CAREMARK, LLC V. CHICKASAW NATION, No. 21-16209 (9th Cir. 2022)
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The Chickasaw Nation, a sovereign and federally recognized Indian tribe, operates its own healthcare system, which includes five pharmacies. Under federal law, members of federally recognized Native nations are eligible to receive healthcare services at the nations’ facilities at no charge, and a nation may recoup the cost of services that it provides to a tribal member from that member’s health insurance plan. Caremark is the pharmacy benefit manager for health insurance plans that cover many tribal members served by the Chickasaw Nation’s pharmacies. The Nation signed agreements with Caremark. Each of these agreements incorporated by reference a Provider Agreement and a Provider Manual. The Provider Manual included an arbitration provision with a delegation clause requiring the arbitrator, rather than the courts, to resolve threshold issues about the scope and enforceability of the arbitration provision. The Nation sued Caremark, claiming violations of 25 U.S.C. Section 1621e, a provision of the Indian Health Care Improvement Act referred to as the “Recovery Act.”
The Ninth Circuit affirmed the district court’s order granting the petition to compel arbitration. The court rejected the Nation’s argument that it did not actually form contracts with Caremark that included arbitration provisions with delegation clauses. The court concluded that the premise of the Nation’s argument— that an arbitration agreement always and necessarily waives tribal sovereign immunity—was incorrect. Rather, the arbitration agreement simply designated a forum for resolving disputes for which immunity was waived.
Court Description: Arbitration. The panel affirmed the district court’s order granting the petition of Caremark, LLC, and Caremark affiliates to compel arbitration of a dispute with the Chickasaw Nation and five pharmacies that the Nation owns and operates. The Chickasaw Nation, a sovereign and federally recognized Indian tribe, operates its own healthcare system, which includes the five pharmacies. Under federal law, members of federally recognized Native nations are eligible to receive healthcare services at the nations’ facilities at no charge, and a nation may recoup the cost of services that it provides to a tribal member from that member’s health- insurance plan. Caremark is the pharmacy benefit manager for health-insurance plans that cover many tribal members served by the Chickasaw Nation’s pharmacies. The Nation signed agreements with Caremark, enrolling its pharmacies * The Honorable Danny J. Boggs, United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation. CAREMARK V. CHICKASAW NATION 3 in Caremark’s networks to facilitate reimbursement for the costs of providing pharmacy services to tribal members. Each of these agreements incorporated by reference a Provider Agreement and a Provider Manual. The Provider Manual included an arbitration provision with a delegation clause requiring the arbitrator, rather than the courts, to resolve threshold issues about the scope and enforceability of the arbitration provision. The Nation sued Caremark in the United States District Court for the Eastern District of Oklahoma, claiming violations of 25 U.S.C. § 1621e, a provision of the Indian Health Care Improvement Act referred to as the “Recovery Act.” The Nation alleged that Caremark improperly denied claims for reimbursement for covered medications that its pharmacies provided to tribal members enrolled in Caremark-managed health-insurance plans. Caremark filed a petition to compel arbitration of the Nation’s Recovery Act claims. It filed that petition in the United States District Court for the District of Arizona, the forum that the Provider Manual designated for arbitration. The district court granted the petition. The Nation argued that its Recovery Act claims were not arbitrable for two reasons. First, it argued that it was not bound by the arbitration provision in Caremark’s Provider Manual because it never clearly and unequivocally waived its tribal sovereign immunity. Second, it argued that the Recovery Act itself precluded the enforcement of any agreement to arbitrate. Rather than addressing these arguments, the district court sent the threshold arbitrability question to the arbitrator in light of the delegation clause in the Provider Manual. 4 CAREMARK V. CHICKASAW NATION The panel applied the following principles from Supreme Court case law. First, a court must resolve any challenge that an agreement to arbitrate was never formed, even in the presence of a delegation clause. Next, a court must also resolve any challenge directed specifically to the enforceability of the delegation clause before compelling arbitration of any remaining gateway issues of arbitrability. Finally, if the parties did form an agreement to arbitrate containing an enforceable delegation clause, all arguments going to the scope or enforceability of the arbitration provision are for the arbitrator to decide in the first instance. The panel rejected the Nation’s argument that it did not actually form contracts with Caremark that included arbitration provisions with delegation clauses. The Nation argued that agreeing to arbitration would have waived its tribal immunity, and because the Nation did not take the clear and unequivocal steps necessary to waive immunity, it could not have agreed to the arbitration provisions. The panel concluded that the premise of the Nation’s argument— that an arbitration agreement always and necessarily waives tribal sovereign immunity—was incorrect. Rather, the arbitration agreement simply designated a forum for resolving disputes for which immunity was waived. In the alternative, the Nation contended that arbitration of its claims against Caremark was precluded by the Recovery Act, which states that “no provision of any contract . . . shall prevent or hinder the right of recovery of . . . an Indian tribe[] or organization.” The panel concluded that this contention challenged the enforceability of the arbitration provisions as a whole, rather than impugning the validity of the delegation clause specifically, and therefore was for the arbitrator to decide. CAREMARK V. CHICKASAW NATION 5
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