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Trilogy Health Care, LLC v. Medco Health Solutions, Inc.

United States District Court, Third Circuit

September 10, 2013

TRILOGY HEALTH CARE, LLC, Plaintiff,
v.
MEDCO HEALTH SOLUTIONS, INC., Defendant.

OPINION & ORDER

STANLEY R. CHESLER, District Judge.

This matter comes before the Court on the motion by Plaintiff Trilogy Health Care, LLC ("Trilogy") for a preliminary injunction. For the reasons stated below, the motion will be denied.

"A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. NRDC, Inc. , 129 S.Ct. 365, 374 (2008). While all four elements are essential, the Third Circuit has held that a court may not grant injunctive relief, "regardless of what the equities seem to require, " unless the movant carries its burden of establishing both a likelihood of success and irreparable harm. Adams v. Freedom Forge Corp. , 204 F.3d 475, 484 (3d Cir.2000); see also Hoxworth v. Blinder, Robinson & Co. , 903 F.2d 186, 197 (3d Cir.1990) (holding same); In re Arthur Treacher's Franchisee Litig. , 689 F.2d 1137, 1143 (3d Cir. 1982) (holding that "a failure to show likelihood of success or a failure to demonstrate irreparable injury must necessarily result in the denial of a preliminary injunction."). "[T]he grant of injunctive relief is an extraordinary remedy, which should be granted only in limited circumstances.'" Instant Air Freight Co. v. C.F. Air Freight, Inc. , 882 F.2d 797, 800 (3d Cir.1989) (quoting Frank's GMC Truck Ctr. Inc. v. Gen. Motors Corp. , 847 F.2d 100, 102 (3d Cir.1988)).

This case arises from a dispute between Plaintiff Trilogy, a pharmacy, and Defendant Medco Health Solutions, Inc. ("Medco"), a pharmacy benefits manager. On April 9, 2013, Medco terminated Trilogy's membership in Medco's pharmacy network, alleging contractual violations and asserting a termination for cause. Trilogy has moved for a preliminary injunction requiring Medco to reinstate Trilogy to its network, retroactive to April 9, 2013.

There is no dispute that the relationship between the parties is the subject of a contract (the "Agreement"), which the parties executed in December of 2009. (Abou Nader Decl. Ex. 1.) The Agreement expressly incorporates the Pharmacy Services Manual. (Id.) Section 6.11 of the Pharmacy Services Manual contains this termination provision: "Medco may at any time terminate Provider's Agreement with Medco without cause upon 30 days' prior written notice to Provider and with cause immediately." (Abou Nader Decl. Ex. 2.) These terms appear as well in the "Termination" section of the "Network Provider Manual." (Abou Nader Decl. Ex. 3.) Because Trilogy is a Missouri entity, these terms appear to have been modified by the "Missouri Requirements" section of the Pharmacy Services Manual, which states in § 4 that Medco may terminate without cause upon 60 days' written notice. (Abou Nader Decl. Ex. 2.)

There is no dispute about the validity of the relevant termination provisions, and they sharply limit Trilogy's available remedies. Under the best case scenario, Trilogy would be entitled to no more than 60 additional days of membership in Medco's network. Medco has declared in no uncertain terms that "Medco's relationship with Trilogy is over." (Def.'s Opp. Br. 1.) There is no reason to believe that the previously existing status quo could be restored by the grant of an injunction. Even if Trilogy could demonstrate that it is likely to succeed on the merits, and show that it is entitled to injunctive relief, the contract limits the available injunctive remedy to 60 additional days of membership in the network. On the present record, this Court doubts that this is a sensible remedy.

The largest defect in Trilogy's application for injunctive relief is its failure to recognize that it cannot be contractually entitled to network membership lasting beyond 60 days. Rather, Trilogy seeks an injunction requiring Medco to restore its provider status retroactive to April 9, 2013 - at this date, a period of over 150 days, when it can only be entitled to 60 at best. Trilogy has given this Court nothing from which this Court could find - setting aside the reasonable likelihood of success standard for a moment - even a possibility that it is contractually entitled to what it has asked for. Trilogy has asked for a particular injunctive remedy to which it has no entitlement under the contract. It is from this starting point that this Court considers Trilogy's application.

Trilogy has not persuaded this Court that it is likely to succeed on the merits. Medco contends that it terminated Trilogy's provider status for cause, and that it was entitled to do so under the contract. Medco contends that it terminated Trilogy for these contractual violations: 1) "Trilogy obtained grossly inflated reimbursements based on fictitious prices for products" (Def.'s Opp. Br. 2); 2) "Trilogy has inflated its Usual and Customary pricing" (Def.'s Opp. Br. 3); and 3) "Trilogy had been waiving co-pays for individual plan members served by Medco" (Def's Opp. Br. 4.) These are complex and hotly contested factual disputes, and this Court has no way at this juncture to predict which side is likely to prevail at trial. The Court observes, however, that, as to the waived co-payments issue, Medco has offered what appears to be substantial evidence. The declaration of Linda Ragsdale appears to be compelling evidence: she stated that she worked as Trilogy's "in-house accountant" during 2011, and that Trilogy offered patients an auto-refill program in which co-payments were waived. (Seelbach Decl. Ex. M.) Moreover, Ragsdale stated that owner David Rieck had instructed her to generate financial statements that concealed this fact. (Id. at ¶ 7.) Trilogy, in reply, makes procedural objections directed to the admissibility of Ragsdale's potential testimony. Trilogy's argument that Ragsdale's declaration is inadmissible hearsay is patently incorrect. The declaration is based on personal knowledge, and clearly her testimony would be admissible at a hearing or trial. This evidence alone is sufficient to raise substantial doubt about the likelihood that Plaintiff will succeed on the merits. If Medco were able to prove at trial that what Ragsdale stated is true, it could well justify the termination of Trilogy for cause. The bottom line is that there appear to be genuine factual questions requiring trial, and it is not possible at this juncture for this Court to conclude that Trilogy has a reasonable likelihood of success at trial.

In its reply brief, Trilogy raised the argument that Medco's discretion to terminate Trilogy under the contract is limited by "Any Willing Provider" laws in various states in which Trilogy is licensed. The Court asked the parties to submit supplemental briefing on this issue. Trilogy has failed to persuade this Court that "Any Willing Provider" laws impact this case. As Medco points out, Trilogy argues only in very general terms and has failed to identify any specific state's law that it contends materially impacts these issues. Trilogy is a Missouri limited liability company, and Missouri has no "Any Willing Provider" law. The Provider Agreement contains a choice of law provision which specifies that New Jersey's law governs the contract. (Abou Nader Decl. Ex. 1.) Trilogy has not identified any applicable "Any Willing Provider" law, nor offered even a colorable argument that, given the choice of law provision in the contract, a particular "Any Willing Provider" statute applies or gives rise to a private right of action against a pharmacy benefits manager, which Medco is, rather than an insurer. Trilogy's "Any Willing Provider" argument does not persuade this Court that it is reasonably likely to succeed on the merits.

Next, this Court examines whether Trilogy has demonstrated that it is likely to suffer irreparable harm in the absence of preliminary relief, and finds that Trilogy has not done so. One of the main problems for Trilogy is that its brief fails to clearly show that the limited injunctive remedy to which it could be entitled will protect it from irreparable harm that has not already occurred. Moreover, the brief confuses injuries already suffered with future injuries to be avoided.

David Rieck, owner of Trilogy, declared that, since Medco's termination of Trilogy, he has laid off twelve employees and that, if the preliminary injunction does not issue, he will be unable to pay his remaining workers and "the business will be destroyed." (Rieck Decl. ¶¶ 5, 7.) Rieck also declared:

Since Trilogy's termination..., 295 physicians have completely stopped consulting with, and referring their patients to Trilogy. Moreover, this number does not take into account the 240 physicians that have substantially cutback (i.e., by a factor of anywhere from 10% to 90% of their average monthly prescription volume) on consulting... It is highly unlikely that Trilogy shall ever be able to regain these physician relationships once they are severed.

(Id. at ¶ 8.) It is clear that, at this point, Trilogy's business has already been gravely crippled. Plaintiff has given no reason to believe that reinstatement for 60 days would be of greater benefit to that business than an award of money damages for 60 days of lost profits.

Under Third Circuit law, the party seeking preliminary injunctive relief must demonstrate irreparable injury in the absence of injunctive relief. "The irreparable harm requirement is met if a plaintiff demonstrates a significant risk that he or she will experience harm that cannot adequately be compensated after the fact by monetary damages. ...


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