PATRICIA A. SULLIVAN, Magistrate Judge.
Pursuant to § 7 of the Federal Arbitration Act (9 U.S.C. § 7) ("FAA"), Maine Community Health Options ("Health Options") has petitioned for enforcement of an arbitration subpoena duces tecum issued to CVS Pharmacy, Inc. ("CVS"), in an American Arbitration Association arbitration ("Arbitration") of its dispute with Navitus Health Solutions, LLC ("Navitus"), a pharmacy benefits manager. ECF No. 1 ("Petition"). In the Arbitration, Health Options claims that Navitus failed properly to calculate the usual and customary ("U&C") prices that it charged Health Options for drugs purchased by its members, resulting in millions of dollars in overcharges. The Arbitration is presided over by a panel of arbitrators ("Panel") that authorized the issuance of subpoenas to the retail pharmacies in the Navitus network, including CVS.
Health Options filed the Petition because CVS refused to comply, beyond providing Health Benefits with information regarding its "Health Savings Program" ("HSP"), unless ordered to do so by a court. Focused on the period from January 1, 2014, until June 30, 2016, the Petition asks the Court to compel CVS to produce price lists, transaction data, and documents, with some requests based on a "sufficient to show" standard and others encompassing "all communications" or "all documents and communications" relating to CVS's price for retail transactions with individuals who pay without insurance. ECF No. 1-2. In opposition, CVS argues that this Court lacks subject matter jurisdiction. And if there is subject matter jurisdiction, it contends that it should not be further ordered to comply because of the burden of doing so and the lack of materiality or relevance of the requested data and documents.
The Petition has been referred to me for determination. However, although it presents a dispute that may be boiled down to a simple discovery scuffle, its resolution is also outcome-determinative of the entire case. Therefore, I have addressed it in this report and recommendation. 28 U.S.C. § 636(b)(1)(B).
Although the FAA animates the Petition, it does not supply federal jurisdiction.
Health Options has asserted diversity jurisdiction based on 28 U.S.C. § 1332(a)(1). Petition ¶ 10. This requires that "the matter in controversy exceeds the sum or value of $75,000" and the parties on either side are "citizens of different States."
In a case where the plaintiff seeks money damages, calculating the § 1332 minimum is relatively simple — the claimant must show that the pecuniary consequences of the judgment might crest $75,000 to sustain diversity jurisdiction.
While this guidance is workable for a typical case where the underlying dispute is between the parties before the court, the law is less well developed regarding the applicability of these principles in the context of actions to enforce arbitration subpoenas. As of this writing, federal district courts around the country embrace diametrically opposed approaches to the measurement of the amount in controversy, differing principally on whether and to what extent the underlying arbitration affects the outcome.
Some courts have held that the value of the underlying arbitration controls or plays a significant role in calculating the amount in controversy.
In challenging the amount in controversy, CVS relies on the holdings of other courts-these conclude that the money at issue in the underlying arbitration is not applicable to the federal court's § 1332 jurisdictional analysis.
Fortunately, this Court does not need to resolve this knotty conundrum. If the Court accepts and applies the
First, William Boyd, CVS's Information Technology Director, laid out his experience in extracting data and his specific experience with the data on U&C prices and the HSP program; he estimated that compliance with Health Options' subpoena would require at least two months and that the costs "would reach into the tens of thousands of dollars." ECF No. 13-5 ¶¶ 3, 8 ("Boyd Decl."). Second, CVS submitted a declaration from its legal counsel, Attorney Grant A. Geyerman, who has represented CVS in many matters involving third-party subpoenas. ECF No. 13-4 ¶ 2 ("Geyerman Decl."). Attorney Geyerman predicts that the arbitral subpoena "is quite unlikely" to cause CVS to "incur more than $75,000 in fees," id. ¶¶ 4-5, but stops short of asserting that just the transactional costs of subpoena compliance would never exceed $75,000. Put differently, focusing only on the transactional costs associated with subpoena compliance, the Boyd/Geyerman declarations are enough to establish "facts indicating that it is not a legal certainty that the claim involves less than the jurisdictional amount."
To recap, whether the Court looks at the value of the underlying arbitration as Health Options argues, or limits its analysis to "the pecuniary burden on [CVS] were [Health Options] to prevail" in obtaining the relief sought by the Petition,
on the lack of materiality of the requested data and documents and the burden of subpoena compliance. These arguments frame a threshold issue for the Court — what is the proper legal lens through which to examine CVS's objections. They require consideration of the FAA's § 7 and its displacement of Fed. R. Civ. P. 26(b)(1), but not Fed. R. Civ. P. 45(d)(1).
Congress enacted the FAA, including its discovery procedures, to "overcome judicial resistance to arbitration and to declare a national policy favoring arbitration of claims that parties contract to settle in that manner."
In sum, in the unique context of an arbitral subpoena, the FAA reserves materiality (in other words, relevance) determinations for the arbitration panel, while courts still have the Fed. R. Civ. P. 45 duty to assess the subpoena's burden and ensure that the third party is not subject to "undue burden or expense." Fed. R. Civ. P. 45(d)(1);
Turning to the subpoena placed in issue by the Petition, its requests fall into three categories, each of which calls for an independent burden analysis. First, Health Options asks for price lists (Request 1); there is no burden associated with this request because CVS reports that it does not maintain price lists. Therefore, it is ordered to respond. Second, the subpoena asks for transaction data (Request 3). Third, the subpoena requires CVS to search for and produce speaking documents, one request is based on a "sufficient to show" standard (Request 4) while the others are all-inclusive, seeking "all communications" or "all documents and communications" (Requests 2 and 5). The transaction data and speaking document requests raise burden issues that I recommend be resolved as follows.
Health Options' subpoena originally sought a staggering quantum of transaction data-nationwide for a thirty-month period — reflecting every CVS pharmacy transaction for individuals who paid without insurance (whether by cash, pursuant to the CVS HSP or otherwise). To address CVS's burden concerns, Health Options expressed its willingness to narrow the scope of the data request in several significant ways. First, it is now seeking transaction data only for Maine and New Hampshire; second, it is looking for transactions only involving drugs purchased by Health Options' members; third, it is amenable to accepting transactional data in a format previously assembled by CVS in other matters; and fourth, it has agreed to waive its request for a witness and to accept a sworn affidavit. ECF No. 14 at 4. CVS's confidentiality and collateral-use burdens are addressed by Health Options' agreement to a protective order to be entered in the context of the Arbitration protecting the confidentiality of the data (and any other documents or information produced by CVS) and strictly limiting their access and use to the Arbitration. I have relied on these compromises, and I incorporate them into my recommendation that CVS must comply with the subpoena.
The time period to be produced is an unresolved matter affecting CVS's burden. has advised the Court that it has twenty-five months of data already assembled, for which the burden of production is significantly lower. On the other hand, to produce the remaining months that Health Options seeks, which are not readily available, would be very burdensome indeed. Health Options remains insistent that it must have all thirty months of data.
Despite Health Options' burden-reducing concessions and even if the Court were to limit its production to the twenty-five months already assembled, CVS argues passionately that it should not have to produce any transaction data. It contends that, for each transaction it did with a Health Options member, it provided Navitus with data that populated the "NCPDP Field 426-DQ." CVS argues that this constitutes all that is conceivably relevant to the Arbitration because the cash price it charged to uninsured customers on the same day is always the same as the price that the pharmacist input for Field 426-DQ, unless the non-insurance customer was charged the HSP price, which was a uniform and publicly available price. Therefore, CVS asserts, the relevant data is what is already in the possession of Navitus and there is no need to burden a third party like CVS. With equal passion, Health Options contends that the CVS transaction data will show prices charged to uninsured customers that are not reported to Navitus in field 426-DQ; it contends that this information is essential for its experts to develop the analysis needed for both the liability and damages portions of its claim against Navitus.
This is not a fight that this Court can or should resolve. The proposition that these data are not relevant at all is a materiality matter that must be determined by the Arbitration Panel pursuant to
Based on the foregoing, as to the transaction data, I recommend that the petition be granted to the extent that CVS should be ordered to provide the less-burdensome-to-produce twenty-five months of transaction data for CVS pharmacy transactions in Maine and New Hampshire for individuals who paid without insurance, further limited as set forth above. Based on CVS's representation of how long this will take, I further recommend that CVS be ordered to comply within three weeks of the Court's adoption of this recommendation. As to the remaining time period, if, after Health Options has reviewed the initial twenty-five-month tranche, it believes that the data for the remaining five-month period is also material, it may ask the Arbitration Panel (with notice to CVS) to rule that such data is material. If the Panel so rules, I recommend that CVS shall also be under order by this Court to comply and produce the data for the remaining five months. Finally, this recommendation that CVS must comply by producing any transaction data is based on Health Options' representation that the Arbitration Panel has already deemed such data to be material. If CVS moves to quash the subpoena based on the non-materiality of the data in the Arbitration and the Panel grants that motion, this Court's order of enforcement as to the transaction data may be deemed to be void.
The first of Health Options' three speaking document requests (Request 2) asks the Court to order CVS to search for and produce "all communications" (presumably documents reflecting all communications) with anyone external to CVS who maintained a price list and communicated with CVS about its pricing policies applicable to transactions with individuals who pay without insurance. This request appears to the Court to be hopelessly broad and burdensome, sweeping far beyond what is appropriate for a Fed. R. Civ. P. 45 subpoena. As crafted, it would require the identification of custodians, the use of search terms and burdensome follow-up to review before producing. Despite the mandate of Fed. R. Civ. P. 45(d)(1), Health Options focused very little effort on explaining what it is after and did not suggest any burden-reducing compromises. I recommend that the Court sustain CVS's objection to complying with this request based on the burden that compliance would impose.
The second speaking document request — Request 4, looking for documents "sufficient to show" how CVS calculated the U&C price that it submitted to Navitus — seems more tailored and focused on Health Options' contention that it needs to understand CVS's methodology for calculating its U&C prices. As to burden, which is what this Court must consider, compliance requires CVS only to provide a single document if that is sufficient to describe its methodology. To the extent that it would reduce the burden, I recommend that CVS be permitted to comply at its option by providing a sworn description of its methodology in lieu of hunting down and producing one or more specific documents.
Based on the foregoing, as to Request 4, I recommend that the petition be granted to the extent that CVS should be ordered to produce (at its option) either documents sufficient to describe or a sworn statement that describes its methodology for calculating its U&C prices, as pertinent in Maine and New Hampshire and related to the drugs sold to Health Options' members. I further recommend that CVS be ordered to comply within three weeks of the Court's adoption of this recommendation. As with the transaction data, this order that CVS must comply by responding to Request 4 is based on Health Options' representation that the Arbitration Panel has already deemed such material to be material. If CVS moves to quash the subpoena based on the non-materiality of such material in the Arbitration and the Panel grants that motion, this Court's order of enforcement as to Request 4 may be deemed to be void.
The third speaking document request — Request 5 asks for documents relating to the effect of cash, HSP pricing or minimum retail prices on CVS's U&C price — reverts to the sweeping requirement to search for and produce "all documents and communications." As with Request 2, compliance would require the identification of custodians, the use of search terms and burdensome follow-up for pre-production review. Request 5 echoes what one might expect if CVS were the counterparty in the case, whose U&C prices were in issue before the Arbitration Panel. But it is not. Further, with Health Options' receipt of the transaction data and the response to Request 4, it is difficult to see how or why Health Options needs to inflict such a seemingly gratuitous burden on CVS. Based on the burden of compliance and the absence of any representation by Health Options establishing materiality, I recommend that the Court sustain CVS's objection to complying with Request 5.
Based on the foregoing, I recommend that the Petition (ECF No. 1) be granted in part and denied in part as set forth above.
Any objection to this report and recommendation must be specific and must be served and filed with the Clerk of the Court within fourteen (14) days of its receipt.