Scripps Health v. Bcbs of Kansas ( 2014 )

FILED
+Corrected July 15, 2014 MAY 30 2014
MOLLY C. DWYER, CLERK
NOT FOR PUBLICATION U.S. COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SCRIPPS HEALTH, A California No. 12-56493
corporation; SOUTH BAY SURGICAL
ASSOCIATES MEDICAL GROUP, INC., D.C. No. 3:10-cv-02028-DMS-
A California corporation, RBB
Plaintiffs - Appellees,
MEMORANDUM*
v.
BLUE CROSS AND BLUE SHIELD OF
KANSAS, INC., a Kansas Corporation,
Defendant - Appellant.
Appeal from the United States District Court
for the Southern District of California
Dana M. Sabraw, District Judge, Presiding
Argued and Submitted May 12, 2014
Pasadena, California
Before: PREGERSON, REINHARDT, and NGUYEN, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Blue Cross and Blue Shield of Kansas (“BCBS Kansas”) appeals the district
court’s final judgment in favor of Scripps Health (“Scripps”), confirming the
arbitration award at issue. BCBS Kansas also appeals an interlocutory order
relating to that judgment—the denial of its motion to dismiss. As the facts and
procedural history are familiar to the parties, we do not recite them here except as
necessary to explain our disposition. We have jurisdiction under 28 U.S.C. § 1291,
and we affirm.
This case arises out of a dispute over payment for hospital services provided
to a BCBS Kansas member at a Scripps hospital in California. In its complaint,
Scripps set forth two claims against BCBS Kansas: one for breach of contract and
the other for breach of implied contract. In the district court, BCBS Kansas moved
to dismiss both claims. In the event the motion to dismiss was denied as to the
breach of contract claim, BCBS Kansas moved to compel arbitration of that claim
and to stay the remaining claims. The district court denied BCBS Kansas’s motion
to dismiss, holding that Scripps stated a valid breach of contract claim against
BCBS Kansas where Scripps alleged that BCBS Kansas accepted the benefits of a
contract between Scripps and Blue Cross of California in the form of a discounted
rate for services. The district court granted BCBS Kansas’s motion to compel
arbitration of the breach of contract claim and stayed the remaining claims.
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We review de novo the district court’s ruling on a motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. AE ex.rel.
Hernandez v. Cnty. of Tulare, 666 F.3d 631, 636 (9th Cir. 2012). Factual
allegations of the complaint are accepted as true and construed in the light most
favorable to the plaintiff. Id. “[T]he factual allegations that are taken as true must
plausibly suggest an entitlement to relief.” Starr v. Baca, 652 F.3d 1202, 1216 (9th
Cir. 2011).
Here, if we accept the factual allegations of the complaint as true and
construe them in the light most favorable to Scripps, the complaint articulates
sufficient facts to support Scripps’s breach of contract claim against BCBS Kansas.
+Thus, we affirm the district court’s denial of BCBS Kansas’s motion to dismiss.
The arbitrator’s final award stated that BCBS Kansas breached an express or
implied contract between BCBS Kansas and Scripps, BCBS Kansas owes Scripps
damages based on that breach, and that BCBS Kansas owes Scripps interest on
those damages. In the district court, BCBS Kansas moved to vacate the arbitration
award. The district court confirmed the arbitration award, entering final judgment
in favor of Scripps.
We review de novo a district court’s “decision to vacate or confirm an
arbitration award.” New Regency Prods., Inc. v. Nippon Herald Films, Inc., 501
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F.3d 1101, 1105 (9th Cir. 2007). Under the Federal Arbitration Act, the district
court may vacate an arbitration award if “arbitrators exceed their powers, or so
imperfectly executed them that a mutual, final, and definite award upon the subject
matter submitted was not made.” 9 U.S.C. § 10(a)(4).
“A party seeking relief under [§ 10(a)(4)] bears a heavy burden.” Oxford
Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013). BCBS Kansas argues
that the district court should have vacated the arbitration award because the
arbitrator decided a claim other than the claim submitted to arbitration. BCBS
Kansas fails to carry its burden, however, because “[t]he arbitrator’s interpretation
of the scope of his powers is entitled to the same level of deference as his
determination of the merits.” Schoenduve Corp. v. Lucent Techs., Inc., 442 F.3d
727, 733 (9th Cir. 2006) (internal citation omitted).
BCBS Kansas also fails to carry its burden as to its claim that the arbitrator
manifestly disregarded the law. “[A]rbitrators exceed their powers . . . not when
they merely interpret or apply the governing law incorrectly, but when the award is
completely irrational, or exhibits a manifest disregard of the law.” Biller v. Toyota
Motor Corp., 668 F.3d 655, 665 (9th Cir. 2012) (internal citation omitted). “To
vacate an arbitration award [based on manifest disregard for the law], it must be
clear from the record that the arbitrator recognized the applicable law and then
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ignored it.” Id. at 665 (internal citation and quotation marks omitted). Because the
record in this case demonstrates neither that the arbitrator “recognized the
applicable law and then ignored it,” Biller, 668 F.3d at 665, nor that the arbitrator
did more than “merely interpret or apply the governing law incorrectly,” Id. at 655,
we affirm the district court’s final judgment and confirmation of the arbitration
award.
AFFIRMED.
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