Caremark, LLC v. Chickasaw Nation

43 F.4th 1021

CAREMARK, LLC ; Caremark PHC, LLC; CaremarkPCS Health LLC; Caremark Rx, LLC ; Aetna, Inc.; Aetna Health, Inc., Petitioners-Appellees,

v.CHICKASAW NATION; Chickasaw Nation Department of Health; Ardmore Health Clinic; Chickasaw Nation Medical Center; Purcell Health Clinic; Tishomingo Health Clinic; Chickasaw Nation Online Pharmacy Refill Center, Respondents-Appellants.

No. 21-16209

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 11, 2022 Pasadena, California

Filed August 9, 2022

Jonathan Massey (argued) and Matthew M. Collette, Massey & Gail LLP, Washington, D.C.; Michael Burrage, Patricia A. Sawyer, and Reggie N. Whitten, Whitten Burrage, Oklahoma City, Oklahoma; Michael B. Angelovich, Chad E. Ihrig, Bradley W. Beskin, and Nicholas W. Shodrok, Nix Patterson LLP, Austin, Texas; for Respondents-Appellants.

Sarah M. Harris (argued), Kimberly Broecker, and Helen E. White, Williams & Connolly LLP, Washington, D.C.; Jon T. Neumann, Greenberg Traurig LLP, Phoenix, Arizona; Peter J. Kocoras, Thompson Hine LLP, Chicago, Illinois; Brian Steinwascher, Thompson Hine LLP, New York, New York; for Petitioners-Appellees.

John M. Masslon II and Cory L. Andrews, Washington Legal Foundation, Washington, D.C., for Amicus Curiae Washington Legal Foundation.

Mark Emery, Jonathan S. Franklin, and Peter B. Siegal, Norton Rose Fulbright US LLP, Washington, D.C.; Tara S. Morrissey and Jennifer B. Dickey, U.S. Chamber Litigation Center, Washington, D.C.; for Amicus Curiae Chamber of Commerce of the United States of America.

Before: J. Clifford Wallace, Danny J. Boggs,^* and Michelle T. Friedland, Circuit Judges.

FRIEDLAND, Circuit Judge:

The Chickasaw Nation and five pharmacies that it owns and operates (collectively, "the Nation") appeal from a district court's order compelling arbitration of the Nation's dispute with Caremark and Caremark affiliates (collectively, "Caremark"). The district court explained that, in light of a clause in the parties' contract delegating to the arbitrator the authority to resolve threshold issues regarding the scope and enforceability of the arbitration provision, the Nation's arguments that its claims are not arbitrable must be resolved by the arbitrator. We affirm.

I.

A.

The Chickasaw Nation is a sovereign and federally recognized Indian tribe that operates its own healthcare system, which includes the five pharmacies that are co-appellants in this case.¹ The Nation's healthcare system serves Native persons throughout Chickasaw territory. Under federal law, members of federally recognized Native nations are eligible to receive healthcare services at the Nation's facilities at no charge, and the Nation may recoup the cost of services that it provides to a tribal member from that member's health-insurance plan.

Caremark is the pharmacy benefit manager ("PBM") for health-insurance plans that cover many tribal members served by the Nation's pharmacies. As a PBM, Caremark manages prescription drug benefits for health insurers, Medicare Part D drug plans, large employers, and other healthcare payers. Caremark manages these benefits by enrolling individual pharmacies in "pharmacy networks." By enrolling in a Caremark network, the pharmacies agree to offer preferential pricing to patients enrolled in Caremark-supported health-insurance plans. Under that business model, the health plans and their member-patients receive lower prices when the patients obtain their prescription drugs from in-network pharmacies. By enrolling in Caremark networks, the pharmacies avoid the administrative costs of submitting reimbursement claims to each patient's individual insurer. Instead, an enrolled pharmacy deals only with Caremark, which pays each pharmacy directly for any prescription drugs that it provides to the patients covered by the Caremark-supported insurance plans.

The Nation has signed agreements with Caremark, enrolling its pharmacies in Caremark's networks to facilitate reimbursement for the costs of providing pharmacy services to tribal members.² Like all Caremark pharmacy-network agreements, each of the Nation's agreements with Caremark includes two key documents: the Provider Agreement and the Provider Manual.

The Provider Agreement is a three-page document setting forth the general terms of the relationship. It contains a section entitled "Entire Agreement" stating that the Provider Manual, among other documents, is "incorporated by this reference as if fully set forth herein." By signing the Provider Agreement, the pharmacy "acknowledges receipt of the Provider Manual."³

The Provider Manual is a hundred-plus-page document that governs a pharmacy's relationship with Caremark. The Manual describes, among other things, the services that Caremark-network pharmacies must provide, the claim-submission process, and the terms governing reimbursement. A section entitled "Miscellaneous" includes several subsections governing matters such as assignment of rights, termination of the contract, and the amendment process. It also includes a subsection entitled "Arbitration."

According to the amendment provision, the Provider Manual is updated from time to time, and providers accept amendments to the Manual by receiving the updated version and subsequently submitting to Caremark claims for reimbursement. Caremark amended the Provider Manual eight times between 2004 and 2020. Every version of the Provider Manual has included substantially the same amendment provision.

The "Arbitration" subsection in every version of the Provider Manual has instructed that all disputes arising in connection with the agreement will be resolved in arbitration. The arbitration provision also includes a "delegation clause"—a clause requiring the arbitrator, rather than courts, to resolve threshold issues about the scope and enforceability of the arbitration provision. A delegation clause appeared in earlier versions of the Provider Manual through incorporation, by reference to the Rules of the American Arbitration Association; after 2014, a delegation clause was expressly set forth in the Provider Manual itself.

Specifically, the pre-2014 versions of the Provider Manual included clauses stating that "[a]ny and all controversies in connection with or arising out of the Provider Agreement ... will be exclusively settled by arbitration before a single arbitrator in accordance with the Rules of the American Arbitration Association." Since at least 2002, those rules have contained a delegation clause stating that the "arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement." See Am. Arb. Ass'n, Commercial Dispute Resolution Procedures (Including Mediation and Arbitration Rules) R-8 (2002).⁴

Since 2014, the arbitration provision in the Provider Manual, including its express delegation clause, has remained essentially the same. The arbitration provision in the most recent Provider Manual in the record, including the delegation clause (which we underline below), states:

Any and all disputes between Provider and Caremark [and Caremark's affiliates], including but not limited to, disputes in connection with, arising out of, or relating in any way to, the Provider Agreement or to Provider's participation in one or more Caremark networks ... will be exclusively settled by arbitration. This arbitration provision applies to any dispute arising from events that occurred before, on or after the effective date of this Provider Manual....

The arbitrator(s) shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the agreement to arbitrate, including but not limited to, any claim that all or part of the agreement to arbitrate is void or voidable for any reason. In the event the arbitrator(s) determine that any provision of this agreement to arbitrate is invalid for any reason, such provision shall be stricken and all remaining provisions will remain in full force and effect. The arbitrator(s) must follow the rule of Law, and the award of the arbitrator(s) will be final and binding on the parties, and judgment upon such award may be entered in any court having jurisdiction thereof. Any such arbitration must be conducted in Scottsdale, Arizona and Provider agrees to such jurisdiction, unless otherwise agreed to by the parties in writing.

Since at least 2004, Caremark has sent Provider Manuals to all network pharmacies. Caremark sent updated Manuals to all network pharmacies in 2004, 2007, 2009, 2011, 2014, 2016, 2018, and 2020. Since 2014, Caremark has maintained proof of delivery of the Provider Manual to all network pharmacies, including all Chickasaw Nation pharmacies. Between 2014 and 2020, the Nation's pharmacies submitted to Caremark about 1.5 million claims for reimbursement, which collectively exceeded $173 million in value.

B.

In December 2020, the Nation sued Caremark in the United States District Court for the Eastern District of Oklahoma, claiming violations of 25 U.S.C. § 1621e, a provision of the Indian Health Care Improvement Act referred to here as the "Recovery Act."

Congress passed the Recovery Act to enable tribal healthcare providers to recover the cost of healthcare services from third-party insurers. Although many Native persons were covered by employer-sponsored or other private health-insurance plans, their insurance contracts often contained coverage exceptions for care provided through the Indian Health Service or at tribal healthcare facilities. Accordingly, the insurers were collecting premiums for insurance coverage for Native individuals whose healthcare costs the insurers were, in reality, reimbursing only rarely. See S. Rep. No. 100-508, at 15–16 (1988), reprinted in 1988 U.S.C.C.A.N. 6183, 6197–98. To address that problem, Congress created a mechanism whereby "Indian tribes and tribal organizations" could "recover reasonable...