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State v. Pharmacy Corporation of America

Court of Appeals of Missouri, Western District, Second Division

September 3, 2019

STATE OF MISSOURI, OFFICE OF ADMINISTRATION, et al., Appellants-Respondents,
v.
PHARMACY CORPORATION OF AMERICA, d/b/a PHARMERICA, et al., Respondents-Appellants.

          Appeal from the Circuit Court of Cole County, Missouri The Honorable Daniel R. Green, Judge.

          Before: Lisa White Hardwick, Presiding Judge, and Thomas H. Newton and Mark D. Pfeiffer, Judges.

          OPINION

          Mark D. Pfeiffer, Judge.

         The State of Missouri, Office of Administration ("State") appeals the partial summary judgment of the Circuit Court of Cole County, Missouri ("circuit court"), for Pharmacy Corporation of America ("PharMerica"), on the State's breach of contract claim. Conversely, PharMerica cross-appeals the circuit court's partial summary judgment in favor of the State. We affirm.

         Factual and Procedural Background

         The material facts are not in dispute.

         On May 21, 2009, the State issued a Request for Proposal ("RFP") seeking a pharmacy vendor to provide services and pharmaceuticals for the residents of the Missouri Veterans Homes. The RFP provided that the "original contract period" would extend from the Date of Award through June 30, 2010 ("Year 1"). The RFP also provided that the State could, in its sole discretion, renew the contract on a yearly basis for up to four more years thereafter ("Year 2," "Year 3," "Year 4," and "Year 5").

         On June 2, 2009, PharMerica submitted a bid in response to the State's RFP. PharMerica is the second largest institutional pharmacy company in America with nearly $2 billion in annual revenues. PharMerica's bid provided per resident, per month pricing for the "original contract period" and "each potential renewal period" at the same rate, $425, for all five years. On August 13, 2009, the State awarded the contract to PharMerica, sending it a Notice of Award. The Notice provided that the original contract period was from September 1, 2009, to June 30, 2010.

         Both PharMerica and the State fully performed for the original contract period. During that time, however, in a meeting on February 18, 2010, PharMerica communicated to the State that it was "losing money" and claimed it would not perform past Year 1. In a letter dated May 6, 2010, PharMerica indicated to the State that "If the state elects to renew the contract, PharMerica does not intend to enter into a renewal agreement" after the expiration of the original contract period on June 30, 2010. The State responded in a letter of May 11, 2010, stating PharMerica "does not have an option to decline the renewal" and that any refusal to honor the renewal provisions of the contract "will be viewed and acted upon by the State of Missouri as a material breach of PharMerica's contractual obligations" and further expressed in a letter of June 23, 2010, that "[a]ny actions by PharMerica after June 30, 2010, that are not consistent with the terms of the contract will be considered a breach and the state will refer the matter [to] the Missouri Attorney General's Office for appropriate legal remedies." On June 7, 2010, the State issued a Notice of Contract Renewal for Year 2, for the period from July 1, 2010 through June 30, 2011. PharMerica issued an ultimatum in early July that it would not perform past July 31, 2010, at the contracted price, and would not provide a ninety-day transition period (as called for in the contract) for the State to get a replacement contractor.

         The State then replaced PharMerica with the second-place bidder from the initial RFP- Interlock-at a cost higher than PharMerica's contract price. The last date PharMerica provided pharmacy services to Missouri Veterans Homes was July 31, 2010.

         Interlock acted as the State's contractor for the remaining eleven months of Year 2 and for all of Years 3, 4, and 5. The State did not communicate again with PharMerica until serving a demand letter on January 21, 2015, claiming PharMerica was liable for breaching Years 2-5 of the contract and quantifying its alleged damages. On June 11, 2015, the State sued PharMerica for breach of contract. Following depositions and written discovery, the parties both filed motions for summary judgment. The circuit court granted the State's motion for summary judgment as to Year 2, and granted PharMerica's motion for summary judgment as to Years 3 through 5.

         This appeal and cross-appeal timely follow.

         Standard of Review

         The Missouri Supreme Court explained the standard of review for the grant of summary judgment in Goerlitz v. City of Maryville:

The trial court makes its decision to grant summary judgment based on the pleadings, record submitted, and the law; therefore this Court need not defer to the trial court's determination and reviews the grant of summary judgment de novo. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993); Rule 74.04. In reviewing the decision to grant summary judgment, this Court applies the same criteria as the trial court in determining whether summary judgment was proper. Id. Summary judgment is only proper if the moving party establishes that there is no genuine issue as to the material facts and that the movant is entitled to judgment as a matter of law. Id. The facts contained in affidavits or otherwise in support of a party's motion are accepted "as true unless contradicted by the non-moving party's response to the summary judgment motion." Id. Only genuine disputes as to material facts preclude summary judgment. Id. at 378. A material fact in the context of summary judgment is one from which the right to judgment flows. Id.
A defending party . . . may establish a right to summary judgment by demonstrating: (1) facts negating any one of the elements of the non-movant's claim; (2) "that the non-movant, after an adequate period for discovery, has not been able and will not be able to produce sufficient evidence to allow the trier of fact to find the existence of any one" of the elements of the non-movant's claim; or (3) "that there is no genuine dispute as to the existence of facts necessary to support movant's properly pleaded affirmative defense." Id. at 381. Each of these three methods individually "establishes the right to judgment as a matter of law." Id.

333 S.W.3d 450, 452-53 (Mo. banc 2011); Ditto, Inc. v. Davids, 457 S.W.3d 1, 8-9 (Mo. App. W.D. 2014).

         Analysis

         On appeal, the State asserts that the grant of partial summary judgment was erroneous because the State exercised its option to extend the contract for a second year and PharMerica's conduct made it "not only useless but impossible" to continue to exercise its option to extend the contract each year thereafter. In its cross-appeal, PharMerica contends that the grant of partial summary judgment was erroneous because the State failed to meet its burden to establish that PharMerica's affirmative defenses failed as a matter of law. The parties' arguments will be analyzed in chronological order in the context of the contract.

         Year 1:

         There is no dispute that the parties both fully performed during the "original term" of the contract.

         Year ...


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