Case: 1:20-cv-01853 Document #: 121 Filed: 01/08/21 Page 1 of 33 PageID #:2321
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`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`BCBSM, INC, (d/b/a BLUE CROSS and
`BLUE SHIELD of MINNESOTA), HEALTH
`NEW YORK, INC, HORIZON
`HEALTHCARE SERVICES, INC. (d/b/a
`HORIZON BLUE CROSS BLUE SHIELD OF
`NEW JERSEY), BLUE CROSS AND BLUE
`SHIELD OF ARIZONA, INC. (d/b/a BLUE
`CROSS BLUE SHIELD OF ARIZONA and
`d/b/a AZBLUE), ASURIS NORTHWEST
`HEALTH, et al.,
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` Plaintiffs,
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` v.
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`WALGREEN CO. and WALGREENS BOOTS
`ALLIANCE, INC.,
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` Defendants.
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` No. 20 C 1853
` No. 20 C 1929
` No. 20 C 3332
` No. 20 C 4940
` No. 20 C 4738
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` Judge Virginia M. Kendall
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`MEMORANDUM OPINION AND ORDER
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`The Plaintiffs in this case are health care plans offering comprehensive health care services
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`and coverage, including prescription drug coverage, to their members in locations across the
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`United States. Defendants are Walgreen Co. and Walgreens Boots Alliance, Inc. (together
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`“Walgreens”) who allegedly engaged in a fraudulent scheme to overcharge Plaintiffs for
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`prescription drugs by submitting claims for payment at artificially inflated prices. Plaintiffs filed
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`five separate cases, which were consolidated on September 18, 2020 before this Court. Walgreens
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`filed Motions to Dismiss [Dkts. 47, 57, 64, 87]1 the Complaints, arguing Plaintiffs failed to join a
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`1 The Motion to Dismiss Case No. 20-cv-04738 was filed before Judge Rowland at Dkt. No. 24 prior to being
`consolidated with Case No. 20-cv-1853 before this Court.
`1
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`Case: 1:20-cv-01853 Document #: 121 Filed: 01/08/21 Page 2 of 33 PageID #:2322
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`required party under Fed. R. Civ. P. 12(b)(7). Walgreens additionally asserts Plaintiffs failed to
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`state a claim pursuant to Fed. R. Civ. P. 12(b)(6) for common law fraud, fraudulent concealment,
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`negligent misrepresentation, unjust enrichment, and statutory consumer protection claims under
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`the laws of various states. Walgreens also moves for sanctions pursuant to Fed. R. Civ. P. 11 and
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`28 U.S.C. § 1927 claiming that the Complaints are frivolous and without legal merit.
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`For the foregoing reasons, the Court dismisses without prejudice Plaintiffs’ negligent
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`misrepresentation claim, Illinois Consumer Fraud and Deceptive Business Practices Act (815
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`ILCS 505, et seq.) and Illinois Uniform Deceptive Trade Practices Act (815 ILCS 510, et seq)
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`claims. The Court denies Walgreens’ Motions to Dismiss the remaining claims. The Court denies
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`Walgreens’ Motion for Sanctions. [Dkts. 99, 101].
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`BACKGROUND
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`On a motion to dismiss under Rule 12(b)(6), the Court accepts the Complaint’s well-
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`pleaded factual allegations and draws all reasonable inferences in the non-moving party’s favor,
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`but not its legal conclusions. See Smoke Shop, LLC v. United States, 761 F.3d 779, 785 (7th Cir.
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`2014). The facts below come from Plaintiffs’ Complaints2 and the Court accepts them as true for
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`purposes of reviewing this Motion. See Vinson v. Vermillion Cty., Ill., 776 F.3d 924, 925 (7th Cir.
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`2015).
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`Defendant Walgreen Co. is an Illinois corporation with its principal place of business and
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`corporate headquarters in Deerfield, Illinois. On December 31, 2014, Walgreen Co. became a
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`wholly owned subsidiary of Defendant Walgreens Boots Alliance, Inc. (“WBA”) pursuant to a
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`merger to effect a reorganization of Walgreen Co. into a holding company structure. (Dkt. 1 ¶ 24).
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`2 The cases discussed in this motion were consolidated on July 8, 2020 (Dkt. 46) and September 18, 2020 (Dkt. 87).
`Because of the overlap of the material facts in the Complaints, the Court will cite to the Complaint in Case No. 1: 20-
`cv-1853, which the other cases have been consolidated under, while acknowledging that paragraph numbers
`containing the cited facts are different in each complaint.
`2
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`Defendant WBA is a Delaware corporation with its principal place of business and corporate
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`headquarters in Deerfield, Illinois. (Id. ¶ 24). Because of their integrated operations, allegations
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`as to Walgreen Co. and WBA pertain to both parties. (Id. ¶ 26).
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`Walgreens is and has been a network pharmacy for every Plaintiff, meaning that Plaintiffs’
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`Members can use their prescription drug benefit to fill their prescriptions at Walgreens pharmacy
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`locations at in-network pricing. (Dkt. 1 ¶ 32). When a Walgreens pharmacy dispenses a
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`prescription to a Member, Walgreens causes an electronic claim for reimbursement to be sent to
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`Plaintiffs’ pharmacy benefit managers (“PBMs”), which then submits a claim for payment to
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`Plaintiffs. (Id.). During the relevant time period, Plaintiffs have paid Walgreens through PBMs.
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`(Id.). Plaintiffs employed Medco Health Solutions, Inc.; Catalyst Rx; Catamaran Corp.; CVS
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`Caremark; Express Scripts, Inc.; MedImpact Healthcare Systems, Inc.; Preferred Care Services,
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`Inc.; Prime Therapeutics LLC; and RegenceRx as their PBM agents. (Id. ¶ 56; Case No. 20-cv-
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`4940 (hereinafter “Asuris”) ¶ 29).
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`Walgreens reports a “usual and customary price” (“U&C price”) on every reimbursement
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`claim, which the PBMs directly pass on to the Plans. (Id. ¶ 55). U&C price is the price customers
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`without insurance pay a given pharmacy for prescription drugs, i.e., the cash or uninsured price,
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`and federal health programs have consistently required Walgreens and other pharmacies to report
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`the cash prices offered by pharmacy discount programs to be reported as a pharmacy’s U&C price.
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`(Id. ¶¶ 37–39). The U&C price also serves as a ceiling to how much a pharmacy can charge a
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`health plan for the drug. (Id. ¶ 37).
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`For more than a decade, Walgreens knowingly and intentionally submitted inflated U&C
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`prices for brand and generic drugs purchased by Plaintiffs’ members. (Id ¶ 49). Walgreens
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`submitted U&C prices paid by few—if any—actual cash customers (i.e. customers who paid for
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`3
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`Case: 1:20-cv-01853 Document #: 121 Filed: 01/08/21 Page 4 of 33 PageID #:2324
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`drugs without insurance) and were regularly five, ten, or even twenty times higher than what
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`Walgreens actually charged cash customers. (Id. ¶ 7). Walgreens has been able to continue this
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`scheme through its Prescription Savings Club (“PSC”), which offers cash customers steeply
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`discounted prices on up to 8,000 brand and generic drugs in exchange for a small enrollment fee.
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`(Id. ¶¶ 63–70). In its recent settlement with the Department of Justice, Walgreens admitted that it
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`regularly returned “enrollment fees” to its PSC Program enrollees through store credits.3 (Id. ¶ 67).
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`Walgreens additionally offers a similar “Rx savings program” called the JustRx Program to
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`customers who pay without using insurance at more than 1,900 Walgreens-owned Rite Aid stores,
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`as well as Duane Reade-branded Walgreens pharmacies, which provides discounts on all
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`prescription drugs with no annual or up-front membership fee to participate. (Id. ¶ 71). Walgreens
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`inflated the U&C prices that it reported to Plaintiffs and their PBMs by pegging Walgreens’
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`reported U&C prices to higher prices that did not reflect the cash prices offered to PSC Program
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`enrollees, JustRx Program participants, or third-party discount program cardholders. (Id. ¶ 72).
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`Since 2007, the Plans paid Walgreens more than $18 billion to reimburse more than 264 million
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`claims.4 (Id. ¶ 76). Through its fraudulent scheme, Walgreens overcharged Plaintiffs hundreds of
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`millions of dollars for prescription drug. (Id. ¶ 1).
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`DISCUSSION
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` Walgreens moves to dismiss the Complaints pursuant to Rule 12(b)(7) because Plaintiffs’
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`have not joined the PBMs, a required party under Fed. R. Civ. P. 19 according to Walgreens.
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`3 On January 15, 2019, Walgreens settled claims brought by the United States, 39 states, and the District of Columbia
`alleging that, from January 2008 through December 2017, Walgreens violated the False Claims Act, 31 U.S.C. § 3729
`et seq., by submitting false U&C prices that were higher than the prices it charged for the same drugs sold through its
`Prescription Savings Club cash discount program (“PSC Program”), thereby obtaining more money in reimbursements
`for Medicaid fee-for-service claims than it was entitled to receive. Id. ¶ 2.
`4 In the Complaints for Case No. 1:20-cv-4738 (BCBSAZ) and Asuris (defined above), the Plaintiffs state that since
`2007, the Plans have paid Walgreens more than $3.4 billion to reimburse more than 60.5 million claims. See BCBSAZ
`¶ 65; Asuris ¶ 74.
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`4
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`Walgreens additionally moves under 12(b)(6) for failure to state a claim for common law fraud,
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`fraudulent concealment, negligent misrepresentation, unjust enrichment, and statutory consumer
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`protection claims under the laws of various states. Walgreens also moves for sanctions pursuant
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`to Fed. R. Civ. P. 11 and 28 U.S.C. § 1927 claiming the Complaints are frivolous and without legal
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`merit.
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`I.
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`Motion to Dismiss for Failure to Join a Necessary Party
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`Walgreens first argues the Court should dismiss the suit because Plaintiffs failed to join the
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`PBMs, allegedly the conduit between Plaintiffs and Walgreens and purportedly indispensable
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`parties. “The purpose of Rule 19 is to permit joinder of all materially interested parties to a single
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`lawsuit so as to protect interested parties and avoid waste of judicial resources.” Askew v. Sheriff
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`of Cook Cty., 568 F.3d 632, 634 (7th Cir. 2009). When evaluating a Rule 12(b)(7) motion, the
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`Court accepts all well-pleaded allegations in the complaint as true and may consider extrinsic
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`evidence. Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 480 n. 4 (7th Cir. 2001). Dismissal
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`for failure to join a party “is not the preferred outcome under the Rules.” Askew, 568 F.3d at 634.
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`Analysis of a Rule 12(b)(7) motion proceeds in two steps. First, the Court determines
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`whether a party is one that should be joined, if feasible, under Rule 19(a). Askew, 568 F.3d at 635;
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`Davis Cos., 268 F.3d at 481 (citing Thomas v. United States, 189 F.3d 662, 667 (7th Cir. 1999)).
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`A party is necessary if:
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`(A) in that person's absence, the court cannot accord complete relief among existing
`parties; or
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`(B) that person claims an interest relating to the subject of the action and is so
`situated that disposing of the action in the person's absence may:
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`(i) as a practical matter impair or impede the person's ability to protect the
`interest; or
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`(ii) leave an existing party subject to a substantial risk of incurring double,
`multiple, or otherwise inconsistent obligations because of the interest.
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`Fed. R. Civ. P. 19(a)(1). Second, if the Court determines that the party should be joined but cannot
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`be for jurisdictional reasons, then the Court must determine whether the party is indispensable;
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`that is, whether the litigation can proceed in that party’s absence under Rule 19(b). Askew, 568
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`F.3d at 635; Davis, 268 F.3d at 481.
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`In a 12(b)(7) motion, the movant bears the burden of demonstrating that the absent party
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`is necessary and indispensable. See, e.g., United States v. Sullivan, No. 10 CR 821, 2016 WL
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`1626622, at *4 (N.D. Ill. Apr. 21, 2016) (quoting Ochs v. Hindman, 984 F. Supp. 2d 903, 906
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`(N.D. Ill. 2013)). The term “complete relief” refers solely to whether the relief between the persons
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`already parties to the case is possible without the addition of the absent person. See Davis, 268
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`F.3d at 481.
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`Walgreens asserts that the PBMs are necessary because they contracted with both Plaintiffs
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`and Walgreens. Yet, the Complaints sound in fraud; not in breach of contract. Plaintiffs allege
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`Walgreens engaged in fraudulent conduct that damaged them by forcing them to pay higher prices
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`for prescription drugs. While the PBMs served as the intermediary between the parties, nothing
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`in the Complaint suggests they engaged or assisted in the fraud. It is possible under this
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`relationship for the Court to grant Plaintiffs complete relief for fraudulent activity if, as alleged,
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`the injury they suffered arose through the sole actions of Walgreens. Walgreens baselessly asserts
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`the PBMs’ absence also leaves Walgreens “subject to a substantial risk of incurring double,
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`multiple, or otherwise inconsistent obligations.” Fed. R. Civ. P. 19(a)(1)(B)(ii). Walgreens
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`cherry-picks quotes from the Complaints in an attempt to frame the claims once again as
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`contractual claims. But there are no allegations that the PBMs engaged in the fraudulent conduct
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`or conspired in the fraud. Nor is it clear why the PBMs would have an interest in the matter since
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`6
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`they have not intervened despite public statements in the related litigation Walgreens cites.
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`Walgreens’ statement that the PBMs have claimed an interest or that Walgreens will be subject to
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`inconsistent obligations is more conclusory than sound. See e.g. Rotec Indus., Inc. v. Aecon Grp.,
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`Inc., 436 F. Supp. 2d 931,937 (N.D. Ill. 2006) (denying Rule 12(b)(7) motion because “nothing in
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`the record demonstrates that [the absent party] is claiming an interest in this action”).
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`Finally, as to whether the PBMs are indispensable, Walgreens claims “[t]he Seventh
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`Circuit has repeatedly explained that a contracting party,” like each of the PBMs here, “is the
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`paradigm of an indispensable party.” (Dkt. 89 at 7 (quoting Chaudry v. Musleh, No. 17 C 1813,
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`2018 WL 3361846, at *4 (N.D. Ill. Jul. 9, 2018) (quotations omitted)).5 Again, the allegations in
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`the complaint are fraud claims based on alleged misrepresentations made by Walgreens. The
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`PBMs, while the intermediaries, are not alleged to have engaged in any fraudulent action or made
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`any false or untrue misrepresentations. Surely, if this case were a breach of contract claim, such
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`as Chaudry, an entirely different analysis would apply as to whether the PBMs are necessary
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`parties. However, as it is not, the PBMs are not essential to the litigation. Walgreens’ motion to
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`dismiss for failure to join a necessary party is denied.
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`II. Motion to Dismiss for Failure to State a Claim
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`Walgreens also argues Plaintiffs failed to state a claim and so the Complaint should be
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`dismissed pursuant to Rule 12(b)(6). A motion to dismiss for failure to state a claim challenges
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`the sufficiency of the complaint. Berger v. Nat’l Collegiate Athletic Ass’n, 843 F.3d 285, 289–90
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`(7th Cir. 2016). To survive a motion to dismiss under Rule 12(b)(6), the complaint “must contain
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`sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”
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`Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). A claim is facially
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`5 Defendants also cite Chaudry at Dkt. 69 at 5, Dkt. 59 at 5, Dkt. 52 at 10.
`7
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`plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged.” Id. The Court is “not bound to
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`accept as true a legal conclusion couched as a factual allegation.” Olson v. Champaign Cty., 784
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`F.3d 1093, 1099 (7th Cir. 2015) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
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`“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
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`do not suffice.” Toulon v. Cont’l Cas. Co., 877 F.3d 725, 734 (7th Cir. 2017) (quoting Iqbal, 556
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`U.S. at 678). The Seventh Circuit has interpreted this plausibility standard to mean that the
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`plaintiff must “give enough details about the subject-matter of the case to present a story that holds
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`together.” Vanzant v. Hill’s Pet Nutrition, Inc., 934 F.3d 730, 736 (7th Cir. 2019) (quoting
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`Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir.2010)). Additionally, evaluating whether a
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`plaintiff’s claim is sufficiently plausible to survive a motion to dismiss is “a context-specific task
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`that requires the reviewing court to draw on its judicial experience and common sense.” W. Bend
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`Mut. Ins. Co. v. Schumacher, 844 F.3d 670, 676 (7th Cir. 2016). (quoting McCauley v. City of
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`Chicago, 671 F.3d 611, 616 (7th Cir. 2011); Iqbal, 556 U.S. at 678)).
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`Because Plaintiffs adequately pleaded their claims of common law fraud, fraudulent
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`concealment, and unjust enrichment, Walgreens’ motion to dismiss these claims is denied. The
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`Court dismisses the negligent misrepresentation claim because Plaintiffs failed to plead Walgreens
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`owes them a duty. All of Plaintiffs’ statutory consumer protection claims may proceed, with the
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`exception of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505, et
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`seq.) and the Illinois Uniform Deceptive Trade Practices Act (815 ILCS 510, et seq).
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`A.
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`Plaintiffs’ Common Law Claims
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`Walgreens’ arguments as to Plaintiffs’ common
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`law claims of fraud, fraudulent
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`concealment, negligent misrepresentation, and unjust enrichment are largely the same across each
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`8
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`Case: 1:20-cv-01853 Document #: 121 Filed: 01/08/21 Page 9 of 33 PageID #:2329
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`of its motions to dismiss. Walgreens argues that Plaintiffs’ claims are deficient under the Rule 9
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`heightened pleading standard because Plaintiffs have not pled: (1) false statements; (2) that
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`Walgreens knew Plaintiffs expected reported U&C prices to include PSC prices; and (3) that
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`Plaintiffs reasonably relied on the reported U&C prices.6 Walgreens also seeks to dismiss the
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`negligent misrepresentation and fraudulent concealment claims because Walgreens did not owe
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`Plaintiffs a duty. Finally, Walgreens argues the unjust enrichment claim fails as it hinges on the
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`other claims.
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`Under Illinois law, the elements of fraud are: (1) a false statement of material fact; (2)
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`defendant’s knowledge that the statement was false; (3) defendant’s intent that the statement
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`induce the plaintiff to act; (4) plaintiff’s reliance upon the truth of the statement; and (5) plaintiff’s
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`damages resulting from reliance on the statement. 7 Forth v. Walgreen Co., No. 17-cv-2246, 2018
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`WL 1235015, *4 (N.D. Ill. Mar. 9, 2018) (quoting Connick v. Suzuki Motor Co., 675 N.E.2d 584,
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`591 (Ill. 1996)). To state a claim for fraudulent concealment, Plaintiffs must allege Walgreens
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`concealed a material fact when under a duty to disclose that fact to Plaintiffs. Connick, 675 N.E.2d
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`at 593.
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`The elements of negligent misrepresentation in Illinois are similar and Plaintiffs must
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`plead: (1) the defendant had a duty to the plaintiff to communicate accurate information; (2) the
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`defendant made a false statement of material fact to the plaintiff; (3) the defendant negligently
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`failed to ascertain the truth of that statement; (4) the defendant made the statement with the intent
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`to induce the plaintiff to act; (5) the plaintiff acted in reliance on the truth of that statement; and
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`(6) the plaintiff suffered damage due to that reliance. First Midwest Bank, N.A. v. Stewart Title
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`Guar. Co., 843 N.E.2d 327, 334–35 (Ill. 2006).
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` 7
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` The parties agree that Illinois law applies to Plaintiffs’ common law claims.
`9
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`Walgreens, notably, ignores these above elements in its motions to dismiss and seeks to
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`impose their own heightened elements for pleading the above claims. While, as discussed further
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`below, Rule 9(b) indisputably applies and requires Plaintiffs to plead their fraud claims with
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`particularity, Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007) (internal
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`citation and quotation marks omitted), Plaintiffs need not present an affirmative factual showing
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`of fraud at this stage.
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`1.
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`False Statements
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`Walgreens’ first issue with the Complaints is Plaintiffs failed to plead that Walgreens made
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`any false statements, a required element for fraud, fraudulent concealment, and negligent
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`misrepresentation. Walgreens claims that “[t]o plead adequately that Walgreens fraudulently
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`reported false U&C prices, Plaintiffs must allege facts demonstrating that Walgreens was required
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`under its contracts with the PBMs to report discount club prices as U&C prices, and that Walgreens
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`failed to do so.” (Dkt. 52 at 12)8. Walgreens does not provide any support for this requirement
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`and the Court cannot find any authority that, in order to plead a false statement under a theory of
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`fraud, a plaintiff must prove a contractual term. In the similar case of Forth, individual consumer
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`plaintiffs alleged that Walgreens engaged in fraudulent pricing practices through the PSC program,
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`therein artificially inflating the U&C prices reported to health-insurance companies and related
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`third-party payors, and resulting in plaintiffs overpaying for generic drugs. 2018 WL 1235015,
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`*4–5. Walgreens made similar arguments stating that Plaintiffs common law claims for fraudulent
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`conduct failed to state a claim. That court there found Walgreen’s arguments unavailing and that
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`Plaintiffs properly pled their claims. Here, too, Plaintiffs’ common law claims are adequately pled.
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`Plaintiffs pled throughout
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`the Complaints
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`that Walgreens made false statements when it
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`8 See also Dkt. 69 at 7; Dkt. 89 at 9.
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`10
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`fraudulently reported inflated U&C prices on “millions of claims” submitted to the Plans for
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`reimbursement. (Dkt. 1 ¶¶ 1, 7, 74–77, 85–89, 92, 96, 99). In similar cases, allegations that a
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`pharmacy submitted a fraudulently inflated U&C price on a claim form were sufficient under Rule
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`9(b). See e.g. Sheet Metal Workers Local No. 20 Welfare & Benefit Fund v. CVS Health Corp.,
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`221 F. Supp. 3d 227, 231 (D.R.I. 2016) (denying CVS’s motion to dismiss on the basis that
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`fraudulently inflated U&C prices were adequately pled false claims); Corcoran v. CVS Health
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`Corp., 169 F. Supp. 3d 970, 986 (N.D. Cal. 2016) (same). Walgreens’ argument that Plaintiffs
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`have not pled false statements is denied.
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`2. Walgreens’ Knowledge
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`Walgreens next argues Plaintiffs failed to plead Walgreens knew Plaintiffs expected the
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`reported U&C prices to include PSC prices and failed to provide any factual basis to assert
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`Walgreens was even aware of Plaintiffs’ purported contractual expectations about U&C pricing.
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`This argument goes to the knowledge element of the claims. Walgreens cites United States ex rel.
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`Proctor v. Safeway Inc., No. 11-cv-3406, 2020 WL 3132397, at *25 (C.D. Ill. Jun. 12, 2020) and
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`United States ex rel. Schutte v. Supervalu, Inc., No. 11-3290, 2020 WL 3577996, at *9–10 (C.D.
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`Ill. Jul. 1, 2020), which held “that retail pharmacy did not recklessly or knowingly submit false
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`U&C prices because law governing U&C requirements was unclear.” (Dkt. 52 at 14).9 Yet, these
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`cases do not support Walgreens’ argument. First, these cases were at the motion for summary
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`judgment stage which entails a different and higher standard of review.10 At this stage, the Court
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`is limited to the pleadings and may not determine factual issues. Even in these cases that
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`9 See also Dkt. 69 at 8; Dkt. 89 at 10.
`10 The Court notes that the courts in Proctor and Schutte previously denied motions to dismiss, finding the Plaintiffs
`had alleged sufficient facts to state a claim under the FCA. United States ex rel. Schutte v. Supervalu, Inc., 218 F.
`Supp. 3d 767 (C.D. Ill. 2016); United States ex rel. Proctor v. Safeway Inc. Case No. 11-3406, 2016 WL 7017231,
`*8–10 (C.D. Ill. Dec. 1, 2016).
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`11
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`Walgreens cites, they were no dismissed at the pleading stage. Id. Here, Plaintiffs pleaded
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`multiple times that Walgreens knew its U&C prices did not reflect the prices routinely charged to
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`its cash customers, thus rendering them false and inflated. (Dkt. 1 ¶¶ 41–43, 113, 120). This is
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`sufficient to plead knowledge for fraud under Rule 9(b), which requires a complaint to “state with
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`particularity the circumstances constituting fraud or mistake,” but “[m]alice, intent, knowledge,
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`and other conditions of a person's mind may be alleged generally.” Walgreens attempts to place a
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`higher pleading standard than required upon Plaintiffs at this stage. Walgreens' arguments as to
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`its purported lack of knowledge are denied.
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`3.
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`Reasonable Reliance
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`Walgreens argues Plaintiffs failed to plead they reasonably relied on the reported U&C
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`prices. Walgreens argues, because Plaintiffs knew about the PSC program and its discounted
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`prices, Plaintiffs could not ignore the available information and claim reasonable reliance each
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`time Walgreens reported a U&C price that did not match the PSC price. Walgreens also claims
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`years of related litigation in their industry should have made Plaintiffs aware of the alleged scheme
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`such that their reliance was unreasonable. Another court in this district heard this argument and
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`denied it, finding whether the Plaintiffs could have discovered the alleged fraud through research
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`was a “fact-intensive inquiry” inappropriate for resolution at the motion to dismiss stage. Forth,
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`2018 WL 1235015, at *6 (citing Glazer v. Abercrombie & Kent, Inc., No. 07C2284, 2007 WL
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`3120055, at *2 (N.D. Ill. Oct. 23, 2007) (“Based on the specific facts of this case, the issue of
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`whether plaintiffs' reliance on certain documents and statements was reasonable is not appropriate
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`for resolution at the Rule 12(b)(6) motion to dismiss stage of the proceeding.”)).
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`My colleague’s reasoning is sound. Whether the Plaintiffs’ reliance on the reported U&C
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`prices was reasonable is a fact-intensive question inappropriate for resolution at this stage. As it
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`stands, Plaintiffs sufficiently pled they reasonably relied upon Walgreens’ representations. (Dkt.
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`1 ¶¶ 59–60, 78–97, 105–06, 113, 122, 124).
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`
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`Walgreens cites to Smith v. Duffey, 576 F.3d 336, 339 (7th. Cir. 2009) to claim that
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`Plaintiffs’ reliance on an outrageously false statement cannot constitute fraud. In Duffy, the
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`Plaintiff, a knowledgeable businessman, claimed reliance upon an outrageously false statement.
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`The Court reasoned that “a false statement that the person to whom it is made could not believe,
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`because its falsity was obvious to him given what else he knew, is not actionable as a fraud.” Id.
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`at 339. Unlike Duffy, there was no blatantly obvious reason for Plaintiffs to know that they were
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`being defrauded. The Plaintiffs allege that Walgreens “used its marketing to conceal the true
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`nature of the PSC Program.” They further allege that the only way to confirm the true prices was
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`to review Walgreens’ internal cash transactions and discount pricing data neither of which is
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`publicly available. To suggest that these were statements that no one could possibly believe would
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`require that their falsity was obvious and in the public knowledge. The allegations show that this
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`is not the case. Although it is true that “the Illinois Supreme Court has said that the question of
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`whether the plaintiff ha[s] a right to rely on a false representation is to be answered while viewing
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`the representation in the light of all the facts of which plaintiff had actual knowledge as well as
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`those of which he might have availed himself by the exercise of ordinary prudence,” Int’l Star
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`Registry of Ill. v. ABC Radio Network, Inc., 451 F. Supp. 2d 982, 990 (N.D. Ill. 2006), this remains
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`a fact-intensive question that is not so immediately obvious as to grant a dismissal on the pleadings.
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`Plaintiffs allege Walgreens “used its marketing to conceal the true nature of the PSC Program and
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`the fact that cash-paying customers were paying U&C prices that were lower than the U&C prices
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`Walgreens reported” to them. (Dkt. 1 ¶¶ 79, 82). Plaintiffs point out in their response that the
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`“only way to confirm Walgreens’ true cash prices is to review Walgreens’ internal cash transaction
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`and discount pricing data, which are not publicly available and which Walgreens has actively
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`concealed from the Plaintiffs. (Dkt. 83 at 11). Dismissal based on Plaintiffs’ reasonable reliance
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`is denied.
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`4.
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`Rule 9(b)’s Particularity Requirement
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`Walgreens argues generally that Plaintiffs’ claims do not meet the Rule 9(b) pleading
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`standard for fraud. Under Rule 9(b), complaints alleging fraud must be pleaded with particularity.
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`Plaintiffs must describe the “who, what, when, where, and how” of the fraud, that is, “the first
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`paragraph of any newspaper story” United States ex rel. Berkowitz v. Automation Aids, Inc., 896
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`F.3d 834, 839 (7th Cir. 2018) (quoting United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d
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`849, 853 (7th Cir. 2009)). “What constitutes ‘particularity’ . . . may depend on the facts of a given
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`case,” but plaintiffs must “use some . . . means of injecting precision and some measure of
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`substantiation into their allegations of fraud.” Id. at 839–40 (quoting United States ex rel. Presser
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`v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016)).
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`
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`Walgreens claims Plaintiffs’ allegations fail to satisfy Rule 9(b) because they lump
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`defendants WBA and Walgreen Co. together and do not “place the data in context.” (Dkt. 52 at
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`17 (quoting Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d
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`436, 444 (7th Cir. 2011)). Further, they claim the allegations are deficient because Plaintiffs do
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`not include the definition of U&C from any of the Walgreens–PBM contracts that govern the
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`transactions. None of these supposed deficiencies are fatal to Plaintiffs’ claims. Walgreens does
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`not argue that the who, what, where, when, and how of the fraud has not been adequately alleged.
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`Indeed, they cannot. Plaintiffs clearly laid out the allegations of how the fraud was perpetuated
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`and concealed. (See Dkt. 1 ¶¶ 72–77). The district court in Forth found similarly. See Forth,
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`2018 WL 1235015, at *7 (finding that Plaintiffs’ pleadings as to Walgreens’ alleged fraudulent
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`scheme met the Rule 9(b) particularity requirements). Walgreens’ arguments requiring Plaintiffs
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`to plead extraneous details when they have already pled with particularity are unpersuasive.
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`
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`Walgreens alleges the pleadings are deficient because Plaintiffs “lumped together” the
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`parties. This case is not parallel to Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990), where the
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`defendants were individual persons. Here, Walgreens consists of a company and its parent
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`corporation. Other courts have uniformly denied similar arguments. See e.g. U.S. ex rel. Strauser
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`v. LaFrance Holdings, Inc., No. 18-cv-673, 2019 WL 1086363, at *15–16 (N.D. Okla. Mar. 7,
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`2019) (denying Walgreens’ Rule 9(b) arguments that Plaintiff clustered defendants actions because
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`Plaintiff alleged a uniform, chainwide scheme facilitated through a shared centralized pharmacy
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`transaction system”); Schutte, 218 F. Supp. 3d at 771–72 (same).
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`5.
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`Negligent Misrepresentation and Fraudulent Concealment
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`As discussed above, both negligent misrepresentation and fraudulent concealment claims
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`require the existence of a breach of duty. Plaintiffs argue Walgreens owed the Plans a duty to
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`disclose, even in the absence of a fiduciary duty, because Walgreens passed off half-truths as the