In re Express Scripts, Inc., Pbm Litigation

Decision Date31 October 2007
Docket NumberMaster Case No. 4:05-MD-01672-SNL.,Master Case No. 4:05-CV-01082 SNL.
Citation522 F.Supp.2d 1132
PartiesIn re EXPRESS SCRIPTS, INC., PBM LITIGATION. This Document Relates to: The Correction Officers', Benevolent Association of the City Of New York, Inc., individually, and on behalf of all others similarly situated, Plaintiff, v. Express Scripts, Inc., and National Prescription Administrators, Inc., Defendants.
CourtU.S. District Court — Eastern District of Missouri

Chet B. Waldman, Carl L. Stine, Ken H. Chang, Wolf Popper LLP, New York, NY, for Plaintiffs.

William I. Sussman, Ropes and Gray LLP, New York, NY, Brien T. O'Connor, Richard D. Batchelder, Jr., Ropes and Gray LLP, Boston, MA, for Defendants.


STEPHEN N. LIMBAUGH, Senior District Judge.

Express Scripts, Inc. and its related entities are defendants in several interrelated cases which were consolidated for coordinated pre-trial proceedings by the Judicial Panel on Multi-District Litigation. In the instant matter, the Correction Officers' Benevolent Association of the City of New York, Inc. ("COBA") brought this class action lawsuit on behalf of itself, its members, and all others similarly situated, alleging unlawful conduct in connection with Defendants' (Express Scripts, Inc. ["ESI"] and National Prescription Administrators, Inc. ["NPA"]) management of pharmacy benefits plans. Now, before the Court, Defendants move to dismiss (Document # 56, filed July 8, 2005) five of Plaintiff's six claims1 on various grounds. The Court deals with each in turn.


In considering a motion to dismiss under Rule 12(b), a court must take all factual allegations in plaintiff's complaint as true, view the complaint in the light most favorable to plaintiff, and dismiss the action only if the complaint demonstrates on its face that there is an insurmountable obstacle to relief. Alexander v. Peffer, 993 F.2d 1348, 1349 (8th Cir.1993) (citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). A motion to dismiss is not proper merely because plaintiff did not precisely state each element of the offense necessary for recovery, 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1216:120 (1969); nor is it proper solely because the court questions plaintiff's ability to prove all the necessary allegations, Bennett v. Berg, 685 F.2d 1053, 1058 (8th Cir.1982). To survive a motion to dismiss, a complaint need only contain "allegations from which an inference can be drawn that evidence on these material points will be introduced at trial." WRIGHT & MILLER, supra at 122-23.


As the background of this case is complex, the Court will briefly recite its interpretation of the relevant facts. This suit is a consolidated putative class action brought by a municipal employee labor union (COBA) on behalf of itself, its members, and all other similarly situated organizations (and their members); consisting of New York City public employees, who had non-ERISA pharmacy benefit plans (or received benefits under such plans) during the relevant time period, and were managed by Defendants. Plaintiff represents the interests of approximately 11,000 active members of COBA, 4,000 retirees, and what is estimated to be potentially 400,000 additional similarly situated New York City employees. (Amended Complaint, Document # 55 at ¶¶ 9, 77-78, filed July 8, 2005.) Such members were responsible for paying their plan premiums and co-payments, and were caused actual injury2 as a result of Defendants' alleged wrongful conduct3.


This is a diversity action filed in the Supreme Court of New York, removed to the United States District Court for the Southern District of New York, and transferred to the United States District Court for the Eastern District of Missouri for consolidated pretrial proceedings.

Where federal questions are at issue, "consolidated cases are controlled by the law of this circuit, rather than that of the various circuits in which they were first filed." Campos v. Ticketmaster Corp., 140 F.3d 1166, 1171 n. 4 (8th Cir. 1998); see also In re Temporomandibular Joint (TMJ) Implant Recipients v. E.I. Du Pont De Nemours & Co., 97 F.3d 1050, 1055 (8th Cir.1996). Accordingly, the Court will apply Eighth Circuit precedent as opposed to the Second Circuit caselaw cited throughout the litigants' memoranda. As to the state law issues4, a court generally applies the forum state's choice of law principles. See Klaxon Co. v. Stentor Elec. Mfg, Co., 313 U.S. 487, 497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Stricker v. Union Planters Bank, N.A., 436 F.3d 875, 877 (8th Cir.2006). However, when a transferee court presides over a consolidated diversity action, it must apply the choice of law rules of the jurisdiction in which each case was originally filed. Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964). Therefrom, New York choice of law rules apply.

New York applies distinct choice of law approaches depending upon the claims at issue. Finance One Public Co. Ltd. v. Lehman Bros. Special Financing, Inc., 414 F.3d 325, 336 (2d Cir.2005). In those cases involving contract claims, New York applies the "center of gravity theory." Id. (citing Matter of Allstate Ins. Co., 81 N.Y.2d 219, 233-34, 597 N.Y.S.2d 904, 613 N.E.2d 936 (N.Y.1993)). For tort claims, New York courts apply an interest analysis. Hughes v. LaSalle, Bank, N.A., 419 F.Supp.2d 605, 617 (D.N.Y.2006).

In reviewing contract claims, the "center of gravity" test includes various factors to determine which state has the most significant relationship to the transaction at issue. American Centennial Ins. Co. v. Sinkler, 903 F.Supp. 408, 412 (D.N.Y.1995). Under this approach, courts consider "the place of contracting, the places of negotiation and performance, the location of the subject matter, and the domicile or place of business of the contracting parties." Memorial Drive Consultants, Inc. v. ONY, Inc., Nos. 01-7353, 01-7387, 2002 WL 226860, at *5 (2d Cir. Feb.14, 2002) (quoting Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir.1997)).

Applying the "center of gravity" test to the facts in the present case, the Court finds that New York bears the most significant relationship to the transaction. First, as for the place of contracting, neither party state where the contract was entered into; however, the contract lists New Jersey as the place of execution. (Contract at 8.) Absent any evidence to the contrary, the Court assumes this statement to be true. Second, as for negotiation and performance, the complaint is devoid of any allegation concerning where the contract was negotiated. The Court finds it apparent, however, that performance was to take place, and the subject matter was located, in New York. More specifically, the contract's purpose was for a PBM to provide pharmacy plan benefits to thousands of municipal union employees purchasing pharmaceutical drugs in' New York; the plan members were billed in New York; and it is the purchase of these drugs in New York, which led to the accrual of rebates, discounts, and kickbacks, resulting in Defendants' alleged misconduct. Finally, as to the domicile of the parties, Plaintiff is domiciled in New York5, and represents the interests of thousands of plan members domiciled in New York. (Doc. # 55 at ¶ 9.) As to Defendants, during all times relevant here, ESI and NPA were domiciled in Missouri6. Balancing all of these factors, the Court concludes that New York has the most significant relationship to the transaction and the parties, and the Court shall apply New York law to the state law issues dealing with the contract claims alleged, e.g., breach of the implied covenant of good faith and fair dealing. See Ackerley Media Group, Inc. v. Sharp Electronics Corp., 170 F.Supp.2d 445, 450-51 (D.N.Y. 2001).

As to the tort claims, New York courts apply the law of that jurisdiction which, "`because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation.'" Hughes, 419 F.Supp.2d at 617 (quoting Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72, 595 N.Y.S.2d 919, 612 N.E.2d 277 (N.Y.1993)). In assessing a jurisdiction's interest in the litigation, courts weigh (i) significant contacts, and (ii) whether the purpose of the law is to regulate conduct or allocate loss. Hughes, 419 F.Supp.2d at 617 (citing Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 522, 620 N.Y.S.2d 310, 644 N.E.2d 1001 (N.Y.1994)).

Here, during all relevant times, the parties were domiciled in different states, and Plaintiff alleges claims involving conduct-regulating laws; therefore the locus of the tort (location where the tort was committed) is determinative of the choice of law. See, e.g., Champlain Enterprises, Inc. v. U.S., 945 F.Supp. 468, 472 (D.N.Y. 1996); Hughes, 419 F.Supp.2d at 617; Weisberg, 132 A.D.2d at 552, 517 N.Y.S.2d 304. In addition to New York's significant contacts to this transaction (supra); as the place where the torts were allegedly committed, New York has the greater public policy interest in "ensuring that those who conduct business within its borders will be called upon to compensate those whom they have injured while so engaged pursuant to its statutory scheme." Weisberg, 132 A.D.2d at 552. Accordingly, New York law applies to the state law issues dealing with the tort claims alleged, e.g., breach of fiduciary duty, unjust enrichment, and conversion.



Plaintiff seeks relief under Section 349 of New York's General Business Law. Under this section, deceptive acts or practices in conducting business or furnishing services is unlawful. N.Y. Gen. Bus. Law § 349(a). Thereunder, a party injured as a result of such conduct may...

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