Pacificare Health Sys., Inc. v. Book

(Slip Opinion)

OCTOBER TERM, 2002

1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES

Syllabus

PACIFICARE HEALTH SYSTEMS, INC., ET AL. v. BOOK
ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE ELEVENTH CIRCUIT

No. 02–215. Argued February 24, 2003—Decided April 7, 2003

Respondent physicians filed suit alleging that managed-health-care
organizations, including petitioners, violated, inter alia, the Racket-
eer Influenced and Corrupt Organizations Act (RICO) by failing to
reimburse them for health-care services that they had provided to pa-
tients covered by the organizations’ plans. Petitioners moved to com-
pel arbitration. The District Court refused to compel arbitration of
the RICO claims on the ground that the arbitration clauses in the
parties’ agreements prohibited awards of “punitive damages,” and
hence an arbitrator lacked authority to award treble damages under
RICO. Accordingly, the court deemed the arbitration agreements un-
enforceable with respect to those claims. The Eleventh Circuit af-
firmed.
Held: It is unclear whether the agreements actually prevent an arbitra-
tor from awarding treble damages under RICO. This Court’s cases
have placed different statutory treble damages provisions on differ-
ent points along the spectrum between purely compensatory and
strictly punitive awards. In particular, the Court has repeatedly ac-
knowledged that RICO’s treble-damages provision is remedial in na-
ture, and it is not clear that the parties intended the term “punitive” to
encompass claims for treble damages under RICO. Since the Court
does not know how the arbitrator will construe the remedial limitations,
the questions whether they render the parties’ agreement unenforceable
and whether it is for courts or arbitrators to decide enforceability in the
first instance are unusually abstract. It would be premature for the
Court to address them; the proper course is to compel arbitration.
Pp. 2–6.

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PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

285 F. 3d 971, reversed and remanded.

Syllabus

SCALIA, J., delivered the opinion of the Court, in which all other
Members joined, except THOMAS, J., who took no part in the considera-
tion or decision of the case.

Cite as: 538 U. S. ____ (2003)

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Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________

No. 02–215
_________________
PACIFICARE HEALTH SYSTEMS, INC., ET AL.,
PETITIONERS v. JEFFREY BOOK ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE ELEVENTH CIRCUIT

[April 7, 2003]

JUSTICE SCALIA delivered the opinion of the Court.
In this case, we are asked to decide whether respon-
dents can be compelled to arbitrate claims arising under
the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U. S. C. §1961 et seq., notwithstanding the fact
that the parties’ arbitration agreements may be construed
to limit the arbitrator’s authority to award damages under
that statute.

I
Respondents are members of a group of physicians who
filed suit against managed-health-care organizations
including petitioners PacifiCare Health Systems, Inc., and
PacifiCare Operations, Inc. (collectively, PacifiCare), and
UnitedHealthcare, Inc. and UnitedHealth Group Inc.
(collectively, United). These physicians alleged that the
defendants unlawfully failed to reimburse them for health-
care services that they had provided to patients covered by
defendants’ health plans. They brought causes of action
under RICO, the Employee Retirement Income Security
Act of 1974 (ERISA), and federal and state prompt-pay
statutes, as well as claims for breach of contract, unjust

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PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

Opinion of the Court

enrichment, and in quantum meruit. In re: Managed Care
Litigation, 132 F. Supp. 2d 989, 992 (S D Fla. 2000).
Of particular concern here, PacifiCare and United
moved the District Court to compel arbitration, arguing
that provisions in their contracts with respondents re-
quired arbitration of these disputes, including those aris-
ing under RICO. Ibid. Respondents opposed the motion
on the ground that, because the arbitration provisions
prohibit an award of punitive damages, see App. 107, 147,
168, 212, respondents could not obtain “meaningful relief”
in arbitration for their claims under the RICO statute,
which authorizes treble damages, 18 U. S. C. §1964(c).
See Paladino v. Avnet Computer Technologies, Inc., 134
F. 3d 1054, 1062 (CA11 1998) (holding that where a reme-
dial limitation in an arbitration agreement prevents a
plaintiff from obtaining “meaningful relief” for a statutory
claim, the agreement to arbitrate is unenforceable with
respect to that claim).
The District Court denied petitioners’ request to compel
arbitration of the RICO claims. 132 F. Supp. 2d, at 1007.
The court concluded that given the remedial limitations in
the relevant contracts, it was, indeed, “faced with a poten-
tial Paladino situation . . . , where the plaintiff may not be
able to obtain meaningful relief for allegations of statutory
violations in an arbitration forum.” Id., at 1005. Accord-
ingly, it found the arbitration agreements unenforceable
with respect to respondents’ RICO claims. Id., at 1007.
The Eleventh Circuit affirmed “for the reasons set forth in
[the District Court’s] comprehensive opinion,” In re: Hu-
mana Inc. Managed Care Litigation, 285 F. 3d 971, 973
(2002), and we granted certiorari, 537 U. S. 946 (2002).
II
Petitioners argue that whether the remedial limitations
render their arbitration agreements unenforceable is not a
question of “arbitrability,” and hence should have been

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Opinion of the Court

decided by an arbitrator, rather than a court, in the first
instance. They also claim that even if this question is one
of arbitrability, and is therefore properly within the pur-
view of the courts at this time, the remedial limitations at
issue do not require invalidation of their arbitration
agreements. Either way, petitioners contend, the lower
courts should have compelled arbitration. We conclude
that it would be premature for us to address these ques-
tions at this time.
Our decision in Vimar Seguros y Reaseguros, S. A. v.
M/V Sky Reefer, 515 U. S. 528 (1995), supplies the ana-
lytic framework for assessing the ripeness of this dispute.
In Vimar, we dealt with a bill of lading concerning a ship-
ment of goods from Morocco to Massachusetts. Upon
receipt of the goods, the purchaser discovered that they
had been damaged, and, along with its insurer (Vimar),
filed suit against the shipper. The shipper sought to
compel arbitration, relying on choice-of-law and arbitra-
tion clauses in the bill of lading under which disputes
arising out of the parties’ agreement were to be governed
by Japanese law and resolved through arbitration before
the Tokyo Maritime Arbitration Commission. Vimar
countered by arguing that the arbitration clause violated
the Carriage of Goods by Sea Act (COGSA), 46 U. S. C.
App. §1300 et seq., and hence was unenforceable. 515
U. S., at 531–532.
In particular, Vimar claimed that
“there is no guarantee foreign arbitrators will apply
COGSA”; that the foreign arbitrator was likely to apply
rules of Japanese law under which respondents’ liability
might be less than what it would be under COGSA; and
that this would violate “[t]he central guarantee of
[COGSA] §3(8) . . . that the terms of a bill of lading may
not relieve the carrier of obligations or diminish the legal
duties specified by the Act.” Id., at 539.
Notwithstanding Vimar’s insistence that the arbitration
agreement violated federal policy as embodied in COGSA,

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PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

Opinion of the Court

we declined to reach the issue and held that the arbitra-
tion clause was, at least initially, enforceable. “At this
interlocutory stage,” we explained, “it is not established
what law the arbitrators will apply to petitioner’s claims
or that petitioner will receive diminished protection as a
result. The arbitrators may conclude that COGSA applies
of its own force or that Japanese law does not apply so
that, under another clause of the bill of lading, COGSA
controls.” Id., at 540. We further emphasized that “mere
speculation that the foreign arbitrators might apply Japa-
nese law which, depending on the proper construction of
COGSA, might reduce respondents’ legal obligations, does
not in and of itself lessen liability under COGSA §3(8)[,]”
nor did it provide an adequate basis upon which to declare
the relevant arbitration agreement unenforceable. Id., at
541 (emphases added). We found that “[w]hatever the
merits of petitioner’s comparative reading of COGSA and
its Japanese counterpart, its claim is premature.” Id., at
540.
The case at bar arrives in a similar posture. Two of the
four arbitration agreements at issue provide that “punitive
damages shall not be awarded [in arbitration],” App. 107,
147; one provides that “[t]he arbitrators . . . shall have no
authority to award any punitive or exemplary damages,
id., at 212; and one provides that “[t]he arbitrators . . .
shall have no authority to award extra contractual dam-
ages of any kind, including punitive or exemplary dam-
ages . . . ,” id., at 168. Respondents insist, and the District
Court agreed, 132 F. Supp. 2d, at 1000–1001, 1005, that
these provisions preclude an arbitrator from awarding
treble damages under RICO. We think that neither our
precedents nor the ambiguous terms of the contracts make
this clear.
Our cases have placed different statutory treble-
damages provisions on different points along the spectrum
between purely compensatory and strictly punitive

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Opinion of the Court

awards. Thus, in Vermont Agency of Natural Resources v.
United States ex rel. Stevens, 529 U. S. 765, 784 (2000), we
characterized the treble-damages provision of the False
Claims Act, 31 U. S. C. §§3729–3733, as “essentially puni-
tive in nature.” In Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U. S. 477, 485 (1977), on the other hand, we ex-
plained that the treble-damages provision of §4 of the Clay-
ton Act, 15 U. S. C. §15, “is in essence a remedial provision.”
Likewise in American Soc. of Mechanical Engineers, Inc. v.
Hydrolevel Corp., 456 U. S. 556, 575 (1982), we noted that
“the antitrust private action [which allows for treble dam-
ages] was created primarily as a remedy for the victims of
antitrust violations,” (emphasis added). And earlier this
Term, in Cook County v. United States ex rel. Chandler, 538
U. S. ___ (2003) (Slip op., at 9), we stated that “it is impor-
tant to realize that treble damages have a compensatory
side, serving remedial purposes in addition to punitive
objectives.” Indeed, we have repeatedly acknowledged that
the treble-damages provision contained in RICO itself is
remedial in nature. In Agency Holding Corp. v. Malley-Duff
& Associates, Inc., 483 U. S. 143, 151 (1987), we stated that
“[b]oth RICO and the Clayton Act are designed to remedy
economic injury by providing for the recovery of treble dam-
ages, costs, and attorney’s fees,” (emphasis added). And in
Shearson/American Express Inc. v. McMahon, 482 U. S.
220, 241 (1987) we took note of the “remedial function” of
RICO’s treble-damages provision.
In light of our case law’s treatment of statutory treble
damages, and given the uncertainty surrounding the
parties’ intent with respect to the contractual term “puni-
tive,”1 the application of the disputed language to respon-

——————
1 Contrary to respondents’ contention, the prohibition in Dr. Manual
Porth’s contract against an arbitrator’s awarding “extracontractual”
damages is likewise ambiguous. This language might mean, as respon-
dents would have it, that an arbitrator is prohibited from awarding any

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PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

Opinion of the Court

dents’ RICO claims is, to say the least, in doubt. And
Vimar instructs that we should not, on the basis of “mere
speculation” that an arbitrator might interpret these
ambiguous agreements in a manner that casts their en-
forceability into doubt, take upon ourselves the authority
to decide the antecedent question of how the ambiguity is
to be resolved.2 515 U. S., at 541. In short, since we do
not know how the arbitrator will construe the remedial
limitations, the questions whether they render the parties’
agreements unenforceable and whether it is for courts or
arbitrators to decide enforceability in the first instance are
unusually abstract. As in Vimar, the proper course is to
compel arbitration. The judgment of the Court of Appeals
is reversed, and the case is remanded for further proceed-
ings consistent with this opinion.

It is so ordered.
JUSTICE THOMAS took no part in the consideration or
decision of this case.
——————
damages other than for breach of contract. Brief for Respondents 20–
21. But it might only mean that an arbitrator cannot award non-
economic damages such as punitive or mental-anguish damages. See 3
D. Dobbs, Law of Remedies: Damages-Equity-Restitution §12.1(1), p. 8
(2d ed. 1993) (“Punitive damages and mental anguish damages are thus
considered ‘extracontractual,’ and usually denied in pure contract cases”).
2 If the contractual ambiguity could itself be characterized as raising
a “gateway” question of arbitrability, then it would be appropriate for a
court to answer it in the first instance. But we noted just this Term
that “the phrase ‘question of arbitrability’ has a . . . limited scope.”
Howsam v. Dean Witter Reynolds, Inc., 537 U. S. ___ (2002) (Slip op. at 4).
Indeed, we have “found the phrase [question of arbitrability] applicable in
the kind of narrow circumstance where contracting parties would likely
have expected a court to have decided the gateway matter, where they are
not likely to have thought that they had agreed that an arbitrator would
do so, and, consequently, where reference of the gateway dispute to the
court avoids the risk of forcing parties to arbitrate a matter that they may
well not have agreed to arbitrate.” Ibid. Given our presumption in favor
of arbitration, Moses H. Cone Memorial Hospital v. Mercury Constr. Corp.,
460 U. S. 1, 24–25 (1983), we think the preliminary question whether the
remedial limitations at issue here prohibit an award of RICO treble
damages is not a question of arbitrability.