Amicus Curiae Brief — PacifiCare Health Systems, Inc. v. Book

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Supreme Court, U.S |

" FILER

(vs) ;

- | DEC 6 2M

No. 02-215 |

Iu the

Supreme Court of the United States

PACIFICARE HEALTH SYSTEMS, INC., ET AL.,

Petitioners,

Vv.

JEFFREY BOOK, D.O., ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of ——

for the Eleventh Circuit

BRIEF OF THE

WASHINGTON LEGAL FOUNDATION

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

DANIEL J. POPEO CHRISTOPHER LANDAU

RICHARD A. SAMP Counsel of Record

WASHINGTON LEGAL : CRAIG S. PRIMIS

FOUNDATION ASHLEY C. PARRISH

2009 Massachusetts Ave, NW KIRKLAND & ELLIS

Washington, DC 20036 655 Fifteenth Street, NW

(202) 588-0302 Washington, DC 20005

(202) 879-5000

Attorneys for the Amicus Curiae

December 6, 2002

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QUESTION PRESENTED

Whether a district court must compel arbitration of a

plaintiff's RICO claims under a valid arbitration agreement

even if that agreement does not allow an arbitrator to award

punitive damages, leaving to the arbitrator in the first

instance the decision of what remedies are available to the

RICO plaintiff in arbitration. .

TABLE OF CONTENTS

Page(s)

ET i

INTEREST OF AMICUS CURIAE ..........cccccccceccccceseceeceeceeees l

gc 2

SUMMARY OF ARGUMENT ..................00000ccccececeeeeeeeeeeees 3

ERT Se rE 4

I THE COURT SHOULD ENFORCE THE

PARTIES’ AGREEMENTS ACCORDING TO

i ircrtesnncersessssssnsemesmuneseqsnenimenesonmeemmmnseneseeds 4

A. Federal Arbitration Law Is Based On

EE ae eee 5

B. The Parties’ Agreement To Arbitrate RICO

Claims Should Be Enforced ..................000ccccccceeeeeeeees 7

Il. ENFORCING THE PARTIES’ AGREEMENTS

ACCORDING TO THEIR TERMS WILL HELP

KEEP HEALTH CARE COSTS UNDER

A ETE A a 10

EE LE ae 13

TABLE OF AUTHORITIES

Page(s)

Cases

Allied-Bruce Terminix Cos. v. Dobson,

ESE S e 5

AT&T Technologies, Inc. v.

Communications Workers of Am.,

eT sscicsniieteineissinanttsnieisintiniitneiansiia’ 6,7

Baravati v. Josephthal, Lyon & Ross, Inc.,

ee 5

BMW of N. Am., Inc. v. Gore,

I itercietiiediaihienintiiamantiniieninte l

Boomer v. AT&T Corp.,

309 F.3d 404 (7th Cir. 2002)....0..0.cccceccceeeeeeeee 8

Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co.,

ene 6

Gilmer v. Interstate/Johnson Lane Corp.,

IEE iicrenintiitainnenninipcsncnnnianasenntennen 5

Great Western Mortgage Corp. v. Peacock,

Ts fs le ee 8

Honda Motor Co. v. Oberg,

Se icitetenceserscumenenencnninimeensene l

John Wiley & Sons, Inc. v. Livingston,

es irerteicnatsienenenennennaninn 7

Larry's United Super, Inc. v. Werries,

253 F.3d 1083 (8th Cir. 2001)... cccccceeeeeeeee 8

MCI Telecommunications. Corp. v.

Matrix Communications Cerp.,

eo 8 ee 8

Metro East Ctr. for Conditioning & Health v.

Qwest Communications Int'l, Inc.,

294 F.3d 924 (7th Cir. 2002)... cccccceeeeeeees 8,9

Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc.,

I iiecccecttinntinseiinioamindines 4, 6-9

Moses H. Cone Mem'l Hosp. v.

Mercury Constr. Corp.,

ey OP I ciitisernrinccnsnnnnetinteennenmniemasainiial 6

Pacific Mut. Life Ins. Co. v. Haslip,

Re 12

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

8 a 8

Sedima, S.P.R.L. v. Imrex Co.,

ne a vciniinticniecietionisininmenmniniitinnetl 12

Shearson/American Express, Inc. v. McMahon,

a es STE ocirteertccrntneneennicninesiisintintioasel 9

Shutte v. Thompson,

82 U.S. (15 Wall.) 151 (1873).................0.-.ccceeees 9

Southland Corp. v. Keating,

Ny i iciesicitcnereccmmnianeennanmandnsnioneedl 6,7

State Farm Mut. Automobile Ins. Co. v. Campbell,

Ses UIT eicscerisesinsicitennnnencenenannenianinieniniaiianmmenmnees l

TXO Prod. Corp. v. Alliance Res. Corp.,

es SE ciccnnsntenicanenttininainsiiniibiiinteimnsemsin l

United States v. Mezzanatto,

ry Se intnccerricnncnisniinintivininiiatinasial 9

vil

Volt Info. Sciences, Inc. v.

Board of Trs. of Stanford Univ.,

RESET EEIsnnreen 5

Statutes

ies OF Boecanteneernsiccererintitiinnnniatenasnsanienmenitaed 4,7

LS eee 2

Miscellaneous

American Arbitration Assoc., American Bar Assoc.,

American Medical Assoc.

Final Report (July 27, 1998)........c..ccc0cceeeeeeees 11

Cane, Paul W. & E. Jeffrey Grube.

Employment Dispute Arbitration: An

Antidote To Frivolous Litigation,

LEGAL BACKGROUNDER (Nov. 13, 1998)............ l

Connolly, Michael J. & Clifford J. Scharman.

U.S. Supreme Court Gives Employers

A Chance To Avoid Costly Litigation,

LEGAL BACKGROUNDER (Jun. 9, 2001)............... l

Eckman, Richard, Stephen Harvey & Jeffrey

Techentin. Arbitration Clauses Can

Safeguard Lenders From Class Actions,

LEGAL OPINION LETTER (Dec. 15, 2000)............. |

Eisenhower, Jay W. Delaware's New Summary

Procedure For Business Disputes

Could Reduce Legal Costs,

LEGAL OPINION LETTER (Sept. 9, 1994).............. |

Epstein, Richard A. Market And Regulatory

Approaches to Medical Malpractice: The

Virginia Obstetrical No-Fault Statute,

74 Va. L. Rev. 1451 (1998)...........cccccccceeeeeeeeees 10

Vill

Krauss, Michael I. Tort Law

and Private Ordering,

35 St. Louis U. L.J. 623 (1991)... cccceeeees 10

Mathews, Roderick B. The Role of ADR In

Managed Health Care Disputes,

54 Disp. Resol. J. 8 (Aug. 1999)... 11

Nevers, Ann H. Medical Malpractice Arbitration

In The New Millennium: Much Ado About

Nothing?,

1 Pepp. Disp. Resol. L.J. 45 (2000) ............ 11,12

Saravia, Alma. Overview of Alternative Dispute

Resolution in Healthcare Disputes,

FF 8 ee 11

Viscusi, W. Kip. The Social Costs Of Punitive

Damages Against Corporations in

Environmental & Safety Torts,

Sieh GO cinicsinsiesesinienntenenntasnsnniaten 12

Viscusi, W. Kip. Why There Is No Defense Of

Punitive Damages,

gE 12

INTEREST OF AMICUS CURIAE

The Washington Legal Foundation (“WLF”) is a

non-profit public interest law and policy center based in

Washington, D.C., with supporters nationwide.'! WLF seeks

to strengthen the free enterprise system and protect the

economic and civil liberties of individuals and businesses.

WLF has devoted substantial resources to promoting

civil justice reform and freedom of contract. It has published

numerous monographs and other educational materials on

issues relating to alternative dispute resolution. See, e.g.,

Michael J. Connolly & Clifford J. Scharman, U.S. Supreme

Court Gives Employers A Chance To Avoid Costly

Litigation, LEGAL BACKGROUNDER (Jun. 9, 2001); Richard

Eckman, Stephen Harvey & Jeffrey Techentin, Arbitration

Clauses Can Safeguard Lenders From Class Actions, LEGAL

OPINION LETTER (Dec. 15, 2000); Paul W. Cane, Jr. & E.

Jeffrey Grube, Employment Dispute Arbitration: An Antidote

To Frivolous Litigation, LEGAL BACKGROUNDER (Nov. 13,

1998); Jay W. Eisenhower, Delaware's New Summary

Procedure For Business Disputes Could Reduce Legal

Costs, LEGAL OPINION LETTER (Sept. 9, 1994). It has also

appeared as amicus curiae in several cases addressing

punitive damages issues. See, eg., State Farm Mut.

Automobile Ins. Co. v. Campbell, No. 01-1289; BMW of N.

Am., Inc. v. Gore, 517 U.S. 559 (1996); Honda Motor Co. v.

Oberg, 512 U.S. 415 (1994); TXO Prod. Corp. v. Alliance

Res. Corp., 509 U.S. 443 (1993).

! Both petitioners and respondents have consented to the filing of this

brief. Pursuant to Supreme Court Rule 37.6, WLF states that no counsel

for a party authored this brief in whole or in part, and that no person or

entity, other than WLF and its counsel, contributed monetarily to the

preparation or submission of this brief.

WLEF believes that the decision below is an ill-conceived

departure from settled precedent and the sound policies of

the Federal Arbitration Act. If left intact, the decision will

impose substantial costs not only on the managed health care

industry but on all entities that voluntarily seek to resolve

disputes through arbitration. These increased costs will

ultimately be borne by patients, consumers, and society as a

whole. WLEF thus brings a broader perspective to the issues

in this case than either of the parties.

WLF submits this brief as amicus curiae in support of

petitioners. For reasons set forth below, WLF urges the

Court to reverse the decision of the Eleventh Circuit.

STATEMENT OF THE CASE

Respondents are medical doctors who entered into

physician agreements with various managed care

organizations, including UnitedHealthcare, Inc. and United

Health Group Incorporated, and PacifiCare Health Systems,

Inc. and PacifiCare Operations, Inc.. See Pet. App. A-60-63.

The agreements contain two provisions relevant to the issues

presented in this case. The first provision requires that the

parties submit “any disputes about their business

relationship” to “binding arbitration.” Pet. App. A-62-63;

see also Pet. App. A-60-61. The second states that

arbitrators shall have no authority to award punitive or

exemplary damages. See id. at A-60-63; see also Pet. App.

A-30-31.

On August 14, 2000, respondents sued petitioners and

other managed care organizations, claiming among other

things that they had violated the Racketeer Influenced and

Corrupt Organizations Act, 18 U.S.C. § 1961, ef seg.

(“RICO”). Petitioners moved in the district court to compel

arbitration pursuant to the plain terms of the parties’

agreements.

The district court found that respondents were

“sophisticated” commercial actors, see Pet. App. A-25-26,

and that the parties’ agreements were generally enforceable,

see id. at A-29. Nevertheless, the district court declined to

compel arbitration of respondents’ RICO claims. It

determined that, because the parties had agreed to waive

punitive damages, respondents could not recover RICO’s

treble damages in arbitration. See id. at A-31; see also id. at

A-41. It then held that, even though respondents had freely

agreed to arbitrate al] disputes, respondents were not

required to arbitrate their RICO claims because they could

not obtain “meaningful relief” in arbitration. See id. at A-31;

see also id. at A-41.

The Court of Appeals for the Eleventh Circuit affirmed

the district court “for the reasons set forth” in the lower

court’s opinion. See Pet. App. A-4.

SUMMARY OF ARGUMENT

1. Federal law requires that courts enforce arbitration

agreements according to their terms. Here, the parties agreed

to arbitrate all disputes about their business relationships.

See Pet. App. A-62-63. The district court therefore should

have compelled arbitration of respondents’ RICO claims as

required by the parties’ agreements.

The district court’s refusal to enforce the parties’

agreements disregards this Court’s settled precedent and

promotes precisely the type of litigation that the parties’

agreements were designed to avoid. Once the court decided

that the dispute was covered vy a valid arbitration

agreement, it should have compelled arbitration, and left any

issues regarding the validity and scope of a waiver of

statutory remedies to be decided by the arbitrators in the first

instance. The court below thus erred by usurping the role of

the arbitrator and, in so doing, allowing respondents to

nullify their arbitration agreements with petitioners. And

even if the court was entitled to address the validity of

respondents’ waiver of statutory remedies, the court erred by

holding that RICO did not allow such waiver. The normal

rule in our legal system is that parties are free to waive their

statutory rights and remedies unless Congress precludes such

waiver. Congress did not remotely so preclude in RICO.

2. Reversing the lower court and enforcing the parties’

agreements according to their terms also serves broader

policy goals. Arbitration agreements between physicians

and managed care organizations are a critical tool for

controlling the skyrocketing costs of health care. By

mutually agreeing to arbitrate disputes and waive punitive

damages, the parties sought to ensure that their disputes

would be resolved quickly and efficiently, and to avoid

destructive high-stakes litigation. These direct economic

benefits far outweigh any societal interest in encouraging

private attorneys general to pursue treble damages under

RICO in the face of an express waiver by sophisticated

parties of the right to pursue such damages.

ARGUMENT

I. THE COURT SHOULD ENFORCE THE PARTIES’

AGREEMENTS ACCORDING TO THEIR TERMS

Federal law provides that arbitration agreements must be

enforced like other contracts—according to their terms. See

9 U.S.C. §2; Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouih, Inc., 473 U.S. 614, 625-26 (1985). This Court’s

prior cases make clear that a court asked to compel

arbitration has the limited task of determining whether the

parties’ dispute is within the scope of a valid arbitration

agreement. If the parties agreed to arbitrate the dispute, that

is the end of the matter, and the court must honor the parties’

agreement.

Here, because the parties agreed to arbitrate “any dispute

about their business relationship,” Pet. App. A-62-63, the

district court should have compelled respondents to arbitrate

their business-related RICO claims. Instead, the district

court disregarded the parties’ agreement because it did not

believe that the arbitrators could award respondents

“meaningful relief.” /d. at A-31. For reasons explained

below, the lower court’s decision departs from this Court’s

precedents and should be reversed.

A. Federal Arbitration Law Is Based On Freedom Of

Contract

The most fundamental precept of federal ar tration law

is freedom of contract. Indeed, the “basic pur, 2” of the

Federal Arbitration Act is “to overcome courts’ refusals to

enforce agreements to arbitrate,” Allied-Bruce Terminix Cos.

v. Dobson, 513 U.S. 265, 838 (1995), thereby placing those

agreements on “the same footing as other contracts.” Gilmer

v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).

The Act creates “at bottom a policy guaranteeing the

enforcement of private contractual arrangements.”

Mitsubishi, 473 U.S. at 625. It is therefore well-settled that

courts must “enforce privately negotiated agreements to

arbitrate, like other contracts, in accordance with their

terms.” Volt Info. Sciences, Inc. v. Board of Trs. of Stanford

Univ., 489 U.S. 468, 478 (1989).

It is equally well-settled that parties “are generally free to

structure their arbitration agreements as they see fit.” /d. at

469 (citations omitted); see also Baravati v. Josephthal,

Lyon & Ross, Inc., 28 F.3d 704, 709 (7th Cir. 1994) (Posner,

J.) (“[P]arties are as free to specify idiosyncratic terms of

arbitration as they are to specify any other terms in their

contract.”). This Court accordingly has not hesitated to give

full effect to “the contractual rights and expectations of the

parties.” Volt, 489 U.S. at 479 (noting that courts must

“rigorously enforce” arbitration agreements according to

their terms). When an arbitration agreement is “made in an

arms-length negotiation by experienced and sophisticated”

parties, it must be honored and enforced. Southland Corp. v.

Keating, 465 U.S. 1, 7 (1984).

Moreover, because federal law requires “rapid and

unobstructed enforcement of arbitration agreements,” a

court’s role in determining arbitrability is limited. Cortez

Byrd Chips, Inc. v. Bill Harbert Constr. Co., 529 U.S. 193,

201 (2900) (internal quotation omitted). When asked to

compel arbitration of a particular dispute, the court must

determine whether the dispute is within the scope of a valid

arbitration agreement. See Mitsubishi, 473 U.S. at 626. If

the court determines that it is, the court’s work is done—it

must refer the dispute to arbitration. As this Court has

repeatedly emphasized, “[c]ontracts to arbitrate are not to be

avoided by allowing one party to ignore the contract and

resort to the courts.” Southland, 465 U.S. at 7.

This Court has also emphasized that federal policy favors

arbitration. In the absence of “fraud or overwhelming

economic power that would provide grounds ‘for the

revocation of any contract,” Mitsubishi, 473 U.S. at 627, all

doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration. See Moses H. Cone Mem'l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

An “order to arbitrate . . . should not be denied unless it may

be said with positive assurance that the arbitration clause is

not susceptible [to] an interpretation that covers the asserted

dispute.” See AT&T Technologies, Inc. v. Communications

Workers of Am., 475 U.S. 643, 650 (1986) (internal

quotation omitted).

Consistent with this pro-arbitration policy and with

freedom of contract principles, a court may not rewrite the

parties’ agreement by usurping the role assigned to the

—

arbitrator. In this vein, a court asked to compel arbitration

must not delve into the “potential merits of the [parties’]

underlying claims.” AT&T Techs., 475 U.S. at 649. Other

than determining what disputes are within the scope of

arbitration, a court has no authority to interpret the

provisions of the parties’ substantive agreement. See, e.g.,

John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557

(1964) (“‘[P]rocedural’ questions which grow out of the

dispute and bear on its final disposition should be left to the

arbitrator.”). As this Court has noted, “[s}uch a course could

lead to prolonged litigation, one of the very risks the parties,

by contracting for arbitration, sought to eliminate.”

Southland, 465 U.S. at 7.

B. The Parties’ Agreement To Arbitrate RICO

Claims Should Be Enforced

In this case, application of this Court’s settled precedents

is uncomplicated. There is no dispute that the arbitration

agreements between respondents and petitioners were freely

negotiated among sophisticated commercial actors. See Pet.

App. A-24-29. And no one could suggest that the

agreements resulted from the “sort of fraud” that could

provide grounds for revocation of any contract. See

Mitsubishi, 473 U.S. at 627 (citing 9 US.C. § 2).

Accordingly, because the language of the agreements is

sufficiently broad to cover RICO claims, the district court

should have enforced the parties’ agreement and cornpelled

arbitration.

Respondents avoided this straightforward result by

convincing the district court that arbitration would deprive

them of “meaningful relief.” Pet. App. at A-30-31.

Although the district court acknowledged that respondents

were asking it to “negate [their] contractual obligations,” id.

at A-22, it nonetheless declined to enforce the parties’

agreements. It concluded that, because the parties waived

punitive damages, respondents could not recover RICO

treble damages in arbitration. See id. at A-30-31. At bottom,

the district court’s decision rests on its conclusion that, by

waiving punitive damages, the parties rendered their

agreement unenforceable. See id. This extreme position is

wrong, for two basic reasons.

First, the district court erred at the outset by delving into

the validity and scope of the damages limitation in the

parties’ agreement. As long as there is no doubt that the

parties agreed to arbitrate a dispute, “defenses to

performance—even those that logically defeat arbitration—

belong to the arbitrator.” Metro East Ctr. for Conditioning

& Health v. Qwest Communications Int'l, Inc., 294 F.3d 924,

929 (7th Cir. 2002) (Easterbrook, J.); see also Prima Paint

Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04

(1967). Once it is determined that the parties agreed to

arbitrate a particular dispute, the arbitrator can resolve

defenses to enforcement without risk that arbitration is being

foisted on non-consenting parties. See Prima Paint, 388

U.S. at 403-04. Several courts of appeals have therefore

correctly held that, under Prima Paint, the arbitrator in the

first instance determines whether contractual limitations on

remedies are valid. See Boomer v. AT&T Corp., 309 F.3d

404, 419 n.6 (7th Cir. 2002); Larry's United Super, Inc. v.

Werries, 253 F.3d 1083, 1086 (8th Cir. 2001); MCI

Telecommunications Corp. v. Matrix Communications Corp.,

135 F.3d 27, 33 n.12 (lst Cir. 1998); Great Western

Mortgage Corp. v. Peacock, 110 F.3d 222 (3d Cir. 1997).

The district court’s failure to defer to the arbitrator

reflects the type of “judicial suspicion of the desirability of

arbitration and of the competence of arbitral tribunals,” that

this Court long ago rejected. See, e.g., Mitsubishi, 473 U.S.

at 626-27. As this Court has repeatedly noted, there is

simply no reason to assume that arbitrators will not follow

the law. See Shearson/American Express, Inc. v. McMahon,

482 U.S. 220, 232 (1987). The district court therefore erred

by not allowing the arbitrator in the first instance to address

the validity of the parties’ punitive damages limitation as

applied to respondents’ RICO claims.

Second, even assuming that the district court had the

power to reach the issue, the court erred by concluding that

respondents’ waiver of treble damages under RICO was

invalid. It is axiomatic that parties may generally agree to

waive their statutory nghts and remedies. See, e.g., Shutte v.

Thompson, 82 U.S. (15 Wall.) 151, 159 (1873) (“A party

may waive any provision . . . of a statute intended for his

benefit.”); see also United States v. Mezzanatto, 513 U.S.

196, 201 (1995) (“[W]e have presumed that statutory

provisions are subject to waiver by voluntary agreement of

the parties.”). After all, “[o]ne aspect of personal liberty is

the entitlement to exchange statutory nghts for something

valued more highly.” Metro East, 294 F.3d at 929.

Accordingly, having made a “bargain to arbitrate, .. .

part{ies} should be held to it unless Congress itself has

evinced an intention to preclude a waiver of judicial

remedies for the statutory mghts at issue.” Mitsubishi, 473

U.S. at 628; see also Mezzanatto, 513 U.S. at 201; Metro

East, 294 F.3d at 928 (“As far as we know, the Supreme

Court has never held that any entitlement is outside the

domain of contract, unless the statute forbids waiver.”).

It is therefore significant that this Court has already held

that nothing in the text or legislative history of RICO

suggests that Congress intended to exclude RICO treble

damages claims from the ambit of the Federal Arbitration

Act. See McMahon, 482 U.S. at 242. Needless to say, “no

citizen is under any obligation to bring [a RICO] suit.”

Mitsubishi, 473 U.S. at 636. Nor does a private RICO

plaintiff need “executive or judicial approval before settling

one.” /d. Indeed, a private RICO plaintiff is free to settle a

RICO suit for less than its full expected value in order to

avoid the costs associated with prolonged litigation.

It necessarily follows, therefore, that private parties can

by contract agree to limit their recoveries under RICO.

Because parties need not bring RICO claims in the first

place, need not pursue their full remedies under the statute,

and may designate an arbitral forum for such claims, they are

logically free to limit the damages available in the arbitral

forum. See id. That is certainly true of the sophisticated

private parties at issue here: it is neither necessary nor

appropriate for the courts to rewrite the parties’ agreements

to give respondents benefits for which they did not bargain.

Il. ENFORCING THE PARTIES’ AGREEMENTS

ACCORDING TO THEIR TERMS WILL HELP

KEEP HEALTH CARE COSTS UNDER CONTROL

While enforcing the parties’ agreements according to

their terms is required by settled precedent, it is also

consistent with important broader policy goals. The Federal

Arbitration Act’s focus on enforcing private contracts

benefits society as a whole. See, e.g, Michael I. Krauss,

Tort Law and Private Ordering, 35 St. Louis U. LJ. 623,

625-26 (1991). Rigorous enforcement of contracts allows

parties to regularize their relations and to reduce future

uncertainties by creating rules well-suited to their peculiar

circumstances. See, e.g., Richard A. Epstein, Market And

Regulatory Approaches to Medical Malpractice: The

Virginia Obstetrical No-Fault Statute, 74 Va. L. Rev. 1451,

1453-55 (1998) (explaining the logic of contract).

Here, these principles have real-world significance.

Arbitration agreements between physicians and managed

care organizations are a vital tool for controlling

ever-burgeoning costs. See American Arbitration Assoc.,

Am. Bar Assoc., Am. Med. Assoc., Final Report (July 27,

1998) (recommending that arbitration “can and should be

used” to resolve disputes between health care providers and

managed care organizations). Because litigation is costly

and time-consuming, arbitration (like other forms of

alternative dispute resolution) “has increasingly gained

acceptance and recognition among healthcare providers and

insurers as a quick and inexpensive means of resolving

various types of healthcare disputes.” Alma Saravia,

Overview of Alternative Dispute Resolution in Healthcare

Disputes, 32 J. Health L. 139, 140 (1999).

Moreover, as commentators have noted, disputes

between physicians and managed care organizations are

especially well-suited for arbitration. See id. at 143; see also

Roderick B. Mathews, The Role of ADR In Managed Health

Care Disputes, 54 Disp. Resol. J. 8, 11 (Aug. 1999) (“The

advantages of ADR are particularly compelling in the

managed health care context.”) Most physicians and

managed care organizations “have entered into long term

relationships, sharing the common goal of providing

treatment to patients.” Saravia, Overview of Alternative

Dispute Resolution, 32 J. Health L. at 140. Arbitration is

therefore a useful mechanism that permits parties to resolve

their disputes while maintaining continued business

relationships. See Saravia, Overview of Alternative Dispute

Resolution, 32 J. Health L. at 143; see also Ann H. Nevers,

Medical Malpractice Arbitration In The New Millennium:

Much Ado About Nothing?, | Pepp. Disp. Resol. LJ. 45,

49-50 (2000) (“Arbitration makes it easier for the parties

involved to maintain their relationships while increasing the

opportunity for the claimant to be satisfied”).

Under these circumstances, it makes sense that

physicians and managed care organizations might agree, as

they did here, to limit the remedies available in arbitration.

It is generally accepted, for example, that punitive damages

are a “powerful weapon” that “have a devastating potential

for harm.” Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1,

42-46 (1991) (O’Connor, J., dissenting). Indeed, scholars

have shown that punitive damage awards may well impose

substantial costs on society with little (if any) tangible

benefits. See W. Kip Viscusi, Why There Is No Defense Of

Punitive Damages, 87 Geo. L.J. 381 (1998); see also W. Kip

Viscusi, The Social Costs Of Punitive Damages Against

Corporations in Environmental & Safety Torts, 87 Geo. L.J.

285 (1998).

By forgoing punitive damages in arbitration, physicians

and managed care organizations have thus mutually agreed

to disarm themselves of the most threatening legal weaponry.

Both parties to the contract benefit, as does the general

public. Disputes are quickly and efficiently resolved,

destructive high-stakes litigation is avoided, and health care

costs are kept in check. See Nevers, Medical Malpractice

Arbitration, | Pepp. Disp. Resol. L.J. at 50 (noting that in

traditional litigation, unlike arbitration, “a large amount of

the award lands in the pockets of the plaintiff's attorney”).

In this context, the notion that respondents are deprived

of “meaningful relief” by arbitrating their RICO claims is

fanciful. Nothing in the agreements prevents the respondents

from recovering the actual damages they may have suffered.

The agreements only prevent either party from recovering a

windfall in punitive damages.

Nor is there any broader policy reason for encouraging

parties to breach their contracts and litigate RICO claims that

they promised they would arbitrate. After all, no one could

reasonably suggest that managed care organizations are the

“archetypal, intimidating mobster,” that RICO actions were

designed to fight. Sedima, S.P.R.L. v. Imrex Co., 473 U.S.

479, 499 (1985). The direct economic benefits of decreased

health care costs are surely more important to the Nation’s

well-being than any interest in encouraging private attorneys

general to recover treble damages awards that they have

expressly disclaimed.

CONCLUSION

For the foregoing reasons, this Court should reverse the

judgment of the court of appeals.

Respectfully submitted,