Nancy G. Atkins, Liquidator of Ky. Health Coop., Inc. v. Cgi Techs. & Solutions, Inc., Case No. 17-5506
| Decision Date | 09 February 2018 |
| Docket Number | Case No. 17-5506 |
| Parties | NANCY G. ATKINS, Liquidator of Kentucky Health Cooperative, Inc., Plaintiff-Appellee, v. CGI TECHNOLOGIES AND SOLUTIONS, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 18a0069n.06
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF KENTUCKY
BEFORE: KEITH, McKEAGUE, and STRANCH, Circuit Judges.
McKEAGUE, Circuit Judge. This appeal concerns enforcement of a contractual arbitration clause. The Kentucky Commissioner of Insurance, in liquidation proceedings on behalf of an insolvent company, Kentucky Health Cooperative, Inc., filed breach of contract and negligence claims that come within the scope of the arbitration clause. The defendant company, CGI Technologies and Solutions, Inc. ("CGI"), removed the action to federal court and asserted its right to arbitration. Whether the arbitration clause is enforceable depends on the outcome of a contest between federal preemption, pursuant to the Federal Arbitration Act, and "reverse preemption" by a state law regulating the business of insurance, pursuant to the McCarran-Ferguson Act. The district court denied CGI's motion to compel arbitration "without prejudice" . . . and without explanation. Exercising its right to interlocutory review, CGI immediately appealed the ruling. Adherence to Sixth Circuit precedent compels us to conclude, for the following reasons, that the district court's refusal to compel arbitration was in error and must be vacated.
The Kentucky Health Cooperative, Inc. ("Kentucky Health Co-op") was a nonprofit health insurance company established in 2011 as a "Consumer Operated and Oriented Plan" under the Patient Protection and Affordable Care Act, 42 U.S.C. § 18042. As such, it was created to provide qualified health plans for individuals and small groups in Kentucky. In 2013, Kentucky Health Co-op entered into an Administrative Services Agreement ("Agreement") with CGI, a Delaware corporation with its principal place of business in Virginia. Pursuant to the Agreement, CGI undertook to perform administrative claims processing and payment functions relating to services provided by Kentucky Health Co-op to its members. The Agreement provides that any dispute between the parties shall be resolved by mediation or arbitration under the Rules of the American Health Lawyers Association Alternative Dispute Resolution Service. The Agreement further provides that it "shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky."
In 2015, Kentucky Health Co-op became insolvent and the Commissioner of the Kentucky Department of Insurance instituted a delinquency proceeding (which became a liquidation proceeding) in the Franklin Circuit Court in October 2015. As Liquidator, the Commissioner brought a collateral proceeding against CGI, asserting claims on behalf of Kentucky Health Co-op for breach of contract and negligence and gross negligence in its performance of duties under the Agreement. CGI responded by removing the action to federalcourt, based on the parties' diversity of citizenship. CGI also moved the district court to compel arbitration in accordance with the Agreement.
On its way to denying CGI's motion to compel, the district court also denied the Liquidator's motion to remand. The court rejected the Liquidator's argument that the state statute under which it was proceeding against CGI, Kentucky's Insurers Rehabilitation and Liquidation Law ("IRLL"), "reverse-preempted" the federal diversity jurisdiction statute, 28 U.S.C. § 1332, on which CGI's removal was premised, by virtue of the McCarran-Ferguson Act, 15 U.S.C. § 1012(b). The court observed that "the McCarran-Ferguson Act is limited to 'reverse preempting' legislation passed through Congress' Commerce Clause authority." Maynard v. CGI Technology & Solutions, Inc., 227 F.Supp.3d 773, 777 (E.D. Ky. 2017). In the same ruling, the district court also denied the Liquidator's request that the court abstain from exercising jurisdiction. The court held that abstention was inappropriate under both Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), and Burford v. Sun Oil Co., 319 U.S. 315, (1943). Id. at 779-81.
Having made these jurisdictional rulings, the district court solicited additional briefing on the enforceability of the arbitration clause in the Agreement and scheduled the matter for oral argument, conducted on March 2, 2017. The hearing also included arguments on the Liquidator's motion to remand parallel litigation brought by the Liquidator against CGI and other defendants who allegedly played roles contributing to the insolvency of the Kentucky Health Co-op., J. Gaither, Deputy Liquidator v. Beam Partners, LLC, et al., E.D. Ky. No. 3:16-CV-94 ("parallel case"). In a ruling dated March 31, 2017, the district court rejected CGI's argument that non-diverse defendants had been fraudulently joined in the second case and granted the Liquidator's motion to remand the parallel case to state court.
That same day, the district court issued a second ruling, two paragraphs long, addressing CGI's motion to compel arbitration. The court observed that remand of the parallel case to state court "results in a significantly altered procedural posture" for this case and the court summarily denied the motion to compel arbitration "without prejudice to being re-filed at a later date." R. 63, Order at 2, Page ID 1173. The court provided no further explanation. CGI timely filed its notice of appeal and promptly moved the court to expedite the appeal.1
Under 9 U.S.C. § 16, the denial of a motion to compel arbitration, albeit interlocutory, is immediately reviewable. Russell v. Citigroup, Inc., 748 F.3d 677, 679 (6th Cir. 2014); see also Chorley Enterprises, Inc. v. Dickey's Barbecue Restaurants, Inc., 807 F.3d 553, 561 (4th Cir. 2015). This is true even where, as here, the district court's denial is "without prejudice." Id. at 562; Quilloin v. Tenet Health System Philadelphia, Inc., 673 F.3d 221, 228 (3d Cir. 2012); see also Hilton v. Midland Funding, LLC, 687 F.App'x 515, 517-18 (6th Cir. 2017) ().The lack of a final judgment is thus no impediment to immediate review and we undisputedly have jurisdiction to decide CGI's appeal.
The Liquidator has not appealed the district court's denial of her motion to remand for lack of jurisdiction, but argues, in defense of the denial of the motion to compel arbitration, that the district court lacked authority to compel arbitration anyway because it lacked jurisdiction. This argument is not properly before us in this appeal. The denial of a motion to remand for lack of jurisdiction is an interlocutory ruling that is generally not immediately reviewable. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 74 (1996). Nor has the Liquidator asked the court to exercise pendent appellate jurisdiction over her disagreement with the district court's jurisdictional ruling. See Summers v. Leis, 368 F.3d 881, 889-90 (6th Cir. 2004) ().
Yet, the Liquidator's brief on appeal renews the reverse-preemption-of-diversity-jurisdiction argument—presumably to buttress her argument that the IRLL reverse-preempts CGI's contractual right to arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. Assuming the Liquidator is implicitly asking us to exercise pendent appellate jurisdiction, see AmSouth Bank v. Dale, 386 F.3d 763, 774-75 (6th Cir. 2004) (), we decline. These two reverse-preemption issues, albeit arguably related, cannot fairly be characterized as "inextricably intertwined." In Summers, the court interpreted "inextricably intertwined" to mean "that theresolution of the appealable issue 'necessarily and unavoidably' decides the nonappealable issue." 368 F.3d at 889. Here, resolution of the question whether enforcement of the arbitration clause avoids reverse preemption will not necessarily and unavoidably determine whether the district court's jurisdictional ruling was correct. Hence, the Liquidator's reverse-preemption-of-diversity-jurisdiction argument is not inextricably intertwined with issues properly presented in this, CGI's, appeal from the denial of the motion to compel arbitration.
Moreover, the district court's jurisdictional ruling, rejecting the Liquidator's argument that Kentucky's IRLL reverse-preempted the federal diversity jurisdiction statute, is consonant with Sixth Circuit law and the majority view among the circuits. See AmSouth Bank, 386 F.3d at 783; Int'l Ins. Co. v. Duryee, 96 F.3d 837 (6th Cir. 1996); Maynard, 227 F.Supp.3d at 777-79 (collecting cases).
Accordingly, the Liquidator's jurisdictional argument is given no further consideration.
In the order denying CGI's motion to compel arbitration, the district court also denied the Liquidator's motion to dismiss the motion to compel arbitration without prejudice. Again, the district court's order includes no explanation. The Liquidator's motion was based on two grounds. First, the Liquidator asserted that the district court lacked subject matter jurisdiction because the diversity jurisdiction statute and therefore the federal removal statute were reverse-preempted by the IRLL. Second, the Liquidator argued that, if the...
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