Shepherd v. Costco Wholesale Corp.

• Decision Date: 30 April 2019
• Docket Number: No. 1 CA-CV 18-0072,1 CA-CV 18-0072
• Citation: 441 P.3d 989,246 Ariz. 470
• Parties: Greg SHEPHERD, Plaintiff/Appellant, v. COSTCO WHOLESALE CORPORATION, Defendant/Appellee.
• Court: Arizona Court of Appeals

246 Ariz. 470

441 P.3d 989

Greg SHEPHERD, Plaintiff/Appellant,

v.COSTCO WHOLESALE CORPORATION, Defendant/Appellee.

No. 1 CA-CV 18-0072

Court of Appeals of Arizona, Division 1.

FILED April 30, 2019

PERKINS, Judge:

¶1 Greg Shepherd challenges the dismissal of his complaint against Costco Wholesale Corporation ("Costco") alleging numerous tort claims stemming from Costco’s alleged failure to cancel an unwanted prescription and disclosure of the prescription information to his ex-wife. We reverse and remand for further proceedings on Shepherd’s negligence and punitive damages claims but affirm the dismissal of his other claims. Further, we hold that HIPAA’s requirements may inform the standard of care in a negligence action for wrongful disclosure of healthcare information.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Because Shepherd appeals from the grant of a motion to dismiss, we state the facts alleged in his operative complaint and must assume they are true for purposes of this appeal. Southwest Non-Profit Housing Corp. v. Nowak , 234 Ariz. 387, 389, ¶ 4, 322 P.3d 204, 206 (App. 2014).

¶3 Shepherd saw his physician in January 2016 for a check-up and a refill of his usual prescription. During that visit, his physician offered him an erectile dysfunction

("E.D.") medication sample, which he accepted. Shortly thereafter, Costco told Shepherd that his regular prescription and a full prescription of the E.D. medication were ready for pickup. Shepherd told Costco he did not want the E.D. prescription, and Costco acknowledged his cancellation request.

¶4 Approximately one month later, Shepherd called Costco to check on another refill of his regular prescription and was told it and a full prescription of the E.D. medication were ready for pickup. Shepherd again told Costco he did not want the E.D. medication.

¶5 Shepherd called Costco again the next day to authorize his ex-wife, with whom he was exploring possible reconciliation, to pick up his regular prescription. Costco gave her the regular prescription and the E.D. medication. She did not accept or pay for the E.D. medication but joked with a Costco employee about Shepherd "not picking it up yet" and told Shepherd’s children and some friends about the medication. She also stopped reconciliation efforts with Shepherd.

¶6 Shepherd complained to Costco headquarters and received a written response that allegedly acknowledged the disclosure of medical information to his ex-wife violated both the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and Costco’s privacy policy. Shepherd then sued Costco alleging negligence, breach of fiduciary duty, fraud, negligent misrepresentation, intentional infliction of emotional distress, intrusion upon seclusion, and public disclosure of private facts based on Costco’s "public disclosure of an embarrassing medication that [he] twice rejected."

¶7 Costco moved to dismiss the complaint. The trial court granted the motion, finding (1) Costco was entitled to immunity from suit under Arizona Revised Statutes ("A.R.S.") section 12-2296, (2) HIPAA preempted the claims, and (3) Shepherd failed to allege sufficient facts to support his claims. Shepherd now appeals.

DISCUSSION

¶8 We review the dismissal of a complaint pursuant to Arizona Rule of Civil Procedure 12(b)(6)de novo . Coleman v. City of Mesa , 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). We are required to accept as true all well-pled facts and give Shepherd the benefit of all reasonable inferences arising therefrom. Botma v. Huser , 202 Ariz. 14, 15, ¶ 2, 39 P.3d 538, 539 (App. 2002). We will affirm the dismissal only if Shepherd would not have been entitled to relief under any facts susceptible of proof in his complaint. Coleman , 230 Ariz. at 356, ¶ 8, 284 P.3d at 867.

I. Negligence

¶9 A plaintiff must prove four elements to establish a negligence claim: (1) a duty requiring the defendant to conform to a certain standard of care, (2) the defendant’s breach of that standard, (3) a causal connection between the defendant’s conduct and the resulting injury, and (4) actual damages. Quiroz v. ALCOA Inc. , 243 Ariz. 560, 563–64, ¶ 7, 416 P.3d 824, 827–28 (2018).

¶10 In his complaint, Shepherd alleged Costco’s duty of care arose from "the regulations governing pharmacy conduct, HIPAA laws, and Costco’s own privacy policy." On appeal, he again contends Costco violated HIPAA and A.R.S. §§ 12-2291 to -2297.

A. Statutory Authorization

¶11 Under Arizona law, "all medical records and payment records, and the information contained in medical records and payment records, are privileged and confidential." A.R.S. § 12-2292(A). But this information may be disclosed "without the written authorization of the patient or the patient’s health care decision maker as otherwise authorized by state or federal law, including [HIPAA] privacy standards." A.R.S. § 12-2294(C). HIPAA, in relevant part, allows covered entities such as Costco to "disclose to ... any ... person identified by the individual, the protected health information directly relevant to such person’s involvement with the individual’s health care." 45 C.F.R. § 164.510(b)(1)(i).

¶12 Here, Costco disclosed the E.D. prescription to Shepherd’s ex-wife, whom he had expressly authorized to receive prescription information. Shepherd contends HIPAA only authorizes the disclosure of "filled prescriptions," but even assuming Shepherd’s contention is correct, the E.D. prescription was filled, albeit erroneously.

¶13 Shepherd also contends he objected to such disclosure when he requested that the E.D. prescription be cancelled but he bases this contention on a HIPAA provision that applies only to disclosures that take place in the presence of the patient. 45 C.F.R. § 164.510(b)(2)(ii). The portion of the relevant regulation addressing disclosures made when the individual is not present grants covered entities such as Costco the ability to use professional judgment to reasonably infer the individual’s best interest in allowing another to act on his behalf to pick up filled prescriptions. 45 C.F.R. § 164.510(b)(3). Costco did not need to exercise such judgment here because Shepherd authorized his ex-wife to receive prescription information. Shepherd thus did not allege a violation of either HIPAA or related Arizona statutes.

B. Duty

¶14 Although it did not arise under HIPAA, the parties nonetheless agree that Costco owed Shepherd a duty of care. That duty includes, at a minimum, the obligation to act as a reasonably prudent pharmacy would under the circumstances. See Lasley v. Shrake’s Country Club Pharmacy, Inc ., 179 Ariz. 583, 586, 880 P.2d 1129, 1132 (App. 1994). Shepherd alleged that Costco "represented ... that his instructions to cancel his prescription had been acknowledged and would be acted upon," that it "fail[ed] to cancel the [E.D.] prescription" despite multiple requests and opportunities to do so, and that one of its employees "joked" with his ex-wife about the E.D. prescription. These allegations are sufficient to withstand dismissal on the pleadings under Rule 12(b)(6). See, e.g., Verduzco v. American Valet , 240 Ariz. 221, 225, ¶ 9, 377 P.3d 1016, 1020 (App. 2016) (quoting Ariz. R. Civ. P. 8(a)(2) ) (under Arizona’s notice pleading rules, "[a] short and plain statement of the claim showing that the pleader is entitled to relief" is sufficient to overcome a Rule 12(b)(6) motion to dismiss). The trial court thus erred in dismissing Shepherd’s negligence claim.

II. Breach of Fiduciary Duty

¶15 Shepherd alleged a fiduciary duty arose between himself and Costco because of "the confidential, professional, and private nature of the relationship between pharmacist/pharmacy and medical customer." Establishing a fiduciary duty requires either peculiar intimacy or an express agreement to serve as a fiduciary. Cook v. Orkin Exterminating Co., Inc. , 227 Ariz. 331, 334, ¶ 15, 258 P.3d 149, 152 (App. 2011). Neither circumstance is alleged in this case, and mere unilateral trust in another party’s competence or integrity does not alone establish a fiduciary duty. Standard Chartered PLC v. Price Waterhouse , 190 Ariz. 6, 24, 945 P.2d 317, 335 (App. 1996). Nor does the fact that a profession is regulated, despite Shepherd’s contention to the contrary. Thus, the superior court did not err in ruling Shepherd failed to state a claim for breach of fiduciary duty.

III. Fraud

¶16 Shepherd based his common law fraud claim on Costco’s alleged representations that "his instructions to cancel his [E.D.] prescription had been acknowledged and would be acted upon." But unfulfilled promises cannot support an actual fraud claim absent the presence of an intent not to perform at the time of the promise. Hall v. Romero , 141 Ariz. 120, 123–24, 685 P.2d 757, 760–61 (App. 1984). Shepherd alleged no facts to suggest Costco intended to not cancel the E.D. prescription when it acknowledged his first cancellation request. He contends on appeal that there was a "triple confirmation that the offending prescription had been cancelled," but his complaint only alleged acknowledgment of his first cancellation request.

¶17 Shepherd further contends Costco acted fraudulently by failing to disclose to him the E.D. prescription was "a) still not cancelled and b) also waiting for pickup." He did not raise this argument in the trial court and cannot raise it for the first time on appeal. County of La Paz v. Yakima Compost Co., Inc. , 224 Ariz. 590, 606, ¶ 49, 233 P.3d 1169, 1185 (App. 2010). The trial court correctly dismissed Shepherd’s fraud claim.

IV. Negligent Misrepresentation

¶18 Shepherd’s negligent misrepresentation claim also relies on Costco’s alleged acknowledgment of his request to cancel the E.D. prescription. Negligent misrepresentation, like fraud, cannot be premised on a promise of future conduct. McAlister v. Citibank (Arizona) , 171 Ariz. 207, 215, 829 P.2d 1253, 1261 (App. 1992). Thus, this claim was properly dismissed.

V. Intentional Infliction of Emotional...