Cloney's Pharamacy, Inc. v. Wellpartner, Inc.

Background

Cloney’s Pharmacy, Inc., Willow Creek Pharmacy, Inc., and JCH Pharmacy Holdings, Inc., doing business as Pucci’s Pharmacy, brought a proposed class action against Wellpartner, LLC. The opinion states that Wellpartner, Inc. was voluntarily dismissed from the action. The plaintiffs are three independent pharmacies located in and organized under the laws of California. Wellpartner provides third-party administrative services for participants in the federal 340B Drug Pricing Program.

The pharmacies alleged that Wellpartner overcharged them in violation of Contract Pharmacy Services Agreements. They claimed that Wellpartner incorrectly calculated the amounts the pharmacies had to remit after dispensing 340B drugs because it did not account for direct and indirect remuneration fees assessed by pharmacy benefit managers on Medicare Part D prescriptions. The complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, negligent performance, and an accounting.

Arbitration Agreements

Each plaintiff separately entered into a Caremark Provider Agreement with Caremark. Those agreements incorporated Caremark’s Provider Manual, which contained an arbitration clause. The clause required arbitration of any dispute between a provider and Caremark, including disputes involving Caremark’s current, future, or former employees, parents, subsidiaries, affiliates, agents, and assigns. It also gave the arbitrator exclusive authority to decide issues concerning the interpretation, applicability, enforceability, or formation of the arbitration agreement.

The court found that Wellpartner was an affiliate of Caremark because the plaintiffs alleged that Wellpartner and Caremark were sister companies under common ownership. The court also found that the pharmacies accepted later amendments to the arbitration clause by continuing to submit claims to Caremark after the amendments became effective. The court therefore concluded that the parties had entered into valid agreements to arbitrate.

Court’s Analysis

The court explained that deciding whether a dispute must be arbitrated generally involves determining whether a valid arbitration agreement exists and whether the dispute falls within its scope. Here, however, the arbitration clause clearly and unmistakably assigned questions about arbitrability—including the clause’s scope and enforceability—to the arbitrator. The court therefore did not decide whether the pharmacies’ claims under the separate contracts actually fell within the arbitration clause.

The pharmacies argued that their claims arose under Contract Pharmacy Services Agreements that did not contain arbitration clauses, forum-selection clauses, or provisions incorporating the Caremark agreements. The court rejected those arguments at this stage. It concluded that the separate contracts did not displace the broad arbitration clause or send arbitrability disputes to a court. The court also concluded that the question whether Wellpartner, a nonsignatory to the Caremark agreements, could enforce the arbitration clause was delegated to the arbitrator. The court noted that the dispute had a connection to the Caremark agreements because the pharmacies relied on their relationship with Caremark in alleging that Wellpartner knew about the fees at issue.

Disposition

The court stated that it could not clearly compel arbitration outside the district and that the arbitration clause called for arbitration in Arizona. Applying the Federal Arbitration Act, the court granted Wellpartner’s motion to dismiss or stay in favor of arbitration and stayed all proceedings pending arbitration. The court did not decide the ultimate merits of the pharmacies’ contract and related claims.

The pharmacies separately moved to seal unredacted versions of three Contract Pharmacy Services Agreements that had been filed on the docket. The court found that the proposed redactions were consistent with an earlier sealing order protecting payment-related information and payment formulas. It granted the motion to seal and ordered the unredacted exhibits to remain sealed until further court order.