Bellevue Drug Co. v. CaremarksPCS
700 F.3d 109
3rd Cir.2012Background
- Plaintiffs Bellevue Drug Co., Robert Schreiber, Inc., and Rehn-Huerbinger Drug Co. (collectively Plaintiffs) sued AdvancePCS alleging Sherman Act antitrust violations related to PBM arrangements.
- Plaintiffs and AdvancePCS entered into Pharmacy Provider Agreements containing a broad arbitration clause covering all controversies arising from the Agreement.
- AdvancePCS litigated in district court for over ten months, including a 12(b)(6) motion and a motion for reconsideration, before moving to compel arbitration.
- Judge Robreno granted arbitration and stayed the federal action; the district court subsequently stayed/arbitration-related proceedings and, after MDL transfer, Judge Fullam vacated the arbitration order for public-policy reasons.
- On remand, Judge Jones eventually dismissed Plaintiffs’ claims with prejudice in 2012, while AdvancePCS pursued appellate avenues under the FAA.
- The issue on appeal is whether AdvancePCS waived its right to arbitrate by litigating in federal court prior to seeking arbitration; the court reverses, ruling waiver occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of right to arbitrate due to litigation conduct | AdvancePCS waived arbitration by extended court litigation | Waiver not established; arbitrator should decide | Waiver established; reverse arbitration order |
| Enforceability of arbitration clause avoided due to waiver | Clause unenforceable because of waiver-related prejudice | Waiver analysis controls; enforceability not reached | Not reached; court addressed waiver first |
Key Cases Cited
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (U.S. 2000) (final decision under FAA can review arbitration compelled orders via §16(a)(3))
- Blair v. Scott Specialty Gases, 283 F.3d 595 (3d Cir. 2002) (final decision with respect to arbitration analyzed under Randolph)
- Gray Holdco, Inc. v. Cassady, 654 F.3d 444 (3d Cir. 2011) (waiver analysis using Hoxworth factors; de novo review of overall prejudice)
- Nino v. Jewelry Exchange, Inc., 609 F.3d 191 (3d Cir. 2010) (six-factor framework for prejudice in waiver of arbitration)
- Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3d Cir. 2007) (prejudice from litigation delay supports waiver)
- Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912 (3d Cir. 1992) (premised six-factor test for waiver in arbitration disputes)
- PaineWebber Inc. v. Faragalli, 61 F.3d 1063 (3d Cir. 1995) (illustrates timing and discovery considerations in waiver analysis)
- Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir. 2004) (arbitration demand timing relative to suit impacted waiver outcome)