Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit
10-12-2004
CER 1988 Inc v. Aetna Cslty & Surety Precedential or Non-Precedential: Precedential
Docket No. 03-2833
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Recommended Citation "CER 1988 Inc v. Aetna Cslty & Surety" (2004). 2004 Decisions. Paper 172. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/172
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL 1131 King Street, Suite 204 Christiansted, St. Croix UNITED STATES USVI, 00820-4971 COURT OF APPEALS Attorneys for Appellee FOR THE THIRD CIRCUIT
OPINION OF THE COURT No. 03-2833
AM BRO, Circuit Judge C.E.R. 1988, INC. We address in this appeal whether the National Flood Insurance Program (the v. “Program”) is sufficiently comprehensive to preempt a state tort suit arising from THE AETNA CASUALTY AND conduct related to the Program’s SURETY COMPANY, administration. We conclude that the overarching purpose of the Program— to Appellant provide affordable flood insurance in high- risk areas in order to reduce pressures on the federal fisc—would be compromised On Appeal from the by state court interference. Thus the District Court of the Virgin Islands plaintiff’s state law tort claims are Division of St. Croix preempted. D.C. Civil Action No. 97-cv-00065 (Honorable Raymond L. Finch) Factual and Procedural History The Program is administered by the Federal Emergency Management Agency Argued May 6, 2004 (“FEMA”) pursuant to the National Flood Insurance Act of 1968 (“NFIA”), 42 Before: BARRY, AMBRO, and SMITH, U.S.C. § 4001, et seq. C.E.R. 1988, Inc. Circuit Judges (“C.E.R.”) seeks state law remedies for improper handling of the Program’s (Opinion filed: October 12, 2004) Standard Flood Insurance Policy (the “Policy”) issued in favor of C.E.R. by Gerald J. Nielsen, Esquire (Argued) defendant Aetna Casualty and Surety Suite 2850 Company (“Aetna”). Aetna is a “Write- 3838 North Causeway Boulevard Your-Own” (“WYO”) insurance company, Metairie, LA 70002 meaning that it is a private insurer Attorney for Appellant authorized by FEMA to provide Policies in its own name. It collects premiums in Francis J. D’Eramo, Esquire segregated accounts, from which it pays Nancy V. Young, Esquire (Argued) claims and issues refunds. When the funds Nichols, Newman, Logan & D’Eramo are inadequate (as frequently occurs), Aetna pays claims by drawing on letters of C.E.R.’s losses at $263,757.58. In credit issued by the United States February 1998 the parties settled C.E.R.’s Treasury. contract claims for $278,392. Thus only C.E.R.’s tort claims remain. They C.E.R. purchased a Policy from allege negligent adjustment of C.E.R.’s Aetna to cover Hamilton House, a property insurance claim resulting in lost income in St. Croix. In September 1995 the and business opportunities, tortious bad property was damaged by flooding during faith conduct, and outrageous and reckless Hurricane Marilyn. C.E.R. received an conduct entitling C.E.R. to punitive insurance payment of $200,000 as a result damages. C.E.R. also seeks attorney’s fees of damage to Hamilton House. One year and costs. later, in September 1996, the facility again was damaged by flood waters, this time In January 2000, Aetna moved for during Hurricane Hortense. C.E.R. filed a summary judgment on these claims claim for $716,916, but the receipts it alleging, among other defenses, that submitted in conjunction with the claim, C.E.R.’s territorial law tort claims are documenting repairs made since Hurricane preempted by federal law. In April 2001, Marilyn, totaled under $20,000. the District Court denied Aetna’s motion, holding that the tort claims were not Given the disparity between the preempted and that a genuine issue of claim amount and the receipt totals, Aetna material fact existed as to whether Aetna required C.E.R. to submit a “Comparison had acted in bad faith. Aetna filed a Estimate” detailing when the relevant motion for reconsideration of the damage occurred. The Comparison preemption issue. As an alternative Estimate, prepared by an architect, request for relief, it asked the District reported new losses of $325,300.55 Court to certify the question for resulting from Hurricane Hortense. interlocutory appeal in accordance with 28 Nonetheless, Aetna’s adjustment company U.S.C. § 1292(b). The District Court refused to consider the estimate and pursued that course. We granted Aetna’s recommended payment in the amount of petition for permission to appeal in May $25,177.61, minus a $750 deductible. 2003.1 C.E.R. refused the settlement, and Aetna closed its file on the claim, without Discussion payment, in March 1997. Our preemption analysis turns on In 1997 C.E.R. filed a seven-count congressional intent. We must determine complaint against Aetna, alleging contract and tort causes of action, in the United 1 States District Court of the Virgin Islands. Our standard of review is plenary. Van Aetna subsequently hired a second Holt v. Liberty Mut. Fire Ins. Co., 163 adjustment company, which estimated F.3d 161, 167 (3d Cir. 1998) (on rehearing).
2 whether the purposes of the Program will coverage. be jeopardized if disputes involving In its early years, the Program was federal flood insurance policies are administered under what is known as “Part governed by state law.2 Because we have A” of the NFIA. A pool of private examined this issue in a previous case, insurance companies issued policies and Van Holt v. Liberty Mutual Fire Insurance shared the underwriting risk, with financial Co., 163 F.3d 161 (3d Cir. 1998) (on assistance from the federal Government. rehearing), our role today is limited. As of January 1, 1978, however, the Although we left open in Van Holt the Government bears full responsibility for question of whether the NFIA preempts the Program pursuant to 42 U.S.C. § 4071. state law, id. at 169 n.6, our reasoning in Under “Part B” of the NFIA, FEMA that case leads us to answer in the “carr[ies] out the program of flood affirmative. insurance authorized under [the NFIA] I. Overview of the National Flood through the facilities of the Federal Insurance Program Government.” Id. The Program is funded through the National Flood Insurance Fund Congress created the Program to established by FEMA in the United States provide standardized insurance coverage Treasury. for flood damage at or below actuarial rates. Gowland v. Aetna, 143 F.3d 951, Congress authorized FEMA to 953 (5th Cir. 1998). Prior to its enactment, “prescribe regulations establishing the few insurance companies offered flood general method or methods by which insurance because private insurers were proved and approved claims for losses may unable profitably to underwrite flood be adjusted and paid for any damage to or policies. The Program was intended to loss of property which is covered by flood minimize costs to taxpayers by “limit[ing] insurance.” 42 U.S.C. § 4019. The the damage caused by flood disasters resulting regulatory scheme is set out at 44 through prevention and protective C.F.R. §§ 61.1-78.14. States have no measures.” Van Holt, 163 F.3d at 165. It regulatory control over the Program’s is operated by FEMA and supported by the operations.3 Linder & Assocs. Inc. v. federal Treasury. Id. at 165 n.2. The Program encompasses 4.5 million policies aggregating $500 billion dollars of 3 The insurance industry in the United States operates in interstate commerce. States may regulate the insurance industry 2 Because this decision is not specific to only to the extent Congress permits. U.S. the Virgin Islands, we discuss the tensions Const. art. I, § 8, cl. 3. The McCarren- between federal and state law rather than Ferguson Act, 15 U.S.C. § 1011, et seq., territorial law. Our analysis, of course, grants states this power except where also extends to the latter. C o n g r ess enac ts legislatio n th a t
3 Aetna Cas. & Sur. Co., 166 F.3d 547, 550 61.13(d) & (e), 62.23 (c) & (d). In (3d Cir. 1999) (“It is well settled that essence, the insurance companies serve as federal common law governs the administrators for the federal program. It interpretation of [Policies]. Accordingly, is the Government, not the companies, that neither the statutory nor decisional law of pays the claims. And when a claimant any particular state is applicable to the sues for payment of a claim, “the case at bar . . . . [W]e interpret the responsibility for defending claims will be [Policy] in accordance with its plain, upon the Write Your Own Company and u n a m b i g uous meaning, rem ainin g defense costs will be part of the . . . claim cognizant that its interpretation should be expense allow anc e.” 4 44 C .F.R. uniform throughout the country and that § 62.23(i)(6). coverage should not vary from state to Our Court recently evaluated the state.”) (quotations omitted). NFIA in Van Holt. In light of the strong Pursuant to 42 U.S.C. § 4081(a), federal interests intertwined with the FEMA created the WYO program whereby administration of the Program, we Policies may be issued by private insurers concluded that federal courts are the like Aetna. Though FEMA may issue appropriate and exclusive arbiters of Policies directly, more than 90% are Policy-related disputes. written by WYO companies. These As noted, Van Holt is markedly private insurers may act as “fiscal agents similar to today’s case. The plaintiff in of the United States,” 42 U .S.C. Van Holt filed successive claims with its § 4071(a)(1), but they are not general WYO insurance provider, Liberty Mutual, agents. Thus they must strictly enforce the for flood damage. Liberty Mutual provisions set out by FEMA and may vary concluded that the claims were fraudulent the terms of a Policy only with the express and refused to approve the damages written consent of the Federal Insurance claimed from the second flood. The Van Administrator. 44 C.F.R. §§ 61.4(b), Holts sued Liberty Mutual in the United States District Court for the District of New Jersey, alleging that it had committed “specifically relates to the business of state law torts. Our Court initially held insurance.” 15 U.S.C. § 1012(b). In that the District Court lacked subject Barnett Bank of Marion County v. Nelson, matter jurisdiction over the state law 517 U.S. 25 (1996), the Supreme Court held that the exception for acts relating to the business of insurance should be 4 construed broadly, noting that “[t]he word 42 U.S.C. § 4072 authorizes suit ‘relates’ is highly general.” Id. at 38. against the FEMA Director upon the W i t h o u t d o u b t t h e N FI A is disallowance of a claim. By regulation, c o n g r e ssionally-enacted legislatio n the WYO company is sued in place of the relating to the business of insurance. FEMA Director.
4 claims. On rehearing, however, we summary judgment to Liberty Mutual on reversed path, concluding that the District the merits. Id. at 168–69. Although the Court had jurisdiction. 163 F.3d at 167. issue was briefed, we declined to decide whether the NFIA preempts state law Our decision turned on the collapse claims related to an insurance contract. Id. of two distinctions. First, we declined to at 169 n.6. distinguish between suits against FEMA, over which jurisdiction plainly existed, and That issue is back and squarely suits against WYO companies. Though before us today. We must determine the language of the statute speaks whether the federal goals of uniform explicitly only of suits against FEMA, we affordable flood insurance and reduced held that “a suit against a WYO company aggregate pressure on the federal Treasury, is the functional equivalent of a suit which informed our decision in Van Holt, against FEMA,” id. at 166, because a counsel extension of our holding in that WYO company is a fiscal agent of the case to preclude interference with Policies United States. 42 U.S.C. § 4071(a)(1). not only by state courts, but also by state Moreover, “FEM A regulations require a law.5 WYO company to defend claims but II. Preemption assure that FEMA will reimburse the WYO company for defense costs.” Van The reasoning of our decision in Holt, 163 F.3d at 166 (citing 44 C.F.R. Van Holt compels the conclusion that § 62.23(i)(6)). Second, we held that state-law claims are preempted by the district courts have original exclusive NFIA. The uniformity touted in that jurisdiction over cases arising from improper handling of Policy claims even if 5 they “do[] not explicitly allege that [the We note that the immediate effect of WYO carrier] violated the insurance our decision is limited, as a relevant Policy policy contract.” Id. at 167. We provision has since been changed. FEMA emphasized that the causes of action in National Flood Insurance Program, 65 that case, though they “sound[ed] in tort,” Fed. Reg. 60,758, 60,767 (Oct. 12, 2000) alleged “impropriety in the investigation (codified at 44 C.F.R. pt. 61, app. A (1), and adjustment of [the] insurance claim” art. IX). A new regulation, which took and therefore were “intimately related to effect on December 31, 2000, amends an the disallowance of the[] insurance claim.” insured’s Policy to include language Id. Put differently, we reasoned that a providing that “all disputes arising from claim may sound in tort but nonetheless be the handling of any claim under the policy one in contract. are governed exclusively by the flood insurance regulations issued by FEMA, the After concluding that federal National Flood Insurance Act of 1968, as jurisdiction was proper, we affirmed in amended (42 U.S.C. § 4001, et seq.) and Van Holt the District Court’s award of Federal common law.” Id.
5 decision would be seriously jeopardized if Policy, no express provision existed.6 state tort claims were permitted to proceed, Thus C.E.R.’s claims under review are not even if those claims were resolved in expressly preempted. See, e.g., Scherz v. federal court. We reasoned there that S.C. Ins. Co., 112 F. Supp. 2d 1000, “Congress would want federal courts to 1004–05 (C.D. Cal. 2000); Spence v. adjudicate disputes over federal flood Omaha Indem. Ins. Co., 996 F.2d 793, 796 insurance policies for which the federal n.20 (5th Cir. 1993). government would be responsible.” Van While a stronger case, we decline Holt, 163 F.3d at 167. By the same token, also to rely on field preemption. This form Congress would want federal law to of preemption exists if “federal law so govern those disputes. And what Congress thoroughly occupies a legislative field as intends is the crux of our preemption to make reasonable the inference that analysis. Congress left no room for the States to “ ‘ Cons i d e ra t i o n under t he supplement it.” Cipollone v. Ligget Supremacy Clause starts with the basic Group, Inc., 505 U.S. 504, 516 (1992) assumption that Congress did not intend to (internal quotations and citation omitted). displace state law.’” Bldg. & Const. The Fifth Circuit Court of Appeals opined Trades Council of Metro. Dist. v. Assoc. in the seminal case of West v. Harris, 573 Builders & Contractors of Mass./R.I., Inc., 507 U.S. 218, 224 (1993) (quoting 6 Maryland v. Louisiana, 415 U.S. 725, 746 Arguably the Policy now contains such (1981)). The Court may nonetheless a provision. The amended provision reads: conclude that the Program preempts state “This policy and all disputes arising from law under one or more of three theories: the handling of any claim under the policy express preemption, field preemption are governed exclusively by the flood (sometimes referred to as “implied insurance regulations issued by FEMA, the preemption”), and conflict preemption. National Flood Insurance Act of 1968, as Green v. Fund Asset Mgmt., L.P., 245 F.3d amended (42 U.S.C. § 4001, et seq.), and 214, 222 (3d Cir. 2001). This case falls Federal common law.” 44 C.F.R. pt. 61, squarely within the third category. app. A(1), art. IX (2002). The principal differences between the current provision It is easy to glean that federal law and its predecessor are the addition of the expressly preempts state law when a term “exclusively” and the express statute or regulation contains explicit inclusion of disputes arising from claims language to that effect. Morales v. Trans handling. Cf. 44 C.F.R. pt. 61, app. A(1), World Airlines, Inc., 504 U.S. 374, 383 art. X (1985) (“This policy is governed by (1992). But when C.E.R. purchased its the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (42 U.S.C. § 4001, et. seq.) and Federal common law.”).
6 F.2d 873 (5th Cir. 1978), that “Congress Court has urged caution in its application: h a s u n d e r t a k e n to e s t a b li s h a “[B]ecause the States are independent comprehensive flood insurance program sovereigns in our federal system, we have under the control of [FEMA] to achieve long presumed that Congress does not policies national in scope.” Id. at 881–82. cavalierly pre-empt state-law causes of While the case predates Part B of the action.” Medtronic, Inc. v. Lohr, 518 U.S. statute, its reasoning is only more 470, 485 (1996). A court will deem state persuasive given the expansion of federal law preempted only if that is the “clear and involvement in the Program.7 But because manifest purpose of Congress.” Id. conflict preemption is the narrower and, (internal quotations and citation omitted). we believe, clearer path, we do not decide Thus the first step in determining whether Congress has sought to occupy the whether C.E.R.’s claims are preempted is field of federal flood insurance. to evaluate the statute and regulations for Conflict preemption, the final form, evidence of congressional intent. We occurs “when [1] it is impossible to begin by examining the first, narrower comply with both the state and the federal prong of conflict preemption: state law is law, or [2] when the state law stands as an preempted when it would be impossible obstacle to the accomplishment and simultaneously to comply with state and execution of the full purposes and federal law. In this context, we note that objectives of Congress.” Green, 245 F.3d the standards used to analyze ordinary at 222 (citation omitted). Despite the insurance claims differ from those applied generality of this language, the Supreme to Policy claims. In the realm of private insurance, common law doctrines (such as “reasonable expectations,” 7 In West, the Court deemed the “notic e/preju dice,” and “su bstantial plaintiff’s case preempted on this basis. compliance”) govern the evaluation of However, West “did not expressly address claims. By contrast, a WYO insurer must whether the NFIA preempts independent strictly follow the claims processing state law tort claims; it only ruled on the standards set out by the federal availability of a state-based remedy for Government. what is directly justiciable under the The important consequence is that NFIA, i.e., a breach of contract claim.” a WYO insurer may be unable to comply Scherz, 112 F. Supp. 2d at 1006. The both with state law and with the federal holding in West encompassed only “the guidelines that it is bound to follow. In statutory penalty and attorney’s fees these cases, state law is preempted. C.E.R. allowed by state insurance law for has not, however, alleged that Aetna arbitrary denial of coverage.” West, 573 followed federal law in violation of a F.2d at 881. More importantly, our Court conflicting state law doctrine. On the never adopted West’s rule before or after contrary, it has argued that Aetna failed to the statute was amended.
7 comply with a federal refused to reimburse WYO carriers for requirement—specifically, the requirement their defense costs, insurers would leave t h a t “ t h e [ c ]o m p a n y ’ s [ c ] l ai m s the Program, driving the price of insurance [d]epartment verifies the correctness of the higher. The alternative, remuneration for coverage interpretations and losses incurred in such suits, would r e a s o n a b l e n e s s of the p a y m e n ts directly burden the federal Treasury.9 recommended by the adjusters.” 44 C.F.R. And, indeed, our decision in Van Holt § 62.23(i)(2). relied on the belief that “FEMA reimburses the WYO companies for their Accordingly, we rely instead on the defense costs.” Van Holt, 163 F.3d at 165. second variation of conflict preemption: we conclude that the application of state Our understanding that expensive tort law would impede Congress’s litigation will draw on federal funds is objectives. Indisputably a central purpose confirmed by FEMA’s regulations and of the Program is to reduce fiscal pressure policies interpreting and implementing the on federal flood relief efforts. See, e.g., NFIA. Congress statutorily authorized Till v. Unifirst Fed. Sav. & Loan Ass’n., FEMA to enter into “arrangements” with 653 F.2d 152, 159 (5th Cir. 1981) private insurance companies. 42 U.S.C. (“Clearly, the principal purpose in enacting §§ 4071(a)(1), 4081(a). FEMA, in turn, the Program w as to reduc e, by specified the terms of these Arrangements implementation of adequate land use in the regulations governing the Program. controls and flood insurance, the massive Among other things, the Arrangement in burden on the federal fisc of the ever- effect when C.E.R. purchased its Policy i n c reasing federal flood disaste r provided that FEMA could reimburse a assistance.”). State tort suits against WYO WYO company for “payments as a result companies, which are usually expensive, of awards or judgments for punitive undermine this goal.8 Allowing suits to damages arising under the scope of this proceed, Aetna contends, results in one of Arrangement and policies of flood two consequences—both bad. If FEMA insurance issued pursuant to this
8 9 To be sure, the federal Government Congress has authorized reimbursement also has an interest in preventing fraud by for “cost[s] incurred in the adjustment and its insurers. But because a WYO insurer payment of any claims for losses.” 42 profits by paying a claim, the ordinary U.S.C. § 4017(d)(1). Moreover, pursuant rationale for state tort law is largely to 44 C .F.R. § 62.23(i)(6), “the inapplicable to the Program’s context. responsibility for defending claims will be WYO insurers act as “fiduciary” or upon the Write Your Own Company and “fiscal” agents of the United States. 42 defense costs will be part of the U.S.C. § 4071(a)(1). They receive a flat unallocated or allocated claim expense 3.3% commission on all claims paid. allowance . . . .”
8 Arrangement provided that prompt notice Program, on balance, would better be of any claim for punitive damages [was served by requiring claimants to resolve submitted].” 44 C.F.R. pt. 62, app. A, art. their disputes by means of the remedies III(D) (1985). The Write-Your-Own FEMA provides. 11 Claims Manual issued by FEMA to WYO companies also provided explicitly that the Government would reimburse a WYO 44 C.F.R. pt. 62, app. A, art. III(D)(2) company for punitive damages under specifies that FEMA will reimburse a appropriate circumstances. FEMA, Write- WYO company for “payments as a result Your-Own Claims M anual 19 (1986 ed.). of litigation [that arise] under the scope of Thus it appears that FEMA ordinarily will this Arrangement.” In other words, we see be responsible financially for the costs of no inconsistency in holding that FEMA defending a lawsuit against a WYO envisioned that claimants could sue WYO company. 10 The efficiency goals of the insurers, but intended federal law to govern those disputes. 11 This reasoning is bolstered by 10 Relying on these and similar FEMA’s express statements to this Court provisions, C.E.R. argues that FEMA in its amicus brief in Van Holt. While the anticipated that WYO insurers would be Van Holt amicus brief was produced in sued under state law for actions arising conjunction with litigation rather than a from their administration of Policies. We rulemaking, the Supreme Court has reject C.E.R.’s approach because we see deemed appellate briefs worthy of no reason why litigation based on deference. Geier v. Am. Honda Motor improper claims-handling must mean state Co., 529 U.S. 861, 883-84 (2000) (“[T]he law litigation. In fact, the updated Policy agency’s own views should make a set out at 44 C.F.R. pt. 61, app. A(1), difference. We have no reason to suspect indicates the contrary interpretation. In its that the Solicitor General’s representation current form, the Policy appears explicitly of [the agency’s] views reflects anything to preempt state law tort suits, 44 C.F.R. other than ‘the agency’s fair and pt. 61, app. A(1), art. IX (2002), but considered judgment on the matter.’ The nonetheless contemplates that lawsuits failure of the Federal Register to address against FEMA and WYO insurers may pre-emption is thus not determinative.”) proceed. Article VII.R provides: “If you (citation omitted). Cf. Horn v. Thoratec [sue us], you must start the suit within one Corp., 376 F.3d 163, 177 (3d Cir. 2004) year of the date of the written denial of all (“Our preemption conclusion is reenforced or part of the claim, and you must file the by the informed analysis found in the suit in the United States District Court of FDA’s amicus curiae brief.”). FEMA’s the district in which the insured property amicus brief in Van Holt principally was located at the time of loss.” 44 C.F.R. addressed the disruption to the Program pt. 61, app. A(2), art. VII(R). Moreover, that would result from concurrent
9 This analysis is consistent with the reach the same result by a straighter decisions of other courts.12 But we can path—we can simply extrapolate from our decision in Van Holt. The reasoning proceeds as follows. First, no one disputes jurisdiction, but it also noted the that federal law preempts state contract importance of uniformity in the law. Brief law with respect to the interpretation of for FEMA at 8–9, Van Holt (No. Policy language. Linder & Assocs. Inc. v. 97-5098), available at 1998 WL Aetna Cas. & Sur. Co., 166 F.3d 547, 550 34104122 (“Under the Panel’s reasoning, (3d Cir. 1999) (“It is well settled that the 50 States would become co- federal common law governs the administrators of the program along with interpretation of [Policies].”). We need FEMA, a result Congress plainly did not make only one logical step to extend this intend when it enacted § 4019 vesting rule to the case at hand—namely, we must such administrative power in FEMA, and hold that a tort claim of the kind alleged by when it specifically amended § 4072 to C.E.R. is equivalent to a contractual claim make federal jurisdiction exclusive . . . .”). that turns on the interpretation of a Policy. That step we have already taken. Van Holt 12 held that a state claim “sounding in tort” The vast majority of courts have found but “intimately related to the disallowance that the NFIA preempts state law. Gibson of [an] insurance claim” is essentially a v. Am. Bankers Ins. Co., 289 F.3d 943, 949 contractual claim and therefore within the (6th Cir. 2002) (“[M]ost courts have exclusive jurisdiction of the federal consistently found that NFIA preempts courts.13 163 F.3d at 167. state law claims that are based on the handling and disposition of [Policy] claims.”). The most notable exception is 13 Spence v. Omaha Indem. Ins., 996 F.2d We do not consider Aetna’s argument 793 (5th Cir. 1993). That case, however, that enforcement of a tort judgment against arose from misrepresentation in the a WYO company would violate the procurement of a Policy. Our case, by Appropriations Clause of the United States contrast, involves misrepresentation in the Constitution, art. I, § 9, cl. 7, because it adjustment of a claim made under a Policy. would burden a program enacted and Several courts have distinguished Spence funded by Congress. Courts ordinarily on this basis. See, e.g., Messa v. Omaha should not pass on constitutional questions Prop. & Cas. Ins. Co., 122 F. Supp. 2d when a decision may be reached on non- 513, 521 (D.N .J. 2000 ) (“Po licy constitutional grounds. Escambia County procurement is an entirely different v. McMillan, 466 U.S. 48, 51 (1984). creature than claims handling”). We need While preemption derives from the not decide today whether a case alleging Supremacy Clause and thus is formally a misrepresentation in claims procurement “constitutional question,” Chi. & N.W. would also be preempted. Transp. Co. v. Kalo Brick & Tile Co., 450
10 Conclusion U.S. 311, 317 (1981), “the basic question We conclude that C.E.R.’s claims, involved in [preemption claims] is never based on territorial tort law, are one of interpretation of the Federal incompatible with the objectives of the Constitution but inevitably one of NFIA and therefore are preempted. We comparing two statutes.” Swift & Co. v. thus reverse the District Court’s denial of Wickham, 382 U.S. 111, 120 (1965). Thus summary judgment to Aetna and remand we treat preemption as “‘statutory’ for to the Court to dismiss with prejudice purposes of our practice of deciding C.E.R.’s tort claims. statutory claims first to avoid unnecessary constitutional adjudications.” N.J. Payphone Ass’n v. Town of West New York, 299 F.3d 235, 239 n.2 (3d Cir. 2002) (quoting Douglas v. Seacoast Prods., Inc., 431 U.S. 265, 272 (1977)). No similar exception applies to the Appropriations Clause, which— though it may entail analysis of a statute—is an unsettled area of constitutional law. See, e.g., Maryland Dep’t of Human Res. v. United States Dep’t of Agric., 976 F.2d 1462, 1485–86 (4th Cir. 1992) (Hall, J., dissenting)(“[C]onstitutional questions will not be decided unless absolutely necessary to a decision of the case . . . . The majority offers no reason why this prudential constraint should be ignored in the case before us. Indeed, although I express no opinion on the merits of the majority’s analysis of the Appropriations Clause, it appears to me that this area of the law is far from settled. The uncertainty surrounding the issue counsels even greater restraint.”) (quotations omitted). In deciding preemption, we look principally to the text of the statute and to decision for Aetna based on the congressional intent. By contrast, the Appropriations Clause would create new boundaries of Appropriations Clause law; our preemption decision applies analysis are as yet undeveloped. A existing law to a regulatory framework.