Caremark, LLC v. Nation

104 F.4th 81

CAREMARK, LLC; Caremark PHC, LLC; CaremarkPCS Health LLC;Caremark Rx LLC; Aetna, Inc.; Aetna Health, Inc., Plaintiffs-Appellees, v. CHOCTAW NATION; Choctaw Nation Health Services Authority;Choctaw Health Care, Talihina, OK; Choctaw Nation Health Clinic-Rubin White, Poteau;Choctaw Nation Health Clinic-Mcalester; Choctaw Nation Health Clinic-Idabel;Choctaw Nation Health Clinic-Stigler; Choctaw Nation Health Clinic-Hugo;Choctaw Nation Health Clinic-Atoka; Choctaw Nation Health Care Center Durant Pharmacy;Choctaw Nation Online Pharmacy Refill Center, Defendants-Appellants.

No.22-15543

United States Court of Appeals, Ninth Circuit

Argued and Submitted October 18, 2023 Phoenix, Arizona

Filed June 10, 2024

Appeal from the United States District Court for the District of Arizona, Susan M. Brnovich, District Judge, Presiding, D.C. No. 2:21-cv-01554-SMB

Sarah M. Harris (argued), Kimberly Broecker, and Libby Baird, Williams and Connolly LLP, Washington, D.C.; Jon T. Neuman, Greenberg Traurig LLP, Phoenix, Arizona; Peter J. Kocoras, Thompson Hine LLP, Chicago, Illinois; for Plaintiffs-Appellees.

Jessica Underwood (argued), Michael B. Angelovich, Chad E. Ihrig, Bradley W. Beskin, and Nicholas W. Shodrok, Nix Patterson LLP, Austin, Texas; Michael Burrage, Patricia A. Sawyer, and Reggie N. Whitten, Whitten Burrage, Oklahoma City, Oklahoma; for Defendants-Appellants.

Before: Sandra S. Ikuta, Bridget S. Bade, and Daniel A. Bress, Circuit Judges.

OPINION

BADE, Circuit Judge:

The Choctaw Nation and several pharmacies that it owns and operates (collectively, the Nation or the Choctaw Nation) appeal from a district court order compelling arbitration of the Nation's dispute with Caremark, LLC, and its affiliates (collectively, Caremark). Over several years, the Nation and Caremark entered agreements to facilitate insurance reimbursements for the Nation's costs for pharmacy services for its members. This dispute began when the Nation filed suit in the Eastern District of Oklahoma alleging that Caremark, as the insurers' pharmacy benefit manager, unlawfully denied pharmacy reimbursement claims in violation of the Recovery Act, 25 U.S.C. § 1621e, a provision of the Indian Health Care Improvement Act. After the matter was stayed in the Eastern District of Oklahoma, Caremark petitioned to compel arbitration of the Nation's claims in the District of Arizona. The district court granted the petition, concluding that the parties' agreements included arbitration provisions with delegation clauses and therefore an arbitrator must decide the Nation's arguments that its claims are not arbitrable.

In this appeal, most of the Choctaw Nation's arguments challenging the district court's arbitration order are foreclosed by our decision in Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021 (9th Cir. 2022). The Nation's main remaining argument that the District of Arizona lacked subject-matter jurisdiction over the petition to compel arbitration fails because the Nation contractually agreed to arbitrate its claims against Caremark in Arizona, and in those contracts specifically "agree[d] to such jurisdiction." Thus, the Nation expressly waived its tribal sovereign immunity as a bar to arbitration in the District of Arizona, and the district court had subject-matter jurisdiction to decide the motion to compel arbitration. We affirm.

I.

A.

The Choctaw Nation is a sovereign and federally recognized Native American tribal nation headquartered in Oklahoma. The Choctaw Nation owns and operates healthcare facilities, including pharmacies, that serve Choctaw citizens and other Native persons throughout the Choctaw region. Caremark provides pharmacy benefit management services to insurers, third-party administrators, and employer sponsors of group health plans. These services include the administration and maintenance of pharmacy provider networks. The Choctaw Nation's pharmacies are participants in various pharmacy networks administered by Caremark.

As participants in Caremark's pharmacy networks, the Choctaw Nation's pharmacies signed Provider Agreements with Caremark (or its predecessor) in 2003, 2005, 2008, and 2010. Each Provider Agreement incorporates by reference a Provider Manual, which governs each pharmacy's relationship with Caremark.¹ The Provider Manuals, which Caremark issued and sent to the pharmacies in 2004, 2007, 2009, 2011, 2014, 2016, 2018, and 2020, each contain an arbitration provision. The arbitration provision provides,

Any and all disputes between Provider and Caremark . . . 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 or exclusion from any Caremark networks, will be exclusively settled by arbitration.

The arbitration provision further provides that "the arbitration shall be administered by the American Arbitration Association (AAA) pursuant to the then applicable AAA Commercial Arbitration Rules and Mediation Procedures." And it provides that "[t]his arbitration agreement . . . shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16."

The arbitration provision also includes a delegation clause, in which the parties agreed,

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.

The arbitration provision provides that the arbitrator's award "will be final and binding on the parties, and judgment upon such award may be entered in any court having jurisdiction thereof." Finally, the arbitration provision provides that any arbitration "must be conducted in Scottsdale, Arizona and Provider agrees to such jurisdiction, unless otherwise agreed to by the parties in writing."

B.

Under federal law, a member of a tribal nation, including the Choctaw Nation, may obtain prescription medication that is fully funded by that nation. See Chickasaw, 43 F.4th at 1025. The tribal nation receives federal funding for these medication costs through Indian Health Services, an agency within the Department of Health and Human Services that provides medical services and funding to federally recognized Native American tribal nations. See 25 U.S.C. § 1621 et seq. In addition to federally funded healthcare, many tribal members have private insurance coverage, often through the member's employee benefits. Chickasaw, 43 F.4th at 1027. When tribal members have such dual coverage, private insurers have primary payment responsibility, and the Recovery Act provides that the tribal nation is the "payer of last resort." 25 U.S.C. § 1623(b).

In these circumstances, when the Nation's pharmacies fill prescriptions for the tribal members, the pharmacies may seek recovery of these costs from private insurers under the Recovery Act. See Chickasaw, 43 F.4th at 1027 (explaining that the Recovery Act enables "tribal governments to enforce the statutory 'right of recovery' by bringing a civil action to recoup from any applicable insurer the cost of services provided to tribal members" (citing 25 U.S.C. § 1621e(a), (e)(1)(B))). The Recovery Act further provides that "no provision of any contract, insurance or health maintenance organization policy, employee benefit plan, self-insurance plan, managed care plan, or other health care plan or program . . . shall prevent or hinder the right of recovery of the United States, an Indian tribe, or tribal organization." 25 U.S.C. § 1621e(c).

In April 2021, the Choctaw Nation sued Caremark in the Eastern District of Oklahoma for reimbursement of healthcare costs under the Recovery Act. See Choctaw Nation v. Caremark PHC, LLC, No. 6:21-cv-00128 (E.D. Okla. Apr. 26, 2021), ECF 1. In its complaint, the Choctaw Nation alleged that Caremark violated the Recovery Act by improperly denying claims for covered medications that the Nation had submitted on behalf of tribal members. Caremark, in response, moved to stay the proceedings in the Eastern District of Oklahoma based on the arbitration provisions in the Provider Manuals, which require disputes to "be exclusively settled by arbitration . . . in Scottsdale, Arizona." The district court granted the motion and stayed the proceedings.

Caremark then filed a petition to compel arbitration under the Federal Arbitration Act (FAA) in the District of Arizona. Caremark argued that the terms of the Provider Manuals required the Choctaw Nation to arbitrate its reimbursement claims. The Choctaw Nation opposed the petition. The Nation argued that it had not signed agreements that clearly and unequivocally waived its sovereign immunity to allow arbitration of its Recovery Act claims against Caremark, and that it did not waive its immunity to arbitration proceedings in the District of Arizona by filing suit in the Eastern District of Oklahoma. The Nation also argued that the Recovery Act displaces the arbitration provisions in the Provider Manuals, rendering those agreements to arbitrate unenforceable.

The district court granted the petition and compelled the parties to arbitrate under § 4 of the FAA. The district court first found that, under the Provider Agreements, the Choctaw Nation had agreed to the terms of the incorporated Provider Manuals, including the arbitration provisions. The district court also found that the arbitration provisions included "clear and unmistakable" delegation clauses, which required an arbitrator—not the district court—to "decide the threshold question of arbitrability." Given those findings, the district court concluded that "the Nation has waived its sovereign immunity for claims brought related to the Provider Agreement[s]." And finally, the district court determined that whether the Recovery Act displaces the arbitration provisions is a threshold arbitrability question for the...