South-Western Legal Studies in Business

Supreme Court Holds that RICO Claims Are Subject to Arbitration
Description Supreme Court, reversing lower courts, held that the RICO claims that are made as part of litigation between physicians and health-care organizations would be subject to arbitration just as all other aspects of their relationship are. Whether an arbitrator could award treble damages was not clear in the arbitration agreement.
Topic Alternate Dispute Resolution
Key Words Arbitration; RICO; Damages
C A S E   S U M M A R Y
Facts A group of physicians sued various managed-health-care organizations, contending that they unlawfully failed to reimburse them for health-care services that they had provided to patients covered by defendants’ health plans. Among the claims was that the defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO). The defendants moved to compel arbitration on all claims, including RICO, as the contracts with the physicians included an arbitration clause. The district court and appeals court held that the RICO claims were not subject to arbitration and could go to trial. Defendants appealed.
Decision

Reversed. Plaintiffs can be compelled to arbitrate their RICO claims. The one issue that is unclear is if the treble damages provision of RICO would be within the authority of the arbitrator. The arbitration agreement, which precluded punitive damage awards, was not clear if the treble damages possible under RICO would be considered remedial or punitive. That would be a matter for the arbitrator to decide.

Citation Pacificare Health Systems, Inc. v. Book, 123 S.Ct. 1531 (Sup. Ct., 2003)

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