PacifiCare Health Systems, Inc. v. Book – Oral Argument – February 24, 2003

Media for PacifiCare Health Systems, Inc. v. Book

Audio Transcription for Opinion Announcement – April 07, 2003 in PacifiCare Health Systems, Inc. v. Book

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William H. Rehnquist:

We’ll hear argument now in Number 02-215, Pacific Health Care Systems v. Jeffrey Book.

Mr. Grauer.

William E. Grauer:

Mr. Chief Justice, and may it please the Court:

For three reasons, the important Federal policy favoring arbitration would be seriously undermined if courts become entangled in speculative litigation over arbitration remedies.

First, the enforceability of a limitation on remedies in arbitration ought to be decided in the first instance by the arbitrator, since that’s not a gateway issue of arbitrability.

Second, it’s unlikely in this case that the arbitrator would have found that the limitations on remedies agreed by the parties would have precluded the award of RICO treble damages, and third, there is simply no reason why parties found by the district court to be sophisticated cannot mutually agree to limit remedies.

Turning, then, to–

Ruth Bader Ginsburg:

Mr. Grauer, on the second point that you made, you said it’s unlikely that the arbitrators would find that treble damages are inconsistent with the… with the contract.

Would you, supposing this case were to be before the arbitrator, would you concede that the contracts in question permit treble damages awards on a RICO claim?

Would you make that contention?

William E. Grauer:

–Yes.

Ruth Bader Ginsburg:

Thank you.

William E. Grauer:

Yes.

David H. Souter:

On your first point, suppose you have a contract that is very clear that there can be no triple damages under RICO, that’s right in the contract, is it your position that that goes to the arbitrator and it’s for the arbitrator to say that this violates public policy and I’m going to… well, I mean, what would happen in that case?

William E. Grauer:

Yes, we believe that it’s for the arbitrator to decide.

We believe that there’s essentially a 40-year tradition of allowing arbitrators to make decisions of that nature and of allowing issues of the remedies that can arise in arbitration to be decided by the arbitrator.

Stephen G. Breyer:

The arbitrator, I take it, on the face of the contract simply could not award the damages, or are you saying that he might?

William E. Grauer:

Yes.

The arbitrator–

Stephen G. Breyer:

He’d say, this is against public policy and I’m giving you triple damages?

I don’t care what the contract says, I go beyond the scope of the arbitration contract?

William E. Grauer:

–Well, the arbitrator is bound first and foremost, under both the law and under the arbitration clauses in this case, to comply with the controlling law.

This Court has held several times, in Mitsubishi, in Vimar, in Gilmer, and in other cases that we should not suppose that the arbitrator will not follow the law.

We should assume that the arbitrator will follow the law and, therefore, if the law requires the award of treble damages, even if the parties have agreed otherwise, the arbitrator is bound to follow that law.

Stephen G. Breyer:

What’s our best case, or is there one, for the proposition that if the contract says the arbitrator may not do X, and X violates public policy, that the arbitrator goes ahead and does it anyway?

What’s our case that says that?

William E. Grauer:

I believe that that would be found in Mitsubishi, in the Vimar y Seguros case at page 541, in the McMahon case at page–

Stephen G. Breyer:

Well, but I’m not sure in any of those cases it was clear that the contract in very explicit terms said, you cannot do this.

I… I… I recognize that in those cases it does say if there’s important public policy it can’t be overturned by the arbitration.

William E. Grauer:

–I think the… one example… there are several examples, but one that comes to mind is that in the Vimar case the COGSA prevented the arbitrator from… the COGSA prevented any reduction in liability in a bill of lading, and… and there was a concern that the law in Japan which had been selected to conduct the arbitration had a different set of rules that could have allowed the stevedores to be… to have liability laid off on the stevedores, and yet the Court said, we will not indulge in the presumption that the arbitrator will not follow the appropriate law and, therefore, even though Japanese law was different, the arbitrator, we assumed, would follow the controlling law.

William E. Grauer:

Now, in this particular case, it’s… it’s not only true that the… that the Court has held several times that we should not assume that an arbitrator will fail to follow the controlling law, but all of the arbitration agreements, and I would cite the Court to the joint appendix, pages 84, 147, 168, and 212, in each of the arbitration agreements in this case, the arbitrator is admonished to follow the controlling law.

Sandra Day O’Connor:

Well, but in one of the arbitration clauses, I think, it says the arbitrator shall not vary or ignore the terms of this agreement, shall have no authority to award extracontractual damages at any time, including punitive or exemplary damages.

Now, what’s the arbitrator to do with a provision like that?

Is that not the kind of thing that courts have looked at and determined whether that’s a valid public policy or not?

William E. Grauer:

I wouldn’t agree with the Court looking at that, and here’s why.

I agree that what you read, Justice O’Connor, is, in fact, what’s in that agreement, but if you read on in that sentence it says, and the arbitrator shall follow the controlling law.

At best, there is a conflict or a tension between those terms, and this is what arbitrators do all the time.

There are all these agreements that are… that every day are presented to arbitrators that have a number of provisions that could step on each other, and… and the arbitrator has to interpret the contract.

That’s what we bargained for in entering an arbitration agreement, that if there was some tension, or some confusion or dispute, that the arbitr–

Sandra Day O’Connor:

Have we ever allowed a prospective waiver of a statutory right–

William E. Grauer:

–Prospective–

Sandra Day O’Connor:

–in the arbitration context?

William E. Grauer:

–The prospective waivers… yes, I believe that that, for example, in our brief we cited a number of cases such as Mezzanatto that create a presumption that a statutory right is waivable unless Congress has said otherwise.

Now, in the arbitration context, again, to get back to the Vimar y Seguros case, the party was agreeing to arbitration even though there was a concern before the arbitration that the arbitrator might not follow the correct law.

The guiding principle of… that… that has guided this Court’s jurisprudence for… for years, and it’s been reiterated in Mitsubishi, and McMahon, and… and Vimar, and Gilmer, is that we should assume that the arbitrator will apply… will apply the correct law, but if–

Ruth Bader Ginsburg:

Mr. Grauer, on the question of waiver, you have represented, and I want to make this clear, that waiver would be academic in this situation, since you say you will concede that all of these contracts allow the arbitrator to award treble damages.

Is… am I correct in understanding that waiver would be academic because you’re not going to make the argument of waiver, you’re going to make… you’re going to concede that treble damages are available if a RICO violation is found?

William E. Grauer:

–Absolutely.

I agree with that, Justice Ginsburg, and as a matter of fact for two reasons, not only because we’ve made that concession, but also because we agreed to arbitrate.

That means we agreed to submit any issues to the arbitrator and therefore, even if we had not made that concession, we would believe that the arbitrator ought to be asked in the first instance to decide the validity of a waiver.

Ruth Bader Ginsburg:

But suppose the arbitrator gets it wrong.

Suppose the arbitrator thinks that the provision, no punitive damages, excludes treble damages, and that that prevails.

Could that be corrected by post award review?

William E. Grauer:

To the extent… yes, I think it could, and here’s why.

The one thing that this Court has said, no fewer than four times, and… and has emphasized I think those four times, is that when a statutory claim is arbitrated, there… the… we assume that post arbitration review is sufficient to ensure the vindication of statutory interests, and the Court mentioned that not only in McMahon at page 232, in Gilmer at footnote 4, and also in Vimar and in Mitsubishi.

In all four of those cases, this Court has specific… excuse me… this Court has specifically said that… that, while limited, post arbitration review is sufficient to ensure that statutory interests are vindicated.

Stephen G. Breyer:

In other words, it’s quite simple.

I don’t see what’s so complicated about this.

I thought what you were saying, and I thought that’s what the law was, but tell me if I’m not right, please, is, interpreting the contract is a matter for the arbitrator, but once we know what the contract means, then whether that contract, as interpreted, provides sufficient remedy to be valid as an arbitration contract is for the judge.

William E. Grauer:

I would… I would agree with the first part of that, Justice Breyer, and that is–

Stephen G. Breyer:

Well, why not the second?

I mean, after all, if you have a contract which says, Jones and Smith agree to arbitrate all damage claims, but no damages shall ever be awarded, no matter what, okay, that’s pretty clear that the enforcement of that would invalidate that arbitration agreement because it can’t be enforced.

The person who should say that is the judge, because the judge says, look, you people don’t have an arbitration contract.

Now, why you’d leave that to the arbitrator… I guess you could, but I think that is a gateway matter that I think you’d have to be quadruple clear about that somebody wanted that point decided by an arbitrator.

Now, that’s how I’m understanding it, so I’d like you to correct me if I’m wrong.

William E. Grauer:

–I’m not sure I followed the first part of the hypothetical.

Stephen G. Breyer:

The first part’s very simple.

What the contract means is for the arbitrator.

The parties have agreed to that.

But once we know what it means, whether it is an enforceable arbitration contract or violates some anti… some statute that says… or some public policy and the… which means, you two cannot arbitrate this kind of thing with this kind of agreement, that question of arbitrability is for the judge, because it is a gateway matter.

If, in fact, this contract for arbitration is unlawful, as against pubic policy or whatever, then there is no arbitration contract, and that matter is a matter for the judge, unless the parties clearly indicate that they want it to be decided by an arbitrator.

And I read through those cases a little while ago, and that seemed to me what they said, and so I wrote it into an opinion which I think every member of this Court but one agreed to.

William E. Grauer:

Justice Breyer, I agree with the first part, and that is this, that the gateway issue of arbitrability involves the determination of, did the parties make a valid agreement to arbitrate and, if they did, is the dispute within the scope of that agreement, but that should end, in our view, the inquiry, because if you don’t end the inquiry at that point, you’re… you’re opening the door to questions about remedies and legal issues and what are the elements of the cause of action and what have the parties agreed to, and let me give you an example.

The parties… I sell you 10,000 widgets for a dollar each, as is, and no… and liquidated damages of $1 and no other liability, and we agree to that, okay.

Now, the person then sues for RICO because they want to get around that.

Well, the only issue ought to be, did the parties make a valid agreement to arbitrate and, if so, is the dispute in the scope of that agreement, and the fact that there may be a downstream dispute about the validity of the remedies and the validity of the waiver of the remedies should not, under any circumstances, spill over into the gateway–

Stephen G. Breyer:

I didn’t say when you would decide it.

I said, the matter is a matter for the judge.

If we don’t know what the contract means, then I guess we have to go to the arbitrator to find out before we know, before we can present the judge.

That’s Vimar, or Vimar, isn’t it?

William E. Grauer:

–Vimar y Seguros, and I agree, Justice Breyer, that post arbitration–

Stephen G. Breyer:

I thought you probably would end up agreeing.

[Laughter]

William E. Grauer:

–Well, post, as long as the agreement is that it’s post arbitration.

The post arbitration review has been held four times by the Court to be sufficient to clean up matters at the margin that could come up.

John Paul Stevens:

But if the contract is completely cleared at the outset, why not pre-arbitration review?

William E. Grauer:

If the con–

John Paul Stevens:

Why march up the hill and then march down again?

William E. Grauer:

–Well, the courts… I would disagree with approaching it that way, because unfortunately what’s clear to a plaintiff’s lawyer is often not clear to a defense lawyer, and there are many elements of a cause of action, there are many remedial limitations–

John Paul Stevens:

So you’re saying that nothing is ever clear to the bar?

[Laughter]

William E. Grauer:

–My good friend, Mr. Whatley and I agree on very little in the case, and that’s the problem.

Sandra Day O’Connor:

Well, do you say that this provision in one of the arbitration clauses that the arbitrator shall have no authority to award extracontractual damages of any kind is not clear enough for a judge to determine whether that’s–

William E. Grauer:

We feel that… we–

Sandra Day O’Connor:

–against public policy?

William E. Grauer:

–Yes, I do, and here’s why.

Sandra Day O’Connor:

Why?

William E. Grauer:

Because we believe that we bargained to have an arbitrator make that decision, and there are many words in this case that may seem like it’s clear what they mean, but may in some contexts not be so clear.

The word racketeering is used to describe a case where a doctor is seeking to be paid more for treating a patient.

There are a lot of words in this case, and we feel that we bargained to have an arbitrator interpret them, and as I indicated to Justice Ginsburg, it was conceded some time ago that the term, extracontractual was not in… was intended to be noneconomic damages and was not intended to be primarily remedial RICO treble damages, but–

William H. Rehnquist:

Well, what you’re arguing for basically is that it should go to the arbitrator for a decision of almost everything except what we have held to be gateway issues, and that if it doesn’t, it’s just going to kind of get bounced back and forth like a ping pong ball.

William E. Grauer:

–I agree, Mr. Chief Justice.

I… I believe that the importance of the Court’s recent pronouncement in Howsam about gateway arbitrability as we read that case is that you determine, did the parties intend to subject themselves to the power of an arbitrator?

Did they make an arbitration agreement, and is the dispute within the scope of that agreement, and if the answers to those questions are yes, the only additional issue that comes up, and the one that unfortunately became conflated in the Eleventh Circuit below, is where there is a statutory claim, there is an additional analysis that this Court has traditionally done, and that is, did Congress, by enacting that statute, intend to override or preempt the Federal Arbitration Act, and that’s the issue that has come up, and unfortunately what’s happened in the Eleventh and the Ninth Circuits is that they have taken that concept of simply making a determination of whether another statute is… preempts the Federal Arbitration Act, and they’ve used it to create essentially a floating analysis of effective vindication that’s untethered to the statutory conflict analysis.

David H. Souter:

Okay, how… how clear has it got to be before there is some kind of a tether?

Let’s assume you had a simpler case than this one in which the arbitration agreement provided… this is silly, but for the sake of a point, that no damages will be awarded by the arbitrator for the violation of any statutory claim, as distinct from a tort claim, common law tort claim, or a contract claim.

Would you say that in that case there was, in fact, a threshold question of arbitrability because that provision went so clearly to the validity of the agreement that it should be treated as a, could be properly treated as a threshold matter for a court?

William E. Grauer:

It would depend, Justice Souter.

I believe that there could be a situation where an agreement–

David H. Souter:

Well, how about my situation?

William E. Grauer:

–In… in… in your situation, the reason I say your situation would depend is that there are many contracts where that would be a perfectly legitimate understanding.

For example, I… I’ll sell you 10,000 widgets, $1 each, I haven’t checked them over, they may be no darned good, but do you want them for $1 each, and I don’t want to be sued for this, so I want liquidated damages of $1.

That type of commercial arrangement–

David H. Souter:

Yeah, but in that case you’re… well, and again, maybe… maybe this is where it gets theoretical.

In… in that case, in effect, you’re… you’re waiving any statutory claim at the beginning.

In… in the case I gave, maybe it’s the same point, I just said you waive damages.

I… I suppose you wouldn’t waive… on that theory you wouldn’t be waiving equitable remedies if there were any, so… so let’s just take my case.

You waive the damages… you don’t waive the claim.

You waive the damages.

You don’t waive the right to equitable remedy.

David H. Souter:

Is… is that… is the… is the… in effect the… the waiver of the right to damages in the arbitration agreement sufficient to raise a serious enough question about the enforceability of the arbitration agreement to qualify that question as a gateway question?

William E. Grauer:

–I believe the answer is no, with one exception.

In general, anything relating to remedies should be dealt with by the arbitrator, and we should assume that… that if there is something improper about that remedial limitation, that the arbitrator will… will do what he or she is supposed to do, follow the law, get it right.

David H. Souter:

Okay, but you’re saying, I think you’re saying, and… and correct me if I ‘m wrong, that… that no remedial question can ever rise to the level of a… a potential threat to the potential… to… to vindication of statutory rights.

Whatever that phrase may mean, as we have employed it, a mere question of… of waiver of remedies will never rise to that level and, hence, will never get to the threshold question status, is that correct?

William E. Grauer:

As a general premise, I believe that’s correct.

I think we could envision situations where a variety of factors, including that, are linked together such that the plaintiff might make a motion to revoke the arbitration agreement itself on the, on traditional contract grounds should there be a whole series of things that make a contract unconscionable or onerous, but that did not occur in this case.

In fact, the court found that it was not unconscionable or onerous.

It was negotiated between sophisticated parties, and so the court declined to do section 2 revocation of the contract for generally applicable contract grounds, but there could be a case where a remedial limitation, combined with other factors, could rise to that level, not… certainly not this case.

The problem–

David H. Souter:

And I take it you would say that if at least the… the details of the agreement that would raise the issue to that level are specifically pleaded in… in… in… in the request, in… in… in the action that takes it into court, that at least the… the… the breadth of the frustration doctrine would not stand in the way of… of a court’s adjudicating it?

William E. Grauer:

–Well, that’s correct.

If I understood you correctly, I… I… I believe in arbitration cases there’s frequently a motion by a plaintiff to revoke the arbitration agreement on grounds of unconscionability–

David H. Souter:

Yes.

William E. Grauer:

–and judges deal with those from time to time.

This is certainly not such a case.

David H. Souter:

But I think you’re simply saying they’ve got to be specific in telling us right at the outset what it is that makes it unconscionable.

They can’t just come up and say, oh well, there’s a potential for frustration here.

William E. Grauer:

Right, and… and it’s very important to note an additional distinction, and that is, the… the attack on unconscionability cannot be on the contract as a whole, because if it is, under Prima Paint that, too, should be decided by the arbitrator.

The only unconscionability, the only type of attack that could be made would be on the arbitration clause itself.

David H. Souter:

Uh-huh.

John Paul Stevens:

May I ask–

William H. Rehnquist:

–Under what law is unconscionability decided?

Is… is it State law?

William E. Grauer:

In this case, because there’s a Federal claim, and the case is in Federal court, the Court has said a number of times that there is a Federal substantive law of arbitrability, but the contract itself was entered between people governed by State law, and so the revocability question would be a decision about whether that contract either as a whole, or the arbitration clause itself, are revocable under the applicable State law subject to the overlay, so to speak, that’s created by the Federal Arbitration Act in not allowing States to have unconscionability laws that would–

William H. Rehnquist:

Vitiate–

William E. Grauer:

–vitiate an arbitration clause.

William H. Rehnquist:

–May I ask, I just want to… I may be missing what’s perfectly obvious, but if you have a contract in which the only remedy authorized to be provided is an illegal remedy for some reason that could not be taken away from the plaintiff, does the arbitrator… is that agreement immediately nonarbitrable, or do you arbitrate the issues and then saying that there’s no remedy?

William E. Grauer:

I don’t believe either of those would be the case.

I believe that if… if the… you would arbitrate the issue, and you would expect the arbitrator to follow the law.

John Paul Stevens:

Even if, on the face of the contract, a judge could say, the only remedy offered to a successful complainant is one that may not be submitted to arbitration?

William E. Grauer:

There’s only… I… I don’t agree with that.

John Paul Stevens:

The waiver of a statutory right of some kind.

William E. Grauer:

There would be one way that the plaintiff’s lawyer could raise that issue, which is not one of the… what occurred in this case, but I suppose you could argue that the entire arbitration agreement is illusory and unconscionable, but–

John Paul Stevens:

Then if that’s true, what if you have a case in which there are two remedies available, one of which is clearly impermissible as a matter of Federal law, the other of which is permissible, but there’s no severability clause in the contract?

What do you do there?

William E. Grauer:

–I believe in that case, as in the prior one, you should send the matter to arbitration, you should assume that the arbitrator will correctly apply the law, that if there is a provision in the contract that’s unlawful, that the arbitrator will disregard it.

Stephen G. Breyer:

I guess you’d have to… the arbitrator would have to decide whether implicit in the terms of the contract is a decision by the parties that would permit him to waive the thing.

I mean, Justice Stevens’ hypothetical will, I think… I’d like the answer, anyway.

If we assume in the contract it says, and the parties agree that this contract is exclusive in respect to remedy, and the arbitrator does not have the power to strike out some remedies and put in others, okay, so now they’ve done that, now I take it the answer to his first hypothetical is, you go to the judge, and the agreement’s no good.

Isn’t that right?

William E. Grauer:

No.

I don’t agree, if I understood you correctly, and the reason–

Stephen G. Breyer:

The… the contract has only one remedy.

The remedy is clearly illegal.

There is a sentence in the contract saying the arbitrator has no power to add a new remedy or to strike the old one.

Now we have it absolutely clear that this is an unlawful arbitration agreement, and the judge would say that without sending it to arbitration, wouldn’t he?

That’s the same question I asked before–

William E. Grauer:

–Right.

Stephen G. Breyer:

–and I thought your answer was, of course.

William E. Grauer:

Well–

Stephen G. Breyer:

Maybe I’m wrong.

That’s why I’m asking.

William E. Grauer:

–If… if there is a ground under section 2 to revoke the arbitration clause for generally applicable grounds, not because it’s an arbitration clause, then a party could make a motion of that nature and the court, of course, would have to address that motion, and… but… but I didn’t want to get away from the fact that I think is important, is that when you’re dealing with remedies, and when you’re dealing with arbitrators, we really need to assume that the arbitrator will follow the law.

And… and in this particular case, for example, the arbitration clause does contain a limitation on remedies, but that limitation on remedies could have been put elsewhere in the contract, and if it were somewhere else in the contract, or it might have been… the parties might not have agreed to arbitrate.

They might have agreed that we’ll litigate in Florida, but the Court will not have the power to award punitive damages.

Now, you would not say that the limitation on punitive damages prevents the parties from having to go to Florida, and you need to treat an arbitration clause, we think, the same, or the parties might have had the remedial limitation in this case, and no arbitration clause.

Now, what would a court do?

It would… the court would evaluate the validity of the remedial limitation and make a decision.

Well, an arbitrator is exactly the same.

William E. Grauer:

It’s simply selecting a different forum.

I see my light’s on.

Unless there’s an additional question, I would reserve my time for rebuttal.

William H. Rehnquist:

Very well, Mr. Grauer.

Mr. Whatley, we’ll hear from you.

Joe R. Whatley, Jr.:

Mr. Chief Justice, and may it please the Court:

We start with the principle that arbitrability is to be determined by the court, as this Court has said many times, including in AT&T and First Option, and that there is no… no presumption, or no liberal policy in favor of giving that issue of arbitrability to the arbitrator.

It’s exactly the opposite.

You go one step further, since this case involves an issue of public policy, and in both W. R. Grace, and later in Misco and in Eastern Associated Coal Corporation, this Court said that questions of public policy are for the court, not for the arbitrator.

William H. Rehnquist:

We also said that that kind of question that would affect an arbitration is fairly rare, didn’t we?

Joe R. Whatley, Jr.:

You did, Your Honor, and in fact I think this case shows that it… that it’s rare, and I think the various amicus briefs that have been submitted shows that an effort to put limits on remedies, which this Court has attacked many times, is rare.

I mean, other defendants didn’t do that here.

The Well Point didn’t–

William H. Rehnquist:

You say… you say this Court has attacked what many times?

Joe R. Whatley, Jr.:

–This Court… within the context of arbitration, Justice O’Connor’s question, this Court has never allowed the waiver of statutory remedies in the context of an arbitration, enforcing an arbitration provision.

If you go back to Mitsubishi and follow every case right through Waffle House, this Court over and over and over again has quoted the portions of Mitsubishi, and footnote 19 from Mitsubishi, saying that you’re only changing the forum when you’re arbitrating.

Ruth Bader Ginsburg:

Mr. Whatley, Mr. Grauer has conceded that there is no waiver here, that treble damages are available, so why are we engaging in this academic exercise?

Joe R. Whatley, Jr.:

Well, the concern I have with that, Your Honor, is if… if you read the question presented in his brief, that’s not what it says.

Stephen G. Breyer:

Well, he’s made the concession right now–

Joe R. Whatley, Jr.:

He has made the–

Stephen G. Breyer:

–and he has five arguments for saying, any good lawyer would, that these words that you read punitive damages, extracontractual damages, do not prevent the arbitrator from awarding treble damages, so he has one interpreting the thing, two, if the interpretation fails he concedes it, three, there’s nothing in the contract says he can’t concede it, and so why don’t we send this to the arbitrator to find out what the contract means before we decide that it must mean something that would bar its enforcement?

Joe R. Whatley, Jr.:

–Well, the problem with that… the problem with that is, doing it after the fact has some pretty severe policy implications.

Stephen G. Breyer:

But didn’t we, the Court hold precisely, do it after the fact, in Vimar?

Joe R. Whatley, Jr.:

Well–

Stephen G. Breyer:

It’s precisely the same circumstance.

Joe R. Whatley, Jr.:

–In that case, Your Honor, you were dealing with the international context, where you said, starting in Mitsubishi is a… is a special situation concerning, where you’ve got to be concerned with international law.

That’s number one.

Number two, especially when you use the United language that Justice O’Connor quoted, you couldn’t get much more clear than United was in its provision, no extracontractual damages, including–

Stephen G. Breyer:

This contract doesn’t cover a tort action.

Joe R. Whatley, Jr.:

–It doesn’t cover a tort action.

Stephen G. Breyer:

In other words, what they wanted to have is an arbitration between doctors and hospitals, and the single most likely, or a very, very likely kind of dispute they call tort disputes, aren’t even covered by the arbitration agreement, and it’s impossible for an arbitrator to come to a different conclusion.

Joe R. Whatley, Jr.:

That is… that is… that is our position, Your Honor.

Stephen G. Breyer:

I know that’s your position.

It’s just, as I said it with my tone of voice, I’m suggesting it sounds implausible.

Joe R. Whatley, Jr.:

Well–

Stephen G. Breyer:

So what I’d like is an argument for that position.

Joe R. Whatley, Jr.:

–Well, the argument for that position is, you start with the language, and you don’t only start with the language that says, no extracontractual damages and, in fact, the issue you get in arbitration, and… and… and you go to arbitration, and I know we assume arbitrators are going to follow the law, absolutely, the Court has said that many times, although many arbitrators are not lawyers, but I’ve handled many arbitrations, and–

Stephen G. Breyer:

Well, many judges who are lawyers end up not following the law.

[Laughter]

Joe R. Whatley, Jr.:

–Your Honor, you can say that, but I don’t think I can.

[Laughter]

And… and the arbitrators almost invariably say, you know, this is… this is what created me, the contract is my Bible, where I get my directions, and if the contract says very plainly, no extracontractual damages, even if later on it says, and follow the law, and if it says… says that you can’t vary or ignore the terms of this agreement, which this agreement says, that is a strong impediment against an arbitrator awarding appropriate relief where you’ve got a Federal statute that creates tort-like damages.

Sandra Day O’Connor:

Every one of these contracts says the arbitrator will follow the law, the arbitrator has no power to commit errors of law.

Mr. Grauer, I think, said that those provisions may be intention, but when they are, the one that controls is the one that says the arbitrator must follow the law.

Joe R. Whatley, Jr.:

Well, that’s good, and now that the issue has been specifically raised, and after the fact, after it’s raised they come in and waive it.

the concern we have is, what about the times when it’s not specifically raised?

What about the times when you go forward through arbitration and perhaps–

Ruth Bader Ginsburg:

That’s another case.

We’re deciding this case.

Joe R. Whatley, Jr.:

–Well, it’s not… it’s this language, though, Your Honor.

It’s this language.

William H. Rehnquist:

But you don’t litigate this language.

You’re litigating a particular case before us.

Joe R. Whatley, Jr.:

But… but Your Honor, they didn’t come in and waive that position until it got before Judge Moreno, and Judge Moreno was going to hold it illegal, going to hold this arbitration agreement unenforceable because of the overreaching they engaged in by limiting the remedies that could be awarded.

It was only then, having been caught, that they say, okay–

Ruth Bader Ginsburg:

Mr. Whatley, they were never before an arbitrator, were they?

Joe R. Whatley, Jr.:

–Well, they were never before an arbitrator, that’s true, Your Honor.

They were never before an arbitrator, but that’s when it was finally waived, after the issue was specifically presented, and the judge was not going to enforce it, and that’s when Judge Moreno said no, we’re not going to allow this after the fact waiver.

John Paul Stevens:

After the fact… when did he think it should have been waived in order to… to assist the petitioner here?

Joe R. Whatley, Jr.:

Well, in truth, I think he thought it should never… if they’re going to take–

John Paul Stevens:

Well then, if he thought it should never be, then what does after the fact mean?

Joe R. Whatley, Jr.:

–It means, after the issue was presented to the trial court.

John Paul Stevens:

Well, but that happens all the time.

An issue is presented to the trial court, and you say, well, on second thought I’m not going to do that.

Joe R. Whatley, Jr.:

Well, but the problem with that is, Your Honor, it means that that provision is still there.

It’s still addressed.

Stephen G. Breyer:

Well, that’s true if parties settle a case.

John Paul Stevens:

Yes, absolutely.

Joe R. Whatley, Jr.:

Well, if parties settle a case, that’s a very different question, because this is a prospective provision that applies out into the future, and that’s the difference.

The way… that’s the whole difference about our argument about waiver that’s presented to you.

Of course people waive things in settlements all the time, but they don’t waive things prospectively, and this Court hasn’t allowed the waiver of statutory rights prospectively.

That’s the big difference.

Ruth Bader Ginsburg:

The big question for arbitration is, was there a violation of RICO, and I think one of the questions from the bench suggested that the scope of remedy doesn’t rise to the same level as, is there a violation of the act, and if in this case the arbitrator should find that if there is no violation of RICO on the part of care organizations, then there would never be any issue of remedy.

Joe R. Whatley, Jr.:

Well, that–

Ruth Bader Ginsburg:

And, but you want to take that issue, which the parties did agree to arbitrate, and put that in the courts, because you say there’s something defective in the remedy provision of the arbitration.

Joe R. Whatley, Jr.:

–That’s true, but if… if… if a court or an arbitrator can’t grant the remedies that Congress has authorized for a violation, including for a criminal violation, if the court can’t grant that relief, then there is a serious public policy problem with putting the parties into that forum to make that decision.

John Paul Stevens:

And just what is that public policy problem?

Joe R. Whatley, Jr.:

The public policy problem is that… is that the arbitrator then cannot remedy it.

Well–

David H. Souter:

–Well, do you take the position that the arbitrator in a case like this could not even… could… let’s assume… let’s assume the arbitrator took the position that he couldn’t award treble damages.

Do you take the position that under this contract the arbitrator could not award simple compensatory damages?

Joe R. Whatley, Jr.:

Under the plain language of the United contract, yes, Your Honor, because it says no extracontractual damages.

John Paul Stevens:

And do you take the position that he couldn’t even determine liability?

Joe R. Whatley, Jr.:

No, Your Honor, I don’t take that–

Well, who–

David H. Souter:

–Then why isn’t this premature?

I mean, as Justice Ginsburg says, suppose he finds no violation?

That’s the end of it.

Joe R. Whatley, Jr.:

–It… it… it’s premature because it… it is a… it is… it is a wasted process if you can go through a proceeding–

David H. Souter:

You mean it’s not premature.

Joe R. Whatley, Jr.:

–To go through the arbitration process, when you know in advance that… that the arbitrator can’t fully remedy the violation–

William H. Rehnquist:

But maybe the arbitrator will run… reach a conclusion that is consistent with the contract, say simple contract damages, and then it is not a waste of time.

Joe R. Whatley, Jr.:

–But Your Honor, that’s exactly what Judge Moreno did.

David H. Souter:

Why doesn’t–

Joe R. Whatley, Jr.:

Judge Moreno said that the contract claim goes to the arbitrator.

John Paul Stevens:

–Well, so then you’re splitting the thing up.

Joe R. Whatley, Jr.:

But… but Your Honor, you split things up in Byrd.

John Paul Stevens:

Well–

Joe R. Whatley, Jr.:

You split things up in Volt.

And… and I mean, that is not… there are many cases where some cases go to arbitration and some cases–

John Paul Stevens:

–Well–

Joe R. Whatley, Jr.:

–And some claims stay in court.

John Paul Stevens:

–But what you’re saying is, one issue goes to arbitration, the other one doesn’t.

Joe R. Whatley, Jr.:

And then the parties decide, do they want to pursue that issue in arbitration.

John Paul Stevens:

That just really complicates the procedure.

Joe R. Whatley, Jr.:

Actually, it did not.

In this instance, it really simplified the situation, because here what you’re dealing with, and what the focus of the claims are on, is… is the automatic adjudication of claims the way they… the way they adjudicate claims of doctors through computerized processes that by computerization automatically down-code a bundle.

You’re dealing with claims that are $5, $10, $15, that frankly can’t be resolved through an arbitration process or any process on a claim by claim basis, but the judge said, you’ve got to go forward in arbitration on the breach of contract claims and, since those weren’t practical to be pursue in any forum, we made the decision, and the… and the doctors, the individual doctors made the decision not to pursue them.

Those are over.

It was resolved very efficiently in the district court on whether the claims should be arbitrated or not arbitrated, and that dispute ended, and… and so it was done very, very efficiently in this instance.

Stephen G. Breyer:

When you wrote that word, or whoever wrote it, the word extracontractual, no extracontractual damages, now, I guess it could mean one of two things.

It could mean what you think it means, which is, you can’t bring any tort cases, all you can bring are contract cases, you can’t bring any statutory cases in arbitration, or it might mean, if you happen to have a contract case, if that’s the nature of the case, you cannot give damages for mental suffering or other kinds of punitive damages in a contract case.

Now, if you were drafting this, and you wanted it to mean the first, rather than meaning the second, why didn’t you just write the words, there won’t be a tort case?

Joe R. Whatley, Jr.:

Well–

Stephen G. Breyer:

Why didn’t you just write the words, there won’t be a statutory case?

Joe R. Whatley, Jr.:

–Well–

Stephen G. Breyer:

Why did you run all around Robin Hood’s barn in order to… whatever they… my… Rob… whatever you say.

I mean, why did you get such a complicated way just to tell people, we don’t want tort cases in… or this arbitration?

Joe R. Whatley, Jr.:

–Your Honor, first of all, I didn’t write this.

Stephen G. Breyer:

Of course you didn’t.

[Laughter]

Stephen G. Breyer:

I’m sorry, I didn’t mean to suggest it’s your fault.

Joe R. Whatley, Jr.:

This is… this is… this is in the form contract that United presented to… to doctors and medical groups and had them sign under a section that says, resolution of disputes, that only refers to arbitration when you get down into the print.

It’s not even… it’s not even entitled arbitration, but… but… but I mean, could I have written it differently to say… of course I could.

But I mean… I mean, they wrote it, and… and… and it’s really our position that they wrote it to discourage doctors from being able to… to… to recover claims in arbitration, and to limit what doctors could recover, not only to send them to arbitration, but then also to place limits on what they could get once they got there, because they didn’t limit, they didn’t have a provision, like they seem to say in their briefs, we waive, each party waives punitive damages against the other, and then you would have to consider under State law, can you do that, depending on where you are.

Instead, they say–

David H. Souter:

That is not an objection, in its… in itself, that goes to the question presented here, the fact that you think it’s a one-sided contract.

I mean, there are lots of one-sided contracts that are enforced.

Joe R. Whatley, Jr.:

–Well, that’s true, but I think it has to be taken into the mix.

That… that’s absolutely right, there… there are one-sided contracts that are enforced, and… and lots of one-sided arbitration contracts that are enforced, but–

Sandra Day O’Connor:

I’m not clear on what you lose at the end of the day if you let the arbitrator decide whether there was a RICO violation, and if there is such a violation, then you reach the remedy issue, and if the arbitrator were somehow to take the position that treble damages were not available, I assume that could then be resolved in court, could it not?

I mean, what do you lose at the end of the day?

Joe R. Whatley, Jr.:

–Well, here’s… here’s the problem with that, especially if you read the… the Eleventh Circuit RICO decisions.

The issue of remedy–

Sandra Day O’Connor:

Uh-huh.

Joe R. Whatley, Jr.:

–and… and in cases like Sykes, and I apologize, this is going beyond what’s in the briefs, but I’m trying to answer your question.

Uh-huh.

Joe R. Whatley, Jr.:

And… and in cases like Sykes, the issue of damages, either to the individual plaintiffs, or the damages to the class–

Sandra Day O’Connor:

Uh-huh.

Joe R. Whatley, Jr.:

–are so wound up in the question of RICO violation that what you’re left with, then, is trying the case twice if you do it the way you suggest.

Now–

Ruth Bader Ginsburg:

I don’t understand that.

If the damages initially are compensatory, I mean, the difference between punitive damages and these treble damages is, you get a number that’s compensatory, and then you multiply it by three.

It’s not, you send it to the jury and the sky’s the limit, so I don’t understand your answer about it being bound up with anything… it’s… it’s an ordinary measure of compensatory damages that the judge, the arbitrator or the judge, whichever forum you’re in, triples.

Joe R. Whatley, Jr.:

–I’m sorry, Justice Ginsburg, I thought I was answering the question of… of what’s the problem with trying violation first, assuming the arbitrator couldn’t award damages, and then trying damages later.

Ruth Bader Ginsburg:

But I thought that you were answering that question, but you’re saying the reason you can’t try, was there a RICO violation first, is that the remedy is inextricably bound up with–

Joe R. Whatley, Jr.:

That’s right.

Ruth Bader Ginsburg:

–the answer to that question.

Joe R. Whatley, Jr.:

That’s right, so if the arbitrator couldn’t award damages in the first place, you would be trying damages in the first instance.

You would only get a determination of violation, and then you would go back somewhere else, presumably, and try the question of remedy, and you would retry the question of damages.

I don’t follow that.

Antonin Scalia:

No, but if the arbitrator can award simple damages–

Joe R. Whatley, Jr.:

If the arbitrator–

Antonin Scalia:

–one times one damages, then that objection doesn’t apply.

Joe R. Whatley, Jr.:

–Then that takes away that objection, but I didn’t understand that to be the question I was asked.

Antonin Scalia:

And that may… and that may be what the arbitrator decides.

Joe R. Whatley, Jr.:

Well, it… it… it could be what the arbitrator decides.

Under our reading of what United wrote out there, and under our reading of no punitive damages, after this Court has developed the concept of punitive damages in Gore, so… I mean, there’s almost a presumed trebling issue there, that if you get much below that, beyond that, there become constitutional questions.

With… with the development of that, then… then we don’t see there… we see severe problems, especially as that law developed, and especially as the tax, your… your… based on your tax decisions, saying treble damages are punitive damages.

Ruth Bader Ginsburg:

And we’ve also said that–

Anthony M. Kennedy:

–It seems to me that what you’re… you’re… you’re doing is, you’re saying that it’s necessary for us to declare the… the scope of the arbitration in court before the arbitration proceeds.

That’s what the argument amounts to–

Joe R. Whatley, Jr.:

No–

Anthony M. Kennedy:

–and I think that’s inconsistent with the whole idea of the efficiencies to be obtained by the arbitral process.

Joe R. Whatley, Jr.:

–What… what I’m saying is much more limited than that, Your Honor.

What I’m saying is that in instances where someone like United or Pacificare decides not only to insist on an arbitration agreement but also to place limits on what the remedies are that the arbitrator can award, and that’s what they did here, in those instances, the Court should look at what those limitations are on remedies and make a public policy determination if there’s a Federal statutory claim out there.

John Paul Stevens:

Well, then you’re opening up… you’re really expanding the gateway concept.

In other words, you’re no longer talking about, did the parties agree to submit this to arbitration.

You’re talking about remedial terms.

Joe R. Whatley, Jr.:

Well, Your Honor, remedy is different than procedure, and… and… and… and as I read Howsam… and obviously, I mean, you know, it’s a fresh opinion.

You all are all much closer to it than I am, but as I read Howsam, it draws the procedural, substantive distinction.

Remedies are not procedural issues, and remedies can have a direct impact on public policy questions, and so for that limited area–

John Paul Stevens:

Well, but of course, you can say procedural issues will have an impact on public policy issues, too.

Joe R. Whatley, Jr.:

–Well, you certainly can, and if they go far enough, and I think that’s what you were saying in Green Tree, had the record gone far enough in Green Tree, what the Court… the court said, there could be instances where the limitations that are placed on, procedurally on getting to arbitration go far enough that they void the arbitration clause–

William H. Rehnquist:

We–

Joe R. Whatley, Jr.:

–but the record there didn’t go far enough.

William H. Rehnquist:

–Well, and we didn’t… we did not express a view as to what the situation would be if the record had been different.

We simply said, conceivably it might.

Joe R. Whatley, Jr.:

That… that… that’s true, Your Honor, which I assume, and courts below I think are now, there are situations where records are being developed further to determine, so that the trial courts can make that determination, has the remedy, has the arbitration process been so impeded by those procedural issues that you can’t enforce it.

Stephen G. Breyer:

Could two parties agree in advance that if a RICO violation comes up they will only have double damages, nothing about arbitration, just in court?

Joe R. Whatley, Jr.:

No, Your Honor.

Stephen G. Breyer:

They cannot?

Joe R. Whatley, Jr.:

No.

Stephen G. Breyer:

Can… can you do it in an antitrust case?

Joe R. Whatley, Jr.:

No.

Stephen G. Breyer:

Can you ever do it?

Joe R. Whatley, Jr.:

In… in our judgment, Your Honor, you… you cannot do it.

Stephen G. Breyer:

Can two parties agree in a tort suit that… before there’s a tort committed, that if there is a tort, no damages greater than a million dollars in punitives will be collected?

Joe R. Whatley, Jr.:

It depends on the State law.

Stephen G. Breyer:

So why doesn’t it–

Joe R. Whatley, Jr.:

That’s a State law question.

Stephen G. Breyer:

–but under Federal law you cannot… it’s void against public policy to limit in any way any possible damages in a future lawsuit?

Joe R. Whatley, Jr.:

Your Honor, in Mc–

Stephen G. Breyer:

Is there… has that been decided?

I–

Joe R. Whatley, Jr.:

–In McMahon you said that… that parties cannot waive securities, future securities violations even if there was a deal so that you got a lower… a lower payment for the transaction.

In Barrentine you said, either parties or unions can’t respectively waive Fair Labor Standards Act violations in the future.

Ruth Bader Ginsburg:

–The question didn’t go to waiving the violations.

Joe R. Whatley, Jr.:

I–

Ruth Bader Ginsburg:

It went only to the remedy.

Joe R. Whatley, Jr.:

–It went to remedy, and what you’ve got, Your Honor, I think is, Congress has established what that remedy is, and I think it would be void as against public policy.

I mean–

David H. Souter:

But you then want us to adopt a specific gateway rule when any arbitration agreement limits a statutory remedy, and that statutory violation would be arbitrable, and as I understand it, your rule is, any limitation in an arbitration agreement of statutory remedy raises a question of public policy, a question of public policy is a gateway arbitrability question, and it always goes to the court first.

Is–

Joe R. Whatley, Jr.:

–Yes, sir.

David H. Souter:

–Is that a fair statement–

Joe R. Whatley, Jr.:

Yes, sir.

For that–

David H. Souter:

–your position?

Joe R. Whatley, Jr.:

–For that limited issue of, did the… did the limitation, is there a limitation on the remedy authorized by Congress.

David H. Souter:

And that’s, I guess you want to say for… leaving arbitration out of it, that sounds very far-reaching, because I would have thought the matter might have varied, depending upon the statute.

I mean, I would have thought Congress could sometimes pass a statute with remedies, that it would not be against public policy for two private persons to limit–

Joe R. Whatley, Jr.:

Your Honor, Congress–

Stephen G. Breyer:

–Was it always… in your view, always, no matter what the statute, two people cannot say in advance, we will, if there should… should a violation arise, we will agree that, in advance, that the limitation will not exceed $10 million… or the damages won’t exceed… put in some reasonable amount?

Joe R. Whatley, Jr.:

–I suppose in theory Congress could say, in the act, parties can waive this respectively.

Stephen G. Breyer:

It’s only waiving, putting a limitation on damages.

Joe R. Whatley, Jr.:

Congress… Congress has not done that, and yes, Your Honor, that is our position.

If Congress establishes a remedy for a violation, and I think this is discussed in much more detail in the Public Citizen amicus brief that’s submitted than it was in our briefs, because we were trying to address the specific–

Yeah, yeah, yeah.

Joe R. Whatley, Jr.:

–arbitration issues and limitations within arbitration, which is the issue before this Court.

John Paul Stevens:

Well, but that’s… I think Vimar cuts the other way, so the COGSA… COGSA was certainly a statute enacted by Congress.

Joe R. Whatley, Jr.:

And… and the Court said, it’s not clear here whether that’s going to be followed or not followed.

John Paul Stevens:

Yes.

Joe R. Whatley, Jr.:

I think you said, it is not clear to us whether that will be followed or not followed in this instance, and that’s–

John Paul Stevens:

If–

Joe R. Whatley, Jr.:

–That’s why you allowed it to proceed.

John Paul Stevens:

–If your view was correct, that whole issue should have gone to a judge beforehand.

Joe R. Whatley, Jr.:

Well, except that there’s no… I don’t read that.

There are two issues–

John Paul Stevens:

You don’t what?

Joe R. Whatley, Jr.:

–I don’t read that as saying specifically that that act would not be followed, number one, their contract.

Number two, there is the separate consideration there, as in Mitsubishi, of the concerns about international, of international relations, where you have said you’ve got to be especially hands off, and that issue is not involved here.

Stephen G. Breyer:

Well, but what’s involved, which is identical, is the kind of prudential consideration for courts, don’t decide a difficult issue unless you have to.

Now, in Vimar it just said, look, we may never have to decide this.

Send it to the arbitrator and see.

Now what you’ve suggested is to my mind a pretty tough issue.

Joe R. Whatley, Jr.:

Well–

Stephen G. Breyer:

And we may never have to decide it, or at least not soon.

Joe R. Whatley, Jr.:

–Well, you might not.

Stephen G. Breyer:

Yes.

Joe R. Whatley, Jr.:

You might not, but it’s not just, it’s a tough issue, send it to the arbitrator and let the arbitrator decide.

Stephen G. Breyer:

The arbitrator will interpret the contract to see if it really arises.

Joe R. Whatley, Jr.:

But Number 2, it’s also in an international setting, where we’ve got to be, be, you know, be concerned about that and grant all possible deference to that situation.

If there are not other questions–

Ruth Bader Ginsburg:

I have one question, and it’s about something that the petitioner represented in the petitioners’ brief at note 12, page 23.

The petitioner represented to us that you represented to this Court that if any issue is sent to arbitration you simply will give up the claim, that you will not arbitrate any issue in this case.

Do you still take that position, that… is this representation correct, that you have disclaimed any intention to arbitrate any claim sent to arbitration?

Joe R. Whatley, Jr.:

–Your Honor, that gets back to the problem that I was addressing before.

The claims here on a claim by claim basis are so small that you cannot take them to arbitration.

Ruth Bader Ginsburg:

Well, let’s take the RICO claim.

If you lose on where that goes first, if it goes to arbitration first, are you… are you saying that you will not… that you will abandon the case anyway?

Joe R. Whatley, Jr.:

Well, it’s not abandoning the case, Your Honor, because there is a separate conspiracy and aiding and abetting claim that is going forward that is not up before this Court.

Ruth Bader Ginsburg:

But I mean the–

Joe R. Whatley, Jr.:

And the claim here, if we have to… have to resolve those, even the RICO claims, even if you treble $5 to get $15, if we have to try those on a claim by claim basis, in terms of what the doctors’ damages are, it can’t be done, and we will not proceed.

Ruth Bader Ginsburg:

–But why would the trial be different in court versus arbitration on that?

Joe R. Whatley, Jr.:

Well, because… and… and… and I know you’re going to address this issue in Basil to some extent, but the issue in court, the issues have been certified in the court, so they’re proceeding as a class action, which is the only way that… that claims of this magnitude can be handled, and so that’s our problem.

If we could proceed in arbitration on a class-wide basis, sure we would do it, and… and doing that in the Federal system has limits thus far, but… but proceeding on a claim by claim basis, where the damages are $5, $10, $15, $50 for the bundling down claim–

Ruth Bader Ginsburg:

Have you gotten a certification of anything in the district court?

Did you–

Joe R. Whatley, Jr.:

–Yes, Your Honor.

Ruth Bader Ginsburg:

–You did?

Joe R. Whatley, Jr.:

Yes.

The trial court has certified the claims that… that… that are… that are… that… that… that… that were not referred to arbitration.

The… that currently is on appeal, on a 23(f) appeal to the Eleventh Circuit.

We’ve moving forward with discovery on those claims that are certified.

Ruth Bader Ginsburg:

How broad is it?

Is it Nationwide?

Joe R. Whatley, Jr.:

Yes, Your Honor, it’s Nationwide.

William H. Rehnquist:

Thank you, Mr. Whatley.

Joe R. Whatley, Jr.:

Thank you, Your Honors.

William H. Rehnquist:

Mr. Grauer, you have 3 minutes left.

William E. Grauer:

Mr. Whatley’s argument about $5 here and $10 there is flatly inconsistent with what the district judge found, and you can note at page A25 of our cert petition that the court found that these cases were negotiated by sophisticated groups of doctors, that the claims were not small, that in fact the doctors were enlarging an ongoing pattern… that’s about midway through page A25 of our cert petition, that that is an ongoing pattern of instances.

Mr. Whatley’s comment about the… the conspiracy claim has been certified and is going forward is exactly an example of the problem.

Conspiracy is simply a remedy that’s… that… a way of creating liability for an underlying cause of action, and the arbitration clauses in this case require the doctors to arbitrate all of their disputes with the managed care companies, and they’re trying to circumvent that on a mass basis both in this appeal and by trying to say that the conspiracy claims are not part of the arbitration clause, and we don’t think that’s appropriate, and we think when we talk about remedies in our cert petition, that would include methods of holding someone liable for a claim, and the Court ought to take a look at that in the record of the case.

But I would agree fundamentally with a point that I… I thought I heard Justice Souter making a moment ago, and that is that if Mr. Whatley’s premise that any remedial limitation becomes a gateway issue of arbitrability, we are throwing… we are overruling Howsam after only a few weeks, because the whole point of Howsam was, you look to whether the parties made an agreement to arbitrate, and you look to whether the dispute is in the scope of the agreement.

And here, at page A40 of our petition, the Court finds this is an exceptionally broad arbitration agreement.

It includes any and all controversies, and the Court found that.

That has never been appealed.

Every… all of the claims are within the scope of it, and it is complete speculation to suggest that that, that any of these claims are not within the scope of the arbitration agreement.

The… the… with re… a final point with reference to the intent of the parties.

The parties would intend an arbitrator to decide remedial limitations, and the reason why the parties would intend the arbitrator to decide that is because the parties have agreed to arbitrate.

They have a dispute in the scope.

They would never intend to go to court at all.

They would intend to go to arbitration and comply with their agreement, and the question of remedies would be the last thing that would come up in the event, on a speculative basis, that they prevail, and they ought not to be able to get away from that basic principle by labels, the label of punitive damages, the label of RICO, the label of conspiracy.

Those labels are being used to take away the rights of managed care companies on a wholesale, nationwide basis to have these types of disputes resolved by arbitrators, as the parties have agreed, and instead they’re trying to turn it into a nationwide class action.

William H. Rehnquist:

Thank you, Mr. Grauer.

The case is submitted.