Opinion
CASE NO. 2:05-cv-293-MEF (WO).
March 12, 2009
MEMORANDUM OPINION AND ORDER
This cause is before the Court on Defendants' Motion for Summary Judgment (Doc. # 117) filed on May 5, 2008. Also before the Court is Plaintiffs' Motion for Summary Judgment (Doc. #120) filed on May 5, 2008, Plaintiffs' Motion to Strike (Doc. #132) filed on May 27, 2008, and Defendants' Motion to Strike (Doc. #136) filed on June 3, 2008. Named Plaintiffs are two pharmacies that have brought breach of contract claims against Defendants TDI Managed Care Services, Inc. ("TDI") and Eckerd Health Services ("EHS"). Plaintiffs allege that Defendants failed to properly reimburse pharmacies for the drugs they dispensed to patients in accordance with the terms of their contract. In their respective motions, both parties argue that they are entitled to summary judgment based on the unambiguous language of the contract. For the reasons stated below, this Court finds that Defendants' Motion for Summary Judgment is due to be DENIED and Plaintiffs' Motion for Summary Judgment is due to be DENIED.
I. FACTS AND PROCEDURAL HISTORY
The two defendants named in this action are a single entity owned by J.C. Penney, Inc. and known during the early 1990s as TDI. In 1994, J.C. Penney acquired Eckerd Drugs, Inc., and "Eckerd Health Services" became the trade name under which TDI conducted business. This Court will, therefore, refer to Defendants collectively as EHS.EHS is a pharmacy benefits manager ("PBM") that contracts with insurers, managed care organizations, and employers to administer their prescription benefit plans. As part of its administration duties, EHS contracts with chain and independent pharmacies ("network pharmacies") to dispense prescription drugs to people covered by the plans that EHS administers ("end users"). When an end user goes to a network pharmacy to fill a prescription, the pharmacy submits a request for approval to dispense the prescription and obtain reimbursement from EHS; this request is known as a "claim." Such claims are transmitted to EHS instantaneously and electronically. When EHS approves a claim, it transmits back to the pharmacy the total reimbursement amount, which includes the amount to be paid by EHS and the amount to be paid by the end user, for that prescription.
EHS calculates the amount it will pay the pharmacy for the prescription using the Average Wholesale Price ("AWP"). EHS typically reimburses brand drug prescriptions based on a percentage discount from AWP for each brand drug prescription filled by the pharmacy. EHS used a standard form contract, called the Pharmacy Network Agreement ("the Agreement"), to contract with its network pharmacies. The Agreement defined "AWP" as "the current average wholesale price of a Covered Drug listed in First Databank's Bluebook or other nationally recognized price source designated by [EHS]." Every brand drug has a unique AWP that is made available through certain drug database publishers. Because AWP values fluctuate, PBMs receive periodic updates for each brand drug's AWP from these publishers.
EHS received AWP updates from the drug database publisher Medi-Span. Medi-Span offers AWP update services on a daily, weekly, or monthly basis. The weekly publication Medi-Span offers is the Master Drug Database ("MDDB"). Medi-Span's daily update service is the Daily Drug Update. Daily Drug Update would yield the shortest amount of time between a change in AWP and when a PBM's database would reflect the new AWP. MDDB would have a longer lag time in updating a PBM's AWP. Until October 28, 2003, EHS received weekly AWP updates from MDDB. After October 28, 2003, EHS switched to Daily Drug Update.
During the class period, EHS contracted with approximately 10,000 pharmacies throughout the United States. Plaintiff Eufaula Drugs owns and operates a retail pharmacy in Eufaula, Alabama and entered into a contract with EHS to be a network pharmacy. Plaintiff Scott-Cook owns and operates a retail pharmacy in Dothan, Alabama and entered into a contract with EHS to be a network pharmacy.
Plaintiffs filed this action in the Circuit Court of Barbour County on February 14, 2005. Defendants filed a Notice of Removal in this Court on March 30, 2005. Finding that it had subject matter jurisdiction, this Court denied Plaintiffs' Motion to Remand on April 14, 2006. On June 25, 2008, the Court granted Plaintiffs' class certification.
II. JURISDICTION AND VENUE
This Court has subject matter jurisdiction over this action pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d) ("CAFA"). See Eufaula Drugs, Inc. v. TDI Managed Care Servs., Inc., No. 05-cv-293 (M.D. Ala. Dec. 14, 2005) (holding that this action "commenced" after the effective date of CAFA); id. (Apr. 14, 2006) (holding that $5,000,000 amount in controversy requirement under CAFA was satisfied); see also Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 455 F. Supp. 2d 1317 (M.D. Ala. 2005) (Fuller, C.J.) (holding CAFA applied to class action filed under nearly identical factual circumstances).
The parties do not contest venue, and the Court finds an adequate factual basis for venue in this Court.
III. SUMMARY JUDGMENT STANDARD
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party asking for summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323. The movant can meet this burden by presenting evidence showing there is no dispute of material fact, or by showing the non-moving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322-23.
Once the moving party has met its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324. To avoid summary judgment, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). On the other hand, a court ruling on a motion for summary judgment must believe the evidence of the non-movant and must draw all justifiable inferences from the evidence in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). After the nonmoving party has responded to the motion for summary judgment, the court must grant summary judgment if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).
IV. DISCUSSION
A. Breach of contract
i. Pennsylvania contract lawFederal courts sitting in diversity case must apply the choice of law rules of the forum state. See Klaxon Co. v. Stentor Elc. Mfg. Co., 313 U.S. 487, 496 (1941); Clanton v. Inter.Net Global, 435 F.3d 1319, 1323 (11th Cir. 2006). Alabama courts generally respect choice of law provisions in contracts and apply the chosen law to substantive issues. See Stovall v. Universal Constr. Co., 893 So. 2d 1324, 1326 (Ala. 2004); see also Blalock v. Perfect Subscription Co., 458 F. Supp. 123, 126-7 (S.D. Ala. 1978). The Agreement specifies that it is to be interpreted using the law of Pennsylvania. Therefore, Alabama's choice of law rules dictate that this Court apply the substantive law of Pennsylvania when interpreting the Agreement.
To establish a breach of contract under Pennsylvania law, a party must show (1) existence of a contract, (2) breach of a duty imposed by the contract, and (3) damages resulting from that breach. CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053 (Pa.Super. 1999). If a contract contains unambiguous terms, then a court interprets those terms as a matter of law. See Cmty. Coll. of Beaver County v. Cmty. Coll. of Beaver County, Soc'y of the Faculty, 375 A.2d 1267, 1275 (Pa. 1977); Lapio v. Robbins, 729 A.2d 1229, 1232 (Pa.Super. 1999). To prevail on summary judgment, a party must prove that the contract's language is clear and unambiguous. White v. Keystone Ins. Co., 775 A.2d 812 (Pa.Super. 2001).
If a contract contains terms subject to different yet reasonable interpretations, then a court may consider industry custom or usage to explain their meaning. See Resolution Trust Corp. v. Urban Redev. Auth., 638 A.2d 972, 975 (Pa. 1994) (explaining that the parol evidence rule does not apply in its ordinary strictness where the existence of industry custom explains the meaning of words). Even without ambiguity, evidence of industry custom or trade usage is always admissible and relevant to demonstrate that the words used in a commercial contract have a specialized meaning in the trade or industry. Sunbeam Corp. v. Liberty Mut. Ins. Co., 781 A.2d 1189, 1193 (Pa. 2001).
ii. "Nationally recognized price source"
Plaintiffs claim that EHS's use of weekly AWP updates through MDDB breached the Agreement, which defined AWP as "the current average wholesale price of a Covered Drug listed in First Databank's Bluebook or other nationally recognized price source designated by [EHS]." (emphasis added.) The parties differ on their interpretation of a "nationally recognized price source." Plaintiffs contend that EHS designated publisher Medi-Span as its price source and that the Agreement required EHS to use the most frequent AWP updates available from Medi-Span, the Daily Drug Update. In contrast, EHS argues that it designated the publication MDDB as its "nationally recognized price source" and that the Agreement, therefore, did not require it to use Daily Drug Update.
EHS has submitted scant affidavit and deposition testimony that MDDB and Daily Drug Update are "nationally recognized price sources." In addition, EHS has not submitted any evidence that MDDB and Daily Drug Update are separate and distinct "nationally recognized price sources." Indeed, Plaintiff argues that the testimony submitted supports the conclusion that Medi-Span is the "nationally recognized price source" and MDDB and Daily Drug Update are merely two of Medi-Span's products. The Court finds conflicting facts in the record on the meaning of "nationally recognized price source" and a lack of evidence that industry custom explains its meaning. Therefore, the Court finds there is a genuine issue of material fact on whether EHS breached the Agreement with Plaintiffs and that neither party is entitled to judgment as a matter of law.
B. Damages
Under Pennsylvania law, a party cannot prevail on a breach of contract claim unless that party can show that they suffered damages as a result of that breach. See CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053 (Pa.Super. 1999); Logan v. Mirror Printing Co. of Altoona, 600 A.2d 225, 227 (Pa.Super. 1991).
Plaintiffs allege that network pharmacies have lost approximately $16.1 million in reimbursements that they would have received if EHS had used Daily Drug Update. EHS argues that Plaintiffs did not suffer any damages and were actually overpaid by EHS. In light of the conflicting estimates in the record, the Court finds that the evidence is sufficient to create a triable issue on Plaintiffs' damages.
C. Motions to Strike
All of the motions to strike presently before this Court are due to be DENIED AS MOOT due to the fact that whether or not any of the evidence at issue was stricken would not alter this Court's ruling.
V. CONCLUSION
For the reasons stated above, it is hereby ORDERED that:
(1) Defendants' Motion for Summary Judgment (Doc. # 117) is DENIED;
(2) Plaintiffs' Motion for Summary Judgment (Doc. #120) is DENIED;
(3) Plaintiffs' Motion to Strike (Doc. #132) is DENIED as moot;
(4) Defendants' Motion to Strike (Doc. #136) is DENIED as moot.
A copy of this checklist is available at the website for the USCA, 11th Circuit at www.ca11.uscourts.gov Effective on April 9, 2006, the new fee to file an appeal will increase from $255.00 to $455.00. CIVIL APPEALS JURISDICTION CHECKLIST1. Appealable Orders : Appeals from final orders pursuant to 28 U.S.C. § 1291: 28 U.S.C. § 158Pitney Bowes, Inc. v. Mestre 701 F.2d 1365 1368 28 U.S.C. § 636 In cases involving multiple parties or multiple claims, 54Williams v. Bishop 732 F.2d 885 885-86 Budinich v. Becton Dickinson Co. 486 U.S. 196 201 108 S.Ct. 1717 1721-22 100 L.Ed.2d 178LaChance v. Duffy's Draft House, Inc. 146 F.3d 832 837 Appeals pursuant to 28 U.S.C. § 1292(a): Appeals pursuant to 28 U.S.C. § 1292(b) and Fed.R.App.P. 5: 28 U.S.C. § 1292 Appeals pursuant to judicially created exceptions to the finality rule: Cohen v. Beneficial Indus. Loan Corp. 337 U.S. 541 546 93 L.Ed. 1528Atlantic Fed. Sav. Loan Ass'n v. Blythe Eastman Paine Webber, Inc. 890 F.2d 371 376 Gillespie v. United States Steel Corp. 379 U.S. 148 157 85 S.Ct. 308 312 13 L.Ed.2d 199 2. Time for Filing Rinaldo v. Corbett 256 F.3d 1276 1278 4 Fed.R.App.P. 4(a)(1): 3 THE NOTICE MUST BE RECEIVED AND FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF THE APPEAL PERIOD — no additional days are provided for mailing. Fed.R.App.P. 4(a)(3): Fed.R.App.P. 4(a)(4): Fed.R.App.P. 4(a)(5) and 4(a)(6): Fed.R.App.P. 4(c): 28 U.S.C. § 1746 3. Format of the notice of appeal : See also 3pro se 4. Effect of a notice of appeal : 4
Courts of Appeals have jurisdiction conferred and strictly limited by statute: (a) Only final orders and judgments of district courts, or final orders of bankruptcy courts which have been appealed to and fully resolved by a district court under , generally are appealable. A final decision is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." , , (11th Cir. 1983). A magistrate judge's report and recommendation is not final and appealable until judgment thereon is entered by a district court judge. (c). (b) a judgment as to fewer than all parties or all claims is not a final, appealable decision unless the district court has certified the judgment for immediate review under Fed.R.Civ.P. (b). , , (11th Cir. 1984). A judg ment which resolves all issues except matters, such as attorneys' fees and costs, that are collateral to the merits, is immediately appealable. , , , , , (1988); , , (11th Cir. 1998). (c) Appeals are permitted from orders "granting, continuing, modifying, refusing or dissolving injunctions or refusing to dissolve or modify injunctions . . ." and from "[i]nterlocutory decrees . . . determining the rights and liabilities of parties to admiralty cases in which appeals from final decrees are allowed." Interlocutory appeals from orders denying temporary restraining orders are not permitted. (d) The certification specified in (b) must be obtained before a petition for permission to appeal is filed in the Court of Appeals. The district court's denial of a motion for certification is not itself appealable. (e) Limited exceptions are discussed in cases including, but not limited to: , , , 69S.Ct. 1221, 1225-26, (1949); , , (11th Cir. 1989); , , , , , (1964). Rev.: 4/04 : The timely filing of a notice of appeal is mandatory and jurisdictional. , , (11th Cir. 2001). In civil cases, Fed.R.App.P. (a) and (c) set the following time limits: (a) A notice of appeal in compliance with the requirements set forth in Fed.R.App.P. must be filed in the district court within 30 days after the entry of the order or judgment appealed from. However, if the United States or an officer or agency thereof is a party, the notice of appeal must be filed in the district court within 60 days after such entry. Special filing provisions for inmates are discussed below. (b) "If one party timely files a notice of appeal, any other party may file a notice of appeal within 14 days after the date when the first notice was filed, or within the time otherwise prescribed by this Rule 4(a), whichever period ends later." (c) If any party makes a timely motion in the district court under the Federal Rules of Civil Procedure of a type specified in this rule, the time for appeal for all parties runs from the date of entry of the order disposing of the last such timely filed motion. (d) Under certain limited circumstances, the district court may extend the time to file a notice of appeal. Under Rule 4(a)(5), the time may be extended if a motion for an extension is filed within 30 days after expiration of the time otherwise provided to file a notice of appeal, upon a showing of excusable neglect or good cause. Under Rule 4(a)(6), the time may be extended if the district court finds upon motion that a party did not timely receive notice of the entry of the judgment or order, and that no party would be prejudiced by an extension. (e) If an inmate confined to an institution files a notice of appeal in either a civil case or a criminal case, the notice of appeal is timely if it is deposited in the institution's internal mail system on or before the last day for filing. Timely filing may be shown by a declaration in compliance with or a notarized statement, either of which must set forth the date of deposit and state that first-class postage has been prepaid. Form 1, Appendix of Forms to the Federal Rules of Appellate Procedure, is a suitable format. Fed.R.App.P. (c). A notice of appeal must be signed by the appellant. A district court loses jurisdiction (authority) to act after the filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule on a timely motion of the type specified in Fed.R.App.P. (a)(4).