Cardionet, Inc. v. Cigna Health Corp.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 13-2496
_____________

CARDIONET, INC.;
LIFEWATCH SERVICES, INC.,
Appellants
v.

CIGNA HEALTH CORPORATION

____________

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(No. 2:13 Civ. 00191)
District Judge: Honorable Eduardo C. Robreno
____________

Argued: January 22, 2014

Before: FUENTES, FISHER, Circuit Judges, and STARK,
District Judge.1

1
Honorable Leonard P. Stark, United States District Court
Judge for the District of Delaware, sitting by designation.
 (Filed: May 6, 2014)
____________

Mark H. Gallant, Esq. [ARGUED]
Raymond A. Kresge, Esq.
Aaron Krauss, Esq.
Robert A. Chu, Esq.
Cozen O’Connor
1900 Market Street
Philadelphia, PA 19103
Attorneys for Appellants

Paul M. Hummer, Esq. [ARGUED]
Saul Ewing LLP
1500 Market Street,
38th Floor, Centre Square West
Philadelphia, PA 19102
Attorney for Appellee

________________________

OPINION OF THE COURT
________________________

FUENTES, Circuit Judge:

CardioNet, Inc. and LifeWatch Services, Inc. are
providers of medical devices that allow physicians to monitor
cardiac arrhythmias in patients not confined to the hospital.
For several years, CIGNA Health Corporation provided
coverage for this service. Then, in 2012, CIGNA reversed
course and announced that it would no longer do so.

2
CardioNet and LifeWatch filed this action against CIGNA on
their own behalf and as the assignee of patients who used
their services. In response, CIGNA moved to compel
arbitration under the parties’ agreement. The District Court
agreed with CIGNA that CardioNet and LifeWatch’s claims
fell within the arbitration clause of the parties’ agreement and
therefore compelled arbitration. Because we conclude that
none of CardioNet and LifeWatch’s claims fall within the
arbitration clause, we vacate the District Court’s judgment
and remand for further proceedings.

I. 2

A.

2
CIGNA bases its motion to compel arbitration on language
in the parties’ contracts. Those contracts, though not
appended to the Complaint, are integral to, and referenced in,
the Complaint. Because the arbitration clause at issue
appears in a contract relied upon in the Complaint, we resolve
the motion to compel arbitration under a motion to dismiss
standard, Guidotti v. Legal Helpers Debt Resolution, L.L.C.,
716 F.3d 764, 773-75 (3d Cir. 2013), and accept as true the
factual allegations set forth in the Complaint, Bell v.
Cheswick Generating Station, 734 F.3d 188, 192 n.2 (3d Cir.
2013). We are also permitted to consider the substance of the
contracts that ostensibly compel arbitration. See In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997) (noting that “a document integral to or explicitly
relied upon in the complaint may be considered” at the
motion to dismiss stage (quotation marks and emphasis
omitted)).

3
 CardioNet, Inc. and LifeWatch Services, Inc.
(together, “the Providers”) supply outpatient cardiac
telemetry (“OCT”) services. OCT, an outpatient device, is
used by physicians, usually cardiologists, to monitor cardiac
arrhythmias. The device differs from conventional
technologies for detecting arrhythmias in that it transmits
electrocardiographic (“EKG”) data in real time to certified
technicians, who then forward the data to the ordering
physician. OCT is approved by the Food and Drug
Administration, and has been covered by Medicare and
commercial insurers for many years.

CIGNA Healthcare Corporation administers employer
sponsored health and welfare benefit plans across the country.
Like other health insurance companies, CIGNA maintains a
network of health care providers. Pursuant to individual
agreements between CIGNA and its in-network providers,
CIGNA pays the providers directly for the services rendered
to patients.

In 2007, CardioNet and LifeWatch joined CIGNA’s
provider network by entering into identical Administrative
Service Agreements with CIGNA (“the Agreement”). The
Agreement sets the rate at which CIGNA would reimburse
the Providers for the particular services rendered to CIGNA
patients. It also circumscribes the services for which
reimbursement is available. Specifically, the Providers’
services are reimbursable under the Agreement only if they
constitute “Covered Services.” App. at 65, 72. The
Agreement defines “Covered Services” as “those health care
services for which a Participant is entitled to receive coverage
under the terms and conditions of the Participant’s Benefit

4
Plan.” Id. at 64.3 According to the Agreement, “[n]o service
is a Covered Service unless it is Medically Necessary,” that is
it “satisfies the Medical Necessity requirements under the
applicable Benefit Plan.” Id.

B.

CIGNA first announced a policy of covering OCT in
2007. At the time, it determined that there was “sufficient
evidence in the published peer reviewed medical literature
supporting the use of home-based, real-time surveillance
systems.” App. at 35. CIGNA maintained and reaffirmed its
policy of covering OCT each year through 2011. But then, in
2012, it abruptly terminated its coverage of OCT; CIGNA
then issued a new policy statement, entitled 2012 Cardiac
Event Monitor Coverage Policy (“the 2012 Policy”),
announcing that it would no longer cover OCT “for any
indication because it is considered experimental,
investigational or unproven.” Id. at 25, 37. The 2012 Policy
acknowledged, however, that this new position would be
trumped by any conflicting language in the coverage policies
themselves.

Although CIGNA’s OCT policy had changed, its
medical knowledge had not: CIGNA relied on the same
medical literature it had previously relied upon in concluding
that OCT should be covered. Shortly after CIGNA’s
announcement, the Providers asked CIGNA to reconsider its
new position on OCT. According to the Complaint, CIGNA

3
The Agreement defines “Participant” as “any individual, or
eligible dependent of such individual, . . . who is eligible and
enrolled to receive Covered Services.” Id.

5
intimated to the Providers that its motive for reversing course
was financial, but refused to back away from the 2012 Policy.

Subsequently, CIGNA issued Medical Coverage
Policy Updates for Heath Care Professionals (“the Physician
Update”) to hundreds of thousands of its network physicians,
announcing that it would not cover OCT “for any indication
because it is considered [experimental, investigational, and
unproven].” App. 40-41. By letter, CardioNet objected to
CIGNA’s characterization of OCT as experimental,
investigational, and unproven. CardioNet’s letter also
observed that CIGNA’s unequivocal statement that CIGNA
would not cover OCT “for any indications” conflicted with its
acknowledgement in the 2012 Policy that CIGNA’s new
position could be trumped by the specific coverage policies
included in employee benefit plans. Id. CIGNA neither
responded to the letter nor amended the Physician Update.
The Providers allege that the Physician Update not only
prevented patients with CIGNA insurance from ordering
OCT, but also “has caused and continues to cause physicians
to refrain from ordering OCT for patients whose employer
plans . . . do cover OCT.” Id. at 41.

C.

The Providers filed this action in the Eastern District
of Pennsylvania, “on their own behalves and as assignees of
the rights and claims of patients.” App. at 24. The Complaint
contains seven counts. The Providers bring Counts I-IV as
the assignees of the claims of five CIGNA plan participants
(“the Participants”). The Participants all sought coverage for
OCT after the implementation of the 2012 Policy, and were
all denied coverage by CIGNA. After CIGNA denied

6
coverage, the Participants received OCT from the Providers,
and in exchange assigned to the Providers “all of [their] rights
(without limitation) under the Employee Retirement Income
Security Act of 1974 (ERISA) . . . along with any other rights
under federal or state law that [they] may have as related to
the reimbursement of coverage” for the uncovered treatment.
Id. at 284.

Counts I-IV, the so-called “derivative” counts,
challenge CIGNA’s decision to deny the Participants OCT
coverage; the Providers bring these claims standing in the
shoes of the Participants. Specifically, in Count I, the
Providers allege that CIGNA arbitrarily and capriciously
changed its OCT coverage policy, and seek to recover
benefits due under ERISA § 502(a)(1)(B), 29 U.S.C. §
1132(a)(1)(B). In Count II, the Providers seek an injunction,
pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3),
directing CIGNA to withdraw its current coverage policy for
OCT and rescind the Physician Update regarding OCT. In
Count III, the Providers allege that, by systematically denying
OCT coverage, CIGNA breached its duty to the Participants
to faithfully apply the terms of the governing ERISA plans;
they seek an injunction, pursuant to ERISA § 502(a)(3),
“requiring CIGNA to process claims for OCT benefits in all
instances based on the terms of the ERISA plans . . . and to
cease and desist from processing such ERISA claims based
on any conflicting terms . . . in the 2012 [] Policy.” App. 52.
To the extent that any of the assigned claims do not arise
from or are exempt from ERISA, Count IV asserts that
CIGNA breached its contractual obligation to the Participants
by failing to cover medically necessary services.

7
 CardioNet and LifeWatch bring the remaining three
counts on their own behalf. These so-called “direct” counts
primarily concern an alleged harm stemming from CIGNA’s
distribution of the Physician Update. In Count V, the
Providers allege that through the issuance of the Physician
Update, CIGNA tortiously interfered with the Providers’
current and prospective business relations with physicians
who have ordered, or may in the future order, OCT for their
patients. In Count VI, they allege that the Physician Update
constituted a misleading and deceptive commercial or
promotion, in violation of § 43(a)(1)(B) of the Lanham Act,
15 U.S.C. § 1125(a)(1)(B). Finally, Count VII alleges that
the Physician Update constituted trade libel. Through Counts
V-VII, the Providers seek damages, as well as the issuance of
corrective advertising to the physicians who received the
Physician Update.

Shortly after CardioNet and LifeWatch filed this
action, CIGNA moved to compel arbitration, or in the
alternative, to stay the action pending arbitration, under
Rule 12(b)(6) of the Federal Rules of Civil Procedure and the
Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 3-4.4 The
District Court agreed with CIGNA that all of the Providers’
claims, including those brought on behalf of the Participants,
fell within the purview of the Agreement’s arbitration clause.
It therefore compelled arbitration.

The District Court began by analyzing the relevant
language in the Agreement concerning arbitration. It

4
CIGNA also moved to dismiss the Providers’ claims on
other grounds. However, the District Court declined to reach
these alternative arguments.

8
concluded that the arbitration provision was broad, so that the
presumption in favor of arbitration applied with particular
force. CardioNet, Inc. v. Cigna Health Corp., 945 F. Supp.
2d 620, 625-26 (E.D. Pa. 2013). The Court then assessed the
arbitrability of the derivative and direct claims in turn. As to
the derivative claims, the District Court acknowledged that
the Agreement’s arbitration clause could not bind the
Participants, as “an arbitration clause applies only to the
parties to the agreement in which it is contained and those
with whom there is privity of contract.” Id. at 627.
Nonetheless, it concluded that the Providers could not
“pursue the Plan Participants’ claims [in court] through an
assignment from the Plan Participants to Plaintiffs.” Id. The
District Court reasoned that:

Plaintiffs have a preexisting duty under their
agreements with CIGNA to arbitrate disputes
that are substantively identical to the claims
they now seek to bring as assignees. All of
Plaintiffs’ claims rest on the basic argument that
OCT services should be covered services and
therefore should be paid for by CIGNA. This
argument strikes at the heart of Plaintiffs’
contracts with CIGNA, i.e., claims for payment
by Plaintiffs will be subject to arbitration.
Plaintiffs cannot nullify their agreements to
arbitrate these claims for payment by becoming
assignees of the Plan Participants’ claims.

Id. Accordingly, the District Court concluded that, while
“[o]f course, the Plan Participants are free to pursue their
claims independently, or via an assignment to another third
party, . . . [i]f Plaintiffs wish to challenge Defendant’s

9
classification of OCT services as [experimental, investigative,
and unproven], they must arbitrate their claims, as they had
agreed to do under the [Agreement].” Id.

The District Court next evaluated the direct claims.
These too, it determined, were barred by the Agreement’s
arbitration clause. The District Court explained that “the
foundation of Counts V through VII”—the Providers’
allegation that the Physician Update deterred physicians from
ordering OCT—“clearly falls within the scope of the
[Agreement’s] arbitration clauses. To the extent that
Plaintiffs disagree on whether OCT services should be
classified as [experimental, investigative, and unproven] or as
covered, this disagreement must be resolved under the terms
of the arbitration provision.” Id. at 628.

The Providers now appeal the compulsion of
arbitration of both the direct and the derivative claims. 5

II.

A.

In the vast majority of cases, the arbitrability of a
dispute is a question for judicial determination. See First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)

5
The District Court had subject matter jurisdiction pursuant
to 28 U.S.C. §§ 1331 and 1367(a). We have appellate
jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. §
16(a)(3). We exercise “plenary review over the District
Court’s order compelling arbitration.” Bouriez v. Carnegie
Mellon Univ., 359 F.3d 292, 294 (3d Cir. 2004).

10
(“Courts should not assume that the parties agreed to arbitrate
arbitrability unless there is ‘clea[r] and unmistakabl[e]’
evidence that they did so.” (quoting AT & T Techs., Inc. v.
Commc’ns Workers of Am., 475 U.S. 643, 649 (1986))
(alterations in original). Because neither party questions the
propriety of the District Court determining whether the
dispute is arbitrable, we assume, without further analysis, that
the Agreement leaves the question of arbitrability to judicial
determination. See Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 130 S. Ct. 2847, 2856 n.5 (2010).

Until a court determines whether arbitration should be
compelled, however, judicial review is limited to two
threshold questions: “(1) Did the parties seeking or resisting
arbitration enter into a valid arbitration agreement? (2) Does
the dispute between those parties fall with the language of the
arbitration agreement?” John Hancock Mut. Life Ins. Co. v.
Olick, 151 F.3d 132, 137 (3d Cir. 1998). Because neither
party contests the validity of the Agreement, we confine
ourselves to assessing whether the disputes at issue fall within
the scope of the Agreement’s arbitration clause.

The FAA, 9 U.S.C. §§ 1-13, establishes “a uniform
federal law over contracts which fall within its scope.”
Goodwin v. Elkins & Co., 730 F.2d 99, 108 (3d Cir. 1984).
This uniform federal law places “arbitration agreements on an
equal footing with other contracts,” and requires courts to
“enforce them according to their terms.” AT & T Mobility
LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011); see also
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 130 S.Ct.
2772, 2776 (2010) (“The FAA reflects the fundamental
principle that arbitration is a matter of contract.”); Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985) (“The

11
preeminent concern of Congress in passing the [FAA] was to
enforce private agreements into which parties had entered,
and that concern requires that we rigorously enforce
agreements to arbitrate . . . .”). Thus, where a written
agreement evidences an intent on the part of the contracting
parties to arbitrate the dispute in question, a court must
compel the parties to arbitrate that dispute. See Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
626 (1985).

But the fact that the parties have agreed to arbitrate
some disputes does not necessarily manifest an intent to
arbitrate every dispute that might arise between the parties,
since “[u]nder the FAA, ‘parties are generally free to
structure their arbitration agreements as they see fit.’” Green
Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 458 (2003)
(Rehnquist, J., dissenting) (quoting Volt Info. Scis., Inc. v. Bd.
of Trs. of the Leland Stanford Junior Univ., 489 U.S. 468, 479
(1989)). Accordingly, “a court may order arbitration of a
particular dispute only where the court is satisfied that the
parties agreed to arbitrate that dispute.” Granite Rock, 130 S.
Ct. at 2856 (emphasis in original). Ultimately, then, whether
a dispute falls within the scope of an arbitration clause
depends upon the relationship between (1) the breadth of the
arbitration clause, and (2) the nature of the given claim.

We must resolve “any doubts concerning the scope of
arbitrable issues . . . in favor of arbitration.” Moses H. Cone
Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25
(1983); see also Medtronic AVE, Inc. v. Advanced
Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001)
(noting that “federal policy favors arbitration”). However,
the Supreme Court has repeatedly warned against

12
“overread[ing its] precedent[]” concerning the presumption of
arbitrability. E.g. Granite Rock, 130 S. Ct. at 2857. The
presumption in favor of arbitration does not “take[] courts
outside [the] settled framework” of using principles of
contract interpretation to determine the scope of an arbitration
clause. Id. at 2859. Quite the contrary, the presumption
“derives its legitimacy from” the judicial supposition “that
arbitration of a particular dispute is what the parties intended
because their express agreement to arbitrate was validly
formed and (absent a provision clearly and validly
committing such issues to an arbitrator) is legally enforceable
and best construed to encompass the dispute.” Id. at 2859-60;
see also Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress
Int’l, Ltd., 1 F.3d 639, 641 (7th Cir. 1993). Indeed, while the
FAA “embodies a strong federal policy in favor of arbitration,
. . . the duty to arbitrate remains one assumed by contract.”
Sweet Dreams Unlimited, 1 F.3d at 641. Thus, the
presumption of arbitrability applies only where an arbitration
agreement is ambiguous about whether it covers the dispute at
hand. See Granite Rock, 130 S. Ct. at 2858-59. Otherwise,
the plain language of the contract controls.

In assessing whether a particular dispute falls within
the scope of an arbitration clause, we “focus [] on the factual
underpinnings of the claim rather than the legal theory alleged
in the complaint.” Medtronic AVE, Inc., 247 F.3d at 55
(quotation marks omitted). In so doing, we “prevent[] a
creative and artful pleader from drafting around an otherwise-
applicable arbitration clause.” Chelsea Family Pharmacy,
PLLC v. Medco Health Solutions, Inc., 567 F.3d 1191, 1198
(10th Cir. 2009).

13
 B.

We begin by “carefully analyz[ing] the contractual
language” in the arbitration clause at issue. Trap Rock Indus.,
Inc. v. Local 825, Int’l Union of Operating Eng’rs, 982 F.2d
884, 888 (3d Cir. 1992). The Agreement contains the
following two paragraphs concerning alternative dispute
resolution, and no other:6

6.3 Internal Dispute Resolution. Disputes that
might arise between the parties regarding the
performance or interpretation of the Agreement
must first be resolved through the applicable
internal dispute resolution process outlined in
the Administrative Guidelines. In the event the
dispute is not resolved through that process,
either party can request in writing that the
parties attempt in good faith to resolve the
dispute promptly by negotiation . . . . If the
matter is not resolved within 60 days of such a
request, either party may initiate arbitration by
providing written notice to the other. With
respect to a payment or termination dispute,
Provider must submit a request for arbitration
within 12 months . . . If arbitration is not
requested within that 12 month period,
CIGNA’s final decision under its internal
dispute resolution process will be binding on
Provider, and Provider shall not bill CIGNA,

6
The full text of Sections 6.3 and 6.4 is set forth in Appendix
“A” to this Opinion.

14
 Payor or the Participant for any payment denied
because of the failure to timely submit a request
for arbitration.

6.4 Arbitration. If the dispute is not resolved
through CIGNA’s internal dispute resolution
process, either party can initiate arbitration by
providing written notice to the other. If one of
the parties initiates arbitration, the proceeding
will be held in the jurisdiction of Provider’s
domicile. The parties will jointly appoint a
mutually acceptable arbitrator. . . . Arbitration
is the exclusive remedy for the resolutions of
disputes under this Agreement. The decision of
the arbitrator will be final, conclusive and
binding . . . .

App. 69 (emphasis added).

The above-quoted language makes clear that only
those disputes “regarding the performance or interpretation of
the Agreement” must be arbitrated. True, the phrase
“regarding the performance or interpretation of the
Agreement” appears in the internal dispute resolution
paragraph (Section 6.3), rather than the mandatory arbitration
paragraph (Section 6.4). But it is clear from the language of
the two sections that the parties intended them to be read
together, as two stages of mandatory dispute resolution.
Section 6.3 explains that where a dispute subject to that
provision cannot be resolved using the internal dispute
resolution process, “either party may initiate arbitration.”
Section 6.4 then outlines what form such an arbitration will
take. The first sentence of Section 6.4 requires arbitration not

15
of “all” or “any” disputes between the parties, but of only
“the dispute” that the parties failed to resolve through the
internal process outlined in Section 6.3. Hence, Section 6.4
mandates the arbitration of only those disputes subject to the
internal dispute resolution process outlined in Section 6.3.
And Section 6.3 only applies to those “[d]isputes that might
arise between the parties concerning the performance and
interpretation of the Agreement.” Accordingly, Section 6.4
must be limited to disputes concerning the Agreement’s
“performance or interpretation.”

The District Court similarly reached the conclusion
that Sections 6.3 and 6.4 call for “the arbitration of disputes
related to the ‘interpretation or performance’ of the
agreement.” CardioNet, 945 F. Supp. 2d at 626. The District
Court intimated, however, that the statement in the middle of
Section 6.4 that “[a]rbitration is the exclusive remedy for the
resolutions of disputes under this Agreement” broadens the
scope of mandatory arbitration. Id. We believe that the term
“disputes” as used here refers solely to those disputes
concerning the “performance or interpretation of the
Agreement.” As we have explained previously, courts “are
required to read contract language in a way that allows all the
language to be read together, reconciling conflicts in the
language without rendering any of it nugatory if possible.”
CTF Hotel Holding, Inc. v. Marriott Int’l, Inc., 381 F.3d 131,
137 (3d Cir. 2004). Were we to hold that “disputes” as used
here signifies a broader swath of disagreements, it would
render the first sentence of Section 6.4 devoid of meaning.
Moreover, as the Providers note, the words “dispute” and
“disputes” are used three other times in these two sections,
each time clearly referring to the narrower set of disputes
concerning the Agreement’s performance and interpretation.

16
Accordingly, we believe that the word “disputes,” as
employed here, must be circumscribed. See Restatement
(Second) of Contracts § 202 cmt. d (“Meaning is inevitably
dependent on context. A word changes meaning when it
becomes part of a sentence, the sentence when it becomes
part of a paragraph.”).

We therefore conclude that the arbitration clause in
this case is limited in scope to disputes “regarding the
performance or interpretation of the Agreement.” 7

7
The parties spend sizeable portions of their briefs disputing
whether this arbitration clause is properly categorized as
“broad” or “narrow.” The presumption of arbitrability is
“particularly applicable” where the arbitration clause is a
broad one. AT & T Techs., 475 U.S. at 650. However, as we
have noted, the presumption of arbitrability is relevant only
where the scope of the arbitration clause is ambiguous. See
Granite Rock, 130 S. Ct. at 2858-60. Here, the arbitration
provision is not ambiguous. In any event, as the arbitration
provision here “implicate[s only] interpretation or
performance of the contract per se,” it does not sweep beyond
the confines of the contract, and is therefore narrow in scope.
Sweet Dreams, 1 F.3d at 642; see also Mediterranean Enters.,
Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983)
(contrasting arbitration clauses that sweep broadly with those
“intended to cover a much narrower scope of disputes, i.e.,
only those relating to the interpretation and performance of
the contract itself”); cf. Battaglia v. McKendry, 233 F.3d 720,
724-25 (3d Cir. 2000) (an arbitration clause not “limited to
disputes involving the interpretation and performance of the
Settlement Agreement” is broad).

17
 C.

We next consider whether the claims at issue relate to
the performance or interpretation of the Agreement.

First, we examine whether the Providers’ direct claims
fall under the scope of the arbitration clause. CIGNA
contends that the direct claims relate to the performance and
interpretation of the Agreement, because they “unavoidably
implicate Cigna’s contractual obligation to treat as ‘Covered
Services’ any services that participants are entitled to receive
under their benefits plans.” Appellee’s Br. at 30. We
disagree.

Again, in determining whether these claims at issue
relate to the performance and interpretation of the Agreement,
we focus on the factual underpinnings of the claim rather than
the legal theories asserted in the Complaint. Although styled
as distinct statutory and common law causes of action, the
Providers’ trade libel, Lanham Act, and tortious interference
claims rest upon identical factual assertions: CIGNA made
false and misleading statements in the Physician Update
about the nature and quality of OCT; CIGNA conveyed the
false impression that OCT would never be covered under any
health plans CIGNA administers; and the Physician Update
injured them by decreasing the number of physicians willing
to use OCT services.8

8
We take no position here on CIGNA’s argument in the
District Court that the direct counts fail to state cognizable
claims. We simply assume for the time being that they do.

18
 Thus, the adjudication of CIGNA’s direct claims
depends on whether the Physician Update—a document
completely distinct from the Agreement—is deceptive and
misleading, and whether any deceptions therein caused a
cognizable injury to the Providers. The resolution of these
claims does not require construction of, or even reference to,
any provision in the Agreement. Cf. RCM Techs., Inc. v.
Brignik Tech., Inc., 137 F. Supp. 2d 550, 555 (D.N.J. 2001)
(fraudulent inducement claims were subject to arbitration
where “the claims in this case almost undoubtedly will
require interpretation of the parties’ agreement”). Quite the
contrary, whether CIGNA performed its obligations under the
Agreement has no bearing on whether it harmed the Providers
by providing physicians with misleading information on
OCT.

Indeed, it is not even clear to us that the Agreement is
a factual predicate to these claims. Theoretically, any OCT
manufacturer, whether it had entered into an in-network
Agreement with CIGNA or not, would be harmed by the
misleading statements ostensibly made by CIGNA about the
OCT technology and would have a basis for bringing claims
identical to the Providers’ claims here. In any event, factual
connections between the Agreement and the factual
underpinnings of the Complaint do not render these claims
arbitrable.9

9
Thus, the fact that the “[C]omplaint references the
Agreements extensively” is of no moment. See Appellee’s
Br. at 21. The Complaint does indeed discuss the Agreement,
but it hardly follows from this that the parties’ “performance
or interpretation” of the Agreement is implicated by the
Providers’ claims. Accord Ford v. NYLCare Health Plans of

19
 CIGNA brings to our attention an array of circuit and
district court cases where Lanham Act, tort, and trade
disparagement claims were held to be arbitrable, noting that
“[Lanham Act] and tort claims such as those pled in Counts
V-VII are frequently referred to arbitration when they arise
out of a contractual relationship.” Appellee’s Br. at 30. To
be sure, CIGNA is correct that Lanham Act and tort claims
often fall within the scope of different arbitration clauses.
But that bears little relevance to whether these Lanham Act
and tort claims fall within the scope of this arbitration clause.
Again, the arbitrability of a given dispute depends not on the
particular cause of action pleaded, but on the relationship of
the arbitration clause at issue to the facts underpinning a
plaintiff’s claims. Hence, the cases cited by CIGNA would
be relevant only if they (1) contained arbitration clauses of a
similar scope to the one here, and (2) concerned claims whose
underlying facts bore a similar relationship to the parties’
contracts.

As the Providers note, CIGNA’s cases are similar in
neither respect. First, those cases concern arbitration clauses
undisputedly broader than the clause at issue here. See, e.g.,
Sweet Dreams Unlimited, 1 F.3d at 642-43 (assessing the
scope of an arbitration clause that sweeps beyond the
“interpretation or performance of the contract per se” and
concluding that several of plaintiff’s counts fall within the
clause’s scope despite the fact that they “do not raise issues of

the Gulf Coast, Inc., 141 F.3d 243, 250-51 (5th Cir. 1998)
(rejecting the argument that a plaintiff’s decision to
“referenc[e] the agreement in the factual allegations of his
complaint” suggests that the action falls within the scope of
an arbitration clause broader than the clause at issue here).

20
contract interpretation or performance”). Second, the vast
majority of CIGNA’s cases involve disputes that, unlike the
direct claims here, clearly do relate to the performance and
interpretation of the parties’ contracts. See, e.g., Simula, Inc.
v. Autoliv, Inc., 175 F.3d 716, 724 (9th Cir. 1999)
(compelling arbitration of a Lanham Act claim where
“resolving Simula’s factual allegations against Autoliv
requires interpreting Autoliv’s performance and conduct
under the [parties’] Agreement”); see also Norcom Elecs.
Corp. v. CIM USA Inc., 104 F. Supp. 2d 198, 204 (S.D.N.Y.
2000). Thus, the cases cited by CIGNA are inapplicable.

In sum, the facts underpinning these direct claims do
not concern the performance or interpretation of the parties’
Agreement. Accordingly, the direct claims fall outside the
scope of the Agreement’s arbitration clause. The Providers
may pursue these claims in court.

D.

We next address the Providers’ derivative claims.
Again, these claims challenge CIGNA’s decision to deny
OCT to the Participants and more broadly the implementation
of the 2012 Policy, which barred future coverage of OCT.
Through the derivative claims, the Providers seek
reimbursement for the cost of the OCT services provided to
the five Participants, as well as injunctive relief requiring
CIGNA to reverse its policy of denying all claims for OCT.
We conclude that these claims are not subject to arbitration.10

10
In Pascack Valley Hosp., Inc. v. Local 464 A UFCW
Welfare Reimbursement Plan, 388 F.3d 393, 400 n.7 (3d Cir.
2004), we declined to take a position on whether a health care

21
 CIGNA concedes that, as non-signatories, the
Participants would not be bound by the arbitration clause
were they to bring the claims directly. CIGNA nonetheless
maintains that allowing the Providers to pursue the
Participants’ ERISA claims in court would “vitiate the
arbitration provision of the [Agreement],” Appellee’s Br. at
27, since at the core of the Providers’ dispute is simply a
claim for reimbursement under the Agreement. The District
Court reached the same conclusion, stating that “the
arbitration provision provides the exclusive remedy for
Plaintiffs’ claims regarding payment for covered services”
and that “Plaintiffs cannot nullify their agreements to arbitrate
these claims for payment by becoming assignees of the Plan
Participants’ claims.” CardioNet, 945 F. Supp. 2d at 627.

As we see it, this line of argument suffers from two
independent infirmities. First, we do not agree that the

provider has standing to assert claims assigned by a patient
under Section 502(a) of ERISA. We noted, however, that
“almost every circuit to have considered the issue” had
concluded that providers have standing, and we rejected the
argument that we had previously taken a contrary view. Id.
In the wake of Pascack Valley, the lower courts in this Circuit
have assumed that we, like our sister circuits, permit health
care providers to assert properly assigned ERISA claims on
behalf of their patients. See, e.g., N. Jersey Brain & Spine
Ctr. v. St. Peter’s Univ. Hosp., 2013 WL 5366400, at *3
(D.N.J. Sept. 25, 2013). Here, unlike in Pascack Valley, the
ability of providers to bring properly assigned ERISA claims
is squarely before us. We adopt the majority position that
health care providers may obtain standing to sue by
assignment from a plan participant.

22
allegations underlying these claims concern the interpretation
or performance of the Agreement. No provision in the
Agreement concerns the Providers’ underlying contention
here that CIGNA had a duty to cover OCT. Rather, the
Agreement specifically acknowledges that such
determinations shall be made pursuant to “the terms or
conditions of the applicable Benefit Plan” governed by
ERISA. App. at 64. Therefore, interpreting the Agreement is
not required, or even useful, in resolving the derivative
actions. For the same reason, the allegations underpinning
these claims cannot be recast as claims for failure to perform
on the Agreement.

True, as CIGNA notes, the Agreement provides that
CIGNA must reimburse the Providers for “Covered
Services,” and that “[n]o service is a Covered Service unless
it is Medically Necessary.” App. at 64. But this language
creates no contractual duty on CIGNA to provide specific
services to its patients, or to construe OCT as a “Covered
Service.” Irrespective of the reference to the terms “Covered
Services” and “Medically Necessary” in the Agreement, the
Providers lack the ability to bring a claim on their own behalf
against CIGNA for failing to provide adequate coverage to
the Participants: any such claim would be preempted by
ERISA, and therefore would belong, unless and until
assigned, to the participants and beneficiaries of the ERISA
plan. See Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266,
278 (3d Cir. 2001) (suits against insurance companies for
denial of benefits are preempted by ERISA, “even when the
claim is couched in terms of common law negligence and
breach of contract”); see also Lone Star OB/GYN Assocs. v.
Aetna Health Inc., 579 F.3d 525, 530-31 (5th Cir. 2009)
(explaining that “any determination of benefits under the

23
terms of a plan—i.e., what is ‘medically necessary’ or a
‘Covered Service’—[] fall[s] within ERISA” and would be
preempted). This is not an instance where a plaintiff
sidesteps an identical contractual right in an attempt to
sidestep an otherwise-applicable arbitration clause. Rather,
claims challenging the denial of service may be brought only
outside the confines of the Agreement, through ERISA claims
assigned by CIGNA patients. The claims clearly do not
concern the performance and interpretation of the Agreement.

As the Providers correctly note, CIGNA’s argument to
the contrary rests on a conflation of claims, such as this one,
seeking coverage under a benefit plan, and claims seeking
reimbursement for coverage provided. The distinction is key.
As we explained in Pascack Valley, a provider may bring a
contract action for an insurer’s failure to reimburse the
provider pursuant to the terms of the agreement, while a claim
seeking coverage of a service may only be brought under
ERISA. 388 F.3d at 403-04 (holding that a hospital had an
independent breach of contract action against the insurer
because “the dispute here is not over the right to payment,
which might be said to depend on the patients’ assignments to
the Providers, but the amount, or level, of payment, which
depends on the terms of the provider agreements” (emphasis
in original; quotation marks and alterations omitted)); see
also Blue Cross of Cal. v. Anesthesia Care Assocs. Med.
Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (providers’
claim not preempted by ERISA where they “arise from
[insurer’s] alleged breach of the provider agreements’
provisions regarding fee schedules, and the procedure for
setting them, not what charges are ‘covered’ under the []
Plan”). Here, the Providers’ claims do not concern the
amount of payment to which they are entitled under the

24
Agreement, but the right to payment under the terms of the
relevant plans. Thus, we reject the argument that claims
“substantively identical” to these would fall within the scope
of the arbitration clause. Cf. CardioNet, Inc., 945 F. Supp. 2d
at 627.

Second, even if these claims would fall within the
arbitration clause if brought directly, it does not follow that
these claims when brought derivatively on behalf of others
would necessarily fall within the arbitration clause. Stated
differently, we fail to see how bringing an assignee’s claim
derivatively nullifies an assignor’s promise to bring its own
direct claim through arbitration—at least where, as here, the
Agreement does not explicitly require the arbitration of
assigned claims.

It is a basic principle of assignment law that an
assignee’s rights derive from the assignor. That is, “an
assignee of a contract occupies the same legal position under
a contract as did the original contracting party, he or she can
acquire through the assignment no more and no fewer rights
than the assignor had, and cannot recover under the
assignment any more than the assignor could recover.” 6A
C.J.S. Assignments § 110 (footnotes omitted) (emphasis
added). Thus, assuming the validity of the Participants’
assignments to the Providers, CardioNet and LifeWatch now
stand in the shoes of the Participants, and have “standing to
assert whatever rights the assignor[s] possessed.” Misic v.
Bldg. Serv. Emp. Health & Welfare Trust, 789 F.2d 1374,
1378 n.4 (9th Cir. 1986) (emphasis added).

Here, it is undisputed that the Participants possess the
right to pursue their ERISA claims in court, rather than

25
through mandatory arbitration. That right does not dissipate
simply because the claim is brought by assignees who have
promised to arbitrate certain direct claims they might bring
against the defendant. Cf. Conn. State Dental Assoc. v.
Anthem Health Plans, Inc., 591 F.3d 1337, 1347 (11th Cir.
2009) (“[A] provider that has received an assignment of
benefits and has a[n independent] state law claim . . . holds
two separate claims.” (emphasis added)). Surely, where an
assignor has agreed to arbitrate its claims with a defendant,
the assignor cannot circumvent the arbitration clause by
assigning her claim to an assignee whose contract with the
defendant contains no such clause. Just as the burden of
arbitration must travel with a claim, so too, must the right to
litigate.

Moreover, we have concerns about the policy
implications of forcing a provider to arbitrate participants’
claims against an insurer. CIGNA proposes that compelling
arbitration of such claims when brought derivatively by a
provider does not diminish the substantive rights of
participants, since “they are free to pursue such claims
directly in federal court.” Appellee’s Br. at 29. But this
contention trivializes the important public policy interests
served by permitting providers to bring such claims on behalf
of plan participants. As the Fifth Circuit has observed, the
assignment of ERISA claims to providers serves the interests
of patients by increasing their access to care:

Many providers seek assignments of benefits to
avoid billing the beneficiary directly and
upsetting his finances and to reduce the risk of
non-payment. If their status as assignees does
not entitle them to federal standing against the

26
 plan, providers would either have to rely on the
beneficiary to maintain an ERISA suit, or they
would have to sue the beneficiary. Either
alternative, indirect and uncertain as they are,
would discourage providers from becoming
assignees and possibly from helping
beneficiaries who were unable to pay them “up-
front.” The providers are better situated and
financed to pursue an action for benefits owed
for their services.

Hermann Hosp. v. MEBA Med. & Benefit Plan, 845 F.2d
1286, 1289 n.13 (5th Cir. 1988), abrogated on other grounds
by Access Mediquip, L.C.C. v. UnitedHealthcare Ins. Co.,
698 F.3d 229 (5th Cir. 2012). Were we to prevent providers
that have promised to arbitrate their own claims against an
insurer from bringing patients’ claims in court, these
providers would be less likely to accept patients’ claims in
exchange for services. This, in turn, would make it more
difficult for patients to receive necessary services where their
insurers have denied coverage.

Accordingly, even if these claims would be arbitrable
if brought directly by the Providers, we would not force the
Providers to arbitrate the claims derivatively—at least, absent
a clear statement in that Agreement intimating that the parties
intended to arbitrate such claims.

III.

For the foregoing reasons, we hold that the Providers’
direct and derivative claims fall outside the scope of the
Agreement’s arbitration clause. Accordingly, we vacate the

27
order of the District Court and remand for further proceedings
in accordance with this Opinion.

28
 Appendix A

6.3 Internal Dispute Resolution. Disputes that might arise
between the parties regarding the performance or
interpretation of the Agreement must first be resolved
through the applicable internal dispute resolution process
outlined in the Administrative Guidelines. In the event the
dispute is not resolved through that process, either party can
request in writing that the parties attempt in good faith to
resolve the dispute promptly by negotiation between
designated representatives of the parties who have authority
to settle the dispute. If the matter is not resolved within 60
days of such a request, either party may initiate arbitration by
providing written notice to the other. With respect to a
payment or termination dispute, Provider must submit a
request for arbitration within 12 months of the date of the
letter communicating the final decision under CIGNA’s
internal dispute resolution process unless applicable law
specifically requires a longer time period to request
arbitration. If arbitration is not requested within that 12
month period, CIGNA’s final decision under its internal
dispute resolution process will be binding on Provider, and
Provider shall not bill CIGNA, Payor or the Participant for
any payment denied because of the failure to timely submit a
request for arbitration.

6.4 Arbitration. If the dispute is not resolved through CIGNA's
internal dispute resolution process, either party can initiate
arbitration by providing written notice to the other. If one of
the parties initiates arbitration, the proceeding will be held in
the jurisdiction of Provider’s domicile. The parties will
jointly appoint a mutually acceptable arbitrator. If the parties
are unable to agree upon such an arbitrator within 30 days
after one of the parties has notified the other of the desire to
submit a dispute for arbitration, then the parties will prepare
a Request for a Dispute Resolution List and submit it to the
American Health Lawyers Association Alternative Dispute

29
Resolution Service (AHLA ADR Service) along with the
appropriate administration fee. Under the Codes of Ethics
and Rules of Procedure developed by the AHLA ADR
Service, the parties will be sent a list of 10 arbitrators along
with a background and experience description, references and
fee schedule for each. The 10 will be chosen by the AHLA
ADR Service on the basis of their experience in the area of
the dispute, geographic location and other criteria as indicated
on the request form. The parties will review the
qualifications of the 10 suggested arbitrators and rank them
in order of preference from 1 to 9. Each party has the right to
strike 1 of the names from the list. The person with the
lowest total will be appointed to resolve the case. Each party
will assume its own costs, but the compensation and expenses
of the arbitrator and any administrative fees or costs will be
borne equally by the parties, subject to any limitation on fees
or costs required under the MDL No. 1334 Settlement
Agreement Among CIGNA HealthCare and Healthcare
Providers during the period of time such requirements are in
effect. Arbitration is the exclusive remedy for the resolution
of disputes under this Agreement. The decision of the
arbitrator will be final, conclusive and binding, and no action
at law or in equity may be instituted by CIGNA or Provider
other than to enforce the award of the arbitrator. The parties
intend this alternative dispute resolution procedure to be a
private undertaking and agree that an arbitration conducted
under this provision will not be consolidated with an
arbitration involving other physicians or third parties, and that
the arbitrator will be without power to conduct an arbitration
on a class basis. Judgment upon the award rendered by the
arbitrator may be entered in any court of competent
jurisdiction.

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