractual
provisions, all of which federal courts will interpret and

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apply (when reviewing the federal agency’s resolution of dis
putes 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 believe
they have come up with one possible indication of a contrary
congressional intent. They believe that the statute’s juris
dictional provision argues against federal jurisdiction where
the United States is not formally a party. That provision
gives the federal district courts “original jurisdiction, con
current with the United States Court of 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 696.
That is not so. Congress’ failure to write § 8912 to include
suits between carriers and enrollees over plan provisions
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 Federal
Government “founded on” the federal health insurance pro
gram—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, expanding federal
jurisdiction to encompass these claims?
The answer, as the majority itself points out, ante, at 686,
is that Congress did not write § 8912 to expand the jurisdic
tion of the federal courts. It wrote that section to transfer 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).

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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 696. After all, no such express
statement of congressional intent was present in Clearfield
Trust itself, or in any of the cases relying on Clearfield Trust
for the authority to apply federal common law to interpret
Government contracts. See, e. g., cases cited supra, at 707;
see also Clearfield Trust, supra, at 367 (“In absence of an
applicable Act of Congress it is for the federal courts to fash
ion the governing rule of law according to their own stand
ards”). Accordingly, I would apply federal common law to
resolve the petitioner’s contract 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 because
the petitioner has not demonstrated a “ ‘significant conflict
. . . between an identifiable federal policy or interest and
the operation of state law.’ ” Ante, at 693. But as I have
explained, see supra, at 708–709, the Federal Government
has two such interests: (1) the uniform operation of a federal
employee health insurance program, and (2) obtaining reim
bursement under a uniform set of legal rules. These inter
ests 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 applica
tion of federal common law. See, e. g., Boyle, supra, at
508 (“[W]here the federal interest requires a uniform rule,

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the entire body of state law applicable to the area conflicts
and is replaced by federal rules”); Kimbell Foods, 440 U. S.,
at 728 (“Undoubtedly, federal programs that ‘by their nature
are and must be uniform in character throughout the Nation’
necessitate formulation of controlling federal rules”); Clear
field Trust, 318 U. S., at 367 (applying federal common law
because “application of state law . . . would subject the rights
and duties of the United States to exceptional uncertainty”
and “would lead to great diversity in results by making iden
tical transactions subject to the vagaries of the laws of the
several states,” and therefore “[t]he desirability 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 different
accommodation,’ ” ante, at 691–692 (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 occa
sionally 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 com
mon law governs, in general it will incorporate state law as
the rule of decision”); 19 C. Wright, A. Miller, & E. Cooper,
Federal Practice and Procedure § 4518, at 572–573 (“In re
cent years, the Supreme Court has put increasing emphasis
on the notion that when determining what should be the con

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tent 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 692 (emphasis added).
See, e. g., Kimbell Foods, supra, at 727 (deciding that “[f]ed
eral 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 analysis” 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 fol
low state law” (footnote omitted)). Therefore, even if the
Court is correct that state law applies to claims involving
the interpretation 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. Ac
cordingly, 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, 487 U. S., at 507, n. 3 (“If the distinction between dis

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placement of state law and displacement of federal law’s in
corporation of state law ever makes a practical difference, it
at least does not do so in the present case”).
With respect, I dissent.