Optumrx v. King's Drugs, Inc.

385 So.3d 201

OPTUMRX, Appellant,

v.KING’S DRUGS, INC.; Vistacare Pharmacy Services, LLC; Hepzibah, Inc.; Health Link Pharmacy, LLC; Healthwise Pharmacy, LLC; and Adel Consulting, Inc., Appellees.

No. 2D2023-0096

District Court of Appeal of Florida, Second District.

April 17, 2024

Appeal from the Circuit Court for Hillsborough County; Rex M. Barbas, Judge.

Kristen M. Fiore of Akerman LLP, Tallahassee; Michael J. Holecek of Gibson, Dunn & Crutcher LLP, Los Angeles, California; Alexandra M. Mora and Ndifreka U. Uwem of Akerman, LLP, Miami, for Appellant.

Richard E. Miller of Jacobs Law Group, PC, Philadelphia, Pennsylvania; Sean Estes of Hoyer Law Group, PLLC, Tampa; and Mark R. Rosen, admitted pro hac vice, of Jacobs Law Group, PC, West Conshohocken, Pennsylvania, for Appellees.

LUCAS, Judge.

A dispute between a pharmacy benefits manager and several pharmacies requires us to delve into the scope and effect of an arbitration agreement. In the case before us, OptumRx argues that the circuit court erred when it concluded it could not compel King’s Drugs, Inc., Vistacare Pharmacy Services LLC, Hepzibah Inc., Health Link Pharmacy, LLC, Healthwise Pharmacy Inc., and Adel Consulting, Inc. (collectively, the Pharmacies), to arbitrate their dispute with OptumRx in California. We reverse.

I.

OptumRx alleges that it entered into a Provider Agreement with the Pharmacies in which OptumRx, in essence, acts as a "middleman" on behalf of various insurance companies to negotiate and administer pharmaceutical claims for reimbursement. The agreement is lengthy and quite technical, but in this appeal, we focus on two provisions: first, the agreement states that if a "Dispute" (as broadly defined) arises and cannot be resolved through an informal meeting or conference, the Dispute "shall thereafter be submitted to binding arbitration before a panel of three arbitrators in accordance with the Commercial Dispute Procedures of the American Arbitration Association"; and second, the agreement explicitly incorporates a separate document, OptumRx’s Provider Manual.¹ Although the language within the Provider Manual has been amended over the years, the operative version we are concerned with, the 2022 Provider Manual, provides as follows:

[T]he parties will work in good faith as set forth below to resolve any and all issues, disputes, or controversies between them (hereinafter referred to as a "Dispute") including, but not limited to all questions of arbitrability or the formation, validity, scope, and interpretation of this arbitration agreement, all disputes relating in any way to the parties’ relationship, the [Provider] Agreement, or the [Provider Manual] or the breach of either agreement, and all disputes relating in any way to Network Pharmacy Provider’s status as a participating Network Pharmacy Provider in the Administrator’s network, shall be resolved exclusively by binding arbitration administered by the American Arbitration Association ….

….

Any arbitration proceeding under this Agreement shall be conducted in Los Angeles County or Orange County, California.…

….

The parties acknowledge that this arbitration agreement is part of a transaction involving interstate commerce and that the Federal Arbitration Act governs both substantive and procedural aspects of this arbitration ….

The Provider Manual further states that any party asserting a dispute "shall provide written notice to the other party identifying the nature and scope of the Dispute" and that, if the parties are then unable to resolve the dispute, any party may certify in writing the dispute wasn’t resolved and commence an arbitration.

On December 16, 2021, an attorney for the Pharmacies delivered a written "Notification of Dispute" to OptumRx that described several issues of disagreement about OptumRx’s reimbursement and administration of the Pharmacies’ prior claims.² In the letter, the Pharmacies also claimed that OptumRx was in breach of the Provider Manual. The parties’ attorneys participated in a phone conference in an attempt to resolve the disputes identified in. the letter but were unable to reach any agreement. During this conversation, OptumRx’s counsel stated that these disputes were subject to arbitration; the Pharmacies’ counsel disagreed.

On March 29, 2022, OptumRx filed petitions to compel the Pharmacies to arbitrate the disputes identified in the Pharmacies’ written notification. The petitions were later consolidated, and the Pharmacies raised various defenses to OptumRx’s requested arbitration. After hearing arguments on OptumRx’s motion to compel arbitration, the circuit court entered an order denying OptumRx’s motion and dismissing its petitions.

In its order, the circuit court concluded that 9 U.S.C. § 4 (2018) of the Federal Arbitration Act (FAA) only authorized federal district courts, not state courts, to compel arbitration. The court further found (apparently in the alternative) that if venue is specified in an arbitration agreement (as it is in the Provider Manual), then section 4 of the FAA requires a petition to compel arbitration to be filed in that venue. The court was further persuaded that the December 2021 letter did not clearly articulate a specific dispute as to the six Pharmacies named in the petitions before it, such that there was no "party aggrieved" as required under section 4 of the FAA. Finally, the court stated it was "well-settled" that the Florida Arbitration Code, §§ 682.01-.25, Fla. Stat. (2022), could not provide an independent basis to compel arbitration because under Damora v. Stresscon International, Inc., 324 So. 2d 80, 82 (Fla. 1975), a Florida circuit court could not order arbitration in another state. In dismissing the petitions, the court did not address any of the substantive claims or defenses—including whether the case was arbitrable—but rested its decision on the determination that it was without jurisdiction or lawful authority to compel arbitration.

OptumRx timely appeals the circuit court’s order. We have jurisdiction. See Fla. R. App. P. 9.130(a)(3)(C)(iv).

II.

[1–3] The legal issues presented in this appeal are somewhat intertwined but generally concern issues surrounding the subject matter jurisdiction of a circuit court, statutory interpretation of an arbitration act, and whether arbitration may be compelled under a contractual provision. In all respects, these are issues we review de novo. See generally Venn Therapeutics, LLC v. CAC Pharma Invs., LLC, 382 So.3d 6, 11 (Fla. 2d DCA Mar. 6, 2024) ("The standard of review we use when examining a trial court’s construction of an arbitration agreement as well as its application of the law to the facts is de novo." (citing Addit, LLC v. Hengesbach, 341 So. 3d 362, 366 (Fla. 2d DCA 2022))); Bell Transp., LLC v. Dep’t of Highway Safety & Motor Vehicles, 351 So. 3d 249, 250 (Fla. 2d DCA 2022) ("We review issues of statutory interpretation de novo." (citing Lab. Corp. of Am v. Davis, 339 So. 3d 318, 323 (Fla. 2022))); Friedel v. Edwards, 327 So. 3d 1242, 1244 (Fla. 2d DCA 2021) ("We review a circuit court’s determination of. subject matter jurisdiction de novo." (citing Artz rel. Artz v. City of Tampa, 102 So. 3d 747, 749 (Fla. 2d DCA 2012))).

[4] Furthermore, when an arbitration agreement is governed by the FAA, "[f]ed- eral substantive law controls arbitration issues" in state court proceedings. Airbnb, Inc. v. Doe, 336 So. 3d 698, 703 (Fla. 2022) (citing Preston v. Ferrer, 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008)).

III.

[5] The circuit court erred when it determined it was without jurisdiction to compel arbitration under section 4 of the FAA. In pertinent part, 9 U.S.C. § 4 provides:

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days’ notice in writing of such application shall be served upon the party in default.

[6–8] Section 4 of the FAA authorizes federal district courts to consider and compel arbitration in civil cases; but it does not preclude state courts from exercising their own jurisdictional power to compel arbitration when construing a contract governed by the FAA. See English v. McCrary, 348 So. 2d 293, 297 (Fla. 1977) ("The circuit courts of the State of Florida are courts of general jurisdiction … clothed with most generous powers under the Constitution…. [N]othing is outside the jurisdiction of a superior court of general jurisdiction except that which is clearly vested in other courts or tribunals, or is clearly outside of and beyond the jurisdiction vested in such circuit courts by the Constitution and the statutes enacted pursuant thereto." (quoting State ex rel. B.F. Goodrich Co. v. Trammell, 140 Fla. 500, 192 So. 175, 177 (1939))). There is a "presumption that state courts enjoy concurrent jurisdiction" to apply federal statutes such as the FAA. See Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478, 101 S.Ct. 2870, 69 L.Ed.2d 784 (1981). As the Supreme Court has observed, the FAA "creates a body of federal substantive law" that is "applicable in state and federal court." See Southland Corp. v. Keating, 465 U.S. 1, 12, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)); see also McKenzie Check Advance of Fla., LLC v. Betts, 112 So. 3d 1176, 1185 (Fla. 2013) ("[T]he Supreme Court has held that the FAA applies in both federal and state courts." (citing Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 272, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995))); Sachse Constr. & Dev. Corp. v. Affirmed Drywall, Corp., 251 So....