Supreme Court Docket Report, October Term, 2002 - Number 2

By Eileen Penner, Miriam R. Nemetz and Andrew H. Schapiro

Originally published on October 15, 2002

Recently the Supreme Court granted certiorari in one case of potential interest to the business community. Amicus briefs in support of the petitioners are due on Friday, November 29, 2002, and amicus briefs in support of the respondents are due on Monday, December 30, 2002.

Arbitration Agreements - Enforceability of Arbitration Clauses That Limit Punitive

Damages. The Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq., expresses a strong policy preference for arbitrating any dispute that touches matters covered by a valid arbitration agreement. The Supreme Court has determined that federal statutory claims are subject to arbitration (see Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 238-39 (1987)), but has cautioned that the FAA's mandate to enforce an arbitration agreement "may be overridden by a contrary congressional command" (id. at 226). Today, the Supreme Court granted certiorari in PacifiCare Health Systems, Inc. v. Book, No. 02-215, to determine whether a district court may compel arbitration of a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) when the arbitration agreement does not permit the arbitrator to award the treble damages ordinarily available under that statute.

The respondents are physicians who sued several managed care companies, seeking to recover under RICO and other theories for injuries allegedly caused by the defendants' automated claims processing systems. The contracts between the defendants and the physicians contained arbitration clauses that precluded recovery of punitive damages. The defendants asked the district court to enforce those arbitration clauses.

The district court refused to order the physicians to arbitrate their RICO claims. In re Managed Care Litigation, 132 F. Supp. 2d 989 (S.D. Fla. 2000). The court acknowledged that RICO claims generally are amenable to arbitration. See id. at 993. Relying on Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 (11th Cir. 1998), however, it opined that an arbitration clause is enforceable only if the arbitration forum provides "meaningful relief for the plaintiffs' statutory claims." 132 F. Supp. 2d at 997. Accordingly, it concluded that "the limitation on punitive or exemplary damages serves as a limitation on the types of statutory claims that may be adjudicated before an arbitrator." Id. at 1001...