Crawford Professional Drugs v. CVS Caremark Corp.

When a national pharmacy chain merged with a pharmacy-benefit-management network (PBM), four entities (CVS-Caremark companies) were formed: Caremark, LLC (Caremark) (defendant) and CVS Caremark Corporation, Caremark Rx, LLC, and CVS Pharmacy, Inc. (collectively, nonsignatories) (defendants). Collectively, the four entities operated a chain of pharmacies and the largest PBM in the country. Insurance companies hired PBMs to pay prescription-drug claims. Crawford Professional Drugs, Inc. and other businesses (local pharmacies) (plaintiffs) operated locally owned pharmacies in direct competition with the four CVS-Caremark companies. The local pharmacies participated in the PBM, providing prescription drugs at a discount for access to the network’s patients. The local pharmacies entered into provider agreements with Caremark to join the PBM, and each agreement contained or incorporated a mandatory arbitration clause. The nonsignatories were not parties to any of the provider agreements. The local pharmacies filed suit in Mississippi state court, alleging that the CVS-Caremark companies intended to harm the local pharmacies by driving business to the companies, in violation of state law. The local pharmacies claimed that the CVS-Caremark companies misappropriated trade secrets and denied proper access to the PBM network, which was governed by the provider agreements. The CVS-Caremark companies removed the case to federal district court and filed motions to compel arbitration under the Federal Arbitration Act (FAA), citing the provider agreements. The local pharmacies opposed the motion for their claims against the nonsignatories, claiming that the agreements could not be enforced by nonparties. The district court rejected the local pharmacies’ argument and compelled arbitration for the claims against all four companies. The local pharmacies appealed the decision.