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Ullman v. Express Scripts

February 1, 2010

RICHARD O. ULLMAN, PLAINTIFF,
v.
EXPRESS SCRIPTS, INC., DEFENDANT.



The opinion of the court was delivered by: Bongiovanni, Magistrate Judge

MEMORANDUM OPINION

This matter comes before the Court upon Defendant Express Scripts, Inc.'s ("ESI") motion to stay all proceedings in this matter pending a resolution of the Lynch v. NPA lawsuit ("Lynch" or the "Lynch matter"). The Court has fully reviewed and considered all of the papers submitted in support of and in opposition to ESI's Motion, and considers same without oral argument pursuant to FED.R.CIV.P. 78. For the reasons set forth more fully below, ESI's motion to stay is DENIED.

I. Factual Background

In April of 2002, ESI purchased Plaintiff Richard O. Ullman's ("Ullman") company, National Prescription Administrators, Inc. ("NPA"). Pursuant to ESI and Ullman's Stock and Asset Purchase Agreement ("SAPA"), ESI purchased all of the outstanding stock in NPA and Ullman agreed to indemnify and hold ESI harmless for all claims asserted by third parties against ESI arising from NPA's conduct while Ullman owned the corporation. Pursuant to the SAPA, ESI and Ullman also agreed to establish an escrow account containing $25,000,000 from the sale proceeds in order to secure ESI's indemnification rights.

On June 5, 2006, Ullman brought suit against ESI in New Jersey Superior Court alleging breach of contract and breach of fiduciary duty claims arising out of ESI's alleged wrongful prevention of the release of the $25,000,000 held in escrow to Ullman "through the bad faith submission of meritless, defective and exaggerated indemnification claims." (Compl. at ¶ 4). Ullman's case was removed to this Court on July 7, 2006. ESI denies that the $25,000,000 has been wrongfully withheld and requests that the Court enter a declaratory judgment declaring that ESI is entitled to full and complete indemnification for all losses it has and will suffer as a result of the following actions which have been and/or are being litigated in other courts: the Lynch, CVS, Irwin, Fire Fighters and Hamilton matters.

Since Ullman's Complaint was filed, the parties have engaged in fact discovery as well as dispositive motion practice. With respect to the parties' cross-motions for summary judgment, the District Court denied Ullman's motion and granted in part and denied in part ESI's motion, dismissing Count IV of the Complaint (i.e., Ullman's breach of fiduciary duty claim) but permitting all of Ullman's remaining claims to go forward. (Aug. 6, 2009 Order). ESI now moves to stay this litigation pending the resolution of the Lynch matter.*fn1

II. Arguments

ESI argues that this case should be stayed pending the resolution of the Lynch matter. In this respect, ESI argues that in order to preserve judicial economy this matter should be stayed because if the plaintiffs in the Lynch matter are ultimately able to certify a class and recover damages in excess of $25,000,000, then there will be no need to "incur the time and expense of reviewing thousands of pages of fee and cost invoices" related to the CVS, Irwin, Fire Fighters and Hamilton matters as the recovery in Lynch will exhaust "the entire amount currently being held in escrow, irrespective of any issues relating to the [other four matters]." (ESI Br. at 3, 7). As such, ESI argues that both it and Ullman will suffer hardship if this matter proceeds to trial before a final resolution in Lynch because "an adverse ruling in Lynch could render all of the work done by the parties and the Court moot." (ESI Reply Br. at 5).

ESI also claims that, until a resolution in the Lynch matter is reached, findings made in this litigation will not result in the release of the funds held in escrow or a final judgment. In this regard, ESI argues that pursuant to the parties' escrow agreement, an indemnification claim such as that brought in the Lynch matter "shall continue to survive and shall remain a basis for indemnity until such claim is finally resolved or disposed of . . . ." (Escrow Agreement at ¶ 4(e)). ESI also notes that pursuant to the escrow agreement, the escrowed funds can only be released after the escrow agent is presented with "a certified copy of a binding and final arbitration award or decree of a court of competent jurisdiction . . . setting forth the amount to be released. (Id. at ¶ 5(a)(iv)). Thus, ESI argues that regardless of what this Court finds with respect to how much money ESI is entitled to recoup for the CVS, Irwin, Fire Fighters and Hamilton matters, "such findings will not result in a final judgment resulting in the release of the money being held in escrow" until the Lynch matter is resolved." (ESI Br. at 8).

Indeed, ESI argues that any rulings made by this Court that are "anything other than a complete finding for Ullman, granting Ullman all of the relief he is seeking, the trial will still not result in the release of the money held in escrow." (ESI Reply Br. at 7 (emphasis in original)). In this regard, ESI contends that unless this Court finds that Ullman is entitled to the release of the $25,000,000 being held in escrow because Ullman is not legally responsible under the SAPA to indemnify ESI for the types of claims at issue in the underlying matters, an argument made in Ullman's motion for summary judgment, which was denied by the District Court, then said funds cannot be released until Lynch is decided. ESI argues that this is true because Ullman's other argument - that ESI forfeited its right to indemnification by its bad faith efforts - would not discharge Ullman's indemnity obligations, but, instead, would only reduce Ullman's liability to ESI by the "extent of the damage he sustained." (Id. at 4). As such, ESI argues that both it as well as Ullman "may suffer if this case proceeds to trial before a final resolution in Lynch[,]" because an adverse ruling in Lynch would nullify all of the work done here by the parties. (Id. at 5). ESI further contends that "Ullman's suggested approach to conduct two trials would only compound the hardship." (Id. at 5-6). First, ESI claims that Ullman's suggestion to bifurcate the trial with his Complaint being tried first and ESI's Counterclaim, which includes claims related to Lynch, being tried second "flies in the face of judicial economy[.]" (Id. at 1). Second, ESI claims that even if the parties were to proceed in such a fashion, unless Ullman is successful in proving that he is not legally responsible under the SAPA to indemnify ESI for the types of claims at issue in the underlying matters, then the approach "will get Ullman nowhere." (Id.) Consequently, ESI argues that a stay is appropriate to avoid the underlying claims being litigated in an uneconomic and inefficient piecemeal fashion, especially since ESI's indemnification claims in Lynch "are contingent on future events that are unknown" and because "this Court cannot adjudicate any issues regarding Lynch without the risk of results that may be inconsistent with what the court ultimately decides in Lynch." (ESI Br. at 9).

Further, ESI argues that a stay is warranted because Ullman will not be prejudiced by the imposition of same. In this regard, ESI claims that Ullman will not suffer any prejudice or hardship because the money at issue will remain in escrow and continue to accrue interest. Further, ESI claims that "[w]hile having to wait until the Lynch claim is resolved may be an inconvenience for both Ullman and ESI, it does not rise to the level of legal prejudice." (ESI Reply Br. at 2). ESI also argues that while Ullman speculates that a stay might result in "some risk of loss of evidence, or the inability to recall facts, or the death of a party[,]" the actual likelihood of such an occurrence "is minimal given that the parties have already engaged in extensive discovery, including the exchange of relevant document and the depositions of relevant witnesses." (ESI Reply Br. at 2-3).

ESI also contends that Ullman will not be prejudiced by the length of the stay it seeks. While ESI acknowledges that there is no way to know exactly how long it will take for the Lynch matter to be fully resolved, ESI argues that a schedule is in place that requires "all relevant filings [to] be made by the fall of 2010, at the latest." (Id. at 3, n.1). ESI also claims that it is disingenuous for Ullman to argue that ESI is somehow purposefully trying to delay the resolution of the Lynch matter to increase NPA's risk of exposure when a company owned by Ullman that is involved in one of the MDL ERISA track cases "agreed to essentially the same scheduling deadlines as those proposed by defendants in Lynch." (Id.)

In contrast, Ullman contends that ESI has failed to meet its burden to establish that this proceeding should be stayed. In this regard, Ullman contends that ESI's motion fails to take into account his interest in bringing this matter to trial as well as the prejudice Ullman will suffer if his case is stayed indefinitely. Ullman also argues that contrary to ESI's assertions, judicial economy will not be served by staying this matter. Ullman notes that the parties have already engaged in extensive fact discovery as well as two rounds of dispositive motion practice. He also claims that the resolution of his case is in no way dependent on the outcome of the Lynch matter and argues that ESI's declaratory judgment claim is likewise not dependent on the outcome in Lynch. As such, Ullman argues that the interests of judicial efficiency favor proceeding with this matter, which is already three years old, now, instead of delaying these proceedings an indefinite period of time, which increases the risk of prejudice given the possibility that evidence will be lost, witnesses' recall of specific facts will diminish or one or more of the parties and/or witnesses could die.

Further, Ullman argues that ESI has not established that it will suffer any hardship or inequity if this matter proceeds to trial. First, Ullman claims that "[t]here is no real threat of wasted resources or moot claims" because his "arguments will not change, and ESI's defenses to those arguments will not change, if Lynch is dismissed or resolves for $25 million." (Ullman Opp. Br. at 11). Second, Ullman urges the Court to "consider ESI's consistent commitment to proceeding with its claims for the past three years of litigation in this lawsuit, and the failure of it to raise any indication of the stay issue until the eve of trial, in disposing of its claims of hardship now." (Id.) Indeed, Ullman claims that the reasons offered by ESI for a stay are too speculative because they require the Court to accept as true the following uncertain assumptions: (1) the $25,000,000 valuation of Lynch, which Ullman ...


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