United States District Court, E.D. Missouri, Eastern Division
HM COMPOUNDING SERVICES, LLC, and HMX SERVICES, LLC, Plaintiffs,
EXPRESS SCRIPTS, INC., Defendant.
MEMORANDUM AND ORDER
A. ROSS UNITED STATES DISTRICT JUDGE.
matter is before the Court on Defendant Express Script
(“ESI”)'s Motion for Partial Summary Judgment
(Doc. No. 192) and Plaintiffs HM Compounding Services, LLC
and HMX Services, LLC (collectively “HMC”)'s
Motion to Strike Portions of John Gavin's Declaration
Submitted by Defendant (Doc. No. 312). The motions are fully
briefed and ready for disposition. Oral argument on
Defendant's motion was held on November 18, 2016.
HM Compounding Services, LLC, is an independent compounding
pharmacy that provides customized medications to patients.
Plaintiff HMX Services, LLC, is HM Compounding Services,
LLC's New Jersey affiliated pharmacy. ESI is a pharmacy
benefit manager (“PBM”). PBMs administer the
prescription pharmaceutical portion of health care benefit
programs, which are typically purchased by a plan sponsor.
HMC was a member of ESI's pharmacy provider network
pursuant to a Pharmacy Provider Agreement (“Provider
Agreement”) and Network Provider Manual
(“Provider Manual”) (collectively the
condition for membership in ESI's pharmacy network,
compounding pharmacies are required to undergo a
credentialing/recredentialing process. In May 2014, HMC
underwent a recredentialing process. On July 31, 2014, ESI
informed HMC by letter that the Agreement would terminate
effective September 1, 2014. The stated reason for HMC's
termination was that during the credentialing process, it
misrepresented that it never waived or reduced member
copayments. On August 4 and 5, 2014, HMC responded in writing
to ESI, questioning the factual basis of its termination and
requesting an appeal hearing; ESI did not reverse its
decision after receiving HMC's letters.
brought this action on September 10, 2014 in the Supreme
Court of the State of New York, County of Nassau, seeking to
enjoin the termination. On September 12, 2014, ESI removed
the case to the United States District Court for the Eastern
District of New York. On October 27, 2014, the New York
District Court severed HMC's claims against ESI and
transferred them to this Court. On December 1, 2014, HMC
filed its First Amended Complaint (“FAC”)
asserting various statutory and common law claims against ESI
(Doc. No. 126). ESI moved to dismiss the FAC for failure to
state a claim (Doc. No. 129) and, on July 9, 2015, the Court
granted ESI's motion in part and dismissed HMC's
claims under ERISA and New Jersey's Any Willing Provider
Laws (Counts III, IV and VI); in all other respects ESI's
motion was denied (Doc. No. 183).
August 18, 2015, ESI moved for partial summary judgment on
the grounds that HMC's remaining claims fail as a matter
of law based on HMC's breaches of the parties'
Agreement and ESI's resulting right to immediately
terminate that Agreement. In response, HMC argues there are
factual disputes about the materiality of its alleged
breach(es). HMC further argues that ESI breached the
Agreement by failing to comply with the 30-day
“cure” period under Section 4.2.b of the
Agreement; the notice and appeal requirements of the Provider
Manual addendum; or with the Disciplinary Action provision of
the Provider Manual.
Court stayed briefing on ESI's motion and granted the
parties 90 days to conduct phased discovery on the issues
raised in the motion (Doc. No. 208). On November 18, 2015,
HMC's counsel moved to withdraw and requested the Court
stay discovery and all pending deadlines for 60 days to allow
HMC to retain new counsel (Doc. No. 211). The Court granted
counsel's motion to withdraw and stayed discovery and all
pending deadlines for 30 days, up to and including December
18, 2015 (Doc. No. 215). New counsel filed notices of
appearance on behalf of HMC on December 3, 2015 and requested
the Court lift the stay of discovery. The Court granted
HMC's request on December 8, 2015 (Doc. No. 224) and
subsequently extended the initial discovery deadline until
February 26, 2016, and the stay on briefing ESI's pending
motion for partial summary judgment until March 28, 2016
(Doc. No. 227).
February 12, 2016, HMC filed a motion to compel ESI to
produce certain documents (Doc. No. 235). HMC filed a motion
for relief pursuant to Rule 56(d) on March 3, 2016, asking
the Court to deny ESI's motion for partial summary
judgment as premature and expand discovery to include third
party discovery on all of HMC's claims. Alternatively,
HMC asked the Court to indefinitely stay briefing on
ESI's partial summary judgment motion so the parties
could continue to conduct discovery (Doc. No. 259). Following
a status conference with counsel on March 24, 2016, the Court
ordered HMC to submit a proposed plan for completion of
discovery by March 30, 2016 (Doc. No. 274). After
consideration of HMC's discovery plan, the Court granted
HMC's motion to compel in part and extended the discovery
deadline for 30 days, up to and including June 6, 2016 (Doc.
No. 285). Per the Court's order, HMC was required to
respond to ESI's motion for partial summary judgment by
July 6, 2016 (id.). On HMC's motion, the
deadline for discovery was extended to July 6, 2016, and the
deadline to respond to ESI's motion was extended to July
25, 2016 (Doc. No. 287), and then to August 1, 2016 (Doc. No.
291). ESI was granted until September 29, 2016, to reply
(Doc. No. 309).
judgment is appropriate when no genuine issue of material
fact exists in the case and the movant is entitled to
judgment as a matter of law. See Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986). The initial burden
is placed on the moving party. City of Mt. Pleasant, Iowa
v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th
Cir. 1988). If the record demonstrates that no genuine issue
of fact is in dispute, the burden then shifts to the
non-moving party, who must set forth affirmative evidence and
specific facts showing a genuine dispute on that issue.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986). In determining whether summary judgment is
appropriate in a particular case, the Court must review the
facts in a light most favorable to the party opposing the
motion and give that party the benefit of any inferences that
logically can be drawn from those facts. The Court is
required to resolve all conflicts of evidence in favor of the
nonmoving party. Osborn v. E.F. Hutton & Co.,
Inc., 853 F.2d 616, 619 (8th Cir. 1988).
Motion to Strike Gavin Declaration
support of its summary judgment motion, ESI submits the
declaration of John Gavin, its Senior Manager of
Investigations in Fraud, Waste and Abuse Services
(Declaration of John Gavin (“Gavin Decl.”), Doc.
No. 196). HMC moves to strike portions of Gavin's
declaration as containing inadmissible hearsay, legal
conclusions, and improper opinion testimony. Prior to
addressing the merits of ESI's motion for partial summary
judgment, the Court examines briefly the motion to strike.
in support of summary judgment must be made on personal
knowledge and contain admissible evidence. Fed.R.Civ.P.
56(c)(4). When an affidavit contains a statement made without
personal knowledge, consisting of hearsay, or purporting to
state legal conclusions as fact, the statement may not be
used to support or defeat a motion for summary judgment.
See Jenkins v. Winter, 540 F.3d. 742, 748 (8th Cir.
2008); Brooks v. Tri-Systems, Inc., 425 F.3d. 1109,
1111 (8th Cir. 2005); Howard v. Columbia Public School
District, 363 F.3d. 797, 801 (8th Cir. 2004) (citing
Shaver v. Independent Stave Co., 350 F.3d. 716, 723
(8th Cir. 2003)); Camfield Tires, Inc. v. Michelin Tire
Corp., 719 F.2d. 1361, 1367 (8th Cir. 1983).
Court is presumed to consider only evidence found to be
properly admissible. See Wise v. Bowersox, 136 F.3d
1197, 1203 (8th Cir. 1998) (quoting Walton v.
Arizona, 497 U.S. 639, 653 (1990), overruled on
other grounds, Ring v. Arizona, 536 U.S. 584, 609 (2002)
(“[t]rial judges are presumed to know the law and to
apply it in making their decisions.”); see also
United States v. Saddler, 538 F.3d 879, 890 (8th Cir.
2008). Moreover, a motion for summary judgment will not fail
merely because some of the statements contained in the
affidavit may be inadmissible. Gore v. GTE South,
Inc., 917 F.Supp. 1564, 1570 n. 5 (M.D. Ala. 1996). A
court may look to the remaining portions of the affidavit to
see if there is a basis to support the summary judgment.
Id. The Court has carefully reviewed Gavin's
declaration, and considered only those statements that would
be admissible at trial in its analysis of the parties'
legal arguments. Accordingly, HMC's motion to strike will
be granted in part and denied in part.
following facts are undisputed or uncontroverted, except
where indicated, and set forth in the light most favorable to
of a re-credentialing process, HMC submitted an updated
Provider Certification questionnaire to ESI on May 23, 2014,
certifying that each answer given was “true and
correct”; agreeing to notify ESI if a change in the
information provided would make any part of the Provider
Certification “untrue or inaccurate”; and
agreeing that failure to provide true and accurate
information would be a breach of the Provider Agreement that
could lead to immediate termination. (Defendant's
Statement of Uncontroverted Material Facts
(“SOF”), Doc. No. 195 at ¶¶ 7,
9-11) In particular, Question 29 of the Provider
Certification asked: “Do you or your pharmacy(ies) ever
waive or offer a reduction of member copayments? If Yes,
please provide a copy of your written policy relating to the
waiver/reduction of copayments.” HMC answered
“no.” (SOF at ¶ 13).
on the responses provided by HMC, ESI identified HMC for
investigative review.In May 2014, members of ESI's Fraud,
Waste, and Abuse team sent letters to a small subset of ESI
members asking for verification that they had received a
prescription from HMC and paid a copayment. In response, one
ESI member stated she had a prescription filled at HM New
Jersey in April 2014 but that “there was no
co-pay” (SOF at ¶ ...