Case Title: TAP PHARMAC. PROD., INC. v. State Bd. of Pharmacy

Citation: 238 S.W.3d 140

Docket Number: SC 88318

State: missouri

Court: Missouri Supreme Court

Date: 2007-11-20T00:00:00Z

Document:
238 S.W.3d 140 (2007)
TAP PHARMACEUTICAL PRODUCTS INC., d/b/a Pharmacy Solutions, Respondent,
v.
STATE BOARD OF PHARMACY, Appellant.
No. SC 88318.

Supreme Court of Missouri, En Banc.
November 20, 2007.
*141 Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, State Solicitor, Stacy E. Yeung, Asst. Atty. Gen., William Vanderpool, Asst. Atty. Gen., Jefferson City, MO, for Appellant.
Morgan R. Hirst, Jones Day, Chicago, Ill., Duane E. Schreimann, Michael J. Schmid, Jefferson City, MO, for Respondent.
WILLIAM RAY PRICE, JR., Judge.
TAP Pharmaceutical Products Inc., d/b/a Pharmacy Solutions, seeks review of a Board of Pharmacy decision placing TAP's pharmacy permit on probation for three years. The Board's action, however, is barred by a settlement agreement that TAP entered into with the State of Missouri. Pursuant to Rule 84.14, the trial court judgment is vacated and the Board's order is reversed.
In September 2001, TAP agreed to plead guilty to the offense of conspiracy to violate the Prescription Drug Marketing Act, 21 U.S.C. sections 331(t) and 333(b). Specifically, TAP provided free samples of the drug Lupron to physicians with the expectation that those samples would be prescribed to patients and then illegally billed to the Medicaid program. The United States District Court for the District of Massachusetts accepted TAP's guilty plea on December 6, 2001.
TAP and the State of Missouri entered into a Settlement Agreement and Release ("Agreement") on December 3, 2001. Under the terms of the Agreement, TAP paid the state $1,827,331.90. In exchange, the state agreed to release TAP from specified claims arising from the conduct underlying the guilty plea. TAP executed a similar agreement with all other states and the federal government.
Thereafter, the attorney for the Missouri Board of Pharmacy ("Board") filed a felony conviction complaint with the Board pursuant to section 338.065,[1] which allows for discipline of a pharmacy permit if:
The Board sought to impose discipline against TAP's pharmacy permit based on the 2001 guilty plea.[2] The Board held a disciplinary hearing, issued its findings, and ordered TAP's pharmacy permit placed on probation for three years. TAP filed a petition for review in the circuit court, which reversed the Board's decision and remanded the case to the Board.
In an appeal following judicial review of an agency's administrative action, this Court reviews the decision of the agency, not the circuit court. Mo. Coalition for the Environment v. Herrmann., *142 142 S.W.3d 700, 701 (Mo. banc 2004). Pursuant to section 536.140.2, this Court reviews to determine "whether the agency's findings are supported by competent and substantial evidence on the record as a whole; whether the decision is arbitrary, capricious, unreasonable or involves an abuse of discretion; or whether the decision is unauthorized by law." Community Bancshares, Inc. v. Secretary of State, 43 S.W.3d 821, 823 (Mo. banc 2001).
TAP challenges the Board's determination on two fronts. First, it argues that the Board's actions did not comport with due process because TAP received an insufficient hearing and the Board was not a fair and impartial tribunal. Second, TAP points to three provisions in the Agreement that it argues bar the Board from instituting the action in question. Those provisions provide:
The Board notes that these provisions are modified by Paragraph 3, which states in pertinent part that:
Because this dispute can be resolved based on Paragraphs 2 and 4 of the Agreement, TAP's other arguments are not addressed.
Missouri courts treat a settlement agreement as a contract between the parties. Andes v. Albano, 853 S.W.2d 936, 941 (Mo. banc 1993). As a result, normal canons of contract construction apply. Chief among those canons is that the court first looks to the plain language of the agreement. Id. If that language clearly addresses the matter at issue, the inquiry ends. However, if the language is not clear, the court turns to other tools of construction in an attempt to determine the intent of the parties. Id. When making that determination, courts will consider language in the context of the entire contract, as well as "the relationship of the parties, the subject matter of the contract . . . the practical construction the parties themselves have placed on the contract by their acts and deeds, and other external circumstances that cast light on the intent of the parties." Royal Banks of Missouri v. Fridkin, 819 S.W.2d 359, 362 (Mo. banc 1991).
The Agreement does not contain the words "discipline," "license," "pharmacy permit" or the like regarding the proposed probation of TAP's pharmacy permit. This dispute probably would not have arisen had it done so. However, the language of Paragraphs 2 and 4, and the Agreement as a whole, is sufficiently clear to resolve this matter in TAP's favor.
The key language of Paragraph 2 of the Agreement provides that "the state of Missouri . . . shall release and forever discharge TAP . . . from any civil or administrative claims for damages or penalties." (emphasis added). Numerous Missouri cases have used the phrase "penalty" to describe licensure discipline imposed by the Board and other administrative bodies. See Tadrus v. Missouri Bd. of Pharmacy, 849 S.W.2d 222, 228 (Mo. App.1993) (suspension of pharmacy license is "penalty" left largely to the discretion of the Board); Dunning v. Bd. of Pharmacy, 630 S.W.2d 155, 157 (Mo.App.1982) (Board moderated Administrative Hearing Commission's recommended "penalty" of revocation of pharmacy license); Orion Security, Inc. v. Bd. of Police Comm'rs of Kansas City, 90 S.W.3d 157, 163, 167 (Mo. App.2002) (frequently referring to licensure suspension or revocation as a "penalty").
The state notes that this Court has held that licensure discipline is remedial rather than penal in nature. Younge v. State Board of Registration for the Healing *144 Arts, 451 S.W.2d 346, 349 (Mo.1969), cert. denied, 397 U.S. 922, 90 S. Ct. 910, 25 L. Ed. 2d 102 (1970). The state argues that because licensure discipline is remedial rather than penal, it cannot be a penalty covered under the terms of the Agreement. This line of reasoning misses the mark. The word "penalty" is often used in a broader context to include both penal and remedial acts. See In re Caranchini, 956 S.W.2d 910, 914 (Mo. banc 1997); State v. Kelly, 631 N.W.2d 167, 172-73 (N.D. 2001); In re Howard, 307 B.R. 659, 664 (Bankr.D.Minn.2004). A similar analysis applies here. Pharmacy licensure discipline is primarily remedial in nature. However, that characterization does not preclude the Board's actions from being described as a penalty.
In addition to the language in Paragraph 2, licensure discipline is also prohibited by Paragraph 4 of the Agreement, which states in pertinent part that:
TAP argues that this language releases all administrative claims arising from the covered conduct, while the state argues that this language only refers to administrative claims attempting to exclude TAP from Missouri's Medicaid program.
The key to the meaning of the sentence is the use of the disjunctive "or" to separate the "administrative claim" language from the Medicaid program language. The use of the term "or" generally refers to alternative possibilities and is akin to use of the word "either." Council Plaza Redevelopment Corp. v. Duffey, 439 S.W.2d 526, 532 (Mo. banc 1969). In this context, Paragraph 4 releases (1) any administrative claims related to the covered conduct or (2) any action seeking exclusion from Missouri's Medicaid program based on the covered conduct.
The state's interpretation would violate a cardinal rule of contract construction by rendering a portion of the Agreement superfluous. State ex rel. Riverside Pipeline Co., L.P. v. Public Service Com'n, 215 S.W.3d 76, 84 (Mo. banc 2007). Specifically, if the "any administrative claim" language refers only to actions related to Missouri's Medicaid program, then that language is superfluous because those claims would already be covered under the "any action" portion of the sentence.
The state counters that reading Paragraphs 2 and 4 in the above manner would make the language in Paragraph 3(f) of the Agreement superfluous. That Paragraph provides:
If Paragraphs 2 and 4 are read to broadly waive administrative claims then, the state argues, the language in Paragraph 3(f) serves no purpose.
This argument misconstrues the interplay between Paragraph 3 and Paragraphs 2 and 4. Paragraphs 2 and 4 explicitly release administrative claims arising from the covered conduct. Reading the Agreement as a whole, it is clear that TAP is seeking to resolve issues regarding the covered conduct and paid a significant sum of money to do so. On the other hand, the *145 language of Paragraph 3(f) makes clear that any administrative claims for other past or future conduct are still available. Paragraph 3 serves to prevent the Agreement from being read as a blanket release of actions against TAP for conduct unrelated to its specific criminal conduct.
The Board's actions against TAP are barred by the language of Paragraphs 2 and 4 of the Agreement and therefore unauthorized by law. Section 536.140.2. The judgment is vacated, and the Board's order is reversed. Rule 84.14.
LAURA DENVIR STITH, C.J., TEITELMAN, LIMBAUGH, RUSSELL and WOLFF, JJ., and BARNEY, Sp.J., concur.
BRECKENRIDGE, J., not participating.
[1]  All statutory references are to RSMo 2000, unless otherwise noted.
[2]  To date, Missouri is the only state to undertake such action.