3rd Circuit Holds That Litigating for 10 Months Waives Arbitration Rights

In November 2012, the 3rd U.S. Circuit Court of Appeals reversed a district court’s order compelling a plaintiff to arbitrate its claims because the defendant participated in the litigation for 10 months before bringing a motion to compel arbitration. The case is In re Pharmacy Benefit Managers Antitrust Litigation, MDL No. 1782. The defendant, AdvancePCS, is a prescription benefits manager that entered into agreements that included arbitration provisions with retail pharmacies. The plaintiff retail pharmacies asserted Section 1 claims against AdvancePCS, alleging, among other things, that AdvancePCS had conspired with its plan sponsors to reduce the contractual amount it pays to plaintiffs below the levels that would prevail in a competitive marketplace. AdvancePCS aggressively litigated the case without mentioning arbitration, including filing a motion to dismiss, a motion for reconsideration and motion to certify for interlocutory appeal, and an answer. Ten months after the complaint was filed, AdvancePCS filed a motion to compel arbitration, which the district court granted. The 3rd Circuit applied its six-factor test under Hoxworth v. Blinder Robinson & Co., 980 F.2d 912 (3d Cir. 1992), and held that Advance PCS had waived its right to compel arbitration. The opinion is available here.