Express Scripts, Inc. v. The Apothecary Shoppe, Inc. et al
MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendants' motion to dismiss for lack of ersonal jurisdiction is DENIED. (Doc. No. 18.) IT IS FURTHER ORDERED that Defendants motion for additional discovery is DENIED. (Doc. No. 53.) IT IS FURTHER ORDERED that Defendants motion to compel arbitration is DENIED. (Doc. No. 18.) IT IS FURTHER ORDERED Plaintiff's motion for summary judgment is GRANTED. (Doc. No. 13.) A separate Judgment shall accompany this Memorandum and Order. Signed by District Judge Audrey G. Fleissig on 9/30/2013. (NCL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EXPRESS SCRIPTS, INC.,
THE APOTHECARY SHOPPE, INC., et
Case No. 4:12CV01035 AGF
MEMORANDUM AND ORDER
Plaintiff Express Scripts, Inc. (“ESI”) brings this declaratory judgment action
against Defendants, The Apothecary Shoppe, Inc., The Apothecary Shoppe of B.A., Inc.,
and Getman-Apothecary Shoppe, Inc. Plaintiff asks the Court to declare that its dispute
with Defendants is not subject to arbitration and to enjoin Defendants from proceeding
with the arbitration Defendants have instituted before the American Arbitration
Association (“AAA”) in Saint Louis County, Missouri.
Now before the Court are Plaintiff’s motion for summary judgment (Doc. No. 13),
Defendants’ motion to compel arbitration and to dismiss for lack of personal
jurisdiction (Doc. No. 18), and Defendants’ motion for additional discovery (Doc. No.
53.) These motions have been fully briefed and pursuant to the parties’ request the Court
held oral argument on the motions. For the reasons set forth below, Defendants’ motion
to dismiss for lack of personal jurisdiction shall be denied, Defendants’ motion for
additional discovery shall be denied, Plaintiff’s motion for summary judgment shall be
granted, and Defendants’ motion to compel arbitration shall be denied.
The record establishes the following. Defendants, three Oklahoma corporations,
own and operate pharmacies in Oklahoma. Plaintiff is a Delaware corporation with its
principal place of business in Missouri. For purposes of this action, Plaintiff functions in
two capacities. First, Plaintiff functions as a pharmacy benefits manager (“PBM”),
providing services to contracting parties such as employers, health plan sponsors, and
insurance companies, to provide a drug benefit program that meets each contracting
party’s needs. As a PBM, Plaintiff maintains a network of pharmacies that are under
direct contract with Plaintiff pursuant to an “ESI Pharmacy Provider Agreement.” Under
this Agreement, a contracting pharmacy agrees to provide pharmacy services to persons
eligible for benefits under a prescription drug program for which ESI has agreed to
provide pharmacy benefit management and related services. ESI agrees to reimburse the
pharmacy at specified rates for these services, upon submission of claims to ESI
following specified procedures. The Agreement incorporates by reference Plaintiff’s
Provider Manual that includes procedures for claims submission, payment, and audit.
(Doc. No. 21-4.)
The Agreement contains a binding arbitration provision, as follows:
Binding Arbitration. Any claim or controversy (“Claim”) whether under
federal or state statutory or common law brought by either ESI or the
Pharmacy against the other . . . arising from or relating in any way to the
interpretation or performance of this Agreement . . . including Claims
regarding the validity of this arbitration provision shall be resolved by
binding arbitration. . . . Arbitration shall be . . . performed in accordance
with the Commercial Rules of the American Arbitration Association then in
effect. [T]his Agreement shall be governed, interpreted and enforced in
accordance with the FAA [Federal Arbitration Act]. . . . Venue for the
arbitration shall be in Saint Louis County, Missouri. The substantive laws
of the State of Missouri (without regard to its choice of law rules) shall
apply to claims and defenses of the parties and to the interpretation of this
agreement to arbitrate. . . . The parties agree that only Claims asserted
pursuant to this agreement will be arbitrated in a proceeding under this
section. . . .
Id. at ¶ 7.15.
Second, ESI functions as a provider of pharmacy claims processing services for
independent pharmacies and other pharmacy networks. CommunityCare Managed
Health Care Plans of Oklahoma (“CommunityCare”) is such a network of pharmacies for
which ESI provides such services.
On February 1, 2009, Defendants entered into an ESI Pharmacy Provider
Agreement with Plaintiff. Defendants also participate in CommunityCare’s pharmacy
network through an entity known as Mor-Val Healthcare. The CommunityCare
Participating Pharmacy Agreement has an audit provision and, because Plaintiff
processes claims for CommunityCare, makes reference to the standards set forth in
Plaintiff’s Provider Manual. The CommunityCare Participating Pharmacy Agreement
does not include an arbitration provision. (Doc. No. 49-2.)
In mid-2011, CommunityCare asked Plaintiff, as its pharmacy claims processor, to
audit certain claims that Defendants had submitted for payment under the
CommunityCare Agreement. During the audit, Plaintiff identified claims that it asserts
Defendants improperly submitted to CommunityCare for payment totalling
approximately $190,000. After Plaintiff presented its findings to CommunityCare,
CommunityCare instructed Plaintiff to withhold payments on future claims submitted by
the Defendants under the CommunityCare Participating Pharmacy Agreement in order to
recoup the monies attributable to the improperly paid claims.
During the audit requested by CommunityCare, Plaintiff also investigated claims
that Defendants submitted for payment under the ESI Pharmacy Provider Agreement and
discovered some discrepencies in those claims. Plaintiff’s Senior Director of Audit and
Program Integrity attests that all the claims for which Plaintiff was withholding funds
were CommunityCare claims submitted to Plaintiff for processing pursuant to the
CommunityCare Participating Pharmacy Agreement. (Doc. No. 14-1.) Defendants
allege that both CommunityCare and ESI claims are at issue. When asked by Plaintiff to
provide evidence of disputed claims that arose under the ESI Pharmacy Provider
Agreement between Plaintiff and Defendants, Defendants estimated that one-third of the
claims were not governed by the CommunityCare Participating Pharmacy Agreement and
specifically identified five claims that had been submitted under the ESI Pharmacy
Provider Agreement. Upon review of the five identified claims, Plaintiff agreed that they
were submitted under the ESI Pharmacy Provider Agreement and were examined as part
of the audit, but averred that no monies had been withheld with respect to these claims
and produced proof of payment to Defendants on these claims. Defendants have no
evidence to the contrary.
With respect to the remaining claims, Defendants assert that they were audited
pursuant to the terms and conditions of ESI’s Provider Manual and that at least some of
the disputed, but yet to be identified, claims were submitted for payment under the ESI
Pharmacy Provider Agreement rather than the CommunityCare Participating Pharmacy
In March 2012, Defendants initiated AAA arbitration proceedings in Saint Louis
County, Missouri, against Plaintiff. To date, Defendants have not identified any specific
claims submitted under the ESI Pharmacy Network Agreement for which funds are being
withheld. Plaintiff instituted the present action on April 30, 2012, in state court seeking a
declaration that the claims in dispute are not subject to arbitration and enjoining the
pending arbitration. Defendants removed the matter to this Court.
Defendants move to dismiss this action for lack of personal jurisdiction asserting
that there is no basis for the exercise of jurisdiction over them under the Missouri longarm statute and that they lack the requisite minimum contacts with Missouri for the
constitutional exercise of personal jurisdiction. Plaintiff asserts that Defendants possess
the requisite contacts because they entered into a contract in Missouri, did business in
Missouri by virtue of the claims processing activities performed here, and that this Court
may exercise specific jurisdiction over Defendants because they availed themselves of
the benefits of this forum by initiating the arbitration in Saint Louis County, Missouri.
On a motion to dismiss for lack of personal jurisdiction, the party asserting
jurisdiction carries the burden of proof but need only make a prima facie showing of a
basis for jurisdiction. Romak USA, Inc. v. Rich, 384 F.3d 979, 983 (8th Cir. 2004); Epps
v. Stewart Info. Servs. Corp., 327 F.3d 642, 647 (8th Cir. 2003). The Court views the
evidence in the light most favorable to the non-moving party. See Romak, 384 F.3d at
In Missouri, to obtain personal jurisdiction over a non-resident defendant, a
plaintiff must make a prima facie showing that (1) the cause of action arose out of an
activity covered by Missouri’s long-arm statute and (2) the defendant had sufficient
minimum contacts with Missouri to satisfy the due process requirements. Johnson v.
Arden, 614 F.3d 785, 794 (8th Cir. 2010). The Missouri long-arm statute, Mo. Rev. Stat.
§ 506.500, confers jurisdiction to the extent allowed by the Due Process Clause. Arden,
614 F.3d at 794. Under this standard, personal jurisdiction exists if the contacts between
the defendant and the forum state are sufficient to establish that the defendant has
purposefully availed itself of the benefits and protections of the forum state. Johnson v.
Woodcock, 444 F.3d 953, 955 (8th Cir. 2006).
Personal jurisdiction may be specific or general. “‘Specific jurisdiction refers to
jurisdiction over causes of action arising from or related to a defendant's actions within
the forum state,’ while ‘[g]eneral jurisdiction . . . refers to the power of a state to
adjudicate any cause of action involving a particular defendant, regardless of where the
cause of action arose.’” Miller v. Nippon Carbon Co., 528 F.3d 1087, 1091 (8th Cir.
2008) (quoting Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819 (8th Cir. 1994)).
A state may exercise general jurisdiction if a defendant has carried on in the
forum state a continuous and systematic, even if limited, part of its general business; in
such circumstances the alleged injury need not have any connection with the forum state.
Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779 (1984). The plaintiff must make a
prima facie showing, however, that the defendant's contacts were not “random,”
“fortuitous,” or “isolated.” Id. at 774. Specific jurisdiction, on the other hand, is
appropriate only if the injury giving rise to the lawsuit occurred within or had some
connection to the forum state, meaning that the defendant purposely directed its activities
at the forum state and the claim arose out of or relates to those activities. Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985).
To evaluate the sufficiency of a defendant’s contacts, the Eighth Circuit considers
five factors, affording the first three primary importance: (1) the nature and quality of the
defendant’s contacts with the forum state, (2) the quantity of such contacts, (3) the
relation of the cause of action to the contacts, (4) the interests of the forum state in
providing a forum for its residents, and (5) the convenience of the parties. Burlington
Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996).
With respect to the third factor, a court may exercise specific personal jurisdiction
over a party “if the injury giving rise to the lawsuit occurred within or had some
connection to the forum state.” Romak, 384 F.3d at 984 (citation omitted). Specific
personal jurisdiction exists if the non-resident defendant has purposefully directed its
activities toward Missouri residents and the suit arises out of or relates to those activities.
Arden, 614 F.3d at 794.
The Eighth Circuit has held that a valid forum selection clause is sufficient to
confer specific jurisdiction and satisfy the requirements of the due process clause. St.
Paul Fire & Marine Ins. Co. v. Courtney Enters., Inc., 270 F.3d 621, 624 (8th Cir. 2001)
(holding that a forum selection clause in an arbitration agreement conferred jurisdiction
with respect to a motion to compel arbitration filed in that forum); Dominium Austin
Partners, L.L.C. v. Emerson, 248 F.3d 720, 726 (8th Cir. 2001) (holding that due process
is satisfied where the defendant has entered into a contract that contains a valid forum
In St. Paul Fire & Marine Ins. Co., the Eighth Circuit found implied consent to
personal jurisdiction arising from the forum selection clause in an arbitration agreement,
noting that the exercise of personal jurisdiction was necessary and foreseeable for the
defendant in light of the statutory requirement that an arbitration hearing be held “‘within
the district in which the petition for an order directing such arbitration is filed.’” 270
F.3d at 624 (quoting the FAA, 9 U.S.C. § 4).
Defendants contend that because Plaintiff seeks to enjoin rather than compel
arbitration, the forum selection clause does not confer specific jurisdiction. The Court is
satisfied that this a distinction without a difference for purposes of the personal
jurisdiction determination. In essence, Defendants argue that this Court would have
personal jurisdiction to grant affirmative, but not preemptive injunctive relief with respect
to the arbitration. Moreover, given that Defendants have filed a motion to compel
arbitration in this Court, their position on personal jurisdiction seems disingenuous. They
cannot argue that they may consent to personal jurisdiction for purposes of their own
motion to compel arbitration, but object to the exercise of personal jurisdiction for
purposes of Plaintiff’s request for declaratory and injunctive relief. Both requests raise
the same issue – whether the disputed claims are subject to arbitration under the ESI
Pharmacy Provider Agreement – and therefore, the Court has personal jurisdiction to
consider either request. Cf. Painewebber Inc. v. Chase Manhattan, 260 F.3d 453, 460
(5th Cir. 2001) (recognizing as a general rule that “when a party seeks affirmative relief
from a court, it normally submits itself to the jurisdiction of the court with respect to the
adjudication of claims arising from the same subject matter” (citation omitted)); Derse
Inc. v. Haas Outdoors Inc., No. 09–CV–97, 2011 WL 554060, at *3 (E.D. Wis. Feb 4,
2011) (holding that the defendants waived personal jurisdiction challenge by previously
invoking the court’s power to compel arbitration). Defendants, having initiated the
arbitration in this district, cannot be heard to complain that there is no jurisdiction over
them in this district to enjoin that proceeding. Accordingly, the Defendants’ motion to
dismiss for lack of personal jurisdiction will be denied.
Summary Judgment and Arbitrability
Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment
shall be entered “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” In ruling on a motion for
summary judgment, the Court views the facts and inferences therefrom in the light most
favorable to the nonmoving party. Gibson v. Am. Greetings Corp., 670 F.3d 844, 853
(8th Cir. 2012). The moving party must establish both the absence of a genuine issue of
material fact and that it is entitled to judgment as a matter of law. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
“Although the burden of demonstrating the absence of any genuine issue of
material fact rests on the movant, a nonmovant may not rest upon mere denials or
allegations, but must instead set forth specific facts sufficient to raise a genuine issue for
trial.” Wingate v. Gage Cnty. Sch. Dist., No. 34, 528 F.3d 1074, 1078-79 (8th Cir. 2008).
“The mere existence of a scintilla of evidence in support of the [nonmovant’s] position
will be insufficient; there must be evidence on which the jury could reasonably find for
[that party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
Plaintiff contends that the threshold question of whether this dispute is arbitrable is
for the Court and not the arbitrator. Plaintiff further asserts that arbitration is not
appropriate here because all of the disputed claims are CommunityCare claims subject to
the terms of the CommunityCare Participating Pharmacy Agreement, which contains no
arbitration provision and to which Plaintiff is not a party. Plaintiff argues that the ESI
Pharmacy Provider Agreement which contains an arbitration provision cannot form a
basis for the arbitration of these claims because Defendants have not identified a single
ESI claim that is in dispute.
Defendants respond that the arbitration provision in the ESI Pharmacy Provider
Agreement applies to this dispute because at least some of the audited claims were
submitted under that Agreement and the audit was performed pursuant to the standards
set forth in the ESI Pharmacy Provider Agreement and Provider’s Manual incorporated
by reference therein. Defendants further assert that the threshold question of arbitrability
is reserved to the arbitrator because the arbitration provision in the ESI Pharmacy
Provider Agreement provides that the arbitration proceedings under the agreement will be
conducted in accordance with the AAA Rules which reserve questions of arbitral
jurisdiction to the arbitrator.
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The principal question presented here is whether the arbitration provision in the
ESI Pharmacy Provider Agreement is applicable to the parties’ dispute regarding the
audited claims. Plaintiff contends that this determination is for the Court and Defendants
assert that the question should be decided by the arbitrator.
“[A]bitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.” United Steelworkers of
Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). The Eighth Circuit
recognizes two types of challenges to arbitral jurisdiction: procedural and substantive.
Procedural challenges “relate to whether the party who seeks arbitration, and the
arbitrators themselves, abided by the procedural safeguards set forth in the [relevant
agreement] and in the rules of the arbitral body.” Local 36 Sheet Metal Workers’ Int’l
Ass’n, AFL-CIO v. Whitney, 670 F.3d 865, 867-68 (8th Cir. 2012) (citation omitted).
Procedural challenges “are generally appropriate for submission to the arbitrators
Substantive jurisdictional challenges, on the other hand, are generally for the
courts to resolve and relate to two gateway questions of arbitrability, namely, the
underlying issues of contract interpretation necessary to determine whether the parties are
subject to a valid contract that calls for arbitration, and whether the contract, in fact,
authorizes the arbitrator to decide the substantive issue submitted for resolution. Int’l
Ass’n of Bridge, Structural, Ornamental, & Reinforcing Ironworkers, Shopman’s Local
493 v. EFCO Corp. & Constr. Prods., Inc., 359 F.3d 954, 956 (8th Cir. 2004); see also
AT&T Techs., Inc. v. Comm. Workers, 475 U.S. 643, 649 (1986) (holding that it is also
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the role of the courts to determine whether a valid arbitration agreement applies to the
subject matter of the issue submitted for arbitration, unless the parties have unmistakably
agreed otherwise); Whitney, 670 F.3d at 867-68 (holding that jurisdictional challenges of
a substantive nature “are generally for the courts to resolve”).
The question before the Court – whether the dispute between the parties arises
under the agreement that contains the arbitration agreement upon which Defendants rely
– is substantive in nature. See Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772,
2777 (2010). Defendants belatedly sought discovery to uncover such evidence, but
because they did so after responding to the motion for summary judgment and well after
the Court’s own invitation to request such discovery their request for additional discovery
will be denied. On the basis of the undisputed facts before it, the Court is satisfied that
there is no evidence on the record that the disputed claims are subject to the ESI
The Court finds unpersuasive Defendants’ argument that in this instance the
arbitrability question, albeit a substantive one, should be decided by the arbitrator and not
by the Court because the arbitration provision incorporation of the Commercial Rules of
the AAA in the provision. It is true that the Eighth Circuit has held that where the parties
incorporate the AAA Rules in their arbitration provision they effectively reserve the
question of arbitrability for the arbitrator because Rule 7(a) of the AAA Rules provides
that arbitrators determine their own jurisdiction. See, e.g., Green v. SuperShuttle Int’l,
Inc., 653 F.3d 766, 769 (8th Cir. 2011). But reference to the AAA Rules in an arbitration
provision not applicable to the parties’ dispute cannot mandate submission of the
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threshold arbitrability issue to the arbitrator. See Suburban Leisure Ctr., Inc. v. AMF
Bowling Prods., Inc., 468 F.3d 523, 527 (8th Cir. 2006). In sum, the Court concludes
that Plaintiff’s motion for summary judgment should be granted and Defendants’ motion
to compel arbitration should be denied.
IT IS HEREBY ORDERED that Defendants’ motion to dismiss for lack of
personal jurisdiction is DENIED. (Doc. No. 18.)
IT IS FURTHER ORDERED that Defendants’ motion for additional discovery
is DENIED. (Doc. No. 53.)
IT IS FURTHER ORDERED that Defendants’ motion to compel arbitration is
DENIED. (Doc. No. 18.)
IT IS FURTHER ORDERED Plaintiff’s motion for summary judgment is
GRANTED. (Doc. No. 13.)
A separate Judgment shall accompany this Memorandum and Order.
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 30th day of September, 2013.
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