Aqua Pharms., LLC v. Park Irmat Drug Corp

AQUA PHARMACEUTICALS, LLC, Plaintiff, v. PARK IRMAT DRUG CORP, et al., Defendants.

CIVIL ACTION NO. 17-2273

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

May 17, 2018

PAPPERT, J.

MEMORANDUM

Aqua Pharmaceuticals sued Park Irmat and several individuals asserting claims for breach of contract, fraud, civil conspiracy and unjust enrichment. Defendants move to dismiss Aqua's Amended Complaint, arguing, among other things, that Aqua's claims are barred by the voluntary payment and gist of the action doctrines. (ECF No. 36.) The Court grants the motion in part and denies it part for the reasons that follow.

I¹

Aqua, a Pennsylvania corporation with its principal place of business in Pennsylvania, manufactures branded prescription drugs. (Am. Compl. ¶¶ 10, 19, ECF No. 21.) On August 7, 2014, it entered into a Pharmacy Services and Dispensing Agreement ("the Agreement") with Park Irmat, a New York corporation with its principal place of business in New York, doing business as Irmat Pharmacy, a licensed retail, specialty and mail order pharmacy. (Id. at ¶¶ 11, 20, 30.) Under the terms of the Agreement, Irmat bought pharmaceutical products from Aqua for dispensation tocustomers with valid prescriptions and agreed to provide a number of related pharmacy services. (Id. at ¶¶ 2, 31; Mot. to Dismiss Complaint, Exhibit 1 to Declaration of David A. Scupp ("Agreement") at § 2.1 - 2.6, ECF No. 15.) In return, Irmat was permitted to bill Aqua and receive compensation for (1) certain processing fees and (2) "chargeback amounts." (Am. Compl. ¶ 32; Agreement at §4.3.) The Agreement defines chargeback amount as the difference between the price Irmat paid for the drug and the amount of money Irmat received from the customer's third party insurance provider. (Am. Compl. ¶ 34.) For example, if Irmat purchased a drug from Aqua for $150, and received $100 from the customer's insurance provider, Irmat could bill Aqua $50 as the chargeback amount. (Id.)

The Agreement contains a choice of law provision which states that it "shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof." (See Agreement at § 10.6.) The Agreement also contains a non-waiver provision, whereby "[n]o failure or delay on the part of either Party in exercising any right hereunder will operate as a waiver of, or impair, any such right." (See id. at § 10.7.)

Aqua alleges that in late 2015, it noticed discrepancies in Irmat's invoices that eventually led to an audit and investigation. (Am. Compl. ¶ 37.) Aqua contends its audit revealed that on a number of occasions, Irmat billed Aqua and was paid processing fees and chargeback amounts multiple times for a single prescription. (Id. at ¶ 58.) Aqua further asserts that Irmat's invoices contained inaccurate information which, on numerous occasions, allowed Irmat to collect chargeback amounts wherethird party payments equaled or exceeded the price Irmat paid for the drug. (Id. at ¶¶ 64, 73.) Aqua claims that it overpaid Irmat by "many millions of dollars." (Id. at ¶ 57.)

Aqua contends that prior to the audit and investigation, it was not privy to Irmat's internal billing practices and procedures and did not have access to supporting third party documentation, preventing it from verifying the accuracy of invoices in real time. (Id. at ¶ 61.) Aqua further alleges that during the course of its investigation, Irmat sought to conceal its conduct by refusing to provide information and supporting documentation, supplying limited and incomplete documentation, misrepresenting Irmat's operational and financial status, and providing incomplete and evasive answers to Aqua's auditors. (Id. at ¶¶ 46, 49, 51, 53, 76, 77, 80.)

On May 17, 2017, Aqua sued Irmat for breach of contract (Count I) and fraud (Count II). (ECF No. 1.) Aqua amended its complaint on August 25, 2017 after Irmat moved to dismiss. (ECF Nos. 15, 21.) In its Amended Complaint, Aqua asserts additional claims for civil conspiracy (Count III) and unjust enrichment (Count IV) and adds as defendants certain Irmat employees. (ECF No. 21.) All defendants move to dismiss the Amended Complaint. (ECF No. 36.)

II

A

To survive dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the facts pled "allow[ ] the court to draw the reasonable inference that[a] defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

When the complaint includes well-pleaded factual allegations, the Court "should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." See Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (quoting Iqbal, 556 U.S. at 679). However, this "presumption of truth attaches only to those allegations for which there is sufficient factual matter to render them plausible on their face." Schuchardt v. President of the U.S., 839 F.3d 336, 347 (3d Cir. 2016) (internal quotation and citation omitted). "Conclusory assertions of fact and legal conclusions are not entitled to the same presumption." Id.

B

The Agreement's choice of law provision provides that Delaware law governs Aqua's breach of contract claim.² However, Defendants move to dismiss the breach of contract claim in light of the voluntary payment doctrine relying primarily on Pennsylvania law. They contend that the Court need not resolve whether the Agreement's choice of law provision extends to the application of the voluntary payment doctrine because Delaware and Pennsylvania law is indistinguishable in this regard.(Mot. at 6 n.5.) Aqua does not dispute this point, other than to note that Delaware case law does not examine the doctrine in depth. (Resp. at 14.) For purposes of the current motion, finding no actual conflict between the states' laws,³ the Court relies interchangeably on the voluntary payment doctrine under Pennsylvania and Delaware law. See On Air Entm't Corp. v. Nat'l Indem. Co., 210 F.3d 146, 149 (3d Cir. 2000) (finding that where parties failed to show and the court could not find any relevant differences between the applicable laws there was no actual conflict and a choice of law analysis should be avoided).

The Court similarly relies on Pennsylvania and Delaware law⁴ interchangeably with respect to the fraud and unjust enrichment claims. Relying primarily on Pennsylvania law, Defendants argue that Aqua's fraud claim is barred by the gist of the action doctrine and that the unjust enrichment claim is barred in light of the Agreement. The parties do not address whether the Agreement's choice of law provision extends to Aqua's tort and unjust enrichment claims,⁵ though Aqua asserts,without any disagreement from Irmat, that Pennsylvania law governs the tort-based claims. (Resp. at 19 n.2.) Again, because the parties do not dispute that Delaware and Pennsylvania law are in accord and the Court has not identified any relevant differences, the Court need not choose between them. See On Air Entm't Corp., 210 F.3d at 149.

III

A

Defendants argue that Aqua's breach of contact claim is barred by the voluntary payment doctrine, which provides that "payment voluntarily made with full knowledge of the facts cannot be recovered, in the absence of a contract to repay." W. Nat. Gas Co. v. Cities Serv. Gas Co., 201 A.2d 164, 169 (Del. 1964) (citation omitted); see also Liss & Marion, P.C. v. Recordex Acquisition Corp., 983 A.2d 652, 661-62 (Pa. 2009). The doctrine applies only to payments made without fraud or duress. Acme Markets, Inc. v. Valley View Shopping Ctr, Inc., 493 A.2d 736, 737 (Pa. Super. Ct. 1985) ("Where, under a mistake of law, one voluntarily and without fraud or duress pays money to another with full knowledge of the facts, the money paid cannot be recovered."); Nieves v. All Star Title, Inc., No. CIVAN10C03191PLA, 2010 WL 2977966, at *8 (Del. Super. Ct. July 27, 2010) ("[T]he voluntary payment rule could not be applied if a plaintiff presented a viable claim of common-law or consumer fraud, such that it could not be said that the plaintiff paid for services with 'full knowledge' of the material facts."). Even if the doctrine applies, which Aqua disputes in light of the parties' non-waiver provision, dismissal is not warranted.

Defendants claim that there was "nothing deceitful" about Irmat's conduct because Aqua, all along, had the information it needed to uncover any fraudulent practices. (Mot. at 2; Memo. at 2, 5.) They further argue that Aqua's audit did not rely on "any information other than what Irmat had provided to Aqua in the regular course of business." (Memo. at 5.) Aqua, however, asserts that prior to its investigation into the potential fraud, it "was not privy to Irmat's internal billing practices . . . and had no ability to determine whether or not any given invoice entry" was legitimate. (Am. Compl. ¶ 61.) Aqua further alleges that its auditors found inconsistencies in the originally produced invoices and the later produced supporting documentation, and that the misinformation contained in the invoices concealed Irmat's fraud. (Id. at ¶¶ 68, 73.)

Aqua has satisfactorily alleged that it did not have full knowledge of the facts and was subject to fraud,⁶ which precludes dismissal of its breach of contract claim under the voluntary payment doctrine. See W. Nat. Gas, 201 A.2d at 445-46 (stating that question of whether payment is involuntary is "basically one of...