First Circuit Affirms Dismissal of RICO Purported Class Action Suit

Our Litigation Practice Group prevailed before the United States Court of Appeals for the First Circuit in defending the summary dismissal of a purported class action suit filed under the Racketeer Influence and Corrupt Organizations Act (RICO) by providers of medical products and services against, among others, client MC-21 Corporation, the leading pharmacy benefits manager in Puerto Rico. Plaintiffs claimed that MC-21 extorted pharmacies by threatening them with exclusion from the network of pharmacy providers and with conducting arbitrary audits of pharmacy providers' services. Plaintiffs also claimed that MC-21 defrauded pharmacies through a scheme to underpay them for their services and failing to disclose how their prescription drug claims were processed and paid.

From the parties' briefs on the issue of class certification the District Court had found "[d]efendants' arguments and the corresponding facts . . . so compelling," that instead of ruling on plaintiffs' motion for class certification, it ordered plaintiffs to show cause why the case should not be dismissed. Upon plaintiffs' failure to show any reason that would prevent summary judgment, the District Court dismissed the case. After hearing oral argument on plaintiffs' appeal, the First Circuit upheld the District Court's judgment dismissing the case for lack of evidence to support a pattern of racketeering activity under RICO. The First Circuit's opinion was a well received victory for MC-21.