Pan American Life Insurance Company of Puerto Rico v. Medco Health Solutions, Inc.
3:15-cv-01173
D.P.R.Jul 13, 2016Background
- Pan American (insurer) contracted with Medco under an Integrated Prescription Drug Program Master Agreement for exclusive PBM services (retail, mail-order, specialty, point-of-care communications, cost-containment).
- Pan American amended its complaint to seek damages for third-party customer groups that terminated or did not renew contracts allegedly because of Medco’s mishandling of claims and platform implementation failures.
- Pan American quantified estimated annual economic losses at $554,786.69 tied to those third-party contract terminations.
- Medco moved to partially dismiss the Second Amended Complaint, arguing the Agreement bars recovery of incidental, consequential, punitive, special, or exemplary damages.
- The Agreement (governed by New Jersey law) contains a limitation of liability clause precluding consequential damages; the court evaluated whether Pan American’s new claims were consequential and thus barred.
- Pan American also urged judicial estoppel against Medco (arguing Medco sought similar damages in its counterclaim), but the court found that argument unpersuasive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pan American may recover damages from third-party contract terminations alleged to result from Medco’s breach | Pan American contends losses from third-party groups are recoverable damages caused by Medco’s breach | Medco argues those losses are consequential/collateral and barred by the Agreement’s limitation of liability | Court: Losses from third-party terminations are consequential and barred; dismissal granted as to consequential damages |
| Whether the contractual limitation on consequential damages is enforceable under governing law | Pan American did not contest enforceability in substance; argued other remedies should remain | Medco argued New Jersey law permits such contractual limitations unless unconscionable | Court: Enforceable under New Jersey law; clause applies and is not shown unconscionable |
| Whether Medco is judicially estopped from seeking dismissal based on consequential-damages bar because it sought similar damages in its counterclaim | Pan American argued Medco took inconsistent positions and should be estopped | Medco explained its claimed lost profits are legally and factually different (direct vs. collateral losses) and denied bad faith | Court: Judicial estoppel inapplicable — no proven irreconcilable positions, no bad faith, and distinctions exist |
| Whether Pan American may adopt Medco’s dismissal arguments to dismiss Medco’s counterclaim via incorporation by reference | Pan American attempted to adopt Medco’s arguments to dismiss the counterclaim | Medco opposed; court noted procedural rules on motions and answers | Court: Pan American cannot adopt opponent’s motion by reference; must file its own motion if it wishes to seek dismissal of the counterclaim |
Key Cases Cited
- Atlantic City Assoc. v. Carter & Burgess Consultants, Inc., [citation="453 F. App'x 174"] (3d Cir.) (consequential damages defined as lost profits on collateral business arrangements)
- Werner & Pfleiderer Corp. v. Gary Chem. Corp., 697 F. Supp. 808 (D.N.J. 1988) (lost sales opportunity characterized as consequential damages and barred by limitation clause)
- Am. Leistritz Extruder Corp. v. Polymer Concentrates, Inc., [citation="363 F. App'x 963"] (3d Cir.) (New Jersey law permits contractual limitation on consequential damages absent unconscionability)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: reject legal conclusions; accept well-pleaded factual allegations)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim for relief)