2009 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-24-2009

In Re: Pharm Benefit

Precedential or Non-Precedential: Precedential

Docket No. 07-1151

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Recommended Citation

"In Re: Pharm Benefit " (2009). 2009 Decisions. Paper 533.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No: 07-1151

IN RE: PHARMACY BENEFIT MANAGERS

ANTITRUST LITIGATION

(MDL 1782)

BELLEVUE DRUG CO.; ROBERT SCHREIBER, INC.,

doing business as BURNS PHARMACY;

REHN-HUERBINGER DRUG CO.,

doing business as PARKWAY DRUGS #4, on behalf of

themselves and all others similarly situated; 

PHARMACY FREEDOM FUND;

NATIONAL COMMUNITY PHARMACISTS

ASSOCIATION

 v.

*CAREMARKSPCS, INC., f/k/a ADVANCEPCS

(D.C. Civil No. 03-cv-04731)

 *CaremarksPCS, Inc., f/k/a AdvancePCS,

 Appellant

*(Amended in accordance with Clerk's Order dated 02/20/07)
2

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(Civ. No. 03-cv-04731)

District Judge: Hon. John P. Fullam

Argued: February 8, 2008

Before: McKEE and AMBRO, Circuit Judges,

and ALDISERT, Senior Circuit Judge

(Opinion filed: September 24, 2009)

STEVEN E. BIZAR, ESQ.

LANDON Y. JONES, III, ESQ.

Buchanan, Ingersoll & Rooney PC

50 South 16 Street th

Two Liberty Place, Suite 3200

Philadelphia, PA 19102

MICHAEL SENNETT, ESQ.

PAULA W. RENDER, ESQ. (Argued)

Jones Day 

77 West Wacker Drive, Suite 3500

Chicago, IL 60601

VICTOR E. GRIMM, ESQ.

JASON M. MARKS, ESQ.

Bell, Boyd & Lloyd LLP

70 West Madison Street, Suite 3100

Chicago, IL 60602

Attorneys for Appellant
3

MICHAEL J. FREED, ESQ.

Freed Kanner London & Millen LLC

2201 Waukegan Road, Suite 130

Bannockburn, IL 60015

JEAN K. JANES, ESQ.

Much Shelist Denenberg Ament & Rubenstein, P.C.

191 North Wacker Drive, Suite 1800

Chicago, IL 60606

H. LADDIE MONTAGUE, JR., ESQ. (Argued)

MARTIN I. TWERSKY, ESQ.

Berger & Montague, P.C.

1622 Locust Street

Philadelphia, PA 19103

Attorneys for Appellees

OPINION

McKEE, Circuit Judge.

This action (the “Bellevue action”) is one of six similar

antitrust actions challenging the practices of prescription

benefits managers that have been transferred by the Judicial

Panel on Multidistrict Litigation for coordinated proceedings
 On March 24, 2004, AdvancePCS became a wholly owned 1

subsidiary of Caremark Rx, Inc., and changed its name to

CaremarkPCS. In the proceedings in the district court, the

defendant was AdvancePCS and for consistency will be referred

to here as Advance PCS.

4

before the Honorable John P. Fullam of the United States

District Court for the Eastern District of Pennsylvania under the

caption: In re Pharmacy Benefit Managers Antitrust Litigation,

MDL Docket No. 1782. The Bellevue action had initially been

assigned to Judge Eduardo C. Robreno of the same Court. In an

order entered on August 24, 2004, before the Bellevue action

was transferred to Judge Fullam, Judge Robreno granted the

defendant’s motion to compel arbitration and stayed the action

pending arbitration. Judge Fullam subsequently vacated Judge

Robreno’s order compelling arbitration, and that order is the

subject of this appeal. The Appellant is AdvancePCS, the 1

defendant in the Bellevue action. Because we hold that Judge
5

Fullam’s order violated the law of the case doctrine, we will

vacate that order and remand with directions to reinstate Judge

Robreno’s order compelling arbitration.

I. FACTS AND PROCEDURAL HISTORY

Bellevue Drug Co., Inc., Robert Schreiber, Inc., d//b/a

Burns Pharmacy, and Rehn-Heurbinger Drug Co., d/b/a

ParkwayDrugs # 4 (“PharmacyPlaintiffs”), are retail pharmacy

businesses. The Pharmacy Freedom Fund and the National

CommunityPharmacists Association (“Association Plaintiffs”)

are associations of community pharmacies and pharmacists,

respectively.

AdvancePCS is a prescription benefits manager (“PBM”)

for drug benefit plans sponsored by employers, unions,

government agencies, insurance plans and others (“Plan

Sponsors”). PBMs are retained by Plan Sponsors to efficiently

manage their benefit plans and to achieve cost savings for Plan
6

Sponsors and plan members who may be required to pay a

portion of the drug cost, known as a co-payment. Efficiencies

and cost savings are achieved by PBMs in a variety of ways,

including negotiating discounts or rebates from drug

manufacturers, providing mail order prescription service to plan

members, contracting with retail pharmacies for reimbursement

when prescriptions are filled for plan members, and electronic

processing and paying of claims. 

Here, the Pharmacy Plaintiffs entered into written

agreements (“Pharmacy Provider Agreements” or

“Agreements”) with AdvancePCS to provide prescription drugs

and related pharmacy services to persons covered by drug

benefit plans administered by AdvancePCS. The Pharmacy

Provider Agreements contain an “Arbitration Clause” which

provides:

Arbitration. Any and all controversies in
7

connection with or arising out of this Agreement

will be exclusively settled by arbitration before a

single arbitrator in accordance with the Rules of

the American Arbitration Association. The

arbitrator must follow the rule of law, and may

only award remedies provided in this Agreement.

The award of the arbitrator will be final and

binding on the parties, and judgment upon such

award may be entered in any court having

jurisdiction thereof. Arbitration under this

provision will be conducted in Scottsdale,

Arizona, and Provider hereby agrees to such

jurisdiction, unless otherwise agreed to by the

parties in writing or mandated by Law, and the

expenses of the arbitration, including attorneys’

fees, will be paid by the party against whom the

award of the arbitrator is rendered. This Section

9.5 and the parties’ rights hereunder shall be

governed by the Federal Arbitration Act, 9 U.S.C.

§§ 1 et seq.

Section 9.5 (App. 488-89). The Pharmacy Provider

Agreements also contain a “Remedies Clause” which provides:

Remedies. Provider acknowledges that any

unauthorized disclosure or use of [AdvancePCS]

proprietary information would cause

[AdvancePCS] immediate and irreparable injury

or loss. Accordingly, should Provider fail to

abide by this Section 6 [captioned “Intellectual
8

P ro p e rt y Righ t s: Con fiden tia lity” ] ,

[AdvancePCS] shall be entitled to specific

performance including immediate issuance of a

temporary restraining order or preliminary

injunction enforcing this Agreement, and to

judgment for damages (including attorneys’ fees)

caused by the breach and to all other remedies

provided by this Agreement and applicable law.

Section 6.4 (App. 487). In addition, the Agreements contain

limitation of liability and indemnification provisions. The

limitation of liability provision reads:

Limitation on Liability. [AdvancePCS] shall not

be liable to Provider for any claim, injury,

demand or judgment based upon contract, tort or

other grounds (including warranty of

merchantability) arising out of the sale,

compounding, dispensing, manufacturing, or use

of any drug or device dispensed by or any

Pharmacy Services provided by Provider under

this Agreement. In no event is either party liable

to the other party for indirect, consequential or

special damages or any nature (even if informed

of their possibility), lost profits or savings,

punitive damages, injury to reputation or loss of

customers or business. 

Section 7.1 (App. 487). The indemnification provision reads:
9

Indemnification. Provider agrees to indemnify

and hold [AdvancePCS], its shareholders,

directors, employees, agents and representatives

free and harmless for, from and against any and

all liabilities, losses, settlements, claims,

demands, and expenses of any kind (including

attorneys’ fees), that may result or arise out of: (I)

any actual or alleged malpractice, negligence or

misconduct of Provider in the performance or

omission of any act or responsibility assumed by

Provider under this Agreement, or (ii) the sale,

compounding, dispensing, failure to sell,

manufacture or use of a drug or device dispensed

by Provider of Pharmacy Service provided by

Provider under this Agreement.

Section 7.2 (App. 487). 

On August 15, 2003, the Pharmacy Plaintiffs, for

themselves and all other similarly situated pharmacies that

“contracted with AdvancePCS to dispense and sell brand name

and generic prescription drugs for any prescription drug benefit

plan(s),” Complaint ¶ 29, and the Association Plaintiffs filed a

complaint in the United States District Court for the Eastern

District of Pennsylvania captioned Bellevue Drug Co., et al. v.
 The Association Plaintiffs joined the action solely to seek 2

injunctive relief on behalf of their members and did not seek

status as representative plaintiffs or class members. 

 Similar complaints were filed in several federal district 3

courts against various PBMs. Those complaints are: N. Jackson

Pharmacy v. Express Scripts Inc., No. 5:03-2696 (N.D. Ala.); N.

Jackson Pharmacy v. Medco Health Solutions, Inc., No. 5:-3-

2697 (N.D. Ala.); Mike’s Med. Ctr. Pharmacy v. Medco Health

Solutions, Inc., No. 3:05-5108 (N.D. Cal.); N. Jackson

Pharmacy v. Caremark RX Inc., No. 1:04-5674 (N.D. Ill.);

10

AdvancePCS, No. 2:03-cv-04731. The complaint alleged that 2

AdvancePCS used the combined economic power of its Plan

Sponsors to reduce the contractual amount it pays to retail

pharmacies below the levelsthat would prevail in a competitive

marketplace. It also alleged that the Agreements impose certain

limitations on drug refills and co-payment charges to plan

members. The complaint asserted that the foregoing actions

constituted an unlawful conspiracy among AdvancePCS and its

Plan Sponsors to restrain competition in violation of Section 1

of the Sherman Act, 15 U.S.C. § 1.3
Brady Enters., Inc. v. Medco Health Solutions, Inc., No. 2:03-

4730 (E.D. Pa.). The last named case, Brady Enters., Inc., was

filed simultaneously with the complaint here. Brady was

initially assigned to Judge Jan E. Dubois but, on August 27,

2003, it was reassigned to Judge Fullam.

 In Eichorn v. AT & T Corp., we explained: 4

Once there is the finding of antitrust injury, courts

examine the alleged illegal conduct under one of

two distinct tests: per se violation or rule of

reason. Under the per se test, “agreements whose

nature and necessary effect are so plainly

anti-competitive that no elaborate study of the

industry is needed to establish their illegality” are

found to be antitrust violations. For those

11

On September 25, 2003, AdvancePCS moved to dismiss

the complaint, arguing that the plaintiffs lacked standing.

AdvancePCS also argued that, even assuming arguendo that

plaintiffs had standing, they had not sufficiently alleged either

horizontal collusion to state a per se violation of the antitrust

laws or sufficient injury to competition to allege a rule of reason

violation. AdvancePCS submitted with that motion a binder of 4
activities not within the per se invalidity category,

courts employ the rule of reason test. Under this

test, plaintiffs have the burden of establishing

that, under all the circumstances, “the challenged

acts are unreasonably restrictive of competitive

conditions” in the relevant market.

248 F.3d 131, 139 (3d Cir. 2001) (citations omitted). 

12

exhibits of allegedly judicially noticeable materials. The

materials included three lengthy government-sponsored studies

of the efficiency enhancing effects of PBMs, as well as

AdvancePCS’s own Form 10-K and other materials. 

In an opinion dated March 2, 2004, Judge Robreno

denied AdvancePCS’s motion, finding that the Plaintiffs

suffered antitrust injury and had antitrust standing. The district

court further held that the allegations of horizontal collusion

were sufficient to allege both a per se violation and to state a

claim for restraint of trade under the rule of reason based upon
 “Horizontal collusion” exists where competitors at the same 5

market level agree to fix or control the prices they will charge

for their respective goods or services. It is a per se unreasonable

restraint of trade under the Sherman Act. See In re Flat Glass

Antitrust Litig., 385 F.3d 350 (3d Cir. 2004). 

 AdvancePCS’s action was purportedly the result of the 6

Federal Trade Commission’s decision (memorialized in a letter)

not to investigate a proposed acquisition of AdvancePCS by

Caremark, see n.1, supra.

13

alleged price suppression.5

On March 16, 2004, AdvancePCS filed an answer to the

complaint and moved to reconsider the March 2, 2004 order or

to certify it for interlocutory appeal pursuant to 28 U.S.C. §

1292(b). On April, 9, 2004, the Pharmacy Plaintiffs and the 6

Association Plaintiffs filed an opposition to that motion. On

May 14, 2004, Judge Robreno denied AdvancePCS’s motion.

On May 17, 2004, AdvancePCS submitted a revised

corporate disclosure form to reflect the fact that it had been

acquired in March 2004 by Caremark. See n.1, supra.
14

On June 21, 2004, some ten months after the Plaintiffs’

complaint was filed (but before any discovery began),

AdvancePCS filed a motion to compel arbitration in which it

asked the district court to enforce the arbitration clause in the

Pharmacy Provider Agreements and enter an order compelling

arbitration of all of the Plaintiffs’ claims. In the alternative,

AdvancePCS asked for an order compelling arbitration of the

claims of the Pharmacy Plaintiffs and staying the claims of the

Association Plaintiffs pending the completion of arbitration. 

Plaintiffs based their opposition to the motion to compel

on two distinct grounds. First, they contended that AdvancePCS

waived any right to arbitrate by actively litigating the Plaintiffs’

claims for ten months. Second, they contended that the

arbitration agreement was unenforceable because it precluded

them from pursuing statutory antitrust remedies. The Plaintiffs

also claimed that they would not be able to afford arbitration,
15

particularly in light of the provision in the Agreements that

costs and attorneys’ fees are to be paid by the party who loses

the arbitration. 

In a Memorandum Order entered August 24, 2004, Judge

Robreno granted AdvancePCS’s motion to compel arbitration

and stayed the district court action. He found that the Pharmacy

Plaintiffs had entered into enforceable arbitration agreements

that encompassed any antitrust claims, and that AdvancePCS

had not waived its right to seek arbitration. 

On September 7, 2004, the Plaintiffs filed a motion to

reconsider or, in the alternative, for certification of an

interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Plaintiffs

urged the district court to reconsider its decision on the

enforceability of the arbitration agreement; alternatively, they

requested that the district court dismiss the case so that they

could file an appeal. On June 17, 2005, Judge Robreno denied
16

reconsideration and certification and ordered that the case

remain stayed in accordance with the Federal Arbitration Act

(“FAA”), 9 U.S.C. § 3.

However, the Plaintiffs did not thereafter initiate

arbitration proceedings. AdvancePCS contends that on April 7,

2006, the Plaintiffs filed a motion before the Judicial Panel on

Multidistrict Litigation (“MDL Panel”) for transfer of this and

certain other cases under 28 U.S.C. § 1407 for coordinated

pretrial proceedings. The Plaintiffs dispute this claim and insist

that they did not file the motion before the MDL Panel. They

contend that the plaintiffs in the Brady action, see n.3, supra,

filed that motion. 

In any event, on May 19, 2006, the Plaintiffs filed a

motion to lift the stay and dismiss the complaint so that they

could pursue an appeal of the district court’s August 24, 2004,

and June 17, 2005, orders. In that motion to dismiss, the
17

Plaintiffs represented that they did not intend to arbitrate their

claims but desired to obtain appellate review of the orders

compelling arbitration. 

As we noted at the outset, this case was transferred to

Judge Fullam by the MDL Panel. That transfer occurred on

August 24, 2006, before Judge Robreno ruled on the Plaintiffs’

motion to lift the stay and dismiss their complaint. In re

Pharmacy Benefit Managers Antitrust Litig., 452 F. Supp. 2d

1352 (Jud.Pan.Mult.Lit. 2006). 

On August 25, 2006, Judge Robreno transferred this

action to Judge Fullampursuant to the MDL Panel’s August 24,

2006 transfer order. On December 7, 2006, Judge Fullam

convened a status conference in the MDL proceedings, which

then included this action. At that conference, Judge Fullam

heard argument on the Plaintiffs’ motion to lift the stay and

dismiss the complaint.
 That order was entered on December 19, 2006. 7

18

On December 18, 2006, Judge Fullam sua sponte signed

an order and supporting memorandum vacating Judge

Robreno’s August 24, 2004, order compelling arbitration and

staying litigation. Judge Fullam then dismissed the then- 7

pending motion to dismiss the complaint as moot. In re

Pharmacy Benefit Mangers Antitrust Litig. (Bellevue Drug Co.

v. AdvancePCS), 2006 WL 3759712 (E.D. Pa. Dec. 18, 2006).

In doing so, Judge Fullam explained that “Judge Robreno’s

Orders compelling arbitration were clearly appropriate under

the Federal Arbitration Act and the Congressional policies

reflected in that statute.” Id. at *1. However, Judge Fullam

believed that, in ordering arbitration, Judge Robreno “did not

actually decide that the issuesinvolved were arbitrable, or even

whether the arbitration agreement relied upon was enforceable;
19

he merely, in accordance with the general policy of favoring

arbitration, required that all issues be submitted initially to the

arbitrator for decision.” Id. Noting the “action of the [MDL

Panel] (which clearly assumed that the stay or proceedings did

not preclude coordinated pretrial proceedings),” Judge Fullam

reasoned that he could therefore “diverge from Judge Robreno’s

Orders to the limited extent of considering whether any useful

purpose would be served in submitting all preliminary

determinations to the arbitrator.” Id. Judge Fullam believed:

“the task assigned to me as transferee judge can best be

performed by expediting the decision which, I believe, would

necessarily have been reached by the arbitrator with respect to

the procedural aspects of this litigation.” Id. at *2.

In deciding the “procedural aspect of th[e] litigation,”

Judge Fullam found that because the “arbitrator must follow the

rule of law, and may only award remedies provided” in the
 We have jurisdiction pursuant to Sections 16(a)(1)(A) and 8

(B) of the Federal Arbitration Act, 9 U.S.C. §§ 16(a)(1)(A) and

(B), which provide that appeals may be taken from orders

denying motions to compel arbitration and denying stays of

proceedings pending arbitration. 

20

agreement, the “arbitrator is precluded from considering the

antitrust claims asserted by plaintiff in this litigation.” Id. 

Thus, Judge Fullam had “no difficulty in concluding either that

the parties never intended this type of litigation to be submitted

to arbitration, or that the Arbitration Agreement is

unenforceable because it violates public policy.” Id. at

AdvancePCS then filed this appeal. 

8

II. DISCUSSION

AdvancePCS makes a number of arguments. It

contends, inter alia, that Judge Fullam’s order vacating Judge

Robreno’s order compelling arbitration violates the Federal

Arbitration Act (“FAA”); that the claims of the Pharmacy
21

Plaintiffs and the Association Plaintiffs are subject to

arbitration; and that the arbitration clauses in the Pharmacy

Provider Agreements are valid and enforceable. However, we

need not address the merits of any of those arguments because

we agree with Advance PCS thatJudge Fullam’s order vacating

Judge Robreno’s orders compelling arbitration cannot stand

under the law of the case doctrine.

In Arizona v. California, 460 U.S. 605 (1983), the

Supreme Court noted:

Unlike the more precise requirements of res

judicata, law ofthe case is an amorphous concept.

As most commonly defined, the doctrine posits

that when a court decides upon a rule of law, that

decision should continue to govern the same

issues in subsequent stages in the same case. 

Id. at 618 (citations omitted). The “[l]aw of the case rules have

developed ‘to maintain consistency and avoid reconsideration

of matters once decided during the course of a single continuing
22

lawsuit.’” Casey v. Planned Parenthood of Se. Pa., 14 F.3d

848, 856 (3d Cir. 1994) (quoting 18 Charles A. Wright, Arthur

R. Miller, Edward Cooper, Federal Practice and Procedure §

4478 at 788 (2d ed. 1981)). 

“The . . . doctrine does not restrict a court’s power but rather

governs its exercise of discretion.” Pub. Interest Research

Group of NJ, Inc. v. Magnesium Elektron, 123 F.3d 111, 116

(3d Cir. 1997) (citations omitted). The Supreme Court has

explained the scope of this discretion as follows:

A court hasthe power to revisit prior decisions of

its own or of a coordinate court in any

circumstance, although as a rule courts should be

loathe to do so in the absence of extraordinary

circumstances such as where the initial decision

was clearly erroneous and would make a manifest

injustice.

Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816

(1988) (citing Arizona v. California, 460 U.S. at 618 n.8). 

In addition to the extraordinary circumstance noted by
23

the Supreme Court in Christianson, we have we “recognized

several ‘extraordinary circumstances’ that warrant a court’s

reconsideration of an issue decided earlier in the course of

litigation.” Public Interest Research Group, 123 F.3d at 116-

17. In Public Interest Research Group, we explained that the

law of the case doctrine does not preclude a court from

revisiting its own decisions or one of a coordinate court where

(1) new evidence is available or (2) a supervening new law has

been announced. 123 F.3d at 117 (citations omitted). In

addition, we have held the “law of the case doctrine does not

preclude a trial judge from clarifying or correcting an earlier,

ambiguous ruling.” Swietlowich v. County of Bucks, 610 F.2d

1157, 1164 (3d Cir. 1979). We have also held that “a trial

judge has the discretion to reconsider an issue and should

exercise that discretion whenever it appears that a previous

ruling, even if unambiguous, might lead to an unjust result.” Id.
24

(citing Messenger v. Anderson, 225 U.S. 436 (1912)).

However, we have also been careful to caution that if a “trial

judge decides to change or explain an earlier ruling, he should

state hisreasons on the record” and also “take appropriate steps

so that the parties are not prejudiced by reliance on the prior

ruling.” Id. 

Judge Fullam did not rely on any of the recognized

exceptions to the law of the case doctrine in vacating Judge

Robreno’s order compelling arbitration. He also failed to find

any extraordinary circumstance that would have justified

vacating Judge Robreno’s order compelling arbitration. 

Moreover, Judge Fullam held that Judge Robreno’s order was

“clearly appropriate” under the FAA, 2006 WL 3759712, at *1,

and it is clear that Judge Fullam misread Judge Robreno’s

opinion in support of the August 24, 2004, order compelling

arbitration. As stated above, Judge Fullam believed that Judge
25

Robreno:

did not actually decide that the issues involved in

the present case were arbitrable, or even whether

the arbitration agreement relied upon was

enforceable; he merely, in accordance with the

general policy of favoring arbitration, required

that all such issues be submitted initially to the

arbitrator for decision.

Id. That is simply not accurate. In compelling arbitration,

Judge Robreno expressly stated: “it is unmistakably clear that

the instant dispute falls within the scope of the Arbitration

Agreement,” App. A245, and he expressly found “that there is

a valid agreement to arbitrate between the parties.” App. A268.

In fact, the “Remedies” section of Judge Robreno’s August 20,

2004, Memorandum begins: “[f]inding that there is a valid

agreement to arbitrate between the parties and that the instant

dispute falls within the scope of the Arbitration Agreement . .

. and that the Arbitration Agreement is not unconscionable, the

Court will grant the . . . motion to compel arbitration and stay
26

the proceedings pending the outcome of arbitration.” Id. 

Thus, Judge Robreno could not have been clearer, and

Judge Fullam’s reading of Judge Robreno’s Memorandum is

clearly inconsistent with Judge Robreno’s findings and legal

conclusions.

 Judge Fullam was nevertheless convinced that he had

the authority to vacate Judge Robreno’s order compelling

arbitration “notwithstanding ‘law of the case’ principles.” 2006

WL 3759712, at *1. Judge Fullam explained: “As a general

proposition, a transferee judge under the Multidistrict statute

may vacate or modify any order of a transferor court bearing

upon pretrial matters.” Id. However, we can find nothing in the

text of 28 U.S.C. § 1407, the Multidistrict litigation transfer

statute, that authorizes a transferee judge to vacate or modify an
 That statute provides: 9

(a) When civil actions involving one or more

common questions of fact are pending in different

districts, such actions may be transferred to any

district for coordinated or consolidated pretrial

proceedings. Such transfers shall be made by the

judicial panel on multidistrict litigation authorized

by this section upon its determination that

transfers for such proceedings will be for the

convenience of parties and witnesses and will

promote the just and efficient conduct of such

actions. Each action so transferred shall be

remanded by the panel at or before the conclusion

of such pretrial proceedings to the district from

which it was transferred unless it shall have been

previously terminated: Provided, however, That

the panel may separate any claim, cross-claim,

counter-claim, or third-party claim and remand

any of such claims before the remainder of the

action is remanded.

(b) Such coordinated or consolidated pretrial

proceedings shall be conducted by a judge or

judges to whom such actions are assigned by the

judicial panel on multidistrict litigation. For this

purpose, upon request of the panel, a circuit judge

27

order of a tra nsfe r o r j u d g e . 

9
or a district judge may be designated and assigned

temporarily for service in the transferee district by

the Chief Justice of the United States or the chief

judge of the circuit, as may be required, in

accordance with the provisions of chapter 13 of

this title. With the consent of the transferee

district court, such actions may be assigned by the

panel to a judge or judges of such district. The

judge or judges to whom such actions are

assigned, the members of the judicial panel on

multidistrict litigation, and other circuit and

district judges designated when needed by the

panel may exercise the powers of a district judge

in any district for the purpose of conducting

pretrial depositions in such coordinated or

consolidated pretrial proceedings.

(c) Proceedings for the transfer of an action under

this section may be initiated by--

(i) the judicial panel on

multidistrict litigation upon its

own initiative, or

(ii) motion filed with the panel by

a party in any action in which

28
transfer for coordinated or

consolidated pretrial proceedings

under this section may be

appropriate. A copy of such

motion shall be filed in the

district court in which the moving

party's action is pending.

The panel shall give notice to the parties in all

actions in which transfers for coordinated or

consolidated pretria l pro c e edings are

contemplated, and such notice shall specify the

time and place of any hearing to determine

whether such transfershall be made. Orders of the

panel to set a hearing and other orders of the

panel issued prior to the order either directing or

denying transfer shall be filed in the office of the

clerk of the district court in which a transfer

hearing is to be or has been held. The panel's

order of transfer shall be based upon a record of

such hearing at which material evidence may be

offered by any party to an action pending in any

district that would be affected by the proceedings

under this section, and shall be supported by

findings of fact and conclusions of law based

upon such record. Orders of transfer and such

other orders as the panel may make thereafter

shall be filed in the office of the clerk of the

29
district court of the transferee district and shall be

effective when thus filed. The clerk of the

transferee district court shall forthwith transmit a

certified copy of the panel's order to transfer to

the clerk of the district court from which the

action is being transferred. An order denying

transfer shall be filed in each district wherein

there is a case pending in which the motion for

transfer has been made.

(d) The judicial panel on multidistrict litigation

shall consist of seven circuit and district judges

designated from time to time by the Chief Justice

of the United States, no two of whom shall be

from the same circuit. The concurrence of four

members shall be necessary to any action by the

panel.

(e) No proceedings for review of any order of the

panel may be permitted except by extraordinary

writ pursuant to the provisions of title 28, section

1651, United States Code. Petitions for an

extraordinary writ to review an order of the panel

to set a transfer hearing and other orders of the

panel issued prior to the order either directing or

denying transfer shall be filed only in the court of

appeals having jurisdiction over the district in

30
which a hearing is to be or has been held.

Petitions for an extraordinary writ to review an

order to transfer or orders subsequent to transfer

shall be filed only in the court of appeals having

jurisdiction over the transferee district. There

shall be no appeal or review of an order of the

panel denying a motion to transfer for

consolidated or coordinated proceedings.

(f) The panel may prescribe rules for the conduct

of its business not inconsistent with Acts of

Congress and the Federal Rules of Civil

Procedure.

(g) Nothing in this section shall apply to any

action in which the United States is a complainant

arising under the antitrust laws. “Antitrust laws”

as used herein include those acts referred to in the

Act of October 15, 1914, as amended (38 Stat.

730; 15 U.S.C. 12), and also include the Act of

June 19, 1936 (49 Stat. 1526; 15 U.S.C. 13, 13a,

and 13b) and the Act of September 26, 1914, as

added March 21, 1938 (52 Stat. 116, 117; 15

U.S.C. 56); but shall not include section 4A of the

Act of October 15, 1914, as added July 7, 1955

(69 Stat. 282; 15 U.S.C. 15a).

31
(h) Notwithstanding the provisions of section

1404 or subsection (f) of this section, the judicial

panel on multidistrict litigation may consolidate

and transfer with or without the consent of the

parties, for both pretrial purposes and for trial,

any action brought under section 4C of the

Clayton Act.

28 U.S.C. § 1407. 

32

Moreover, if Judge Fullam’s interpretation of the statute were

accurate, litigation could begin anew with each MDL transfer.

Section 1407 does allow the Joint Panel on Multidistrict

Litigation to “prescribe rules for the conduct of its business not

inconsistent with Acts of Congress and the Federal Rules of

Civil Procedure,” 28 U.S.C. § 1407(f), but there is nothing in

the rules adopted by the Joint Panel on Multidistrict Litigation

that authorizes a transferee judge to vacate or modify the order

of a transferor judge, see 199 F.R.D. 425 (2001). Moreover, we

do not believe that Congress intended that a “Return to Go”
33

card would be dealt to parties involved in MDL transfers.

Judge Fullam’s belief that he had the authority to vacate

or modify any order of a transferor court was based on two

sources, viz., the Manual for Complex Litigation (“MCL-4th”),

§ 20.132 (4th ed. 2004) and In re Upjohn Co. Antibiotic

Cleocin Prods. Liab. Litig., 644 F.2d 114 (6th Cir. 1981). The

MCL-4th, § 20.132 does state, inter alia, that: “The transferee

judge may vacate or modify any order of a transferor court,

including protective orders; unless altered, however, the

transferor court’s orders remain in effect.” However, that

clearly does not have the force of law and can not undermine

Supreme Court precedent or the decisions of this court. See

MCL-4th, Introduction (advising that the MCL-4th “is not, and

should not be cited as, authoritative legal or administrative

policy”). 

Interestingly, the cited provision in the MCL-4th stating
 The court in Upjohn, defined the issue before it as follows: 10

“The issue in this appeal is the extent to which a transferee

judge in multidistrict litigation proceedings under 28 U.S.C. §

1407 may vacate and modify protective orders earlier entered by

transferor courts, where those orders enjoin the use of discovery

materials obtained through the federal litigation by others not

parties to the multidistrict litigation.” 664 F.2d at 115. 

34

that the transferee court may vacate or modify any order of a

transferor court is based on In re Upjohn, supra. See MCL-4th,

§ 20.132 n.659. However, Upjohn only held that a transferee

court can modify a transferor court’s protective order when

necessary to “harmonize activity relating to discovery.” 664

F.2d at 118. Therefore, Upjohn only applies to protective

orders that are required to “harmonize . . . discovery.” Upjohn 10

does not carve an exception out of the law of the case doctrine

that gobbles up the limitations inherent in that doctrine. Thus,

Upjohn does not support a claim that a transferee court has the

power to vacate or modify any order of a transferor court. On
35

the contrary, the Upjohn court was very careful to limit the

reach of its discussion: 

[I]t cannot be successfully urged that a transferee

court is without power to modify or even vacate

a protective order once entered when

circumstances so dictate. Clearly, the power of a

district judge includes the power to modify a

protective order. . . .

**************

Therefore, if the judicial power to modify a

protective order exists, it must be capable of

being exercised on need, and in cases where the

proceedings have been transferred, it must follow

that such power must then pass to the transferee

judge. It cannot exist in a vacuum. This

conclusion is buttressed by the express language

in the statute conferring all powers of the district

judge upon the transferee judge.

Id. (emphasis added). Under Upjohn, the power of the

transferor court “pass[es] to the transferee judge.” Therefore,

if the transferor judge has the power to vacate or modify a

protective order when needed, commonsense compels the
36

conclusion that the transferee court must also have the power to

vacate or modify a protective order of a transferor court when

necessary and appropriate. Concomitantly, absentsuch need or

propriety (i.e., “extraordinary circumstances”), the transferee

court simply does not have the power to vacate or modify an

existing protective order.

Accordingly, if the transferor court is bound by the law

of the case doctrine (subject to the exceptions discussed above),

the transferee court must be similarly bound. Nothing in §

1407 suggests that Congress intended to confer more power on

the transferee court than the transferor court would have had

absent the transfer under 20 U.S.C. § 1407. 

Judge Fullam therefore interpreted Upjohn far too

liberally in stating: “As a general proposition, a transferee judge

under the Multidistrict statute may vacate or modify any order

of a transferor court bearing upon pretrial matters. 2006 WL
37

3759712, at *1 (citing In re Upjohn, supra; MCL-4th, §

20.312). On the contrary, given the havoc and potential delay

and confusion that such a broad proposition could visit on

parties involved in multidistrict litigation, it is not surprising

that the Upjohn court cautioned: “The rule of the law of the

case . . . is particularly applicable to multidistrict litigation in

which the presence of a large number of diverse parties might

otherwise result in constant relitigation of the same legal issue.”

664 F.2d at 119 (emphasis added).

III. CONCLUSION

Because Judge Fullam’s order vacating Judge Robreno’s

order compelling arbitration violated the law of the case

doctrine, we will vacate Judge Fullam’s order and remand with

directions to reinstate the order compelling arbitration and

staying this case pending arbitration.