Walsh Healthcare Solutions Inc. v. Amerisource Corp.

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT February 25, 2004
_______________________ Charles R. Fulbruge III
Clerk
No. 02-41373
_______________________
WALSH HEALTHCARE SOLUTIONS INC.,
Plaintiff-Counter Defendant-Appellee/Cross-Appellant,
versus
AMERISOURCE CORPORATION,
Defendant-Counter Claimant-Appellant/Cross-Appellee.
Appeals from the United States District Court
for the Eastern District of Texas
No. 5:00-CV-135
Before JONES, MAGILL* and SMITH, Circuit Judges.
PER CURIAM:**
Walsh Healthcare Solutions, Inc. (“Walsh”) sued
AmeriSource Corporation (“AmeriSource”) seeking lost profits under
Department of Veteran Affairs (“VA”) pharmaceutical prime vendor
(“PPV”) contracts . Both Walsh and AmeriSource appeal the district
court’s order granting and denying various portions of each party’s
motion for summary judgment. Because the express terms of a
*
Circuit Judge of the United States Court of Appeals for the Eighth
Circuit, sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
settlement agreement entered into by the parties bars each claim
raised by Walsh and AmeriSource, we reverse and remand.
BACKGROUND
In 1993, Walsh and AmeriSource separately entered into
PPV contracts with the VA. AmeriSource’s PPV contract covered
several geographic regions, while Walsh’s PPV contract covered only
the South Central region.1 The contracts both lasted for one year,
with four optional one-year extensions. Because the VA invoked all
the extensions, the contracts were set to expire in September 1998.
Approximately one year after the parties entered into
their PPV contracts, the VA introduced a new mail-order
prescription refill system. Rather than having out-patient phar-
macies fill these prescriptions, the VA formed a network of
government-run Consolidated Mail Outpatient Pharmacies (“CMOPs”) to
handle all mail-order prescription refills. The medical facilities
in the South Central region, which belonged to Walsh under its PPV
contract, were assigned to CMOPs in AmeriSource’s territory. As a
result, AmeriSource became the sole CMOP supplier in the South
Central region and Walsh lost a significant portion of the business
for which it had contracted.
In December 1995, Walsh and AmeriSource signed a letter
agreement (“December Agreement”), which provided that Walsh would
supply certain “mainstream” pharmaceuticals to one particular CMOP
1
Walsh received the PPV contract as part of a small-business set-aside
program.
2
on a regular basis and act as a back-up supplied to other CMOPs.
The parties hoped that the arrangement would allow Walsh to recover
its lost sales volume. By November 1996, however, Walsh claimed an
$8.5 million deficit. As a result, AmeriSource agreed to compen-
sate Walsh for its lost profits, which would be calculated based on
an agreed-upon formula. Walsh began submitting invoices to
AmeriSource on a regular basis, and AmeriSource paid each invoice
in full, though the payments were sometimes delayed.
As the PPV contract term neared its end, the VA realized
it was not prepared to enter into new PPV contracts and signed one-
page interim contracts (“First Interim Contract”) with both Walsh
and AmeriSource. The First Interim Contracts were set to expire in
March 1999. During the First Interim Contract term, Walsh con-
tinued to submit invoices to AmeriSource. In fact, AmeriSource
paid Walsh $394,161 for the period of October to December 1998.
Walsh later sought compensation in the amount of $404,481 for the
period of January to March 1999, which AmeriSource never paid.
Meanwhile, on December 28, 1998, the VA awarded a new PPV
contract to AmeriSource that covered the entire country. Walsh
filed a bid protest with the General Accounting Office (“GAO”) on
January 19, 1999, and argued that the VA had failed to adhere to
the proper procedures when awarding the new PPV contract. As a
result of the bid protest, the VA entered into a second set of
interim contracts (“Second Interim Contracts”) with Walsh and
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AmeriSource that would last until June 30, 1999. The GAO ulti-
mately denied Walsh’s bid protest on April 28, 1999.
In May 1999, Walsh filed suit against the VA in federal
district court. AmeriSource intervened in the suit as a defendant
to protect the contract award. In July 1999, Walsh, AmeriSource,
and the VA entered into a settlement agreement that accomplished
the following: (1) Walsh’s Second Interim Contract with the VA
would be extended an additional 92 days and would end in September
1999; (2) AmeriSource’s new PPV contract would become effective on
October 1, 1999; and (3) the parties entered into a release of
claims.
In April 2000, Walsh sued AmeriSource in Texas state
court, claiming that AmeriSource failed to compensate it for lost
profits through March 1999, relying on theories of express and
implied contract, third-party beneficiary status, and promissory
estoppel. AmeriSource removed the case to federal district court
and filed conversion and unjust enrichment counterclaims for
$394,161, which AmeriSource alleged it mistakenly paid to Walsh for
lost profits from October to December 1998. Walsh then amended its
complaint to add a claim for lost profits through September 1999,
when the Second Interim Contract expired.
On cross motions for summary judgment, the district court
held that (1) the settlement agreement did not preclude the
parties’ claims; (2) the December Agreement between Walsh and
AmeriSource expired in September 1998; and (3) the parties’ actions
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gave rise to an implied contract throughout the duration of the
First Interim Contract. The district court denied Walsh’s motion
for summary judgment on express contract grounds, but granted
Walsh’s motion on implied contract grounds only for the period of
October 1998 to March 1999.2 Thus, AmeriSource owed Walsh its lost
profits of $404,481 for the second half of the First Interim
Contract term, or January to March 1999, plus attorneys’ fees.
Consequently, AmeriSource’s cross-motion for summary judgment for
conversion and unjust enrichment was denied. Finally, the district
court denied Walsh’s motion for summary judgment on promissory
estoppel. Both parties appealed.
DISCUSSION
We review de novo a district court’s decision to grant or
deny summary judgment. Patterson v. Mobil Oil Corp., 335 F.3d 476,
487 (5th Cir. 2003). “Under Texas law, summary judgment may be
granted if the terms of a contract are not ambiguous, such that
they ‘can be given a certain or definite legal meaning or
interpretation.’” Petula Assocs., Ltd. v. Dolco Packaging Corp.,
240 F.3d 499, 502 (5th Cir. 2001) (quoting Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983)). A district court’s interpretation of
an unambiguous contract is a question of law subject to de novo
review. Guidry v. Halliburton Geophysical Servs., Inc., 976 F.2d
938, 940 (5th Cir. 1992). Because a settlement agreement is a
2
The district court denied Walsh’s motion for summary judgment for the
period of the Second Interim Contract and its extension to September 1999.
5
contract, its interpretation is also subject to de novo review.
Id.
AmeriSource argues that the plain language of the
settlement agreement prevents the parties from asserting the claims
in this suit.3 Conversely, Walsh argues that the settlement
agreement was never intended to preclude claims pertaining to the
First Interim Contract. The settlement agreement, signed by Walsh
and AmeriSource as well as the government, provides that
Any and all damages, expenses, costs and/or attorney fees
of any kind arising from or associated with the bidding
on the solicitation at issue, the award, the protest, the
proceedings before the VA, the proceedings before the
GAO, the extensions of Walsh’s contract, the delay in
implementation of the AmeriSource contract, and this
court action, shall be borne by the party incurring the
same . . . . This release specifically includes, but is
not limited to, any claims for lost profits, bid
preparation costs, attorneys fees and expenses relating
to any administrative or judicial proceedings . . . .
(emphasis added). Finally, the settlement agreement contains a
release, which states that
Each party hereby releases and forever discharges each
and every other party from any claims, demands, or causes
of action which were asserted or which could have been
asserted in this suit and/or the underlying
administrative proceedings, it being the intention of the
parties that any and all issues concerning the bidding,
solicitation and the awarding of the contract at issue
. . . be and hereby are put to rest.
The district court interpreted Texas law to require the
settlement agreement to “mention” the claim being released. The
3
AmeriSource candidly states that, should this court accept its
argument, its claims for conversion and unjust enrichment would also be precluded
by the settlement agreement.
6
court accordingly held that the settlement agreement pertained only
to the “extension of the VA’s PPV contract with Walsh.” The
court’s statement alone mischaracterizes Texas release law. As we
have previously noted, “[w]e are satisfied that ‘mentioning’ does
not require particularized enumeration or detailed description,
only that the claim being released come within the express
contemplation of the release provision when viewed in context of
the contract in which the release provision is contained . . . .”
Stinnett v. Colo. Interstate Gas Co., 227 F.3d 247, 255 (5th Cir.
2000) (citing Mem’l Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d
433, 435 (Tex. 1997); Victoria Bank & Trust Co. v. Brady, 811
S.W.2d 931, 938-39 (Tex. 1991); Keck, Mahin & Cate v. Nat’l Union
Fire Ins. Co. of Pittsburgh, 20 S.W.3d 692, 698 (Tex. 2000)).
In this case, several factors indicate that the
settlement agreement and release cover the period beginning in
October 1998 with the First Interim Contract and continuing through
the end of the Second Interim Contract in September 1999. First,
the settlement agreement specifically mentions the “extensions” of
Walsh’s contract. Walsh argues that “extensions” merely refers to
the settlement agreement’s 92-day extension of the Second Interim
Contract. However, this argument is belied by Walsh’s express
contract theory. Walsh argues separately to this court that the
December Agreement between AmeriSource and Walsh was expressly
incorporated into both the First and Second Interim Contract, and
therefore, that AmeriSource should be forced to compensate Walsh
7
for its lost profits through September 1999. This argument
implicitly assumes that the First and Second Interim Contracts are
seamless extensions of Walsh’s PPV contract. We are persuaded that
the term “extensions” in the settlement agreement refers to each
extension of Walsh’s contract, including the First Interim
Contract.
Second, the settlement agreement releases “causes of
action which were asserted or which could have been asserted in
this suit.” When AmeriSource intervened in the suit between Walsh
and the VA, both parties had an opportunity to assert the causes of
action now raised in this suit. Walsh sent AmeriSource an invoice
for the January to March 1999 period in June 1999, one month after
initiating its suit and one month before signing the settlement
agreement. Thus, Walsh could have asserted its claim for those
lost profits against AmeriSource. In addition, summary judgment
evidence illustrates that executives at AmeriSource became aware of
their allegedly mistaken payment to Walsh in January 1999. Thus,
this claim also existed and could have been asserted.
CONCLUSION
Because the settlement agreement entered into by Walsh
and AmeriSource covers the period of time beginning with the First
Interim Contract in October 1998 and extending through September
1999, the parties’ claims in this case are barred. Consequently,
we REVERSE the district court’s denial of AmeriSource’s summary
8
judgment motion with respect to the settlement agreement, REVERSE
the district court’s award of lost profit to Walsh for the period
of January to March 1999, REVERSE the award of attorney’s fees to
Walsh, and REMAND the case for entry of take-nothing judgment for
both parties.
REVERSED and REMANDED.
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