# Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc.

> Court of Appeals for the Sixth Circuit · November 25, 2003 · 350 F.3d 568

URL: https://www.frixlaw.com/law-library/cases/2971006

## Case

- **Full name:** HIGHLANDS WELLMONT HEALTH NETWORK, INC.; Wellmont Health Systems, Inc., Doing Business as Wellmont Bristol Regional Medical Center, Doing Business as Wellmont Holston Valley Medical Center, Plaintiffs-Appellees, v. JOHN DEERE HEALTH PLAN, INC., Defendant-Appellant
- **Court:** Court of Appeals for the Sixth Circuit
- **Decided:** November 25, 2003
- **Citations:** 350 F.3d 568; 2003 WL 22769231
- **Precedential status:** Published
- **Opinion:** Opinion by Guy
- **Judges:** Gilman, Guy, Reeves
- **Cited by:** 41 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2971006

## How later opinions describe it (automated extraction)

- holding a party’s statement that “we do not at this point agree to arbitration or other alternative dispute resolution” was not a waiver of right to arbitrate, considering, inter alia, the parties were “in a discussion stage about then-respective claims and their positions” in…
- finding that a fraudulent inducement claim was within the scope of the arbitration provision
- holding that alleged fraudulent inducement claim is within arbitration clause

## Opinion text

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Highlands Wellmont Health Network No. 02-6078
ELECTRONIC CITATION: 2003 FED App. 0416P (6th Cir.) v. John Deere Health Plan
File Name: 03a0416p.06
Before: GUY, and GILMAN, Circuit Judges; REEVES,
District Judge.*
UNITED STATES COURT OF APPEALS
_________________
FOR THE SIXTH CIRCUIT
_________________ COUNSEL

HIGHLANDS WELLMONT X ON BRIEF: James S. Chase, HUNTON & WILLIAMS,
HEALTH NETWORK , INC.; - Knoxville, Tennessee, for Appellant. William C. Bovender,
- Jimmie C. Miller, HUNTER, SMITH & DAVIS, Kingsport,
WELLMONT HEALTH Tennessee, for Appellees.
- No. 02-6078
SYSTEMS, INC., doing -
business as Wellmont Bristol > _________________
,
Regional Medical Center, - OPINION
doing business as Wellmont - _________________
Holston Valley Medical -
Center, - RALPH B. GUY, JR., Circuit Judge. Defendant, John
Plaintiffs-Appellees, - Deere Health Plan, Inc. (JDHP), appeals from the denial of its
- motion under the Federal Arbitration Act (FAA), 9 U.S.C.
- § 4, to compel arbitration of the claims asserted by plaintiffs,
v. - Highlands Wellmont Health Network, Inc. and Wellmont
- Health System (collectively “Wellmont”). JDHP argues that
JOHN DEERE HEALTH PLAN, - the district court erred in finding that JDHP had waived its
INC., - rights under the arbitration clause in the parties’ medical
Defendant-Appellant. - services agreement. After review of the record, the applicable
N law, and the arguments presented on appeal, we reverse.
Appeal from the United States District Court
for the Eastern District of Tennessee at Greeneville. I.
No. 02-00032—Thomas G. Hull, District Court.
JDHP is a qualified health maintenance organization.
Submitted: September 17, 2003 Wellmont Health Systems owns and operates the Bristol
Regional Medical Center and Wellmont Holston Valley
Decided and Filed: November 25, 2003 Medical Center in East Tennessee. Each of these hospitals is
a member of the Highland Wellmont Health Network, Inc.

*
The Honorable Danny C. Reeves, United States District Judge for
the Eastern District of Kentucky, sitting by designation.

1
No. 02-6078 Highlands Wellmont Health Network 3 4 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

In 1997, Wellmont and JDHP entered into a medical the question for the arbitrator will be whether the
services agreement (1997 Contract) under which Wellmont decision being arbitrated should be set aside because the
provided medical services to JDHP members. The 1997 decision was arbitrary and capricious.
Contract did not contain an arbitration clause. It had an initial
term of two years and automatically renewed annually Each party will bear its own costs and attorney fees. The
thereafter. expenses associated with the arbitration will be shared
equally by both parties. Arbitration shall be final and
In early 2001, the parties entered into a second contract binding on all parties.
(2001 Contract) that contained the following arbitration
clause: The arbitrator shall have no authority to award exemplary
or punitive damages, and the parties waive their right to
29. DISPUTE RESOLUTION such damages.
Contracting Hospital agrees that any dispute arising out Judgment upon the decision of the arbitrator may be
of this Agreement shall be resolved in accordance with entered in any court having jurisdiction, and the court
JDHP’s written policies and procedures for dispute may enforce the decision of the arbitrator.
resolution, which include mandatory, binding arbitration.
The parties waive their right to seek remedies in court, The 2001 Contract “superceded” the 1997 Contract “to the
including their right to jury trial. If policies and extent [it applied] to inpatient and outpatient hospital
procedures are inconsistent with this provision, then this services.” All other terms and conditions of the 1997
provision shall prevail. Contract remained in full force and effect. The 2001 Contract
was signed by Wellmont on January 24, 2001, and by JDHP
Arbitration in regard to benefit determination, utilization, on February 27, 2001. The term of the 2001 Contract for
and quality of care matters shall be conducted in Medicare + Choice Product (which includes the services
accordance with the Employee Benefit Plans Claims subject to the billing dispute in this case) was made
Arbitration Rules of the American Arbitration retroactive to October 23, 2000 through December 31, 2003.
Association. Arbitration in regard to all other matters
arising out of this Agreement including, but not limited In November 2000, prior to the signing of the 2001
to, credentialing/recredentialing, participation, and Contract, JDHP conducted an audit of Wellmont’s billings
termination, including termination for quality of care under the 1997 Contract. JDHP determined that Wellmont
concerns, shall be conducted in accordance with the had billed rehabilitation services under the rate code called
Commercial Arbitration Rules of the American DRG 462, which JDHP believed was inappropriate because,
Arbitration Association. among other things, the rehabilitation services were provided
in a hospital skilled nursing unit rather than in a licensed
With respect to benefit determination, which includes but
is not limited to authorization of coverage for medical
services and the determination of availability and extent
of coverage for services provided to a particular Member,
No. 02-6078 Highlands Wellmont Health Network 5 6 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

rehabilitation facility as required under the Medicare Several months later, on July 13, 2001, JDHP sent a letter
regulations.1 to Wellmont referencing both the disputed overpayments and
the intervening disputed underpayments.2 With respect to
Wellmont did not learn that JDHP objected to the Wellmont’s proposed resolution methods, JDHP stated:
rehabilitation services billings until Wellmont was contacted
by the FBI on March 9, 2001—after the 2001 Contract was For the reasons stated above, we cannot agree with the
signed. The FBI was investigating allegations made by JDHP assertions made in your May 23 letter that
to the Office of the Inspector General of the Department of underpayments have occurred. On the contrary, John
Health and Human Services regarding Wellmont’s billing Deere Health maintains its position that the services were
practices. Also on March 9, 2001, JDHP informed Wellmont billed inappropriately, resulting in overpayment on John
that it was seeking in excess of $1 million for the alleged Deere Health’s part.
overpayments for rehabilitation services, and that after March
2001 JDHP would prospectively reimburse Wellmont at a While we appreciate Wellmont’s interest in resolving
lower rate applicable to a skilled nursing facility (SNF) for what Wellmont wishes to portray as a contract dispute
the rehabilitation services performed in Wellmont’s skilled quietly and expeditiously, we do not at this point agree to
nursing units. arbitration or other alternative dispute resolution. Rather,
John Deere Health reiterates its demand for full payment
On April 13, 2001, Wellmont sent a letter to JDHP of all amounts overpaid, totaling in excess of $1.3
regarding the alleged overpayments for rehabilitation million before upward adjustment for interest and
services. The letter cited section 12.b of the 1997 Contract in previously returned withhold.
outlining Wellmont’s position on the billing dispute. The
letter concluded with the following: We also expect that Wellmont [sic] take immediate steps
to correct its billing practice to avoid future
Finally, we would like to set a date to discuss overpayments.
alternatives for dispute resolution. As I mentioned,
Wellmont would be open to discussion of a range of On February 8, 2002, Wellmont filed a complaint in this
options, including mediation, possible arbitration, or a action asking for a declaration that it was entitled to
possible declaratory judgment action before the Federal reimbursement under the higher DRG 462 rate and asking for
court. After we have received your analysis and you damages equal to the difference between the DRG 462 and
have had a chance to review our enclosed documentation, the SNF rates for rehabilitation services provided after March
we will be in a better position to have that discussion. 2001. The complaint referenced and attached only the 1997
Contract.

1
The reimbursement schedules under both the 1997 Contract and the 2
2001 Contract reference DRG code which is a standardized coding system The July 13 JD HP letter references a May 23 letter from W ellmont,
used for billing a nd reimbursement within the health care industry. which is not part of the record.
No. 02-6078 Highlands Wellmont Health Network 7 8 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

After JDHP informed Wellmont that its claims were in issue, the court shall proceed summarily to the trial
governed by the 2001 contract, Wellmont filed an amended thereof.
complaint. The amended complaint alleged that JDHP
fraudulently induced Wellmont to enter into the 2001 9 U.S.C. § 4.
Contract. Wellmont also asked for damages for JDHP’s
alleged breach of the implied duty of good faith and fair It is well established that any doubts regarding arbitrability
dealing in negotiating the 2001 Contract and for JDHP’s must be resolved in favor of arbitration. Fazio v. Lehman
alleged breach of the 2001 Contract in paying the lower SNF Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003). We review a
rate for the rehabilitation services. district court’s ruling on a motion to compel arbitration de
novo. Great Earth Cos. v. Simons, 288 F.3d 878, 888 (6th
JDHP immediately filed a motion to compel arbitration and Cir. 2002).
stay proceedings. On August 7, 2002, the district court
denied the motion. It found that the 2001 Contract contained A. Waiver
a binding arbitration clause but concluded that JDHP had
waived its right to compel arbitration in the July 13, 2001 An agreement to arbitration may be “waived by the actions
letter. This appeal followed. of a party which are completely inconsistent with any reliance
thereon.” Gen. Star Nat’l Ins. Co. v. Administratia
II. Asigurarilor de Stat, 289 F.3d 434, 438 (6th Cir. 2002)
(quoting Germany v. River Terminal Ry. Co., 477 F.2d 546,
The FAA provides that arbitration clauses in commercial 547 (6th Cir. 1973)). There is a strong presumption in favor
contracts are “valid, irrevocable, and enforceable, save upon of arbitration under the FAA. O.J. Distrib., Inc. v. Hornell
such grounds as exist at law or in equity for the revocation of Brewing Co., 340 F.3d 345, 355 (6th Cir. 2003). Because of
any contract.” 9 U.S.C. § 2. If a court determines that a the strong presumption in favor of arbitration, waiver of the
claim is covered by an arbitration clause, it must stay the right to arbitration is not to be lightly inferred. Id.
proceedings until the arbitration process is complete.
9 U.S.C. § 3. JDHP argues that it could not have waived its right to
invoke arbitration in the July 2001 letter because Wellmont
When faced with a motion to compel arbitration, a district did not raise the fraudulent inducement or bad faith claims, or
court must follow the procedure set forth in section 4 of the assert other claims under the 2001 Contract, until it filed its
FAA: amended complaint in 2002. JDHP also argues that the July
2001 letter applied only to claims under the 1997 Contract;
The court shall hear the parties, and upon being satisfied and thus, there could be no waiver of arbitration under the
that the making of the agreement for arbitration or the 2001 Contract.
failure to comply therewith is not in issue, the court shall
make an order directing the parties to proceed to Wellmont argues that JDHP waived its right to invoke
arbitration in accordance with the terms of the arbitration because the July 2001 letter (1) made no
agreement. . . . If the making of the arbitration agreement distinction between disputed overpayments under the 1997
or the failure, neglect, or refusal to perform the same be Contract and disputed underpayments under the 2001
No. 02-6078 Highlands Wellmont Health Network 9 10 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

Contract; and (2) categorically denied arbitration without More importantly, JDHP was responding to a suggestion
referring to either contract. for alternative dispute resolution made by Wellmont in its
April 2001 letter.3 That letter did not reference the 2001
The July 2001 letter clearly declined alternative dispute Contract even though at that point the 2001 Contract was in
resolution of JDHP’s claim for the overpayments made under effect, and Wellmont had been informed that beginning in
the 1997 Contract. It also, however, referenced Wellmont’s March JDHP would pay for rehabilitation services at the
claim for underpayments. JDHP did not start reimbursing at lower SNF rate. Instead, Wellmont’s letter referenced only
the lower SNF rate until March 2001, after the 2001 Contract the 1997 Contract, which did not contain arbitration language,
was signed and became effective. Thus, in the July 2001 and suggested different means of alternative dispute
letter, JDHP was declining to engage in alternative dispute resolution, only one of which was arbitration. Wellmont
resolution of claims made under both the 1997 and the 2001 offered no evidence that it ever attempted to invoke, let alone
Contracts. suggest, arbitration under the 2001 Contract. Thus, there is
no evidence that JDHP expressly waived arbitration under the
When JDHP sent the letter in July 2001, the parties were in 2001 Contract. Given the strong preference in favor of
a discussion stage about their respective claims and their arbitration and against waiver, we cannot infer a waiver of
positions on the proper billing code for rehabilitation services. arbitration under the 2001 Contract based solely on the
JDHP made the decision to stand firm on its position. It parties’conduct at this stage of their dispute.
declined “at [that] point” to agree to arbitration or other
alternative dispute resolution. When faced with the growing B. Applicability of Arbitration Clause
underpayments under the 2001 Contract and JDHP’s decision
to stand firm on its position, Wellmont had the choice of Wellmont argues that we should affirm the denial of the
either initiating a lawsuit or commencing arbitration motion to compel arbitration because the arbitration provision
proceedings. If JDHP had not immediately invoked the in the 2001 Contract is “repugnant” and should be
arbitration clause upon the commencement of litigation, or if disregarded. Wellmont points to that portion of paragraph 1
JDHP had frustrated the arbitration process upon of the 2001 Contract stating that all other terms and
commencement by Wellmont, Wellmont may have had a provisions of the 1997 Contract continue in full force and
better argument for waiver. Indeed, most arbitration waiver effect. It argues that because the 1997 Contract did not
cases involve these types of scenarios. See, e.g., Gen. Star contain an arbitration clause, while the 2001 Contract did,
Nat’l Ins. Co., 289 F.3d at 438. But that is not what happened there is a conflict over dispute resolution mechanisms, and
in this case. JDHP’s July 2001 letter was sent during pre- under Tennessee law, the first method, i.e., no alternative
commencement negotiations. It really amounts to nothing dispute resolution, should prevail. See Bartlett v. Philip-
more than the typical posturing that may occur where one Carey Mfg. Co., 392 S.W.2d 325, 327 (Tenn. 1965) (if two
party is attempting to “stare down” the other party in the hope clauses of a contract are so repugnant to each other that they
that the other party will simply give up. See Enviro
Petroleum Inc. v. Kondur Petroleum, 91 F. Supp.2d 1031,
1033-34 (S.D. Tex. 2000). 3
W e focus o n the April letter, because Wellmont itself argues that
JDHP was responding to its suggestion for alternative dispute resolution
contained in its April 2001 letter.
No. 02-6078 Highlands Wellmont Health Network 11 12 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

cannot stand together, the first shall be received and the latter Co., 388 U.S. 395, 402-04 (1967). However, if there was a
rejected). fraud that “goes to the ‘making’ of the agreement to
arbitrate,” then a federal court may adjudicate:
The fatal flaw in Wellmont’s reasoning is that the 1997
Contract did not remain in full force and effect with respect Under § 4, with respect to a matter within the jurisdiction
to hospital services. Paragraph 1 of the 2001 Contract states of the federal courts save for the existence of an
in pertinent part: arbitration clause, the federal court is instructed to order
arbitration to proceed once it is satisfied that “the making
This Agreement supersedes the contracts, HNHPHO of the agreement for arbitration or the failure to comply
98/12 KPMP98 961, and HNH POA/PHO 12/96 (with the arbitration agreement) is not in issue.”
COPYRIGHT 1996 KPMP96 446, to the extent these Accordingly, if the claim is fraud in the inducement of
contracts apply to inpatient and outpatient hospital the arbitration clause itself—an issue which goes to the
services. All other terms and conditions of those “making” of the agreement to arbitrate—the federal court
contracts and any amendments remain in full force and may proceed to adjudicate it. . . . We hold, therefore, that
effect. in passing upon a [section] 3 application for a stay while
the parties arbitrate, a federal court may consider only
Contract KPMP96 446 is the 1997 Contract. The issues relating to the making and performance of the
rehabilitation services are hospital services. They are agreement to arbitrate.
provided in the skilled nursing units of the Wellmont
hospitals. Thus, the 2001 Contract, including the section Id. at 403-04 (footnotes omitted). See also Ferro Corp. v.
requiring arbitration, completely supercedes the 1997 Garrison Indus., Inc., 142 F.3d 926, 933 (6th Cir.1998) (once
Contract for those services. There can, therefore, be no a court determines that the agreement to arbitrate has not been
repugnancy and the arbitration clause is part of the contract fraudulently induced, all other issues falling within that
applying to hospital services.4 agreement are to be sent to arbitration).
C. Fraudulent Inducement Wellmont claims that, when read as a whole, the allegations
in the amended complaint show that not only was Wellmont
Wellmont argues that if we remand this case, the district fraudulently induced to enter into the 2001 Contract, but also
court should be allowed to adjudicate whether the arbitration that the arbitration provision itself was the product of
clause was fraudulently induced. The Supreme Court has fraudulent inducement. It argues that the allegations support
held that a “claim of fraud in the inducement of the entire a finding that JDHP inserted the arbitration clause knowing
contract” is a matter to be resolved by the arbitrators, not the that a major controversy was about to surface of which
federal courts. Prima Paint Corp. v. Flood & Conklin Mfg. Wellmont had no knowledge when it executed the 2001
Contract.
4
Mo reover, complete silence regarding alternative dispute resolution We have, however, held that in order to void an arbitration
does not conflict with a clause requiring arbitration. T herefo re, even if clause, the complaint must contain a “‘well-founded claim of
portions of the 1997 Contract were applicable to hospital services, we fraud in the inducement of the arbitration clause itself,
would not find that there was a repugnancy.
No. 02-6078 Highlands Wellmont Health Network 13 14 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

standing apart from the whole agreement, that would provide D. Scope of the Arbitration Agreement
grounds for the revocation of the agreement to arbitrate.’”
Fazio, 340 F.3d at 394 (quoting Arnold v. Arnold Wellmont finally maintains that its fraudulent inducement
Corp.—Printed Communications For Bus., 920 F.2d 1269, claim does not fall within the scope of the arbitration clause
1278 (6th Cir. 1990)). Allegations of fraudulent schemes are in the 2001 Contract, which requires arbitration of matters
not sufficient to overcome the strong federal policy in favor “arising out of this Agreement.” Wellmont argues that this
of arbitration. The central question is whether the plaintiff’s clause is narrower than a clause requiring arbitration of
claim of fraud as stated in the complaint relates to the making matters “relating to” the contract, and that its fraudulent
of the arbitration agreement itself. Fazio, 340 F.3d at 394. inducement claim “relates to” but does not “arise out of” the
2001 Contract.
The amended complaint in this case alleges that JDHP
“fraudulently induced Wellmont to enter into the 2001 District courts have the authority to decide whether an issue
contract by fraudulently concealing that [JDHP] disagreed is within the scope of an arbitration agreement. Fazio, 340
with the manner in which Wellmont was billing for F.3d at 395. “A proper method of analysis here is to ask if an
rehabilitation services and for failing to disclose that [JDHP] action could be maintained without reference to the contract
had reported Wellmont to the federal investigative agencies or relationship at issue.” Id. If it could, then it may fall
for allegedly fraudulent billing practices.” Wellmont further outside the scope of the arbitration agreement.
alleges that “[b]ut for said fraudulent concealment, Wellmont
would not have been induced to execute the 2001 contract and When a contract contains an arbitration clause, there is a
continue its contractual relationship” with JDHP. The general presumption of arbitrability, and any doubts are to be
amended complaint states that the 2001 Contract was entered resolved in favor of arbitration “unless it may be said with
into as a result of fraud because JDHP signed the contract positive assurance that the arbitration clause is not susceptible
after it had identified the dispute and wrongfully reported it of an interpretation that covers the asserted dispute.” AT&T
to the FBI. Wellmont alleges that JDHP fraudulently induced Techs., Inc. v. Communications Workers of Am., 475 U.S.
Wellmont to sign the 2001 Contract by not disclosing that 643, 650 (1986). Where the arbitration clause is broad, only
JDHP would not continue to pay the higher rate for an express provision excluding a specific dispute, or “the
rehabilitation services. For relief, Wellmont asks that the most forceful evidence of a purpose to exclude the claim from
district court declare the 2001 Contract void. arbitration,” will remove the dispute from consideration by
the arbitrators. Id.
There are no separate allegations in the amended complaint
that JDHP fraudulently induced Wellmont to agree to an In an early case, the Second Circuit stated that the phrase
arbitration clause. The alleged fraudulent scheme in this case “‘any dispute or difference [arising] under this Charter’” was
relates to the contract as a whole. Such a claim must be not broad enough to reach a claim of fraudulent inducement.
brought before the arbitrator and not the district court in
deciding a motion to arbitrate. Fazio, 340 F.3d at 395.
No. 02-6078 Highlands Wellmont Health Network 15 16 Highlands Wellmont Health Network No. 02-6078
v. John Deere Health Plan v. John Deere Health Plan

In re Kinoshita & Co., 287 F.2d 951, 952 (2d Cir. 1961).5 383-85 (11th Cir. 1996) (fraudulent inducement of contract
The court held that this phrase applied only to claims relating within scope of arbitration clause covering “any dispute . . .
to the interpretation or performance of the contract. While which may arise hereunder”); Peoples Sec. Life Ins. Co. v.
Kinoshita has not been formally overruled, the Second Circuit Monumental Life Ins. Co, 867 F.2d 809, 813 (4th Cir. 1989)
has severely limited its application to its precise facts, i.e., to (claim of fraudulent inducement fell within scope of
the phrase “arising under.” See ACE Capital Re Overseas arbitration clause covering any issue “believed to constitute
Ltd. v. Cent. United Life, 307 F.3d 24, 33-34 (2d Cir. 2002) a breach or violation” of the contract).
(“any right of action hereunder” is broad enough to include
claim of fraudulent inducement of contract); Louis Dreyfus In Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress
Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d International, Ltd., 1 F.3d 639, 641 (7th Cir. 1993), the
218, 225 -26 (2d Cir. 2001) (the distinction between “arising plaintiff alleged that the contract should be rescinded because
from” and Kinoshita’s language of “arising under” is more it violated Illinois law. The Seventh Circuit considered the
than just a semantic one, and only the latter phrase limits same language used in this case. The arbitration provision
arbitration to a literal interpretation or performance of the covered disputes “arising out of” the contract. The Seventh
contract); Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, Circuit noted the narrow application of Kinoshita to its
854 (2d Cir. 1987) (“all claims . . . of whatever nature arising precise facts and concluded that “arising out of” covers all
under this contract” was broad enough to reach claim of fraud disputes “having their origin or genesis in the contract,
in the inducement); S.A. Mineracao Da Trindade-Samitri v. whether or not they implicate interpretation or performance of
Utah Int’l, Inc., 745 F.2d 190, 194 (2d Cir. 1984) (“any the contract per se.” Id. at 642. The court held that:
question or dispute aris[ing] or occur[ring] under” the
agreement was sufficiently broad to reach fraudulent Although Count I seeks to cancel the Agreement, it is
inducement claim). The Second Circuit itself has recognized nonetheless a result of the Agreement and has its origins
that the authority of Kinoshita, therefore, is highly in it. In that sense it “arises out of” the Agreement and
questionable even in the Second Circuit. ACE Capital, 307 is subject to arbitration. In fact, any dispute between
F.3d at 33. contracting parties that is in any way connected with
their contract could be said to “arise out of” their
Other circuits have declined to follow Kinoshita because of agreement and thus be subject to arbitration under a
the strong federal policy in favor of arbitration. See Battaglia provision employing this language. At the very least, an
v. McKendry, 233 F.3d 720, 725 (3d Cir. 2000) (“arising “arising out of” arbitration clause would “arguably
under” and “arising out of” are given broad construction and cover[]” such disputes, and, under our cases, this is all
encompass claims going to the formation of the underlying that is needed to trigger arbitration.
agreement); Gregory v. Electro-Mech. Corp., 83 F.3d 382,
Id.

5
The Ninth Circuit reached a similar result in Mediterranean
Enterp rises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983)
(phrase “arising hereunder” covers a much narrower range of disputes
than the phrase “arising out of or relating to”).
No. 02-6078 Highlands Wellmont Health Network 17
v. John Deere Health Plan

This circuit has not yet decided whether a fraudulent
inducement of the contract claim “arises out of” the contract.6
We have previously held, however, that an arbitration clause
requiring arbitration of any dispute arising out of an
agreement is “extremely broad.” Cincinnati Gas & Elec. Co.
v. Benjamin F. Shaw Co., 706 F.2d 155, 160 (6th Cir.1983).
We agree with the reasoning of the Seventh Circuit in that a
claim that a contract is voidable because it was fraudulently
induced arises out of the contract. Resolution of Wellmont’s
claim will require reference to the 2001 Contract. In addition,
because all doubts are to be resolved in favor of arbitration,
consistent with every circuit that has addressed this issue, we
hold that “arising out of” is broad enough to include a claim
of fraudulent inducement of a contract.
III.
The decision of the district court is REVERSED, and this
case is REMANDED with instructions that the district court
enter an order to arbitrate.

6
JDHP argues that Arn old, 920 F.2d at 1271, interprets “arising
under” to require arbitration of fraudulent inducement claims. The scope
or application of the arbitration clause to that type of claim, however, was
not an issue in Arnold.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2971006. Public record. Not legal advice.