Pittsburg SNF LLC et al v. PharMerica East, Inc.
MEMORANDUM ORDER denying 42 MOTION for Joinder filed by PharMerica East, Inc. Signed by Magistrate Judge Roy S Payne on 6/27/12. (ehs, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
PITTSBURG SNF LLC, et al.,
PHARMERICA EAST, INC.,
Defendant and Third-Party Plaintiff,
PHARMASTER, L.P., et al.,
Case No. 2:10-CV-363-JRG-RSP
Before the Court is PharMerica East, LLC’s Motion to Join PharMaster, L.P., Peter
Licari, Michael D’Arcangelo, William D. Jacobson, David C. Milling, PharMaster GP, LLC and
Complete Healthcare Resources, Inc. as required parties under Federal Rule of Civil Procedure
19 (Dkt. No. 42, filed July 15, 2011). Because the Court finds that PharMerica has not met its
burden of showing that these persons are necessary parties, PharMerica’s motion is DENIED.
This recitation of facts is drawn from Plaintiffs’ Third Amended Complaint.
plaintiffs in this case are the owners and operators of 37 nursing homes in Texas. Third Am.
Compl. ¶ 1, Dkt. No. 117. Plaintiffs acquired the nursing homes from Complete Healthcare
Resources in 2008. Prior to the sale of the nursing homes in 2008, Complete Healthcare
Resources (and the nursing homes) were owned by Peter Licari and Michael D’Arcangelo. Id. at
¶ 28. In 2005, Licari and D’Arcangelo formed the institutional pharmacy PharMaster, L.P. to
serve the pharmacy needs of the nursing homes’ residents. Id. at ¶ 11 and 12. Each of the
nursing homes entered into a pharmacy services agreement with PharMaster. Id.
Shortly after forming PharMaster, Licari and D’Arcangelo attempted to sell the
PharMaster pharmacy business separately from the nursing homes. Id. at ¶ 13. However, no
buyer was found. In order to make PharMaster more attractive to potential buyers, Licari and
D’Arcangelo directed the nursing homes to enter into new pharmacy services agreements on
terms that were much more favorable to PharMaster. Id. at ¶ 13-17. With the new pharmacy
services agreements in hand, Licari and D’Arcangelo successfully sold the assets of PharMaster
to PharMerica. Id. at ¶ 18. As part of the sale, PharMerica assumed the pharmacy services
agreements with the nursing homes. Id. One of the requirements of the PharMerica transaction
was that Licari and D’Arcangelo could not sell the nursing homes without requiring the buyers to
assume the pharmacy service agreements. Id. at 13. Accordingly, Plaintiffs were required to
assume the pharmacy services agreements with PharMerica when they acquired the nursing
homes in 2008. Id. at ¶¶ 19 and 20.
In 2010, Plaintiffs filed suit against PharMerica as the successor in interest of
PharMaster. Plaintiffs seek a declaratory judgment that the pharmacy services agreements are
void on the grounds of illegality. Id. at ¶¶ 33-39. The agreements allegedly violate the AntiKickback Statute (42 U.S.C. § 1320a-7b(b)), the False Claims Act (31 U.S.C. § 3729(a)), Texas
Penal Code § 32.43, and public policy. Second, Plaintiffs seek to recover for PharMerica’s
breach of warranties and representations in the pharmacy services agreements. Id. at ¶¶ 40-42.
Finally, Plaintiffs allege breach of the pharmacy service agreements on the grounds that
PharMerica has failed to fully perform. Id. at ¶¶ 43-46.
Federal Rule of Civil Procedure 19(a) provides the standard for determining whether a
person must be joined as a party. A person is a necessary party if they are subject to service of
process, their joinder will not destroy the court’s subject-matter jurisdiction, and “(A) in that
person’s absence, the court cannot accord complete relief among existing parties; or (B) that
person claims an interest relating to the subject of the action and is so situated that disposing of
the action in the person’s absence may: (i) as a practical matter impair or impede the person’s
ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations because of the interest.” Fed. R.
Civ. P. 19(a). The party advocating joinder of a necessary party “has the initial burden of
demonstrating that a missing party is necessary, after an ‘initial appraisal of the facts indicates
that a possibly necessary party is absent, the burden of disputing this initial appraisal falls on the
party who opposes joinder.’” Hood ex rel. Mississippi v. City of Memphis, 570 F.3d 625, 628
(5th Cir. 2009).
PharMerica filed the instant motion to join PharMaster, L.P., Peter Licari, Michael
D’Arcangelo, William D. Jacobson, David C. Milling, PharMaster GP, LLC, and Complete
Healthcare Services, Inc. as necessary parties under Federal Rule of Civil Procedure 19(a).
PharMerica argues that these persons are necessary under Rule 19(a)(1)(A) because Plaintiffs are
challenging the validity of contracts to which these persons are parties, and therefore the Court
cannot accord complete relief among the existing parties in their absence. Dkt. No. 42 at 1.
Asset Purchase Agreement
PharMerica argues that Plaintiffs’ challenges to the validity of the pharmacy services
agreements implicate the validity of the asset purchase agreement by which PharMerica acquired
the assets of PharMaster and assumed the pharmacy services agreements. Id. at 6. Accordingly,
PharMerica argues that the parties to the asset purchase agreement must be joined as necessary
Plaintiffs respond that they are not challenging the asset purchase agreement and note
that because Plaintiffs are not parties to that agreement, Plaintiffs lack standing to challenge the
agreement. Dkt. No. 45 at 3-4. Plaintiffs argue that determining the validity of the asset
purchase agreement is not necessary to the resolution of Plaintiffs’ claims: “The fact that
PharMerica and PharMaster entered into an Asset Purchase Agreement that may have
documented PharMerica’s kickback to PharMaster does not mean that the Asset Purchase
Agreement must necessarily be deemed void or illegal in order for the Pharmacy Services
Agreements to be illegal.” Dkt. No. 45 at 6.
Neither party has presented the asset purchase agreement or the pharmacy services
agreements to the Court. Based upon Plaintiffs’ Third Amended Complaint, it appears to the
Court that only the Plaintiffs and PharMerica are parties to the pharmacy services agreements.
See Third Am. Compl. ¶ 41, Dkt. No. 117. After reviewing the complaint, the Court is not
persuaded that the validity of the asset purchase agreement is at issue in this litigation.
Therefore, the Court finds PharMerica has not shown that the parties to the asset purchase
agreement are necessary parties to this case.
PharMerica argues that the parties to the assumption agreements are necessary parties
because Plaintiffs are seeking a declaratory judgment that the assumption agreements are void.
Dkt. No. 42 at.
Plaintiffs respond that “to the extent that the Court determines that the sellers are
necessary parties in order to make any declarations concerning the Assumption Agreements,
Plaintiffs are ready and willing to dismiss any and all portion of their claims concerning the
Assumption Agreements, with prejudice (and subject to the court granting Plaintiffs leave to do
so, if necessary), as the declarations are not necessary in light of the fact that PharMerica and
Plaintiffs are now each parties to the Pharmacy Services Agreements” Dkt. No. 45 at 8-9.
Since the filing of Plaintiffs’ response, Plaintiffs have amended their complaint and no
longer seek a declaratory judgment that the assumption agreements are void. Accordingly, the
Court finds that the parties to the assumption agreements are not necessary parties.
Having found that validity of the asset purchase agreement is not at issue in this case, and
that Plaintiffs have dropped their challenge to the assumption agreements, the Court finds that
the parties to those agreements are not necessary parties under Federal Rule of Civil Procedure
19. Therefore, PharMerica’s motion is DENIED.
SIGNED this 3rd day of January, 2012.
SIGNED this 27th day of June, 2012.
ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE
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