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Health Care Software, Inc v. Lower Cameron Hospital Service District; Pacer Health

March 15, 2011


The opinion of the court was delivered by: Pisano, District Judge.



Presently before the Court is a motion to dismiss for failure to state a claim filed by Respondent Lower Cameron Hospital Service District (the "District") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The motion seeks to dismiss a petition filed by Health Care Software, Inc. ("HCS") pursuant to 9 U.S.C. § 4 to compel arbitration against the District, Pacer Health Corporation, and Pacer Health Management Corporation. HCS opposes the District‟s motion. For the reasons that follow, the Court finds that arbitration is appropriate and, therefore, the District‟s motion is denied and HCS‟s petition to compel arbitration is granted.*fn1

I. Background

HCS commenced this action on May 28, 2010, when it filed a petition to compel arbitration to resolve a dispute between the parties. The dispute revolves around payment of fees for goods provided and services rendered under agreements between the parties. The agreements provide that New Jersey law governs and they require that any disputes between the parties be settled by arbitration in New Jersey.*fn2 After a dispute arose between the District and HCS, the District filed for arbitration with the American Arbitration Association on October 22, 2009. HSC responded to the District‟s demand for arbitration and filed a third-party demand for arbitration against Pacer Health Corporation and Pacer Health Management Corporation on November 18, 2009.

The District then indicated that it would not arbitrate in New Jersey, nor would it allow that its agreement with HCS was governed by New Jersey law. In its refusal to arbitrate in New Jersey, the District relied on a Louisiana statute, La. R.S. 9:2778, which purports to require arbitrations against political subdivisions of Louisiana to be venued in Louisiana and to be construed under Louisiana law. The statute further purports to nullify any contracts to the contrary.*fn3

The District filed the instant motion on July 16, 2010. The District seeks to dismiss HCS‟s action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and relies on the same Louisiana statute, La. R.S. 9:2778, that it cited when it originally declined to arbitrate. HCS counters that the Federal Arbitration Act preempts the Louisiana statute so that the dispute must be arbitrated in New Jersey pursuant to the agreements. HCS and the District argued their positions before the Court on February 25, 2011. At oral argument, the District cited the Eleventh Amendment of the United States Constitution as the basis for why the Federal Arbitration Act does not preempt a statute that nullifies agreements with political subdivisions of Louisiana that require arbitration outside the state. The Court reserved a decision pending further briefing by the parties on this argument. The briefs have been submitted and the Court now renders its decision.

II. Standard of Review

Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion to dismiss if the complaint fails to state a claim upon which relief can be granted. The Supreme Court set forth the standard for addressing a motion to dismiss under Rule 12(b)(6) in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007). The Twombly Court stated that, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiff‟s obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]" Id. at 555 (internal citations omitted). Therefore, for a complaint to withstand a motion to dismiss under Rule 12(b)(6), the "[f]actual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact) ..." Twombly, 550 U.S. at 555 (internal citations and footnote omitted).

More recently, the Supreme Court has emphasized that, when assessing the sufficiency of a civil complaint, a court must distinguish factual contentions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). A complaint will be dismissed unless it "contain[s] sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face.‟" Id. at 1949 (quoting Twombly, 550 U.S. at 570). This "plausibility" determination will be "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (citations omitted).

III. Discussion

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.

HCS, in its petition to compel arbitration, has asserted that this Court would normally have jurisdiction because the parties are completely diverse and the amount in controversy exceeds $75,000. HCS has also submitted evidence of arbitration agreements between the parties such that dismissing its petition under Fed. R. Civ. P. 12(b)(6) would be ...

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