Humana Inc. v. Forsyth

LOCATION: Kimberley Thompson's Apartment

DOCKET NO.: 97-303
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 525 US 299 (1999)
ARGUED: Nov 30, 1998
DECIDED: Jan 20, 1999

G. Robert Blakey - Argued the cause for the respondent
James W. Colbert, III - Argued the cause for the petitioners
Lawrence G. Wallace - On behalf of the United States, as amicus curiae, supporting the respondents

Facts of the case

Mary Forsyth, the beneficiary of a group health insurance policy issued by Humana Health Insurance of Nevada, Inc., received medical care at a hospital owned by Humana Inc. Humana Insurance agreed to pay 80 percent of Forsyth's hospital charges over a designated deductible. Forsyth bore responsibility for the remaining 20 percent of the charges. Forsyth complained that the hospital gave Human Insurance large discounts on their portion of the hospital charges. Thus, Humana Insurance paid the hospital significantly less than the actual 80 percent of the original bill and, in turn, Forsyth paid significantly more than her 20 percent of the hospital charges. Forsyth alleged that Humana Insurance and Humana Inc. had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO) through fraudulent activity. The District Court ruled in favor of Humana, citing the McCarran-Ferguson Act, which prevents acts of Congress from encroaching on state insurance law unless the act specifically relates to insurance. The Court of Appeals reversed and adopted a "direct conflict" test for determining when a federal law "invalidate[s], impair[s], or supersede[s]" a state insurance law. Under such a test, the McCarran-Ferguson Act did not bar Forsyth's suit because the Act does not preclude application of a federal statute prohibiting acts that are also prohibited under state insurance laws. The Act and Nevada law only provided for different damages to be collected.


May plaintiffs use the federal anti-racketeering law to sue their health insurers over alleged fraud?

Media for Humana Inc. v. Forsyth

Audio Transcription for Oral Argument - November 30, 1998 in Humana Inc. v. Forsyth

William H. Rehnquist:

We'll hear argument next in Number 97-303... spectators are cautioned to remain quiet until you leave the courtroom.

The Court remains in session.

Do not talk until you get outside.

Humana Inc, v. Mary Forsyth.

Mr. Colbert.

James W. Colbert, III:

Mr. Chief Justice, and may it please the Court:

The issue presented before the Court here reduces itself down to two questions.

The first and the most fundamental question is the meaning that Congress intended to the phrase invalidate, impair, or supersede as used in the McCarran Ferguson Act.

Did Congress intend to afford to those words, and particularly to the word impair, its common parlance plain meaning, or did Congress intend a special, restricted meaning, as respondents and the Government have argued and as the Court below has found?

I suggest to the Court that that critical question makes the second question easy.

The second question is, under a proper reading of the word impair, and I focus on that because I think it is the critical word, under a proper reading of the word impair, as intended by Congress, is a State regulatory scheme impaired by an alternative Federal remedy that renders academic the State legislature's decision as to the appropriate remedy to be afforded for the violation of some standard?

Those are the two questions that I believe are dispositive of the matter before the Court.

With respect to the first question, the Court below did not attempt a parsing of the language.

We do not see anything in the decision of the Ninth Circuit or of the other circuits that adopt the same view as the Ninth Circuit, no attempt to go to the words of the statute and ask, what does the word impair mean?

What did it mean to the 79th Congress when the McCarran Ferguson Act was adopted?

In the courts of appeal, what we had is an interpretation by analogy.

The McCarran Ferguson Act has about it an aspect of preemption in that it has an analogous effect and therefore the Ninth Circuit and the other circuits that go along with the Ninth Circuit have reasoned, we believe incorrectly for the reasons set forth in our briefs, that preemption and the special rules of preemption apply.

Sandra Day O'Connor:

Well, how do you say we should look at the level of conflict between Federal and State law to determine impairment?

I mean, one way to look at this is that the Federal RICO law gives a remedy that is not precluded by State law, and that may be supplemental but doesn't impair the State scheme.

James W. Colbert, III:

Whether a remedy is supplemental of a State scheme or impairment of a State scheme depends upon the answer to the question of whether we take seriously the decision of the State legislature to limit remedies.

If Nevada in this instance, when it had adopted the private cause of action under its State insurance law, had said, we... had put a preamble in that said, the legislature has considered and rejected enhanced damages because of a concern for impeding the solvencies of insurers for the purpose of giving windfalls to the first person to get into the courthouse door, if we had such a preamble, there could be no question--

Ruth Bader Ginsburg:

But I thought the law didn't commute punitive damages which have no lid and could be higher than treble damages.

James W. Colbert, III:

--But the limit on punitive damages, which is critical to this issue, is that punitive damages, are not allowed where they impair the solvency of the defendant.

You may punish, but you may not destroy, and the first goal of the insurance laws of the State of Nevada and every other State in the Union is to protect the solvency of the insurers.

RICO gives no discretion to the Court.

Treble damages are mandatory, and if that impairs the solvency of the insurer, so be it.

The same is not true of punitive damages.

Sandra Day O'Connor:

Well, I can understand if Nevada had passed some statutory provision in expressing its intent that its State remedies be exclusive, that this would be an impairment, but absent that, it isn't so clear to me that allowing the Federal remedy is an impairment.

James W. Colbert, III:

But why do we put the burden on the State of Nevada to adopt the hypothetical preamble I came up with a moment before?

Why is it Nevada's burden to justify its legislative decision?