Court Opinion

ID: 2676511
Source: CourtListenerOpinion
Date Created: 2014-05-30 21:00:28.726064+00
Date Added: 2024-06-11T09:31:01.620380
License: Public Domain

FILED
                           NOT FOR PUBLICATION                             MAY 30 2014

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

SCRIPPS HEALTH, A California                     No. 12-56493
corporation; SOUTH BAY SURGICAL
ASSOCIATES MEDICAL GROUP, INC.,                  D.C. No. 3:10-cv-02028-DMS-
A California corporation,                        RBB

              Plaintiffs - Appellees,
                                                 MEMORANDUM*
  v.

BLUE CROSS AND BLUE SHIELD OF
KANSAS, INC., a Kansas Corporation,

              Defendant - Appellant.

                    Appeal from the United States District Court
                       for the Southern District of California
                     Dana M. Sabraw, District Judge, Presiding

                        Argued and Submitted May 12, 2014
                               Pasadena, California

Before: PREGERSON, REINHARDT, and NGUYEN, Circuit Judges.

       Blue Cross and Blue Shield of Kansas (“BCBS Kansas”) appeals the district

court’s final judgment in favor of Scripps Health (“Scripps”), confirming the

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
arbitration award at issue. BCBS Kansas also appeals an interlocutory order

relating to that judgment—the denial of its motion to dismiss. As the facts and

procedural history are familiar to the parties, we do not recite them here except as

necessary to explain our disposition. We have jurisdiction under 28 U.S.C. § 1291,

and we affirm.

      This case arises out of a dispute over payment for hospital services provided

to a BCBS Kansas member at a Scripps hospital in California. In its complaint,

Scripps set forth two claims against BCBS Kansas: one for breach of contract and

the other for breach of implied contract. In the district court, BCBS Kansas moved

to dismiss both claims. In the event the motion to dismiss was denied as to the

breach of contract claim, BCBS Kansas moved to compel arbitration of that claim

and to stay the remaining claims. The district court denied BCBS Kansas’s motion

to dismiss, holding that Scripps stated a valid breach of contract claim against

BCBS Kansas where Scripps alleged that BCBS Kansas accepted the benefits of a

contract between Scripps and Blue Cross of California in the form of a discounted

rate for services. The district court granted BCBS Kansas’s motion to compel

arbitration of the breach of contract claim and stayed the remaining claims.

      We review de novo the district court’s ruling on a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. AE ex.rel.

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Hernandez v. Cnty. of Tulare, 666 F.3d 631, 636 (9th Cir. 2012). Factual

allegations of the complaint are accepted as true and construed in the light most

favorable to the plaintiff. Id. “[T]he factual allegations that are taken as true must

plausibly suggest an entitlement to relief.” Starr v. Baca, 652 F.3d 1202, 1216 (9th

Cir. 2011).

      Here, if we accept the factual allegations of the complaint as true and

construe them in the light most favorable to Scripps, the complaint articulates

sufficient facts to support Scripps’s breach of contract claim against BCBS Kansas.

Thus, we affirm the district court’s denial of Scripps’s motion to dismiss.

      The arbitrator’s final award stated that BCBS Kansas breached an express or

implied contract between BCBS Kansas and Scripps, BCBS Kansas owes Scripps

damages based on that breach, and that BCBS Kansas owes Scripps interest on

those damages. In the district court, BCBS Kansas moved to vacate the arbitration

award. The district court confirmed the arbitration award, entering final judgment

in favor of Scripps.

      We review de novo a district court’s “decision to vacate or confirm an

arbitration award.” New Regency Prods., Inc. v. Nippon Herald Films, Inc., 501

F.3d 1101, 1105 (9th Cir. 2007). Under the Federal Arbitration Act, the district

court may vacate an arbitration award if “arbitrators exceed their powers, or so

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imperfectly executed them that a mutual, final, and definite award upon the subject

matter submitted was not made.” 9 U.S.C. § 10(a)(4).

      “A party seeking relief under [§ 10(a)(4)] bears a heavy burden.” Oxford

Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013). BCBS Kansas argues

that the district court should have vacated the arbitration award because the

arbitrator decided a claim other than the claim submitted to arbitration. BCBS

Kansas fails to carry its burden, however, because “[t]he arbitrator’s interpretation

of the scope of his powers is entitled to the same level of deference as his

determination of the merits.” Schoenduve Corp. v. Lucent Techs., Inc., 442 F.3d

727, 733 (9th Cir. 2006) (internal citation omitted).

      BCBS Kansas also fails to carry its burden as to its claim that the arbitrator

manifestly disregarded the law. “[A]rbitrators exceed their powers . . . not when

they merely interpret or apply the governing law incorrectly, but when the award is

completely irrational, or exhibits a manifest disregard of the law.” Biller v. Toyota

Motor Corp., 668 F.3d 655, 665 (9th Cir. 2012) (internal citation omitted). “To

vacate an arbitration award [based on manifest disregard for the law], it must be

clear from the record that the arbitrator recognized the applicable law and then

ignored it.” Id. at 665 (internal citation and quotation marks omitted). Because the

record in this case demonstrates neither that the arbitrator “recognized the

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applicable law and then ignored it,” Biller, 668 F.3d at 665, nor that the arbitrator

did more than “merely interpret or apply the governing law incorrectly,” Id. at 655,

we affirm the district court’s final judgment and confirmation of the arbitration

award.

      AFFIRMED.

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