Antitrust Law Daily Wrap Up, RICO NEWS: Petition for Supreme Court review of CVS’ arbitration requirement denied, (Feb 29, 2016)

By Linda O’Brien, J.D., LL.M.

The U.S. Supreme Court will not review a decision by the U.S. Court of Appeals in New Orleans that pharmacy chain CVS Caremark and its related entities could compel arbitration of the misappropriation of trade secrets and Racketeer Influenced and Corrupt Organization Act (RICO) claims by a group of independent retail pharmacies. Today, the Court denied the pharmacies’ petition for certiorari. The petition was docketed on December 18, 2015 (The Muecke Company, Inc. v. CVS Caremark Corporation, Dkt. 15-813).

In September 2010, six independent retail pharmacies filed suit against four CVS entities for racketeering and trade secret misappropriation. The pharmacies alleged that they owned trade secrets in their patient names and health information. CVS misappropriated their confidential patient information, which was disclosed through the claims reimbursement process, to market CVS products and services to the pharmacies’ customers. The CVS defendants moved to compel arbitration pursuant to an arbitration provision in the provider agreements. All of the plaintiff pharmacies were signatories; however, only one of the defendants, Caremark LLC, was a signatory. The defendants based their motion on equitable estoppel.

The Fifth Circuit affirmed the district court’s order to compel arbitration between the plaintiffs and the lone signatory defendant and to stay the claims against the non-signatory defendants. The appellate court determined that the district court properly found that the non-signatory defendants could compel arbitration under the equitable estoppel doctrine because the elements of the plaintiffs’ claims were tied to the provider agreements. Equitable estoppel recognizes that a non-signatory to the provider agreements would not be able to exercise rights to compel arbitration but for the plaintiffs’ use of the contract for their claims. Since the plaintiff pharmacies sued the non-signatory defendants as if they were parties to the provider agreement, the plaintiffs could not then claim the defendants were not parties to other portions of the agreement.

In their petition, the pharmacies contended that the Fifth Circuit erred in failing to apply the state law of equitable estoppel applicable to contracts in order to determine whether the non-signatories to an arbitration agreement could compel arbitration. The pharmacies also contended that the appellate court erred in failing to honor the terms of an arbitration agreement that specifically prohibited third parties from enforcing its terms.

RJR Nabisco, Inc. petition. In another RICO case, the Court has granted a motion of the Solicitor General for leave to participate in oral argument as amicus curiae and for divided argument (RJR Nabisco, Inc. v. The European Community, Dkt. 15-138).

In October 2015, the Court granted review of a decision by the Second Circuit, finding that RICO does not require the European Community—consisting of 26 member states—to plead that their injuries actually occurred in the United States. RICO, according to the Second Circuit opinion, applies to foreign conduct when liability is based on “racketeering acts” consisting of violations of predicate statutes that Congress expressly made applicable to foreign conduct. In its petition for review, RJR asked whether, or to what extent RICO applies extraterritorially.

Attorneys: Miguel S. Rodriguez, Donald R. Taylor, and Isabelle M. Antongiorgi (Taylor Dunham and Rodriguez LLP) for The Muecke Company, Inc.

Companies: The Muecke Company, Inc.; CVS Caremark Corporation; RJR Nabisco, Inc.

News: RICO