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Bowie's Priority Care Pharmacy LLC v. CaremarkPCS LLC

United States District Court, N.D. Alabama, Jasper Division

April 26, 2018

CAREMARKPCS, L.L.C., Defendant.


          L. Scott Coogler United States District Judge

         Before this Court is Defendant CaremarkPCS, LLC (“Defendant”)'s Motion to Dismiss and Compel Arbitration. (Doc. 17.) In its Motion, Defendant argues that this case is subject to dismissal in favor of arbitration pursuant to a valid and enforceable written arbitration provision. Plaintiff Bowie's Priority Care Pharmacy (“Plaintiff”) has responded to the Motion, and argues that the arbitration clause upon which Defendant relies is not enforceable because Plaintiff did not agree to be bound by it. For the following reasons, Defendant's Motion to Dismiss is due to be GRANTED.

         I. Facts

         Plaintiff is a local, independently owned pharmacy in Jasper, Alabama. The previous owner of the pharmacy's assets was Richard Bowie, who operated the pharmacy as a sole proprietorship under the name “Bowie's Discount Pharmacy.” In 1996, Bowie's Discount Pharmacy entered into a contract with PCS Health Systems, Inc. (“PCS”) for pharmaceutical benefits management services to be provided by PCS on behalf of Bowie's Discount Pharmacy. Defendant is PCS's successor-in-interest and has the right to enforce the contracts it entered into.

         Bowie's Discount Pharmacy and PCS's relationship was governed by a Provider Agreement. The Provider Agreement also incorporated a separate document titled the “Provider Manual, ” which laid out in detail the rights and obligations of the two parties. In practical terms, Bowie's Discount Pharmacy would fill prescriptions presented by patients or their doctors, and then would submit claims to PCS/ Defendant for reimbursement. Importantly, both the Provider Agreement and the Provider Manual contain arbitration provisions, which mandate that all disputes arising from the parties' relationship under the agreement must be administered exclusively by the American Arbitration Association.

         The parties' direct relationship began when Plaintiff purchased Bowie's Discount Pharmacy from Richard Bowie in 2016 via an Asset Purchase Agreement. Plaintiff continued to run the pharmacy as “Bowie's Discount Pharmacy” to utilize longstanding customer goodwill. Plaintiff likewise continued its predecessor's relationship with Defendant by filling prescriptions and complying with all other obligations under the Provider Manual. (Doc. 1 ¶ 4 (“[Plaintiff] and [Defendant] are in a contractual relationship under which [Plaintiff] is a participating pharmacy in [Defendant]'s pharmacy network.”)

         The parties' dispute arose in September 2017 when an independent contractor hired by Defendant conducted an audit of Plaintiff's pharmacy operations. The purpose of the audit was to review the underlying basis for claims that Plaintiff had submitted to Defendant, and received payment for, in the time period running from August 1, 2016, until July 31, 2017. Plaintiff prepared for the September 27, 2017 audit by gathering information on specific patients and prescriptions as requested by Defendant. The contractor, however, did not appear on September 27; she informed Plaintiff that she would be arriving the following day. On September 28, 2017, the contractor indeed performed the audit, but with a modified list of patients and prescriptions that differed from the earlier list submitted by Defendant.

         After the audit, Defendant sent a list of “discrepant” claims to Plaintiff. Apparently, a claim for payment is discrepant when it was submitted by Plaintiff to Defendant without adequate documentation. Plaintiff submitted additional documentation to Defendant, which brought the cash value of those discrepant claims to a tenth of the original amount. On December 13, 2017, Defendant sent to Plaintiff a letter stating that it had completed Plaintiff's audit, and that “[Defendant] will begin withholding funds from future claims payments, as authorized by the Provider Agreement and in accordance with applicable state Law.” (Doc. 1 ¶ 39.)

         Three weeks later, Plaintiff received another letter from Defendant, which stated that Defendant's claims payments were subject to “temporary payment withholding” (“TPW”) under the Provider Agreement. TPW is a drastic step in a pharmaceutical benefits management relationship. Under TPW, the manager, here Defendant, ceases to reimburse the pharmacy, here Plaintiff, for prescriptions already filled but not paid and ceases all future payments until the TPW is removed. Plaintiff alleges that due to TPW, Defendant has withheld over $300, 000 in reimbursements under their agreement.

         II. Standard of Review

         The standard of review for a motion seeking to compel arbitration is analogous to a summary judgment motion. See In re Checking Account Overdraft Litig., 754 F.3d 1290, 1294 (11th Cir. 2014) (describing an order compelling arbitration as “summary-judgment-like” because it is “in effect a summary disposition of the issue of whether or not there has been a meeting of the minds on the agreement to arbitrate”) (citations omitted); see also Fleetwood Enters, Inc. v. Bruno, 784 So.2d 277, 280 (Ala. 2000). Where the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law, ” a court shall grant a motion for summary judgment. Fed.R.Civ.P. 56(a). A fact is material “if, under the applicable substantive law, it might affect the outcome of the case.” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir. 2004). A genuine dispute as to a material fact exists where “the nonmoving party has produced evidence such that a reasonable factfinder could return a verdict in its favor.” Waddell v. Valley Forge Dental Assocs., Inc., 276 F.3d 1275, 1279 (11th Cir. 2001).

         III. Discussion

         a. The Existence of a Binding Contract

         If there is an arbitration agreement governing the parties' dispute, it is governed by the Federal Arbitration Act (the “FAA”), 9 U.S.C. §§ 1 et seq., which “embodies a liberal federal policy favoring arbitration agreements.” Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th Cir. 2005) (quotation marks omitted). Indeed, the Eleventh Circuit has recognized that the FAA creates a “presumption of arbitrability” such that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Dasher v. RBC Bank (USA), 745 F.3d 1111, 1115-16 (11th Cir. 2014) (quotation marks omitted); see Granite Rock Co. v. Int'l Bd. Of Teamsters, 561 U.S. 287, 298 (2010). Nonetheless, “while doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made.” Dasher, 745 F.3d at 1116 (citation omitted); see Granite Rock, 561 U.S. at 301 (directing courts to “apply[] the presumption of arbitrability only” to “a validly formed and enforceable arbitration agreement”). “The threshold question of whether an arbitration agreement exists at all is ‘simply a matter of contract.'” Bazemore v. Jefferson Capital Sys., LLC, 827 F.3d 1325, 1329 (11th Cir. 2016) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995)). Absent such an agreement, “a court cannot compel the parties to settle their dispute in an arbitral forum.” Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004).

         Plaintiff disputes the existence of a binding agreement to arbitrate between itself and Defendant. Defendant points to the Provider Agreement and the Provider Manual, both of which include arbitration clauses, as valid contracts between the parties. “[I]n determining whether a binding [arbitration] agreement arose between the parties, courts apply the contract law of the particular state that governs the formation of contracts.” Bazemore, 827 F.3d at 1329 (alteration in original) (quoting Caley, 428 F.3d at 1368). While Defendant argues that a choice-of-law provision in the Provider Manual mandates that Arizona law govern all disputes, that provision is only binding if a contract exists. Because the Court cannot apply the choice-of-law clause until it determines that the parties have a valid contract, it applies Alabama law to determine whether a contract exists between the parties. St. Paul Fire & Marine Ins. Co. v. ERA Oxford Realty Co. Greystone, LLC, 572 F.3d 893, 894 n.1 (11th Cir. 2009) (“A federal court sitting in diversity, as in this case, must apply the choice of law principles of the state in which it sits. In determining which state's law applies in a contract dispute, Alabama follows the principle of lex ...

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