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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0590%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 538 U.S. 401

## Text

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

Vv

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

vl

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.

2

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.

3

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

4

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.

5

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

6

“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

—

J

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

8

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

9

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

10

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.,

11

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.

12

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

13

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,

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
Washington Legal Foundation

December 6, 2002

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0590%3A09. Public record. Not legal advice.