CZ Services, Inc. v. Express Scripts Holding Company

Background

The order resolved motions concerning expert witnesses, a motion to strike, and additional discovery. The court refers to the plaintiffs as “CZ Pharmacies,” and to the defendants as “ESI.” The opinion states that earlier orders contain detailed information about the parties, claims, and facts.

Under Federal Rule of Evidence 702, expert testimony must be relevant and reliable and must help the jury understand evidence or decide a disputed fact. The court explained that it acts as a gatekeeper, evaluating the soundness of an expert’s methods rather than deciding whether the expert’s conclusions are correct. Legal conclusions and advice about what the law requires are not proper expert testimony.

CZ Pharmacies’ motions concerning ESI’s experts

The court partly granted and partly denied CZ Pharmacies’ motion concerning Dr. Alyson Wooten. Dr. Wooten could testify about pharmacy licensing standards and practices and could compare CZ Pharmacies’ licenses with the dates of approximately one million dispensing transactions. She could not testify that CZ Pharmacies’ practices were illegal or unlawful. The court viewed much of her proposed testimony about how the pharmacies operated as personal observations rather than expert analysis and found that those subjects were not beyond ordinary jurors’ understanding. The court denied the request to strike her supplemental report because it was a permitted expert disclosure supplement.

The court imposed the same substantive limits on Mr. David A. Kvancz’s proposed testimony. He could testify within the permitted areas concerning pharmacy-industry and licensing matters, but the court warned that his testimony substantially overlapped with Dr. Wooten’s and that duplicative expert testimony would not be permitted at trial. The conclusion states that CZ Pharmacies’ motions concerning Dr. Wooten and Mr. Kvancz were granted in part and denied in part.

ESI’s motion concerning CZ Pharmacies’ experts

The court partly granted and partly denied ESI’s motion concerning Dr. Doug Hillblom and Mr. Richard B. Mazzoni. They could testify about pharmacy-industry and regulatory practices, licensing requirements, and whether CZ Pharmacies provided appropriate patient care. They could not interpret terms in CZ Pharmacies’ contracts with ESI, including “mail order” and “retail,” or testify about whether contractual provisions were satisfied or breached. The court treated contract interpretation and contract compliance as legal questions. It also excluded Dr. Hillblom’s proposed opinions about agency law, CZ Pharmacies’ corporate structure, and competition in pharmacy services.

Lisa Snow’s damages testimony

Ms. Lisa C. Snow offered valuation and lost-profits opinions concerning the alleged effect of ESI’s cease-and-desist and termination actions on CZ Pharmacies. Her initial valuation estimate attributed a reduction of $439 million to $538 million to those actions; her supplemental report revised the range to $436 million to $535 million.

The court expressed serious concerns about whether her opinions were relevant to any damages theory in the case and whether her valuation methods were reliable. Among other concerns, the court said the analysis was not clearly tied to the claims, appeared to focus on termination rather than specific alleged defamatory statements, relied heavily on a single transaction involving PillPack, used an inferred valuation approach that was not shown to be accepted in the field, gave little explanation for several valuation inputs and weighting decisions, and inadequately explained the lost-profits method. The court also questioned whether her assumption that CareZone owned or comprised part of CZ Pharmacies conflicted with CZ Pharmacies’ position that the entities were separate.

The court was inclined to exclude Ms. Snow and her proposed testimony in full but did not make that final ruling in this order. Instead, it directed the parties to propose dates for a hearing after September 14, 2020. CZ Pharmacies would conduct direct examination, followed by ESI’s cross-examination. The hearing was limited to work and opinions already disclosed; the court barred new declarations or reports and prohibited using the hearing to revise or supplement Ms. Snow’s work.

Motion to strike and discovery

ESI’s motion to strike declarations by Ms. Snow and Jonathan Schwartz was granted in part and denied in part. The court denied the request to strike Ms. Snow’s supplemental expert report because it was authorized by her duty to supplement expert disclosures. The court struck Mr. Schwartz’s declaration because it was produced nearly three months after fact discovery closed and was not authorized or required. The court noted that CZ Pharmacies represented that the declaration added no new factual information, minimizing the practical effect of striking it.

The court also directed the parties to meet and confer about the scope of discovery concerning reports that CareZone assets had been purchased for $200 million. They were required to propose a joint discovery plan by August 24, 2020, and to propose dates for Ms. Snow’s hearing by the same date.

Disposition

The court concluded that CZ Pharmacies’ motions to exclude Dr. Wooten and Mr. Kvancz were granted in part and denied in part; ESI’s motion to exclude Dr. Hillblom and Mr. Mazzoni was granted in part and denied in part; the motion to strike Ms. Snow’s supplemental expert report was denied; and Mr. Schwartz’s untimely declaration was stricken. The order was issued by Judge James Donato.