Lynch Ex Rel. Health & Welfare Fund v. National Prescription Administrators, Inc.
2015 U.S. App. LEXIS 8853
| 8th Cir. | 2015Background
- Patrolmen’s Benevolent Association created private trust Funds to provide prescription benefits for members; Funds never contracted with Express Scripts, Inc. (ESI).
- National Prescription Administrators (NPA) provided PBM services to the Funds until July 2002; ESI acquired NPA in 2002.
- In 2003 the Funds brought a class action in federal court against NPA and ESI asserting common-law and statutory claims on behalf of non‑ERISA plans the PBM served.
- In 2004 the New York Attorney General (AG) sued ESI in New York state court alleging breaches affecting the Empire Plan, DCS/State, and certain other New York government plans; the AG later entered a 2008 consent judgment with ESI resolving certain claims for injunctive relief and $27 million.
- ESI moved for summary judgment in the Funds’ federal suit, arguing the state‑court consent judgment barred the Funds’ claims under res judicata; the district court granted that motion.
- The Eighth Circuit reversed, holding ESI failed to prove privity (including that the AG sued as parens patriae) and therefore res judicata did not apply; the court declined to decide whether the consent release language independently barred the Funds’ claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the state‑court consent judgment precludes the Funds’ federal claims via res judicata (claim preclusion) | Funds: They were not parties to the AG suit and were not represented by the AG; no privity exists | ESI: Consent judgment is a final judgment and the AG represented the Funds (parens patriae or otherwise), so claim preclusion bars the Funds’ suit | Reversed: ESI failed to prove privity; res judicata not established |
| Whether the AG sued in parens patriae to represent the Funds and a quasi‑sovereign interest | Funds: AG did not invoke parens patriae or articulate a quasi‑sovereign interest covering the Funds | ESI: AG sued on behalf of the people/State, which equates to parens patriae representation of the Funds | Held for Funds: Record does not show the AG invoked parens patriae; ESI did not meet its burden to prove it |
| Whether statutory bases cited by the AG (Executive Law §§63(1), 63(12) and GBL Art. 22‑A) demonstrate parens patriae representation | Funds: Statutory authority to sue in the State’s name does not automatically show parens patriae | ESI: Those statutes authorized the AG’s suit on behalf of State/people and thus covered the Funds | Held: Statutory citation alone does not demonstrate the required quasi‑sovereign interest or invocation of parens patriae |
| Whether the consent judgment’s release language bars the Funds’ claims (independent release defense) | Funds: Not decided on appeal; argue release does not cover them | ESI: Release may be broad enough to bar the Funds’ claims | Court disposition: Declined to decide; issue waived because district court did not resolve it |
Key Cases Cited
- Torgerson v. City of Rochester, 643 F.3d 1031 (8th Cir.) (en banc) (standard of review for summary judgment
- Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367 (Supreme Court) (Full Faith and Credit Act and treatment of state judgments)
- Taylor v. Sturgell, 553 U.S. 880 (Supreme Court) (claim preclusion is an affirmative defense and burden belongs to defendant)
- People ex rel. Spitzer v. Applied Card Sys., Inc., 894 N.E.2d 1 (N.Y.) (New York res judicata/privity principles)
- Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592 (Supreme Court) (parens patriae requires articulation of quasi‑sovereign interest)
- People ex rel. Spitzer v. Grasso, 893 N.E.2d 105 (N.Y.) (New York requirement that AG affirmatively invoke parens patriae)
- Daley v. Marriott Int’l, Inc., 415 F.3d 889 (8th Cir.) (choice of law for preclusion effect of another forum’s judgment)