The opinion of the court was delivered by: Briccetti, J.
AMENDED MEMORANDUM DECISION
Plaintiffs Rogelio Calingo ("Rogelio") and Georgiana Calingo ("Georgiana") bring this action on behalf of themselves and all other similarly situated class members. Plaintiffs have filed a motion to remand this action to New York Supreme Court (Doc. #16), and defendants have filed a motion to dismiss (Doc. #8). For the reasons set forth below, the Court denies plaintiffs' motion and grants defendants' motion as to plaintiffs' claim for damages and plaintiffs' claim under N.Y. Gen. Bus. Law. § 349.
For purposes of ruling on the motions, the Court accepts all factual allegations of plaintiffs' complaint as true.
Plaintiff Rogelio was a federal employee who participated in an Empire Blue Cross Blue Shield New York Federal Employee Program ("Heath Plan") and was insured by defendant Empire HealthChoice Assurance, Inc. ("Empire"). Plaintiff Georgiana is a dependant of Rogelio and was also insured by Empire. On February 22, 2009, Georgiana fell in the Palisades Mall in West Nyack, New York. As a result of her fall, she suffered injuries that were paid for by Empire. Georgiana recovered $382,000 as part of a settlement for the injuries that she suffered.
Defendant Meridian Resource Company LLC ("Meridian") is subroger of Empire and has asserted subrogation claims seeking reimbursement for the cost of health care services that Empire provided to its New York insureds who suffered personal injury and settled actions for personal injuries, malpractice, and wrongful death. Meridian and Empire, according to defendants, have asserted a lien against Georgiana for $143,378.60 based on her recovery, but have not collected on it.
Plaintiffs are members of a class that share the following characteristics: (1) all class members participate in health insurance plans provided by Empire or other benefit providers for which Meridian provides subrogation services; (2) all class members suffered personal injuries for which they received medical treatment paid for by Empire or are family members of such individuals; (3) all class members either commenced an action for a personal injury which settled on or after November 12, 2009 or has not yet settled, or are family members of such individuals; and (4) all class members were required and/or asked by Meridian to reimburse Empire or another benefit provider from the proceeds of their recovery.
Plaintiffs commenced this action in the Supreme Court of the State of New York, Rockland County, on December 9, 2010. Defendants filed a notice of removal on January 24, 2011 asserting federal question jurisdiction.
This action arises because of a change in New York law that affects plaintiffs and the class members. Section 5-335 of the New York General Obligations Law applies to plaintiffs settling personal injury or wrongful death civil actions after November 12, 2009. It provides:
When a plaintiff settles with one or more defendants in an action for personal injuries . . . , it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any non-statutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.
Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.
N.Y. Gen. Oblig. Law § 5-335(a). The action presently before the Court challenges how this provision is affected by the Federal Employees Health Benefits Act, 5 U.S.C. §§ 8901-8914 ("FEHBA"). FEHBA provides
The terms of any contract under this chapter [5 U.S.C. §§ 8901-8914] which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.
Congress enacted FEHBA to provide health benefits for federal employees and their dependants. The law vested a government agency -- currently, the Office of Personnel Management ("OPM") -- with the authority to establish insurance plans with multiple insurers, known under the Act as "carriers." 5 U.S.C. § 8901(7). One such insurance plan is the Service Benefit Plan, U.S.C. § 8903(1), which was created pursuant to a contract between OPM and the Blue Cross Blue Shield Association ("BCBSA"). BCBSA acts on behalf of local Blue Cross and Blue Shield companies which underwrite the plan and administer it within their respective territories.
Under FEHBA, OPM has the sole authority to contract for the provision of health plans, to determine the benefit structure of such plans and to promulgate the official description of the plans' terms in a Statement of Benefits. The terms of the Statement of Benefits are incorporated in the contract between OPM and BCBSA. The Statement of Benefits provides in relevant part:
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 provisions listed below . . . . All recoveries you or your representatives obtain (whether by lawsuit, settlement, insurance or benefit program claims, or otherwise), no matter how described or designated, must be used to reimburse us in full for benefits we paid. 2009 State of Benefits at 114; 2010 Statement of Benefits at 112; 2011 State of Benefits at 124.*fn1
In addition, the contract between OPM and BCBSA provides:
The Carrier's subrogation rights, procedures and policies, including recovery rights, shall be in accordance with the provisions of the agreed upon brochure text [i.e., the Statement of Benefits], which is incorporated in this Contract in Appendix A. As the member is obligated . . . to comply with the terms of this Contract, the Carrier, in its discretion, shall have the right to file suit in federal court in order to enforce those rights. 2008 Master Contract § 2.5(a). The Master Contract further provided: "[A]ll Participating [Blue Cross and Blue Shield] Plans shall subrogate under a single, nation-wide policy to ensure equitable and consistent treatment for all Members under the Contract." 2008 Master Contract § 2.5(f).
I. Plaintiffs' Motion to Remand
Because plaintiffs' motion to remand challenges the Court's subject matter jurisdiction to hear this case, the Court will address it first. A party may remove a case from state court to federal court only if the action is one over which the federal court would have had original jurisdiction. 28 U.S.C. § 1441(a). In order to demonstrate that removal is proper, the removing party bears the burden of showing the existence of federal jurisdiction. The rules regarding removal are to be strictly construed. In re Methyl Tertiary Butyl Ether Products Liability Litig., 342 F. Supp. 2d 147, 151 (S.D.N.Y. 2004). "[F]ederal courts are courts of limited jurisdiction and lack the power to disregard such limits as have been imposed by the Constitution or Congress." Durant, Nichols, Houston, Hodgson, & Cortese-Costa, P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009). Once the question of jurisdiction is raised, the burden of establishing subject matter jurisdiction rests on the party asserting such jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446 (1942).
Plaintiffs make three arguments in support of their motion to remand. First, they argue the Court lacks jurisdiction under the Class Action Fairness Act because of the local controversy exception. Second, they assert there is no federal question in this action. Finally, they contend defendants were not acting under the direction of a federal agency so as to provide jurisdiction under 28 U.S.C. § 1442(a)(1).
The Class Action Fairness Act, 28 U.S.C. § 1332(d) ("CAFA"), creates original jurisdiction in the district court for certain class actions. Under CAFA, the Court possesses jurisdiction when (a) the amount in controversy is greater than $5,000,000 exclusive of costs and interests; (b) any plaintiff is diverse from any defendant; and (c) there are more than 100 class members. 28 U.S.C. §§ 1332(d)(2) & 1332(d)(5)(B). In addition, the statute provides that the district court "shall decline to exercise jurisdiction" when the following conditions are met:
(a) more than two-thirds of the class members are citizens of the state in which the action was commenced; (b) when at least one defendant, from whom significant relief is sought and whose conduct forms a significant basis for relief, is a citizen of the state in which the action was commenced; (c) the principal injuries occurred in the state in which the action was originally filed; and (d) during the three-year period prior the commencement of the case, no other class actions had been filed against any of the defendants on behalf of any persons. 28 U.S.C. § 1332(d)(4). These conditions "are designed to draw a delicate balance between making a federal forum available to genuinely national litigation and allowing the state courts to retain cases when the controversy is strongly linked to that state." Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 682 (7th Cir. 2006); Brook v. UnitedHealth Group, ...