Wednesday, January 14, 2015

Passing off claim is subject to Rule 9(b) but passes

Medscript Pharmacy, LLC v.My Script, LLC, LLC, No. 14 C 0469, 2015 WL 149062 (N.D. Ill. Jan. 12, 2015)
The complaint alleged that Medscript was a Professional Compounding Centers of America (PCCA) certified compounding pharmacy, while defendants are compounding pharmacies/former owners and members of Medscript.  The non-pharmacy defendants sold their interests in Medscript and received a patient list containing health information to verify the amount of payments they’d get from Medscript post-closing.  The non-pharmacy defendants allegedly gave the patient list to My Script and defendant Valuscript to market those pharmacies and get prescribers to fill prescriptions with those pharmacies, in alleged violation of HIPAA.
My Script employees or agents allegedly falsely told Medscript patients and prescribers that (1) Medscript was out of business and My Script was taking over its patients and would fill the patients’ prescriptions, or (2) Medscript had changed its name to My Script, and My Script would fill the patients’ prescriptions going forward. My Script also made these false statements to prescribers. Also, Valuscript allegedly sent patients unauthorized prescriptions that were supposed to be filled by Medscript, and billed the patients’ insurance carriers for the prescriptions.  Finally, My Script and Valuscript allegedly sent their representatives prescription pads to give to prescribers that had Medscript’s name on them but My Script’s and Valuscript’s fax numbers. Thus, prescribers would believe they were filling prescriptions with Medscript but were unknowingly filling them with My Script and Valuscript.
First, defendants argued that the complaint didn’t plead with sufficient specificity under Rule 9(b), and the court agreed that allegations of false statements/passing off with the prescription pads triggered Rule 9(b).  But the complaint adequately alleged the who (My Script employees), what (out of business/name change/prescription pads—direct quotes not needed), where (to Medscript patients and prescribers), when (after they received the patient list), and how (use of the patient list).  Thus, the Lanham Act claims and related claims survived Rule 9(b) scrutiny.  (Note the interesting fact that the court applies Rule 9(b) to what’s ordinarily considered a classic trademark claim, passing off, and courts don’t often do that with §43(a)(1)(A) claims.)  But the civil conspiracy claim wasn’t pled with sufficient particularity.
Defendants argued that the allegations didn’t establish “commercial advertising or promotion” because the statements weren’t made to the general population or a significant portion of the industry, but were person-to-person communications.  Advertising or promotion is usually directed to a subset of the public.  But the Lanham Act requires that communications be made to a significant portion of the relevant industry. Here, the relevant industry was the compounding pharmacy industry. It was plausible that Medscript’s patients and prescribers contacted by defendants represented a significant portion of that industry, though factual development might ultimately show otherwise.  Thus both Lanham Act and related state law claims (including tortious interference) survived.

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