Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-30310

C.C.N. MANAGED CARE, INC.,

Plaintiff - Appellee

v.

FAYEZ SHAMIEH A.M.C.; SOUTHWESTERN LOUISIANA

HOSPITAL ASSOCIATION, doing business as Lake Charles

Memorial Hospital; LAKE CHARLES PHYSICIAN HOSPITAL

ORGANIZATION; ENGLAND MASSE CLINIC; R. DALE

BERNAUER; KEVIN GORIN; LYNN FORET,

Defendants - Appellants

Appeal from the United States District Court

for the Western District of Louisiana

USDC No. 2:06-CV-519

Before KING, JOLLY, and STEWART, Circuit Judges.

PER CURIAM:*

Appellants are health care providers (Providers) who contracted with

appellee CCN, a Preferred Provider Organization (PPO). In exchange for CCN’s

referrals to insurance companies and employers (Payors), the Providers agreed

to provide health care services to the Payors at discounted rates. The Providers

United States Court of Appeals

Fifth Circuit

F I L E D

March 18, 2010

Charles R. Fulbruge III

Clerk

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No. 09-30310

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first filed an action in state court seeking to declare their contracts with PPOs

unenforceable. The action was removed to federal court and the plaintiff

Providers dismissed a number of defendants, including CCN. In this separate

action, CCN sought a declaratory judgment that the discounts taken pursuant

to its contracts with the Providers are valid. After months of delay in the

proceeding, the Providers moved to compel arbitration under the mandatory

provisions of the contracts. The court denied their motion and the Providers

filed this appeal once the district court’s order became a final judgment. For the

reasons that follow, we affirm the district court’s denial of the motion.

I.

We begin with some background. In January 2006, the Providers filed a

declaratory action in Louisiana state court against CCN, among many other

defendants, in Shamieh, et al. v. American Interstate Ins. Co., et al. (American

Interstate). The Providers sought a declaratory judgment that the PPO network

discounts taken by Payors for services rendered by the Providers, pursuant to

CCN’s (and others’) PPO agreements, were unenforceable under the Louisiana

Workers Compensation Laws (WCL), La. Rev. Stat. § 23:1031 et seq., and Any

Willing Provider Act (AWPA), id. § 40:2201 et seq. In February 2006, one of the

defendants removed the case to federal court, at which point the Providers

voluntarily and quickly dismissed CCN and 115 of the other defendants.

CCN then filed the instant action on March 28, 2006, seeking a federal

declaratory judgment declaring that its contracts were not subject to the notice

requirements of the AWPA, and were valid and enforceable under the WCL. The

complaint also sought damages and attorneys’ fees for breach of contract, based

on the assertion that the Providers’ state court suit in American Interstate

constituted a breach of their agreement to charge only a discounted amount to

Payors. 

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In April 2006, without mentioning the arbitration clause, the now federal

defendant Providers moved to dismiss or stay proceedings based on two pending

state court cases and the pending appeal of a federal case concerning similar

issues, Liberty Mutual Ins. Co. v. Gunderson, 2006 WL 367700 (W.D. La.). The

district court granted a stay based on the Liberty Mutual appeal. After another

panel of this court dismissed that appeal for lack of jurisdiction, the district

court lifted the stay on December 21, 2006.

CCN filed a motion for summary judgment on May 3, 2007. On May 31,

2007, the Providers filed a motion to compel arbitration. On July 20, the district

court denied the Providers’ motion on the ground that they had waived their

rights to arbitration. The court simultaneously granted summary judgment to

CCN on its declaratory judgment claims, leaving only the breach of contract

claims, which CCN later moved to dismiss. On February 2, 2009, the district

court granted CCN’s motion to dismiss, rendering the court’s July 20, 2007,

order final and appealable. Providers appeal only the denial of their motion to

compel arbitration.

II.

We review de novo the district court’s legal conclusion that the Providers

waived arbitration, but review underlying factual findings for clear error.

Subway Equipment Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999).

Specifically, whether a party substantially invoked the judicial process and

whether there was prejudice are both factual findings that we review for clear

error. Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.

2004).

There is, of course, a strong presumption in favor of arbitration and “any

doubts . . . should be resolved in favor of arbitration.” Moses H. Cone Mem’l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). But, “[w]aiver will be

found when the party seeking arbitration substantially invokes the judicial

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Nicholas notes two exceptions to its general rule and allows that other exceptions may

1

exist. However, the enumerated exceptions both involve situations in which the party initiates

litigation that is not inconsistent with an intent to arbitrate (suing “solely to obtain a

threshold declaration as to whether a valid arbitration agreement existed,” or suing “to obtain

injunctive relief pending arbitration.”). Here, the Providers did not mention arbitration in the

state court.

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process to the detriment or prejudice of the other party.” Subway, 169 F.3d at

326 (quoting Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497

(5th Cir. 1986)). Furthermore, “the act of a plaintiff filing suit without asserting

an arbitration clause constitutes substantial invocation of the judicial process.”1

Nicholas v. KBR, Inc., 565 F.3d 904, 980 (5th Cir. 2009). However, “a party only

invokes the judicial process to the extent it litigates a specific claim it

subsequently seeks to arbitrate.” Subway, 169 F.3d at 328. 

Finally, the non-moving party opposing arbitration must come forward to

demonstrate that it was prejudiced by the moving party’s substantial invocation

of the judicial process, and “[p]rejudice in the context of arbitration waiver refers

to delay, expense, and damage to a party’s legal position.” Nicholas, 565 F.3d at

910. Prejudice is more easily demonstrated when the moving party seeking to

arbitrate “engages in pretrial activity inconsistent with an intent to arbitrate,”

thus failing to “put[] a party on notice that arbitration may be forthcoming.”

Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1161 (5th Cir. 1986). 

On appeal, the Providers argue that the state court suit, American

Interstate, did not involve the same claims as those raised by CCN in the instant

action, which the Providers are now seeking to arbitrate. Each party has a

different characterization of the state court litigation, but the district court

found, and we agree, that it involved the same claims as those in the federal

action. Both actions involved the same contracts between CCN and the

Providers, and both involved the question of whether the discounts taken under

those contracts were in violation of the AWPA and the WCL.

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Therefore, the Providers’ actions in the state court suit must be considered

when determining whether they substantially invoked the judicial process

regarding the claims in the instant action. We conclude that the Providers’ act

of filing suit in American Interstate constituted a substantial invocation of the

judicial process. See Nicholas, 565 F.3d at 980. Our conclusion is strengthened

by the Providers’ continued delay in the federal court before filing the motion to

compel arbitration: they attempted dismissal, obtained a stay, and waited for

CCN’s summary judgment motion, all over a period of fourteen months, before

seeking arbitration. There can be no question that they demonstrated a

“disinclination” to arbitrate these claims. See Miller, 781 F.2d at 497.

Further, we agree with the district court that CCN was prejudiced by the

Providers’ invocation of the judicial process. In state court, CCN spent $58,000

coordinating the removal to federal court. Even if this would not have been

sufficient on its own (CCN did not remove the state court case itself and seems

to have been required to do very little in state court before being voluntarily

dismissed as a defendant upon removal), CCN’s prejudice in the federal action

is more substantial; it has spent $110,000 in initiating the suit, responding to

the Providers’ motion to dismiss or stay, and filing a motion for summary

judgment. Further, CCN’s legal position has changed considerably because its

motion for summary judgment on the merits of its federal declaratory action was

successful; it would likely have to relitigate the same issues in arbitration. See

Nicholas, 565 F.3d at 911 (“KBR would be prejudiced by having to re-litigate in

the arbitration forum the ERISA [preemption] issue already decided by the

district court in its favor”). Therefore, the district court’s finding of prejudice

was not clearly erroneous. Because the Providers substantially invoked the

judicial process to CCN’s prejudice, we agree that they waived their right to

arbitrate these claims and consequently the district court’s denial of arbitration

is 

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AFFIRMED.

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