United HealthCare Services v. Merck & Co.
United HealthCare Services, Inc. v. Merck & Co., Inc., et al.; Cardinal Health, Inc., et al.
- David Doty
- 0:20-cv-01909
- U.S. District Court · District of Minnesota
- 11
In United HealthCare Services, Inc. v. Merck & Co., Inc., et al., Judge Doty denied Cardinal Health's motion to dismiss Merck's third-party indemnification complaint but stayed the entire case against Cardinal, sending two claims to a private arbitrator under the parties' distribution agreement and two claims to a retired federal judge designated in a prior settlement agreement.
Pharmaceutical manufacturers, wholesale drug distributors, and other parties who have entered into settlement agreements or distribution agreements containing arbitration clauses or forum-selection provisions designating private dispute resolvers; also relevant to health insurers pursuing antitrust claims related to branded drug pricing.
What happened
United HealthCare Services, Inc. v. Merck & Co., Inc. is an antitrust case in which UHS, a large health insurer, alleges that Merck illegally delayed competition for its cholesterol drugs Zetia and Vytorin by entering into an anticompetitive settlement with a generic drug maker. Cardinal Health, a wholesale drug distributor, had previously assigned its own claims against Merck to UHS and was also a party to two separate contracts with Merck: a 2006 settlement agreement (the Zetia Settlement Agreement) and a 2012 authorized distributorship agreement (the MAD Agreement). Merck later filed a third-party complaint — a claim brought against a new party in an existing lawsuit — arguing that Cardinal is obligated under both contracts to reimburse Merck (indemnify it) for any money Merck owes to UHS.
Cardinal moved to dismiss the third-party complaint entirely, or alternatively to pause (stay) the case and send the disputes to the special tribunals called for in each contract. The Zetia Settlement Agreement directs disputes over interpretation of the contract to retired federal Judge Layn R. Phillips, with appeals handled by the Eastern District of Virginia. The MAD Agreement requires that any dispute about the contract be resolved through mandatory, binding private arbitration under the American Arbitration Association's rules in Philadelphia. Merck opposed the stay, arguing that a prior court ruling during earlier multi-district litigation (consolidated pretrial proceedings in federal court) made the MAD Agreement's arbitration clause unenforceable, and that Cardinal could not invoke the Zetia Settlement Agreement's procedures because it had not first tried to mediate the dispute.
Judge Doty denied the motion to dismiss but granted the motion to stay all proceedings in this court on the third-party complaint. The court found that the indemnification question under the MAD Agreement is a contractual matter — separate from the antitrust merits that the earlier multi-district court had refused to send to arbitration — and falls squarely within the MAD Agreement's broad arbitration clause; moreover, because the MAD Agreement incorporates American Arbitration Association rules, even the question of whether the dispute is arbitrable belongs to the arbitrator, not the court. As for the Zetia Settlement Agreement, Judge Doty concluded that disputes over how to interpret the indemnification provision belong to Judge Phillips under the broad language of that agreement, and that the question of whether Cardinal first had to pursue separate mediation is itself an interpretive question for Judge Phillips to resolve. The case against Cardinal is now paused while counts one and three proceed before Judge Phillips (and any appeals) and counts two and four proceed in arbitration.
The detailed version
- United HealthCare Services, Inc. v. Merck & Co., Inc., et al.; Cardinal Health, Inc., et al., Civil No. 20-1909
- David S. Doty, United States District Judge
- December 1, 2025
Procedural Posture This is an antitrust action originally filed in September 2020. UHS, a centralized prescription drug payor for its subsidiaries and affiliates, alleges that Merck & Co. and Glenmark Pharmaceuticals entered into an anticompetitive 'pay-for-delay' settlement (the Zetia Settlement Agreement) in violation of the Sherman Act (15 U.S.C. § 1), the Clayton Act (15 U.S.C. § 2), the Minnesota Antitrust Law (Minn. Stat. §§ 325D.49, 325D.52), and various other states' antitrust and consumer protection laws, as well as unjust enrichment. The case was transferred to the Eastern District of Virginia for consolidated multi-district litigation (MDL No. 2836) and remanded to the District of Minnesota on December 23, 2023. UHS filed its operative amended complaint on May 17, 2024.
On March 24, 2025, Merck filed a third-party complaint against Cardinal Health, Inc., Cardinal Health 110, LLC, and Cardinal Health 112, LLC (collectively, Cardinal), asserting two indemnification theories: (1) under the Zetia Settlement Agreement, for any liability on UHS's federal antitrust claims (counts one and three); and (2) under the MAD Agreement, for any liability on UHS's indirect purchaser state law claims (counts two and four).
Cardinal moved to dismiss the third-party complaint or, alternatively, to stay proceedings pending resolution before the contractually designated tribunals.
The Two Contracts at Issue
Zetia Settlement Agreement (2006): Cardinal was a direct purchaser of Zetia and Vytorin and a party to this agreement. Cardinal agreed to indemnify Merck for liabilities arising out of claims Cardinal had assigned to UHS. The agreement directs that disputes over its interpretation be mediated on an expedited basis and decided in the first instance by retired federal Judge Layn R. Phillips, with jurisdiction for enforcement and appeals vested in the Eastern District of Virginia.
MAD Agreement (2012): Merck authorized Cardinal as a direct purchaser of Zetia and Vytorin for resale. Cardinal agreed to indemnify Merck for certain liabilities relating to resale (indirect purchaser claims). The agreement contains a broad mandatory, binding arbitration clause covering 'any controversy, claim or dispute' arising out of or related to the agreement's performance, construction, or interpretation — including disputes about the scope and applicability of the arbitration clause itself — to be conducted under American Arbitration Association (AAA) rules in Philadelphia, Pennsylvania, pursuant to the Federal Arbitration Act (FAA).
Analysis
MAD Agreement — Arbitration: The court applied the Eighth Circuit's two-part test for compelling arbitration under the FAA: (1) existence of a valid arbitration agreement, and (2) whether the dispute falls within it. See Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir. 2004). Finding the arbitration provision's validity uncontested, the court held the indemnification question falls within the broad scope of the MAD Agreement's arbitration clause. Additionally, under Fallo v. High-Tech Institute, 559 F.3d 874, 878 (8th Cir. 2009), incorporation of AAA rules constitutes clear and unmistakable delegation of arbitrability questions to the arbitrator. Accordingly, both the merits and any threshold arbitrability questions go to the arbitrator.
The court rejected Merck's argument that the MDL court's prior ruling rendered the MAD Agreement's arbitration clause wholly unenforceable. The MDL court had declined to compel arbitration on the merits of the federal antitrust claims. Here, the arbitration concerns the contractual indemnification obligation for indirect purchaser state law claims — a separate and distinct contractual, not antitrust, question.
Zetia Settlement Agreement — Judge Phillips: The court found that Cardinal's dispute over the meaning of the contractual indemnification provision in the Zetia Settlement Agreement falls within the agreement's broad language directing 'any' interpretation disputes to Judge Phillips in the first instance. The court further held that Merck's estoppel argument — that Cardinal had not pursued prior mediation — is itself an interpretive question appropriately directed to Judge Phillips. The court noted in passing that because Judge Phillips himself mediated the Zetia litigation, it would be anomalous to require mediation before a third party prior to his involvement.
Stay vs. Dismissal: Citing Smith v. Spizzirri, 601 U.S. 472, 478 (2024), the court declined to consider dismissal as an alternative to a stay, consistent with the Supreme Court's directive that courts must stay rather than dismiss actions when valid arbitration agreements are involved.
Holding The motion to dismiss is DENIED. The motion to stay is GRANTED. Litigation on the third-party complaint is stayed pending: (1) resolution by Judge Phillips (and any subsequent appeal) on counts one and three (Zetia Settlement Agreement indemnification); and (2) arbitration on counts two and four (MAD Agreement indemnification).
Reviewer note from the AI+
Read the full 11-page opinion on CourtListener, the free public archive maintained by the Free Law Project.