Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc.

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-13761
________________________
D.C. Docket No. 1:00-md-01334-FAM
MANAGED CARE ADVISORY GROUP, LLC,
Plaintiff - Appellee,
versus
CIGNA HEALTHCARE, INC.,
Defendant - Appellant,
EPIQ SYSTEMS, INC.,
DAVID GARCIA,
NEIL MANNING,
IMEDECS,
MILLENNIUM HEALTHCARE CONSULTING, INC.,
MARY FALBO,
Interested Parties - Appellants.
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________________________
Appeals from the United States District Court
for the Southern District of Florida
________________________
(September 18, 2019)
Before JILL PRYOR and BRANCH, Circuit Judges, and REEVES,* District
Judge.
PER CURIAM:
Medical providers filed several class action lawsuits against managed care
insurance companies, including CIGNA Healthcare, Inc. (“CIGNA”). These
actions alleged that the insurers improperly processed and rejected certain
physicians’ claims for payment. The actions were consolidated into Multidistrict
Litigation (“MDL”) before the United States District Court for the Southern
District of Florida. The class and CIGNA reached a settlement after extensive
litigation and the district court subsequently approved the parties’ Settlement
Agreement.
Following the settlement, Managed Care Advisory Group, LLC (“MCAG”),
acting on behalf of class members, entered into an arbitration agreement with
CIGNA in an attempt to resolve a dispute over a portion of the settlement funds.
*
The Honorable Danny C. Reeves, United States Chief District Judge for the Eastern
District of Kentucky, sitting by designation.
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The Settlement Agreement did not provide for arbitration and MCAG was not a
party to it. Instead, MCAG claimed to represent class members who were parties
to the Settlement Agreement. The arbitrator summonsed the settlement claims
administrator and independent review entities (“IREs”) 1 to appear for a live
hearing and video conference and to bring with them certain documents. MCAG
filed a motion to enforce the arbitral summonses in the district court approximately
three years after it had closed all proceedings involving the MDL. CIGNA
responded to MCAG’s motion to enforce the arbitral summonses with a motion to
strike the summonses. The district court referred the matter to a magistrate judge
who denied CIGNA’s motion and granted MCAG’s request to enforce the
summonses. CIGNA and the summonsed parties appealed the magistrate judge’s
decision to the district court and, at the district court’s suggestion, CIGNA filed a
motion to enforce the settlement and compel an accounting.
The district court affirmed the magistrate judge’s decision, enforcing the
arbitral summonses, but denied CIGNA’s motion to enforce the Settlement
Agreement and compel an accounting stating, “[t]he Arbitrator shall be allowed to
arbitrate the claims in the manner he sees fit.” After careful review of the record
1
The IREs are organizations selected by mutual agreement of counsel for the parties to
the Settlement Agreement. Their role is to review CIGNA’s disposition of insurance claims
submitted pursuant to the Settlement Agreement.
3
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and with the benefit of oral argument, we reverse enforcement of the arbitral
summonses. Additionally, we reverse and remand the denial of the motion to
enforce the Settlement Agreement and compel an accounting to the extent that it
relates to a portion of settlement funds previously paid.
I. BACKGROUND
Medical providers filed several class actions against managed care insurance
companies, including CIGNA, starting in 1999. The matters were consolidated
into an MDL proceeding in the United States District Court for the Southern
District of Florida in April 2000. MCAG was not a party, class member, or class
counsel in any of the lawsuits consolidated into the MDL, nor was it a party to the
MDL itself. The parties later moved for preliminary approval of a settlement, and
the district court granted their request.
The district court approved the settlement on January 30, 2004, following a
class action fairness hearing. The court noted, however, that it retained jurisdiction
for “all matters relating to [] the interpretation, administration, and consummation
of the Agreement . . . .” The settlement included monetary relief to the class
members as well as the ability to either (1) participate in a $30,000,000 fund that
would be distributed to class members or (2) seek recovery from an uncapped fund
for claims that were previously denied or reduced. As relevant to this appeal,
“Category Two” claims sought recovery from the uncapped fund. To seek
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compensation for Category Two claims, the class members would submit their
claims to the settlement administrator, who would forward them to CIGNA upon
verification that the claim was accompanied by sufficient supporting documents.
If CIGNA determined that a claim was not payable, it would be reviewed by the
independent settlement administrator or the IRE (collectively, “the Reviewers”),
depending on the reason for the denial. After evaluating these claims, the
Reviewers would make a final, independent decision regarding whether the claims
should be paid.
Class member Texas Children’s Pediatric Associates (“TCPA”) moved for
enforcement of the settlement on July 14, 2005, asserting that CIGNA obstructed
the process for Category Two claims, causing the Reviewers to improperly process
claims. TCPA requested in the motion for enforcement of the settlement that the
district court direct CIGNA to pay its claims. However, TCPA subsequently
withdrew its motion on November 16, 2005, noting that MCAG and CIGNA
agreed to binding arbitration of the matter.
The notice of withdrawal indicated that the parties agreed that the district
court “should, consistent with the Settlement Agreement, Final Judgment and the
Arbitration Agreement, retain jurisdiction over the parties and this matter for
purposes of confirming, modifying and/or vacating that Arbitration Award (as well
as any pre-Award decisions) in accordance with the FAA [Federal Arbitration
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Act].” However, the Settlement Agreement did not require arbitration and did not
have an arbitration provision. Instead, the arbitration agreement between CIGNA
and MCAG was separate and apart from the Settlement Agreement, to which
MCAG was not a party. The Reviewers were not parties to the binding arbitration
and the arbitration agreement was solely between MCAG and CIGNA.2
During the arbitration, the arbitrator required CIGNA to allow reprocessing
of certain claims; however, problems supposedly arose. The arbitrator issued non-
party summonses to the following third parties requiring them to participate in the
arbitration hearing: (1) Epiq, the settlement administrator; (2) David Garcia, a
project director at Epiq; (3) Neil Manning, an ex-employee of Epiq; (4)
IMEDECS/Millennium Healthcare Consulting, Inc., the IRE; and (5) Mary Falbo,
the IRE’s founder and CEO (collectively, “the summonsed parties”).
The summonses directed the summonsed parties to appear by video. Some
also required the summonsed parties to produce documents. Federal district courts
where the summonsed parties were located issued corresponding subpoenas. Upon
receipt, however, the summonsed parties objected to the summonses and indicated
they would not comply without an order compelling them to do so. On September
2, 2016, MCAG moved the district court to enforce the arbitration summonses
2
The district court, sua sponte, closed the MDL on September 9, 2013, because it
concluded all the associated cases had been closed.
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pursuant to 9 U.S.C § 7. CIGNA then moved to strike MCAG’s motion to enforce
the summonses. IMEDECS, Millennium Healthcare Consulting, Inc., and Falbo
(collectively, “IMEDECS”) filed a response in opposition to the motion to enforce.
Epiq, Garcia, and Manning (collectively, “Epiq”) also filed a separate response in
opposition.
A magistrate judge held a hearing and concluded the court had jurisdiction
to enforce the arbitration summonses because the district court judge “appointed
the arbitrator and he reserved jurisdiction to enforce the settlement agreement and
the parties agreed, in the arbitration agreement, . . . to the jurisdiction of the
Court.” The magistrate judge ruled directly on the pending motions by granting
MCAG’s motion to enforce, while denying CIGNA’s motion to strike. CIGNA,
Epiq, and IMEDECS challenged the magistrate judge’s rulings.
The district court held a status conference, and CIGNA subsequently moved
to enforce the Settlement Agreement and compel an accounting as suggested by
the district court. CIGNA alleged MCAG mismanaged settlement funds totaling
over $25 million, which CIGNA had paid to MCAG for the benefit of the class
members. CIGNA made two types of payments to MCAG. First, prior to
arbitration, CIGNA paid a total of approximately $11 million to MCAG for class
members’ claims that were not the subject of arbitration. Second, during
arbitration, CIGNA paid an additional $14 million for class members’ Category
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Two claims. CIGNA paid these funds to MCAG solely for distribution to class
members as required by the Settlement Agreement.
The district court affirmed the magistrate judge’s order granting MCAG’s
motion to enforce the arbitral summonses and denied CIGNA’s motion to enforce
the Settlement Agreement and compel an accounting. It noted that “[t]he
Arbitrator shall be allowed to arbitrate the claims in the manner he sees fit.”
CIGNA, Epiq, and IMEDECS appeal the district court order. Epiq and
IMEDECS challenge the district court’s order enforcing the arbitral summonses.
CIGNA appeals the district court’s denial of its motion to enforce the Settlement
Agreement and compel an accounting.
MCAG conceded during oral argument that: (1) it had not distributed all of
the funds CIGNA paid before the arbitration for claims that were not the subject of
the arbitration (despite MCAG’s previous assertion that it had distributed all of
these funds); (2) it had not distributed any of the settlement money paid by CIGNA
for Category Two claims since the arbitration commenced; and (3) only
approximately $4.5 million remains of the settlement proceeds CIGNA paid to
MCAG for class members’ Category Two claims. Additionally, MCAG conceded
that it was obligated to pay the class members shortly after receiving payment from
CIGNA.
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Before oral arguments, this Court issued a jurisdictional question asking the
parties to respond to two inquiries: (1) whether the district court order enforcing
the arbitration summonses was a final order, particularly in light of the fact that the
order enforced summonses against third parties and is apparently a post-judgment
order; and (2) whether the district court’s order denying CIGNA’s motion to
enforce the Settlement Agreement and to compel an accounting was final in light
of the district court’s reasoning that CIGNA’s claims would instead be handled by
the arbitrator. CIGNA, Epiq, and IMEDECS responded that the orders were final
and appealable, while MCAG contended the orders were not final and appealable.
II. STANDARDS OF REVIEW
A district court’s decision regarding personal jurisdiction is reviewed de
novo. Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir.
2013). Additionally, a district court’s decision that it has subject matter
jurisdiction to hear a motion to enforce arbitral summonses is also reviewed de
novo. Doe v. Fed. Aviation Admin., 432 F.3d 1259, 1261 (11th Cir. 2005). This
Court has not explicitly established a standard of review for a district court’s
enforcement of arbitral summonses. However, whether an agency had authority to
issue an administrative subpoena and a district court’s interpretation and
application of a statute are reviewed de novo. United States v. Fla. Azalea
Specialists, 19 F.3d 620, 622 (11th Cir. 1994); Alexander v. Hawk, 159 F.3d 1321,
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1323 (11th Cir. 1998). Further, a district court’s decision to enforce or quash a
subpoena is reviewed for abuse of discretion. In re Hubbard, 803 F.3d 1298, 1307
(11th Cir. 2015). A district court’s decision to deny the equitable remedy of
accounting is also reviewed for abuse of discretion. Zaki Kulaibee Establishment
v. McFliker, 771 F.3d 1301, 1310 (11th Cir. 2014).
Finally, this Court reviews a district court’s interpretation of a settlement
agreement de novo, and decisions regarding motions to enforce settlements for
abuse of discretion. In re Managed Care, 756 F.3d 1222, 1232 (11th Cir. 2014);
Resnick v. Uccello Immobilien GMBH, Inc., 227 F.3d 1347, 1350 (11th Cir. 2000).
“An error of law is an abuse of discretion per se.” Resnick, 227 F.3d at 1350
(citing Alikhani v. United States, 200 F.3d 732, 734 (11th Cir. 2000)).
III. ANALYSIS
A. Finality of the Order Enforcing Arbitral Summonses
The district court’s order enforcing the arbitral summonses is a final and
appealable order. The FAA allows an appeal from “a final decision with respect to
an arbitration that is subject to this title.” 9 U.S.C. § 16(a)(3). The Supreme Court
has interpreted this section according to the “well-developed and longstanding
meaning” of a “final decision.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S.
79, 86, 121 S. Ct. 513, 519, 148 L. Ed. 2d 373 (2000). A final decision “ends the
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litigation on the merits and leaves nothing more for the court to do but execute the
judgment.” Id. (internal quotation marks omitted).
An arbitrator may summons an individual to attend the arbitration as a
witness. 9 U.S.C. § 7. But if the individual who was summonsed to testify refuses
to attend, the aggrieved party may petition the United States district court to
compel the attendance of the individual refusing to attend. Id. The district court
must be in the district where the arbitrator sits and may compel attendance “in the
same manner provided by law for securing the attendance of witnesses . . . in the
courts of the United States.” Id. Rule 45(b) of the Federal Rules of Civil
Procedure provides the manner of serving subpoenas before the court and states
that “[a] subpoena may be served at any place within the United States.” Fed. R.
Civ. P. 45(b)(2).
The district court’s order enforcing the arbitration summonses is a post-
judgment order. Generally, a post-judgment order is final if it disposes of all the
issues raised in the motion that initiated the post-judgment proceedings. Mayer v.
Wall St. Equity Grp., Inc., 672 F.3d 1222, 1224 (11th Cir. 2012). However, there
is authority holding that interlocutory orders denying motions to quash third-party
subpoenas and post-judgment orders compelling discovery are not appealable.
Drummond Co. v. Terrance P. Collingsworth, Conrad & Scherer, LLP, 816 F.3d
1319, 1322, 1325-27 (11th Cir. 2016); Rouse Constr. Int’l. Inc. v. Rouse Constr.
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Corp., 680 F.2d 743, 745-46 (11th Cir. 1982). This case is distinguishable,
however.
Drummond and Rouse did not consider orders under § 7.3 Instead,
Drummond states the general rule that a final order “is one by which a district court
disassociates itself from the case.” 816 F.3d at 1322. In other words, “[i]t ends the
litigation on the merits and leaves nothing more for the court to do but execute the
judgment.” Id. (internal quotation marks omitted). The Court noted, in the context
of a civil litigation subpoena, “[d]iscovery orders are ordinarily not final orders
that are immediately appealable.” Id. (internal quotation marks omitted). Rouse
states, “As a general proposition most orders granting or denying discovery are not
final orders . . . and therefore are not immediately appealable.” 680 F.2d at 745.
Also, in Drummond and Rouse, the district courts were overseeing
discovery. After discovery concluded, the cases were almost certainly going to
return to the district court for litigation on the merits (Drummond) or for
verification that Rouse Construction Corp. was complying with the arbitration
award (Rouse). In contrast, the district court’s order in the present case enforcing
the arbitral summonses sends the litigants back to the standalone arbitration
3
Drummond concerned an order denying a motion to quash a subpoena pursuant to Rule
45(d)(3)(A) of the Federal Rules of Civil Procedure. 816 F.3d at 1322. Rouse addressed a
district court order granting a post-judgment motion to compel discovery pursuant to Rules 37(a)
and 69(a) of the Federal Rules of Civil Procedure. 680 F.2d at 744 & n.2, 745 & n.4.
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proceeding, and the district court has disposed of everything pending before it. If
MCAG or CIGNA wants the district court to review the arbitration award later on,
they will have to submit a separate application to the district court. 9 U.S.C. §§ 9-
11.
The Second and Seventh Circuits have determined that they possess
jurisdiction under 9 U.S.C. § 16(a)(3) regarding orders compelling compliance
under 9 U.S.C. § 7. See Dynegy Midstream Servs. v. Trammochem, 451 F.3d 89,
92-94 (2d Cir. 2006); Amgen, Inc. v. Kidney Ctr. of Del. Cty., Ltd., 95 F.3d 562,
565-67 (7th Cir. 1996). The Second Circuit concluded it had jurisdiction in
Dynegy because the “litigation to enforce the subpoena [was] an entirely self-
contained court proceeding, and the court’s order compelling compliance
completely disposed of the case, leaving nothing more for the court to do but
enforce the judgment.” 451 F.3d at 93. And in Amgen, the Seventh Circuit noted
that, “[w]hen the district court confirmed the arbitrator’s authority to issue the
summons and when it identified a mechanism to compel compliance with that
summons, it disposed of all the issues before it.” 95 F.3d at 567.
Here, the district court confirmed the arbitrator’s authority to issue the
summonses and identified a way to compel compliance with them. Accordingly,
this Court has jurisdiction because the district court order enforcing the summonses
disposed of all the issues before it. See Mayer, 672 F.3d at 1224.
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Notwithstanding the district court’s disposition of the motion, it retained
jurisdiction to review the arbitrator’s decision. The FAA permits “parties to
arbitration agreements to bring a separate proceeding in a district court to enter
judgment on an arbitration award once it is made (or to vacate or modify it), but
the existence of that remedy does not vitiate the finality of the [d]istrict [c]ourt’s
resolution of the claims in the instant proceeding.” Green Tree, 531 U.S. at 86,
121 S. Ct. at 520 (citing 9 U.S.C. §§ 9, 10, 11). Thus, the district court order was
final and its retention of jurisdiction to review the arbitrator’s decision does not
destroy the finality of the district court’s ruling pertaining to the enforcement of the
arbitral summonses. See id.
B. Order Allowing Nationwide Arbitral Summons
i. Subject Matter Jurisdiction
“[T]his court has the obligation to inquire into subject matter jurisdiction
whenever it may be lacking.” Baltin v. Alaron Trading Corp., 128 F.3d 1466,
1468 (11th Cir. 1997). When a federal court otherwise lacks jurisdiction, it may
possess ancillary jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 379, 114 S. Ct. 1673, 1676, 128 L. Ed. 2d 391 (1994).
The district court properly determined that it had ancillary jurisdiction over
the motion to enforce the summonses. However, the magistrate judge improperly
found jurisdiction on two additional grounds: (1) the district court appointed the
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arbitrator; and (2) the parties agreed to jurisdiction of the district court in their
arbitration agreement. The first additional ground is an error of law because
appointing an arbitrator pursuant to the FAA does not provide jurisdiction. Cf.
Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 578, 581-82, 128 S. Ct. 1396, 1400,
1402, 170 L. Ed. 2d 254 (2008). The second additional ground also constitutes an
error of law because jurisdiction cannot be created by an agreement between
parties. Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1261 (11th Cir. 2000).
While the FAA “creates a body of federal substantive law establishing and
regulating the duty to honor an agreement to arbitration, [] it does not create any
independent federal-question jurisdiction under 28 U.S.C. § 1331 [] or otherwise.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32, 103 S.
Ct. 927, 942 n.32, 74 L. Ed. 2d 765 (1983); see also Hall, 552 U.S. at 581-82, 128
S. Ct. at 1402. However, the magistrate judge did not hold that the district court
had federal question jurisdiction. He instead held that the district court had
ancillary jurisdiction because it retained jurisdiction over the settlement agreement.
Ancillary jurisdiction applies when necessary “to enable a court to function
successfully, that is, to manage its proceedings, vindicate its authority, and
effectuate its decrees.” Kokkonen, 511 U.S. at 380, 114 S. Ct. at 1676. If a court
retains jurisdiction over a settlement agreement, it retains ancillary jurisdiction to
enforce the agreement. Id. at 381.
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The district court retained jurisdiction “as to all matters relating to [] the
interpretation, administration, and consummation of the Agreement.” Because the
district court retained jurisdiction concerning matters related to the administration
of the Settlement Agreement, it retained jurisdiction over the distribution of
Category Two claims. The arbitration involves disputes regarding distribution of
Category Two claims, so the district court has ancillary jurisdiction over the
arbitration.
While MCAG was not a party to the Settlement Agreement, the Settlement
Agreement contained no provision for arbitration, and the summonsed parties were
not parties to the arbitration agreement, the purpose of the arbitration was to
resolve disputes involving Category Two claims that arose out of the Settlement
Agreement, and the subpoenas issued to the summonsed parties were for the
purpose of determining whether Category Two claims as provided in the
Settlement Agreement were payable.
Accordingly, the district court’s determination that it had ancillary
jurisdiction is appropriate because the arbitration and arbitral summonses “relat[ed]
to” the Settlement Agreement in which the district court retained jurisdiction.4
4
CIGNA protests that MCAG lacks standing because it has breached its fiduciary duties
to class members it purports to represent. Though CIGNA invokes the language of standing, its
standing argument is a recharacterization of its arguments for why the district court should have
granted its motion to enforce the Settlement Agreement and compel an accounting. We address
that motion below in Part III.D.
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ii. Personal Jurisdiction
“Before a federal court may exercise personal jurisdiction over a defendant,
the procedural requirement of service of summons must be satisfied.” Omni
Capital Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104, 108 S. Ct. 404, 409,
98 L. Ed. 2d 415 (1987). Section 7 of the FAA allows nationwide service of
arbitral summonses. In the present case, the magistrate judge stated, “I find that as
far as personal jurisdiction because it [referring to the service of arbitral
summonses] is allowed throughout the United States that that meets the personal
jurisdiction needs.”
“[I]n interpreting a statute a court should always turn first to one, cardinal
canon before all others . . . . [C]ourts must presume that a legislature says in a
statute what it means and means in a statute what it says there.” Conn. Nat’l Bank
v. Germain, 503 U.S. 249, 253-54, 112 S. Ct. 1146, 1149, 117 L. Ed. 2d 391
(1992). “When the words of a statute are unambiguous, then, this first canon is
also the last: judicial inquiry is complete.” Id. (internal quotation marks omitted).
The words of 9 U.S.C. § 7 are unambiguous, so the plain meaning must be
used. Two concepts are addressed in 9 U.S.C. § 7. First, it addresses service of
arbitral summonses. Next, it addresses compelling enforcement of arbitral
summonses. These concepts are addressed in turn.
a. Service of Arbitral Summonses
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Title 9 of the United States Code, Section 7, states that arbitral summonses
“shall be served in the same manner as subpoenas to appear and testify before the
court . . . .” Without specifically citing the rule by name, this provision references
Rule 45 of the Federal Rules of Civil Procedure. Rule 45 governs the service of
subpoenas and states that “[a] subpoena may be served at any place within the
United States.” Fed. R. Civ. P. 45(b)(2). Thus, under 9 U.S.C. § 7, the FAA
permits nationwide service of arbitral summonses.
The appellants contend that the Second Circuit has held that Section 7 of the
FAA does not authorize nationwide service of process. Dynegy, 451 F.3d at 94-96.
However, the Second Circuit issued its opinion in Dynegy in 2006, well before
Rule 45 was amended in 2013 to provide for nationwide service of subpoenas.
Fed. R. Civ. P. 45 advisory committee’s note to 2013 amendment. “When a statute
adopts the general law on a given subject, the reference is construed to mean that
the law is as it reads thereafter at any given time including amendments subsequent
to the time of adoption.” Longmire v. Sea Drilling Corp., 610 F.2d 1342, 1352
(5th Cir. 1980) (quoting Dir., Office of Workers’ Comp. Programs v. Peabody
Coal Co., 554 F.2d 310, 322 (7th Cir. 1977)); see also Jam v. Int’l Fin. Corp.,
__ U.S. __, 139 S. Ct. 759, 769, 203 L. Ed. 2d 53 (2019) (“[W]hen a statute refers
to a general subject, the statute adopts the law on that subject as it exists whenever
a question under the statute arises.”). Conversely, when a statute references
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“limited and particular provisions of another statute,” it does not include
subsequent amendments. Longmire, 610 F.2d at 1352; see also Jam, __ U.S. __,
139 S. Ct. at 769 (“[A] statute that refers to another statute by specific title or
section number in effect cuts and pastes the referenced statute as it existed when
the referring statute was enacted, without any subsequent amendments.”).
Further, Jam states that “a general reference to federal discovery rules
incorporates those rules ‘as they are found on any given day, today included.’” Id.
(quoting El Encanto, Inc. v. Hatch Chile Co., 825 F.3d 1161, 1164 (10th Cir. 2016)
(specifying that the reference to Rule 45 in 35 U.S.C. § 24 is a general reference
and refers to Rule 45 as it is today)). Because Section 7 of the FAA contains a
general reference to Rule 45 by requiring subpoenas to be “served in the same
manner as subpoenas to appear and testify before the court,” it incorporates
subsequent changes to Rule 45, including the 2013 amendment permitting
nationwide service. The incorporation of the 2013 amendment to Rule 45
permitting nationwide service therefore distinguishes the present case from the
Second Circuit’s holding in Dynegy. Accordingly, we conclude that nationwide
service of arbitral summonses is appropriate.
b. Compelling Enforcement of Arbitral Summonses
Section 7 of the FAA also addresses compelling the enforcement of arbitral
summonses when a summonsed party fails to comply. The section states that if a
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person refuses to comply with an arbitral summons, a court “may compel the
attendance of such person . . . in the same manner provided by law for securing the
attendance of witnesses . . . in the courts of the United States.” 9 U.S.C. § 7.
Again, without specifically citing the rule by name, this provision references Rule
45 of the Federal Rules of Civil Procedure. Rule 45 governs securing the
attendance of witnesses and states that “the serving party may move the court for
the district where compliance is required for an order compelling production or
inspection.” Fed. R. Civ. P. 45(d)(2)(B)(i). However, 9 U.S.C. § 7 provides that
the district court for the district in which the arbitrators are sitting may compel the
attendance of a person refusing to obey an arbitral summons.
Initially, it appears that 9 U.S.C. § 7 and Rule 45 are inconsistent because
Rule 45 requires the motion to be filed in the district where compliance is required,
while 9 U.S.C. § 7 requires the motion to be filed in the district where the
arbitrators sit. Ultimately however, this inconsistency is avoided because 9 U.S.C.
§ 7 simply states that compelling attendance must be done in the same manner
provided by law (i.e., filing a motion) and does not incorporate Rule 45 regarding
where motions to compel must be filed. As a result, we conclude that the plain
meaning of 9 U.S.C. § 7 requires that a motion to compel must be filed in the
district in which the arbitrators are sitting.
iii. Fifth Amendment
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Even if a statute authorizes nationwide service of process, due process
requires that the district court evaluate traditional notions of fairness and
reasonableness, by weighing the burdens imposed on the summonsed parties
against the federal interest, before exercising personal jurisdiction. Republic of
Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 946, 948 (11th Cir.
1997). However, when nationwide service is involved, “it is only in highly
unusual cases that inconvenience will rise to a level of constitutional concern.” Id.
at 938-39, 947. Further, we need to balance the federal interest against the burdens
imposed on the summonsed parties only if they have “established that [their]
liberty interests actually have been infringed” and that “jurisdiction in the forum
will make litigation so gravely difficult and inconvenient that [they] unfairly [are]
at a severe disadvantage in comparison to [their] opponent.” Id. at 946, 948
(internal quotation marks omitted).
The summonsed parties in this case assert that requiring non-parties to travel
to distant jurisdictions to defend against arbitral summonses serves no federal
purpose and that exercising jurisdiction is neither fair nor reasonable. However,
“[t]here is nothing inherently burdensome about crossing a state line.” Id. at 946.
Further, the summonsed parties have not shown that the inconvenience of traveling
in the present case to litigate their objections to the arbitral summonses rises to the
level of constitutional concern. Accordingly, the Court need not consider whether
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the “federal interest in litigating the dispute in the chosen forum outweighs the
burden imposed” on the summonsed parties. Id. at 948.
iv. Pre-Hearing Discovery from Non-Parties
As previously explained, the summonsed parties are non-parties to the
arbitration agreement. Arbitration is a creature of contract and “an arbitrator’s
authority over the parties to an arbitration is limited by the contours of the parties’
agreement and those enumerated in the [FAA].” Kennedy v. Am. Express Travel
Related Servs. Co., 646 F. Supp. 2d 1342, 1343 (S.D. Fla. 2009). Non-parties to an
arbitration agreement have not subjected themselves to the authority of an
arbitrator and, therefore, have not limited their rights beyond the FAA.
Accordingly, the authority for an arbitrator to summons non-parties to produce pre-
hearing discovery must be found within the FAA.
Section 7 of the FAA allows an arbitrator to “summon in writing any person
to attend before them . . . as a witness and in a proper case to bring with him . . .
any book, record, document, or paper which may be deemed material as evidence
in the case.” 9 U.S.C. § 7. In Hay Group, Inc. v. E.B.S. Acquisition Corp.,
360 F.3d 404, 407 (3d Cir. 2004), then-Judge Alito found that the plain language
of Section 7 “unambiguously restricts an arbitrator’s subpoena power to situations
in which the non-party has been called to appear in the physical presence of the
arbitrator and to hand over the documents at that time.” The Second, Fourth, and
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Ninth Circuits have reached similar conclusions that Section 7 is unambiguous and
does not provide arbitrators with the authority to order non-parties to provide
documents outside of the presence of the arbitrator. Life Receivables Tr. v.
Syndicate 102 at Lloyds of London, 549 F.3d 210, 216 (2d Cir. 2008) (“The
language of section 7 is straightforward and unambiguous. Documents are only
discoverable in arbitration when brought before arbitrators by a testifying
witness.”); COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269, 275-76 (4th Cir.
1999) (arbitral summons powers are “limited to those created by the express
provisions of the FAA,” which do not include “the authority to order non-parties to
. . . provide the litigating parties with documents during prehearing discovery,” but
a party may petition the court for pre-hearing discovery upon a showing of
necessity); CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017)
(“[S]ection 7 of the FAA does not grant arbitrators the power to order third parties
to produce documents prior to an arbitration hearing.”). However, the Eighth
Circuit has held that while Section 7 does not “explicitly authorize the arbitration
panel to require the production of documents for inspection by a party[,] . . .
implicit in an arbitration panel’s power to subpoena relevant documents for
production at a hearing is the power to order the production of relevant documents
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for review by a party prior to the hearing.” 5 In re Sec. Life Ins. Co. of Am.,
228 F.3d 865, 870-71 (8th Cir. 2000).
After analyzing these cases, we agree with the Second, Third, Fourth, and
Ninth Circuits and hold that the plain language of the statute is unambiguous in
requiring witnesses to appear before an arbitrator and bring any documents with
them, thus prohibiting pre-hearing discovery from non-parties. The FAA confers
the power to compel a non-party to attend an arbitration hearing and bring
documents, but it is silent regarding the power to compel documents from non-
parties without summoning the non-party to testify. See 9 U.S.C. § 7. Thus, the
FAA implicitly withholds the power to compel documents from non-parties
without summoning the non-party to testify. And if Congress intended the
arbitrators to have the broader power to compel documents from non-parties
without summoning the non-party to testify, it could have said so. Accordingly,
we conclude that 9 U.S.C. § 7 does not permit pre-hearing depositions and
discovery from non-parties.
We respectfully decline to follow the Eighth Circuit’s reasoning that the
“interest in efficiency is furthered by permitting a party to review and digest
5
The Sixth Circuit has also authorized a subpoena to a non-party for pre-hearing
documents, but while the court looked to the FAA for guidance in the labor arbitration case, its
holding was limited to Section 301 of the Labor Management Relations Act of 1947, 29 U.S.C.
§ 185. Am. Fed’n of Tel. & Radio Artists, AFL-CIO v. WJBK-TV, 164 F.3d 1004, 1009 (6th Cir.
1999).
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relevant documentary evidence prior to the arbitration hearing.” In re Sec. Life Ins.
Co. of Am., 228 F.3d at 870-71. Simply put, because the plain meaning of the
statute does not permit pre-hearing discovery from non-parties, the policy
argument does not supersede the text of the statute.
The summonses issued in the present case indicate that the non-parties shall
attend a hearing before the arbitrator. The hearing will be held in Miami, Florida,
but the testimony of the non-parties will be taken in their respective locations
across the country and transmitted via video conference. Additionally, the
summonses directed the non-parties to bring certain documents to the video
conference.
The first issue with the summonses is that the non-parties will not be in the
physical presence of the arbitrator. Instead, the arbitrator will be located in Miami
while the non-parties are in their respective states, and the hearing will take place
via video conference. We hold that the district court abused its discretion in
affirming the magistrate judge’s order granting Managed Care’s motion to compel
the non-parties to comply with the summonses because the district court lacked
authority under Section 7 to do so.
“It’s a fundamental canon of statutory construction that words generally
should be interpreted as taking their ordinary meaning at the time Congress
enacted the statute.” New Prime v. Oliveira, __ U.S. __, 139 S. Ct. 532, 539-40,
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202 L. Ed. 2d 536 (2019) (alterations adopted) (internal quotation marks omitted).
Congress passed Section 7 in 1925, so we must ascertain the meaning of
“attendance” and “before” in Section 7’s grant of authority to district courts to
“compel the attendance of such person or persons before said arbitrator . . . in the
same manner provided by law for securing the attendance of witnesses . . . in the
courts of the United States” as of 1925.6 9 U.S.C. § 7 (emphasis added); see also
Oliveira, __ U.S. at __, 139 S. Ct. at 539-40 & 540 n.1 (looking to dictionaries
published in the decades surrounding 1925 to determine the meaning of “contracts
of employment” in Section 1 of the FAA).
Looking to dictionaries from the time of Section 7’s enactment makes clear
that a court order compelling the “attendance” of a witness “before” the arbitrator
meant compelling the witness to be in the physical presence of the arbitrator. In
1925, “attendance” meant the “[a]ct of attending,” and “attend” meant “be present
at.” See, e.g., H.W. Fowler & F.G. Fowler, The Concise Oxford Dictionary of
Current English 52 (1926). Similarly, “before” meant “in [the] presence of.” Id.
at 74. And “presence” meant “place where person is,” while “present” meant
“[b]eing in the place in question.” Id. at 650. Thus, Section 7 does not authorize
district courts to compel witnesses to appear in locations outside the physical
6
United States Arbitration Act, Pub. L. No. 68-401, § 7, 43 Stat. 883, 884 (1925).
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presence of the arbitrator, so the court may not enforce an arbitral summons for a
witness to appear via video conference.
The second issue with the video conference concerns the production of
documents. The summonses do not indicate how the arbitrator will view and
consider the documents brought by the non-parties to the video conference. The
district court and magistrate judge went beyond the directive of the summonses to
indicate that a video conference is possible and permissible because documents can
be provided in advance to the attorneys and arbitrator, allowing the arbitrator to
make decisions as the evidence is presented. The fundamental problem with the
district court’s attempt at resolving the presentation of the documents is that
providing the necessary documents to the arbitrator and attorneys prior to the
hearing constitutes pre-hearing discovery that is not authorized by the FAA. CVS
Health Corp., 878 F.3d at 708. Accordingly, the provision of documents prior to
the hearing is not the same as appearing in the physical presence of an arbitrator
and bringing documents at the time of the hearing. As a result, this requirement is
not enforceable.
“The [arbitrator’s] power to require a non-party to bring items with him
clearly applies only to situations in which the non-party accompanies the items to
the arbitration proceeding, not to situations in which the items are simply sent or
brought by a courier.” Hay Grp., 360 F.3d at 407. We look beyond the plain
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language of a statute only if applying the statute in accordance with the plain
language would lead to an absurd result. Consol. Bank, N.A. v. U.S. Dep’t of
Treasury, 118 F.3d 1461, 1463-64 (11th Cir. 1997). Enforcing Section 7’s
prohibition on pre-hearing discovery does not lead to an absurd result because it
will force the parties “to consider whether the documents are important enough to
justify the time, money, and effort that the subpoenaing parties will be required to
expend if an actual appearance before an arbitrator is needed.” Hay Grp., Inc., 360
F.3d at 409. This leads to a redistribution of bargaining power where “the party
seeking the documents cannot simply obtain a subpoena requiring the documents
to be shipped from one warehouse to another; instead, the party [seeking the
documents] will be forced to appear at a proceeding during which the documents
are produced.” Id. at 411. Additionally, enforcing the bar on pre-hearing
discovery is beneficial because it will impose some inconvenience on the arbitrator
that will induce the arbitrator to weigh whether the production of the documents is
necessary. See id. at 414 (Chertoff, J., concurring).
Accordingly, we interpret the plain meaning of Section 7 as (1) requiring
summonsed non-parties to appear in the physical presence of the arbitrator as
opposed to a video conference or teleconference; and (2) prohibiting pre-hearing
discovery. The district court abused its discretion in enforcing the arbitral
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summonses because the court lacked power under Section 7 to order the witnesses
to appear at the video conference and provide pre-hearing discovery.
C. The Finality of the Order Denying Enforcement of the Settlement
Agreement
The district court’s order denying CIGNA’s motion to enforce the
Settlement Agreement and compel an accounting constitutes a post-judgment order
that is final and appealable. An order is final when it disposes of all the issues
raised in the motion that initiated the post-judgment proceedings. Mayer, 672 F.3d
at 1224. While CIGNA’s motion to enforce the Settlement Agreement and compel
an accounting was not the motion that triggered the post-judgment proceeding,
CIGNA could have filed this motion to start a post-judgment proceeding even if
MCAG had not already filed its petition to enforce the arbitral summonses.
Further, the order denying CIGNA’s motion disposed of the entire post-judgment
action, leaving nothing more for the district court to do. Accordingly, it is properly
characterized as a final and appealable order.
D. The District Court’s Failure to Enforce the Settlement Agreement
and Compel an Accounting
The claims pending in the arbitration address Category Two claims that have
not yet been paid, whereas CIGNA’s motion seeks an accounting of what MCAG
has done with the proceeds of the claims that CIGNA has already paid. The
district court denied CIGNA’s motion to enforce the Settlement Agreement and
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compel an accounting on the ground that “[t]he Arbitrator shall be allowed to
arbitrate the claims in the manner he sees fit.” However, the district court abused
its discretion by allowing the arbitrator to review the claims that have already been
paid, because the district court has a duty to class members to ensure that they
receive what they are entitled to under the Settlement Agreement and may not
defer to the arbitrator to compel an accounting of the claims that fall outside the
ambit of the arbitration agreement.
The district court retained jurisdiction “as to all matters relating to [] the
interpretation, administration, and consummation of the [Settlement] Agreement.”
Because the district court retained jurisdiction over the administration of the
Settlement Agreement, which set the terms for how CIGNA would compensate
class members, it has a responsibility to ensure the class members receive that to
which they are entitled under the Settlement Agreement.
The district court’s explicit retention of jurisdiction is consistent with
its responsibility, pursuant to Fed. R. Civ. P. 23, to protect the interests
of class members . . . . Retention of jurisdiction is enhanced when the
court is attempting to protect members of a class action: In a class
action, the district court has a duty to class members to see that any
settlement it approves is completed, and not merely to approve a
promise . . . to pay the relief to which it has decided class members are
entitled.
Alexander v. Chicago Park Dist., 927 F.2d 1014, 1023 (7th Cir. 1991) (citing In re
Corrugated Container Antitrust Litig., 752 F.2d 137, 141 (5th Cir. 1985)) (internal
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block quotation omitted); see also United States v. City. of Miami, 614 F.2d 1322,
1331 (5th Cir. 1980) (explaining that courts, in their “role as a fiduciary” and
“guardian for the unrepresented class members,” must apply “careful scrutiny . . .
to guard against settlements that may benefit the class representatives or their
attorneys at the expense of absent class members”).
In the present case, the district court retained jurisdiction “as to all matters
relating to [] the interpretation, administration, and consummation of the
Agreement.” The motion to enforce the Settlement Agreement and compel an
accounting was initiated because CIGNA paid approximately $25 million to
MCAG for class members’ claims submitted pursuant to the Settlement Agreement
and, based on the record before the Court, it does not appear that class members
received a significant portion of the funds to which they are entitled. CIGNA paid
MCAG approximately $11 million prior to arbitration to distribute to class
members for claims that were not the subject of the arbitration agreement and $14
million during arbitration for Category Two claims.7 CIGNA paid these funds to
MCAG solely for distribution to class members for their approved claims as
required by the Settlement Agreement.
7
MCAG and CIGNA agreed to arbitrate “final resolution of all issues relating to whether
the claims for Category Two Compensation under the Settlement Agreement . . . submitted by
MCAG on behalf of Class Members are payable pursuant to that agreement . . . .” Because
CIGNA already has paid $14 million in Category Two claims, these claims are no longer
“payable,” and so they fall outside the ambit of the arbitration agreement.
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MCAG’s Chief Financial Officer, Douglas Perry, filed a sworn declaration
stating that, “CIGNA paid approximately $11 million to MCAG prior to the
Arbitration in connection with other types of claims. Those moneys were
disbursed to class members.” However, MCAG subsequently admitted during oral
argument that it distributed to class members only $7.5 million of the $11 million
CIGNA paid for claims that were not the subject of arbitration. At a minimum,
this discrepancy indicates that class members have not received approximately
$3.5 million of the funds to which they are entitled under the Settlement
Agreement. Therefore, the district court should require an accounting regarding
funds CIGNA paid to MCAG for claims that were not the subject of the arbitration.
Alexander, 927 F.2d at 1023.
MCAG also admitted during oral argument that it has not distributed any of
the $14 million CIGNA paid to MCAG for Category Two claims since the
arbitration began. MCAG further admitted that only approximately $4.5 million
remains of the $14 million CIGNA paid to MCAG for class members’ Category
Two claims. The physician agreements between MCAG and class members
indicate that MCAG would retain at most 30 percent of the recovery amount.
Therefore, even if MCAG distributes the remaining $4.5 million to claimants, a
total of approximately $12 million would be distributed to class members and
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MCAG would retain over 50 percent of the total amount paid by CIGNA. This is
significantly more than the 30 percent agreed to in the physician agreements.
An accounting will provide information regarding how settlement proceeds
have been distributed because there is no formal record of what MCAG did with
approximately $3.5 million in paid claims that were not the subject of the
arbitration and $9.5 million in paid Category Two claims that should have gone to
class members under the Settlement Agreement. See Alexander, 927 F.2d at 1023.
Additionally, MCAG is in possession of $4.5 million of the Category Two funds
and has not indicated how those funds will be paid to the class members who are
entitled to receive them.
IV. CONCLUSION
This litigation has been ongoing for almost twenty years, but it appears that
most of the money CIGNA paid to MCAG for the class members has not been
distributed. The district court should require an expeditious accounting of all funds
CIGNA previously paid to MCAG for the benefit of the class members. The
accounting should include any interest earned on the funds paid to MCAG. 8
8
We deny as moot CIGNA’s first motion to supplement the record. On remand, CIGNA
may move the district court for permission to refile these documents on the district court’s
docket. We also deny as moot CIGNA’s motion for clarification regarding oral argument.
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The judgment of the district court is REVERSED, and this case is
REMANDED for further proceedings consistent with this opinion.
34