A federal judge has ruled Walgreens can’t use a standard arbitration clause to end class action litigation from members of its customer rewards program, because the judge said the company waited too long to attempt that strategy.
U.S District Judge Mary Rowland issued an opinion Jan. 10 in favor of named plaintiff Yasmine Acosta-Aguayo regarding purchases made through the Walgreens smartphone application and using the myWalgreens customer rewards program.
“When customers register in a brick-and-mortar store, they are prompted to agree to the myWalgreens terms and conditions by touching an ‘I agree’ button at the point of sale,” Rowland wrote. “Customers registering online through the Walgreens app must create a Walgreens.com account and then create or link a myWalgreens account by providing their phone number and ZIP code.”
According to the complaint, in November 2020 the retail pharmacy giant invited members of its old Balance Rewards program to migrate their information to the new myWalgreens. Rowland said that process required customers to click an “I Agree” button affirming acceptance of the myWalgreens terms, which contained a specific arbitration provision.
Rowland said Acosta-Aguayo joined the litigation in April 2022 as part of a first amended complaint from initial named plaintiff Tam Dang, who since has been voluntarily dismissed as a plaintiff. When Walgreens moved to dismiss the amended complaint, in May 2022, it did so “lodging similar substantive arguments as its first motion to dismiss,” she wrote.
After further litigation, Rowland partially granted Walgreens’ motion to dismiss in March 2023, but did not kill claims for unjust enrichment and pursuit of financial damages under various state consumer protection laws. She ordered Walgreens to answer the remaining claims. When it did so, on March 23, 2023, it “raised, for the first time, arbitration as an affirmative defense.”
Acosta-Aguayo doesn’t dispute the validity and enforceability of Walgreens’ arbitration agreement, Rowland wrote, but maintains the company waived its right to invoke the clause to bring her case out of the courtroom.
Rowland said the act of filing a motion to dismiss does not conclusively waive the right to arbitration, but that motion “is not irrelevant to the analysis” because a motion that seeks dismissal on substantive grounds does give evidence of such a waiver.
Walgreens argued it could not have known Acosta-Aguayo was a myWalgreens member until it had an additional piece of identifying information, which it only obtained in June 2023. However, Rowland noted that Acosta-Aguayo said, in an April 2022 filing, that she used the Walgreens’ app to make the purchase that lay at the root of the complaint, and Walgreens could’ve tried using her app account to determine her myRewards status.
“A party has the obligation to discover and assert its right to arbitration,” Rowland wrote. “This is especially true when the party has the information in its own custody and control. Walgreens could have sent the interrogatory requests earlier in an effort to discover its right to arbitration — there was no stay of discovery until Aug. 2, 2023. If Walgreens did not want to engage in fulsome discovery, it could have engaged in limited discovery, for the sole purpose of discovering whether (Acosta-Aguayo) was in fact a myWalgreens member.”
However, the company instead challenged Acosta-Aguayo’s complaints on its merits and obtained a decision. Choosing to then pursue arbitration on the remaining claims, Rowland said, would constitute forum shopping, when it is “well established that a litigant cannot attempt to prevail in court and then seek arbitration as a second resort.”
Acosta-Aguayo is represented by attorney Russell Busch, of the Chicago office of Milberg Coleman Bryson Phillips Grossman.
Walgreens’ external relations department said it would not make a statement on the ruling.
Walgreens was represented by attorneys Timothy J. Storino, Leah R. Bruno, Emily C. Eggmann, Deborah H. Renner and Sara Gates, of the firm of Dentons US LLP, of Chicago and New York.