Grettenberger Pharmacy, Inc. v. Blue Cross-Blue Shield of Michigan, CROSS-BLUE

• Citation: 98 Mich.App. 1,296 N.W.2d 589
• Decision Date: 03 June 1980
• Docket Number: CROSS-BLUE,Docket No. 45798
• Parties: GRETTENBERGER PHARMACY, INC., Plaintiff-Appellee, v. BLUESHIELD OF MICHIGAN, Defendant-Appellant. 98 Mich.App. 1, 296 N.W.2d 589
• Court: Court of Appeal of Michigan (US)

Page 589

296 N.W.2d 589

GRETTENBERGER PHARMACY, INC., Plaintiff-Appellee, v. BLUE CROSS-BLUE SHIELD OF MICHIGAN, Defendant-Appellant.

Docket No. 45798.

98 Mich.App. 1, 296 N.W.2d 589

Court of Appeals of Michigan.

June 3, 1980.

Rehearing Denied July 22, 1980.

Released for Publication Sept. 24, 1980.

[98 MICHAPP 3] Henry H. Sills, Detroit, for defendant-appellant.

Dwight D. Ebaugh, Lansing, for plaintiff-appellee; Charles R. MacLean, Lansing, of counsel.

[98 MICHAPP 4] Before CYNAR, P. J., and V. J. BRENNAN and CAVANAGH, JJ.

V. J. BRENNAN, Judge.

This is a class action suit brought by plaintiff Grettenberger Pharmacy on behalf of itself and all similarly situated pharmacies against Blue Cross-Blue Shield of Michigan. Plaintiff claims that it and other pharmacies received improperly reduced dispensing fees under defendant's prescription program for services performed ¹ between January 1, 1975, and April 29, 1975.

A chronology of the litigation surrounding this case is necessary to understand the issues now before us. On February 7, 1973, Grettenberger filed a complaint, alleging that Blue Cross-Blue Shield had modified the existing contract in order to reduce the dispensing fee without amending defendant's manual as required by the parties' Service Benefit Prescription Program Participation Agreement. Blue Cross-Blue Shield answered and asserted inter alia that the court was without jurisdiction or power to act in the absence of the other parties to Blue Cross-Blue Shield's service contract. Grettenberger Pharmacy subsequently filed a motion for partial summary judgment which was granted by the circuit court judge who found that Blue Cross-Blue Shield did not amend the contract as required, and therefore the dispensing fee reduction was illegal. This Court affirmed the circuit court's granting of partial summary judgment in an unpublished per curiam opinion. Grettenberger Pharmacy, Inc. v. Blue [98 MICHAPP 5] Cross-Blue Shield of Michigan (Docket No. 24163, April 8, 1976).

Grettenberger Pharmacy then filed an amended complaint and certification of class action, GCR 1963, 208. Blue Cross-Blue Shield answered and asserted inter alia that plaintiff's unique position, the class members' failure to state claims of greater than $10,000 and the defenses of accord and satisfaction and accounts stated precluded Grettenberger Pharmacy from relief, and moved for accelerated judgment.

On September 8, 1977, Ingham County Circuit Judge Ray C. Hotchkiss granted plaintiff's motion for certification of class action and approved the class action notice and response and claim form which was sent to approximately 1,920 potential class members. Of these, 660 opted into the suit by returning the required form.

On March 7, 1979, plaintiff filed a motion for summary judgment, GCR 1963, 117.2(2) and (3), in order to (a) determine the party plaintiffs as those of the class list submitted to the court; (b) extend the court's previous partial summary judgment to each plaintiff; (c) fix damages; and (3) determine the claims of the individual plaintiffs. Defendant's answer in opposition to plaintiff's motion alleged (a) that plaintiff's unique position and the fact that it was no longer a pharmacy, nor by statute ever could be, precluded it from being a member of the class; (b) improper aggregation; (c) defenses of account stated and accord and satisfaction; and (d) that the fact that many class members returned deficient claim forms precluded the court from granting plaintiff's motion. On June 8, 1979, plaintiff's motion for summary judgment was granted by Judge Hotchkiss. Defendant now appeals as of right. GCR 1963, 806.1.

[98 MICHAPP 6] Blue Cross-Blue Shield raises three issues on appeal. Appellant first contends that the trial court erred in allowing plaintiff pharmacy's action to proceed as a class action under GCR 1963, 208.1(3). Specifically, Blue Cross-Blue Shield claims that plaintiff pharmacy was not an adequate representative of the class since plaintiff's owners sold the business after the complaint was filed but before the trial court's certification of the class action. Since plaintiff was not engaged in business and was precluded by M.C.L. § 338.481; M.S.A. § 14.771 from any future pharmaceutical business, Blue Cross-Blue Shield argues that plaintiff was an inadequate representative of the class. Hernandez v. Gray, 530 F.2d 858 (CA 10, 1976), Free World Foreign Cars v. Alfa Romeo, 55 F.R.D. 26 (1972).

In his order, the trial judge correctly stated:

"Plaintiff sold certain assets of the corporation on March 1, 1977, and is not presently engaged in the day-to-day operation of a pharmacy. Plaintiff has retained those assets which would be affected by the outcome of this lawsuit. The claim involved in this case covers the limited period of time from January 1, 1975, through April 29, 1975. There is no question that plaintiff is a member of the class. The claim here involved does not cover a continuing period of time, and it is largely irrelevant whether plaintiff is presently, or will, in the future, be engaged in the daily operation of a pharmacy. Plaintiff has pursued this action with both diligence and competence. The Court believes plaintiff to be an adequate representative of the class."

We find Blue Cross-Blue Shield's reliance on both Hernandez, and Free World Foreign Cars v. Alfa Romeo, supra, misplaced. In Hernandez, former city employees filed a class action civil rights suit against the city, alleging racial discrimination. The district court dismissed the action. The 10th [98 MICHAPP 7] Circuit Court of Appeals affirmed by rejecting plaintiffs' argument that they were representatives of the class of present city employees since there had not been an initial determination that plaintiffs were in fact proper representatives of the class and plaintiffs voluntarily left the city employment for reasons unrelated to the complained-of discriminatory practices. In the instant case the trial court had made an initial determination that the plaintiff was a proper representative of the class, and more importantly, unlike Hernandez, plaintiff's claims were for a fixed period during which plaintiff and all other potential class members were participants in defendant's drug prescription program.

In Free World Foreign Cars, the district court found that plaintiff's interest as a former franchisee of defendant was not co-extensive and consistent with those of the present franchisees who apparently depended upon the defendant's economic viability, since whether the defendant could economically survive against the threat of heavy and burdensome expenses involved in defending a class action was of no concern to the plaintiff, a former franchisee. It was, however, a matter of concern to the present franchise dealers that the defendant remain in business in order to supply automobiles and parts.

While it is true in the instant case that plaintiff was no longer an operating pharmacy, plaintiff did have a common interest with class members (refund of improperly reduced dispensing fees) and there did not exist any conflict of interest. Furthermore, while the presently participating pharmacies would be concerned with the defendant's financial well-being, we do not believe that the amount of damages involved, approximately $220,000[98 MICHAPP 8] plus interest plus costs, would cause defendant's financial downfall and the termination of dispensing fee arrangements with class members.

Blue Cross-Blue Shield next argues that the trial court's certification of the class action was inconsistent with the convenient administration of justice standard enunciated in Grigg v. Michigan National Bank, 405 Mich. 148, 274 N.W.2d 752 (1979). Appellant asserts that since the determination of the facts concerning eligible claims could be exorbitantly expensive and time-consuming in the instant case, the judge's ruling was in fact contrary to Grigg.

GCR 1963, 208.1(3) sets forth seven separate requirements which must be satisfied in order for an action to proceed on a representative basis. The relevant requirements in the instant case include: (a) there must be an identifiable class; (b) the number of persons in the class must be so large that it would be impractical to bring them before the court; and (c) the person seeking to represent the class must be a member.

(a) There must be an identifiable class.-If the membership of the group is so amorphous that it cannot be definitely ascertained, there is no "class" and the case cannot proceed on a representative basis. Grigg at 168, 274 N.W.2d 752. In the instant case, Grettenberger Pharmacy was able to obtain Blue Cross-Blue Shield's micro-film record showing the names and addresses of all potential class members. Plaintiff Pharmacy then prepared a list of potential class members and filed it with the trial court. These facts are sufficiently analogous to those in Grigg in which the Supreme Court found the group sufficiently identifiable.

(b) The number of persons must be so large that it would be impractical to bring them before the [98 MICHAPP 9] court. Of the approximately 1,920 participating pharmacies in the instant case, 660 opted in. While there exists no requisite minimum number to satisfy the court rule, we believe that the number in the instant case fits within the letter and spirit of this requirement. Also, because of the nature of the case, there is no requirement that each member personally appear before the court.

(c) A person seeking to represent the class must be a member of that class.-As indicated, Grettenberger Pharmacy meets this requirement. Although no longer operating as a pharmacy, plaintiff corporation was not dissolved and no interest in the lawsuit was transferred. Fixtures, general inventory items, prescription files and prescription drug items, lease interest and covenant not to compete were involved in the transfer but all other assets not specifically...