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Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc.

United States Court of Appeals, Eleventh Circuit

September 18, 2019

MANAGED CARE ADVISORY GROUP, LLC, Plaintiff - Appellee,
v.
CIGNA HEALTHCARE, INC., Defendant-Appellant, EPIQ SYSTEMS, INC., DAVID GARCIA, NEIL MANNING, IMEDECS, MILLENNIUM HEALTHCARE CONSULTING, INC., MARY FALBO, Interested Parties - Appellants.

          Appeals from the United States District Court for the Southern District of Florida D.C. Docket No. 1:00-md-01334-FAM

          Before JILL PRYOR and BRANCH, Circuit Judges, and REEVES, [*] District Judge.

          PER CURIAM.

         Medical providers filed several class action lawsuits against managed care insurance companies, including CIGNA Healthcare, Inc. ("CIGNA"). These actions alleged that the insurers improperly processed and rejected certain physicians' claims for payment. The actions were consolidated into Multidistrict Litigation ("MDL") before the United States District Court for the Southern District of Florida. The class and CIGNA reached a settlement after extensive litigation and the district court subsequently approved the parties' Settlement Agreement.

         Following the settlement, Managed Care Advisory Group, LLC ("MCAG"), acting on behalf of class members, entered into an arbitration agreement with CIGNA in an attempt to resolve a dispute over a portion of the settlement funds. The Settlement Agreement did not provide for arbitration and MCAG was not a party to it. Instead, MCAG claimed to represent class members who were parties to the Settlement Agreement. The arbitrator summonsed the settlement claims administrator and independent review entities ("IREs")[1] to appear for a live hearing and video conference and to bring with them certain documents. MCAG filed a motion to enforce the arbitral summonses in the district court approximately three years after it had closed all proceedings involving the MDL. CIGNA responded to MCAG's motion to enforce the arbitral summonses with a motion to strike the summonses. The district court referred the matter to a magistrate judge who denied CIGNA's motion and granted MCAG's request to enforce the summonses. CIGNA and the summonsed parties appealed the magistrate judge's decision to the district court and, at the district court's suggestion, CIGNA filed a motion to enforce the settlement and compel an accounting.

         The district court affirmed the magistrate judge's decision, enforcing the arbitral summonses, but denied CIGNA's motion to enforce the Settlement Agreement and compel an accounting stating, "[t]he Arbitrator shall be allowed to arbitrate the claims in the manner he sees fit." After careful review of the record and with the benefit of oral argument, we reverse enforcement of the arbitral summonses. Additionally, we reverse and remand the denial of the motion to enforce the Settlement Agreement and compel an accounting to the extent that it relates to a portion of settlement funds previously paid.

         I. BACKGROUND

         Medical providers filed several class actions against managed care insurance companies, including CIGNA, starting in 1999. The matters were consolidated into an MDL proceeding in the United States District Court for the Southern District of Florida in April 2000. MCAG was not a party, class member, or class counsel in any of the lawsuits consolidated into the MDL, nor was it a party to the MDL itself. The parties later moved for preliminary approval of a settlement, and the district court granted their request.

         The district court approved the settlement on January 30, 2004, following a class action fairness hearing. The court noted, however, that it retained jurisdiction for "all matters relating to [] the interpretation, administration, and consummation of the Agreement . . . ." The settlement included monetary relief to the class members as well as the ability to either (1) participate in a $30,000,000 fund that would be distributed to class members or (2) seek recovery from an uncapped fund for claims that were previously denied or reduced. As relevant to this appeal, "Category Two" claims sought recovery from the uncapped fund. To seek compensation for Category Two claims, the class members would submit their claims to the settlement administrator, who would forward them to CIGNA upon verification that the claim was accompanied by sufficient supporting documents. If CIGNA determined that a claim was not payable, it would be reviewed by the independent settlement administrator or the IRE (collectively, "the Reviewers"), depending on the reason for the denial. After evaluating these claims, the Reviewers would make a final, independent decision regarding whether the claims should be paid.

         Class member Texas Children's Pediatric Associates ("TCPA") moved for enforcement of the settlement on July 14, 2005, asserting that CIGNA obstructed the process for Category Two claims, causing the Reviewers to improperly process claims. TCPA requested in the motion for enforcement of the settlement that the district court direct CIGNA to pay its claims. However, TCPA subsequently withdrew its motion on November 16, 2005, noting that MCAG and CIGNA agreed to binding arbitration of the matter.

         The notice of withdrawal indicated that the parties agreed that the district court "should, consistent with the Settlement Agreement, Final Judgment and the Arbitration Agreement, retain jurisdiction over the parties and this matter for purposes of confirming, modifying and/or vacating that Arbitration Award (as well as any pre-Award decisions) in accordance with the FAA [Federal Arbitration Act]." However, the Settlement Agreement did not require arbitration and did not have an arbitration provision. Instead, the arbitration agreement between CIGNA and MCAG was separate and apart from the Settlement Agreement, to which MCAG was not a party. The Reviewers were not parties to the binding arbitration and the arbitration agreement was solely between MCAG and CIGNA.[2]

         During the arbitration, the arbitrator required CIGNA to allow reprocessing of certain claims; however, problems supposedly arose. The arbitrator issued non-party summonses to the following third parties requiring them to participate in the arbitration hearing: (1) Epiq, the settlement administrator; (2) David Garcia, a project director at Epiq; (3) Neil Manning, an ex-employee of Epiq; (4) IMEDECS/Millennium Healthcare Consulting, Inc., the IRE; and (5) Mary Falbo, the IRE's founder and CEO (collectively, "the summonsed parties").

         The summonses directed the summonsed parties to appear by video. Some also required the summonsed parties to produce documents. Federal district courts where the summonsed parties were located issued corresponding subpoenas. Upon receipt, however, the summonsed parties objected to the summonses and indicated they would not comply without an order compelling them to do so. On September 2, 2016, MCAG moved the district court to enforce the arbitration summonses pursuant to 9 U.S.C. § 7. CIGNA then moved to strike MCAG's motion to enforce the summonses. IMEDECS, Millennium Healthcare Consulting, Inc., and Falbo (collectively, "IMEDECS") filed a response in opposition to the motion to enforce. Epiq, Garcia, and Manning (collectively, "Epiq") also filed a separate response in opposition.

         A magistrate judge held a hearing and concluded the court had jurisdiction to enforce the arbitration summonses because the district court judge "appointed the arbitrator and he reserved jurisdiction to enforce the settlement agreement and the parties agreed, in the arbitration agreement, . . . to the jurisdiction of the Court." The magistrate judge ruled directly on the pending motions by granting MCAG's motion to enforce, while denying CIGNA's motion to strike. CIGNA, Epiq, and IMEDECS challenged the magistrate judge's rulings.

         The district court held a status conference, and CIGNA subsequently moved to enforce the Settlement Agreement and compel an accounting as suggested by the district court. CIGNA alleged MCAG mismanaged settlement funds totaling over $25 million, which CIGNA had paid to MCAG for the benefit of the class members. CIGNA made two types of payments to MCAG. First, prior to arbitration, CIGNA paid a total of approximately $11 million to MCAG for class members' claims that were not the subject of arbitration. Second, during arbitration, CIGNA paid an additional $14 million for class members' Category Two claims. CIGNA paid these funds to MCAG solely for distribution to class members as required by the Settlement Agreement.

         The district court affirmed the magistrate judge's order granting MCAG's motion to enforce the arbitral summonses and denied CIGNA's motion to enforce the Settlement Agreement and compel an accounting. It noted that "[t]he Arbitrator shall be allowed to arbitrate the claims in the manner he sees fit."

         CIGNA, Epiq, and IMEDECS appeal the district court order. Epiq and IMEDECS challenge the district court's order enforcing the arbitral summonses. CIGNA appeals the district court's denial of its motion to enforce the Settlement Agreement and compel an accounting.

         MCAG conceded during oral argument that: (1) it had not distributed all of the funds CIGNA paid before the arbitration for claims that were not the subject of the arbitration (despite MCAG's previous assertion that it had distributed all of these funds); (2) it had not distributed any of the settlement money paid by CIGNA for Category Two claims since the arbitration commenced; and (3) only approximately $4.5 million remains of the settlement proceeds CIGNA paid to MCAG for class members' Category Two claims. Additionally, MCAG conceded that it was obligated to pay the class members shortly after receiving payment from CIGNA.

         Before oral arguments, this Court issued a jurisdictional question asking the parties to respond to two inquiries: (1) whether the district court order enforcing the arbitration summonses was a final order, particularly in light of the fact that the order enforced summonses against third parties and is apparently a post-judgment order; and (2) whether the district court's order denying CIGNA's motion to enforce the Settlement Agreement and to compel an accounting was final in light of the district court's reasoning that CIGNA's claims would instead be handled by the arbitrator. CIGNA, Epiq, and IMEDECS responded that the orders were final and appealable, while MCAG contended the orders were not final and appealable.

         II. STANDARDS OF REVIEW

         A district court's decision regarding personal jurisdiction is reviewed de novo. Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir. 2013). Additionally, a district court's decision that it has subject matter jurisdiction to hear a motion to enforce arbitral summonses is also reviewed de novo. Doe v. Fed. Aviation Admin., 432 F.3d 1259, 1261 (11th Cir. 2005). This Court has not explicitly established a standard of review for a district court's enforcement of arbitral summonses. However, whether an agency had authority to issue an administrative subpoena and a district court's interpretation and application of a statute are reviewed de novo. United States v. Fla. Azalea Specialists, 19 F.3d 620, 622 (11th Cir. 1994); Alexander v. Hawk, 159 F.3d 1321, 1323 (11th Cir. 1998). Further, a district court's decision to enforce or quash a subpoena is reviewed for abuse of discretion. In re Hubbard, 803 F.3d 1298, 1307 (11th Cir. 2015). A district court's decision to deny the equitable remedy of accounting is also reviewed for abuse of discretion. Zaki Kulaibee Establishment v. McFliker, 771 F.3d 1301, 1310 (11th Cir. 2014).

         Finally, this Court reviews a district court's interpretation of a settlement agreement de novo, and decisions regarding motions to enforce settlements for abuse of discretion. In re Managed Care, 756 F.3d 1222, 1232 (11th Cir. 2014); Resnick v. Uccello Immobilien GMBH, Inc., 227 F.3d 1347, 1350 (11th Cir. 2000). "An error of law is an abuse of discretion per se." Resnick, 227 F.3d at 1350 (citing Alikhani v. United States, 200 F.3d 732, 734 (11th Cir. 2000)).

         III. ANALYSIS

         A. Finality of the Order Enforcing Arbitral Summonses

         The district court's order enforcing the arbitral summonses is a final and appealable order. The FAA allows an appeal from "a final decision with respect to an arbitration that is subject to this title." 9 U.S.C. § 16(a)(3). The Supreme Court has interpreted this section according to the "well-developed and longstanding meaning" of a "final decision." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86, 121 S.Ct. 513, 519, 148 L.Ed.2d 373 (2000). A final decision "ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment." Id. (internal quotation marks omitted).

         An arbitrator may summons an individual to attend the arbitration as a witness. 9 U.S.C. § 7. But if the individual who was summonsed to testify refuses to attend, the aggrieved party may petition the United States district court to compel the attendance of the individual refusing to attend. Id. The district court must be in the district where the arbitrator sits and may compel attendance "in the same manner provided by law for securing the attendance of witnesses . . . in the courts of the United States." Id. Rule 45(b) of the Federal Rules of Civil Procedure provides the manner of serving subpoenas before the court and states that "[a] subpoena may be served at any place within the United States." Fed.R.Civ.P. 45(b)(2).

         The district court's order enforcing the arbitration summonses is a post-judgment order. Generally, a post-judgment order is final if it disposes of all the issues raised in the motion that initiated the post-judgment proceedings. Mayer v. Wall St. Equity Grp., Inc., 672 F.3d 1222, 1224 (11th Cir. 2012). However, there is authority holding that interlocutory orders denying motions to quash third-party subpoenas and post-judgment orders compelling discovery are not appealable. Drummond Co. v. Terrance P. Collingsworth, Conrad & Scherer, LLP, 816 F.3d 1319, 1322, 1325-27 ...


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