REVISED 5/29/98
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 97-20109
_____________________
KENNETH FORD, Dr.,
Plaintiff-Appellee,
versus
NYLCARE HEALTH PLANS OF THE
GULF COAST, INC., ET AL.,
Defendants,
NYLCARE HEALTH PLANS OF THE
GULF COAST INC.; NEW YORK
LIFE INSURANCE COMPANY,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court for the
Southern District of Texas, Houston
_________________________________________________________________
May 26, 1998
Before JOLLY, WIENER, and STEWART, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
In this appeal, we consider whether an agreement providing for
the arbitration of all disputes “arising out of or relating to” the
agreement may be invoked to compel arbitration of a cause of action
that does not depend as a legal matter on the agreement. The
appellants, NYLCare Health Plans of the Gulf Coast, Inc., and its
parent corporation, New York Life Insurance Co., are federally
qualified health maintenance organizations (“the HMOs”).1 Dr.
Kenneth Ford, like many other physician-specialists, entered into
an agreement with the HMOs to provide certain medical services to
beneficiaries covered under their health plans. Dissatisfied with
the way the HMOs were managing physicians and health care, and with
the accuracy of the HMOs’ advertising to consumers, Dr. Ford
brought this action against the HMOs for, inter alia, false
advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a).
Based on the arbitration clause in their agreement with Dr. Ford,
the HMOs petitioned the district court to compel arbitration of the
lawsuit under the Texas General Arbitration Act (“TGAA”) and the
Federal Arbitration Act (“FAA”). The district court denied the
petition with respect to the false advertising claim, and the HMOs
appeal. We conclude that, under the TGAA, the arbitration clause
in the agreement between Dr. Ford and the HMOs does not reach the
false advertising claim. We therefore affirm.
I
A
The facts of this case revolve around the agreement between
Dr. Ford and the HMOs. Dr. Ford, an orthopedic surgeon, signed the
agreement in December 1986. The agreement continues in effect from
year to year until either party elects to terminate it. Neither
1
NYLCare was formerly known as “Sanus Texas Health Care Plan,
Inc.” Throughout this opinion, NYLCare and New York Life will be
referred to collectively as “the HMOs.”
2
Dr. Ford nor the HMOs have done so, and it remains in effect to
this day. Dr. Ford entered into this agreement with the HMOs to
provide medical services to those beneficiaries covered by the
HMOs’ health plan who require the attention of a specialist. In
return for these services, the HMOs agreed to compensate Dr. Ford
according to a rate schedule maintained by the HMOs. The agreement
forbids Dr. Ford from seeking any payment for his services except
from the HMOs and, then, subject to their payment procedures and
schedules.
As a specialist under the agreement, Dr. Ford is permitted to
treat a beneficiary covered by the HMOs’ plan only upon proper
referral by another physician who has contracted with the HMOs to
provide primary care services to that beneficiary. When a
specialist like Dr. Ford believes a beneficiary requires the
attention of another specialist, referral is permissible only in
cases involving “medical emergencies,” a term defined by the
agreement as the “sudden and unexpected onset of a condition of
sufficient seriousness that failure to receive immediate medical or
surgical care would jeopardize the life or seriously impair the
health of the patient.” This requirement may be waived only upon
approval by HMO personnel. Even then, the referred specialist must
also have contracted with the HMOs and have the referral approved
by the primary care physician. “Incentive Withhold Pools” created
by the agreement provide that 25% of all payments to primary care
physicians and specialists are withheld to pay for medical cost
3
overruns. The agreement likewise establishes a “Referral Services
Pool,” from which referral costs are paid. Annual surpluses in the
referral pool are returned to physicians, while annual deficiencies
are compensated by drawing funds from the incentive withhold pools.
The agreement also contains an arbitration clause. It states,
in relevant part:
Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof shall be settled by
arbitration in accordance with the Texas General
Arbitration Act, and judgment upon the award rendered may
be enforced in any Court of the State of Texas having
jurisdiction thereof . . . . The arbitration proceeding
shall be conducted in Harris County, Texas. . . .
The front page of the agreement further states, underlined and in
bold type: “NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION UNDER
THE TEXAS GENERAL ARBITRATION ACT.” The scope of the arbitration
clause is the focus of this litigation.
B
On May 15, 1996, Dr. Ford brought this action against the
HMOs2 based generally on his dissatisfaction with the way the HMOs
administered physicians in their provision of health care services
and the way the HMOs advertised the benefits of their plan to
consumers. Dr. Ford claimed that these practices constituted false
2
In addition to NYLCare and New York Life, Dr. Ford also sued
Aetna Health Plans of Texas, Inc., Aetna Life and Casualty Co.,
MetraHealth Care Plan of Texas, Inc., MetraHealth Insurance Co.,
United Healthcare Corp., Travelers Insurance Co., and Metropolitan
Life Insurance Co. These defendants did not have arbitration
clauses in their agreements with Dr. Ford and are not parties to
this appeal.
4
advertising under section 1125(a) of the Lanham Act and violated
the Texas Insurance Code and Texas Deceptive Trade Practices Act
(“TDTPA”). In support of these claims, he alleged that the HMOs
make tall promises to consumers about the quality of health care
their plan is designed to provide, but that the plan actually
results in a reduced quality of care because of medical
decision-making by relatively unqualified individuals, burdensome
internal procedures, and incentive programs designed to minimize
medical costs at the expense of needed health care measures.
Rather than using premiums to provide effective health care as
promised, Dr. Ford alleged, the HMOs divert needed funds to fill
“overflowing corporate coffers” and to pay “bloated executive
salaries.” Dr. Ford also alleged claims for tortious interference
with business relations, negligence, negligent misrepresentation,
fraud, breach of good faith and fair dealing, unjust enrichment,
and a right to an accounting. Because the HMOs had entered
agreements similar to Dr. Ford’s with many other specialist-
physicians,3 Dr. Ford sought to bring these claims in a class
action on behalf of himself and all other specialist-physicians who
had contracted with the HMOs under a managed care plan.
The HMOs filed a motion to dismiss Dr. Ford’s claims and a
petition to compel arbitration. On January 3, 1997, the court
3
At oral argument, the HMOs confirmed that the agreements they
maintained with other physicians were “virtually identical” to Dr.
Ford’s.
5
dismissed the claims based on the Texas Insurance Code, the TDTPA,
negligence, negligent misrepresentation, unjust enrichment, and the
right to an accounting. The court then ordered arbitration of the
claim for breach of the duty of good faith and fair dealing. It
refused, however, to compel arbitration of the false advertising
and tortious interference claims. The court reasoned that these
claims would exist in the absence of the agreement between Dr. Ford
and the HMOs and, therefore, did not arise out of or relate to that
agreement. The court did not specify whether federal or state law
governed its analysis. The HMOs appeal this order. They contend
that although the district court basically employed the correct
test to determine whether those claims were arbitrable, it applied
the test incorrectly. Based on the allegations in Dr. Ford’s
complaint, the HMOs argue, the false advertising and tortious
interference claims are related to the agreement between the
parties and thus come within the scope of the arbitration clause.
Dr. Ford, in an effort to better limit the case to an easily
definable class action, has since agreed to send the tortious
interference claim to arbitration.4 Thus, we consider only the
arbitrability of the false advertising claim in this appeal.
“Resolving this dispute is a matter of contract interpretation and
4
Dr. Ford explained at oral argument that he limited the
action to physicians who had contracted with the HMOs solely to
assure an easily identifiable list of plaintiffs for whom the HMOs
could provide telephone numbers and addresses.
6
therefore is subject to de novo review by this court.” Neal v.
Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990).
II
Ordinarily, “the first task of a court asked to compel
arbitration of a dispute is to determine whether the parties agreed
to arbitrate that dispute.” Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). And,
ordinarily, “[t]he court is to make this determination by applying
the ‘federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the FAA.’” Id.
(citations omitted). The arbitration clause in the agreement
between Ford and the HMOs in this case, however, states that
controversies would be subject to arbitration in accordance with
the Texas General Arbitration Act. This provision is significant
evidence that the parties intended the scope of the clause to be
determined according to Texas law. Citing Atlantic Aviation, Inc.
v. EBM Group, Inc., 11 F.3d 1276 (5th Cir. 1994), the HMOs argue
that such references to Texas law are irrelevant because, even if
the parties had chosen Texas law to govern arbitration, the FAA
preempts any otherwise applicable state law if the agreement
involves commerce.5
A
5
The parties apparently agree that the agreement here involves
commerce.
7
We will consider as a threshold matter, therefore, whether
parties may designate state law to govern the scope of an
arbitration clause in an agreement otherwise covered by the FAA.
Clearly, they can. The federal policy underlying the FAA “is
simply to ensure the enforceability, according to their terms, of
private agreements to arbitrate.” Volt Information Sys., Inc. v.
Board of Trustees of the Leland Stanford Junior Univ., 489 U.S.
468, 476 (1989) (emphasis added). Indeed, the FAA was specifically
designed to place arbitration agreements “‘upon the same footing as
other contracts.’” Scherk v. Alberto-Culver Co., 417 U.S. 506,
510-11 (1974) (quoting H.R. Rep. No. 96, 68th Cong., 1st Sess., 1,
2 (1924)). And, “as with any other contract, the parties’
intentions control” the ultimate interpretation of an arbitration
clause. Mitsubishi, 473 U.S. at 626. For “[a]rbitration under the
[FAA] is a matter of consent, not coercion, and parties are
generally free to structure their arbitration agreements as they
see fit.” Volt, 489 U.S. at 479; see also Drake Bakeries, Inc. v.
Local 50, Am. Bakery & Confectionery Workers Int’l, AFL-CIO, 370
U.S. 254, 256 (1962) (“the issue of arbitrability is a question for
the courts and is to be determined by the contract entered into by
the parties”); Baravati v. Josephthal, Lyon & Ross, Inc., 28 F.3d
704, 709 (7th Cir. 1994) (Posner, C.J.) (“short of authorizing
trial by battle or ordeal or, more doubtfully, by a panel of three
monkeys, . . . parties are as free to specify idiosyncratic terms
8
of arbitration as they are to specify any other terms in their
contract”).
Applying these principles, the Supreme Court has recognized
that parties may use choice-of-law provisions to designate state
law to provide the procedural rules under which arbitration will be
conducted. See Volt, 489 U.S. at 476. In Volt, the parties had
entered into an agreement with a general choice-of-law clause
providing that the agreement be governed by the law of the place
where the subject of the agreement was located, which in that case
was California. See id. at 470. The issue was whether a
procedural rule in the California Arbitration Act, not available
under the FAA, should be interpreted to apply to the arbitration
agreement. The Court held that it should, stating:
Just as [the parties] may limit by contract the issues
which they will arbitrate, . . . so too may they specify
the rules under which that arbitration will be conducted.
Where, as here, the parties have agreed to abide by state
rules of arbitration, enforcing those rules according to
the terms of the agreement is fully consistent with the
goals of the FAA, even if the result is that arbitration
is stayed where the [FAA] would otherwise permit it to go
forward.
Id. at 479. As the above-quoted passage demonstrates, the Court
expressly analogized the parties’ freedom to limit contractually
the scope of the arbitration clause with their freedom to select
the rules under which arbitration will be conducted. It follows,
then, that if the parties may select the rules of arbitration
through the use of choice-of-law provisions, so too may they
specify the law governing interpretation of the scope of the
9
arbitration clause. Indeed, we think that to disregard the
parties’ choice of law in this respect “would be quite inimical to
the FAA’s primary purpose of ensuring that private agreements to
arbitrate are enforced according to their terms.” Id.6
Consequently, the issue we must address here is whether the
parties intended state law to govern the scope of their agreement
to arbitrate. If the agreement between Dr. Ford and the HMOs
demonstrates their intent to have the scope of the arbitration
clause determined by Texas law, we must respect that choice. Only
6
The HMOs’ reliance on our decision in Atlantic Aviation for
the proposition that substantive federal law governs the scope of
an arbitration clause whenever the agreement involves commerce is
misplaced. That case concerned whether parties could invoke a
choice-of-law provision to limit the jurisdiction of federal courts
to hear the appeal of an order vacating an arbitration award and
directing a rehearing. See 11 F.3d at 1279. The jurisdiction of
the federal courts is generally a matter for Congress to decide,
not private parties or state law. Recognizing this principle, the
court held that “the FAA governs judicial review of arbitration
proceedings notwithstanding any choice of law provision or state
law to the contrary.” Id. at 1280. The court did not, however,
extend its reasoning beyond the issue of jurisdiction. Compare,
e.g., Gateway Tech., Inc. v. MCI Telecomm. Corp., 64 F.3d 993,
996-97, 997 n.3 (5th Cir. 1995) (upholding parties’ contractual
choice to expanded review of the arbitration award by federal
courts). Thus, Atlantic Aviation does not control the case before
us. Although parties cannot use a choice-of-law provision to
divest federal courts of jurisdiction, this limitation does not
prevent parties from selecting state law to govern the scope of
their agreement to arbitrate. And although Atlantic Aviation
relied in part on earlier cases suggesting that the involvement of
commerce under the FAA was dispositive with respect to the law
governing arbitrability even where the parties contemplated state
law to apply, see, e.g., Mesa Operating Ltd. Partnership v.
Louisiana Interstate Gas Corp., 797 F.2d 238 (5th Cir. 1986), those
cases did not survive Volt, which, as discussed above, expressly
held otherwise. Atlantic Aviation, decided five years after Volt,
should not be read to revive these cases in any way.
10
by rigorously enforcing arbitration agreements according to their
terms, do we “give effect to the contractual rights and
expectations of the parties, without doing violence to the policies
behind the FAA.” Volt, 489 U.S. at 479.
B
We thus consider the agreement between Dr. Ford and the HMOs
to determine whether the parties contemplated Texas law to govern
the scope of the arbitration clause. We begin with the arbitration
clause itself, focusing on whether any choice-of-law provision in
the clause is relevant to the issue at hand. See Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 64 (1995) (holding that
choice-of-law provision in arbitration clause covered arbitration,
while general choice-of-law clause in contract covered the other
rights and duties of the parties). The clause in this case states
that arbitration of any claim must be settled “in accordance with
the Texas General Arbitration Act.” On its face, this provision
would seem to designate the TGAA as the law governing all aspects
of arbitration under the agreement. Although the HMOs proposed at
oral argument that the provision could be read to make the TGAA
applicable only to the procedural aspects of arbitration, they
conceded that nothing in the arbitration clause supported such
limited application. Nor does anything in the TGAA suggest that it
would not apply to issues such as the scope of the arbitration
clause. It consists of more than procedural rules. Like the FAA,
the TGAA contains substantive provisions governing both the
11
validity and enforceability of arbitration agreements. See, e.g.,
Tex. Civ. Prac. & Rem. § 171.001. The HMOs simply furnish no
reason to believe that Texas law and the TGAA apply to anything
less than every aspect of arbitration under their agreement with
Dr. Ford.
Nothing in the remainder of the arbitration clause or the body
of the agreement indicates otherwise. The arbitration clause goes
on to provide that any arbitration proceedings under the agreement
“shall be conducted in Harris County, Texas.” Judgment upon any
arbitration award may be enforced only in a “Court of the State of
Texas having jurisdiction thereof.” Disagreements over arbitrators
are to be resolved by “any judge of any Court of the State of
Texas, having jurisdiction and located in Harris County.” As for
the main body of the agreement, the first page announces in bold
type: “NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION UNDER THE
TEXAS GENERAL ARBITRATION ACT.” The rest of the agreement contains
only general references to other applicable laws. The first page
notes that physicians must provide or arrange for basic health care
services as required by what the agreement defines as the “HMO
Laws”: the Health Maintenance Organization Act of 1973, 42 U.S.C.
§§ 300e, et seq., and the Texas Health Maintenance Organization
Act, Tex. Ins. Code ch. 20A. Finally, in a general choice-of-law
clause of sorts, the agreement provides that it “shall be governed
in all respects by the HMO Laws and any other applicable laws or
regulations.”
12
Examining the agreement as a whole, we are persuaded that the
parties intended Texas law and the TGAA to govern the scope of the
arbitration clause. The clause itself specifies that arbitration
is to be governed by the TGAA. Other provisions in the arbitration
clause lean heavily in favor of applying Texas law to determine the
arbitrability of disputes under the agreement. Nothing else in the
agreement suggests that the parties intended federal law or the FAA
to apply. Indeed, the only provision in the entire agreement
possibly making a law applicable to arbitration other than Texas
law can, at best, be characterized as an extremely general
choice-of-law clause. And it, in relevant part, simply makes the
unremarkable observation that the agreement generally is governed
by all applicable laws or regulations.
Finally, to the extent that the general choice-of-law clause
could conceivably be read to create an ambiguity, we construe
ambiguous contract language against the party who drafted it. See
Mastrobuono, 514 U.S. at 62 (applying the common law rule to
interpretation of arbitration clauses). If the HMOs drafted an
ambiguous document, they cannot now claim the benefit of the doubt.
“The reason for this rule is to protect the party who did not
choose the language from an unintended or unfair result.” Id. at
63. As in Mastrobuono, “[t]hat rationale is well-suited to the
facts of this case.” Id. Thus, we hold that Texas law and the
TGAA govern the scope of the arbitration clause in this case.
III
13
Having determined that the arbitrability of Dr. Ford’s false
advertising claim is governed by Texas law and the TGAA, we turn
now to interpret the scope of the arbitration clause under Texas
law. Texas courts favor arbitration. Monday v. Cox, 881 S.W.2d
381, 384 (Tex. App. 1994). Whether a claim falls within the scope
of an arbitration agreement under Texas law depends on the factual
allegations of the complaint instead of the legal causes of action
asserted. See X.L. Ins. Co., Inc. v. Hartford Accident & Indem.
Co., 918 S.W.2d 687, 689 (Tex. App. 1996, writ requested). A tort
claim, like Dr. Ford’s false advertising claim, see Chevron Chem.
Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 700-01 (5th
Cir. Unit A Oct. 1981) (false advertising claims under Lanham Act
are based on the common law tort), is arbitrable if it is “so
interwoven with the contract that it could not stand alone, but is
not arbitrable if it is completely independent of the contract and
could be maintained without reference to a contract.” X.L.
Insurance Co., 918 S.W.2d at 689; accord Valero Energy Corp. v.
Wagner & Brown, 777 S.W.2d 564, 566 (Tex. App. 1989, writ denied).
A
The HMOs contend that the allegations in the complaint
supporting Dr. Ford’s false advertising claim are interwoven with
the agreement sufficiently to make the claim arbitrable, even under
Texas law.7 In particular, the HMOs cite Dr. Ford’s allegations
7
We agree with the HMOs that there is no perceptible
difference between the federal and Texas standards in this respect.
14
that the HMOs promise consumers “cost effective and high quality
health care” but instead provide a “labyrinthine system that
ultimately denies effective health care” by constructing elaborate
payment systems designed to discourage physicians from providing
necessary care and by rejecting physician-recommended procedures.
The HMOs further cite Dr. Ford’s allegations of a reduced quality
of care resulting from the referral systems and financial incentive
pools established in the agreement. The HMOs argue that although
Dr. Ford certainly could have stated a false advertising claim
without referencing the agreement in the factual allegations of his
complaint, he did not. Thus, they conclude, his false advertising
claim cannot exist without the agreement.
The HMOs’ argument, we think, fundamentally misconceives the
test for whether a tort claim is sufficiently related to the
agreement to be arbitrable. To be sure, the test focuses on the
factual allegations in the complaint instead of the legal labels
attached to the causes of action. See X.L. Insurance Co., 918
S.W.2d at 689. It does so, however, not to identify whether the
facts in support of the action will implicate the agreement as an
item of evidence, but to uncover whether an action formally labeled
Whether described as “touch[ing] matters covered by” the agreement,
see Mitsubishi, 473 U.S. at 624 n.13, or “interwoven with” the
agreement, see X.L. Insurance Co., 918 S.W.2d at 689, a tort claim
is “related to” the agreement only if reference to the agreement is
required to maintain the action. This is true notwithstanding the
fact that the tort claim may implicate the agreement as a factual
matter.
15
a tort is in essence a breach of contract claim or based on a
breach of contract. See, e.g., Valero Energy Corp., 777 S.W.2d at
566 (“[The plaintiff] here is asserting a tort claim that is
directly related to its rights under the contract. It could have
just as easily alleged a breach of contract action under the fact
situation presented.”). Because a breach of duty owed under a
contract may involve tortious conduct, a dispute arising out of a
contractual relationship may give rise to both breach of contract
and tort claims at the same time. See id. Basing the
arbitrability of an action merely on the legal label attached to it
would allow artful pleading to dodge arbitration of a dispute
otherwise “arising out of or relating to” (or legally dependent on)
the underlying contract. To avoid this contrivance, courts look at
the facts giving rise to the action and to whether the action
“could be maintained without reference to the contract,” id.
(emphasis added), not, as the HMOs contend, to whether the
complaint happens to reference the contract.
A couple of Texas cases directly illustrate the point. For
example, in Fridl v. Cook, 908 S.W.2d 507 (Tex. App. 1995, writ
dismissed w.o.j.), the court considered the arbitrability of
various tort claims under an arbitration clause essentially
mirroring the one in Dr. Ford’s agreement. The plaintiff alleged
claims based on fraud and tortious interference with contract.
Because the complaint referenced the contract between the plaintiff
and defendants, the defendants argued that the claims were
16
arbitrable because they “related to” the contract. The court
rejected the argument. With respect to the fraud claim, the court
stated:
We do not see that this is a claim “arising out of
or relating to” the contract. [The defendants] may have
honored their contractual obligations in every respect,
and yet be liable for fraudulently inducing [the
plaintiff] to obtain business outside the contract so as
to avoid full payment of commissions. We believe this
claim is distinguishable from the fraud claim which this
Court found subject to arbitration in Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Wilson, 805 S.W.2d 38, 40
(Tex. App.--El Paso 1991, no writ). There, Merrill Lynch
could not be liable for fraud unless it had breached its
obligations under the brokerage contract with Wilson, its
client. Here, the fraud claim may be pursued even if no
breach of the [] contract occurred. . . .
Id. at 513. The court also applied this same analysis in holding
that the tortious interference claim did not fall within the scope
of the arbitration clause. Examining the legal elements of a
tortious interference claim, the court concluded that the existence
of the contract between the plaintiff and defendants was
unnecessary to establish the claim. See id. The fact that the
complaint specifically referred to, and related as a factual matter
to, the contract containing the arbitration clause was irrelevant.
The tort action did not depend, as a legal matter, on the contract
and, therefore, was not “related to” the contract within the
meaning of the arbitration clause.
Similarly, in Heartshire Braeswood Plaza Ltd. Partnership v.
Bill Kelly Co., 849 S.W.2d 380 (Tex. App. 1993, writ denied), the
court refused to compel arbitration of a tort claim that was
17
legally independent of the contract containing the arbitration
agreement. Again, the relevant arbitration clause provided for
arbitration of any dispute “arising out of or relating to” the
contract between the parties. See id. at 383. The plaintiff
alleged that it had entered the contract with the defendant--
involving a “Gardens” project--only because it had been promised
another project--involving the “Landing.” See id. at 391. The
plaintiff advanced several tort claims against the defendant in
connection with the Landing project. Holding that these claims
were not arbitrable, the court observed that the plaintiff “need
not even refer to the contracts involving the Gardens in order to
maintain the claims regarding the Landing.” Id. Thus, Heartshire
demonstrates that the test for whether a tort claim “relates to” a
contract depends on whether the claim could be maintained without
reference to the contract, not simply whether the complaint
references the contract.
B
Applying this test to Dr. Ford’s false advertising claim, we
conclude that it does not arise out of or relate to his agreement
with the HMOs. The basic elements Dr. Ford must allege to sustain
a false advertising claim are: (1) that the HMOs made a false or
misleading statement as to their services; (2) that there is actual
deception or a tendency to deceive a substantial portion of the
intended audience; (3) that the deception is material in that it is
likely to influence purchasing decisions; (4) that the advertised
18
services involve interstate commerce; and (5) that there is a
likelihood of injury to Dr. Ford. See Seven-Up Co. v. Coca-Cola
Co., 86 F.3d 1379, 1383 n.3 (5th Cir. 1996).8 None of these
elements depends, as a legal matter, on the agreement between Dr.
Ford and the HMOs.
As the district court correctly determined, Dr. Ford could
maintain this action without reference to the agreement. The
action is based on the manner in which the HMOs advertised their
services to consumers. The competitive injuries alleged by Dr.
Ford come in the form of patients and revenue lost as a result of
consumers being misled into participating in the HMOs’ health plan
instead of going directly to the doctor of their choice and seeking
reimbursement through the traditional health insurance route.9 Dr.
Ford clearly would suffer the same injuries regardless of the
agreement or a breach thereof. Although the policies, practices,
and procedures implemented by the HMOs, as they appear in the terms
of the agreement, would undoubtedly be relevant evidence in support
8
Section 43(a) of the Lanham Act provides, in relevant part:
Any person who . . . in commercial advertising or
promotion, misrepresents the nature, characteristics,
qualities, or geographic origin of his or her or another
person’s goods, services, or commercial activities, shall
be liable in a civil action by any person who believes
that he or she is likely to be damaged by such act.
15 U.S.C. § 1125(a).
9
Dr. Ford, like the other doctors providing services under the
HMOs’ plan, maintains a private practice outside his relationship
with the HMOs.
19
of Dr. Ford’s claims (e.g., to show that the HMOs use procedures
resulting in care different from that advertised), this evidence
could likewise be established with witness testimony and documents,
which exist independent of the agreement. In other words, the fact
that an agreement exists between Dr. Ford and the HMOs is legally
irrelevant and indeed can be treated as nonexistent as far as his
false advertising claim is concerned. In fact, the agreement will
likely play, even as a purely evidentiary matter, a very minor role
in the ultimate litigation of Dr. Ford’s false advertising claim.
Thus, we hold that Dr. Ford’s false advertising claim does not
arise out of or relate to his agreement with the HMOs and,
therefore, is not subject to the agreement’s arbitration clause.
IV
For the foregoing reasons, the judgment of the district court
is
A F F I R M E D.
20