            SUPREME COURT OF MISSOURI
                                      en banc


JODIE NEVILS,                )
                             )
         APPELLANT,          )
                             )
vs.                          )                 No. SC93134
                             )
GROUP HEALTH PLAN, INC., and )
ACS RECOVERY SERVICES, INC., )
                             )
         RESPONDENTS.        )

        APPEAL FROM THE CIRCUIT COURT OF ST. LOUIS COUNTY
                    Honorable Thea A. Sherry, Judge

                              Opinion issued May 3, 2016

      In Nevils v. Group Health Plan, Inc., 418 S.W.3d 451, 457 (Mo. banc 2014), this

Court held that 5 U.S.C. section 8902(m)(1) of the Federal Employee Health Benefits Act

(FEHBA) did not preempt Missouri law prohibiting subrogation of personal injury

claims. The United States Supreme Court granted certiorari, vacated this Court’s

decision in Nevils, and remanded the case for this Court to determine whether a new

regulation promulgated by the Office of Personnel Management (OPM) establishes that

FEHBA preempts Missouri’s anti-subrogation law. Group Health Plan Inc., v. Nevils,

135 S. Ct. 2886 (2015).

      The United States Supreme Court has never held that a regulation promulgated by

an executive branch administrative agency determines the scope
of Congress’ exercise of its legislative prerogative to expressly preempt state law.

Instead, the Court has held consistently that courts should presume that there is no

preemption and that a federal statute preempts state law only if it demonstrates

Congress’ clear and manifest intent to preempt state law. The text of the FEHBA

preemption clause has not changed, and the OPM regulation does not overcome

the presumption against preemption and demonstrate Congress’ clear and manifest

intent to preempt state law. Therefore, this Court holds that the OPM regulation

does not establish that FEHBA preempts Missouri law prohibiting the subrogation

of personal injury claims.

                                     Background

       Jodie Nevils (Appellant) was a federal employee with a health insurance

plan governed by FEHBA. FEHBA expressly preempts state law as follows:

          The terms of any contract under this chapter which relate to the
          nature, provision, or extent of coverage or benefits (including
          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.

5 U.S.C. section 8902(m)(1).

       Appellant filed suit against Group Health Plan, Inc., 1 and ACS Recovery

Services, Inc., after Coventry and ACS enforced a subrogation lien against the

proceeds from Appellant’s settlement of a personal injury claim. Appellant

alleged that the subrogation lien violated Missouri law prohibiting the subrogation


1
 Group Health Plan, Inc., is now Coventry Health Care of Missouri, Inc., and will
hereafter be referred to as “Coventry.”
of personal injury claims. The trial court entered summary judgment in favor of

Coventry and ACS on grounds that FEHBA preempts Missouri anti-subrogation

law.

       This Court reversed the summary judgment and held that the FEHBA

preemption clause did not preempt Missouri anti-subrogation law because the

subrogation of a personal injury claim does not clearly “relate to the nature,

provision, or extent of coverage or benefits.” Nevils, 418 S.W.3d at 455. This

Court’s analysis began with the principle that the “historic police powers of the

States” are generally preempted only when the federal statute at issue indicates

that preemption is the “clear and manifest purpose of Congress.” Id. at 454

(quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992)). “[W]hen two

plausible readings of a statute are possible, ‘we would nevertheless have a duty to

accept the reading that dis-favors preemption.’” Id. (quoting Bates v. Dow

Agrosciences, L.L.C., 544 U.S. 431, 449 (2005)). The FEHBA preemption clause

is ambiguous because it is subject to plausible, alternate interpretations. Id. at 454

(citing Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 697

(2006)). Specifically, the FEHBA preemption clause does not address the

subrogation or reimbursement rights of insurance providers, id. at 455 (citing

Empire, 547 U.S. at 683), and “there is no indication that Congress delegated to

the OPM the authority to make binding interpretations of the scope of the FEHBA

preemption clause,” id. at 457 n.2. In addition to the presumption against

preemption, this Court noted that a “cautious” reading of the FEHBA preemption


                                          3
clause was further warranted because the statute takes the unusual step of

providing that the terms of a privately negotiated contract preempt state law. Id.

at 455. Consequently, this Court held that the plain language of the FEHBA

preemption clause does not establish a clear and manifest congressional intent to

preempt state anti-subrogation law. Id. at 457.

       Following this Court’s opinion in Nevils, the OPM promulgated a formal

rule providing that:

          A carrier’s rights and responsibilities pertaining to subrogation
          and reimbursement under any FEHB contract relate to the
          nature, provision, and extent of coverage or benefits (including
          payments with respect to benefits) within the meaning of 5
          U.S.C. 8902(m)(1). These rights and responsibilities are
          therefore effective notwithstanding any state or local law, or
          any regulation issued thereunder, which relates to health
          insurance or plans.

5 C.F.R. § 890.106(h). The United States Supreme Court granted certiorari,

vacated this Court’s decision in Nevils, and remanded the case to this Court to

determine whether the foregoing rule establishes that FEHBA preempts Missouri’s

anti-subrogation law.

                                      Analysis

       Coventry argues that the OPM’s new rule providing that FEHBA preempts

state anti-subrogation law is dispositive and requires this Court to hold that

FEBHA preempts Missouri’s anti-subrogation law. Coventry asserts that the

OPM rule is entitled to deference pursuant to Chevron U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984). Chevron held that when



                                          4
resolving statutory ambiguities, courts should defer to an executive administrative

agency’s interpretation of the statute through formally promulgated administrative

rules. Id. 842-43. 2 “Chevron deference” is typically applied “[w]here an agency

rule sets forth important rights and duties, where the agency focuses fully and

directly on the issue, where the agency uses notice-and-comment procedures to

promulgate a rule, [and] where the resulting rule falls within the statutory grant of

authority.” Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 173 (2007).

       The OPM rule at issue was promulgated formally pursuant to notice and

comment rulemaking. The text of the FEHBA preemption clause, however,

remains unchanged. To reverse course from the holding in Nevils, this Court

would have to hold that the OPM’s rule is dispositive as to Congress’ intent to

preempt state law. While Chevron has been applied repeatedly to determine the

substantive meaning of a statute, the United States Supreme Court has never held

expressly that Chevron deference applies to resolve ambiguities in a preemption

clause. Absent binding precedent requiring such deference, this Court declines to

afford dispositive deference to an executive agency’s interpretation of a statutory

preemption clause.




2
 The statutory term at issue in Chevron was a provision of the Federal Clean Air
Act establishing permitting requirements for “new or modified major stationary
sources.” 467 U.S. at 840. Therefore, the Court’s holding that the agency rule
regarding what constituted a “source” of air pollution was entitled to deference
related only to the substantive meaning of the statute rather than its preemption of
conflicting state law.

                                          5
       The Supremacy Clause of the United States Constitution provides that state

laws and constitutional provisions are preempted when in conflict with federal

laws. See Johnson v. State, 366 S.W.3d 11, 26-27 (Mo. banc 2012). “In

determining whether a state statute is pre-empted by federal law and therefore

invalid under the Supremacy Clause of the Constitution, our sole task is to

ascertain the intent of Congress.” California Fed. Sav. & Loan Ass'n v. Guerra,

479 U.S. 272, 280 (1987). “Accordingly, ‘the purpose of Congress is the ultimate

touchstone of pre-emption analysis.’” Cipollone, 505 U.S. 504 at 516 (1992)

(quoting Malone v. White Motor Corp., 435 U.S. 497, 504 (1978)); see also

Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (Congress’ purpose is the

“ultimate touchstone” for determining the existence and reach of preemption).

       While Congress’ intent and purpose are the determinative factors,

preemption analysis “starts with the basic assumption that Congress did not intend

to displace state law.” Maryland v. Louisiana, 451 U.S. 725, 746 (1981); see also

Cipollone, 505 U.S. at 516 (preemption analysis “starts with the assumption that

the historic police powers of the States [are] not to be superseded by” federal

statute). There are two aspects to the presumption against preemption. City of

Belton v. Smoky Hill Ry. & Historical Soc., Inc., 170 S.W.3d 429, 434 (Mo. App.

2005) (quoting Medtronic, Inc., 518 U.S. 470 at 485 (1996)). First, it is presumed

that the states’ historic police powers are not preempted unless it is the clear intent

of Congress to preempt state law. Id. Second, a court’s analysis of the scope of a

statute’s preemption is determined by the congressional purpose in enacting the


                                           6
statute. Id. When two plausible readings of a statute are possible, “we would

nevertheless have a duty to accept the reading that disfavors pre-emption.” Bates,

544 U.S. 431 at 449 (2005).

       As this Court noted in Nevils, the United States Supreme Court has

recognized that the FEHBA preemption clause is subject to plausible, alternate

interpretations. 418 S.W.3d at 454-455 (citing Empire Healthchoice Assurance

Inc., 547 U.S. 677 at 697 (2006)). The Court also noted that the “choice-of-law

prescription is unusual in that it renders superior preemptive contract terms in

health insurance plans, not provisions enacted by Congress [ ] and that such an

unusual order warrants [a] cautious interpretation.” Id. The fact that the FEHBA

preemption clause is susceptible to alternate interpretations implicates the

presumption against preemption and counsels that preemption is warranted only if

Congress expressed its clear and manifest intent that the purposes of FEHBA

require the preemption of state anti-subrogation laws. Coventry’s argument that

this Court must give dispositive deference to the new OPM rule is a tacit

admission that Congress did not express its clear and manifest intent that the

purpose of FEHBA requires preemption of state anti-subrogation law.

       Cipollone illustrates the Supreme Court’s application of the presumption

against preemption when an express preemption clause is at issue. In Cipollone,

the issue was whether the Federal Cigarette Labeling and Advertising Act

preempted state law claims based on failure to warn, breach of express warranty,

fraudulent misrepresentation, and conspiracy. The act contained an express


                                          7
preemption clause that “governed entirely” the preemptive scope of the Act. 505

U.S. at 517. The preemption clause provided that “[n]o statement relating to

smoking and health shall be required in the advertising of properly labeled

cigarettes.” Id. The Supreme Court applied the presumption against preemption

to analyze separately whether each of the asserted state law claims was preempted.

The Supreme Court stated that “we must construe these provisions in light of the

presumption against the pre-emption of state police power regulations. This

presumption reinforces the appropriateness of a narrow reading ….” Id. at 518.

The Supreme Court also emphasized that courts “must fairly but - in light of the

strong presumption against pre-emption - narrowly construe the precise language

of [the preemption clause] and we must look to each of petitioner’s common-law

claims to determine whether it is in fact pre-empted.” Id. at 523.

       While Cipollone discussed the general presumption against preemption,

Cipollone did not address the issue of whether an agency rule is entitled to judicial

deference when application of the rule may result in preemption. That issue was

addressed in Smiley v. Citibank (S. Dakota), N.A., 517 U.S. 735 (1996). In

Smiley, a California resident filed a class action lawsuit alleging that late payment

fees charged by a South Dakota bank were “unconscionable” and illegal under

California law. Id. at 738. The bank argued that the lawsuit was preempted by

the definition of “interest” in section 85 of the National Bank Act. Id. The agency

that administered the act promulgated a rule providing that the term “interest”

included late fees. Id. The plaintiff asserted that if the term “interest” included


                                          8
late fees, then California law, that allegedly barred such fees, would be preempted.

Id. As such, the plaintiff argued the agency rule was not entitled to deference and

the presumption against preemption applied. Id.

       The Supreme Court rejected the plaintiff’s argument that the presumption

against preemption applied because:

          This argument confuses the question of the substantive (as
          opposed to pre-emptive) meaning of a statute with the question
          of whether a statute is pre-emptive. We may assume (without
          deciding) that the latter question must always be decided de
          novo by the courts. That is not the question at issue here; there
          is no doubt that § 85 pre-empts state law.

Id. at 744. The Supreme Court further emphasized the distinction between the

substantive meaning of a statute and the preemptive reach of a statute by noting

that “[w]hat is at issue here is simply the meaning of a provision that does not (like

the provision in Cipollone) deal with pre-emption, and hence does not bring into

play the considerations petitioner raises.” Id.

       Smiley indicates that Chevron deference does not apply to provisions, “like

the provision in Cipollone,” that deal expressly with preemption, while it does

apply to “substantive” provisions even if application of the substantive provision

will have some preemptive effect. Like the preemption clause in Cipollone, the

FEHBA preemption clause is an express preemption clause. Following the

distinction between “substantive” and “preemptive” statutory provisions noted in

Smiley, this Court concludes that there is no binding precedent requiring courts to

afford dispositive deference to an agency rule defining the scope of an express



                                          9
preemption clause. Accordingly, this Court declines to hold that the OPM rule

conclusively resolves the ambiguity in the FEHBA preemption clause. 3

       Contrary to this conclusion, Coventry argues that the case law establishes

that the OPM rule is entitled to dispositive deference. Coventry argues that City of

Arlington, Tex. v. F.C.C., 133 S.Ct. 1863 (2013), indicates clearly that the courts

must defer to an agency rule interpreting a preemption clause. The issue in City

of Arlington was whether “an agency’s interpretation of a statutory ambiguity that

concerns the scope its regulatory authority (that is, its jurisdiction) is subject to

deference under” Chevron. Id. at 1866. The Supreme Court held that the rule was

entitled to deference because:

          Chevron is rooted in a background presumption of
          congressional intent: namely, that Congress, when it left
          ambiguity in a statute administered by an agency, understood
          that the ambiguity would be resolved, first and foremost, by the
          agency, and desired the agency (rather than the courts) to
          possess whatever degree of discretion the ambiguity allows.
          Chevron thus provides a stable background rule against which
          Congress can legislate: Statutory ambiguities will be resolved,
          within the bounds of reasonable interpretation, not by the
          courts but by the administering agency.




3
   In Wyeth v. Levine, 555 U.S. 555, 576 (2009), the Supreme Court “recognized that an
agency regulation with the force of law can pre-empt conflicting state requirements.”
The fact that an agency regulation can have preemptive effect does not mean that courts
must defer to an agency rule purporting to define the preemptive scope of a statute
administered by the agency. To the contrary, “[i]n such cases, the Court has performed
its own conflict determination, relying on the substance of state and federal law and not
on agency proclamations of pre-emption.” Id. Although Wyeth did not directly address
the issue of Chevron deference, Wyeth is consistent with Cipollone and Smiley insofar as
each case indicates that the courts are not required to afford dispositive deference to an
agency rule regarding preemption.


                                            10
       As Coventry asserts, the Supreme Court’s holding and rationale in City of

Arlington is a strong re-affirmation of Chevron. However, City of Arlington was

not a Supremacy Clause case. Instead, as the Supreme Court made a clear, City of

Arlington was about the reach of the FCC’s regulatory authority. Therefore, City

of Arlington is, at its core, a Commerce Clause case with the attendant

presumption that “legislative Acts adjusting the burdens and benefits of economic

life come to the Court with a presumption of constitutionality ....” Hodel v.

Indiana, 452 U.S. 314, 323 (1981) (quoting Usery v. Turner Elkhorn Mining Co.,

428 U.S. 1, 15 (1976)). City of Arlington does not require this Court to hold that

the OPM rule is entitled to Chevron deference.

       Coventry also asserts that Cuomo v. Clearing House Association, L.L.C.,

557 U.S. 519, 531 (2009), holds that Chevron deference applies to express

preemption clauses. In Cuomo, the issue was whether an agency regulation

purporting to pre-empt state law enforcement can be upheld as a “reasonable

interpretation of the National Bank Act.” Id. at 523-524. The Supreme Court

noted that Chevron deference generally applies to agency regulations. Id. at 525.

However, as Coventry notes, the Supreme Court did not actually apply Chevron

deference because the agency’s regulation did not comport with the statute. Id. at

531. Cuomo does not hold that an agency regulation interpreting an express

preemption clause is entitled to Chevron deference.

       Coventry also cites Helfrich v. Blue Cross & Blue Shield Ass’n, 804 F.3d

1090 (10th Cir. 2015). In Helfrich, the Tenth Circuit held that the same OPM


                                         11
regulation at issue in this case supports a finding that FEHBA preempts state anti-

subrogation law. Id. at 1110. Helfrich reasoned that the presumption against

preemption did not apply because the federalism issues that underlie the

presumption have “little purchase” when addressing the FEHBA preemption

clause because of the federal interest in establishing a uniform set of health

insurance benefits for federal employees. Id. at 1105. There is no doubt that there

is strong federal interest in regulating the provision of health insurance benefits for

federal employees. However, it is also true that Missouri has an interest in the

uniform enforcement of its anti-subrogation law for all of its citizens. More

importantly, even with the federal interest in providing uniform insurance benefits

for federal employees, the presumption against preemption still applies because, as

indicated in Empire, the FEHBA preemption clause is ambiguous and warrants a

“cautious interpretation” due to the fact of its “unusual” provision permitting

contract terms to preempt state law. 547 U.S. at 697. Respectfully, this Court is

not bound by and declines to follow Helfrich.

       Finally, Coventry notes that in Kobold v. Aetna Life Ins. Co., (Ariz. Ct.

App. March 31, 2016), the Court held that the OPM rule at issue in this case is

entitled Chevron deference. Respectfully, for the reasons noted above, this Court

is not bound by and declines to follow Kobold.

                                     Conclusion

       The OPM rule does not alter the fact that the FEHBA preemption clause

does not express Congress’ clear and manifest intent to preempt Missouri’s anti-


                                          12
subrogation law. The circuit court’s judgment in favor of Coventry is reversed,

and the case is remanded.



                                             _________________________________
                                             Richard B. Teitelman, Judge

Fischer, Stith, Draper and Russell, JJ.,
concur; Wilson, J., concurs in result in
separate opinion filed; Breckenridge,
C.J., Fischer, Stith, Draper and Russell,
JJ., concur in opinion of Wilson, J.




                                            13
             SUPREME COURT OF MISSOURI
                                        en banc


JODIE NEVILS,                              )
                                           )
                     Appellant,            )
                                           )
v.                                         )      No. SC93134
                                           )
GROUP HEALTH PLAN, INC., and               )
ACS RECOVERY SERVICES, INC.,               )
                                           )
                     Respondents.          )


                        OPINION CONCURRING IN RESULT

       As stated in my separate opinion in Nevils v. Group Health Plan, Inc., 418 S.W.3d

451, 457 (Mo. banc 2014), even if the majority opinion is incorrect and the repayment

terms in GHP’s contract do fall within the reach of the preemption provision in 5 U.S.C.

§ 8902(m)(1), that statute’s attempt to give preemptive effect to the provisions of a

contract between the federal government and a private party is not a valid application of

the Supremacy Clause in article VI of the United States Constitution and, therefore, does

not displace Missouri law here. Accordingly, for all of the reasons stated in that separate

opinion, I concur in the result reached in the majority opinion in this case.



                                                  _________________________________
                                                  Paul C. Wilson, Judge
