In re Humana Inc. Managed Care Litigation, 01-10247.

• Decision Date: 14 March 2002
• Docket Number: No. 01-10247.,No. 01-12596.,01-10247.,01-12596.
• Citation: 285 F.3d 971
• Parties: In re: HUMANA INC. MANAGED CARE LITIGATION. Price, Plaintiffs, Price, Sessa, Katz & Yingling, Sandra Johnson, Patricia Freyre, Regina Joi Price, Anthony Sessa, Arnold Katz, et al., Plaintiffs-Appellees, v. Humana Insurance Company, Coventry Health Care of Georgia, Inc., f.k.a. Principal Health Care of Georgia, Inc., Principal Health Care, Inc., et al., Defendants, Pacificare Health Systems, Inc., Pacificare Operations, Inc., United Health Care, United Health Group, Foundation Health Systems, Inc., Wellpoint Health Networks, Inc., Prudential Insurance Company of America, Defendants-Appellants. Leonard J. Klay, M.D., Price Plaintiffs, Price, Sessa, Katz & Yingling, Sandra Johnson, Patricia Freyre, Regina Joi Price, Anthony Sessa, Arnold Katz, et al., Plaintiffs-Appellees, v. Humana, Inc., et al., Defendants, Pacificare Health Systems, Inc., Pacificare Operations, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

285 F.3d 971

In re: HUMANA INC. MANAGED CARE LITIGATION.

Price, Plaintiffs, Price, Sessa, Katz & Yingling, Sandra Johnson, Patricia Freyre, Regina Joi Price, Anthony Sessa, Arnold Katz, et al., Plaintiffs-Appellees, v. Humana Insurance Company, Coventry Health Care of Georgia, Inc., f.k.a. Principal Health Care of Georgia, Inc., Principal Health Care, Inc., et al., Defendants, Pacificare Health Systems, Inc., Pacificare Operations, Inc., United Health Care, United Health Group, Foundation Health Systems, Inc., Wellpoint Health Networks, Inc., Prudential Insurance Company of America, Defendants-Appellants.

Leonard J. Klay, M.D., Price Plaintiffs, Price, Sessa, Katz & Yingling, Sandra Johnson, Patricia Freyre, Regina Joi Price, Anthony Sessa, Arnold Katz, et al., Plaintiffs-Appellees, v. Humana, Inc., et al., Defendants, Pacificare Health Systems, Inc., Pacificare Operations, Inc., Defendants-Appellants.

No. 01-10247.

No. 01-12596.

United States Court of Appeals, Eleventh Circuit.

March 14, 2002.

Christopher R.J. Pace, William E. Grauer, San Diego, CA, Kenneth P. Gavsie, Jeffrey S. Klein, James Quinn, Weil, Gotshal & Manges LLP, New York City, Walter E. Dellinger, O'Melveny & Myers, John D. Aldock, Washington, DC, Franklin G. Burt, Jorden, Burt, Berenson & Johnson, LLP, Michael Nachwalter, Robert D.W. Landon, III, Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, PA, Edward Soto, Jennifer J. Ator, Weil, Gotshal & Manges LLP, Eduardo Palmer, Steel Hector & Davis, LLP, Miami, FL, Stan Blumenfeld, O'Melveny & Myers, LLP, Los Angeles, CA, Mark R. Filip, Edward M. Crane, Skaden, Arps, Slate, Meagher & Flom, Chicago, IL, for Defendants-Appellants.

Harley S. Tropin, Kozyak, Tropin, Throckmorton & Humphreys, P.A., James B. Tilghman, Jr., Stewart, Tilghman, Fox & Bianchi, P.A., Miami, FL, Dennis George Pantazis, Brian M. Clark, Gordon, Silberman, Wiggins & Childs, P.C., Joe R. Whatley, Jr., Whatley Drake, L.L.C., Charlene P. Ford, Birmingham, AL, for Plaintiffs-Appellees.

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

Before BARKETT, FAY and WINTER,^* Circuit Judges.

BARKETT, Circuit Judge:

The Defendants appeal the district court's order granting in part and denying in part their motion to compel arbitration. 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 contracts with some of the HMOs; some of those contracts had arbitration clauses; and some of those arbitration clauses placed limitations on the sort of damages an arbitrator may award.¹ The task facing the district court was, in short, to determine which of the various legal claims must be resolved through arbitration.

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.² 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.³ 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.⁴ 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 particular contract may not invoke that contract's arbitration clause to compel arbitration.⁵

We affirm 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). We agree that under the circumstances here MS Dealer does not compel application of equitable estoppel. In MS Dealer, the plaintiff, Franklin, bought a car pursuant to a "Buyers Contract" with Jim Burke Motors. The Buyers Contract incorporated by reference a retail installment contract, in which Franklin was charged $ 990.00 for a service contract through MS Dealer. Franklin subsequently sued both Jim Burke and MS Dealer for conspiracy and fraud. MS Dealer, a nonsignatory to the Buyers Contract, attempted to invoke that contract's arbitration clause to compel arbitration. Noting that "there are certain limited exceptions, such as equitable estoppel, that allow[] non signatories to a contract to compel arbitration," this Court found that MS Dealer could compel arbitration. Id. at 947. In discussing those exceptions, MS Dealer relied primarily on Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir.1993) and Boyd v. Homes of Legend, Inc., 981 F.Supp. 1423 (M.D.Ala.1997).

In Sunkist, the plaintiff, Sunkist Growers, Inc. (SGI), sought to avoid arbitration as provided by the contractual agreement between SGI and Sunkist Soft Drinks, Inc. (SSD). Subsequent to the agreement between the SGI and SSD, Del Monte purchased SSD. When SGI sued Del Monte over the terms of the agreement between SGI and SSD, Del Monte sought arbitration pursuant to that agreement. SGI argued that Del Monte could not compel arbitration because it was not a signatory to the contract. This Court held that SGI was equitably estopped from avoiding arbitration because SGI was suing under the same contract that provided for arbitration and, thus, should not be permitted to rely on some contractual terms but avoid others. Sunkist at 758. We noted that Del Monte was the parent company of SSD, and that after the purchase of SSD, Del Monte had ceased operating it as an independent enterprise. Id. Thus, the direct nexus between all of SGI's claims and the agreement as well as the integral relationship between SSD and Del Monte led us to conclude that SGI's claims were intimately founded in and intertwined with the agreement, and the plaintiff was thus equitably estopped from denying the non-signatory defendant's right to compel arbitration. Id.

In Boyd, plaintiffs purchased mobile homes from several mobile home dealers, homes which had been manufactured by Homes of Legend (Homes). The purchases were made pursuant to retail installment and security agreements between the plaintiffs and the dealers, agreements that contained arbitration clauses. Homes was not a party to nor mentioned in these contracts for sale. The plaintiffs sued Homes, inter alia, for breach of their written express warranties on the mobile homes, alleging defects in materials and workmanship. They also alleged that their homes were covered under a myriad of state and federal consumer warranties — including implied and non-written warranties of merchantability, habitability, and freedom from defects — and that Homes' conduct violated the those warranties as well as the consumer protection provisions of the Magnuson-Moss Act. Some plaintiffs also sued the dealers. Homes attempted to compel arbitration based on the arbitration clauses in the retail installment contracts between the various plaintiffs and dealers.

The Boyd court ruled that Homes could not compel arbitration by invoking plaintiffs' arbitration agreements with the dealers, in part, because plaintiffs did not "advance the theory that the [dealer] defendants acted as Homes of Legend's front in committing the alleged frauds," but, rather, "pursue[d] parallel claims of fraudulent conduct against two separate commercial entities who have common, but decidedly distinct, duties toward them...." Boyd at 1434. Boyd observed that this scenario was completely distinct from two previous cases in which it had applied equitable estoppel:

In both instances, this court applied the doctrine of equitable estoppel, concluding that the plaintiffs' allegations of such pre-arranged, collusive behavior established that their claims against the insurers were intimately founded in and intertwined with the obligations imposed by the underlying loan agreements.... In Staples [v. Money Tree, Inc.], this court emphasized that the plaintiff's "claims against the [the insurers were] derivative of, and predicated on, her claims against [the lender]; if she had no claim against [the lender], she had no claim against [the insurers]." 936 F.Supp. [856,] 859 [(M.D.Ala.1996)]. In Roberson [v. Money Tree of Alabama, Inc.], this court emphasized that the holding was a result of the plaintiffs' allegations of "common breaches of duties by all defendants working hand-in-hand," essentially acting on behalf of each other to commit a common and conspiratorial fraud. 954 F.Supp.[1519,] 1522, 1529 [(M.D.Ala.1997)].

Boyd at 1433.

In Sunkist, because the plaintiff's claims against the nonsignatory defendant were based upon, and inextricably intertwined with, the written agreement of the parties, we compelled arbitration. In Boyd, the plaintiff's causes of action against Homes were based on duties separate and apart from those arising out of the retail installment contract between the plaintiffs and the dealers, and did not allege collusion between the defendants to defraud the plaintiffs as to the terms of that contract. Thus, the nonsignatory defendant was not entitled to compel arbitration. Applying Sunkist and Boyd, MS Dealer concluded that defendant...