1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Local 640 Trustees of IBEW and Arizona No. CV-20-01260-PHX-MTL Chapter NECA Health and Welfare Trust 10 Fund, ORDER
11 Plaintiff,
12 v.
13 CIGNA Health and Life Insurance Company, 14 Defendant. 15 16 The Board of Trustees of the IBEW Local No. 640 and Arizona Chapter NECA 17 Health and Welfare Trust Fund (the “Board” or the “Fund’s Trustees”) brings this action 18 as a fiduciary for a welfare benefit plan (the “Plan”). (Doc. 1.) Defendant Cigna Health and 19 Life Insurance Company (“Cigna”) has moved to dismiss this case and compel arbitration. 20 (Doc. 25.) Cigna’s motion is fully briefed. (Docs. 25, 28, 29.) For the reasons given below, 21 the Court will grant the motion to compel arbitration and dismiss this case. 22 I. BACKGROUND 23 The International Brotherhood of Electrical Workers, Local No. 640 and the 24 Arizona Chapter of the National Electrical Contractors Association established the IBEW 25 Local No. 640 and Arizona Chapter NECA Health and Welfare Trust Fund (the “Fund”). 26 (Doc. 1 ¶ 2.) The Fund allows employers and unions who are parties to collective 27 bargaining agreements to pool their resources and share the costs of running welfare benefit 28 plans. (Id. ¶ 3.) The Fund’s Trustees adopted the Plan, which is an employee welfare 1 benefit plan under § 3(1) of the Employee Retirement Income Security Act of 1974 2 (“ERISA”). (Id. ¶¶ 4–5.) 3 Rather than purchase insurance coverage, the Fund’s Trustees opted to self-fund the 4 Plan. (Id. ¶ 8.) Accordingly, employers, employees, and retirees contribute to the Fund, 5 and that money is then used to pay claims of Plan participants and beneficiaries. (Id. ¶¶ 25– 6 26.) The Board, “acting for the Fund as Plan sponsor,” executed an Administrative Services 7 Only Agreement (“ASO Agreement” or “Agreement”) with Cigna, which is one of the 8 largest health service companies in the country. (Id. ¶¶ 12, 39; Doc. 26-1 at 4.) Under the 9 terms of the Agreement, Cigna provided claims administration services to the Plan. (Doc. 1 10 ¶ 23; Doc. 26-1, Ex. A.) Consistent with the Agreement’s terms, Cigna received and 11 reviewed claims for Plan benefits, determined whether benefits were payable, and if so, 12 disbursed payments to healthcare providers using money supplied by the Fund. (Doc. 1 13 ¶ 33.) In exchange for its services, Cigna received compensation from the Plan. (Id. ¶¶ 28, 14 32.) Because the ASO Agreement grants Cigna the authority to control the Plan’s bank 15 account, Cigna paid itself the amounts the Plan allegedly owed. (Id.) 16 Among the terms in the Agreement are mandatory dispute resolution procedures. 17 (Doc. 26-1 at 9–10.) The procedures require “any dispute between the Parties arising from 18 or relating to the performance or interpretation of [the ASO] Agreement” to “first be 19 referred to an executive level employee of each Party who shall meet and confer with 20 his/her counterpart to attempt to resolve the dispute.” (Id. at 9.) If the dispute is not resolved 21 within 35 days of the request for executive review, “the disputing Party shall initiate 22 mediation.” (Id. at 10.) If the dispute remains unresolved, it “shall be settled by binding 23 arbitration.” (Id.) The term “Parties,” as used in the Agreement, “refers to [the] Fund and 24 CHLIC [i.e., Cigna], each a ‘Party’ and collectively, the ‘Parties.’” (Id. at 4.) 25 In October 2019, counsel for the Fund and the Fund’s Trustees provided Cigna 26 written notice of a dispute and requested executive review under the terms of the ASO 27 Agreement. (Doc. 26-1, Ex. C.) The Fund alleged that Cigna had breached its fiduciary 28 duties under ERISA, breached the ASO Agreement, and engaged in overpayment and self- 1 dealing. (Id. at 11–12.) To establish Cigna owed fiduciary duties under ERISA, the notice 2 explained: 3 The Agreement expressly empowers Cigna with each individually sufficient discretionary power to establish 4 ERISA fiduciary status. Foremost, Cigna has authority over 5 the Fund’s bank account, which is funded with ERISA- regulated monies deposited to pay the health expenses and the 6 administrative costs of the Fund’s enrollees. Additionally, the 7 Agreement stipulates Cigna has the authority to “receive and review claims for Plan Benefits,” “determine the Plan 8 Benefits, if any, payable for such claims,” and “disburse 9 payments of Plan Benefits to claimants.” In sum, the Agreement grants Cigna both requisite discretionary powers 10 necessary to find that Cigna is, as a claims administrator for a 11 self-funded plan, an ERISA fiduciary. Cigna has the ability to determine claims and pay claims. Based on this clear 12 reasoning, there can be no dispute that Cigna is an ERISA fiduciary to the Fund. 13 14 (Id. at 11 (footnote omitted) (second emphasis added).) The notice further alleged that 15 Cigna had “pa[id] unreasonable or unnecessary fees,” used “inflated and arbitrary billed 16 charges in the calculation of its fees,” and “pa[id] itself fees on claims that the Fund ha[d] 17 already been billed for and [were] not supported by the Agreement.” (Id. at 12–13.) 18 Additionally, the Fund noted that “Cigna’s Cost Containment Fees [had] increased from 19 roughly $34.50 [per employee per month (“PEPM”)] in 2016, to $75 PEPM for 2017, to 20 $112 PEPM for 2018 and to $122 PEPM for the first quarter of 2019” and argued Cigna 21 “masked” those fees “as a claims expense.” (Id. at 13–14.) In the Fund’s view, Cigna’s 22 actions “exacerbate[d] the breach and demonstrate[d] a willful disregard of Cigna’s duty 23 as a Plan fiduciary.” (Id. at 14.) 24 Cigna responded to the notice, and the Fund then sent Cigna a follow-up letter. 25 (Doc. 27, Exs. D, E.) In its letter, the Fund maintained that “Cigna had a duty, as a fiduciary 26 of the fund, to bring [certain] extreme fees to the attention of the trustees” and reasserted 27 that “Cigna has breached its fiduciary duty to the Fund and violated the terms of the ASO 28 Agreement.” (Id., Ex. E (emphasis added).) “Given the nature of [the] dispute, the amount 1 at issue, and the parties’ stated positions,” the Fund believed the dispute would not likely 2 be resolved by executive review, and thus the Fund “propose[d] that the parties agree to 3 move directly to the required mediation.” (Id.) 4 Instead of engaging in mediation, the Fund’s Trustees brought this lawsuit. In its 5 Complaint, the Board, “as fiduciary of its welfare benefit Plan,” asserts claims for breach 6 of fiduciary duty and prohibited transactions under ERISA. (Doc. 1.) The Complaint 7 alleges that Cigna “charged excessive fees to the Plan,” including fees for “a so-called ‘cost 8 containment service’” and “[h]idden [f]ees on in-network claims.” (Id. ¶¶ 60, 61, 78.) The 9 Board alleges that Cigna “processed grossly inflated healthcare claims from [non- 10 participating providers], and then used those inflated claims to calculate the amount of 11 [h]idden [f]ees to pay itself.” (Id. ¶ 66.) The Complaint also alleges that “Cigna’s fees for 12 its so-called ‘cost containment program’ have increased from roughly $34.50 per member, 13 per month (“PMPM”) in 2016, to $75 PMPM for 2017, to $112 PMPM for the first quarter 14 of 2019.” (Id. ¶ 124.) “These fees,” says the Board, “are many, many times the market rate 15 for out-of-network claims administration, violate Plan terms, and are indefensible under 16 any circumstance.” (Id. ¶ 125.) 17 Relying on the ASO Agreement’s arbitration clause, Cigna moves to compel 18 arbitration and dismiss this case. (Doc. 25.) The motion is ripe for ruling. (Docs. 25, 28, 19 29.) The Court ordered supplemental briefing on the Supreme Court’s decision in GE 20 Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S. 21 Ct. 1637 (2020), which the parties timely submitted. (Docs. 37, 38.) The Court now rules. 22 II. LEGAL STANDARD 23 The Federal Arbitration Act (“FAA”) governs arbitration agreements in contracts 24 involving interstate commerce. 9 U.S.C. § 2. By the FAA’s terms, arbitration agreements 25 “shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or 26 in equity for the revocation of any contract.” Id. The FAA reflects the federal policy 27 favoring arbitration. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28 24 (1983). The party seeking to compel arbitration bears the initial burden of demonstrating 1 that a valid agreement exists to arbitrate the claims at issue. Bridge Fund Cap. Corp. v. 2 Fastbucks Franchise Corp., 622 F.3d 996, 1005 (9th Cir. 2010) (noting “[t]he [party 3 seeking arbitration] bears the burden of proving the existence of a valid arbitration 4 agreement by the preponderance of the evidence”). If an arbitration clause is valid and 5 enforceable, this Court must stay or dismiss the action to allow the arbitration to proceed. 6 Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA), 560 F.3d 935, 7 940 (9th Cir. 2009). “The party resisting arbitration bears the burden[] of proving that the 8 claims at issue are unsuitable for arbitration.” Munro v. Univ. of S. Cal., 896 F.3d 1088, 9 1091 (9th Cir. 2018) (quoting Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 10 (2000)). Thus, “any doubts concerning the scope of arbitrable issues should be resolved in 11 favor of arbitration . . . .” Moses H. Cone Mem’l Hosp., 460 U.S. at 24–25. 12 Where no conflict between the FAA and the substantive statutory provision exists, 13 the courts involvement is limited to “determining (1) whether a valid agreement to arbitrate 14 exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Munro, 15 896 F.3d at 1091 (internal quotations omitted). If the Court answers both questions in the 16 affirmative, the FAA compels the enforcement of the arbitration agreement in accordance 17 with its terms. Id.; see also Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 18 1130 (9th Cir. 2000). “There is no room for discretion[:]” the Act “‘mandates that district 19 courts shall direct the parties to proceed to arbitration on issues as to which an arbitration 20 agreement has been signed.’” Munro, 896 F.3d at 1091 (quoting Dean Witter Reynolds, 21 Inc. v. Byrd, 470 U.S. 213, 218 (1985)). 22 III. DISCUSSION 23 As an initial matter, the Court addresses whether it has subject-matter jurisdiction 24 over the alleged claims. The Complaint asserts that the Court has federal question 25 jurisdiction and jurisdiction under 29 U.S.C. § 1132(e) “because this action is brought by 26 a fiduciary for relief under ERISA.” (Doc. 1 ¶ 14.) That assertion is consistent with the 27 Complaint’s opening paragraph, which reads: “The Board of Trustees of IBEW Local No. 28 640 and Arizona Chapter NECA Health and Welfare Trust Fund . . . , as fiduciary of its 1 welfare benefit Plan . . . , states as follows for its Complaint against Cigna Health and Life 2 Insurance Company . . . .” (Id. at 1.) At odds with those allegations, Plaintiff’s counsel 3 seemed to suggest, for the first time at oral argument, that the Plan, itself, is the plaintiff in 4 this case. Unofficial Transcript of Oral Argument at 7, Loc. 640 Trs. of IBEW & Ariz. 5 Chapter NECA Health & Welfare Tr. Fund v. CIGNA Health & Life Ins. Co., CV-20- 6 01260-PHX-MTL (July 30, 2021) (hereinafter “Transcript of Oral Argument”). In 7 response, Cigna’s counsel noted that, if the Plan is truly bringing this action on its own 8 behalf, the Plan lacks standing to sue under § 502(a) of ERISA. Id. at 25. From the Court’s 9 independent research, Cigna appears to be correct. See Loc. 159 v. Nor-Cal Plumbing, Inc., 10 185 F.3d 978, 983 (9th Cir. 1999) (“We have previously held that an ERISA plan itself 11 does not have standing to sue under § 502(a) of ERISA because it is not a plan participant, 12 beneficiary or fiduciary.”). That being said, the Complaint, which guides this litigation, 13 alleges that the Fund’s Trustees—i.e., the Board—are bringing this action on behalf of the 14 Plan. The Complaint alleges the Board is the Plan’s fiduciary as defined in Section 15 402(a)(1) of ERISA. (Doc. 1 ¶ 1.) Thus, the Court has subject-matter jurisdiction under 28 16 U.S.C. § 1331 and 29 U.S.C. § 1132. 17 The Court now turns to the merits of Cigna’s motion. Cigna argues this matter 18 belongs in arbitration and should be dismissed. (Doc. 25.) The Board opposes the motion 19 on two grounds. (Doc. 28.) First, it argues no arbitration agreement exists between the 20 relevant parties because the Plan “owns the claims raised by the Board,” and the Fund, not 21 the Plan, is a party to the ASO Agreement. (Id. at 1.) Second, the Board contends that the 22 claims fall beyond the scope of the arbitration provision because it is a “narrow” provision 23 and the alleged claims only concern “Cigna’s distinct, preexisting statutory obligations 24 under ERISA.” (Id. at 2.) Thus, there are two issues before the Court: (1) whether the Plan 25 is bound by the Agreement, and, if so, (2) whether the arbitration clause encompasses the 26 alleged claims. The Court takes the issues in turn. 27 A. Application of the ASO Agreement 28 The ASO Agreement was executed “b[y] and [b]etween” Cigna and the Fund. 1 (Doc. 26 at 2.) The Board does not challenge the validity of the arbitration clause. Indeed, 2 the Board concedes that the Fund would be required to arbitrate a breach of contract claim 3 against Cigna. Transcript of Oral Argument at 15. The Board, instead, argues that only the 4 Fund, and not the Plan, is bound by the arbitration provision. (Doc. 28 at 6–10.) The Board 5 is correct that the relevant question in this case is whether the Plan is bound to arbitrate. 6 See Dorman v. Charles Schwab Corp., 780 F. App’x 510, 513 (9th Cir. 2019) (citing 7 Munro, 896 F.3d at 1092). To answer that question, the Court must apply Arizona law.1 8 See Benson v. Casa de Capri Enters., LLC, 980 F.3d 1328, 1331 (9th Cir. 2020) (applying 9 Arizona law to determine whether a particular party was bound by an arbitration 10 agreement); see also Dylag v. W. Las Vegas Surgery Ctr., LLC, 719 F. App’x 568, 570 (9th 11 Cir. 2017) (“Following the U.S. Supreme Court’s decision in Arthur Andersen LLP v. 12 Carlisle, 556 U.S. 624, 129 S. Ct. 1896, 173 L.Ed.2d 832 (2009), courts must apply state 13 law in determining the applicability of [an arbitration agreement].” (emphasis in original)). 14 In Arizona, “whether a nonparty is bound by a contract term is properly resolved by 15 the Court as a matter of law.” JTF Aviation Holdings, Inc. v. CliftonLarsonAllen LLP, 249 16 Ariz. 510, 513 (2020) (internal quotations and alternations omitted). “In general, a party is 17 bound to arbitrate only those disputes which it has contractually agreed to arbitrate.” Smith 18 v. Pinnamaneni, 227 Ariz. 170, 176 (App. 2011). But the Arizona Supreme Court 19 recognizes that nonsignatories can be bound to arbitrate under ordinary contract and agency 20 principles, like equitable estoppel. See JTF Aviation Holdings, Inc., 249 Ariz. at 513–14. 21 Arizona courts apply “a variant of equitable estoppel,” which is often referred to as 22 “direct benefits estoppel.” Benson, 980 F.3d at 1331. “In the arbitration context, a 23 nonsignatory to an agreement requiring arbitration may be estopped that is, barred, from 24 1 Relying on Setty v. Shrinivas Sugandhalaya LLP, No. 18-35573, --- F.4th ----, 2021 WL 25 2817005 (9th Cir. 2021), the Board argues that “federal substantive law” governs whether the Plan is bound by the ASO agreement. (Doc. 37 at 1.) Setty’s directive is clear: “In cases 26 involving the New York Convention, in determining the arbitrability of federal claims by or against non-signatories to an arbitration agreement, we apply ‘federal substantive law,’ 27 for which we look to ‘ordinary contact and agency principles.’” 2021 WL 2817005, at *2. The instant action does not involve the New York Convention. Thus, Setty offers the Board 28 no support, and the Court will apply Arizona law, as required under Arthur Anderson LLP v. Carlisle, 556 U.S. 624 (2009). 1 avoiding arbitration if that party is claiming or has received direct benefits from the 2 contract.” Schoneberger v. Oelze, 208 Ariz. 591, 594 (App. 2004), superseded on other 3 grounds by A.R.S. § 14-10205; Turley v. Beus, No. 1 CA-CV 15-0107, 2017 WL 410976, 4 at *6 (Ariz. App. Jan. 31, 2017) (“[The equitable estoppel doctrine] evaluate[s] whether a 5 nonsignatory has received benefits from an arbitration agreement or a contract containing 6 an arbitration clause and, therefore, should be equitably barred from avoiding arbitration.”). 7 “[T]he direct-benefits test can be satisfied in several ways.” Benson v. Casa de 8 Capri Enters., LLC, No. CV-18-00006-PHX-DWL, 2019 WL 3430159, at *4 (D. Ariz. 9 July 30, 2019) (citing Austin v. Austin, 237 Ariz. 201, 210 (App. 2015)). “[A] nonsignatory 10 may be compelled to arbitrate” if it “knowingly exploits the benefits of an agreement 11 containing an arbitration clause.” Austin, 237 Ariz. at 210. Alternatively, a nonsignatory 12 can be required to arbitrate if it “seeks to enforce terms of that agreement or asserts claims 13 that must be determined by reference to the agreement.” Id. 14 To start, the Court notes that it is skeptical of the Board’s linguistic gymnastics. In 15 this litigation, the Board attempts to draw a hard line between the Fund and the Plan, but 16 the record reveals that the Fund’s Trustees have not always observed this distinction. For 17 example, prior to this lawsuit, the Board alleged that Cigna owed fiduciary duties under 18 ERISA to the Fund. (See Doc. 26-1 at 11 (stating “Cigna has authority over the Fund’s 19 bank account” and “Cigna is an ERISA fiduciary to the Fund.” (emphasis added)); Doc. 27, 20 Ex. E at 1 (“Cigna had a duty, as a fiduciary of the fund, to bring these extreme fees to the 21 attention of the trustees.” (emphasis added)); Doc. 27, Ex. E at 2 (“Cigna has breached its 22 fiduciary duty to the Fund and violated the terms of the ASO Agreement.” (emphasis 23 added)).) Now that the Board has shifted to a litigation-based strategy, it abandons this 24 theory and adamantly alleges that Cigna’s duties are owed solely to the Plan. (Doc. 1 ¶ 41 25 (“Cigna functioned as a fiduciary in its administration of the Plan.” (emphasis added)); 26 Doc. 28 at 2 (“Cigna conflates the Fund, Board, and Plan.”).) If the Plan and the Fund are 27 not separate entities, the Board’s argument that “no arbitration agreement exists between 28 the Plan and Cigna” must fail. See Nor-Cal Plumbing, Inc., 185 F.3d at 982 (finding that 1 trust funds were, themselves, ERISA plans). But even if the Board is correct that the Plan 2 and the Fund are distinct entities, the Plan would still be compelled to arbitrate under the 3 doctrine of equitable estoppel.2 4 There is no apparent dispute that the Plan received direct benefits from the 5 Agreement in the form of Cigna’s administrative services. Transcript of Oral Argument at 6 14 (“Let’s be honest. The Plan—of course, it benefits in some way from the fact that 7 someone is administering these claims because that effectuates the purpose of the Plan.”); 8 see Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., No. 06CV09210 IEG (JMA), 9 2006 WL 8455626, at *5 (S.D. Cal. Nov. 7, 2006) (binding a nonsignatory plan to an 10 arbitration agreement signed by the plan sponsor because “the Plan itself receive[d] direct 11 benefits from the Agreement in the form of defendant’s administrative services”). There is 12 also substantial evidence in the record that the Plan “knowingly exploit[ed]” the ASO 13 Agreement despite having never allegedly signed it. Austin, 237 Ariz. at 210. The Board 14 took advantage of the Agreement’s terms by subjecting the very claims alleged in this case 15 to the dispute resolution procedures outlined in the Agreement. (See Doc. 26-1, Ex. C.) 16 Regardless of whether the claims were alleged before this lawsuit or in this lawsuit, the 17 Plan is the entity that would “benefit from a winning claim for breach of fiduciary duty.” 18 See Munro, 896 F.3d at 1093. Thus, by availing itself of the Agreement’s dispute resolution 19 procedures, the Plan “knowingly exploit[ed]” the Agreement’s terms.3
20 2 The Board argues Cigna waived its equitable estoppel argument because it was not raised in Cigna’s motion. (Doc. 30-1, Ex. A at 3.) Although the Ninth Circuit has held that 21 litigants waive arguments if raised for the first time in a reply brief, Burlington Northern & Santa Fe Railway Co. v. Vaughn, 509 F.3d 1085, 1093 n.3 (9th Cir. 2007), the Ninth 22 Circuit has discretion to review an issue if it is raised in an appellee’s brief, In re Riverside- Linden Inv. Co., 945 F.2d 320, 324 (9th Cir. 1991). Applying those principles to the case 23 at bar, the Court will exercise its discretion to consider Cigna’s equitable estoppel argument. The Board raised a related theory, agency, in its responsive memorandum. 24 (Doc. 28 at 10.) See JTF Aviation Holdings Inc., 249 Ariz. at 513–14 (noting that theories of “incorporation by reference, assumption, agency, veil-piercing or alter ego, equitable 25 estoppel, and third-party beneficiary . . . are not analytically distinct. They are a toolbox that courts can use to get at the essential justice of each case.”). Moreover, the Board has 26 had an adequate opportunity to address Cigna’s estoppel argument in its supplemental brief. (Doc. 37.) Accordingly, the Court will reject the Board’s waiver argument and 27 consider the doctrine of equitable estoppel. 3 The Court is not persuaded by the Board’s arguments based on Comer v. Micor, Inc., 436 28 F.3d 1098 (9th Cir. 2006). (Doc. 37 at 2–4.) Considering Arthur Anderson, this Court must apply Arizona law in determining the applicability of equitable estoppel. See Benson, 980 1 If that is not enough, the direct-benefits test is also satisfied because the alleged 2 ERISA claims can only be resolved “by reference to the [ASO Agreement].” See Austin, 3 237 Ariz. at 210. The Complaint asserts that Cigna breached fiduciary duties that it owed 4 to the Plan under ERISA. (Doc. 1 ¶¶ 137–43.) ERISA is “a comprehensive and reticulated 5 statute[.]” Mertens v. Hewitt Assocs., 508 U.S. 248, 251 (1993). It “provides that not only 6 the persons named as fiduciaries by a benefit plan, see 29 U.S.C. § 1102(a), but also anyone 7 else who exercises discretionary control or authority over the plan’s management, 8 administration, or assets, see § 1002(21)(A), is an ERISA ‘fiduciary.’” Id. The Board here 9 does not allege that Cigna is a named fiduciary. (Doc. 1 ¶¶ 22–41.) Thus, the Board must 10 establish that Cigna is a “functional” fiduciary under § 1002(21)(A). Absent a contractual 11 grant of authority, Cigna would not qualify as a functional fiduciary. Put differently, the 12 ASO Agreement is what ultimately delegated “authority, responsibility and discretion” for 13 “claim administrative duties” to Cigna. (Doc. 26 at 5.) Therefore, to establish Cigna’s 14 fiduciary status, the Board would be required to, at minimum, reference the terms of the 15 ASO Agreement. See IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1419–21 (9th Cir. 16 1997) (evaluating a service provider’s fiduciary status by referencing the terms of an 17 administrative services contract). 18 In sum, the Court will not allow the Plan to claim the benefits of the ASO Agreement 19 while simultaneously avoiding its burdens. See E.I. DuPont de Nemours & Co. v. Rhone 20 Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 200 (3d Cir. 2001) (quoting 21 Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th 22 Cir. 2000)). Doing so “would both disregard equity and contravene the purposes underlying 23 enactment of the Arbitration Act.” Id. Accordingly, because the direct-benefits test is 24 satisfied, the Court concludes that the Plan is bound by the ASO Agreement. 25 B. Arbitrability of Claims 26 Because the Plan is bound by the ASO Agreement, the Court next considers whether 27 the Agreement’s arbitration provision encompasses the claims at issue. The Court begins 28 F.3d at 1331. 1 with the text of the provision. It reads: “any dispute between the Parties arising from or 2 relating to the performance or interpretation of this Agreement . . . . shall be settled by 3 binding arbitration,” unless the parties first resolve the controversy by way of executive 4 review or mediation. (Doc. 26 at 9–10.) The Board argues the Plan’s statutory ERISA 5 claims fall beyond the scope the Agreement’s “narrow arbitration provision.” (Doc. 28 6 at 11.) For the reasons expressed below, the Court disagrees. 7 The Court first rejects the Board’s characterization of the arbitration provision as 8 “narrow.” (Id.) Where, as here, a provision requires arbitration of disputes “arising out of 9 or relating to” an agreement, the provision is considered broad. See Cape Flattery Ltd. v. 10 Titan Mar., LLC, 647 F.3d 914, 922 (9th Cir. 2011) (“[W]hen parties intend to include a 11 broad arbitration provision, they provide for arbitration ‘arising out of or relating to’ the 12 agreement.”); Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th 13 Cir. 1983) (noting the phrase “relating to” broadens the scope of arbitration agreements). 14 The Board argues the phrase “performance or interpretation of this Agreement” narrows 15 the provision’s scope. (Doc. 28 at 11.) But, the Ninth Circuit has classified an arbitration 16 agreement containing similar language as “broad and far reaching.” See Chiron Corp., 207 17 F.3d at 1131 (“The parties’ arbitration clause is broad and far reaching: ‘Any dispute, 18 controversy or claim arising out of or relating to the validity, construction, enforceability 19 or performance of this Agreement shall be settled by binding Alternate Dispute 20 Resolution . . . .”). Thus, the Court concludes the arbitration clause is broad. 21 Having determined the scope of the provision, the Court turns now to whether the 22 alleged claims are arbitrable. Albeit in a different context, the Ninth Circuit has held that 23 contract terms “covering disputes ‘relating to’ a particular agreement apply to any disputes 24 that reference the agreement or have some ‘logical or causal connection’” thereto. See Yei 25 A. Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081, 1086 (9th Cir. 2018) (citation 26 omitted). “The dispute need not grow out of the contract or require interpretation of the 27 contract in order to relate to the contract.” Id. (citations omitted). Rather, the “factual 28 allegations need only ‘touch matters’ covered by the contract containing the arbitration 1 clause.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 (9th Cir. 1999). 2 As discussed at length above, the alleged ERISA claims necessarily reference the 3 ASO Agreement. Supra Part III.A; see also Huffington v. T.C. Grp., LLC, 637 F.3d 18, 22 4 (1st Cir. 2011) (explaining that the phrase “relating to” is synonymous with the phrase 5 “with reference to”). In addition, the factual allegations in the Complaint are virtually 6 identical to the allegations asserted by the Board in its 2019 request for executive review. 7 When allegations underlying a plaintiff’s claims “touch” matters covered by an arbitration 8 agreement, “those claims must be arbitrated, whatever the legal labels attached to them.” 9 Holick v. Cellular Sales of N.Y., LLC, 802 F.3d 391, 395 (2d Cir. 2015). To find otherwise 10 would elevate the form of the Board’s claims over their substance. See Chelsea Fam. 11 Pharmacy, PLLC v. Medco Health Sols., Inc., 567 F.3d 1191, 1198 (10th Cir. 2009) 12 (“Focusing on the facts rather than on a choice of legal labels prevents a creative and artful 13 pleader from drafting around an otherwise-applicable arbitration clause.”). 14 The Board’s theory—that breach of fiduciary duty claims are exempt from the Ninth 15 Circuit’s ruling that ERISA claims are generally arbitrable—is unavailing. (Doc. 28 at 6– 16 7.) The Board relies on Ramos v. Natures Image, Inc., No. CV 19-7094 PSG (ASx), 2020 17 WL 2404902 (C.D. Cal. Feb. 19, 2020), for support. But Ramos does not stand for the 18 proposition that breach of fiduciary claims under ERISA cannot be arbitrated. Instead, the 19 district court in Ramos explained: “The recent Ninth Circuit cases of Munro and Dorman 20 indicate that when an individual employee brings a claim for ERISA breach of fiduciary 21 duty, that claim is not subject to arbitration unless the plan itself has consented.” Ramos, 22 2020 WL 2404902, at *6. As that passage suggests, the Board’s argument is belied by 23 recent Ninth Circuit caselaw. For example, in Dorman, the Ninth Circuit held that a 24 “district court erred by refusing to compel arbitration of [] ERISA breach of fiduciary 25 claims.” 780 F. App’x at 512. Thus, the Court rejects the Board’s argument. 26 Last, the Board contends the arbitration provision does not cover the alleged claims 27 because it only applies to disputes between the Fund and Cigna. (Doc. 28 at 10.) As noted, 28 the record is ambiguous as to whether the Fund and the Plan are actually distinct entities. || Supra Part I.A. Before this lawsuit, the Board alleged that Cigna owed fiduciary duties under ERISA to the Fund. (Docs. 26-1 at 11; Doc. 27, Ex. E at 1-2.) Now, when faced with 3|| Cigna’s motion to compel arbitration, the Fund’s Trustees are adamant that Cigna’s 4|| fiduciary duties are owed only to the Plan. (Doc. 28.) Under the FAA, “any doubts 5 || concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether || the problem at hand is the construction of the contract language itself or an allegation of 7\| waiver, delay, or a like defense to arbitrability.”” Moses H. Cone Mem’! Hosp., 460 U.S. at 8 || 24-25. At minimum, the arbitration clause is “susceptible of an interpretation that covers 9|| the asserted dispute,” and considering the presumption in favor of arbitration, the Court 10 || concludes the arbitration clause governs the alleged claims. See United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-83 (1960). The Court will therefore grant Cigna’s motion to compel arbitration and dismiss this case. IV. CONCLUSION 14 Accordingly, 15 IT IS ORDERED granting Defendant Cigna Health and Life Insurance Company’s Motion to Dismiss and Compel Arbitration (Doc. 25). 17 IT IS FURTHER ORDERED dismissing this case in its entirety. 18 Dated this 2nd day of August, 2021. 19 Mi Chak T. Sibude Michael T. Liburdi 22 United States District Judge 23 24 25 26 27 28
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