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HEALTHCARE SERVS. v. NATIONAL PRESCRIPTION ADMRS.

November 10, 1994

HEALTHCARE SERVICES, INC., Plaintiff,
v.
NATIONAL PRESCRIPTION ADMINISTRATORS, INC., Defendant.



The opinion of the court was delivered by: J. CURTIS JOYNER

 Joyner, J.

 The defendant in this civil matter, National Prescription Administrators, Inc. (NPA), has brought a motion seeking an order granting it summary judgment on all counts of the Plaintiff's complaint as well as an order awarding it costs and attorney's fees pursuant to Rule 11 of the Federal Rules of Civil Procedure. For the reasons outlined below, the motion will be denied in part and granted in part.

 I. HISTORY OF THE CASE

 The plaintiff in this diversity case, Healthcare Services, Inc. (HCS), is a Delaware corporation engaged in the business of filling medical prescriptions by mail order. The defendant NPA is a New Jersey corporation that provides prescription program administration services to certain companies and other entities. In 1983, NPA and HCS entered into a contract (HCS/NPA agreement) by which HCS agreed to join NPA's network of companies willing to fill prescriptions for companies with employee prescription plans. In 1990, NPA entered into a written contract (Pan Am/NPA agreement) with Pan American World Airlines, Inc. (Pan Am), a wholly owned subsidiary of Pan American Corporation. Pursuant to this contract, NPA agreed to provide prescription administrative services to Pan Am.

 The relationship between the three companies operated as follows. HCS filled prescriptions for Pan Am's employee prescription plan and then submitted claims to NPA for reimbursement. NPA would review the claims in order to insure that the claims conformed to Pan Am's billing guidelines. Following review, NPA would report the non-conforming claims to HCS and submit to Pan Am a billing report for all valid claims, indicating the amount owed to HCS. Pan Am would then transfer monies to NPA to cover both NPA's services and the reimbursement of HCS's claims. Finally, NPA would reimburse HCS for the valid claims out of funds received from Pan Am. NPA would only provide payment to HCS after receiving funds from Pan Am.

 In the late summer and fall of 1991, NPA rejected a large number of claims submitted by HCS. *fn1" When HCS contacted NPA to inquire about the large number of rejected claims, NPA instructed HCS to resubmit the claims. HCS sent the first of its resubmissions on November 25. The vast majority of these claims were eventually approved at various times during late November and December of 1991 and January of the following year. However, on December 4, 1991, Pan Am ceased all business operations and informed HCS that it could not fill any more prescriptions. Soon thereafter, Pan Am contacted HCS directly to ensure that HCS would continue to ship prescriptions to Pan Am employees. HCS agreed to continue to provide services on condition that Pan Am send an advance payment of $ 155,000 directly to HCS. This amount, intended to be a pre-payment for future services, was sent to HCS on December 6, 1991.

 Meanwhile, HCS and Pan Am entered into direct negotiations to resolve the issue of the outstanding claims. HCS allowed the claims to be processed by NPA, but it sought payment from Pan Am directly. On or about January 9, 1992, Pan Am agreed to make a direct payment to HCS for a number of claims amounting to approximately $ 913,000. Pan Am's vice president of finance requested funds to finance this payment on January 21, 1992, but Pan Am refused to make the payment, opting instead to allow those obligations to be resolved through the bankruptcy process. Later, Pan Am offered HCS 50 cents on the dollar to satisfy its claim, but HCS did not accept this offer.

 In September of 1993, HCS filed its complaint, asserting an entitlement to relief under the theories of breach of contract, promissory estoppel, and negligence. The essence of HCS's complaint is that HCS failed to receive payment as a direct result NPA's improper rejection of the claims for reimbursement. NPA answers these allegations by stating that it was contractually bound to transfer funds to HCS only after it received payment from Pan Am. Since both parties agree that Pan Am never paid NPA, NPA never became obligated to make payment to HCS and, as a result, it is entitled to an award of summary judgment. Further, NPA contends that by entering into direct negotiations with Pan Am, HCS essentially waived any claim it had against NPA. The Court holds that issues of fact exist as to whether NPA breached its contract with HCS by mishandling the claims and as to whether HCS was harmed as a result. As a result of this disposition, this Court further holds that NPA's motion for Rule 11 sanctions must be denied.

 II. DISCUSSION

 A. The Summary Judgment Standard

 This Court is authorized to award summary judgment "if the pleadings, depositions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Thus, the Court's responsibility is not to resolve disputed issues of fact, but to determine whether there exist any factual issues to be tried. Anderson v. Liberty Lobby, 477 U.S. 242, 247-49, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The non-moving party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Liberty Lobby, 477 U.S. at 249). Further, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Boiled to its essence, the summary judgment standard requires the non-moving party to create a "sufficient disagreement to require submission [of the evidence] to a jury." Liberty Lobby, 477 U.S. at 251-52. With these principles in mind, the Court turns to HCS's complaint.

 Counts I and II of HCS's complaint allege that NPA is liable to HCS under a breach of contract theory. Count I asserts that HCS is entitled to relief as a third party beneficiary of the Pan Am/NPA agreement, while ...


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