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HM Compounding Services, LLC v. Express Scripts, Inc.

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

February 3, 2017




         This 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.

         I. Procedural background

         Plaintiff 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 “Agreement”).

         As a 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.

         HMC 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).

         On August 18, 2015, ESI moved for partial summary judgment on the grounds that HMC's remaining claims[1] 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.

         The 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).

         On 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).

         II. Legal standard

         Summary 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).

         III. Motion to Strike Gavin Declaration

         In 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.

         Affidavits 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).

         The 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.

         IV. Facts [2]

         The following facts are undisputed or uncontroverted, except where indicated, and set forth in the light most favorable to HMC:

         As part 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)[3] 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).

         Based on the responses provided by HMC, ESI identified HMC for investigative review.[4]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 ¶ ...

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