BriovaRx, LLC v. Transcript Pharmacy, Inc.

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2013-CA-01158-COA
BRIOVARX, LLC, IMPROPERLY NAMED AS APPELLANTS
MEDFUSION RX ASCEND PHARMACY, AND
CATAMARAN CORPORATION F/K/A
CATALYST RX
v.
TRANSCRIPT PHARMACY, INC. APPELLEE
DATE OF JUDGMENT: 07/08/2013
TRIAL JUDGE: HON. WINSTON L. KIDD
COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS: ALAN M. PURDIE
DION JEFFERY SHANLEY
ROBERT RICHARDSON BAUGH
MICHAEL W. ULMER
HUGH RUSTON COMLEY
JAIME C. ERDBERG
ATTORNEYS FOR APPELLEE: CECIL MAISON HEIDELBERG
CHARLES STEPHEN STACK JR.
NATURE OF THE CASE: CIVIL - TORTS - OTHER THAN PERSONAL
INJURY AND PROPERTY DAMAGE
TRIAL COURT DISPOSITION: MOTION TO COMPEL ARBITRATION
DENIED
DISPOSITION: REVERSED AND REMANDED - 05/05/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE LEE, C.J., BARNES AND MAXWELL, JJ.
MAXWELL, J., FOR THE COURT:
¶1. The circuit court denied BriovaRX’s motion to compel arbitration because BriovaRX
was not a party to the arbitration agreement it sought to enforce. But in Mississippi, a non-
signatory can enforce an arbitration agreement when the non-signatory maintained a close
legal relationship with the signatory to the agreement and the plaintiff has alleged
“substantially interdependent and concerted misconduct” between the non-signatory and
signatory.1 Here, both conditions were met. BriovaRX is a subsidiary of Catamaran
Corporation, which had entered into an agreement with Transcript Pharmacy, Inc. This
agreement included a broad arbitration clause. When you couple this with the fact Transcript
had alleged BriovaRX’s “joint conduct” with Catamaran was the source of its injury, the
exception allowing non-signatories to compel arbitration applied.
¶2. Because we find BriovaRX, though a non-signatory, had a right under these
circumstances to enforce the arbitration agreement between Transcript and Catamaran, and
because we also find neither BriovaRX nor Catamaran waived the right to arbitrate the new
claims raised in Transcript’s 2012 amended complaint, it was error for the circuit court to
deny BriovaRX’s and Catamaran’s motions to compel arbitration. We reverse and remand
for the circuit court to grant the motions to compel arbitration.
Background Facts and Procedural History
I. Initial Lawsuit
¶3. Interestingly, BriovaRX and Transcript started off on the same side. In 2009,
Transcript sued Catalyst RX, the pharmacy-benefits manager for the Mississippi State and
School Employees’ Life and Health Plan (State Plan), for dropping Transcript from the State
1
Sawyers v. Herrin-Gear Chevrolet Co., 26 So. 3d 1026, 1039 (¶34) (Miss. 2010)
(quoting B.C. Rogers Poultry, Inc. v. Wedgeworth, 911 So. 2d 483, 492 (¶30) (Miss. 2005)).
2
Plan.2 Transcript claimed that Mississippi’s “any willing provider” statute for pharmacies,
Mississippi Code Annotated section 83-9-6 (Rev. 2011), entitled it to participate in the State
Plan. Transcript prayed for emergency and permanent injunctive relief. See Miss. Code
Ann. § 83-9-6(6) (creating a civil action for injunctive relief for violation of this section).
It also sought a declaratory judgment that section 83-9-6 applied to the State Plan.
Additionally, it requested money damages under several tort theories.
¶4. BriovaRX—a specialty pharmacy then named Medfusion RX—intervened as a
similarly situated plaintiff.
¶5. Medfusion RX had entered a similar agreement with Catalyst RX as Transcript had.
Both of these agreements contained broad arbitration clauses. Relying on these clauses,
Catalyst RX moved to compel arbitration. But later Catalyst RX agreed that the declaratory
action—which sought to resolve the legal question whether section 83-9-6 applied to the
State Plan—should be decided by the circuit court. So Catalyst RX agreed to withdraw its
motion to compel arbitration. In exchange, Transcript and Medfusion RX agreed to dismiss
their claims for money damages. The dismissal of these claims was without prejudice. But
Transcript and Medfusion RX expressly assured Catalyst RX that any later pursuit of their
damages claims would happen in the arbitration forum.
¶6. The declaratory action was resolved in Transcript and Medfusion RX’s favor. In
February 2011, through a grant of partial summary judgment, the circuit court declared the
2
Transcript sued the State Plan too.
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any-willing-provider statute applied to the State Plan. While it took a year, Catalyst RX had
this judgment certified as final and filed a notice of appeal. But that appeal was later
withdrawn, owing to the fact that, in a separate appeal, the Mississippi Supreme Court
conclusively held the any-willing-provider statute entitled willing pharmacies like Transcript
to act as providers to State Plan members. Miss. State & Sch. Emps’ Life & Health Plan v.
KCC, Inc., 108 So. 3d 932 (Miss. 2013).
II. Corporate Realignments
¶7. While that first appeal was pending, several significant events happened.
¶8. First, both Catalyst RX and Medfusion RX changed their names and their legal
relationship to each other. After a series of mergers, Catalyst RX became Catamaran. As
part of these corporate changes, Catamaran acquired Medfusion RX. Catamaran then
rebranded Medfusion RX as BriovaRX. Thus, Catamaran’s once legal foe on the other side
of the “v.” became part of its corporate family, designated as Catamaran’s specialty
pharmacy.
¶9. Second, in light of this change, Catamaran—on Catalyst RX letterhead—mailed its
customers nationwide a letter informing them their specialty pharmacy was changing and
directing them to call for further instructions. Catamaran acknowledges this letter was
erroneously sent to members of the State Plan. Because of the supreme court’s ruling on the
any-willing-provider question, Transcript legally could continue to be the specialty pharmacy
for State Plan members.
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III. Amended Complaint
¶10. What Catamaran characterized as a mistake—sending the letter to State Plan
members—Transcript called a conspiracy. As soon as it learned of the September 2012
letter, Transcript immediately moved to amend its complaint. The proposed amended
complaint focused on the letter, alleging Catamaran and Transcript’s former ally, BriovaRX
f/k/a Medfusion RX, conspired together to steal Transcript’s customers and that their “joint
actions” had harmed Transcript. Transcript sought money damages under various tort
theories—but only against BriovaRX. Transcript was careful in its prayer for relief to state
that it was not seeking tort damages from Catamaran, but instead just injunctive and
declaratory relief.
¶11. In light of these new allegations, Catamaran renewed its motion to compel arbitration.
And while BrioavaRX did not assert the right to arbitrate in its initial answer to Transcript’s
amended complaint, it soon after filed a motion to amend its answer to include an arbitration
defense. It also filed a separate motion to compel arbitration.
¶12. Both Catamaran’s and BriovaRX’s motions to compel arbitration were heard together,
along with BrioavRX’s motion to amend its answer. The circuit court denied all three
motions. The court found Catamaran had waived its right to compel arbitration by
participating thus far in the now three-year-old litigation. And the court found BriovaRX,
as a third-party to the Catamaran/Transcript agreement, had no right to enforce the arbitration
clause found in that agreement. And because BriovaRX had no right to compel arbitration,
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there was no reason to allow BriovaRX to amend its answer with a futile assertion of
arbitration.
¶13. Because the denial of a motion to compel arbitration is a final judgment conferring
appellate jurisdiction, Catamaran and BriovaRX immediately appealed. See, e.g., Wolgin
v. Experian Info. Solutions, Inc., 101 So. 3d 1160, 1165-66 (¶16) (Miss. 2012) (recognizing
appellate jurisdiction of the denial of a motion to compel arbitration).
Standard of Review
¶14. The right to compel arbitration is a legal question. Thus, we review the grant or denial
of a motion to compel arbitration de novo. Sawyers v. Herrin-Gear Chevrolet Co., 26 So.
3d 1026, 1034 (¶20) (Miss. 2010). As Mississippi follows the federal policy in favor of
arbitration, we resolve “any doubts concerning the scope of arbitrable issues . . . in favor of
arbitration[.]” East Taylor, Inc. v. Ford, 826 So. 2d 709, 713 (¶11) (Miss. 2002).
Discussion
I. Enforcement by Non-Signatory
¶15. Transcript drafted its amended complaint with an eye toward avoiding arbitration.
Though Catamaran’s alleged conspiratorial misconduct is integral to Transcript’s various tort
theories, Transcript clearly stated it did “not seek money damages against” Catamaran—only
injunctive and declaratory relief. The claims for money damages were lodged against
Catamaran’s new subsidiary and Transcript’s old ally, BriovaRX.3 No doubt this was a
3
Transcript also seeks money damages from the State Plan.
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calculated move to honor its agreement (that it would only pursue money-damage claims
against Catamaran in arbitration) while at the same time have its day in court. On de novo
review, the question we must answer is whether Transcript’s strategy worked.
¶16. Unfortunately for Transcript, under these circumstances, we find it did not. Transcript
cannot avoid the arbitration clause, even though it has only directed the arbitrable claims
against BriovaRX, and not Catamaran. This is because the general rule that a non-signatory
may not be bound by an arbitration contract has a “repeatedly recognized” exception.
Sawyers, 26 So. 3d at 1038 (¶31). “[A] non-signatory may be able to enforce an arbitration
agreement against a signatory where the non-signatory has a close legal relationship with a
signatory of the agreement” and where the plaintiff alleges “substantially interdependent and
concerted misconduct” between the signatory and non-signatory. Id. at (¶¶31-32) (citations
omitted).
¶17. Both conditions for this exception to apply have clearly been met. Catamaran and
BriovaRX are in a close legal relationship. They are related companies, with BriovaRX
being the specialty pharmacy of Catamaran.4 And Transcript’s allegations undoubtedly rest
upon the “substantially interdependent and concerted misconduct” of Catamaran and
BriovaRX. The amended complaint explicitly alleged that Catamaran acted “in concert” with
BriovaRX “in an attempt to steal Transcript’s patients”; BriovaRX was misuing Transcript’s
4
While Transcript appears to question their relationship on appeal, in paragraph
thirty of its amended complaint, Transcript stated it had verified through public records that
Catamaran now owns BriovaRX.
7
patient information, which Catamaran provided to BriovaRX; BriovaRX, the State Plan, and
Catamaran have “conspired together”; BriovaRX has unfairly profited “from the
conspiratorial acts” committed with the State Plan and Catamaran; and BriovaRX, the State
Plan, and Catamaran’s civil conspiracy has damaged Transcript monetarily. Thus, BriovaRX
has a right to enforce the arbitration clause in the Catamaran/Transcript agreement.
¶18. Further, the fact Transcript brings tort claims and not breach-of-contract claims
against BriovaRX is a distinction without a difference, as far as arbitration is concerned.
When determining the scope of arbitration, we focus “on factual allegations in the complaint
rather than the legal causes of action asserted.” Scruggs v. Wyatt, 60 So. 3d 758, 766 (¶16)
(Miss. 2011) (quoting Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A., 372 F.3d
339, 344 (5th Cir. 2004)). “If the allegations underlying those claims ‘touch matters’ covered
by the parties’ agreements, then those claims must be arbitrated, whatever the legal labels
attached to them.”5 Id.
¶19. Here, the allegations underlying Transcript’s tort claims “touch matters” covered by
the Catamaran/Transcript agreement. For example, the contract covers how customer
information may be used. And the amended complaint specifically alleges Catamaran and
BriovaRX misused Transcript’s customer list to gain an unfair business advantage. But
5
The arbitration clause in the Catamaran/Transcript contract is broad, covering
“[a]ny controversy or claim arising out of or relating to” the agreement. (Emphasis added).
With broad arbitration clauses, it is enough that the claims brought “touch” matters in the
agreement. Kulpa v. OM Fin. Life Ins., 558 F. Supp. 2d 676, 684 (S.D. Miss. 2008).
8
much more broadly, Transcript’s allegations of conspiracy and illegal interference touch
Transcript’s right to operate under the agreement itself. Given our directive to resolve “any
doubts concerning the scope of arbitrable issues . . . in favor of arbitration,” we must find that
Transcript’s new claims fall under the broad, enforceable arbitration clause. East Taylor, 826
So. 2d at 713 (¶11).
¶20. We are mindful that the remedy provided to the non-signatory in Sawyers is to be
applied “cautiously” and only “to prevent unconscionable results.” Sawyers, 26 So. 3d at
1039 (¶35). But just as in Sawyers, we find Transcript cannot avoid the arbitration
agreement with Catamaran, while at the same time seek money damages for BriovaRX
allegedly conspiring to interfere with that agreement. See id. at (¶34). Under these
circumstances, BriovaRX had a right to enforce the arbitration clause in the Catamaran /
Transcript agreement.
II. No Waiver
¶21. We also find neither BriovaRX nor Catamaran waived the right to arbitrate the new
claims raised in the 2012 amended complaint.
¶22. It is true that participation in litigation leads to waiver of the right to arbitrate. See
Lemon Drop Props., LLC v. Pass Marianne, LLC, 73 So. 3d 1131, 1135 (¶12-13) (Miss.
2011). It is also true that Catamaran, as defendant Catalyst RX, and BriovaRX, as plaintiff
Medfusion RX, had participated in the litigation with Transcript for three years before filing
their motions to arbitrate. But that participation was limited, by agreement, to litigating the
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declaratory-judgment action. Back in August 2010, Catamaran only withdrew its original
motion to compel arbitration so the circuit court could resolve specifically whether section
83-9-6 applied to the State Plan. And BriovaRX, along with Transcript, conceded that any
future claims for money damages should be asserted in the arbitration forum.
¶23. As this court has previously acknowledged, parties can agree to arbitrate some claims
and litigate others. Cf. Nobel Real Estate, Inc. v. Seder, 101 So. 3d 197, 202 (¶19) (Miss. Ct.
App. 2012) (enforcing a narrow arbitration clause that agreed to arbitration of some, but not
all, claims between the parties). Thus, litigating the purely legal questions—whether section
83-9-6 applies and, if so, whether Transcript was entitled to the injunctive relief section 83-9-
6(6) affords—did not act as a waiver of other arbitrable claims. This is especially true here
where the allegations underlying the amended complaint rely on events that did not even
occur until September 2012. Catamaran and BriovaRX cannot be deemed to have waived
the arbitration of claims two years before those claims arose.
¶24. Further, for there to be waiver of the right to arbitration, there must be detriment or
prejudice to the opposing party. Lemon Drop Props., 73 So. 3d at 1135 (¶12). Here,
Transcript has suffered no prejudice as far as the amended complaint is concerned.
Catamaran asserted its right to arbitrate the amended claims before Transcript was even
permitted to file its amended complaint. Further, Transcript had literally known for years of
Catamaran’s intent to seek arbitration of any future claims besides the declaratory
action—especially any claims that sought tort damages.
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¶25. True, BriovaRX did not assert the affirmative defense of arbitration in its initial
answer. But it quickly sought to amend its answer before any significant litigation ensued.
And it was only denied the requested amendment based on the trial judge’s erroneous belief
that BriovaRX could not rely on the arbitration agreement between Catamaran and
Transcript. Again, for participation in litigation to amount to waiver, the party opposing
arbitration must be prejudiced. And here, Transcript was not prejudiced by BriovaRX’s
failure to assert arbitration in its original answer. Catamaran’s motion to compel arbitration
was already pending, and BriovaRX’s motion to compel arbitration soon followed.
¶26. Therefore, the judgment denying arbitration is reversed, and this case is remanded for
the circuit court to grant the motions to compel arbitration of all counts in the amended
complaint seeking money damages.
¶27. THE JUDGMENT OF THE HINDS COUNTY CIRCUIT COURT IS
REVERSED, AND THIS CASE IS REMANDED FOR THE CIRCUIT COURT TO
COMPEL ARBITRATION. ALL COSTS OF THIS APPEAL ARE ASSESSED TO
THE APPELLEE.
LEE, C.J., GRIFFIS, P.J., BARNES, ISHEE, ROBERTS, CARLTON, FAIR
AND JAMES, JJ., CONCUR. IRVING, P.J., DISSENTS WITHOUT SEPARATE
WRITTEN OPINION.
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