Muecke Company, Incorporated v. CVS Caremar , 615 F. App'x 837 ( 2015 )

Case: 14-41213 Document: 00513167856 Page: 1 Date Filed: 08/25/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 25, 2015
No. 14-41213
Lyle W. Cayce
Clerk
THE MUECKE COMPANY, INCORPORATED; BRUCE ROGERS,
individually and doing business as Rogers Pharmacy; BROOKSHIRE
BROTHERS PHARMACY OF KIRBYVILLE, TEXAS; DE LA ROSA
PHARMACY, INCORPORATED; HOMETOWN PHARMACY, L.C.; ROBERT
KINSEY INVESTMENTS, INCORPORATED, doing business as Kinsey's
Pharmacy,
Plaintiffs - Appellants
v.
CVS CAREMARK CORPORATION; CVS PHARMACY, INCORPORATED;
CAREMARK RX, L.L.C.,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 6:10-CV-78
Before WIENER, CLEMENT, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Several independent retail pharmacies appeal the district court’s grant
of a motion to compel arbitration of their RICO and misappropriation of trade
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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secrets claims against several CVS entities. A recent decision from our circuit
has almost entirely disposed of the issue. Consequently, we AFFIRM.
FACTS AND PROCEDURAL BACKGROUND
The plaintiffs are independent retail pharmacies in Texas that filed
claims against several CVS entities for racketeering, trade secret
misappropriation, and violations of the Texas Any Willing Provider Law 1 in
September 2010. In their RICO/trade secret claims, the plaintiffs alleged CVS
used the plaintiffs’ patients’ names and health information to market CVS
products and services to the plaintiffs’ customers. The plaintiffs claim those
names and the information were trade secrets and that CVS misappropriated
them.
The defendants moved to compel arbitration pursuant to an arbitration
provision in the provider agreements. Only one of the defendants was a
signatory; all of the plaintiffs were signatories. The defendants based their
motion on equitable estoppel, contending that the plaintiffs should not be
allowed to raise claims based on the provider agreements while simultaneously
avoiding the arbitration provision. There was no dispute that Arizona law
controlled the interpretation of the provider agreements. Applying Arizona
law, the magistrate judge recommended against compelling arbitration for the
non-signatory defendants because he found that the claims could be litigated
without reference to the contracts containing the arbitration provision. The
magistrate judge stated: “The only relevance of the provider agreements to
these claims is to explain how [the] [d]efendants obtained the information in
the first place.”
1The plaintiffs have since dismissed the only defendant to which their Texas Any
Willing Provider claim applied.
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The district court adopted the magistrate judge’s memorandum and
recommendations. It ordered arbitration between the plaintiffs and the lone
signatory defendant, Caremark, L.L.C. It stayed claims against the non-
signatory defendants – CVS Caremark, CVS Pharmacy, and Caremark Rx –
pending the completion of arbitration to avoid inconsistent outcomes and
comply with the Federal Arbitration Act.
The non-signatory parties appealed to this court. We affirmed in a short,
unpublished opinion, holding that under the abuse of discretion standard, the
district court did not err in denying the motion to compel arbitration with
regard to the non-signatories. Muecke Co. v. CVS Caremark Corp., 512 F.
App’x 395 (5th Cir. 2013) (“Muecke I”).
The plaintiffs did not initiate arbitration. Instead, they waited until the
time expired for the defendants to seek review of Muecke I by the United States
Supreme Court. Once that period ended, they moved to dismiss the claims that
were to be arbitrated against Caremark, L.L.C. After briefing on both the
voluntary dismissal and lifting of the stay pending arbitration, the district
court granted the dismissal of the sole signatory defendant, Caremark, L.L.C.,
and lifted the stay as to the other defendants. The district court reminded the
plaintiffs that if they later raised any issue related to the contracts the court
would again compel arbitration even with regard to the remaining non-
signatories.
In April 2014, this court issued a precedential opinion in a related case.
See Crawford Prof’l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249 (5th Cir.
2014). That suit involved similarly situated plaintiffs who sued Caremark,
L.L.C., CVS Caremark, CVS Pharmacy, and Caremark Rx. Id. at 254. The
plaintiffs asserted trade secret misappropriation claims as well as other
claims. Id. It is undisputed that Caremark, L.L.C. and the Crawford plaintiffs
entered into the same provider agreements that are at issue here. Id. Three
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of the Crawford defendants were non-signatories to the provider agreements,
but all four moved to compel arbitration. Id.
The Crawford plaintiffs argued that they should not be compelled to
arbitrate claims against non-signatories, their claims were not subject to the
provider agreements, and the provider agreements and the provider manual’s
arbitration clause were procedurally and substantively unconscionable under
Mississippi law. Id. at 254-55. This court recognized, as did the district court
in Muecke I, that the Supreme Court has held that the Federal Arbitration Act
permits state-law contract theories such as equitable estoppel to compel
arbitration against nonparties. Arthur Andersen LLP v. Carlisle, 556 U.S. 624,
630 (2009). Applying that concept, this court held that “[t]he relevant Arizona
law, made controlling by the Provider Agreement’s choice-of-law clause,
supports the non-signatory [d]efendants’ motion to enforce the agreement to
arbitrate . . . based on state-law equitable estoppel doctrine.” Crawford, 748
F.3d at 255.
The Crawford court found that Arizona case law on equitable estoppel
was unhelpful, so it followed the Arizona Supreme Court’s direction to consider
California law in the absence of relevant Arizona law. Id. at 260. It identified
a California Supreme Court decision advising courts to consider whether
“‘claims against the [non-signatory defendants] are founded in and inextricably
bound up with the obligations imposed by the agreement containing the
arbitration clause’” when determining whether to apply equitable estoppel to
an arbitration agreement. Id. (quoting Goldman v. KPMG LLP, 92 Cal. Rptr.
3d 534, 541 (Cal. Ct. App. 2009)). The court held that under the elements of
the plaintiffs’ trade secret claims, they needed to prove the defendants gained
the secrets through “breach of a confidential relationship or discover[y] by
improper means.” Id. at 261 (citation and quotation marks omitted). Because
the plaintiffs alleged they voluntarily gave the information to the defendants,
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the plaintiffs would have to demonstrate that the defendants’ use of the
information had “exceeded the scope of their permitted use . . . .” in the provider
agreements. Id. Thus, the plaintiffs’ claims were “‘inextricably bound up with
the obligations imposed by the agreement containing the arbitration clause.’”
Id. (quoting Goldman, 92 Cal. Rptr. 3d at 541).
The remaining defendants in the current case, relying on Crawford, filed
a motion for reconsideration of the court’s decision on arbitration. The
magistrate judge recommended reconsideration because it found that
Crawford was an intervening change in the law. The magistrate judge had
used a “derived-benefit standard” to determine that the plaintiffs were not
claiming any benefit under the contract, but the Crawford court held that the
elements of the plaintiffs’ trade secret misappropriation claims should be
considered. The magistrate judge recognized that the elements for trade secret
misappropriation in Texas, like those in Mississippi, require a plaintiff to show
the “secrets are discovered through improper means.” Because it would be
necessary to show how the defendants acquired their information, the
misappropriation claims were “‘founded in and inextricably bound up with’ the
terms and conditions of the provider agreements.”
The magistrate judge also held that changes in the factual development
in the case warranted reconsideration because the changes demonstrated that
“interpretation of the information-usage terms of the provider agreements is
inescapable for the claims in this case.” The magistrate judge recommended
the district court compel the plaintiffs to arbitrate their claims against the non-
signatory defendants. The district court agreed, adopted all recommendations,
granted the motion to compel arbitration on all claims, and dismissed the case.
The plaintiffs appealed.
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DISCUSSION
The plaintiffs contend that the district court erred by granting
reconsideration and compelling arbitration. We review a district court’s
decision to grant a motion to reconsider under Federal Rule of Civil Procedure
59(e) for abuse of discretion. Miller v. BAC Home Loans Servicing, L.P., 726
F.3d 717, 721-22 (5th Cir. 2013). “‘To the extent that a ruling was a
reconsideration of a question of law, however, the standard of review is de
novo.’” Id. at 722 (quoting Pioneer Natural Res. USA, Inc. v. Paper, Allied
Indus., Chem. & Energy Workers Int’l Union Loc. 4-487, 328 F.3d 818, 820 (5th
Cir. 2013). We review a district court’s decision to compel arbitration de novo,
its findings of fact under the clearly erroneous standard, and its “use of
equitable estoppel to compel arbitration for an abuse of discretion.” Crawford,
748 F.3d at 256.
A. Whether reconsideration was warranted
The plaintiffs argue that the law-of-the-case doctrine or, alternatively,
the mandate rule prevents the district court from reconsidering its previous
order denying the defendants’ motion to compel arbitration. The law-of-the-
case doctrine “is not a jurisdictional rule, but a discretionary practice” that
“merely expresses the practice of courts generally to refuse to reopen what has
been decided, not a limit to their power.” United States v. Matthews, 312 F.3d
652, 657 (5th Cir. 2002) (citation and quotation marks omitted). Unpublished
opinions are precedential for purposes of the law of the case. 5TH CIR. R. 47.5.4.
The same theory and rules apply to the mandate rule, which “provides that a
lower court on remand must implement both the letter and the spirit of the
appellate court’s mandate and may not disregard the explicit directives of that
court.” Matthews, 312 F.3d at 657 (citation and quotation marks omitted). The
rule does not apply when: “(1) [t]he evidence at a subsequent trial is
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substantially different; (2) there has been an intervening change of law by a
controlling authority; and (3) the earlier decision is clearly erroneous and
would work a manifest injustice.” Id.
The district court concluded that Crawford represented an intervening
change in the law, fitting within an exception to the law-of-the case doctrine
and the mandate rule. The plaintiffs contend that decision was incorrect
because the Crawford panel did not consider the provider agreements’ no non-
party rights provision. That provision states that “no term or provision . . . is
for the benefit of any person who is not a party to the [p]rovider [a]greement .
. . .” The plaintiffs have argued throughout this litigation that this provision
prohibits the non-signatory defendants from compelling arbitration. The
Crawford panel did not address that provision. The plaintiffs make no other
attempt to distinguish the facts of this case from those in Crawford. They also
argue that Crawford could not overrule Muecke I, citing several cases in which
we held that one panel of this court cannot overrule another even if it perceives
error in the precedent.
The magistrate judge specifically concluded that Crawford required a
different analysis than the one used when first considering the issue. The
Crawford court considered California precedent to find the relevant law. In
Muecke I, the magistrate judge had only applied Arizona law. Because an
intervening precedential Fifth Circuit decision used a distinctly different
analysis for the same contract, the magistrate judge here concluded there was
an intervening change of law by a controlling authority.
We agree that Crawford represents an intervening change of law by a
controlling authority. It is a published opinion in which the court applied a
completely different analysis than the one the district court used prior to our
decision in Muecke I. Moreover, we need not determine whether the law-of-
the-case doctrine or mandate rule applies because they are merely procedural.
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See Matthews, 312 F.3d at 657. “So long as a case remains alive, there is power
to alter or revoke earlier rulings.” Id. at 657 n.5 (citation and quotation marks
omitted). The district court retained control of this case and altered its earlier
ruling. Under Matthews, it had the authority to do so. See id. Regarding the
argument that Crawford could not have overruled Muecke I, our rules make
clear that an unpublished opinion such as Muecke I is not precedential. See
5TH CIR. R. 47.5.4. Thus, the Crawford court was not bound by Muecke I.
B. Whether the district court erred in granting the defendants’ motion to
compel arbitration
The plaintiffs argue that Crawford incorrectly applied Arizona law and
incorrectly held that California law required compelling arbitration under the
equitable estoppel doctrine. They urge this court to ignore Crawford and apply
an analysis similar to that in the Muecke I district court decision. Crawford is
controlling precedent, however, and the decision shaped the Fifth Circuit’s
equitable estoppel analysis as applied to Arizona contracts.
The Crawford analysis, discussed at length above, leads to the conclusion
that the non-signatory defendants here may compel arbitration under the
equitable estoppel doctrine because the elements for the plaintiffs’ claims are
bound up with the provider agreements. See Crawford, 748 F.3d at 261. The
district court correctly concluded that liability for a Texas trade secret
misappropriation claim arises when trade secrets are obtained through
improper means or disclosed or used in a manner that breaches confidence.
See Lamont v. Vaquillas Energy Lopeno Ltd., LLP, 421 S.W.3d 198, 212 (Tex.
App.—San Antonio 2013, no pet.) (quoting Hyde Corp. v. Huffines, 314 S.W.2d
763, 769 (Tex. 1958)). The only way to determine how the defendants received
the information and the manner in which they were allowed to use it is by
referring to the provider agreements. Those claims therefore are bound up
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with the provider agreements. See Crawford, 748 F.3d at 261. As a result,
under Crawford, the district court did not err in granting the non-signatory
defendants’ motion to compel arbitration.
The no non-party rights provision does not affect the Crawford analysis.
Equitable estoppel is based on the premise that “[o]ne should not be permitted
to rely on an agreement containing an arbitration clause for its claims, while
at the same time repudiating the arbitration provision contained in the same
contract.” Id. at 260 (citation and quotation marks omitted). Equitable
estoppel, therefore, overrides a no non-party rights provision in the same way
that it overrides an arbitration provision stating that it only applies to disputes
between parties. Equitable estoppel recognizes that a non-signatory to the
provider agreements would not be able to exercise rights to compel arbitration
but for the opposing party’s use of the contract for its claims. Because the
plaintiffs are suing the defendants as if the defendants were parties to the
contract, the plaintiffs cannot then claim the defendants are not parties to
other portions of the contract.
Furthermore, the plaintiffs have not directed us to any case law in which
a no non-party rights provision barred the application of equitable estoppel.
The general equitable estoppel or contract interpretation cases the plaintiffs
cite do not discuss such provisions. Crawford controls the equitable estoppel
analysis. The district court did not err in granting the motion to compel.
AFFIRMED.
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