19-523 Lynch v. Nat’l Prescription Adm’rs, Inc.

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32 .1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRON IC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated Term of the Unite d States Court of Appeals for th e Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York on the

27 th day of February, two thousand twenty.

Present: ROSEMARY S. POOLER, GERARD E. LYNCH, MICHAEL H. PARK, Circuit Judges

.

_____________________________________________________

PATRICK J. LYNCH, as Trustee of the H ealth and Welfare Fund of the Patrolmen’s Benevolent Association of the City of Ne w York and The Retiree Health & Welfare
Fund of the Patrolmen’s Benevol ent Association of the City of New York, on behalf of himself and all other similarly situated Plans,

Plaintiff-Appellant

,

v. 19-523

NATIONAL PRESCRIPTION ADMINISTRATORS, INC., EXPRESS SCRIPTS, INC., JOHN DOES, 1 through 25,

Defendants-Appellees

,

_____________________________________________________

Appearing for Appellant: Mathew P. Jasinski (Jessica C. Colombo, on the brief ), Motley Rice LLC, Hartford, CT.

Appearing for Appellees: Christophe r A. Smith (Melissa Z. Baris, on the brief ), Husch Blackwell LLP, St. Louis, MO.2 Appeal from the United States District Court for the Southern District of New York (Daniels, J. ).

ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of said Dist rict Court be and it hereby is AFFIRMED

.

Appellant Patrick J. Lynch, trustee of the Health and Welfare Fund and the Retiree
Health and Welfare Fund of the Patrolmen’s Be nevolent Association of the City of New York (collectively, “the Funds”), appeals from the February 1, 2019 judgment of the United States
District Court for the Southern District of New York (Daniels, J. ) granting Appellees’ motion for summary judgment and denying the Funds’ motion for leave to am end. We assume the parties’ familiarity with the underlying fa cts, procedural history, and speci fication of issues for review.

The district court properly granted Appellees’ summary judgment motion on the Funds’ breach of fiduciary duty claim because there wa s no fiduciary relationship between the parties. “A fiduciary relationship exists between two pers ons when one of them is under a duty to act for or to give advice for the bene fit of another upon matt ers within the scope of the relation.” EBC I, Inc. v. Goldman, Sachs & Co. , 832 N.E.2d 26, 31 (N.Y. 2005) (internal quotation marks and citation omitted). Reliance, de fa cto control, and dominance are e ssential elements of a fiduciary relationship. AG Capital Funding Partners, L.P. v. State St. Bank & Tr. Co. , 896 N.E.2d 61, 68 (N.Y. 2008). A fiduciary relations hip “is grounded in a higher leve l of trust than normally present in the marketpl ace between those involved in arm’ s length business transactions.” EBC

I , 832 N.E.2d at 31. A plaintiff must establish that the parties cr eated a relationship of higher trust “apart from the terms of the cont ract” and not from the agreement alone. Id

.

We agree with the district court that there was no “relationship of higher trust” between the Funds and Appellees apart fro m the terms of the contract. See id . The facts underlying the Funds’ breach of fiduciary duty claim are, accord ing to the Funds, nearly identical to those underlying their proposed breach of contract claims . As such, there is no evidence that “the parties created a relationship of hi gher trust than would arise from [t heir contracts] alone so as to permit a cause of action for bre ach of a fiduciary duty independe nt of the contractual duties.” Brooks v. Key Tr. Co. Nat’l Ass’n , 809 N.Y.S.2d 270, 272-73 (N.Y . App. Div. 2006) (internal quotation marks and citation omitted).

Nor is there evidence that Appellees exerci sed the necessary de facto control over the Funds. The Funds allege that Appellees did so by serving as their agen t in negotiations, and by processing the Funds’ pharmacy claims and drug manufacturer rebates.

In terms of negotiations, the absence of contractual provisions regarding interim
instructions makes clear that the Funds “ret ain[ed] no authority over the manner in—or price for—which [the drugs] will be procured.” Johnson v. Priceline.com, Inc. , 711 F.3d 271, 278 (2d Cir. 2013). “[T]hat right of contro l is what distinguishes an ag ency relationship from a mere
contractual one.” Id . As to negotiating rebates, there are no contractual provisions obligating Appellees to negotiate rebates at all. In any event, negotiati ons would have occurred across Appellees’ entire book of business, and negotia ting rates across a book of business does not
demonstrate the levels of trust and control with any individual client re quired of a fiduciary.3 As to the processing of pharmacy claims, Appellees simply carried out the detailed process outlined in the contract. The Funds’ counterargum ent that Appellees inflated the prices of pharmaceuticals with fees th ey had negotiated for themselves is misplaced, as this has no bearing on whether Appellees ha d discretion to devi ate from the contractual process in transmitting the payments. There is also no evid ence that the Funds depended on Appellees to calculate or make payments correctly. The Funds had direct access to Appellees’ own system, and they also conducted audits internally and w ith the use of external CPAs. Accordingly, the
district court did not err in conc luding that no fiduciary relations hip existed between the parties.

The district court also did not abuse its discretion in denyi ng the Funds leave to amend.

“ Reasons for a proper denial of leave to amend include undue dela y, bad faith, futility of the amendment, and perhaps most important, the resulting prejudice to the opposing party.” State Teachers Ret. Bd. v. Fluor Corp. , 654 F.2d 843, 856 (2d Cir. 1981). “Mere delay, however, absent a showing of bad faith or undue prejudice, does not provide a basis for the district court to deny the right to amend.” Ruotolo v. City of New York , 514 F.3d 184, 191 (2d Cir. 2008) (internal quotation mark s and citation omitted). “In gauging prejudice, we consider, among other factors, whether an amendment would requir e the opponent to expend significant additional resources to conduct discovery and prepare for tria l or significantly delay the resolution of the dispute.” Id . at 192 (internal quotation marks and citation omitted).

Even assuming the Funds’ proposed amendment would not have been futile, the district court appropriately found that further delay would unduly prejudice Appellees at this late stage in the litigation. See id . The Funds’ amendment “pleads a ne w scenario that would prevent disposition of the case until either further motion practice or a trial.” Id . Although the factual underpinnings of the claims may be the same, “a mendment is prejudicial when it substantially changes the theory on which the case has been pr oceeding and is proposed late enough so that the opponent would be required to engage in significant new preparation.” Id . (internal quotation marks and citation omitted). Appe llees have been defending agains t the breach of fiduciary duty claim for many years with the argument that no fi duciary relationship existed because the parties had a contractual relationship. Th is theory could not serve as an appropriate defense to a breach of contract claim, however. A llowing the Funds to amend would thus require “significant new preparation” and unduly pr ejudice the Appellees.

We have considered the remainder of the F unds’ arguments and find them to be either unpreserved or without merit. Acco rdingly, the order of the distri ct court hereby is AFFIRMED.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk