LAKELAND ANESTH., INC. v. UNITED HEALTH. OF LA.

• Decision Date: 17 March 2004
• Docket Number: No. 2003-CA-1662.,2003-CA-1662.
• Citation: 871 So.2d 380
• Parties: LAKELAND ANESTHESIA, INC. v. UNITED HEALTHCARE OF LOUISIANA, INC.
• Court: Court of Appeal of Louisiana — District of US

871 So.2d 380

LAKELAND ANESTHESIA, INC. v. UNITED HEALTHCARE OF LOUISIANA, INC.

No. 2003-CA-1662.

Court of Appeal of Louisiana, Fourth Circuit.

March 17, 2004.

Andrew A. Lemmon, The Lemmon Law Firm, Hahnville, LA and Dennis G. Pantazis, Wiggins, Child, Quinn & Pantazis, Birmingham, AL, for Plaintiffs/Appellees.

Errol J. King, Jr., Juston M. O'Brien, Layna S. Cook, McGlinchey Stafford, PLLC, Baton Rouge, LA, Monica A. Frois, Nathalie G. Simon, McGlinchey Stafford, PLLC, New Orleans, LA and Edward Soto, Weil, Gotshal & Manges, LLP, Miami, FL and Gregory S. Coleman, Weil, Gotshal & Manges, Austin, TX, for Defendant/Appellant.

Court composed of Judge CHARLES R. JONES, Judge PATRICIA RIVET MURRAY, Judge MICHAEL E. KIRBY.

PATRICIA RIVET MURRAY, Judge.

This is a commercial litigation by several medical providers against a health management organization (HMO). The providers allege that the HMO implemented a practice of routinely delaying payment for the services they rendered to its subscribers. The narrow issue presented is twofold: whether the trial court erred in refusing to grant the HMO's motion to compel arbitration of the entire proceeding; or, in the alternative, whether the court erred in refusing to stay the entire proceeding while the matters subject to arbitration are arbitrated. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.

I.

On February 28, 2000, Lakeland Anesthesia, Inc., commenced this suit as a plaintiffs-class action on behalf of itself and other similarly situated medical providers who have submitted claims to United Healthcare of Louisiana, Inc., a HMO, according to a physician agreement or other oral or written contracts. The petition alleges that United has offered such contracts to hospitals, physicians, and other medical providers and that, according to these contracts, is obligated to pay the providers for the medical treatment they rendered to its subscribers. The petition seeks damages arising out of United's alleged routine practice of either intentionally or negligently artificially delaying payment of valid claims beyond the time provided for payment under these contracts.¹ Based on these alleged improper payment practices, the petition asserts that United is liable under: (i) the Civil Code for breach of contract and breach of the general tort duty not to cause harm to others (La. C.C. arts. 2315 and 2316), (ii) the Insurance Code for bad faith, and (iii) both codes for abuse of rights.

On April 14, 2000, United removed the case to federal court, asserting federal question jurisdiction based on complete preemption by the Employee Retirement Income Security Act, 29 U.S.C. § 1000, et seq. ("ERISA"). On April 20, 2000, Lakeland filed an amended petition in federal court to add Medical Advantage Company as a plaintiff. On June 22, 2000, the federal district court, finding no basis for removal under ERISA, remanded the case. In so doing, the court noted that "Lakeland does not purport to be an assignee of a participant or beneficiary" and that "Lakeland's complaint is based on separate provider agreements as opposed to any ERISA plan or plans, and no evidence has been offered to the contrary."

On July 3, 2000, Lakeland filed a second amended petition to add Dr. Leslie Hightower as a plaintiff. The amended petition clarifies the definition of the class as including medical providers who have submitted claims to United as "in-network" or "participating" providers at any time since January 1, 1991. The amended petition also clarifies that "[t]he suit seeks interest or other delay damages and penalties arising from `in-network' `participating' claims that have been acknowledged by Defendant, but were not timely paid." The amended petition still further clarifies that the suit neither seeks damages for claims for medical treatment that was not "covered" nor for claims arising from "out-of-network" claims based only on an assignment.

On July 25, 2000, United filed a motion to stay discovery and class certification. On August 4, 2000, United filed a motion to stay all proceedings, including discovery, and to compel arbitration, and in the alternative summary judgment. Following the November 3, 2000 hearing, the trial court deferred ruling on United's motion to compel.²

On January 13, 2003, United filed a second motion to stay proceedings and compel arbitration. In that motion, United asserted that arbitration was required for the following reasons:

• Dr. Hightower entered into a participating physician agreement with United entitled United Healthcare of Louisiana, Inc. Physician Participation Agreement (the "Hightower Agreement").

• Section 8 of the Hightower Agreement is entitled Resolution of Disputes and requires binding arbitration for any dispute arising under the Hightower Agreement.³ Each and every claim asserted by Dr. Hightower is subject to binding arbitration under that provision.

• Medical Advantage has admitted that it is bound by the Hightower Agreement. Thus, its claims are subject to Section 8 of that agreement.

• Lakeland contends that it is a third party beneficiary under a contract similar to the Hightower Agreement, which contains an arbitration provision.⁴ It is thus required to arbitrate. That contract, which is between United and Columbia Healthcare Systems of La., Inc., is the Community Health Network Hospital Participation Agreement (the "Columbia/HCA Agreement").⁵

On April 11, 2003, a hearing was held on United's motions, the trial court requested the parties file supplemental briefs addressing two issues.⁶ On June 3, 2003, the trial court granted United's motion in part, ordering that the claims asserted by Dr. Hightower and Medical Advantage arising after the April 1, 2000 effective date of the Hightower Agreement be arbitrated. As to all other claims, the trial court denied United's motion to compel arbitration.⁷ In so holding, the trial court relied heavily on this court's recent decision involving one of the same plaintiffs and strikingly similar issues. Lakeland Anesthesia, Inc. v. Cigna Healthcare of Louisiana, Inc., XXXX-XXXX (La.App. 4 Cir. 2/6/02), 812 So.2d 695.

Treating the claims by Dr. Hightower and Medical Advantage together,⁸ the trial court reasoned that the arbitration clause in the Hightower Agreement was intended to have prospective, not retrospective, application from the April 1, 2000 effective date of that agreement. In so finding, the trial court relied on the following reasoning in Lakeland, supra:

The mandatory arbitration provision in the instant case clearly refers to disputes, controversies, and questions arising under "this Agreement." Unquestionably, that provision is broad; however, as stated in Security Watch, [Inc. v. Sentinel Systems, Inc., 176 F.3d 369 (1999),] "this breadth of scope does not extend over time." Id." ... [T]he agreement between CIGNA HealthCare and Anesthesia East sets forth the "Term of Agreement" as follows: "This Agreement shall begin on the Effective Date and shall continue from year to year thereafter, unless terminated as set forth below." That provision clearly reveals that the agreement executed on September 1, 1999 was intended by the parties to be applied prospectively only, not retroactively.

Lakeland, XXXX-XXXX at p. 7, 812 So.2d at 700. By analogy, the trial court reasoned that Section 9 of the Hightower Agreement sets forth a similar term provision, providing that it "begins on the Effective Date and it shall remain in effect for one year, and shall automatically renew for successive 1-year terms until it is terminated as provided below." As in Lakeland, the trial court thus reasoned that the Term provision "precludes the arbitration of any claims or disputes prior to the April 1, 2000 effective date of the Hightower Agreement."

Turning to the claims asserted by Lakeland, the trial court noted that the issue presented is whether Lakeland as a nonsignatory to an agreement containing an arbitration provision may be required to submit its claims to arbitration. Relying on our analysis in Lakeland, the trial court stated:

Federal jurisdictions have adopted the principle that a third party beneficiary to a contract containing a mandatory arbitration provision is subject to that provision; however, in Louisiana, a contract that benefits a third party, a stipulation pour autri, must contain a clear expression of intent to benefit the third party, and this benefit cannot be incidental to the contract....

In this case, the plaintiffs alleged that Lakeland Anesthesia was a third party beneficiary of written agreements between United Healthcare of Louisiana, Inc. and Columbia/HCA. However, there was no clear expression of intent in the agreements from which Lakeland Anesthesia could derive any benefit.

The trial court thus found Lakeland was not subject to arbitration.

Finally, the trial court denied United's request to stay the entire matter pending arbitration of the claims it found subject to arbitration. This suspensive appeal by United followed.⁹

II.

The arbitration issues presented in this case are complicated for three reasons: (i) this case is styled a class action, (ii) the claims asserted span about a decade (commencing January 1, 1991), and (iii) there were multiple contractual agreements between the parties over that lengthy span. Nonetheless, we find that at this juncture the issues can be simplified in that there are only two relevant agreements before us on this appeal: the Hightower Agreement and the Columbia/HCA Agreement.¹⁰ All the assignments of error United raises on appeal revolve around those two agreements; to-wit:

1) The trial court erred in refusing to compel all of Dr. Hightower's claims to arbitration [under the Hightower Agreement] because (a) it improperly usurped the role of the arbitrator by deciding substantives issues of contract interpretation, and (b) it failed to properly recognize that the broad

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