PharMerica Mountain LLC v. Arizona Rehab Campus LLC

1 WO [8] IN THE UNITED STATES DISTRICT COURT [9] FOR THE DISTRICT OF ARIZONA [11] PharMerica Mountain LLC, No. CV-20-00493-TUC-RM [12] Plaintiff/Counter Defendant, ORDER [13] v. [14] Arizona Rehab Campus LLC, [15] Defendant/Counter Plaintiff. [17] Pending before the Court are Plaintiff/Counter Defendant PharMerica Mountain 18 LLC’s (“Plaintiff” or “PharMerica”) Motion for Partial Summary Judgment (Doc. 58)1 and [19] Defendant/Counter Plaintiff Arizona Rehab Campus LLC’s (“Defendant” or “ARC”) 20 Motion for Partial Summary Judgment (Doc. 60).2 The Motions are fully briefed. For the [21] following reasons, PharMerica’s Motion for Partial Summary Judgment will be granted [22] and ARC’s Motion for Partial Summary Judgment will be granted in part and denied in [23] part. [24] I. Background [25] Defendant ARC has operated a drug and alcohol rehabilitation facility in Tucson, [26] Arizona since 2017. (Doc. 58.) The Arizona Department of Health Services has licensed [27] 1 The record citations herein refer to the docket and page numbers generated by the Court’s 28 electronic filing system. 2 The Court finds the parties’ Motions suitable for decision without oral argument. 1 the facility as a B6 Subacute Behavioral Health Inpatient Facility. (Doc. 60 at 3.) During 2 the period at issue, Plaintiff PharMerica was the sole provider of pharmaceutical goods and 3 services to ARC. (Id.) The parties entered into an agreement—the Pharmacy Services 4 Agreement, or “PSA”—effective August 1, 2017, that gave PharMerica the exclusive right 5 to supply ARC with the pharmaceuticals needed to treat ARC’s clients. (Doc. 58 at 2.) The 6 pharmaceutical medications that PharMerica provided mostly consisted of psychotropic 7 medications used for detoxification and sobriety maintenance. (Doc. 60 at 3.) PharMerica 8 provided ARC with medications that ARC ordered for the facility itself, known as “house 9 drugs,” as well as those that were prescribed to ARC’s individual clients. (Doc. 58 at 3.) 10 A significant portion of ARC’s clients are insured through the Arizona Heath Care 11 Cost Containment System (“AHCCCS”), the Arizona state Medicaid benefit that provides 12 health insurance to indigent Arizonans. (Doc. 73 at 2.) Third-party companies provide 13 managed-Medicaid health insurance plans that are governed by Arizona Medicaid 14 regulations. (Id.) Specifically, ARC contracts with Banner University Family Care 15 (“Banner”) to provide services to its AHCCCS-insured clients. (Doc. 60 at 4-5.) The 16 agreement between AHCCCS and Banner provides for a negotiated payment (the “per 17 diem” payment) to ARC for each day that an AHCCCS-insured client is admitted at ARC’s 18 facility. (Id.) Banner executes its pharmaceutical agreements through its pharmacy benefit 19 manager, MedImpact, and PharMerica billed MedImpact for the prescriptions it provided 20 ARC for ARC’s AHCCCS-insured clients. (Doc. 60 at 5.) Banner refused to pay many of 21 those claims. (Id.) A key dispute between the parties is whether, as a matter of law, the per 22 diem payment covers pharmaceuticals. (See Docs. 60, 73, 78.) PharMerica contends that it 23 does, and that therefore ARC is liable for the unpaid claims because ARC was already paid 24 by Banner for the prescription drugs via the per diem payments. (Id.) ARC contends that, 25 as a matter of law, the per diem payments did not cover pharmaceuticals and that therefore 26 Banner or another third-party payor, and not ARC, is responsible for those claims. (Id.) 27 The parties also dispute which laws or regulations should govern the enforcement of their 28 contractual agreement. (See Docs. 58, 60, 73, 75.) 1 In this breach of contract action, PharMerica alleges that ARC owes it 2 approximately $775,000 in outstanding payments, as well as approximately $83,000 for 3 pharmacy goods and services that it acquired allegedly without intending to pay for them. 4 (Doc. 1.) ARC filed a counterclaim for $60,000 plus interest thereon. (Doc. 6.) ARC alleges 5 that the $60,000 in payments it made to PharMerica from January 10, 2020 to June 12, 6 2020 were unjustified because the PSA stated that PharMerica would be compensated by 7 the client, a private insurance carrier, or AHCCCS, and thus PharMerica was unjustly 8 enriched by ARC’s payments. (See id.) 9 II. Summary Judgment Standard 10 A court must grant summary judgment “if the movant shows that there is no genuine 11 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 12 Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The 13 movant bears the initial responsibility of presenting the basis for its motion and identifying 14 those portions of the record, together with affidavits, if any, that it believes demonstrate 15 the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323 . 16 If the movant fails to carry its initial burden of production, the nonmovant need not 17 produce anything. Nissan Fire & Marine Ins. Co. v. Fritz Co., 210 F.3d 1099 , 1102–03 18 (9th Cir. 2000). But if the movant meets its initial responsibility, the burden shifts to the 19 nonmovant to demonstrate the existence of a factual dispute and to show (1) that the fact 20 in contention is material, i.e., a fact that might affect the outcome of the suit under the 21 governing law, and (2) that the dispute is genuine, i.e., the evidence is such that a 22 reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., [23] 477 U.S. 242, 248, 250 (1986); see Triton Energy Corp. v. Square D. Co., 68 F.3d 1216 , 24 1221 (9th Cir. 1995). The nonmovant need not establish a material issue of fact 25 conclusively in its favor, First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253 , 288– 26 89 (1968); however, it must “come forward with specific facts showing that there is a 27 genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 , 28 587 (1986) (internal citation omitted); see Fed. R. Civ. P. 56(c)(1). 1 At summary judgment, the Court’s function is not to weigh the evidence and 2 determine the truth but to determine whether there is a genuine issue for trial. Anderson, 3 477 U.S. at 249. Pure questions of law, where there is no disputed issue of fact, are 4 appropriate for summary judgment. Schrader v. Idaho Dep’t of Health & Welfare, 768 F.2d 5 1107, 1110 (9th Cir. 1985). “The inquiry performed is the threshold inquiry of determining 6 whether there is the need for a trial—whether, in other words, there are any genuine factual 7 issues that properly can be resolved only by a finder of fact because they may reasonably 8 be resolved in favor of either party.” Anderson, 477 U.S. at 250 . “[T]his standard mirrors 9 the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which is 10 that the trial judge must direct a verdict if, under the governing law, there can be but one 11 reasonable conclusion as to the verdict.” Id. (internal citation omitted). In its analysis, the 12 Court must accept the nonmovant’s evidence and draw all inferences in the nonmovant’s 13 favor. Id. at 255 . The Court need consider only the cited materials, but it may consider any 14 other materials in the record. Fed. R. Civ. P. 56(c)(3). 15 III. ARC’s Motion for Partial Summary Judgment 16 a. Arguments 17 ARC moves for summary judgment on three issues: (1) liability for claims 18 PharMerica submitted to Banner that Banner denied; (2) Plaintiff’s fraud claim; and (3) 19 Plaintiff’s claim for punitive damages. 20 First, ARC moves for summary judgment on its liability for the denied claims that 21 PharMerica submitted to Banner for the drugs it provided to ARC’s AHCCCS-insured 22 clients. (Doc. 60.) ARC argues that it is not financially responsible for Banner’s denials of 23 payment for these claims because the per diem payments ARC received from Banner did 24 not cover the cost of pharmaceuticals. (Id. at 6-7.) ARC bases this argument on its 25 interpretation of the PSA and what it contends are the applicable regulations. Specifically, 26 ARC argues that finding that the per diem payments covered pharmaceuticals would grant 27 PharMerica a windfall because it would have received payment twice—once from ARC 28 and once from the third-party payors it billed—and that neither party intended such an 1 outcome when they agreed to the PSA. (Doc. 78 at 4-5.) ARC further argues that the 2 applicable regulations—namely, what it calls “AHCCCS Manual Regulation”—support its 3 position that the per diem payments from Banner did not cover pharmaceuticals. (Id. at 54 6.) ARC further argues that PharMerica, not ARC, was responsible for appealing the denied 5 claims to Banner and that PharMerica’s failure to do so should preclude it from suing ARC 6 for those claims. (Doc. 60 at 7-8.) 7 ARC also contends that Plaintiff’s fraud claim, set forth in Count VI, and Plaintiff’s 8 claim for punitive damages, both fail as a matter of law. (Id. at 8-10.) As to the fraud claim, 9 ARC contends that PharMerica has presented no evidence to support this claim. (Id. at 810 9.) As to Plaintiff’s claim for punitive damages, ARC contends that (1) the PSA explicitly 11 bars any liability for punitive damages and (2) the record does not contain any evidence of 12 egregious or outrageous conduct that could give rise to punitive damages. (See id. at 9-10.) 13 PharMerica makes several arguments in response. (Doc. 73.) First, PharMerica 14 argues that the AHCCCS Manual Regulation upon which ARC bases its argument (1) does 15 not have the controlling force of law because it is an AHCCCS agency guide, not a law or 16 regulation and (2) was not in effect during the time frame of the disputed claims and was 17 superseded by a new agency guide that omitted the language upon which ARC relies. (Id. 18 at 3.) PharMerica contends that Arizona Administrative Code R9-22-1205 is the 19 controlling state regulation in this matter and that it provides that per diem payments to 20 subacute behavioral health inpatient facilities, such as ARC, include pharmaceutical 21 medications. (Id. at 4-7.) More specifically, A.A.C. R9-22-1205 does not explicitly exclude 22 medications from coverage or indicate that they should be billed separately. (Id. at 5.) 23 PharMerica further argues that ARC could have challenged Banner’s determination that its 24 per diem payments to ARC included pharmaceuticals but chose not to. (Id. at 8-9.) 25 PharMerica points to evidence showing that both Banner and AHCCCS believed that the 26 per diem payments covered pharmaceuticals, as well as evidence that ARC communicated 27 to Banner that it understood its responsibility to pay PharMerica for pharmaceuticals. (Doc. 28 74-4 at 7-8; Doc. 74-7 at 1.) PharMerica agrees to dismissal of the fraud claim raised in 1 Count VI and does not respond to Defendant’s arguments regarding punitive damages. 2 (Doc. 73 at 10-11.) 3 b. Law 4 i. The PSA 5 In Arizona, in the absence of an explicit choice of law by the parties, the contractual 6 rights and duties of the parties are governed by the law of the state having “the most 7 significant relationship to the parties and the transaction.” Ervco, Inc. v. Texaco Ref. & 8 Mktg., Inc., 422 F. Supp. 2d 1084, 1087 (D. Ariz. 2006) (internal citation omitted). 9 Accordingly, as the PSA does not include a choice of law provision, Arizona law applies 10 to this dispute. Under Arizona law, “[w]hen parties bind themselves to a lawful contract, a 11 court must give effect to that contract as written if the terms are clear and unambiguous.” 12 BMW of N. Am., LLC v. Mini Works, LLC, 166 F. Supp. 3d 976, 982 (D. Ariz. 2010) 13 (internal citation omitted). “The intent of the parties, as ascertained by the language used, 14 must control the interpretation of the contract. It is not within the province or power of the 15 court to alter, revise, modify, extend, rewrite or remake an agreement. Its duty is confined 16 to the construction or interpretation of the one which the parties have made for themselves.” 17 Shattuck v. Precision-Toyota, Inc., 566 P.2d 1332, 1334 (Ariz. 1977) (internal citation 18 omitted). 19 Under Arizona law, “a valid statute is automatically part of any contract affected by 20 it, even if the statute is not specifically mentioned in the contract.” Ervco, Inc., 422 F. Supp. 21 2d at 1087. “The principle of Expressio unius est exclusio alterius as used in statutory and 22 administrative rule construction means that the expression of one or more items of a class 23 and the exclusion of other items of the same class implies the legislative intent to exclude 24 those items not so included.” Sw. Iron & Steel Indus., Inc. v. State, 597 P.2d 981, 982 (Ariz. 25 1979) (internal citation omitted). 26 Neither party argues that the terms or provisions of the PSA are ambiguous or 27 inapplicable. The PSA provides that PharMerica would submit monthly statements to ARC 28 for its services, and that ARC would pay those statements within 60 days. (Doc. 58 at 10.) 1 The PSA further provides that if ARC disputed its liability for a charge on a statement, it 2 had to provide PharMerica with specific information regarding the dispute within 60 days, 3 and if it did not do so, the statement was deemed correct. (Id.) Specifically, the PSA 4 provides as follows: 5 (e) If Client disputes any amount on a statement, Client must by the due date for the applicable statement (i) provide the information described in Section 5.(e)(1) to 6 Pharmacy for each disputed charge before the payment due date, and (ii) pay all charges on the statement by the payment due date. 7 [. . .] If Client does not provide Pharmacy with written notice that it disputes an amount 8 due on a statement in accordance with the procedure set out in this section, the statement shall be deemed to be correct and Client shall pay Pharmacy the entire 9 amount due on the statement (plus interest if applicable). (1) All Disputed Charges shall be submitted by Client using the Resolution 10 Center available on ViewMasteRx or via email to an email address to be provided by Pharmacy with “Home’s Name” in the subject line. Disputed 11 Charges shall include the following information: Pharmacy Name; Home Name; Payer; Resident Name; Rx in dispute; Reason; Dates of Services; 12 Credit amount requested; Comments. 13 (Doc. 58 at 10-11; see also Doc. 59-2.) 14 ii. AHCCCS Regulations and Guidance 15 The Arizona Administrative Code (“A.A.C.”) codifies the “Scope and Coverage of 16 Behavioral Health Services” for Arizona’s state Medicaid benefit at A.A.C. R9-22-1205. 17 Regarding the services that are and are not covered by a per diem payment administered 18 by AHCCCS to a subacute behavioral health inpatient facility, it provides: 19 C. Covered Inpatient sub-acute agency services. Services provided in [an] inpatient sub-acute facility as defined in 9 [20] A.A.C. 10, Article 1 are covered subject to the limitations and 21 exclusions under this Article. 1. Inpatient sub-acute facility services are not [22] covered unless provided under the direction of a 23 licensed physician in a licensed inpatient sub-acute facility that is accredited by an AHCCCS-approved 24 accrediting body. 25 2. Covered Inpatient sub-acute facility services include room and board and treatment services for 26 behavioral health and substance abuse conditions. 27 3. Services are reimbursed on a per diem basis. The per diem rate includes all services, except the following [28] 1 licensed or certified providers may bill independently for services: [2] a. A licensed psychiatrist, 3 b. A certified psychiatric nurse practitioner, [4] c. A licensed physician assistant, 5 d. A licensed psychologist, e. A licensed clinical social worker, [6] f. A licensed marriage and family 7 therapist, g. A licensed professional counselor, [8] h. A licensed independent substance 9 abuse counselor, and i. A medical practitioner. 10 4. The following may be billed independently if 11 prescribed by a provider specified in this Section who is operating within the scope of practice: 12 a. Laboratory services, and 13 b. Radiology services. A.A.C. R9-22-1205, Section C. [14] The regulation further provides: [15] H. Other covered behavioral health services. Other covered [16] behavioral health services include: 17 1. Case management as defined in 9 A.A.C. 10, Article 1; [18] 2. Laboratory and radiology services for behavioral 19 health diagnosis and medication management; 3. Medication; [20] 4. Monitoring, administration, and adjustment for 21 psychotropic medication and related medications; 5. Respite care as described within subsection (J); [22] 6. Behavioral health therapeutic home care services 23 provided by a RBHA in a professional foster home defined in 6 A.A.C. 5, Article 58 or in an adult 24 behavioral health therapeutic home as defined in 9 25 A.A.C. 10, Article 1; 8.3 Other support services to maintain or increase 26 the member’s self-sufficiency and ability to live outside an institution. [28] 3 The regulation does not include a provision numbered 7. 1 A.A.C. R9-22-1205, Section H (emphasis added). 2 The AHCCCS Behavioral Health Services Guide, which Defendant refers to as 3 “AHCCCS Manual Regulation,” states that the per diem payment to subacute facilities 4 does not cover pharmaceutical medications and medications should be billed separately. 5 (Doc. 61-1 at 39.) The parties agree that this Guide was retired in 2018, prior to nearly all 6 the claims in dispute, and replaced by the AHCCCS Medical Policy Manuals and Provider 7 Billing Manuals, which provide that medical services, including medication and 8 medication management, are covered. (See Doc. 74-2 at 1; Doc. 74-3 at 7.) 9 c. Analysis 10 The sole authority upon which ARC relies to support its argument that the per diem 11 rate did not include pharmaceuticals and therefore that ARC is not liable to PharMerica for 12 the claims denied by Banner is the 2017 version of the AHCCCS Behavioral Health 13 Services Guide. That Guide is not controlling law and does not control the interpretation 14 of the parties’ contract. Rather, the applicable regulation, A.A.C. R9-22-1205, controls the 15 interpretation of whether the per diem payments from Banner to ARC included 16 pharmaceutical medications. A.A.C. R9-22-1205 indicates that per diem payments do 17 cover medications; thus, the Court finds that the per diem payments from Banner to ARC 18 covered pharmaceutical medications. Because the per diem payments cover 19 pharmaceuticals, ARC’s argument that it should be granted summary judgment as to the 20 denied claims that PharMerica submitted to Banner for the drugs PharMerica provided to 21 ARC’s AHCCCS-insured clients fails as a matter of law. 22 As to ARC’s arguments regarding Count VI and punitive damages, the Court will 23 grant summary judgment in favor of ARC. PharMerica agrees to dismiss Count VI and 24 does not refute ARC’s contentions regarding the impropriety of punitive damages in this 25 case. The Court finds that (1) the PSA explicitly precludes liability for punitive damages 26 (see Doc. 60 at 9) and (2) there is no evidence of outrageous or egregious conduct on the 27 part of ARC that could support a claim for punitive damages. Accordingly, the Court will [28] 1 grant summary judgment in favor of ARC as to Count VI and the claim for punitive 2 damages. 3 IV. PharMerica’s Motion for Partial Summary Judgment 4 a. Arguments 5 PharMerica moves for summary judgment on two issues. (Doc. 58.) First, 6 PharMerica seeks summary judgment as to Count 1 of its Complaint, which alleges that 7 ARC breached the PSA by failing to pay PharMerica the sums it owed for the pharmacy 8 goods and services PharMerica provided. (Doc. 1 at 12-13; Doc. 58 at 2, 9-14.) PharMerica 9 alleges that ARC owes it the total amount of $877,395.26, comprised of $667,700.42 in 10 principal and $209,694.84 in contractual interest, plus $378.45 in contractual interest 11 accruing per day between December 2, 2021 and the date of judgment. (Doc. 58 at 2.) In 12 support of its position that ARC owes it an undisputed total of $877,395.26, PharMerica 13 provides evidence including invoices, records of internal communications and 14 communications with Banner representatives regarding ARC’s nonpayment, records of 15 communications documenting the parties’ and Banner’s understanding that the per diem 16 payments covered pharmaceuticals, and multiple demand letters for payment. (Doc. 59.) 17 PharMerica concedes that there may be a genuine dispute of material fact as to an additional 18 $112,102.28 of the principal balance it is owed and reserves its right to prove that portion 19 of its breach of contract damages at trial. (Id.) 20 PharMerica also moves for summary judgment on ARC’s counterclaim for $60,000. 21 (Doc. 58 at 2.) PharMerica reserves Counts II-VI4 of its Complaint to be proven at trial. 22 (Id.) 23 In support of its argument that it is entitled to summary judgment on Count I and 24 the associated damages, PharMerica argues first that ARC failed to follow the procedures 25 set forth in the PSA for contesting the charges it received from PharMerica for 26 pharmaceuticals PharMerica provided. (Doc. 58 at 9-12.) Because ARC did not properly 27 follow the procedure for contesting charges, including providing PharMerica with specific [28] 4 As discussed supra in Section III(c), Count VI will be dismissed. 1 information regarding the disputed charges within 60 days of the statement date, 2 PharMerica argues that ARC deemed those charges correct pursuant to the PSA’s explicit 3 provisions. (Id. at 10-11.) PharMerica concedes that ARC timely disputed charges for four 4 statements, for the amount of $9,950.58, and that PharMerica provided partial credit to 5 ARC for those disputed charges. (Id. at 11.) PharMerica further states that ARC submitted 6 untimely written disputes for four other statements, for which ARC received no credit, 7 since the disputes were submitted outside of the contractual 60-day period. (Id.) Apart from 8 those statements, PharMerica contends that ARC did not dispute any of the other 32 9 statements PharMerica issued, that ARC did not pay those statements, and thus that 10 PharMerica is entitled to summary judgment on the amounts in those statements. 11 PharMerica further argues that there is no genuine dispute of material fact that ARC 12 was responsible for paying for the pharmaceuticals it obtained pursuant to the per diem 13 payments from third parties. (Id. at 13.) PharMerica contends that the per diem payments 14 covered pharmaceuticals and that this conclusion is supported by ARC’s contracts with 15 other third-party providers, including United Health Care (“UHC”) and Blue Cross Blue 16 Shield of Arizona (“BCBS”). (Id. at 4-6, 13-14.) Like Banner, UHC and BCBS paid ARC 17 an all-inclusive per diem rate on behalf of members of their insurance networks who were 18 admitted to ARC’s facility. (Id. at 4-6.) Because ARC’s contracts with UHC and BCBS 19 explicitly provide that per diem payments cover medications, and because Banner stated in 20 email communications that its per diem payments to ARC included medications,5 21 PharMerica contends that there is no genuine dispute of material fact that the per diem 22 payments included medications. (Id. at 5-7, 13-14.) [23] 24 5 Danielle Carnes Kacer, Provider Relations Representative at Banner, wrote to ARC on August 4, 2020: “Yes, pharmacy costs are included in the per diem. We believe this is 25 supported by AHCCCS policies (see, e.g., A.A.C. R9-22-1205(C), as well as our contract with Arizona Rehab Campus.” (Doc. 59-29.) [26] Ryan Thomsen, Medicaid Administrative Director at Banner, wrote to ARC on September 27 3, 2020: “We continue to believe we are paying your claims appropriately. We previously shared our perspective that the billed revenue codes are paid at an all-inclusive per diem 28 rate for the members in your detox facility and we have cited Arizona Administrative Code as support for that position.” (Doc. 59-30.) 1 In support of its argument that it is entitled to summary judgment on ARC’s 2 counterclaim for $60,000, PharMerica argues that the counterclaim is based on the premise 3 that ARC paid PharMerica more than was required under the parties’ contract—an 4 assertion that PharMerica contends is unsupported by the evidence. (Id. at 15.) PharMerica 5 contends that the evidence shows that ARC underpaid its obligations to PharMerica by 6 hundreds of thousands of dollars and failed to meet its contractual obligations with 7 PharMerica and with third-party payors, not the other way around. (Id.) 8 In response, ARC contests the admissibility of the emails from Banner 9 representatives stating Banner’s understanding that the per diem payments included 10 medications. (Doc. 75 at 3.) ARC contends that the email communications cannot be relied 11 upon for the proposition that the per diem payments included medications because the 12 authors of the emails have not been deposed or cross-examined, and therefore the emails 13 cannot be considered for the truth of their contents at summary judgment. (Id.) ARC further 14 argues that PharMerica should have appealed the denied claims to Banner instead of filing 15 this lawsuit. (Doc. 75 at 3-4; see also Docs. 59-29, 59-30.) 16 Next, ARC raises a number of arguments alleging that PharMerica mishandled the 17 billing dispute prior to this lawsuit, including that (1) ARC raised concerns about the 18 “abnormally high amounts of the invoices” and that PharMerica led ARC to believe these 19 concerns had been resolved when they had not; (2) “billing errors” were due to 20 PharMerica’s unfamiliarity with industry billing practices; (3) PharMerica miscategorized 21 ARC as a long-term care or skilled nursing facility; and (4) PharMerica “frequently 22 changed” the amount it claimed ARC owed. (Doc. 75 at 5-6.) ARC further contends that it 23 complied with the PSA in providing complete patient billing information and that it 24 continually made good-faith efforts to work with PharMerica to resolve billing issues 25 according to the PSA. (Id. at 6-7.) ARC contends that “it was provided with no definitive, 26 binding authority that would require it to pay PharMerica hundreds of thousands of dollars 27 to provide drugs to its insured clients.” (Id. at 8.) ARC argues in response to PharMerica’s 28 arguments regarding its counterclaim that PharMerica has not identified any provision of 1 the PSA that would require ARC to pay PharMerica or else risk losing delivery of 2 pharmaceuticals as provided under the agreement. (Id. at 7.)6 3 In reply, PharMerica contends that ARC failed to comply with the provision of the 4 PSA requiring ARC to provide “written notice that it disputes an amount due on a 5 statement,” and that, according to the PSA, the amount will therefore “be deemed correct 6 and [ARC] shall pay [PharMerica] the entire amount due.” (Doc. 77 at 1-2.) PharMerica 7 accordingly contends that ARC has raised no genuine dispute of material fact that would 8 preclude PharMerica from being granted summary judgment. (Id.) PharMerica further 9 contends that ARC has failed to provide any evidence contradicting the material facts that 10 ARC failed to properly dispute all but four billing statements, failed to provide timely 11 written notice of disputes pursuant to the PSA, and failed to pay the undisputed amounts. 12 (Id. at 2-3.) PharMerica also contends that ARC’s arguments do not raise genuine issues 13 of disputed material facts but rather rely on immaterial facts that should not affect a 14 summary judgment ruling. (Id. at 2-5, 8.) 15 b. Law and Analysis 16 As discussed supra in Section 3(b)(ii), the Court has determined as a matter of law 17 that the per diem payments covered pharmaceuticals and will not re-visit that issue in 18 considering ARC’s Motion for Summary Judgment.7 19 ARC has not cited any authority, and the Court is not aware of any, precluding 20 PharMerica from filing this lawsuit before appealing Banner’s denials of its claims to state 21 6 This argument ignores the facts, for which PharMerica provides evidentiary support, that in early 2020, the parties agreed to an arrangement designed to help ARC catch up on its 22 late payments of over $600,000. Pursuant to that arrangement, ARC was to overnight PharMerica $10,000 per week and PharMerica would not terminate provision of 23 pharmaceuticals, as it was contractually entitled to do. (Doc. 59 ¶¶ 15, 62, 64-65; Doc. 591 ¶ 42-46; Doc. 59-17.) PharMerica thereafter terminated the PSA and ceased delivering 24 pharmaceuticals due to ARC’s non-payment. (Doc. 59 ¶¶ 86-87.) 7 Because the Court has already determined as a matter of law that the per diem payments 25 covered pharmaceuticals, it need not consider the emails from Banner representatives as evidence on that issue. However, the Court notes that there is no dispute that the contents 26 of the emails support PharMerica’s position that the per diem payments covered pharmaceuticals. Furthermore, Defendant’s argument that the emails should be excluded 27 fails, as evidence may be considered at the summary judgment stage if it could be presented in an admissible form at trial, Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003), 28 and the contents of the emails could be presented in an admissible form via witness testimony or to refresh a witness’s recollection. 1 authorities and ultimately to AHCCCS. Thus, ARC’s argument that summary judgment 2 should be denied to PharMerica because PharMerica should have or was obligated to 3 appeal its denied claims before filing this lawsuit fails. 4 ARC’s remaining arguments also fail to raise material questions of fact that would 5 preclude summary judgment for PharMerica. ARC does not argue that it timely and 6 properly contested, according to the PSA’s terms, the bills that it now disputes. ARC’s 7 arguments center on the notion that PharMerica mishandled the billing disputes prior to 8 this lawsuit, but ARC cites to no legal authority and points to no evidence that would 9 undermine or contradict PharMerica’s position that ARC is responsible for the unpaid bills 10 pursuant to the PSA’s terms. ARC has failed to show that a genuine dispute of material 11 fact exists that would preclude PharMerica from obtaining summary judgment on the 12 amount it seeks in connection with Count I. 13 Accordingly, the Court will grant summary judgment to PharMerica on Count I and 14 will order ARC to pay PharMerica the total amount of $877,395.26. It will also grant 15 summary judgment to PharMerica on ARC’s counterclaim for $60,000, as ARC does not 16 present any evidence or argument that a genuine dispute of material fact exists regarding 17 that claim. 18 V. Conclusion 19 For the foregoing reasons, the parties’ Partial Motions for Summary Judgment are 20 resolved as follows: 21 IT IS ORDERED that Defendant’s Motion for Partial Summary Judgment (Doc. 22 60) is granted in part and denied in part, as follows: 23 (1) The Motion is denied as to the AHCCCS claims. 24 (2) The Motion is granted as to Count VI. Count VI is dismissed with prejudice. 25 (3) The Motion is granted as to punitive damages. Plaintiff’s claim for punitive 26 damages is dismissed with prejudice. 27 IT IS FURTHER ORDERED that Plaintiff’s Motion for Partial Summary 28 Judgment (Doc. 58) is granted as follows: 1 (1) Partial summary judgment on Count I is granted in favor of Plaintiff. Defendant 2 is liable to Plaintiff for the total amount of $877,395.26, comprised of 3 $667,700.42 in principal and $209,694.84 in contractual interest, plus $378.45 4 in contractual interest accruing after December 2, 2021. 5 (2) Defendant’s counterclaim for $60,000 is dismissed with prejudice. 6 (3) Plaintiff's claims in Counts II-V are reserved for trial. Plaintiff’s claim to the 7 additional $112,102.28 of the principal balance it contends it is owed is also 8 reserved for trial. 9 Dated this 8th day of August, 2022. [1] 12 a, 13 TD 4 tigi Z □□ Honorable Rostsiary □□□□□□□ 14 United States District □□□□□ [28] -15-