Opinion
03 CV 5164 (RLC).
December 13, 2006
Eric S. Jackson, Robins, Kaplan, Miller Ciresi, L.L.P., Washington, DC.
Frances F. Makris, Robins, Kaplan, Miller Ciresi, L.L.P., Washington, DC.
Peter Neil Wang, Friedman, Wang Bleiberg, P.C., New York, NY.
Robert Allen Scher, Friedman, Wang Bleiberg P.C., New York, NY.
Thomas J. Poulin, Robins, Kaplan, Miller Ciresi, L.L.P., Washington, DC.
W. Scott Simmer, Robins, Kaplan, Miller Ciresi, L.L.P., Washington, DC.
Eric Tunis, Edwards Angell, LLP (NJ), Short Hills, NJ.
OPINION
Background
Plaintiffs Healthfirst Inc., Managed Health, Inc., Healthfirst PHSP, Inc. and HF Administrative Services Inc. (collectively, "Healthfirst") alleges that defendants Medco Health Solutions, Inc., Systemed, L.L.C., Merck-Medco Rx Services of Massachusetts, L.L.C., and Paid Prescriptions, L.L.C. (collectively, "Medco") breached an Integrated Prescription Drug Program Agreement (the "IPDPA") that the parties entered into as of February 1, 1999. Under the agreement, Medco was to provide Prescription Drug Benefit Management ("PBM") services to Healthfirst. Healthfirst, which is a non-profit, provider-owned healthcare management and delivery system, entered into the IPDPA to contain costs and achieve savings by providing drug benefits through a managerial care prescription program run by Medco. This action arises out of a dispute over what fees, if any, are owed to Medco by Healthfirst for its services under the IPDPA. Also at issue, is whether Medco has improperly withheld any rebates or other savings owed to Healthfirst under the IPDPA.
The IPDPA was amended twice; once in February 1999 to address certain compliances issues; and subsequently in January 2001 Healthfirst and Medco entered a Second Amendment to the IPDPA, which set forth additional and amended terms governing Pricing and Formulary Customer Service and Early Termination.
Healthfirst claims that on July 16, 2002, representatives from Healthfirst and Medco met to discuss Medco's performance under the IPDPA and whether the terms of the IPDPA would be extended. At the July 16th meeting, Medco asserted that Healthfirst owed Medco for "savings" purportedly achieved under the IPDPA. Healthfirst had previously been billed a seventy-three (0.73¢) cents dispensing fee between January 1, 2001 and December 31, 2001 and Medco was demanding that Healthfirst pay an additional one dollar and twenty-seven cents ($1.27) for each prescription that was dispensed.
Thereafter, on July 31, 2002, Healthfirst sent a letter to Medco about its billing practices and specifically requested that Medco provide detailed billing information, including cost and savings breakdowns, and savings methodologies. Medco refused to provide this information to Healthfirst purportedly because doing so would violate the confidentiality provisions in their contracts with pharmaceutical companies.
On December 3, 2002, according to Healthfirst, Medco advised plaintiffs that they could seek an audit by a "Big Four Accounting Firm." As a result of Medco's alleged conduct and failure to provide the information Healthfirst had requested, on December 16, 2002, Healthfirst advised Medco that it would not renew the IPDPA. Over the term of the IPDPA, Healthfirst believes that Medco has received more than $1.5 million in rebates that it has refused to repay to the plaintiffs. Healthfirst also claims that it was unaware for almost a year of Medco's disputed practice of withholding rebates owed to Healthfirst or that Medco was offsetting the rebates against amounts that Healthfirst disputed that it owed the defendants.
In July 2003, after efforts to resolve the dispute failed, Healthfirst filed a Complaint seeking declaratory and compensatory relief based on Medco's alleged breach of the IPDPA by improperly withholding certain rebates and other monies due to Healthfirst. Defendants' counsel filed an Answer and Counterclaim on October 31, 2003. Defendants Counterclaim seeks declaratory and monetary relief based on Healthfirst's alleged breach of the IPDPA for non-payment of fees for services rendered by Medco.
On May 1, 2006, Healthfirst filed a Motion for Leave to File an Amended Complaint. The proposed Amended Complaint includes state law claims for breach of contract, fraud, breach of the covenant of good faith and fair dealing, conversion and declaratory judgment. On June 2, 2006, Medco filed a "letter brief" opposing Healthfirst's Motion to Amend but did not include with it a Memorandum of Law. On June 22, 2006, plaintiffs filed a reply to defendants' letter brief. Healthfirst argues that defendants' opposition does not comply with the requirement under S.D.N.Y. Local Civil Rule 7.1 that all opposition papers must include a memorandum of law.
Next on August 24, 2006, plaintiffs filed a Motion for Summary Judgment on the grounds that Medco's failure to timely respond to fifty-nine Requests for Admissions ("RFAs") made on May 12, 2006, resulted in them having conclusively admitted certain dispositive issues pursuant to Rule 36(a), F. R. Civ. P. Defendants filed responses to the RFAs on September 22, 2006. Plaintiffs in their reply to defendants' opposition to the summary judgment motion assert that even if defendants' untimely responses are admitted by the court, they fail to comply with Local Rule 56.1(d), which mandates the specification of particular admissible evidence following each disputed material fact. Thus, plaintiffs' Motion for Summary Judgment should be granted even if the court considers defendants' untimely responses to the RFAs.
Defendants' counsel does not deny receiving the RFAs, according to the defendants' counsel; the RFAs were misplaced and overlooked during his transition to a new law firm. Defendants' counsel stated that he did not realize his oversight until he was served the present motion papers. Defense counsel argues that "certain matters fell through the cracks" and that he "joined [his] new firm without the attorneys who were assisting [him] on this matter at [his] prior firm, and had little opportunity to enlist any of [his] new colleagues to fill the vacuum at the time." Although defendants eventually filed a response to the plaintiffs' motion to amend their complaint, "the RFA was lost in a mountain of paper that had piled up during [his] transition."
To date, discovery has not yet been completed.
I.
As a preliminary matter, the court notes that defendants, who are represented by counsel, have filed only a "letter brief" (affirmed by defendants' counsel) in response to plaintiffs' motion to amend its complaint. In the case at bar, a review of the docket sheet and the file maintained by the Clerk of Court reveals that the non-moving party, the defendants, failed to file a legal memorandum in support of their position, and, the letter brief cites to a single case Manhattan Life Ins. Co. v. A.J. Stratton Syndicate, 132 F.R.D. 139, 142 (S.D.N.Y. 1990) (Carter J.) for the proposition that a motion to amend should be denied where the moving party's grounds for amending are unsupported and conclusory and based on facts known years before the complaint was filed.
S.D.N.Y. Local Civil Rule 7.1 provides:
Except as otherwise permitted by the court, all motions and all oppositions thereto shall be supported by a memorandum of law, setting forth the points and authorities relied upon in support of or in opposition to the motion, and divided, under appropriate headings, into as many parts as there are points to be determined. Willful failure to comply with this rule may be deemed sufficient cause for the denial of a motion or for the granting of a motion by default.
"Failure to file a memorandum of law in opposition to the opposing party's motion is, by itself, a sufficient basis to grant the motion." Although it is within the court's discretion to grant the plaintiffs' motion based solely on defendants' failure to comply with Local Rule 7.1, in the interest of thoroughness, the court chooses to exercise its discretion to address the motion to amend on its merits.
Kamara v. United States, No. 04 CV 626, 2005 WL 2298176, at *1 (S.D.N.Y. Sep. 20, 2005) (Katz, J.).
Leave to amend under Rule 15(a) is liberally granted except where it would result in undue delay, where it would be futile, where it is sought in bad faith, where it would prejudice the opposing party, or where the moving party has repeatedly failed to cure deficiencies by amendments previously allowed. The decision to grant leave to amend is within the discretion of the trial court.
See Foman v. Davis, 371 U.S. 178, 182 (1962).
See id.
Plaintiffs argues that Manhattan Life Ins. is inapplicable to the present situation because Healthfirst stated its grounds to amend with specificity in its Amended Complaint and Motion to Amend, which are based on facts obtained from depositions and documents produced in the matter. It was through the discovery process and deposition testimony that Healthfirst claims it initially learned of the withholding of rebates which serve as the basis for the proposed amended complaint.
Motions to amend are often granted after years of delay. There is no evidence of bad faith on behalf of Healthfirst or of any undue prejudice that would result to defendants from the addition of claims for fraud, breach of duty of good faith and fair dealing and conversion.
Journal Publ'g Co. v. Am. Home Assurance Co., 771 F. Supp. 632, 637 (S.D.N.Y. 1991) (Leisure, J.); see Richardson Greenshields Securities, Inc. v. Lau, 825 F.2d 647, 653 n. 6 (2d Cir. 1987) (noting liberality in granting leave to amend and cataloguing cases granting leave following delays of three to five years).
In determining what constitutes "prejudice," courts consider "whether the assertion of the new claim would: (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." The addition of these causes of action is unlikely to require expenditure of significant additional resources since they concern the same underlying facts and transactions described in the original pleadings. Moreover, since discovery is still ongoing, the amendment will not significantly delay resolution of this matter. Therefore, the court will permit Healthfirst's motion to amend their complaint to add the aforementioned causes of action.
Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993).
II.
On August 24, 2006, plaintiffs filed a Motion for Summary Judgment on the grounds that Medco failed to respond to the service of fifty-nine RFAs made on May 12, 2006. Pursuant to Rule 36(a), F. R. Civ. P., plaintiffs argue that defendants' untimely responses to the RFAs, on September 22, 2006, render these matters that are dispositive of the issues in this action conclusively admitted.
Under Rule 36, F. R. Civ. P., a party may serve upon the other party written requests for admissions of the truth of statements of fact, or the application of law to facts, pertaining to the pending action. The matter about which an admission is requested "is admitted unless, within 30 days after service of the request, . . . the party to whom the request is directed serves . . . a written answer or objection addressed to the matter, . . . ." Rule 36(a), F. R. Civ. P. Moreover, "any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission."
Rule 36(b), F. R. Civ. P. See Moosman v. Joseph P. Blitz, Inc., 358 F.2d 686, 688 (2d Cir. 1966); Commodity Futures Trading Comm'n v. Int'l Fin. Servs. (N.Y.), Inc., 323 F. Supp. 2d 482, 506 (S.D.N.Y. 2004) (Lynch, J.).
Rule 6, F. R. Civ. P. provides that where a party failed to act as required in a timely fashion, the time within which to act may be enlarged upon a showing that the failure to act "was the result of excusable neglect." Defendants' counsel's excuse that his transition to a new firm resulted in his failure to respond to the RFAs in a timely manner does not constitute excusable neglect. An attorney's failure to manage his case load does not constitute an exceptional circumstance entitling him to relief. This is especially inexcusable given the legal resources of the firm representing the defendants.
See S.E.C. v. Dynasty Fund, Ltd., 121 F.Appx. 410, 411 (2d Cir. 2005).
See Gadsden v. Jones Lang Lasalle Ams. Inc., 210 F. Supp. 2d 430, 437 (S.D.N.Y. 2002) (Motley, J.) (holding that counsel's practice did not excuse his failure to file a timely response to defendant's motion for summary judgment, counsel's actions did not constitute excusable neglect); Stemcor USA, Inc. v. Sea Ripple Mar., Inc., 99 CV 3530, 2003 U.S. Dist. LEXIS 7896, at * 5-6 (S.D.N.Y. Apr. 30, 2003) (Knapp, J.) (holding failure to comply with deadlines does not constitute excusable neglect when an attorney relocated three times and affiliated himself with at least two new law firms during the lawsuit); Cline v. American Airlines Inc., No. 90-1096, 1991 U.S. App. LEXIS 2682, at * 8-9 (7th Cir. Feb. 20, 1991) (holding that the case having been reassigned to a new attorney four days before a response to a motion to dismiss was due did not excuse plaintiffs' failure to file a timely response).
Thorpe v. Luisi, 00 CV 3144, 2005 U.S. Dist. LEXIS 15996, at *6-7 (S.D.N.Y. Aug. 4, 2005) (Daniels, J.).
The court finds it "well settled that a failure to respond to a request to admit will permit the District Court to enter summary judgment if the facts as admitted are dispositive." In addition, "[t]he decision to permit withdrawal of admissions lies within the discretion of the district courts, and should be exercised `only when (1) the presentation of the merits will be aided and (2) no prejudice to the party obtaining the admission will result.'"
Moosman, 358 F.2d at 688 (untimely replies may be permitted by the district courts under "compelling circumstances").
Commodity Futures, 323 F. Supp. at 510-511; Donovan v. Carls Drug Co., 703 F.2d 650 (2d Cir. 1983); see also Moosman, 358 F.2d at 688; Beberaggi v. New York City Transit Authority, No. 93 CV 1737, 1994 WL 18556, at *3 (Dolinger, J.).
Notwithstanding the automatic effect of the time limitations in Rule 36(a), the court is given some discretion in Rule 36(b) to make exceptions in appropriate circumstances. The Rule states that "the court may permit withdrawal or amendment [of admissions] when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice him in maintaining his action or defense on the merits." In view of this provision and the authority conveyed in Rule 36(a) to extend the time to serve responses, the courts may forgive tardiness.
See, e.g., Donovan, 703 F.2d at 651-52; Szatanek v. McDonnell Douglas Co., 109 F.R.D. 37, 39-40 (W.D.N.Y. 1985). See also Farr Man Co. v. M/V Rozita, 903 F.2d 871, 876 (1st Cir. 1990);Gutting v. Falstaff Brewing Co., 710 F.2d 1309, 1312 (8th Cir. 1990); United States v. Turk, 139 F.R.D. 615, 618 (D.Md. 1991).
Since the purpose of Rule 36 is to expedite trial by removing uncontested issues and no delay was caused here, there is not sufficient reason to force the District Court to grant summary judgment here where no prejudice is shown. Since no prejudice is shown, the court will admit defendants' responses to RFAs.
Moosman, 358 F. 2d at 688.
III.
Healthfirst argues in its reply to defendants' opposition to the motion for summary judgment that even if defendants are permitted to respond to the RFAs out of time, summary judgment should still be granted in plaintiffs' favor. This is because defendants' responses to the RFAs fail to comply with Local Rule 56.1(d) requiring the specification of particular admissible evidence following each disputed material fact. Therefore, according to plaintiffs, defendants have not fulfilled their burden under Rule 56(e), F. R. Civ. P.
A party is entitled to summary judgment when there is no "genuine issue of material fact" and the undisputed facts warrant judgment for the moving party as a matter of law. In addressing a motion for summary judgment, "the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Whether any disputed issue of fact exists is for the Court to determine.
Rule 56(c), F. R. CIV. P.; Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Balderman v. United States Veterans Admin., 870 F. 2d 57, 60 (2d Cir. 1989).
The moving party has the initial burden of demonstrating the absence of a disputed issue of material fact. Once such a showing has been made, the non-moving party must present "specific facts showing that there is a genuine issue for trial." Rule 56(e), F. R. Civ. P. The party opposing summary judgment "may not rely on conclusory allegations or unsubstantiated speculation." In fact, "[t]o withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant."
Celotex v. Catrett, 477 U.S. 317, 323 (1986).
Scotto v. Almenas, 143 F. 3d 105, 114 (2d Cir. 1998).
Taste of Soc'y, L.C. v. Ciffone, 05 CV 4028, 2006 U.S. Dist. LEXIS 13142, at *4 (S.D.N.Y. Mar. 23, 2006) (McMahon, J.).
Under the law of this Circuit, "Where there are no citations or where the cited materials do not support the factual assertions in the Statements, the court is free to disregard the assertion." The court is not required to search the record for genuine issues of material fact that the party opposing summary judgment failed to bring to the court's attention.
Holtz v. Rockefeller Co., Inc., 258 F.3d 62, 73 (2d Cir. 2001) (citations omitted); see also O'Keefe v. Arbon Equip. Corp., 399 F.Supp.2d 478, 482-83 (S.D.N.Y. 2005) (Conner, J.);Epstein v. Kemper Ins. Cos., 210 F. Supp. 2d 308, 314 (S.D.N.Y. 2002) (Berman, J.); Fernandez v. DeLeno, 71 F.Supp.2d 224, 227-28 (S.D.N.Y. 1999) (Barrington, J.).
Holtz, 258 F.3d at 73; Every v. Makita U.S.A. Inc., 02 CV 8545, 2005 U.S. Dist. LEXIS 24881, at *13, 32-34 (S.D.N.Y. Oct. 17, 2005) (Lynch, J.) (holding that to contest statements of undisputed facts, the nonmoving party must point to specific evidence in the record).
Local Rule 56 sets forth special rules with which both parties must comply whenever a motion for summary judgment is filed. Local Rule 56.1(a) requires a party filing a summary judgment motion to annex a short, concise statement, in numbered paragraphs, setting forth each material fact in the case. Rule 56.1(b) requires a party opposing a motion for summary judgment to serve a counter-statement of material facts. Rule 56.1(d) requires that the statements filed pursuant to Rules 56.1(a) and (b) include a citation to admissible evidence to support each proposition.
However, "[a] district court has broad discretion to determine whether to overlook a party's failure to comply with local court rules." Even in cases where the opposing party completely neglects to file a response under Rule 56.1, a district court may conduct a review of the record to determine if summary judgment is appropriate.
Holtz, 258 F.3d at 73.
Id.
Plaintiffs' motion complies with both Rule 56 of the Federal Rules of Civil Procedure and Local Rule 56.1. Defendants' responses, however, do not comply with either the federal or the local rules. This is true for the most part with the exception of a single citation in response to Paragraph 6 of Plaintiffs' Statement of Undisputed Facts. Otherwise defendants' responses consist of either assertive or non responsive statements unsupported by citations to the record. In the interest of justice, the court will exercise its discretion to allow defendants, if they determine to do so, leave to amend their responses.
Rule 15(a), F. R. Civ. P. provides that "[a] party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served. . . . Otherwise a party may amend the party's pleading by leave of the court . . . and leave shall be freely given when justice so requires." See also Dow Corning Corp. v. Chemical Design, Inc., 3 F.Supp.2d 361, 364 (W.D.N.Y. 1998) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971)); see also New York State Nat'l Org. for Women v. Cuomo, 182 F.R.D. 30, 36 (S.D.N.Y. 1998) (Carter, J.).