Bellevue Drug Co. v. Advance Pcs
| Decision Date | 20 August 2004 |
| Docket Number | No. CIV.A. 03-4731.,CIV.A. 03-4731. |
| Citation | 333 F.Supp.2d 318 |
| Parties | BELLEVUE DRUG CO., Robert Schreiber, Inc., d/b/a Burns Pharmacy, and Rehn-Huerbinger Drug Co., d/b/a Parkway Drugs # 4, on behalf of themselves and all others similarly situated, and the Pharmacy Freedom Fund and the Nat'l Community Pharmacists Ass'n, Plaintiffs, v. ADVANCE PCS, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
H. Laddie Montague, Jr., Jerome M. Marcus, Bart D. Cohen, Berger & Montague, P.C., Philadelphia, PA, for Bellevue Drug Co., Robert Schreiber, Inc., dba Burns Pharmacy, Rehn-Huerbinger Drug Co., dba Parkway Drugs # 4, on Behalf of Themselves and all others Similarly Situated, Pharmacy Freedom Fund, National Community Pharmacists Association, Plaintiffs.
E. Marcellus Williamson, Washington, DC, Erik F. Dyhrkopp, Bell Boyd & Lloyd LLC, Chicago, IL, J. Thomas Rosch, Latham & Watkins LLP, San Francisco, CA, Michael E. Martinez, Michael Sennett, Paula W. Render, Scott M. Mendel, Victor E. Grimm, Bell Boyd & Lloyd LLC, Chicago, IL, Stephen J. Spiegelhalter, Washington, DC, Steven E. Bizar, Eliot G. Long, Buchanan Ingersoll, P.C., Philadelphia, PA, for Advance PCS, Defendant.
The factual background that give rises to this lawsuit and the specific claims asserted by plaintiffs are discussed in detail in the Court's opinion in Bellevue Drug Co. v. Advance PCS, No. 03-4731, 2004 WL 724490, 2004 U.S. Dist. LEXIS 3627 (E.D.Pa. Mar. 2, 2004) and do not bear repeating here. For present purposes, it is sufficient to reiterate only that plaintiffs in this case are individual pharmacies and several pharmacy trade organizations, who have brought a section 1, Sherman Act, 15 U.S.C. § 1, action against Advance PCS ("defendant"), a prescription benefit manager that, among other things, purchases drugs and dispensing services from the pharmacies pursuant to a written agreement (hereinafter referred to as the "Pharmacy Provider Agreement" or "PPA") between the individual pharmacy and the defendant. Presently before the Court is defendant's motion to seek enforcement of the arbitration clause contained in the PPA. For the reasons provided below, the motion will be granted.
Motions to compel arbitration are reviewed, in the first instance, under the well-settled summary judgment standard set forth in Fed.R.Civ.P. 56(c). See E-Time Sys., Inc. v. Voicestream Wireless Corp., No. 01-5754, 2002 WL 1917697, *4, 2002 U.S. Dist. LEXIS 15568, at *16 (E.D.Pa. Aug. 19, 2002) (citing Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 n. 9 (3d Cir.1980)); Trott v. Paciolla, 748 F.Supp. 305, 308 (E.D.Pa.1990). Therefore, movants must prove through "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ... that there is no genuine issue as to any material fact and that [they are] entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The court must consider all of the non-moving party's evidence and construe all reasonable inferences in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Versarge v. Township of Clinton N.J., 984 F.2d 1359, 1361 (3d Cir.1993).
Defendant contends that each of the pharmacy plaintiffs entered into identical but separate PPAs with Advance PCS containing an arbitration agreement (the "Arbitration Agreement"). According to defendant, the Arbitration Agreement is valid and enforceable and plaintiffs' claims fall within its scope. To the extent that there is any disagreement as to whether or not defendant has waived the right to seek arbitration by litigating the instant case in this Court or whether or not certain provisions of the PPA render the Arbitration Agreement unenforceable, defendant asserts that these questions are not for the Court to decide in the first instance, and that rather, these defenses to enforcement of the Arbitration Agreement — presumably based on state contract law — must be submitted to an arbitrator.
Plaintiffs, on the other hand, contend that defendant has waived any right to arbitration by demonstrating an intent to resolve the underlying controversy through litigation rather than arbitration. Plaintiffs also argue that the Arbitration Agreement is "unenforceable" because the PPA limits statutory remedies otherwise available to plaintiffs under the antitrust laws, and because certain fee-shifting and cost-sharing provisions of the Arbitration Agreement financially impair plaintiffs from proceeding with arbitration. Thus, plaintiffs contend that they are effectively precluded from vindicating their statutory rights in the arbitral forum.
There is a strong federal policy in favor of the resolution of disputes through arbitration. Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263 (3d Cir.2003)(citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Accordingly, federal law presumptively favors the enforcement of arbitration agreements. Alexander, 341 F.3d at 263. Before a federal district court entertaining a motion to compel arbitration may order a reluctant party to arbitrate, however, the Federal Arbitration Act (FAA) "requires the court to engage in a limited review to ensure that the dispute is arbitrable — i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement." PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990) (overruled by implication on other grounds by Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), as recognized by Dean Witter Reynolds, Inc. v. Druz, 71 Fed.Appx. 941, 2003 U.S.App. LEXIS 15523 (3d Cir. Aug. 4, 2003)). In making this determination, courts are to look to the relevant state law of contracts. Alexander, 341 F.3d at 264.
Section 9.5 of the PPA provides:
Arbitration. Any an all controversies in connection with or arising out of this Agreement will be exclusively settled by arbitration before a single arbitrator in accordance with the Rules of the American Arbitration Association. The arbitrator must follow the rule of law, and may only award remedies provided in this Agreement. The award of the arbitrator will be final and binding on the parties, and judgment upon such award may be entered in any court having jurisdiction thereof. Arbitration under this provision will be conducted in Scottsdale, Arizona, and Provider hereby agrees to such jurisdiction, unless otherwise agreed to by the parties in writing or mandated by Law, and the expenses of the arbitration, including attorneys' fees will be paid for by the party against whom the award of arbitration is rendered. This Section 9.5 and the parties' rights hereunder shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.
Pharmacy Provider Agreement, at p. 6-7. Under the clause, it is unmistakably clear that the instant dispute falls within the scope of the Arbitration Agreement. See id. (). Plaintiffs have not contested the fact that the scope of the Arbitration Agreement encompasses their antitrust claims against defendant.
Plaintiffs do argue, however, that the motion to compel arbitration should be denied because, by actively litigating the action for the last ten months in this Court, defendants have effectively waived any right to arbitrate under the PPA. Plaintiffs point to the following activity, which has occurred in this case since the complaint was filed on August 15, 2003, to prove that waiver has occurred:
1. A motion to dismiss was filed by Advance PCS on September 25, 2003;
2. Corporate disclosures were filed by Advance PCS on November 5, 2003;
3. The motion to dismiss was denied by the Court on March 2, 2004;
4. A motion for reconsideration and motion for interlocutory appeal was filed by Advance PCS on March 16, 2004;
5. An answer to the complaint was filed by Advance PCS on March 16, 2004;
6. A joint request to continue the pretrial conference was filed by Advance PCS on April 21, 2004;
7. The motion for reconsideration was denied by the Court on May 14, 2004 8. A supplemental corporate disclosure statement was filed by Advance PCS on May 17, 2004;
9. The instant motion to compel arbitration was filed by Advance PCS on June 21, 2004; and
10. A motion to continue the Rule 16 conference was filed by Advance PCS on June 21, 2004, which the Court granted thereby causing the initial pretrial conference and the hearing on the motion to compel arbitration to be moved to July 29, 2004.
While waiver is recognized in the Third Circuit in circumstances where the party seeking arbitration has actively litigated the case, waiver "is not to be lightly inferred." PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir.1995). Before addressing the issue head on, the Court pauses to consider the threshold question of whether or not the arbitrator or the Court should decide the issue of waiver.
Recently, in Howsam, the Supreme Court explained that "question[s] of arbitrability," that is, whether the parties have agreed to submit a particular dispute to arbitration, are limited in scope and primarily concerned "gateway disputes about whether the parties are bound by a given arbitration clause ... [and] whether an arbitration clause in a concededly binding contract applies to a particular type of controversy." 537 U.S. at 83-84, 123 S.Ct. 588. The Supreme Court instructed that "procedural questions which grow out of the dispute and bear on its final disposition are...
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