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`C.A. No. 16-046 WES
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF RHODE ISLAND
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`SHEET METAL WORKERS LOCAL NO. 20
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`WELFARE AND BENEFIT FUND, and
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`INDIANA CARPENTERS WELFARE FUND,
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`on behalf of themselves and all )
`others similarly situated,
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`Plaintiffs,
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`PLUMBERS WELFARE FUND, LOCAL 130, )
`U.A., on behalf of itself and all )
`others similarly situated,
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`MEMORANDUM AND ORDER
`WILLIAM E. SMITH, District Judge.
`Plaintiffs Sheet Metal Workers Local No. 20 Welfare and
`Benefit Fund (“Sheet Metal Workers”), Indiana Carpenters Welfare
`Fund (“Indiana Carpenters”), and Plumbers Welfare Fund Local 130
`(“Plumbers”) (collectively, “Plaintiffs” or “named Plaintiffs”)
`move to certify four classes of third-party payors (“TPPs”) or
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`C.A. No. 16-447 WES
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`C.A. No. 16-046 WES
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF RHODE ISLAND
`___________________________________
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`SHEET METAL WORKERS LOCAL NO. 20
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`WELFARE AND BENEFIT FUND, and
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`INDIANA CARPENTERS WELFARE FUND,
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`on behalf of themselves and all )
`others similarly situated,
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`Plaintiffs,
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`CVS PHARMACY, INC., et al.,
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`Defendants.
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`___________________________________)
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`PLUMBERS WELFARE FUND, LOCAL 130, )
`U.A., on behalf of itself and all )
`others similarly situated,
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`Plaintiffs,
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`___________________________________)
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`MEMORANDUM AND ORDER
`WILLIAM E. SMITH, District Judge.
`Plaintiffs Sheet Metal Workers Local No. 20 Welfare and
`Benefit Fund (“Sheet Metal Workers”), Indiana Carpenters Welfare
`Fund (“Indiana Carpenters”), and Plumbers Welfare Fund Local 130
`(“Plumbers”) (collectively, “Plaintiffs” or “named Plaintiffs”)
`move to certify four classes of third-party payors (“TPPs”) or
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`C.A. No. 16-447 WES
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`health plans in two consolidated cases. Pls.’ Mem. in Supp. of
`Pls.’ Mot. for Class Certification (“Pls.’ Mot.”) 1-3, ECF No.
`123;1 see also Reply in Supp. of Pls.’ Mot. for Class Certification
`(“Pls.’ Reply”) 3-4, ECF No. 145-1 (amending the class definition
`for the “Omissions Consumer Protection Class”).2 They allege that
`Defendant CVS Pharmacy, Inc. (“CVS”) and five pharmacy benefit
`managers (“PBMs”) – Defendant Caremark, L.L.C. (“Caremark”,
`together with CVS, “Defendants”), Express Scripts, Inc., OptumRx,
`Inc., Medco Health Solutions, Inc., 3 and MedImpact Healthcare
`Systems, Inc. – engaged in a nationwide scheme and conspiracy to
`overcharge TPPs, in violation of the Racketeer Influenced and
`Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq., and
`various state laws. First Am. Compl. (“FAC”) 5-9, 52-84, ECF No.
`171. Specifically, Plaintiffs allege that CVS defrauded and
`overcharged the health plans in failing to treat its Health Savings
`Pass (“HSP”) membership prices as its “Usual and Customary” (“U&C”)
`prices when reporting U&C prices to the PBMs. Moreover, Plaintiffs
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`1 All docket entries refer to the docket in C.A. No. 16-046.
` Defendants make much of the term “health plans” as overly
`vague, but Plaintiffs clarify that it is used as a synonym for
`“third-party payor” – “namely, any entity (other than the patient
`or health care provider) that reimburses the patient’s health care
`expenses (e.g., pharmaceutical purchases).” Pls.’ Reply 18. In
`this opinion, “TPPs” and “health plans” are used interchangeably.
` Express Scripts purchased MedCo in 2012. FAC ¶¶ 12, 111.
`During the life of the HSP Program, Indiana Carpenters’ PBM was
`MedCo. Id. ¶ 12.
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`claim that CVS and the PBMs conspired to conceal from the TPPs
`that the HSP prices were not included in its U&C prices.
`In addition, Caremark moves to dismiss Sheet Metal Workers’
`claims against Caremark, on the basis that the parties have agreed
`to arbitrate any disputes between them. See generally Mem. in
`Supp. of Caremark LLC’s Mot. under the FAA to Dismiss the Claims
`of Sheet Metal Workers (“Caremark Mot. to Dismiss”) 1, ECF No.
`163-1.
`For the reasons that follow, Plaintiffs’ Motion for Class
`Certification, ECF No. 120, is GRANTED, and Caremark’s Motion to
`Dismiss, ECF No. 163, is also GRANTED. The Court DENIES WITHOUT
`PREJUDICE Plaintiffs’ Motions to Exclude the Expert Testimony of
`Catherine Graeff, Michael P. Salve, Ph.D., and Brett E. Barlag,
`ECF Nos. 140-42.
`I.
`Background4
`Retail pharmacy chains generally sell their prescription
`drugs to two groups of consumers: those with prescription
`insurance, and those without insurance, also referred to as cash
`payors. FAC ¶ 29. Customers with insurance make up well over 90
`percent of CVS’s prescription drug business, and their
`prescription purchases are processed and paid for (in part or in
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`4 The Court gleans the background from Plaintiffs’ First
`Amended Complaint. See generally First Am. Compl. (“FAC”), ECF
`No. 81-1.
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`3
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`full) by health plans, including health insurance companies,
`third-party administrators, health maintenance organizations,
`self-funding health and welfare benefit plans, health plans, and
`other health benefit providers (collectively referred to herein as
`“health plans” or “TPPs”). Id.
`Pharmacies, including CVS, report the prices they charge cash
`customers, known as the “Usual and Customary” or “U&C” price, to
`PBMs and TPPs to comply with the National Council for Prescription
`Drug Program’s (“NCPDP”) requirements. Id. ¶¶ 1, 33-35. This
`arrangement (and the contracts between CVS and the PBMs), in part,
`guarantees that TPPs and insured consumers do not pay more for a
`prescription drug than an uninsured consumer would pay for the
`same drug. Id. ¶ 1.
`Pharmacy benefit managers, or PBMs, facilitate transactions
`between TPPs and pharmacies. Id. ¶ 28. TPPs contract with PBMs
`to perform services “including the negotiation of drug prices with
`drug companies, creation of formularies, management of
`prescription billing, construction of retail pharmacy networks for
`insurers, and provision of mail-order services.” Id. PBMs set up
`how pharmacy claims are adjudicated consistent with instructions
`from their TPP clients. Id. ¶ 36. Pursuant to PBM/TPP contracts,
`TPPs pay their PBMs for generic drugs purchased by their members
`based on the “lower of” three benchmark prices: average wholesale
`price (“AWP”) less a defined percentage (i.e., AWP - %); U&C; or
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`Maximum Allowable Cost (“MAC”). Id. ¶¶ 39-41. A drug’s AWP is
`set and published by third parties. Id. ¶ 40. PBMs set the MAC
`for each generic drug on their proprietary MAC lists. Id. ¶ 41.
`The U&C is set by the pharmacy and is typically the highest of the
`three prices. Id. ¶ 42.
`PBMs also contract with pharmacies to dispense drugs to their
`TPP clients. Id. ¶ 43. In those contracts, PBMs also typically
`agree to pay pharmacies based on benchmark prices, such as AWP,
`U&C, and MAC. Id. As the middlemen, PBMs make their profit from
`charging their TPP clients more for drugs than they pay the
`pharmacy for the transactions. Id. Thus, PBMs do not disclose
`the prices they charge their TPP clients, nor what they pay
`pharmacies. Id.
`It was against this backdrop that, in September 2006, “Walmart
`turned the world of generic prescription drugs upside-down” by
`announcing that it would charge $4 for a 30-day supply, and $10
`for a 90-day supply, of hundreds of generic prescription drugs.
`Id. ¶¶ 2, 52. Target, Walgreens, Rite Aid, and other retailers
`with pharmacies followed suit. Id. ¶ 52. Walmart and Target
`(until CVS acquired Target pharmacies in 2015) reported $4 as their
`U&C prices. Id. Tweaking the model a bit, Walgreens and Rite Aid
`required customers to “join” their generic prescription drug
`programs to reap the benefits. Id. ¶ 57.
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`Plaintiffs allege that CVS joined with Caremark (and later
`ScriptSave), a fellow subsidiary of CVS Health Corporation, to
`sketch out a discount generic drug program that shielded CVS from
`reporting the discount price as its U&C to PBMs. Id. ¶¶ 56-57,
`71-83. In March 2008, prior to launching the HSP program, CVS and
`Caremark analyzed how adopting a generic discount program would
`impact CVS’s revenue from TPPs. Id. ¶ 59. An analyst at CVS
`determined that the impact to TPP revenue would be $866 million
`annually if CVS included all the drugs on the Walmart list, and,
`if CVS included all the drugs on the Walgreens list, the impact
`would be an additional $329 million. Id. As a result, CVS
`structured its HSP differently, citing concerns that “[m]aking the
`program ‘too attractive’ creates higher risk for our 3rd party
`plan pricing and profitability.” Id. ¶ 61 (quoting CVSSM-0002427,
`at 2430 (May 8, 2008 presentation given to Larry Merlo, as edited
`by Bari A. Harlam at Caremark)). Unlike Walmart and Walgreens,
`CVS decided to charge consumers a $10 annual fee to join the
`program. Id. ¶ 65. Plaintiffs allege that, in addition to
`collaborating with Caremark, CVS also “enlisted the participation
`of” three of the largest PBMs in the country, Express Scripts,
`OptumRx, and MedImpact, to embark on a scheme to conceal from
`health plans its HSP drug prices when reporting U&C prices. Id.
`¶ 3.
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`In November 2008, the HSP program went live. Id. ¶ 64. From
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`November 9, 2008 through 2010, customers paid a $10 annual fee to
`join the program, which gave them access to a 90-day supply of 400
`commonly prescribed generic drugs for $9.99. Id. ¶¶ 64-65.
`Starting in 2011, the annual fee went up to $15, and CVS raised
`the price for HSP-listed drugs to $11.99 for a 90-day supply and
`$3.99 for a 30-day supply. Id. ¶ 65. From November 2008 to
`February 2016, CVS did not report the HSP price as the U&C price
`for HSP-eligible drugs. Id. ¶ 66. Caremark administered the HSP
`program from its inception until July 2013, when ScriptSave took
`over its administration; the program was discontinued on January
`31, 2016. Id. ¶¶ 23, 70, 83. Caremark played a dual rule in this
`saga: in addition to administering the HSP program, many TPPs
`used Caremark as a PBM. Id. ¶ 3.
`Importantly, PBMs have incentive to encourage or conceal
`inflated U&C prices – PBMs make more money when U&C prices are
`higher. Id. ¶ 47. When a PBM pays a pharmacy the U&C price for
`a generic drug transaction, the TPP also pays the U&C price to the
`PBM. Under those circumstances, the PBM makes no profit or
`“spread” between what it pays the pharmacy and what the TPP pays
`the PBM. Id. ¶ 49. During the HSP program, CVS’s HSP prices were
`often lower than the price a TPP would have paid under a formula
`using AWP or MAC as the benchmark price. Id. ¶ 50. Therefore, if
`CVS had reported its HSP prices as U&C prices, the U&C price
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`generally would have been the lowest benchmark price. Id. Thus,
`PBMs stood to lose “hundreds of millions of dollars in ‘spread’
`opportunities” were HSP prices to be reported as U&C prices. Id.
`Plaintiffs allege that, for this reason, Caremark, Express
`Scripts, OptumRx, and MedImpact not only failed to intervene and
`prevent CVS’s alleged fraudulent scheme, but concealed it “by
`adopting ‘policies’ that contradicted the language of their own
`contracts and provider manuals . . . .” Id. ¶ 51. Specifically,
`in its role as a PBM, Caremark instituted a policy that
`differentiated between Walmart’s $4 generic program and “Club
`Plans” – like the HSP program – that required consumers to join
`and pay a membership fee. Id. ¶ 4. Under this policy, generic
`programs without membership fees were required to report their
`plan prices as U&C prices, and “Club Plans” were not. Id. Caremark
`did not disclose this policy to its TPP clients, other than those
`members of its Client Advisory Board. As a result, Plaintiffs
`allege, CVS and Caremark – both as HSP administrator and PBM –
`concealed from TPPs that CVS was not reporting HSP prices as U&C
`prices for HSP-eligible drugs. Id. ¶¶ 3-5.
`II. Discussion
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`A.
`Defendant Caremark’s Motion to Dismiss Sheet Metal
`Workers’ Claims under the Federal Arbitration Act
`Caremark moves to dismiss Sheet Metal Workers’ claims under
`the Federal Arbitration Act (“FAA”), arguing that the operative
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`agreements between Caremark and Sheet Metal Workers include
`arbitration clauses. See generally Caremark Mot. to Dismiss 1.
`Caremark argues that Sheet Metal Workers violated the parties’5
`agreements by initiating this suit against Caremark and by refusing
`to engage in dispute-resolution negotiations. See id. Caremark
`highlights that, under the parties’ dispute-resolution provisions,
`Sheet Metal Workers agreed to do the following in advance of
`litigation: (1) give notice of any dispute; (2) designate a
`dispute-resolution representative; (3) negotiate in good faith to
`resolve the dispute; and (4) submit to binding arbitration in Cook
`County, Illinois if negotiations did not resolve the dispute in 90
`days. Id.
`On a motion to dismiss in favor of arbitration, a court
`considers “whether a valid arbitration clause exists, whether the
`movant is entitled to invoke the clause, whether the non-moving
`party is bound by it, and whether the clause covers the claims
`asserted.” FPE Found. v. Cohen, 801 F.3d 25, 29 (1st Cir. 2015)
`(citing Soto–Fonalledas v. Ritz–Carlton San Juan Hotel Spa &
`Casino, 640 F.3d 471, 474 (1st Cir. 2011)). A court may then
`consider whether a party has waived the right to arbitrate. Id.
`Here, Sheet Metal Workers argues only that Caremark has forfeited
`its arbitration rights by sitting on its hands, and that not all
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`5 In this section, “parties” refers only to Plaintiff Sheet
`Metal Workers and Defendant Caremark.
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`claims asserted fall within the relevant arbitration provisions.
`See Resp. in Opp’n to Def. Caremark’s Mot. for Leave to File Mot.
`under the FAA to Dismiss the Claims of Sheet Metal Workers (“Pls.’
`Opp’n to Mot. to Dismiss”) 5, ECF No. 132; Sheet Metal Workers
`Sur-Reply in Opp’n to Def. Caremark’s Mot. For Leave to File Mot.
`Under FAA to Dismiss (“Sheet Metal Workers Sur-Reply”) 8-9, ECF
`No. 164.
`But before the Court can pass on whether Caremark waived its
`right to arbitration, the Court must first address a threshold
`issue: whether the Court or an arbitrator should decide whether
`Caremark forfeited its right to arbitrate through litigation-
`conduct waiver.6
`1.
`Who Decides Litigation-Conduct Waiver?
`Caremark argues that whether it waived its right to arbitrate
`under the relevant contracts is an issue of arbitrability for an
`arbitrator, not the Court, to decide. Reply in Supp. of Caremark’s
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`6 Caremark argues that Illinois law, not federal law, applies
`to this dispute. Caremark Reply 8-9. While the Court need not
`reach the issue, the First Circuit has signaled that litigation-
`conduct waiver is an issue of federal law. See Rankin v. Allstate
`Ins. Co., 336 F.3d 8, 12 n.3 (1st Cir. 2003) (noting that, while
`not argued, “arbitration-related issues in this case are probably
`governed by the” FAA and, if so, “federal law would automatically
`govern waiver issues” (citation omitted)). Under either body of
`law, the result here is the same. See LRN Holding, Inc. v. Windlake
`Capital Advisors, LLC, 949 N.E.2d 264, 270–72 (Ill. App. 3d Dist.
`2011) (noting that, under Illinois law, where a contract contains
`a choice-of-law provision and incorporates the American
`Arbitration Association rules of arbitration, federal law applies
`to questions regarding arbitration).
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`Mot. for Leave to File Mot. under the FAA to Dismiss the Claims of
`Sheet Metal Workers (“Caremark Reply”) 1, ECF No. 135. This is
`because, Caremark says, the contracts at issue here incorporate
`the commercial rules of the American Arbitration Association
`(“AAA”), which delegate the issue of arbitrability to an
`arbitrator. Id. at 4-5 (citing Prescription Benefit Services
`Agreement ¶ 13.16 (Jan. 1, 2015) (“PBSA”), ECF No. 131-32).
`In Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 14-15 (1st
`Cir. 2005), the First Circuit held that, even where a contract
`provides that an arbitrator shall decide issues of arbitrability,
`“waiver by conduct, at least where due to litigation-related
`activity, is presumptively an issue for the court.” Applying this
`rule, courts in this Circuit have decided issues of litigation-
`conduct waiver, distinct from issues of arbitrability. See, e.g.,
`In re Intuniv Antitrust Litig., No. 1:16-CV-12653-ADB, 2021 WL
`517386, at *8 (D. Mass. Feb. 11, 2021) (citing Christensen v.
`Barclays Bank Del., No. 18-cv-12280, 2019 WL 1921710, at *5 (D.
`Mass. Apr. 30, 2019); Binienda v. Atwells Realty Corp., No. 15-
`cv-00253, 2018 WL 1271443, at *2-3 (D.R.I. Mar. 9, 2018); Cutler
`Assocs., Inc. v. Palace Constr., LLC, 132 F. Supp. 3d 191, 199–
`200 (D. Mass. 2015)).
`Caremark contends that after the Supreme Court’s decisions in
`BG Group, PLC v. Republic of Argentina, 572 U.S. 25 (2014), and
`Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524
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`(2019), Marie is no longer good law, and issues of litigation-
`conduct waiver are now consigned to an arbitrator. Caremark Reply
`3. This argument gets no traction.
`In BG Group, the Supreme Court recognized that “courts presume
`that the parties intend arbitrators, not courts, to decide disputes
`about the meaning and application of particular procedural
`preconditions for the use of arbitration.” 572 U.S. at 34
`(citation omitted). “These procedural matters include claims of
`‘waiver, delay, or a like defense to arbitrability.’” Id. at 35
`(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
`U.S. 1, 25 (1983)). This Court previously considered, in Binienda,
`2018 WL 1271443, at *2-3, whether BG Group displaced the reasoning
`in Marie, and concluded that it did not.
`In BG Group, the Supreme Court emphasized that parties
`typically expect a forum-based decisionmaker to decide forum-
`specific procedural gateway matters, including “the satisfaction
`of ‘prerequisites such as time limits, notice, laches, estoppel,
`and other conditions precedent to an obligation to arbitrate.’”
`572 U.S. at 34-35 (quoting Howsam v. Dean Witter Reynolds, Inc.,
`537 U.S. 79, 84 (2002)). Thus, “waiver”, as contemplated in BG
`Group, does not include “litigation-conduct waiver”. See
`Binienda, 2018 WL 1271443, *2. As it did in Binienda, this Court
`concludes that “[n]othing in BG Group undercuts the holding in
`Marie, that the Supreme Court did not intend to alter [the]
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`traditional rule that courts presumptively decide issues of
`litigation-conduct waiver.” Id. (citation omitted); see also
`Rankin v. Allstate Ins. Co., 336 F.3d 8, 12 (1st Cir. 2003) (pre-
`dating BG Group, but emphasizing that “an arbitration provision
`has to be invoked in a timely manner or the option is lost” and,
`“[u]nder federal law, such a forfeiture is an issue for the judge”
`(citations omitted)).
`Nor does Henry Schein come to Caremark’s aid. In Henry
`Schein, the Supreme Court held that when a contract delegates
`arbitrability to an arbitrator, courts must give full meaning to
`that delegation and refrain from passing on any issues of
`arbitrability. 139 S. Ct. at 529. Here, in contrast, whether
`Caremark waived its right to arbitrate through litigation conduct
`in this judicial forum is a distinct issue from the underlying
`arbitrability of the dispute. See In re Intuniv Antitrust Litig.,
`2021 WL 517386, at *8 (concluding that the Supreme Court’s decision
`in Henry Schein did not upset Marie’s holding); see also Sabatelli
`v. Baylor Scott & White Health, 832 F. App’x 843, 848 n.3 (5th
`Cir. 2020) (noting that litigation-conduct waiver “is an issue for
`the court, rather than the arbitrator, to decide . . . because it
`‘implicates courts’ authority to control judicial procedures or to
`resolve issues . . . arising from judicial conduct’” (quoting Vine
`v. PLS Fin. Srvs., Inc., 689 F. App’x 800, 802–03 (5th Cir. 2017));
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`Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 219 (3d Cir.
`2007).7
`The Court therefore concludes that litigation-conduct waiver
`is presumptively an issue for the Court, not an arbitrator, to
`decide.
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`Litigation-Conduct Waiver
`2.
`Next, Caremark argues that it has not waived its right to
`arbitrate Sheet Metal Workers’ claims through its participation in
`this litigation. Caremark Reply 8-15. Generally, a party may
`waive its right to arbitration explicitly or through its conduct.
`FPE Found., 801 F.3d at 29. Under federal law, when deciding
`whether a litigant has waived its right to compel arbitration
`through litigation conduct, a court must consider several factors:
`(1) whether the parties participated in a lawsuit or
`took other action inconsistent with arbitration; (2)
`whether the litigation machinery has been substantially
`invoked and the parties [are] well into preparation of
`a lawsuit by the time an intention to arbitrate [is]
`communicated; (3) whether there has been a long delay
`
`7 Caremark further highlights that the current version of the
`AAA’s Commercial Rules states that “[n]o judicial proceeding by a
`party relating to the subject matter of the arbitration shall be
`deemed a waiver of the party’s right to arbitrate.” Caremark Reply
`5 (quoting
`American
`Arbitration
`Association,
`Commercial
`Arbitration Rules and Mediation Procedures, Rule 52(a) (2013)).
`However, the AAA’s Commercial Rules contained this same language
`when the First Circuit decided Marie, and thus, this argument is
`not persuasive. See In re Intuniv Antitrust Litig., 2021 WL
`517386, at *8. Moreover, one could interpret the text “judicial
`proceeding by a party” as denoting that a plaintiff does not waive
`its right to arbitrate by filing suit. But in any event, the Rules
`only govern arbitration, they have no bearing on the Court’s
`determinations.
`
`14
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`and trial is near at hand; (4) whether the party seeking
`to compel arbitration has invoked the jurisdiction of
`the court by filing a counterclaim; (5) whether
`discovery not available in arbitration has occurred;
`and, (6) whether the party asserting waiver has suffered
`prejudice.
`
`Id. (citation and quotation omitted) (alterations in original).
`In weighing the factors, no one factor carries the day, but rather,
`“each case is to be judged on its particular facts.” Tyco Int’l
`Ltd. v. Swartz (In re Tyco Int’l Ltd. Sec. Litig.), 422 F.3d 41,
`46 (1st Cir. 2005) (citation omitted). “‘[W]aiver is not to be
`lightly inferred,’ thus reasonable doubts as to whether a party
`has waived the right to arbitrate should be resolved in favor of
`arbitration.” Id. at 44 (quoting Restoration Pres. Masonry, Inc.
`v. Grove Eur. Ltd., 325 F.3d 54, 61 (1st Cir. 2003)). Here, the
`question is whether Caremark invoked its arbitration right in a
`timely manner consistent with its desire to arbitrate. See id.
`
`While Plaintiffs initiated this suit against CVS in 2016,
`they did not seek leave to amend their Complaint to add Caremark
`as a defendant until June 5, 2017. See Pls.’ Mot. for Leave to
`File First Am. Compl., ECF No. 56. After being granted that leave,
`on May 4, 2018, Plaintiffs filed the First Amended Complaint,
`naming Caremark as a defendant. FAC, ECF No. 81-1. Caremark
`answered on July 3, 2018, asserting that “putative class members
`and at least one Plaintiff have agreed to, and failed to comply
`
`15
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`with, dispute resolution procedures for their claims . . . .”
`Caremark L.L.C.’s Answer to FAC ¶ 29, ECF No. 90.
`On October 31, 2018, Caremark began the dispute-resolution
`process and sent Sheet Metal Workers a Dispute Notice requesting
`a response within ninety days in accordance with the arbitration
`clause. See Caremark Dispute Resolution Ltr 1, ECF No. 129-79.
`In that letter, Caremark designated a representative and requested
`that Sheet Metal Workers do the same. Id. at 1-2. Sheet Metal
`Workers responded on January 22, 2019, declining to participate in
`the dispute resolution process and asserting that Caremark had
`forfeited its right to compel that process. Sheet Metal Worker
`Dispute Resolution Ltr 1-2, ECF No. 129-80. Caremark responded,
`denying Sheet Metal Workers’ forfeiture argument, on January 26,
`2019. Caremark Dispute Resolution Ltr, ECF No. 129-81. The 90-
`day period expired on January 29, 2019, and Sheet Metal Workers
`did not respond to Caremark’s final letter. See Caremark Mot. to
`Dismiss 3. Plaintiffs filed their Motion for Class Certification
`on April 29, 2019, and on July 17, 2019, Caremark filed its Motion
`for Leave to File Motion under the FAA to Dismiss the Claims of
`Sheet Metal Workers, ECF No. 127.
`The upshot is that Caremark was added as a defendant on May
`4, 2018, engaged in the dispute-resolution process from October
`31, 2018 to January 29, 2019, and sought dismissal based on
`
`16
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`arbitration on July 17, 2019.8 While the down time before and
`after the dispute resolution process (May to October 2018, and
`January to July 2019) remains somewhat unexplained, it was not
`particularly long. Importantly, prior to its filing this Motion,
`Caremark’s litigation-related activity vis-à-vis Sheet Metal
`Workers was limited to responding to discovery requests. Caremark
`Reply 12. Caremark further filed its Motion to Dismiss prior to
`any summary judgment deadline and well in advance of (a yet-to-
`be-scheduled) trial. Id. at 13.
`Thus, turning to the six factors the Court must consider, the
`first five factors lean in Caremark’s favor. During the period of
`delay, Caremark and Sheet Metal Workers participated very little
`in the lawsuit, no substantive motions were litigated, trial was
`still far off, Caremark filed no counterclaims against Sheet Metal
`Workers, and Sheet Metal Workers does not claim that Caremark
`secured discovery that is unavailable in arbitration.9 See FPE
`
`
`8 While Caremark makes much of putting Sheet Metal Workers on
`notice of its intent to arbitrate by asserting it as an affirmative
`defense, this Motion is the first time Caremark properly asserted
`its right. See In re Citigroup, Inc., 376 F.3d 23, 27 (1st Cir.
`2004) (noting that it is not sufficient to assert in an answer the
`right to arbitrate as an affirmative defense).
` The Court does understand Sheet Metal Workers to argue that
`CVS conducted discovery that would not have been available at
`arbitration and that CVS and Caremark have the same attorneys.
`See Feb. 27, 2020 Hr’g Tr. 123-24, ECF No. 170. While the Court
`is sympathetic to the realities of this situation, it is not
`confident that Sheet Metal Workers would have found itself in any
`different of a position had Caremark asserted its arbitration right
`
` 9
`
`17
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`
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`
`Found., 801 F.3d at 29. Notably, Caremark did not, for instance,
`file counterclaims against Sheet Metal Workers, serve discovery
`requests on Sheet Metal Workers, file motions against Sheet Metal
`Workers, or seek adjudication of any arbitrable issue involving
`Sheet Metal Workers. Caremark Reply 12. Caremark further filed
`its Motion to Dismiss well in advance of any trial date, and before
`any other substantive deadlines, aside from class certification.
`See FPE Found., 801 F.3d at 29; see also Creative Sols. Grp., Inc.
`v. Pentzer Corp., 252 F.3d 28, 33-34 (1st Cir. 2001) (holding that
`the right to arbitrate had not been waived where party moving to
`compel arbitration had not invoked formal discovery).
`
`On the last of the six factors, Sheet Metal Workers contends
`that it has been prejudiced by Caremark’s dilatory effort to move
`for arbitration. In particular, it argues that if it is sent to
`arbitration now, Sheet Metal Workers will be prejudiced by the
`need to litigate potential defenses related to statutes of
`limitations and laches (even assuming that the defenses eventually
`fail). Moreover, it contends that Caremark may argue that its
`claims are barred for failure to comply with the dispute-resolution
`procedures. Pls.’ Opp’n to Mot. to Dismiss 6-7. However, the
`only relevant prejudice is that which is a product of a defendant’s
`failure to timely invoke the arbitration procedure, not a product
`
`
`earlier. Presumably CVS and Sheet Metal Workers would have engaged
`in that same discovery.
`
`18
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`of arbitration itself. See In re Citigroup, Inc., 376 F.3d 23, 26
`(1st Cir. 2004)). For that reason, Sheet Metal Workers’ claims
`that it may face new defenses in arbitration (statute of
`limitations, laches, and failure to comply with dispute-resolution
`procedures) fail because Caremark already has alleged those
`affirmative defenses in its Answer. Caremark Reply 14.
`Sheet Metal Workers further argues that it is prejudiced
`because it did not have the opportunity to add a substitute named
`plaintiff without an arbitration clause in its relevant agreement;
`this argument, however, also fails as it is not the product of any
`alleged delay. Moreover, named Plaintiffs and the putative class
`suffer no prejudice because, as discussed below, the Court is not
`persuaded that the absence of a named plaintiff that contracted
`with a specific PBM advances Defendants’ typicality argument.
`
`Having considered all the relevant factors, the Court
`concludes that Caremark has not waived its right to arbitration
`through its litigation conduct. See FPE Found., 801 F.3d at 29.
`3.
`Claims Subject to Arbitration
`Sheet Metal Workers further argues that, even if the Court
`finds no litigation-conduct waiver, Caremark is still not entitled
`to arbitrate all of Sheet Metal Workers’ claims. Sheet Metal
`Workers highlights that the contracts containing the arbitration
`clause do not cover the entire class period – they are dated
`January 1, 2011 and January 1, 2015. Sheet Metal Workers Sur-
`
`19
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`Reply 9. Sheet Metal Workers thus argues that Caremark has no
`right to arbitrate claims arising prior to January 1, 2011.
`Further, Sheet Metal contends that it is unclear whether the
`parties entered into the January 11, 2011 agreement. Id.
`In pertinent part, the dispute resolution provision in the
`January 1, 2015 contract provides:
`Dispute Resolution. In the event of a dispute between
`the parties and prior to commencing any litigation or
`other legal proceeding, each party shall, by giving
`written notice to the other party (“Dispute Notice”),
`request a meeting of authorized representatives of the
`parties for the purpose of resolving the dispute.
`
`PBSA ¶ 13.16; see also id. ¶ 13.12 (providing that the dispute
`resolution clause survives termination of the agreement). Whether
`this dispute-resolution provision requires the parties to
`arbitrate disputes arising out of contracts entered prior to or
`after the January 1, 2015 contract is an issue of arbitrability.
`The parties have delegated the issues relating to arbitrability to
`an arbitrator, see PBSA ¶ 13.16 (incorporating the AAA rules), and
`therefore, these arbitrability questions must be decided by an
`arbitrator. See Henry Schein, Inc. v. Archer and White Sales,
`Inc., 139 S. Ct. 524, 529 (2019) (holding that, where “the parties’
`contract delegates the arbitrability question to an arbitrator, a
`court may not override the contract”, even where “the argument
`
`20
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`
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`Case 1:16-cv-00447-WES-PAS Document 176
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