Grider Drugs, LLC v. Express Scripts, Inc. ( 2012 )


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  •                   NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
    File Name: 12a1002n.06
    No. 10-5522
    UNITED STATES COURT OF APPEALS
    FOR THE SIXTH CIRCUIT
    FILED
    Sep 13, 2012
    )                                    DEBORAH S. HUNT, Clerk
    GRIDER DRUGS, LLC, et al.,                             )
    )
    Plaintiffs-Appellants,                         )         ON APPEAL FROM THE
    )         UNITED STATES DISTRICT
    v.                                                     )         COURT FOR THE WESTERN
    )         DISTRICT OF KENTUCKY
    EXPRESS SCRIPTS, INC., KELLY                           )
    HENSLEY, and JOHN DUDINSKIE,                           )
    )                        OPINION
    Defendants-Appellees.                          )
    )
    Before: SILER and MOORE, Circuit Judges; and VAN TATENHOVE, District Judge.*
    VAN TATENHOVE, District Judge. Grider Drugs is a pharmacy located in Russell
    County, Kentucky. It asks us to reinstate a lawsuit brought in an effort to maintain a business
    relationship with a pharmacy benefit manager, Express Scripts, Inc. For important jurisprudential
    reasons we require that the arguments made in this court are first brought to the attention of the
    district judge. Grider Drugs failed to do that. For that reason, we will AFFIRM the district court
    dismissal and deny Grider Drugs’ request for relief.
    I.
    At one point, Grider Drugs had a contract with Express Scripts under which, Express Scripts
    was required to supply pharmaceutical drugs to Grider for the benefit of its clients. These clients
    *
    The Honorable Gregory F. Van Tatenhove, United States District Judge for the Eastern District of Kentucky, sitting
    by designation.
    included insurance companies and, importantly in this case, the Department of Defense. Under the
    arrangement, individuals who had benefits through the Department of Defense could fill their
    prescriptions at network pharmacies, including Grider. The contract between Grider and Express
    Scripts allowed either party to terminate the contract for any reason upon ninety days’ notice to the
    other party. Express Scripts exercised this right after two of Grider’s principals were investigated
    for crimes relating to illegal drug distribution and Medicaid fraud.
    Grider responded by bringing a state law cause of action for perjury and tortious interference
    with a contract in Kentucky state court against both Express Scripts and two agents in the Kentucky
    Attorney General’s office, Kelly Hensley and John Dudinskie. The Hensley and Dudinskie
    allegations resulted from their roles in investigating the criminal charges and subsequent
    communication with Express Scripts about their findings. The action was properly removed to
    federal court by Express Scripts. Shortly after removal, Express Scripts moved for dismissal and
    Grider moved for remand. The district court considered both matters in the same opinion, denying
    remand and dismissing the case based on the state court complaint.
    Grider then moved under Federal Rule of Civil Procedure 60(b) for relief from the judgment,
    arguing that there was a vast conspiracy to “get” the company and its leadership, and that it should
    be allowed to amend its complaint based on the nature of said conspiracy. The district court denied
    the Rule 60(b) motion and stated that, as a result, it was unable to reach the issue of whether
    amending the complaint was appropriate. Grider appeals the decision denying relief under Rule
    60(b), but does so raising new arguments not brought before the district court.
    In addition, Grider argues here, for the first time, that Judge Russell should have recused
    himself from the proceedings based on his financial interest in a company that conducted business
    2
    with the Defendant Express Scripts. Further, Grider argues that it is entitled to relief from judgment
    as a result of Judge Russell’s failure to recuse sua sponte.1
    II.
    The district court denied relief under Rule 60(b).2 Grider asserts that it is entitled to relief
    under the catch-all provision of the rule, “any other reason that justifies relief.” Fed. R. Civ. P.
    60(b)(6). Essentially, Grider argues that dismissal was a miscarriage of justice and patently unfair
    because the district court dismissed its suit based on a complaint that was filed under the less
    stringent pleading standards of Kentucky. The district court did this at the same time as it ruled on
    a pending motion to remand. As a result, it argues, the entire suit was in a sort of limbo, where it
    was unclear whether the suit would remain in federal court. Grider argues that the district court
    should have denied its motion to remand in order to allow it an opportunity to amend its complaint
    to meet the federal pleading standard before dismissing it.
    Whatever the relative merits of this argument may be, it would be inappropriate for this court
    to consider them. Grider makes this argument for the first time before this court. While Grider did
    file a 60(b) motion before the district court, it completely failed to argue or even suggest that relief
    was warranted because of the difference in the pleading standards between Kentucky’s standard and
    the United States’ standard. Instead, in a disjointed motion considered by the district court, Grider
    pointed to numerous alleged conspiratorial acts of various Kentucky and Federal officials and
    concluded that relief under Rule 60(b) must be warranted. It argued that, “[w]hat is actually taking
    1
    Grider also appealed the district court’s imposition of sanctions, but the parties who won sanctions were dismissed
    from the appeal after filing notice that they would not oppose the reversal of the sanction award and that they would not
    seek its collection. As those parties are no longer before the court, it would be improper for us to consider the issue.
    2
    Grider moved for relief under Rule 60(b) and Rule 59 (allows alteration or amendment of judgment). However, its
    motion was not timely under Rule 59 so the district court considered it only under Rule 60(b).
    3
    place and easily proven in light of the new evidence is that the Defendants have been engaging in
    a scheme for some time to interfere with the 6th amendment rights of the employees of Plaintiff
    Grider Drug, Leon and Eric Grider.” [district court docket entry (“R.”) 34 at 5].
    In addition, Grider only referred to the rule itself in the opening sentence and failed to tie any
    of its conspiratorial accusations to any of the specific prongs or grounds in the rule. While some of
    the arguments in the motion reference new evidence so that the motion could be fairly read to rely
    on Rule 60(b)(2),3 Grider fails to assert that argument to this court. Indeed, Grider made plain in
    its appellate Reply that it is arguing for relief only under Rule 60(b)(6):
    [t]he dismissal of the unamended state court complaint for failure to comply with
    federal pleading requirements is a ‘reason that justifies relief’ in the form of re-
    opening the case to allow the plaintiffs to amend once their state court complaint.
    Fed. R. Civ. P. 60(b)(6) states that, ‘[o]n motion and just terms, the court may relieve
    a party or its legal representative from a final judgment, order, or proceeding for . .
    . any other reason that justifies relief.’
    [Grider Reply at 7] (emphasis added by Grider).
    The confusion over exactly what was being appealed is further evidenced by Hensley and
    Dudinskie’s brief which argues exclusively that relief is not warranted based on Rule 60(b)(2), while
    failing to address Grider’s pleading standards argument. [See Hensley and Dudinskie Response at
    17-21]. In its Reply, Grider argues that the Hensley-Dudinskie “brief did not address the issue
    raised on appeal by Grider, but instead analyzed whether the plaintiffs below had produced
    sufficient ‘new’ evidence to garner relief under Fed. R. Civ. P. 60(b)(2).” [Grider Reply at 9-10].
    3
    Under 60(b)(2), a court may grant a movant relief because of “newly discovered evidence, that, with reasonable
    diligence, could not have been discovered in time to move for a new trial under Rule 59(b).” Grider’s 60(b) motion
    states, “[s]ince the pleadings, leading up to the dismissal of the instant action, the Plaintiffs have obtained information
    and proof of a well defined conspiracy, revolving around a false belief that ‘Grider must be guilty of something so let’s
    go out and prove it.’” [R. 34 at 9]. In addition, Grider states that it “has discovered a plethora of new material and
    evidence which greatly support their claims as well as additional claims.” [Id. at 8].
    4
    Based not only on these statements, but also on review of Grider’s briefs as a whole, which
    fail to reference the “new evidence” basis of 60(b)(2), we must conclude that the only argument
    Grider is making before this court is the pleading standards argument. This is problematic for
    Grider because this issue was not raised before the district court in any of its filings before that
    court. The Sixth Circuit has previously stated that, “[w]hile we have never articulated precisely
    what constitutes raising an issue with the district court, we have found issues to be waived when
    they are raised for the first time in motions requesting reconsideration or in replies to responses.”
    Scottsdale Ins. Co. v. Flowers, 
    513 F.3d 546
    , 553 (6th Cir. 2008). Here, Grider did not even raise
    the issue in reply or in a response. It never raised the issue at all. It was not properly before the
    district court at any point.
    The consequence of this is significant. “[A]n argument not raised before the district court
    is waived on appeal to this Court.” 
    Id. at 552
     (citations omitted). This rule is justified by three main
    concerns. “First, the rule eases appellate review by having the district court first consider the issue.
    Second, the rule ensures fairness to litigants by preventing surprise issues from appearing on
    appeal.” 
    Id.
     (internal quotations and citations omitted). Third, the rule “promote[s] ‘judicial
    economy and the finality of judgments.’” Fairlane Car Wash, Inc. v. Knight Enterprises, Inc., 
    396 Fed. Appx. 281
     286 (6th Cir. 2010) (quoting Taft Broad. Co. v. United States, 
    929 F.2d 240
    , 244
    (6th Cir. 1991)).
    Because Grider did not properly preserve its pleading standards argument for appeal, we hold
    that it waived the argument. Relief cannot now be granted relying on such a theory at the appellate
    level.
    5
    III.
    Grider makes another argument to this court not raised below. According to Grider, it was
    plain error for Judge Russell not to recuse himself sua sponte based on his financial interests in a
    non-party, and this error should result in reversal of his order and disqualification in any future
    litigation in this matter. This argument is another whose merits should not be considered because
    it was not preserved for appeal.
    To briefly outline the nature of Judge Russell’s challenged financial interest4 and the basis
    of Grider’s challenge: during the district court litigation, Judge Russell owned a modest amount of
    stock (less than $15,000) in the company, Allscripts. In 2000, Express Scripts, a defendant to this
    action, announced via a press release, that it was entering into a “strategic alliance” with Allscripts,
    and that “[a]s a major component of the strategic alliance, Express Scripts will provide marketing
    support and clinical assistance to Allscripts, in addition to service fees based on the number of high-
    prescribing physicians who use the Personal Prescriber for the majority of prescriptions written for
    Express Scripts’ patients.” [Grider brief at 45].5 In short, Allscripts hired Express Scripts to provide
    certain services to it. Allegedly, this “strategic alliance” continues today. Grider argues that the
    above factual circumstance mandates recusal under 
    28 U.S.C. § 455
    (a), which states, in its entirety,
    that “[a]ny justice, judge, or magistrate judge of the United States shall disqualify himself in any
    proceeding in which his impartiality might reasonably be questioned.”
    Much like the different pleading standards argument discussed above, this argument was not
    raised before the district court; Grider never moved for recusal. It argues that this court should
    4
    Grider asks us to take judicial notice of three facts which form the basis of this outline. W e grant Grider’s request
    pursuant to Federal Rule of Evidence 201(b)(2) and 201(d).
    5
    The website Grider Drugs cites and which it quotes in its brief does not produce the press release. Instead, only an
    “error” page is viewable.
    6
    review Judge Russell’s failure to recuse himself sua sponte under a “plain error” standard. As
    support for this argument, Grider directs the court to Eighth Circuit precedent which states,
    “[o]rdinarily, we review a judge’s refusal to recuse for an abuse of discretion. However, when a
    recusal claim is not raised below, we apply a lower standard of appellate review and review only for
    plain error.” Fletcher v. Conoco Pipe Line Co., 
    323 F.3d 661
    , 663 (8th Cir. 2003) (internal citations
    omitted).
    Whatever the status of the law may be in the Eighth Circuit, it is not the same here. Recusal
    arguments such as this one, based on 
    28 U.S.C. § 455
    (a), which are not brought before the district
    court, are deemed waived. There is Sixth Circuit precedent directly on point addressing this issue.
    “Unless exceptional circumstances exist, this Court normally will decline to address an issue not
    raised in the district court. This general rule bars an appellate court from considering a recusal issue
    that was not initially raised in the trial court.” Callihan v. Kentucky, 
    36 Fed. Appx. 551
    , 552 (6th
    Cir. 2002) (internal citation omitted); see also In re Eagle-Picher Industries, Inc., 
    963 F.2d 855
    , 863
    (6th Cir. 1992) (relying on the “general rule . . . that appellate courts are not to address issues not
    raised for the first time in the trial court” to conclude that it was appropriate to “decline to consider
    the issue of recusal because it was not raised in the bankruptcy court”); Cook v. Cleveland State
    University, 
    13 Fed. Appx. 320
    , 322 (6th Cir. 2001) (“Th[e] general rule bars an appellate court from
    considering a recusal issue that was not initially raised in the trial court.”).
    Grider fails to address the Sixth Circuit rule or argue why it should be overturned in favor
    of the Eighth Circuit rule. It mistakenly assumes that the Eighth Circuit rule applies. We will not
    oblige such an assumption and, instead, simply apply the existing Sixth Circuit rule and find the
    7
    issue waived. Because Grider failed to raise the recusal issue before the district court, we hold that
    it was waived and not properly preserved for appeal.6
    IV.
    For the reasons stated above, we affirm the district court and find that none of the bases
    relied upon by Grider for appeal were properly preserved at the district court.7
    6
    Even if the court were to entertain the merits of Grider’s argument, Judge Russell’s interest would not qualify as one
    which would cause his impartiality to reasonably be questioned. Grider urges the court to find plain error based on the
    assertion that whenever companies have gone through the trouble of announcing a business relationship through a press
    release, they have such a close relationship that a judge’s interest in one must preclude him from presiding over a case
    involving the other. Adoption of such a rule would lead to preposterous results. A judge with stock in Bank of America
    or W al-Mart would be precluded from hearing innumerable cases simply because a corporate party may obtain financing
    through Bank of America or deliver dog food to W al-Mart. There was no plain error here.
    7
    Express Scripts seeks sanctions against Grider pursuant to Federal Rule of Appellate Procedure 38, alleging Grider
    filed a frivolous appeal. W e deny Express Scripts’ motion. “Sanctions are not appropriate simply because an appellant’s
    case ‘may indeed be quite weak.’” B & H Medical, L.L.C. v. ABP Admin., Inc., 
    526 F.3d 257
    , 271 (6th Cir. 2008)
    (quoting Uhl v. Komatsu Forklift Co., 
    512 F.3d 294
    , 308 (6th Cir. 2008)). It is only the rare case where sanctions are
    appropriate, and typically when the appeal involves an improper purpose or entirely baseless arguments. 
    Id.
     (“[W ]e
    generally impose sanctions only in the rare case when an appeal involves an improper purpose, such as harassment or
    delay”). This is not that case and we will not impose sanctions.
    8