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Huntingford v. Pharmacy Corp. of America

United States District Court, D. New Mexico

January 2, 2019




         This matter is before the Court on Defendant's Motion for Summary Judgment (Doc. 39) and Motion to Strike Plaintiff's Reply in Support of Request for Rule 56(d) Relief (Doc. 49). This case involves a contractual dispute between Plaintiff Ross Huntingford and Defendant Pharmacy Corporation of America d/b/a PharMerica (PharMerica) over whether PharMerica is required to pay Mr. Huntingford a “Deferred Payment” pursuant to the purchase agreement the parties executed when PharMerica bought Mr. Huntingford's pharmacy business. (See Doc. 1-1.)

         What began as a seemingly straightforward motion for summary judgment has devolved into a convoluted and protracted discovery dispute in which both parties have made assertions of bad faith at every juncture. The discovery period has now closed, so much of the parties' bickering over Mr. Huntingford's Request for Rule 56(d) Relief is mercifully moot and the Court will deny as moot PharMerica's Motion to Strike Plaintiff's Reply (Doc. 49). However, several substantive arguments that go to the heart of the summary judgment dispute are intermingled with the briefings on Mr. Huntingford's request for Rule 56(d) relief and PharMerica's motion to strike. Thus, the Court will grant in part PharMerica's Motion for Summary Judgment as it relates to the quantum meruit and unjust enrichment claims, but allow Mr. Huntingford until January 16, 2019, to respond more fully and clearly to the Motion for Summary Judgment on the remaining counts. PharMerica will then have 14 days from the date of that filing to file a Reply.

         I. Background

         A. Deferred Payment Dispute

         On September 30, 2013, Plaintiff Ross Huntingford and Defendant PharMerica entered into an Asset Purchase Agreement (APA) for Mr. Huntingford's pharmacy business. (Doc. 39-1 (APA) at 3.) The business provides pharmaceutical products, supplies, and consultation services to long-term care facilities in New Mexico. (Id.) After executing the APA, Mr. Huntingford transferred his business and various listed assets to PharMerica in exchange for a closing date payment and an inventory payment. (See Id. at 4-5, 7.)

         The APA also includes a deferred payment clause, which provides that if the Actual Gross Profit of the business meets a certain target amount at the two-year anniversary of the closing date, PharMerica must make an additional payment to Mr. Huntingford. (Id. at 5.) The APA defines Actual Gross Profit as the gross profit earned between the one-year and two-year anniversaries of the closing date “from each of the Qualified Customer Accounts that Buyer actively services as of the Two Year Anniversary.” (Id. at 6.) The Actual Gross Profit calculation does not include any customer accounts terminated before the two-year anniversary by either PharMerica or the customer. (Id.)

         The deferred payment is to be calculated as follows: if, at the two-year anniversary, the Actual Gross Profit is greater than or equal to $2, 200, 000, PharMerica must pay Mr. Huntingford $1, 250, 000. (Id. at 5.) If the Actual Gross Profit is less than $1, 870, 000, Mr. Huntingford will receive no deferred payment. (Id.) If the Actual Gross Profit at the two-year anniversary falls between $2, 200, 000 and $1, 870, 000, Mr. Huntingford will receive a lesser deferred payment calculated using a reduction multiplier. (Id. at 5-6.) If PharMerica terminated an account prior to the two-year anniversary for any reason (besides being required to do so by law or because the customer account was not complying with the terms of its contract), then the minimum thresholds for the two deferred payment options ($1, 870, 000 and $2, 200, 000) would be reduced by the gross profit earned on that account prior to its termination. (Id. at 7.)

         At the two-year anniversary of the closing date, PharMerica must “calculate the Actual Gross Profit and deliver to [Mr. Huntingford] a statement (the “Deferred Payment Statement”) setting forth such calculation with reasonable supporting documentation.” (Id. at 6.) The statement is deemed accepted unless Mr. Huntingford delivers to PharMerica a “notice specifying [his] objections to the Deferred Payment Statement in reasonable detail within twenty (20) days of its receipt . . . .” (Id.) In the event of a timely objection, if the parties are unable to resolve the dispute in good faith, “Buyer and Seller shall promptly engage an independent certified public accounting firm as mutually agreed by Buyer and Seller (the “Accounting Firm”), acting as an expert and not an arbiter, to resolve the items remaining in dispute (the “Disputed Items”).” (Id.) Both parties must submit their “respective position[s] with regard to the Disputed Items” to the Accounting Firm, and the Accounting Firm must “use all reasonable efforts to resolve all the Disputed Items within twenty (20) days . . . .” (Id.)

         On January 6, 2016, PharMerica emailed Mr. Huntingford its Deferred Payment Statement, which included an “Earn-Out Summary” aggregating the profits from the purchased accounts and stating that the accounts fell short of even the lowest target threshold required to receive a deferred payment. (Doc. 39-1 at 14, 19.) This initial Earn-Out Summary left out accounting data for various consulting and pharmaceutical services that were part of the business, and also included accounting data for rebates, which the APA expressly excluded from the calculation of the Actual Gross Profit. (Id. at 14.) PharMerica subsequently revised the data and provided Mr. Huntingford with an updated copy of the spreadsheet, the “Earn-Out Reconciliation.” (Doc. 39-1 at 14-15, 37-40.) According to the calculations in the Earn-Out Reconciliation and an affidavit by PharMerica's Senior Vice President of Corporate Development Christopher Schaefer, “Mr. Huntingford fell $648, 701.00 below the Target Gross Threshold and, as such, did not qualify for the Deferred Payment.” (Id. at 16.)

         Mr. Huntingford did not trust PharMerica's data calculations, and on November 7, 2017, filed suit in the Second Judicial District Court of New Mexico, which PharMerica removed to this Court. (Doc. 1 at 1.) The Complaint alleges that the original Earn-Out Summary omitted many accounts without explanation, and that “[i]f the threshold would have been reduced by the amount of profits from the omitted accounts, or if those profits would have been included in Defendant's calculations, Mr. Huntingford would have been entitled to a deferred payment.”[1] (Doc. 1-1 at 5.) The Complaint includes four counts: (1) Breach of Contract; (2) Specific Enforcement of Contract; (3) Breach of the Duty of Good Faith and Fair Dealing; and (4) Quantum Meruit and Unjust Enrichment. (Id. at 6-8.)

         B. Procedural Background in Federal Court

         On February 5, 2018, Judge Fashing entered a Scheduling Order that set August 3, 2018, as the termination date for discovery. (Doc. 20 at 2.) On May 7, 2018, PharMerica filed its Motion for Summary Judgment. (Doc. 39.) Four days after PharMerica filed its Motion for Summary Judgment, Mr. Huntingford's counsel emailed PharMerica's counsel to request a one-week extension of the expert witness disclosure deadline, which had been set as May 18, 2018. (Doc. 44-1 at 2.) PharMerica agreed to extend the deadline to May 25, 2018. (Id.) Mr. Huntingford's response to the Motion for Summary Judgment was due on May 21, 2018. See D.N.M.LR-Civ. 7.4(a).

         C. Request for ...

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