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Media Alerts - Catamaran Corporation v. Towncrest Pharmacy - Eighth Circuit
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July 28, 2017
  Catamaran Corporation v. Towncrest Pharmacy - Eighth Circuit
Headline In matter of first impression, Eighth Circuit holds that courts must decide whether arbitration agreements authorize class arbitration absent clear language delegating the decision to an arbitrator

Area of Law Arbitration

Issue(s) Presented Whether the district court properly held that arbitration agreements' reference to AAA rules committed the question of whether class arbitration was allowed under the agreements to an arbitrator.
Brief Summary Catamaran Corporation is a pharmacy benefits manager and contracts with entities that sponsor, administer, or otherwise participate in prescription drug benefit plans. One of the services Catamaran provides is reimbursing pharmacies who provide prescription drugs to people covered by such a plan. The defendants are four pharmacies who have arrangements with Catamaran for such reimbursements under two different agreements. Each agreement contains an arbitration provision indicating that the rules of the American Arbitration Association (AAA) will apply to any dispute arising out of the agreements.

A dispute arose between Catamaran and the pharmacies. The pharmacies filed a demand for class arbitration with the AAA asserting claims on behalf of themselves and similarly situated independent pharmacies. The class contained over 85 pharmacies. In response, Catamaran filed a declaratory judgment action and argued that the agreements do not allow the pharmacies to proceed with class arbitration. Instead, Catamaran argued that each pharmacy must engage in bilateral arbitration. The district court held that because the agreements reference application of the AAA rules, they clearly and unmistakably commit the decision of whether the agreements contemplate class arbitration to an arbitrator, not the court.

On appeal, a panel of the Eighth Circuit reserved. The Court first addressed whether the issue of class arbitration is a substantive question of arbitrability typically reserved to courts. The panel noted that the Supreme Court has not definitively answered this question. It determined, however, that recent Supreme Court decisions noting the fundamental differences between bilateral and class arbitration and rulings by sister circuits indicate that the question of class arbitration is substantive, not merely procedural, and requires judicial determination unless the parties clearly and unmistakably delegate the question to an arbitrator. Here, the agreements were both silent as to class arbitration. The Court held that mere reference to AAA rules alone is not enough to clearly and unmistakably delegate the question to an arbitrator, and therefore the question falls to the courts. It instructed the district court to determine whether a contractual basis for class arbitration exists under the agreements on remand.

The full text of the opinion may be found at

Panel Chief Judge Smith and Circuit Judges Fenner and Shepherd

Date of Issued Opinion July 28, 2017

Decided Reversed

Docket Number 16-3275

Counsel Jason Michael Casini for Appellant and Bruce Henry Stoltze, Sr. for Appellees

Author Circuit Judge Shepherd

Case Alert Circuit Supervisor Joelle Larson, University of Minnesota Law School

    Posted By: Joelle Larson @ 07/28/2017 02:22 PM     8th Circuit  

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