Qui Tam Action Is Not Subject To Arbitration Agreement

Aetna provided insurance coverage to a California surgical center and determined that the center was erroneously characterizing claims that it performed surgeries at out-of-network facilities, when in fact they had been performed at its in-network facilities. This mischaracterization resulted in Aetna paying higher reimbursements to the center.

Alleging that the center’s action constituted fraud, Aetna filed a qui tam action in the California court. The center moved to compel arbitration based on its agreement with Aetna that provided for arbitration of fee disputes.

The lower court rejected the motion to compel, and the California Court of Appeal has affirmed this result. As the court explained, a qui tam action, while filed by an individual party, is brought on behalf of the state. Since the state was not a party to the arbitration agreement, the qui tam action was not subject to arbitration.

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