## Facts

- Independent Mississippi pharmacies contracted with Caremark, L.L.C. to participate in a pharmacy-benefit-management (PBM) network under Provider Agreements.
- The Provider Agreements required the pharmacies to dispense drugs at discounted rates in exchange for access to covered patients and included mandatory arbitration clauses (or incorporated them by reference).
- Three related CVS entities (CVS Caremark Corporation, CVS Pharmacy, Inc., and Caremark Rx, L.L.C.) were not signatories to the Provider Agreements.
- The pharmacies alleged that the CVS–Caremark enterprise used patient and prescription information obtained through the PBM relationship to steer customers to CVS-owned pharmacies, asserting trade-secret misappropriation and intentional interference with business relations.
- The pharmacies also alleged violations of Mississippi’s Any Willing Provider law based on exclusion from certain PBM networks administered by defendants.
- After removal to federal court, defendants moved under the Federal Arbitration Act to compel arbitration of all claims, including claims against the nonsignatory affiliates.

## Issues

1. Whether, under the FAA and the Provider Agreements’ choice-of-law clause, nonsignatory corporate affiliates may compel arbitration against signatory pharmacies through state-law equitable estoppel.
2. Whether the pharmacies’ tort and statutory claims were sufficiently connected to the Provider Agreements to permit nonsignatory enforcement of the arbitration clauses.

## Decision

- The Fifth Circuit affirmed the order compelling arbitration.
- The court applied Arizona law (selected by the Provider Agreements) to determine whether nonsignatories could enforce the arbitration clauses.
- It held that Arizona equitable estoppel permits nonsignatories to compel arbitration when a signatory’s claims rely on, presume, or are intertwined with the contract containing the arbitration clause.
- Because the pharmacies’ claims arose from defendants’ access to data and network decisions made through the PBM relationship established by the Provider Agreements, the nonsignatory affiliates could compel arbitration.
- All claims against all four defendants were sent to arbitration.

## Legal Principles

- Under *Arthur Andersen LLP v. Carlisle*, whether a nonsignatory can enforce an arbitration agreement is determined by applicable state contract law principles, not a free-standing federal common law rule.
- A contractual choice-of-law clause may govern the state-law doctrines (including equitable estoppel) that determine who may invoke an arbitration clause.
- Arizona equitable estoppel can allow a nonsignatory to enforce an arbitration clause where the signatory’s claims depend on, relate directly to, or are intertwined with the agreement containing the clause.
- A signatory may be estopped from avoiding arbitration by suing nonsignatory affiliates when the alleged misconduct is rooted in performance of the agreement that provides the arbitration obligation.
- Once state law permits nonsignatory enforcement, the FAA requires courts to enforce the arbitration agreement according to its terms.

## Conclusion

The Fifth Circuit held that, under Arizona equitable estoppel and the FAA, nonsignatory CVS affiliates could compel arbitration because the pharmacies’ claims were grounded in and inseparable from the Provider Agreements that created the PBM relationship and included mandatory arbitration.


Crawford Pro. Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249 (5th Cir. 2014)