American Bar Assocation - November 23, 2020
In the decade since the Supreme Court decided AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) and American Express Co. v. Italian Colors Restaurants, 570 U.S. 228, 233 (2013), arbitrability has become a threshold question for class action practitioners. On the plaintiffs’ side, a cautious practitioner might avoid bringing a claim that falls within an enforceable arbitration clause. And on the defendants’ side, the first move will be to invoke an arbitration clause with a class waiver whenever there is contractual privity between a plaintiff and a defendant. Arbitrability thus becomes a quasi-dispositive question, independent of a case’s merits.
The Supreme Court’s broad interpretation of the Federal Arbitration Act (FAA) is robust as ever. As a result, arbitrability questions have moved away from systemic policy questions about whether arbitration is permissible or unconscionable. The more recent arbitration cases—such as Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), and Henry Schein Inc. v. Archer & White Sales Inc., No. 19-963 (schedule for argument December 8, 2020)—instead often turn on interpreting arbitration clauses’ scope.
Remicade is a drug used to treat inflammatory conditions, including Crohn’s disease and rheumatoid arthritis. Rochester Drug Cooperative (RDC), a direct purchaser and wholesaler of Remicade, sued Johnson & Johnson (J&J), the drug’s manufacturer, claiming violations of the Sherman Act. In substance, RDC alleged that J&J established a monopoly through a series of exclusion and bundling agreements with insurers and healthcare providers that effectively removed many competitors from the market even after the FDA began approving Remicade “biosimilars” offered by RDC’s competitors.
RDC was not a competitor blocked from entering the market; it was a purchaser alleging it paid inflated prices because those competitors were unable to compete. Thus, RDC was not a party to the exclusion or bundling agreements on which it based its antitrust claims. But, it was party to a distribution agreement for Remicade that included a “Dispute Resolution” clause stating that “[a]ny controversy or claim arising out of or relating to this agreement” would be subject to arbitration.
J&J moved to compel arbitration, arguing that the antitrust claims “arose out of” or “related to” RDC’s distribution agreement. The district court denied that motion, and J&J appealed. (The FAA allows...
