Hopkinton Drug, Inc. v. CaremarkPCS, L.L.C.

• Citation: 77 F.Supp.3d 237
• Decision Date: 05 January 2015
• Docket Number: Civil Action No. 14–12794–WGY.
• Parties: HOPKINTON DRUG, INC., Plaintiff, v. CAREMARKPCS, L.L.C. CVS Caremark, Corp., Defendants.
• Court: U.S. District Court — District of Massachusetts

77 F.Supp.3d 237

HOPKINTON DRUG, INC., Plaintiff

v.CAREMARKPCS, L.L.C. CVS Caremark, Corp., Defendants.

Civil Action No. 14–12794–WGY.

United States District Court, D. Massachusetts.

Signed Jan. 5, 2015.

Lawrence G. Green, Burns & Levinson LLP, Boston, MA, Christopher L. Ayers, Burns & Levinson LLP, Providence, RI, for Plaintiff.

Robert H. Griffith, Foley & Lardner LLP, Chicago, IL, Lawrence M. Kraus, Foley & Lardner LLP, Boston, MA, for Defendants.

MEMORANDUM

YOUNG, District Judge.

I. INTRODUCTION

In this emergency action, CaremarkPCS, L.L.C. and CVS Caremark Corporation (collectively, “Defendants” or “CVS Caremark”), moved to compel the plaintiff, Hopkinton Drug, Inc. (“Hopkinton”) to submit to arbitration most of the claims asserted in its complaint, and to stay any remaining claims. Hopkinton, in reply, argued that the arbitration agreement is invalid and, even if it is valid, does not cover the actions at issue in this lawsuit.

The relationship between the parties is governed by a broad arbitration clause which compels arbitration. This Court does, however, retain the authority to issue a preliminary injunction and may develop the factual record necessary to do so. Before doing so, however, it needed to assure itself that the conduct Hopkinton originally sought to enjoin has not yet occurred; if it has, a preliminary injunction would be moot and could not be issued.

A. Procedural History

On June 30, 2014, Hopkinton filed a five-count complaint against the Defendants, in which it sought injunctive and monetary relief. Verified Compl. & Jury Demand, ECF No. 8. On that same day, it also filed an emergency motion for a temporary restraining order (“TRO”). Emergency Mot. TRO, ECF No. 3. This Court held a hearing two days later, on July 2, 2014, at which time, as is its wont, it combined the TRO motion with a trial on the merits pursuant to Federal Rule of Civil Procedure 65(b), and placed the case on the running trial list for September 2014. The next day, on July 3, Hopkinton filed an amended complaint, which added an additional count seeking confirmation of a previously issued arbitration award entered in its favor and against the Defendants. Verified Am. Compl. & Jury Demand (“Compl.”), ECF No. 12.

That same day, the Defendants filed a motion to compel arbitration, along with an accompanying memorandum. Defs.' Mot. Compel Arbitration, ECF No. 13; Mem. Law Supp. Defs.' Mot. Compel Arbitration (“Defs.Mem.”), ECF No. 14. Hopkinton responded on July 10, 2014. Pl.'s Mem. Law Opp'n Defs.' Mot. Compel Arbitration (“Pl.'s Opp'n”), ECF No. 16. The Defendants replied on July 14, 2014. Reply Supp. Defs.' Mot. Compel, Arbitration (“Defs.' Reply”), ECF No. 23.

The Court heard the matter on an expedited basis on July 17 and 18, 2014. Elec. Notice, July 14, 2014, ECF No. 21.

B. Concerning Arbitration¹

Hopkinton is an independent pharmacy, which specializes in compounded pharmaceuticals (i.e., “preparing on a prescription-by-perception basis compounded medications for patients who cannot take standard prescriptions.”). Compl. ¶¶ 7–8. CVS Caremark is a national pharmacy operator. Caremark entered into a provider agreement (the “Provider Agreement”) with Hopkinton whereby Hopkinton agreed to fill prescriptions for health care plan members for which CVS served as a pharmacy benefits manager (“PBM”).² Id. ¶ 13. On June 23, 2014, CVS Caremark issued a written notice to Hopkinton, alleging that Hopkinton was not in compliance with the Provider Agreement, and that it would terminate Hopkinton's rights under the agreement. Id. ¶¶ 16, 19.

The relationship between Hopkinton and CVS is governed, as discussed above, by the Provider Agreement, which incorporates by reference a provider manual (the “Provider Manual”). The Provider Manual sets out further details governing the contractual obligations among the parties. See Defs.' Mem., Ex. 6, Decl. Wendy Walker, Ex. C, Provider Agreement, ECF No. 14–6. The parties first entered into the Provider Agreement in 1995, and it governs the contractual relationship today. See Defs.' Mem., Ex. 6, Decl. Wendy Walker 2. The Provider Agreement includes a clause requiring all disputes to be settled by an arbitrator, Provider Agreement § 9.5, as well as a provision allowing Caremark to amend the agreement or manual “by giving notice to the Provider of the terms of the amendment and specifying the date the amendment becomes effective.” Id. § 1.3. By agreement, Arizona law applies to any substantive disputes. Id. § 9.4.

The Provider Manual also includes an arbitration clause. Complicating the dispute, there are two Manuals at issue here: one issued in 2011 (the “2011 Manual”), and one issued in 2014 (the “2014 Manual”).

As is relevant for arbitration purposes, the 2011 Agreement provides that:

Any and all disputes in connection with or arising out of the Provider Agreement by the parties 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 for in the Provider 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. Any such arbitration must be conducted in Scottsdale, Arizona, and Provider agrees to such a jurisdiction, unless otherwise agreed to by the parties in writing. The expenses of arbitration, including reasonable attorney's fees, will be paid for by the party against whom the award of the arbitrator is rendered. Except as may be required by Law, neither a party nor an arbitrator may disclose the existence, content or results of any dispute or arbitration hereunder without the prior written consent of both parties. Arbitration shall be the exclusive and final remedy for any dispute between the parties in connection with or arising out of the Provider agreement; provided, however, that nothing in this provision shall prevent either party from seeking injunctive relief for breach of this Provider Agreement in any state or federal court of law.

Pls.' Opp'n, Ex. 1, 2011 Provider Manual, ECF No. 16–1. The manual further provides that the contract is not static, but rather:

From time to time ... Caremark may amend the Provider Agreement ... by giving notice to the Provider of the terms of the amendment and specifying the date the amendment becomes effective. If Provider submits claims to Caremark after the effective date of any notice or amendment, the terms of the notice or amendment is accepted by Provider and is considered part of the Provider Agreement.

Id. Pursuant to that authority, on November 15, 2013, CVS sent Hopkinton a cover letter accompanied by a new Provider Manual which “supersedes all previous versions of the Provider Manual” as of January 1, 2014. Defs.' Mem., Ex. 6, Decl. Wendy Walker, Ex. A, Caremark Letter, ECF No. 14–6. Wendy Walker, CaremarkPCS's Director of Contracting Communications, averred that Hopkinton Drug submitted claims after January 1, 2014, the effective date of the 2014 Provider Manual. Defs.' Mem., Ex. 6, Decl. Wendy Walker 3.

In turn, the 2014 Manual provides that:

Any and all disputes between Provider and Caremark (including Caremark's employees, parents, subsidiaries, affiliates, agents and assigns) (collectively referred to in this Arbitration section as “Caremark”), including but not limited to disputes in connection with, arising out of, or relating in any way to, the Provider Agreement or to Provider's participation in one or more Caremark networks or exclusion from any Caremark networks, will be exclusively settled by arbitration. Unless otherwise agreed to in writing by the parties, the arbitration shall be administered by the American Arbitration Association (“AAA”) pursuant to the then applicable AAA Commercial Arbitration Rules and Mediation Procedures (available from the AAA). In no event may the arbitrator(s) award indirect, consequential, or special damages of any nature (even if informed of their possibility), lost profits or savings, punitive damages, injury to reputation, or loss of customers or business, except as required by law. The arbitrator(s) shall have exclusive authority to resolve any dispute relating to the interpretation applicability, enforceability or formation of the agreement to arbitrate, including, but not limited to any claim that all or part of the agreement to arbitrate is void or voidable for any reason. The arbitrator(s) must follow the rule of Law, and the award of the arbitrator(s) will be final and binding on the parties, and judgment upon such award may be entered in any court having jurisdiction thereof. Any such arbitration must be conducted in Scottsdale, Arizona and Provider agrees to such jurisdiction, unless otherwise agreed to by the parties in writing. The expenses of arbitration, including reasonable attorney's fees, will be paid for by the party against whom the award of the arbitrator(s) is rendered, except as otherwise required by Law.

Arbitration with respect to a dispute is binding and neither Provider nor Caremark will have the right to litigate that dispute through a court. In arbitration, Provider and Caremark will not have the rights that are provided in court, including the right to a trial by judge or jury. In addition, the right to discovery and the right to appeal are limited or eliminated by arbitration. All of these rights are waived and disputes must be resolved through arbitration.

No dispute between Provider and Caremark may be pursued or resolved as part of a class action, private attorney general or other representative action or proceeding (hereafter all included in the term “Class Action”). All disputes are subject to arbitration on an individual basis, not on a class or representative basis, and the arbitrator(s) will not resolve Class Action disputes and will not consolidate arbitration proceedings. Provider and Caremark agree that each

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