UNITED STATES and State of Nevada EX REL. Mary Kaye WELCH; Plaintiff-Appellee, v. MY LEFT FOOT CHILDREN‘S THERAPY, LLC; Ann Marie Gottlieb; Jonathan Gottlieb, Defendants-Appellants.
No. 16-16070
United States Court of Appeals, Ninth Circuit.
Filed September 11, 2017
871 F.3d 791
Argued and Submitted June 16, 2017, San Francisco, California
DENIED IN PART, DISMISSED IN PART, GRANTED AND REMANDED IN PART, and ENFORCED.
Robert S. Oswald (argued), David Scher, and Andrew M. Witko, The Employment Law Group P.C., Washington, D.C., for Plaintiff-Appellee.
Lindsey Powell (argued) and Michael S. Raab, Assistant United States Attorneys, Appellate Staff; Civil Division, United States Department of Justice, Washington, D.C.; for Amicus Curiae United States.
Mark J. Kreuger (argued), Senior Deputy Attorney General; Adam Paul Laxalt, Attorney General; Office of the Attorney General, Carson City, Nevada; for Amicus Curiae State of Nevada.
Before: MARY M. SCHROEDER, D. MICHAEL FISHER,* and N. RANDY SMITH, Circuit Judges.
OPINION
FISHER, Circuit Judge:
Originally enacted in 1863, the False Claims Act (FCA) establishes a scheme that permits either the Attorney General,
In this case, Mary Kaye Welch alleges that her former employer violated the federal FCA and Nevada FCA by presenting fraudulent Medicaid claims. The United States and Nevada declined to intervene in the case and her employer moved to compel arbitration under the Federal Arbitration Act (FAA),
I.
In August 2013, Mary Kaye Welch applied for employment with My Left Foot Children‘s Therapy, LLC (MLF), a small, family-owned company that provides functional therapy to children in the Las Vegas area. She was hired as a speech therapist that September and worked at MLF for just over a year. During the application process, Welch entered into a mutually binding arbitration agreement with MLF that provides:
I agree and acknowledge that the Company and I will utilize binding arbitration to resolve all disputes that may arise out of the employment context. Both the Company and I agree that any claim, dispute, and/or controversy that either I may have against the Company or the Company may have against me, arising from, related to, or having any relationship or connection whatsoever with my seeking employment by, or employment or other association with the Company shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act.... To the extent permitted by applicable law, the arbitration procedures stated below shall constitute the sole and exclusive method for the resolution of any claim between the Company and Employee arising out of ‘or related to’ the employment relationship.
ER 20 (underlining in original). The agreement then adds:
Included within the scope of this agreement are all disputes, whether they be based on the state employment statutes, Title VII of the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation, equitable law, or otherwise, with exception of claims aris-
ing under the National Labor Relations Act which are brought before the National Labor Relations Board, claims brought pursuant to state workers compensation statutes, or as otherwise required by state or federal law.
Id.
Shortly before Welch left MLF, she filed a sealed complaint in federal court alleging that MLF and its co-owners—Ann Marie and Jonathan Gottlieb—violated both the federal FCA and the Nevada FCA1 by presenting fraudulent claims to Medicaid and Tricare, a program that offers Medicaid-like benefits to service members. In 2015, the United States and Nevada declined to intervene and Welch amended her complaint. In that amended complaint, Welch alleges that MLF treated patients who could not benefit from therapy, provided and billed for unnecessary treatment, ordered therapists to draft inaccurate patient progress reports, and told therapists to use a single billing code for all services regardless of whether a more appropriate code would result in lower charges.
On October 19, 2015, the Defendants moved to compel arbitration of Welch‘s FCA claims pursuant to the FAA and MLF‘s arbitration agreement with Welch. Welch opposed that motion as did the United States and Nevada. On June 13, 2016, the District Court denied the Defendants’ motion to compel arbitration on the ground that Welch‘s arbitration agreement did not extend to the United States or Nevada, the parties which owned the underlying FCA claims. This timely appeal followed.
II.
The District Court had jurisdiction under
III.
On appeal, the Defendants argue that we should reverse the district court‘s denial of their motion to compel arbitration. They maintain that MLF‘s arbitration agreement with Welch encompasses this FCA lawsuit and that the government cannot prevent enforcement of an arbitration agreement covering FCA claims when, as here, it has declined to intervene in the underlying FCA suit. In addressing those arguments, we must first determine whether Welch‘s arbitration agreement with MLF encompasses the FCA claims at issue in this case.
A.
Seeking “to reverse the longstanding judicial hostility to arbitration agreements” and place them “upon the same footing as other contracts,” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), Congress enacted the FAA in 1925. Under the FAA, private agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
In this case, Welch does not argue that her arbitration agreement with MLF is invalid. Instead, she maintains that these FCA claims do not fall within its scope because, contrary to what the District Court held, none of them are related to, arose out of, or were connected with her employment or other association with MLF. This argument turns on interpretation of her arbitration agreement with MLF—“a matter of contract” that requires us “to honor parties’ expectations.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 351, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011).
Governing Law
Before turning to the text of Welch‘s arbitration agreement, we must first determine the governing law. Under the FAA, the “interpretation of an arbitration agreement is generally a matter of state law,” Stolt-Nielsen S.A. v. AnimalFeeds Int‘l Corp., 559 U.S. 662, 681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), and since the arbitration agreement in this case was signed in Nevada by a Nevada resident and a Nevada-based LLC, the parties agree that Nevada law would govern any contract dispute here. In applying Nevada law to interpret Welch‘s arbitration agreement, however, “the FAA imposes certain rules of fundamental importance” that must also guide our interpretation “including the basic precept that arbitration is a matter of consent, not coercion,” id. (internal quotation marks omitted), and the rule that “questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.” Moses H. Cone Mem‘l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
“Because the FAA is at bottom a policy guaranteeing the enforcement of private contractual arrangements,” EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (internal quotation marks omitted), when examining the scope of an arbitration agreement, “[a]s with any other contract dispute, we first look to the express terms [of the parties’ agreement].” Chiron, 207 F.3d at 1130. If the text is plain and unambiguous, that is the end of our analysis in this case because we “must rigorously enforce arbitration agreements according to their terms” under both the FAA and Nevada law. Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013) (internal quotation marks omitted); see also Waffle House, 534 U.S. at 294, 122 S.Ct. 754 (“While ambiguities in the language of the agreement should be resolved in favor of arbitration, ... we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated.“); State ex rel Masto v. Second Judicial Dist. Ct. ex rel. Cty. of Washoe, 125 Nev. 37, 199 P.3d 828, 832 (2009) (“In interpreting a contract, we construe a contract that is clear on its face from the written language, and it should be enforced as written.“).
The Arbitration Agreement
Turning now to the text, the arbitration agreement that Welch signed when
On appeal, the Defendants rely on the presumption in favor of arbitration, the breadth of the “Agreement” section, and the breadth of the “Included Claims” section to maintain that Welch‘s arbitration agreement covers the FCA claims at issue in this case. In our view, however, it is solely the text of the “Agreement” section that dictates the scope of Welch‘s arbitration agreement. Since the presumption of arbitrability is not in play if the text of the agreement is clear, that presumption plays no role unless the agreement is susceptible to an interpretation that covers this FCA case. And since it would violate several rules of textual interpretation to rely on the “Included Claims” section to define the breadth of the agreement, we believe that section is irrelevant to assessing the scope of Welch‘s agreement unless the “Agreement” section first provides for arbitration.
Certainly, as the Defendants point out, the “Included Claims” section is broad and encompasses FCA claims insofar as it provides that “all disputes,” including those based on “any... federal law,” fall within the scope of the arbitration agreement. ER 20. There are nonetheless two problems with relying on this section to assess whether this case is subject to arbitration. First, the “Included Claims” section contains no agreement to arbitrate any disputes—rather, the “Agreement” section defines when the parties have agreed to arbitration while the “Included Claims” section explains the types of disputes that arbitration extends to when the parties have elsewhere agreed to arbitration. Second, the breadth of the “Included Claims” section cannot be read in isolation from the rest of the arbitration agreement, and the “Agreement” section provides for arbitration in much narrower circumstances than the “Included Claims” section.
This second point is particularly critical because had the parties wished to arbitrate every dispute encompassed in the “Included Claims” section it could have left the scope of the “Agreement” section at “any and all disputes whatsoever.” Instead, every provision in the “Agreement” section containing an agreement to arbitrate is followed by some plain language imposing a textual limitation that, to be arbitrable, the dispute must arise from, relate to, or be connected with Welch‘s employment or association with MLF. Having chosen to include that language, we are bound to define the scope of this agreement by those limitations under two cardinal rules of textual interpretation. The first is the rule that the specific governs the general, or generalia specialibus non derogant, because the “Agreement” section is more specific than the “Included Claims” section. See, e.g., S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 891 (9th Cir. 2003) (“A standard rule of contract interpretation is that when provisions are inconsistent, specific terms control over general ones.“); Shelton v. Shelton, 119 Nev. 492, 78 P.3d 507, 510 (2003) (“[A] specific provision will qualify the meaning of a general provision.“). The second is the interpretative principle of verba cum effectu sunt accipienda—that if possible, every word and every provision is to be given effect—because if the language about arising out of and relating to employment did
Having established that the scope of this arbitration agreement turns solely on the text of the “Agreement” section, we must now consider whether the text of the “Agreement” section is broad enough to encompass this lawsuit. As discussed above, the “Agreement” contains three different arbitration provisions. The first provision provides for arbitration of “all disputes that may arise out of the employment context.” ER 20. The second provision provides for arbitration of “any claim, dispute, and/or controversy that either I may have against the Company... or the Company may have against me arising from, related to, or having any relationship or connection whatsoever with my seeking employment by, or employment or other association with the Company.” Id. The third provision provides for arbitration of “any claim between the Company and Employee arising out of ‘or related to’ the employment relationship.” Id. (underlining in original).
Like the “Included Claims” section, these provisions are broad and capable of expansive reach. But as this Court has noted, there is a difference between a clause being “broad” and “unlimited.” N. Cal. Newspaper Guild Local 52 v. Sacramento Union, 856 F.2d 1381, 1383 (9th Cir. 1988). The first arbitration provision is limited to disputes that “arise out of the employment context” while the third is limited to claims “arising out of or ‘related to’ the employment relationship.” ER 20. And for three reasons, we cannot hold that the text of the first or third provision is broad enough to encompass this case.
First, contrary to Defendants’ position, the terms used in the limiting language of the first and third provisions are not boundless because both of the phrases, “arising out of” and “related to,” mark a boundary by indicating some direct relationship. As we have held, the words arising out of are “relatively narrow as arbitration clauses go,” Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983) (internal quotation marks omitted), and “understood to mean originating from[,] having its origin in, growing out of or flowing from.” Cont‘l Cas. Co v. City of Richmond, 763 F.2d 1076, 1080 (9th Cir. 1985) (internal quotation marks omitted). And though we have recognized that the phrase “relate to” is broader than the phrases “arising out of” or “arising under,” we agree with the Eleventh Circuit that “‘related to’ marks a boundary by indicating some direct relationship; otherwise the term would stretch to the horizon” and “have no limiting purpose” in violation of the cannon of verba cum effectu sunt accipienda. Doe v. Princess Cruise Lines, Ltd., 657 F.3d 1204, 1218 (11th Cir. 2011); see also N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 131 L.Ed.2d
Second, we are persuaded by the reasoning of the Fifth and Eleventh Circuits, which have previously interpreted arbitration agreements covering disputes that “arise out of” or “relate to” a contractual or employment relationship. Though neither circuit decided this issue in the context of a FCA claim, we find their textual analysis compelling and instructive. In both cases, the courts found that a plaintiff‘s sexual assault claims did not “arise out of” or “relate to” the plaintiff‘s employment or workplace simply because the assault occurred at the plaintiff‘s workplace or would not have occurred but for the plaintiff‘s employment. As both circuits explained, the sexual assault did not “arise out of” or “relate to” the plaintiffs’ employment because there was no direct connection between their claims and employment where the defendant “could have engaged in” the same conduct “even in the absence of any contractual or employment relationship with [the plaintiff],” and a third party “could have brought the[] same claims... based on virtually the same alleged facts.” Doe, 657 F.3d at 1219-20; see also Jones v. Halliburton Co., 583 F.3d 228, 240 (5th Cir. 2009). The same is true here—this FCA suit has no direct connection with Welch‘s employment because even if Welch “had never been employed by defendants, assuming other conditions were met, she would still be able to bring a suit against them for presenting false claims to the government.” Mikes v. Strauss, 889 F.Supp. 746, 754 (S.D.N.Y. 1995).
Finally, the fact that Welch observed the fraud while employed is immaterial under the first and third arbitration provisions. Since, contrary to what the District Court held, neither clause applies to “claims aris[ing] from observations Welch made while employed by MLF,” United States v. My Left Foot Children‘s Therapy, LLC, No. 14-01786, 2016 WL 3381220, at *3 (D. Nev. June 13, 2016), to interpret this clause to cover all disputes discovered while Welch worked at MLF would be “to read the arbitration provision so broadly as to encompass any claim related to [her] employer, or any incident that happened during her employment” whereas “that is not the language of the contract.” Jones, 583 F.3d at 241. Indeed, because Welch could have just as easily discovered the factual predicate of her claims in a different capacity, because Defendants could have engaged in the same fraudulent conduct absent any relationship with Welch, and because the legal basis of this FCA case would exist regardless of where Welch worked or observed the fraud, it is MLF‘s act of fraudulent billing—rather than Welch‘s employment—that these FCA claims “arise out of” and “relate to.”
Since neither the first nor third arbitration provision is broad enough to encompass this FCA case, the lawsuit is arbitrable only if it falls within the scope of the second arbitration provision. As Defendants note, this provision is clearly the broadest and may not require a direct relationship with Welch‘s employment insofar as the phrase “any relationship or connection whatsoever with” is much broader than the phrases “arising out of” and “related to.” But we must again look carefully at the text of this provision, which indicates that it only covers a “claim, dispute, and/or controversy that either [Welch] may have against [MLF]... or [MLF] may have against [Welch].” ER 20.
Contrary to Defendants’ arguments, this case does not meet that textual requirement. This case involves no claim
IV.
For the reasons set forth above, we affirm the District Court‘s denial of the Defendants’ motion to compel arbitration on the alternate ground that Welch‘s FCA claims do not fall within the scope of her arbitration agreement with MLF.
AFFIRMED.