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Trone Health Services, Inc. v. Express Scripts Holding Co.

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

August 8, 2017

TRONE HEALTH SERVICES, INC.; REDDISH PHARMACY, INC.; JABOS PHARMACY, INC.; OAK TREE PHARMACY, INC.; and AMRUT JAL, LLC, Plaintiffs,
v.
EXPRESS SCRIPTS HOLDING COMPANY; EXPRESS SCRIPTS, INC.; EXPRESS SCRIPTS MAIL ORDER PROCESSING, INC.; and EXPRESS SCRIPTS MAIL PHARMACY SERVICES, INC., Defendants.

          MEMORANDUM AND ORDER

          RONNIE L. WHITE UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint (ECF No. 27). The motion is fully briefed and ready for disposition.

         I. Background

         Plaintiffs, who are retail pharmacies, filed an action in federal court claiming that Defendants Express Scripts Holding Company ("ES Holding"), Express Scripts, Inc. ("ESI"), Express Scripts Mail Order Processing, Inc. ("ES Mail Order"), and Express Scripts Mail Pharmacy Services, Inc. ("ES Mail Pharmacy") (collectively "Defendants") engaged in the "anticompetitive and unfair practice of stealing Plaintiffs' (retail pharmacies) customer information and prescription data and using it to divert Plaintiffs' customers to Defendants' own mail order pharmacy business." (First Amended Compl. ("FAC") ¶ 1, ECF No. 9) The claims stem from contracts between Plaintiffs and Defendant ESI to participate in a retail pharmacy network affiliated with ESFs services as a pharmacy benefit manager ("PMB"), ESI contracts with health plans and third-party payors such as insurers ("Plan Sponsors") to manage delivery of prescription drugs to plan members and their beneficiaries ("Members"). Plan Sponsors provide confidential information regarding the Members to ESI to enable ESI to manage the prescription drug benefits for its Plan Sponsors. Plan Sponsors may also contract with ESI to allow Members to fill prescriptions at ESI's mail ordered pharmacies. When a Member fills a prescription at a retail pharmacy, such as those run by Plaintiffs, ESI verifies coverage, copayment information, possible drug interactions, and amount of reimbursement owed to the pharmacy. However, Plaintiffs contend that ESI uses this confidential information to forcibly switch Plaintiffs' customers to Defendants' mail order pharmacies and prohibit Plaintiffs from supplying any refills for those prescriptions.

         On August 1, 2016, Plaintiffs filed a putative class action Complaint in federal court. Plaintiff filed their First Amended Complaint on December 21, 2016. In the First Amended Complaint, which eliminates Plaintiffs' class allegations, Plaintiffs allege claims for attempted monopolization against all Defendants (Count I), unfair competition against all Defendants (Count II), breach of contract against ESI (Count III), breach of implied covenant of good faith and fair dealing against ESI (Count IV), interference with prospective economic advantage against all Defendants (Count V), violation of Uniform Trade Secrets Act against all Defendants (Count VI), and fraud against ESI (Count VII). Defendants filed a Motion to Dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure on March 3, 2017, arguing that the agreements between the parties control, and that Plaintiffs have failed to state a plausible claim for relief.

         II. Discussion

         Defendants move for dismissal of Plaintiffs' First Amended Complaint on the basis that the requirements of the agreements between the parties mandates that the parties attempt to resolve their claims before proceeding to litigation. Specifically, § 7.15 of the Pharmacy Provider Agreement ("Agreement") provides:

Dispute Resolution. Except as provided here in, prior to either party taking any legal action in connection with this Agreement, both parties agree to meet in good faith to resolve any claim or controversy ("Claim"), whether under federal or state statutory or common law, brought by either ESI or the Provider against the other, or against the employee, members, agents or assigns of the other, arising from or relating in any way to the interpretation or performance of this Agreement. The aggrieved party shall notify the other party of its Claim including sufficient detail to permit the other party to respond. The parties agree to meet and confer in good faith to resolve any Claims that may arise under this Agreement for a period of not less than thirty (30) days. In the event the parties cannot resolve any Claims pursuant to Good Faith Discussions and the minimum thirty (30) day period has been met, then the aggrieved party may end discussions with the other party by providing written notice to the other party of intent to cease discussions. Thereafter, the parties may proceed to litigation.

(Agreement § 7.15, ECF No. 18) Defendants assert, and Plaintiffs do not dispute, that Plaintiffs did not comply with the provisions of § 7.15. Instead, Plaintiffs argue that only Plaintiffs and ESI are parties to the contract such that there is no basis for dismissing the claims against the other Defendants. Further, Plaintiffs contend that the provision does not bar filing a lawsuit absent pre-suit mediation, does not state that informal negotiation is a condition precedent to filing a suit, and does not provide that an action filed without pre-suit mediation would be subject to dismissal. Finally, Plaintiffs assert that any mediation would have been futile. Plaintiffs maintain that, at most, the provision justifies a stay pending mediation and not dismissal.

         The Court finds that the terms of the Agreement warrant dismissal of this action against ESI. "Several courts have determined that dismissal of an action is warranted when there has been a failure to mediate a dispute pursuant to a contract that makes mediation a condition precedent to litigation." Union Elec. Co. v. Energy Ins. Mut. Ltd., No. 410-CV-1153CEJ, 2011 WL 98555, at *2 (E.D. Mo. Jan. 10, 2011), rev'd and remanded on other grounds, 689 F.3d 968 (8th Cir. 2012). "When parties to a contract bind themselves to complete certain prerequisites prior to commencing litigation (thereby agreeing that the other party will not be subject to a court's jurisdiction until there is mutual compliance with that condition), 'the appropriate remedy is to dismiss the action.'" Dominion Transmission, Inc. v. Precision Pipeline, Inc., No. 3:13cv442-JAG, 2013 WL 5962939, at *4 (E.D. Va. Nov. 6, 2013) (quoting Tattoo Art, Inc. v. Tat Int'l, LLC, 711 F.Supp.2d 645, 651 (E.D. Va. 2010)).

         "Interpretation of a contract is a question of law." Hogan Logistics, Inc. v. Davis Transfer Co., Inc., No. 4:16-CV-1541 (CEJ), 2017 WL 1508603, at *2 (E.D. Mo. Apr. 27, 2017) (citation omitted). '"Under Missouri law, determining the meaning of an unambiguous provision is a question of law for the court, determined by giving language its plain and ordinary meaning without resort to extrinsic evidence."' Id. at *3 (quoting Shaw Hofstra & Assocs. v. Ladco Dev., Inc., 673 F.3d 819, 825 (8th Cir. 2012)).

         Here, the Agreement unambiguously states that "prior to either party taking any legal action in connection with this Agreement" the parties will meet in good faith to resolve any claim. The Agreement further states that only after such attempt to resolve the claim, and after a minimum 30-day period has been met, the aggrieved party may end discussions by notifying the other party in writing of such intent and may thereafter proceed to litigation. Other than the sentence stating that the aggrieved party may discontinue discussions by providing written notice and may file suit, the language in the Agreement contains specific and mandatory, not discretionary, language.

         The provision at issue is similar to the agreement in Tattoo Art, which stated, "[i]n the event of any dispute arising from this Agreement, the parties agree to submit the dispute to mediation . . . prior to filing any action to enforce this Agreement." 711 F.Supp.2d at 650. Likewise, in Hometown Servs., Inc. v. EquityLock Sols., Inc., the agreement provided, "[p]rior to initiating any legal action, the initiating Party shall give the other party (30) days written notice of its intent to file an action. During such notice period, the Parties will endeavor to settle amicably by mutual discussions any disputes, differences, or claims whatsoever related to this Agreement." No. 1:13CV304, 2014 WL 4406972, at *2 (W.D. N.C. May 8, 2014), report and recommendation adopted, No. 1:13-CV-00304-MR-DLH, 2014 WL 4406973 (W.D. N.C. Sept. 5, 2014), In both cases, the courts dismissed the actions without prejudice, noting that the plaintiffs failed to submit the claims to mediation as required by the terms of the agreements. See Tattoo Art, 711 F.Supp.2d at 651 (dismissing action without prejudice where agreement unambiguously provided that the parties must mediate any dispute arising out of the agreement prior to initiating litigation); Hometown Servs., 2014 WL 4406972, at *3 (finding case was subject to dismissal where plaintiff failed to submit the case to mediation, thereby failing to satisfy the condition precedent to filing a lawsuit arising under the agreement).

         Plaintiffs, however, argue that any pre-suit mediation would be futile such that the Court should deny Defendants' Motion to Dismiss. Specifically, Plaintiff relies on Jefferson v. Fannie Mae for the proposition that the Court should not require pre-suit mediation because any mediation would be futile. No. 4:13-CV-00604-ALM-CAN, 2016 WL 5339702 (E.D. Tex. July 29, 2016). In Jefferson, the court denied defendant's motion to dismiss where the language in the agreement indicated that any arbitration award could be rejected by the plaintiff and would not be binding on the parties. 2016 WL 5339702, at *9. The Jefferson court noted that several courts granted motions to dismiss without prejudice for prematurely filing a claim in court before first proceeding to arbitration. Id. (collecting cases). However, the Jefferson court ...


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