CVS 2012 Annual Report Download - page 81

CVS CAREMARK 2012 ANNUAL REPORT
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Caremark was named in a putative class action lawsuit filed in October 2003 in Alabama state court by John Lauriello,
purportedly on behalf of participants in the 1999 settlement of various securities class action and derivative lawsuits
against Caremark and others. Other defendants include insurance companies that provided coverage to Caremark with
respect to the settled lawsuits. The Lauriello lawsuit seeks approximately $3.2 billion in compensatory damages plus other
non-specified damages based on allegations that the amount of insurance coverage available for the settled lawsuits
was misrepresented and suppressed. A similar lawsuit was filed in November 2003 by Frank McArthur, also in Alabama
state court, naming as defendants Caremark, several insurance companies, attorneys and law firms involved in the 1999
settlement. This lawsuit was stayed as a later-filed class action, but McArthur was subsequently allowed to intervene in
the Lauriello action. Following the close of class discovery, the trial court entered an Order on August 15, 2012 that granted
the plaintiffs’ motion to certify a class pursuant to Alabama Rule of civil Procedures 23(b)(3) but denied their request that
the class also be certified pursuant to Rule 23(b)(1). In addition, the August 15, 2012 Order appointed class representatives
and class counsel. The defendants have filed a notice of appeal with the Alabama Supreme Court and the plaintiffs have
filed a notice of cross-appeal. The proceedings in the trial court are stayed by statute pending a decision on the appeal and
cross-appeal by the Alabama Supreme Court.
Various lawsuits have been filed alleging that Caremark has violated applicable antitrust laws in establishing and maintaining
retail pharmacy networks for client health plans. In August 2003, Bellevue Drug Co., Robert Schreiber, Inc. d/b/a Burns
Pharmacy and Rehn-Huerbinger Drug Co. d/b/a Parkway Drugs #4, together with Pharmacy Freedom Fund and the
National Community Pharmacists Association filed a putative class action against Caremark in Pennsylvania federal court,
seeking treble damages and injunctive relief. This case was initially sent to arbitration based on the contract terms between
the pharmacies and Caremark. In October 2003, two independent pharmacies, North Jackson Pharmacy, Inc. and C&C,
Inc. d/b/a Big C Discount Drugs, Inc., filed a putative class action complaint in Alabama federal court against Caremark
and two PBM competitors, seeking treble damages and injunctive relief. The North Jackson Pharmacy case against two
of the Caremark entities named as defendants was transferred to Illinois federal court, and the case against a separate
Caremark entity was sent to arbitration based on contract terms between the pharmacies and Caremark. The Bellevue
arbitration was then stayed by the parties pending developments in the North Jackson Pharmacy court case.
In August 2006, the Bellevue case and the North Jackson Pharmacy case were both transferred to Pennsylvania federal
court by the Judicial Panel on Multidistrict Litigation for coordinated and consolidated proceedings with other cases
before the panel, including cases against other PBMs. Caremark appealed the decision which vacated an order compelling
arbitration and staying the proceedings in the Bellevue case and, following the appeal, the Court of Appeals reinstated
the order compelling arbitration of the Bellevue case. Following remand, plaintiffs in the Bellevue case sought dismissal of
their complaint to permit an immediate appeal of the reinstated order compelling arbitration and pursued an appeal to the
Circuit Court of Appeals. In November 2012, the Circuit Court reversed the district court ruling and directed the parties to
proceed in federal court. Motions for class certification in the coordinated cases within the multidistrict litigation, including
the North Jackson Pharmacy case, remain pending. The consolidated action is now known as the In Re Pharmacy Benefit
Managers Antitrust Litigation.
In November 2009, a securities class action lawsuit was filed in the United States District Court for the District of Rhode
Island purportedly on behalf of purchasers of the Company’s stock between May 5, 2009 and November 4, 2009. The
lawsuit names the Company and certain officers as defendants and includes allegations of securities fraud relating to