Similarly to a recent California case that denied Optum’s motion to compel arbitration, the 12th Circuit Court has denied a similar motion due to procedural and substantive unconscionability.

In a nutshell, 45 pharmacies brought a legal action against Optum claiming underpayment since 2012 (as in the California case, Mark Cuker represents the pharmacies). To stall litigation, Optum brought a motion to compel arbitration due to arbitration provisions in its contract with the pharmacies.

Some plaintiff-pharmacies, however,  contracted with Optum through their PSAOs. The court held that the arbitration clauses in the PSAO Agreements with either Catamaran or Optum could not bind pharmacies because they never saw them and thus, could not assent to them.

As to the pharmacies that contracted directly, the court found procedural unconscionability because:

(i) the arbitration clause was not properly flagged and buried in the text

(ii) the clause did not inform of the cost of arbitration

(iii) the clause was confusing and riddled with contradictions

(iv) Optum could unilaterally change the arbitration clause without notice.

In addition, the court found substantive unconscionability because Optum’s arbitration provision:

(i) placed limits on discovery and trial

(ii) could potentially result in extremely expensive arbitration  (average of $250,000)

(iii)banned claim joinder exacerbating the high cost of arbitration

(iv) was not mutual

(v) provided for a distant forum (Southern California) (for mostly Illinois pharmacies).

As a result, the court held that Optum had failed to meet its burden of demonstrating an enforceable agreement to arbitrate.