CZ Services, Inc. v. Express Scripts Holding Company

Background

CZ Services, Inc. and CareZone Pharmacy LLC sued Express Scripts Holding Company and Express Scripts, Inc. (collectively, ESI). A jury trial in February 2022 resulted in findings against CZ on its claims for defamation, violations of the Lanham Act, trade libel, and intentional and negligent interference with prospective economic relations. The jury also found against ESI on its counterclaims against CZ and Jonathan Schwartz for breach of contract and promissory fraud. The court entered judgment on the verdict on March 22, 2022, and the time for appeal had passed.

This order addressed several equitable claims—claims seeking court-ordered relief—that the verdict had not specifically resolved: CZ’s claims under the Tennessee Any Willing Provider (AWP) statute and the Tennessee and California unfair-competition laws.

Tennessee Any Willing Provider Claim

The court had previously determined that the Tennessee AWP statute did not apply to ESI. The only remaining issue was whether ESI had voluntarily agreed in its contracts to comply with the statute even though the law did not otherwise require it to do so.

During the trial, CZ presented only one contract on this issue: an agreement between ESI and BlueCross/BlueShield of Tennessee. The agreement stated that ESI accepted responsibility for performing contracted services and understood that BlueCross/BlueShield would oversee those services based on applicable standards, policies, regulations, instructions, and letter rulings. Although the Tennessee AWP law appeared in a list of statutes covered by the provision, the court concluded that the language did not show that ESI expressly agreed to comply with the Tennessee AWP statute. CZ presented no testimony establishing that the contract imposed those requirements on ESI. The court also noted that CZ had represented there was no evidence ESI had told CZ that it was bound by the Tennessee law under that contract.

The court concluded that CZ had received a full and fair opportunity to present evidence of a voluntary agreement and had fallen well short. It found that no further proceedings on the Tennessee AWP issue were warranted.

Unfair-Competition Claims

Under Tennessee law, the unfair-competition claim required conduct amounting to a recognized tort and the loss of economic prospects. Because the jury found against CZ on all of its tort claims, the court concluded that the Tennessee unfair-competition claim lacked an essential element.

The California Unfair Competition Law covers unlawful, unfair, or fraudulent business practices. The court had previously ruled that the Tennessee AWP statute could not serve as the basis for CZ’s California claim. It had allowed the claim to proceed based on alleged defamation and interference torts, but the jury’s findings against CZ on those claims eliminated that basis as well.

The court had also left open a portion of the California claim based on an alleged violation of the federal Medicaid AWP statute, 42 U.S.C. § 1396a(a)(23). At trial, however, CZ presented no evidence that ESI operated as a state Medicaid plan, had voluntarily assumed the statute’s requirements, or was otherwise subject to that statute. CZ did not introduce the ESI policy it had cited during the earlier summary-judgment proceedings.

Disposition

The court found that nothing remained in the case warranting post-verdict proceedings. It ordered that judgment be entered against CZ on the AWP and unfair-competition claims.