2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-6-2014

Cardionet Inc v. Cigna Health Corp

Precedential or Non-Precedential: Precedential

Docket No. 13-2496

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 13-2496

_____________

CARDIONET, INC.;

LIFEWATCH SERVICES, INC.,

Appellants

v.

CIGNA HEALTH CORPORATION

____________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(No. 2:13 Civ. 00191)

District Judge: Honorable Eduardo C. Robreno

____________

Argued: January 22, 2014

Before: FUENTES, FISHER, Circuit Judges, and STARK, 

District Judge.

1

 

1 Honorable Leonard P. Stark, United States District Court 

Judge for the District of Delaware, sitting by designation.
2

(Filed: May 6, 2014)

____________

Mark H. Gallant, Esq. [ARGUED]

Raymond A. Kresge, Esq.

Aaron Krauss, Esq.

Robert A. Chu, Esq.

Cozen O’Connor

1900 Market Street

Philadelphia, PA 19103

Attorneys for Appellants

Paul M. Hummer, Esq. [ARGUED]

Saul Ewing LLP

1500 Market Street, 

38th Floor, Centre Square West

Philadelphia, PA 19102

Attorney for Appellee

________________________

OPINION OF THE COURT

________________________

FUENTES, Circuit Judge:

CardioNet, Inc. and LifeWatch Services, Inc. are 

providers of medical devices that allow physicians to monitor 

cardiac arrhythmias in patients not confined to the hospital. 

For several years, CIGNA Health Corporation provided 

coverage for this service. Then, in 2012, CIGNA reversed 

course and announced that it would no longer do so. 
3

CardioNet and LifeWatch filed this action against CIGNA on 

their own behalf and as the assignee of patients who used 

their services. In response, CIGNA moved to compel 

arbitration under the parties’ agreement. The District Court 

agreed with CIGNA that CardioNet and LifeWatch’s claims 

fell within the arbitration clause of the parties’ agreement and 

therefore compelled arbitration. Because we conclude that 

none of CardioNet and LifeWatch’s claims fall within the 

arbitration clause, we vacate the District Court’s judgment

and remand for further proceedings.

I. 2

A.

 

2 CIGNA bases its motion to compel arbitration on language 

in the parties’ contracts. Those contracts, though not 

appended to the Complaint, are integral to, and referenced in, 

the Complaint. Because the arbitration clause at issue 

appears in a contract relied upon in the Complaint, we resolve 

the motion to compel arbitration under a motion to dismiss 

standard, Guidotti v. Legal Helpers Debt Resolution, L.L.C., 

716 F.3d 764, 773-75 (3d Cir. 2013), and accept as true the 

factual allegations set forth in the Complaint, Bell v. 

Cheswick Generating Station, 734 F.3d 188, 192 n.2 (3d Cir. 

2013). We are also permitted to consider the substance of the 

contracts that ostensibly compel arbitration. See In re 

Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d 

Cir. 1997) (noting that “a document integral to or explicitly 

relied upon in the complaint may be considered” at the 

motion to dismiss stage (quotation marks and emphasis 

omitted)).
4

CardioNet, Inc. and LifeWatch Services, Inc. 

(together, “the Providers”) supply outpatient cardiac 

telemetry (“OCT”) services. OCT, an outpatient device, is 

used by physicians, usually cardiologists, to monitor cardiac 

arrhythmias. The device differs from conventional

technologies for detecting arrhythmias in that it transmits 

electrocardiographic (“EKG”) data in real time to certified 

technicians, who then forward the data to the ordering 

physician. OCT is approved by the Food and Drug 

Administration, and has been covered by Medicare and 

commercial insurers for many years. 

CIGNA Healthcare Corporation administers employer 

sponsored health and welfare benefit plans across the country. 

Like other health insurance companies, CIGNA maintains a 

network of health care providers. Pursuant to individual 

agreements between CIGNA and its in-network providers, 

CIGNA pays the providers directly for the services rendered 

to patients. 

In 2007, CardioNet and LifeWatch joined CIGNA’s 

provider network by entering into identical Administrative 

Service Agreements with CIGNA (“the Agreement”). The

Agreement sets the rate at which CIGNA would reimburse 

the Providers for the particular services rendered to CIGNA 

patients. It also circumscribes the services for which 

reimbursement is available. Specifically, the Providers’

services are reimbursable under the Agreement only if they 

constitute “Covered Services.” App. at 65, 72. The 

Agreement defines “Covered Services” as “those health care 

services for which a Participant is entitled to receive coverage 

under the terms and conditions of the Participant’s Benefit 
5

Plan.” Id. at 64.

3

 According to the Agreement, “[n]o service 

is a Covered Service unless it is Medically Necessary,” that is 

it “satisfies the Medical Necessity requirements under the 

applicable Benefit Plan.” Id.

B.

CIGNA first announced a policy of covering OCT in 

2007. At the time, it determined that there was “sufficient

evidence in the published peer reviewed medical literature 

supporting the use of home-based, real-time surveillance 

systems.” App. at 35. CIGNA maintained and reaffirmed its

policy of covering OCT each year through 2011. But then, in 

2012, it abruptly terminated its coverage of OCT; CIGNA 

then issued a new policy statement, entitled 2012 Cardiac 

Event Monitor Coverage Policy (“the 2012 Policy”), 

announcing that it would no longer cover OCT “for any 

indication because it is considered experimental, 

investigational or unproven.” Id. at 25, 37. The 2012 Policy 

acknowledged, however, that this new position would be 

trumped by any conflicting language in the coverage policies 

themselves. 

Although CIGNA’s OCT policy had changed, its 

medical knowledge had not: CIGNA relied on the same 

medical literature it had previously relied upon in concluding 

that OCT should be covered. Shortly after CIGNA’s 

announcement, the Providers asked CIGNA to reconsider its 

new position on OCT. According to the Complaint, CIGNA

 

3

The Agreement defines “Participant” as “any individual, or 

eligible dependent of such individual, . . . who is eligible and 

enrolled to receive Covered Services.” Id.
6

intimated to the Providers that its motive for reversing course 

was financial, but refused to back away from the 2012 Policy. 

Subsequently, CIGNA issued Medical Coverage 

Policy Updates for Heath Care Professionals (“the Physician 

Update”) to hundreds of thousands of its network physicians, 

announcing that it would not cover OCT “for any indication 

because it is considered [experimental, investigational, and

unproven].” App. 40-41. By letter, CardioNet objected to 

CIGNA’s characterization of OCT as experimental, 

investigational, and unproven. CardioNet’s letter also 

observed that CIGNA’s unequivocal statement that CIGNA 

would not cover OCT “for any indications” conflicted with its 

acknowledgement in the 2012 Policy that CIGNA’s new 

position could be trumped by the specific coverage policies 

included in employee benefit plans. Id. CIGNA neither 

responded to the letter nor amended the Physician Update. 

The Providers allege that the Physician Update not only 

prevented patients with CIGNA insurance from ordering 

OCT, but also “has caused and continues to cause physicians 

to refrain from ordering OCT for patients whose employer

plans . . . do cover OCT.” Id. at 41. 

C.

The Providers filed this action in the Eastern District 

of Pennsylvania, “on their own behalves and as assignees of 

the rights and claims of patients.” App. at 24. The Complaint 

contains seven counts. The Providers bring Counts I-IV as 

the assignees of the claims of five CIGNA plan participants 

(“the Participants”). The Participants all sought coverage for 

OCT after the implementation of the 2012 Policy, and were 

all denied coverage by CIGNA. After CIGNA denied 
7

coverage, the Participants received OCT from the Providers, 

and in exchange assigned to the Providers “all of [their] rights 

(without limitation) under the Employee Retirement Income 

Security Act of 1974 (ERISA) . . . along with any other rights 

under federal or state law that [they] may have as related to 

the reimbursement of coverage” for the uncovered treatment. 

Id. at 284. 

Counts I-IV, the so-called “derivative” counts,

challenge CIGNA’s decision to deny the Participants OCT

coverage; the Providers bring these claims standing in the 

shoes of the Participants. Specifically, in Count I, the 

Providers allege that CIGNA arbitrarily and capriciously 

changed its OCT coverage policy, and seek to recover 

benefits due under ERISA § 502(a)(1)(B), 29 U.S.C. § 

1132(a)(1)(B). In Count II, the Providers seek an injunction, 

pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), 

directing CIGNA to withdraw its current coverage policy for 

OCT and rescind the Physician Update regarding OCT. In 

Count III, the Providers allege that, by systematically denying 

OCT coverage, CIGNA breached its duty to the Participants 

to faithfully apply the terms of the governing ERISA plans; 

they seek an injunction, pursuant to ERISA § 502(a)(3), 

“requiring CIGNA to process claims for OCT benefits in all 

instances based on the terms of the ERISA plans . . . and to 

cease and desist from processing such ERISA claims based 

on any conflicting terms . . . in the 2012 [] Policy.” App. 52. 

To the extent that any of the assigned claims do not arise 

from or are exempt from ERISA, Count IV asserts that 

CIGNA breached its contractual obligation to the Participants 

by failing to cover medically necessary services. 
8

CardioNet and LifeWatch bring the remaining three 

counts on their own behalf. These so-called “direct” counts 

primarily concern an alleged harm stemming from CIGNA’s 

distribution of the Physician Update. In Count V, the 

Providers allege that through the issuance of the Physician 

Update, CIGNA tortiously interfered with the Providers’

current and prospective business relations with physicians 

who have ordered, or may in the future order, OCT for their 

patients. In Count VI, they allege that the Physician Update 

constituted a misleading and deceptive commercial or 

promotion, in violation of § 43(a)(1)(B) of the Lanham Act, 

15 U.S.C. § 1125(a)(1)(B). Finally, Count VII alleges that 

the Physician Update constituted trade libel. Through Counts 

V-VII, the Providers seek damages, as well as the issuance of 

corrective advertising to the physicians who received the 

Physician Update. 

Shortly after CardioNet and LifeWatch filed this 

action, CIGNA moved to compel arbitration, or in the 

alternative, to stay the action pending arbitration, under

Rule 12(b)(6) of the Federal Rules of Civil Procedure and the 

Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 3-4.4 The 

District Court agreed with CIGNA that all of the Providers’

claims, including those brought on behalf of the Participants,

fell within the purview of the Agreement’s arbitration clause. 

It therefore compelled arbitration. 

The District Court began by analyzing the relevant 

language in the Agreement concerning arbitration. It 

 

4 CIGNA also moved to dismiss the Providers’ claims on 

other grounds. However, the District Court declined to reach 

these alternative arguments.
9

concluded that the arbitration provision was broad, so that the 

presumption in favor of arbitration applied with particular 

force. CardioNet, Inc. v. Cigna Health Corp., 945 F. Supp. 

2d 620, 625-26 (E.D. Pa. 2013). The Court then assessed the 

arbitrability of the derivative and direct claims in turn. As to 

the derivative claims, the District Court acknowledged that 

the Agreement’s arbitration clause could not bind the 

Participants, as “an arbitration clause applies only to the 

parties to the agreement in which it is contained and those 

with whom there is privity of contract.” Id. at 627.

Nonetheless, it concluded that the Providers could not 

“pursue the Plan Participants’ claims [in court] through an 

assignment from the Plan Participants to Plaintiffs.” Id. The 

District Court reasoned that: 

Plaintiffs have a preexisting duty under their 

agreements with CIGNA to arbitrate disputes 

that are substantively identical to the claims 

they now seek to bring as assignees. All of 

Plaintiffs’ claims rest on the basic argument that 

OCT services should be covered services and 

therefore should be paid for by CIGNA. This 

argument strikes at the heart of Plaintiffs’ 

contracts with CIGNA, i.e., claims for payment 

by Plaintiffs will be subject to arbitration. 

Plaintiffs cannot nullify their agreements to 

arbitrate these claims for payment by becoming 

assignees of the Plan Participants’ claims. 

Id. Accordingly, the District Court concluded that, while 

“[o]f course, the Plan Participants are free to pursue their 

claims independently, or via an assignment to another third 

party, . . . [i]f Plaintiffs wish to challenge Defendant’s 
10

classification of OCT services as [experimental, investigative, 

and unproven], they must arbitrate their claims, as they had 

agreed to do under the [Agreement].” Id.

The District Court next evaluated the direct claims. 

These too, it determined, were barred by the Agreement’s 

arbitration clause. The District Court explained that “the 

foundation of Counts V through VII”—the Providers’

allegation that the Physician Update deterred physicians from

ordering OCT—“clearly falls within the scope of the 

[Agreement’s] arbitration clauses. To the extent that 

Plaintiffs disagree on whether OCT services should be 

classified as [experimental, investigative, and unproven] or as 

covered, this disagreement must be resolved under the terms 

of the arbitration provision.” Id. at 628. 

The Providers now appeal the compulsion of 

arbitration of both the direct and the derivative claims.

5

II.

A.

In the vast majority of cases, the arbitrability of a

dispute is a question for judicial determination. See First 

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) 

 

5

The District Court had subject matter jurisdiction pursuant 

to 28 U.S.C. §§ 1331 and 1367(a). We have appellate 

jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. §

16(a)(3). We exercise “plenary review over the District 

Court’s order compelling arbitration.” Bouriez v. Carnegie 

Mellon Univ., 359 F.3d 292, 294 (3d Cir. 2004).
11

(“Courts should not assume that the parties agreed to arbitrate 

arbitrability unless there is ‘clea[r] and unmistakabl[e]’ 

evidence that they did so.” (quoting AT & T Techs., Inc. v. 

Commc’ns Workers of Am., 475 U.S. 643, 649 (1986))

(alterations in original). Because neither party questions the 

propriety of the District Court determining whether the 

dispute is arbitrable, we assume, without further analysis, that 

the Agreement leaves the question of arbitrability to judicial 

determination. See Granite Rock Co. v. Int’l Bhd. of 

Teamsters, 561 U.S. 287, 130 S. Ct. 2847, 2856 n.5 (2010). 

Until a court determines whether arbitration should be 

compelled, however, judicial review is limited to two 

threshold questions: “(1) Did the parties seeking or resisting 

arbitration enter into a valid arbitration agreement? (2) Does 

the dispute between those parties fall with the language of the 

arbitration agreement?” John Hancock Mut. Life Ins. Co. v. 

Olick, 151 F.3d 132, 137 (3d Cir. 1998). Because neither 

party contests the validity of the Agreement, we confine 

ourselves to assessing whether the disputes at issue fall within 

the scope of the Agreement’s arbitration clause. 

The FAA, 9 U.S.C. §§ 1-13, establishes “a uniform 

federal law over contracts which fall within its scope.” 

Goodwin v. Elkins & Co., 730 F.2d 99, 108 (3d Cir. 1984). 

This uniform federal law places “arbitration agreements on an 

equal footing with other contracts,” and requires courts to 

“enforce them according to their terms.” AT & T Mobility 

LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011); see also 

Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 130 S.Ct. 

2772, 2776 (2010) (“The FAA reflects the fundamental 

principle that arbitration is a matter of contract.”); Dean 

Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985) (“The 
12

preeminent concern of Congress in passing the [FAA] was to 

enforce private agreements into which parties had entered, 

and that concern requires that we rigorously enforce 

agreements to arbitrate . . . .”). Thus, where a written 

agreement evidences an intent on the part of the contracting 

parties to arbitrate the dispute in question, a court must 

compel the parties to arbitrate that dispute. See Mitsubishi 

Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 

626 (1985).

But the fact that the parties have agreed to arbitrate

some disputes does not necessarily manifest an intent to 

arbitrate every dispute that might arise between the parties, 

since “[u]nder the FAA, ‘parties are generally free to 

structure their arbitration agreements as they see fit.’” Green 

Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 458 (2003) 

(Rehnquist, J., dissenting) (quoting Volt Info. Scis., Inc. v. Bd.

of Trs. of the Leland Stanford Junior Univ., 489 U.S. 468, 479 

(1989)). Accordingly, “a court may order arbitration of a 

particular dispute only where the court is satisfied that the 

parties agreed to arbitrate that dispute.” Granite Rock, 130 S.

Ct. at 2856 (emphasis in original). Ultimately, then, whether 

a dispute falls within the scope of an arbitration clause 

depends upon the relationship between (1) the breadth of the 

arbitration clause, and (2) the nature of the given claim. 

We must resolve “any doubts concerning the scope of 

arbitrable issues . . . in favor of arbitration.” Moses H. Cone

Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25

(1983); see also Medtronic AVE, Inc. v. Advanced 

Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001) 

(noting that “federal policy favors arbitration”). However, 

the Supreme Court has repeatedly warned against 
13

“overread[ing its] precedent[]” concerning the presumption of 

arbitrability. E.g. Granite Rock, 130 S. Ct. at 2857. The 

presumption in favor of arbitration does not “take[] courts 

outside [the] settled framework” of using principles of 

contract interpretation to determine the scope of an arbitration 

clause. Id. at 2859. Quite the contrary, the presumption

“derives its legitimacy from” the judicial supposition “that 

arbitration of a particular dispute is what the parties intended 

because their express agreement to arbitrate was validly 

formed and (absent a provision clearly and validly 

committing such issues to an arbitrator) is legally enforceable 

and best construed to encompass the dispute.” Id. at 2859-60; 

see also Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress 

Int’l, Ltd., 1 F.3d 639, 641 (7th Cir. 1993). Indeed, while the 

FAA “embodies a strong federal policy in favor of arbitration, 

. . . the duty to arbitrate remains one assumed by contract.”

Sweet Dreams Unlimited, 1 F.3d at 641. Thus, the 

presumption of arbitrability applies only where an arbitration 

agreement is ambiguous about whether it covers the dispute at 

hand. See Granite Rock, 130 S. Ct. at 2858-59. Otherwise, 

the plain language of the contract controls.

In assessing whether a particular dispute falls within

the scope of an arbitration clause, we “focus [] on the factual 

underpinnings of the claim rather than the legal theory alleged 

in the complaint.” Medtronic AVE, Inc., 247 F.3d at 55

(quotation marks omitted). In so doing, we “prevent[] a 

creative and artful pleader from drafting around an otherwiseapplicable arbitration clause.” Chelsea Family Pharmacy, 

PLLC v. Medco Health Solutions, Inc., 567 F.3d 1191, 1198 

(10th Cir. 2009).
14

B.

We begin by “carefully analyz[ing] the contractual 

language” in the arbitration clause at issue. Trap Rock Indus., 

Inc. v. Local 825, Int’l Union of Operating Eng’rs, 982 F.2d 

884, 888 (3d Cir. 1992). The Agreement contains the 

following two paragraphs concerning alternative dispute 

resolution, and no other:

6

6.3 Internal Dispute Resolution. Disputes that 

might arise between the parties regarding the 

performance or interpretation of the Agreement

must first be resolved through the applicable 

internal dispute resolution process outlined in 

the Administrative Guidelines. In the event the 

dispute is not resolved through that process, 

either party can request in writing that the 

parties attempt in good faith to resolve the 

dispute promptly by negotiation . . . . If the 

matter is not resolved within 60 days of such a 

request, either party may initiate arbitration by 

providing written notice to the other. With 

respect to a payment or termination dispute, 

Provider must submit a request for arbitration 

within 12 months . . . If arbitration is not 

requested within that 12 month period, 

CIGNA’s final decision under its internal 

dispute resolution process will be binding on 

Provider, and Provider shall not bill CIGNA, 

 

6

The full text of Sections 6.3 and 6.4 is set forth in Appendix 

“A” to this Opinion.
15

Payor or the Participant for any payment denied 

because of the failure to timely submit a request 

for arbitration.

6.4 Arbitration. If the dispute is not resolved 

through CIGNA’s internal dispute resolution 

process, either party can initiate arbitration by 

providing written notice to the other. If one of 

the parties initiates arbitration, the proceeding 

will be held in the jurisdiction of Provider’s 

domicile. The parties will jointly appoint a 

mutually acceptable arbitrator. . . . Arbitration 

is the exclusive remedy for the resolutions of 

disputes under this Agreement. The decision of 

the arbitrator will be final, conclusive and 

binding . . . .

App. 69 (emphasis added).

The above-quoted language makes clear that only 

those disputes “regarding the performance or interpretation of 

the Agreement” must be arbitrated. True, the phrase 

“regarding the performance or interpretation of the 

Agreement” appears in the internal dispute resolution 

paragraph (Section 6.3), rather than the mandatory arbitration 

paragraph (Section 6.4). But it is clear from the language of 

the two sections that the parties intended them to be read 

together, as two stages of mandatory dispute resolution. 

Section 6.3 explains that where a dispute subject to that 

provision cannot be resolved using the internal dispute 

resolution process, “either party may initiate arbitration.” 

Section 6.4 then outlines what form such an arbitration will 

take. The first sentence of Section 6.4 requires arbitration not 
16

of “all” or “any” disputes between the parties, but of only 

“the dispute” that the parties failed to resolve through the 

internal process outlined in Section 6.3. Hence, Section 6.4 

mandates the arbitration of only those disputes subject to the 

internal dispute resolution process outlined in Section 6.3. 

And Section 6.3 only applies to those “[d]isputes that might 

arise between the parties concerning the performance and 

interpretation of the Agreement.” Accordingly, Section 6.4 

must be limited to disputes concerning the Agreement’s 

“performance or interpretation.”

The District Court similarly reached the conclusion 

that Sections 6.3 and 6.4 call for “the arbitration of disputes 

related to the ‘interpretation or performance’ of the 

agreement.” CardioNet, 945 F. Supp. 2d at 626. The District 

Court intimated, however, that the statement in the middle of 

Section 6.4 that “[a]rbitration is the exclusive remedy for the 

resolutions of disputes under this Agreement” broadens the 

scope of mandatory arbitration. Id. We believe that the term 

“disputes” as used here refers solely to those disputes 

concerning the “performance or interpretation of the 

Agreement.” As we have explained previously, courts “are 

required to read contract language in a way that allows all the 

language to be read together, reconciling conflicts in the 

language without rendering any of it nugatory if possible.” 

CTF Hotel Holding, Inc. v. Marriott Int’l, Inc., 381 F.3d 131, 

137 (3d Cir. 2004). Were we to hold that “disputes” as used 

here signifies a broader swath of disagreements, it would 

render the first sentence of Section 6.4 devoid of meaning. 

Moreover, as the Providers note, the words “dispute” and 

“disputes” are used three other times in these two sections, 

each time clearly referring to the narrower set of disputes 

concerning the Agreement’s performance and interpretation. 
17

Accordingly, we believe that the word “disputes,” as 

employed here, must be circumscribed. See Restatement 

(Second) of Contracts § 202 cmt. d (“Meaning is inevitably 

dependent on context. A word changes meaning when it 

becomes part of a sentence, the sentence when it becomes 

part of a paragraph.”).

We therefore conclude that the arbitration clause in 

this case is limited in scope to disputes “regarding the 

performance or interpretation of the Agreement.”

7

 

7

The parties spend sizeable portions of their briefs disputing 

whether this arbitration clause is properly categorized as 

“broad” or “narrow.” The presumption of arbitrability is 

“particularly applicable” where the arbitration clause is a 

broad one. AT & T Techs., 475 U.S. at 650. However, as we 

have noted, the presumption of arbitrability is relevant only 

where the scope of the arbitration clause is ambiguous. See 

Granite Rock, 130 S. Ct. at 2858-60. Here, the arbitration 

provision is not ambiguous. In any event, as the arbitration 

provision here “implicate[s only] interpretation or 

performance of the contract per se,” it does not sweep beyond 

the confines of the contract, and is therefore narrow in scope. 

Sweet Dreams, 1 F.3d at 642; see also Mediterranean Enters., 

Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983) 

(contrasting arbitration clauses that sweep broadly with those 

“intended to cover a much narrower scope of disputes, i.e., 

only those relating to the interpretation and performance of 

the contract itself”); cf. Battaglia v. McKendry, 233 F.3d 720, 

724-25 (3d Cir. 2000) (an arbitration clause not “limited to 

disputes involving the interpretation and performance of the 

Settlement Agreement” is broad).
18

C.

We next consider whether the claims at issue relate to 

the performance or interpretation of the Agreement. 

First, we examine whether the Providers’ direct claims 

fall under the scope of the arbitration clause. CIGNA 

contends that the direct claims relate to the performance and 

interpretation of the Agreement, because they “unavoidably 

implicate Cigna’s contractual obligation to treat as ‘Covered 

Services’ any services that participants are entitled to receive 

under their benefits plans.” Appellee’s Br. at 30. We 

disagree.

Again, in determining whether these claims at issue 

relate to the performance and interpretation of the Agreement, 

we focus on the factual underpinnings of the claim rather than 

the legal theories asserted in the Complaint. Although styled 

as distinct statutory and common law causes of action, the 

Providers’ trade libel, Lanham Act, and tortious interference 

claims rest upon identical factual assertions: CIGNA made 

false and misleading statements in the Physician Update 

about the nature and quality of OCT; CIGNA conveyed the 

false impression that OCT would never be covered under any 

health plans CIGNA administers; and the Physician Update 

injured them by decreasing the number of physicians willing 

to use OCT services.8 

 

8 We take no position here on CIGNA’s argument in the 

District Court that the direct counts fail to state cognizable 

claims. We simply assume for the time being that they do. 
19

Thus, the adjudication of CIGNA’s direct claims 

depends on whether the Physician Update—a document 

completely distinct from the Agreement—is deceptive and 

misleading, and whether any deceptions therein caused a 

cognizable injury to the Providers. The resolution of these 

claims does not require construction of, or even reference to, 

any provision in the Agreement. Cf. RCM Techs., Inc. v. 

Brignik Tech., Inc., 137 F. Supp. 2d 550, 555 (D.N.J. 2001) 

(fraudulent inducement claims were subject to arbitration 

where “the claims in this case almost undoubtedly will 

require interpretation of the parties’ agreement”). Quite the 

contrary, whether CIGNA performed its obligations under the 

Agreement has no bearing on whether it harmed the Providers 

by providing physicians with misleading information on 

OCT.

Indeed, it is not even clear to us that the Agreement is 

a factual predicate to these claims. Theoretically, any OCT 

manufacturer, whether it had entered into an in-network 

Agreement with CIGNA or not, would be harmed by the 

misleading statements ostensibly made by CIGNA about the 

OCT technology and would have a basis for bringing claims

identical to the Providers’ claims here. In any event, factual 

connections between the Agreement and the factual 

underpinnings of the Complaint do not render these claims 

arbitrable.9

 

9

Thus, the fact that the “[C]omplaint references the 

Agreements extensively” is of no moment. See Appellee’s 

Br. at 21. The Complaint does indeed discuss the Agreement, 

but it hardly follows from this that the parties’ “performance 

or interpretation” of the Agreement is implicated by the 

Providers’ claims. Accord Ford v. NYLCare Health Plans of 
20

CIGNA brings to our attention an array of circuit and 

district court cases where Lanham Act, tort, and trade 

disparagement claims were held to be arbitrable, noting that 

“[Lanham Act] and tort claims such as those pled in Counts 

V-VII are frequently referred to arbitration when they arise 

out of a contractual relationship.” Appellee’s Br. at 30. To 

be sure, CIGNA is correct that Lanham Act and tort claims 

often fall within the scope of different arbitration clauses. 

But that bears little relevance to whether these Lanham Act 

and tort claims fall within the scope of this arbitration clause.

Again, the arbitrability of a given dispute depends not on the 

particular cause of action pleaded, but on the relationship of

the arbitration clause at issue to the facts underpinning a

plaintiff’s claims. Hence, the cases cited by CIGNA would 

be relevant only if they (1) contained arbitration clauses of a 

similar scope to the one here, and (2) concerned claims whose 

underlying facts bore a similar relationship to the parties’ 

contracts. 

As the Providers note, CIGNA’s cases are similar in 

neither respect. First, those cases concern arbitration clauses 

undisputedly broader than the clause at issue here. See, e.g.,

Sweet Dreams Unlimited, 1 F.3d at 642-43 (assessing the 

scope of an arbitration clause that sweeps beyond the 

“interpretation or performance of the contract per se” and 

concluding that several of plaintiff’s counts fall within the 

clause’s scope despite the fact that they “do not raise issues of 

 

the Gulf Coast, Inc., 141 F.3d 243, 250-51 (5th Cir. 1998)

(rejecting the argument that a plaintiff’s decision to 

“referenc[e] the agreement in the factual allegations of his 

complaint” suggests that the action falls within the scope of 

an arbitration clause broader than the clause at issue here).
21

contract interpretation or performance”). Second, the vast 

majority of CIGNA’s cases involve disputes that, unlike the 

direct claims here, clearly do relate to the performance and 

interpretation of the parties’ contracts. See, e.g., Simula, Inc. 

v. Autoliv, Inc., 175 F.3d 716, 724 (9th Cir. 1999) 

(compelling arbitration of a Lanham Act claim where 

“resolving Simula’s factual allegations against Autoliv

requires interpreting Autoliv’s performance and conduct 

under the [parties’] Agreement”); see also Norcom Elecs.

Corp. v. CIM USA Inc., 104 F. Supp. 2d 198, 204 (S.D.N.Y. 

2000). Thus, the cases cited by CIGNA are inapplicable.

In sum, the facts underpinning these direct claims do 

not concern the performance or interpretation of the parties’ 

Agreement. Accordingly, the direct claims fall outside the 

scope of the Agreement’s arbitration clause. The Providers 

may pursue these claims in court.

D.

We next address the Providers’ derivative claims. 

Again, these claims challenge CIGNA’s decision to deny 

OCT to the Participants and more broadly the implementation 

of the 2012 Policy, which barred future coverage of OCT. 

Through the derivative claims, the Providers seek 

reimbursement for the cost of the OCT services provided to 

the five Participants, as well as injunctive relief requiring

CIGNA to reverse its policy of denying all claims for OCT.

We conclude that these claims are not subject to arbitration.

10

 

10 In Pascack Valley Hosp., Inc. v. Local 464 A UFCW 

Welfare Reimbursement Plan, 388 F.3d 393, 400 n.7 (3d Cir. 

2004), we declined to take a position on whether a health care 
22

CIGNA concedes that, as non-signatories, the 

Participants would not be bound by the arbitration clause 

were they to bring the claims directly. CIGNA nonetheless 

maintains that allowing the Providers to pursue the 

Participants’ ERISA claims in court would “vitiate the 

arbitration provision of the [Agreement],” Appellee’s Br. at 

27, since at the core of the Providers’ dispute is simply a 

claim for reimbursement under the Agreement. The District 

Court reached the same conclusion, stating that “the 

arbitration provision provides the exclusive remedy for 

Plaintiffs’ claims regarding payment for covered services” 

and that “Plaintiffs cannot nullify their agreements to arbitrate 

these claims for payment by becoming assignees of the Plan 

Participants’ claims.” CardioNet, 945 F. Supp. 2d at 627. 

As we see it, this line of argument suffers from two

independent infirmities. First, we do not agree that the 

 

provider has standing to assert claims assigned by a patient 

under Section 502(a) of ERISA. We noted, however, that

“almost every circuit to have considered the issue” had 

concluded that providers have standing, and we rejected the 

argument that we had previously taken a contrary view. Id. 

In the wake of Pascack Valley, the lower courts in this Circuit 

have assumed that we, like our sister circuits, permit health 

care providers to assert properly assigned ERISA claims on 

behalf of their patients. See, e.g., N. Jersey Brain & Spine 

Ctr. v. St. Peter’s Univ. Hosp., 2013 WL 5366400, at *3 

(D.N.J. Sept. 25, 2013). Here, unlike in Pascack Valley, the 

ability of providers to bring properly assigned ERISA claims 

is squarely before us. We adopt the majority position that 

health care providers may obtain standing to sue by 

assignment from a plan participant. 
23

allegations underlying these claims concern the interpretation 

or performance of the Agreement. No provision in the 

Agreement concerns the Providers’ underlying contention 

here that CIGNA had a duty to cover OCT. Rather, the 

Agreement specifically acknowledges that such 

determinations shall be made pursuant to “the terms or

conditions of the applicable Benefit Plan” governed by 

ERISA. App. at 64. Therefore, interpreting the Agreement is

not required, or even useful, in resolving the derivative 

actions. For the same reason, the allegations underpinning 

these claims cannot be recast as claims for failure to perform 

on the Agreement. 

True, as CIGNA notes, the Agreement provides that 

CIGNA must reimburse the Providers for “Covered 

Services,” and that “[n]o service is a Covered Service unless 

it is Medically Necessary.” App. at 64. But this language 

creates no contractual duty on CIGNA to provide specific 

services to its patients, or to construe OCT as a “Covered 

Service.” Irrespective of the reference to the terms “Covered 

Services” and “Medically Necessary” in the Agreement, the 

Providers lack the ability to bring a claim on their own behalf 

against CIGNA for failing to provide adequate coverage to 

the Participants: any such claim would be preempted by

ERISA, and therefore would belong, unless and until 

assigned, to the participants and beneficiaries of the ERISA 

plan. See Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 

278 (3d Cir. 2001) (suits against insurance companies for 

denial of benefits are preempted by ERISA, “even when the 

claim is couched in terms of common law negligence and 

breach of contract”); see also Lone Star OB/GYN Assocs. v. 

Aetna Health Inc., 579 F.3d 525, 530-31 (5th Cir. 2009) 

(explaining that “any determination of benefits under the 
24

terms of a plan—i.e., what is ‘medically necessary’ or a 

‘Covered Service’—[] fall[s] within ERISA” and would be

preempted). This is not an instance where a plaintiff 

sidesteps an identical contractual right in an attempt to 

sidestep an otherwise-applicable arbitration clause. Rather, 

claims challenging the denial of service may be brought only 

outside the confines of the Agreement, through ERISA claims 

assigned by CIGNA patients. The claims clearly do not 

concern the performance and interpretation of the Agreement.

 

As the Providers correctly note, CIGNA’s argument to 

the contrary rests on a conflation of claims, such as this one, 

seeking coverage under a benefit plan, and claims seeking 

reimbursement for coverage provided. The distinction is key. 

As we explained in Pascack Valley, a provider may bring a 

contract action for an insurer’s failure to reimburse the 

provider pursuant to the terms of the agreement, while a claim 

seeking coverage of a service may only be brought under 

ERISA. 388 F.3d at 403-04 (holding that a hospital had an 

independent breach of contract action against the insurer 

because “the dispute here is not over the right to payment, 

which might be said to depend on the patients’ assignments to 

the Providers, but the amount, or level, of payment, which 

depends on the terms of the provider agreements” (emphasis 

in original; quotation marks and alterations omitted)); see 

also Blue Cross of Cal. v. Anesthesia Care Assocs. Med.

Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (providers’

claim not preempted by ERISA where they “arise from 

[insurer’s] alleged breach of the provider agreements’ 

provisions regarding fee schedules, and the procedure for 

setting them, not what charges are ‘covered’ under the [] 

Plan”). Here, the Providers’ claims do not concern the 

amount of payment to which they are entitled under the 
25

Agreement, but the right to payment under the terms of the 

relevant plans. Thus, we reject the argument that claims 

“substantively identical” to these would fall within the scope 

of the arbitration clause. Cf. CardioNet, Inc., 945 F. Supp. 2d 

at 627. 

Second, even if these claims would fall within the 

arbitration clause if brought directly, it does not follow that 

these claims when brought derivatively on behalf of others 

would necessarily fall within the arbitration clause. Stated 

differently, we fail to see how bringing an assignee’s claim 

derivatively nullifies an assignor’s promise to bring its own 

direct claim through arbitration—at least where, as here, the 

Agreement does not explicitly require the arbitration of 

assigned claims. 

It is a basic principle of assignment law that an 

assignee’s rights derive from the assignor. That is, “an 

assignee of a contract occupies the same legal position under 

a contract as did the original contracting party, he or she can 

acquire through the assignment no more and no fewer rights

than the assignor had, and cannot recover under the 

assignment any more than the assignor could recover.” 6A 

C.J.S. Assignments § 110 (footnotes omitted) (emphasis 

added). Thus, assuming the validity of the Participants’ 

assignments to the Providers, CardioNet and LifeWatch now 

stand in the shoes of the Participants, and have “standing to 

assert whatever rights the assignor[s] possessed.” Misic v. 

Bldg. Serv. Emp. Health & Welfare Trust, 789 F.2d 1374, 

1378 n.4 (9th Cir. 1986) (emphasis added).

Here, it is undisputed that the Participants possess the 

right to pursue their ERISA claims in court, rather than 
26

through mandatory arbitration. That right does not dissipate

simply because the claim is brought by assignees who have 

promised to arbitrate certain direct claims they might bring 

against the defendant. Cf. Conn. State Dental Assoc. v. 

Anthem Health Plans, Inc., 591 F.3d 1337, 1347 (11th Cir. 

2009) (“[A] provider that has received an assignment of 

benefits and has a[n independent] state law claim . . . holds 

two separate claims.” (emphasis added)). Surely, where an 

assignor has agreed to arbitrate its claims with a defendant, 

the assignor cannot circumvent the arbitration clause by 

assigning her claim to an assignee whose contract with the 

defendant contains no such clause. Just as the burden of 

arbitration must travel with a claim, so too, must the right to 

litigate. 

Moreover, we have concerns about the policy 

implications of forcing a provider to arbitrate participants’ 

claims against an insurer. CIGNA proposes that compelling 

arbitration of such claims when brought derivatively by a 

provider does not diminish the substantive rights of 

participants, since “they are free to pursue such claims 

directly in federal court.” Appellee’s Br. at 29. But this 

contention trivializes the important public policy interests 

served by permitting providers to bring such claims on behalf 

of plan participants. As the Fifth Circuit has observed, the 

assignment of ERISA claims to providers serves the interests 

of patients by increasing their access to care:

Many providers seek assignments of benefits to 

avoid billing the beneficiary directly and 

upsetting his finances and to reduce the risk of 

non-payment. If their status as assignees does 

not entitle them to federal standing against the 
27

plan, providers would either have to rely on the 

beneficiary to maintain an ERISA suit, or they 

would have to sue the beneficiary. Either 

alternative, indirect and uncertain as they are, 

would discourage providers from becoming 

assignees and possibly from helping 

beneficiaries who were unable to pay them “upfront.” The providers are better situated and 

financed to pursue an action for benefits owed 

for their services.

Hermann Hosp. v. MEBA Med. & Benefit Plan, 845 F.2d 

1286, 1289 n.13 (5th Cir. 1988), abrogated on other grounds 

by Access Mediquip, L.C.C. v. UnitedHealthcare Ins. Co., 

698 F.3d 229 (5th Cir. 2012). Were we to prevent providers 

that have promised to arbitrate their own claims against an 

insurer from bringing patients’ claims in court, these 

providers would be less likely to accept patients’ claims in 

exchange for services. This, in turn, would make it more 

difficult for patients to receive necessary services where their

insurers have denied coverage. 

Accordingly, even if these claims would be arbitrable 

if brought directly by the Providers, we would not force the 

Providers to arbitrate the claims derivatively—at least, absent 

a clear statement in that Agreement intimating that the parties 

intended to arbitrate such claims. 

III.

For the foregoing reasons, we hold that the Providers’ 

direct and derivative claims fall outside the scope of the 

Agreement’s arbitration clause. Accordingly, we vacate the 
28

order of the District Court and remand for further proceedings 

in accordance with this Opinion.
29

Appendix A

6.3 Internal Dispute Resolution. Disputes that might arise

between the parties regarding the performance or

interpretation of the Agreement must first be resolved

through the applicable internal dispute resolution process

outlined in the Administrative Guidelines. In the event the

dispute is not resolved through that process, either party can

request in writing that the parties attempt in good faith to

resolve the dispute promptly by negotiation between

designated representatives of the parties who have authority

to settle the dispute. If the matter is not resolved within 60

days of such a request, either party may initiate arbitration by

providing written notice to the other. With respect to a

payment or termination dispute, Provider must submit a

request for arbitration within 12 months of the date of the 

letter communicating the final decision under CIGNA’s

internal dispute resolution process unless applicable law

specifically requires a longer time period to request

arbitration. If arbitration is not requested within that 12

month period, CIGNA’s final decision under its internal

dispute resolution process will be binding on Provider, and

Provider shall not bill CIGNA, Payor or the Participant for 

any payment denied because of the failure to timely submit a

request for arbitration.

6.4 Arbitration. If the dispute is not resolved through CIGNA's

internal dispute resolution process, either party can initiate

arbitration by providing written notice to the other. If one of

the parties initiates arbitration, the proceeding will be held in

the jurisdiction of Provider’s domicile. The parties will 

jointly appoint a mutually acceptable arbitrator. If the parties

are unable to agree upon such an arbitrator within 30 days

after one of the parties has notified the other of the desire to

submit a dispute for arbitration, then the parties will prepare

a Request for a Dispute Resolution List and submit it to the

American Health Lawyers Association Alternative Dispute
30

Resolution Service (AHLA ADR Service) along with the

appropriate administration fee. Under the Codes of Ethics

and Rules of Procedure developed by the AHLA ADR

Service, the parties will be sent a list of 10 arbitrators along 

with a background and experience description, references and

fee schedule for each. The 10 will be chosen by the AHLA

ADR Service on the basis of their experience in the area of

the dispute, geographic location and other criteria as indicated

on the request form. The parties will review the 

qualifications of the 10 suggested arbitrators and rank them

in order of preference from 1 to 9. Each party has the right to

strike 1 of the names from the list. The person with the

lowest total will be appointed to resolve the case. Each party

will assume its own costs, but the compensation and expenses

of the arbitrator and any administrative fees or costs will be

borne equally by the parties, subject to any limitation on fees

or costs required under the MDL No. 1334 Settlement

Agreement Among CIGNA HealthCare and Healthcare

Providers during the period of time such requirements are in

effect. Arbitration is the exclusive remedy for the resolution

of disputes under this Agreement. The decision of the

arbitrator will be final, conclusive and binding, and no action

at law or in equity may be instituted by CIGNA or Provider

other than to enforce the award of the arbitrator. The parties 

intend this alternative dispute resolution procedure to be a

private undertaking and agree that an arbitration conducted

under this provision will not be consolidated with an

arbitration involving other physicians or third parties, and that

the arbitrator will be without power to conduct an arbitration

on a class basis. Judgment upon the award rendered by the

arbitrator may be entered in any court of competent

jurisdiction.