FILED NOT FOR PUBLICATION JUN 12 2019 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER CORCORAN, et al., No. 17-16996
Plaintiffs-Appellants, D.C. No. 4:15-cv-03504-YGR
v. MEMORANDUM* CVS HEALTH CORPORATION and CVS PHARMACY, INC.,
Defendants-Appellees.
Appeal from the United States District Court for the Northern District of California Yvonne Gonzalez Rogers, District Judge, Presiding
Argued and Submitted December 17, 2018 San Francisco, California
Before: CALLAHAN and N.R. SMITH, Circuit Judges, and OLGUIN,** District Judge.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Fernando M. Olguin, United States District Judge for the Central District of California, sitting by designation. Plaintiffs filed a multi-state consumer putative class action against CVS Pharmacy,
Inc. (“CVS”), alleging that CVS misrepresented the “usual and customary” (“U&C”)
prices of certain generic prescription drugs by not submitting the lower prices CVS
charged to members of its Health Savings Pass (“HSP”) program to third-party insurance
providers (“TPPs”) and pharmacy benefits managers (“PBMs”).1 The district court:
granted in part plaintiffs’ motion for class certification; granted CVS’s motion to exclude
and strike the expert opinion of plaintiffs’ pharmaceutical economist, Professor Joel W.
Hay; and granted CVS’s motion for summary judgment. Plaintiffs appeal the district
court’s decisions. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and
remand.
1. We review the grant of summary judgment de novo. See Albino v. Baca,
747 F.3d 1162, 1168 (9th Cir. 2014). The district court erred in granting summary
judgment to CVS, because, having found plaintiffs’ evidence “relevant” but
“inconsequential” or “unavailing,” the district court nonetheless placed CVS’s and
plaintiffs’ evidence on equal footing and impermissibly weighed the evidence and failed
to credit and draw all reasonable inferences from the evidence in plaintiffs’ favor. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations,
1 Because the parties are familiar with the factual and procedural history of the case, we need not recount it in detail here.
2 17-16996 the weighing of the evidence, and the drawing of legitimate inferences from the facts are
jury functions, not those of a judge,” and “[t]he evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in his favor.”).
a. Plaintiffs argue that certain emails and presentations (that CVS produced)
show that CVS employees had expressed concerns about whether CVS needed to report
its HSP price as usual and customary, but the district court found that those materials
failed to create a triable issue, because CVS did not misrepresent, based on the PBMs’
testimony, the U&C price. We disagree. A jury weighs the evidence and determines
whether CVS engaged in wrongful conduct in its reporting of U&C prices, which resulted
in the PBMs calculating higher copayments. Contrary to CVS’s assertion, plaintiffs need
not produce evidence that the PBMs believed that CVS misrepresented the U&C price.
It is enough for plaintiffs to show that CVS failed to report the HSP prices as U&C prices
contrary to the PBM contracts, and that, as a result, plaintiffs were charged higher
copayments.
b. CVS also argues that summary judgment was properly granted, because the
testimony of the PBM witnesses established that the parties to the contracts agreed on the
meaning of the U&C provisions. While the district court set forth the definitions of the
U&C provisions contained in the relevant PBM agreements and noted that plaintiffs were
relying on the language in those agreements, the district court did not discuss or explain
3 17-16996 why the contractual provisions, in conjunction with the evidence proffered by plaintiffs,
were insufficient to raise a genuine issue of material fact. Instead, the district court noted
that “[i]n some cases, the PBMs even amended the agreement to exclude explicitly
membership programs from their definition of U&C.” But this same evidence could
show the opposite, i.e., that the U&C definitions in the PBM contracts encompassed the
HSP prices. A jury could reasonably infer that subsequent modifications of the
agreements indicate that the prior definitions of U&C included HSP prices.
c. Although CVS and the PBMs agreed during this litigation (as opposed to
when the agreements were negotiated) that the PBM contracts did not require CVS to
submit its HSP prices as the U&C prices, plaintiffs proffered “some evidentiary support
for [their] competing interpretation[] of the contract[s’] language.” Nat’l Union Fire Ins.
Co. of Pittsburgh, Pa. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). Given the
extrinsic evidence proffered by plaintiffs to support their reasonable interpretation of the
U&C language in the PBM contracts, the district court erred in granting summary
4 17-16996 judgment.2 See, e.g., First Nat’l. Mortg. Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058,
1067 (9th Cir. 2011) (“Where the interpretation of contractual language turns on a
question of the credibility of conflicting extrinsic evidence, interpretation of the language
is not solely a judicial function. As trier of fact, it is the jury’s responsibility to resolve
any conflict in the extrinsic evidence properly admitted to interpret the language of a
contact.” (emphasis omitted) (quoting Morey v. Vannucci, 64 Cal. App. 4th 904, 912-13
(1998))).
2. The district court narrowed plaintiffs’ proposed classes by limiting each
class to the PBM(s) in California, Florida, Illinois, and Massachusetts that adjudicated
the respective class representative’s claims based on Federal Rule of Civil Procedure
23(a)’s typicality requirement. The district court found that, since the evidence relating
to one PBM does not necessarily apply to the other PBMs, typicality was lacking. We
review the district court’s class certification ruling for abuse of discretion. Pulaski &
Middleman, LLC v. Google, Inc., 802 F.3d 979, 984 (9th Cir. 2015); see also Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (“Under [Rule 23(a)]’s permissive
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FILED NOT FOR PUBLICATION JUN 12 2019 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER CORCORAN, et al., No. 17-16996
Plaintiffs-Appellants, D.C. No. 4:15-cv-03504-YGR
v. MEMORANDUM* CVS HEALTH CORPORATION and CVS PHARMACY, INC.,
Defendants-Appellees.
Appeal from the United States District Court for the Northern District of California Yvonne Gonzalez Rogers, District Judge, Presiding
Argued and Submitted December 17, 2018 San Francisco, California
Before: CALLAHAN and N.R. SMITH, Circuit Judges, and OLGUIN,** District Judge.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Fernando M. Olguin, United States District Judge for the Central District of California, sitting by designation. Plaintiffs filed a multi-state consumer putative class action against CVS Pharmacy,
Inc. (“CVS”), alleging that CVS misrepresented the “usual and customary” (“U&C”)
prices of certain generic prescription drugs by not submitting the lower prices CVS
charged to members of its Health Savings Pass (“HSP”) program to third-party insurance
providers (“TPPs”) and pharmacy benefits managers (“PBMs”).1 The district court:
granted in part plaintiffs’ motion for class certification; granted CVS’s motion to exclude
and strike the expert opinion of plaintiffs’ pharmaceutical economist, Professor Joel W.
Hay; and granted CVS’s motion for summary judgment. Plaintiffs appeal the district
court’s decisions. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and
remand.
1. We review the grant of summary judgment de novo. See Albino v. Baca,
747 F.3d 1162, 1168 (9th Cir. 2014). The district court erred in granting summary
judgment to CVS, because, having found plaintiffs’ evidence “relevant” but
“inconsequential” or “unavailing,” the district court nonetheless placed CVS’s and
plaintiffs’ evidence on equal footing and impermissibly weighed the evidence and failed
to credit and draw all reasonable inferences from the evidence in plaintiffs’ favor. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations,
1 Because the parties are familiar with the factual and procedural history of the case, we need not recount it in detail here.
2 17-16996 the weighing of the evidence, and the drawing of legitimate inferences from the facts are
jury functions, not those of a judge,” and “[t]he evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in his favor.”).
a. Plaintiffs argue that certain emails and presentations (that CVS produced)
show that CVS employees had expressed concerns about whether CVS needed to report
its HSP price as usual and customary, but the district court found that those materials
failed to create a triable issue, because CVS did not misrepresent, based on the PBMs’
testimony, the U&C price. We disagree. A jury weighs the evidence and determines
whether CVS engaged in wrongful conduct in its reporting of U&C prices, which resulted
in the PBMs calculating higher copayments. Contrary to CVS’s assertion, plaintiffs need
not produce evidence that the PBMs believed that CVS misrepresented the U&C price.
It is enough for plaintiffs to show that CVS failed to report the HSP prices as U&C prices
contrary to the PBM contracts, and that, as a result, plaintiffs were charged higher
copayments.
b. CVS also argues that summary judgment was properly granted, because the
testimony of the PBM witnesses established that the parties to the contracts agreed on the
meaning of the U&C provisions. While the district court set forth the definitions of the
U&C provisions contained in the relevant PBM agreements and noted that plaintiffs were
relying on the language in those agreements, the district court did not discuss or explain
3 17-16996 why the contractual provisions, in conjunction with the evidence proffered by plaintiffs,
were insufficient to raise a genuine issue of material fact. Instead, the district court noted
that “[i]n some cases, the PBMs even amended the agreement to exclude explicitly
membership programs from their definition of U&C.” But this same evidence could
show the opposite, i.e., that the U&C definitions in the PBM contracts encompassed the
HSP prices. A jury could reasonably infer that subsequent modifications of the
agreements indicate that the prior definitions of U&C included HSP prices.
c. Although CVS and the PBMs agreed during this litigation (as opposed to
when the agreements were negotiated) that the PBM contracts did not require CVS to
submit its HSP prices as the U&C prices, plaintiffs proffered “some evidentiary support
for [their] competing interpretation[] of the contract[s’] language.” Nat’l Union Fire Ins.
Co. of Pittsburgh, Pa. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). Given the
extrinsic evidence proffered by plaintiffs to support their reasonable interpretation of the
U&C language in the PBM contracts, the district court erred in granting summary
4 17-16996 judgment.2 See, e.g., First Nat’l. Mortg. Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058,
1067 (9th Cir. 2011) (“Where the interpretation of contractual language turns on a
question of the credibility of conflicting extrinsic evidence, interpretation of the language
is not solely a judicial function. As trier of fact, it is the jury’s responsibility to resolve
any conflict in the extrinsic evidence properly admitted to interpret the language of a
contact.” (emphasis omitted) (quoting Morey v. Vannucci, 64 Cal. App. 4th 904, 912-13
(1998))).
2. The district court narrowed plaintiffs’ proposed classes by limiting each
class to the PBM(s) in California, Florida, Illinois, and Massachusetts that adjudicated
the respective class representative’s claims based on Federal Rule of Civil Procedure
23(a)’s typicality requirement. The district court found that, since the evidence relating
to one PBM does not necessarily apply to the other PBMs, typicality was lacking. We
review the district court’s class certification ruling for abuse of discretion. Pulaski &
Middleman, LLC v. Google, Inc., 802 F.3d 979, 984 (9th Cir. 2015); see also Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (“Under [Rule 23(a)]’s permissive
2 In addition to key disputed factual questions relating to the interpretation of the agreements and whether CVS was obligated to report its HSP prices as the U&C prices, the evidence raises other related genuine issues of material fact such as: (1) whether the HSP program constitutes a “cash discount” program; (2) whether CVS offered HSP prices to uninsured customers who were not program members and whether the PBM witnesses were aware that CVS offered such prices to non-HSP members; and (3) whether plaintiffs are third-party beneficiaries of any of the PBM contracts.
5 17-16996 standards, representative claims are ‘typical’ if they are reasonably co-extensive with
those of absent class members; they need not be substantially identical.”).
The district court abused its discretion in narrowing the proposed classes on
typicality grounds. The named plaintiffs and the absent class members are insured
customers who were charged copayments higher than the HSP prices, which plaintiffs
maintain should have been CVS’s actual U&C prices. As a result, the named plaintiffs
were injured in the same manner as the absent class members and they suffered the same
type of damages, i.e., the delta between the actual copayment and the HSP price.
Plaintiffs’ action is not based on conduct that is unique to the named plaintiffs. See Wolin
v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010).
While plaintiffs’ motion for class certification focused on CVS’s agreements with
five PBMs, the alleged overall conduct or scheme was the same. That is, plaintiffs
alleged that insured CVS customers were charged higher copayments as a result of CVS’s
failure to report its actual U&C prices in accordance with its agreements with the PBMs.
The district court did not identify any meaningful differences in the PBM agreements that
would result in the interests of the class representatives being misaligned with those of
the absent class members. Indeed, CVS reported the same prices to the PBMs
notwithstanding any variation in the language of the PBM contracts. In other words,
CVS’s actual reporting to the PBMs underscores the fact that the class representatives’
6 17-16996 claims are “reasonably coextensive,” if not “substantially identical” to the claims of the
absent class members. See Just Film, Inc. v. Buono, 847 F.3d 1108, 1116 (9th Cir. 2017).
3. We review the district court’s decision to exclude and strike Dr. Hay’s
testimony for abuse of discretion. Samuels v. Holland Am. Line-USA Inc., 656 F.3d 948,
952 (9th Cir. 2011); see also Pyramid Tech., Inc. v. Hartford Cas. Ins. Co., 752 F.3d 807,
813 (9th Cir. 2014) (observing that the test for admissibility “is not the correctness of the
expert’s conclusions but the soundness of his methodology, and when an expert meets
the threshold established by [Federal Rule of Evidence] 702, the expert may testify and
the fact finder decides how much weight to give that testimony.” (quoting Primiano v.
Cook, 598 F.3d 558, 564-65 (9th Cir. 2010))).
The district court found that Dr. Hay’s testimony lacked foundation, it excluded
his report on that basis, and it struck Dr. Hay’s testimony that CVS’s HSP prices are the
U&C prices as defined in CVS’s contracts. We disagree that Dr. Hay’s opinion lacks
foundation. Based on our review of Dr. Hay’s disclosed report and the record before us,
it is apparent that Dr. Hay formed his opinion regarding the U&C price based on his
experience, industry standards, and his review of the materials produced by CVS
(including transactional data) during the course of the litigation. Dr. Hay’s review of
these materials provides an adequate basis for his disclosed testimony.
7 17-16996 The district court also appears to have accepted CVS’s argument that the
conclusions that Dr. Hay disclosed in his report were not the product of sound or reliable
methodology. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999) (“[T]he
importance of Daubert’s gatekeeping requirement . . . is to ensure the reliability and
relevancy of expert testimony.”). In part, this conclusion appears to be due to the fact that
CVS’s expert, Dr. Barlag, reviewed much of the same transaction level data as Dr. Hay
and disagreed with Dr. Hay’s analysis and conclusions. However, Dr. Barlag’s analysis
doesn’t show Dr. Hay’s analysis to be without foundation or the product of questionable
or unreliable methodology; if credited, Dr. Barlag’s testimony does little more than cast
some doubt on Dr. Hay’s conclusions. Resolving the conflict between these experts is
a matter for the jury, not a basis to exclude one of them under Rule 702. See Pyramid
Tech., Inc., 752 F.3d at 813.
We therefore reverse the district court’s summary judgment order, its class
certification order, and its order excluding the expert opinion and striking the expert
report of Dr. Hay. We remand for further proceedings. The parties shall bear their own
costs on appeal.
REVERSED and REMANDED.
8 17-16996