Court Opinion

ID: 9960827
Source: CourtListenerOpinion
Date Created: 2024-04-17 14:04:41.8835+00
Date Added: 2024-06-11T08:19:55.010018
License: Public Domain

DISTRICT COURT OF APPEAL OF FLORIDA
                       SECOND DISTRICT

                               OPTUMRX,

                               Appellant,

                                    v.

             KING'S DRUGS, INC.; VISTACARE PHARMACY
            SERVICES, LLC; HEPZIBAH, INC.; HEALTH LINK
           PHARMACY, LLC; HEALTHWISE PHARMACY, LLC;
                    and ADEL CONSULTING, INC.,

                                Appellees.

                            No. 2D2023-0096

                             April 17, 2024

Appeal from the Circuit Court for Hillsborough County; Rex M. Barbas,
Judge.

Kristen M. Fiore of Akerman LLP, Tallahassee; Michael J. Holecek of
Gibson, Dunn & Crutcher LLP, Los Angeles, California; Alexandra M.
Mora and Ndifreka U. Uwem of Akerman, LLP, Miami, for Appellant.

Richard E. Miller of Jacobs Law Group, PC, Philadelphia, Pennsylvania;
Sean Estes of Hoyer Law Group, PLLC, Tampa; and Mark R. Rosen,
admitted pro hac vice, of Jacobs Law Group, PC, West Conshohocken,
Pennsylvania, for Appellees.

LUCAS, Judge.
     A dispute between a pharmacy benefits manager and several
pharmacies requires us to delve into the scope and effect of an
arbitration agreement. In the case before us, OptumRx argues that the
circuit court erred when it concluded it could not compel King's Drugs,
Inc., Vistacare Pharmacy Services LLC, Hepzibah Inc., Health Link
Pharmacy, LLC, Healthwise Pharmacy Inc., and Adel Consulting, Inc.
(collectively, the Pharmacies), to arbitrate their dispute with OptumRx in
California. We reverse.
                                     I.

     OptumRx alleges that it entered into a Provider Agreement with the
Pharmacies in which OptumRx, in essence, acts as a "middleman" on
behalf of various insurance companies to negotiate and administer
pharmaceutical claims for reimbursement. The agreement is lengthy and
quite technical, but in this appeal, we focus on two provisions: first, the
agreement states that if a "Dispute" (as broadly defined) arises and
cannot be resolved through an informal meeting or conference, the
Dispute "shall thereafter be submitted to binding arbitration before a
panel of three arbitrators in accordance with the Commercial Dispute
Procedures of the American Arbitration Association"; and second, the
agreement explicitly incorporates a separate document, OptumRx's
Provider Manual.1 Although the language within the Provider Manual
has been amended over the years, the operative version we are concerned
with, the 2022 Provider Manual, provides as follows:
     [T]he parties will work in good faith as set forth below to
     resolve any and all issues, disputes, or controversies between
     them (hereinafter referred to as a "Dispute") including, but
     not limited to all questions of arbitrability or the formation,
     validity, scope, and interpretation of this arbitration
     agreement, all disputes relating in any way to the parties'
     relationship, the [Provider] Agreement, or the [Provider
     Manual] or the breach of either agreement, and all disputes

     1 The Provider Agreement provides that this document may be

referred to as the Administrator Provider Manual, the Provider Manual,
or the Pharmacy Manual. For the sake of clarity, we refer to this
document as the Provider Manual.

                                     2
     relating in any way to Network Pharmacy Provider's status as
     a participating Network Pharmacy Provider in the
     Administrator's network, shall be resolved exclusively by
     binding arbitration administered by the American Arbitration
     Association . . . .
           ....
           Any arbitration proceeding under this Agreement shall
     be conducted in Los Angeles County or Orange County,
     California. . . .
           ....
           The parties acknowledge that this arbitration agreement
     is part of a transaction involving interstate commerce and
     that the Federal Arbitration Act governs both substantive and
     procedural aspects of this arbitration . . . .
     The Provider Manual further states that any party asserting a
dispute "shall provide written notice to the other party identifying the
nature and scope of the Dispute" and that, if the parties are then unable
to resolve the dispute, any party may certify in writing the dispute wasn't
resolved and commence an arbitration.
     On December 16, 2021, an attorney for the Pharmacies delivered a
written "Notification of Dispute" to OptumRx that described several
issues of disagreement about OptumRx's reimbursement and
administration of the Pharmacies' prior claims. 2 In the letter, the
Pharmacies also claimed that OptumRx was in breach of the Provider
Manual. The parties' attorneys participated in a phone conference in an

     2 The letter was sent on behalf of a list of hundreds of pharmacies

nationwide, a list that included the Pharmacies in this action. We are
informed that litigation similar to the case before us is pending in
numerous courts throughout the country. As of the time of writing this
opinion, there are no less than two pending appeals in Florida
concerning OptumRx and the arbitration issues raised in this case. See
Vistacare Pharm. Servs. 2 LLC, d/b/a Vistacare Pharm. II v. OptumRx,
2D23-466; OptumRx v. Bay Pharm. Inc., 5D23-652.

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attempt to resolve the disputes identified in the letter but were unable to
reach any agreement. During this conversation, OptumRx's counsel
stated that these disputes were subject to arbitration; the Pharmacies'
counsel disagreed.
      On March 29, 2022, OptumRx filed petitions to compel the
Pharmacies to arbitrate the disputes identified in the Pharmacies' written
notification. The petitions were later consolidated, and the Pharmacies
raised various defenses to OptumRx's requested arbitration. After
hearing arguments on OptumRx's motion to compel arbitration, the
circuit court entered an order denying OptumRx's motion and dismissing
its petitions.
      In its order, the circuit court concluded that 9 U.S.C. § 4 (2018) of
the Federal Arbitration Act (FAA) only authorized federal district courts,
not state courts, to compel arbitration. The court further found
(apparently in the alternative) that if venue is specified in an arbitration
agreement (as it is in the Provider Manual), then section 4 of the FAA
requires a petition to compel arbitration to be filed in that venue. The
court was further persuaded that the December 2021 letter did not
clearly articulate a specific dispute as to the six Pharmacies named in
the petitions before it, such that there was no "party aggrieved" as
required under section 4 of the FAA. Finally, the court stated it was
"well-settled" that the Florida Arbitration Code, §§ 682.01-.25, Fla. Stat.
(2022), could not provide an independent basis to compel arbitration
because under Damora v. Stresscon International, Inc., 324 So. 2d 80, 82
(Fla. 1975), a Florida circuit court could not order arbitration in another
state. In dismissing the petitions, the court did not address any of the
substantive claims or defenses—including whether the case was

                                      4
arbitrable—but rested its decision on the determination that it was
without jurisdiction or lawful authority to compel arbitration.
      OptumRx timely appeals the circuit court's order. We have
jurisdiction. See Fla. R. App. P. 9.130(a)(3)(C)(iv).
                                      II.
      The legal issues presented in this appeal are somewhat intertwined
but generally concern issues surrounding the subject matter jurisdiction
of a circuit court, statutory interpretation of an arbitration act, and
whether arbitration may be compelled under a contractual provision. In
all respects, these are issues we review de novo. See generally Venn
Therapeutics, LLC v. CAC Pharma Invs., LLC, 49 Fla. L. Weekly D509,
D510 (Fla. 2d DCA Mar. 6, 2024) ("The standard of review we use when
examining a trial court's construction of an arbitration agreement as well
as its application of the law to the facts is de novo." (citing Addit, LLC v.
Hengesbach, 341 So. 3d 362, 366 (Fla. 2d DCA 2022))); Bell Transp., LLC
v. Dep't of Highway Safety & Motor Vehicles, 351 So. 3d 249, 250 (Fla. 2d
DCA 2022) ("We review issues of statutory interpretation de novo." (citing
Lab. Corp. of Am. v. Davis, 339 So. 3d 318, 323 (Fla. 2022))); Friedel v.
Edwards, 327 So. 3d 1242, 1244 (Fla. 2d DCA 2021) ("We review a
circuit court's determination of subject matter jurisdiction de novo."
(citing Artz rel. Artz v. City of Tampa, 102 So. 3d 747, 749 (Fla. 2d DCA
2012))).
      Furthermore, when an arbitration agreement is governed by the
FAA, "[f]ederal substantive law controls arbitration issues" in state court
proceedings. Airbnb, Inc. v. Doe, 336 So. 3d 698, 703 (Fla. 2022) (citing
Preston v. Ferrer, 552 U.S. 346, 349 (2008)).
                                      III.

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      The circuit court erred when it determined it was without
jurisdiction to compel arbitration under section 4 of the FAA. In
pertinent part, 9 U.S.C. § 4 provides:
            A party aggrieved by the alleged failure, neglect, or
      refusal of another to arbitrate under a written agreement for
      arbitration may petition any United States district court
      which, save for such agreement, would have jurisdiction
      under title 28, in a civil action or in admiralty of the subject
      matter of a suit arising out of the controversy between the
      parties, for an order directing that such arbitration proceed in
      the manner provided for in such agreement. Five days' notice
      in writing of such application shall be served upon the party
      in default.
      Section 4 of the FAA authorizes federal district courts to consider
and compel arbitration in civil cases; but it does not preclude state
courts from exercising their own jurisdictional power to compel
arbitration when construing a contract governed by the FAA. See English
v. McCrary, 348 So. 2d 293, 297 (Fla. 1977) ("The circuit courts of the
State of Florida are courts of general jurisdiction . . . clothed with most
generous powers under the Constitution. . . . [N]othing is outside the
jurisdiction of a superior court of general jurisdiction except that which
is clearly vested in other courts or tribunals, or is clearly out side of and
beyond the jurisdiction vested in such circuit courts by the Constitution
and the statutes enacted pursuant thereto." (quoting State ex rel. B.F.
Goodrich Co. v. Trammell, 192 So. 175, 177 (Fla. 1939))). There is a
"presumption that state courts enjoy concurrent jurisdiction" to apply
federal statutes such as the FAA. See Gulf Offshore Co. v. Mobil Oil Corp.,
453 U.S. 473, 478 (1981). As the Supreme Court has observed, the FAA
"creates a body of federal substantive law" that is "applicable in state and
federal court." See Southland Corp. v. Keating, 465 U.S. 1, 12 (1984)
(quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

                                      6
25 n.32 (1983)); see also McKenzie Check Advance of Fla., LLC v. Betts,
112 So. 3d 1176, 1185 (Fla. 2013) ("[T]he Supreme Court has held that
the FAA applies in both federal and state courts." (citing Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 272 (1995))); Sasche Constr. &
Dev. Corp. v. Affirmed Drywall, Corp., 251 So. 3d 1005, 1009 (Fla. 2d
DCA 2018) ("The FAA applies in both federal and state courts." (citing
Betts, 112 So. 3d at 1185; Global Travel Mkt., Inc. v. Shea, 908 So. 2d
392, 396 (Fla. 2005))). And indeed, the FAA has been applied and
interpreted, repeatedly, in Florida state courts. See, e.g., Airbnb, 336 So.
3d at 703; Visiting Nurse Ass'n of Fla., Inc. v. Jupiter Med. Ctr., Inc., 154
So. 3d 1115, 1125 (Fla. 2014); Basulto v. Hialeah Auto., 141 So. 3d 1145,
1154-55 (Fla. 2014); Fla. Holdings III, LLC v. Duerst ex rel. Duerst, 198
So. 3d 834, 843 (Fla. 2d DCA 2016); Palm Court, NH, L.L.C. v. Dowe, 336
So. 3d 735, 738 (Fla. 4th DCA 2022); CEFCO v. Odom, 278 So. 3d 347,
351-54 (Fla. 1st DCA 2019); Fahnestock v. Dean Witter Reynolds, Inc.,
691 So. 2d 509, 510 (Fla. 4th DCA 1997).
      The California venue provision within the Provider Agreement did
not divest the circuit court of its lawful power to consider OptumRx's
petitions. The court's reliance on the Florida Supreme Court's
pronouncement in Damora, 324 So. 2d at 82 ("[A]n agreement to
arbitrate future disputes in another jurisdiction is outside the authority
of the Florida Arbitration Code . . . and . . . renders the agreement to
arbitrate voidable at the instance of either party."), was misplaced for two
reasons. First, as previously mentioned, the arbitration provision at
issue here is governed by the FAA. See AMS Staff Leasing, Inc. v. Taylor,
158 So. 3d 682, 685-86 (Fla. 4th DCA 2015) ("If, however, the Federal
Arbitration Act ('FAA') applies to the agreement, a Florida court must
enforce a valid arbitration clause which provides for arbitration in a

                                       7
foreign state." (citing Default Proof Credit Card Sys., Inc. v. Friedland, 992
So. 2d 442, 444 (Fla. 3d DCA 2008))). Second, even under the Florida
Arbitration Code, that part of the Damora opinion is no longer apt
because section 682.02, the section Damora was construing, was
substantially amended in 2013. The statute's prior text—"this act shall
not apply to any such [arbitration] agreement or provision to arbitrate in
which it is stipulated that this law shall not apply or to any arbitration or
award thereunder"—was removed. See ch. 2013-232, § 7, Laws of Fla.
(July 1, 2013). We agree with OptumRx that this amendment effectively
cabined that portion of Damora's holding to the prior version of the
statute. Cf. Rogers & Ford Constr. Corp. v. Carlandia Corp., 626 So. 2d
1350, 1354 (Fla. 1993) ("The [l]egislature responded to these decisions by
amending the statute in 1974 to enlarge the standing of condominium
associations while reserving all the unit owners' statutory and common
law rights that were available, including standing. Ch. 74–104, § 7, Laws
of Fla. The amendment effectively abrogated Rubenstein [v. Burleigh
House, Inc., 305 So.2d 311 (Fla. 3d DCA 1974)], Commodore Plaza [at
Century 21 Condominium Ass'n, Inc. v. Saul J. Morgan Enters., Inc., 301
So.2d 783 (Fla. 3d DCA 1974)], and Hendler [v. Rogers House
Condominium, Inc., 234 So.2d 128 (Fla. 4th DCA 1970)] . . . ."). The
circuit court erred in concluding otherwise.
      Finally, we can reject out of hand the court's determination that
OptumRx was not a "party aggrieved" under section 4 of the FAA. A
party may compel arbitration under section 4 where, as here, there is a
written agreement to arbitrate, a dispute within the scope of that
agreement, and a refusal to arbitrate. See Zurich Am. Ins. Co. v. Watts
Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). An opposing party's
refusal to proceed to arbitration may be manifested in various ways. As

                                      8
the Eleventh Circuit Court of Appeals explained concerning this issue,
the trial court's focus should be
     on "the specific controversy—the concrete dispute that one
     party has 'fail[ed], neglect[ed], or refus[ed]' to arbitrate—and
     determine whether that controversy would give rise to a suit
     under federal law." [Vaden v. Discover Bank, 556 U.S. 49, 77-
     8 (2009)] (Roberts, C.J., concurring in part and dissenting in
     part) (quoting 9 U.S.C. § 4). After all, FAA § 4 is only
     triggered when one party has expressed a "refusal" to
     arbitrate, and the other party has been thereby "aggrieved."
     See 9 U.S.C. § 4. This refusal will undoubtedly be
     documented in some way (for example, by a letter).
     Examining these pre-litigation or extra-legal communications
     between the parties can provide insight into the factual
     nature of the dispute. In addition, the FAA petitioner's
     description of the underlying dispute in the § 4 petition itself
     can provide some (although not conclusive) evidence of the
     contours of the dispute. . . . As Chief Justice Roberts
     explained, "the exercise is closely analogous to the
     jurisdictional analysis in a typical declaratory judgment
     action," which requires a court to imagine for itself which
     coercive claims the parties' dispute could hypothetically
     support, in order to determine whether a hypothetical
     coercive lawsuit brought by the declaratory judgment
     defendant would present a federal question on the face of its
     well-pleaded complaint. [Vaden, 556 U.S. at 78] (citing
     Franchise Tax Bd. [of State of Cal. v. Constr. Laborers Vacation
     Tr. for S. Cal.,] 463 U.S. [1,] 19 [(2009)]).
Cmty. State Bank v. Strong, 651 F.3d 1241, 1256 (11th Cir. 2011) (first,
second, and third alterations in original) (footnote omitted).
     The Pharmacies, through their counsel, initiated a "Dispute" under
the arbitration provision in the Provider Agreement when they sent their
written Notification of Dispute to OptumRx's attorney. Their letter
sufficiently described various points of controversy that could potentially
be arbitrable. Though they question the sufficiency of the record, they
never contradict OptumRx's representation that the Pharmacies later
indicated their refusal to arbitrate the issues described in their own letter

                                      9
during a telephone conference with OptumRx's counsel. Cf. ACE Am.
Ins. Co. v. Guerriero, No. 2:17-CV-00820, 2017 WL 3641905, at *6 (D.
N.J. Aug. 24, 2017) (recognizing that a refusal to arbitrate under the FAA
can arise during a telephone conference). They have steadfastly
continued their refusal to arbitrate by litigating this issue in the circuit
court below and in this court on appeal. From our de novo review, the
Pharmacies' refusal to arbitrate the disputes they notified OptumRx of
satisfied section 4's requirement that there be a "failure, neglect, or
refusal" to arbitrate;3 OptumRx is an aggrieved party under section 4.
      Accordingly, there was no impediment to the circuit court
exercising its jurisdiction to decide OptumRx's petitions to compel
arbitration on their merits. We reverse and remand for the court to do so
in accordance with this opinion.
      Reversed and remanded.

NORTHCUTT and CASANUEVA, JJ., Concur.
                 _____________________________

Opinion subject to revision prior to official publication.

      3 We note there appears to be something of an open question in

federal jurisprudence as to whether a party's refusal must be
"unequivocal" in order to satisfy section 4 of the FAA. Cf. Beauperthuy v.
24 Hour Fitness USA, Inc., No. 06–715 SC, 2011 WL 6014438, at *2 n.4
(N.D. Cal. Dec. 2, 2011) ("Because the Ninth Circuit has not adopted the
'unequivocal refusal' standard, and because Plaintiff makes compelling
arguments that such a standard imported from the [National Labor
Relations Act] should not apply to the FAA, the Court declines to adopt
the PaineWebber [Inc. v. Faragalli, 61 F.3d 1063 (3d Cir. 1995),] standard
and instead adheres to the text of Section 4 itself, which states that a
court may compel arbitration upon a party's 'failure, neglect, or refusal to
arbitrate.' "). We need not resolve that question today because it appears
to us that the Pharmacies' continued refusal to arbitrate the disputes
they raised was sufficiently unequivocal to meet that heightened
threshold.

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