United States District Court, N.D. Alabama, Northeastern Division
MEMORANDUM OPINION 
G. CORNELIUS, U.S. MAGISTRATE JUDGE.
matter was removed from the Circuit Court of Jackson County,
Alabama, on December 9, 2014. (Doc. 1). On August 24, 2015,
the court denied the motion to remand filed by the plaintiff,
North Jackson Pharmacy, Inc. ("NJP"), and ordered
that Tom Smith be dismissed from this action as fraudulently
joined. (See Doc. 33). This matter is now before the
court on the motion for summary judgment filed by the
remaining defendant, McKesson Corporation
("McKesson"). (Doc. 52). The motion is fully
briefed and ripe for review. (Docs. 53, 57, 60). As explained
below, the motion is due to be granted.
an independent pharmacy located in Stevenson, Alabama, owned
and operated by Bryan Hicks. (Doc. 57 at 4). McKesson is a
pharmaceutical supplier. (See id.). McKesson
supplied prescription drugs to NJP for approximately ten
years prior to December 2014. (See id.). NJP asserts
claims for breach of contract and tortious interference with
business relations against McKesson arising from
McKesson's December 3, 2014 termination of its
relationship with NJP. (Doc. 1-1 at 6-8).
contract in question is a vendor agreement (the
"Agreement") between McKesson and the American
Pharmacy Cooperative, Inc. ("APCI"), of which NJP
is a member. (See generally Doc. 57-1). The version
of the Agreement governing at the time of McKesson's
termination was executed by McKesson and APCI in May 2013,
and is governed by Alabama law. (Id. at 2, 26).
Under the Agreement, McKesson was the exclusive supplier of
products for APCI's members. (Doc. 57-1 at 4). Paragraph
40 of the Agreement, entitled "Controlled Substance
Requirements, " provides:
Nothing in this Agreement shall be construed as requiring
McKesson to perform any obligations hereunder or engage in
any action or omission that McKesson reasonably determines as
violating any applicable federal, state or local law, rule,
regulation or government requirement ("Laws") or
putting McKesson in jeopardy of violating any such Laws. . .
. In the event that performance of the terms of this
Agreement would cause McKesson to be noncompliant with or in
jeopardy of being noncompliant with any Laws or any
governmental guideline or pronouncement involving Controlled
Substances . . . including the Drug Enforcement
Administration's regulatory requirements for verifying
its customers and reporting suspicious or excessive orders,
McKesson shall have the right, within its sole and absolute
discretion, to do any of the following with respect to any
APCI Member: (A) limit or deny any order for Controlled
Substances or other regulated products as warranted by any
established diversion monitoring program of McKesson; and/or
(B) immediately terminate this Agreement, in whole or in
part, as to an APCI Member without liability if: (i)
continued performance of any part of this Agreement with
respect to an APCI Member would . . . put McKesson in
jeopardy of violating any Laws regarding Controlled
Substances or any other regulated products or activities . .
(Id. at 32).
October 15, 2014, Chris Sanderson, a manager in
McKesson's regulatory affairs department, visited NJP and
later prepared a report regarding its pharmacists and
disbursement of controlled substances. (See Doc. 1-3
at 4-10). After reviewing the report, Jerry Carmack, also in
McKesson's regulatory affairs department, prepared a
report recommending termination of McKesson's
relationship with NJP. (Id. at 1-3). After citing
aspects of NJP's practices, discussed in more detail
below, Carmack's report concluded NJP was not performing
its duties under federal law regarding disbursement of
controlled substances. (Id.).
Boggs, McKesson's senior director of regulatory
compliance, was employed as a Special Agent with the Drug
Enforcement Administration ("DEA") from 1985 to
2012, and was assigned to the Office of Diversion Control for
the last six years of his employment by the DEA. (Doc. 54-3
at 2-3). Boggs reviewed Sanderson's and Carmack's
reports, as well as NJP's purchasing data, and-based on
numerous "red flags"-made the decision to
"suspend any further supply" of controlled
substances to NJP. (Id. at 4-6). Sanderson's and
Carmack's reports noted: (1) the disciplinary record of
three NJP pharmacists, one of which "was caught taking
and consuming pain pills while working as a pharmacist";
(2) approximately 30% of NJP's total prescription sales
were paid in cash; (3) NJP's failure to utilize the
state's voluntary prescription drug monitoring program;
and (4) over 45% of the prescriptions dispensed by NJP during
the previous six months were for controlled substances.
(Id. at 4). The reports also noted the relatively
high volume of controlled substances dispensed by NJP,
including: (1) two standard deviations above the mean for
morphine and oxycodone doses: (2) three standard deviations
above the mean for alprazolam; (3) more than four standard
deviations above the mean for hydrocodone, 76.3% of which was
dispensed in the higher 10 mg dosage; and (4) NJP's
purchase of 1, 268, 000 doses of phendimetrazine in 2014,
which was more than 1000 times the threshold established by
McKesson. (Id. at 4-5). Finally, the reports noted
red flags regarding NJP's filling of phendimetrazine
prescriptions written by the Cumberland Center, a weight loss
clinic located next door to NJP. In particular, the reports
noted the Cumberland Center employed physicians that had been
disciplined by licensing boards in Alabama or Tennessee for
"improper prescribing of controlled substances."
(Id. at 4). The reports also noted the suspicion
that the Cumberland Center was prescribing
phendimetrazine-which is illegal in Tennessee-to Tennessee
residents who filled their prescriptions at NJP and paid in
on the red flags revealed by NJP's purchasing data and
identified in Carmack's and Sanderson's reports,
Boggs decided to suspend any further delivery of controlled
substances to NJP. (Doc. 54-3 at 5-6). Boggs made this
decision "because of a concern that a continued
performance of the Agreement as to NJP would violate laws
regarding controlled substances, or could put McKesson in
jeopardy of violating laws regarding controlled
substances." (Id. at 6). During his deposition,
Boggs testified that NJP's "inability to
appropriately exercise" its responsibility under 21
C.F.R. § 1306.04 put McKesson at risk of violating its
requirement to maintain effective controls against diversion
under 21 U.S.C. § 823. (Doc. 56-4 at 42).
Dale Harris relayed the termination to NJP via a telephone
call to Bryan Hicks on December 3, 2014. (See Doc.
57 at 5). Harris stated McKesson was terminating the
Agreement due to the ratio of controlled to non-controlled
pharmaceutical orders, the amount of cash sales, and concerns
about the number of prescriptions written by the Cumberland
Center. (See id.). During his deposition, Hicks
testified that NJP was never in violation of any law, rule,
or regulation governing pharmacy practices. (Id. at
36). Hicks further testified that McKesson never warned NJP
that it could be in possible violation of any rule,
regulation, or law prior to termination. (Id.).
Finally, Hicks testified there was a "linked"
business relationship between NJP, its customers, and
McKesson. (See Doc. 53 at 17).
STANDARD OF REVIEW
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). To demonstrate there is a genuine dispute
as to a material fact that precludes summary judgment, a
party opposing a motion for summary judgment must cite
"to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials."
Fed.R.Civ.P. 56(c)(1)(A). When considering a summary judgment
motion, the court must view the evidence in the record in the
light most favorable to the non-moving party. Hill v.
Wal-Mart Stores, Inc., 510 Fed.Appx. 810, 813 (11th Cir.
2013). "The court need consider only the cited
materials, but it may consider other materials in the
record." Fed.R.Civ.P. 56(c)(3).
claims for breach of contract and tortious interference with