United States District Court, D. Maryland
L. Russell, III United States District Judge
MATTER is before the Court on Defendant Express Scripts,
Inc.'s (“ESI”) Partial Motion to Dismiss
Plaintiffs' First Amended Complaint (ECF No.
The Motion is ripe for disposition, and no hearing is
necessary. See Local Rule 105.6 (D.Md. 2018). For
the reasons outlined below, the Court will grant the Motion.
dispute arises out of ESI's agreement to manage pharmacy
benefits for Plaintiff Bon Secours Health System, Inc.'s
(“BSHSI”) self-insured employee prescription plan
(the “Plan”). (1st Am. Compl. ¶¶ 1-2,
ECF No. 14). The contract at issue is the Pharmacy Benefit
Management Agreement and related Amendment (the
“Agreement”), effective February 1, 2010 and
September 1, 2012 respectively. (Id. ¶ 1).
provisions of the Agreement are relevant to ESI's Motion.
In pertinent parts, Section 6.3(d) of the Agreement, entitled
“Indemnification, ” provides:
(i) In addition to any indemnification obligations set forth
in the Business Associate Agreement, ESI will indemnify and
hold [BSHSI] harmless from and against any loss, cost,
damage, expense or other liability, including, without
limitation, reasonable costs and attorney fees
(“Costs”) incurred in connection with any and all
third[-]party claims, suits, investigations or enforcement
actions (“Claims”) which may be asserted against,
imposed upon or incurred by [BSHSI] and arising as a result
of (A) ESI's negligent acts or omissions or willful
misconduct (including those of the Mail Service Pharmacy and
CuraScript), or (B) ESI's breach of this Agreement.
(iii) As a condition of indemnification, the party seeking
indemnification will notify the indemnifying party in writing
promptly upon learning of any Claim for which indemnification
may be sought hereunder, and will tender the defense of such
claim to the indemnifying party. No. party will be obligated
to indemnify the other with respect to any claim settled
without the written consent of the other.
(1st Am. Compl. Ex. 1, ECF No. 14-2; Compl. Ex. 1
[“Agreement”] § 6.3(d)(i), (iii), ECF No.
1-2; Def.'s Mem. Supp. Partial Mot. Dismiss Pls.' 1st
Am. Compl. [“Def.'s Mot.”] at 3, ECF No.
Business Associate Agreement (“BAA”), an exhibit
to the Agreement, contains an indemnification provision,
which provides, in relevant part:
Each party (the “Indemnifying Party”) shall
indemnify and hold the other party and its officers,
directors, employees and agents (each an “Indemnified
Party”) harmless from and against any claim, cause of
action, liability, damage, cost or expense
(“Liabilities”) to which the Indemnified Party
becomes subject to as a result of third[-]party claims
(including reasonable attorneys' fees and court or
proceeding costs) brought against the Indemnified Party,
which arise as a result of: (i) the material breach of this
Business Associate Agreement by the Indemnifying Party; or
(ii) the gross negligence or willful misconduct of the
Indemnifying Party, except to the extent such Liabilities
were caused by the Indemnified Party.
(Agreement Ex. C [“Bus. Assoc. Agreement”] §
the services ESI offered its clients was the Compound
Management RX Program (the “Program”), which was
designed to combat fraud and abuse by pharmacies. (1st Am.
Compl. ¶¶ 3, 29) According to ESI's own
guidelines, BSHSI should have been auto-enrolled in the
Program no later than September 15, 2014, but it was not.
(Id. ¶¶ 3-4, 32). In 2014 and 2015, a
BSHSI employee in South Carolina, conspiring with others,
caused unauthorized or improper prescriptions for compounded
medications to be issued, which ESI processed and the Plan
paid for. (Id. ¶ 48). ESI's failure to
enroll BSHSI in the Program allowed “multiple,
fraudulent pharmacy claims” to be processed and paid
from September 15, 2014 through May 31, 2015, when “it
appears that ESI did start to exclude these compounds from
being filled.” (Id. ¶¶ 5, 40). On
December 21, 2016, Plaintiff Federal Insurance Co.
(“Federal”) paid a BSHSI claim for $4, 571,
483.96 under BSHSI's Health Care Portfolio policy.
(Id. ¶ 52).
29, 2018, BSHSI filed its initial Complaint. (ECF No. 1). On
July 24, 2018, BSHSI and Federal, to whom BSHSI had assigned
certain of its rights against ESI, filed the First Amended
Complaint. (1st Am. Compl. ¶ 8, ECF No. 14). The First
Amended Complaint alleges three breach of contract claims:
failure to perform (Count I); failure to indemnify (Count
II); and, by Federal only, subrogation (Count III). (1st Am.
Compl. ¶¶ 57-91). BSHSI and Federal seek money
damages. (Id. at 15-16).
August 7, 2018, ESI filed its Partial Motion to Dismiss
Plaintiffs' First Amended Complaint, seeking to dismiss
Count II. (ECF No. 21). On August 21, 2018, Plaintiffs filed
an Opposition. (ECF ...