Antitrust Law Daily Wrap Up, RICO NEWS: Supreme Court asked to review CVS’ arbitration requirement, (Dec 28, 2015)

By Linda O’Brien, J.D., LL.M.

A group of independent retail pharmacies has asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in New Orleans that pharmacy chain CVS Caremark and its related entities could compel arbitration of the retail pharmacies’ misappropriation of trade secrets and Racketeer Influenced and Corrupt Organization Act (RICO) claims. The petition for certiorari was filed on December 18 (The Muecke Company, Inc. v. CVS Caremark Corporation, Dkt. 15-813).

In September 2010, six independent retail pharmacies filed suit against four CVS entities—CVS Caremark Corp., CVS Pharmacy, Inc., Caremark Rx, LLC, and Caremark, LLC—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, basing their motion on equitable estoppel, contended that the plaintiffs should not be allowed to raise claims based on the provider agreements while simultaneously avoiding the arbitration provision.

The Fifth Circuit affirmed the district court’s order to compel arbitration between the plaintiffs and the lone signatory defendant, and 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.

The petitioner presented two questions: (1) Whether the Fifth Circuit erred in failing to apply Arizona’s law of equitable estoppel applicable to contracts generally as required by Arthur Andersen v. Carlisle, 556 U.S. 624 (2009) in order to determine whether the non-signatories to an arbitration agreement could compel arbitration? (2) Whether the Fifth Circuit erred in failing to honor the terms of an arbitration agreement that specifically prohibited third parties such as Respondents from enforcing its terms?

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

News: RICO