Manes' Pharmacy, Inc. v. AmerisourceBergen Drug Corporation

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FORT SMITH DIVISION

MANES’ PHARMACY, INC. PLAINTIFF

v. No. 2:22-cv-2186

AMERISOURCEBERGEN DRUG CORPORATION DEFENDANT

OPINION AND ORDER

Before the Court are Plaintiff Manes’ Pharmacy, Inc.’s (“Manes”) motion for temporary

restraining order and preliminary injunction (Doc. 5), and Defendant AmerisourceBergen Drug

Corporation’s (“AmerisourceBergen”) response in opposition (Doc. 16). The Court previously

denied Manes’ request for a temporary restraining order (“TRO”), but deferred ruling on Manes’

request for a preliminary injunction until the Court could conduct an evidentiary hearing. That

hearing occurred over two non-consecutive days: January 24 and 26, 2023. For the reasons given

below, Manes’ motion for preliminary injunction will be DENIED.

As this Court previously recounted in its order denying Manes’ request for a TRO:

This dispute arises between a pharmacy and the pharmacy’s wholesale distributor

of, among other products, controlled substances. Manes is a pharmacy that has

served the local Van Buren, Arkansas community for nearly 40 years. (Doc. 4,

p. 2). AmerisourceBergen is a wholesale distributor of pharmaceutical products,

including controlled substances. (Doc. 16, p. 4). Manes alleges that it has

purchased pharmaceuticals from AmerisourceBergen for over 15 years. (Doc. 4,

p. 3). Manes purchases “many different medications” from AmerisourceBergen’s

facility in Tulsa, Oklahoma. Id. According to AmerisourceBergen, the wholesaler

sells Manes both controlled and non-controlled substances. (Doc. 16, p. 10).

The crux of this dispute and the instant motion arise from AmerisourceBergen’s

decision to restrict its sale of controlled substances and listed chemicals to Manes.1

In a November 2, 2022 letter memorializing that decision, AmerisourceBergen

explained that members of its Controlled Substance Monitoring Program reviewed

Manes’ dispensing practices and identified several “red flags.” (Doc. 4, p. 400;

1 For convenience, controlled substances and listed chemicals will collectively be referred

to as “controlled substances” throughout this Opinion and Order.

Doc. 16-4). Specifically, AmerisourceBergen was concerned that Manes: (1)

dispensed controlled substances for prescriptions from family/general practitioners;

(2) dispensed combinations of opioids and benzodiazepines; (3) dispensed multiple

controlled substances in the same therapeutic class concurrently; and (4) dispensed

controlled substances to a dentist in large quantities. Id. Manes was given the

opportunity to dispute or respond to these allegations in writing. Id.

Manes responded to the letter and indicated that it would change its dispensing

practices to comply with AmerisourceBergen’s letter. (Doc. 4, p. 404). Manes’

owner also requested reconsideration of AmerisourceBergen’s decision to cease

sales, stating “I am willing to do what ever I have to do to avoid suspension of sales

of controlled substances.” Id. AmerisourceBergen acknowledged receipt of the

reconsideration request the same day. (Doc. 4, p. 406). Six days later,

AmerisourceBergen sent a second letter stating that Manes’ letter did not

adequately address its concerns. (Doc. 4, p. 411; Doc. 16-5). AmerisourceBergen

indicated that its restriction of controlled substance sales to Manes would go into

effect on November 30, 2022. Id.

Manes sued AmerisourceBergen on December 2, 2022 in Arkansas state court for

breach of contract, tortious interference with business expectancy, and violation of

the United States and Arkansas Constitutions’ procedural due process clauses.

(Doc. 4). Manes contemporaneously filed this motion for a temporary restraining

order and preliminary injunction, seeking an order requiring AmerisourceBergen

to continue its sale of controlled substances to Manes. (Doc. 5).

AmerisourceBergen removed the case to this Court on December 6, premising its

removal on both diversity and federal question jurisdiction. (Doc. 2).

The Court ordered AmerisourceBergen to provide an expedited response to Manes’

motion. (Doc. 7). AmerisourceBergen filed its response on December 9, 2022. (Doc. 16). The

Court issued an order later that same day denying Manes’ request for a TRO, but deferred ruling

on the request for a preliminary injunction until an evidentiary hearing could be held. (Doc. 17).

Requests for TROs and preliminary injunctions are evaluated under the same standard, see

Tumey v. Mycroft AI, Inc., 27 F.4th 657, 665 (8th Cir 2022), which consists of the four so-called

“Dataphase factors”: “(1) the threat of irreparable harm to the movant; (2) the state of balance

between this harm and the injury that granting the injunction will inflict on other parties litigant;

(3) the probability that movant will succeed on the merits; and (4) the public interest.” Dataphase

Sys., Inv. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc). The movant, Manes, has

the burden of establishing that injunctive relief is proper. Watkins Inc. v. Lewis, 346 F.3d 841, 844

(8th Cir. 2003). While no single factor is dispositive, relief will be denied if irreparable harm is

not shown. Id.

The Court’s December 9 order denying a TRO found that Manes had not shown any threat

of irreparable harm; therefore, the Court declined to address the other three Dataphase factors.

The Court noted that closure of a business may constitute irreparable harm, see, e.g., Packard

Elevator v. I.C.C., 782 F.2d 112, 115 (8th Cir. 1986), and that Manes had alleged it would likely

have to close its business if AmerisourceBergen was not enjoined from terminating its sales of

controlled substances to Manes. See Doc. 17, p. 3. However, since Manes had not provided any

concrete numbers in support of the claim that it was in danger of closure, the Court concluded

there was no factual basis to make such a finding. See id. at 3–4 (citing Mgmt. Registry, Inc. v.

A.W. Cos., Inc., 920 F.3d 1181, 1183–84 (8th Cir. 2019).

The Court also observed:

Furthermore, given the record currently before it, the Court is skeptical that Manes

is actually in imminent danger of shuttering its doors. AmerisourceBergen

apparently is not terminating its entire relationship with Manes, but rather is only

terminating its sales of controlled substances to Manes. See Doc. 16-4, p. 2.

According to sworn testimony from Duane Stickles, who is a Senior Director of

Diversion Control for AmerisourceBergen, controlled substances account for only

15% by value of the prescription medications that Manes purchased from

AmerisourceBergen during the first 11 months of 2022. See Doc. 16-1, ¶¶ 30–31.

A good deal of relevant information is not presently available to the Court, such as

Manes’ operating expenses, profit margins, or even what percentage of Manes’

revenues are derived from sales of controlled substances. But the limited

information currently in the record indicates that Manes is only in danger of losing,

at most, 15% of its revenues. Of course that is likely a significant hardship, and the

Court does not mean to trivialize it. But the Court is presently unpersuaded that

Manes cannot survive the termination of its ability to purchase controlled

substances from AmerisourceBergen, at least until a hearing can be held on Manes’

request for a preliminary injunction.

(Doc. 17, p. 4).

The evidence presented at the recent hearing has only confirmed the Court’s initial

skepticism on this front. In particular, the evidence showed that Manes is on track to lose roughly

16% of its annual revenues because of AmerisourceBergen’s decision to terminate its sales of

controlled substances to Manes.2 While this is no trivial amount, no evidence in the record shows

that Manes cannot survive that loss. Additionally, testimony showed that Manes has found a

different source for some of its controlled substances. In other words, this harm appears financially

compensable rather than irreparable. “Recoverable monetary loss may constitute irreparable harm

only where the loss threatens the very existence of the petitioner’s business.” Packard Elevator,

782 F.2d at 115 (emphasis added; internal alterations omitted).

Perhaps recognizing these shortcomings, counsel for Manes emphasized another theory of

irreparable harm in his closing argument at the evidentiary hearing: that AmerisourceBergen’s

actions have inflicted reputational harm on Manes. “Loss of intangible assets such as reputation

and goodwill can constitute irreparable injury” because such harms are “difficult, if not impossible

to quantify in terms of dollars.” Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801, 805

(8th Cir. 2003) (quoting United Healthcare Ins. Co. v. AdvancePCS, 316 F.3d 737, 741 (8th Cir.

2002)). However, the testimony at the hearing largely undermines this theory. Mark Manes

(Manes’ owner) and Michelle McClure (a pharmacist at Manes) both testified that although Manes

has lost customers as a result of AmerisourceBergen’s actions, those losses were not due to lost

goodwill or reputation, but rather to Manes’ inability to fill those customers’ prescriptions for

Schedule II controlled substances any longer. Indeed, Mr. Manes and Ms. McClure both testified

that their customers have been understanding and forgiving throughout this process.

2 Mr. Manes testified that he expects to lose roughly $300,000.00 out of a total $1.8 million

in annual sales, which amounts to 16.67%. Other documentary evidence projects losses closer to

15.5%. See Def. Ex. 16, p. 1.

But the matter of reputational harm becomes more complicated once one turns away from

Manes’ customers and looks towards its potential suppliers. Manes presented evidence showing

that after AmerisourceBergen terminated sales of controlled substances to it, two wholesalers

likewise refused to sell controlled substances to Manes, citing AmerisourceBergen’s decision to

terminate sales of controlled substances to Manes as the reason for their refusals. See Pl. Exs. 19,

20. Manes has also applied to two other wholesalers who have not yet decided whether to sell

controlled substances to Manes. When one party’s negative judgment about another entity

influences third parties to make the same negative judgment about that entity, this constitutes

textbook reputational harm. Therefore, Manes has made at least a slight showing of irreparable

harm, though this harm is somewhat mitigated by the fact that Manes can apply for reinstatement

at AmerisourceBergen after one year.

Under the second Dataphase factor, the Court must balance the threat of irreparable harm

against the injury that granting the injunction would inflict on AmerisourceBergen. On the one

hand, an injunction ordering AmerisourceBergen to continue selling controlled substances to

Manes would likely work to both parties’ short-term economic benefit; after all,

AmerisourceBergen presumably profits from its sales of controlled substances to willing buyers.

However, such an injunction would also constrain AmerisourceBergen’s ability to comply with

the terms of a settlement agreement it recently reached with various states’ attorneys general and

local government entities.3 Under this agreement, AmerisourceBergen must take a variety of

proactive measures designed to ensure that the controlled substances it sells are not being diverted

or abused by pharmacies or patients. Any injunction entered here would thus need to permit

3 The Court notes that among those local government entities is the City of Van Buren, Arkansas,

where Manes Pharmacy is located. ECF No. 4, pp. 106, 166.

AmerisourceBergen to exercise ongoing reasonable judgment as to whether such concerns might

warrant termination of controlled-substances sales to Manes—but AmerisourceBergen insists that

is exactly what it has already done. The Court does not see how it can craft an injunction in this

case that provides any meaningful relief to Manes while properly balancing the equities under the

second Dataphase factor. Therefore, this factor weighs heavily against granting injunctive relief.

The public interest does not tip the scales any further in either direction. The Court finds

that while the public has an interest in not seeing patients’ care disrupted by the sudden termination

of access to needed medicine, the public also has an interest in seeing steps taken to reduce the

risk of dangerous drugs’ diversion or abuse. These conflicting interests are very difficult to

quantify, and in the Court’s view neither outweighs the other here.

As for Manes’ probability of success on the merits, the Court should first make a few

remarks about the governing standard. “[M]athematical precision” is neither possible nor

appropriate for this sort of “probability” inquiry. See Dataphase, 640 F.2d at 113. Furthermore,

although likelihood of success on the merits is often described as “the most important” factor, see,

e.g., Craig v. Simon, 980 F.3d 614, 617 (8th Cir. 2020) (per curiam), that does not mean it is

dispositive, see Dataphase, 640 F.2d at 113. To obtain a preliminary injunction, the movant “must

simply show a ‘fair chance of prevailing’” and need not “prove a greater than fifty per cent

likelihood that it will prevail on the merits.” See Jet Midwest Int’l Co., Ltd. v. Jet Midwest Grp.,

LLC, 953 F.3d 1041, 1044–45 (8th Cir. 2020) (internal alterations omitted). However, what

constitutes a sufficiently strong showing to warrant injunctive relief in a particular case necessarily

depends on how the other three Dataphase factors weigh. For example, “where the balance of

other factors tips decidedly toward” the movant, then a preliminary injunction may issue if the

movement has merely “raised questions so serious and difficult as to call for more deliberate

investigation.” See Dataphase, 640 F.2d at 113. On the other hand, when the other Dataphase

factors weigh in the aggregate against injunctive relief, then the movant “faces a heavy burden of

demonstrating that he is likely to prevail on the merits.” See id. Here, as discussed above, there

has been a slight showing of irreparable harm, but the equities of the situation heavily favor

AmerisourceBergen and the public interest is neutral. Taken together, therefore, the other three

Dataphase factors weigh against granting injunctive relief.

The Court presently assesses Manes’ odds of success on the merits as low, but not

insignificant. Manes has raised substantial questions that call for more deliberate investigation,

but it has not demonstrated a sufficiently high likelihood of success on the merits to overcome the

aggregate weight of the other three factors against injunctive relief.

The Court emphasizes, just as it did in its previous Opinion and Order denying the TRO,

that none of its findings or conclusions here constitutes law of the case, and that the Court remains

free to change its mind once the record is further developed. See, e.g., Travelers Ins. Co. v.

Westridge Mall Co., 826 F. Supp. 289, 293 n.2 (D. Minn. 1992) (citing Berrigan v. Sigler, 499

F.2d 514 (D.C. Cir. 1974)). But with that significant caveat, the Court is presently very skeptical

of Manes’ procedural due process claim. Even if AmerisourceBergen’s decision to terminate sales

of controlled substances to Manes was motivated by a settlement agreement it reached with various

state actors, AmerisourceBergen is itself a private actor and its decision here is ultimately one of

whether to engage in commercial activity. It appears to have exercised its own independent

judgment and does not appear to have been compelled by any state actor to terminate sales of

controlled substances to Manes. Thus, the Court is not presently persuaded that

AmerisourceBergen qualifies as a “state actor” against which relief can be sought for violations of

procedural due process. Cf. Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928

(2019) (listing “limited circumstances” in which a private entity can qualify as a state actor).

Manes’ odds of success appear somewhat higher on its breach of contract and tortious

interference claims, though not enough to tip the Dataphase scales in Manes’ favor overall. The

Court believes AmerisourceBergen has a strong argument that it had a contractual right to

terminate sales of controlled substances to Manes for virtually any reason whatsoever. See Def.

Ex. 11, § 7(A). However, the Court cannot at this stage completely discount Manes’ argument

that the way in which AmerisourceBergen went about making this decision implicates its

contractual duty of good faith and fear dealing,4 as well as its common-law duty not to improperly

interfere with Manes’ business expectancies with its customers. Cf. Dodson v. Allstate Ins. Co.,

345 Ark. 430, 444–45 & n.2, 47 S.W.3d 866, 875 & n.2 (2001) (discussing factors to consider

when evaluating whether defendant’s conduct was “improper” for purposes of tortious interference

claim).

To this point, the Court must confess that it finds certain aspects of AmerisourceBergen’s

conduct towards Manes rather baffling. Although AmerisourceBergen’s initial inquiries into

Manes’ dispensing practices were reasonable, motivated by legitimate concerns, and grounded in

objective data, its only meaningful discussion of these concerns with Manes occurred during a

single unscheduled phone call that took place while Mr. Manes was very busy at work, short-

staffed, and apparently did not have much of the requested information quickly available. It is

undisputed that Mr. Manes requested that AmerisourceBergen schedule a follow-up call with him,

4 Arkansas “does not recognize a separate tort cause of action for breach of [the] implied

covenants” of good faith and fair dealing which accompany every contract. See West Memphis

Adolescent Residential, LLC v. Compton, 2010 Ark. App. 450, at *9, 374 S.W.3d 922, 927. But

these duties can implicate claims for breach of contract. See id. at *5–*7, 374 S.W.3d at 925–26.

and it is undisputed that AmerisourceBergen declined to do so. The evidence received at the

hearing overwhelmingly shows that Mr. Manes repeatedly attempted through written

correspondence to provide AmerisourceBergen the information he was unable to provide during

their initial phone conversation, and that AmerisourceBergen sidestepped these attempts and

refused to engage in any further meaningful discussion of the matter—even though

AmerisourceBergen employee Duane Stickles’ testimony shows there is at least one other

Arkansas pharmacy with which AmerisourceBergen was more accommodating during similar

proceedings. AmerisourceBergen persisted in its mistaken belief that Manes lacked any written

policy for addressing red flags, even though documentary evidence at the hearing clearly showed

that in fact such a policy existed at the time of these communications. See Pl. Ex. 10. Furthermore,

the totality of the evidence received at the hearing strongly indicates that all the “red flags”

AmerisourceBergen identified with respect to Manes were ultimately the result of medically

appropriate prescriptions that were filled in the exercise of sound pharmacological judgment. It is

difficult to escape the conclusion that this litigation results more from AmerisourceBergen’s

inexplicable intransigence and bureaucratic rigidity than from Manes’ pharmaceutical dispensing

practices. Whether a jury would find that conduct to be “improper” or to breach any duty of good

faith and fair dealing is hard to say at this point; but at this very early stage of litigation, such an

outcome does not strike the Court as completely implausible.

Nevertheless, considering all the Dataphase factors together, the Court concludes that

injunctive relief is not appropriate here. As described above, Manes’ showing on the first factor

(irreparable harm) has been only slight: Manes has not presented any evidence that it will close

because of the loss of controlled substances sales, and its reputational damage appears relatively

low. On the other hand, the second factor (relative harms) weighs heavily against granting

injunctive relief. The public-interest factor does not weigh significantly in either direction. And

although Manes has raised some serious questions on the merits that call for more deliberate

investigation, it has not demonstrated strong enough odds of success to overcome the other three

factors’ aggregate weight against granting injunctive relief. IT IS THEREFORE ORDERED that

Plaintiff Manes’ Pharmacy’s motion for preliminary injunction (Doc. 5) is DENIED.

IT IS SO ORDERED this 1st day of February 2023.

/s/ Mark E. Ford

HON. MARK E. FORD

UNITED STATES MAGISTRATE JUDGE