The Franchise Memorandum

The United States District Court for the Eastern District of Pennsylvania has denied a drug manufacturer’s motion to compel arbitration of a putative class member’s antitrust claim. In re Remicade Antitrust Litig., 2018 WL 5314775 (E.D. Pa. Oct. 26, 2018). The plaintiff at issue was an authorized distributor, pursuant to a distributor agreement, of an infliximab medication called Remicade. The distributor alleged the drug manufacturer monopolized the infliximab market and artificially inflated prices by entering into third-party contracts and imposing rebate penalties that prevented insurers from covering, and providers from purchasing, lower-priced competitive drugs. In response, the manufacturer filed a motion to compel arbitration, arguing the claim fell within the scope of the agreement’s arbitration clause. That clause required arbitration of all claims “arising out of or relating to this agreement.” It also contained a jury waiver, forbade punitive and consequential damages, prejudgment interest, and attorney’s fees claims, and disclaimed the right to arbitrate claims on a class basis. However, the arbitration clause did not reference antitrust claims. Nor did the distributor agreement set the price paid by the distributor for Remicade, or address antitrust statutes or anticompetitive conduct.

The manufacturer argued the antitrust claim related to the distributor agreement, since the distributor’s standing to sue arose from purchases it made under the agreement. The court disagreed, finding that the parties’ obligations under the distributor agreement were separate from the alleged anticompetitive conduct. In finding that the antitrust claim did not depend on the existence of the agreement, the court observed that other claimants who had not entered into distributor agreements with the manufacturer had asserted “identical” claims. It also noted that the prices of other infliximab drugs, not just Remicade, were allegedly inflated by the claimed anticompetitive conduct. Because the antitrust claim did not require interpretation of the distributor agreement, the court found the claim was outside the scope of the arbitration clause, including its jury waiver, damages-limitations, and anti-class action provisions.

Franchisors and manufacturers with arbitration clauses in their agreements should closely review the scope of the language to determine whether the clause is sufficiently broad to cover all potential claims between the parties. They should also ensure that jury, class action, and punitive damages waivers do not depend on the applicability of arbitration clauses.