The pharmacy defendants – major national corporations CVS Pharmacy, Inc., Rite Aid of Maryland, Inc., Walgreen Co., and Walmart Inc., sued by Long Island counties Nassau and Suffolk (County Plaintiffs) in their capacities as dispensers and distributors of prescription opioids, consolidated in In Re Opioid Litigation pending in Suffolk County Supreme Court, moved for summary judgment seeking dismissal of public nuisance claims. (Supreme Court Suffolk County 400000/2017). Supreme Court Judge Jerry Garguilo granted summary judgment for the corporations in their capacity as dispensers only, and denied summary judgment in their capacity as distributors.
Corporate Parents Held Insulated from Liability for Pharmacist Dispensing Decisions Under New York Law
County plaintiffs alleged that the pharmacy defendants dispensed opioids without implementing adequate measures to prevent filling prescriptions in the presence of unresolved red flags, and that the corporations were willfully blind to indicia of diversion. The Controlled Substances Act (CSA) and applicable regulations impose the responsibility for the proper dispensing of controlled substances on the pharmacist. This “corresponding responsibility” for proper dispensing complements the prescriber’s responsibility for proper prescribing. 21 C.F.R. § 1306.04(a). From the DEA’s perspective, the pharmacist’s corresponding responsibility involves identifying and resolving “red flags” – unusual circumstances arising during the presentation of a prescription. [Link to Legal Alert
County plaintiffs tried to analogize corporate parent public nuisance liability to corporate parent liability under the CSA, citing federal cases holding corporations liable for the dispensing activity of their subsidiary pharmacies. The judge disagreed. Holding that the retail chain pharmacy defendants are not vicariously liable for the dispensing conduct of their subsidiaries under New York law, the judge granted summary judgment on claims against the pharmacy defendants in their capacity as dispensers of opioids. “That there may be liability for a non-registrant owner under the federal CSA is not instructive as to whether the corporate parent would have personal liability for the dispensing conduct of its subsidiaries under New York law in a common law public nuisance cause of action.” (NYSCEF Doc. No. 5639, April 9, 2020 Decision and Order).
The Court relied on well-established principle under New York law that a parent corporation is not liable for the torts of the subsidiary by mere virtue of its stock ownership, absent “extraordinary circumstances.” “At the very least, there must be direct intervention by the parent in the management of the subsidiary to such an extent that the subsidiary’s paraphernalia of incorporation, directors and offers are completely ignored.” (NYSCEF Doc. No. 5639, quoting Billy v. Consol. Mach. Tool Corp., 51 N.Y.2d 152, 163 (1980)).
Another argument for summary judgment, not reached by the Court, was based on lack of proximate causation. Relying on the physician-patient relationship, the pharmacy defendants argued that pharmacists have no ability to affect prescribing decisions or override the prescribers’ judgment, and thus pharmacists were not in position to prevent or mitigate the claimed injuries.
Although the pharmacy defendants distributed controlled substances only to their own pharmacies, their motion for summary judgment in their capacity as distributors was denied. “To suggest that an articulable question of fact is not presented is untenable.” (NYSCEF Doc. No. 5959, April 16, 2020 Decision and Order).
New York State Opioid Litigation Deemed “Essential”
On April 15, 2020, Supreme Court Judge Jerry Garguilo issued an order deeming “essential” In Re Opioid Litigation pending in Suffolk County Supreme Court, after a hiatus in court filings. (NYSCEF Doc. No. 5647). On April 9 through April 16, 2020, the Judge issued a wave of decisions and orders on dozens of pending motions, including motions for summary judgment filed by distributor and pharmacy defendants.
The qualification of this matter as “essential” lifted restrictions on filing and conferencing applicable since March 22, 2020 per Chief Administrative Judge Lawrence Marks administrative order AO/78/20. The list of essential matters included in the administrative order contains a catch-all provision of “any other matter that the court deems essential.” In Re Opioid Litigation qualified as one of “very rare cases where individual facts necessitate an immediate hearing notwithstanding current public health concerns.”[i]
Upcoming Trial on Public Nuisance Claims Under New York Law
The much-anticipated trial against multiple opioid manufacturers, distributors, and pharmacies in In Re Opioid Litigation was set to begin on March 20, 2020 but has been delayed due to the ongoing risk posed by COVID-19. The trial will be limited to public nuisance claims, defined under New York common law as conduct that amounts to a substantial interference with the exercise of a common right of the public.
The parties having agreed or certainly concurred that an “opioid crisis” does exist. …[A]n inquiry at trial would be whether or not the “opioid crisis” in and of itself constitutes a Public Nuisance. In the event the finder of fact determines that the answer is “yes, the opioid crisis constitutes a Public Nuisance,” the next area of inquiry would be whether or not the acts and/or omissions of any Defendant represents a “substantial factor” in the creation of the Public Nuisance. (NYSCEF Doc. No. 5662)
The action will be tried together by plaintiffs Nassau County, Suffolk County, and the State of New York.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.
[i] Coronavirus And The New York State Courts, To All Attorneys And Parties In Litigation Before The New York State Courts, https://www.nycourts.gov/limited-filings.shtml.