Corcoran et al v. CVS Health Corporation

Northern District of California, cand-4:2015-cv-03504

Memorandum in Support of CVS MIL #4

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1 Enu Mainigi (admitted pro hac vice) Grant A. Geyerman (admitted pro hac vice) 2 WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. 3 Washington, DC 20005 4 Telephone: (202) 434-5000 Facsimile: (202) 434-5029 5 Edward W. Swanson (Cal. Bar No. 159859) 6 August Gugelmann (Cal. Bar No. 240544) 7 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 8 San Francisco, CA 94104 Telephone: (415) 477-3800 9 Facsimile: (415) 477-9010 10 Attorneys for Defendant CVS Pharmacy, Inc. 11 12 IN THE UNITED STATES DISTRICT COURT 13 FOR THE NORTHERN DISTRICT OF CALIFORNIA 14 OAKLAND DIVISION 15 16 Christopher Corcoran, et al., Case No. 15-cv-03504-YGR 17 Plaintiffs, CLASS ACTION 18 v. CVS'S MOTION IN LIMINE #4: 19 TO EXCLUDE THE JANUARY 2015 CVS Pharmacy, Inc., CVS-OPTUM CONTRACT 20 Date: May 13, 2020 21 Defendant. Time: 9:30 a.m. 22 Courtroom: 1 Judge: Hon. Yvonne Gonzalez Rogers 23 24 25 26 27 28 CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 1 Pursuant to Federal Rule of Evidence 407, CVS respectfully moves for an order in limine 2 excluding evidence of a "subsequent remedial measure": the January 29, 2015 contract between CVS 3 and the pharmacy benefit manager ("PBM") Optum. That contract changed the parties' prior 1999 4 contract to expressly "exclud[e] any coupons or discount card programs" from the definition of "usual 5 and customary" price. At trial, Plaintiffs should not be permitted to use that changed contract 6 language to suggest that prior to that 2015 amendment, CVS was required under the 1999 contract to 7 submit the HSP price as the U&C price. Rule 407 squarely precludes using the contract for that 8 purpose. The January 2015 contract is otherwise irrelevant to this case because the class period for the 9 Optum classes ends before the contract became effective. Accordingly, the Court should bar any 10 evidence or argument concerning the January 2015 contract under Rule 407, as well as Rules 401, 402, 11 and 403. 12 ARGUMENT 13 The class periods for each of the certified classes run from November 2008 through July 31, 14 15 2015—except the classes of customers whose prescriptions were adjudicated through the PBM Optum. 16 The Optum classes include only those customers whose purchases occurred prior to January 29, 2015. 17 See Order Approving Forms of Class Notice at 3, Dkt 409 (Dec. 3, 2019). Plaintiffs' motion for class 18 certification affirmatively requested this limitation as to Optum because, effective January 29, 2015, 19 CVS and Optum adopted a new master contract to govern their business relationship. That new 20 contract contained the following definition of "Usual and Customary Charge": 21 1.41. "Usual and Customary Charge" shall mean the price that a cash 22 paying customer pays Company for same Drug Products, devices, products and/or supplies and same amount on date of service excluding any coupons 23 and discount card programs. 24 Ex. 17 (Jan. 29, 2015 Pharmacy Network Agreement) (emphasis added). Plaintiffs believe that HSP is 25 a "discount card program[]" for purposes of this definition. 26 The emphasized language did not appear in the prior contract between CVS and Optum's 27 predecessor-in-interest Pacificare Pharmacy Centers, Inc. (d/b/a Prescription Solutions), which dates 28 CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 1 1 from 1999.1 The 1999 contract's definition of usual and customary reads: 2 "[T]he price that the Company Pharmacy would have charged the Member for the Prescription if the Member was a cash customer. This includes all 3 applicable discounts including but not limited to: Senior citizen discounts, frequent shopper and special customer discounts, or other discounts." 4 Ex. 18 at CVSC-0342355 (June 1, 1999 Prescription Drug Services Agreement). 5 The first membership program offered by any pharmacy (Walgreens) commenced in 2007, 6 eight years after the 1999 contract. CVS's Health Savings Pass program commenced in 2008. As 7 Optum's witness testified, the emphasized language in the 2015 definition made express the parties' 8 pre-existing understanding that programs like HSP were not within the scope of usual and customary 9 pricing, and thus reflected no change in position from the 1999 contact vis-a-vis HSP and usual and 10 customary prices. Ex. 5 ¶ 10 (Reichardt Decl., OptumRx) (Nov. 20, 2016). 11 It is undisputed that CVS's insured customers whose prescriptions Optum adjudicated on or 12 after January 29, 2015, are outside the certified classes, and they will not be part of the trial. Plaintiffs 13 have suggested, however, that they may use the 2015 contract to show that the definition of usual and 14 15 customary in the 1999 contract must include membership program prices, or it would not have been 16 necessary to add the phrase "excluding. . . discount card programs" when the parties amended the 17 contract in 2015.2 If made at trial, this argument would violate Federal Rule of Evidence 407. 18 Rule 407 provides: "When measures are taken that would have made an earlier injury or harm 19 less likely to occur, evidence of the subsequent measures is not admissible to prove. . . culpable 20 conduct." Fed. R. Evid. 407. Rule 407 vindicates "a social policy of encouraging people to take, or at 21 least not discouraging them from taking" steps that would mitigate against an earlier "injury or harm." 22 Fed. R. Evid. 407 advisory committee notes to 1972 proposed rules. This policy applies fully to 23 changes in contract terms, and it extends to situations where, as here, "[plaintiff] wants to use the 24 evidence that [defendant], to avert future liability to persons in the position of the plaintiff, changed 25 26 1 Optum acquired Prescription Solutions in December 2005. 27 2 See, e.g., Ex. 9 at 125:23–25 (Reichardt Dep., OptumRx) (Dec. 20, 2016) ("But if it was already excluded under your prior interpretation, why would you change the language?"); id. at 124:11–13 28 ("Then why did they need to change the language if they had an understanding in place for a seven- year period?"). CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 2 1 the policy, to establish [defendant's] 'culpable conduct.'" Pastor v. State Farm Mut. Auto. Ins., 487 2 F.3d 1042, 1045 (7th Cir. 2007). As the Pastor court explained, "to use at trial a revision in a contract 3 to argue the meaning of the original version would violate Rule 407 of the Federal Rules of Evidence, 4 the subsequent-repairs rule, by discouraging efforts to clarify contractual obligations, thus perpetuating 5 any confusion caused by the unclarified language in the contract." Id. See also Hickman v. GEM Ins. 6 Co., 299 F.3d 1208, 1214 (10th Cir. 2002) (change in insurance policy language "is not admissible to 7 establish liability because it is evidence of a subsequent remedial measure under Rule 407"); Indigo 8 Grp. USA, Inc. v. Polo Ralph Lauren Corp., 2013 WL 12122306, at *6 (C.D. Cal June 27, 2013) 9 (excluding "evidence relating to any version of the [form contract] after that executed by Indigo" 10 because "changes to contract language may be considered subsequent repairs and may be barred by 11 Rule 407 for an impermissible purpose"). 12 There are narrow exceptions to Rule 407, but Plaintiffs cannot satisfy them. "[T]he court may 13 14 admit this evidence for another purpose, such as impeachment or—if disputed—proving ownership, 15 control, or the feasibility of precautionary measures." Fed. R. Evid. 407. Here, there is no dispute 16 about "ownership, control, or the feasibility." CVS and Optum had the ability to clarify and/or 17 modernize their understanding of whether U&C applied to membership programs. That Plaintiffs 18 defined the class for Optum only through January 2015—but defined the classes as to other PBM 19 through July 2015—shows that this measure was not only feasible, but effective.3 Nor is the 2015 20 contract relevant to impeach any witness. As a matter of law, "impeachment" does not mean rebutting 21 a witness's testimony that the 1999 contract did not require reporting HSP prices as usual and 22 customary prices—otherwise, Rule 407 would be meaningless. See Flaminio v. Honda Motor Co., 23 Ltd., 733 F.2d 463, 468 (7th Cir. 1984) ("Although any evidence of subsequent remedial measures 24 might be thought to contradict and so in a sense impeach a defendant's testimony that he was using 25 due care at the time of the accident, if this counted as 'impeachment' the exception would swallow the 26 27 3 For the avoidance of doubt, CVS in no way concedes that the HSP price was the U&C price under 28 the 1999 definition, or that the language included in the 2015 contract was necessary to ensure that HSP prices were not U&C prices. CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 3 1 rule."); Complaint of Consolidation Coal Co., 123 F.3d 126, 136 (3d Cir. 1997) (to fit within Rule 2 407's exception, "the evidence offered for impeachment must contradict the witness's testimony 3 directly"); Harrison v. Sears, Roebuck & Co., 981 F.2d 25, 31 (1st Cir. 1992) (noting that the 4 impeachment exception requires "a great[] nexus between the statement sought to be impeached and 5 the remedial measure"). 6 And, even if Plaintiffs could identify some permissible purpose for raising the January 2015 7 contract (and they have not done so to date), it would have to be weighed under the standards of Rule 8 403, and excluded if its probative value would be substantially outweighed by the unfair prejudice that 9 Rule 407 is meant to prevent. Fed. R. Evid. 403. 10 Finally, the Ninth Circuit's opinion in this case is not to the contrary. Though the Ninth Circuit 11 referenced the 2015 contract, Corcoran v. CVS Health Corp., 779 F. App'x 431, 433 (9th Cir. 2019), 12 the Court did not have occasion to consider its admissibility under Rule 407, which was not among the 13 14 questions presented to it. 15 CONCLUSION 16 For the foregoing reasons, the Court should enter an order precluding Plaintiffs from 17 presenting evidence or argument concerning the January 2015 contract between CVS and Optum. 18 19 Dated: April 15, 2020 Respectfully submitted, 20 By: /s/ Grant A. Geyerman ______________ 21 Enu Mainigi (admitted pro hac vice) 22 Grant A. Geyerman (admitted pro hac vice) WILLIAMS & CONNOLLY LLP 23 725 Twelfth Street, N.W. 24 Washington, DC 20005 Telephone: (202) 434-5000 25 Facsimile: (202) 434-5029 26 27 Edward W. Swanson (Cal. Bar No. 159859) August Gugelmann (Cal. Bar No. 240544) 28 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 4 1 San Francisco, CA 94104 Telephone: (415) 477-3800 2 Facsimile: (415) 477-9010 3 Attorneys for Defendant CVS Pharmacy, Inc. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CVS MIL #4: TO EXCLUDE THE JANUARY CASE NO. 15-CV-03504-YGR 2015 CVS-OPTUM CONTRACT 5