Corcoran et al v. CVS Health Corporation

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

Memorandum in Support of CVS MIL #7

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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 #7: 19 TO EXCLUDE DR. JOEL HAY'S CVS Pharmacy, Inc., INTERPRETATION OF PBM 20 CONTRACTS 21 Defendant. Date: May 13, 2020 22 Time: 9:30 a.m. Courtroom: 1 23 Judge: Hon. Yvonne Gonzalez Rogers 24 25 26 27 28 CVS MIL #7: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S INTERPRETATION OF PBM CONTRACTS 1 Plaintiff's expert Dr. Joel Hay opines: "CVS's HSP prices properly should be considered 2 CVS's true U&C prices." Ex. 24 ¶ 10 (Hay Expert Report) (Dec. 9, 2016). Insofar as he explains why 3 HSP is "properly" the U&C price, Dr. Hay should not be permitted to tell the jury how to interpret the 4 Five PBM contacts, or what the parties' intended when including the defined term of U&C price in 5 their contracts.1 An expert who tells a jury what a contract means exceeds the boundaries of 6 appropriate expert testimony as a matter of long-settled law. 7 Federal Rule of Evidence 702 permits expert opinion only if (1) the expert is qualified and (2) 8 the opinion will "help the trier of fact to understand or to determine a fact in issue." Fed. R. Evid. 9 702(a). Where, as here, the fact in issue is the interpretation of an ambiguous contract provision, 10 expert testimony is admissible only to the extent it sheds light on the industry's understanding of an 11 ambiguous term in the contract. See Pierce Cty. Hotel Emps. & Rest. Emps. Health Tr. v. Elks Lodge, 12 827 F.2d 1324, 1327 (9th Cir. 1987) ("[I]f a term is ambiguous, its interpretation depends on the 13 parties' intent at the time of the contract's execution, in light of earlier negotiations, later conduct, 14 related agreements, and industrywide custom." (citation omitted)); Actuate Corp. v. Aon Corp., 2012 15 WL 2285187, at *1 (N.D. Cal. June 18, 2012) ("Subject to Rule 403, it is usually proper for an expert 16 to explain custom and practice to a jury."). 17 While an expert's testimony about industry custom or understanding may be admissible, the 18 expert may not testify to the proper, true, or correct interpretation of the contract, or what the parties 19 intended. The Ninth Circuit has consistently drawn this distinction, excluding expert testimony that 20 extends beyond industry custom and purports to tell the jury how to interpret a contract. See McHugh 21 v. United Service Auto. Ass'n, 164 F.3d 451, 454 (9th Cir. 1999) ("[Expert] testimony cannot be used 22 to provide legal meaning or interpret the policies as written."); Energy Oils, Inc. v. Mont. Power Co., 23 626 F.2d 731, 737 (9th Cir. 1980) (trial court erred in admitting expert's contract interpretation 24 because it constituted an inadmissible opinion as to "the subjective intent of the parties in entering into 25 26 1 The PBM were not a basis of Dr. Hay's opinion. Ex. 30 at 164:12–16 (Hay Dep.) (Nov. 9, 2016) 27 ("for this case I did not review specific contracts"); Ex. 24 ¶¶ 36–45 (Hay Expert Report) (no mention of contracts; instead explaining "transaction data" and "[t]he National Council of Prescription Drug 28 Programs['] . . . industry standard for electronic transmission and adjudication of pharmacy claims, [which] defines U&C" support the opinion). CVS MIL #7: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S INTERPRETATION OF PBM 1 CONTRACTS 1 the agreements"); Maffei v. N. Ins. Co., 12 F.3d 892, 898–99 (9th Cir. 1993) (affirming exclusion of 2 expert testimony that interpreted meaning of contract rather than opined on "custom and usage" in the 3 industry); Actuate Corp., 2012 WL 2285187, at *1 ("[B]oth experts will be limited on direct 4 examination to testimony about custom and practice in the software industry, and likely be precluded 5 from testimony about the particular contracts and conduct at issue in this litigation."); Med. Sales & 6 Consulting Grp. v. Plus Orthopedics USA, Inc., 2011 WL 290986, at *3 (S.D. Cal. Jan. 27, 2011) 7 ("The Court excludes any opinion testimony on how the contract should be interpreted, but allows his 8 testimony about industry practices and norms with regard to change-in-control provisions."); Warner 9 Bros. Int'l Television Distribution v. Golden Channels & Co., 2004 WL 7336849, at *6 (C.D. Cal. Jan. 10 6, 2004) ("[T]he intent of the parties is an issue within the competence of the jury and expert opinion 11 testimony will not assist the jury, within the meaning of Federal Rule of Evidence 702, in determining 12 the factual issue of intent."). 13 14 The Ninth Circuit's prior opinion in this matter did not address the issue in this Motion. The 15 Ninth Circuit considered whether Dr. Hay's opinions about industry standards should be excluded 16 because it "lacked foundation"—that is, because Dr. Hay lacked the experience or understanding 17 necessary to give opinions about industry standards generally. Corcoran v. CVS Health Corp., 779 F. 18 App'x 431, 434–35 (9th Cir. 2019). Although the Ninth Circuit disagreed with this Court's finding 19 that Dr. Hay's opinion about the industry standard lacked foundation, nothing in the Ninth Circuit's 20 memorandum opinion suggests that it intended to overturn the longstanding prohibition on "expert" 21 contract interpretation. Thus, while Dr. Hay is free to offer his opinion as to how the industry 22 supposedly understood the phrase "usual and customary," Rules 402 and 702 preclude him from 23 offering any interpretation of the definitions in the five PBM contracts at issue in this case, or opining 24 on what CVS and the PBMs intended. 25 CONCLUSION 26 For the foregoing reasons, the Court should enter an order precluding Dr. Hay from opining 27 specifically as to the definition of usual and customary in the five PBM contracts or what CVS and the 28 PBMs intended when including the defined term of U&C price in their contracts. CVS MIL #7: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S INTERPRETATION OF PBM 2 CONTRACTS 1 Dated: April 15, 2020 Respectfully submitted, 2 3 By: /s/ Grant A. Geyerman ______________ 4 Enu Mainigi (admitted pro hac vice) 5 Grant A. Geyerman (admitted pro hac vice) WILLIAMS & CONNOLLY LLP 6 725 Twelfth Street, N.W. Washington, DC 20005 7 Telephone: (202) 434-5000 8 Facsimile: (202) 434-5029 9 Edward W. Swanson (Cal. Bar No. 159859) 10 August Gugelmann (Cal. Bar No. 240544) 11 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 12 San Francisco, CA 94104 Telephone: (415) 477-3800 13 Facsimile: (415) 477-9010 14 Attorneys for Defendant CVS Pharmacy, Inc. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CVS MIL #7: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S INTERPRETATION OF PBM 3 CONTRACTS