J.R. v. Walgreens Boots Alliance, Inc.

Decision Date02 July 2020
Docket NumberNo. 2:19-cv-00446-DCN,2:19-cv-00446-DCN
Citation470 F.Supp.3d 534
CourtU.S. District Court — District of South Carolina
Parties J.R., individually and on behalf of her minor children A.R. and H.K., J.H., B.Y., and J.S., individually and on behalf of all others similarly situated, Plaintiffs, v. WALGREENS BOOTS ALLIANCE, INC. and Walgreen Co., Defendants.

Adair Ford Boroughs, Frances C. Trapp, William Norman Nettles, Bill Nettles Law, Columbia, SC, Aimee J. Hall, Pro Hac Vice, C. Neal Pope, Pro Hac Vice, Charles W. Byrd, Pro Hac Vice, Michael J. Moore, Pro Hac Vice, Pope McGlamry PC, Atlanta, GA, Arthur R. Miller, Pro Hac Vice, New York University School of Law, New York, NY, Edward L. Hardin, Jr., Pro Hac Vice, Edward L. Hardin Jr. Law Office, Birmingham, AL, Sally Corbette Newman, Charleston, SC, Wade H. Tomlinson, III, Pro Hac Vice, Pope McGlamry, Columbus, GA, for Plaintiffs.

Adam Jesse Hegler, Amanda S. Kitts, David Eidson Dukes, Nelson Mullins Riley and Scarborough LLP, Columbia, SC, Kate Elizabeth Heinzelman, Pro Hac Vice, Sidley and Austin LLP, Washington, DC, Matt C. Bergs, Pro Hac Vice, Ross O. Kloeber, Pro Hac Vice, Scott David Stein, Pro Hac Vice, Sidley Austin LLP, Chicago, IL, for Defendants.

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

The following matter is before the court on defendants Walgreens Boots Alliance, Inc. ("WBA") and Walgreen Co.’s (collectively, "Walgreens") motion to dismiss the amended complaint and to dismiss WBA for lack of personal jurisdiction, ECF No. 135. For the reasons set forth below, the court grants the motion.

I. BACKGROUND

This case arises from Walgreens's alleged violation of plaintiffs J.R., J.H., B.Y., and J.S.’s (collectively, "plaintiffs") privacy rights by unlawfully using, disclosing, and disseminating plaintiffs’ personally identifiable information ("PII") through Walgreens's 340B Complete® services ("340B Complete"). Plaintiffs are all residents of Charleston, South Carolina and customers of Walgreens pharmacies. Plaintiffs allege that WBA uses three divisions to conduct its operations: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale. Walgreen Co. is the wholly-owned subsidiary of WBA that operates the Retail Pharmacy USA division of WBA, meaning Walgreen Co. operates all of the Walgreens pharmacy locations in South Carolina.

A. Walgreens Pharmacy Operations in South Carolina

Plaintiffs begin by explaining that each Walgreens pharmacy is required to comply with South Carolina's Prescription Information Privacy Act ("PIPA"), the South Carolina Pharmacy Practice Act ("PPA"), and the American Pharmaceutical Association Code of Ethics. In addition, South Carolina law requires each Walgreens pharmacy to operate with a pharmacist-in-charge, who is responsible for compliance with the law and management of the pharmacy and its personnel. Walgreens uses a Notice of Privacy Practices ("NPP") in its pharmacies, and plaintiffs allege that the NPP contains no mention of 340B Complete.

Plaintiffs allege that Walgreens pharmacy customers provide their PII to Walgreens's pharmacies for the purpose of obtaining their individual prescriptions and to allow Walgreens's pharmacy to seek third-party payment for those prescriptions. In doing so, Walgreens inputs pharmacy customers’ PII into a "proprietary computer software system" called IntercomPlus, which is accessible by all nationwide retail, mail service, and specialty Walgreens pharmacies. Am. Compl. ¶ 42. The PII that is collected and inputted into IntercomPlus includes the pharmacy customer's name, address, date of birth, payment information, allergies, health conditions, drug information, and physician information.

B. 340B Complete

In 1992, Congress enacted the 340B Drug Discount Program ("340B Program"), which requires drug manufacturers to provide certain medications at discounted prices to eligible healthcare entities that primarily serve low-income patients ("Covered Entities"). Because not all Covered Entities have in-house pharmacy services, Covered Entities contract with third-party pharmacies ("contract pharmacies") to dispense 340B drugs on their behalf. When doing so, Covered Entities are still responsible for ensuring compliance with the 340B Program. Walgreens has entered into multiple contracts with Covered Entities in South Carolina to serve as contract pharmacies.

Around 2010, Walgreens created an allegedly separate department, division, or unit within its corporate structure known as 340B Complete and began marketing its 340B Complete services to help Covered Entities administer the 340B Program and to ensure compliance. Plaintiffs allege that Walgreens operates 340B Complete "as an independent line of business, separate from its retail, photo, health clinic, or pharmacy lines of business, and functions on its own" and promotes 340B Complete "as a ‘prescription eligibility verification solution’ with ‘comprehensive’ and ‘advanced online reporting and data-capture tools,’ providing a single vendor ‘end-to-end contract pharmacy solution.’ " Am. Compl. ¶ 56. Plaintiffs allege that Walgreens markets access to its entire database of pharmacy customers’ PII to potentially capture all patients who received care from a Covered Entity and would therefore be eligible for 340B discounted drugs.

Walgreens's alleged 340B Complete process is as follows. Walgreens allegedly transfers on a daily basis all of its pharmacy customers’ PII from IntercomPlus to a "corporate central repository" called Enterprise Data Warehouse ("EDW"). Am. Compl. ¶ 68. Plaintiffs allege that EDW is not a secure platform and that "unauthorized persons and other Walgreens’ departments, divisions, and/or units can and do unlawfully access pharmacy customers’ PII contained therein." Id. ¶ 69. Plaintiffs allege that 340B Complete receives and scans EDW, compares it to the patient database received by Covered Entities, and then transfers PII of those patients of the Covered Entities into 340B Complete.

According to plaintiffs, one of the business purposes behind 340B Complete is to acquire 340B drugs for resale at Walgreens's pharmacies at prices significantly below the price that Walgreens pays in the wholesale market. Walgreens allegedly performs a financial analysis to determine whether a profit margin on a 340B drug exceeds the Covered Entity's fees paid to Walgreens, and if it does, 340B Complete will generate a purchase order for the drug. If the profit margin does not exceed the fee, 340B Complete will not generate a purchase order for the 340B drug, will not charge fees to the Covered Entity, and will retain its usual non-340B profit margin. Plaintiffs allege that 340B Complete is outside of the scope of Walgreens's pharmacies’ normal operations, and that these administration services are not provided to its pharmacy customers. Covered Entities compensate Walgreens for its provision of services through 340B Complete, and Walgreens allegedly realizes substantial profits from 340B Complete.

There are 160 employees in Walgreens's 340B Complete department, and plaintiffs allege that those employees all have unauthorized and unconsented access to pharmacy customers’ PII. Those employees are allegedly not registered with South Carolina's State Board of Pharmacy, do not maintain pharmacy licensure in South Carolina, and do not provide pharmacy care services.

Plaintiffs filed their complaint and a motion for a preliminary injunction on February 14, 2019. After briefing and limited discovery, the court held a two-day evidentiary hearing on the motion for a preliminary injunction and issued an order denying the motion. This order is currently on appeal.

After appealing the court's order, plaintiffs filed an amended complaint. ECF No. 128. The amended 56-page, 280-paragraph complaint brings claims for: (1) invasion of privacy: wrongful appropriation; (2) invasion of privacy: wrongful publicizing of private affairs; (3) violation of the Fair Credit Reporting Act ("FCRA"); (4) negligence per se based on violations of FCRA, the Health Insurance Portability and Accountability Act ("HIPAA"), and the Federal Trade Commission Act ("FTCA"); (5) negligence per se based on violations of PIPA; (6) breach of contract; (7) declaratory relief pursuant to 28 U.S.C. § 2201 ; (8) negligence based on professional standards; (9) negligence based on PPA; (10) respondeat superior; (11) negligent training and supervision; and (12) unjust enrichment. Walgreens filed a motion to dismiss the amended complaint and to dismiss Walgreens Boots Alliance, Inc. ("WBA") for lack of personal jurisdiction on January 9, 2020. ECF No. 135. Plaintiffs responded on February 24, 2020, ECF No. 143, and Walgreens replied on April 8, 2020, ECF No. 147. On May 18, 2020, plaintiffs filed additional exhibits to their response brief that were not discussed in the brief, ECF No. 154, and on May 19, 2020, plaintiffs filed a "request that the court take judicial notice of facts contained in plaintiffs’ additional exhibits in support of" their response brief, ECF No. 155. The court held a hearing on the motion on May 19, 2020.

II. STANDARD
A. Motion to Dismiss for Lack of Personal Jurisdiction

When the defendant challenges personal jurisdiction, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). When the court decides a personal jurisdiction challenge without an evidentiary hearing, the plaintiff must prove a prima facie case of personal jurisdiction. See Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). "In considering the challenge on such a record, the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." In re Celotex Corp., 124 F.3d at 628 (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989) ). However, the court need not "credit...

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