28 U.S.C.S. § 1331 vests in federal district courts original jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. A case arises under federal law within the meaning of § 1331 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.
A health insurance carrier under a federal program sued the administratrix of the estate of a former federal employee, seeking reimbursement of the employee's medical benefits from a settlement between the administratrix and tortfeasors. Under the Federal Employees Health Benefits Act of 1959 (FEHBA), the carrier contracted with the government to provide health insurance for federal employees, and the contract allowed the carrier to seek reimbursement of paid benefits from liable third parties. The carrier argued that its reimbursement claim was within federal jurisdiction since it sought to vindicate a contractual right contemplated by FEHBA and federal law was a necessary element of the claim.
Did the claim acquire federal jurisdiction?
The U.S. Supreme Court held that the carrier's action failed to raise a federal question to support jurisdiction and the claim raised only state law issues. It was undisputed that FEHBA did not expressly create a federal right of action for reimbursement under contracts contemplated by FEHBA, and the carrier's right to reimbursement arose from its contract rather than from FEHBA. Further, the carrier's claim was triggered by the state-court settlement rather than any federal action, and FEHBA interests in the welfare of federal employees did not warrant federal jurisdiction over a state-law contract case which was fact-bound and situation-specific.