Court Opinion

ID: 1019775
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:40:46.462928+00
Date Added: 2024-06-11T15:07:35.470646
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 06-1003

DAVIS VISION, INCORPORATED,

                                              Plaintiff - Appellant,

           versus

MARYLAND OPTOMETRIC ASSOCIATION, Individually
and On Behalf of Its Members,

                                              Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District Judge.
(CA-05-1019-WDQ)

Argued:   May 22, 2006                      Decided:   June 29, 2006

Before WIDENER and MICHAEL, Circuit Judges, and Joseph R. GOODWIN,
United States District Judge for the Southern District of West
Virginia, sitting by designation.

Reversed by unpublished per curiam opinion.

ARGUED: Donna M. Doblick, REED & SMITH, L.L.P., Pittsburgh,
Pennsylvania, for Appellant.     Edward John Steren, OBER, KALER,
GRIMES & SHRIVER, Washington, D.C., for Appellee. ON BRIEF: James
C. Martin, Jeanne B. McHale, REED & SMITH, L.L.P., Pittsburgh,
Pennsylvania, for Appellant.    Harold G. Belkowitz, OBER, KALER,
GRIMES & SHRIVER, Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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PER CURIAM:

            An optometric trade association brought an antitrust suit

against a corporation that provides vision care.                   Some of the

association’s members had signed contracts with the corporation,

and each of these contracts contained an arbitration clause.                The

district court dismissed the association’s suit for lack of subject

matter jurisdiction because it determined that the association

lacked   standing   to     sue    in   federal   court.      The    association

thereafter commenced arbitration proceedings, and the corporation

filed this action seeking a declaration that the association had no

authority to force the corporation to arbitrate.             On cross-motions

for   summary   judgment    the    district   court   held   that    its   prior

decision precluded the corporation from litigating the issue of the

association’s capacity to arbitrate and that the association in

fact had such capacity.          The court denied summary judgment to the

corporation and granted it to the association.               The corporation

appeals.    We conclude that the requirements of issue preclusion

were not satisfied and that the corporation was entitled to summary

judgment.    We therefore reverse.

                                        I.

            CareFirst of Maryland, Inc. and affiliates (collectively

CareFirst) make up a health maintenance organization.                It offers

some health plans providing vision benefits.              Under an agreement

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with CareFirst, plaintiff-appellant Davis Vision, Inc. (Davis) in

turn has signed contracts with various parties -- ophthalmologists,

optometrists, opticians, and eyeglass retailers -- to provide

vision care to CareFirst plan participants.               Defendant-appellee

Maryland Optometric Association (MOA) is a non-profit corporation

with about 350 members.         Fifty-four MOA members are providers in

the Davis network making them signatories to contracts with Davis.

Each contract contains an arbitration clause.             The clause provides

that “[a]ny controversy or claim arising out of or relating to” the

contract    “or     the    breach     thereof      will     be   settled     by

arbitration. . . .”       J.A. 72, 85.

           In July 2004 MOA sued Davis and CareFirst in the U.S.

District   Court    for   the   District   of   Maryland.        MOA    asserted

antitrust claims on behalf of its members under federal and state

law, as well as state law tort claims for unfair competition, civil

conspiracy,   and    malicious      interference    with    business.       The

complaint sought money damages and injunctive relief.                  CareFirst

and Davis moved to dismiss on the ground that, among others, MOA

lacked associational standing.        On December 21, 2004, the district

court dismissed the case for lack of subject matter jurisdiction.

The court stated that those MOA members who were Davis providers

would have to submit their claims to arbitration and could not be

permitted to “circumvent” the arbitration clause “by suing through

an association.”      J.A. 160.      On the theory that an association

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cannot “pick and choose” the members that it seeks to represent,

the   court    further      stated   that      MOA       could   not   proceed    as   a

representative only on behalf of those members who were not Davis

providers.

              In    March   2005   MOA    filed      a    demand   for    arbitration,

presenting essentially the same claims it had pursued in federal

court but seeking only injunctive relief.                        The following month

Davis filed this action against MOA in the District of Maryland,

seeking a declaratory judgment that Davis was not required to

arbitrate     MOA’s    claims.       Davis     thereafter         moved   for   summary

judgment on the ground that MOA had no agreement to arbitrate with

Davis.   MOA cross-moved for summary judgment.

              On December 5, 2005, the district court granted MOA’s

motion for summary judgment and denied Davis’s motion.                      The court

concluded that in its December 2004 order it had “determined that

MOA lacked standing to seek injunctive relief [in federal court]

. . . but could represent its members in arbitration,” J.A. 267,

and asserted that such determination was entitled to collateral

estoppel effect in this case.            As for MOA’s right to arbitrate, the

court noted that “there are certain limited exceptions (e.g.,

equitable estoppel, agency, and third party beneficiary rights)

that allow non-signatories to a contract to compel arbitration.”

J.A. 265.          The court then ruled in MOA’s favor.                   This appeal

followed.

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                                         II.

                                         A.

             Davis first contends that the district court erred in

concluding    that   under    the       doctrine   of    issue    preclusion    or

collateral estoppel its December 2004 order precluded Davis from

challenging MOA’s capacity to arbitrate.                 The issue preclusion

doctrine bars subsequent litigation of legal and factual issues

common to an earlier action that were “actually and necessarily

determined” in the first litigation. Montana v. United States, 440

U.S. 147, 153 (1979).        For this doctrine to apply to a legal or

factual issue, the proponent must demonstrate that (1) the issue is

identical to the one previously litigated; (2) the issue was

actually determined in the prior proceeding; (3) determination of

the issue was critical and necessary to the judgment in the prior

proceeding; (4) the judgment in the prior proceeding is final and

valid; and (5) the party to be foreclosed by the prior resolution

of the issue had a full and fair opportunity to litigate the issue

in the prior proceeding.          Sedlack v. Braswell Servs. Group, Inc.,

134 F.3d 219, 224 (4th Cir. 1998).             We review de novo whether the

first four elements are satisfied, and we review the district

court’s   determination      as    to    the   fifth    element   for   abuse   of

discretion.    Sandberg v. Virginia Bankshares, Inc., 979 F.2d 332,

344 (4th Cir. 1992).

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            We need not evaluate each of these elements because

analysis of the first and third is dispositive, for the issues were

not   identical    and   the   district        court’s      comments     about    MOA’s

capacity to arbitrate were not critical and necessary to the prior

judgment.    As to issue preclusion’s first element, the district

court’s December 2004 order expressly resolved Davis’s claim that

the court had no subject matter jurisdiction over MOA’s suit

because MOA could not satisfy the requirements for associational

standing set forth in Hunt v. Washington State Apple Advertising

Commission, 432 U.S. 333, 343 (1977).               See J.A. 153 (“Pending are

. . . motions to dismiss for lack of subject matter jurisdiction.”)

(emphasis added).        (Under Hunt “an association has standing to

bring suit on behalf of its members when:                   (a) its members would

otherwise   have   standing     to    sue      in   their    own   right;      (b)   the

interests it seeks to protect are germane to the organization’s

purpose;    and   (c)    neither     the    claim    asserted      nor   the     relief

requested requires the participation of individual members in the

lawsuit.”    Hunt, 432 U.S. at 343.             When an association suing on

behalf of its members cannot satisfy these requirements, it lacks

standing and the federal courts have no subject matter jurisdiction

over its claim.)         The district court granted Davis’s dismissal

after concluding that MOA lacked associational standing because

some of MOA’s members were bound by the arbitration clause while

others were not, thereby necessitating individual participation in

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the suit under Hunt’s third element.                  The only issue of law

presented by the prior proceeding was whether MOA had standing to

seek relief for its members in the federal judicial forum.                     This

current suit by Davis for declaratory relief presents an entirely

separate issue of law:         whether MOA has any right to pursue claims

on behalf of its members in the arbitral forum.              A party’s capacity

to arbitrate is analytically distinct from its standing to sue in

federal court.

             As   to   issue   preclusion’s     third      element,   while    the

existence    of   an   arbitration     clause   was    a   fact    necessary    and

critical to the district court’s judgment, the district court’s

further comments about MOA’s ability to enforce that clause were

not.   In challenging MOA’s standing to sue in federal court, Davis

did not concede that MOA had any capacity to arbitrate.                Davis, of

course, did refer to the arbitration clause.                      It argued that

because some MOA members were parties to contracts containing that

clause while others were not, MOA could not satisfy Hunt’s mandate

that   for   an   association     to   have   standing     “neither   the   claim

asserted nor the relief requested requires the participation of

[its] individual members in the lawsuit.”              Hunt, 432 U.S. at 343.

The district court apparently agreed.                 Merely pointing to the

arbitration clause as a fact undermining associational standing was

not, however, tantamount to an admission that the clause could be

enforced by the association asserting rights under it.                After all,

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in the previous case Davis moved to dismiss for lack of subject

matter jurisdiction, not to compel arbitration.

           Thus,   MOA   could   not    satisfy     all   elements   of    issue

preclusion, and Davis was not precluded from challenging MOA’s

capacity to arbitrate its claims.

                                       B.

           Davis next contends that summary judgment should have

been granted to it because MOA lacked the capacity to arbitrate its

claims against Davis.       Usually a dispute may not be submitted to

arbitration unless the opponents are signatories to a contract

containing an arbitration clause, in which case “our task in

assessing the arbitrability of a dispute ‘primarily is one of

contract interpretation.’”       Wachovia Bank, Nat. Ass’n v. Schmidt,

445 F.3d 762, 767 (4th Cir. 2006) (quoting Summer Rain v. Donning

Co., 964 F.2d 1455, 1460 (4th Cir. 1992)); see also Mitsubishi

Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625

(1985) (describing the policy behind Federal Arbitration Act, 9 U.

S. C. § 1 et seq., as “at bottom a policy guaranteeing the

enforcement of private contractual arrangements”).               Under narrow

circumstances, however, a party that did not enter into a contract

containing an arbitration clause may nevertheless insist that a

dispute be arbitrated.        We have said that “[w]ell-established

common   law   principles   dictate     that   in   an    appropriate     case   a

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nonsignatory can enforce, or be bound by, an arbitration provision

within a contract executed by other parties.” Int’l Paper Co. v.

Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416-17 (4th

Cir. 2000).    Courts have recognized “five theories arising out of

common law principles of contract and agency law [that] could

provide    a   basis   for    binding     nonsignatories    to     arbitration

agreements:    1) incorporation by references;           2) assumption;      3)

agency;    4) veil piercing/alter ego;         and 5) estoppel.”      Id. at 417

(punctuation omitted).

            The district court granted MOA summary judgment without

determining whether any of these various theories actually allowed

MOA   (a   nonsignatory      plaintiff)   to    bring   Davis    (a   signatory

defendant) into arbitration based on the contracts between Davis

and some of MOA’s members.        MOA unpersuasively suggests on appeal

that theories of agency or equitable estoppel apply here.               Even if

the law permitted MOA to act as an agent for a MOA member who was

bound by the arbitration clause, MOA failed to oppose Davis’s

summary judgment motion by submitting evidence that MOA was such an

agent under Maryland law.        See Patten v. Board of Liquor License

Comm’rs, 107 Md. App. 224, 238, 667 A.2d 940, 947 (Md. Ct. Spec.

App. 1995) (absent a written agency agreement, a person is not an

agent of a principal unless (1) he is “subject to the principal’s

right of control,” (2) he is under a “duty to act primarily for the

benefit of the principal,” and (3) he holds “the power to alter the

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legal relations of the principal.”).           The only evidence that MOA

offered on this score was the declaration of its executive director

that the MOA board voted to authorize litigation and that one board

member (who had a “practice affiliated with” a retailer afforded

special treatment under CareFirst’s arrangement with Davis) voted

to pursue the litigation.         J.A. 118-19.       This declaration fell

short of establishing that there was even a single MOA member who

was a party to a contract with Davis and who made MOA its agent for

purposes of pursuing arbitration.

          Nor was this an equitable estoppel case.                Two sets of

circumstances fall within that theory.          First, “[w]hen each of a

signatory’s claims against a nonsignatory makes reference to or

presumes the existence of the written agreement, the signatory’s

claims arise out of and relate directly to the written agreement,

and arbitration is appropriate.”           Brantley v. Republic Mortgage

Ins. Co., 424 F.3d 392, 396 (4th Cir. 2005) (punctuation omitted).

Second, “application of equitable estoppel is warranted when the

signatory to the contract containing the arbitration clause raises

allegations    of    substantially        interdependent    and     concerted

misconduct    by   both   the   nonsignatory   and   one   or   more   of   the

signatories to the contract.”        Id.    Neither circumstance matches

the facts of this case because here it is a nonsignatory raising

claims against a signatory, not vice versa.

                                     11
          Thus, MOA had no grounds on which to force Davis into

arbitration.   Summary judgment should have been granted to Davis

and not to MOA.

                               III.

          For the foregoing reasons we reverse the summary judgment

in favor of MOA and remand for the district court to enter summary

judgment in favor of Davis.

                                                          REVERSED

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