FILED

NOT FOR PUBLICATION

JUN 12 2019

UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

CHRISTOPHER CORCORAN, et al., No. 17-16996

Plaintiffs-Appellants, D.C. No. 4:15-cv-03504-YGR

v.

MEMORANDUM*

CVS HEALTH CORPORATION and CVS

PHARMACY, INC.,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California Yvonne Gonzalez Rogers, District Judge, Presiding

Argued and Submitted December 17, 2018 San Francisco, California

Before: CALLAHAN and N.R. SMITH, Circuit Judges, and OLGUIN,** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Fernando M. Olguin, United States District Judge for the Central District of California, sitting by designation. Plaintiffs filed a multi-state consumer putative class action against CVS Pharmacy,

Inc. (“CVS”), alleging that CVS misrepresented the “usual and customary” (“U&C”)

prices of certain generic prescription drugs by not submitting the lower prices CVS

charged to members of its Health Savings Pass (“HSP”) program to third-party insurance

providers (“TPPs”) and pharmacy benefits managers (“PBMs”).1 The district court:

granted in part plaintiffs’ motion for class certification; granted CVS’s motion to exclude

and strike the expert opinion of plaintiffs’ pharmaceutical economist, Professor Joel W.

Hay; and granted CVS’s motion for summary judgment. Plaintiffs appeal the district

court’s decisions. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and

remand.

1. We review the grant of summary judgment de novo. See Albino v. Baca,

747 F.3d 1162, 1168 (9th Cir. 2014). The district court erred in granting summary

judgment to CVS, because, having found plaintiffs’ evidence “relevant” but

“inconsequential” or “unavailing,” the district court nonetheless placed CVS’s and

plaintiffs’ evidence on equal footing and impermissibly weighed the evidence and failed

to credit and draw all reasonable inferences from the evidence in plaintiffs’ favor. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations,

1 Because the parties are familiar with the factual and procedural history of the case, we need not recount it in detail here.

2 17-16996 the weighing of the evidence, and the drawing of legitimate inferences from the facts are

jury functions, not those of a judge,” and “[t]he evidence of the non-movant is to be

believed, and all justifiable inferences are to be drawn in his favor.”).

a. Plaintiffs argue that certain emails and presentations (that CVS produced)

show that CVS employees had expressed concerns about whether CVS needed to report

its HSP price as usual and customary, but the district court found that those materials

failed to create a triable issue, because CVS did not misrepresent, based on the PBMs’

testimony, the U&C price. We disagree. A jury weighs the evidence and determines

whether CVS engaged in wrongful conduct in its reporting of U&C prices, which resulted

in the PBMs calculating higher copayments. Contrary to CVS’s assertion, plaintiffs need

not produce evidence that the PBMs believed that CVS misrepresented the U&C price.

It is enough for plaintiffs to show that CVS failed to report the HSP prices as U&C prices

contrary to the PBM contracts, and that, as a result, plaintiffs were charged higher

copayments.

b. CVS also argues that summary judgment was properly granted, because the

testimony of the PBM witnesses established that the parties to the contracts agreed on the

meaning of the U&C provisions. While the district court set forth the definitions of the

U&C provisions contained in the relevant PBM agreements and noted that plaintiffs were

relying on the language in those agreements, the district court did not discuss or explain

3 17-16996 why the contractual provisions, in conjunction with the evidence proffered by plaintiffs,

were insufficient to raise a genuine issue of material fact. Instead, the district court noted

that “[i]n some cases, the PBMs even amended the agreement to exclude explicitly

membership programs from their definition of U&C.” But this same evidence could

show the opposite, i.e., that the U&C definitions in the PBM contracts encompassed the

HSP prices. A jury could reasonably infer that subsequent modifications of the

agreements indicate that the prior definitions of U&C included HSP prices.

c. Although CVS and the PBMs agreed during this litigation (as opposed to

when the agreements were negotiated) that the PBM contracts did not require CVS to

submit its HSP prices as the U&C prices, plaintiffs proffered “some evidentiary support

for [their] competing interpretation[] of the contract[s’] language.” Nat’l Union Fire Ins.

Co. of Pittsburgh, Pa. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). Given the

extrinsic evidence proffered by plaintiffs to support their reasonable interpretation of the

U&C language in the PBM contracts, the district court erred in granting summary

4 17-16996 judgment.2 See, e.g., First Nat’l. Mortg. Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058,

1067 (9th Cir. 2011) (“Where the interpretation of contractual language turns on a

question of the credibility of conflicting extrinsic evidence, interpretation of the language

is not solely a judicial function. As trier of fact, it is the jury’s responsibility to resolve

any conflict in the extrinsic evidence properly admitted to interpret the language of a

contact.” (emphasis omitted) (quoting Morey v. Vannucci, 64 Cal. App. 4th 904, 912-13

(1998))).

2. The district court narrowed plaintiffs’ proposed classes by limiting each

class to the PBM(s) in California, Florida, Illinois, and Massachusetts that adjudicated

the respective class representative’s claims based on Federal Rule of Civil Procedure

23(a)’s typicality requirement. The district court found that, since the evidence relating

to one PBM does not necessarily apply to the other PBMs, typicality was lacking. We

review the district court’s class certification ruling for abuse of discretion. Pulaski &

Middleman, LLC v. Google, Inc., 802 F.3d 979, 984 (9th Cir. 2015); see also Hanlon v.

Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (“Under [Rule 23(a)]’s permissive

2 In addition to key disputed factual questions relating to the interpretation of the agreements and whether CVS was obligated to report its HSP prices as the U&C prices, the evidence raises other related genuine issues of material fact such as: (1) whether the HSP program constitutes a “cash discount” program; (2) whether CVS offered HSP prices to uninsured customers who were not program members and whether the PBM witnesses were aware that CVS offered such prices to non-HSP members; and (3) whether plaintiffs are third-party beneficiaries of any of the PBM contracts.

5 17-16996 standards, representative claims are ‘typical’ if they are reasonably co-extensive with

those of absent class members; they need not be substantially identical.”).

The district court abused its discretion in narrowing the proposed classes on

typicality grounds. The named plaintiffs and the absent class members are insured

customers who were charged copayments higher than the HSP prices, which plaintiffs

maintain should have been CVS’s actual U&C prices. As a result, the named plaintiffs

were injured in the same manner as the absent class members and they suffered the same

type of damages, i.e., the delta between the actual copayment and the HSP price.

Plaintiffs’ action is not based on conduct that is unique to the named plaintiffs. See Wolin

v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010).

While plaintiffs’ motion for class certification focused on CVS’s agreements with

five PBMs, the alleged overall conduct or scheme was the same. That is, plaintiffs

alleged that insured CVS customers were charged higher copayments as a result of CVS’s

failure to report its actual U&C prices in accordance with its agreements with the PBMs.

The district court did not identify any meaningful differences in the PBM agreements that

would result in the interests of the class representatives being misaligned with those of

the absent class members. Indeed, CVS reported the same prices to the PBMs

notwithstanding any variation in the language of the PBM contracts. In other words,

CVS’s actual reporting to the PBMs underscores the fact that the class representatives’

6 17-16996 claims are “reasonably coextensive,” if not “substantially identical” to the claims of the

absent class members. See Just Film, Inc. v. Buono, 847 F.3d 1108, 1116 (9th Cir. 2017).

3. We review the district court’s decision to exclude and strike Dr. Hay’s

testimony for abuse of discretion. Samuels v. Holland Am. Line-USA Inc., 656 F.3d 948,

952 (9th Cir. 2011); see also Pyramid Tech., Inc. v. Hartford Cas. Ins. Co., 752 F.3d 807,

813 (9th Cir. 2014) (observing that the test for admissibility “is not the correctness of the

expert’s conclusions but the soundness of his methodology, and when an expert meets

the threshold established by [Federal Rule of Evidence] 702, the expert may testify and

the fact finder decides how much weight to give that testimony.” (quoting Primiano v.

Cook, 598 F.3d 558, 564-65 (9th Cir. 2010))).

The district court found that Dr. Hay’s testimony lacked foundation, it excluded

his report on that basis, and it struck Dr. Hay’s testimony that CVS’s HSP prices are the

U&C prices as defined in CVS’s contracts. We disagree that Dr. Hay’s opinion lacks

foundation. Based on our review of Dr. Hay’s disclosed report and the record before us,

it is apparent that Dr. Hay formed his opinion regarding the U&C price based on his

experience, industry standards, and his review of the materials produced by CVS

(including transactional data) during the course of the litigation. Dr. Hay’s review of

these materials provides an adequate basis for his disclosed testimony.

7 17-16996 The district court also appears to have accepted CVS’s argument that the

conclusions that Dr. Hay disclosed in his report were not the product of sound or reliable

methodology. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999) (“[T]he

importance of Daubert’s gatekeeping requirement . . . is to ensure the reliability and

relevancy of expert testimony.”). In part, this conclusion appears to be due to the fact that

CVS’s expert, Dr. Barlag, reviewed much of the same transaction level data as Dr. Hay

and disagreed with Dr. Hay’s analysis and conclusions. However, Dr. Barlag’s analysis

doesn’t show Dr. Hay’s analysis to be without foundation or the product of questionable

or unreliable methodology; if credited, Dr. Barlag’s testimony does little more than cast

some doubt on Dr. Hay’s conclusions. Resolving the conflict between these experts is

a matter for the jury, not a basis to exclude one of them under Rule 702. See Pyramid

Tech., Inc., 752 F.3d at 813.

We therefore reverse the district court’s summary judgment order, its class

certification order, and its order excluding the expert opinion and striking the expert

report of Dr. Hay. We remand for further proceedings. The parties shall bear their own

costs on appeal.

REVERSED and REMANDED.

8 17-16996