Walgreens to appeal $988M ruling in Covid test disputeWalgreens to appeal $988M ruling in Covid test dispute

Walgreens said it plans to appeal the decision issued by a Delaware court this week that upheld a previous arbitration ruling against the company totaling $988 million.

The ruling stems from a disagreement with Everly Health Solutions related to Covid testing services. In 2022, Everly initiated arbitration with the American Arbitration Association alleging that its contract with Walgreens to provide the services was exclusive, and that Walgreen violated that exclusivity when it took certain services in-house, Walgreens said in filings with the Securities and Exchange Commission.

Last year, the arbitrator said Walgreens must pay Everly $988 million, including interest. Walgreens petitioned a federal court in Delaware to vacate the award in part because the contract limits damages to $79 million, Walgreens said. 

In a filing on Tuesday with the SEC, Walgreens said it is evaluating its legal rights and options to challenge both the award and the amount of damages on appeal to the United States Court of Appeals for the Third Circuit. The appeals process “would likely take two years or more to complete,” the company said.

In a statement to Supermarket News, a spokesperson for Everly Health said it was pleased with the Delaware court’s “well-reasoned” decision, “which resulted from a thorough, multi-year arbitration process.”

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Another setback for Walgreens

The latest ruling is yet another in a series of setbacks for Walgreens, including a civil suit that the U.S. Department of Justice filed against the company last month alleging the illegal dispensing of opioids and other medications.

The company is also in the midst of a sweeping campaign to shutter 1,200 store locations and rethink its retail operations. Last month Walgreens also took the extraordinary step of cancelling its stock dividend to reallocate cash toward its restructuring efforts. According to a Bloomberg report on Thursday, Walgreens is working with Perella Weinberg Partners and AlixPartners to help in its operational challenges and to improve its balance sheet.

As a part of its efforts to remake itself, Walgreens is continuing to pursue the divestiture of its stake in Village Medical, the clinic operator that operates VillageMD clinics in Walgreens stores and other locations. According to the Bloomberg report, Village Medical is working with Evercore and Alvarez & Marsal as it explores a potential sale or restructuring of its business.

In their own words: “We are very disappointed”

“We are very disappointed that the court declined to set aside an arbitration award that clearly far exceeded the contractual cap on damages—and also, importantly, the arbitrator’s authority. We vigorously intend to seek review of this decision on appeal.” — Fraser Engerman, senior director, media relations and issues management, Walgreens.

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