Opinion ID: 794138
Heading Depth: 4
Heading Rank: 2

Heading: Pacificare and Bazzle

Text: 55 In the wake of Howsam, the Court decided two additional cases, PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401, 123 S.Ct. 1531, 155 L.Ed.2d 578 (2003), and Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), that must also inform our analysis of the proper decision maker for the vindication of statutory rights claims before us. In PacifiCare, a group of physicians brought claims against a number of health-care management organizations (HMOs), including a RICO claim. The HMOs sought to compel arbitration. See PacifiCare, 538 U.S. at 402-03, 123 S.Ct. 1531. The physicians opposed arbitration on the ground that they could not obtain meaningful relief in arbitration for their claims under the RICO statute, which authorizes treble damages, because the arbitration provision prohibited the awarding of punitive damages. Id. at 403, 123 S.Ct. 1531. The HMOs asserted that there was no question of arbitrability, and hence [the dispute] should have been decided by an arbitrator, rather than a court, in the first instance. Id. at 403, 123 S.Ct. 1531. They also asserted in the alternative that if there was a question of arbitrability, the remedial limitation at issue did not require invalidation of the arbitration agreements. Id. at 404, 123 S.Ct. 1531. The Court ultimately reached neither of the HMOs' positions, concluding that it would be premature for us to address these questions at this time. Id. at 404, 123 S.Ct. 1531. That was so because of a crucial ambiguity in the arbitration agreements. 56 The arbitration agreements at issue in PacifiCare explicitly prohibited the recovery of punitive damages, not treble damages. Id. at 405, 123 S.Ct. 1531. This fact, coupled with existing precedent, convinced the Court that there was too much legal ambiguity to conclude that there was a question of arbitrability; as a result, the Court compelled arbitration. The Court reasoned that: 57 since we do not know how the arbitrator will construe the remedial limitations, the questions whether they render the parties' agreements unenforceable and whether it is for courts or arbitrators to decide enforceability in the first instance are unusually abstract . . . . the proper course is to compel arbitration. 58 Id. at 407, 123 S.Ct. 1531. Because the underlying meaning of the arbitration agreement was unclear with respect to the availability of treble damages, it was also unclear whether that agreement conflicted with the RICO statute. Since such a conflict might threaten the validity of the arbitration agreements, we should not, on the basis of `mere speculation' that an arbitrator might interpret these ambiguous agreements in a manner that casts their enforceability into doubt, take upon ourselves the authority to decide the antecedent question of how the ambiguity is to be resolved. Id. at 406-07, 123 S.Ct. 1531. Given the presumption in favor of arbitration, a court should not foreclose the operation of that presumption by deciding that there is a question of arbitrability when there is the possibility that an arbitrator's decision in the first instance would obviate the need for judicial decision making. See id. at 407, 123 S.Ct. 1531 n. 2. 59 In Bazzle, decided soon after PacifiCare, the Court once again confronted the significance of ambiguity in an arbitration agreement. Bazzle concerned contracts between a commercial lender and its customers, each of which contains a clause providing for arbitration of all contract-related disputes. 539 U.S. at 447, 123 S.Ct. 2402. The Supreme Court of South Carolina held that the arbitration clauses were silent as to whether arbitration could take place on a class basis, and that South Carolina law permitted class arbitration under those circumstances. Id. The Supreme Court was faced at the outset with a problem concerning the contracts' silence. Are the contracts in fact silent, or do they forbid class arbitration? Bazzle, 539 U.S. at 447, 123 S.Ct. 2402. The lender asserted that the arbitration language prohibited class arbitration; the Court disagreed. It held that because the literal terms of the agreement did not resolve the class arbitration question, i.e., the terms were ambiguous, the case present[ed] a disputed issue of contract interpretation. Id. at 450, 123 S.Ct. 2402. Drawing on Howsam, the Court noted that the question here — does not fall into [the] narrow exception described in Howsam. 539 U.S. at 452, 123 S.Ct. 2402. That is, [i]n certain limited circumstances, courts assume that the parties intended courts, not arbitrators, to decide a particular arbitration-related matter.... They include certain gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy. Id. The contract interpretation question posed in Bazzle did not fall into this narrow exception: 60 Rather the relevant question here is what kind of arbitration proceeding the parties agreed to. That question does not concern a state statute or judicial procedures. It concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question. 61 539 U.S. at 452-53, 123 S.Ct. 2402 (internal citations omitted). 62 In essence, the Bazzle court applied principles derived from Howsam and Pacificare. From Howsam, it considered and rejected the interpretive rule (an exception to the federal policy favoring arbitration) that courts assume that the parties intended courts, not arbitrators, to decide certain arbitration-related matters. Confronted with a dispute about what the arbitration language meant with respect to the availability of class arbitration (an uncertainty analogous to the ambiguity addressed in PacifiCare ), the Court concluded that an arbitrator, not a judge, should decide what kind of arbitration proceeding the parties had agreed to. 63