In re Rotavirus Vaccines Antitrust Litig.
In re Rotavirus Vaccines Antitrust Litig.
Opinion of the Court
This consolidated putative antitrust class action has been brought before the Court on Motion of Defendant Merck Sharp & Dohme Corp. ("Merck") to compel each individual plaintiff to arbitration and to *259stay these proceedings pending such arbitrations. For the reasons which we explain in the pages which follow, the motion shall be denied.
Factual Background
As averred in the Consolidated Amended Class Action Complaint filed by Sugartown Pediatrics, LLC and Schwartz Pediatrics S.C.,
By the motion that is now before us, Merck seeks to stay this matter and compel Plaintiffs to submit its claims to arbitration on the basis of arbitration clauses contained within Merck's contracts with the three Physician Buying Groups through which Plaintiffs purchased their vaccines. Those clauses are virtually identical in all three of the contracts at issue and read as follows:
Any controversy, claim or dispute arising out of or relating to the performance, construction, interpretation or enforcement of this Agreement shall, if not resolved through negotiations between the parties, be submitted to mandatory binding arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. Sec. 1 et. seq.
Plaintiffs rejoin that this matter should not be submitted to arbitration because they were not signatories to any agreements directly with Merck and the agreements which they entered into with the Physician Buying Groups of which they were members did not contain any such clauses requiring submission of any of their disputes to arbitration.
Discussion
A. Arbitration under the Federal Arbitration Act
As the Supreme Court has observed, "Congress adopted the [Federal] Arbitration Act in 1925 in response to a perception that courts were unduly hostile to arbitration" and, in so doing, "directed courts to abandon their hostility and instead treat arbitration agreements as 'valid, *260irrevocable, and enforceable.' " Epic Systems Corp. v. Lewis, --- U.S. ----,
The Federal Arbitration Act also provides two parallel devices for enforcing an arbitration agreement: a stay of litigation in any case raising a dispute referable to arbitration [
B. Standards Governing Motions to Compel Arbitration
In evaluating "whether there is a valid agreement to arbitrate, a district court 'must initially decide whether the determination is made under Fed. R. Civ. P. 12(b)(6) or 56.' " Noye v. Johnson & Johnson,
In this case, both parties have submitted evidentiary support for their respective positions in the form of witness affidavits/declarations, contracts, etc. We therefore find that the summary judgment standard is properly utilized in ruling upon Defendant's motion to compel arbitration.
C. Application to Non-Signatories
It is axiomatic that, "[u]nder Pennsylvania law, contract formation requires: (1) a mutual manifestation of an intention to be bound, (2) terms sufficiently definite to be enforced, and (3) consideration." Kirleis v. Dickie, McCamey & Chilcote, P.C.,
Although the usual presumption in favor of arbitration does not extend to non-signatories to an agreement, but rather applies only when both parties have consented to and are bound by the arbitration clause, "[s]till, a non-signatory may be bound by an arbitration agreement if 'traditional principles' of state law allow a contract to be enforced by or against nonparties to the contract.". Griswold v. Coventry First LLC,
Specifically, there are five theories under which non-signatories may be bound to the arbitration agreements of others: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter ego; and (5) estoppel. Booth v. BMO Harris Bank, N.A., Civ. A. No. 13-5968,
1. Agency
Under the law of Pennsylvania, an agency relationship exists with the (1) manifestation by the principal that the *262agent shall act for him; (2) the acceptance of the undertaking by the agent; and (3) the control of the endeavor in the hands of the principal. Tribune Review v. Westmoreland Housing Authority,
Express authority exists where the principal deliberately and specifically grants authority to the agent as to certain matters. Implied authority exists in situations where the agent's actions are "proper, usual and necessary" to carry out express agency. Apparent agency exists where the principal, by word or conduct, causes people with whom the alleged agent deals to believe that the principal has granted the agent authority to act. Authority by estoppel occurs when the principal fails to take reasonable steps to disavow the third party of their belief that the purported agent was authorized to act on behalf of the principal.
In this case, Merck premises its claim of agency on paragraphs 2.1 and 4.6 in its agreements with the PBGs which read:
2.1 Upon execution of this Agreement, [PBG] shall submit to Merck a complete list of all [PBG] members. All [PBG] members that purchase vaccines ("Vaccine Clinics") through an agreement entered into, maintained or facilitated by [PBG] shall, subject to acceptance by Merck, be listed in Schedule B and eligible to purchase Merck Vaccines pursuant to this Agreement (collectively, the "Eligible Clinics"), unless and until removed from Schedule B as set forth herein. Any Vaccine Clinic not accepted by Merck shall not be an Eligible Clinic and shall not be eligible to purchase Merck Vaccines pursuant to this Agreement. By submitting a list of Vaccine Clinics to be attached to Schedule B, [PBG] hereby acknowledges that it has the authority of the Vaccine Clinics to participate in this Agreement.
4.6 [PBG] will accurately communicate to Eligible Clinics the terms and conditions of this Agreement identified as being applicable to the Eligible Clinics and shall inform them that by purchasing Merck Vaccines pursuant to this Agreement, Eligible Clinics agree to the applicable terms and conditions set forth herein.
*263Although these clauses obviously reflect Merck's desire to impose the terms and conditions of its buying agreements with the PBGs on the individual medical practices/"vaccine clinics" with whom the PBGs have relationships, in and of themselves, however, they do not evince an agency relationship between Plaintiffs and the PBGs. Likewise, they do not demonstrate that the Plaintiffs either consented or had knowledge that, by becoming PBG members, they were giving authority to the PBGs to enter into an agreement with Merck to arbitrate.
Furthermore, there is no other evidence to suggest that either a parent-subsidiary, ownership, or any other significant relationship existed between the signatory and the non-signatory parties, nor is there any other evidence that Plaintiffs (acting as principals) said or did anything which might have caused Defendant to believe that they had granted the PBGs the authority to act broadly on their behalves. (See, e.g., Declarations of Dr. Gerald Margiotti, M.D., Dr. David Schwartz and Louis M. Gianciulio, M.D. attached to Plaintiffs' Sur-Reply Memorandum in Further Opposition to Defendant's Motion to Compel Individual Arbitration and Stay Proceedings). Given that the burden of proving agency rests upon the party seeking to assert it, without more, we cannot find that Defendant here has established as a matter of law that the PBGs were the agents of the plaintiffs.
Third Party Beneficiary/Estoppel
"There are two theories of equitable estoppel that can bind a non-signatory to an arbitration clause." Booth,
The second, alternative theory of estoppel arises where there is an "obvious and close nexus" between the non-signatories and the contract or the contracting parties. Miron,
In application of the foregoing and drawing all reasonable inferences in favor of the plaintiffs as the non-movants, we again cannot find that the requisite showing of relatedness or congruence has been made. Although Plaintiffs are PBG members, there is no evidence that they are closely related in terms of their ownership, administration, mission, business functions or otherwise. Plaintiffs are private medical practices presumably independently owned and operated by either larger, medical practice groups or some or all of the individual physicians who practice with them. There is absolutely no evidence on this record that they have any relationship whatsoever with Merck or with the PBG(s) to which they belong aside from having entered into contractual agreements for membership in the PBGs. The Plaintiffs' only obligations and duties under the Merck contracts are those found in paragraphs 9.3 and 9.5 (Duty to Warn and Confidentiality), 9.8 (regarding reporting of discounts pursuant to
Conclusion
Based upon all of the foregoing, the Court simply cannot find that sufficient grounds exist to compel the Plaintiffs to arbitrate their anti-trust claims in this case. The Defendant's Motion to Compel *265Arbitration and Stay Proceedings shall therefore be denied pursuant to the attached Order.
In an Order entered on August 8, 2018, the action initiated by Margiotti & Kroll Pediatrics, P.C. against Merck (Case No. 18-CV-3064) was consolidated into this action as well.
As per ¶ 9.11 in Merck's agreements with the PBGs: "This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to Pennsylvania's choice of laws or arbitration provisions."
Nor do we find that such authority was conferred by Plaintiffs through the contracts which they made with the PBGs. To be sure, the Main Street Vaccines Agreement states in relevant part only that:
The following is an agreement between (Practice Group) representing all providers of _______________ with a practice address of _______________ and Main Street Vaccines (Main Street) to participate as a member practice (member) in a vaccine purchasing contract with Merck Vaccines ...
The CCPA Agreement, on the other hand, provides in pertinent part:
By executing and submitting this Agreement to GPO [CCPA Purchasing Partners, L.L.C.], Provider [the health care provider executing the agreement] authorizes GPO to act as its non-exclusive agent to arrange for the purchase of goods and services as set forth herein, and agrees to comply with and be bound by the terms and conditions of this Agreement."
While the CCPA contract does on its face grant CCPA "non-exclusive" authority to arrange for the purchase of "goods and services as set forth herein," unlike the Main Street Vaccines agreement, the CCPA Agreement does not specify Merck as a Vendor and is instead a broad, general agreement with its member practices to negotiate and enter into vendor agreements with any number of sellers of medical supplies, pharmaceuticals and other goods and services. Neither the CCPA nor the Main Street Vaccines contract contains any references whatsoever to arbitration nor does either incorporate any other agreements by reference. And, the CCPA agreement also contains an integration clause representing that "[t]his Agreement contains the entire agreement and understanding between the parties with respect to the subject matter of this Agreement and shall supersede any and all prior oral or written negotiations, agreements, or understanding between the parties with respect thereto."
Reference
- Full Case Name
- IN RE ROTAVIRUS VACCINES ANTITRUST LITIGATION
- Cited By
- 2 cases
- Status
- Published