Graphic Communications Local 1B Health & Welfare Fund A v. CVS Caremark Corp., 725 F.Supp.2d 849 (D. Minn. 2010).
A District Court in Minnesota remanded the case to the state court under CAFA’s local controversy exception holding that ‘significant relief’ is a significant portion of the entire relief sought by the class, and ‘the significant basis’ provision effectively calls for comparing the local defendant’s alleged conduct to the alleged conduct of all the defendants.
In this case, the plaintiffs were union-sponsored health benefit plans, and the defendants ran and operated pharmacies, often as part of larger retail stores. The plaintiffs brought an action alleging that their members filled drug prescriptions at the defendants’ pharmacies, but did not realize the appropriate savings resulting from the use of generic drugs. The plaintiffs claimed that the defendants’ failure to pass on these savings violated a Minnesota statute, and gave rise to claims of consumer fraud and unjust enrichment.
The defendants removed the plaintiffs’ original complaint to federal court, and, after the plaintiffs amended the complaint, the defendants moved to dismiss, which was granted by the District Court.
The plaintiffs then filed a second amended complaint, and, the defendants again moved to dismiss. In response, the plaintiffs moved to remand the case to the state court.
The District Court remanded the action to the state court.
In considering the motion to dismiss, the Court noted that the plaintiffs claimed that the pharmacies violated Minnesota Statute § 151.21, which provides that a pharmacist filling a prescription which does not specify that it be dispensed as written, may substitute a generically equivalent drug that, in the pharmacist’s professional judgment, is safely interchangeable with the prescribed drug, if the substitution is disclosed to the purchaser, and the purchaser does not object. As no Minnesota court had construed the statue, the Court found that the statute was ambiguous and the plaintiffs’ interpretation of the statute could support a plausible claim for relief. Accordingly, the Court denied the second motion to dismiss.
Next, the defendants suggested that CAFA granted subject matter jurisdiction because there was minimal diversity, and an aggregate amount in controversy of $ 5 million or more. The plaintiffs conceded that these requirements were met; however, they argued that the local controversy exception divested the Court of the subject matter jurisdiction.
The Court noted that 28 U.S.C. §1332(d)(4) provides that a district court shall decline to exercise jurisdiction if (1) more than two-thirds of the proposed class members were Minnesota citizens; (2) at least one defendant was a Minnesota citizen whose alleged conduct formed a ‘significant basis’ for the class claims, and from whom ‘significant relief’ is sought; and (3) no similar class action has been filed in the preceding three years. The Court noted that the third point was undisputed.
For the purposes of considering jurisdiction, the Court noted that the plaintiffs have offered a sufficient factual basis from which to conclude that two-thirds of the proposed plaintiff class were Minnesota citizens. The plaintiffs submitted census data showing 87% of prescription drug sales to individual consumers in Minnesota occurred within the state’s most populous region, the Twin Cities metropolitan area (which includes a small part of Wisconsin).
The defendants responded by pointing out that over 90% of Minnesotans had some health insurance coverage, and suggested that prescription benefits may be provided by out-of-state insurers, who were also potential class members.
The Court accepted this information, for the sake of argument, but found that it did not materially alter the calculus. Given the information available at this early stage of the litigation, the Court found that the plaintiffs presented sufficient evidence that two-thirds of the plaintiff class were likely to be Minnesota citizens.
Next, the Court noted that the word ‘significant’ is commonly understood as ‘meaningful’; and the Eleventh Circuit circularly defined ‘significant relief’ as a ‘significant portion of the entire relief sought by the class; and the Third Circuit holds ‘the significant basis provision effectively calls for comparing the local defendant’s alleged conduct to the alleged conduct of all the defendants.’
The plaintiffs sought ‘significant relief’ from at least three Minnesota defendants–the Target corporation, Coborn’s, Inc. , and Snyder’s Holding Inc.–whose conduct, they contended, was a ‘significant basis’ for the claims at issue. The plaintiffs alleged without contradiction, that Target, Snyders, and Coborn’s collectively owned 166 or about 43%, of the 384 Minnesota pharmacies of concern to the Court. The Court found that at this early stage, prior to discovery, such a percentage was facially sufficient to demonstrate these Minnesota defendants may have engaged in a ‘significant part of the alleged conduct of all defendants.’ Accordingly, the Court ruled that the local controversy exception applied.
Accordingly, the Court remanded the case to the state court.