merck & co., inc. nov 2/ 2006 - sconet.state.oh.us merck-medco rx services of flordia,...

IN THE SUPREME COURT OF OHIO

BOARD OF THE STATE TEACHERS ) ® ^®6RETIREMENT SYSTEM OF OHIO, ) CASE NO.

Plaintiffs-Appellees, ) On Appeal fi-om the Hamilton County Court

V.of Appeals, First Appellate District

Court of AppealsMEDCO HEALTH SOLUTIONS INC., ) Case Nos. C-060759; C-60786; C-60787

- and -

MERCK-MEDCO MANAGED CARE,LLC.,

-and-

PAID PRESCRIPTIONS, LLC

- and -

MEDCO HEALTH SOLUTIONS OFCOLUMBUS NORTH, LTD.

- and -

MEDCO HEALTH SOLUTIONS OFCOLUMBUS WEST, LTD.

- and -

MEDCO HEALTH SOLUTIONS OFFAIRFIELD, LLC.,

- and -

MERCK & CO., INC.

- and -

MERCK-MEDCO RX SERVICESOF FLORIDA, L.C. NO. 2

- and -

NOV 2/ 2006

SUPNkM^^°ijU^^^QNI®K^_.....w

MERCK-MEDCO RX SERVICESOF FLORDIA, L.C.

-and-

MEDCO HEALTH SOLUTIONS OFLAS VEGAS, INC.

- and -

MEDCO HEALTH SOLUTIONS OFTEXAS, LLC

Defendants-Appellants

COMBINED MEMORANDUM IN SUPPORT OF JURISDICTIONOF DEFENDANTS-APPELLANTS MEDCO HEALTH SOLUTIONS INC., MERCK-

MEDCO MANAGED CARE, LLC, PAID PRESCRIPTIONS, LLC, MEDCO HEALTHSOLUTIONS OF COLUMBUS NORTH, LTD., MEDCO HEALTH SOLUTIONS OF

COLUMBUS WEST, LTD., MEDCO HEALTH SOLUTIONS OF FAIRFIELD, LLC, INC.,MERCK-MEDCO RX SERVICES OF FLORIDA NO. 2, L.C. MERCK-MEDCO RX

SERVICES OF FLORIDA, L.C., MEDCO HEALTH SERVICES OF LAS VEGAS, INC.,MEDCO HEALTH SOLUTIONS OF TEXAS, LLC, AND MERCK & CO., INC.

Stanley M. CliesleyPaul M. DeMarcoRobert Hueck IIW.B. MarkovitsWAITE, SCHNEDIER, BAYLESS& CHESLEY CO., LPA1513 Fouith & Vine TowerCincimiati, Ohio 45202-3685

Ronald S. Kopp (0004950)Stephen W. Funk (0058506)ROETZEL & ANDRESS, LPA222 South Main Street, Suite 400Akron, Ohio 44308Phone: (330) 376-2700Facsimile: (330) [email protected]; [email protected]

Attorneys for Relator-Appellee Board of theState Teachers Retire nent Systeni of Ohio

Thomas W. Breidenstein

Barett & Weber, LPA

500 Fourth and Walnut Centre105 E. Fourth StreetCincinnati, Ohio 45202

Attorneys for Medco Defendants andMerck & Co., Inc.

Earle Jay Maiman (0014200)Stephen L. Richey (0061570)Thompson Hine LLP312 Walnut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsimile: (513) 241-4771

James E. SwaimFlanagan, Lieberman, Hoffman & Swaim318 West Foutth StreetDayton, Ohio 45402

Attorneys for Relator-Appellee Board of theState Teachers Retirement Systenx of Ohio

Joseph T. DetersHamilton County Prosecuting AttomeyClu-istian J. Schaefer (0015494)Colleen McCarren (0079858)Assistant Prosecuting Attomeys230 E. Ninth Street, Suite 4000Cincinnati, Ohio 4 52 02-2 1 74

Attorneys for Respondent-AppellantHon. David P. Davis, JudgeHamilton County Court of Common Pleas

William E. McDaniels

Enu Mainigi

Jennifer WichtWilliams & Comiolly LLP725 Twelftli Street, NWWashington, DC 20005-5901

Trial Attorneys for Medco Defendants

Renee S. FiliatrautThompson Hine LLP312 Wahiut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsimile: (513) 241-4771

Trial Attorneyfor Merck & Co., Inc.

TABLE OF CONTENTSPage

TABLE OF AUTHORITIES . ...............................................................................................................ii

EXPLANATION OF WHY THIS APPEAL PRESENTS ISSUESOF PUBLIC AND GREAT GENERAL INTEREST ..........................................................................1

STATEMENT OF THE CASE AND FACTS .....................................................................................5

A. Factual Background and Relevant Clanns ...................................................................5

B. The Trial Court's First Judgment Entry, Dated Febniary 22, 2006 .............................6

C. The Trial Court's Final Judgment Entry of September 5, 2006 .....:.............................8

LAW AND ARGUMENT ..................................................................................................................10

Proposition of Law #1: A Final Judgnent Entry That Resolves All PendingMotions and Claims In A Civil Action Is A Final, Appealable Order ...................................10

Proposition of Law #2: If The Trial Court Issues A Final, Appealable Order,The Court of Appeals Should Not Selectively Resolve Only An Assignmentof Error By Motion,. But Should D_etermine All Of The Assignments of ErrorUnless Rendered Moot By The Court's Ruling ............._..................................................13

CONCLUSION ...................................................................................................................................15

CERTIFICATE OF SERVICE

TABLE OF AUTHORITIESPage

Cases

Aetna Casualty Co. & Surety Co. v. Nierniec (1961), 172 Ohio St. 53 .............................................14

Barksdale v. Van'sAuto Sales (1988), 38 Ohio St.3d 127 ............................................................11

Bickley v. Caremcn•k, 361 F. Supp. 1317 (N.D. Ala. 2004) .............................................................2

Blon v. Bank One (1988), 35 Ohio St.3d 98 ....................................................................................2

Burns v. Morgan (2006), 165 Ohio App.3d 694, 2006-Ohio-1213 ....................................................10

Chi Dist. Council on Carpenters Welfare Fund v. Carernark, 2005 U.S.Dist. LEXIS 7891 .............................................................................................................1, 2

Hamilton Cty. Bd. OfMental Retardation v. Pr•ofessional Guild of Ohio (1989)46 Ohio St.3d 147 ....................................................................................................................10

Maritinte Manufactures, Inc. v. Hi-Skipper Marina (1982), 70 Ohio St.2d 257 ...........................11

Pharm Care Mgmt. Ass'n v. Rowe, No. 05-1606, 2005 U.S.L_E_XIS 24032 (15c Cir. Nov. 8, 2005) .....................:.............................................................1

State ex rel. CNG Financial Corp. v. Nadel (2006), 111 Ohio St.3d 149, 2006-Ohio-5344 .............12

State ex rel. Downs v. Panioto (2006), 107 Oliio St.3d 3472006-Ohio-8, 839 N.E.2d 911 .................................................................................................10

State ex rel. LTV Steel Co. v. Gwin (1992), 64 Ohio St.3d 245 ..........................................................12

State ex rel. Lewis v. Moser, Judge (1995), 72 Ohio St.3d 25 ............................................................12

State ex rel. Miley v. Parrot, Judge (1996), 77 Ohio St.3d 64 ............................................................12

Stcite ex rel. Reynolds v. Bassinger, Judge (2003), 99 Ohio St.3d 303, 2003-Ohio-3631 ..................12

Statutes

O.R.C. § 2505.02 ..........................................................................................................................10,

O.R.C. § 2505.02(B)(1) ................................................................................................................11,

ii

EXPLANATION OF WHY THIS APPEAL PRESENTS ISSUES OFPUBLIC AND GREAT GENERAL INTEREST

This appeal presents important issues of public and great general interest that call for

immediate resolution by the Ohio Supreme Court. The case involves the question of whether

Appellants Merck & Co., Inc. and Medco Health Solutions, Inc. ("Medco"), a phannacy benefit

management company ("PBM"),1 have the right to obtain timely review in the court of appeals of a

final judgment entry that is both final and appealable under every definition promulgated by this

Court and contained in the Ohio Rules of Appellate and Civil Procedure. The current fmal

judgment entry wrongfully holds Appellants Merck and Medco jointly and severally liable for $7.8

million in damages based upon meritless claims for "breach of fiduciary duty" and "constructive

fraud" under Ohio law. Yet, unless this Court accepts this appeal, the parties will be unable to

obtain appellate review of the erroneous final judgment until yet another trial is conducted, a trial

that could be totally unnecessary if all the issues on appeal are heard and decided.

The underlying issues in this case are of vital importance to the healthcare industry, and in

that the trial court has issued a final and appealable order on all claims, Medco and Merck are

entitled to appellate review of the merits of the Plaintiff's claims at this time. The issue of wliether a

PBM is a "fiduciary" that has duties beyond the scope of a written contract is an important legal

issue under Oliio law and will affect a great number of vendors wlio conduct business in Ohio as

well as the Ohio businesses, unions, and retirement plans that contract with these third party

vendors. To date, virtually all of the courts have held that PBMs are not fiduciaries, even under

ERISA's broad defmition of a fiduciary. See Pharnz Care Mgmt. Ass'n v. Rowe, No. 05-1606, 2005

U.S. App. LEXIS 24032, at *10-11 (Is' Cir. Nov. 8, 2005); Chi Dist. Council on Carpenters

' As used herein, "Medco" shall refer to all of the Defendants listed in the caption, except forDefendant Merck & Co., Inc. ("Merck"). Merck was at all times relevant to this case the parentcompany for the Medco Defendants.

1

Welfare Fund v. Care nark, 2005 U.S. Dist. LEXIS 7891, *3; Bickley v. Caremark, 361 F. Supp.

1317, 1332 (N.D. Ala. 2004). In this case, Medeo had a written contract with its client, Plaintiff

Board of State Teachers Retirement System of Ohio ("STRS"), that expressly stated that it was

acting as an "independent contractor." Thus, under Ohio law, the sole claims that should have

arisen against Medco are claims based upon the requirenients of the written contracts, and not upon

any common law fiduciary duty. See Blon v. Bank One (1988), 35 Ohio St.3d 98, 101.

To date, the First District Court of Appeals has wrongfully refused to decide the merits of

this important legal issue on appeal. Although the trial court has entered a final judgment entry that

resolved all of the plaintiff's claims on Septeniber 5, 2006, the Court of Appeals dismissed the three

notices of appeal filed by STRS, Medco and Merck, for lack of a final, appealable order. While this

Court ordinarily does not become involved in detemlining whether orders are final and appealable

under R.C. 2505.02, this case is different and, given the importanee of the underlying legal issues

presented, calls for Supreme Court intervention at this time. hi this case, the Court of Appeals has

decided that the trial court's final judgment entry was not appealable because the jury failed to reach

a verdict on two of the plaintiff's claims (one of plaintiff's two claims for breach of contract and the

plaintiff's claim for punitive damages) (the "Hung Jury Claims"). In making this deterznination,

however, the Court of Appeals wrongfally overlooked that the t-ial court entered a final judgment

on the two Hung Jury Claims because it concluded that STRS had waived the right to another trial

as a matter of law. The trial court tlierefore entered a final judgment on all of the plaintiff's claims,

leaving nothing to decide at the trial court level and allowing both parties to obtain appellate review

of the entire judgment in the Court of Appeals.

The Court of Appeals' wrongful refusal to decide the merits of Medco's appeal has

significant implications for this case. For Medco, it means, among other things, that Medco has

been deprived of the ability to obtain prompt appellate review of whether it is a "fiduciary" under

2

Oliio law and whether it can be held liable for breach of fiduciary duty and breach of contract as a

matter of law, a fact that may eliminate the need for another trial of the Htmg Jury Claims. While

STRS is certainly entitled to appellate review of whether it waived the right to a new trial, Medco

and Merck are equally entitled to appellate review of their assigmnents of eiror, which seek to

vacate a multi-million dollar jury award and to eliminate the need for another trial on any claims.

The CoLu-t of Appeals therefore should not be pennitted to pick and choose which assignments of

error it wants to decide, and it should not be able to decide any of the alleged assignments of error

by motion. Rather, it must review the entire judgment entry and decide all of the assignments of

error based upon full briefing and argument by the parties under App. R. 12 and 16.

This procedural en-or presents an issue of public and great general interest because it

effectively deprives the litigants (and otlier affected parties in Ohio) of an appellate ruling of all

claims, including whether Medco is entitled to judgment as a matter of law on the Plaintiff's Hung

Jury Claims, a result that inay potentially eliminate the need for another trial. The first trial of this

matter lasted for six (6) weeks and resulted in a sizeable, multi-million dollar verdict that, unless

reversed, will have a far-reaching and deti-unental effect on PBMs in Ohio and price of prescription

drugs in Ohio. Medco has the right to immediate and complete appellate review of this improper

damages award and to address all of the other assigmnents of error or cross-assignments of error

that may arise from the trial court's final judgment entry. It should not be deprived of this

significant right by procedural irregularities. As the highest court of the State of Ohio, it is up to

this Court to enforce the appellate rules and to ensure that parties are granted the right to appellate

review in a timely, efficient and comprehensive manner. Accordingly, the Court should conclude

that this case presents issues of public and great general interest and exercise jurisdiction over the

instant appeals.

3

It should be noted that this is the second time that this case has come before the Ohio

Supreme Court. In August 2006, this Court elected not to accept review of the trial court's first

judgment entry, dated February 22, 2006, because it did not present a "substantial constitutional

question." (See Entry, dated August 23, 2006, Supreme Court Case No. 2006-1002). The

circuinstances presented at this time, however, are quite different from that appeal. In the first

appeal, the trial court only had addressed the Hung Jury Claims orally and had not entered a written

order with respect to the waiver issue. Rather, in its first judgment entry, dated February 22, 2006,

the trial court only entered judgment on the breach of fiduciary duty and constnictive fraud claims

and certified that there was no just cause for delay under Civ. R. 54(B). Following the Court of

Appeals' dismissal of the first appeal, however, the trial judge now has entered an amended final

judgment entry, dated September 5, 2006, that explicitly resolves the Hung Jury Claims by holding

that STRS waived the riglit to another trial of such claims under Civ. R. 50(B) and 6(B).

Moreover, unlike the first appeal, the Court of Appeals has not only dismissed the three

notices of appeal for lack of a fmal, appealable order, it has taken the extraordinary step of issuing a

writ of procedendo that effectively sustains one of STRS's assignments of error by reversing the

trial court's waiver ruling and ordering a new trial only on the Hung Jury claiins. As this writ was

issued via a petition originating in the court of appeals, the matter is now the subject of a separate

appeal of right under Sup. Ct. R. lI, Section 1(A)(1). See State of Olaio ex rel. Board of the State

Teachers Retirement Systens of Ohio v. Hon. David P. Davis, Judge, Case No. 2006-2006. The

pendency of this other appeal, therefore, provides further support for exercising jurisdiction over the

instant appeals, which should be consolidated and decided at the same time. By so doing, the

Supreme Court can grant full and complete relief to all parties and eliminate the possibility of

inconsistent orders and rulings. Accordingly, for all of these reasons, the Court should exercise

jtuisdiction over the instant appeals.

4

STATEMENT OF THE CASE AND FACTS

A. Factual Background and Relevant Claims

As previously discussed, this case presents important questions relating to the duties and

obligations of a phannacy benefit management company ("PBM"). As the name indicates, PBMs

manage the phaimacy benefit portion of the health care coverage provided by public and private

employers, retirement systems, unions, and managed care organizations. PBMs operate mail order

pharmacies and contract with networlcs of retail phannacies to dispense the drugs that they purchase

from pliannaceutical manufactories. PBMs also create formularies, or lists of preferred drugs, that

clients may elect to adopt for their menlbers. By utilizing the buying power of all its clients, PBMs

are able to achieve pricing concessions from manufacturers in the fonn of rebates and discounts.

Depending on the pricing tenns of any given contract with a client, these savings can be passed on

by sharing some or all of the rebates or lowering the prices charged for dnxgs or other fees. The

pricing concessions, however, are also the primary profit source for PBMs. Thus, the nature and

types of rebates and discomrts that will be shared with the clients is a matter set forth in the written

agreements entered into between the PBM and its client.

Medco is one of the largest PBMs in the United States that enjoys healthy contractual

relationships with some of the most sophisticated purchasers of healthcare in the United States -

one-third of the Fortune 500 companies, many large unions, and many large retirement plans,

including STRS. Medco's relationship with the State of Ohio began in 1981 and continues through

today with four separate state retirement plans: SERS, PERS, Police & Fire, and Highway Patrol.

STRS was a client until 2001 and the instant case involves Medco's compliance with the pricing

terms of tl-iree written contracts that governed their contractual relationship from 1993 through

2001. With respect to all three contracts, STRS negotiated with the benefit of PBM industry experts

and well-respected legal counsel. Indeed, STRS notably does not allege that Medco fraudulently

5

induced STRS to enter into any of the agreements in question. Rather, they are seeking to recover

the alleged benefit of the agreements by suggesting that Medco should have provided STRS with

more financial advantages than were actually provided. In particular, STRS alleged tlu-ee (3)

primary claiins for damages in the Complaint:

(1) Breach of Contract Claim #1: that Medco received and retained certain "marketshare" rebates from diug manufacturers that STRS alleges should have paidto the client under the tenns of the contract (alleged damages of $55,670,888);

(2) Breach of Contract #2: That Medco charges a $8.30 dispensing fee that wasnot authorized by the contract ( alleged damages of $48,575,128); and

(3) Breach of Fiduciary Duty/Constructive Fraud: that Medco breach analleged fiduciary duty by marking up the price of generic drugs at mailorder (alleged damages of $47,984,901).

(See Plaintiff's Trial Brief, pg. 11)?

B. The Trial Court's First Judgment Entry, Dated February 22, 2006.

This case was the subject of a 6-week trial that began on November 7, 2005. A number of

claims were disinissed by directed verdict at the close of STRS's case. On December 19, 2005, the

jury retmmed a verdict in favor of Defendants on Plaintiff's Breach of Contract clann #2, but in

favor of STRS on the claims for breach of fiduciary duty and constructive fraud, awarding

compensatory damages of $7,815,000 on the two claims. The jury announced, however, that it was

deadlocked on Plaintiff s breach of contract claim #1 and Plaintiff's claim for puiutive damages (the

"Htmg Jury Claims"). The jury was then discharged by the trial court judge.

On January 3, 2006, Medco and Merclc submitted a timely motion for judgment

notwithstanding the verdict on the two Hung Juiy Claims under Civ. R. 50(B). As set forth therein,

Civ. R. 50(B) and Civ. R. 6(B) establish a 14-day mandatory deadline for any party who moves for

2 STRS alleged other claims in the complaint, such as tortious interference with contract, butthey were either dismissed by the trial judge or decided in Defendants' favor at trial.

6

judgment notwithstanding the verdict or for a new trial with respect to any claims upon which "a

verdict was not returned." Id. STRS did not file any motion within 14 days of the discharge of the

jury, as required by Civ. R. 50(B). Rather, on January 19, 2006, over two weeks after the 14-day

deadline had expired, STRS submitted proposed judgnient entries that included a request that the

trial court scliedule a new trial on the Hung Jury Claims for the fiist tinie. Medco objected to this

request for a new trial under Civ. R. 50(B), arguing that any request for a new trial had been waived

as a matter of law.

During a hearing scheduled to address the pending motions, the trial court orally advised the

parties on the record that he agreed with Medco's legal position that STRS had waived the right to a

new trial under Civ. R. 50(B). The trial cotu-t did not directly address the waiver issue, however, in

his final judgment entry, dated February 22, 2006, which only stated that a final judgment had been

entered against in the amount of $7,815,000, and certifying that there was no just reason for delay

under Civ. R. 54(B). On March 2, 2006, Medco filed a notice of appeal from the final judgment

entry to the First District Court of Appeals. On March 13, 2006, STRS moved to dismiss the appeal

for lack of a fmal, appealable order, arguing, among other things, that the trial court's judgment

entry was not final because it did not enter final judgment on the two Hung Jury claims. Upon

review, the Court of Appeals agreed, issuing a judgment entry, dated April 6, 2006, that Medco's

notice of appeal was "not taken from a final appealable order." See Board of the State Teachers

Retirenierit Systen2 of Oliio, Hamilton App. No. C-060197.

Medco and Merck then filed timely notices of appeal from this dismissal order with the

Ohio Supreme Court. (See Supreme Court Case Nos. 06-0997, 06-1002). During the pendency of

the Supreme Court appeals, however, Medco filed a motion in the Court of Common Pleas that

requested that the thial court issue a new final judginent entry that rernoved the Rule 54(b) language,

entered judgment on all claim's, including the Hung Jury claims, and decided the three pending post-

7

trial motions filed by STRS for a judgment notwitlrstanding the verdict or, in the alternative, for a

new trial on the Hung Jury issues. Following another hearing in which the trial court indicated that

it would issue a new judgment entry, Medco and Merck then filed applications to voluntarily

dismiss the Supreme Court appeals on August 21, 2006. Two days later, on August 23, 2006, this

Court issued its own journal entry, which did not take note of the voluntary withdrawal, but

dismissed the appeal "as not involving any substantial constitutional question." (See Case No. 06-

1002, Entry, dated August 23, 2006).

C. The Trial Court's Final Judgment Entry of September 5, 2006

On September 5, 2006, the trial court entered an order and aniended final judgment entry

that again entered a fmal judgment in Plaintiff's favor in the amount of $7,185,000:

"This action came on for trial before the Court and a jury, and the issueshaving been duly tried and the jury having duly rendered its verdict,

IT IS SO ORDERED AND ADJUDGED that Plaintiff, Board of the StateTeacher Refirement System of Ohio, recover of the Defendants, Medco HealthSolutions, Inc., Merck-Medco Managed Care, L.L.C., Paid Prescriptions, L.L.C.,Medco Health Solutions of Columbus North, Ltd., Medco Health Solutions ofColumbus West, Ltd., Medco Health Solutions of Fairfield, L.L.C., Merck-MedcoRx Services of Florida No. 2, L.C., Merck-Medco Rx. Services of Florida, L.C.,Medco Health Services of Las Vegas, Inc., and Medco Health Solutions of Texas,L.L.C. (collectively "Medco") and Merck & Company, Inc., jointly and severally,the sum of $7,815,000, and the costs of this action."

Moreover, as requested, the final judgment entry removed the certifying language of Civ. R. 54(b)

and resolved all of the remaining motions and all claims (including the two Hung Jury claims) by

denying Plaintiff's Motion for a New Trial on the Hung Jury Issues and by denying Plaintiffls

Motion for Judgment Notwithstanding The Verdict and for New Trial with respect to the claims that

had been decided by the jury in Defendants' favor:

"PlaintifPs Motion for a New Trial or, in the Alternative Relief fromJudgment and a New Trial, on the Hung Jury Issues is hereby DENIED. The Courtholds that Plaintiff has waived its right to a new trial for failure to file a tnnelymotion pursuant to Ohio Rules of Civil Procedure 50(B) and 6(B)."

8

"Plaintiffs Motion for Judgnlent Notwithstanding the Verdict Pursuant toRule 50(B) and Motion for New Trial Pursuant to Rule 59 is hereby DENIED."

(See Trial Court Order and Final Judgment Entry, dated September 5, 2006) (copy attached).

Notwithstanding the completeness and finality of the Septeinber 5°i final judginent entry, the

First District Court of Appeals again refused to hear any of the appeals on the merits. Tluee notices

of appeal were filed by STRS (C-0060759), Medco (C-060787), and Merck (C-060786) from the

trial court's final judgment entry, dated September 5, 2006. STRS characterized their notice of

appeal, however, as a "protective" notice of appeal and, on September 8, 2006, filed a motion to

dismiss the appeal, along with a "petition for extraordinary relief' that sought to overrule the trial

court's "waiver" ruling and compel a new trial on the Hung Jury claims without deciding any of

Medco's potential assigmnents of error. The petition for extraordinary relief was filed on

September 8, 2006, as an original action (C-060760) against the trial court judge, the Honorable

David P. Davis, as Respondent,and against Medco and Merck, as Defendants. Judge Davis,

Medco, and Merck then filed motions to disrniss the petition on September 26, 2006, and September

28, 2006, respectively. Although they were named as "Defendants" in the original petition, both

Medco and Merck also filed motions to intervene as a protective measure to ensure that they could

be fully heard on the merits of the petition. STRS opposed the motions to dismiss, but did not

oppose the motions to intervene.

On October 12, 2006, the Court of Appeals issued six (6) separate judgment entries that

granted STRS's petition for extraordinary relief and dismissed all pending appeals 3

(1) Entry Ovenuling Motion to Dismiss Petition and Granting Preemptory WritofProcedendo (No. C-060760);

3 As required by S.Ct. R. III, Section 1(D), a date-stamped copy of the Court of Appeals'judgment entries is attached to this jurisdictional memorandum, along with a copy of the trialcourt's final judgment entry of September 5, 2006.

9

(2) Entry Overruling Motion to Intervene by Medco (No. C-060760);

(3) Entry Overnxling Motion to Intervene by Merck & Co., Inc. (No. C-060760);

(4) Entry of Disinissal (Appeal No. C-060759)

(5) Entry of Dismissal (Appeal No. C-060786)

(6) Entry of Dismissal (Appeal No. C-060787)

On October 25, 2006, Judge Davis filed a notice of appeal from the entry granting the

peremptory writ. (See Supreme Court Case No. 06-2006). Medco and Merck have filed their own

notices of appeal from the pereniptory writ in Suprenie Court Case No. 06-2006, along with notices

of appeal from the denials of the motions to intervene. Moreover, both Medco and Merck have

filed notices of appeal from the three judgment entries that dismissed Appeals Nos. C-060759, C-

060786, and C-060787. The first set of appeals filed by Davis, Medco and Merck from the case

originating in the court of appeals are appeals of right under S.Ct. II, Section 1(A)(1). The second

set of appeals are discretiorary; -but Medco-md Marek are=ovinglvednsulidatcthe-app7eals,so-that

they may be decided at one time by this Court.

LAW AND ARGUMENT

Proposition of Law #1: A Final Judgment Entry That Resolves All Pending Motionsand Claims In A Civil Action Is A Final, Appealable Order.

It is clear that the Comt of Appeals erred in concluding that the Trial Court's Final

Judgtnent Entry of September 5, 2006, was not a final, appealable order. As this Court has held, a

final, appealable order is an order that disposes of all claims and "leaves nothing" for fiiture

determination by the trial court. State ex rel. Downs v. Panioto (2006), 107 Ohio St.3d 347, 2006-

Ohio-8, 839 N.E.2d 911; Hanzilton Cty. Bd. OfMental Retardation v. Professional Guild of Ohio

(1989), 46 Ohio St.3d 147, 154. As one court recently explained, "the primary ftinction of a final

order, for purposes of appeal, is the tennination of a case or controversy that the parties have

submitted to the trial court for resolution." Burns v. Morgan (2006), 165 Ohio App.3d 694, 2006-

10

Ohio-1213. Here, the trial court's Final Judgment Entry was clearly a final, appealable order under

R.C. 2505.02 because it resolved all of the pending motions and all claims, including the Hung Jury

Claims. While STRS believes that the trial court should have granted another ttial on the Hung Jury

Claims, the undisputed fact is that the trial court rejected this contention and entered final judgment

that resolved the Hung Jury Claims and left nothing for fiiture detennniation. Tlnis, while STRS

has the right to appeal this "waiver" ruling on the merits, the undisputed fact remains that the

September 5lh judginent entry is a final, appealable order as a matter of law.

In proceedings below, STRS argued that the September 5t° judgment entry was not "final"

because it did not expressly enter judginent in Defendant's favor on the Hung Jury claims, but only

denied STRS's motion for a new trial. This argutnent is based upon a distinction without a

difference 4 R.C. 2505.02(B)(1) provides that an "order is a final order that may be reviewed,

affirmed, modified, or reversed, with or witliout retrial" if, ijzter alia, it is an "order that affects a

substantial right in an action that in effect detemiines the action and prevents a judgment" in favor of

one of the parties. Id. (emphasis added). Here, the trial court denied STRS's motion for a new trial

on the Hung Jury Claims based upon the finding that it had been "waived" under Civ. R. 50(B).

This order effectively detennined the action and prevented a judgment in the PlaintifF's favor on the

Hung Jury Claims. While Plaintiff may disagree with the trial court's waiver ruling on the merits,

this argument does not mean that the September 5`h order was not "final," given that it clearly and

unanibiguously prevented STRS froin obtaining a judgment in its favor on the two Hung Jury

Claims. Thus, the alleged error was just one of the assignments of error that the parties would have

the right to present in any appeal taken from the trial court's final judgment entry.

4 This Court has recognized that the denial of a motion for a new trial can be a final appealable

order, noting that the issue should be decided based upon the practical effect of the order, not

upon procedural irregularities. See Barksdale v. Van's Auto Sales (1988), 38 Ohio St.3d 127,

128; Maritime Manufactures, Inc. v. Hi-Skipper Marina (1982), 70 Ohio St.2d 257, 260.

11

Even if the trial court erred in denying the PlaintifPs motion for a new trial on the Hung

Jury claims, the proper remedy would not be the issuance of an extraordinary writ of procedendo. It

is well-established that an extraordinary writ should not be granted "where an adequate remedy in

the ordinary course of law is available." State ex rel. CNG Financial Corp. v. Nadel (2006), 111

Ohio St.3d 149, 151, 2006-Ohio-5344; see also State ex rel. Miley v. Parrot, Judge (1996), 77 Ohio

St.3d 64, 65 ("In order to be entitled to a writ of procedendo, a relator must establish a clear legal

right to require to court to proceed, a clear legal duty on the part of the court to proceed, and the lack

of an adequate remedy in the ordinary course of law"). In this regard, this Court has held that "the

availability of a direct appeal constitutes "an adequate remedy and will prevent the issuance of

extraordinary relief." State ex rel. LTV Steel Co. v. Gwin (1992), 64 Ohio St.3d 245, 248. Thus, the

Court has refused to issue of writ of mandamus or procedendo if an adequate remedy exists by

appeal. State ex rel. Reynolds v. Bassinger, Judge (2003), 99 Oluo St.3d 303, 2003-Ohio-363 i, ¶ 8;

State ex rel. Lewis v. Moser, Judge (1995), 72 Ohio St.3d 25, 27 ("exth-aordinary relief is not to be

used as a substitute for appeal").

In this case, STRS clearlyhas an adequate remedy available tln-ough the direct appeals that

were filed from the trial court's final judgment entry, dated September 5, 2006. In such an appeal,

the Court of Appeals would be able to determine on the nierits whether the trial court erred in

denying Plaintiffs motion for new trial. In that appeal, however, the Court of Appeals would not

only be deciding STRS's assignnients of error. It would also be deciding Medco's assignments of

error, which may render STRS's assignments of error moot and could eliminate the need for a new

trial altogether. Accordingly, the Court should exercise appellate jurisdiction over the instant

appeals and conclude that the Court of Appeals erred in issuing a writ of procedendo and dismissing

Medco's and Merck's appeals as a matter of law.

12

Proposition of Law #2: If The Trial Court Issues A Final, Appealable Order, TheCourt of Appeals Should Not Selectively Resolve Only An Assignment of Error ByMotion, But Should Determine The Merits of All Of The Assignments of Error UnlessRendered Moot By The Court's Ruling.

If the Court concludes that the trial court's judgnient entry of September 5t" is a final,

appealable order, then it also must conclude that the Court of Appeals erred in failing to review the

entire judgment entry and to decide all of the assignments of ei-ror that may be presented by the

parties. This basic and fundamental right of appellate review is mandated by Appellate Rule 12(A),

which provides, in relevant part, as follows:

(1) On an undismissed appeal from a trial corut, a court of appeals shall doall of the following:

(a) review and affirm, modify, or reverse the judgment or final orderappealed;

(b) determnie the appeal on its merits on the assignments of error setforth in the briefs under App. R. 16, the record on appeal under App.R. 9, and, unless waived, the oral argument under App. R. 21;

(c) unless an assigmnent of error is made moot by aruling on anotherassignment of error, decide each assigmnent of error and givereasons in writing for its decision.

In this case, the Court of Appeals effectively circumvented the mandatory requirements of

App. R. 12 by selectively reviewing the merits of only one portion of the trial court's fmal order -

whether the trial court erred in determining that STRS waived the right to a new trial on the Hung

Jury Claims. In this regard, the issue presented to this Court is not whether the Court of Appeals

was right or wrong in holding that STRS did not waive the right to a new trial on the Hung Jury

Claims. Rather, the issue is whether the Court of Appeals should be required to review the entire

judgment entry and to decide all of the assignments of error (not just STRS's assignment of error)

before ordering a new trial. If, as previously discussed, the Court of Appeals sustains Medco's

assignments of error and concludes that it is not a "fiduciary" and that it catniot be held liable for

13

breach of fiduciary duty and constructive fraud as a matter of law, then there is either no need for

another trial, or any new trial would be greatly limited in scope. Indeed, if Medco also prevails on

their assignment of error that it is entitled to judgment in its favor on Breach of Contract Claim #1,

then there would be no need for another trial altogether. In that case, STRS's assignment of error on

the Hung Jury ruling would be rendered moot.

This Court has not yet had an occasion to address the unique procedural issues presented by

this case. While STRS likely will argue that the Court addressed this procedural issue in Aetna

Casualty Co. & Surety Co. v. Niemiec (1961), 172 Ohio St. 53, this case is clearly distinguishable.

In Niensiec, the Supreme Court was reviewing an order by the trial court to grant a new trial on the

merits. It did not dismiss the appeal for lack of a final, appealable order. Thus, the case only

provides support for Appellants' position that the Court of Appeals should have reviewed the trial

court's entire judgment entry on the merits. Indeed, even with respect to the nierits of the waiver

issue, Niemiec is clearly distinguishable because it was decided in 1961 before the adoption of Rule

50(B). Thus, Niemiec was not deciding the same procedural issue that was decided by the trial court

under Civ. R. 50(B), which establishes jurisdictional deadlines for the filing of post-trial motions

where, as here, "a verdict was not retumed" for any party. Accordingly, for this additional reason,

Niemiec is not applicable here.

The lack of Supreme Court precedent on the unique procedural issues in this case, therefore,

lends further support for accepting jurisdiction at this tinie. While courts of appeal generally can be

relied upon to follow the appellate niles of procedure, the fact remains that this Court, as the highest

court of Ohio, is the sole court that can police whether the niles are being interpreted and properly

followed by the appellate courts. Here, this Court has a uiuque opportunity to define with greater

particularity the requirements of a final, appealable order and to vindicate the right of a party to

appellate review in a case of public and great general interest in the State of Ohio. The question of

14

whether a pharmacy benefits management company is a "fiduciary" is a threshold legal issue that

should be decided before another 6-week jury trial is held in this important case. The trial court has

entered a final, appealable order, and Medco is entitled to appellate review of the entire judgment

entry at this time as a matter of law. The Court tlierefore should accept jurisdiction of these appeals,

and reverse the appellate court's dismissal orders, so that this important case of public and great

general interest may be decided on the merits by the Court of Appeals.

CONCLUSION

For these reasons, the Court should accept jurisdiction over the instant appeals, consolidate

the appeals with the appeal pending in Case No. 06-2006, and reverse the judgment entries that

were erroneously entered by the Court of Appeals in this case.

Earle Jay Maiman (0014200)Stephen L. Richey(0061570)Thompson Hine LLP312 Walnut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsimile: (513) 241-4771

William E. McDanielsEnu MainigiJennifer WichtWillianis & Connolly LLP725 Twelfth Street, NWWashnrgton, DC 20005-5901

TriaZAttorneys for Medco Defendants

Renee S. FiliatrautThompson Hine LLP312 Walnut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsimile: (513) 241-4771Trial Attor ney for Merck & Co., Inc.

Respectfully submitted,

R6nald S. Kopp, Esq. 700495Stephen W. Funk, Esq. (0058506)ROETZEL & ANDRESS222 South Main Street, Suite 400Akron, Ohio 44308Telephone: (330) 376-2700Facsimile: (330) [email protected]; sfunk a ralaw.com

Attorneys For Medco Defendants andMerck & Co., Inc.

15


I hereby certify that on this 27th day of November, 2006, a true and correct copy of the

foregoing MEMORANDUM IN SUPPORT OF JURISDICTION was served upon the below-

listed counsel of record via first-class U.S. mail, postage prepaid, at the following addresses:

Star-Aey M. ChesleyPaul M. DeMarcoRobert Hueck IIW.B. MarkovitsWAITE, SCHNEDIER, BAYLESSCHESLEY CO., LPA1513 Fourth & Vine TowerCincinnati, Ohio 45202-3685

Thomas W. BreidensteinBarrett & Weber, LPA500 Fourtl-i and Walnut Centre105 E. Fourth StreetCincinnati, Ohio 45202

Earle Jay Maiinan (0014200)Stephen L. Richey (0061570)Thompson Hine LLP312 Walnut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsiniile: (513) 241-4771

William E. McDanielsEnu MainigiJennifer WichtWilliams & Connolly LLP725 Twel$h Street, NWWashington, DC 20005-5901

James E. SwaimFlanagan, Lieberman, l318 West Fourth StreetDayton, Ohio 45402

Attorneys for Relator-Appellee Board of theState Teachers Retirement Systein of Ohio

Joseph T. DetersHamilton County Prosecuting AttorneyChristian J. Schaefer (0015494)Colleen McCarren (0079858)Assistant Prosecuting Attomeys230 E. Ninth Street, Suite 4000Cincinnati, Ohio 45202-2174

Attorneys for Respondent-AppellantHon. David P. Davis, JudgeHamilton County Court of Conzmon Pleas

1386966.01.114929.0001

Trial Attorneys for Medco Defendants

Renee S. FiliatrautThompson Hine LLP312 Walnut Street, Suite 1400Cincinnati, OH 45202-4029Phone: (513) 352-6747Facsimile: (513) 241-4771

Trial Attorney for Merclz & Co., Inc.

161387430.01.114929.0003

IN THE COURT OF APPEALS

FIRST APPELLATE DISTRICT OF OHIO

HAIVIILTON COUNTY, OHIO

BOARD OF THE STATE TEACHERS APPEAL NO. C-060787RETIREMENT SYSTEM OF OHIO

TRIAL NO. A-0309929

Appellee,

vs. ENTRY OF DISMISSAL

MEDCO HEALTH SOLUTIONS,INC., et al.

Appellants,

MERCK & CO., INC.,

Appellee:

This cause came on to be considered by the Court sua sponte upon the appeal filed

herein.

The Court finds that the appeal is not taken from a final appealable order.

WHEREFORE, it is ordered and decreed that the appeal is dismissed.

It is further ordered that a certified copy of this judgment shall constitute the mandate to

the trial court pursuant to Rule 27, Ohio Rules of Appellate Procedure.

To The Clerk:

Enter upon,the Journal of the Court on OCT 1 2 2006 per order of the Court.

By: /WISGiA '-r^ (Copies sent to all counsel)Presiding Judge



HAMILTON COUNTY, OHIO


TRIAL NO. A-0309929

Appellee,



Appellees,

MERCK & CO., INC.,

Appellants.

This cause came on to be considered by the Court sua sponte upon the appeal filed

herein.

The Court finds that the appeal is not taken from a final appealable order.




To The Clerk:

Enter upon the Journal of the Court on 0 CT 12 2006 per order of the Court.

By: (Copies sent to all counsel)





TRIAL NO. A-0309929

Appellant,



Appellees.

This cause came on to be considered by the Court upon the motion of the appellant filed

herein for an order of this Court dismissing the appeal.

The Court, upon consideration thereof, finds that said motion is well taken and is granted.




To The Clerk:

Enter upon the Journal of the Court on 0 CT 12 2006 per order of the Court.

By: I (Copies sent to all counsel)Presidirig Judge

IN THE COURT OF APPEALSFIRST APPELLATE DISTRICT OF OHIO

HAIVIILTON COUNTY, OHIO

STATE OF OHIO EX REL. BOARD CASE NO. C-060760OF THE STATE TEACHERSRETIREMENT SYSTEM OF OHIO

Relator,

vs. ENTRY OVERRULING MOTION TODISMISS PETITION AND GRANTINGPEREMPTORY WRIT OF PROCEDENDO

JUDGE DAVID P. DAVIS, Court ofCommon Pleas, Hamilton County, Ohio

Respondent.

-Shiscausecame onto be considered upon the motion of the respondent to dismiss

the petition and upon the response thereto. This cause also came on for consideration of

the petition for extraordinary relief and the motion for a peremptory writ or alternative

writ of procedendo or mandamus.

The Court, upon consideration of the motion to dismiss, finds that it is not well

taken and is overruled.

The Court further finds that the motion for a peremptory writ of procedendo is

well taken and is granted. The trial court shall proceed with retrial of those claims or

causes of action upon which the jury could not reach a verdict.

To The Clerk:

Enter upon the Journal of the Court on OCT 12 2006 per order of the Court.

gy; ^Zc/ (Copies sent to all counsel)Presiding Judge

IN THE COURT OF APPEALSFIRST APPELLATE DISTRICT OF OHIO



Relator,

vs. ENTRY OVERRULING MOTION TOINTERVENE BY MERCK & CO., INC.


Respondent.

This cause came on to be considered upon the motion of the Merck & Co., Inc. to__-

intervene in this cause and for leave to file a motion to dismiss the petition foi

extraordinary relief.

The Court, upon consideration of the motion to intervene, finds that it is not well


To The Clerk:

Enter upon t h e Journal of the Court on D C T^ 12 0^6 per order of the Court.

By: (Copies sent to all counsel)Presiding Judge

IN THE COURT OF APPEALSFIRST APPELLATE DISTRICT OF OFIIO



Relator,

vs. ENTRY OVERRULING MOTION TO .INTERVENE BY MEDCO DEFENDANTS


Respondent.

This cause came on to be considered upon the motion of the Medco defendants to

intervene- in-this-cause-and-for-leave to file-a motion to--dismi-ss-the-petitionfor

extraordinary relief.

The Court, upon consideration of the motion to intervene, finds that it is not well


To The Clerk:

Enter upon the Journal of the Court on O C T 12 2006 per order of the Court.

By:Presiding Judge

(Copies sent to all counsel)

!'e^i4 tl^J

SEP 0 5 2006COURT OF COMMON PLEASHAMILTON COUNTY, OHIO

BOARD OF THE STATETEACHERS RETIREMENTSYSTEM OF OHIO,

: CASE NO.: A0309929

. (Judge David Davis)

D69866357

Plaintiff,

-vs-

MEDCO HEALTH SOLUTIONS,INC., et al.,

Defendants.

: ORDER AND FINAL JUDGMENT ENTRY

This action came on for trial before the Court and a jury, and the issues having been duly

tried and the jury having duly rendered its verdict,

ITIS ORDERED AND ADJUDGED-thatthe Plaintiff,Board-oftheState-T-eachers-

Retiremetit System of Ohio, recover of tha Defendants, Medco Health Solutions, Inc., Merck-

Medco Managed Care, L.L,C., Paid Prescriptions, L.L.C., Medco Health Solutions of Columbus,

North, Ltd., Medco Health Solutions of Columbus West, Ltd., Medco Health Solutions of

Fairfield, L.L.C., Merck-Medco Rx Services of Florida No. 2, L.C., Merck-Medco Rx Services

of Florida, L.C., Medco Health Sarvices of Las Vegas, Inc. and Medco Health Solutions of

Texas L.L.C. (collectively "Medco") and Merck & Company, Inc., jointly and severally, the sum

of $7,815,000, and the costs ofthis action.

Plaintiffs Motion to Submit Supplement Argument for Consideration by the Court and

Argument is hereby DENIED.

Plaintiffs Motion for a New Trial or, in the Altemative for Relief ftom Judgment and a

New Trial, on the Hung Jury Issues is hereby DENIED. The Court holds that Plaintiff has

waived its right to a new trial for failure to file a timely motion pursuant to Ohio Rules of Civil

Procedure 50(B) and 6(B).

Plaintiffs Motion for Judgment Notwithstanding the Verdict Pursuant to Rule 50(B) and

Motion for a New Trial Pursuant to Rule 59 is hereby DENIED.

Medco's Motion to Joumalize the Court's Ruling on Rule 50(B) Waiver and to Amend

its Final Judgment Entry Proposed Order and Entry Attached, in which Merck & Co., Inc. has

joined, is hereby GRANTED.

SO ORDERED.

Judge David Davis

Stanley M. Chesley (000852)Robert Heuck,1I (0051283)

-P_aul-De Marco-(0041153)_ -WAITE SCHNEIDER BAYLESS & CHESLEY CO., LPA1513 Fourth and Vine TowerOne West Fourth StreetCincinnati, Ohio 45202Telephone: (513) 621-0267Fax: (513) 381-2375On Behalf of Plaintiff

Earle Jay Ivlklman (00142Stephen L. Richey (00615James D. Houston (0072794)THOMPSON HINE LLP312 Walnut Street, Suite 1400Cincinnati, Ohio 45202-4029Telephone: (513) 352-6747Fax: (513) 241-4771On Behalf of All Defendants


I hereby certify that a copy of the foregoing has been served via U.S. Mail upon thefollowing this ay of August, 2006:

Stanley M. ChesleyRobert Heuck IIPaul M. De MarcoWaite, Schneider, Bayless & Chesley Co., LPA1513 Fourth and Vine TowerOne West Fourth StreetCincinnati, Ohio 45202

James E. SwaimFlanagan, Lieberman, Hoffman & Swaim318 West Fourth StreetDayton, Ohio 45402

Thomas W. BreidensteinBarrett & Weber, L.P.A.500 Fourth & Wa{nut Centre105 East Fourth StreetCincinnati, Ohio 45202

James E. SwaimFlanagan, Lieberman, Hoffman & Swaim318 West Fourth StreetDayton, Ohio 45402

Trial Attomeys for Plaintiff,Board of State Teachers Retirement System ofOhio

602178.1

merck & co., inc. nov 2/ 2006 - sconet.state.oh.us merck-medco rx services of flordia,...

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