Cardionet, Inc. v. Cigna Health Corp.
751 F.3d 165
| 3rd Cir. | 2014Background
- CardioNet and LifeWatch (Providers) supplied outpatient cardiac telemetry (OCT) and had 2007 Administrative Service Agreements with CIGNA setting reimbursement terms; reimbursement only for “Covered Services” as defined by participants’ ERISA benefit plans.
- From 2007–2011 CIGNA covered OCT; in 2012 CIGNA issued a 2012 Policy and a Physician Update stating OCT was experimental and would not be covered.
- Providers allege the Physician Update misled physicians, reduced OCT orders, and caused economic harm; they sued CIGNA on their own behalf (direct claims) and as assignees of five plan participants (derivative ERISA claims).
- CIGNA moved to compel arbitration under the Agreements’ Section 6.3–6.4 dispute-resolution clauses; the district court compelled arbitration of all claims.
- The Third Circuit reversed: it held the arbitration clause is limited to disputes about the Agreement’s performance or interpretation and ruled (1) Providers’ direct tort/Lanham/trade-libel claims do not depend on contract interpretation and are not arbitrable, and (2) derivative ERISA claims assigned by participants likewise are not subject to arbitration because participants (non-signatories) retain the right to litigate ERISA benefit denials and that right does not evaporate when assigned to providers absent a clear contractual statement to the contrary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration clause — does it cover all disputes or only those about the Agreement? | Arbitration clause should be read broadly to force forum for disputes with CIGNA. | Clause limits arbitration to disputes “regarding performance or interpretation of the Agreement.” | Clause is limited to disputes about interpretation/performance of the Agreement. |
| Are Providers’ direct claims (tortious interference, Lanham Act, trade libel) arbitrable? | Direct claims arise from CIGNA statements tied to the contractual relationship and thus fall within arbitration clause. | Direct claims rest on the Physician Update (outside the Agreement) and do not require contract interpretation. | Direct claims are not arbitrable; they do not depend on interpreting or enforcing the Agreement. |
| Can Providers, as assignees, be compelled to arbitrate Participants’ ERISA claims? | Assignment cannot avoid arbitration because Providers previously agreed to arbitrate substantively identical payment disputes. | Participants (non-signatories) are not bound by the arbitration clause; assigned ERISA claims may be litigated in court. | Assigned ERISA claims are not subject to arbitration; assignees stand in participants’ shoes and retain participants’ right to litigate absent a clear contractual statement to the contrary. |
| Whether a provider’s standing to sue on assigned ERISA claims is recognized | Providers assert assignee standing to pursue assigned ERISA claims (recover benefits). | CIGNA contested or cautioned that allowing such suits undermines arbitration bargain. | Third Circuit adopts majority view: providers may sue on properly assigned ERISA claims; policy reasons support allowing providers to litigate assigned claims in court. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (courts decide arbitrability absent clear delegation)
- AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (presumption favoring arbitration where clause is broad)
- Granite Rock Co. v. Int’l Brotherhood of Teamsters, 561 U.S. 287 (presumption of arbitrability does not displace ordinary contract interpretation)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (doubts about scope resolved in favor of arbitration)
- Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., 247 F.3d 44 (focus on factual underpinnings to determine arbitrability)
- Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639 (distinguishing narrow clauses limited to contract interpretation/performance)
- Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393 (distinguishing provider contract claims from ERISA plan benefit claims)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (arbitration compelled when parties agreed to arbitrate a dispute)