Court of Appeals Addresses Class-wide Arbitration Issue

Our loyal readers know that the decision whether a matter gets sent to arbitration, as opposed to being adjudicated through traditional litigation, can have profound impact, including on timing and costs to the litigants. Even more so, when the case is a proposed class action. A few weeks ago, the Third Circuit weighed in on the issue of the availability of class-wide arbitration, holding that it is generally a question for the court, not an arbitrator, to decide.  See Opalinski v. Robert Half Int'l Inc., No. 12-4444 (3d Cir., July 30, 2014). This week, the petition for rehearing was denied by the panel and the en banc court. See Opalinski v. Robert Half Int'l Inc., No. 12-4444 (3d Cir.) (petition for rehearing denied, 8/27/14).

The plaintiffs brought claims under the Fair Labor Standards Act.  The court noted that the issue was whether a district court, rather than an arbitrator, should decide if an agreement to arbitrate disputes
between the parties to that agreement also authorizes class-wide arbitration. Because of the fundamental differences between class-wide and individual arbitration, and the consequences of proceeding with one rather than the other, the court of appeals concluded that the availability of class-wide arbitration is a substantive “question of arbitrability” to be decided by a court, absent clear agreement otherwise. The only other Circuit Court of Appeals to have squarely resolved the “who decides” issue is the Sixth, which has also held that “whether an arbitration agreement permits
class-wide arbitration is a gateway matter” that is presumptively “for judicial determination.” Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013).

Plaintiffs had signed employment agreements that contained arbitration provisions. They provided that “[a]ny dispute or claim arising out of or relating to Employee’s employment, termination of employment or any provision of this Agreement” shall be submitted to arbitration. Neither agreement mentioned class-wide arbitration.  Defendant moved to compel arbitration of plaintiffs' claims on an individual basis. The District Court granted the motion in part, thus compelling arbitration but holding that the propriety of individual (also known as bilateral) versus class-wide arbitration was for the arbitrator to decide.

The first part of the analysis was whether the availability of class-wide arbitration is a “question of arbitrability.” See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002).  If yes, it is presumed that the issue is “for judicial determination unless the parties clearly and unmistakably provide otherwise.” Id.  If the availability of class-wide arbitration is not a “question of arbitrability,” it is presumptively for the arbitrator to resolve. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944-45 (1994). “Questions of arbitrability” are limited to a narrow range of gateway issues. They may include, for example, whether the parties are bound by a given arbitration clause or whether an arbitration clause in a concededly binding contract applies to a particular type of controversy. On the other hand, questions that the parties would likely expect the arbitrator to decide are not “questions of arbitrability.”  The Third Circuit has explained that questions of arbitrability generally fall into two categories – (1) when the parties dispute whether they have a valid arbitration agreement at all (whose claims the arbitrator may adjudicate); and (2) when the parties are in dispute as to whether a concededly binding arbitration clause applies to a certain type of
controversy (what types of controversies the arbitrator may decide). Puleo v. Chase Bank USA, N.A., 605 F.3d 172, 178 (3d Cir. 2010).

By seeking class-wide arbitration, plaintiffs contended that their arbitration agreements empower the arbitrator to resolve not only their personal claims but the claims of additional individuals not currently parties to this action. The determination whether defendant must include absent individuals in its arbitrations with named plaintiffs affects whose claims may be arbitrated and is thus a question of arbitrability to be decided by the court. Second, while plaintiffs argued that, because class actions in the context of traditional litigation are a procedural construct, the availability of class-wide arbitration is also a procedural question, the Supreme Court, in Stolt-Nielsen, SA v. Animal Feeds Int'l Corp., had expressly disclaimed class-wide arbitration as simply procedural. 559 U.S. at 687 (the differences between class and individual arbitration cannot be characterized as a question of “merely what ‘procedural mode’ [i]s available to present [a party’s] claims”). The Court stated that class action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator.

Moreover, it is presumed that courts must decide questions of arbitrability unless the parties clearly and unmistakably provide otherwise, said the court. The burden of overcoming the presumption is onerous, as it requires express contractual language unambiguously delegating the question of arbitrability to the arbitrator. Here, the plaintiffs' employment agreements provided for arbitration of any dispute or claim arising out of or relating to their employment but are silent as to the availability of class-wide arbitration or whether the question should be submitted to the arbitrator. Nothing else in the agreements or record suggests that the parties agreed to submit questions of arbitrability to the arbitrator.

This case was remanded for the District Court to determine whether appellees’ employment agreements call for class-wide arbitration.

 

 

PhRMA Submits Amicus Brief on First Amendment Issues

The Pharmaceutical Research and Manufacturers of America recently submitted an amicus brief urging a federal court to dismiss a whistleblower's False Claims Act suit because the off-label claims in the case violate the defendants' free speech rights. See U.S. ex rel. Solis v. Millennium Pharmaceuticals Inc. et al., No. 2:09-cv-03010 (E.D. Cal. Brief August 15, 2014). The Pharmaceutical Research and Manufacturers of America (“PhRMA”) is a voluntary, nonprofit association representing the nation’s leading research-based pharmaceutical and biotechnology companies.

Readers know that physicians may lawfully prescribe FDA-approved drugs to treat any condition or disease, including unapproved uses, based on their independent medical judgment. See Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 350 (2001). Indeed, many unapproved uses are integral to the practice of medicine, and reflect the standard of patient care. E.g., Joseph W. Cranston et al., Report of the Council on Scientific Affairs: Unlabeled Indications of Food and Drug Administration-Approved Drugs, 32 Drug Info. J. 1049, 1050 (1998). The case here involved a qui tam False Claims Act (FCA) suit against defendants. This case raises serious First Amendment concerns, said amicus, because relator’s and the United States’ construction of the FCA would impose liability on manufacturers for engaging in truthful speech about “off-label” uses of their drugs, i.e., particular uses of an FDA-approved medication that the FDA has not yet approved. The First Amendment unquestionably protects such truthful and non-misleading speech. E.g., Sorrell v. IMS Health Inc., 131 S. Ct. 2653, 2659 (2011).  The prevalence of unapproved—but fully legal—uses of many FDA-approved prescription medicines to treat patients makes it critical that healthcare professionals have access to accurate, comprehensive, and current information about such uses. 

Notably, pointed out amicus, neither relator nor the government alleged that the speech at issue here—relaying reprinted articles about unapproved uses of the drug Integrilin from peer-reviewed journals, and summarizing the results of clinical trials—was false or misleading. Relator and the United States did not even agree on why the FCA proscribes this speech, or how this speech somehow causes others to submit false claims. But their interpretations of the FCA shared a critical flaw according to the Brief: both threaten core First Amendment rights and should be rejected under principles of constitutional avoidance. See Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Const. Trades Council, 485 U.S. 568, 575 (1988).

These constitutional concerns seem well-founded: “Speech in aid of pharmaceutical marketing . . . is a form of expression protected by the Free Speech Clause of the First Amendment.” Sorrell, 131 S. Ct. at 2659. Interpreting the FDCA to punish manufacturers for truthfully speaking about unapproved uses impermissibly restricts speech based on its content and the identity of the speaker, and thus triggers heightened scrutiny. These First Amendment concerns apply with particular force to the speech that relator targeted here. The Complaint alleged that the manufacturer merely distributed reprints of medical studies published in reputable independent journals like Cardiology, the American Heart Journal, and the American Journal of Cardiology, and sent letters accurately relaying summaries of clinical trials.  There was no question that the authors of the reprints, the studies’ investigators, physicians, or anyone other than manufacturers can speak about the reprints and trial results as much as they wish. Indeed, everyone but manufacturers apparently can talk to physicians about prescribing Integrilin for unapproved uses without penalty. Relator even conceded that the manufacturer can distribute reprints promoting unapproved uses so long as physicians request such information.

Physicians who received the reprints or other information from the manufacturer in this case received precisely the type of educational information that a trained physician would wish to receive about his patients. Physicians were not only free to disregard these reprints; their Hippocratic Oath obligated them to use their own, independent medical judgment as to whether a given prescription was warranted. And after those physicians prescribed the FDA-approved drug for an unapproved use, hospitals then made additional, independent determinations whether the prescriptions were reimbursable. Only after that did hospitals submit claims to the government.

A good summary of the issues from defense perspective.