18th Annual Workplace Class Action Report - 2022 Edition

644 Annual Workplace Class Action Litigation Report: 2022 Edition between OfferUp and Defendant, the Court declined to find that one existed, and thus it ruled that the arbitration provision could not be enforced on the basis of agency. For these reasons, the Court denied Defendant’s motion to compel arbitration. Stafford v. Rite Aid Corp., 2021 U.S. App. LEXIS 15182 (9th Cir. May 21, 2021). Plaintiff, a prescription drug consumer, brought a putative class action alleging that Defendant fraudulently inflated the reported prices of prescription drugs to insurance companies, which resulted in putative class members paying a higher co- payment for their drugs. Although Defendant and Plaintiff had no contract between them containing an arbitration clause, Defendant did have such contracts with the intermediaries who coordinated insurance reimbursements and co-payment calculations, called “pharmacy benefits managers.” Defendant moved to compel Plaintiff to arbitrate his claims through the theory of equitable estoppel. Defendant argued that Plaintiff’s claims were intertwined with Defendant’s contracts with the pharmacy benefits managers. According to Defendant, it would be unfair to permit Plaintiff to sue in court for relief provided by contracts with arbitration clauses. The District Court denied Defendant’ s motion to compel arbitration on the grounds that principles of equitable estoppel did not bind Plaintiff to the arbitration agreements in contracts to which he was not a signatory, inasmuch as Plaintiffs claims were not based upon Defendant’s breach of its contracts with the pharmacy benefits managers. Instead, the District Court reasoned that Plaintiff sought recovery under California law for Defendant’s fraudulent claims to the pharmacy benefits managers that had the effect of increasing the cost of his prescription drugs. The District Court also rejected Defendant’s contention that an arbitrator ought to decide arbitrability on the grounds that: (i) there was no valid arbitration clause; and (ii) Plaintiff could not have clearly and unmistakably agreed to submit arbitrability to an arbitrator because he was not a signatory to the contract. On Defendant’s appeal, the Ninth Circuit affirmed the District Court’s order denying Defendant’s motion to compel arbitration. Defendant argued that equitable estoppel bound Plaintiff to arbitrate his claims because his claims were based in part on the contracts between Defendant and the pharmacy benefits managers. The Ninth Circuit rejected Defendant’s arguments. It found that it was irrelevant whether the contracts between Defendant and the pharmacy benefits managers required Defendant to report the usual and customary price of a prescription drug. Even if the contracts contained no provision requiring Defendant to report the usual and customary price, the Ninth Circuit reasoned that the fact remained that it did report that information and allegedly purposely inflated it. Further, the Ninth Circuit determined that Defendant’s duty not to commit fraud was independent from any contractual requirements with the pharmacy benefit managers. Additionally, the Ninth Circuit pointed out that statutes and common law – not provisions in the contracts – entitled Plaintiff to relief. As such, the Ninth Circuit held that the principles of equitable estoppel did not require Plaintiff to submit to arbitration based on clauses of contracts between Defendant and the pharmacy benefits managers. For these reasons, the Ninth Circuit affirmed the District Court’s denial of Defendant’s motion to compel arbitration. Staley, et al. v. Gilead Sciences, Inc., Case No. 19-CV-2573 (N.D. Cal. March 12, 2021). Plaintiffs, a group of direct and indirect purchasers of HIV drugs, filed three separate class actions alleging that Defendants, a group of pharmaceutical companies that manufacture HIV drugs, conspired together to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act as well as various state antitrust laws. Plaintiff Stanley represented direct purchasers of Defendants’ HIV drugs, while indirect purchasers McKesson and Kerr assigned their claims to Plaintiff KPH and Plaintiff FWK, respectively. Id. at 2. According to Plaintiffs, Defendants executed a number of “No Generic Restraints” agreements barring these pharmaceutical manufacturers from creating alternative HIV drugs using generic pharmaceuticals, thereby restricting trade and keeping HIV drug prices artificially high. Id. at *5. Defendants filed a motion to compel arbitration. The Court conditionally denied Defendants’ motion to compel arbitration. Defendants moved to compel the arbitration of Plaintiffs KPH and FWK’s antitrust claims on the grounds that assignors McKesson and Kerr signed distribution agreements with an affiliate of Defendant Janssen that contained arbitration clauses. Defendants’ argument relied on the concept of equitable estoppel, and the Court noted that, for this doctrine to apply, there must be a relationship between the claims at issue and the contract containing the arbitration provision. Id. at 13. The Court found equitable estoppel to be inapplicable because Plaintiffs’ claims alleged a conspiracy based on Defendants’ “No Generic Restraints” contracts and did not rely on the Janssen distribution agreements at all. Id . at *9. The Court also pointed out that the Janssen distribution agreements contained clear language restricting the scope of arbitration to only parties to the contract. Accordingly, the Court denied Defendants’ motion to compel on the