Walgreens Denounces $987 Arbitration Award as ‘Egregious’

AM Editorial Team

Walgreens, the retail pharmacy giant, has filed a lawsuit in the U.S. District Court for the District of Delaware to strike down an arbitration award of nearly $1 billion for telemedicine provider PWNHealth in a contract dispute between the companies. PWNHealth, which does business as Everly Health Solutions, separately asked the judge to affirm the arbitration award. Walgreens argued that the $987 million award was 12 times above the maximum of $79 million in damages allowed under the contract between the two companies. It would be the largest-ever under the federal Lanham Act, a false advertising law that protects trademarks, the company said.

The arbitration was initiated in 2022 by Everly, claiming that Walgreens broke the terms of a 2020 COVID-era business contract. Walgreens was using Everly’s physician network to order COVID-19 tests that customers asked for on Walgreens’ website, according to its court filings. It said the relationship deteriorated after it started using its own in-house pharmacist to order tests.

Everly said Walgreens on its website continued to display PWN’s trademark and also displayed that tests would be sent to PWN and its network, despite “diverting tests from the agreed workflow.” Everly called the award by David Brodsky of the American Arbitration Association “presumptively valid” and said there was no reason to overturn it.

Walgreens, which denied breaching its agreement with Everly, said in a statement that the arbitrator “clearly exceeded his authority by ignoring the liability cap in the contract.” In its filings, Walgreens said there was no “willfulness” in its “inadvertent failure to remove PWN’s name and mark from its website for a short time after it began in-sourcing.”

The cases are Walgreen Co v. PWNHealth, U.S. District Court for the District of Delaware, 1:24-cv-00356; and PWNHealth v. Walgreen Co, U.S. District Court for the District of Delaware, No. 1:24-cv-00357.

Walgreens is represented by Reed Brodsky of Gibson, Dunn & Crutcher, while PWN is represented by Shawn Rabin of Susman Godfrey and William M. Lafferty of Morris, Nichols, Arsht & Tunnell.

In summary, Walgreens is challenging the nearly $1 billion arbitration award over the alleged breach of a COVID-era business contract with telemedicine provider PWNHealth. Walgreens has argued that the award was “egregious and improper” and exceeded the liability cap in the contract. Meanwhile, PWNHealth has asked the judge to affirm the arbitration award, claiming that Walgreens broke the terms of the contract and diverted tests from the agreed workflow.