Managed Care Insurance Consultants, Inc. v. United Healthcare Insurance Co.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
MANAGED CARE INSURANCE CONSULTANTS, INC.,
Appellant,
v.
UNITED HEALTHCARE INSURANCE COMPANY; UNITED
HEALTHCARE OF FLORIDA, INC.; and any and all entities that are its
affiliates,
Appellees.
No. 4D16-2767
[October 4, 2017]
ON MOTION FOR CLARIFICATION
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Jack B. Tuter, Judge; L.T. Case No. 15-018699CACE
(07).
Glenn J. Waldman, Douglas T. Marx of Waldman Trigoboff Hildebrandt
& Calnan, P.A., Fort Lauderdale, for appellant.
Todd R. Legon and William F. Rhodes of Legon Fodiman, P.A., Miami,
and David B. Potter and Archana Nath of Fox Rothschild LLP, Minneapolis,
MN, for appellees.
WARNER, J.
We grant the motion for clarification, withdraw our prior opinion, and
substitute the following in its place.
Managed Care Insurance Consultants, Inc., appeals the order denying
its motion to vacate an arbitration award based on the partiality of one of
the arbitrators. It contends that it showed that the arbitrator had an
actual conflict, as her husband’s medical practice had a business
connection with the appellee, United Healthcare of Florida. Because the
court found that the arbitrator did not have “actual knowledge of such a
relationship or potential conflict prior to or during the subject arbitration,”
nor was there any actual bias shown, the court did not err in denying the
motion. We affirm.
United Health Care (“United”) contracted with Centers for Medicare &
Medicaid Services (“CMS”) to offer Medicare Advantage health plans to
Medicare beneficiaries in South Florida. In exchange for United providing
Medicare benefits, CMS made monthly payments to United for each of its
Medicare Advantage members. United entered into a delegation agreement
with Managed Care Insurance Consultants, Inc. (“MCIC”), whereby United
delegated to MCIC some of its medical management responsibilities under
the contract with CMS. In return, United was to pay the authorized claims
and to fund the payments with funds it received from CMS. MCIC was to
be compensated from revenue placed into a risk pool, based upon a ratio
of expenses to revenue. Both parties claimed that the other breached the
agreement.
The contract had an arbitration provision through the American
Arbitration Association (“AAA”). The AAA appointed three arbiters to hear
the dispute, including the chairperson.
We need not detail the claims and the arbitral proceedings. In short,
MCIC contended that United had not funded the risk pool properly, nor
had it paid only authorized expenses from the pool. MCIC claimed lost
revenues between $14 million and $21 million. United, on the other hand,
claimed that there were deficits in the risk pool due to MCIC’s management
of patient care. It sought damages in the millions of dollars.
In the Final Arbitration Award, the panel found that United had
breached the agreement for funding the risk pool, but did not award any
damages to MCIC because it found the evidence in support of the claimed
damages was too speculative. Similarly, the panel found for MCIC on its
claim that certain patient expenses should have been removed from the
risk pool reconciliation. Again, however, it did not award damages because
of “its inability to quantify with reasonable certainty the amount of invalid
claims that were paid by United.” As to United’s claim against MCIC, the
panel denied relief because United could not establish that it had
performed its part of the contract. Thus, neither party obtained a damage
award from the other party. MCIC made a motion to affirm the portion of
the arbitration award which found that United had breached the
agreement and to vacate the portion which refused to award MCIC
damages. The panel denied the motion and the order became final.
Subsequently, MCIC filed a petition in circuit court to confirm the
award as to its findings of liability in its favor but to vacate the denial of
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damages. It claimed that the lack of damage award was contrary to Florida
law, and the evidence was clear that it was entitled to at least $24 million
in damages.
After filing its petition, MCIC filed an amended petition to vacate the
award in its entirety because of the chairperson’s failure to disclose the
relationship between her physician husband and United. The
chairperson’s husband was a cardiologist associated with HeartWell, a
large cardiology group in South Florida. He treated patients at HeartWell
who were insured by United. He was also on the Board of Directors of
HeartWell. The motion alleged that the chairperson was the primary
architect of the arbitration award based on the amounts she charged to
the parties after the close of the final hearing. The motion also alleged that
she never disclosed that her husband had a contractual relationship with
United or that some of the medical claims at issue were actually paid to
her spouse. Because HeartWell was part of United’s network—and United
reimbursed HeartWell for its doctors’ treatment of patients insured by
United—the chairperson’s failure to disclose that she was married to a
physician receiving payments from United established partiality on her
part.
The court allowed limited discovery from the chairperson. In the
chairperson’s deposition via written questions, she testified that she had
asked her husband if he had any relationship with United and he told her
he didn’t. She had him look at the witness lists, as well as the parties,
and he said he had no dealings with any of them. She stated that if she
had known he had a relationship she would have disclosed it, but “[m]ost
of the times he probably doesn’t even know who the insurance companies
are for his patients, and he did not tell me that he had any relationship
with United Healthcare.” She was not aware of any money that her
husband, or his practice, received from United; nor was she aware that
HeartWell had a contract with United. She was asked whether, between
2010 and 2015, HeartWell billed United $41.3 million, and United paid
HeartWell $12.9 million for medical services, something she should have
disclosed. She testified that she had no idea that there was a relationship.
After reviewing the AAA oath, which required her to do a reasonable
investigation of potential conflicts, she testified that she had made that
investigation by questioning her husband and presenting him with the
conflicts checklist of the parties and witnesses.
In lieu of testimony at the hearing on the motion to vacate, MCIC
submitted the affidavit of another arbitrator. That arbitrator testified that
the relationship between the physician husband and United should have
been disclosed and that the chairperson arbitrator was obligated to do an
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investigation to ascertain the business relationship. The affidavit did not
opine on what a reasonable investigation would include.
The trial court denied both motions to vacate the award. As to the issue
of conflict on the part of the chairperson, the court relied on Gianelli Money
Purchase Plan & Trust v. ADM Investor Services, Inc., 146 F.3d 1309, 1313
(11th Cir. 1998), to conclude that MCIC had not proved an actual conflict
nor that actual bias had been shown. The court ruled that “although there
was evidence that [the arbitrator’s husband] treats patients who are
insured by United and, as a result, receives reimbursement from United,
there was insufficient evidence demonstrating [that the arbitrator] had
actual knowledge of such a relationship or potential conflict prior to or
during the subject arbitration.” As to the original claim that the arbitration
panel had exceeded its powers by not applying the correct law, the court
found that this was not a statutory ground for vacating the award and
denied the petition. From this order, MCIC appeals.
In order to vacate an arbitration award, one of the statutory grounds
listed in section 682.13(1), Florida Statutes (2015), must be present. One
of the statutory grounds warranting vacatur is that there was “[e]vident
partiality by an arbitrator appointed as a neutral arbitrator[.]”
§ 682.13(1)(b)1., Fla. Stat. An arbitrator has an affirmative duty to
disclose to the parties any business relationships that the arbitrator might
have which might create the impression of possible bias. See Weinger v.
State Farm Fire & Cas. Co., 620 So. 2d 1298, 1299 (Fla. 4th DCA 1993).
The Federal Arbitration Act, which applies in this case, likewise permits
vacatur of an arbitration award where a litigant shows “evident partiality
or corruption in the arbitrators[.]” 9 U.S.C. § 10(a)(2) (2015). In Gianelli,
the Eleventh Circuit followed its prior precedent and held that “an
arbitration award may be vacated due to the ‘evident partiality’ of an
arbitrator only when either (1) an actual conflict exists, or (2) the arbitrator
knows of, but fails to disclose, information which would lead a reasonable
person to believe that a potential conflict exists.” Gianelli, 146 F.3d at
1312.
In Gianelli, the office manager of the Gray Harris law firm was chosen
as an arbitrator for a dispute between Gianelli and an investor service. Id.
at 1310. Before the arbitration commenced, Gianelli discovered that Gray
Harris represented the principal of the adverse party, Kelly, in a lawsuit.
Id. The office manager professed no knowledge of the case, and the
principal indicated that it was an isolated incident. Id. After the office
manager arbitrator rendered a ruling in favor of ADM, Gianelli discovered
that the relationship between Kelly and Gray Harris was considerably more
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extensive. Id. Prior to the office manager’s employment with the Gray
Harris firm, the firm had extensive representation of Kelly, but the
arbitrator did not know of the representation. Id. While the district court
granted the motion to vacate for evident partiality, the circuit court
reversed. Id. It concluded that there was no showing of actual bias, and
thus the first criteria of actual conflict did not exist. Id. at 1313. As to the
second criteria, it found that nothing in the record showed that the
arbitrator knew of the prior representation of Kelly. Id. “Because [the
arbitrator] did not have actual knowledge of the information upon which
the alleged ‘conflict’ was founded, the second ‘evident partiality’ condition
is not present in this case.” Id.
Gianelli has been criticized in several courts for requiring actual
knowledge of a conflict without requiring that the arbitrator conduct an
investigation to ascertain whether a conflict exists. See, e.g., New Regency
Prod., Inc. v. Nippon Herald Films, Inc., 501 F.3d 1101, 1109 (9th Cir.
2007). Those courts impose a duty to investigate potential conflicts. Id.;
see also Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994); Applied Indus.
Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132 (2d
Cir. 2007); ANR Coal Co. v. Cogentrix of N.C., Inc., 173 F.3d 493 (4th Cir.
1999).
The cases requiring investigation deal with instances in which lawyers
have not made a conflicts check within their own firm or a business person
has not make a check of business relationships of the arbitrator’s own
business with the arbitration parties. In this case, however, the business
relationship is between the arbitrator’s husband’s business and one of the
parties to the arbitration. The arbitrator did do an investigation by asking
her husband about any conflicts and presenting him with a conflicts
checklist. Thus, even if a duty to investigate is required, the arbitrator
complied. We do not believe that the arbitrator is compelled to disbelieve
the information she is given by her husband and investigate further. We
are not even sure that the arbitrator would have the ability to probe the
corporate business to determine whether a conflict exists.
Under Florida law, section 682.041, Florida Statutes (2015), requires
that an arbitrator disclose any “known facts that a reasonable person
would consider likely to affect the person’s impartiality as an arbitrator in
the arbitration proceeding[.]” § 682.041(1), Fla. Stat. (emphasis added). If
there was no evidence that the arbitrator knew of the facts, then there
would be no basis for vacatur. Thus, the Florida Arbitration Code adheres
most closely to Gianelli.
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There was no actual bias shown by the arbitrator in this case, nor was
there an actual conflict. The arbitrator did not know of the business
relationship between her husband’s corporate employer and United (nor,
apparently, did her husband). The trial court did not err in denying the
motion to vacate.
In its other claim for vacatur of the arbitration award, MCIC claims that
the arbitrators exceeded their powers under the agreement by failing to
apply controlling Florida law in denying any damage award. As found by
the trial court, this is an attempt to disguise what is clearly a claim of legal
error by the arbitration panel, which is not a ground to vacate an
arbitration award. See Hall St. Assoc., LLC v. Mattel, Inc., 552 U.S. 576,
585-86 (2008) (holding that arbitrator’s legal error is not reviewable under
the Federal Arbitration Act and contract cannot expand grounds for
vacating award).
For the foregoing reasons, we affirm the order denying the motion to
vacate the arbitration award.
DAMOORGIAN and FORST, JJ., concur.
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