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Timestamp: 2019-04-20 22:15:09+00:00

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FindACase | Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Pharmacy, Inc.
Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Pharmacy, Inc.
Presently before the Court is Plaintiffs' Motion for Leave to File First Amended Complaint (ECF No. 56), in which they ask permission to update their story about alleged fraud spearheaded by Defendant CVS Pharmacy, Inc., (“CVS”). In particular, Plaintiffs would like to revise their complaint to comport with information they learned in discovery, namely, that Pharmacy Benefit Managers (“PBMs”), who facilitated generic-drug purchases between Plaintiffs and CVS, were allegedly aware of and abetted CVS's fraud. But not only do Plaintiffs seek to amend their factual allegations; they also hope to add two claims under the Racketeer Influence and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968. For the reasons that follow, Plaintiffs' Motion is GRANTED.
Alleging negligent misrepresentation, unjust enrichment, and violations of state-consumer-protection acts, Plaintiffs had it in their original complaint that CVS overcharged them by collecting more for generic drugs than it was allowed under the National Council for Prescription Drug Program (“NCPDP”). See Sheet M Workers Local No. 20 Welfare and Benefit Fund v. CVS Health Corp., 221 F.Supp.3d 227, 229-31 (D.R.I. 2016) (denying CVS's motion to dismiss). According to this complaint, a key component of CVS's fraud was its Health Savings Pass (“HSP”) program, which CVS developed to compete with big-box retailers (e.g., Wal-Mart, Inc.) who had recently slashed prices on certain generic drugs. See Id. at 229-30.
Plaintiffs believe that the foregoing, if proved, supports the two RICO claims in their PAC. In the first of these claims, Plaintiffs allege that CVS and Caremark shepherded a RICO enterprise that included the aforementioned PBMs and ScriptSave, all of whom Plaintiffs want as defendants. (Id. at 51-64.) This enterprise worked together to defraud Plaintiffs by disguising the fact that CVS failed to report HSP prices as its U&C prices for certain generic drugs. (Id.) The second claim is similar to the first, except that it splits the enterprise alleged in the first claim into three, each including CVS, Caremark, ScriptSave, and one of the three other PBMs. (Id. at 64-78.) Plaintiffs also have a standalone fraud claim in their PAC, which relies on the same alleged fraud underlying their RICO claims. (Id. at 82-83.) The remaining claims - negligent misrepresentation, unjust enrichment, and violations of state-consumer-protection acts - are holdovers from the original complaint. See Sheet M Workers, 221 F.Supp.3d at 230.
The parties disagree as to whether Federal Rule of Civil Procedure 15(a) or 16(b) supplies the standard by which the Court must evaluate Plaintiffs' Motion. But, in fact, both apply.
The First Circuit has made plain that where, as here, a plaintiff seeks to amend its complaint after the deadline for doing so set by the district court's scheduling order has passed, Rule 16(b)'s “good cause” standard applies. O'Connell v. Hyatt Hotels of P.R., 357 F.3d 152, 154 (1st Cir. 2004). This standard - “[u]nlike Rule 15(a)'s ‘freely given' standard, which focuses mostly on the bad faith of the moving party and the prejudice to the opposing party” - “emphasizes the diligence of the party seeking the amendment.” Id. at 155. Under Rule 16(b), “[p]rejudice to the opposing party remains relevant but is not the dominant criterion.” Id.
If a plaintiff makes it over the hurdle set by Rule 16(b), the district court must then evaluate a contested motion to amend under Rule 15(a)'s “freely give[n]” standard. See Leary v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2006) (“Once the scheduling order's deadline passes, a plaintiff first must show good cause under Rule 16(b) for failure earlier to seek leave to amend before a court will consider whether amendment is proper under Rule 15(a).”); 6A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1522.2 (3d ed. 1998) (same). That is, the district court must ask whether a plaintiff's amendment would cause undue delay, was brought in bad faith, or with a dilatory motive, or if the amendment would be futile. Grant v. News Grp. Bos., Inc., 55 F.3d 1, 5 (1st Cir. 1995).

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