Klay v. All Defendants

• Decision Date: 05 November 2004
• Docket Number: No. 03-14828.,03-14828.
• Citation: 389 F.3d 1191
• Parties: 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, v. 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.
• Court: U.S. Court of Appeals — Eleventh Circuit

389 F.3d 1191

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, v. 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.

No. 03-14828.

United States Court of Appeals, Eleventh Circuit.

November 5, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Robert D.W. Landon, III, Kenny Nachwalter, Edward Soto, Christopher R.J. Pace, Weil, Gotshal & Manges, LLP, Jeffrey B. Crockett, Jorden Burt, LLP, Miami, FL, Brian P. Brooks, O'Melveny & Myers, Audrey Anderson, Hogan & Hartson, L.L.P., John D. Aldock, Mark S. Raffman, Goodwin Procter, LLP, Washington, DC, Edward M. Crane, Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, Gregory S. Coleman, Lisa Royce Eskow, Weil, Gotshal & Manges, Austin, TX, James Quinn, Nicholas J. Pappas, Jeffrey S. Klein, Weil, Gotshal & Manges, New York City, Stan Blumenfeld, O'Melveny & Myers, LLP, Los Angeles, CA, William E. Grauer, Cooley Godward LLP, San Diego, CA, for Appellants.

Othni J. Lathram, Joe R. Whatley, Jr., Charlene P. Ford, Whatley Drake, L.L.C., Birmingham, AL, James B. Tilghman, Jr., Stewart, Tilghman, Fox & Bianchi, P.A., Miami, FL, for Plaintiffs-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

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 nonarbitrable 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 behalf of themselves and others similarly situated ("physicians"), 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 PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 402-03, 123 S.Ct. 1531, 1533-34, 155 L.Ed.2d 578 (2003); In Re Humana Inc. Managed 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;¹ (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 ("[S]ome 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 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 [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.² 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 arbitrator in the first instance. PacifiCare Health Sys., Inc., 538 U.S. at 407, 123 S.Ct. 1531. As a result, we remanded 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 (11th 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.³ 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 ("non-par claims")⁴ 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 ___, ___, 2003 WL 22410373 (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.

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, 100 L.Ed.2d 811 (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 c...