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Cystic Fibrosis Pharmacy, Inc. v. Express Scripts, Inc.

United States District Court, E.D. Missouri, Eastern Division

December 15, 2016

CYSTIC FIBROSIS PHARMACY, INC., Plaintiff,
v.
EXPRESS SCRIPTS, INC., Defendant.

          MEMORANDUM AND ORDER

          CAROL E. JACKSON UNITED STATES DISTRICT JUDGE

         This matter is before the Court on defendant's motion for partial dismissal of the first amended complaint pursuant to Fed.R.Civ.P. 12(b)(6). Plaintiff has filed a response in opposition, and the issues are fully briefed.

         I. Background

         Plaintiff Cystic Fibrosis Pharmacy, Inc., provides traditional pharmacy and compounding services. Defendant Express Scripts, Inc., (“ESI”) is a pharmacy benefits manager that processes and pays insurance claims for prescription drugs. Patients in plans managed by defendant receive prescription drugs from participating pharmacies, such as plaintiff, or directly from defendant through the mail-order pharmacy it owns and operates. [See Doc. # 44 at ¶¶15, 19].

         In May 2014, plaintiff joined defendant's network of pharmacies. [Doc. # 44 at ¶21]. In April 2016, defendant notified plaintiff that it would be subjected to an audit on May 19, 2016. On June 10, 2016, defendant notified plaintiff that it was terminating the provider agreement pursuant to the agreement's “immediate termination” provision, § 4.2.c.[1] [Doc. # 44 at ¶¶24-25].[2] As grounds for the termination, defendant stated that it had determined that plaintiff was primarily operating a mail order business, rather than a retail pharmacy as required by the provider agreement. Defendant also determined that plaintiff was regularly mailing drugs to patients in states “without appropriate licensure.” [Doc. # 44-2]. Although defendant's notice to plaintiff stated that the termination was effective “on or about July 18, 2016, ” defendant notified patients that plaintiff would be out of network on July 8, 2016. [Doc. # 44 at ¶33].

         Plaintiff alleges that its termination is not justified under the provider agreement. Plaintiff also alleges that defendant did not comply with provisions requiring notice 90 days before termination and a 30-day period for dispute resolution. [Doc. # 44 at ¶¶29-31, 44, 52]. In the first amended complaint, plaintiff asserts the following claims: breach of contract arising from the termination of the provider agreement (Count I); breach of implied duty of good faith and fair dealing (Count II); unjust enrichment (Count III); tortious interference with plaintiff's patient base (Count IV); declaratory judgment (Count V); injunctive relief (Count VI); breach of contract arising from failure to pay monies due and owing (Count VII); and tortious interference with patient choice (Count VIII).

         Defendant moves to dismiss Counts II through VI and VIII.

         II. Legal Standard

         The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint. Fed.R.Civ.P. 12(b)(6). The factual allegations of a complaint are assumed true and construed in favor of the plaintiff, “even if it strikes a savvy judge that actual proof of those facts is improbable.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n.1 (2002)); Neitzke v. Williams, 490 U.S. 319, 327 (1989) (“Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations.”); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (stating that a well-pleaded complaint may proceed even if it appears “that a recovery is very remote and unlikely”). The issue is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence in support of his claim. Scheuer, 416 U.S. at 236. A viable complaint must include “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see id. at 563 (stating that the “no set of facts” language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), “has earned its retirement”); see also Ashcroft v. Iqbal, 556 U.S. 662, 678-84 (2009) (holding that the pleading standard set forth in Twombly applies to all civil actions). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.

         III. Discussion

         A. Count II - Breach of implied covenant of good faith and fair dealing

         “In Missouri, all contracts have an implied covenant of good faith and fair dealing.” Lucero v. Curators of Univ. of Missouri, 400 S.W.3d 1, 9 (Mo.Ct.App. 2013) (citation omitted). This good faith requirement extends to the manner in which a party employs discretion conferred by a contract. BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 914 (8th Cir. 2007) (citing Mo. Consol. Health Care Plan v. Cmty. Health Plan, 81 S.W.3d 34, 45 (Mo.Ct.App. 2002)). “When a decision is left to the discretion of one party, the question is not whether the party made an erroneous decision but whether the decision was made in bad faith or was arbitrary or capricious so as to amount to an abuse of discretion.” Cordry v. Vanderbilt Mortg. & Fin., Inc., 445 F.3d 1106, 1112 (8th Cir. 2006) (citation omitted). Evidence suggesting that a party's discretionary decision was a mere pretext for terminating the contract will support a finding of bad faith. See Citimortgage, Inc. v. OCM Bancorp, Inc, No. 4:10CV467 CDP, 2011 WL 1594950, at *4 (E.D. Mo. Apr. 27, 2011) (citing BJC, 478 F.3d at 915-16).

         Under Missouri law, the “implied covenant will not . . . be imposed where the parties expressly address the matter at issue in their contract.” State v. Nationwide Life Ins. Co., 340 S.W.3d 161, 194 (Mo.Ct.App. 2011) (“There is no authority for the proposition that a party has an implied duty of good faith and fair dealing to agree to renew a contract that is set to expire by its negotiated terms.”). Defendant argues that plaintiff's claim for breach of the implied covenant of good faith and fair dealing must be dismissed because § 4.2 of the provider agreement expressly governs termination. Plaintiff's claim is based on its contention that termination was not justified under the contract and was undertaken in order to divert plaintiff's patients to other pharmacies. See Doc. #44 at ¶¶16, 18 (defendant has become the nation's largest PBM as a result of engaging in “anticompetitive and other unlawful behavior.”); ¶19 (defendant “takes affirmative steps to direct the flow of prescriptions to its own [mail order] pharmacy to increase market share, slow down the costs, and eliminate competition.”); ¶51, 62 (defendant did not have cause to terminate its provider agreement and will divert plaintiff's patients to its own pharmacy or another pharmacy that is more economically advantageous to it); ¶¶33, 44 (defendant failed to comply with contractual requirements regarding notice and an opportunity to cure and prematurely notified plaintiff's patients that it was no longer a covered provider). Accepting these allegations as true and drawing all inferences in favor of plaintiff, plaintiff has sufficiently alleged that defendant's termination decision was made in bad faith. See Citimortgage, Inc. v. Platinum Home Mortg. Corp., No. 4:15CV1242 JCH, 2016 WL 147110, at *4 (E.D. Mo. Jan. 13, 2016) (finding defendant adequately stated counterclaim for breach of implied covenants by alleging that plaintiffs acted on nonexistent defects and failed to afford contractually-mandated period and opportunity to cure). Plaintiff has adequately stated a claim for breach of the implied covenant of good faith and fair dealing and defendant's motion to dismiss will be denied with respect to Count II.

         B. Count III - ...


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