Sheet Metal Workers Local No. 20 Welfare & Benefit Fund v. CVS Health Corp.

221 F. Supp. 3d 227, 2016 U.S. Dist. LEXIS 150804, 2016 WL 6462137
CourtDistrict Court, D. Rhode Island
DecidedNovember 1, 2016
DocketC.A. No. 16-046 S
StatusPublished
Cited by9 cases

This text of 221 F. Supp. 3d 227 (Sheet Metal Workers Local No. 20 Welfare & Benefit Fund v. CVS Health Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sheet Metal Workers Local No. 20 Welfare & Benefit Fund v. CVS Health Corp., 221 F. Supp. 3d 227, 2016 U.S. Dist. LEXIS 150804, 2016 WL 6462137 (D.R.I. 2016).

Opinion

OPINION AND ORDER

WILLIAM E. SMITH, Chief Judge.

Before the Court are Defendant’s Motion to Dismiss (ECF No. 13) and Motion to Certify Question to the Indiana Supreme Court (ECF No. 24). Plaintiffs filed Oppositions to both motions (ECF Nos. 20 and 28) and Defendant filed Replies (ECF Nos. 22 and 31). For the reasons that follow, Defendant’s Motions are DENIED.

I. Background1

Plaintiffs are suing CVS Health Corporation (“CVS”), on behalf of themselves and a nationwide putative class of entities providing prescription drug insurance (“Third-Party Payors” or “TPPs”), alleging that CVS perpetrated an eight-year fraud by reporting an inflated Usual and Customary (“U & C”) price for generic drugs, rather than the significantly cheaper price associated with CVS’s Health Savings Pass (“HSP”) program.

In 2006, “big-box” retailers with pharmacy departments, such as Wal-Mart and Target, began offering hundreds of generic [230]*230prescription drugs at significantly reduced prices. (Compl. ¶¶ 18-19, EOF No. 1.) In November 2008, CVS responded by introducing its HSP program, which provided special pricing for approximately 400 generic prescription medications to individuals who paid an annual membership fee. (Id. ¶¶ 20-24.)

CVS is required to “report[] to Third-Party Payors CVS’s [U & C] price for the drug being dispensed. The U & C price is generally defined as the cash price to the general public, which is the amount charged cash customers for the prescription, exclusive of sales tax or other amounts claimed.” (Id. ¶ 16.) Plaintiffs claim that because “CVS offers the HSP price as the cash price to the general public and the HSP price is the most common price paid by CVS’s cash-paying customers[,] [t]he HSP price is CVS’s U & C price.” (Id. ¶ 30.) However, instead of reporting the HSP price, “CVS has reported U & C prices for generic prescription drugs that are up to eleven (11) times the U & C prices reported by some of its most significant competitors and its own HSP prices.” (Id. ¶38.) In contrast, the “big-box” retailers “report the discounted price as the U & C price.” (Id. ¶ 37.) According to Plaintiffs, CVS’s “fraudulent scheme” has resulted in CVS “overcharg[ing] hundreds or thousands of TPPs (including Plaintiffs and others similarly situated) which paid for some of the most commonly prescribed generic drugs from CVS Pharmacies around the country.” (Id. ¶ 41.)

II. Discussion

CVS argues that: (1) the Complaint does not satisfy the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure; (2) Plaintiffs have failed to state a claim under Indiana’s Deceptive Consumer Sales Act (“IDCSA”), or in the alternative, the question of whether TPPs are “consumers” under the IDCSA should be certified to the Indiana Supreme Court; (3) named Plaintiffs, who are Indiana TPPs, do not have standing to assert state law claims on behalf of putative class members, and Plaintiffs have not properly pled the elements of the state consumer protection statutes they attempt to invoke; and (4) Plaintiffs’ negligent misrepresentation and unjust enrichment claims fail because they are contract claims masquerading as tort claims. The Court will discuss each of these arguments in turn.

A. Rule 9(b) of the Federal Rules of Civil Procedure

Rule 9(b) of the Federal Rules of Civil Procedure requires that a pleading alleging fraud “must state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). The Complaint “must ‘(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.’ ” Suna v. Bailey Corp., 107 F.3d 64, 68 (1st Cir. 1997) (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127-28 (2d Cir. 1994)). In other words, Rule 9(b) requires plaintiffs to allege the “ hvho, what, when, where, and how' of the alleged fraud.” United States ex rel. Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116, 123 (1st Cir. 2013) (quoting United States ex. rel Walsh v. Eastman Kodak Co., 98 F.Supp.2d 141, 147 (D. Mass. 2000)).

Here, CVS argues that “the Complaint does not allege that CVS (or anyone) ever communicated an alleged false statement, a U & C price, to the Indiana Funds,” which “is the most basic requirement of Rule 9(b).” (Def.’s Mot. to Dismiss 8, ECF No. 13 (emphasis in original).) Moreover, Plaintiffs supposedly

[231]*231do not allege their plan beneficiaries actually purchased overpriced prescriptions from CVS pharmacies; or when, where, and how frequently any such (un-alleged) purchases took place; or what U & C prices CVS supposedly reported during those purchases; or what amount the Indiana Funds purportedly overpaid for the purchases; or any details describing when or how CVS obtained such overpayments.

(Id. (emphases in original).)

Plaintiffs cite a recent decision in Corcoran v. CVS Health Corporation & CVS Pharmacy Inc., 169 F.Supp.3d 970, 986 (N.D. Cal. 2016), in which the court denied a motion to dismiss in a similar case. They argue that, like the plaintiffs in Corcoran, they have satisfied the “who, what, where, and when” required by Rule 9(b).

The Court finds that Plaintiffs’ Complaint satisfies Rule 9(b). It is clear from the Complaint that the alleged false statement to the Indiana Funds was the reported U & C price, which Plaintiffs claim was inflated. (See Compl. ¶¶ 16-30, ECF No. 1.) While it is true that Plaintiffs do not provide certain details — such as the specific amount of drugs purchased — that level of specificity is not required. A complaint need not “allege specific shipments to specific customers at specific times with a specific dollar amount of improperly recognized revenue.” Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). As long as “the complaint ‘identifies the circumstances of the alleged fraud so that defendants can prepare an adequate answer,’ ” it is sufficient under Rule 9(b). IcL (quoting Warshaw v. Xoma Corp., 74 F.3d 955, 960 (9th Cir. 1996)); see also W. Reserve Life Assur. Co. of Ohio v. Conreal LLC, 715 F.Supp.2d 270, 283 (D.R.I. 2010) (stating that allegations are sufficient if they “serve the goals of Rule 9(b) to ‘provide a defendant with fair notice’ of the claim and discourage baseless actions” (quoting Suna, 107 F.3d at 68)). Here, Plaintiffs’ allegations are clear:

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221 F. Supp. 3d 227, 2016 U.S. Dist. LEXIS 150804, 2016 WL 6462137, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sheet-metal-workers-local-no-20-welfare-benefit-fund-v-cvs-health-corp-rid-2016.