This post written by Eric Buhr.
In a precedential decision issued Thursday, In Re: Pharmacy Benefit Managers Antitrust Litigation (MDL 1782), the U.S. Court of Appeals for the Third Circuit reinstated a district court order compelling arbitration of antitrust claims, an order which another district court judge vacated after the case was transferred to a federal Multi-District Litigation (MDL)s. Based on the law of the case doctrine, the Court of Appeals held that MDL judges may not overturn an order of the transferor court absent a finding of extraordinary circumstances – a conclusion that has broad ramifications for MDL proceedings in general.
The In Re Pharmacy Benefit Managers Antitrust Litigation case began in 2003, when Bellevue Drug Co. and several other pharmacies and associations sued AdvancePCS, a pharmacy benefits manager now known as CaremarkPCS, Inc for antitrust violations. In 2004, AdvancePCS moved to compel arbitration of all of the Plaintiffs’ claims based on a contractual arbitration clause, and the district judge, Judge Eduardo Robreno of the U.S. District Court for the Eastern District of Pennsylvania, granted the motion to compel arbitration and stayed the district court action.
Two years later, though, the case was transferred to an MDL pending in the Eastern District of Pennsylvania before Judge John P. Fullam. There, Judge Fullam lifted the stay and vacated the order for arbitration. Although Judge Fullam admitted the orders compelling arbitration were “clearly appropriate under the Federal Arbitration Act,” he felt that an order vacating the arbitration order would help expedite the case. In support of his ruling, he explained his belief that a transferee judge under the multidistrict litigation statute had the power to vacate or modify any order of a transferor court bearing on pretrial matters.
The Court of Appeals clearly disagreed, stating that “there is nothing in the rules adopted by the Joint Panel on Multidistrict Litigation that authorized a transferee judge to vacate or modify the order of a transferor judge.” Although Judge Fullam relied, in part, on portions of the Manual for Complex Litigation suggesting that a transferee judge may vacate or modify orders of the transferor court, the Third Circuit dismissed that argument. The Court explained that “if Judge Fullam’s interpretation of the statute were accurate, litigation could begin anew with each MDL transfer…Moreover, we do not believe that Congress intended that a ‘Return to Go’ card would be dealt to parties involved in MDL transfers.”
Ultimately, the Third Circuit agreed that the transfer of a case to an MDL does not confer more power on a transferee court; its powers are commensurate with those the transferor court has absent the transfer. Therefore, under ordinary application of the law of the case doctrine, an MDL court may only revisit past orders upon a finding of “extraordinary circumstances”. Some recognized examples justifying exceptions and revisiting old orders anew include: (1) when new evidence becomes available; (2) when a supervening new law has been announced; (3) when there is a need to clarify or correct an earlier ambiguous ruling; and (4) when the order might lead to an unjust result. Since the MDL judge had not relied on on any such exception to the law of the case doctrine, the Third Circuit reinstated the original order by the transferor court.
