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First Managed Care Option v. Patricia A. Ott


May 2, 2012


On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1419-11.

Per curiam.


Argued April 16, 2012 --

Before Judges A. A. Rodriguez and Fasciale.

Defendant Premier Comp Solutions, LLC (PCS) appeals from an August 23, 2011 order denying it's motion to compel arbitration.

PCS entered into a participation agreement (the Agreement) with plaintiff First Managed Care Option (FMCO). PCS argues that an arbitration provision in the Agreement requires the dispute between PCS and FMCO be arbitrated. We conclude, however, that the dispute does not arise out of or relate to the Agreement. As a result, we affirm.

FMCO provides medical claims management services to insurance companies and third-party administrators. PCS is one of FMCO's competitors. The Agreement identified PCS "as an agent for its affiliates which own or operate health care facilities [(the Facilities)] which will actually be providing the services . . . and sets forth the terms and conditions under which [PCS] shall participate in one or more Networks . . . developed by [FMCO] to render health care services to Covered Persons[.]" PCS terminated the agreement in 2010.

The Agreement enumerated PCS's obligation to perform specific claims management services, including, but not limited to, arranging for health-related services to covered persons; ensuring that the Facilities complied with licensing requirements and all applicable federal and state laws; establishing and maintaining medical records; and ensuring that the Facilities were properly credentialed. The Agreement relates solely to routine duties and responsibilities to provide managed health care services.

In 2011, FMCO filed a complaint against defendants Patricia Ott, Bayview Consultants, Inc., and PCS.*fn1 FMCO alleged that it employed Ott from 1998 to 2010 and, as a result, Ott obtained FMCO's confidential client and marketing information. FMCO alleged that PCS stole FMCO's proprietary information by hiring Ott while Ott remained employed by FMCO. FMCO did not allege that PCS breached its duties and responsibilities outlined in the Agreement. Rather, FMCO contended that PCS's conduct constituted tortious conduct.*fn2

PCS filed a motion to compel arbitration and sought summary judgment.*fn3 PCS argued that pursuant to paragraph eight of the Agreement, PCS and FMCO agreed to arbitrate in Pittsburgh, Pennsylvania, "any disputes arising out of or which [are] related to this Agreement." PCS maintained that paragraph eight required the dispute between PCS and FMCO to be arbitrated. FMCO contended that the arbitration provision in the Agreement was inapplicable because PCS's tortious conduct did not arise out of or relate to the Agreement. The judge conducted oral argument, rendered an oral opinion, and denied PCS's motion. The judge concluded that (1) the dispute between them did not arise out of or relate to the Agreement; and (2) arbitration would result in piecemeal litigation between FMCO and PCS in Pennsylvania, and FMCO and Ott and Bayview in New Jersey.

On appeal, PCS contends that the judge erred by (1) concluding that the dispute did not arise out of or relate to the Agreement,*fn4 and (2) applying New Jersey law. PCS maintains that, pursuant to the Agreement, the law of Pennsylvania governs. PCS contends that pursuant to Pennsylvania law, the dispute is arbitrable and piecemeal litigation is permitted.

PCS also argues that the matter is arbitrable pursuant to New Jersey law.

The issue is whether PCS's alleged tortious conduct constitutes a dispute "arising out of or which is related to this Agreement." We reach the same result whether we apply the law of Pennsylvania or New Jersey: the allegation that PCS engaged in tortious conduct by soliciting clients from FMCO does not arise out of or relate to the Agreement, and therefore the dispute is not arbitrable.

Pursuant to Pennsylvania law, courts "must be careful not to extend the arbitration agreement by implication beyond the clear, express, and unequivocal intent of the parties as manifested by the writing itself." Emlenton Area Mun. Auth. v. Miles, 548 A.2d 623, 626 (Pa. Super. Ct. 1988) (citing Hassler v. Columbia Gas Transmission Corp., 464 A.2d 1354, 1356, 1357 (Pa. Super. Ct. 1983)). In Hazleton Area Sch. Dist. v. Bosak, 671 A.2d 277, 282 (Pa. Commw. Ct. 1996), a Pennsylvania appellate court affirmed an order denying a motion to compel arbitration where the plaintiff's claims sounded in negligence. There, the arbitration clause provided: "Claims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration." Id. at 279.

Similarly, here, because the underlying negligence claims did not arise out of or relate to any of the provisions of the Agreement, PCS cannot use the Agreement to compel arbitration of those claims.

Pursuant to New Jersey law, "'[i]n the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be.'" Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132 (2001) (alteration in original) (quoting In re Arbitration Between Grover & Universal Underwriters Ins. Co., 80 N.J. 221, 228 (1979)). "In respect of specific contractual language, '[a] clause depriving a citizen of access to the courts should clearly state its purpose. The point is to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue.'" Ibid. (alteration in original) (quoting Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993)). With these principles in mind, we see nothing in the Agreement to indicate that FMCO intended to waive its right to sue on tortious grounds not appearing anywhere in the Agreement's provisions.

Because we have determined that the dispute is not arbitrable, we need not reach PCS's contention that piecemeal litigation is permitted pursuant to Pennsylvania law.


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