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In Gearhart, the defendant moved for summary judgment on the plaintiff's claim for unjust enrichment because the plaintiff did not directly confer a benefit on the defendant.
Summary of this case from Burgin v. Ethicon, Inc.Opinion
Civil Action No. 18-2-HRW
11-20-2019
Edward P. GEARHART, Individually and on behalf of All Others Similarly Situated, Plaintiff, v. EXPRESS SCRIPTS, INC., Defendant.
Alex C. Davis, Jasper Duduley Ward, IV, Jones Ward PLC, Louisville, KY, for Plaintiff. Britt K. Latham, Pro Hac Vice, Elaina S. Al-Nimri, Pro Hac Vice, Bass, Berry & Sims PLC, Nashville, TN, Jaron P. Blandford, Jason R. Hollon, McBrayer, McGinnis, Leslie & Kirkland, PLLC, Lexington, KY, Jonathan R. Chally, Pro Hac Vice, Philip E. Holladay, Jr., Pro Hac Vice, King & Spalding, Atlanta, GA, for Defendant.
Alex C. Davis, Jasper Duduley Ward, IV, Jones Ward PLC, Louisville, KY, for Plaintiff.
Britt K. Latham, Pro Hac Vice, Elaina S. Al-Nimri, Pro Hac Vice, Bass, Berry & Sims PLC, Nashville, TN, Jaron P. Blandford, Jason R. Hollon, McBrayer, McGinnis, Leslie & Kirkland, PLLC, Lexington, KY, Jonathan R. Chally, Pro Hac Vice, Philip E. Holladay, Jr., Pro Hac Vice, King & Spalding, Atlanta, GA, for Defendant.
MEMORANDUM OPINION AND ORDER
Henry R. Wilhoit, Jr., United States District Judge
This matter is before the Court upon Defendant Express Scripts, Inc.'s Motion for Summary Judgment [Docket No. 67]. The matter has been fully briefed by the parties [Docket Nos. 67-1, 71 and 72]. For the reasons set forth herein, the Court finds that the Defendant is entitled to judgment as a matter of law.
I.
Plaintiff Edward Gearhart filed this civil action as a putative class action, seeking a declaratory judgment that Defendant Express Scripts, Inc.'s ("ESI") $75 fee violates the Kentucky Consumer Protection Act, KRS § 367.110, et seq. and Kentucky's Medical Records Law, KRS 422.317, as well as damages for fraud and unjust enrichment. i.
This Court previously dismissed Plaintiff's claims of breach of contract and fraud under the Health Insurance Portal and Accountability Act ("HIPAA"), 45 C.F.R. § 160.103 [Docket No. 37].
ESI is a corporation based in St. Louis, Missouri. [Third Amended Complaint, Docket No. 27, ¶ 8]. It is neither a pharmacy nor a health care provider. [Deposition of ESI Corporate Representative Maryanne Cameron, Docket No. 67-3, pp. 96 and 103]. Rather, ESI contracts with health plans and third-party payors to manage the delivery of prescription drugs to individual members of those insurance plans. Id. at pp. 48, 86 and 96. In the parlance of the industry, ESI is a pharmacy benefit manager ("PBM").
ESI has subsidiaries which operate as pharmacies. Id. at 85.
In its capacity as a PBM, ESI responds to requests from members of covered plans to search for prescription claims records. Id. at 10. A covered plan member can obtain his or her prescription claims history free of charge by accessing those records online or calling the toll-free number listed on the back of his or her pharmacy benefit card. Id. at 20 and 26.
In addition to responding to requests for prescription records from covered plan members, ESI responds to record requests from third parties. Third-party requests for prescription claim histories are handled differently than direct requests from covered plan members. Id. at 10. When a request is made by a third party, ESI requires a fee for record retrieval only if it cannot be determined that the request is on the covered plan member's behalf. [ESI Policy and Procedures, Docket No. 67-9, No. ESI000025]. Id. The fee is disclosed on the request form and paid in advance. When a third-party request for a covered plan member's prescription claims record is received, ESI takes a number of steps to process the request including: (1) analyzing the request to determine if it is new or already in process; (2) entering a new request into the tracking log it uses to track third-party requests; (3) verifying that the request is HIPAA compliant, that all required documentation is included, and that the fee has been received; (4) following up with the requesting party regarding any missing information needed to process the request; (5) gathering records responsive to the request; (6) preparing an affidavit if required; (7) preparing a cover letter to send to the requesting party; and (8) mailing the cover letter and records to the requesting party. Id.
ii.
Plaintiff previously filed a products liability suit against DePuy Orthopedics and related entities for a failed and recalled hip implant device. [Deposition of Edward Gearhart, Docket No. 67-9, p. 81]. In that case, he was represented by Jones Ward, PLC, the same firm which represents him in the instant matter. As is customary, Plaintiff had a contingency fee arrangement with Jones Ward in the DePuy case, which provided, inter alia , that Plaintiff had no obligation to reimburse his lawyers for the expenses incurred unless he prevailed against or recovered from DePuy. [Engagement Agreement., Docket No. 67-15].
Following standard litigation procedure, in connection with the DePuy case, Plaintiff authorizes Jones Ward to obtain certain records. [Docket No. 67-9, p. 81]. Jones Ward used the services of a third-party records retrieval company, Express Medical Records ("EMR") to collect Plaintiff's records from ESI. [Docket No. 67-4]. In doing so, EMR submitted a request to ESI which gave no indication that EMR was working on Plaintiff's behalf. [Docket No. 67-5]. Rather, the request EMR submitted appeared to be a third-party request, one that ESI routinely receives from those seeking information about, rather than on behalf of, a covered plan member. Id. The record establishes that EMR did not represent itself as Plaintiff's agent or take any action to convey that it was acting on Plaintiff's behalf. Id. As such, according to its policy set forth supra , ESI handled the request from EMR as a third-party request and required the payment of a fee. EMR paid the $75 fee.
Plaintiff testified that he did not know which records his lawyers would attempt to obtain or from whom. [Docket No. 67-11 at p. 68]. He was not informed that his lawyers would request his prescription data from ESI. Id. at p. 76. He had no interaction with ESI. Id. at p. 68. Indeed, he has never spoken to anyone at ESI or EMR for any purpose. Id. at p. 80.
iii.
In March 2014, Plaintiff received a settlement offer in the DePuy case, which he agreed to accept. [March 11, 2014, Letter from Jones Ward to Mr. Gearhart, Docket No. 67-13].
In October 2016, two and a half years after he accepted the settlement and a year after Plaintiff filed the instant case, Plaintiff's lawyers reduced his settlement payment by $75 as reimbursement for the $75 that EMR had paid to ESI for his prescription claims records. [Docket Nos. 67-12 and 67-14].
iv.
Plaintiff filed this civil action in Rowan County Circuit Court, alleging that ESI "targets lawyers and their injured clients across Kentucky by charging them exorbitant and unlawful fees for health records that should be free." [Docket No. 27, ¶ 1]. Specifically, Plaintiff alleged violations of the Kentucky Consumer Protection Act ("KCPA") and Kentucky's Medical Records Law, fraud, unjust enrichment, fraud based on HIPAA violations, declaratory judgment, and breach of contract. [Docket No. 27]. The HIPAA-based fraud claim and the claim for breach of contract were dismissed by the Court on February 22, 2019. [Docket No. 37].
Notably, at the time Plaintiff filed this lawsuit, he had not yet been charged the $75 he challenges.
Defendant seeks summary judgment as to all claims alleged against it.
II.
In ruling on a motion for summary judgment, the Court must determine whether there is any genuine issue of material fact that would preclude entry of judgment for the moving party as a matter of law. See Fed. R. Civ. P. 56(a). The moving party bears the initial burden of stating the basis for the motion and identifying evidence in the record that demonstrates an absence of a genuine issue of material fact. See Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party satisfies its burden, the non-moving party must then produce specific evidence proving the existence of a genuine issue of fact for trial. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
While the Court must view the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show the existence of some "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). Rather, the non-moving party must present specific facts proving that a genuine factual issue exists by "citing to particular parts of the materials in the record" or by "showing that the materials cited do not establish the absence ... of a genuine dispute." Fed. R. Civ. P. 56(c)(1). "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson , 477 U.S. at 252, 106 S.Ct. 2505.
III.
As Justice Scalia famously wrote in Summers v. Earth Island Institute , 555 U.S. 488, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009) :
In limiting the judicial power to "Cases" and "Controversies," Article III of the Constitution restricts it to the traditional role of Anglo–American courts, which is to redress or prevent actual or imminently threatened injury to persons caused by private or official violation of law. Except when necessary in the execution of that function, courts have no charter to review and revise legislative and executive action. This limitation is founded in concern about the proper—and properly limited—role of the courts in a democratic society.
Id. at 492-493, 129 S.Ct. 1142 (internal citations omitted).
He continued:
The doctrine of standing is one of several doctrines that reflect this fundamental limitation. It requires federal courts to satisfy themselves that the plaintiff has ‘alleged such a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court jurisdiction.
Id. at 493, 129 S.Ct. 1142 (internal citations omitted).
In order to partake of the jurisdiction of the federal courts, a plaintiff must demonstrate (1) a concrete "injury in fact", (2) which was caused by the defendant and (3) can be redressed through the sought-after relief. See generally , Lujan v. Defenders of Wildlife , 504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The injury must be "fairly traceable to the defendant's conduct." Id. at 561, 112 S.Ct. 2130.
The undisputed facts demonstrate that Plaintiff's alleged injury, to-wit, payment of a fee to ESI for retrieval of pharmacy claims records, is not fairly traceable to ESI's conduct. Plaintiff testified that he had no role in requesting his prescription claims records from ESI beyond signing an authorization for the release of records. He generally did not know what records his lawyers requested. No one informed him about the specific records request to ESI. He did not pay any fee to ESI for the records. In fact, he has never personally spoken to anyone at ESI.
It is also clear that Plaintiff's alleged injury does not result from any conduct of ESI. Rather, Plaintiff's injury stems directly and entirely from his lawyers', or EMR's, decision to pay $75 for records as opposed to employing the means necessary to obtain the records for free. Plaintiff testified that he could have called the number on the back of his prescription card or requested his prescription claims records directly from his pharmacies. [Docket No. 67-11, p. 104]. He further admits that the authorization form he signed explicitly states that he could call the number on his card. Id. at 99. That would have allowed Plaintiff to obtain these records for free. Yet, he testified that his lawyers never asked him to do that. Id. at 79.
Plaintiff did not even know the fee charged by ESI was the basis of this class action complaint prior to receiving a letter from his lawyers stating that the $75 had been deducted from his settlement in the DePuy case and that the $75 "forms the basis of [this] class action." Id. at 72-73.
In insisting that he has standing to bring this case, Plaintiff relies upon the Kentucky Court of Appeals' opinion in William C. Eriksen, P.S.C. v. Gruner & Simms , 400 S.W.3d 290 (Ky. Ct. App. 2013). In Eriksen , a chiropractor in Louisville failed to provide a free copy of medical records to the law firm hired by one of its patients. Pursuant to the chiropractor's policy, records are provided free of charge only to patients, and that attorneys and other authorized representatives had to pay $1 per page. Id. at 291-292. The Court of Appeals held that the free copy of records "...must be made available to an agent of the patient if the patient expressly so requests." Id. at 293.
Plaintiff contends that Eriksen "looms large," implying that simply by virtue of the agency relationship between Gearhart and his counsel, standing is established. Yet Plaintiff ignores the factual distinctions between Eriksen and this case. In this case, Plaintiff's counsel chose the means by which to obtain the records, opting for the fee and, further, employed a third-party, unknown and unrelated to Plaintiff, to obtain the records. Plaintiff's lawyers and EMR chose to utilize a method to obtain Plaintiff's records that resulted in the $75 fee. ESI's conduct did not cause Plaintiff's alleged loss. The agency relationship between Plaintiff and his lawyers, therefore, does nothing to change the fact that Plaintiff's injury is not fairly traceable to ESI's conduct.
Plaintiff also contends he has standing because he ultimately paid the $75 fee. Again, Plaintiff misses the mark. His belief that he was "at all times contractually responsible" for the $75 fee is simply at odds with the undisputed facts in the record. Plaintiff's liability for the $75 fee was always contingent upon a favorable outcome in the DePuy lawsuit.
In opposing summary judgment, Plaintiff does not refute that he played no role in obtaining records from ESI, that the fee was incurred due to his lawyer's decision not to use the means available to obtain the records for free and that decision has nothing to do with the conduct of ESI.
Plaintiff's injury is not traceable, "fairly" or otherwise to ESI. Therefore, Plaintiff lacks standing to bring claims against ESI related to the $75 fee. See Appalachian Reg'l Healthcare v. Coventry Health & Life Ins. Co. , No. 5:12-CV-114-KSF, 2014 WL 12749202, at *4 (E.D. Ky. Mar. 24, 2014) (finding plaintiffs lacked standing where the injury complained of was "not fairly traceable to the action of [the defendant], as opposed to the independent action of some third party.").
IV.
Even if Plaintiff were properly before this Court, his claims fail on the merits as well.
i. Plaintiff's claim for violation of the KCPA fails as a matter of law.
The KCPA provides redress for "[u]nfair, false, misleading, or deceptive acts or practices in the conduct of any trade or commerce." KRS § 367.170. A lawsuit for violation of the Act may be brought by a person who "purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal" as a result of the unlawful act. KRS § 367.220.
Conduct giving rise to a claim for violation of the KCPA is tortious in nature. Capitol Cadillac Olds, Inc. v. Roberts , 813 S.W.2d 287, 291 (Ky. 1991). However, a contractual relationship is the crux of a KCPA claim. See Keaton v. G. C. Williams Funeral Home, Inc. , 436 S.W.3d 538, 546 (Ky. App. 2013) "The language of the statute plainly contemplates an action by a purchaser against his immediate seller." Skilcraft Sheetmetal, Inc. v. Kentucky Machinery, Inc. , 836 S.W.2d 907, 909 (Ky. App. 1992). "The legislature intended that privity of contract exist between the parties in a suit alleging a violation of the Consumer Protection Act." Id.
The Kentucky legislature had the option of enacting a statute which allows persons other than purchasers with privity of contract to bring an action under the Consumer Protection Act but, unlike its counterparts in Massachusetts and Texas, it did not. Id.
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An examination of the record establishes that there is no privity between Plaintiff and ESI. The transaction at issue proceeded as follows: Plaintiff's lawyers retained the services of EMR to request and obtain Plaintiff's prescription claims records from ESI. EMR then requested Plaintiff's prescription claims records and paid $75 to ESI for the records. ESI provided the records to EMR. Plaintiff was not part of the chain.
Plaintiff's bald assertion that he "was in privity with ESI through his agent's actions" flouts the undisputed facts in the record. Plaintiff testified that he was not aware of this arrangement or even of the existence of EMR. Plaintiff did not pay ESI, or even EMR, for the records. Instead, the $75 was deducted from Plaintiff's settlement in the DePuy litigation to reimburse his lawyers' payment to EMR. He was not in privity with ESI and therefore, his claim pursuant to the KCPA is untenable.
ii. Plaintiff's claim for violation of the Kentucky Medical Records Law fails as a matter of law.
The Kentucky Medical Records Law provides that "[u]pon a patient's written request, a hospital licensed under KRS Chapter 216B or a health care provider shall provide, without charge to the patient, a copy of the patient's medical record." KRS § 422.317.
The statute does not define "health care provider". As such, the rules of statutory construction apply. "The cardinal rule of statutory construction is ‘to ascertain the intention from the words employed in enacting the statute and not to guess what the Legislature may have intended but did not express. Resort must be had first to the words, which are decisive if they are clear.’ " Com v. Gaitherwright , 70 S.W.3d 411, 414 (Ky. 2002) (quoting Gateway Constr. Co. v. Wallbaum, Ky. , 356 S.W.2d 247, 249 (Ky. 1962).) "[I]t is neither the duty nor the prerogative of the judiciary to breathe into the statute that which the Legislature has not put there." Id. at 413. Accordingly, "the plain meaning of the statutory language is presumed to be what the legislature intended, and if the meaning is plain, then the court cannot base its interpretation on any other method or course. [The Court] ascertain[s] the intention of the legislature from the words used in enacting statutes rather than surmising what may have been intended but was not expressed." Revenue Cabinet v. O'Daniel , 153 S.W.3d 815, 819 (Ky. 2005).
ESI is not a healthcare provider. Unlike a doctor, physical therapist or dentist, it does not provide health care services to patients. ESI does not have patients, dispense medication or medical advice. To argue that is a "healthcare provider" stretches the meaning of the terms beyond the bounds of logic.
Plaintiff vehemently contends that ESI is a true pharmacy, which dispenses medications. This is false and based upon a misunderstanding of the structure of the company and a misstatement of ESI's representative's deposition testimony. Plaintiff cites out of context deposition testimony that "Express Scripts", the parent company of ESI, "also functions as a pharmacy." Yet, as the deponent explained, the only Express Scripts-related entity registered with the Kentucky Board of Pharmacy is Express Scripts Pharmacy, Inc., a subsidiary of Express Scripts Holding Company that is completely distinct from ESI. ESI, the entity that provided Plaintiff's prescription claims data to EMR and the entity that Plaintiff sued in this lawsuit on that basis, is not a pharmacy or a health care provider and, this, is not subject to the Kentucky Medical Records Law.
iii. Plaintiff's claim of fraud fails as a matter of law.
Under Kentucky law, the elements of a claim for fraud are:
(1) the defendant made a material representation to the plaintiff; (2) the representation was false; (3) the defendant knew the representation to be false or made it with reckless disregard for its truth or falsity; (4) the defendant intended to induce the plaintiff to act upon the misrepresentation; (5) the plaintiff reasonably relied upon the misrepresentation; and (6) the misrepresentation caused injury to the plaintiff.
Bisig v. Time Warner Cable, Inc. , 940 F.3d 205, 213 (6th Cir. 2019) (internal citations omitted).
Glaringly absent from Plaintiff's proof is a misrepresentation made by ESI to him. Plaintiff not only fails to allege that ESI made a misrepresentation to him, but he admitted, under oath, that ESI did not make any representations to him at all. He testified that he has never spoken to or interacted in any way with anyone at ESI, and he admits he did not read any written communications from ESI.
Also missing from Plaintiff's prima facie case is reliance upon the alleged misrepresentation. In addition to not speaking to anyone at ESI Plaintiff admits that he did not rely on any representations contained in the authorization for he signed at the behest of his lawyers. Rather, Plaintiff relied entirely on his lawyers' advice in signing the authorization form. Indeed, Plaintiff testified that he may not have even read the authorization form before signing it due to his trust in his lawyers to "handle everything." [Docket No. 67-9, p.100]. Where the party claiming [fraud] does not rely on any misstatement by the other party, a claim for [fraud] does not lie." First Capital Bank of Kentucky v. Hammann , No. 3:08-CV-646-H, 2010 WL 2228282, at *3 (W.D. Ky. June 2, 2010) (citing Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc. , 113 S.W.3d 636, 640 (Ky. App. 2003) ). Plaintiff relied entirely on advice from his lawyers, certainly nothing from ESI, and for that reason he cannot establish the reliance element of a fraud claim.
Plaintiff's argument in support of his fraud claim appears to be that ESI's fee is too high. Yet, absent a misrepresentation or reliance thereon, there is no fraud.
i. Plaintiff's claim of unjust enrichment fails as a matter of law.
Under Kentucky law, "[t]o recover on a claim of unjust enrichment a plaintiff is required to prove the following three elements: (1) benefit conferred upon defendant at plaintiff's expense; (2) a resulting appreciation of benefit by defendant; and (3) inequitable retention of [that] benefit without payment for its value." Furlong Dev. Co. v. Georgetown-Scott Cty. Planning & Zoning Comm'n , 504 S.W.3d 34, 39-40 (Ky. 2016). "Kentucky courts have consistently found that the first element not only requires a benefit be conferred upon the defendant, but also that the plaintiff be the party conferring that benefit." Pixler v. Huff , No. 3:11-CV-00207-JHM, 2011 WL 5597327, at *11 (W.D. Ky. Nov. 17, 2011).
Plaintiff's claim fails at the first element, to-wit, he did not directly confer any benefit upon ESI. He testified that he did not directly pay any fee to ESI. It is undisputed that it was EMR that paid the $75 fee to ESI. Plaintiff is at least two steps removed from the transaction. As set forth repeatedly supra , Plaintiff has never even spoken to anyone at ESI. Plaintiff also does not know who hired EMR to request his pharmacy claims records. it was Plaintiff's lawyers, not EMR, who deducted $75 from Plaintiff's settlement in the DePuy case as reimbursement for the $75 fee.
As Plaintiff did not directly confer a benefit upon ESI, he cannot claim unjust enrichment.
V.
In opposing Defendant's dispositive motion, Plaintiff argues that ESI's fees are a "flagrant attack on Kentucky lawyers and their ability to practice law." [Plaintiff's Response to Defendant's Motion for Summary Judgment, Docket No. 71, p. 4]. He challenges ESI to explain "why it is charging Kentucky law firms a fee that is double, triple, or quadruple the rate that similar entities charge for health records, if they charge a fee at all." Id.
Worthy musings but aired in the incorrect forum. Plaintiff's arguments sound in policy rather than established law. This Court does not make the law but applies it. Prospective decision making is the handmaid of judicial activism , and the born enemy of stare decisis. Harper v. Virginia Dept. of Taxation , 509 U.S. 86, 106, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993) (Scalia, J. concurring).
Plaintiff lacks standing to pursue this claim and, further, his claims cannot withstand summary judgment.
Accordingly, IT IS HEREBY ORDERED that upon Defendant Express Scripts, Inc.'s Motion for Summary Judgment [Docket No. 67] be SUSTAINED .