Beeman v. ANTHEM PRESCRIPTION MANAGEMENT, LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JERRY BEEMAN AND PHARMACY 

SERVICES, INC., doing business as

Beemans Pharmacy; ANTHONY

HUTCHINSON AND ROCIDA INC, doing

business as Finleys Rexall Drug;

CHARLES MILLER, doing business as

Yucaipai Valley Pharmacy; JIM

MORISOLI AND AMERICAN SURGICAL

PHARMACY INC, doing business as

American Surgical Pharmacy; BILL

PEARSON AND PEARSON AND HOUSE,

on behalf of themselves and all

others similarly situated and on

behalf of the general public; doing No. 07-56692

business as Pearson Medical

Group Pharmacy,

 D.C. No.

CV-04-00407-VAP

Plaintiffs-Appellees,

v.

ANTHEM PRESCRIPTION

MANAGEMENT, LLC; ARGUS HEALTH

SYSTEMS, INC.; BENESCRIPT

SERVICES, INC.; FFI RX MANAGED

CARE; FIRST HEALTH SERVICES

CORPORATION; MANAGED PHARMACY

BENEFITS, INC., formerly known as

Cardinal Health MPB Inc.;

NATIONAL MEDICAL HEALTH CARD

SYSTEMS, INC.; PHARMACARE

MANAGEMENT SERVICES, INC.;



9723

9724 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

PRIME THERAPEUTICS; RESTAT 

CORPORATION; RX SOLUTIONS, INC.;

TMESYS, INC.; WHP HEALTH

INITIATIVES, INC.; MEDE AMERICA 

CORP.,

Defendants-Appellants.



JERRY BEEMAN AND PHARMACY 

SERVICES, INC., doing business as

Beemans Pharmacy; ANTHONY

HUTCHINSON AND ROCIDA INC, doing

business as Finleys Rexall Drug;

CHARLES MILLER, doing business as

Yucaipai Valley Pharmacy; JIM

MORISOLI AND AMERICAN SURGICAL

PHARMACY INC, doing business as

American Surgical Pharmacy; BILL

PEARSON AND PEARSON AND HOUSE,

No. 07-56693

on behalf of themselves and all

others similarly situated and on

behalf of the general public; doing

 D.C. No.

CV-02-01327-VAP

business as Pearson Medical OPINION

Group Pharmacy,

Plaintiffs-Appellees,

v.

TDI MANAGED CARE SERVICES,

INC., doing business as ECKERD

HEALTH SERVICES; MEDCO HEALTH

SOLUTIONS, INC.; EXPRESS SCRIPTS,

INC.; ADVANCE PCS, Advance PCS

Health, L.P.; RX SOLUTIONS, INC.,

Defendants-Appellants.



JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9725

Appeal from the United States District Court

for the Central District of California

Virginia A. Phillips, District Judge, Presiding

Argued and Submitted

March 8, 2011—Pasadena, California

Filed July 19, 2011

Before: Betty B. Fletcher, Stephen Reinhardt, and

Kim McLane Wardlaw, Circuit Judges.

Opinion by Judge B. Fletcher;

Dissent by Judge Wardlaw

9728 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

COUNSEL

Thomas M. Peterson (argued), Morgan Lewis & Bockius,

LLP, San Francisco, California, for the defendants-appellants.

Michael A. Bowse (argued), Browne Woods George LLP,

Los Angeles, California, for the plaintiffs-appellees.

OPINION

B. FLETCHER, Circuit Judge:

In this consolidated appeal, defendants-appellants (collec-

tively “Defendants”) appeal the denial by the district court of

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9729

their motions for judgment on the pleadings. Plaintiffs-

appellees (collectively “Plaintiffs”) brought this diversity suit

against Defendants to enforce California Civil Code §§ 2527

and 2528. These statutes require Defendants to supply the

results of bi-annual studies of California pharmacies’ retail

drug pricing for private uninsured customers to their clients,

who are third-party payors such as insurance companies and

self-insured employer groups. In their motions for judgment,

Defendants argued that California Civil Code § 2527 (herein-

after “§ 2527”) compels speech in violation of the United

States and California Constitutions. The district court denied

the motions, first reasoning that it was not bound by the state

appellate court decisions striking down the statute under the

California Constitution, and then holding that § 2527 does not

unconstitutionally compel speech. Defendants obtained per-

mission to file an interlocutory appeal. We accordingly have

jurisdiction under 28 U.S.C. § 1292(b).

In this appeal, we must decide (1) whether we are bound by

the Erie doctrine to follow the state appellate court decisions

striking down § 2527, and, if not, (2) whether § 2527 violates

the First Amendment or the California Constitution’s free

speech provision. We conclude that Erie does not require us

to follow the state appellate court decisions, and that § 2527

does not unconstitutionally compel speech under either the

United States or California Constitution. We therefore affirm.

I.

A. Factual Background

Plaintiffs own five independent retail pharmacies licensed

in California. Defendants are current or former pharmacy ben-

efit managers (“PBMs”). They “contract with third-party pay-

ors or health plan administrators such as insurers, HMOs,

governmental entities, and employer groups to facilitate cost-

effective delivery of prescription drugs to health plan mem-

bers or other persons to whom the third-party payors provide

9730 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

prescription drug benefits.” PBMs assist in the “processing of

prepaid or insured prescription drug benefit claims submitted

by a licensed California pharmacy or patron thereof.” In other

words, PBMs act as intermediaries between pharmacies and

third-party payors such as health insurance companies. Pursu-

ant to this role, PBMs may create networks of retail pharma-

cies that agree to accept certain reimbursement rates when

they fill prescriptions for health plan members. According to

Defendants, network reimbursements “generally are lower

than what pharmacies would charge uninsured, cash-paying

customers.”

Section 2527, the challenged statute, requires “prescription

drug claims processors”1 to conduct or obtain studies every 24

months identifying the fees California pharmacies charge to

private customers for pharmaceutical dispensing services. Cal.

Civ. Code § 2527(c).2 The claims processors must send the

1

Although Defendants maintain that they are not “prescription drug

claims processors” under the statute, the issue is not contested for pur-

poses of this appeal.

2

California Civil Code § 2527(c) reads:

On or before January 1, 1984, every prescription drug claims pro-

cessor shall have conducted or obtained the results of a study or

studies which identifies the fees, separate from ingredient costs,

of all, or of a statistically significant sample, of California phar-

macies, for pharmaceutical dispensing services to private con-

sumers. The study or studies shall meet reasonable professional

standards of the statistical profession. The determination of the

pharmacy’s fee made for purposes of the study or studies shall be

computed by reviewing a sample of the pharmacy’s usual charges

for a random or other representative sample of commonly pre-

scribed drug products, subtracting the average wholesale price of

drug ingredients, and averaging the resulting fees by dividing the

aggregate of the fees by the number of prescriptions reviewed. A

study report shall include a preface, an explanatory summary of

the results and findings including a comparison of the fees of

California pharmacies by setting forth the mean fee and standard

deviation, the range of fees and fee percentiles (10th, 20th, 30th,

40th, 50th, 60th, 70th, 80th, 90th). This study or these studies

shall be conducted or obtained no less of ten than every 24

months.

Cal. Civ. Code § 2527(c).

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9731

results of these studies to “each client for whom [they] per-

form[ ] claims processing services,” or, in other words, to

third party payors such as insurers. Id. § 2527(d).3 Section

2528 imposes civil penalties ranging from $1,000 to $10,000

for violations of § 2527. Cal. Civ. Code § 2528.

The legislative history of § 2527 reveals that the original

bill, introduced by the California Pharmacists Association in

1981, required pharmacies to be reimbursed according to their

“customary charges” rather than according to rates “unilater-

ally set by PBMs.” Beeman v. TDI Managed Care Services,

Inc., 449 F.3d 1035, 1038 (9th Cir. 2006) (“TDI Managed

Care”). The bill was then amended in committee to substitute

the reimbursement requirements with the current PBM report-

ing requirements. According to legislative staff comments, the

“purpose of this [amended] bill is to require claims processors

to present objective data on the range and percentiles of usual

and customary charges of pharmacists in the hope that at a

time in the future this information will become the basis for

reimbursement.” In recommending that the Governor sign the

bill, California’s Department of Insurance advised that § 2527

“is fairly innocuous in its impact, since it merely requires a

study to be made and distributed to clients, and does not

require any action to be taken on the basis of that study.” The

Department further noted that the statute could “help identify

areas for cost-containment in the future.”

3

California Civil Code § 2527(d) reads:

The study report or reports obtained pursuant to subdivision (c)

shall be transmitted by certified mail by each prescription drug

claims processor to the chief executive officer or designee, of

each client for whom it performs claims processing services.

Consistent with subdivision (c), the processor shall transmit the

study or studies to clients no less often than every 24 months.

Cal. Civ. Code § 2527(d).

9732 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

B. Procedural Background

In 2002, Plaintiffs filed a class action complaint in the Cen-

tral District of California (Beeman 02) alleging, inter alia,

that Defendants failed to conduct the fee studies mandated by

§ 2527(c). In 2004, Plaintiffs filed a second complaint (Bee-

man 04) alleging the same violation against a second group of

Defendants. Both cases were assigned to Judge Virginia Phil-

lips, but have not been consolidated. The district court has

diversity jurisdiction over both cases pursuant to 28 U.S.C.

§ 1332.4

The district court granted Defendants’ motions to dismiss

both cases, concluding that Plaintiffs lacked an injury-in-fact

sufficient to confer Article III standing. See TDI Managed

Care, 449 F.3d at 1038. The district court found it unneces-

sary to reach Defendants’ alternative grounds for seeking dis-

missal, including that § 2527 violated their right to free

speech under the United States and California Constitutions.

Plaintiffs appealed.

While the appeal of the district court’s standing decision

was pending in this court, three of the five Plaintiffs filed suit

against some but not all of the Beeman 02 and Beeman 04

Defendants in Los Angeles County Superior Court. Like the

federal actions, that suit alleged that Defendants failed to

comply with the requirements of § 2527. In Bradley v. First

Health Services Corp., No. B185672, 2007 WL 602969 (Cal.

4

In their Complaints, Plaintiffs allege violations of only state law.

Defendants aver that § 2527 violates the United States Constitution as an

affirmative defense to Plaintiffs’ allegations. Under the well-pleaded com-

plaint rule, therefore, there is no federal question jurisdiction, and the dis-

trict court’s jurisdiction is based solely on diversity of citizenship. See

Vaden v. Discover Bank, 129 S. Ct. 1262, 1272 (2009) (“Under the long-

standing well-pleaded complaint rule, however, a suit arises under federal

law only when the plaintiff’s statement of his own cause of action shows

that it is based upon federal law.” (internal citations, quotation marks, and

alternations omitted)).

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9733

Ct. App. Feb. 28, 2007), the California Court of Appeal

affirmed the state trial court’s dismissal of the suit, declaring

§ 2527 unconstitutional under article I, section 2 of the Cali-

fornia Constitution. The Supreme Court of California denied

review on June 13, 2007.

Meanwhile, in TDI Managed Care, 449 F.3d at 1040, we

overturned the district court’s standing decisions in Beeman

02 and Beeman 04 and remanded the case for further proceed-

ings. We did not reach Defendants’ argument that § 2527 is

unconstitutional because the issue was not fully argued before

the district court. Id.

On remand, the Defendants moved for judgment on the

pleadings in Beeman 02 and Beeman 04, arguing that § 2527

unconstitutionally compels speech in violation of both the

United States and California Constitutions. The Defendants

cited three California state appellate court decisions, including

Bradley, all of which held that § 2527 violates the California

Constitution’s free speech provision. The district court denied

the motions for judgment, reasoning that, under the Erie doc-

trine, it was not bound by the California appellate court deci-

sions because (1) the single published state court decision

relied entirely on interpretations of federal, not state, law; and

(2) there was persuasive evidence that the Supreme Court of

California would not follow the state appellate courts’ hold-

ing. The district court accordingly conducted its own constitu-

tional analysis and held that § 2527 does not compel speech

in violation of the First Amendment or the California Consti-

tution’s free speech provision. The district court then granted

Defendants’ requests to file a petition for interlocutory appeal.

Defendants in Beeman 02 and Beeman 04 successfully peti-

tioned this court for permission to appeal under 28 U.S.C.

§ 1292(b), and the cases were consolidated into the current

appeal.

Since this appeal was filed, the district court has granted in

part Defendants’ motions for summary judgment based on res

9734 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

judicata. The court held that the three Plaintiffs who brought

suit in Bradley are precluded by the final judgment in that

case from pursuing their overlapping claims in federal court.

The district court further held, however, that the Plaintiffs

who were not parties in that state court suit are not so pre-

cluded, and can continue to pursue their federal action. On

February 25, 2008, we stayed the district court proceedings

pending our decision in this appeal.

II.

“In an interlocutory appeal, we review de novo the district

court’s denial of a motion for judgment on the pleadings.”

Metrophones Telecomm., Inc. v. Global Crossing Telecomm.,

Inc., 423 F.3d 1056, 1063 (9th Cir. 2005). Here, we must

decide whether Defendants’ motions for judgment should

have been granted on the ground that § 2527 violates either

the United States or California Constitution.

A. Erie Doctrine

[1] We first determine whether, in exercising diversity

jurisdiction over this case, we are bound by the California

state appellate courts’ holdings that § 2527 is unconstitutional

under the California Constitution’s free speech provision. The

seminal case of Erie Railway Co. v. Tomkins, 304 U.S. 64,

71-80 (1938), held that federal courts exercising diversity

jurisdiction must apply as their rules of decision the substan-

tive law of the states. Generally, state law is determined by

statutes or by pronouncements from the state’s highest court.

See West v. American Telegraph & Telephone Co., 311 U.S.

223, 236-37 (1940); Vestar Dev. II, LLC v. General Dynamics

Corp., 249 F.3d 958, 960 (9th Cir. 2001). In cases where a

state supreme court has not addressed the presented issue of

state law, “a federal court is obligated to follow the decisions

of the state’s intermediate appellate courts” unless the court

finds “convincing evidence that the state’s supreme court

likely would not follow [them].” Ryman v. Sears, Roebuck

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9735

and Co., 505 F.3d 993, 994 (9th Cir. 2007) (internal quotation

marks and citations omitted). As the inquiry is one purely of

law, we determine de novo whether Erie requires us to follow

the reasoning of the state appellate courts on the issue of

§ 2527’s constitutionality.

Three California appellate court decisions have concluded

that § 2527 violates the free speech clause of the California

Constitution. The first of these decisions, ARP Pharmacy

Servs. Inc. v. Gallagher Bassett Servs., Inc., 42 Cal. Rptr. 3d

256 (Cal. Ct. App. 2006), is set forth in a published opinion.

The two subsequent decisions—A.A.M. Health Group, Inc. v.

Argus Health Systems, Inc., No. B183468, 2007 WL 602968

(Cal. Ct. App. Feb. 28, 2007) and Bradley—decided on the

same day, relied heavily on ARP and remain unpublished. All

three decisions came out of California’s second appellate dis-

trict; none of the state’s five other appellate districts has

opined on the issue.

The district court, in concluding that it was not bound by

the state appellate court holdings, considered only the ARP

decision. It declined to consider the two unpublished deci-

sions, citing California Rule of Court 977(a).5 Defendants cor-

rectly argue that we are not precluded from considering these

unpublished decisions as a possible reflection of California

law, although they have no precedential value. See Employers

Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1220

n.8 (9th Cir. 2003). Therefore, we consider all three Califor-

nia appellate court decisions in our analysis.

5

California Rule of Court 977(a) reads: “[Unpublished opinions] An

opinion of a Court of Appeal or an appellate department of the superior

court that is not certified for publication or ordered published shall not be

cited or relied on by a court or a party in any other action or proceeding

. . . .”

9736 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

1.

[2] First, the district court reasoned that it was not bound

by the state appellate court decisions because they “rest

entirely on interpretations of federal, not state law.” It is true

that ARP, the first state appellate court opinion on the issue

of § 2527’s constitutionality, “applied legal principles derived

exclusively from federal constitutional law.” The state court

decisions to which ARP cites either were similarly decided

under the federal Constitution or serve only as duplicate refer-

ences to analogous federal decisions. Nonetheless, the ulti-

mate conclusion reached in ARP is one of state law, not

federal law. See ARP, 42 Cal. Rptr. 3d at 267 (“We conclude

that the reporting requirement in section 2527 and the related

penalty and enforcement provisions in section 2528 violate

the free speech provision of the California Constitution.”). We

note that the state court did not apparently reach its conclu-

sion under the First Amendment and then simply extend it to

California’s free speech provision; its opinion purports to ana-

lyze the statute only under article I, section 2 of the California

Constitution. Accordingly, the current operative law in the

State of California’s second appellate district is that § 2527 is

unconstitutional under the California Constitution.

[3] No authority supports the premise that, when a state

court relies primarily on federal cases to reach a conclusion

under state law, its decision is exempt from Erie. Thus, the

state court’s exclusive reliance upon and application of fed-

eral case law does not automatically allow federal courts to

disregard its holding as the substantive law of the state. Pur-

suant to Erie, ARP’s holding as to § 2527’s constitutionality

under the California Constitution’s free speech provision is

the rule of decision that a federal court sitting in diversity

must apply (subject to the “convincing evidence” exception

discussed below).6

6

A.A.M. Health and Bradley rely heavily on ARP, in addition to federal

case law, in reaching the same conclusion. Like ARP, those decisions

interpret only California’s free speech provision, and not the First Amend-

ment.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9737

2.

[4] The district court alternatively reasoned that, even if

ARP’s holding was one under state law, “there is convincing

evidence that the Supreme Court of California” would not fol-

low them. We agree. We hold that there is convincing evi-

dence that, in assessing the constitutionality of § 2527, the

Supreme Court of California would construe article I, section

2 of the California Constitution as coextensive with the First

Amendment. Because, as we explain in Part B below, § 2527

does not violate the First Amendment, we believe that the

Supreme Court of California would deem § 2527 constitu-

tional under the state constitution as well. Accordingly, we

conclude that, in this case, the state supreme court would not

follow the holdings of the state appellate courts. Erie does

not, therefore, require us to apply ARP, A.A.M. Health, or

Bradley in deciding whether Defendants’ motions should

have been granted.

California courts generally “follow the United States

Supreme Court in matters concerning free speech doctrine . . .

unless persuasive reasons are presented for taking a different

course.” Gallo Cattle Co. v. Kawamura, 159 Cal. App. 4th

948, 959 (2008) (internal citations and quotation marks omit-

ted). California courts have identified and applied “four cate-

gories of potential sources of such persuasive reasons”:

(1) something “in the language or history of the Cali-

fornia provision suggests that the issue before us

should be resolved differently than under the federal

Constitution”; (2) “the high court ‘hands down a

decision which limits rights established by earlier

precedent in a manner inconsistent with the spirit of

the earlier opinion’ ”; (3) there are vigorous “dissent-

ing opinions [or] incisive academic criticism of those

decisions”; or (4) following the federal rule would

“overturn established California doctrine affording

greater rights.”

9738 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

Id. at 959 (quoting People v. Teresinski, 30 Cal. 3d 822, 836-

837 (Cal. 1982)); see Gerawan Farming, Inc. v. Lyons, 24

Cal. 4th 468, 510-12 (Cal. 2000) (applying these factors).

Considering these limited categories, we find no reason to

believe that the California Supreme Court would not, in

accordance with its general practice, decide the issue before

us by relying primarily, if not exclusively, on First Amend-

ment precedent. The California Supreme Court has interpreted

free speech protections under the California Constitution to be

“in some ways broader” than those under the First Amend-

ment. Kasky v. Nike, Inc., 27 Cal. 4th 939, 958-59 (Cal.

2002). No statutory language, authoritative decision, or Cali-

fornia legal doctrine, however, suggests that, to the extent that

California’s free speech provision can be broader than the

First Amendment, such additional breadth operates in the con-

text of compelled speech. Gerawan, a recent case in which the

California Supreme Court interpreted its Constitution more

expansively than the First Amendment, dealt only with the

narrow issue of compelled subsidies for commercial speech,

rather than compelled speech more broadly.7 As discussed

more fully below, cases dealing with commercial speech and

compelled subsidies are of little relevance here.8 Finally, there

7

Notably, Gerawan came down before United States v. United Foods,

Inc., 533 U.S. 405 (2001), another commercial speech subsidy decision by

the U.S. Supreme Court. United Foods approaches and distinguishes prior

compelled subsidy cases in a similar manner as does Gerawan. Therefore,

the distinction between the United States and California Constitutions,

even on the narrow subject of subsidies for commercial speech, probably

no longer exists after United Foods further clarified the scope of First

Amendment protection in this area.

8

ARP cites to Gerawan only in conjunction with federal precedent and

for the general proposition that, “like the First Amendment[ ],” the Cali-

fornia Constitution protects against compelled speech. Gerawan, 24 Cal.

4th at 491; ARP, 42 Cal. Rptr. 3d at 260. ARP does not suggest that Gera-

wan serves as independent state authority for its actual holding that § 2527

compels speech in a manner that infringes upon the California Constitu-

tion. In fact, ARP expressly distinguishes compelled subsidy cases and

concludes, as we do, that they are inapposite. See 42 Cal. Rptr. 3d at 262.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9739

has been no noteworthy criticism of the First Amendment

compelled speech jurisprudence on the basis of which the

California Supreme Court would choose to depart from those

cases. Thus, we find no persuasive basis on which to assume

that the Supreme Court of California would read the state’s

free speech provision differently or more expansively than the

First Amendment in the compelled speech context.

Indeed, none of the state appellate court decisions opining

on § 2527’s constitutionality even suggests that its holding

turns on a more expansive reading of California’s free speech

provision than of the First Amendment. Instead, these opin-

ions rely exclusively on federal First Amendment doctrine to

reach their conclusions. ARP mentions the U.S. Supreme

Court by name six times, and the key parts of its holdings are

expressly based on its purported adoption of federal prece-

dent. See, e.g., ARP, 138 Cal. App. 4th at 1314-15 (discussing

Johanns v. Livestock Marketing Ass’n, 544 U.S. 550 (2005)

and holding that “[u]nder this definition [of compelled

speech], section 2527, which requires drug claims processors

to obtain and transmit drug processing cost reports to [their]

clients, is properly classified as ‘true’ compelled speech”

(emphasis added)). A.A.M. Health is even more explicit on

this point. A.A.M. Health, 2007 WL 602968, at *3 (assuming

for purposes of analyzing FAIR that “the freedom of speech

in the federal and state constitutions are coextensive”).

Although the state appellate courts’ application of First

Amendment precedent was erroneous, those opinions none-

theless make clear that they are attempting to follow federal

law.

It is evident that the California Supreme Court, like the

state appellate courts, would analyze the issue of § 2527’s

constitutionality under article I, section 2 of the California

Constitution by following First Amendment doctrine. And

because, as discussed below, § 2527 is constitutional under

the First Amendment, we believe that the California Supreme

9740 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

Court would reach the same conclusion under its own consti-

tution.

Conversely, we conclude that the Supreme Court of Cali-

fornia would reject the holdings of ARP, A.A.M. Health, and

Bradley. Indeed, in analyzing and applying First Amendment

law, the state appellate courts committed several critical

errors. First, the ARP court ignored the Supreme Court’s most

recent case on compelled speech, Rumsfeld v. Forum for Aca-

demic and Institutional Rights, 547 U.S. 47 (2006) (“FAIR”),

in its discussion and application of federal law. Because FAIR

clarifies the line between compulsion of speech that does and

does not infringe upon the First Amendment, its analysis is

highly relevant and directly undermines the conclusion

reached in ARP. Second, the ARP court incorrectly interpreted

and applied the federal case law that it did cite. Specifically,

the opinion fails to recognize the key distinctions between the

speech at issue in this case and that in Riley v. National Fed-

eration of the Blind of North Carolina, 487 U.S. 781 (1988),a

decision on which ARP heavily relies. The compelled disclo-

sure in Riley had a direct chilling effect on protected First

Amendment speech, and it was on this basis that the disclo-

sure was struck down. No such chilling effect exists here.9

Citing ARP extensively, neither subsequent unpublished

state appellate court decision offers any significant analytic

support for its conclusion. Bradley relies almost exclusively

on ARP, and does little to fill the gaps in that opinion’s rea-

soning. A.A.M. Health, at least, acknowledges the Supreme

Court’s holding in FAIR. 2007 WL 602968, at *3. Nonethe-

less, A.A.M. Health fails to examine or appreciate FAIR’s sig-

nificance, simply concluding without analysis that it does not

apply because “section 2527 is not analogous to a law that

governs a course of conduct.” Id. This purported distinction,

9

The state court’s errors in applying federal law are more fully dis-

cussed in our First Amendment analysis in Part B, below.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9741

however, is based on an overly superficial reading of the

FAIR decision.

Thus, all three state appellate decisions are fatally flawed

in their analysis of federal precedent. These errors provide

further evidence that the Supreme Court of California would

not reach the same result. Cf. Briceno, 555 F.3d at 1080-82

(reasoning that the Supreme Court of California would not

adopt state appellate court decisions interpreting a provision

of the California Penal Code); Dimidowich v. Bell & Howell,

803 F.2d 1473, 1482-83 (9th Cir. 1986) (concluding that the

Supreme Court of California would not follow the decision of

an appellate court because its analysis was “flawed”); Owen

By and Through Owen v. United States, 713 F.2d 1461, 1465-

66 (9th Cir. 1983) (pointing out “defects” in a state appellate

court’s interpretations of a California statute governing settle-

ment agreements, and concluding that the California Supreme

Court would follow this circuit’s interpretation instead).

[5] We are convinced that the California Supreme Court

would, consistent with this opinion, rely primarily on (and

correctly apply) First Amendment jurisprudence when pre-

sented with the question of § 2527’s constitutionality under

the California Constitution. And because, as explained

below, the statute is constitutional under the First Amend-

ment, the California Supreme Court would not follow the

holdings of the state appellate courts, but rather would uphold

the statute’s constitutionality. Erie does not, therefore, require

us to apply to this case the state courts’ holding that § 2527

is unconstitutional under the California Constitution.10

10

Defendants and our dissenting colleague place great weight upon the

fact that, after the district court’s decision on the motions for judgment on

the pleadings, the Supreme Court of California denied Plaintiffs’ petition

for review of Bradley. According to Defendants, the Supreme Court of

California’s refusal to reject ARP, A.A.M. Health, and Bradley in favor of

the district court’s constitutional analysis is the best evidence that it would

not decide the constitutionality of § 2527 differently from the California

appellate courts.

9742 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

B. First Amendment

[6] As we are not bound under Erie to follow the state

appellate decisions, we now independently assess the consti-

tutionality of § 2527. Because the result under both the United

States and California Constitutions turns on First Amendment

law, we start our analysis there. It is a well-established princi-

ple that freedom of speech not only protects the right to speak,

but also “prohibits the government from telling people what

they must say.” FAIR, 547 U.S. at 61. “The right to speak and

the right to refrain from speaking are complementary compo-

nents of the broader concept of individual freedom of mind.”

Wooley v. Maynard, 430 U.S. 705, 714 (1977) (internal cita-

tion and quotation marks omitted). Here, Defendants argue

that § 2527’s requirements violate their First Amendment

right to be free from compelled speech.

1.

As a preliminary matter, we must decide whether Defen-

dants mount a facial or an as applied challenge to § 2527.

A state’s highest court’s refusal to grant discretionary review of a lower

court decision is not dispositive of whether it agrees with the lower court’s

holding. See Ryman, 505 F.3d at 995 n.2. Indeed, the Supreme Court of

California has instructed that its refusal to grant a hearing in a particular

case is not to be construed as an affirmative approval of an intermediate

appellate court opinion. See, e.g., In re K F Dairies, Inc. & Affiliates, 224

F.3d 922, 925 n.3 (9th Cir. 2000) (“The California Supreme Court’s denial

of our certification request is in no way an expression of its opinion on the

correctness of the judgments in those two cases.” (citing Trope v. Katz, 11

Cal. 4th 274, 287 n.1 (Cal. 1995)). Moreover, in Bradley, three of the

seven California Supreme Court Justices recused themselves from ruling

on the petition for review. Finally, the Supreme Court denied review in

Bradley after the district court in this case refused to follow the holdings

of the state appellate courts. Thus, in declining to review the decision in

Bradley, the Supreme Court declined not only to reverse the lower courts,

but also to affirm them in the face of a contrary federal holding. We there-

fore decline to give the Supreme Court of California’s refusal to hear

Bradley the significance for which Defendants advocate.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9743

Plaintiffs argue that Defendants’ argument is based on noth-

ing more than “the words of the statute,” and is therefore a

facial challenge. Defendants respond that, because they raise

the statute’s unconstitutionality in response to Plaintiffs’

attempts to enforce the statute against them, this is an as

applied challenge.

We conclude that this case presents a facial challenge. The

thrust of Defendants’ argument is that neither they nor any

other PBM should ever have to comply with § 2527’s direc-

tive because the statute itself unconstitutionally compels

speech. See Doe v. Reed, 130 S. Ct. 2811, 2817 (2010) (not-

ing that the presented challenge to Washington’s election law

was “ ‘facial’ in that it [was] not limited to plaintiffs’ particu-

lar case, but challeng[ed] the application of the law more

broadly to all referendum petitions”). Defendants challenge

neither the specific manner in which the statute applies to

them nor a particular instance of the statute’s application. See,

e.g., Reno v. Flores, 507 U.S. 292, 300 (1993) (noting that the

case involved a facial challenge because the respondents were

not challenging the regulation’s application in a particular

instance). Although they bring their challenge in response to

an enforcement action, Defendants are not alleging that the

statute is unconstitutional only as applied in the context of

Plaintiffs’ suit. Rather, if we were to find in Defendants’

favor, we would necessarily hold that § 2527 violates the First

Amendment whenever and against whomever it is enforced.

Thus, in order to succeed in their facial challenge to

§ 2527, Defendants must show that “no set of circumstances

exists under which the [statute] would be valid.” Reno, 507

U.S. at 301 (quoting United States v. Salerno, 481 U.S. 739,

745 (1987)) (internal quotation marks omitted). A facial chal-

lenge presents a “heavy” burden, and is the “most difficult

challenge to mount successfully.” Salerno, 481 U.S. at 745.

2.

Moving to the merits of Defendants’ argument, we evaluate

the speech compelled by § 2527 in order to determine whether

9744 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

it infringes on the First Amendment. The Supreme Court first

established the Constitution’s prohibition on compelled

speech in West Virginia Bd. of Education v. Barnette, 319

U.S. 624 (1943). There, the Court held unconstitutional a state

law compelling students to salute the flag and recite the

Pledge of Allegiance in schools. Id. at 642. The Court rea-

soned that “a ceremony so touching matters of opinion and

political attitude may [not] be imposed upon the individual by

official authority under powers committed to any political

organization under our Constitution.” Id. at 636. The Court

again opined on the issue of compelled speech in Wooley, 430

U.S. at 714-15. Striking down a New Hampshire law requir-

ing vehicles to bear license plates with the state motto “Live

Free or Die,” the Court reasoned that “a state measure which

forces an individual . . . to be an instrument for fostering pub-

lic adherence to an ideological point of view he finds unac-

ceptable” invades the sphere protected by the First

Amendment. Id. Even as broadly construed, therefore, the

holdings of both Barnette and Wooley are limited to com-

pelled speech that affects the content of the speaker’s message

by touching on matters of opinion, or to compulsions that

force the speaker to endorse a particular viewpoint.

In the wake of these seminal decisions, the Court has fur-

ther developed the doctrine of compelled speech in several

specific contexts. As relevant here, ARP and Defendants rely

heavily on Riley v. National Federation of the Blind of North

Carolina, 487 U.S. 781 (1988), to support their argument that,

although it compels only facts rather than an express opinion,

§ 2527 is subject to the highest First Amendment scrutiny. In

Riley, the Court struck down the North Carolina Charitable

Solicitations Act, which required professional fundraisers to

disclose to potential donors the gross percentage of revenues

retained in prior charitable solicitations. Id. at 784-801. As

was well-established in the Court’s precedent, charitable

solicitations “involve a variety of speech interests . . . that are

within the protection of the First Amendment.” Id. at 788.11

11

As the Supreme Court has held, “charitable appeals for funds . . .

involve a variety of speech interests — communication of information, the

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9745

The Court reasoned that the “predictable result” of the com-

pelled disclosure at issue would be to discourage fundraisers

from “engaging in solicitations that result in an unfavorable

disclosure.” Id. at 800. The Court therefore concluded that

this law was subject to “exacting First Amendment scrutiny”

and that its prophylactic rule applicable to all professional

solicitations was not “narrowly tailored” to the State’s interest

in full disclosure. Id. at 798-801. The Riley Court’s reasoning

was thus consistent with the Court’s earlier precedent apply-

ing strict First Amendment scrutiny to statutes regulating

charitable solicitations. See id. at 796.

[7] Notably, then, under Riley, compelled disclosures of

fact, like compelled matters of opinion, may infringe upon the

First Amendment. But the decision there turned on the

Court’s finding that the compelled disclosure at issue had a

direct and chilling effect on speech that was otherwise

cloaked in First Amendment protection—charitable solicita-

tions. Contrary to the Dissent’s analysis, Riley, in deciding to

apply First Amendment scrutiny to the compelled disclosures,

expressly reasons that Wooley and Barnette could not be dis-

tinguished on the grounds that they involved compelled opin-

ion as opposed to compelled fact, because “either form of

compulsion burdens protected speech.” Riley, 487 U.S. at

797-98 (emphasis added); see also id. at 798 (noting other

examples of compelled factual disclosures that would “clearly

and substantially burden protected speech”). The burden

placed on protected speech, therefore, is precisely why Riley’s

holding with respect to compelled facts is consistent with the

content-based compulsion of speech doctrine established by

dissemination and propagation of views and ideas, and the advocacy of

causes — that are within the protection of the First Amendment.” Schaum-

burg v. Citizens for a Better Environment, 444 U.S. 620, 632 (1980). Such

appeals are inextricably “intertwined with informative and perhaps persua-

sive speech seeking support for particular causes or for particular views

on economic, political, or social issues,” because “without solicitation the

flow of such information and advocacy would likely cease.” Id.

9746 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

Wooley and Barnette. By chilling protected speech, the com-

pelled disclosure “necessarily alter[ed] the content of the

speech.” Id. at 795. Thus, although it required only the disclo-

sure of factual information, the statute at issue in Riley none-

theless altered the speaker’s message and thereby constituted

a content-based regulation subject to “exacting” First Amend-

ment scrutiny.

Recently, the Court further clarified the line between

content-based compulsion of speech that infringes upon the

First Amendment (as in Barnette and Wooley), and that which

does not. In FAIR, 547 U.S. at 60-65, the Supreme Court

upheld against a First Amendment challenge the constitution-

ality of the Solomon Amendment, which withholds federal

funding from colleges and universities that deny equal access

to military and nonmilitary recruiters. FAIR recognizes that,

in providing recruiting assistance to the military pursuant to

the statute, schools may be compelled to provide “statements

of fact” in the form of notices or emails. Id. at 61-62. FAIR

recognized that compelled factual statements, like compelled

statements of opinion, may affect the content of the speaker’s

message and thereby trigger First Amendment scrutiny. Id. at

62 (citing Riley, 487 U.S. at 797-98). The Court, however,

declined to apply any such scrutiny, expressly distinguishing

the speech compelled by the Solomon Amendment from that

in Barnette and Wooley. Id. As the Court noted, the Solomon

Amendment does not “dictate the content of speech at all” and

does not involve a “Government-mandated pledge or motto

that the school must endorse.” Id. Its requirements, therefore,

did not warrant constitutional scrutiny.

[8] Consistent with Barnette, Wooley, and Riley, FAIR

makes clear that not all fact-based disclosure requirements are

subject to First Amendment scrutiny.12 Instead, such require-

12

We readily acknowledge, as both FAIR and our dissenting colleague

point out, that compelled disclosures are not immune from First Amend-

ment scrutiny merely because they involve facts rather than opinions. See

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9747

ments implicate the First Amendment only if they affect the

content of the message or speech by forcing the speaker to

endorse a particular viewpoint or by chilling or burdening a

message that the speaker would otherwise choose to make.

[9] We now apply this precedent to the statute at issue

here. Defendants argue that § 2527 constitutes a content-

based compulsion of speech because it forces PBMs to advo-

cate for pharmacies “in the hope that the insurance companies

will provide greater remuneration to [them].” This argument,

however, significantly mischaracterizes the nature of § 2527’s

requirement. The statute requires PBMs merely to conduct or

obtain the results of studies of the prices charged by pharma-

cies to their private customers and to report the objective data

revealed by these studies to the third-party health plan manag-

ers for whom they process claims. The “compelled speech” at

issue, therefore, is nothing more than the reporting of the

purely statistical facts that these studies yield. The statute

does not in any way regulate the content of the

speech—content is instead dictated solely by the results of the

studies themselves. See id. at 57 (noting that the Solomon

Amendment does not focus on the content of the school’s

recruiting policy, but only on results achieved by the policy).

[10] Like the speech in FAIR, the compelled speech here

does not in any way resemble the type of political messages

FAIR, 547 U.S. at 62. But FAIR makes clear that the inquiry requires an

additional step: whether a compelled factual disclosure requires First

Amendment scrutiny depends on whether it involves anything like the

“Government-mandated pledge or motto” at issue in Barnette and Wooley.

Id. The FAIR Court reasoned that “[c]ompelling a law school that sends

scheduling e-mails for other recruiters to send one for a military recruiter

is simply not the same as forcing a student to pledge allegiance, or forcing

a Jehovah’s Witness to display the motto ‘Live Free or Die,’ and it trivial-

izes the freedom protected in Barnette and Wooley to suggest that it is.”

Id. Our own precedent is entirely consistent with this point. See Envtl. Def.

Ctr., Inc. v. EPA, 344 F.3d 832, 848-51 (9th Cir. 2003).

9748 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

at issue in Barnette and Wooley. Nothing in the statutory

scheme forces the PBMs to advocate any position or “en-

dorse” any “pledge or motto” that is contrary to their beliefs.

See FAIR, 547 U.S. at 62. In fact, § 2527 does not require

Defendants to convey any “message” at all; Defendants are

not compelled to convey a viewpoint or perform any subjec-

tive analysis of the numbers they report.13 Instead, § 2527

requires only a purely objective, informational exercise, the

results of which PBMs must report to their clients.14

We note that Defendants’ and the state appellate courts’

repeated emphasis on the purpose for which § 2527 was

enacted—in hopes that the reported pricing information could

serve as the basis for future increases in pharmacy reimburse-

ments—is of limited significance. That the legislation was

motivated by political considerations does not mean that the

obligations that it places on the speaker are, in fact, political

or ideological in nature.15 Indeed, nearly every piece of pro-

13

The statute does require, in addition to the data, “a preface, an explan-

atory summary of the results and findings including a comparison of the

fees of California pharmacies by setting forth the mean fee and standard

deviation, the range of fees and fee percentiles (10th, 20th, 30th, 40th,

50th, 60th, 70th, 80th, 90th).” Cal. Civ. Code § 2527(c). This analysis,

however, is entirely objective, and does not carry with it a particular mes-

sage or viewpoint.

14

The Dissent argues that our “interpretation of the First Amendment

contradicts decades of Supreme Court precedent extending constitutional

protection to communications containing truthful information.” But this

assertion misapprehends our position. We agree, of course, that the gov-

ernment may not prohibit speakers from disseminating facts. The cases

that the Dissent cites all make this basic point. For the government to com-

pel factual speech, however, is quite different from its prohibiting factual

speech. This case deals only with the former. See Riley, 487 U.S. at 796

(noting that “[t]here is certainly some difference between compelled

speech and compelled silence” but recognizing that the difference has no

constitutional significance when protected expression is affected).

15

As was noted in ARP, the purpose of the enacted bill may have been

for the benefit not only of pharmacies, but also insurers and insured con-

sumers. See ARP, 42 Cal. Rptr. 3d at 265 (discussing the purpose of

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9749

posed and enacted legislation is generated by some sort of

political motive. Our inquiry, however, is limited to whether

the requirements contained within the enacted text infringe on

the First Amendment.16 We conclude that they do not.

Furthermore, in contrast to the factual reporting require-

ment in Riley, the pricing study results compelled by § 2527

in no way alter, chill, or otherwise affect a PBM message that

enjoys First Amendment protection. Whereas the law in Riley

threatened to interfere with core protected speech, by “ham-

per[ing] the legitimate efforts of professional fundraisers to

raise money for the charities they represent,” 487 U.S. at 799,

§ 2527 does not in any way burden a PBM’s ability to say

whatever it chooses about pharmacy reimbursements. Cf.

FAIR, 547 U.S. at 60 (noting that “[l]aw schools remain free

under the statute to express whatever views they may have on

the military’s congressionally mandated employment poli-

cy”). If, for example, a PBM wanted actively to engage in

lobbying efforts to directly discourage its clients from increas-

ing reimbursements to pharmacies, its simultaneous compli-

ance with § 2527 would in no way chill or impede this

message. Indeed, it is quite possible that the pricing survey

results could serve to enhance this or any other message

§ 2527 and noting that “if insurers paid the pharmacies dispensing fees

closer to the amount paid by uninsured consumers, pharmacies would be

more likely to continue to contract with insurers, and insured consumers

would be able to have their prescriptions filled at the pharmacies of their

choice”).

16

Indeed, most disclosure requirements, from nutritional facts on pack-

aged foods to the financial details of publicly traded companies, are

designed to remedy information asymmetries and potentially alter individ-

uals’ behavior as they become more well-informed market participants. As

long as those who are compelled to disclose are not required to endorse

the possible result of a better-informed market, just as the law schools in

FAIR were not required to “endorse” the military’s hiring policies, the fact

that legislators may desire the resulting behavior is irrelevant. In such

cases, the disclosing party is required only to provide the raw facts that

others may use to make their own decisions.

9750 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

related to pharmacy reimbursements; the content of the

reported data can be known only after the studies are actually

conducted. See TDI Managed Care, 449 F.3d at 1040 (noting

the mere possibility that the information will improve reim-

bursement rates in the future). Simply put, PBMs remain free,

in reporting survey results under § 2527, to assert any view-

point they would like. They may encourage action or inaction

on the basis of the statistics, or they may say that the report

is worthless, sent only under government mandate. Because

§ 2527 does not alter or burden speech otherwise protected

under the First Amendment, it is readily distinguishable from

the compelled factual disclosures in Riley. The state appellate

courts failed to appreciate this critical distinction.17

Defendants aver that the reasoning in FAIR is inapposite

because the Solomon Amendment primarily regulates con-

duct, rather than speech. It is true that, in distinguishing its

compelled speech precedent, the FAIR Court notes that “[t]he

compelled speech to which the [plaintiffs] point is plainly

incidental to the Solomon Amendment’s regulation of con-

duct.” 547 U.S. at 62. Nonetheless, FAIR analyzes whether

the Solomon Amendment’s compulsion of speech implicates

17

The Supreme Court’s recent decision in Sorrell v. IMS Health Inc.,

___ S.Ct. ___, 2011 WL 2472796 (2011), which struck down a Vermont

law that restricts health care-related entities’ dissemination of information,

offers little guidance in the compelled speech context. Recognizing, none-

theless, that the underlying inquiry in any First Amendment case is

whether the challenged regulation burdens protected speech, we note why

IMS Health is entirely consistent with our holding. In that case, because

the Vermont law restricted the ability of the regulated entities to dissemi-

nate and use the information for a particular purpose, the Court concluded

that the statute “imposed a burden based on the content of speech and the

identity of the speaker.” Id. at * 8. As a content-based restriction on

speech, therefore, the law in IMS Health placed a burden on protected

expression and therefore required heightened constitutional scrutiny. Id.

As discussed, § 2527 neither directly restricts nor results in the chilling of

protected speech, and accordingly places no such burden on any expres-

sion. The absence of any such burden is what saves § 2527 from the Ver-

mont law’s fate.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9751

the First Amendment by applying Wooley and Barnette, as a

court would in any compelled speech case. Id. Its observation

that the speech at issue was “incidental” to conduct, though

perhaps further supportive of its conclusion, was evidently not

dispositive as a matter of law.

Moreover, even if this part of FAIR’s reasoning was con-

trolling, it applies similarly to the statute here. The primary

prescription of § 2527 is conduct-based: it requires PBMs to

conduct, or obtain the results of, pharmacy pricing studies.

The statute also requires that the results of these studies, that

is, a document containing the results of the performed con-

duct, be transmitted to a third party. This “compelled speech,”

or the transmission of the study results, is not the main thrust

of the statute’s requirement—this speech is required only as

the method by which PBMs’ clients are to become informed

of the study mandated by the statute.18 Therefore, even if we

limit FAIR’s holding to statutes that primarily regulate con-

duct, it remains controlling as to § 2527.19

18

Notably, Defendants do not allege that § 2527 is unconstitutional

because it impermissibly regulates conduct.

19

Consistent with the cases cited by the Dissent, we readily agree that

the transmission of the pricing survey results constitutes speech. The

§ 2527-regulated conduct to which we refer, and that we believe is the

statute’s primarily regulatory effect, is the actual performance of the pric-

ing studies, as distinguished from the transmission of their results. We

fully accept that the transmission, even to the extent that it involves some

conduct, constitutes speech. We also recognize that the performance of

pricing surveys is not completely devoid of speech. Our point is simply

that the § 2527 is effectuated primarily through conduct rather than

through speech, just as, under FAIR, the Solomon Amendment’s equal

access requirement primarily regulates the schools’ conduct, even while

such conduct might inherently contain speech.

Moreover, the Dissent incorrectly asserts that to consider § 2527 “as

conduct-based . . . is akin to considering the laws in Wooley and Miami

Herald Publishing Co. v. Tornillo, 418 U.S. 241 (1974), as primarily regu-

lating conduct because they require the physical display of a license plate

and the tangible allocation of newspaper column inches.” In Wooley and

9752 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

[11] We hold that, under the applicable precedent, § 2527

does not offend the First Amendment by compelling speech

that affects the content of the speaker’s message. Therefore,

we need not apply to it any level of constitutional scrutiny.

See Envtl. Def. Ctr., Inc., v. EPA, 344 F.3d 832, 848-51 (9th

Cir. 2003) (upholding an EPA regulation requiring storm

sewer providers to distribute educational materials to the com-

munity about potential pollution, noting that this requirement

involved no “compelled recitation of a message” and no “af-

firmation of belief” and was therefore a non-ideological pub-

lic information mandate that did not impermissibly compel

speech or offend the First Amendment).20

3.

The parties debate several other theories under which

§ 2527 could raise First Amendment concerns and thereby

Tornillo, the compulsion of speech was the obvious, central purpose of the

laws in question. Any effect on conduct was simply a means to that end.

Here, by contrast, the PBMs’ transmission of survey results — the com-

pelled speech in question — is the means to the statute’s ultimate,

conduct-based end: the reduction of information costs in the prescription

drug market. The Dissent’s formalistic reasoning misses the point of

FAIR’s reasoning: the question is not whether speech is compelled at all,

but whether that compulsion is the law’s primary purpose or only “inci-

dental” to the conduct-based purpose. FAIR, 547 U.S. at 62.

20

Defendants argue that Environmental Defense Center and cases like

it are inapposite because the disclosure requirements at issue there were

part of a “comprehensive regulatory scheme.” This argument misses the

mark. In Environmental Defense Center, we did note that the disclosure

requirements at issue were “consistent with the overall regulatory program

of the Clean Water Act,” 344 F.3d at 851, but this observation was sepa-

rate from our First Amendment holding, which was explicitly based on our

conclusion that the regulation did not “compel endorsement of political or

ideological views” or impose “restraint on the freedom of any [regulated

entity] to communicate any message to any audience.” 344 F.3d at 850.

Environmental Defense Center, therefore, serves as applicable precedent,

and the district court correctly relied upon it.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9753

require constitutional scrutiny. We discuss briefly why each

theory is unavailing or inapplicable here.

a.

First, though they do not clearly raise the argument in their

briefs, Defendants refer to a line of cases that concern forced

accommodation of another’s speech. The First Amendment

limits the government’s power to force individuals to accom-

modate a third party’s message that would interfere with their

own expression of ideas. FAIR, 547 U.S. at 63. Rather than

looking at whether the challenger himself is being compelled

to speak, forced accommodation cases consider whether a

party is being made involuntarily to accommodate the expres-

sive speech of another.

Forced accommodation was first considered in Miami Her-

ald Publishing Co. v. Tornillo, 418 U.S. 241, 254-58 (1974).

There, the Court held that a statute that required newspapers

to print free of charge political candidates’ replies to critical

editorials violated the First Amendment because it forced

newspapers to disseminate certain views, thereby exacting “a

penalty on the basis of the content of a newspaper,” and

because it violated the newspaper’s right to determine the

content of the paper. Id. at 256-58; see also Pac. Gas & Elec

Co. v. Pub. Util. Comm’n of California, 475 U.S. 1, 9-18

(1986) (holding that a state utilities commission could not

require a utility company to include a third-party newsletter

in its billing envelope because the utility company had “the

right to be free from government restrictions that abridge its

own rights in order to ‘enhance the relative voice’ of its oppo-

nents” (internal citation omitted)); Hurley v. Irish-American

Gay, Lesbian and Bisexual Group of Boston, 515 U.S. 557,

566-70 (1995) (state law cannot require a parade to include a

group whose message the parade’s organizer does not wish to

send because parades are “a [protected] form of expression,

not just motion”).

9754 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

There is a considerable measure of overlap between the

forced accommodation cases and the compelled speech analy-

sis in Riley. Both focus on how the compulsion of speech or

the compelled accommodation of another’s speech effectively

chills or frustrates the speaker’s own ability to express his

views pursuant to his First Amendment rights. See FAIR, 547

U.S. at 63 (“The compelled-speech violation in each of our

prior [forced accommodation] cases . . . resulted from the fact

that the complaining speaker’s own message was affected by

the speech it was forced to accommodate.”).

[12] Here, Defendants argue that § 2527 requires them to

provide their clients with surveys that further the

“compensation-enhancing goals” of the pharmacies, which

are at odds with Defendants’ own desired message to their cli-

ents that they provide the most cost-effective administration

of any benefit program. Reports of pharmacy price surveys,

however, “lack the expressive quality of a parade, a newslet-

ter, or the editorial page of a newspaper,” and, more impor-

tantly, do not “sufficiently interfere with any message” of the

PBMs. FAIR, 547 U.S. at 64. Should the PBMs choose, they

could report the pricing survey results while simultaneously

or more vigorously advocating that their clients do nothing to

change their pharmacy reimbursement rates or offer only the

most cost-effective rates. In other words, § 2527 in no way

chills or hampers PBMs’ independent ability to speak their

views on the subject of pharmacy reimbursements, even if

these views are at direct odds with those of the pharmacies.

Moreover, even if the reporting of objective data could be

construed as advocacy for increases in pharmacy reimburse-

ments, insurance companies “can appreciate the difference

between” voluntary advocacy and statistical information that

Defendants must convey because they are “legally required to

do so.” Id. at 65. And as in FAIR, there is little chance that

the recipient of a report will mistakenly associate its contents

with the PBM that sends it, when that PBM can so easily dis-

sociate itself. Id.; see also PruneYard Shopping Center v.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9755

Robins, 447 U.S. 74, 87-88 (1980). Defendants’ forced

accommodation argument is therefore unavailing.

b.

Defendants also argue that the court should invalidate

§ 2527 under United States v. United Foods, Inc., 533 U.S.

405 (2001), in which the Supreme Court struck down a law

mandating that fresh mushroom handlers pay fees used to

fund advertisements promoting mushroom sales. Under

United Foods and its predecessors, the First Amendment pre-

vents the government in some instances from compelling indi-

viduals to pay subsidies for speech to which they object. 533

U.S. at 409-16; see also Keller v. State Bar of California, 496

U.S. 1 (1990); Abood v. Detroit Bd. of Educ., 431 U.S. 209

(1977). The line of cases deals only with compelled funding,

rather than compelled speech in the literal sense. See United

Foods, 533 U.S. at 417 (Stevens, J., concurring) (noting that

the regulation in United Foods was distinguishable from that

in Wooley and Barnette because it did not compel speech

itself, but rather the payment of money). United Foods rea-

sons that the mushroom producers, who were not voluntarily

collectivized, were being forced to fund the message to which

they were opposed—that any mushroom is worth consuming

regardless of its brand. 533 U.S. at 411. In striking down the

law, United Foods is careful to distinguish Glickman v. Wile-

man Bros. & Elliott, Inc., 521 U.S. 457 (1997)—a case that

upheld mandatory advertising contributions—noting that the

requirements at issue there were incidental to a “valid scheme

of economic regulation” in which “the producers were bound

together and required by the statute to market their products

according to cooperative rules” and had therefore already sur-

rendered many individual liberties to a collective entity. 533

U.S. at 412. In the case of the mushroom law, by contrast,

collective advertising was “the principal object of the regula-

tory scheme.” Id.

9756 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

[13] Here, Defendants challenge § 2527 for unconstitution-

ally compelling speech, not for compelling subsidies for com-

mercial speech. And unlike the regulations at issue in the

United Foods line of cases, § 2527 in no way requires Defen-

dants to subsidize a particular message, let alone one to which

they are principally opposed. While the reported data could,

at some point, serve as the basis for political lobbying efforts,

it does not inherently support one message or agenda over

another. Therefore, to the extent that Defendants are expend-

ing resources to comply with § 2527’s requirements, such

expenditures are not analogous to the subsidies at issue in

United Foods.21

c.

The parties devote some portion of their briefs to discuss-

ing whether the speech compelled under § 2527 constitutes

“commercial speech.” Compelled “commercial speech” cases

generally involve challenges to disclosure requirements

designed to prevent deceptive consumer advertising. See, e.g.,

Zauderer v. Office of Disciplinary Counsel of Supreme Court

of Ohio, 471 U.S. 626, 638 (1985) (“The States and the Fed-

eral Government are free to prevent the dissemination of com-

mercial speech that is false, deceptive, or misleading . . . .”);

see also United Foods, 533 U.S. at 406 (distinguishing

Zauderer because the regulation at issue was not “necessary

to make voluntary advertisements non-misleading for con-

sumers”). Accordingly, although these types of disclosure

requirements implicate the First Amendment by potentially

chilling the advertiser’s protected commercial speech,

Zauderer, 471 U.S. at 651, courts subject them to a lower

21

Notably, as a matter of state law, the ARP decision expressly distin-

guishes Johanns v. Livestock Marketing Ass’n, 544 U.S. 550 (2005), a

compelled subsidy case that followed United Foods, and holds that it is

inapposite because “the issue [before the court] is compelled speech by

drug processors, not compelled subsidy of government speech.” 42 Cal.

Rptr. 3d at 262.

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9757

form of constitutional scrutiny resembling rational basis

review. Milavetz, Gallop & Milavetz, P.A. v. United States,

130 S. Ct. 1324, 1339-40 (2010) (noting that the “required

disclosures [regarding debt relief assistance] are intended to

combat the problem of inherently misleading commercial

advertisements” and therefore applying Zauderer scrutiny);

Zauderer, 471 U.S. at 650-51 (disclosure requirements on

advertisers are lawful if “reasonably related to the state’s

interest in preventing deception of consumers”); see also

Pharmaceutical Care Mgmt. Ass’n v. Rowe, 429 F.3d 294,

316 (1st Cir. 2005) (financial disclosure requirements

imposed on PBMs were designed to protect against question-

able PBM business practices and, therefore, require only a

Zauderer level of scrutiny akin to rational basis review); Nat’l

Elec. Mfrs. Ass’n v. Sorrell, 272 F.3d 104, 113-16 (2d Cir.

2001) (because disclosure of “accurate, factual commercial

information presents little risk that the state is forcing speak-

ers to adopt disagreeable state-sanctioned positions” and fur-

thers the First Amendment protection of “the free flow of

accurate information,” it requires less exacting scrutiny).

Though the disclosures mandated by § 2527 are similar to

commercial disclosures in that they contain factual informa-

tion related to commerce, Defendants and ARP correctly rec-

ognize that the disclosures required by § 2527 do not

constitute commercial speech. ARP, 138 Cal. App. 4th at

1317. The Supreme Court has suggested that “commercial

speech” is not merely “on a commercial subject” or “[p]urely

factual matter of public interest.” Virginia State Bd. of Phar-

macy v. Virginia Citizens Consumer Council, Inc., 425 U.S.

748, 761-62 (1976). Rather, commercial speech is “expression

related solely to the economic interests of the speaker and its

audience.” Central Hudson Gas & Elec. Corp. v. Public Ser-

vice Commission of New York, 447 U.S. 557, 561 (1980). In

summarizing federal commercial speech jurisprudence, the

Supreme Court of California has noted that these cases gener-

ally involve “a speaker engaged in the sale or hire of products

or services conveying a message to a person or persons likely

9758 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

to want, and be willing to pay for, that product or service[,]”

that is, speech related to a commercial transaction. Kasky, 27

Cal. 4th at 960.

[14] Section 2527 neither aims to reduce deceptive adver-

tising to consumers nor compels disclosures in the context of

a commercial transaction. Therefore, its requirements do not

qualify as compelled “commercial speech” subject to a lower

form of scrutiny. This conclusion, however, is of little signifi-

cance in our analysis. Because the reporting requirements of

§ 2527 do nothing to compel or affect the content of any pro-

tected speech, commercial or otherwise, they are not subject

to any form of First Amendment scrutiny.

[15] Pursuant to the foregoing analysis, we conclude that

Defendants are not entitled to a judgment that § 2527 violates

the First Amendment.

C. Article I, section 2 of the California Constitution

Finally, we must decide whether Defendants’ motion

should have been granted on the ground that the statute vio-

lates article I, section 2—the free speech provision—of the

California Constitution. Because the California Supreme

Court has not decided this question or one analogous to it, we

must “predict how the highest state court would decide the

issue,” using any relevant material as guidance. Vestar Dev.,

249 F.3d at 960; see also West, 311 U.S. at 237; Air-Sea For-

warders, Inc. v. Air Asia Co., 880 F.2d 176, 186 (9th Cir.

1989) (the duty of the federal courts in a diversity case is to

“predict how the state high court would resolve” the issue

(internal citation and quotation marks omitted)).

[16] As we have held, the California Supreme Court would

construe the state free speech provision as being coextensive

with the First Amendment with respect to § 2527. Therefore,

in accordance with our First Amendment analysis, we believe

that California’s highest court would hold that § 2527 is con-

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9759

stitutional under the California Constitution’s free speech pro-

vision. We therefore hold the same.

We realize that, in so holding, we are creating a degree of

disparity between the federal and state courts that could tem-

porarily result in forum-shopping. Plaintiffs and others simi-

larly situated may now sue in federal court to enforce what we

have held to be a constitutional statute, while their ability to

do so in state court remains subject to question. This is the

unavoidable result of our faithful application of the “convinc-

ing evidence” standard under Erie.

As a practical matter, however, this concern is a minor one.

ARP, A.A.M. Health, and Bradley were all decided in Califor-

nia’s second appellate district. This is the only one of Califor-

nia’s six appellate districts in which an erroneous

interpretation of federal precedent on this issue operates as the

current law. The other districts are not bound by that position

and are free to resolve the question de novo. See 9 Witkin,

Cal. Proc. 5th, Appeal, § 498 (2008) (“A decision of a Court

of Appeal is not binding in the Courts of Appeal. One district

or division may refuse to follow a prior decision of a different

district or division . . . .”). We are confident that, in light of

this opinion, California courts will henceforth apply federal

precedent in the area of compelled speech as we have here,

thereby alleviating any forum-shopping incentives.

If the Supreme Court of California eventually considers

§ 2527 and decides to construe the California free speech pro-

vision more broadly than the First Amendment in this context,

then we will, of course, be bound by its decision. Our decision

today is based on our analysis of First Amendment compelled

speech precedent, or the body of law upon which every single

judge to have opined on § 2527’s constitutionality has relied.

The California Supreme Court may choose to depart from that

analysis; at this stage, however, we have no basis on which

to believe that it would. Thus, as we are currently charged

with predicting how the Supreme Court of California would

9760 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

decide, we must conclude that § 2527 is constitutional under

article I, section 2 of the California Constitution.

III.

[17] Because the statute that Plaintiffs seek to enforce is

constitutional under both the United States and California

Constitutions, the district court’s denial of Defendants’

motions for judgment on the pleadings is hereby

AFFIRMED.

WARDLAW, Circuit Judge, dissenting:

It has been more than seven decades since the Supreme

Court ended the “mischievous” regime of Swift v. Tyson, 41

U.S. 1 (1842), in which federal courts sitting in diversity dis-

regarded state court decisions and independently determined

the meaning of state law. Erie Railroad Co. v. Tompkins, 304

U.S. 64, 74 (1938). The Erie doctrine has long required fed-

eral courts to “follow the decisions of intermediate state

courts in the absence of convincing evidence that the highest

court of the state would decide differently.” Stoner v. New

York Life Ins. Co., 311 U.S. 464, 467 (1940); see also Ryman

v. Sears, Roebuck & Co., 505 F.3d 993, 994 (9th Cir. 2007).

Today the panel majority returns us to the era of Swift v.

Tyson, openly acknowledging that its opinion will lead to

forum shopping and the inconsistent enforcement of state law,

the very evils that the Erie Court sought to eradicate. See

Erie, 304 U.S. at 74-78.

The majority disregards not one but three intermediate Cal-

ifornia appellate decisions holding that California Civil Code

§ 2527 violates Article I, section 2 of the California Constitu-

tion. See ARP Pharmacy Servs., Inc. v. Gallagher Bassett

Servs., Inc., 42 Cal. Rptr. 3d 256 (Cal. Ct. App. 2006); A.A.M.

Health Group, Inc. v. Argus Health Sys., Inc., No. B183468,

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9761

2007 WL 602968 (Cal. Ct. App. Feb 28, 2007); Bradley v.

First Health Servs. Corp., No. B185672, 2007 WL 602969

(Cal. Ct. App. Feb 28, 2007). It does so not because of any

convincing evidence that the state high court would rule dif-

ferently, but because it has convinced itself that its interpreta-

tion of federal constitutional law is correct, that the three

panels of the Second District Court of Appeal got it wrong,

and that the California Supreme Court would side with the

views of two federal judges over the seven state appellate

judges and two state trial judges who have all ruled to the

contrary.

In point of fact, the California Supreme Court denied

review of the last of the appellate court decisions, leaving the

precedent intact. The failure to follow the intermediate state

courts violates the Erie doctrine and offends important princi-

ples of federalism and comity. Even worse, however, it is the

majority that fails to correctly apply First Amendment princi-

ples to fact-based expression, while endorsing unfettered gov-

ernment authority to compel “objective” speech. Not only am

I not convinced that the California Supreme Court would uti-

lize the majority’s flawed analysis of the federal right of free

speech to interpret the distinct, and more protective, state con-

stitutional right, I find it highly doubtful. Therefore, I respect-

fully dissent.

I.

We confront in § 2527 an unusual law without clear analo-

gies in existing precedent. The statute requires drug claims

processors to undertake or obtain studies about pharmacy

pricing, summarize the results, and transmit the material to

their clients. § 2527(c)-(d). Essentially, it requires Business A

to speak about Business B to Business C. Unlike a disclosure

law, it does not require that regulated entities divulge infor-

mation about themselves to the public, but rather that they pri-

vately produce information about third parties to their clients.

Cf. Zauderer v. Office of Disciplinary Counsel of Supreme

9762 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

Court of Ohio, 471 U.S. 626, 651 (1985). Moreover, § 2527

is a stand-alone law that does nothing more than mandate

speech. It is not ancillary to any comprehensive economic

regulatory scheme. Cf. United States v. United Foods, Inc.,

533 U.S. 405, 411-12 (2001).

As our free speech jurisprudence treats “[e]ach method of

communicating ideas [as] ‘a law unto itself,’ ” so must it

afford unique treatment to each different method of govern-

ment mandated communication of ideas. Metromedia, Inc. v.

City of San Diego, 453 U.S. 490, 501 (1981) (adding that the

“law must reflect the ‘differing natures, values, abuses and

dangers’ of each method”) (quoting Kovacs v. Cooper, 336

U.S. 77, 97 (1949)); Wooley v. Maynard, 430 U.S. 705, 714

(1977) (“The right to speak and the right to refrain from

speaking are complementary components of the broader con-

cept of ‘individual freedom of mind.’ ”) (quoting Bd. of Educ.

v. Barnette, 319 U.S. 624, 637 (1943)). The parties have not

identified any case that squarely controls the federal or state

constitutional analysis of this unique brand of government

mandated private speech about third parties.

The California Constitution provides that “[e]very person

may freely speak, write and publish his or her sentiments on

all subjects, being responsible for the abuse of this right. A

law may not restrain or abridge liberty of speech or press.”

Cal. Const. art. 1 § 2. This clause “enjoys existence and force

independent of the First Amendment” of the United States

Constitution. Gerawan Farming, Inc. v. Lyons, 12 P.3d 720,

734 (Cal. 2000). Indeed, “the California liberty of speech

clause is broader and more protective than the free speech

clause of the First Amendment.” Los Angeles Alliance for

Survival v. City of Los Angeles, 993 P.2d 334, 342 (Cal.

2000); see also Kasky v. Nike, Inc., 45 P.3d 243, 255 (Cal.

2002). Therefore, we should be especially hesitant to tell the

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9763

California courts how to apply their own Constitution to such

a unique and unprecedented state law mandating speech.1

II.

The majority identifies two “critical errors” in the Court of

Appeal panel decisions that it believes the California Supreme

Court would not make: giving insufficient weight to Rumsfeld

v. Forum for Academic and Institutional Rights, Inc., 547

U.S. 47 (2006) (“FAIR”), and misinterpreting Riley v.

National Federation of the Blind of North Carolina, Inc., 487

U.S. 781 (1988). However, the California Court of Appeal

panels reasonably interpreted both cases, and thus there is no

convincing reason to believe that the California Supreme

Court would rule differently.

In FAIR, the Court rejected a First Amendment challenge

to the Solomon Amendment, a statute restricting federal fund-

ing to universities that do not grant military recruiters compa-

rable access to other employers looking to hire at their law

schools. 547 U.S. at 52-53. The Court recognized that the “re-

cruiting assistance provided by the schools often includes ele-

ments of speech” as “schools may send e-mails or post notices

on bulletin boards on an employer’s behalf.” Id. at 61-62.

However, the Court concluded that this marginal compulsion

of speech did not violate the constitution. The majority analo-

gizes the pricing reports from § 2527 to the hypothetical e-

1

The case law relied on by the majority illustrates the dangers of disre-

garding state court decisions and imposing our own interpretations of legal

gray areas. The first case cited by the majority for the proposition that we

can refuse to follow intermediate state appellate decisions that make “ana-

lytical errors” is Briceno v. Scribner, 555 F.3d 1069 (9th Cir. 2009). There

a divided panel of our court declined to follow two California Court of

Appeal decisions interpreting a gang sentencing enhancement statute. Id.

at 1080-82. However, the California Supreme Court subsequently dis-

agreed with the Briceno majority, concluding that the Court of Appeal

panels did not erroneously interpret state law. People v. Albillar, 244 P.3d

1062, 1074-75 (Cal. 2010).

9764 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

mails and bulletin board postings in FAIR, and holds that

because of its factual nature, such compelled speech does not

give rise to First Amendment scrutiny. This dramatically

overstates the holding of FAIR, as the Supreme Court specifi-

cally acknowledged that “these compelled statements of fact

. . . are subject to First Amendment scrutiny.” Id. at 62.

The FAIR Court did not find a constitutional violation

because the particular factual statements at issue were both

hypothetical and ancillary to a comprehensive regulatory

regime. The Court determined that the e-mails and bulletin

board postings would only be “ ‘compelled’ if, and to the

extent, the school provides such speech for other recruiters,”

and that such compulsion would be “plainly incidental to the

Solomon Amendment’s regulation of conduct.” Id. That

stands in stark contrast to § 2527, where the compulsion is not

contingent on any voluntary conduct by the regulated party,

and where it is not ancillary to any comprehensive regulatory

scheme. Rather, § 2527 is a direct, stand-alone government

mandate of speech. Therefore, the Court of Appeal panels’

treatment of FAIR in this context was not erroneous, and it

does not provide convincing evidence that the California

Supreme Court would rule differently.2

2

The majority’s suggestion that § 2527 may primarily regulate conduct

because it requires the compiling and transmission of a document, is con-

trary to explicit Supreme Court precedent. See Bartnicki v. Vopper, 532

U.S. 514, 527 (2001) (“It is true that the delivery of a tape recording might

be regarded as conduct, but given that the purpose of such a delivery is

to provide the recipient with the text of recorded statements, it is like the

delivery of a handbill or a pamphlet, and as such, it is the kind of ‘speech’

that the First Amendment protects.”). All government compulsion of

speech requires some conduct incident to the expression. Labeling § 2527

as conduct-based on this ground is akin to considering the laws in Wooley

and Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241 (1974) as primar-

ily regulating conduct because they require the physical display of a

license plate and the tangible allocation of newspaper column inches. The

majority’s attempt to distinguish “the actual performance of the pricing

studies” from “the transmission of their results” is unavailing, as both “the

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9765

As for Riley, the Court of Appeal decisions relied on the

case for the proposition that § 2527 warrants constitutional

scrutiny even though it compels “essentially statistical infor-

mation.” ARP, 42 Cal. Rptr. 3d at 261. The majority argues

that Riley stands for the narrower proposition that mandated

factual speech only warrants scrutiny if the law has a direct

chilling effect on other protected First Amendment speech.

However, this confuses the initial inquiry into whether a regu-

lation even implicates the First Amendment with the separate

inquiry into whether it survives constitutional scrutiny.

The Riley Court first held quite broadly that “mandating

speech that a speaker would not otherwise make necessarily

alters the content of the speech. We therefore consider the Act

as a content-based regulation of speech.” 487 U.S. at 795. The

Court thus established that the compulsion of factual speech

triggered First Amendment analysis before even considering

whether the regulation burdened other protected expression.

Only then did the Riley Court proceed to discuss Wooley and

Barnette, and the broader question of whether the regulation

burdened other protected speech, as part of the separate and

subsequent inquiries into the precise level of scrutiny to apply

and whether the regulation was sufficiently tailored to fit the

state interest. Id. at 797-99.

In other words, the Riley Court held that the particular law

compelling speech failed exacting scrutiny because of its

creation and dissemination of information are speech within the meaning

of the First Amendment.” Sorrell v. IMS Health, 564 U.S. ___, Slip Op.

at 15, 2011 WL 2472796 at *12 (June 23, 2011); see also Brown v. Entm’t

Merch. Ass’n, 564 U.S.___, Slip Op. at 4 n.1, 2011 WL 2518809 at *4

(June 27, 2011) (“Whether government regulation applies to creating, dis-

tributing, or consuming speech makes no difference.”). Finally, the major-

ity asserts that § 2527’s compulsion of speech is merely ancillary to the

legislature’s ultimate goal of reducing information costs. However, the

majority contradicts itself, for elsewhere it correctly notes that the statute’s

purpose “is of limited significance.” What matters is the effect of the stat-

ute on speech, and just as in Wooley and Tornillo, the sole tangible direc-

tive of this regulation is the compulsion of speech.

9766 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

chilling effect; it did not hold that a chilling effect is a prereq-

uisite to any First Amendment scrutiny at all. The FAIR Court

made this clear when it cited Riley for the proposition that

“compelled statements of fact (‘The U.S. Army recruiter will

meet interested students in Room 123 at 11 a.m.’), like com-

pelled statements of opinion, are subject to First Amendment

scrutiny.” 547 U.S. at 62. The FAIR Court made no mention

of a chill requirement, and indeed it suggested that the poten-

tial compulsion of e-mails and bulletin board postings would

draw constitutional scrutiny despite the nature of the content.

Id.

In faulting the California courts for relying on Riley’s hold-

ing about factual speech, the majority makes the stunning

assertion that § 2527 is not subject to any First Amendment

scrutiny because it requires only the dissemination of “objec-

tive” data, and “Defendants are not compelled to convey a

viewpoint or perform any subjective analysis of the numbers

they report.” No authority is cited for the proposition that

compelled speech must contain subjective analysis or overt

opinion in order to implicate constitutional rights. Indeed, it

is well established that “the First Amendment’s proscription

of compelled speech does not turn on the ideological content

of the message that the speaker is being forced to carry. The

constitutional harm — and what the First Amendment prohib-

its — is being forced to speak rather than to remain silent.”

Axson-Flynn v. Johnson, 356 F.3d 1277, 1284 n.4 (10th Cir.

2004).

The majority’s narrow interpretation of the First Amend-

ment contradicts decades of Supreme Court precedent extend-

ing constitutional protection to communications containing

truthful information. For instance, the majority’s reasoning

fails to account for fact-based news reporting, which is con-

sidered protected speech under both the First Amendment and

the California Constitution. See, e.g., Lafayette Morehouse,

Inc. v. Chronicle Publ’g Co., 44 Cal. Rptr. 2d 46, 51 (Cal. Ct.

App. 1995) (explaining that it is a “faulty premise . . . that

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9767

news reporting activity cannot be characterized as ‘free

speech.’ In fact, courts have consistently described such activ-

ity as ‘free speech.’ ”) (citing Philadelphia Newspapers, Inc.

v. Hepps, 475 U.S. 767, 775-776 (1986), Joseph Burstyn, Inc.

v. Wilson, 343 U.S. 495, 501 (1952), and Daily Herald Co. v.

Munro, 838 F.2d 380, 384 (9th Cir. 1988)); see also Bartnicki

v. Vopper, 532 U.S. 514, 527 (2001) (“[S]tate action to punish

the publication of truthful information seldom can satisfy con-

stitutional standards.”) (quoting Smith v. Daily Mail Publ’g

Co., 443 U.S. 97, 102 (1979)). Moreover, the Supreme Court

has extended First Amendment protection to numerous forms

of speech that communicate nothing but factual information.

See, e.g., Linmark Associates, Inc. v. Willingboro Township,

431 U.S. 85, 96 (1977) (striking an ordinance prohibiting the

display of “For Sale” and “Sold” signs in front of houses);

Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer

Council, Inc., 425 U.S. 748, 770 (1976) (extending First

Amendment protection to the communication of product price

information).

Most recently, in Sorrell v. IMS Health, 564 U.S. ___, 2011

WL 2472796 (June 23, 2011), the Supreme Court applied

heightened First Amendment scrutiny to a Vermont statute

that restricts how certain entities can use medical prescription

information. The Court approvingly quoted the Second Cir-

cuit, which had held that the “First Amendment protects even

dry information, devoid of advocacy, political relevance, or

artistic expression.” IMS Health, Slip Op. at 14, 2011 WL

2472796 at *11 (quoting IMS Health Inc. v. Sorrell, 630 F.3d

263, 271-72 (2d Cir. 2010)). The Vermont law in IMS Health

is the flip side of California’s § 2527; they involve similar

speech that Vermont prohibits and California compels.

The majority asserts that the compulsion of factual speech

is “quite different from” the prohibition of such speech, but

in fact, “in the context of protected speech, the difference is

without constitutional significance, for the First Amendment

guarantees ‘freedom of speech,’ a term necessarily compris-

9768 JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT

ing the decision of both what to say and what not to say.”

Riley, 487 U.S. at 796. As the First Amendment protects the

“concomitant” rights to speak and refrain from speaking, it

follows that § 2527 does not avoid all constitutional scrutiny

merely because it mandates factual speech. Wooley, 405 U.S.

at 714. Facts, including statistics, convey messages. See IMS

Health, Slip Op. at 15, 2011 WL 2472796 at *12 (“Facts,

after all, are the beginning point for much of the speech that

is most essential to advance human knowledge and to conduct

human affairs.”). The record in this case clearly “suggests that

the governmental purpose in enacting section 2527 was to

urge third party payors, by the use of statistical information,

to compensate pharmacists at a fairer rate for providing phar-

maceutical services to their insureds.” ARP, 42 Cal. Rptr. 3d

at 265. The California Court of Appeal panels properly

applied the holding of Riley to this scenario in which the

Defendants complain that § 2527 compels them to dissemi-

nate a message with which they disagree. Nothing about these

decisions provides convincing evidence that the California

Supreme Court would decide the question differently.

III.

“[W]here there is no convincing evidence that the state

supreme court would decide differently, a federal court is

obligated to follow the decisions of the state’s intermediate

appellate courts.” Vestar Dev. II, LLC v. Gen. Dynamics

Corp., 249 F.3d 958, 960 (9th Cir. 2001). “This is especially

true when the Supreme Court has refused to review the lower

court’s decision.” See State Farm Fire & Cas. Co. v. Abraio,

874 F.2d 619, 621 (9th Cir. 1989). The majority gives insuffi-

cient weight to the California Supreme Court’s denial of

review here, relying on an inapposite citation about the mean-

ing of the denial of a certification request from this court. See

In re K F Dairies, Inc. & Affiliates, 224 F.3d 922, 925 n.3

(9th Cir. 2000). Here, in the context of the Erie doctrine,

denial of review by a state high court is an appropriate and

JERRY BEEMAN v. ANTHEM PRESCRIPTION MANAGEMENT 9769

important factor to consider. See Tenneco West, Inc. v. Mara-

thon Oil Co., 756 F.2d 769, 771 (9th Cir. 1985).

The district court issued its ruling in this case on May 15,

2007, after the three California Court of Appeal panels had

rendered their judgments that § 2527 violates the state consti-

tution. However, in opting not to afford Erie deference to

those judgments, the district court did not have the benefit of

the California Supreme Court’s decision to deny review of

Bradley, which occurred on June 13, 2007. See Bradley, 2007

Cal. LEXIS 6365. The panel majority is at no such disadvan-

tage, but it still substitutes its own analysis for that of every

state court to consider this matter.3

Two important “aims of the Erie rule [are] discouragement

of forum-shopping and avoidance of inequitable administra-

tion of the laws.” Kohlrautz v. Oilmen Participation Corp.,

441 F.3d 827, 831 (9th Cir. 2006) (quoting Gasperini v. Cen-

ter for Humanities, Inc., 518 U.S. 415, 428 (1996)). As the

majority acknowledges, its opinion will encourage forum

shopping by creating a disparity in the administration of Cali-

fornia law. The proffered justification for this unfortunate

result is that the three California Court of Appeal panels made

critical analytical errors in holding that § 2527 violates the

state constitution, but in fact they properly interpreted the rel-

evant state and federal law, and there is no convincing evi-

dence that the California Supreme Court would rule

differently. As this is a classic case requiring deference to

state court judgments about a state law matter, I would

reverse the decision of the district court.

3

That the California Supreme Court denied review in Bradley, leaving

state precedent intact in the face of a contrary federal district court hold-

ing, only further indicates that the intermediate state appellate courts cor-

rectly applied state law, and certainly does not count as convincing

evidence that the California Supreme Court would uphold the statute.