Appendix — UnitedHealth Group, Inc. v. Klay
Supreme Court brief2005
Ask Donna
What actually matters in this document.
Text
la
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF FLORIDA
Miami Division
[Filed September 15, 2003]
MDL No. 1334
Master File No. 00-1334-MD-MORENO
IN RE: MANAGED CARE LITIGATION
THIS DOCUMENT RELATES TO
PROVIDER TRACK CASES
ORDER GRANTING IN PART AND DENYING
IN PART MOTIONS TO COMPEL ARBITRATION
Defendant managed care companies’ seek to compel Plain-
- . 2 . . °
tiff health care providers’ to arbitrate all of their claims. Most
of the Defendants have previously sought arbitration, and the
‘The managed care companies include: UnitedHealthcare, Inc. and
UnitedHealth Group Incorporated f/k/a United HealthCare Corporation
(“United”), PacifiCare Health Systems, Inc. (“PacifiCare”), Health Net,
Inc. f/k/a Foundation Health Systems, Inc. (“Health Net”), WellPoint
Health Networks, Inc. (“WellPoint”), The Prudential Insurance Company
of America, Humana, Inc., Humana Health Plan, Inc., Coventry Health
Care, Inc. and Anthem, Inc. (collectively referred to as “Defendants” or
“HMOs”).
* The health care providers include: Doctors Charles B. Shane, Jeffrey
Book, Michael Burgess, Edward L. Davis, Lance R. Goodman, H. Robert
Harrison, Glenn L. Kelly, Leonard J. Klay, Eugene Mangieri, Kevin
Molk, Martin Moran, Manuel Porth, Thomas Backer, David Boxstein,
Susan Hansen, Andres Taleisnik, Julio Taleisnik, Roger Wilson and Navid
Ghalambor, as well as Medical Associations from California, Texas,
Georgia, Florida, Louisiana and Denton County [Texas] (collectively
referred to as “Plaintiffs” or “Providers”).
2a
Court has twice determined which claims had to be resolved
through arbitration. /n re Managed Care Litig., 143 F. Supp.
2d 1371 (S.D. Fla. 2001); Jn re Managed Care Litig., 132 F.
Supp. 2d 989 (S.D. Fla. 2000). These decisions were af-
firmed in their entirety by the United States Court of Appeals
for the Eleventh Circuit. Jn re Humana Inc. Managed Care
Litig., 285 F.3d 971 (11th Cir. 2002). However, the Supreme
Court reversed in part, concluding that arbitration should be
compelled despite certain contractual provisions prohibiting
the arbitral award of punitive damages. PacifiCare Health
Sys., Inc. v. Book, 123 §. Ct. 1531 (2003). More specifically,
the Supreme Court held that Providers could be compelled to
arbitrate their claims under the Racketeer Influenced and
Corrupt Organization Act, 18 U.S.C. § 1961 et seg. (“RICO”),
even though certain arbitration agreements could be con-
strued to limit the arbitrator’s authority to award treble dam-
ages. While the First and Second Arbitration Orders were up
on appeal, Providers filed a Second Amended, Consolidated
Class Action Complaint (D.E. No. 1607) (the “Complaint’”)
modifying their claims and adding new Defendants in the
“Main Track.”’ The new Defendants seek arbitration while
the past Defendants renew their motions to compel arbitra-
tion. For the reasons outlined infra, the various motions to
compel arbitration are GRANTED in part and DENIED in
part consistent with this opinion.
* There also are numerous “tag along” cases that have been transferred
to this Court by the Judicial Panel on Multi-District Litigation. All such
tag-along cases are temporarily stayed pending disposition of dispositive
motions in the Main Track. See Order Staying Provider Track Tag-Along
Cases (D.E. No. 2264), filed on August 21, 2003.
3a
I. INTRODUCTION
A. The Complaint
The Complaint alleges ten separate causes of action:
(i) conspiracy to commit RICO violations, 18 U.S.C.
§ 1962(d); (ii) aiding and abetting RICO violations, 18 U.S.C.
§ 2 ((i) and (ii) collectively referred to as “derivative RICO
claims”); (iii) so-called “direct” RICO violations, 18 U.S.C.
§ 1962(a) & (c); (iv) RICO declaratory and injunctive relief,
18 U.S.C. § 1964(a); (v) breach of contract; (vi) unjust en-
richment/constructive contract; (vii) violation of various state
prompt pay statutes; (viii) violation of the California Business
& Professions Code § 17200; (ix) violation of the Connecti-
cut Unfair Trade Practices Act; and (x) violation of the New
Jersey Consumer Fraud Act.
B. Procedural Background
The complaint at the time of the appeal as well as this
Court’s prior rulings were succinctly summarized by the
Eleventh Circuit:
In this case, a group of doctors, acting on behalf of
themselves and others similarly situated, have sued
several HMOs on various grounds—including RICO,
ERISA, quantum meruit, breach of contract, federal
clean claim payment regulations, unjust enrichment,
and state prompt pay statutes. The suit is made
particularly complicated by the wide array of different
relationships among the various parties in the action,
relationships that we need not elaborate here beyond
noting the following: some of the doctors had con-
tracts with some of the HMOs; some of those con-
tracts had arbitration clauses; and some of those
arbitration clauses placed limitations on the sort of
damages an arbitrator may award. The task facing the
district court was, in short, to determine which of
the various legal claims must be resolved through
arbitration.
4a
The district court made four rulings related to this
appeal. First, the court held that claims between
plaintiffs and defendants who are both signatories to
contracts containing enforceable arbitration clauses
must be arbitrated. Second, relying primarily on our
opinion in Paladino v. Avnet Computer Technologies,
Inc., 134 F.3d 1054 (11th Cir. 1998), the court found
that those arbitration clauses that exclude punitive
damages are unenforceable in this suit because they
preclude recovery of treble damages under RICO;
therefore, an HMO may not compel arbitration of a
RICO suit under such an arbitration clause. Third, the
court determined that an HMO may not invoke its
arbitration clause to compel arbitration of an aiding-
and-abetting charge regarding a doctor’s contractual
rights with a different HMO. Fourth, the court held
that exceptions to the general rule that a non-party to a
contract may not invoke the contract—exceptions we
described in MS Dealer Corp. v. Franklin, 177 F.3d
942 (11th Cir. 1999)—do not apply in the present
case; thus an HMO that is not a signatory to a par-
ticular contract may not invoke that contract’s arbi-
tration clause to compel arbitration.
In re Humana Inc. Managed Care Litig., 285 F.3d at 973."
The Court also made several additional rulings in the First
and Second Arbitration Orders that are relevant to resolution
of the instant disputes. First, arbitration generally is limited
to claims made pursuant to particular contracts during the
effective dates of those contracts. In re Managed Care Litig.,
* While United argues that the Court’s previous ruling that it may not
compel arbitration of derivative RICO claims that stem from contractual
relationships with other managed care companies was based sole/y on the
perceived infirmities arising from remedial limitations, the Court did
not need to reach the broader issue as to United at that time. Regardless,
the rationale of the broader ruling applicable to the other Defendants,
as reaffirmed in the Second Arbitration Order, is equally applicable to
United.
Sa
143 F. Supp. 2d at 1374. Second, a physician whose contract
with a company’s subsidiary contains an arbitration agree-
ment must arbitrate any claims against the parent company
even though the physician’s direct contractual relationship is
with the subsidiary. /n re Managed Care Litig., 132 F. Supp.
2d at 996-97, 1000 n.3, 1002 n.6, 1005 n.9. Similarly, a
physician whose work was performed through a separate
practice group must arbitrate any claims made pursuant to the
group’s contract with the health plan.” Jd. Third, cost
distribution provisions are not a sufficient hurdle to enforce-
ment of arbitration clauses executed by “sophisticated groups
of doctors” like Providers who “contract to provide health
care to large groups of patients.” /d. at 998. Finally, a one
year statute of limitations to bring claims in arbitration upon
written notice is not alone enough to preclude arbitration. See
id. at 1000-01. Furthermore, as discussed more fully infra in
Sections II and III(A)(2), Howsam v. Dean Witter Reynolds,
Inc., 537 U.S. 79 (2002), probably requires both notice and
cost distribution provisions to be construed by an arbitrator in
the first instance, since-such Clauses implicate questions of
procedural not substantive arbitrability. ;
II. LEGAL STANDARD
The Federal Arbitration Act (the “FAA”) extends to the
furthest reaches of Congress’s Commerce Power and is appli-
cable as long as the contract at issue affects interstate com-
merce. 9 U.S.C. § 2 (“contract evidencing a transaction in-
volving commerce”); Allied-Bruce Terminix Cos. v. Dobson,
513 U.S. 265, 273-74 (1995); Toledo v. Kaiser Permanente
Med. Group, 987 F. Supp. 1174, 1180 (N.D. Cal. 1997) (ap-
plying applicable standard in managed care context). There
* The First Arbitration Order bound physicians to arbitration agree-
ments executed by affiliated practice groups. The Court now reaches the
same conclusion as to hospital, foundation and other similar agreements
by logical extension.
6a
is no dispute that the contracts at issue affect interstate
commerce.
“A party aggrieved by the alleged failure, neglect or refusal
of another to arbitrate under a written agreement for arbitra-
tion may petition any United States district court . . . for an
order directing that such arbitration proceed in the manner
provided for in such agreement. . . . [T]he court shall make an
order directing the parties to proceed to arbitration in
accordance with the terms of the agreement.” 9 U.S.C. § 4.
The FAA establishes a strong federal policy, even a presump-
tion, in favor of arbitration. Moses H. Cone Mem’! Hosp. v.
Mercury Contr. Corp., 460 U.S. 1, 24-25 (1983). If Pro-
viders’ allegations “touch matters” covered by the relevant
arbitration agreements, then those claims must be arbitrated,
irrespective of how the allegations are labeled. Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
625 n.13 (1985). Whether a matter is within the scope of an
arbitration provision is a matter of the parties’ intent, and
“those intentions are generously construed as to issues of
arbitrability.” /d. at 626. Courts decide this threshold issue
of substantive arbitrability unless there is “clear and un-
mistakable evidence” that the parties intended to submit such
questions to an arbitrator. Dean Witter Reynolds, Inc. v.
Fleury, 138 F.3d 1339, 1342-43 (11th Cir. 1998) (citing
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943
(1995)).
Even though there is a strong federal policy favoring it,
arbitration is a matter of contract, and parties can only be
required to submit disputes to arbitration if they agreed to do
so. First Options, 514 U.S. at 942-43; AT&T Techs., Inc. v.
Communications Workers of Am., 475 U.S. 643, 648-49
(1986); United Steelworkers of Am. v. Warrior & Gulf Nav.
Co., 363 U.S. 574, 582 (1960). An arbitration agreement
“shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
Ta
contract.” 9 U.S.C. § 2. “[A]lthough federal law establishes
the enforceability of arbitration agreements, a court must
construe that agreement according to generally applicable
principles of state law.” Jn re S.E. Banking Corp., 156 F.3d
1114, 1121 n.9 (11th Cir. 1998) (citing Perry v. Thomas, 482
U.S. 483, 492 n.9 (1987)); Eassa Props. v. Shearson Lehman
Bros., Inc., 851 F.2d 1301, 1304 n.7 (11th Cir. 1988) (“While
federal law may govern the interpretation and enforcement of
a valid arbitration agreement, state law governs the question
of whether such an agreement exists in the first instance.”).
Accordingly, “courts are not to twist the language of the
contract to achieve a result which is favored by the federal
policy but contrary to the intent of the parties.” Goldberg v.
Bear Sterns & Co., 912 F.2d 1418, 1419-20 (11th Cir. 1990).
Therefore, the Court must determine whether an applicable
agreement to arbitrate exists and, if so, whether the dis-
putes at issue are within the scope of the parties’ agreement
to arbitrate. 9 U.S.C. § 4; Howsam, 537 U.S. at 83-85:
Mitsubishi, 473 U.S. at 626-28. All other issues should be
resolved by the arbitrator in the first instance, including the
impact of any notice provisions, statutes of limitation, cost
distribution provisions or remedial limitations. PacifiCare,
123 S. Ct. at 1535-36; Howsam, 537 U.S. at 83-85.
Ill. DISCUSSION
The Court previously has issued two arbitration orders in
the Provider Track as well as one arbitration order in the
related Subscriber Track.° At the risk of falling into the
category of which Ra'!ph Waldo Emerson wrote about when
he stated that “a foolish consistency is the hobgoblin of small
minds,” the Court will not re-examine its previous rulings,
°The Subscriber Track involves related claims of Defendants’
insureds. All claims in the Main Subscriber Track have been dismissed,
and only one Subscriber Track tag-along case remains pending for adju-
dication before this Court.
8a
except to the extent that they are decisively impacted by the
Supreme Court’s decisions this past term in PacifiCare and
Howsam, significant new facts or altered circumstances. As
detailed below, the Court finds that PacifiCare and Howsam,
as well as the purported fundamentally different allegations in
the latest Complaint, do not require the Court to digress from
any of its previous rulings, the lone exception being the
impact of potential remedial limitations on the arbitrability of
RICO claims. For instance, and perhaps most importantly,
the Court declines to reconsider its decision not to apply
the principles of MS Dealer to Providers’ derivative RICO
claims. This ruling was affirmed by the Eleventh Circuit and
the “new” allegations in the Complaint as well as the new
argument proffered by both old and new Defendants does not
alter the result. PacifiCare is the most vociferous proponent of
a reexamination of the applicability of MS Dealer. However,
the Court rejects the argument that the balance of equities has
changed with the filing of the final Complaint and that
entities that have only marginal connection to PacifiCare
should not be able to thwart arbitration by alleging a unitary
conspiracy.
In addition to affirming the applicability of its previous
rulings to all Defendants, both old and new, the Court also
must consider several new issues and arguments. The Court
first addresses certain general topics relevant to most, if not
all, Defendants, including: (i) the arbitrability of “direct”
RICO claims after PacifiCare; (ii) the continued nonarbi-
trability of derivative RICO claims under the Complaint;
(iii) the fate of non-participating provider claims (“non-par
claims”); (iv) the viability of claims asserted by medical
associations; and (v) the impact of certain broad arbitration
provisions on claims not made pursuant to the particular
agreements containing such clauses. Second, the Court
briefly addresses the applicability of these general rulings to
the individual Defendants. To this end, the Court incorpo-
9a
rates by reference four “arbitration charts” filed by the parties
and sets out a supplemental briefing schedule concerning the
applicability of the Court’s rulings to the specific parties,
claims and contracts remaining in the Main Track. Finally,
the Court summarily considers the numerous motions to stay
or dismiss pending arbitration.
A. Topics Common to Multiple Defendants
1. Remedial Limitations Clauses
Paladino is no longer authoritative as to direct RICO
claims after the Supreme Court’s decisions in PacifiCare and
Howsam. Thus, all direct RICO claims that stem from con-
tractual relationships subject to arbitration must be arbitrated,
notwithstanding any clauses limiting the availability of puni-
tive, exemplary or extra-contractual damages. It is for the
arbitrator to decide in the first instance whether any applica-
ble provisions improperly limit the availability of treble
damages. This ruling also necessarily applies to derivative
RICO claims that stem from contractual relationships with the
target Defendant, as opposed to contractual relationships with
other managed care companies. Moreover, such logic also
extends to state law causes of action that support recovery of
punitive, exemplary, extra-contractual or treble damages. See
also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S.
52, 58 (1995); Davis v. Prudential Sec., Inc., 59 F.3d 1186,
1192 n.6 (11th Cir. 1995); Bonar v. Dean Witter Reynolds,
Inc., 835 F.2d 1378, 1387 n.16 (11th Cir. 1988). Thus, all
remedial limitations provisions must be construed by arbitra-
tors in the first instance.
2. Derivative RICO Claims
While Providers’ focus undoubtedly has morphed over
time, this category of claims remains largely shielded from
arbitration. The Court previously held that derivative RICO
claims against a particular Defendant based upon contractual
relationships with other managed care companies are not sub-
10a
ject to arbitration. The Court also previously held that Defen-
dants may not borrow co-Defendants’ arbitration clauses
under the principles of MS Dealer. The Eleventh Circuit has
affirmed both holdings. As discussed more fully below,
the Court finds that neither PacifiCare or Howsam nor the
alleged changed circumstances require the Court to amend its
previous rulings.
Defendants first argue that PacifiCare mandates arbitration
of these claims. However, contrary to Defendants’ pleas,
PacifiCare does not directly require arbitration of Providers’
RICO conspiracy and aiding and abetting claims that stem
from contractual relationships with other managed care com-
panies. Even though the Supreme Court did not differentiate
between direct and derivative RICO claims in its introductory
description, its substantive analysis only expressly addresses
the impact of United and PacifiCare’s remedial limitations.
Moreover, the question framed by the Supreme Court mili-
tates in favor of the Court’s conclusion: “In this case, we are
asked to decide whether respondents can be compelled to
arbitrate claims arising under [RICO], notwithstanding the
fact that the parties’ arbitration agreements may be construed
to limit the arbitrator’s authority to award damages under that
statute.” PacifiCare, 123 S. Ct. at 1533. Simply put, the
Supreme Court never separately analyzed the fate of Defen-
dants’ derivative RICO claims. While Defendants’ requested
ruling certainly may be a logical extension of the Supreme
Court’s decision, the Court cannot depart from its previous
rulings without express direction from an appellate court.
Finally, the Court declines the parties’ invitations to divine
from the appellate “litigation history” rulings beyond those
contained within the four corners of the opinions from the
Eleventh Circuit and the Supreme Court.
Defendants also argue that Howsam calls into question the
Court’s decision as to derivative RICO claims. The Court
again disagrees. Howsam addressed the question of who
lla
should decide whether a claim was barred by the limitation
provisions of the National Association of Securities Dealers
Code of Arbitration. The Supreme Court held that gateway
questions that grow out of the dispute itself and bear upon its
final disposition should be decided by arbitrators (e.g. statute
of limitations), but that true questions of substantive arbitra-
bility relating to whether the parties contractually agreed to
arbitrate the dispute (e.g. existence of a contract) are for the
court to decide. Howsam, 537 U.S. at 84-85. Thus, questions
concerning whether a nonsignatory can invoke an arbitration
agreement, or whether a given dispute is within the scope of
a particular arbitration clause, are for the district court to
decide. Notwithstanding the above, the Court acknowledges
that Howsam eliminates any lingering doubt as to who should
decide the effect of notice provisions, statutes of limitation
and cost distribution provisions.
Third, in light of the specific allegations cited and the new
Defendants named in the Complaint, Defendants argue that
certain arbitration provisions are broad enough to capture
particular Provider’s derivative RICO claims that stem from
contractual relationships with other managed care companies.
This argument is premised upon the “touch matters” standard
articulated by relevant arbitration case law. AT&T Techs.,
Inc. v. Communications Workers of Am., 475 U.S. 643,
648-49 (1986); Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 625 n. 13 (1985); Moses H.
Cone Mem’! Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-
25 (1983). So the argument goes, because the Court cannot
determine with “positive assurance” that such arbitration
clauses are not susceptible to an interpretation that covers the
asserted disputes, it has no choice but to compel arbitration of
these claims. Defendants assert that there is no exception to
the mandated inquiry for conspiracy allegations. J.J. Ryan &
Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 321-
22 (4th Cir. 1988). They argue that claims may simultane-
12a
ously “touch matters” within the scope of an arbitration agree-
ment and “stem from” agreements with other Defendants.
Defendants further maintain that the Complaint clarifies
that a// RICO claims are predicated on proof that each HMO
committed direct RICO violations and that the most recent
complaints differ “dramatically” from previous versions con-
sidered by the Court. For instance, Defendants assert that it is
now clear that all RICO claims are inextricably intertwined,
because the “new” allegations clarify that Defendants needed
to act in concert for their fraudulent schemes to be successful
and that the goal of the conspiracy is to keep one’s own
doctors under contract, as opposed to an altruistic motive to
help another Defendant. See Complaint 4 118 (“[FJjor the
fraudulent schemes described above to be successful, each
Defendant and other members of the conspiracy had to agree
to enact and utilize the same devices and fraudulent tactics
against the Plaintiffs and the members of the class. If only
one Defendant engaged in these activities, physicians would
and could refuse to do business with that Defendant, but
together Defendants have the power and influence necessary
to effect and perpetuate their scheme.”). While Defendants
insist that this type of language simply was not present when
the Court issued the First Arbitration Order, the Court notes
that the Second Arbitration Order considered similar lan-
guage in the Amended, Class Action Consolidated Complaint
qq 198-201.
The Eleventh Circuit addressed this issue when it stated
that “an HMO may not invoke its arbitration clause to compel
arbitration of an aiding-and-abetting charge regarding a doc-
tor’s contractual rights with a different HMO.” Jn re Humana
Inc. Managed Care Litig., 285 F.3d at 973. Even if the
Eleventh Circuit had not addressed this issue, the Court finds
that the “new” allegations do not require alteration of its
previous decision. It is undisputed that the basic conspiracy
allegations have been in the complaint since the beginning of
13a
this case, i.e. that each Defendant agreed with each other to
develop and deploy certain automated processing techniques
to cheat doctors and agreed to use it on their own doctors.
Simply put, the “new” allegations differ more in degree than
kind. Also, Paragraph 118 of the Complaint can be construed
merely as an allegation of motive, as opposed to a core
allegation of conspiracy.
Moreover, the Court believes that even the broadest of
arbitration provisions at issue in this case, i.e. those covering
“all grievances and disputes” and claims “related to” the
contract, do not contemplate the capture of the contracting
Defendants’ conspiracy with or aid to another Defendant’s
violation of its contractual agreements. A common sense
interpretation of the arbitration clauses at issue limits them to
disputes over the practices of the contracting parties, not the
contracting Defendants’ assistance with other Defendants’
breaches, even if one of the motives was to preserve their
own ability to harm the contracting Providers. While note-
worthy, the alleged interconnected nature of the claims is not
dispositive. See Hill v. G.E. Power Sys., Inc., 282 F.3d 343,
347 (Sth Cir. 2002); see also Howsam, 537 U.S. at 83-84:
Mitsubishi, 473 U.S. at 627-28; Prima Paint Corp. v. Flood
& Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967).
3. Non-Par Claims
The prior complaints did not include claims by non-
participating providers. Non-participating providers, by defi-
nition, do not have a written contractual relationship with the
target HMO. To complicate matters, Providers allege that
some doctors have both contract and non-contract claims (i.e.
are both participating and non-participating providers) as to
some Defendants. The primary question concerns whether
these claims are legally linked to assignments of the under-
lying subscriber claims for benefits. If so, the assignee-
providers “stand in the shoes” of the assignor-subscribers,
including their obligation to arbitrate. Misic vy. Building Serv.
l4a
Employees Health & Welfare Trust, 789 F.2d 1374, 1378 (9th
Cir. 1986); see also Cagle v. Bruner, 112 F.3d 1510, 1514-15
(lith Cir. 1997). These claims can be divided into two
camps: claims by doctors that have no contractual relation-
ship with the target Defendant and those by doctors that do
have such a contractual relationship, but also allege non-par
claims.
As for the latter, Defendants again advance their scope
argument. In those circumstances in which there is a contract
between a Provider and a particular Defendant establishing a
commercial relationship, Defendants argue that the scope of
that contractual agreement combined with its arbitration
clause is sufficient to encompass whatever non-par claims for
payment that same Provider may be bringing as to that
Defendant. AT&T, 475 U.S. at 648-49; Mitsubishi, 473 U.S.
at 625 n.13; Cone, 460 U.S. at 24-25. While several Defen-
dants advance isolated provisions of particular contracts that
they claim evidence that the scope of these contracts with
their arbitration clauses are broader than the particular sub-
scribers, networks, plans or covered services specifically
addressed, the Court again finds that a common sense inter-
pretation of these contracts limits their applicability to such
specific subscribers, networks, plans and services. While
recognizing that this is a closer question than in the derivative
RICO claim context, the Court nonetheless finds that even the
broadest arbitration clauses at issue are limited to claims
made pursuant to the contracts in which such clauses are
contained.
The presence of a boilerplate integration clause does not
alter this analysis. For instance, if a contract covers the
rendition of services to particular subscribers for particular
services, even the broadest arbitration clauses (“all grievances
and disputes” or “related to” language) do not encompass
non-par or other out-of-network claims, regardless of whether
such claims arose before or after the effective date of the
<<
1Sa
contract at issue. While Defendants assert that such niceties
are for the arbitrator to decide under Howsam, the Court
believes that this inquiry is within the core substantive
arbitrability determination for the Court. This finding is
consistent with the Court’s previous rulings limiting the scope
of arbitration clauses to the particular contracts in which they
are contained when a doctor has multiple contracts with a
particular Defendant.
In the alternative, and as to those doctors without any
enforceable arbitration clauses or without arbitration clauses
of sufficient scope to encompass non-par claims with a
particular Defendant, Defendants argue that Providers are
bound by the terms of the evidence of coverage or other
Operative contract between the patient and the insurer,
including any arbitration clauses. In support of this assertion,
Defendants cite “hornbook” contract law, Int'l Paper Co. v.
Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d
411(4th Cir. 2000) and Sunkist Soft Drinks, Inc. v. Sunkist
Growers, Inc., 10 F.3d 753 (11th Cir. 1993), cert. denied, 513
U.S. 869 (1994) (finding that a claim which presumes the
existence of a licensing agreement subject to arbitration must
be submitted to arbitration even if it does not rely exclusively
upon the licensing agreement).
Defendants argue that Providers are seeking to advance
claims that are necessarily derivative of, inextricably inter-
twined with, or presume the existence of a contract, be it
through assignment, beneficiary principles or estoppel prin-
ciples. Therefore, any claim for payment is necessarily
derivative of the patient’s insurance rights, especially since
Providers are only asserting claims for covered services. See
Complaint { 4 (“The fundamental premise of the relationship
between the Defendants and the doctors who treat their in-
sureds, either pursuant to or without contract, is that the
doctors will be paid in a timely manner for the covered
16a
medically necessary services that they render.”) (emphasis
added).
This issue can be divided into those claims based on as-
signment theory and those asserted on non-contract grounds.
In practice, doctors either (i) accept assignments and attempt
to get payment directly from the insurance company, or
(ii) administer claims paperwork as a courtesy but continue to
hold patients liable for payment. As to assignment-based
claims, there is no dispute that such claims must be arbitrated
if the underlying subscriber is subject to an applicable and
enforceable arbitration clause. Under this theory, Providers’
claims only exist based upon the contractual right of
the subscriber to seek benefits for the Providers’ services.
Weiner v. Klais & Co., 108 F.3d 86, 92 (6th Cir. 1997).
Thus, if the subscriber-assignor is subject to mandatory
arbitration, the provider-assignee is required to submit such
claims to arbitration. Bel-Ray Co. v. Chemrite, Ltd., 181 F.3d
435, 444-46 (3d Cir. 1999); Fisser v. Int'l Bank, 282 F.2d
231, 233 n.6 (2d Cir. 1960); see also Banque de Paris et des
Pays-Bas v. Amoco Oil Co., 573 F. Supp. 1464, 1469-70
(S.D.N.Y. 1983). Otherwise, an assignor could give greater
rights than they owned and deprive the other original party of
contractual arbitration rights.
The inquiry is more difficult in the absence of an assign-
ment theory. As correctly pointed out by Providers, these
claims theoretically are independent of any contractual obli-
gations of subscribers, since the relevant causes of action
include unjust enrichment and various federal and state statu-
tory claims. Media Servs. Group, Inc. v. Bay Cities Commu-
nications, Inc., 237 F.3d 1326, 1330-31 (11th Cir. 2001); Jn
re De Laurentiis Entm’t Group, Inc., 963 F.2d 1269, 1272
(9th Cir. 1992), cert. denied, 506 U.S. 918 (1992). While
Defendants point out that recovery is only possible for
services covered under subscriber contracts, and that such
contract reliance necessarily requires adherence to any req-
17a
uisite alternative dispute mechanisms, Providers clearly at-
tempt to articulate claims independent of any contractual
relationship. They assert that HMOs, which cannot have
doctors in every geographic location and in every specialty,
make it known through various sources that doctors will be
reimbursed if they provide medically necessary services to
their patients, even if they do not have a contract with the
HMO. Moreover, such treatment often occurs in contexts
where inspection of the coverage scope of applicable sub-
scriber contracts is not feasible. Accordingly, the Court
declines to compel arbitration of these non-par claims that are
purportedly advanced independent of the particular subscriber
contracts. While Defendants also argue that Providers lack
standing to assert such claims, and that such claims are in any
event preempted by ERISA, the Court will embark on that
journey in the context of the various pending motions to
dismiss.
Therefore, the Court will not compel non-par claims to
arbitration in the absence of an agreement to do so. Any
Provider claims that are based upon assignments from sub-
scribers with arbitration clauses must be arbitrated. More-
over, any Provider claims that necessarily rely upon sub-
scriber contracts with arbitration clauses also must be arbi-
trated. All other Provider claims that rely upon non-contrac-
tual or quasi-contractual: state statutes or common law
theories of recovery, and that are independent of any sub-
scriber contractual relationship, are not arbitrable. As men-
tioned above, the Court will further examine the viability of
such causes of action in the context of the pending motions to
dismiss.
4. Medical Associations
The next important decision concerns the fate of the claims
pressed by the various Plaintiff medical associations. These
medical associations have brought suit for declaratory and
injunctive relief both individually and on behalf of their
18a
respective memberships. Analysis of this issue can be neatly
divided into alieged direct and derivative claims.
Associations suing in a representative capacity generally
are bound by the same limitations and obligations as the
members that they represent. Hunt v. Wash. St. Apple Adver.
Comm'n, 432 U.S. 333, 342-43 (1977) (citing Warth v.
Seldin, 422 U.S. 490, 511 (1975)); Communications Workers
of Am. v. AT&T Co., 40 F.3d 426, 434 n.2, 435 (D.C. Cir.
1994) (dismissing union’s claims because its members did not
exhaust administrative remedies or submit dispute to manda-
tory arbitration). In fact, Defendants argue that associations
are bound by the greatest commitments of the least of their
physicians; otherwise, it would permit those physicians to
escape their commitments merely by having a representative
sue on their behalf. Crow Tribe of Indians v. Campbell Farm-
ing Corp., 828 F. Supp. 1468, 1478 (D. Mont. 1992), aff'd, 31
F.3d 768 (9th Cir. 1994), cert. denied, 514 U.S. 1018 (1995).
However, because numerous associational members are not
bound by enforceable arbitration clauses with respect to the
claims brought, Providers attempt to bring suit only on behalf
of their members that are not bound by enforceable arbi-
tration clauses. In support, Providers argue that the Hunt
standing factors are the sole requirements in this context and
that they need only identify one member with standing. Sea
Shore Corp. v. Sullivan, 158 F.3d 51, 55 (1st Cir. 1998).
Nonetheless, the Court finds that the issue of standing is at
least partially distinct from whether the association must
arbitrate its representative claims. Associations may not pick
anc chose the members that they represent; otherwise, they de
facto avoid the requirements of Fed. R. Civ. P. 23. See Crow
Tribe, 828 F. Supp. at 1478. Moreover, the logic of Warth is
that prospective relief is the only remedy that “will inure to
the benefit of those members of the association actually
injured.” Warth, 422 U.S. at 515. An association that aban-
dons some of its allegedly injured members no longer pur-
19a
ports to be a “representative” of its membership. Instead, it
attempts to act as a de facto class aggregator of selected
members and seek prospective injunctive relief that would
benefit all of its membership.
Furthermore, partial representation would violate the pru-
dential standing requirements articulated in the third prong of
the Hunt test. Hunt, 432 U.S. at 343 (holding that claims
asserted and relief requested must not require individual par-
ticipation in the lawsuit); see also Rent Stabilization Ass'n v.
Dinkins, 5 F.3d 591, 596 (2d Cir. 1993). The Article III
requirement that at least one association member must have
individual standing is separate from the prudential require-
ment that an association can only sue when it can obtain
prospective relief on behalf of all of its allegedly injured
members. United Food & Comm. Workers Union Local 75]
v. Brown Group, Inc., 517 U.S. 544, 555-57 (1996). In
the instant case, participation of individual members is un-
avoidable. The only way for the Court to determine which
members have claims not subject to arbitration and what
prospective relief might be appropriate for those members is
for each member to participate and defend against a motion to
compel arbitration. See generally Kan. Health Care Ass'n,
Inc. v. Kan. Dep't of Social & Rehab. Serv., 958 F.2d 1018,
1022-23 (10th Cir. 1992).
Because the Court has ruled that many of the pending
claims of individual Providers must be submitted to arbitra-
tion, it is inevitable that certain of each of the associations’
members are required to arbitrate the claims raised on their
behalf. The Court also notes that Providers have made no
attempt to distinguish which associational members are free
from enforceable arbitration clauses. Accordingly, all arbitra-
ble claims asserted on behalf of memberships at least partially
subject to enforceable arbitration clauses must be submitted
to arbitration. Of course, any nonarbitrable claims brought
derivatively by medical associations, including the deriva-
20a
tive RICO and non-par claims addressed supra in Section
TIH(A)(2) and (3), remain pending before this Court.
Several associations also contend that they have standing in
their own right to bring the asserted claims. Conn. St. Med.
Soc’y v. Connecticare, Inc., No. X01 CV 010165649S, 2002
WL 725510 (Conn. Super. Ct. Apr. 1, 2002) (finding that a
medical society had independent standing to bring claims for
injunctive relief under state unfair trade practices statute).
“An organization also has standing to sue for relief from
injury to its own interests, apart from any injury to its mem-
bers, since standing may be established in an individual or
representative capacity.” /d. at *3 (quotations omitted); see
also Havens Realty Corp. v. Coleman, 455 U.S. 363, 378-79
(1982). Associations generally have independent standing if
they have direct injury. Ragin v. Harry Macklowe Real Estate
- Co., 6 F.3d 898, 904-05 (2d Cir. 1993); Spann v. Colonial
Village, Inc., 899 F.2d 24, 27 (D.C. Cir. 1990), cert. denied,
498 U.S. 980 (1990), 498 U.S. 1046 (1991); Village of
Bellwood v. Dwivedi, 895 F.2d 1521, 1526 (7th Cir. 1990);
Pac. Legal Found. v. Goyan, 664 F.2d 1221, 1224 (4th Cir.
1981). In short, these associations argue that they have
expended their own resources to fight Defendants’ alleged
unlawful practices and have lost members due to these prac-
tices. Because the associational Defendants themselves are
not subject to enforceable arbitration clauses, this issue will
best be resolved in the context of motions to dismiss for
standing, not motions to compel arbitration.
5. Multiple Contracts and Effective Dates
Finally, the Court examines Defendants’ argument that
certain arbitration clauses, most notably those that apply to
“all grievances or disputes” or anything that “relates to” the
particular contract, are broad enough to engulf claims not
made or brought pursuant to the particular contracts contain-
ing these clauses. The Court hereby incorporates its rulings
articulated supra in Section III(A)(2) and (3) as to Defen-
2la
dants’ scope argument in the context of derivative RICO and
non-par claims. In this vein, the Court also incorporates its
previous ruling that arbitration generally is limited to claims
arising under or made pursuant to particular contracts during
the effective date of those contracts. Jn re Managed Care
Litig., 143 F. Supp. 2d at 1374. Most notably, this issue
arises in the context of claims by physicians having multiple
contracts with particular Defendants and claims arising before
or after the effective dates of particular contracts.
For instance, certain Defendants, including Health Net and
WellPoint, seek to impose arbitration on claims performed
pursuant to contracts without arbitration clauses and even
outside the scope of any contract. Similarly, Anthem argues
that Dr. Shane must arbitrate both claims arising before and
after execution of his contracts. In support, these Defendants
cite extremely broad arbitration clauses that purport to apply
to “all grievances and disputes” between the parties or any
claims “related to” the applicable agreements. Admittedly,
some courts have held that broad arbitration clauses can cover
claims arising under other agreements lacking arbitration
provisions. ARW Exploration Corp. v. Aguirre, 45 F.3d
1455, 1462 (10th Cir. 1995), cert. denied, 525 U.S. 822
(1998); Associated Brick Mason Contractors of Greater N.Y.,
Inc. v. Harrington, 820 F.2d 31, 35-36 (2d Cir. 1987); see
also Inlandboatmens Union of Pac. v. Dutra Group, 279 F.3d
1075, 1080 (9th Cir. 2002). Other courts have held that broad
arbitration agreements can cover disputes that arose prior to
execution of the agreement. E.g., Zink v. Merrill Lynch
Pierce Fenner & Smith, Inc., 13 F.3d 330, 332 (10th Cir.
1993); Mail-Well Envelope v. Int'l Ass'n of Machinists &
Aerospace Workers, 916 F.2d 344, 346-48 (6th Cir. 1990):
Beneficial Nat’ 1 Bank v. Payton, 214 F. Supp. 2d 679, 689-90
(S.D. Miss. 2001); Spurlock v. Life Ins. Co. of Va., No.
CIV.A.98-D-222-N, 2000 WL 1785300, *8 (M.D. Ala. Oct.
31, 2000); but see Peerless Imps., Inc. v. Wine, Liquor &
ets. aoe Ee
22a
Distillery Workers Union Local One, 903 F.3d 924, 927-28
(2d Cir. 1990); Armada Coal Exp., Inc. v. Interbulk, Ltd., 726
F.2d 1566, 1567-68 (11th Cir. 1984).
However, arbitration clauses cannot be extended beyond
the context that the parties intended. /7T Hartford Life &
Annuity Ins. Co. v. Amerishare Invests., Inc., 133 F.3d 664,
669-70 (8th Cir. 1998) (refusing to compel arbitration of suit
to enforce guarantees via clause in separate agreement estab-
lishing underlying business relationship); see also Frank v.
Am. Gen. Fin., Inc., 23 F. Supp. 2d 1346, 1349 (S.D. Ala.
1998). Recognizing that this is a close call, the Court finds,
consistent with its previous rulings and the analysis set forth
above, that even the broadest arbitration clauses at issue do
not contemplate claims not brought pursuant to the particular
contract containing such clauses. A common sense inter-
pretation of these provisions limits their application to the
particular services specifically addressed by the heart of
the contract, since the agreements as a whole relate to and
concern the rights and liabilities of the parties within the
context of that particular contractual relationship. Moreover,
many of these contracts contain other clauses that appear to
further restrict the scope of arbitrable disputes. Accordingly,
the Court finds that the scope of the arbitration clauses at
issue is limited to claims made pursuant to the particular
contract containing such clauses. Finally, while Defendants
continue to argue that arbitrators must decide these issues in
the first instance, such scope determinations implicate sub-
stantive arbitrability and are therefore for the Court to decide.
B. Application to Individual Defendants
. The Court declines at this time to painstakingly apply its
previous rulings in the First and Second Arbitration Orders
(as modified by PacifiCare) as well as its new rulings in this
Order to the numerous parties, claims and contracts remain-
ing in this case. In response to the Court’s previous rulings
and the Supreme Court’s PacifiCare decision, Providers vol-
MELE STELIOS AGE BAF SHOE LI ape Se
t
4
e
5
23a
untarily dismissed certain claims subject to arbitration. See
Notice of Dismissal of Arbitrable Claims (D.E. No. 1637),
filed on October 10, 2002; Supplemental Notice of Dismissal
of Arbitrable Claims (D.E. No. 1720), filed on November 15,
2002; Notice of Dismissal of Arbitrable Direct RICO Claims
Against PacifiCare and United (D.E. No. 1945), filed on
April 18, 2003; Second Supplemental Notice of Dismissal of
Arbitrable Claims (D.E. No. 2281), filed on August 26, 2003.
At oral argument the parties also confirmed that “all direct
claims that have been raised by a physician as to services
performed pursuant to a contract with a Defendant containing
an [enforceable] arbitration clause . . . includ[ing] any con-
spiracy or aiding and abetting claims as to that Defendant
with respect to services performed under that contract . . . are
dismissed.” The Court anticipates further dismissals based
upon this Order.
Accordingly, the Court reserves decision on the application
of all relevant rulings to the particular parties, claims and
contracts remaining in this case until further consultation and
briefing by the parties. The Court also attaches and incorpo-
rates by reference four “arbitration charts” filed by the parties
in an attempt to organize the remaining parties, claims and
contracts containing arbitration provisions. See Providers’
Main Track Arbitration Status Report (D.E. No. 2278), filed
on August 26, 2003 (“Appendix 1”); Defendants’ Arbitration
Chart Responsive to Court’s 8/21/03 Order (D.E. No. 2279),
filed on August 26, 2003 (“Appendix 2”); Defendant Health
Net, Inc.’s Notice of Supplemental Fling to Defendants’
Arbitration Chart Responsive to Court’s 8/21/03 Order (D.E.
No. 2280), filed on August 26, 2003 (“Appendix 3”);
Providers’ Notice of Filing Corrected Main Track Arbitration
Chart (D.E. No. 2323), filed on September 8, 2003 (“Appen-
dix 4”). Thus, the parties are hereby directed to file supple-
mental briefing applying the relevant arbitration rulings to the
remaining parties, claims and contracts outlined in the at-
24a
tached arbitration charts, including any argument as to the
enforceability of pertinent contracts. Defendants shall file
initial briefing by no later than September 29, 2003. Pro-
viders shall file responsive briefing by no later than October
15, 2003. Defendants may reply by no later than October 24,
2003.
C. Motions to Stay
“If any suit or proceeding be brought in any of the courts of
the United States upon any issue referable to arbitration under
an agreement in writing for such arbitration, the court in
which such suit is pending, upon being satisfied that the issue
involved in such suit or proceedings is referable to arbitration
under such an agreement, shall on application of one of the
parties stay the trial of the action until such arbitration has
been had in accordance with the terms of the agreement, pro-
viding the applicant for the stay is not in default in pro-
ceeding with such arbitration.” 9 U.S.C. § 3. Thus, all arbi-
trable claims are stayed pending adjudication in arbitration or
dismissal by Providers. Kotam Elecs., Inc. v. JBL Consumer
Prods., Inc., 93 F.3d 724, 728 (11th Cir. 1996), cert. denied,
519 U.S. 1110 (1997).
On the other hand, all claims not subject to arbitration re-
main active before this Court. The Court has repeatedly
refused to stay claims, as opposed to issues, not subject to
arbitration. Simply put, the parties have not provided any new
facts or argument that counsel against continued consistency
with the Court’s previous orders. Moreover, neither the
Eleventh Circuit nor the Supreme Court has addressed the
Court’s refusal to stay nonarbitrable claims. Besides, Provid-
ers are not pursuing arbitrable claims, so no duplication
of effort or preclusive effect is foreseeable, and the Court
previously ruled that Defendants may not pursue dismissed
claims under the guise of declaratory relief or otherwise. See
Order Granting Plaintiffs’ Motion to Enjoin Arbitration
(D.E. No. 1705), filed on November 6, 2002; Order Denying
LOE Ge LRAT
25a
United’s Motion to Strike Plaintiffs’ Notice of Dismissal and
for Involuntary Dismissal with Prejudice of Arbitrable Claims
(D.E. No, 1748), filed on November 25, 2002.
IV. CONCLUSION
THIS MATTER came before the Court upon Defendant
PacifiCare Health Systems, Inc. and PacifiCare Operations,
Inc.’s Notice of Renewal of Motions (D.E. No. 693), filed on
December _1, 2000, Defendant PacifiCare Health Systems,
Inc.’s Motion to Compel Arbitration as to Newly Added
Plaintiffs (D.E. No. 1130), filed on April 26, 2001, Defen-
dant The Prudential Insurance Company of America’s Motion
to Compel Plaintiffs to Arbitrate their Claims (D.E. No.
1137), filed on April 27, 2001, Defendant WellPoint Health
Networks, Inc.’s Motion to Compel Arbitration (D.E. No.
1158), filed on April 30, 2001, Defendant Health Net, Inc.’s
Motion to Compel Arbitration (D.E. No. 1165), filed on
April 30, 2001, Defendant Humana Inc. and Humana Health
Plan Inc.’s Motion to Compel Arbitration (D.E. No. 1171),
filed on April 30, 2001, Defendant United’s Motion to Com-
pel Plaintiffs to Arbitrate their Claims and to Stay Proceed-
ings Pending Arbitration (D.E. No. 1182), filed on May 2,
2001, Defendant PacifiCare Health Systems, Inc.’s Motion to
Compel Arbitration of Plaintiffs’ Conspiracy and Aiding-and-
Abetting Claims based on their Arbitration Commitments
with Other Defendants (D.E. No. 1193), filed on May 4,
2001, the Order to Show Cause Directed to Dr. Kelly (D.E.
No. 1199), filed on May 4, 2001, Defendant Health Net,
Inc.’s Motion to Reconsider this Court’s Order of April 26,
2001, that Modified its Arbitration Order of December 11,
2000, Concerning Defendant Health Net (D.E. No. 1207),
filed on May_ 10, 2001, Defendant Coventry Health Care,
Inc.’s Motion to Compel Arbitration (D.E. No. 1249), filed on
June 8, 2001, Defendant PacifiCare Health Systems, Inc.’s
Motion to Compel Arbitration as to Plaintiffs Ghalambor and
Hansen (D.E. No. 1296), filed on June 26, 2001, Defendant
ee
26a
Health Net, Inc.’s Motion to Compel Arbitration of the
Claims Asserted by Navid Ghalambor, M.D. as a Participat-
ing Provider (D.E. No. 1557), filed on August 16, 2002,
Defendant Health Net, Inc.’s Motion to Compel Arbitration
of Any Claims Plaintiffs Navid Ghalambor, M.D., Susan
Hansen, M.D., Andres Taleisnik, M.D., Julio Taleisnik, M.D.,
or Roger Wilson, M.D., may be Asserting Regarding Services
Performed as Nonparticipating Providers (D.E. No. 1558),
filed on August 16, 2002, Defendant PacifiCare Health Sys-
tems, Inc.’s Supplemental Motion to Compel Arbitra
tion as to Plaintiffs Boxstein, Breen, Ghalambor, Klay, A.
Taleisnik, J. Taleisnik and Wilson (D.E. No. 1564), filed on
August 16, 2002, Defendant PacifiCare Health Systems,
Inc.’s Joinder in Motion to Compel Arbitration of Co-Defen-
dants (D.E. No. 1565), filed on August 16, 2002, Defendants
UnitedHealthcare Inc. and UnitedHealth Group Incorpo-
rated’s Motion to Strike Portions of Plaintiffs’ Consolidated
Amended Class Action Complaint Relating to Plaintiff Navid
Ghalambor or, in the Alternative, Motion to Compel Arbitra-
tion as to Plaintiff Navid Ghalambor (D.E. No. 1570), filed
on August 16, 2002, Defendants United Healthcare, Inc.,
UnitedHealth Group Incorporated f/k/a United HealthCare
Corporation, United HealthCare Insurance Company, United
HealthCare of Georgia, Inc., UnitedHealthcare of New Jersey,
Inc., UnitedHealthcare of New York, Inc. And United
HealthCare of Tennessee, Inc.’s Joinder in Motion to Compel
Arbitration of Co-Defendants (D.E. No. 1571), filed on
August 16, 2002, Defendant Coventry Health Care, Inc.’s
Second Metion to Compel Arbitration (D.E. No. 1649), filed
on October 17, 2002, Defendant Health Net, Inc.’s Notice of
Renewal of its Motions to Compel Arbitration (D.E. No.
1651), filed on October 18, 2002, Defendants UnitedHealth-
care, Inc. and UnitedHealth Group Incorporated f/k/a United
HcalthCare Corporation’s Supplemental Motion to Dismiss
and Notice of Renewal of its Motions to Compel Arbitration
and to Stay Proceedings Pending Arbitration (D.E. No. 1657),
27a
filed on October 18, 2002, Defendant WellPoint Health Net-
works, Inc.’s Motion to Compel Arbitration (D.E. No. 1659),
Sal filed on October 18, 2002, Defendant Anthem, Inc.’s Motion
to Compel Arbitration (D.E. No. 1666), filed on October 18
2002, Defendants Humana, Inc. and Humana Health Plan,
Inc.*s Renewed Motion to Compel Arbitration (D.E. No.
1668), filed on October 18, 2002, Defendant PacifiCare
Health Sysiems, Inc.’s Contingent Motion to Compel Arbitra-
tion (D.E. No. 1717), filed on November 15, 2002, Defen-
dants United Healthcare, Inc. and UnitedHealth Group Incor-
porated f/k/a United HealthCare Corporation’s Joinder in
Defendant PacifiCare Health Systems, Inc.’s Contingent
Motion to Compel Arbitration (D.E. No. 1808), filed on
December _ 18, 2002, Defendants UnitedHealth Group Incor-
porated, UnitedHealthcare, Inc., and PacifiCare Health Sys-
tems, Inc.’s Renewal of their Motions to Compel Arbitration
and to Stay Proceedings (D.E. No. 1943), filed on April 17,
2003, Defendants PacifiCare Health Systems, Inc., The
Prudential Insurance Company of America, UnitedHealthcare,
Inc., UnitedHealth Group Incorporated, Humana, Inc.,
Humana Health Plan, Inc., Health Net, Inc., Coventry Health
Care, Inc., Anthem, Inc. and WellPoint Health Networks,
Inc.’s Alternative Supplemental Motion to Dismiss Any
Conspiracy or Aiding-and-Abetting Theories Related to the
Direct RICO Claims that Plaintiffs have Renounced—or may
be Expected to Renounce (D.E. No. 1948), filed on April 21,
2003, the Notice of Joinder of Defendants Anthem, Inc.,
Coventry Health Care, Inc., Health Net, Inc., Humana, Inc.,
Humana Health Plan, Inc., Prudential Insurance Company of
America and WellPoint Health Networks, Inc. to UnitedHealth
Group Incorporated, UnitedHealthcare, Inc. and PacifiCare
Health Systems, Inc.’s Renewal of their Motions to Compel
Arbitration (D.E. No. 1956), filed on April 25, 2003, and
Defendants Humana, Inc. and Humana Health Plan, Inc.’s
28a
Corrected Renewed Motion to Compel Arbitration (D.E. No.
2247), filed on August 13, 2003.’
THE COURT has considered the motions, the notices, the
Order, the responses and the pertinent portions of the record,
and being otherwise fully advised in the premises and in open
court, it is
ADJUDGED that the motions to compel arbitration and
motions to stay are GRANTED in part and DENIED in part
consistent with the above opinion.
DONE AND ORDERED in Chambers at Miami, Florida,
this 15th day of September, 2003.
s/ Federico A. Moreno
FEDERICO A. MORENO
UNITED STATES DISTRICT JUDGE
COPIES PROVIDED TO COUNSEL ON
THE JULY 31, 2003 SERVICE LIST
[Omitted is the 139-page appendix of claims charts submitted
by the parties in response to the district court’s order of
August 21, 2003.]
’ The Court noticed oral argument on all pending motions to compel
arbitration for August 14, 2003. See Order Setting Hearing and Requiring
Notice of Pending Motions to Compel Arbitration (D.E. No. 2122), tiled
on July 15, 2003. The Court advised the parties that any Main Track
motions to compel arbitration not brought to the attention of the Court by
July 24, 2003, would be denied without prejudice as abandoned. In
accordance with that Order, all Main Track motions to compel arbitration
not listed above are DENIED without prejudice as abandoned.
29a
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
[Filed November 5, 2004]
No. 03-14828
D. C. Docket No. 00-01334-MD-FAM
LEONARD J. KLAY, M.D., ALL PLAINTIFFS, PRICE
PLAINTIFFS, PRICE, SESSA, KATZ & YINGLING,
SANDRA JOHNSON, PATRICIA FREYRE, et al.,
Plaintiffs-Appellees,
REGINA JOI PRICE, et al.,
Plaintiffs,
versus
ALL DEFENDANTS, et al..
Defendants,
PACIFICARE HEALTH SYSTEMS, INC.,
HUMANA, INC., COVENTRY HEALTH CARE, INC..
ANTHEM HEALTH PLANS, INC., PRUDENTIAL
INSURANCE COMPANY OF AMERICA, UNITED
HEALTHCARE, UNITED HEALTH GROUP, HUMANA
HEALTH PLAN, INC., WELLPOINT HEALTH
NETWORKS, INC.,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of Florida
(November 5, 2004)
30a
Before ANDERSON and BIRCH, Circuit Judges, and
LAND’, District Judge. BIRCH, Circuit Judge:
This appeal requires us to determine the propriety of a
district court order in light of prior appeals and the scope to
be afforded to broad arbitration clauses. Based on our
previous rulings and existing precedent, the district court
refused to compel arbitration of various claims asserted by
plaintiffs-appellees and declined to stay litigation of nonar-
bitrable claims. Because we previously affirmed the district
court’s refusal to compel arbitration of RICO conspiracy and
aiding and abetting claims in a decision not disturbed by the
United States Supreme Court, the law of the case doctrine
compels us to affirm the district court’s order regarding these
claims. With respect to the scope to be given to broad
arbitration clauses, a matter not decided previously, we also
affirm the district court’s ruling that broad arbitration clauses
cannot be extended to compel parties to arbitrate disputes
they have not agreed to arbitrate.
I. BACKGROUND
Plaintiffs-appellees, a group of physicians acting on be-
half of themselves and others similarly situated (“physi-
cians”), sued defendants-appellants, a collection of health
maintenance organizations (“HMOs”), on various grounds—
including violations of the Racketeer Influenced and Corrupt
Organizations Act (RICO), breaches of various state prompt
pay statutes, and claims for quantum meruit, breach of
contract, and unjust enrichment. At bottom, the physicians
alleged that the HMOs, individually and collectively by
conspiring and aiding and abetting each other, failed to
properly reimburse physicians for services rendered. Because
the facts of this case have been detailed in prior opinions, see
* Honorable Clay D. Land, United States District Judge for the Middle
District of Georgia, sitting by designation. ,
Sma ag a BS RE NORA Gime YSN ARCANE SNR RE ON OEE
“BAGLESS HTD RG IR SOLA tee
3la
PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 402-03,
123 S. Ct. 1531, 1533-34 (2003); In Re Humana Inc. Man
aged Care Litig., 285 F.3d 971, 973 (11th Cir. 2002); In
Re Managed Care Litig., 132 F. Supp. 2d 989, 992 (S.D.
Fla. 2000), we recount here only those facts relevant to
this appeal.
The physicians’ complaint alleged ten claims against
HMOs: (1) conspiracy to commit RICO violations under 18
U.S.C. § 1962(d); (2) aiding and abetting RICO violations
under 18 U.S.C. § 2;! (3) direct RICO violations under 18
U.S.C. §§ 1962 (a) and (c); (4) RICO declaratory and
injunctive relief under 18 U.S.C. § 1964(a); (5) breach of
contract; (6) unjust enrichment; (7) violations of various state
prompt pay statutes; (8) violations of the California Business
and Professional Code; (9) violations of the Connecticut
Unfair Trade Act; and (10) violations of the New Jersey
Consumer Fraud Act. In response, HMOs moved to compel
arbitration of these claims pursuant to arbitration agreements
that had been signed between some of the physicians and
some of the HMOs. See In Re Humana Inc. Managed Care
Litig., 285 F.3d at 973 & n.1 (“[SJome of the doctors had
contracts with some of the HMOs; some of those contracts
had arbitration clauses.”). In deciding which of physicians’
claims must be arbitrated, the district court made four rulings:
First, the court held that claims between plaintiffs and
defendants who are both signatories to contracts
containing enforceable arbitration clauses must be
arbitrated. Second, relying primarily on our opinion
in Paladino v. Avnet Computer Technologies, Inc.,
134 F.3d 1054 (11th Cir. 1998), the court found that
those arbitration clauses that exclude punitive dam-
' The claims of conspiracy to violate RICO and aiding and abetting
RICO violations shall be collectively referred to as “indirect RICO
claims.”
32a
ages are unenforceable in this suit because they
preclude recovery of treble damages under RICO;
therefore, an HMO may not compel arbitration of a
RICO suit under such an arbitration clause. Third, the
court determined that an HMO may not invoke its
arbitration clause to compel arbitration of an aiding-
and-abetting charge regarding a doctor’s contractual
rights with a different HMO. Fourth, the court held
that exceptions to the general rule that a non-party to a
contract may not invoke the contract—exceptions we
described in MS Dealer [Serv.] Corp. v. Franklin, 177
F.3d 942 (11th Cir. 1999)—do not apply in the
present case; thus, an HMO that is not a signatory to a
particular contract may not invoke that contract’s
arbitration clause to compel arbitration.
In Re Humana Inc. Managed Care Litig., 285 F.3d at 973
(footnotes omitted). On appeal, we “‘affirm[ed] in its entirety
the district court’s order for the reasons set forth in its
comprehensive opinion found at 132 F. Supp. 2d 989 (S.D.
Fla. 2000).” Id. at 973-74.
HMOs then appealed to the United States Supreme Court
with respect to the district court’s second finding, i.e. that
HMOs could not compel arbitration of RICO claims if the
arbitration clauses excluded punitive damages awards
because such clauses were unenforceable.” The Supreme
Court reversed our decision and held that whether punitive
damages limitations in the arbitration clauses precluded an
award of treble damages, and whether such a finding would
render the arbitration agreements unenforceable, should be
decided by an arbitratoi in the first instance. PacifiCare
Health Sys., Inc., 538 U.S. at 407. As a result, we remanded
> At oral argument, HMOs admitted that they only sought certiorari
with respect to this issue and did not also appeal the district court’s other
rulings, some of which they challenge in this appeal.
33a
this case to the district court “for further proceedings in
accordance with the Supreme Court’s decision.” In_ Re
Humana Inc. Managed Care Litig., 333 F.3d 1247, 1248 (1 ith
Cir. 2003).
While the issue of the arbitrability of RICO claims in light
of contractual punitive damages limitations was on appeal,
the physicians amended their complaint to add two new
defendants, twelve new physician-plaintiffs, and six new
medical association plaintiffs. They also amended their
complaint to clarify the general allegations of conspiracy
found in their prior amended complaint.’ Following our
remand, HMOs again moved to compel arbitration based on
the Supreme Court’s PacifiCare opinion. The district court
ruled that: (1) direct RICO claims must be arbitrated pursuant
to PacifiCare regardless of damages limitations in the
arbitration agreements; (2) indirect RICO claims remain
nonarbitrable pursuant to prior decisions which had not been
disturbed by PacifiCare; (3) nonparticipating provider claims
* The parties disagree about whether the physicians’ amended com-
plaint really averred anything new. HMOs admitted that the “amended
complaint clarified plaintiffs’ theory of RICO conspiracy and aiding-and-
abetting liability.” Appellants’ Br. at 10-11 (emphasis added). HMOs
argue, however, that the general allegations of conspiracy found in
physicians’ first amended complaint did not subsume the : ore specific
allegations of conspiracy found in the second amended complaint, i.e. that
because all HMOs were concertedly failing to reimburse physicians
properly, they conspired to effectively deny physicians the option to
decline rendering services for a particular HMO in favor of contracting
with a competing HMO. See Appellants’ Reply Br. at 21-22. The
physicians disagree and point to similar language found in both amended
complaints with respect to HMOs’ conspiracy. See Appellee’s Br. at 19-
20. The distric court agreed with the physicians. See In Re Managed
Care Litig., +. Supp. 2d __, __ (S.D. Fla. Sept. 15, 2003) (“[T]he ‘new’
allegations differ more in degree than in kind.”); see also Klay v. Humana,
Inc., 382 F.3d 1241, 1241 n.l (11th Cir. 2004) (“[T]he substance of the
allegations is the same across all three of the plaintiffs’ complaints.”’).
34a
(“non-par claims”)* are nonarbitrable if raised by physicians
in the absence of either (i) a contract between the physician
and the HMO regarding the services from which the claim
arose or (ii) an assignment to a physician of the claim by a
subscriber who had a contract with the HMO; (4) claims
asserted by medical associations are arbitrable only to the
extent that the claims of their members, on whose behalf the
medical associations are raising the claims, are arbitrable; (5)
the range of arbitrable claims is limited to those claims which
arose during the effective dates of the arbitration contracts;
and (6) litigation of nonarbitrable claims pending before the
district court would not be stayed pending arbitration of
claims deemed arbitrable. See In Re Managed Care Litig., __
F. Supp. 2d _, __ (S.D. Fla. Sept. 15, 2003). On appeal,
HMOs argue that the district court erred by not directing
arbitration of all indirect RICO claims, non-par claims,
medical association claims, and claims outside of the
effective dates of relevant contracts containing arbitration
clauses and by not granting a stay of litigation pending the
resolution of arbitrable claims.
* These claims arise when a patient receives care from a physician who
is outside of an HMO’s network of preferred physicians. This means the
physician does not have a contract with the HMO to provide services for
that particular patient. When a patient receives care from an out-of-
network physician, the physician can attempt to receive payment directly
from the HMO as a courtesy to the patient or the physician can receive a
direct assignment of the patient’s contractual right to reimbursement from
the HMO. Because the treating physician does not participate in the
patient’s plan, such claims for reimbursement are referred to as “‘non-par”
claims. These claims become more complicated in this case because some
doctors have both contractual and non-par claims against some HMOs
depending on the coverage of the patient from whom the claim for
reimbursement arose.
35a
II. DISCUSSION
Because the issue of the arbitrability of indirect RICO
claims was decided in our prior opinion, we will address it
first under law of the case principles. Second, we will
address the district court’s refusal to compel arbitration of
certain non-par claims, medical association claims, and
claims outside the effective dates of contracts. Third, we will
review the district court’s denial of a motion to stay of
litigation of nonarbitrable claims.
A. Indirect RICO Claims and Law of the Case
The law of the case doctrine ‘““posits that when a court
decides upon a rule of law, that decision should continue to
govern the same issues in subsequent stages in the same case.”
Christianson _v. Colt Indus. Operating Corp., 486 U.S. 800,
816, 108 S. Ct. 2166, 2177 (1988) (citation omitted). This
doctrine is designed to further important goals vital to just and
efficient judicial process, including the provision of an end to
litigation, the discouragement of “panel shopping,” and the
promotion of consistency in rulings between courts. Burger
King Corp. v. Pilgrim’s Pride Corp., 15 F.3d 166, 169 (1 Ith
Cir. 1994). The doctrine does not bar consideration of issues
that could have been raised in a prior appeal but were not;
however, the doctrine does apply not only as to “matters
‘decided explicitly’ but also as to those ‘decided by necessary
implication.” DeLong Equip. Co. v. Washington Mills Electro
Minerals Corp., 990 F.2d 1186, 1196 (11th Cir.) (citations
omitted), modified on other grounds, 997 F.2d 1340 (11th Cir.
1993). The law of the case doctrine should guide a court in its
discretion to hear subsequent appeals on a particular issue. See
Arizona _v. California, 460 U.S. 605, 618, 103 S. Ct. 1382,
1391 (1983). The doctrine, however, does not limit the court’s
power to revisit previously decided issues when (1) new and
substantially different evidence emerges at a subsequent trial;
(2) controlling authority has been rendered that is contrary to
the previous decision; or (3) the earlier ruling was clearly
36a
erroneous and would work a manifest injustice if implemented.
Wheeler v. City of Pleasant Grove, 746 F.2d 1437, 1440 (11th
Cir. 1984) (per curiam).
With these standards in mind, we must determine whether
our prior decision constitutes law of the case as to indirect
RICO claims and whether any of the Wheeler exceptions
apply. First, HMOs argue that the district court and our court
only decided that HMOs could not compel arbitration based
on the contractual rights of third parties. Accordingly, they
contend that we did not reach the issue of whether the indirect
RICO claims actually did relate solely to the contractual
rights of third parties. HMOs maintain that, rather than
relating to third party contractual rights, the indirect RICO
claims touch matters within the parties’ arbitration
agreements and therefore are arbitrable. Second, HMOs
argue alternatively that even if the issue was previously
reached, our prior opinion cannot be controlling law of the
case because the amendment of the complaint, the addition of
new defendants, and the decision in PacifiCare mandate we
review our prior decision.
HMOs’ first argument—that our previous decision did not
reach the issue of the arbitrability of indirect RICO claims—
is without merit. A review of our decision reveals that we
affirmed two findings of the district court that bear on indirect
RICO claims: (1) “that an HMO may not invoke its
arbitration clause to compel arbitration of an aiding-and-
abetting charge regarding a doctor’s contractual rights with a
different HMO .. . [and (2) that] an HMO that is not a
Signatory to a particular contract may not invoke that
contract’s arbitration clause to compel arbitration.” In Re
Humana Inc. Managed Care Litig., 285 F.3d at 973. After
making this determination, we affirmed the district court’s
refusal to compel arbitration of indirect RICO claims. Id. at
977. Necessarily implicit in that ruling was a finding that
indirect RICO claims did relate solely to third party
37a
contractual rights. Moreover, we directly applied our
decisions to the parties in several examples which also
implied this finding. See id. at 973 nn. 4-5. Realizing that a
prior decision is law of the case as to matters decided
explicitly and by necessary implication, we find that our prior
affirmation of the district court constitutes law of the case
here and forecloses HMOs’ argument that indirect RICO
claims must be arbitrated.” See Burger King Corp., 15 F.3d at
| 169 (finding that prior decision allowing recovery of
| attorney’s fees was law of the case by “necessary
implication” which foreclosed subsequent appeal that the case
was not sufficiently “exceptional” to award attorney’s fees
under Lanham Act); Terrell v. Household Goods Carriers’
Bureau, 494 F.2d 16, 19 (Sth Cir. 1974) (finding that law of
case doctrine precluded review of causation issues where
previous panel had affirmed liability which necessarily
implied a finding on causation).
HMOs’ alternative arguments—that an exception to the
law of the case doctrine applies—are equally without merit.
First, despite HMOs’ allegations to the contrary, the district
court found, and we agree, that physicians’ amended
complaint did not add anything new which would call into
question our prior ruling regarding indirect RICO claims. See
supra n.3. A review of the first and second amended
complaints reveals that both contained the same basic
allegations for the conspiracy and aiding and abetting claims;
moreover, HMOs admit that the second amended complaint
> We note that while the law of the case doctrine does not bind
nonparties, our prior decision does constitute precedent which we must
follow in subsequent proceedings. See Morrow v. Dillard, 580 F.2d 1284,
1289 (Sth Cir. 1978) (stating that a court’s prior decision “establishes a
precedent” which the court “will, normally, apply to the same issues in
subsequent proceedings in the same case”). Thus, our prior decision
regarding indirect RICO claims applies to both parties and nonparties to
|
|
the original decision, under law of the case principles as to the former and
under the rules of precedent as to the latter.
38a
“clarified” physicians’ position rather than fundamentally
altering their claims. See id. Further, the addition of new
parties did not substantially change the nature of the indirect
RICO allegations. Accordingly, we reject HMOs’ argument
that the law of the case should be abandoned because new
and substantially different evidence mandates a departure
from the doctrine. See Louisville & Nashville R.R. Co. v.
Higdon, 234 U.S. 592, 598-99, 34 S. Ct. 948, 950 (1914)
(affirming refusal to allow subsequent appeai under the law
of the case doctrine where an amended pleading “was simply
an elaboration of the [pleading] presented” in an earlier
appeal); De Tenorio v. Lightsey, 589 F.2d 911, 917 (Sth Cir.
1979) (refusing to revisit prior findings because “plaintiff has
presented nothing new in her amended complaint”).° Second,
contrary to HMOs’ arguments, PacifiCare did not affect our
previous ruling regarding indirect RICO claims because the
Court only focused on whether remedial limitations in
arbitration clauses prevented arbitration of direct RICO
claims; the scope to be afforded arbitration agreements in the
indirect RICO context was not before the Court. See supra
n.2. Therefore, the exception that the law of the case doctrine
is inapplicable when controlling authority controverts a prior
decision does not apply here. See United States v. M.C.C. of
Florida, Inc., 967 F.2d 1559, 1562 (11th Cir. 1992). Because
none of the three exceptions to the law of the case doctrine
listed in Wheeler apply, our prior decision regarding indirect
RICO claims is controlling in this appeal.
° In a separate brief, adopted by the other HMOs, PacifiCare argues
that the amendments to physicians’ complaint mandate we reconsider our
decision that the MS Dealer exception, which would allow an HMO that
is a nonsignatory to an arbitration agreement with a physician to invoke
that agreement to compel arbitration of a physician’s claim against it, does
not apply in this case. Because we find that the amended complaint does
not allege anything new, that HMOs did not appeal our previous ruling on
the MS Dealer issue, and that the Supreme Court’s PacifiCare opinion did
not affect our ruling, we reject PacifiCare’s argument.
39a
While not an inexorable command, the law of the case
doctrine provides stability and finality in litigation, which are
crucial cornerstone values for developing a just and efficient
judicial process. Litman v. Massachusetts Mut. Life Ins. Co.,
825 F.2d 1506, 1511 (11th Cir. 1987). Here, we previously
decided, if not explicitly then by necessary implication, that
HMOs may not compel arbitration of physicians’ indirect
RICO claims. HMOs’ failure to seek en banc rewiew or
certiorari with respect to these issues caused our previous
ruling to become law of the case. See Silverberg v Paine,
Webber, Jackson & Curtis, Inc., 724 F.2d 1456, 1457 (11th
Cir. 1983) (per curiam). Because HMOs have failed to show
that an exception mandates our departure from the law of the
case doctrine, we cannot reconsider our previous ruling.’
Accordingly, the district court properly held that the law of
the case doctrine precludes reconsideration of ou: previous
determination that HMOs cannot compel physicians to
arbitrate their indirect RICO claims.
B. District Court’s Refusal to Compel Arbitration
We review a district court’s denial of a motion to compel
arbitration de novo. Musnik v. King Motor Co. of Fort
Lauderdale, 325 F.3d 1255, 1257 (11th Cir. 2003). The
determination of the propriety of a motion to compel arbi-
tration pursuant to Section 4 of the Federal Arbitration Act
(FAA)” is a two-step inquiry. The first step is to determine
whether the parties agreed to arbitrate the dispute. Mitsubishi
” Absent an erroneous ruling that would work manifest injustice,
consistency between appellate panels is mandated even if a subsequent
panel would have decided a case differently than the prior panel. See
United States v. Burns, 662 F.2d 1378,1384 (11th Cir. 1981 ).
"U.S.C. § 4 (2004). The Act provides that “[a] party aggrieved by the
alleged failure, neglect, or refusal of another to arbitrate under a written
agreement for arbitration may petition any United States district court . . :
for an order directing that such arbitration proceed in the manner provided
for in such agreement.” Id.
40a
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
626, 105 S. Ct. 3346, 3353 (1985). We must make this
determination “by applying the ‘federal substantive law of
arbitrability, applicable to any arbitration agreement within
the coverage of the [FAA].”” Id. (citation omitted). This
inquiry must be undertaken against the background of a
“liberal federal policy favoring arbitration agreements.”
Moses H. Cone Mem’! Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24, 103 S. Ct. 927, 941 (1983) (“[Q]uestions of
arbitrability must be addressed with a healthy regard for the
federal policy favoring arbitration.”). Under this policy, it is
the role of courts to “rigorously enforce agreements to
arbitrate.”” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
221, 105 S. Ct. 1238, 1242 (1985). Because arbitration is a
matter of contract, however, the FAA’s strong proarbitration
policy only applies to disputes that the parties have agreed to
arbitrate. Mastrobuono v. Shearson Lehman Hutton, Inc.,514
U.S. 52, 57, 115 S. Ct. 1212, 1216 (1995). In the absence of
an agreement to arbitrate, a court cannot compel the parties to
settle their dispute in an arbitral forum. See AT&T Techs.,
Inc. v. Communications Workers of Am., 475 U.S. 643, 648,
106 S. Ct. 1415, 1418 (1986) (citation omitted); see Volt Info.
Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489
U.S. 468, 479, 109 S. Ct. 1248, 1256 (“Arbitration under the
[FAA] is a matter of consent, not coercion....”). The
second step in ruling on a motion to compel arbitration
involves deciding whether “legal constraints external to the
” The FAA applies to any contract “affecting” interstate commerce.
Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-74, 115 S. Ct.
834, 839 (1995); see 9 U.S.C. § 2 (FAA covers any “contract evidencing a
transaction involving commerce”). It is undisputed that the contracts at
issue in this case affect interstate commerce and that the precedent
construing the FAA applies.
4la
parties’ agreement foreclosed arbitration.” Mitsubishi Motors
Corp., 473 U.S. at 628, 105 S. Ct. at 3355!”
1. Non-Par Claims
With these general principles in mind, we turn to the
district court’s ruling that non-par claims are only arbitrable
if: (1) the physician asserting the non-par claim has a contract
containing an arbitration clause with the target HMO that
covers the rendering of services from which the claim arose;
or (2) the physician was assigned a claim for reimbursement
by a patient who has a contract with the target HMO. First,
HMOs argue that the broad arbitration clauses! signed by
physicians are sufficient to cover any non-par claims brought
by physicians, even if the contract they signed does not cover
the rendition of services from which the claim arose. Second,
HMOs argue that all of physicians’ non-par claims, even
those the district court exempted from arbitration as claims
held by the physicians in their own right,'* are derivative of a
patient-subscriber’s contract and therefore arbitrable. We
will address each argument in turn.
° Because the parties dispute only the scope of the arbitration agree-
ments and not their enforceability, we will not discuss this second step of
the analysis.
'' “While the contracts signed between physicians (and patients) and
HMOs vary in their particular terms, they have in common the substance
of broadly worded arbitration clauses. For example, PacifiCare sought to
compel arbitration based on a contract which called for arbitration of “any
controversy, dispute, or claim arising out of the agreement.” See In Re
Managed Care Litig., 132 F. Supp. 2d at 1005. Because we find that even
the broadest arbitration clauses could not compel arbitration of non-par
claims in this instance, we need not parse through the language used in
each HMO’s arbitration agreements.
> The district court held that physicians’ claims which arose under
quasi-contractual theories were not arbitrable because the claims belonged
to the physicians in their own right and not on the basis of an assignment.
42a
First, HMOs’ attempt to expand the scope of various
arbitration agreements to cover the rendition of services
outside of the services contemplated by a particular contract
is ineffectual. Because arbitration can only be compelled
when the subject of the dispute has been agreed to be settled
by arbitration, having one contract which contains a broad
arbitration agreement does not necessarily mean that
arbitration can be compelled when the subject of the dispute
arises from a separate contract which does not have an
arbitration clause. Seaboard Coast Line R.R. Co. v. Trailer
Train Co., 690 F.2d 1343, 1352 (11th Cir. 1982) (refusing to
compel arbitration based on broad arbitration clause found in
a license contract between the parties when the underlying
claim was for breach of a separate lease contract which did
not contain an arbitration clause). While we acknowledge
that any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, see Moses H. Cone
Mem’! Hosp., 460 U.S. at 24-25, 103 S. Ct. at 941, no doubt
has been cast upon whether physicians agreed to arbitrate
non-par claims; it is undisputed that physicians did not sign
contracts containing arbitration clauses for the provision of
the services from which the nJn-par claims have sprung. In
effect, physicians are nonsignatories of arbitration agreements
with respect to these non-par claims and yet HMOs are
attempting to compel arbitration as if they were signatories.
Implicit in our previous decision was a rejection of this
argument. See In Re Humana Inc. Managed Care Litig., 285
F.3d at 973 (finding that “an HMO that is not a signatory to a
particular contract may not invoke that contract's arbitration
clause to compel arbitration”). Moreover, HMOs drafted the
arbitration agreements signed by the physicians with whom
they have contracts and represented to physicians without
contracts that they would be compensated for providing out-
of-network services. If HMOs wanted the benefit of
arbitration for disputes arising from non-par claims, they
could have contracted with physicians for it. See Mastro-
43a
buono, 514 U.S. at 62-63, 115 S. Ct. at 1219 (construing
scope of arbitration agreement against the party that initiated
the contract). Arbitration is at its core a matter of contract,
and here it is clear that physicians did not agree to arbitrate
these non-par claims. See EEOC v. Waffle House Inc., 534
U.S. 279, 24, 122 S. Ct. 754, 764 (2002). Accordingly, the
district court properly refused to compel arbitration of non-
par claims asserted by physicians based on arbitration
agreemenis they had signed regarding the provision of
services unrelated to the non-par claims.
HMOs’ second argument—that the district court should
have compelled arbitration of non-par claims asserted by
physicians under quasi-contract and Statutory causes of action
because these claims stemmed from claims assigned to them
by patient-subscribers who bad signed arbitration agree-
ments—fails on similar grounds. Because physicians assert-
ing non-par claims do not have a contractual relationship with
the HMO, they can only be compelled to arbitrate non-par
claims to the extent that they received the right to reim-
bursement by assignment from patient-subscribers who had
signed arbitration agreements. See DiMercurio v. Sphere
Drake Ins. PLC, 202 F.3d 71, 81(1st Cir. 2000). However, as
with the non-par claims for services rendered outside of the
contractual relationship established between physicians and
HMOs, the non-par claims asserted by physicians under
quasi-contract and statutory theories necessarily stem from
services rendered outside of the contracts established between
patient-subscribers and HMOs. '* Because these claims are
'’ If the services rendered were covered by the contract between
patient-subscriber and the HMO, then the physicians’ claims would be
arbitrable under the district court’s order that “any claims that necessarily
rely upon subscriber contracts with arbitration clauses must be arbitrated.”
In Re Managed Care Litig., _ F. Supp. 2d at__. HMOs. however, have
represented that physicians will be reimbursed for supplying medically
necessary treatments to patient-subscribers even if such treatments are not
covered by contract. Thus, because the physicians’ non-par claims in this
44a
thus held by physicians independent of the patient-subscriber
contracts, HMOs may not argue that the scope of the
arbitration agreements in the patient-subscriber contracts
should be extended to compel arbitration. See American
Bankers Ins. Co. of Fla. v. First State Ins. Co., 891 F.2d 882,
885 (11th Cir. 1990) (per curiam) (finding unjust enrichment
claims existed independently of contractual claims). Thus,
the district court properly found nonarbitrable non-par claims
asserted by physicians under quasi-contract and statutory
causes of action in the absence of an assignment from a
patient-subscriber who had signed an arbitration agreement.
2. Medical Association Claims
HMOs also argue that the district court erred by refusing to
compel arbitration of the indirect RICO and non-par claims
brought by medical association plaintiffs on behalf of some
of their members. Specifically, as they argued regarding
physicians’ attempt to litigate these claims, HMOs argue that
these claims brought by the medical associations are within
the scope of the various arbitration agreements signed by the
associations’ members or their patient-subscribers who have
assigned reimbursement claims to their members. Because
associations suing in a representative capacity are bound by
the same limitations and obligations as their members, see
Arizonans for Official English v. Arizona, 520 U.S. 43, 65-
66, 117 S. Ct. 1055, 1068 (1997), our previous discussion
regarding the scope to be afforded to arbitration agreements
with respect to these claims is controlling. Accordingly, we
reject HMOs’ arguments to the extent that they are
inconsistent with our previous determinations of the scope to
instance are not based on any contract to provide the particular treatments,
quasi-contract and statutory theories are the physicians’ only recourse to
recover for these services. See Flint v. ABB, Inc., 337 F.3d 1326, 1331
n.2 (11th Cir. 2003) (explaining that quasi-contract claims are the only
claims available in the absence of a specific contractual obligation to
perform services) cert. denied, ___ U.S. __, 124 S. Ct. 1507 (2004).
45a
be given to arbitration agreements as they impact indirect
RICO and non-par claims.
3. Claims Outside of the Effective Dates of the Arbi-
tration Agreements
HMOs also argue that the district court erred by refusing to
compel arbitration of disputes which arose outside of the
effective dates of the contracts containing arbitration agree-
ments. Specifically, HMOs argue that our decision in Belke
v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023,
1028 (11th Cir. 1982) compels us to order arbitration even for
claims which arose either before or after the execution of
arbitration agreements.'* We disagree. Our decision in
Armada Coal Exp., Inc. v. Interbulk, Ltd., 726 F.2d 1566,
1567-68 (11th Cir. 1984), in which we refused to compel
arbitration of claims that arose after a contract with a valid
arbitration agreement had been breached, demonstrated that
Belke did not categorically command the arbitration of claims
arising from disputes outside of the effective dates of
arbitration agreements. Moreover, the Supreme Court has
since found in the collective bargaining context that arbi-
tration cannot be mandated for a grievance which arose after
the expiration of an arbitration agreement even when the
parties bargained for a “broad arbitration provision.” Litton
Fin. Printing Div. v. NLRB, 501 U.S. 190, 193-201, 111 S.
Ct. 2215, 2219-2223 (1991); see District No. 1 - Marine
Eng’rs Beneficial Ass’n v. GFC Crane Consultants, Inc., 331
F.3d 1287, 1291 (11th Cir. 2003) (noting that “grievance
'* KIMOs argue alternatively that the question of the temporal scope to
be afforded to arbitration agreements should be a matter decided by an
arbitrator in the first instance. In essence, both parties dispute whether
they in fact agreed to arbitrate disputes which arose either before or after
the effective dates of the arbitration agreements. Because such questions
of arbitrability are “undeniably an issue for judicial determination,” we
reject HMOs’ argument that an arbitrator should decide the temporal
scope issue. AT&T Techs., Inc., 475 U.S. at 649, 106 S. Ct. at 1418.
46a
arbitration obligations end upon expiration of the CBA unless
the parties have agreed otherwise’). Because arbitration is
strictly a matter of contract, we cannot compel arbitration for
disputes which arose during time periods in which no
effective contract requiring arbitration was governing the
parties. See Brandon, Jones, Sandall, Zeide, Kohn, Chalal &
Musso, P.A. v. MedPartners, Inc., 312 F.3d 1349, 1358 (11th
Cir. 2002) (per curiam) (“[W]e will compel no arbitration of
issues that are outside an agreement to arbitrate.”).
Accordingly, the district court properly refused to compel
arbitration of claims arising from disputes which arose
outside of the effective dates of arbitration agreements.
C. District Court’s Refusal to Grant a Stay
We review a district court’s denial of a motion to stay
litigation of nonarbitrable claims under an abuse of discretion
standard. See Moses H. Cone Mem’! Hosp., 460 U.S. at 21
n.23, 103 S. Ct. at 939 n.23; Sam Reisfeld & Son Import Co.
v. S. A. Eteco, 530 F.2d 679, 681 (Sth Cir. 1976). Pursuant to
Section 3 of the FAA, a district court shall stay a pending suit
“upon being satisfied that the issue involved in such suit or
proceeding is referable to arbitration” under a_ valid
arbitration agreement. 9 U.S.C. § 3. For arbitrable issues, the
language of Section 3 indicates that the stay is mandatory.
See Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220,
226, 107 S. Ct. 2332, 2337 (1987) (“[A] court must stay its
proceedings if it is satisfied that an issue before it is
arbitrable. . . . ”) (emphasis added). When confronted with
litigants advancing both arbitrable and nonarbitrable claims,
however, courts have discretion to stay nonarbitrable claims.
See Moses H. Cone Mem’! Hosp., 460 U.S. at 21 n.23, 103 S.
Ct. at 939 n.23; AgGrow Oils, L.L.C., v. Nat’] Union Fire Ins.
Co. of Pittsburgh, 242 F.3d 777, 782-83 (8th Cir. 2001); Sam
Reisfeld & Son Import Co., 530 F.2d at 681. In this instance,
courts generally refuse to stay proceedings of nonarbitrable
claims ‘vhen it is feasible to proceed with the litigation. See
- 47a
Dean Witter Reynolds Inc., 470 U.S. at 225, 105 S. Ct. at
1245 (White, J., concurring) (noting that the “heavy
presumption should be that the arbitration and the lawsuit will
each proceed in its normal course”). Crucial to this
determination is whether arbitrable claims predominate or
whether the outcome of the nonarbitrable claims will depend
upon the arbitrator’s decision. See Genesco, Inc. v. T.
Kakiuchi & Co., Ltd., 815 F.2d 840, 856 (2d Cir. 1987).
Here, the district court found that it would be feasible to
compel arbitration of arbitrable claims while allowing
litigation of nonarbitrable claims. The district court stated
that its refusal to grant the stay would not result in duplicative
proceedings and would not permit a decision in either
proceeding to have preclusive effect in the other. Moreover,
the district court did not find that physicians were pre-
dominately advancing arbitrable claims. In fact, at oral
argument, it was disputed whether any arbitrable claims
remained before the district court which physicians had not
dismissed.'” Because it is well established that a district court
may order arbitration and refuse to stay nonarbitrable
proceedings, the district court was properly within its
discretion to refuse HMOs’ motion to Stay litigation of
nonarbitrable claims. See Dean Witter Reynolds Inc., 470
U.S. at 221, 105 S. Ct. at 1243 (stating that proper
enforcement of FAA might yield “piecemeal” litigation);
Moses H. Cone Mem’! Hosp., 460 U.S. at 20, 105 S. Ct. at
939 (finding that district court may order the parties to
resolve “related disputes in different forums’’).
° To the extent that claims deemed arbitrable have not been dismissed,
we affirm the district court’s order that the litigation of arbitrable claims
must be stayed and that arbitration of these claims must be compelled.
Shearson/Am. Express, Inc., 482 U.S. at 226, 107 S. Ct. at 2337.
48a
Il. CONCLUSION
In this appeal involving both signatories and nonsignatories
of broad arbitration agreements, HMOs argued that the
district court erred by refusing to compel arbitration and stay
litigation based on an expansive interpretation of the
arbitration agreements and the strong federal policy favoring
arbitration. As we have explained, however, the law of the
case doctrine precluded us from revisiting our previous
rulings regarding indirect RICO claims and the federal policy
favoring arbitration could not compel us to order arbitration
of disputes which the parties had not agreed to arbitrate.
Accordingly, the district court’s order is
AFFIRMED.
49a
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCU
[Filed Januc. y 7, 2005]
No. 03-14828-CC
LEONARD J. KLAY, M.D., ALL PLAINTIFFS, PRICE
PLAINTIFFS, PRICE, SESSA, KATZ & YINGLING.
SANDRA JOHNSON, PATRICIA FREYRE, et al..
Plaintiffs-Appellees,
REGINA JOI PRICE, et al.,
Plaintiffs,
versus
ALL DEFENDANTS, et al.,
Defendants,
PACIFICARE HEALTH SYSTEMS, INC..,
HUMANA, INC., COVENTRY HEALTH CARE, INC..
ANTHEM HEALTH PLANS, INC., PRUDENTIAL
INSURANCE COMPANY OF AMERICA, UNITED
HEALTHCARE, UNITED HEALTH GROUP, HUMANA
HEALTH PLAN, INC., WELLPOINT
HEALTH NETWORKS, INC.,
Defendants-Appellants.
On Appeal from the United States District Court for the
Southern District of Florida
ON _PETITION(S) FOR REHEARING AND PETITION(S)
FOR REHEARING EN BANC (Opinion
Lith Cir., 19__, F.2d >.
50a
Before: ANDERSON and BIRCH, Circuit Judges, and
LAND’, Circuit Judge.
PER CURIAM:
The Petition(s) for Rehearing are DENIED and no Judge in
regular active service on the Court having requested that the
Court be polled on rehearing en banc (Rule 35, Federal Rules
of Appellate Procedure), the Petition(s) for Rehearing En
Banc are DENIED.
ENTERED FOR THE COURT:
s/Stanley F. Birch, Jr.
UNITED STATES CIRCUIT JUDGE
ORD-42
(12/01)
* Honorable Clay D. Land, United States District Judge for the Middle
District of Georgia, sitting by designation.
Sla
UNITED STATES CODE
TITLE 18. CRIMES AND CRIMINAL PROCEDURE
PART I—CRIMES
CHAPTER I—GENERAL PROVISIONS
§2. Principals
(a) Whoever commits an offense against the United States
or aids, abets, counsels, commands, induces or procures its
commission, is punishable as a principal.
(b) Whoever willfully causes an act to be done which if
directly performed by him or another would be an offense
against the United States, is punishable as a principal.
52a
UNITED STATES CODE
TITLE 18. CRIMES AND CRIMINAL PROCEDURE
PART I—CRIMES
CHAPTER 96—RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS
§1961. Definitions
As used in this chapter—
(1) “racketeering activity” means (A) any act or threat
involving murder, kidnapping, gambling, arson, robbery,
bribery, extortion, dealing in obscene matter, or dealing in a
controlled substance or listed chemical (as defined in section
102 of the Controlled Substances Act), which is chargeable
under State law and punishable by imprisonment for more
than one year; (B) any act which is indictable under any of
the following provisions of title 18, United States Code:
Section 201 (relating to bribery), section 224 (relating to
sports bribery), sections 471, 472, and 473 (relating to
counterfeiting), section 659 (relating to theft from interstate
shipment) if the act indictable under section 659 is felonious,
section 664 (relating to embezzlement from pension and
welfare funds), sections 891-894 (relating to extortionate
credit transactions), section 1028 (relating to fraud and
related activity in connection with identification documents),
section 1029 (relating to fraud and related activity in con-
nection with access devices), section 1084 (relating to the
transmission of gambling information), section !341 (relating
to mail fraud), section 1343 (relating to wire fraud), section
1344 (relating to financial institution fraud), section 1425
(relating to the procurement of citizenship or nationalization
unlawfully), section 1426 (relating to the reproduction of
naturalization or citizenship papers), section 1427 (relating to
the sale of naturalization or citizenship papers), sections
1461-1465 (relating to obscene matter), section 1503 (relating
to obstruction of justice), section 1510 (relating to obstruction
$3a
of criminal investigations), section 151] (relating to the
obstruction of State or local law enforcement), section 1512
(relating to tampering with a witness, victim, or an in-
formant), section 1513 (relating to retaliating against a
witness, victim, or an informant), section 1542 (relating to
false statement in application and use of passport), section
1543 (relating to forgery or false use of passport), section
1544 (relating to misuse of Passport), section 1546 (relating
to fraud and misuse of visas, permits, and other documents),
sections 1581-1591 (relating to peonage, slavery, and
trafficking in persons), section 1951 (relating to interference
with commerce, robbery, or extortion), section 1952 (relating
to racketeering), section 1953 (relating to interstate trans-
portation of wagering paraphernalia), section 1954 (relating
to unlawful welfare fund payments), section 1955 (relating to
the prohibition of illegal gambling businesses), section 1956
(relating to the laundering of monetary instruments), section
1957 (relating to engaging in monetary transactions in
property derived from specified unlawful activity), section
1958 (relating to use of interstate commerce facilities in the
commission of murder-for-hire), sections 2251, 2251A, 2252,
and 2260 (relating to sexual exploitation of children), sections
2312 and 2313 (relating to interstate transportation of stolen
motor vehicles), sections 2314 and 2315 (relating to interstate
transportation of stolen property), section 2318 (relating to
trafficking in counterfeit labels for phonorecords, computer
programs or computer program documentation or packaging
and copies of motion pictures or other audiovisual works),
section 2319 (relating to criminal infringement of a copy-
right), section 2319A (relating to unauthorized fixation of and
trafficking in sound recordings and music videos of live
musical performances), section 2320 (relating to trafficking in
goods or services bearing counterfeit marks), section 232]
(relating to trafficking in certain motor vehicles or motor
vehicle parts), sections 2341-2346 (relating to trafficking in
contraband cigarettes), sections 2421-24 (relating to white
S4a
slave traffic), (C) any act which is indictable under title 29,
United States Code, section 186 (dealing with restrictions on
payments and loans to labor organizations) or section 501(c)
(relating to embezzlement from union funds), (D) any offense
involving fraud connected with a case under title 11 (except a
case under section 157 of this title), fraud in the sale of
securities, or the felonious manufacture, importation, receiv-
ing, concealment, buying, selling, or otherwise dealing in a
-controlled substance or listed chemical (as defined in section
102 of the Controlled Substances Act), punishable under any
law of the United States, (E) any act which is indictable under
the Currency and Foreign Transactions Reporting Act, (F)
any act which is indictable under the Immigration and
Nationality Act, section 274 (relating to bringing in and
harboring certain aliens), section 277 (relating to aiding or
assisting certain aliens to enter the United States), or section
278 (relating to importation of alien for immoral purpose) if
the act indictable under such section of such Act was
committed for the purpose of financial gain, or (G) any
act that is indictable under any provision listed in section
2332b(2)(5)(B);
(2) “State” means any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, any
territory or possession of the United States, any political
subdivision, or any department, agency, or instrumentality
thereof;
(3) “person” includes any individual or entity capable of
holding a legal or beneficial interest in property;
(4) “enterprise” includes any individual, partnership,
corporation, association, or other legal entity, and any union
or group of individuals associated in fact although not a legal
entity;
(5) “pattern of racketeering activity” requires at least two
acts of racketeering activity, one of which occurred after the
5Sa
effective date of this chapter and the last of which occurred
within ten years (excluding any period of imprisonment) after
the commission of a prior act of racketeering activity;
(6) “unlawful debt” means a debt (A) incurred or con-
tracted in gambling activity which was in violation of the law
of the United States, a State or political subdivision thereof,
or which is unenforceable under State or Federal law in whole
or in part as to principal or interest because of the laws
relating to usury, and (B) which was incurred in connection
with the business of gambling in violation of the law of the
United States, a State or political subdivision thereof, or the
business of lending money or a thing of value at a rate
usurious under State or Federal law, where the usurious rate
is at least twice the enforceable rate:
(7) “racketeering investigator” means any attorney or
investigator so designated by the Attorney General and
charged with the duty of enforcing or carrying into effect this
chapter;
(8) “racketeering investigation” means any inquiry con-
ducted by any racketeering investigator for the purpose of
ascertaining whether any person has been involved in any
violation of this chapter or of any final order, judgment, or
decree of any court of the United States, duly entered in any
case or proceeding arising under this chapter;
(9) “documentary material” includes any book, paper,
document, record, recording, or other material: and
(10) “Attorney General” includes the Aitorney General of
the United States, the Deputy Attorney General of the United
States, the Associate Attorney General of the United States,
any Assistant Attorney General of the United States, or any
employee of the Department of Justice or any employee of
any department or agency of the United States so designated
by the Attorney General to carry out the powers conferred on
the Attorney General by this chapter. Any department or
56a
agency so designated may use in investigations authorized by
this chapter either the investigative provisions of this chapter
or the investigative power of such cepartment or agency
otherwise conferred by law..
S7a
UNITED STATES CODE
TITLE 18. CRIMES AND CRIMINAL PROCEDURE
PART I—CRIMES
CHAPTER 96—RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS
§1962. Prohibited activities
(a) It shall be unlawful for any person who has received
any income derived, directly or indirectly, from a pattern of
racketeering activity or through collection of an unlawful debt
in which such person has participated as a principal within the
meaning of section 2, title 18, United States Code, to use or
invest, directly or indirectly, any part of such income, or the
proceeds of such income, in acquisition of any interest in, or
the establishment or operation of, any enterprise which is
engaged in, or the activities of which affect, interstate or
foreign commerce. A purchase of securities on the open mar-
ket for purposes of investment, and without the intention of
controlling or participating in the control of the issuer, or of
assisting another to do so, shall not be unlawful under this
subsection if the securities of the issuer held by the purchaser,
the members of his immediate family, and his or their accom-
plices in any pattern or racketeering activity or the collection
of an unlawful debt after such purchase do not amount in the
aggregate to one percent of the outstanding securities of any
one class, and do not confer, either in law or in fact, the
power to elect one or more directors of the issuer.
(b) It shall be unlawful for any person through a pattern
of racketeering activity or through collection of an unlawful
debt to acquire or maintain, directly or indirectly, any interest
in or control of any enterprise which is engaged in, or the
activities of which affect, interstate or foreign commerce.
(c) It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the activities of
which affect, interstate or foreign commerce, to conduct or
58a
participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity
or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to
violate any of the provisions of subsection (a), (b), or (c) of
this section.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.