Unreported / Non-Citable
Background
PHI Health, LLC, an air ambulance provider, won a $55,066.49 arbitration award against California Physicians’ Service, doing business as Blue Shield of California, under the “independent dispute resolution” (IDR) process created by the federal No Surprises Act (NSA). The NSA governs billing disputes between out-of-network providers, like PHI, and health plans, like Blue Shield, when the provider has no contract with the plan. Instead of paying, Blue Shield did not comply, so PHI sued in California state court to force payment of the award.
Blue Shield removed the case to federal court, arguing it belonged there because PHI’s claims raised federal questions: PHI contended the NSA itself allows a provider to go to court to enforce an IDR award (an “implied right of action”), and separately invoked Section 9 of the Federal Arbitration Act (FAA), which lets parties to certain arbitration agreements ask a court to confirm an award as a judgment. Blue Shield then moved to dismiss the complaint for failure to state a claim.
The case landed in front of U.S. District Judge James Donato in the Northern District of California, who had to decide whether either federal theory actually gives providers like PHI a path into court, or whether Congress intended IDR awards to be enforced some other way.
The Court’s Holding
Judge Donato dismissed PHI’s federal claims without leave to amend and declined to keep the related California state-law claims in federal court, dismissing those without prejudice so they could be pursued elsewhere. On the core question, he held that the NSA does not create an implied private right of action to sue in court to enforce IDR awards. He pointed to a growing, one-sided body of appellate and district authority — including the Second Circuit, the Fifth Circuit, and another Northern District of California judge — all reaching the same conclusion: Congress built a “comprehensive regulatory framework” in which federal agencies such as the Treasury Department and Department of Labor, not private lawsuits, are supposed to enforce IDR awards.
A key textual clue reinforced that reading. The NSA expressly incorporates Section 10 of the FAA, which covers vacating (undoing) an arbitration award, but it says nothing about Section 9, which covers confirming (enforcing) an award as a judgment. Judge Donato treated that omission as deliberate, not an oversight courts should fix. He rejected PHI’s reliance on a lone Connecticut district court decision that had found an implied right of action, noting that decision had since been abrogated — effectively overruled — by the Second Circuit.
PHI’s backup argument, a direct claim under FAA Section 9, failed for an independent reason: Section 9 only applies when the parties had a written agreement providing that a court judgment would be entered on the arbitration award. PHI and Blue Shield never had any such arbitration agreement; their dispute was routed into IDR by statute, not by contract. Because no amendment could cure either defect, the court dismissed the federal claims with prejudice and sent the state-law claims away rather than deciding them.
Key Takeaways
- The No Surprises Act does not give out-of-network providers an implied right to sue in court to enforce IDR arbitration awards — federal courts nationwide, including the Second and Fifth Circuits, now agree on this point.
- The NSA’s choice to incorporate FAA Section 10 (vacatur) but not Section 9 (confirmation) was read as Congress deliberately channeling enforcement away from private litigation.
- FAA Section 9 confirmation claims require a written agreement that a court judgment be entered on the award; IDR awards created by statute, without such an agreement, cannot qualify.
- Providers seeking to collect unpaid IDR awards must look to administrative enforcement by agencies like the Department of Labor or Treasury, not a lawsuit against the health plan.
- Because the legal defects were not fixable by better pleading, the dismissal was with prejudice on the federal claims, while related state-law claims were sent back for resolution outside federal court.
Why It Matters
This ruling adds the Northern District of California to a now-uniform national consensus that out-of-network providers cannot use the courts to force health plans to pay IDR arbitration awards under the No Surprises Act. For air ambulance companies and other out-of-network providers who win IDR arbitrations, that means a health plan’s refusal to pay cannot be remedied by a straightforward breach-of-award lawsuit in federal court; providers must instead pursue the administrative enforcement channels Congress built into the statute, which can be slower and less direct than litigation.
For health plans and insurers like Blue Shield, the decision confirms a reliable defense against enforcement suits over unpaid IDR awards, reducing one source of litigation risk tied to out-of-network billing disputes. The opinion also illustrates how quickly a near-unanimous judicial consensus can form around a new statute’s enforcement gaps, with one circuit’s reasoning (here, the Second Circuit’s) rippling through district courts around the country to resolve what had briefly been an open question.