Caremark, LLC v. Chickasaw Nation ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CAREMARK, LLC; CAREMARK PHC, No. 21-16209
LLC; CAREMARKPCS HEALTH LLC;
CAREMARK RX, LLC; AETNA, INC.; D.C. No.
AETNA HEALTH, INC., 2:21-cv-00574-
Petitioners-Appellees, SPL
v.
OPINION
CHICKASAW NATION; CHICKASAW
NATION DEPARTMENT OF HEALTH;
ARDMORE HEALTH CLINIC;
CHICKASAW NATION MEDICAL
CENTER; PURCELL HEALTH CLINIC;
TISHOMINGO HEALTH CLINIC;
CHICKASAW NATION ONLINE
PHARMACY REFILL CENTER,
Respondents-Appellants.
Appeal from the United States District Court
for the District of Arizona
Steven Paul Logan, District Judge, Presiding
Argued and Submitted January 11, 2022
Pasadena, California
2 CAREMARK V. CHICKASAW NATION
Before: J. Clifford Wallace, Danny J. Boggs, * and
Michelle T. Friedland, Circuit Judges.
Filed August 9, 2022
Opinion by Judge Friedland
SUMMARY **
Arbitration
The panel affirmed the district court’s order granting the
petition of Caremark, LLC, and Caremark affiliates to
compel arbitration of a dispute with the Chickasaw Nation
and five pharmacies that the Nation owns and operates.
The Chickasaw Nation, a sovereign and federally
recognized Indian tribe, operates its own healthcare system,
which includes the five pharmacies. Under federal law,
members of federally recognized Native nations are eligible
to receive healthcare services at the nations’ facilities at no
charge, and a nation may recoup the cost of services that it
provides to a tribal member from that member’s health-
insurance plan. Caremark is the pharmacy benefit manager
for health-insurance plans that cover many tribal members
served by the Chickasaw Nation’s pharmacies. The Nation
signed agreements with Caremark, enrolling its pharmacies
*
The Honorable Danny J. Boggs, United States Circuit Judge for
the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
CAREMARK V. CHICKASAW NATION 3
in Caremark’s networks to facilitate reimbursement for the
costs of providing pharmacy services to tribal members.
Each of these agreements incorporated by reference a
Provider Agreement and a Provider Manual. The Provider
Manual included an arbitration provision with a delegation
clause requiring the arbitrator, rather than the courts, to
resolve threshold issues about the scope and enforceability
of the arbitration provision.
The Nation sued Caremark in the United States District
Court for the Eastern District of Oklahoma, claiming
violations of 25 U.S.C. § 1621e, a provision of the Indian
Health Care Improvement Act referred to as the “Recovery
Act.” The Nation alleged that Caremark improperly denied
claims for reimbursement for covered medications that its
pharmacies provided to tribal members enrolled in
Caremark-managed health-insurance plans. Caremark filed
a petition to compel arbitration of the Nation’s Recovery Act
claims. It filed that petition in the United States District
Court for the District of Arizona, the forum that the Provider
Manual designated for arbitration. The district court granted
the petition.
The Nation argued that its Recovery Act claims were not
arbitrable for two reasons. First, it argued that it was not
bound by the arbitration provision in Caremark’s Provider
Manual because it never clearly and unequivocally waived
its tribal sovereign immunity. Second, it argued that the
Recovery Act itself precluded the enforcement of any
agreement to arbitrate. Rather than addressing these
arguments, the district court sent the threshold arbitrability
question to the arbitrator in light of the delegation clause in
the Provider Manual.
4 CAREMARK V. CHICKASAW NATION
The panel applied the following principles from
Supreme Court case law. First, a court must resolve any
challenge that an agreement to arbitrate was never formed,
even in the presence of a delegation clause. Next, a court
must also resolve any challenge directed specifically to the
enforceability of the delegation clause before compelling
arbitration of any remaining gateway issues of arbitrability.
Finally, if the parties did form an agreement to arbitrate
containing an enforceable delegation clause, all arguments
going to the scope or enforceability of the arbitration
provision are for the arbitrator to decide in the first instance.
The panel rejected the Nation’s argument that it did not
actually form contracts with Caremark that included
arbitration provisions with delegation clauses. The Nation
argued that agreeing to arbitration would have waived its
tribal immunity, and because the Nation did not take the
clear and unequivocal steps necessary to waive immunity, it
could not have agreed to the arbitration provisions. The
panel concluded that the premise of the Nation’s argument—
that an arbitration agreement always and necessarily waives
tribal sovereign immunity—was incorrect. Rather, the
arbitration agreement simply designated a forum for
resolving disputes for which immunity was waived.
In the alternative, the Nation contended that arbitration
of its claims against Caremark was precluded by the
Recovery Act, which states that “no provision of any
contract . . . shall prevent or hinder the right of recovery of
. . . an Indian tribe[] or organization.” The panel concluded
that this contention challenged the enforceability of the
arbitration provisions as a whole, rather than impugning the
validity of the delegation clause specifically, and therefore
was for the arbitrator to decide.
CAREMARK V. CHICKASAW NATION 5
COUNSEL
Jonathan Massey (argued) and Matthew M. Collette, Massey
& Gail LLP, Washington, D.C.; Michael Burrage, Patricia
A. Sawyer, and Reggie N. Whitten, Whitten Burrage,
Oklahoma City, Oklahoma; Michael B. Angelovich,
Chad E. Ihrig, Bradley W. Beskin, and Nicholas W.
Shodrok, Nix Patterson LLP, Austin, Texas; for
Respondents-Appellants.
Sarah M. Harris (argued), Kimberly Broecker, and Helen E.
White, Williams & Connolly LLP, Washington, D.C.; Jon T.
Neumann, Greenberg Traurig LLP, Phoenix, Arizona; Peter
J. Kocoras, Thompson Hine LLP, Chicago, Illinois; Brian
Steinwascher, Thompson Hine LLP, New York, New York;
for Petitioners-Appellees.
John M. Masslon II and Cory L. Andrews, Washington
Legal Foundation, Washington, D.C., for Amicus Curiae
Washington Legal Foundation.
Mark Emery, Jonathan S. Franklin, and Peter B. Siegal,
Norton Rose Fulbright US LLP, Washington, D.C.; Tara S.
Morrissey and Jennifer B. Dickey, U.S. Chamber Litigation
Center, Washington, D.C.; for Amicus Curiae Chamber of
Commerce of the United States of America.
6 CAREMARK V. CHICKASAW NATION
OPINION
FRIEDLAND, Circuit Judge:
The Chickasaw Nation and five pharmacies that it owns
and operates (collectively, “the Nation”) appeal from a
district court’s order compelling arbitration of the Nation’s
dispute with Caremark and Caremark affiliates (collectively,
“Caremark”). The district court explained that, in light of a
clause in the parties’ contract delegating to the arbitrator the
authority to resolve threshold issues regarding the scope and
enforceability of the arbitration provision, the Nation’s
arguments that its claims are not arbitrable must be resolved
by the arbitrator. We affirm.
I.
A.
The Chickasaw Nation is a sovereign and federally
recognized Indian tribe that operates its own healthcare
system, which includes the five pharmacies that are co-
appellants in this case. 1 The Nation’s healthcare system
serves Native persons throughout Chickasaw territory.
Under federal law, members of federally recognized Native
nations are eligible to receive healthcare services at the
Nation’s facilities at no charge, and the Nation may recoup
the cost of services that it provides to a tribal member from
that member’s health-insurance plan.
Caremark is the pharmacy benefit manager (“PBM”) for
health-insurance plans that cover many tribal members
1
Those pharmacies are the Ardmore Health Clinic, the Chickasaw
Nation Medical Center, the Chickasaw Nation Online Pharmacy Refill
Center, the Purcell Health Clinic, and the Tishomingo Health Clinic.
CAREMARK V. CHICKASAW NATION 7
served by the Nation’s pharmacies. As a PBM, Caremark
manages prescription drug benefits for health insurers,
Medicare Part D drug plans, large employers, and other
healthcare payers. Caremark manages these benefits by
enrolling individual pharmacies in “pharmacy networks.”
By enrolling in a Caremark network, the pharmacies agree
to offer preferential pricing to patients enrolled in Caremark-
supported health-insurance plans. Under that business
model, the health plans and their member-patients receive
lower prices when the patients obtain their prescription drugs
from in-network pharmacies. By enrolling in Caremark
networks, the pharmacies avoid the administrative costs of
submitting reimbursement claims to each patient’s
individual insurer. Instead, an enrolled pharmacy deals only
with Caremark, which pays each pharmacy directly for any
prescription drugs that it provides to the patients covered by
the Caremark-supported insurance plans.
The Nation has signed agreements with Caremark,
enrolling its pharmacies in Caremark’s networks to facilitate
reimbursement for the costs of providing pharmacy services
to tribal members. 2 Like all Caremark pharmacy-network
agreements, each of the Nation’s agreements with Caremark
includes two key documents: the Provider Agreement and
the Provider Manual.
The Provider Agreement is a three-page document
setting forth the general terms of the relationship. It contains
a section entitled “Entire Agreement” stating that the
Provider Manual, among other documents, is “incorporated
2
The Ardmore Health Clinic, the Chickasaw Nation Online
Pharmacy, and the Tishomingo Health Clinic enrolled in Caremark
networks in 2003. The Purcell Health Clinic enrolled in 2005. The
Chickasaw Nation Medical Center enrolled in 2010.
8 CAREMARK V. CHICKASAW NATION
by this reference as if fully set forth herein.” By signing the
Provider Agreement, the pharmacy “acknowledges receipt
of the Provider Manual.” 3
The Provider Manual is a hundred-plus-page document
that governs a pharmacy’s relationship with Caremark. The
Manual describes, among other things, the services that
Caremark-network pharmacies must provide, the claim-
submission process, and the terms governing
reimbursement. A section entitled “Miscellaneous” includes
several subsections governing matters such as assignment of
rights, termination of the contract, and the amendment
process. It also includes a subsection entitled “Arbitration.”
According to the amendment provision, the Provider
Manual is updated from time to time, and providers accept
amendments to the Manual by receiving the updated version
and subsequently submitting to Caremark claims for
reimbursement. Caremark amended the Provider Manual
eight times between 2004 and 2020. Every version of the
Provider Manual has included substantially the same
amendment provision.
The “Arbitration” subsection in every version of the
Provider Manual has instructed that all disputes arising in
connection with the agreement will be resolved in
arbitration. The arbitration provision also includes a
“delegation clause”—a clause requiring the arbitrator, rather
than courts, to resolve threshold issues about the scope and
enforceability of the arbitration provision. A delegation
3
The Provider Agreements for the Chickasaw Nation Medical
Center and Purcell Health Clinic are in the record. The other three co-
appellant pharmacies’ Provider Agreements, which were signed with
Caremark’s predecessor-in-interest, are not in the record.
CAREMARK V. CHICKASAW NATION 9
clause appeared in earlier versions of the Provider Manual
through incorporation, by reference to the Rules of the
American Arbitration Association; after 2014, a delegation
clause was expressly set forth in the Provider Manual itself.
Specifically, the pre-2014 versions of the Provider
Manual included clauses stating that “[a]ny and all
controversies in connection with or arising out of the
Provider Agreement . . . will be exclusively settled by
arbitration before a single arbitrator in accordance with the
Rules of the American Arbitration Association.” Since at
least 2002, those rules have contained a delegation clause
stating that the “arbitrator shall have the power to rule on his
or her own jurisdiction, including any objections with
respect to the existence, scope or validity of the arbitration
agreement.” See Am. Arb. Ass’n, Commercial Dispute
Resolution Procedures (Including Mediation and
Arbitration Rules) R-8 (2002). 4
Since 2014, the arbitration provision in the Provider
Manual, including its express delegation clause, has
remained essentially the same. The arbitration provision in
the most recent Provider Manual in the record, including the
delegation clause (which we underline below), states:
Any and all disputes between Provider and
Caremark [and Caremark’s affiliates],
including but not limited to, disputes in
connection with, arising out of, or relating in
any way to, the Provider Agreement or to
Provider’s participation in one or more
Caremark networks . . . will be exclusively
4
For archived versions of these rules, see Rules, Forms, Fees, Am.
Arb. Ass’n, http://www.adr.org/ArchiveRules.
10 CAREMARK V. CHICKASAW NATION
settled by arbitration. This arbitration
provision applies to any dispute arising from
events that occurred before, on or after the
effective date of this Provider Manual. . . .
The arbitrator(s) shall have exclusive
authority to resolve any dispute relating to the
interpretation, applicability, enforceability or
formation of the agreement to arbitrate,
including but not limited to, any claim that all
or part of the agreement to arbitrate is void or
voidable for any reason. In the event the
arbitrator(s) determine that any provision of
this agreement to arbitrate is invalid for any
reason, such provision shall be stricken and
all remaining provisions will remain in full
force and effect. The arbitrator(s) must
follow the rule of Law, and the award of the
arbitrator(s) will be final and binding on the
parties, and judgment upon such award may
be entered in any court having jurisdiction
thereof. Any such arbitration must be
conducted in Scottsdale, Arizona and
Provider agrees to such jurisdiction, unless
otherwise agreed to by the parties in writing.
Since at least 2004, Caremark has sent Provider Manuals
to all network pharmacies. Caremark sent updated Manuals
to all network pharmacies in 2004, 2007, 2009, 2011, 2014,
2016, 2018, and 2020. Since 2014, Caremark has
maintained proof of delivery of the Provider Manual to all
network pharmacies, including all Chickasaw Nation
pharmacies. Between 2014 and 2020, the Nation’s
pharmacies submitted to Caremark about 1.5 million claims
CAREMARK V. CHICKASAW NATION 11
for reimbursement, which collectively exceeded $173
million in value.
B.
In December 2020, the Nation sued Caremark in the
United States District Court for the Eastern District of
Oklahoma, claiming violations of 25 U.S.C. § 1621e, a
provision of the Indian Health Care Improvement Act
referred to here as the “Recovery Act.”
Congress passed the Recovery Act to enable tribal
healthcare providers to recover the cost of healthcare
services from third-party insurers. Although many Native
persons were covered by employer-sponsored or other
private health-insurance plans, their insurance contracts
often contained coverage exceptions for care provided
through the Indian Health Service or at tribal healthcare
facilities. Accordingly, the insurers were collecting
premiums for insurance coverage for Native individuals
whose healthcare costs the insurers were, in reality,
reimbursing only rarely. See S. Rep. No. 100-508, at 15–16
(1988), reprinted in 1988 U.S.C.C.A.N. 6183, 6197–98. To
address that problem, Congress created a mechanism
whereby “Indian tribes and tribal organizations” could
“recover reasonable expenses incurred for the provision of
health services to any individual through third party
reimbursement.” H.R. Rep. No. 102-643, pt. 1, at 75 (1992).
The statute allows tribal governments to enforce the
statutory “right of recovery” by bringing a civil action to
recoup from any applicable insurer the cost of services
provided to tribal members. See 25 U.S.C. § 1621e(a),
(e)(1)(B). The Recovery Act also states that “no provision
of any contract . . . or other health care plan or program . . .
shall prevent or hinder the right of recovery of . . . an Indian
tribe[] or tribal organization.” 25 U.S.C. § 1621e(c).
12 CAREMARK V. CHICKASAW NATION
The Nation alleges that, since approximately 2015,
Caremark has violated the Recovery Act in several ways.
For example, the Nation alleges that Caremark improperly
denied claims submitted by the Nation seeking
reimbursement for covered medications that its pharmacies
provided to tribal members enrolled in Caremark-managed
health-insurance plans, and that the Recovery Act entitles
the Nation to recover from Caremark the cost of providing
those prescription drugs. The Nation seeks compensatory
and punitive damages, attorney’s fees, and declaratory and
injunctive relief.
A few months after the Nation filed its Complaint,
Caremark filed a Petition under the Federal Arbitration Act
to compel arbitration of the Nation’s Recovery Act claims.
Caremark filed that Petition in the United States District
Court for the District of Arizona, the forum that the Provider
Manual designates for arbitration.
The district court granted the Petition. The court first
explained that “[e]ach of Chickasaw Nation’s pharmacies
has a current contract with Caremark” and that “[t]hese
contracts contain arbitration agreements.” The court then
declined to transfer, stay, or dismiss the action based on the
Nation’s earlier-filed lawsuit in federal court in Oklahoma. 5
Finally, the court held that the delegation clause in the
5
The district court explained that “[t]he majority of courts, including
the Tenth Circuit in which Oklahoma is located, hold that where the
parties have agreed to arbitrate in a particular forum, only a district court
in that forum has the authority to compel arbitration under § 4 of the
[Federal Arbitration Act].” (quotation marks omitted). The court
reasoned that, if it were to “defer to the Oklahoma court on the arbitration
issue, and the Oklahoma court were to find that the claims in this case
were subject to arbitration, the Oklahoma court could not enforce the
agreement and compel arbitration.”
CAREMARK V. CHICKASAW NATION 13
Provider Manual was “clear and unmistakable” evidence of
the parties’ intent to submit the threshold issue of
arbitrability to the arbitrator and that, therefore, the
“arbitrator must decide whether the claims in this case are
subject to arbitration, not [the district court].”
The Nation timely appealed and moved the district court
for a stay of its order pending appeal, which the court denied.
The Nation sought a stay from our court. In an unexplained
order, a motions panel granted a stay pending appeal and
ordered expedited briefing.
II.
We review de novo a district court’s decision to grant or
deny a petition to compel arbitration. Bushley v. Credit
Suisse First Bos., 360 F.3d 1149, 1152 (9th Cir. 2004). We
review for clear error any factual findings underlying the
district court’s order. O’Connor v. Uber Techs., Inc.,
904 F.3d 1087, 1093 (9th Cir. 2018).
III.
The Nation advances two reasons why its Recovery Act
claims are not arbitrable. First, the Nation argues that it is
not bound by the arbitration provision in Caremark’s
Provider Manual because it never clearly and unequivocally
waived its tribal sovereign immunity. Second, and in the
alternative, the Nation argues that the Recovery Act itself
precludes the enforcement of any agreement to arbitrate in
this context.
The primary issue raised by this appeal, however, is who
should decide whether the Nation’s claims are arbitrable—
the arbitrator or the court. The district court sent the
threshold arbitrability question to the arbitrator in light of the
14 CAREMARK V. CHICKASAW NATION
delegation clause in the Provider Manual. The Nation argues
that the district court erred by refusing to decide for itself the
threshold issue of arbitrability.
A.
We briefly explain the background legal principles that
guide our analysis. To start, Section 2 of the Federal
Arbitration Act (“FAA”) provides:
A written provision in . . . a contract
evidencing a transaction involving commerce
to settle by arbitration a controversy
thereafter arising out of such contract . . .
shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in
equity for the revocation of any contract.
9 U.S.C. § 2. Section 4 of the FAA further provides that a
party may petition to compel arbitration in federal district
court, and the court “shall make an order directing the parties
to proceed to arbitration” “upon being satisfied that the
making of the agreement for arbitration . . . is not in issue.”
9 U.S.C. § 4.
The Supreme Court has interpreted that statutory
language to cabin a court’s authority to adjudicate challenges
to contracts governed by the FAA that contain arbitration
provisions. In general, courts may resolve challenges
directed specifically to the validity of the arbitration
provision itself. See Buckeye Check Cashing, Inc. v.
Cardegna, 546 U.S. 440, 445–46 (2006). If there is no such
challenge—or if such a challenge fails—the court must send
to the arbitrator any other challenges, including challenges
to the validity of the contract as a whole. Id. For instance,
in the presence of an otherwise-valid arbitration provision, a
CAREMARK V. CHICKASAW NATION 15
challenge that “the [entire] agreement was fraudulently
induced” or “that the illegality of one of the contract’s
provisions renders the whole contract invalid” must be sent
to the arbitrator. Id. at 444–46 (enforcing an arbitration
clause despite a challenge that the contract as a whole was
void for illegality under state law); see also Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402–04
(1967) (enforcing an arbitration clause despite a challenge
that the contract as a whole was fraudulently induced).
The presence of a delegation clause further limits the
issues that a court may decide. A delegation clause is a
clause within an arbitration provision that delegates to the
arbitrator gateway questions of arbitrability, such as whether
the agreement covers a particular controversy or whether the
arbitration provision is enforceable at all. Rent-A-Center,
W., Inc. v. Jackson, 561 U.S. 63, 68–69 (2010). The FAA
“allows parties to agree by contract that an arbitrator, rather
than a court, will resolve threshold arbitrability questions as
well as underlying merits disputes.” Henry Schein, Inc. v.
Archer & White Sales, Inc., 139 S. Ct. 524, 527 (2019). But
the Supreme Court has “added [the] important qualification”
that there must be “clear and unmistakable” evidence that
“the parties agreed to arbitrate arbitrability.” First Options
of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (alterations
and quotation marks omitted). The Court has held that “[a]n
agreement to arbitrate a gateway issue is simply an
additional, antecedent agreement the party seeking
arbitration asks the federal court to enforce.” Rent-A-Center,
561 U.S. at 70. In other words, a delegation clause is
essentially a mini-arbitration agreement, nested within a
larger one. “[T]he FAA operates on this additional
arbitration agreement just as it does on any other.” Id.
16 CAREMARK V. CHICKASAW NATION
The Court has treated delegation clauses within
arbitration provisions the same way it treats arbitration
provisions within broader contracts. In Rent-A-Center, the
Court held that a challenge to the validity of an entire
arbitration agreement—there, an unconscionability
challenge—must be decided by the arbitrator if the
agreement includes a delegation clause that is not directly
challenged. Id. at 70–72. The Court emphasized that a party
must “challenge[] the delegation provision specifically” for
a court to intervene. Id. at 71–72. Under Rent-A-Center,
then, a valid—i.e., enforceable 6—delegation clause commits
to the arbitrator nearly all challenges to an arbitration
provision.
But in Granite Rock Company v. International
Brotherhood of Teamsters, 561 U.S. 287 (2010)—decided
just three days after Rent-A-Center—the Supreme Court
clarified that contract-formation issues are always matters
for judicial resolution. Granite Rock explained that the
issues reserved to the courts for decision “always include”
whether an arbitration agreement was formed, even in the
presence of a delegation clause. Id. at 297; see id. at 299.
That principle follows from the fundamental premise that
arbitration is “strictly ‘a matter of consent.’” Id. at 299(quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
Stanford Junior Univ., 489 U.S. 468, 479 (1989)). “To take
the question of contract formation away from the courts
would essentially force parties into arbitration when the
parties dispute whether they ever consented to arbitrate
anything in the first place.” Dr.’s Assocs., Inc. v.
Alemayehu, 934 F.3d 245, 251 (2d Cir. 2019). And
See Rent-A-Center, 561 U.S. at 69 n.1 (stating that the issue of an
6
agreement’s “validity” concerns “whether it is legally binding”
(emphasis omitted)).
CAREMARK V. CHICKASAW NATION 17
preserving for the courts the contract-formation question
comports with the requirement in section 4 of the FAA that
courts enforce arbitration agreements only “upon being
satisfied that the making of the agreement for arbitration . . .
is not in issue.” 9 U.S.C. § 4. Accordingly, a court “should
order arbitration of a dispute only where the court is satisfied
that neither the formation of the parties’ arbitration
agreement nor (absent a valid provision specifically
committing such disputes to an arbitrator) its enforceability
or applicability to the dispute is in issue.” 7 Granite Rock,
561 U.S. at 299.
The following principles emerge from the above line of
cases. First, a court must resolve any challenge that an
agreement to arbitrate was never formed, even in the
presence of a delegation clause. Next, a court must also
resolve any challenge directed specifically to the
enforceability of the delegation clause before compelling
arbitration of any remaining gateway issues of arbitrability.
Finally, if the parties did form an agreement to arbitrate
containing an enforceable delegation clause, all arguments
going to the scope or enforceability of the arbitration
provision are for the arbitrator to decide in the first instance.
7
To the extent that there may have been any lingering ambiguity
after Granite Rock, numerous courts of appeals have since held that
contract formation is always an issue for the court, notwithstanding the
presence of a delegation clause. Dr.’s Assocs., Inc. v. Alemayehu,
934 F.3d 245, 251 (2d Cir. 2019); Rowland v. Sandy Morris Fin. & Est.
Plan. Servs., LLC, 993 F.3d 253, 258 (4th Cir. 2021); Edwards v.
Doordash, Inc., 888 F.3d 738, 744 (5th Cir. 2018); Fedor v. United
Healthcare, Inc., 976 F.3d 1100, 1105–06 (10th Cir. 2020). Our cases
decided before Granite Rock are in accord. See Textile Unlimited, Inc.
v. A..BMH & Co., Inc., 240 F.3d 781, 786 (9th Cir. 2001); Three Valleys
Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140–41 (9th
Cir. 1991).
18 CAREMARK V. CHICKASAW NATION
We next apply these principles to the Nation’s two
arguments challenging the arbitrability of its Recovery Act
claims.
B.
We first address the Nation’s argument that it did not
actually form contracts with Caremark that included
arbitration provisions with delegation clauses. The Nation
argues that agreeing to arbitration would have waived its
tribal immunity, and because the Nation did not take the
clear and unequivocal steps necessary to waive immunity, it
cannot have agreed to the arbitration provisions. We reject
that argument.
The Nation does not seriously dispute that its pharmacies
have contractual relationships with Caremark that are
governed by the terms of the Provider Manual. The Nation
acknowledges that all its pharmacies signed Provider
Agreements with Caremark or with Caremark’s
predecessors-in-interest governing reimbursement of claims
for pharmacy services. Again, the Provider Agreements
state that the Provider Manuals are “incorporated [in the
Provider Agreements] by this reference as if fully set forth
herein.” 8
8
The Provider Agreements signed by Ardmore Health Clinic,
Tishomingo Health Clinic, and the Chickasaw Nation Online Pharmacy
Refill Center are not in the record. See supra note 3. Caremark has
submitted a declaration stating that, because its agreements use
consistent language, those pharmacies’ Provider Agreements “would
have contained the same language” as the Agreements signed by the
Chickasaw Nation Health Center and Purcell Health Clinic purporting to
incorporate the Provider Manual by reference as part of the entire
agreement. The record also contains a 2005 Addendum to the Provider
CAREMARK V. CHICKASAW NATION 19
As explained above, every version of the Provider
Manual has included an arbitration provision delegating
gateway questions of arbitrability to the arbitrator. The pre-
2014 Manuals did so by incorporating the Rules of the
American Arbitration Association, which contain a
delegation clause. We have held that “incorporation of the
AAA rules constitutes clear and unmistakable evidence that
contracting parties agreed to arbitrate arbitrability.”
Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015).
Since 2014, the Provider Manuals have expressly stated that
the arbitrator “shall have exclusive authority to resolve any
dispute relating to the interpretation, applicability, [or]
enforceability . . . of the agreement to arbitrate.”
Given that history—and considering the hundreds of
thousands of claims the Nation has submitted to Caremark
over the last several years—the Nation cannot plausibly
deny that it formed contracts with Caremark. And the
language of those contracts includes arbitration provisions
with delegation clauses. 9
Agreement signed by the Tishomingo Health Clinic confirming that “the
terms” of the original Provider Agreement “includ[e] the Provider
Manual.” In concluding that the Nation’s pharmacies have current
contracts with Caremark that include the terms in the Provider Manuals,
the district court implicitly credited the assertion in Caremark’s
declaration that all the Provider Agreements signed by those pharmacies
included the “incorporated by this reference” language and that the
pharmacies received the Provider Manuals. The Nation has not shown
that those factual findings are clearly erroneous.
9
The Nation challenges the amendment process laid out in the
Provider Manual to argue that the most recent arbitration provision—the
one contained in the Provider Manuals since 2014—does not govern this
case. We need not reach that issue because, as we stated above, every
version of the Provider Manual since the Nation’s pharmacies first
20 CAREMARK V. CHICKASAW NATION
The Nation does not disavow the contracts entirely.
Instead, it asks us to “excise” the arbitration provisions while
leaving the remainder of the parties’ agreements intact. The
Nation argues that, because arbitration provisions are
severable from the contracts in which they appear as a matter
of substantive federal arbitration law, we may consider
separately (1) whether the parties agreed to the arbitration
provisions, and (2) whether the parties agreed to the other
obligations in the Provider Agreement (including the
Provider Manual). The Nation suggests that we must apply
a different standard in answering each of those two
questions, requiring a special, heightened showing to
conclude, in answering the first question, that the Nation
entered into an arbitration agreement. The Nation grounds
its argument in sovereign-immunity principles: It argues
that, because an arbitration agreement would waive its
sovereign immunity, we must infer, absent clear and
unequivocal evidence to the contrary, that the Nation did not
agree to arbitration.
The Nation is correct that any waiver of its sovereign
immunity must be expressed in clear and unequivocal terms.
C & L Enters., Inc. v. Citizen Band Potawatomi Indian Tribe
of Okla., 532 U.S. 411, 417–18 (2001); see also Ute Indian
Tribe of the Uintah & Ouray Rsrv. v. Utah, 790 F.3d 1000,
1009 (10th Cir. 2015) (Gorsuch, J.). That proposition is
beyond dispute, but it is also beside the point. The premise
of the Nation’s argument—that an arbitration agreement
signed Provider Agreements has delegated gateway issues of
arbitrability to the arbitrator. Accordingly, even if the Nation were
correct about a flaw in the amendment procedure, our analysis of
whether the district court was correct to send gateway issues to the
arbitrator would not change.
CAREMARK V. CHICKASAW NATION 21
always and necessarily waives tribal sovereign immunity—
is incorrect, so its argument falls apart at the threshold. 10
An arbitration agreement may or may not have
implications for a tribe’s sovereign immunity, and courts
need not resolve the sovereign-immunity implications (if
any) before deciding whether an agreement to arbitrate exists
at all. The Tenth Circuit’s decision in Ute Indian Tribe
helpfully explains how a forum-selection clause—which,
like an arbitration provision, is an agreement to bring any
disputes to a particular forum—does not necessarily waive
sovereign immunity; rather, the forum-selection clause may
simply designate a forum for resolving disputes for which
immunity is waived. See 790 F.3d at 1010. In that case, the
tribe had agreed that “[o]riginal jurisdiction to hear and
decide any disputes or litigation” under the contract “shall
be in the United States District Court for the District of
Utah.” Id. at 1009 (alteration in original). The court
declined to find an immunity waiver because a different
10
The Nation is correct that—at least in the absence of a delegation
clause in an arbitration agreement and a non-severability clause in the
contract containing that agreement—the court might be able to sever an
invalid arbitration provision from the contract and enforce the remainder
of the parties’ agreement. See, e.g., Graham Oil Co. v. ARCO Prods.
Co., 43 F.3d 1244, 1248–49 (9th Cir. 1994) (holding an arbitration clause
invalid and striking the clause from the contract, where “neither party
suggest[ed] that if the arbitration clause is unlawful, the entire contract
must be invalidated”). The fact that the arbitration provision might be
severable from the contract if the provision is ultimately found to be
unenforceable, however, does not support the Nation’s argument that we
should conduct a separate and more stringent contract-formation inquiry
in deciding whether the Nation agreed to the arbitration provision in the
first place. Moreover, in the presence of a valid delegation clause, the
arbitrator—and not the court—would have to determine whether an
arbitration provision is enforceable and, if not, whether it can be severed
from the remainder of the contract. See Rent-A-Center, 561 U.S. at 71.
22 CAREMARK V. CHICKASAW NATION
provision of the contract stated that “no acquiescence in or
waiver of claims of rights, sovereignty, authority,
boundaries, jurisdiction, or other beneficial interests is
intended by this Agreement.” Id. at 1009–10. The court
concluded that the tribe had agreed to proceed in the
designated forum for any dispute for which it waived tribal
immunity, but that it had reserved its right to stand on its
claim of immunity on a case-by-case basis. Id. at 1010.
As Ute Indian Tribe illustrates, the Nation’s assumption
that a tribe’s entering an arbitration agreement will
necessarily waive tribal immunity is unfounded—a tribal
organization might agree to arbitrate any disputes for which
it has waived sovereign immunity but still reserve its ability
to choose whether to waive immunity in any given case. The
Nation’s proposed approach here would put the cart before
the horse, requiring us to resolve whether there has been a
waiver of tribal immunity for particular claims for which
arbitration is sought before determining whether an
arbitration agreement exists at all.
Accordingly, we reject the Nation’s argument that,
because it did not clearly and unequivocally waive its tribal
immunity, it cannot have agreed to the arbitration provisions
(or the delegation clauses) in the Provider Manuals. 11
11
A couple of sentences in the Nation’s reply brief could be read to
suggest that, even if valid arbitration agreements with valid delegation
clauses exist, the Nation’s sovereign immunity bars Caremark from
initiating a proceeding against the Nation in the Arizona district court to
compel arbitration. That issue was not “argued specifically and
distinctly in [the] opening brief,” nor adequately developed in the reply
brief, so we decline to address it here. Christian Legal Soc’y Chapter of
Univ. of Cal. v. Wu, 626 F.3d 483, 485 (9th Cir. 2010) (quoting
Brownfield v. City of Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010));
CAREMARK V. CHICKASAW NATION 23
C.
In the alternative, the Nation contends that the Recovery
Act precludes arbitration of its claims against Caremark.
The Nation relies primarily on language in the Recovery Act
stating that “no provision of any contract . . . shall prevent or
hinder the right of recovery of . . . an Indian tribe[] or tribal
organization.” 25 U.S.C. § 1621e(c). The Nation argues
that the arbitration procedures specified in the Provider
Manual “prevent or hinder” the Nation’s right of recovery in
violation of § 1621e(c)—and that the arbitration provision is
therefore unenforceable, as applied to the Nation’s claims.
The Nation points, for example, to the arbitration
agreement’s specification of a statute-of-limitations period
shorter than that in the Recovery Act. The Nation also
argues that the Recovery Act’s language permitting the tribe
to “institut[e] a separate civil action,” 25 U.S.C.
§ 1621e(e)(1)(B), gives the Nation the remedy of an action
in federal court, not arbitration. 12
The Nation’s theory that the Recovery Act displaces the
arbitration provisions in the Provider Manuals does not
impugn the validity of the delegation clauses specifically.
Instead, like the unconscionability claim in Rent-A-Center,
it is a challenge to the enforceability of the arbitration
provisions as a whole. Rent-A-Center, 561 U.S. at 72;
accord Brennan, 796 F.3d at 1133 (holding that the
see United States v. Kimble, 107 F.3d 712, 715 n.2 (9th Cir. 1997)
(declining to address an argument that “was not coherently developed in
[the] briefs on appeal”).
12
In its opening brief, the Nation also appeared to argue that the
arbitration provision is an invalid prospective waiver of the Nation’s
right to pursue its Recovery Act claims. The Nation disclaimed that
argument in its reply brief, so we do not address it here.
24 CAREMARK V. CHICKASAW NATION
plaintiff’s unconscionability claim was for the arbitrator to
decide because the plaintiff “failed to make any arguments
specific to the delegation provision and instead argued that
the [arbitration provision] as a whole [was] unconscionable”
(quotation marks and citation omitted)). Accordingly, the
district court was correct to “treat [the delegation clause] as
valid under [FAA] § 2” and “enforce it under §§ 3 and 4,
leaving any challenge to the validity of the [arbitration
agreement] as a whole for the arbitrator.” Rent-A-Center,
561 U.S. at 72.
The Nation responds that, under New Prime Inc. v.
Oliveira, 139 S. Ct. 532 (2019), a delegation clause can
never prevent a court from determining whether a statute
precludes arbitration. We disagree. In New Prime, the
Supreme Court held that a district court must determine for
itself whether a contract is covered by the FAA before
asserting its authority under that statute to enforce an
arbitration provision. Id. at 537–38. That is because, if a
contract falls within an FAA-exempt category, the district
court has no power at all to compel arbitration—including to
compel arbitration of gateway issues pursuant to a delegation
clause. See id. By contrast, the Nation’s argument here does
not call into question the district court’s authority to enforce
the delegation clause—rather, it challenges the
enforceability of the arbitration provision as a whole, on the
ground that the Nation’s claims are not arbitrable because
the procedural rules in arbitration “prevent or hinder” the
Nation’s right of recovery under § 1621e(c). That challenge
raises exactly the type of threshold arbitrability issue that the
CAREMARK V. CHICKASAW NATION 25
parties have delegated to the arbitrator, and the district court
was therefore correct not to decide it. 13
IV.
For the foregoing reasons, we affirm the judgment of the
district court compelling arbitration. We express no opinion
on the enforceability of the underlying arbitration provision,
which—in light of the delegation clause—is an issue that the
arbitrator must decide in the first instance. We do not decide,
for example, whether the Nation has waived its sovereign
immunity with respect to any counterclaims that Caremark
might assert against the Nation in arbitration, or whether the
13
In its reply brief, the Nation notes that the procedures specified in
the arbitration agreement “become effective at the moment of delegation
and hamstring the Nation’s ability to arbitrate the threshold issues
themselves.” Those procedures include the arbitration agreement’s
prescription of a shorter statute-of-limitations period, less generous fee-
and cost-shifting provisions (including a requirement that the party
initiating the arbitration deposit funds in escrow to cover the expected
costs of arbitrating), limitations on discovery and available damages, and
confidentiality provisions. To the extent that this argument specifically
challenges the enforceability of the delegation clause, we reject it. Most
of the challenged arbitration procedures do not implicate at all the
Nation’s ability to arbitrate the delegated gateway issues. The statute-
of-limitations and damages provisions are immaterial at this stage, and
the Nation has not explained why it would need discovery to arbitrate
the legal question whether the Recovery Act displaces the arbitration
provision. Nor has the Nation explained how the confidentiality
provisions would hamper its ability to arbitrate that question. Finally,
even if the delegation clause requires the Nation to deposit funds in
escrow before arbitrating the gateway issues, that requirement does not
impose a barrier sufficient to render the delegation clause unenforceable.
The Nation can recover that deposit and recover attorney’s fees from
Caremark if the Nation prevails on its argument that its Recovery Act
claims are not arbitrable. The Nation has not raised any other challenges
directed specifically to the validity of the delegation clause.
26 CAREMARK V. CHICKASAW NATION
Recovery Act precludes arbitration of the merits of the
Nation’s claims.