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Cupp Drug Store, Inc. v. Blue Cross & Blue Shield of Louisiana, Inc.

Court of Appeal of Louisiana, Second Circuit

January 7, 2015

CUPP DRUG STORE, INC., D/B/A THE CORNER DRUG STORE, Plaintiff-Appellee
v.
BLUE CROSS AND BLUE SHIELD OF LOUISIANA, INC., ET AL., Defendant-Appellant

Page 861

Appealed from the Third Judicial District Court for the Parish of Lincoln, Louisiana. Trial Court No. 52,069. Honorable R. Wayne Smith, Judge.

COLVIN & SMITH By: James Henry Colvin, Jr., Cole B. Smith, Taunton Melville, Daniel N. Bays, Jr., Counsel for Appellants.

CHARLES ANDREW O'BRIEN, III, LAW OFFICE OF WILLIAM A. JONES, JR., By: William A. Jones, Jr., Michael Stephen Coyle, Counsel for Appellee.

Before WILLIAMS, CARAWAY and DREW, JJ. CARAWAY, J., dissents with written reasons.

OPINION

Page 862

[49,482 La.App. 2 Cir. 1] DREW, J.

Blue Cross and Blue Shield of Louisiana, Inc., Louisiana Health Service and

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Indemnity Company, Inc., HMO Louisiana, Inc., and RxBlue (collectively referred to as " Blue Cross" ), appeal a judgment and supplemental judgment awarding damages and attorney fees for unfair trade practices in violation of the Louisiana Unfair Trade Practices and Consumer Protection Law (" LUTPA" ). Cupp Drug Store d/b/a Corner Drug Store (collectively referred to as " Cupp" ) has answered the appeal seeking an increase in the damages award of $185,000 and attorney fees award of $110,000, as well as additional attorney fees for this appeal.

We affirm the final judgment awarding damages, award $5,000 in attorney fees to Cupp for this appeal, vacate the supplemental judgment awarding attorney fees and costs, and remand.

FACTS

Gil Birch was the owner, chief executive officer, and pharmacist of Cupp in Ruston for nearly 35 years. Cupp had standard walk-in customers, but it also had a significant number of customers in institutional settings such as nursing homes and group homes. Birch thought Cupp was the largest independently owned drug store in Ruston in 2007.

Cupp was a provider pharmacy for Blue Cross insureds. Express Scripts, Inc. (" ESI" ) was the third-party administrator of Blue Cross's pharmacy plan.

Investigation

Scot Simmons is the owner of Sterling Pharmacy in Ruston. In the [49,482 La.App. 2 Cir. 2] spring of 2007,[1] Simmons called Kandyce Cowart, a senior fraud investigator for Blue Cross, concerning allegations against Cupp. On May 15 and 16, Cowart, along with Andrea Lopez, an investigator for ESI, and Rayland Trisler, an investigator with the Louisiana Board of Pharmacy (" BOP" ), conducted an inspection of Cupp.

The inspection of Cupp led Trisler to file complaints with the BOP against Birch and Cupp on July 23. The complaints alleged violations of Louisiana and federal laws. Some of the charges related to Birch and Cupp: (1) not reversing claims for returned medicines, (2) redispensing returned medicines, (3) billing insurers for medications that were not dispensed, (4) having missing drugs, including Hydrocodone, (5) dispensing multiple prescriptions for controlled dangerous substances that were not authorized, (6) allowing pharmacy techs to process and dispense prescriptions outside the supervision of a pharmacist; (7) permitting unsanitary conditions in a storage building where boxes of new prescription vials and nursing home medication blister packs were kept, and (8) keeping improper daily report records.

Lawsuit

On May 17, the pharmacy director of Blue Cross wrote to Birch that effective the next day, Cupp would no longer be considered a participating pharmacy for Blue Cross.

On May 29, Cupp sued Blue Cross and ESI for damages and injunctive relief regarding the termination of Cupp as a participating [49,482 La.App. 2 Cir. 3] pharmacy.[2] The trial court granted ESI's motion to stay and to compel arbitration, but denied Blue Cross's motion to stay pending the outcome of arbitration.

Walgreens comes to town

Walgreens announced in 2007 that it was opening a store in Ruston. As explained by William Grayson, regional vice-president of store operations for Walgreens from 2003 until July of 2008, Walgreens' strategy

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when entering small markets was to acquire local pharmacies in order to jumpstart their new stores.

In 2007, Birch received a letter from Walgreens inquiring about whether he would be interested in selling Cupp. Birch's attorney, Bill Jones, began negotiating with Walgreens in July.[3]

On September 14, Jones sent an email to Russell Lehman, a pharmacy acquisitions specialist for Walgreens, that outlined the key elements of an asset purchase agreement in principle.[4] The deed for Cupp was faxed from Jones to Lehman on September 24.[5]

[49,482 La.App. 2 Cir. 4] Ricky Indovina, a pharmacy supervisor for Walgreens, met with Birch and Jones at Cupp on September 26. Birch remembered that Indovina asked about Cupp's files (prescription records) and inventory, and his business practices.

Jones sent an email to Lehman on October 5 in which he disclosed the pending lawsuit and the BOP complaints. Three days later, Jones sent an email to Mary Jen Fisher, a Walgreens paralegal involved with acquisitions, and to Lehman that summarized a telephone conversation that Jones and Fisher had that day. The email listed items that Jones wanted changed or added to the asset purchase agreement. The email also mentioned the pending BOP complaints.

On October 17, Jones wrote to Lehman about his agreement to changes and additions to the asset purchase agreement. Jones also stated that he understood that his email disclosures of litigation were satisfactory. Jones finished by stating that he would have Birch execute two signature pages and then fax and mail the originals to Lehman, signifying Birch's formal consent to the asset purchase agreement as amended.

On October 23, Fisher emailed Jones asking him to provide details of the pending legal proceedings that had been disclosed on exhibit G of the asset purchase agreement. Jones replied the next day, describing the pending legal proceedings as the pending suit against Blue Cross and ESI for terminating Cupp as a pharmacy provider, the BOP complaints, and a claim against Cupp's insurer from a customer who claimed he received the wrong prescription.

[49,482 La.App. 2 Cir. 5] On October 29, Fisher emailed Jones, asking for documentation on each of the pending legal proceedings listed on exhibit G. This email was also sent to Josephine Kramer and Cheryl Creek of Walgreens. Kramer was the senior pharmacy acquisitions coordinator. Creek was the manager of pharmacy acquisitions.

On October 30, Jones wrote a letter to Fisher in which he attached the petition in the suit against Blue Cross and ESI, the BOP complaints, and a demand letter alleging the misfiled prescription. Jones also wrote a short summary of each proceeding.

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Regarding the BOP complaints, he wrote that at the proper time, Birch would respond and refute the charges. He also added that it was important to recognize that the charges were the result of a competitor's complaint.

On November 1, Jones wrote to Lehman concerning how many prescription drugs had been purchased from Cupp's suppliers during a one-year period. The next day, Jones emailed Lehman about drug purchases from another supplier.

Change of plans

In the month of November, Walgreens began reconsidering the terms of the agreement. On November 13, Marc Metz, the pharmacy acquisitions implementation coordinator, wrote that Indovina believed the business was legitimate and wanted to move forward with the buyout. However, the price would be lower because no inventory would be purchased and Birch would not be hired. Walgreens would retain some of Cupp's institutional customers, but not the nursing home customers. Metz also wrote that once [49,482 La.App. 2 Cir. 6] Lehman was able to confirm the average number of prescriptions per day, Walgreens could proceed with renegotiating the price and terms. Metz followed up with Indovina in another email that day which said that Walgreens would restructure the holdback in addition to adjusting the purchase price based on retention.

On November 20, Lehman emailed Grayson to let him know that Birch had verbally accepted the offer of $500,000 for files, and an additional $200,000 to $400,000 depending on the number of prescriptions retained. Walgreens would not purchase the inventory or offer employment to Birch. Lehman asked Grayson to let him know if he was okay with the changes, which Grayson did by email that day. Later that day, Lehman forwarded his email to Kramer, with Creek cc'ed. He asked Kramer to forward the information to the legal department so they could make the necessary changes to the contract and get it sent to Jones.

Walgreens and Jones began taking steps to facilitate the closing of the sale. Infowerks is a data conversion company hired by Walgreens to transfer the data from the computer systems of the acquired pharmacy and put it in a format that Walgreens will use. On November 20, Metz emailed Infowerks and Kramer that the closing was now to be held on December 6. He told Infowerks they should be able to contact Birch the next day.

On November 21, Jones emailed Lehman concerning his suggestions of how the employees and the institutions should learn of the sale to Walgreens. Jones thought Walgreens could secure the business from [49,482 La.App. 2 Cir. 7] institutions when Birch and Indovina met with them the morning after telling Cupp's employees about the sale.

On November 21, Jones emailed Lehman, wanting to amend the asset purchase agreement to allow Birch to advertise and sell his nonprescription inventory. Lehman forwarded the email to Kramer, who told him to see whet Indovina wanted to do. Lehman replied to Kramer to word the agreement so that Birch had to get approval from Walgreens before he did any kind of advertisement. Again on November 21, Jones emailed Lehman about additional changes that Jones wanted to make to the latest draft of the asset purchase agreement so it would conform to the deal. Included were instructions for wiring the check for the purchase.

On November 27, Fisher emailed Jones an asset purchase agreement reflecting the new terms of the deal. Kramer and Creek were also sent this email. Exhibit G to the agreement listed the four pending legal proceedings, including the two BOP

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complaints. On November 27, Jones emailed Fisher with some suggested changes. Jones added that the agreement was otherwise acceptable to Birch. Lehman and Kramer were cc'ed in this email. The email was forwarded to Creek the next day.

On November 27, Jones emailed to Lehman and Indovina a statement that Birch was going to make to his customers. Indovina replied to Jones two days later that he thought the statement was clear and accurate, but he wanted Birch to put his personal touch on it. Indovina also asked if Jones had heard about any meetings set up by Birch. Jones replied to Indovina that Birch would not set up any meetings until after he had a signed [49,482 La.App. 2 Cir. 8] agreement. Jones added that he would appreciate any help that Indovina could give in moving the deal along.

On November 27, Metz emailed Indovina that he was planning on being there for the buyout. He asked Indovina about the interviewing of employees and if Indovina had any questions or concerns. Indovina replied the same day that he had not met with the employees because Birch was waiting until the contracts were received and signed.

On November 28, Kramer emailed Fisher, wanting to know if Cupp had any liens. Creek was cc'ed in the email.

Interference with the sale

On November 16, Scott Simmons sent two emails 19 minutes apart to Cowart.[6] The first email said, " I just learned Gil sold out to Walgreens." The second one said, " The purchase amount $1.2 mil, not sure how this would cover the fraud but at least it will capture a portion."

Cowart noted in her log on November 16 that she forwarded Simmons's email to in-house counsel Andy O'Brien and left a detailed message for Assistant U.S. Attorney Cytheria Jernigan. She contacted Jernigan because she " just wanted action taken[.]" Jernigan never called her back.

When she did not hear from Jernigan, Cowart called FBI Special Agent Jared Medaries on November 20. This is also reflected in her log. Cowart left a detailed message for Medaries, who was investigating Birch and Cupp at the time. She noted in her log on November 26 that she talked [49,482 La.App. 2 Cir. 9] to Medaries on that day and they discussed that they needed to know the details of the purchase. She also wrote in her log that she told Medaries that she had a contact at Walgreens, but was not going to discuss the matter with him because she did not want to put Blue Cross in a position of liability. According to Cowart, Medaries told her that he thought Blue Cross probably had an obligation to share the information with Walgreens out of public safety concerns regarding contaminated drugs getting into Walgreens' inventory, but he understood her concern and would have a conversation with Walgreens' management to learn more about the sale. Cowart noted that she then called Ed Svihra, director of pharmacy loss prevention with Walgreens. She told him that Walgreens had recently purchased a mom and pop store in Louisiana that was under a criminal investigation involving the FBI. She asked him to speak with Medaries and gave his contact information to Svihra. She then called Medaries and gave Svihra's contact information to him. She concluded that she notified O'Brien of the conversation.

The aftermath

On December 1, Creek emailed Lehman. She told him to contact Jones and let him know that " we are unable to move forward at this ...


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