United States District Court, D. Rhode Island
SHEET METAL WORKERS LOCAL NO. 20 WELFARE AND BENEFIT FUND; and INDIANA CARPENTERS WELFARE FUND, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
CVS HEALTH CORPORATION, Defendant.
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.
Background[1]
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 prescription drugs at significantly
reduced prices. (Compl. ¶¶ 18-19, ECF 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 “‘who, 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
do not allege their plan beneficiaries actually purchased
overpriced prescriptions from CVS pharmacies; or
when, where, and how frequently any such (unalleged)
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). Id.
(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:
[T]he fraud occurred each time CVS electronically submitted a
claim to TPPs using the [National Council for Prescription
Drug Program (“NCPDP”)] reporting system wherein
it misrepresented the price for a prescription generic drug
to be the U&C price when, in fact, CVS cash-paying
customers were charged substantially lower prices for the
same drug.
(Pls.' Opp'n to Mot. to Dismiss 11, ECF No. 20-1.)
The Complaint adequately puts CVS on notice of the details of
the alleged fraud. This is particularly true given that
“all of the missing details are likely in the
possession of CVS.” Corcoran, 169 F.Supp.3d at
986.[2]
B.
Plaintiffs' Claims under the IDCSA
1.
Definition of “Consumer” under the IDCSA
One of
the purposes of the IDCSA is to “protect consumers from
suppliers who commit deceptive and unconscionable sales
acts.” Ind. Code § 24-5-0.5-1(b)(2). The statute
prohibits deceptive acts “in connection with a consumer
transaction, ” which is defined as a “sale . . .
to a person for purposes that are primarily personal,
familial, charitable, agricultural, or household, or a
solicitation to supply any of these things.”
Id. §§ 24-5-0.5-2(a)(1), 24-5-0.5-3(a).
“Person” is defined as “an individual,
corporation, the state of Indiana or its subdivisions or
agencies, business trust, estate, trust, partnership,
association, nonprofit corporation or organization, or
cooperative or any other legal entity.” Id.
§ 24-5-0.5-2(a)(2). The statute empowers Indiana's
Attorney General to enjoin a supplier's deceptive or
unconscionable acts and authorizes courts to order, among
other things, restitution for “aggrieved
consumers.” Id. § 24-5-0.5-4(c). It also
creates a civil remedy for a consumer claiming injury from
conduct prohibited by the statute: “A person relying
upon an uncured or incurable deceptive act may bring an
action for the damages actually suffered as a consumer as a
result of the deceptive act . . . .” Id.
§ 24-5-0.5-4(a). The question is thus whether the TPPs
suffered damages “as a consumer.”
Although
the IDCSA defines “consumer transaction, ” it
does not define “consumer, ” which leaves some
ambiguity as to what is meant by “as a consumer.”
CVS argues that because consumer is not defined, it must be
given its “plain meaning, ” which is
“someone who ‘uses' or ‘utilizes' a
purchased item.” (Def.'s Mot. to Dismiss 16, ECF
No. 13.) CVS also points out that Indiana law has codified
CVS's proposed definition in other areas, such as
products liability law. ...