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Alderman Drugs v. Metropolitan Life Ins.





APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.


The plaintiffs filed a class action seeking a declaratory judgment that the defendant's proposed amendment to a contract between them was void, as was defendant's termination of members of plaintiff class; that defendant was required to bargain in good faith and that all members of plaintiff class were entitled to recover damages. The trial court, while stating that the proposed amendment was void, granted the defendant's motion to dismiss the complaint. We find that the complaint stated a cause of action and reverse.

The plaintiffs are two individual drug companies, Alderman Drugs, Inc. (Alderman), and Woodbury Drug Company, Inc. (Woodbury), plus the Illinois Pharmaceutical Association (The Association). They filed a class action against Metropolitan Life Insurance Company (Metropolitan). According to the complaint the suit was brought on behalf of the over 1000 pharmacies and pharmacists who had entered into MediMET prescription drug agreements with Metropolitan. These contracts were prepared by Metropolitan and entered into in 1969 and thereafter. The contracts consisted of two parts: the basic agreement and the MediMET prescription drug schedule for each of the Metropolitan group health insurance plans for which the contracting pharmacy acted as a participating provider. Under the agreement, when a covered employee (one belonging to a group plan insured by Metropolitan) had a drug prescription to be filled, he would take it to a participating provider (a pharmacy under a MediMET agreement). The employee paid the deductible. Metropolitan then paid the pharmacy the actual cost of the drugs plus a dispensing fee of $2.50 minus the deductible. The amount of drugs dispensed at one time, and thus for the $2.50 fee, was limited by the schedules. The MediMET Agreement drawn up by Metropolitan provided "This Agreement and the Schedule or Schedules attached hereto constitute the entire understanding between the parties and shall not be altered or amended except in writing signed by both METROPOLITAN and PARTICIPATING PROVIDER." Despite this provision, in 1977 Metropolitan unilaterally amended the Rockwell schedule (one of the schedules attached to the contract) to increase the amount of drugs dispensed for the $2.50 dispensing fee. Metropolitan threatened to terminate any pharmacist who objected to the amendment and did in fact terminate Alderman for the explicit reason that Alderman refused to sign the agreement. *fn1 Metropolitan has also taken the position that providers such as Woodbury who neither signed the amendment nor expressed to Metropolitan an objection to it have accepted the amendment.

The complaint further alleged that Metropolitan owed the members of plaintiff class a contractual duty of good faith and fair dealing, specifically that it had a duty not to use the termination provision of the agreement to nullify the amendment provision. Allegedly it owed this duty because, inter alia, through its group health insurance programs it controlled large groups of prescription drug customers and the terms and conditions under which they purchase drugs; it held an extremely superior economic position in relation to the individual members of the plaintiff class; Metropolitan induced the members of the plaintiff class to enter into the agreement and in reliance on Metropolitan's continuance of the agreements, the members of the class had invested substantial time and resources in developing good will and continuing business relationships with the employees covered by the plans.

The plaintiffs in their complaint asked the court for an order:

1. declaring that Metropolitan's proposed Rockwell amendment constitutes a breach of Metropolitan's implied contractual duty of good faith and fair dealing; was unilaterally imposed in an arbitrary, unfair and coercive manner; constitutes a breach of Metropolitan's fiduciary duty to the plaintiff class, and is void and unenforceable;

2. declaring that Metropolitan has a duty under the agreement to bargain in good faith with members or representatives of the plaintiff class with respect to proposed amendment to the agreement;

3. declaring that Metropolitan's termination of the agreements with members of the class who refused to sign the amendment are void and of no effect;

4. declaring that all members of the plaintiff class are entitled to their actual damages, plus interest, attorneys' fees and costs;

5. granting any further relief that may be just and equitable.

Metropolitan moved to dismiss the complaint because:

1. it failed to state a cause of action;

2. either Metropolitan or any participating provider who does not wish to continue under the terms offered by the defendant ...

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