Jerry Beeman & Pharmacy Services, Inc. v. Anthem Prescription Management, LLC
652 F.3d 1085
| 9th Cir. | 2011Background
- Plaintiffs own five California pharmacies; Defendants are pharmacy benefit managers who contract with insurers and health plans.
- California Civil Code § 2527(c) requires claims processors to study and identify fees charged by pharmacies for dispensing services every 24 months.
- Section 2527(d) requires the study results to be transmitted to each client of the processor; § 2528 imposes penalties for violations.
- Plaintiffs sued in federal court under diversity jurisdiction, alleging § 2527 violations; district court denied motions for judgment on the pleadings.
- California state appellate courts by ARP, A.A.M. Health, and Bradley held § 2527 unconstitutional under the California Constitution’s free speech provision; the district court declined to follow Erie.
- The Ninth Circuit consolidated Beeman 02 and Beeman 04 on interlocutory appeal and addressed whether § 2527 violates the U.S. or California Constitutions, applying Erie deference and First Amendment analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Erie/Eñe requires following California appellate decisions | Beeman 02/04/Bradley control state law | Erie requires federal court independence when state high court would decide differently | Eñe does not bind; we may disregard state appellate holdings |
| whether § 2527 violates the First Amendment | Statute compels speech in violation | Pricing data disclosure is non-ideological and not subject to heightened scrutiny | § 2527 does not compel protected speech; no First Amendment violation |
| whether § 2527 violates California Constitution, art. I, § 2 | California Constitution protects broader free speech | State high court would view it differently under state doctrine | California Supreme Court would construe § 2527 consistently with First Amendment; constitutional |
| facial vs. as-applied challenge | Challenge to statute itself would fail only in applied context | Challenge to law as applied to enforcement actions suffices | Facial challenge accepted; statute constitutional on its face |
| whether speech at issue is commercial speech requiring Zauderer-style scrutiny | Disclosures relate to commerce and may chill speech | Not purely commercial speech; scrutiny inapplicable | Not commercial speech; no heightened scrutiny; no constitutional violation |
Key Cases Cited
- ARP Pharmacy Servs. Inc. v. Gallagher Bassett Servs., Inc., 138 Cal.App.4th 1307 (Cal. Ct. App. 2006) (California free-speech holding on § 2527)
- TDI Managed Care, Inc. v. Beeman, 449 F.3d 1038 (9th Cir. 2006) (Erie/standing and constitutional analyses in context)
- Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47 (U.S. 2006) (compelled speech framework for context (FAIR))
- Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781 (U.S. 1988) (compelled factual disclosures subject to First Amendment scrutiny)
- Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (U.S. 2011) (facts as speech; content-based burdens trigger scrutiny)
- Gallo Cattle Co. v. Kawamura, 159 Cal.App.4th 948 (Cal. Ct. App. 2008) (California free-speech doctrine; state vs federal approach)
- Gerawan Farming, Inc. v. Lyons, 24 Cal.4th 468 (Cal. 2000) (California constitutional breadth on speech)
- Kasky v. Nike, Inc., 27 Cal.4th 939 (Cal. 2002) (California free speech broader than First Amendment in certain contexts)