Independent Drug Wholesalers Group, Inc. v. Denton
| Decision Date | 07 October 1993 |
| Docket Number | No. 92-2164-JWL.,92-2164-JWL. |
| Citation | 833 F. Supp. 1507 |
| Parties | INDEPENDENT DRUG WHOLESALERS GROUP, INC., a Delaware Corp., Plaintiff, v. Lawrence DENTON, et al., Defendants. |
| Court | U.S. District Court — District of Kansas |
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W. Joseph Hatley, Lathrop & Norquist, Overland Park, KS, Marisa V. Lindell, Graham & Dunn, Daniel Gandara, Seattle, WA, for Independent Drug Wholesalers, Chris Osmers, Brad Jones.
Mark D. Hinderks, Stinson, Mag & Fizzell, Overland Park, KS, Teresa L. Clark, Stinson, Mag & Fizzell, Kansas City, MO, Michael J. Coffman, Zackery E. Reynolds, Fort Scott, KS, Michael P. Morton, Wilmington, DE, for Lawrence Denton, Pharmacy Dispensing Quantities, Inc.
Mark D. Hinderks, Stinson, Mag & Fizzell, Overland Park, KS, Kevin F. Mitchelson, Wheeler & Mitchelson, Chtd., Pittsburg, KS, Teresa L. Clark, Stinson, Mag & Fizzell, Kansas City, MO, Steve A. Leben, Law Offices of Steve Leben, Overland Park, KS, Michael J. Coffman, Fort Scott, KS, for Mark Denton.
Mark D. Hinderks, Stinson, Mag & Fizzell, Overland Park, KS, Teresa L. Clark, Stinson, Mag & Fizzell, Kansas City, KS, Michael J. Coffman, Fort Scott, KS, for Russell Craig Campbell, American Home Pharmacy, Inc.
Russell Craig Campbell, pro se.
Mark D. Hinderks, Stinson, Mag & Fizzell, Overland Park, KS, Teresa L. Clark, Stinson, Mag & Fizzell, Kansas City, KS, Gregory L. Musil, Shughart, Thomson & Kilroy, Overland Park, KS, Michael J. Coffman, Fort Scott, KS, for Rudolph Villegas.
Zackery E. Reynolds, Fort Scott, KS, Michael P. Morton, Wilmington, DE, for Hurst-Asher Drug Inc., Camden Enterprises.
James C. Fowler, Graham & Dunn, Seattle, WA, for Brad Jones.
This matter comes before the court on the motion of defendant Larry Denton for summary judgment (Doc. # 215); the motion of Camden Enterprises ("Camden"), Hurst-Asher Drug, Inc. ("AHP"), and Pharmacy Dispensing Quantities, Inc. ("PDQ") for summary judgment (Doc. # 217); the motion of defendant Mark Denton for summary judgment (Doc. # 211); and the motion of plaintiff Independent Drug Wholesalers Group, Inc. ("IDWG"), cross-defendant Chris Osmers, and cross-defendant Brad Jones for summary judgment (Doc. # 209). IDWG has also moved for leave to file a supplementary memorandum in opposition to defendant's motions for summary judgment (# 241).
This case involves Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. (RICO) and common law claims by a pharmaceutical drug distributor against its repackaging contractor related to the repackager's alleged theft of pharmaceutical "overages."1 For the reasons set forth below, Larry Denton's motion is denied, the motion of Camden Enterprises, et al., is denied and Mark Denton's motion is denied. IDWG's motion for leave to file a supplementary memorandum is granted and its contents have been considered. The motion of IDWG, et al., for summary judgment is denied in part and granted in part.
The following facts are uncontroverted for purposes of these motions for summary judgment.2
Plaintiff IDWG is a cooperative consisting of 62 local and regional prescription drug wholesalers. IDWG buys prescription drugs in very large quantities from pharmaceutical manufacturers and uses contractors such as defendant Pharmaceutical Dispensing Quantities ("PDQ") to repackage them into smaller quantities which are then shipped to its members across the country. PDQ performed this repackaging and shipping service for IDWG from sometime before September 1990 until around February of 1992. In addition to repackaging for IDWG, PDQ also repackaged for other drug wholesalers, including Humiston Keeling and Morrison & Dickson.
Larry Denton is the President and an owner of PDQ. Camden Enterprises is a partnership owned by defendant Larry Denton and defendant Craig Campbell. Camden owns the real estate on which AHP is located and PDQ was previously located. AHP is a retail pharmaceutical operation owned by Camden Enterprises.
In May, 1990, the board of IDWG decided that PDQ's $2,000,000 in products liability insurance was insufficient and required PDQ to acquire $10,000,000 in insurance and name IDWG as a named insured under the policy. Whether or not IDWG made an oral contract that allowed PDQ to keep all non-Motrin overages as compensation for PDQ's increased products liability insurance is a central issue in this lawsuit. IDWG admits that there was an oral agreement between IDWG and PDQ that PDQ could keep all less than full bottle overages of all products. However, IDWG contends that PDQ was not allowed to take full bottle overages of any products.
The parties operated for a time without a formal contract. In September, 1990, the parties executed a formal repackaging agreement which did not mention ownership or procedure with regard to overages. After the contract was executed, the business between the parties grew substantially and both parties' businesses grew accordingly. PDQ's production grew from less than 50,000 bottles per month in October, 1990 to over 300,000 bottles per month in January, 1992. IDWG's gross receipts grew from $1.3 million in 1990 to $79.2 million in 1992.
In September, 1991, Brad Jones, an IDWG vice president, was placed in charge of the IDWG repack program. Mr. Jones occasionally visited the PDQ facility and had access to all batch records at PDQ. The utility of those batch records in determining the existence and quantity of overages is in controversy.
C.D. Smith, among other companies, purchased overages from PDQ.
Mark Denton, Larry Denton's son, had no managerial responsibilities at PDQ until after he graduated from the University of Kansas in May, 1991. He was not involved in negotiations which led to the execution of the contract in September, 1990.
In late May, 1991, Mark became Chief of Operations at PDQ and oversaw operations, training, and FDA compliance. He trained the hourly employees to separate all overages from IDWG inventory and store them in an electrical room. At least some of the Motrin overages were returned to IDWG inventory. None of the written policies of PDQ, either before or after Mark became Chief of Operations, contained any instructions regarding overages. PDQ ceased separating out IDWG overages beginning in February, 1992.
In early February, 1992, Chris Osmers of IDWG offered to purchase PDQ. Larry Denton, President of PDQ, perceived this offer as a "hostile takeover attempt." On February 26, 1992, the FDA shut down PDQ's plant and seized all the inventory, including over $8 million worth of inventory belonging to IDWG. Thereafter, Brad Jones, IDWG Vice President, worked with PDQ personnel to rework the IDWG inventory in order to release it from the FDA seizure. During this period, PDQ also packaged a small amount of non-seized product.
On March 10, 1992, Mr. Osmers and Larry Denton met in Washington, D.C. At that time, Denton told Osmers that "he would rather liquidate than sell PDQ to him" and Osmers conveyed to Denton that there was "a very good chance that IDWG would not continue to do business with PDQ."
About March 16, 1992, IDWG was contacted by C.D. Smith Co., who mistakenly thought that IDWG had sold certain drugs to C.D. Smith. After investigation, IDWG learned that PDQ had sold the drugs which originated from IDWG. Thereafter, IDWG considered PDQ and its principals to be thieves.
On March 24, 1992, Larry Denton wrote a letter to Chris Osmers asking Osmers for a written statement regarding the future of the relationship between IDWG and PDQ. Osmers did not respond to that letter. Osmers did not promise to continue to do business with PDQ after the FDA rework was completed.
On May 4, 1992, the rework was completed and IDWG filed this lawsuit shortly thereafter. PDQ has been unable to obtain additional work and Larry Denton believes that his company has been blackballed by the industry by IDWG accusing it of RICO violations and theft.
When considering a motion for summary judgment, the court must examine all the evidence in the light most favorable to the nonmoving party. Langley v. Adams County, Colorado, 987 F.2d 1473, 1476 (10th Cir.1993). A moving party who bears the burden of proof at trial is entitled to summary judgment only when the evidence indicates that no genuine issue of material fact exists. Fed.R.Civ.P. 56(c); Anthony v. United States, 987 F.2d 670, 672 (10th Cir.1993). If the moving party does not bear the burden of proof at trial, it must show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986).
Once the movant meets these requirements, the burden shifts to the party resisting the motion to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986). The nonmovant may not merely rest on the pleadings to meet this burden. Id. Genuine factual issues must exist that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. at 2511; Tersiner v. Union Pacific R.R., 740 F.Supp. 1519, 1522-23 (D.Kan. 1990). More than a "disfavored procedural shortcut," summary judgment is an important procedure Celotex, 477 U.S. at 327, 106 S.Ct. at 2555.
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