Catamaran Corporation v. Towncrest Pharmacy
2017 U.S. App. LEXIS 13689
8th Cir.2017Background
- Catamaran (successor to SXC and Catalyst) and four pharmacies (represented by AccessHealth) signed reimbursement agreements that include arbitration clauses referencing the AAA rules but do not mention "class" arbitration.
- Pharmacies filed a demand for class arbitration under the AAA Supplementary Rules for Class Arbitration on behalf of an 85+ pharmacy class.
- Catamaran sued in federal court for declaratory and injunctive relief under the FAA, seeking to bar class arbitration and compel bilateral arbitration.
- The district court denied Catamaran’s summary judgment, relying on Eighth Circuit precedent holding incorporation of AAA rules gives arbitrators authority to decide arbitrability; Catamaran appealed.
- The Eighth Circuit panel considered whether the availability of class arbitration is a substantive question for courts (absent clear and unmistakable delegation) or a procedural question for arbitrators.
Issues
| Issue | Catamaran's Argument | Pharmacies' Argument | Held |
|---|---|---|---|
| Whether availability of class arbitration is a substantive (court) or procedural (arbitrator) question | Class arbitration is substantive because it fundamentally changes arbitration rights and must be decided by a court absent clear delegation | Incorporation of AAA rules makes arbitrators the decisionmakers on arbitrability, so the arbitrator should decide class availability | Court: class arbitration is a substantive gateway question for courts to decide unless parties clearly and unmistakably delegated it to arbitrator |
| Whether incorporation of AAA rules alone is a clear and unmistakable delegation of the class-arbitration question | Silence about class arbitration and mere AAA incorporation do not clearly show consent to class arbitration or delegation of that specific question | Incorporation of AAA rules is sufficient under Eighth Circuit bilateral-arbitration precedent to delegate arbitrability to arbitrator | Court: incorporation of AAA rules is insufficient to clearly and unmistakably delegate the specific question of class arbitration |
| Whether bilateral-arbitration precedent (Eighth Circuit cases) controls class-arbitration delegation analysis | Precedent on bilateral arbitration is distinguishable and of limited weight for class-arbitration issues | Pharmacies rely on Eighth Circuit bilateral-arbitration cases (Fallo, Green, Eckert/Wordell) to support delegation | Court: bilateral-arbitration cases do not govern class-arbitration delegation because class arbitration raises distinct, fundamental differences |
| Remedy on appeal | Affirm district court denial of summary judgment, let AAA arbitrator decide | Reverse and remand for the district court to determine whether a contractual basis exists for class arbitration | Court: reverse district court order and remand for the court to determine whether contracts contain a contractual basis for class arbitration |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (Supreme Court 2010) (class arbitration changes arbitration’s nature; parties must consent to class arbitration)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (Supreme Court 2002) (courts decide substantive arbitrability questions absent clear delegation)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Supreme Court 1995) (silence/ambiguity is insufficient to delegate arbitrability)
- Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (Supreme Court 2003) (plurality treating class arbitration as procedure for arbitrator)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (Supreme Court 2011) (class procedures undermine arbitration’s advantages)
- Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867 (4th Cir. 2016) (discusses class-arbitration gateway and consequences)
- Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594 (6th Cir. 2013) (classwide arbitrability is a gateway question for courts)
- Opalinski v. Robert Half Int’l Inc., 761 F.3d 326 (3d Cir. 2014) (class arbitration question is for courts absent clear delegation)
- Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746 (3d Cir. 2016) (incorporation of arbitration rules insufficient to delegate class-arbitration question)