Association Ben. Services v. Caremark Rx, Inc.
| Decision Date | 13 July 2007 |
| Docket Number | No. 05-4388.,05-4388. |
| Citation | 493 F.3d 841 |
| Parties | ASSOCIATION BENEFIT SERVICES, INCORPORATED, Plaintiff-Appellant, v. CAREMARK RX, INCORPORATED, and CaremarkPCS, a Delaware Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
David A. Novoselsky (argued), Novoselsky & Associates, Paul A. Caghan, Chicago, IL, Chicago, IL, Plaintiff-Appellant.
Frank E. Pasquesi, Michael S. Baig (argued), Foley & Lardner, Chicago, IL, for Defendants-Appellees.
Before BAUER, RIPPLE and MANION, Circuit Judges.
Association Benefit Services, Inc., ("ABS") brought this action against Caremark Rx, Inc., and CaremarkPCS (collectively, "Caremark"). It raised claims of fraud, unjust enrichment and breach of contract. Caremark filed a motion for summary judgment on all counts, which the district court granted. ABS appealed to this court. For the reasons stated in this opinion, we affirm the judgment of the district court.
ABS is a company formed to facilitate contracts between pharmacy benefit managers ("PBMs") and organizations seeking administrators for their prescription benefit plans. AdvancePCS (now CaremarkPCS) is a PBM.1
In January 2003, Jerome Coppage, the then-President of ABS, contacted Christopher Lee, Vice President of Sales for AdvancePCS. Coppage described an opportunity for AdvancePCS to be the PBM for a plan to be offered to American Automobile Association ("AAA") members. He represented that ABS "could deliver" AAA to AdvancePCS. R.105-1, Ex.8 at 81. Over the next several months, Lee and ABS communicated regarding a proposal to meet AAA's requirements. At some point during this process, ABS contacted AdvancePCS and represented that AAA wished to meet and undertake further negotiations for PBM services. ABS arranged a meeting between Lee and AAA to occur on May 19, 2003.
On May 13, 2003, at the request of Coppage, and in apparent anticipation of the upcoming meeting with AAA, Lee sent a letter to ABS confirming AdvancePCS' intent to work with ABS to secure a contract with AAA. On May 19, 2003, immediately before the scheduled meeting with AAA, Lee met with Coppage and Jack Bestrom, a consultant to ABS, in a hotel near AAA's headquarters. Bestrom had drafted, by hand, a forty-page contract between ABS and AdvancePCS, but had been unable to complete a typed version of it prior to meeting with Lee and therefore abandoned the project. See R.105-1, Ex.9 at 95-96. Instead, Bestrom told Lee that ABS would need a document acknowledging that, if AdvancePCS became AAA's PBM, AdvancePCS was willing to pay to ABS commissions of $0.25 per prescription filled at a retail store and $1.50 per prescription filled by mail. Bestrom further told Lee that AdvancePCS would not be allowed to meet with ABS' "client," AAA, until Lee gave ABS such a document. R.105-1, Ex.8 at 92. Because the men had an appointment with AAA that very afternoon and, therefore, time was short, Lee edited the May 13, 2003 letter to Coppage to include a reference to the commission as requested by Bestrom. The men then drove to a nearby Kinko's to print the letter. As modified, this May 19, 2003 letter reads, in full:
Re: AdvancePCS Agreement—AAA
Dear Mr. Coppage:
I want to once again thank you for partnering with AdvancePCS for your prescription benefits management services. We are very excited about growing our relationship with Association Benefits [sic] Services, Inc. and look forward to working closely with you as we move forward. We will be working exclusively with you as we work toward delivering consumer card services with AAA. For the length of time AdvancePCS delivers benefits to AAA, I want to confirm that we will be paying commissions to Association Benefits [sic] Services of $0.25 per retail claim and $1.50 per mail order claim.
Additionally, we commit to deliver unparalleled service and prescription benefits that will enhance the quality of membership in the organizations that you serve and to implement all groups expeditiously and efficiently. As the nation's largest and most clinically advanced prescription benefit management and health improvement company, we are confident that we will fully address your financial and customer service objectives.
We are dedicated to delivering the most innovative programs and plan efficiencies to each of our clients. With AdvancePCS as its partner, Association Benefits [sic] Services will realize the following benefits:
• We offer aggressive retail network pricing with a national, broad-based retail network.
• We offer aggressive mail order pricing with programs aimed at increasing generic utilization saving members even more money.
If you have any questions or comments, please feel free to contact me at [phone number and email].
R.105-1, Ex.5D.2 The letter was printed on AdvancePCS letterhead and included Lee's electronic signature. According to Coppage's deposition testimony, Coppage himself signed the letter several days later, at home, and included a notation reading: "accepted and agreed this 19th day of May, 2003, by Association Benefit Services, Inc." R.105-1, Ex.8 at 99, Ex.5D. Coppage then forwarded the letter to Robert Blixt, the CEO of ABS. Lee later stated, in his affidavit submitted in support of summary judgment for AdvancePCS, that he modified the letter to include the commission structure based on his understanding that ABS was a consultant to AAA and that the revenue sharing fees requested by AAA, as ABS' client, would cover the commissions to ABS. R.105-1, Ex.5 at 6-7. After the men left Kinko's, Lee, Bestrom and Coppage met with representatives of AAA.
ABS claims that, in reliance on the letter, it not only facilitated the introduction to AAA and participated in the May 19, 2003 meeting but, over the course of the ensuing months, also assisted AdvancePCS in formulating a successful proposal to become AAA's PBM. ABS also claims that, in reliance on the letter, it did not work with rival PBMs to develop proposals for AAA's business.
AdvancePCS claims that, in the course of the development of the final proposal for AAA, ABS agreed to adjust its own fees to ensure the deal went through. All parties also acknowledge that AdvancePCS would have been under no obligation to pay ABS were it not for the successful completion of the agreement. Documents in the record, generated by both AdvancePCS and ABS, indicate that fee and compensation adjustments were topics of discussion in late May. These discussions took place after the meeting with AAA, and thus after Lee's letter was drafted. In particular, Blixt sent a conference call agenda to Lee listing compensation adjustments to ABS as one of several topics of discussion. R.105-1, Ex.5E. Lee sent an email in June detailing a revised offer to AAA, including $0.15 in commissions to ABS. R.105-1, Ex.5J.
Also in June, Lee sent a letter to representatives of AAA that detailed a proposed division of responsibilities between AAA, ABS and AdvancePCS in the pharmacy card program. Notably, the letter laid out a full page of responsibilities for ABS, which included marketing the program to AAA members and traveling to assist local clubs in implementing and utilizing the program. All these services were to be provided at the expense of ABS. R.105-1, Ex.5K at 4. Several days later, Lee sent an email to Bestrom and Blixt, apparently reiterating information recently garnered from AAA: ABS was neither AAA's consultant nor its agent and that AAA would not sign a third-party agreement or "pay anything" to ABS. R.105-1, Ex.5L. On June 26, 2003, yet another email followed from Lee to Bestrom, Blixt and Coppage, this one stating, in pertinent part:
. . . I was reading through my old files this week and need to re-tract [sic] the letter dated May 19th to Jerry re: AAA. In that letter I offered that we would pay ABS $0.25 per claim while we managed the AAA account. This doesn't make any sense any more in light of our on-going negotiations. I just want to point out that this is not in effect as we don't have any negotiated agreement with AAA or ABS. It isn't too big a deal, but I just wanted to clarify things. The contract that we sign with y'all and with AAA will reflect all the accurate financials and obligations.
AdvancePCS contends that, in the course of these "ongoing negotiations," Lee offered commissions of $0.025 from AdvancePCS to ABS, and ABS verbally accepted. The parties rely upon no record evidence in which ABS directly responded to these gradually decreasing commission levels; in particular, in response to AdvancePCS' submission of documents suggesting that ABS was willing to adjust commissions, ABS relies on no record evidence to demonstrate any continuing insistence upon the commission levels stated in the May 19, 2003 letter.
AdvancePCS eventually offered ABS a written contract including the $0.025 commissions, which ABS rejected. R.31, Ex.B; R.105-1, Ex.7 at 204. AdvancePCS and AAA entered into a contract for prescription benefit services in October 2003.
In March 2004, ABS instituted this action against AdvancePCS (now CaremarkPCS) and Caremark Rx in the Circuit Court of Cook County, Illinois. The complaint alleged various tort theories of recovery against the defendants arising out of their conduct in arriving at the AAA agreement. The defendants removed the action to the Northern District of Illinois on the ground of diversity of citizenship. In the district court, the claims eventually were amended to include fraud, breach of contract and unjust enrichment. Caremark filed motions for summary judgment on all counts; the district court granted the motions in their entirety on September 23, 2005.
ABS first alleged that AdvancePCS was liable for fraud. ABS claimed that the May 19th letter and other statements made by Lee...
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