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Catamaran Corp. v. Towncrest Pharmacy

United States Court of Appeals, Eighth Circuit

July 28, 2017

Catamaran Corporation Plaintiff-Appellant
Towncrest Pharmacy; Clark's Pharmacy; Meyer's Healthmart Pharmacy; Osterhaus Pharmacy Defendants - Appellees

          Submitted: April 6, 2017

         Appeal from United States District Court for the Southern District of Iowa - Des Moines

          Before SMITH, Chief Judge, SHEPHERD, Circuit Judge, and FENNER, [1] District Judge.

          SHEPHERD, Circuit Judge.

         This case presents a question of first impression in this circuit: whether a court or an arbitrator should determine whether an arbitration agreement authorizes class arbitration. After reviewing relevant Supreme Court precedent and the opinions of our sister circuits, we hold that a court must decide the question because of the fundamental differences between bilateral and class arbitration.


         Catamaran Corp.[2] operates as a pharmacy benefit manager. It contracts with entities that sponsor, administer, or otherwise participate in prescription drug benefit plans. Among the services Catamaran provides is reimbursing pharmacies who furnish prescription drugs to individuals covered by such a plan. The defendants in this case are four pharmacies who have agreements with Catamaran for reimbursements.

         There are two relevant agreements here.[3] One agreement was with SXC Health Solutions Corp., a predecessor in interest to Catamaran. The other agreement was with Catalyst Health Solutions, Inc., also a predecessor in interest to Catamaran. Each of the four pharmacies were parties to these agreements, which were brokered on their behalf by AccessHealth, a pharmacy services administration organization comprised of some 85 independent pharmacies. AccessHealth acted as the attorney-in-fact for the pharmacies in these two agreements.

         The SXC Agreement contains an arbitration provision stating that if "any disputes arising during the term of this Agreement" cannot be resolved informally, then "either party may submit the dispute to binding arbitration in accordance with the Rules for the Conduct of Arbitration of the American Arbitration Association [AAA] . . . in effect at the date of commencement of such arbitration." The Catalyst Agreement contains a similar provision: "Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the applicable rules of the [AAA]." Neither agreement uses the word "class" or refers to class arbitration. The AAA Supplementary Rules for Class Arbitration permit class arbitration and give arbitrators the power to decide whether an agreement contemplates class arbitration.

         Eventually, a dispute arose between Catamaran and the four pharmacies. The pharmacies filed a demand for class arbitration with the AAA, asserting claims on behalf of themselves and similarly situated independent pharmacies-a class of over 85 pharmacies.

         Catamaran responded by filing a declaratory judgment action under 28 U.S.C. § 2201 and the Federal Arbitration Act (FAA) in the district court. Catamaran sought declaratory relief and an injunction preventing the pharmacies from proceeding with class arbitration. Catamaran then moved for summary judgment, arguing that the relevant agreements do not permit the pharmacies to proceed to arbitration as a class. Rather, Catamaran contends that each pharmacy must engage Catamaran in bilateral arbitration proceedings.

         After oral arguments, the district court denied Catamaran's motion for summary judgment. The court viewed the issue before it as twofold: (1) whether the availability of class arbitration is a substantive or a procedural question; and (2) whether the agreements clearly and unmistakably commit the class arbitration question to an arbitrator. On the first question, the court recognized that the Eighth Circuit has yet to offer an answer. The court surveyed case law from around the country but ultimately did not make any determination on this question. Instead, the court answered the second question in the affirmative. Relying on Eighth Circuit precedent analyzing bilateral arbitration, the court held that the agreements' reference to the AAA rules was a clear and unmistakable commitment for an arbitrator to decide whether the agreements contemplate class arbitration. Catamaran appeals.


         We review de novo a district court's order on a motion for summary judgment. See Lamoureux v. MPSC, Inc., ...

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