Robert D Mabe Inc v. OptumRx ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________________
No. 21-2192
_______________________
ROBERT D. MABE, INC.; ABINGTON PHARMACY,
INC.;
JAC STORES, INC.; BIEN PHARMACY, INC.; BLENDE
DRUG, INC.;
WULLSTEIN PHARMACY, INC.;
BUCHANAN BROTHERS PHARMACY, INC.;
CARROLL APOTHCARY, INC.; CARROLL
APOTHCARY, LTC.;
CONCORD, INC.; DELRAY SHORES PHARMACY,
INC.;
K.V.H., INC.; ELLENSBURG DOWNTOWN
PHARMACY, INC.;
ERIC'S RX SHOPPE, LLC; FERGUSON REXALL
DRUG, INC.;
FOX DRUG, INC.; CATHRON, INC.; KZ
ENTERPRISES, LLC;
RCH PHARMACY SERVICES, LTD.; PHARMACY
SERVICES, INC.;
HINES PHARMACY, INC.; HINES PHARMACY AT
WKOA.;
E R BLACK PHARMACY, INC.; FAMILY
PHARMACY;
J&S PROFESSIONAL PHARMACY, INC.;
VOSMEK DRUG STORE, INC.;
MESA PHARMACY OF PUEBLO, INC.;
PARKWAY DRUGS OF ONEIDA COUNTY;
PARKWAY DRUGS OF ONEIDA COUNTY NORTH,
INC.;
PARKWAY DRUGS OF ONEIDA COUNTY SOUTH,
INC.;
STREET ROAD PHARMACY, INC.;
PHILADELPHIA PHARMACY, INC.; PHILIP E.
PEPPER, INC.;
PRESSMAN, INC.; CHELSEA DRUGS, INC.;
RASHID PHARMACY, PLC; SHAKTI PHARMACY,
INC.;
RED CROSS PHARMACY, INC.;
REED DISCOUNT PHARMACY, INC.; REED
PHARMACY, INC.;
GNSP CORP.; SAVALL DRUG, INC.; L&M
PHARMACY, INC.;
SUBURBAN BUSTLETON PHARMACY, INC.;
RCL PHARMACY SERVICES, INC.;
OPERA HOUSE PHARMACY COMPANY; SPIVACK,
INC.;
TOWN AND COUNTRY PHARMACIES, INC.;
WILLIAM J. FARLANDER, INC.; WHITMAN
PHARMACY;
2
MEDS AND MORE, INC., d/b/a Meds & More;
CARROLLTON DRUGS, INC., d/b/a Carrollton Drugs;
BOWEN PHARMACY, LLC, d/b/a Bowen Pharmacy;
BALL GROUND PHARMACY, LLC, d/b/a Ball Ground
Pharmacy;
BREN-MAK, LLC, d/b/a Corner Drugs;
HITCHCOCK RX, INC., d/b/a Jack's Discount Pharmacy;
LITTLE DRUG COMPANY, LLC, d/b/a Little Drug
Company;
BROWN'S DRUG STORE, d/b/a Brown's Drug Store;
PARKHILL PHARMACY, INC., d/b/a Lopez Island
Pharmacy;
ANKENY APOTHECARY, INC., d/b/a Medicap
Pharmacy #8015;
PROFESSIONAL PHARMACY, LLC, d/b/a Professional
Pharmacy;
DESERT SKY PHARMACY, LLC, d/b/a Desert Sky
Pharmacy;
MT. VERNON COMMUNITY PHARMACY, INC.,
d/b/a The Medicine Shoppe, #0560;
BEDFORD PHARMACY, INC., d/b/a Bedford Pharmacy;
MEDSCENE, INC., d/b/a Crown Drugs;
DELCO PHARMACY, INC., d/b/a Delco Pharmacy;
LINSON PHARMACY LIMITED (S-Corp), d/b/a Linson
Pharmacy;
TAMP, INC., d/b/a Pomarico's Pharmacy;
REDNER'S MARKETS, INC.,
d/b/a Redner's Pharmacy, Redner's Pharmacy #21,
3
Redner's Pharmacy #22, Redner's Pharmacy #23;
WASHCHKO'S PHARMACY, INC., d/b/a Waschko's
Pharmacy
LARSEN SERVICE DRUG, INC.,
d/b/a Larsen Service Drug-New Town and Larsen Service
Drug-Watford City;
KELLY KIDZ, d/b/a Kapler's Pharmacy;
8TH STREET PHARMACY, LLC, d/b/a 8th Street
Pharmacy;
ACADEMY PHARMACY, LLC, d/b/a Academy
Pharmacy;
BOUNT'S MUTUAL DRUGS, INC., d/b/a Blount's Mutual
Drugs;
PUBLIC DRUG COMPANY; CHAPMAN
HEALTHCARE PHARMACY, INC.;
CHELTEN DRUG INC.; COBB'S WESTSIDE
PHARMACY, INC.;
CRITTENDEN'S DRUG, INC.; DAHLONEGA
PHARMACY, INC.;
DON'S PHARMACY, INC.; NEFF DRUGS 8, LLC;
FRIENDLY PHARMACY, INC.; FRIENDSHIP
PHARMACY, INC.;
GLENDALE PRESCRIPTION CENTER, INC.;
GOOD PHARMACY, LLC; HEREFORD PHARMACY,
INC.;
HANDI CAPABLE, INC.; BHS; PHARMACY CARE
CENTERS, LLC;
PHREDS DRUG, INC.; PROFESSIONAL PHARMACY
4
OF OXFORD, LLC;
RANN PHARMACY, INC.; REESER'S PHARMACY,
INC.;
SMITH BROTHERS DRUG COMPANY, INC.;
SOUTH END PHARMACY, INC.;
OLD BALTIMORE PIKE APOTHECARY, INC.;
SSJARS, INC.; TOTAL CARE RX, INC.;
BOYD'S PHARMACY OF BORDENTOWN, INC.;
BOYD'S PHARMACY OF FLORENCE, INC.;
CRYSTAL CITY APOTHECARY, LLC; GAYCO, INC.;
NOVA STAR PHARMACY, INC.; R W GROUP, INC.;
RIPLEY DRUG CO.;
SHIRLEY COURT PHARMACY, INC.; ADD, INC.;
WAKEEM, INC.;
WALLY'S PHARMACY, INC.; WALTER'S
PHARMACY, INC.;
BOYD'S PHARMACY OF MANSFIELD, INC.;
BOYD'S PHARMACY OF MEDFORD, INC.;
BOYD'S PHARMACY OF PEMBERTON, INC.; CABEL
L. JONES, III;
COMMUNITY DRUG, INC.; MEG'S PHARMACY, INC.;
COLOSSEUM, INC.; DAMIANO PHARMACY (S-Corp)
DAVIS CUT RATE DRUGS, INC.; DR. IKE, INC.;
ESTERBROOK PHARMACY, LLC; BOBO DRUGS,
INC.;
PHARMAKON, LLC; FUNK PHARMACY, INC.;
GATEWAY PHARMACY OF PHOENIXVILLE, INC.;
HARBOR DRUG, INC.; HEALTHY WAY PHARMACY,
5
INC.;
NRX RX, INC.; PELELLA APOTHECARY, INC.; JBD,
INC.;
HENRIETTA PHARMACY;
HOLLYWOOD DISCOUNT PHARMACY, INC.;
BROWN & GOBIN, INC.;
LONOKE HEALTH & WELLNESS; MACE
PHARMACY, INC.;
MALAND, INC.; MEDISAVE, INC.; LAMAR &
SEYMOUR, LLC.;
MT. CARAMEL MEDICAL; NEWHARD PHARMACY,
INC.;
SYL-MAX PHARMCARE, INC.; PEOPLES DRUG
STORE;
PHARMACY CARE, INC.; PHARMAHEALTH
HAWTHORN, INC.;
PHILLIPS DRUGS, INC.; POINCIANA PHARMACY,
LLC.;
POTTERVILLE PHARMACY, INC.; DAO PHARMACY,
INC.;
PAUL REED ENTERPRISES, INC.(S-Corp);
QUIK-STOP PHARMACY OF BARLEY STN, INC.;
RICCIO FAMILY PHARMACY, INC.;
RINGS DRUGS, LTD.; MMRX HEALTHSOLUTIONS,
INC.;
RX EXPRESS; ROCKWOOD PHARMACY;
S & S CORPORATION; SCHAEPER PHARMACY,
INC.;
6
SEAWAY PHARMACY, PC.;
SHERMAN'S APOTHECARY PHARMACY, INC.,
d/b/a Sherman's Apothecary Pharmacy;
SMITH'S PHARMACY II, INC., Smith's Pharmacy II;
SMITH'S PHARMACY III, INC., d/b/a Smith's Pharmacy
III;
SOUTHERN DISCOUNT DRUGS OF CHARLESTON,
INC.,
d/b/a Southern Discount Drugs of Charleston;
MEDICINE SHOPPE, LTD, d/b/a Stephens Pharmacy;
REVRAC INDUSTRIES, INC., d/b/a Stony Point
Pharmacy;
RICHARD L. BERRY PHARMACY, INC.,
d/b/a The Medicine Shoppe #1086 and The Medicine
Shoppe#1759;
WILSON DRUG, INC., d/b/a Tillamook Pharmacy;
FLEMING PHARMACIST GROUP, INC.,
d/b/a Total Care Pharmacy#1 and Total Care Pharmacy #2;
GRANT PHARAMACIST GROUP, INC.,
d/b/a Total Care Pharmacy #3 and Total Care Pharmacy #4;
PENDLETON PHARMACIST GROUP, INC.,
d/b/a Total Care Pharmacy #5;
ROWAN PHARMACIST GROUP, INC.,
d/b/a Total Care Pharmacy #6 and total Care Pharmacy #7;
KL ARNOLD ENTERPRISE, INC.,
d/b/a West Point Pharmacy;
VISELS DRUG STORE, INC., d/b/a Visels Pharmacy;
JGBLA, INC., d/b/a West Hempstead Pharmacy;
7
RJ PROFESSIONALS, INC., d/b/a Young's Pharmacy;
RUDI PHARMACY, INC., d/b/a Philadelphian Pharmacy;
WALKER DRUG COMPANY, INC., d/b/a Walker Drug;
HARRIS PHARMACY, INC., d/b/a Harris Pharmacy;
NEFF DRUGS 5, LLC, d/b/a 18th Street Apothecary;
TANDONS ADVANCED PHARMACY, d/b/a Advanced
Health Pharmacy;
CARIBBEAN PHARMACY, INC., d/b/a Caribbean
Pharmacy;
CASTOR PHARMACY & SURGICAL SUPPLIES, LLC,
d/b/a Castor Pharmacy;
CENTRAL CITY FAMILY PHARMACY, INC.,
d/b/a Center Point Family Pharmacy;
CHRISTOFANO ASSOCIATES, LLC,
Hayden's Pharmacy 1 and Hayden's Pharmacy 2;
CIRCLE PHARMACY, LLC, d/b/a Circle Pharmacy;
CONDO, INC., d/b/a Condo Pharmacy;
COOKS PHARMACY OF KINGSTON, INC.,
d/b/a Cook's Pharmacy of Kingston;
CRESTWOOD PHARMACY, LLC,
d/b/a Crestwood Pharmacy;
DAKES DRUG STORE, INC., d/b/a Dakes Drug Store;
DOC'S DRUGS, LTD.;
ESCO DRUG COMPANY, INC., d/b/a Esco Drug;
FOREST HILLS PHARMACY, INC.,
d/b/a Forest Hills Pharmacy;
GETWELL PHARMACY CORP.,
d/b/a Getwell Pharmacy Corp.;
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HOMETOWN VILLAGE PHARMACY, LLC,
d/b/a Hometown Village Pharmacy;
JOHNSON'S PHARMACY,
d/b/a Johnson's Pharmacy of Hazelton;
KEYSTONE PHARMACY(S-CORP.), d/b/a Keystone
Pharmacy;
KIM DO, INC., d/b/a M.R. Pharmacy;
MCNEILL FAMILY PHARMACY, INC.,
d/b/a Aston Pharmacy Home Health Center;
NEFF DRUGS 20, LLC, d/b/a Farmacia Rayo De Sol;
NEFF DRUGS 21, LLC, d/b/a Farmacia Sunray;
NEFF DRUGS, INC., d/b/a Baederwood Pharmacy;
NEFF MERION ENTERPRISES, INC., d/b/a Babis
Pharmacy;
PHARMACY SHOP, INC., d/b/a Ed Snell's Pharmacy
Shop;
RJ JOMICI, INC., d/b/a Jomici Apothecary;
RIAZ U RAHMAN, d/b/a Getwell Pharmacy;
INDEPENDENT RX, INC., d/b/a Olde Philly Pharmacy;
MIDDLETOWN CHEMISTS, INC., d/b/a NeighboRx
Pharmacy;
MILLS FAMILY PHARMACY, LLC,
d/b/a Mills Family Pharmacy;
NEWPOINTE PHARMACY, LLC,
d/b/a Newpointe Pharmacy;
NICE PHARMACY, INC., d/b/a Nice Pharmacy;
PACKER APOTHECARY, INC., d/b/a Packer Apothecary
PAW PAW VILLAGE DRUG, d/b/a Paw Paw Village
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Pharmacy;
V.V. INC., d/b/a ND Pharmacy;
EKLUND DRUG, INC., d/b/a Preston's Pharmacy;
IGM, INC., d/b/a Rapoport Pharmacy;
NEFF DRUGS 12, LLC,
d/b/a Sunray Drugs 56th&Market Street;
NEFF DRUGS 6, LLC,
d/b/a Sunray Drugs Baltimore Avenue;
NEFF DRUGS, 11, LLC,
d/b/a Sunray Drugs 60th Street;
OPIERX, INC., d/b/a S& B Drugs;
PROFESSIONAL PHARMACY AND CONVALESCENT
PRODUCTS, LTD,
d/b/a Professional Pharmacy;
RAMON PHARMACY, INC., d/b/a Ramon Pharmacy;
RESOLUTION RX, INC., d/b/a Resolutin Rx;
RINGS DRUG, LTD, d/b/a Rings Drug;
SAMUEL J ROBINSON PHARMACY, INC.,
d/b/a SJ Robinson Pharmacy;
SHEEANS PHARMACY, INC., d/b/a Sheeans Pharmacy;
SUNRAY DRUGS, LLC, d/b/a Sunray Drugs;
TWO FISHES, INC., d/b/a Roger's Family Pharmacy;
DANIEL RAIF, INC., d/b/a The Medicine Shoppe#0188;
GRIFFIN DRUGS, INC., d/b/a Thrift Drugs;
KARWASKI PHARMACY, INC.,
d/b/a The Medicine Shoppe-Dallas (#1251);
NEFF DRUGS 13, LLC, d/b/a Sunray Drugs Chestnut
Plaza;
10
PHC PHARMACIES, INC., d/b/a The Medicine
Shoppe#1330
and The Medicine Shoppe#1397;
SLV PHARMACY, INC., d/b/a Valley Pharmacy &
Surgical Supplies;
SSV PHARMACY, LLC, d/b/a The Medicine
Shoppe#1404;
SCHROPP PHARMACY, INC.,
d/b/a The Medicine Shoppe #0146;
SHIRLEY COURT PHARMACY, INC.,
d/b/a Upper Darby Family Pharmacy;
THE ROBBINS PHARMACY (S-CORP),
d/b/a The Robbins Pharmacy;
CLLAMP CO., INC., d/b/a Medicap Pharmacy#8213;
FAIRMOUNT PHARMACY SERVICES, INC.,
d/b/a Fairmount Pharmacy Services;
FOREST HILLS PHARMACY, INC., d/b/a FHP
Pharmacy Services;
GRANITE STATE PHARMACY, LLC, d/b/a Granite
State Pharmacy;
HEALTH SPECTRUM, d/b/a Wonder Drug;
HUSACK HOLDINGS, JPL, d/b/a The Medicine Shoppe-
Berwick;
J.B.M. INC., d/b/a Village Pharmacy At Springhouse;
JJM ENTERPRISES, INC., d/b/a Gem Pharmacy;
KEDO, LLC, d/b/a Valumed Pharmacy-Coralville;
MADSEN, INC., d/b/a Medicap Pharmacy; #8019;
MEDCARE LTC, LLC, d/b/a Medcare LTC;
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NEFF DRUGS 22, LLC, d/b/a Village Shires Pharmacy;
SPRINGFIELD PHARMACY, INC., d/b/a Village
Pharmacy(Queens Village);
SUGAR RIVER PHARMACY, LLC, d/b/a Sugar River
Pharmacy;
THE MEDICINE SHOPPE,
d/b/a The Medicine Shoppe-Jeffersonville and
The Medicine Shoppe-Munhall;
WARNER PHARMACY, INC., d/b/a Warner Pharmacy;
WEST VILLAGE PHARMACY, INC.,
d/b/a West Village Pharmacy;
BOWSER CORPORATION, d/b/a Shankel's Pharmacy;
CLAYWELL, INC., d/b/a Medica Pharmacy & Wellness
Center and Medica Pharmacy Bloomfield;
CLINIC PHARMACY, LLC, d/b/a Clinic Pharmacy;
EVANS CITY DRUG STORE, INC.,
d/b/a Evans City Drug Store;
FAIRMOUNT PHARMACY, INC., d/b/a Fairmount
Pharmacy;
G&R INC., CORP, d/b/a Malheur Drug II
GFJ, INC., d/b/a Broken Arrow Family Drug and
Broken Arrow Family Drug#2;
HIDENWOOD PHARMACY, INC., d/b/a Hidenwood
Pharmacy;
KST GROUP, LLC, d/b/a Valumed Pharmacy-Sioux City;
KAPAA PHARMACY (S-Corp), d/b/a Kapaa Pharmacy;
LIHUE PHARMACY (S-CORP), d/b/a Lihue Pharmacy
Group;
12
M.D. CO., INC., d/b/a M.D. Pharmacy;
MELROSE PHARMACY, LLC, d/b/a Melrose Pharmacy;
MILLERSBURG PHARMACY, INC., Millersburg
Pharmacy;
PACIFIC HEALTH MANAGEMENT, LLC,
d/b/a Lihue Professional Pharmacy;
PHARMACY CONSULTANT SERVICES, INC., d/b/a
Turner Drug;
ROCKY TOP PHARMACY, INC., d/b/a Longley
Pharmacy;
ROYER PHARMACY, INC.;
SANO VITO, INC. (S.CORP), d/b/a Rivergate Pharmacy;
SHELTONS PHARMACY, INC., d/b/a A Village
Pharmacy;
SUMPTER PHARMACY, INC., d/b/a Sumpter Pharmacy
& Wellness;
TAYLOR DRUG OPERATING SERVICES, INC.,
d/b/a Taylor Drug Operating Services;
THE MEDICINE CENTER, LLC, d/b/a The Medicine
Center;
BLUEGRASS RX, LLC, d/b/a Bluegrass Pharmacy;
BROAD & GRANGE, INC., d/b/a Broad & Grange
Pharmacy;
BROAD & LEHIGH PHARMACY, INC., d/b/a Broad &
Lehigh Pharmacy;
CHOICE FAMILY PHARMACY, INC., d/b/a Choice
Family Pharmacy;
ELU, INC., d/b/a Point Breeze Pharmacy;
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EAST BERLIN PHARMACY, INC., d/b/a East Berlin
Pharmacy;
FAMILY PHARMACY PROFESSIONAL
ASSOCIATION,
(Sub S Corp.), d/b/a Family Pharmacy P.A.;
FINO'S PHARMACY, LLC, d/b/a Fino's Pharmacy-Dallas;
GREATER FALLS PHARMACY, INC.,
d/b/a Greater Falls Pharmacy;
HEALME, INC., d/b/a Hometown;
HERITAGE PHARMACY, INC., d/b/a Heritage
Pharmacy;
HOWES PHARMACY, LLC, d/b/a Howes Pharmacy;
KB PHARMACY, LLC, d/b/a Grafton Drug;
MATSTE, INC., d/b/a Hometown Pharmacy-Brookfield;
MED-FAST PHARMACY, INC.;
MILAN PHARMACY, INC., d/b/a King Pharmacy;
KRYNICKI, INC., d/b/a Hometown Pharmacy-Dierkens;
TADEK, INC., d/b/a Hometown Pharmacy-Cornersburg
and Hometown Pharmacy-Struthers;
TADMAR, INC., d/b/a Hometown Pharmacy-Girard;
CMV PHARMACY, INC., d/b/a Manlius Pharmacy;
HEIN-LUN, INC., d/b/a Neff Surgical Pharmacy;
LION PHARMACY, INC., d/b/a Lion Pharmacy;
MARYSIA, INC., d/b/a Hometown Pharmacy-Harmony;
NEWTKO, INC.; d/b/a Port Allegheny Pharmacy;
NORLAND AVENUE PHARMACY, LLC,
d/b/a Norland Avenue Pharmacy;
OAK LANE PHARMACY, INC., d/b/a Oak Lane
14
Pharmacy;
PATTERSON FAMILY PHARMACY, INC.,
d/b/a Patterson Family Pharmacy;
RX EXPRESS PRESCRIPTION SERVICES, INC.,
d/b/a Rx Express Prescription Services;
RICHLANDS PHARMACY ASSOCIATES,
d/b/a Richalands Pharmacy;
SAV-MOR PHARMACY, INC., d/b/a Sav-Mor Pharmacy;
ST. MARY'S PHARMACY, INC., d/b/a St. Mary's
Pharmacy;
Stemat, INC., d/b/a Hometown Pharmacy-New Castle;
STONEWOOD VILLAGE PHARMACY, INC.,
d/b/a Stonewood Village Pharmacy;
WANDAROO, INC.;
CITY DRUGS CO OF JEFFERSON TX, d/b/a City Drug;
FRANKLIN SQUARE PHARMACY, INC.,
d/b/a Franklin Square Pharmacy;
KULER DRUGS, LLC, d/b/a Med Depot Pharmacy;
LEHAN DRUGS, INC., d/b/a Lehan Drugs;
LUKE'S FAMILY PHARMACY, d/b/a Luke's Family
Pharmacy;
MATTHEWSON DRUG CO., INC., d/b/a Matthewson
Drug Co.;
NEFF DRUGS 9, LLC, d/b/a Sunray Drugs Progress Plaza;
PINE STREET PHARMACY, d/b/a Stacy's Family
Pharmacy;
PURDY PHARMACY, INC., d/b/a Purdy Costless Rx;
RJMTZ PHARMACY, LLC, d/b/a The Pharmacy Corner;
15
RX SHOPS, INC., d/b/a Hometown Pharmacy;
READINGS COMMUNITY PHARMACY, INC., d/b/a
R&R Pharmacy;
S&R DRUG CO. (S-Corp), d/b/a S&R Drug Co.;
SAN JUAN PHARMACY, INC., d/b/a San Juan
Pharmacy;
THE COUNTRY SQUIRE DISCOUNT PHARMACY,
INC.,
d/b/a The Country Squire Discount Pharmacy;
URBAN SPECIALTY PHARMACY, LLC,
d/b/a Urban Specialty Pharmacy;
S&B HEALTH SYSTEMS, LLC,
d/b/a West Cocoa Pharmacy & Compounding;
DAVID J. GREENLEE, d/b/a Ross Grant Avenue
Pharmacy;
JAK PHARMA, INC., d/b/a Arthur Avenue Pharmacy;
JEN PHARMA, INC., d/b/a Summer Ave Pharmacy;
MEDICAP SPECIALTY SERVICES, d/b/a Medicap
Specialty Services;
NEFF DRUGS 23 LLC, d/b/a Allegheny Apothecary;
NEFF DRUGS 24, LLC, d/b/a Holmesburg Pharmacy;
STAR PHARMACY SERVICES, INC., d/b/a Paoli
Pharmacy;
UNIVERSITY PHARMACY, INC., d/b/a University
Pharmacy;
VIJAN PHARMA, INC., d/b/a Sure Drugs;
ESTATE OF THEODORE BILLINGER
Brent Billinger, Personal Representative;
16
v.
OPTUMRX, successor by merger to Catamaran
Corporation,
Appellant
_______________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
District Court No. 3-17-cv-01102
District Judge: The Honorable Malachy E. Mannion
__________________________
Argued March 3, 2022
Before: McKEE, AMBRO, and SMITH, Circuit Judges
(Filed: August 4, 2022)
Lucas C. Townsend ARGUED
Gibson Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellant
Mark R. Cuker ARGUED
Suite 1120
17
2005 Market Street
Philadelphia, PA 19103
Counsel for Appellee
__________________________
OPINION OF THE COURT
__________________________
SMITH, Circuit Judge.
Over 400 pharmacies joined forces in a lawsuit
against OptumRX (Optum), a pharmacy benefits manager,
alleging breaches of contract and breaches of duties of
good faith and fair dealing, together with violations of
certain state statutes. Pointing to arbitration agreements
found in various contracts covering almost all of those
pharmacies, Optum moved to compel arbitration. The
pharmacies opposed the motion, arguing that compelling
arbitration would be unconscionable. The District Court
agreed with the pharmacies, and Optum timely appealed.
We conclude that the District Court erred by
applying the wrong standard in ruling on Optum’s motion.
Per Guidotti v. Legal Helpers Debt Resolution, LLC, 716
F.3d 764 (3d Cir. 2013), the District Court—after
concluding the pharmacies brought forth sufficient facts to
place the arbitration agreements in question—should have
allowed discovery limited to the question of arbitrability
and then provided Optum an opportunity to renew its
18
motion. It did neither. We will therefore vacate in part the
District Court’s order denying Optum’s motion to compel
arbitration and remand with instructions.
I. Facts & Procedural History
Optum is a pharmacy benefits manager (PBM)
responsible for administering prescription drug programs
on behalf of health-insurance plans. Optum and its
predecessors1 entered into 41 contracts with, in total, over
400 pharmacies.2 Twenty of the pharmacies negotiated
their contracts with Optum directly; others used
bargaining agents known as pharmacy services
administrative organizations (PSAOs). Each of these
contracts consists of two documents that refer to, and
incorporate, each other. The first is the Provider Manual,
which covers, inter alia, claim submission, pricing, and
provider audits. The contents of the Provider Manual do
not vary across the many contractual relationships. Then,
there are the Provider Agreements, which are specific to
1
The contracts at issue in this appeal are, in some instances,
between pharmacies and other PBMs, which later merged into
Optum. It is, however, undisputed that Optum is the proper
party for each of the contracts.
2
Up to nine pharmacies’ relationships with Optum are
governed by contracts that Optum is unable to locate. So these
pharmacies were not included in the motion to compel
arbitration, and their contracts are not among the 41 contracts
described herein.
19
their signing parties and which address matters such as
pharmacy responsibilities and reimbursement rates. But
while each contract consists of these two documents, the
pharmacies allege that only those pharmacies that
negotiated with Optum directly received copies of their
Provider Agreements.
The pharmacies banded together and, in June 2017,
brought a mass action in the United States District Court
for the Middle District of Pennsylvania. They alleged that
Optum: (1) paid them less than they were due under their
contracts; (2) breached its duties of good faith and fair
dealing; and (3) violated certain state statutes. In early
2018, Optum moved to compel arbitration of all but nine
pharmacies’ claims,3 relying on arbitration provisions
within the Provider Agreements.4 Each pharmacy that
3
Optum concedes that these nine pharmacies are not subject to
arbitration.
4
Optum also sought outright dismissal of all pharmacies’
claims. Generally, per Optum’s motion, the pharmacies failed
to state a claim for which relief could be granted. Additionally,
the District Court, again per Optum’s motion, would lack
subject matter jurisdiction over those pharmacies that were not
subject to arbitration agreements if arbitration were to be
compelled for the other pharmacies. The District Court
granted Optum dismissal, in part, for failure to state a claim but
denied as moot the request to dismiss for lack of subject matter
jurisdiction. These aspects of the District Court’s ruling are
not presently before us.
20
negotiated through PSAOs opposed arbitration as
procedurally unconscionable on grounds that the
arbitration provisions were contained in their Provider
Agreements and that those Provider Agreements were
unavailable to them at all relevant times. The pharmacies
that negotiated directly with Optum did not initially
oppose the motion but did so later, advancing a theory of
substantive unconscionability.
Three years after Optum filed its motion to compel
arbitration, the District Court denied the motion in full.
The Court held that “compelling [the pharmacies] to
proceed with arbitration in this matter would be
procedurally unconscionable” because Optum
“prohibit[ed] PSAOs from giving the Provider Agreement
to the individual pharmacies . . . , making it impossible for
the pharmacies to have any knowledge of the arbitration
agreement.” Dist. Ct. Op., App’x at 10–13. Optum timely
appealed.
II. Jurisdiction
Always, this Court’s “first and fundamental
question is that of jurisdiction.” Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 94 (1998) (quoting Great S. Fire
Proof Hotel Co. v. Jones, 177 U.S. 449, 453 (1900)). The
establishment of jurisdiction is “a threshold matter,” and
without it “the court cannot proceed at all.” Id. (quoting
Ex Parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868)).
21
We thus raised, sua sponte,5 the question of whether 28
U.S.C. § 1332(d)(11) gives district courts subject matter
jurisdiction over mass actions that were brought originally
in federal court as opposed to those that were removed
from state court.
A. Background on Mass Actions
Because the mass action is less common than other
forms of aggregate litigation—namely the Rule 23 class
action and the Fair Labor Standards Act opt-in collective
action—we begin with a look at just what it is and how the
device came to be. Congress created the mass action in
2005, when it passed the Class Action Fairness Act
(CAFA), a mostly jurisdictional statute. That legislation
“provid[ed] for Federal court consideration of interstate
cases of national importance under diversity jurisdiction”
in an effort to minimize state and local courts’ “[a]buses
in class actions undermin[ing] the national judicial
system.” Pub L. No. 109-2, § 2(a)(4) & 2(b)(2), 119 Stat.
4 (2005). Through CAFA, Congress “ma[de] it easier both
for plaintiffs to establish federal jurisdiction in original
federal class actions and for defendants to remove class
actions from the state courts.” Emery G. Lee III &
5
Optum challenged whether 28 U.S.C. § 1332(d)(11) provided
subject matter jurisdiction before the District Court in its reply
brief in support of its motion. The District Court did not,
however, address its jurisdiction, nor did Optum reassert its
challenge before us.
22
Thomas E. Willging, The Impact of the Class Action
Fairness Act on the Federal Courts: An Empirical
Analysis of Filings and Removals, 156 U. PA. L. REV.
1723, 1734 (2008). But “CAFA’s legislative sponsors
realized that CAFA’s core class action provisions would
not comprehensively reach all problematic state court
complex litigation” because most states permitted large-
scale aggregation of claims through joinder or other
procedural mechanisms. Linda S. Mullenix, Class Actions
Shrugged: Mass Actions and the Future of Aggregate
Litigation, 32 REV. LITIG. 591, 606 (2013). For example,
two states did not provide for class-action litigation at the
time of CAFA’s enactment and allowed collective
litigation only through non-class joinder and consolidation
rules. Id. at 606 & n.53. Consequently, “CAFA’s drafters
feared that large-scale state litigation—deemed mass
actions and brought under non-class joinder and
consolidation rules—would evade CAFA’s removal
provisions simply because [such] litigation was not
pursued under class action rules.” Id. at 606–07.
So Congress included mass-action provisions in
CAFA. The Act defined a mass action as
any civil action (except a civil action within
the scope of section 1711(2)) in which
monetary relief claims of 100 or more
persons are proposed to be tried jointly on the
ground that the plaintiffs’ claims involve
common questions of law or fact, except that
23
jurisdiction shall exist only over those
plaintiffs whose claims in a mass action
satisfy the jurisdictional amount
requirements under [§ 1332(a)].
28 U.S.C. § 1332(d)(11)(B)(i). In essence, mass actions
are collective actions that utilize large-scale joinder or
other consolidation mechanisms rather than class
certification pursuant to Rule 23. For this reason, “a mass
action has no representative or absent members,” and is
“more akin to an opt-in than it is to a class action.”
Abraham v. St. Croix Renaissance Grp., L.L.L.P., 719
F.3d 270, 272 n.1 (3d Cir. 2013); see also Mississippi ex
rel. Hood v. AU Optronics Corp., 571 U.S. 161, 173–74
(2014) (rejecting a purported mass action consisting of 1
named plaintiff and 100 or more unspecified individuals).
But still, the Senate Judiciary Committee described mass
actions as “class actions in disguise.” S. Rep. No. 109-14
(2005). Accordingly, mass actions are deemed to be class
actions removable under 28 U.S.C. § 1332(d)(2)–(10) if
they otherwise meet the provisions of those paragraphs.6
28 U.S.C. § 1332(d)(11)(A).
6
As the Ninth Circuit has noted, “[s]ome of these provisions
in § 1332(d)(2)–(10), however, make no sense in the context
of a mass action.” Abrego Abrego v. Dow Chem. Co., 443 F.3d
676, 680 n.6 (9th Cir. 2006) (per curiam).
24
B. Mass-Action Jurisdiction
Surprisingly, whether the district courts may
exercise original jurisdiction over mass actions is
unsettled. Section 1332(d)(2) grants original jurisdiction
over certain class actions.7 And Section 1332(d)(11)(A)
states that a mass action is “deemed to be a class action
removable under” paragraphs (d)(2) through (10) if it
otherwise meets the conditions of those paragraphs.8 The
question presented here is whether district courts have
jurisdiction over mass actions brought originally before
them through paragraph (2), or whether they have
jurisdiction over only mass actions which are removed
from state court by defendants pursuant to paragraph (11).
Optum urges us to hold that the District Court
lacked original jurisdiction. In doing so, Optum advances
four arguments: (1) the plain text of CAFA makes clear
that mass actions are only removable to federal courts but
7
Section 1332(d)(2) relevantly provides: “The district courts
shall have original jurisdiction of any civil action in which the
matter in controversy exceeds the sum or value of $5,000,000,
exclusive of interest and costs, and is a class action in which []
any member of a class of plaintiffs is a citizen of a State
different from any defendant . . . .”
8
Section 1332(d)(11)(A) provides: “For the purposes of this
subsection and section 1453, a mass action shall be deemed to
be a class action removable under paragraphs (2) through (10)
if it otherwise meets the provisions of those paragraphs.”
25
that this action originated in federal court; (2) purpose
statements within CAFA and its legislative history show
that Congress did not intend to provide original
jurisdiction over mass actions; (3) courts and scholars
have doubted that CAFA provides original jurisdiction
over mass actions; and (4) there is no alternate basis for
subject matter jurisdiction if the Court agrees with
Optum’s interpretation of § 1332(d)(11).
The pharmacies urge us to reach the opposite
conclusion. First, they insist that we adopt the reasoning
of district courts that have recognized the availability of
original jurisdiction of mass actions under 28 U.S.C.
§ 1332(d)(11). They then insist that, “should this Court
determine an ambiguity exists with respect to the scope of
jurisdiction authorized by 1332(d)(11), the legislative
history and intent of CAFA require that this ambiguity be
resolved in favor of federal courts having original
jurisdiction.” Pharmacies Supp. Br. at 1. Alternatively,
the pharmacies ask that the Court dismiss the three non-
diverse plaintiffs that prevent use of standard diversity
jurisdiction.
Our “primary purpose in statutory interpretation is
to discern legislative intent.” Morgan v. Gay, 466 F.3d
276, 277 (3d Cir. 2006). And in so doing, we must begin
with the statute’s text. Ross v. Blake, 578 U.S. 632, 638
(2016). “If the statute’s plain language is unambiguous
and expresses Congress’s intent with sufficient precision,
we need not look further.” Douglass v. Convergent
26
Outsourcing, 765 F.3d 299, 302 (3d Cir. 2014) (alteration
adopted) (quoting In re Lord Abbett Mut. Funds Fee Litig.,
553 F.3d 248, 254 (3d Cir. 2009)). But on occasion, plain
and unambiguous language ends up stating what was not
Congress’s intent. In these instances, “we are obligated to
‘construe statutes sensibly and avoid constructions which
yield absurd or unjust results.’” Id. (quoting United States
v. Fontaine, 697 F.3d 221, 227 (3d Cir. 2012)); see also
United States v. Am. Trucking Ass’ns, Inc., 310 U.S. 534,
543 (1940) (“[E]ven when the plain meaning did not
produce absurd results but merely an unreasonable one
‘plainly at variance with the policy of the legislation as a
whole’ this Court has followed that purpose rather than the
literal words.” (footnote omitted) (quoting Ozawa v.
United States, 260 U.S. 178, 194 (1922))); Morgan, 466
F.3d at 278 (quoting United States v. Ron Pair Enters.,
Inc., 489 U.S. 235, 242 (1989)).
CAFA includes the following relevant provisions:
CAFA § 2(a)(4)(A)—
Congress finds th[at] . . . [a]buses in class
actions undermine the national judicial
system, the free flow of interstate commerce,
and the concept of diversity jurisdiction as
intended by the framers of the United States
Constitution, in that State and local courts are
[] keeping cases of national importance out of
Federal court;
27
CAFA § 2(b)—
The purposes of [CAFA] are to [] assure fair
and prompt recoveries for class members
with legitimate claims[,] restore the intent of
the framers of the United States Constitution
by providing for Federal court consideration
of interstate cases of national importance
under diversity jurisdiction[,] and benefit
society by encouraging innovation and
lowering consumer prices;
CAFA § 4(a)(2) (codified at 28 U.S.C. § 1332(d)(2)
(A))—
The district courts shall have original
jurisdiction of any civil action in which the
matter in controversy exceeds the sum or
value of $5,000,000, exclusive of interest and
costs, and is a class action in which [] any
member of a class of plaintiffs is a citizen of
a State different from any defendant;
CAFA § 4(a)(2) (codified at 28 U.S.C. § 1332(d)
(11)(A))—
For purposes of this subsection and section
1453, a mass action shall be deemed to be a
class action removable under paragraphs (2)
through (10) if it otherwise meets the
provisions of those paragraphs;
28
CAFA § 4(a)(2) (codified at 28 U.S.C. § 1332(d)
(11)(C)(i))—
Any action(s) removed to Federal court
pursuant to this subsection shall not
thereafter be transferred to any other court . . .
unless a majority of the plaintiffs in the action
request transfer . . .; and
CAFA § 4(a)(2) (codified at 28 U.S.C. § 1332(d)
(11)(D))—
The limitations periods on any claims
asserted in a mass action that is removed to
Federal court pursuant to this subsection shall
be deemed tolled during the period that the
action is pending in Federal court.
Optum and the pharmacies seem to agree that 28
U.S.C. § 1332(d)(2) provides that district courts have
CAFA original jurisdiction only over civil actions that are
class actions, but they disagree as to when mass actions
are class actions per 28 U.S.C. § 1332(d)(11)(A) and thus
fall within that grant of original jurisdiction. Optum
argues that mass actions are deemed class actions only for
removal purposes. The pharmacies, on the other hand,
argue that mass actions are deemed class actions generally.
29
Optum and the pharmacies both advance readings
of § 1332(d)(11) that are plausible,9 but neither reading
can be characterized as clearly correct. By Optum’s
reading, mass actions would not be class actions within
district courts’ original jurisdiction because mass actions
are only class actions when “removable under paragraphs
(2) through (10).”10 This reading, however, raises as many
9
Given that the text can be read several ways, it is not
surprising that relevant treatises reveal a split on the question.
Compare Wright & Miller § 3601 (“[CAFA] provides the
federal courts with original jurisdiction over a class or mass
action when . . . .”) with 2 Newberg on Class Actions § 6:24
(“[CAFA] does not enable original jurisdiction over mass
actions; it only states that such actions are subject to
removal.”). These contrasting views betray both sides’ claims
that the scholarly literature decisively favors their respective
positions.
10
Optum also argues that other subparagraphs suggest that all
of § 1332(d)(11) was focused only on removal. We find no
support for that position in the language of those
subparagraphs. The emphasis on removed actions in
§ 1332(d)(11)(C)(i) would make sense regardless of whether
original jurisdiction was granted because transferability is less
of a concern where the plaintiffs chose which court would
ultimately hear their claims. And § 1332(d)(11)(D)’s emphasis
on removed actions would also make sense regardless of
whether original jurisdiction was granted because mass-action
jurisdiction “exist[s] only over those plaintiffs whose claims in
a mass action satisfy the jurisdictional amount requirements,”
28 U.S.C. § 1332(d)(11)(B)(i), and courts sometimes dismiss
30
questions as it answers because paragraphs (2) through
(10) do not concern removal. Paragraph (11) is prefaced
by language of applicability to subsection (d) and to
section 1453, and section 1453 provides that class actions
are removable pursuant to section 1446.11 So deeming a
mass action a class action if it otherwise meets the
provisions of paragraphs (2) through (10) would make it
removable—but under section 1453, not under paragraphs
(2) through (10). More importantly, because section 1453
is the basis for removal, what other purpose would
Congress have had in treating mass actions as class actions
under subsection (d) if not to establish original
jurisdiction?
dispensable parties that would defeat jurisdiction, Federal Rule
of Civil Procedure 21. So unlike those brought originally in
federal court, tolling statutes of limitations is necessary for
removed actions.
11
Section 1446 provides that “[a] defendant or defendants
desiring to remove any civil action from a State court shall file
in the district court of the United States for the district and
division within which such action is pending a notice of
removal . . . containing a short and plain statement of the
grounds for removal.” And section 1453(b) provides that, in
general, “[a] class action may be removed to a district court of
the United States in accordance with section 1446 . . . without
regard to whether any defendant is a citizen of the State in
which the action is brought, except that such action may be
removed by any defendant without the consent of all
defendants.”
31
As for the pharmacies’ reading, mass actions could
be generally deemed class actions for purposes of
subsection (d) and section 1453. Such a reading would
provide district courts with original jurisdiction through
§ 1332(d)(2). Yet if we interpret the language that way,
we are left with the extraneous and unexplained
“removable under” language. Interpreting § 1332(d)(11)
in a manner that ignores parts of its text—as both Optum
and the pharmacies ask us to do—would “violat[e] the
cardinal rule that, if possible, effect shall be given to every
clause and part of a statute.” RadLAX Gateway Hotel,
LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012)
(quoting D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S.
204, 208 (1932)).
We express the same frustrations as have two of our
sister circuits as we attempt to make sense of CAFA’s
mass-action provisions. See Abrego Abrego v. Dow Chem.
Co., 443 F.3d 676, 680–82 (9th Cir. 2006) (per curiam);
Lowery v. Ala. Power Co., 483 F.3d 1184, 1200 n.41 (11th
Cir. 2007). In calling the drafting of the relevant
subsection “clumsy,” the Ninth Circuit also observed:
Congress’s use of the word “removable” in
the text of § 1332, a statute establishing
original jurisdiction, blurs what had
previously been a clear distinction between
jurisdiction and removal statutes, and thus
obscures the reach of jurisdiction over mass
actions. Because Congress did not refer to
32
original jurisdiction in either the mass action
provision itself, or in § 1453, the text does not
answer the important question of when there
is original federal jurisdiction over mass
actions, and what the scope of that original
jurisdiction might be.
Abrego Abrego, 443 F.3d at 682. The Eleventh Circuit
went beyond the Ninth’s use of the word “clumsy”:
“CAFA’s mass action provisions present an opaque,
baroque maze of interlocking cross-references that defy
easy interpretation, even though they are contained in a
single paragraph . . . .” Lowery, 483 F.3d at 1198 (footnote
omitted). In a different context, and without mentioning
the “removable under” language, Lowery took the position
that mass actions are generally deemed class actions. Id.
at 1199. But the Lowery Court nevertheless concluded
that “[i]t is not clear . . . whether a group of plaintiffs who,
choosing not to certify as a class, but otherwise meeting
the requirements for a mass action, would be permitted to
file a mass action originally in a district court.” Id. at 1200
n.41. So while both the Ninth and Eleventh Circuits
recognized that Congress was not clear about conferring
on district courts jurisdiction over mass actions, neither
court needed to resolve the issue in the case before it.
33
Looking beyond the CAFA provisions that made
their way into the United States Code12 does make our task
easier. See King v. Burwell, 576 U.S. 473, 492 (2015) (“A
provision that may seem ambiguous in isolation is often
clarified by the remainder of the statutory scheme . . .
because only one of the permissible meanings produces a
substantive effect that is compatible with the rest of the
law.” (alteration in original) (quoting United Sav. Ass’n of
Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S.
365, 371 (1988)). A statutory statement of purpose is “an
appropriate guide to the meaning of the statute’s operative
provisions.” Gundy v. United States, 139 S. Ct. 2116,
2126–27 (2019) (interpreting a provision in light of its
purpose statement); see also POM Wonderful LLC v.
Coca-Cola Co., 573 U.S. 102, 106–07 (2014) (interpreting
the Lanham Act in light of its “detailed statement of the
statute’s purposes”). In CAFA itself, Congress found that
“keeping cases of national importance out of Federal
court” was “undermin[ing] the national judicial system,
the free flow of interstate commerce, and the concept of
diversity jurisdiction as intended by the framers of the
United States Constitution.” CAFA § 2(a)(4)(A). So
12
Section 2 of CAFA contains the findings of Congress and a
statement regarding the Act’s purposes. This section was not
formally codified within the United States Code, though it is
included as a Note appended to 28 U.S.C. § 1711. Regardless,
it is part of the law. See U.S. Nat’l Bank of Or. v. Indep. Ins.
Agents of Am., Inc., 508 U.S. 439, 448 (1993) (concluding that
a provision omitted from the Code is valid law).
34
Congress enacted CAFA for the explicit purpose of
“restor[ing] the intent of the framers of the United States
Constitution by providing for Federal court consideration
of interstate cases of national importance under diversity
jurisdiction.” CAFA § 2(b); see also Std. Fire Ins. Co. v.
Knowles, 568 U.S. 588, 595 (2013) (mentioning CAFA’s
“primary objective”).
Congress’s explicit purpose in enacting CAFA
supports a conclusion that the District Court had original
jurisdiction here. Congress sought to “provid[e] for
Federal court consideration of interstate cases of national
importance under diversity jurisdiction.” CAFA § 2(b)(2).
It would seem, then, passing strange to construe
ambiguous language as preventing a plaintiff from asking
a federal court to consider an interstate case of national
importance pursuant to diversity jurisdiction. True,
Congress’s mention of removal without any mention of
original jurisdiction could tend to imply an intent not to
provide original jurisdiction. But because the statutory
purpose suggests that the inclusion of removal jurisdiction
was not done to the exclusion of original jurisdiction, that
implication does not attach. See Burns v. United States,
501 U.S. 129, 136 (1991) (“An inference drawn from
congressional silence certainly cannot be credited when it
is contrary to all other textual and contextual evidence of
congressional intent.”), abrogated on other grounds by
Booker v. United States, 543 U.S. 220 (2005). And since
Congress’s animating concern was state and local courts’
tendency to keep class actions for themselves, when
35
examined in light of CAFA’s statement of purpose, the
text of § 1332(d)(11) is best read as ensuring that
qualifying mass actions—like class actions—are not being
kept from the federal courts. See Burwell, 576 U.S. at 492.
For that reason, we interpret § 1332(d)(11) as deeming all
mass actions that comport with the requirements of
paragraphs (2) through (10) to be class actions within
§ 1332(d)(2)’s grant of original jurisdiction.
Having settled upon a permissible meaning of
§ 1332(d)(11) that produces a substantive effect
compatible with the purpose of CAFA, we have no
occasion to rely on legislative history. See Mohamad v.
Palestinian Auth., 566 U.S. 449, 459 (2012); see also In re
Trump Ent. Resorts, 810 F.3d 161, 168 (3d Cir. 2016)
(noting that legislative history should only be relied on “as
a last resort”). We have on occasion, however, checked
our work by looking to it. See G.L. v. Ligonier Valley Sch.
Dist. Auth., 802 F.3d 601, 621–22 (3d Cir. 2015)
(“[L]egislative history can play a confirmatory role in
resolving ambiguity when statutory language and structure
support a given interpretation.”). We do so here and
conclude that the legislative history supports our
interpretation of the statutory language. The Senate
Judiciary Committee Report, for example, states that,
under § 1332(d)(11), a mass action “will be treated as a
class action for jurisdictional purposes. Thus, if such a
civil action met the other diversity jurisdictional
prerequisites set forth for class actions in this legislation,
that civil action would be subject to federal jurisdiction.”
36
S. Rep. No. 109-14 at 46 (2005). It further states that
§ 1332(d)(11) “expands federal jurisdiction over mass
actions.” Id. While neither of these statements explicitly
states that original jurisdiction will expand, it is equally
true that neither says only removal jurisdiction will
expand. We will not read qualifying language into a
statement that contains none; had Congress intended to so
limit their expansions, it surely would have given some
indication to that effect.
The only legislative history that might support
Optum’s view is Congress’s motivating concern of
federal-court evasion, but only if understood as evidence
that Congress’s purpose was preventing forum shopping.
On the other hand, a Congress concerned with federal-
court evasion could simply aim to make the federal courts
more accessible. The latter understanding makes more
sense, especially in light of the Judiciary Committee’s
observation that “mass actions are simply class actions in
disguise” and that they “often result in the same abuses as
class actions,” or sometimes “even worse.” Id. at 47.
Optum otherwise relies on language from the Senate
Judiciary Committee Report that “a mass action removed
to a federal court under this provision may not be
transferred to another federal court under the MDL
statute” and that, when a mass action is removed, it should
stay in federal court “so long as the mass action met the
various jurisdictional requirements at the time of
removal.” S. Rep. No. 109-14 at 47. Neither statement
37
even implies that Congress intended to prevent mass
actions from being originally brought in federal court.
We therefore agree with the pharmacies and hold
that mass actions initiated in federal district court are
considered class actions if they otherwise meet the
provisions of paragraphs (2) through (10), and that district
courts accordingly have original jurisdiction over those
mass actions. Because this mass action otherwise meets
the provisions of paragraphs (2) through (10), the District
Court properly exercised jurisdiction. We exercise
jurisdiction under 28 U.S.C. § 1291.
III. Standard of Review
This appeal comes to us after the District Court’s
denial of Optum’s motion to compel arbitration. Motions
to compel arbitration are treated either as motions to
dismiss or motions for summary judgment. Guidotti v.
Legal Helpers Debt Resol., LLC, 716 F.3d 764, 771 (3d
Cir. 2013) (AJS, KAJ, JRR). “‘Where the affirmative
defense of arbitrability of claims is apparent on the face of
a complaint (or documents relied upon in the complaint),’
‘the [Federal Arbitration Act] would favor resolving a
motion to compel arbitration under a motion to dismiss
standard without the inherent delay of discovery.’” Id. at
773–74 (citations omitted and alterations adopted). In
such a case, Rule 12 supplies the appropriate standard. Id.But “a more deliberate pace is required” when “‘the
motion to compel arbitration does not have as its predicate
38
a complaint with the requisite clarity’ to establish on its
face that the parties agreed to arbitrate, or the opposing
party has come forth with reliable evidence that is more
than a ‘naked assertion that it did not intend to be bound’
by the arbitration agreement.” Id. at 774 (citations omitted
and alterations adopted). In such a case, “Rule 56
furnishes the correct standard.” Id. at 774–75.
Our first task is to determine which of these two
standards applies. Id. at 772. Optum was explicit in
seeking review of its motion to compel under the Rule 12
standard. Its motion was accordingly limited to the
pharmacies’ complaint and its contracts with the
pharmacies that formed the basis thereof. The District
Court was tasked, then, with judging Optum’s motion
under the Rule 12 standard. Id. at 776. And because we
“apply the same standard the district court should have
applied,” that is our task as well. Id. at 772 (citing Exxon
Shipping Co. v. Exxon Seamen’s Union, 73 F.3d 1287,
1291 (3d Cir. 1996)).
Under the Rule 12 standard, we will affirm a district
court’s denial of a motion to compel arbitration if “‘the
assertions of the complaint, given the required broad
sweep, would permit adduction of proofs that would
provide a recognized legal basis’ for rejecting the
affirmative defense.” Id. at 774 (quoting Leone v. Aetna
Cas. & Sur. Co., 599 F.2d 566, 567 (3d Cir. 1979)). In
other words, we look to the complaint and the documents
on which it relies and will compel arbitration only if it is
39
clear, when read in the light most favorable to the
respondents, that the parties agreed to arbitrate. Id. at 772
& 776. But even if the complaint and the documents on
which it relies do appear to show an agreement to arbitrate,
we do not compel arbitration when the respondents have
come forward with nonfrivolous evidence that they are not
bound by the agreement. Id. at 776.
IV. Analysis
With passage of the Federal Arbitration Act,
Congress established “a national policy favoring
arbitration when the parties contract for that mode of
dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349
(2008). And when the parties have done so, arbitration
agreements must be enforced according to their terms like
any other contract would be. Rent-A-Ctr., W., Inc. v.
Jackson, 561 U.S. 63, 67 (2010). Like other contracts,
arbitration agreements “may be invalidated by ‘generally
applicable contract defenses, such as fraud, duress, or
unconscionability.’” Id. at 68 (quoting Doctor’s Assocs.,
Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). Here, the
District Court concluded that one of these generally
applicable defenses—procedural unconscionability—
applied, and it therefore denied Optum’s motion to
compel.
Optum argues that this conclusion was in error for
five reasons and urges us to reverse, or alternatively
vacate, the District Court’s order. First, Optum argues that
40
the pharmacies’ procedural-unconscionability defense
should have been decided by an arbitrator rather than the
District Court. Second, that there was no procedural
unconscionability because PSAOs were not prohibited
from sharing the Provider Agreements from their
constituent pharmacies. Third, that the pharmacies ratified
the Provider Agreements and thus vitiated any procedural
unconscionability that may have otherwise been present.
Fourth, that twenty of the pharmacies did not even claim
procedural unconscionability. And fifth, that Guidotti
requires that Optum be given a chance to engage in
discovery limited to the question of arbitrability and a
chance to reassert its motion to compel arbitration under
the Rule 56 standard. For the reasons discussed below, we
will vacate in part the District Court’s order denying
Optum’s motion to compel and remand for proceedings
consistent with this opinion.
A. Who Decides?
Before a court can resolve a dispute arising out of a
contract containing an arbitration clause, it must address
the “threshold arbitrability question”: who decides, the
arbitrator or the court? See Henry Schein, Inc. v. Archer
& White Sales, Inc., 139 S. Ct. 524, 527 (2019). Optum
argues that the District Court “should have stayed the case
and compelled arbitration so that the arbitrator can address
[the pharmacies’] procedural unconscionability argument
in the first instance.” Blue Br. at 39. The pharmacies
contend that Optum forfeited this argument by not raising
41
it before the District Court, and that even if it was not
forfeited, the District Court was correct in deciding the
issue itself. For the following reasons, we agree with the
pharmacies.
Arbitration agreements “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.” 9 U.S.C. § 2.
In other words, arbitration agreements are placed on equal
footing with other contracts and thus may be challenged
and invalidated as other contracts are. Rent-A-Ctr., 561
U.S. at 68 (“Like other contracts, [arbitration agreements]
may be invalidated by ‘generally applicable contract
defenses, such as fraud, duress, or unconscionability.’”);
Puleo v. Chase Bank USA, N.A., 605 F.3d 172, 179 (3d
Cir. 2010) (en banc) (confirming that arbitrability
questions may be raised when a party contends that its
terms are “unconscionable under generally applicable
state contract law”). Challenges to arbitration agreements
are classified as either: (1) targeted at “specifically the
validity of the agreement to arbitrate”; or (2) targeted at
“the contract as a whole, either on a ground that directly
affects the entire agreement (e.g., the agreement was
fraudulently induced), or on the ground that the illegality
of one of the contract’s provisions renders the whole
contract invalid.” Buckeye Check Cashing, Inc. v.
Cardegna, 546 U.S. 440, 444 (2006). Challenges of the
first type “go[] to the ‘making’ of the agreement to
arbitrate” and must be adjudicated by the courts. Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,
42
403–04 (1967); see also Rent-A-Ctr., 561 U.S. at 70.
Challenges of the second type, on the other hand, concern
the contract “generally” and must be adjudicated by the
arbitrator. Prima Paint, 388 U.S. at 404.
For a district court, rather than an arbitrator, to
consider a challenge to an arbitration agreement, the
challenge “must focus exclusively on the arbitration
provision.” S. Jersey Sanitation Co. v. Applied
Underwriters Captive Risk Assurance Co., 840 F.3d 138,
143 (3d Cir. 2016). “[A]bsent a specific challenge to the
validity of the arbitration clause specifically, the court
must treat [an arbitration agreement] as a valid and
enforceable agreement and refer any challenges to the
container contract to arbitration.” MZM Constr. Co. v.
N.J. Bldg. Laborers Statewide Benefit Funds, 974 F.3d
386, 397 (3d Cir. 2020). Here, the District Court
concluded that the pharmacies “argue[d] . . . that it would
be procedurally unconscionable to bind them to the
arbitration agreement [because] the terms and conditions
of the agreement were not accessible to them when they
entered into their contractual relationship” and proceeded
to address the pharmacies’ challenge. Dist. Ct. Op., App’x
at 10 (emphasis added).
The District Court addressed the pharmacies’
challenge without the benefit of any argument from
Optum that the arbitrability decision was not the District
Court’s to make. “We generally refuse to consider issues
that the parties have not raised below.” Freeman v.
43
Pittsburgh Glass Works, LLC, 709 F.3d 240, 249 (3d Cir.
2013). This refusal “is essential in order that parties may
have the opportunity to offer all the evidence they believe
relevant to the issues.” Id. (quoting Hormel v. Helvering,
312 U.S. 552, 556 (1941)). And while it is within our
discretion to depart from this general rule, we do so only
in exceptional circumstances. Id.; Gen. Refractories Co.
v. First State Ins. Co., 855 F.3d 152, 162 (3d Cir. 2017).
In its reply brief, Optum identifies two instances
before the District Court where it raised this argument.
Neither is sufficient. The first was a lone citation to Rent-
A-Center in Optum’s motion to compel, before the
pharmacies even challenged arbitrability.13 And that
citation supported nothing more than the rule that an
arbitration provision shall be valid unless it is specifically
challenged. Nothing in the motion to compel can be read
as an argument that the District Court was unable to
preside over such a specific challenge. It is beyond
implausible to read such a simple statement, made before
Optum knew the pharmacies were disputing whether they
were bound to arbitrate, as an argument that the District
Court had to stay the case and refer the arbitrability
challenge to the arbitrator.
13
Despite submitting numerous briefs relating to its motion,
this is the only time that Optum cited any cases relevant to the
“who decides” question.
44
The second instance Optum highlights is the
following sentence from its response to the pharmacies’
second supplemental brief opposing its motion in the
District Court: “Plaintiffs argue that the entire Provider
Agreement was purportedly concealed from them.
Accordingly, there is no basis for singling out the
arbitration clause as not binding.” But again, nothing in
this statement amounts to an argument that the District
Court should have referred the arbitrability challenge to
the arbitrator. Both of these instances are more naturally
seen as arguments to the District Court about why it
should have rejected the pharmacies’ arbitrability
challenge.
Optum also argues that it could not have forfeited
this issue because the question of who decides is
jurisdictional. Per the Supreme Court, “the word
‘jurisdictional’ is generally reserved for prescriptions
delineating the classes of cases a court may entertain
(subject-matter jurisdiction) and the persons over whom
the court may exercise adjudicatory authority (personal
jurisdiction).” Fort Bend Cnty. v. Davis, 139 S. Ct. 1843,
1848 (2019). And the Supreme Court, when discussing a
district court’s responsibility to give effect to arbitration
agreements, has at times used language of that flavor, e.g.:
“When the parties’ contract delegates the arbitrability
question to an arbitrator, a court may not override the
contract. In those circumstances, a court possesses no
power to decide the arbitrability issue.” Henry Schein,
139 S. Ct. at 529 (emphasis added). But placing the weight
45
that Optum does on this language would put the Supreme
Court at odds with itself. It has repeatedly held that
statutory limitations are to be treated as nonjurisdictional
unless Congress clearly states it intends otherwise.
Gonzalez v. Thaler, 565 U.S. 134, 141–44 (2012) (quoting
Arbaugh v. Y & H Corp., 546 U.S. 500, 515–16 (2006));
see also United States v. Wong, 575 U.S. 402, 409–10
(2015).
Optum points to no such clear statement by
Congress. Instead it directs our attention to section 3 of
the FAA, which requires courts to stay trial of an action
pending arbitration, and to section 4, which directs courts
to order parties to proceed to arbitration when required by
an agreement. Both of these statutory provisions undercut
Optum’s argument. If a court lacks jurisdiction, how
could it stay the case or enter an order other than for
dismissal? Far from making a clear statement that the
FAA strips courts of jurisdiction whenever there is an
arbitration agreement, Congress has made a clear
statement telling the courts how they are to exercise that
jurisdiction.
Sections 3 and 4 of the FAA are not jurisdictional
limitations. Further, because Optum did not argue before
the District Court that the pharmacies’ arbitrability
challenge needed to be decided by the arbitrator, we
conclude that Optum forfeited its argument that the
District Court was required to submit the pharmacies’
46
arbitrability challenge to the arbitrator.14 We therefore
refuse to consider the issue.
B. Guidotti
After considering the pharmacies’ arbitrability
challenge, the District Court concluded that “compelling
plaintiffs to proceed with arbitration in this matter would
be procedurally unconscionable.” Dist. Ct. Op., App’x at
13. It reached this conclusion upon finding that “the
record demonstrates that the defendant prohibits PSAOs
from giving the Provider Agreement to the individual
pharmacies without first gaining permission to do so and
the defendant has never given such permission, making it
impossible for the pharmacies to have any knowledge of
the arbitration agreement.” Id. at 12. Optum argues that
the record does not actually demonstrate that PSAOs were
prohibited from sharing the Provider Agreements from
14
Optum argues that we should nevertheless exercise our
discretion to decide the issue because the public interest
requires that it be resolved. Per Optum, the issue of “who
decides” arbitrability questions is recurrent and our resolution
of the issue may affect contracts beyond the parties before us
(including thousands of other pharmacies that Optum contracts
with). We are not convinced these circumstances are
exceptional enough to warrant addressing the issue,
notwithstanding Optum’s forfeiture. If Optum is party to a
similar lawsuit from one of those non-plaintiff pharmacies, it
may raise its argument before the appropriate district court.
47
their constituent pharmacies, and that there was thus no
procedural unconscionability.
Under Illinois law—which the parties agree
controls here—“[p]rocedural unconscionability exists
when a contract term is so difficult to find, read, or
understand that the plaintiff cannot fairly be said to have
been aware that he or she was agreeing to it.” Zuniga v.
Major League Baseball, — N.E.3d —, No. 1-20-1264,
2021 WL 976958 (Ill. App. Ct. Mar. 16, 2021). In
response to Optum’s argument, the pharmacies
prominently focus on language found in a number of the
pharmacies’ Provider Agreements, which they contend
prevents PSAOs from sharing terms such as the arbitration
agreement with the pharmacies. For example, one
Provider Agreement provides:
Unless required to do so by operation of law or
order of any court or government authority,
Pharmacy will not share information concerning the
terms of this Agreement or other proprietary
information, including but not limited to,
reimbursement rates and pricing as provided to
Pharmacy by [Optum], with any other person or
entity without the permission of [Optum]. If any
such disclosure is made or contemplated, Pharmacy
will notify [Optum].
AccessHealth Provider Agreement, Exh. A § 3.3, App’x at
506. While at first blush this may suggest, as Optum
48
argues, that the pharmacies are expected to have access to
but not share the Provider Agreement’s terms, this contract
in particular shows the PSAO signing as “Pharmacy.” So
when read in the light most favorable to the pharmacies,
this Provider Agreement could plausibly prevent the
PSAO from sharing the Provider Agreement’s terms with
any third party, including the PSAO’s member
pharmacies. Further, the pharmacies came forward with
other evidence: a transcript from the deposition of
Optum’s corporate representative, Kerri Tanner. Tanner
was unable to recall any specific times that Optum
authorized PSAOs to disclose Provider Agreement terms
to non-signatory pharmacies. Otherwise, Tanner provided
only vague statements that could be understood to support
either view (and are indeed selectively quoted by Optum
and the Pharmacies).
Given that Optum brought its motion to compel
arbitration under the Rule 12(b)(6) standard, the
pharmacies were required to show only that the complaint
and its supporting documents were not clear enough on
their face to establish that the parties agreed to arbitrate or
otherwise “come forth with reliable evidence that is more
than a ‘naked assertion that it did not intend to be bound’
by the arbitration agreement.” Guidotti, 716 F.3d at 774
(citations omitted). The language of at least some of the
Provider Agreements is ambiguous enough that, looking
only to the complaint and its relied-upon documents, we
cannot say Optum allowed PSAOs to share the terms of
the Provider Agreement—and thus the arbitration
49
agreement—with their pharmacies absent authorization to
do so. And Tanner’s statements suggest that, if
authorization was required, it may not have been given.
The pharmacies have thus provided more than a naked
assertion that they were never given the terms of their
Provider Agreements.
Because it is plausible that a number of the
pharmacies were never given the terms of their Provider
Agreements, it is likewise plausible that holding the
pharmacies to the arbitration agreements contained therein
would be procedurally unconscionable. See Zuniga, 2021
WL 976958, at *5 (“Procedural unconscionability consists
of some impropriety during the process of forming the
contract depriving a party of a meaningful choice.”
(quoting Kinkel v. Cingular Wireless, LLC, 223 Ill.2d 1,
23 (2006))). So we agree with the District Court that the
pharmacies “brought forth sufficient facts to place the
agreement to arbitrate in issue.” Dist. Ct. Op., App’x at 6.
Optum’s motion to compel arbitration, brought under the
Rule 12(b)(6) standard, then, should have been denied.
But the District Court did not stop there.
Without providing for discovery as to arbitrability
and without allowing Optum to bring a Rule 56-styled
motion to compel arbitration, the District Court proceeded
to judge Optum’s motion by the Rule 56 standard.
Guidotti explains that the appropriate procedure for
converting motions brought under the Rule 12 standard to
motions brought under the Rule 56 standard “mirrors the
50
process provided by Rule 12(d).” 716 F.3d at 775 n.6.
That rule says “that ‘if, on a motion under Rule 12(b)(6)
or 12(c), matters outside the pleadings are presented to and
not excluded by the court, the motion must be treated as
one for summary judgment under Rule 56,’ and ‘all parties
must be given a reasonable opportunity to present all the
material that is pertinent to the motion.’” Id. (alterations
omitted) (quoting Fed. R. Civ. P. 12(d)). This means that
“[o]nce the motion is converted to a motion for summary
judgment, reasonable allowance must be made for the
parties to obtain discovery. Otherwise, weighing the new
factual assertions against the facts pleaded in the
complaint would ‘invite courts to consider facts and
evidence that have not been tested in formal discovery.’”
Id. (citations and alterations omitted) (quoting Pfeil v.
State St. Bank & Trust Co., 671 F.3d 585, 594 (6th Cir.
2012), abrogated on other grounds by Fifth Third Bancorp
v. Dudenhoeffer, 573 U.S. 409 (2014)).
This formal discovery, limited to the question of
arbitrability, may then be followed by a renewed motion
to compel arbitration wherein both the moving and non-
moving parties’ arguments can be supported by a
developed record. Id. at 776. To proceed otherwise would
plainly disadvantage moving parties because they would
be limited to the complaint, exhibits attached to the
complaint, matters of public record, and undisputedly
authentic documents relied upon by the complaint, even
when non-moving parties introduced and relied on other
evidence in opposition. Id. at 772.
51
Guidotti, then, requires a district court to allow
discovery on the question of arbitrability after it has denied
a motion to compel arbitration under the Rule 12(b)(6)
standard. Id. at 776. The District Court noted Guidotti’s
requirement but nevertheless declared that “the parties
have already engaged in discovery and have submitted
supplemental filings with the court in relation to the issue
of arbitrability.”15 It was, therefore, the District Court’s
view that adhering to Guidotti was a waste of time. Dist.
Ct. Op., App’x at 6. That was error, so we will vacate the
District Court’s order in part and remand to allow the
parties to conduct discovery limited to the issue of
arbitrability. After the conclusion of such discovery,
Optum will then have an opportunity to file a new motion
under the appropriate standard.
Before concluding, we note that the District Court
did not provide any citations to the record in support of its
finding that “the record demonstrates that [Optum]
prohibits PSAOs from giving the Provider Agreement to
15
The District Court seems to be mistaken about the discovery
that had taken place. Optum had conducted discovery as to the
nine pharmacies with which it did not seek to compel
arbitration, but not as to the pharmacies with which
arbitrability was at issue. Regardless, any discovery that might
have occurred with respect to arbitrability after the filing of
Optum’s original motion would be of little use without a later
opportunity to move to compel arbitration under the Rule 56
standard.
52
the individual pharmacies without first gaining permission
to do so.” Because we apply the same standard of review
the District Court should have applied, Guidotti, 716 F.3d
at 772, we have examined the record and found support for
the finding in the Provider Agreement set forth in Exhibit
A and in other Provider Agreements. But that particular
Provider Agreement may not be representative of other
pharmacies’ Provider Agreements. We note two
examples. The Provider Agreement set forth in Exhibit D
appears to contain the same confidentiality clause as the
Provider Agreement in Exhibit A, but “Pharmacy” therein
is defined more broadly—as each of the PSAO’s
participating member pharmacies—and the Provider
Agreement set forth in Exhibit P does not appear to
contain the same confidentiality clause as the others.
Moreover, as Optum and the pharmacies note, twenty of
the pharmacies made no claim of procedural
unconscionability. Because the issue is being remanded
to the District Court, which will soon have before it a
renewed motion, the District Court will be in a better
position to make, in the first instance, factual findings
regarding which, if any, of the pharmacies were prevented
from accessing the terms of their Provider Agreements. It
will also be in a better position to determine, in the first
instance, whether certain pharmacies’ substantive
unconscionability claims have merit or (as raised for the
first time in Optum’s reply brief) are preempted by the
FAA.
53
V. Conclusion
For the foregoing reasons, we will vacate in part16
and remand to the District Court for further proceedings
consistent with this opinion.
16
The District Court also ordered dismissal of various claims.
The dismissals are not challenged here.
54