# Appendix — Group Life & Health Ins. Co. v. Royal Drug Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0857%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1979 - **Citation:** 440 U.S. 205 ## Text Supreme Court, U. § FILED | 1978 APPENDIX _, we ee = eae - IN THE Supreme Court of the United States OCTOBER TERM, 1977 No. 77-952 Group LIFE AND HEALTH INSURANCE COMPANY, also known as BLUE SHIELD OF TEXAS, et al., Petitioners, v. RoyaL DruG Company, INC., doing business as ROYAL PHARMACY OF CASTLE HILLS and DISCO PRESCRIPTION PHARMACY, et al., Respondents. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT aan PETITION FOR WRIT OF CERTIORARI FILED JANUARY 3, 1978 CERTIORARI GRANTED FEBRUARY 27, 1978 INDEX TO APPENDIX Relevant Docket Entries: FT ELE OE CRT Os EE Ie I iia lca his delcitaiieiaahenetianeiainadsinantiadihnticees its CN, TN ia a Answer of Defendant Rieger/Medi-Save Pharmacies, Inc., I I CI aliens ditch nasheitinihechebchiatticiontidiphndbiindietiosndabibbeiinicinbdeness Answer of Defendant The Sommers Drug Stores Company, Ts, a alicia Ditech ctielninclasiaiisceittaatainiiti et tes Answer of Defendant Group Life and Health Insurance en , chetaeiobadaniniaesieedianemaiade Answer of Defendant Walgreen Texas Co., June 27, 1975... Joint Motion to Suspend Discovery and to Modify Order Preliminary to Pre-Trial Conference, January 21, 1976.... Order of United States District Court for the Western Dis- trict of Texas Approving Joint Motion to Suspend Dis- covery and to Modify Order Preliminary to Pre-Trial Conference, January 28, 1976 .....................-...-....2.---0..... Motion of Defendant Group Life and Health Insurance Com- pany to Dismiss, February 23, 1976 ............220000000-. 8 Affidavit of Steve G. McDonald, February 23, 1976 .......... Group Life and Health Insurance Company Drug Supple- ment Policy, dated April 1, 1969 (Exhibit A to McDonald IEEE * hehindttditin byotpteegiaaeiclehalinidincstuhh ecedhchatiheededegnaiatanalliahadeheidstbacie Participating Drug Pharmacy siociancats (Exhibit B to i Letter of Transmittal of Policy and Agreement to State Board of Insurance, dated March 14, 1969 (Exhibit C to I ete Official Order No. 29701 of Texas Commissioner of Insur- ance, dated June 18, 1969 (Exhibit D to McDonald Affi- (ACRE ESA ERR SSRIS ces Leak 6 SILI A A De act» SAF RN a Ie 5la 59a 62a ii Official Order No. 30413 of Texas Commissioner of Insur- ance, dated September 30, 1969 (Exhibit E to McDonald Affidavit) -............... Group Life and Health Insurance Company Drug Supple- ment Policy, dated October 1, 1974 (Exhibit F to Mc- Donald Affidavit) Letter of Transmittal of Policy to State Board of Insurance, dated September 23, 1974 (Exhibit G to McDonald Affi- ES Official Order No. 45511 of Texas Commissioner of Insur- ance, dated October 1, 1974 (Exhibit H to McDonald OE poet TaES Nel BACT Motion of Defendant Walgreen Texas Co. to Dismiss, Feb- TUALY 2B, 1976 .....-----.----------n-n--n--ceeenerorernesnnsnensnesnenennsnssnenes Motion of Defendant The Sommers Drug Stores Company to Dismiss, February 23, 1976 -...............-------------------------- Motion of Defendant Rieger/Medi-Save Pharmacies, Inc. to Dismiss, February 25, 1976 ...............------------------------------ Stipulation of Plaintiffs and Defendant Rieger/Medi-Save Pharmacies, Inc., March 11, 1976 ...............-..---------------------- Stipulation of Plaintiffs and Defendant The Sommers Drug Stores Company, March 11, 1976 __........-------------------------- Stipulation of Plaintiffs and Defendant Walgreen Texas Co., - . xe Affidavit of Bruce L. Busby, April 19, 1976 ......................-..--. Affidavit of John Hannah, April 19, 1976 .............-.-.---.--------- Opinion of United States District Court for the Western District of Texas, May 18, 1976 _............--...--..------------------ Final Order and Judgment of United States District Court for the Western District of Texas, May 18, 1976 -.............. Opinion of United States Court of Appeals for the Fifth Circuit, August 8, 1977 el Page 76a 116a 117a iii Judgment of United States Court of A peals Fifth Circuit, August 8, 1977 f ; echoes Notice of Order Denying Petition for Reheari hearing En Banc, October 27, 1977 snes ihicusbandi EXHIBITS TO APPENDIX Excerpts from Deposition of Judith J ge . Johnson, November Blue Shield of Texas Form Letter and Enclos ici ures (Partici- pating Drug Pharmacy Agreement, Drug Manual, Decals and Forms) (Exhibit 2 to Johnson Deposition) Letter from Ernest A. Maxwell to The Sommers Drug Stores Company, dated October 9, 1974 (Exhibi etc (Exhibit 4 to Johnson Letter from Judy Johnson to Patts Dru g Store, dated D cember 20, 1974 (Exhibit 7 to Johnson Deposition) 7" Memorandum from David Thigpen to Ra y Pace, dated N vember 19, 1974 (Exhibit 12 to Johnson Deposition) 2 Memorandum from David Thigpen to Jud y Johnson, dated November 19, 1974 (Exhibit 18 to Johnson Deposition) .. Participating Drug Pharmacy Agreement Betw t een G Life and Health Insurance Company and Walgreen ti / Texas, dated January 27, 1970 ; eee nee we wenn SPOR mma meee ee we es eeeeeeeeennnee Memorandum Entitled “Special Plan Meetings: Auto Pre- scription Drug Program” (Exhibit 23 to — Johnson Depo- Letter from M.C. Rotter to Tom L. Beaucham p, Jr., dated May 28, 1968 (Exhibit 32 to Johnson Deposition) Excerpts from Deposition of Lee Helis, November 21, 1975... — from Deposition of Steve G. McDonald, November . 5 Rs , Page 139a 140a 14la 159a 194a 196a 198a 199a 200a 205a 276a 278a 288a iv Drug Supplement Policy of Group Life and Health Insur- ance Company, dated April 1, 1969, Disapproved by Order No. 29701 of Texas Commissioner of Insurance, dated June 18, 1969 (Exhibit 37 to McDonald Deposition).......... Drug Supplement Policy of Group Life and Health Insur- ance Co., dated October 1, 1974, Approved By Order No. 45511 of Texas Commissioner of Insurance, dated October 1, 1974 (Exhibit 39 to McDonald Deposition) -.................. ae Participating Drug Pharmacy Agreement Between Group Life and Health Insurance Company and Drug Mart Pharmacy, dated October 12, 1974 (Exhibit 6 to Pogue TD cecccictentisinimnnictenpeninnineaiemie maple Letter from Steve G. McDonald to Robert C. McAnelly, dated March 14, 1969 (Exhibit 51 to Pogue Deposition) ............. Group Life and Health Insurance Company Drug Supple- ment Policy, dated April 1, 1969 (Exhibit 52 to Pogue Deposition) -......... Official Order No. 29701 of Texas Commissioner of Insur- ance, dated June 18, 1969 (Exhibit 53 to Pogue Deposi- RR Re eee Letter from Paul D. Connor to Hon. Crawford Martin, dated August 21, 1969 (Exhibit 54 to Pogue Deposition) -. Official Order No. 29701 of Texas Commissioner of Insur- ance, dated September 30, 1969 (Exhibit 55 to Pogue TINY coccceicccterepeevecesenseees-ccennienpeesensietenenenennsennantanettnngsvoranie Letter from Paul D. Connor to Hon. Crawford Martin, dated October 1, 1969 (Exhibit 56 to Pogue Deposition) ............ Letter from Steve G. McDonald to A. W. Pogue, dated Sep- tember 23, 1974 (Exhibit 57 to Pogue Deposition) .......... Group Life and Health Insurance Company Drug Supple- ment Policy, dated October 1, 1974 (Exhibit 59 to Pogue Deposition) OO ERR REET Ee Page 303a 3lla 319a 367a 370a 372a 374a 377a Vv Official Order No. 45511 of Texas Commissioner of Insur- ance, dated October 1, 1974 (Exhibit 6 ee ( : sas Pogue Depo- — from Deposition of Paul D. Connor, December 30, Excerpts from Deposition of Robert C. M ecem ber 30, 1975 ....... tase aon Excerpts from Deposition of Donald H. B a. ae - Bunnell, December Articles of Incorporation of Group Life and Health Insur- ance Company, dated December 15, 1960 ibi Bunnell Deposition) vos seabed Certificate of Authority No. 2246 Issued to Group Life and Health Insurance Company, dated December 15 “ys of . 19 (Exhibit 65 to Bunnell Deposition)... vid Texas Attorney General Opinion No. WW-1475, d ‘ - , dated De- cember 11, 1962 (Appendix I to Brief of Appellee Group Life and Health Insurance Company) Page 385a 387a 409a 42la 430a 470a Date 6/25/76 7/16/76 7/21/76 8/2/76 8/2/76 8/4/76 9/7/76 9/8/76 9/24/76 9/24/76 9/24/76 10/4/76 10/6/76 10/12/76 10/26/76 10/27/76 10/27/76 11/4/76 1/10/77 vii RELEVANT DOCKET ENTRIES COURT OF APPEALS FILINGS/ PROCEEDINGS Fig. Duplicate Notice of Appeal and Clerk’s Statement of Docket Entries Fig. Notice of Election [Under] Rule 30(c) [Deferred Appendix] Fig. Appellants’ Designation Fig. Amended Notice of Appeal, filed in D.C. 6/23/76 Fig. Record on Appeal Fig. Exhibits to Brief Fig. Brief for Appellants Flg. Appellants’ Designation Fig. Appellee’s Designation (Group Life) Fig. Brief for Appellee Group Life and Health Insur- ance Company Fig. Brief for Appellee Rieger, et al. Fig. Motion for Leave to File Reply Brief in Excess Pages (Granted, 10/12/76) Fig. Appellants’ Supplemental Designation Fig. Reply Brief for Appellants Fig. Motion for Extension of Time to File Appendix Fig. Exhibits Fig. Motion for Leave to File Supplemental Record (Granted, 10/27/76) Fig. Appendix Fig. Motion of Appellees, Sommers Drug Stores Com- pany, et al., to designate counsel for oral argument Date 1/13/77 1/19/77 1/20/77 3/28/77 4/13/77 6/3/77 6/23/77 6/27/77 8/8/77 8/8/77 8/22/77 9/6/77 9/12/77 9/19/77 viii Fig. Appellants’ Letter dated 1/11/77 citing recent decision of the Fourth Circuit Court of Appeals Fig. Appellee’s (Walgreen Texas Co.) Letter dated 1/11/77 Fig. Letter of Appellee Group Life and Health Insur- ance Company, dated 1/17/77 responding to Appel- lants’ letter dated 1/11/77 and citing recent opinions, copies attached Fig. Appellants’ letter dated 3/24/77 citing recent opinion of the U.S. Court of Appeals for the Fourth Circuit Fig. Letter of Appellee, Group Life and Health Insur- ance Company, dated 4/11/77 enclosing recent opin- ion of the U.S. Court of Appeals for the Fourth Circuit Fig. Appellants’ letter dated 5/30/77 enclosing a copy of opinion in Barry Vv. St. Paul Fire & Marine Ins. Co. Fig. Letter of Appellee, Group Life and Health Insur- ance Company, dated 6/21/77 enclosing copy of recent decision from U.S. Court of Appeals for the District of Columbia Fig. Appellants’ letter dated 6/27/77 replying to Appel- lees’ letter dated 6/21/77 Opinion Rendered [Judgment of U.S. Court of Appeals for the Fifth Circuit] Fig. Petition for Rehearing En Banc Fig. Brief of Amicus Curiae (R.B. Cousins) in support of Petition for Rehearing En Banc Fig. Amicus Curiae (Allstate Insurance Company) Fig. Order Granting Motion of Allstate Insurance Com- pany for Leave to File Brief as Amicus Curiae in support of Appellees’ Petition for Rehearing and Rehearing En Banc and for Extension to file same to 9/19/77 — ee Date 9/20/77 9/22/77 10/27/77 11/3/77 11/9/77 11/10/77 11/14/77 12/6/77 12/16/77 ix Fig. Brief of Amicus Curiae, Allstate Insurance Com- pany, in support of Petition for Rehearing En Banc on behalf of Appellees, Group Life and Health Insur- ance Company Fig. Appellees’ Supplement to Petition For Rehearing En Bane Order Denying Rehearing En Banc Fig. Motion for Stay of Mandate Fig. Appellees’ Reply to Appellants’ Opposition to Ap- pellees’ Motion for Stay of Mandate Fig. Appellants’ Supplemental Response to Appellees’ Reply to Appellants’ Opposition to Motion for Stay of Mandate [Order Granting Motion for Stay of Mandate] Fig. Motion for Further Stay of Mandate [Order Granting Motion tor Further Stay of Mandate] Date 5/29/75 5/30/75 6/4/75 6/16/75 6/20/75 6/23/75 6/23/75 6/26/75 6/27/75 6/27/75 6/27/75 7/30/75 8/7/75 8/8/75 8/11/75 8/13/75 on | eT a TE x DISTRICT COURT FILINGS/ PROCEEDINGS Original Complaint, filed. [J] ury demand Summonses issued. (4) 2. Summons (Sommers Drug Stores) re/ex 6-2-75. 8. Summons (Gibson Pharmacy by serving Sec. of State of Texas) re/ex 6-3-75. Original Ans. of Deft., Rieger/Medi-Save Pharma- cies, Inc., filed. Marshal’s Return on Complaint and Summons re/ex 6/10/75. Deft. Answer [The Sommers Drug Store Company] and Jury Demand, filed. Marshal’s Return on Complaint & Summons re/ex 6/10/75 Answer of Deft. Group Life & Health Ins. Co., filed. Request for Production of Documents by Deft. Group Life & Health Insurance Co. (First set), Joel H. Pullen, Attorney for Pitfs., filed. Answer of Def. Walgreen Texas Co. and Jury De- mand, filed. . Agreed Motion for Ext. of Time to Resp. to Deft’s Request for Prod. of Doc., filed. Order Granting Agreed Motion for Ext. of Time To Resp. to Deft’s Request for Prod. of Doc., filed. Order Preliminary to Pre-Trial Conference, filed. Pitfs’ Objections and Ans. to Request for Prod. of Doc., filed. Pitfs’ Motion to Bifurcate Discovery & for Pro- tective Order, filed. Date 8/20/75 8/20/75 8/25/75 8/25/75 8/25/75 8/26/75 8/27/75 8/29/75 9/10/75 9/29/75 9/29/75 11/14/75 12/3/75 16. 17. 18. 19. 20. 21. xi Opposition of Deft. Group Life & Health Ins. Co. to Pitfs’ Motion to Bifurcate Discovery & in the Alternative for Protective Order Pursuant to Rule 26, Fed. Rules of Civil Proc., filed. Memo Brief of Deft. Group Life & Health Ins. Co. in Opposition to Pitfs’ Motion to Bifurcate Dis- covery & in the Alternative for Protective Order, filed. Deft., Rieger-Medi-Save, Inc.’s, Response in Oppo- sition to Pitfs’ Motion to Bifurcate Discovery & for Alternative Relief, filed. Brief in Support of Deft., Rieger-Medi-Save, Inc.’s Response in Opposition to Plitfs’ Motion to Bifur- cate Discovery & for Alternative Relief, filed. Opposition of Deft., Walgreen Texas Co., to Motion of Pitfs’ Motion to Bifurcate Disc. & in the Alter- native, for Protective Order, filed. Response of Deft., the Sommers Drug Stores Co., to Pitfs’ Motion to Bifurcate Discovery and in the Alternative for Protective Order, filed. 22. Brief of Pitfs in Resp. to Defts’ Opposition to 25. 26. Pitfs’ Motion to Bifurcate Discovery, filed. Reply of Deft. Group Life & Health Ins. Co. to Brief of Pitfs. in Response to Defts’ Opposition to Pitfs’ Motion to Bifurcate Discovery, filed. Notice Duces Tecum to Take Deposition Upon Oral Examination, filed. Order Denying Pitfs’ Motion to Bifurcate Dis- covery & in the Alternative for Protective Order, filed. Order Requiring Stipulation of Positions on Dis- puted Discovery, filed. Notice of Intent to Take Deposition. Stipulation of Dismissals. Filed. Date 12/12/75 12/12/75 12/12/75 12/12/75 12/15/75 12/15/75 12/23/75 12/23/75 12/23/75 12/23/75 12/23/75 1/6/76 1/6/76 31. 32. 36. 37. xii Notice Duces Tecum to take Deposition Upon Oral Examination. Filed. (Mr. A. W. Pogue) Notice Duces Tecum to take Deposition Upon Oral Examination of Mr. R. C. McAnelly. Filed. Notice Duces Tecum to take Deposition Upon Oral Examination of Mr. Donald H. Bunnell. Filed. Notice Duces Tecum to take Deposition Upon Oral Examination of Mr. Paul D. Connor. Filed. Ordered that the Stipulation of Dismissals is ap- proved and cause is dismissed with prejudice as to Alamo Heights Pharmacy, Inc., Patts Drug, Inc., d/b/a Patt’s Drug Store No. 1, Thomas J. Parma d/b/a Parma’s Pharmacy, Baylor Parsons d/b/a Parson’s Pharmacy, James Pollock d/b/a Pollock’s Pharmacy, Physicians & Surgeons Phar- macy, Inc., and Charles Griffin d/b/a Dellview Drug Store. DOCKET CALL: Pre-Trial Order due April, 1976. Case will be called for announcements and possible setting on March-April Docket. Amended Notice to take Deposition Upon Oral Examination of Paul D. Connor. Filed. . Amended Notice to take Deposition upon Oral Ex- amination of R. C. McAnelly. Filed. Amended Notice Duces Tecum to take Deposition Upon Oral Examination of A. W. Pogue. Filed. Amended Notice Duces Tecum to take Deposition Upon Oral Examination of Donald H. Bunnell. Filed. Motion to Compel Discovery Filed. Marshals Return on Deposition Subpoena Received (Re/ex 12/29/75) (A. W. “Woody” Pogue). Marshals Return on Deposition Subpoena Received (Re/ex 12/29/75) (R. C. MeAnelly). Date 1/6/76 1/6/76 1/6/75 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 1/6/76 39. 40. xiii Marshals Return on Deposition Subpoena Received (Re/ex 12/30/75) (Donald H. Bunnell). Marshals Return on Deposition Subpoena Received (Re/ex 12/29/75) (Paul D. Connor). Notice Duces Tecum to Take Deposition Upon Oral Exam of Dellmar Pharmacies, Inc. d/b/a Dellmar Pharmacy #4. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Delimar Pharmacies, Inc. d/b/a Dellmar Pharmacy +4. Filed. . Notice Duces Tecum to Take Deposition Upon Oral Exam of Blauser’s Pharmacy, Inc. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Parker’s Pharmacy, Inc. Filed. 43. Notice Duces Tecum to Take Deposition Upon Oral Exam of Highland Hills Pharmacy, Inc. Filed. 44. Notice Duces Tecum to Take Deposition Upon Oral 45. 46. 47. 49. Exam of Craig Bell d/b/a Bell Pharmacy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Royal Drug Co., Inc. d/b/a Pharmacy of Castle Hills and Disco Prescription Pharmacy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of White Cross Professional Pharmacy, Inc., d/b/a White Cross #1 and #4. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Blanco Pharmacy, Inc. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Econodose Systems, Inc. d/b/a Medical Center Pharmacy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Gustin Hncir d/b/a Turner’s Pharma- cists. Filed. Date 1/6/76 1/6/75 1/6/76 1/6/76 1/6/76 1/6/76 1/12/76 1/15/76 1/15/76 1/16/76 1/19/76 1/21/76 51. 52. 53. 58. xiv Notice Duces Tecum to Take Deposition Upon Oral Exam of Carlos Diaz d/b/a Valley View Phar- macy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Alfred Sangalli d/b/a Star Drug Store. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Blanco Southside Pharmacy, Inc. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Rodolfo L. Davila, Inc. d/b/a Davila Pharmacy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Rong, Inc. d/b/a Economy Pharmacy. Filed. Notice Duces Tecum to Take Deposition Upon Oral Exam of Zarzamora Pharmacy, Inc. Filed. Notice Int. to Take Depo. Pursuant to Rule 30(b) (6), filed. Notice of Intention to Take Depos. of Rieger/Medi- Save Pharmacies, filed. Notice of Intention to Take Depos. of Walgreen Texas Co., filed. [no item 59] 60. 61. Deposition of Donald H. Bunnell, filed. ORDER Approving Stipulation of Dismissals (Dis- missing with prejudice Alamo Hgts. Pharmacy, Inc.; Patts Drug, Inc. dba Patt’s Drug Store #1; Thomas J. Parma dba Parma’s Pharmacy; Baylor Parscn’s dba Parson’s Pharmacy; James Pollock dba Pollock’s Pharmacy; Physicians & Surgeons Pharmacy, Inc; Charles Griffin dba Dellview Drug Store). Joint Motion to Suspend Discovery and to Modify Order Preliminary to Pre-Trial Conference, filed. Date 1/23/76 1/28/76 2/2/76 2/23/76 2/23/76 2/23/76 2/23/76 2/23/76 2/25/76 2/25/76 3/10/76 3/11/76 3/11/76 3/12/76 3/15/76 ORDER Approving Joint Motion to Suspend Dis- covery and to Modify Order Preliminary to Pre- Trial Conference, filed. 64. Deposition of Paul D. Connor and A. W. Pogue, filed. 65. Deposition of Robert C. McAnelly, filed. S 67. 75. 76. Motion of Def., Group Life & Health Ins. Co., to Dismiss, filed. Brief of Def., Group Life and Health Ins. Co. in Support of Motion to Dismiss, filed. Motion of Def., Walgreen Texas Co., to Dismiss, filed. . Motion of Def., The Sommers Drug Stores Co., to Dismiss, filed. Brief of Sommers Drug Stores Co., in Support of Motion to Dismiss, filed. . Def., Rieger/Medi-Save Pharmacies, Inc.’s Motion to Dismiss, filed. Memorandum Brief in Support of Def., Rieger/ Medi-Save Pharmacies, Inc.’s Motion to Dismiss, filed. . Motion to Extend Time for Filing Defs’ Response and Brief to Defs’ Motion to Dismiss, filed. . Stipulation of Plfs. & Def., Rieger/Medi-Save Pharmacies, Inc., filed. Stipulation of Plfs. and Def., Sommers Drug Stores Co., filed. Stipulation of Plfs. and Def., Walgreen Texas Co., filed. DOCKET CALL: Hearing on Motion to Dismiss requested by Mr. Pullen and set for April 19, 1976 at 2:30 P.M. All briefs are to be filed in advance. Set on June, 1976 Docket. Settlement not possible at this time. Date 3/19/76 77. 3/24/76 178 4/5/76 79 4/15/76 80 4/15/78 81. 4/9/76 82. 4/19/76 83. 4/19/76 84. 5/18/76 84. xvi ORDER Allowing 10 days to Respond after filing of the last of the depositions of Steve G. McDonald, Judith S. Johnson and Lee Helis, filed. . Depositions of Judith S. Johnson, Lee Helis and Steve G. McDonald, filed. . Plaintiffs’ Brief in Opposition to Defendants’ Mo- tion to Dismiss, filed. . Defendant’s Rieger/Medi-Save Pharmacies, Inc., Reply Brief in Support of its Motion to Dismiss, filed. Reply of Defendant Group Life and Health Ins. Co. to Plaintiffs’ Brief in Opposition to Motion to Dismiss, filed. Affidavit in Support of Defendant Rieger/Medi- Save Pharmacies, Inc.’s Motion to Dismiss, filed. Reply of Def., The Sommers Drug Stores Co. to Plaintiffs’ Brief in Opposition to Motion to Dis- miss, filed. HEARING ON MOTION TO DISMISS: Movant, Group Life Ins., et al, announced ready. Respond- ent announced ready. Mr. Kaiser asked Court to treat this motion as a Motion for Summary Judg- ment. Respondent argued against in that in this instance with reference to drugs, Blue Cross & Blue Shield are not in insurance business. Both sides agreed to an Interlocutory Appeal, whether the Court decides for plaintiff or defendant. Mr. Kaiser cited cases he wishes the Court to consider. Mr. Pullen cited the State Board of Insurance does not feel it has the right to regulate pharmacies. Any additional authorities are to be given to the Court by Friday. The Court will take this matter under advisement. Decision on motion will prob- ably be ready in a week. MEMORANDUM OPINION, filed. (Including Findings of Fact and Conclusions of Law contain- ed therein.) wameneees ee en a ee Date 5/18/76 6/16/76 6/16/76 6/23/76 6/23/76 6/24/76 7/2/76 7/9/76 7/16/76 7/26/76 1/7/78 1/7/78 86. 93. 95. xvii - ORDER (consistent with the Memo. Opinion and Findings of Fact and Conclusions of Law) render- ing judgment for and in behalf of Defts. Group Life and Health Ins. Co., aka/Blue Shield of Texas, Walgreen Texas Co., The Sommers Drug Stores Co. Se ere Pharmacies, Inc. with respec aintiffs’ Claims i- manera under the federal anti Notice of Appeal, filed. Cy. to Court of A peals for Fifth Circuit. mites Bond for Costs on Appeal Secured b ear y Cash De- Amended Notice of Appeal, filed. - Amended Bond for Costs on Appeal Secured by Cash Deposit, filed. ae of Contents of Record on Appeal, . Designation of Deft. Group Life & Health Ins. Co. of Transcript and Additional Parts to be included in the Record on Appeal, filed. ae Appellants’ Supplemental Designation of Contents of Record on Appeal, filed. Cy. to Court of Ap- Transcript of Hearing on Motions to Dismiss April 19, 1976, filed. ™ ” ORIGINAL RECORD ON APPEAL MAILED a to Court of Appeals for the Fifth ircui . Copy from the Fifth Circuit of Appellees’ Motion for Stay of Mandate, filed. Order from the Fifth Circuit GRANTING Appel- lees Motion for Stay of the Issuance of the Man- date pending Petition for Writ of Certiorari, filed. la COMPLAINT, MAY 29, 1975 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION Civil Action No. SA 75 CA 131 — ROYAL DruG COMPANY, INC. d/b/a ROYAL PHARMACY OF CASTLE HILLS and DISCO PRESCRIPTION PHARMACY, BLAUSER’S PHARMACY, INC., PARKERS PHARMACY, INC., CHARLES GRIFFIN d/b/a DELLVIEW DRUG STORE, JAMES POLLOCK, d/b/a POLLOCK’s PHARMACY, THOMAS J. PARMA, d/b/a PARMA’S PHARMACY, CRAIG BELL, d/b/a BELL PHARMACY, GEORGE STONE, d/b/a OLMOS PHAR- MACY, ALAMO HEIGHTS PHARMACY, INC., PATTS DRUG, INC. d/b/a PATT’s DRUG STORE No. 1, BAYLOR PARSONS d/b/a PARSONS PHARMACY, HIGHLAND HILLS PHAR- MACY, INC., ECONODOSE SYSTEMS, INC. d/b/a MEDICAL CENTER PHARMACY, GUSTAVE HNCIR, d/b/a TURNERS PHARMACISTS, PHYSICIAN & SURGEONS PHARMACY, INC., CARLOS DIAZ d/b/a VALLEY VIEW PHARMACY, ALFRED SANGALLI, d/b/a STAR DRUG STORE, BLANCO PHARMACY, INC., BLANCO SOUTHSIDE PHARMACY, INC., DAN PARADA d/b/a DAN’S PHARMACY, RopoLFo L. Davia, INC. d/b/a DAVILA PHARMACY, DELLMAR PHARMACIES, INC. d/b/a DELLMAR PHARMACY #4, RoNnG, INC. d/b/a ECONOMY PHARMACY #1, ZARZAMORA PHARMACY, INC. and WHITE CROSS PROFESSIONAL PHARMACY, INC. d/b/a WHITE Cross #1 and d/b/a WHITE Cross #4 V. Group LIFE AND HEALTH INSURANCE COMPANY a/k/a BLUE SHIELD and/or BLUE CrRoss-BLUE SHIELD OF TEXAS, WALGREEN TEXAS COMPANY, SOMMERS DRUG STORE, RIEGER-MEDI-SAVE, INC. d/b/a GIBSONS PHAR- MACY 2a Complaint ORIGINAL COMPLAINT TO SAID HONORABLE COURT: inti i i i i dants for the Plaintiffs bring this action against defen amount of damages suffered and to be suffered by oe due to the defendants’ violation of the anti-trust laws the United States and the State of Texas and allege as follows: i i i- t Act This action arises under the Sherman Anti Trus of July 2, 1890, 15 U.S.C.A. Sects. 1-7, and rer Clayton Anti-Trust Act of October 15, 1914, 15 U.S.C.A. section 12 et seq. II 1. The plaintiff, ROYAL DRUG COMPANY, INC., d/b/a Royal Pharmacy of Castle Hills and Disco Pre- scription Pharmacy, is a corporation organized and exist- ing under the laws of the State of Texas, with its prin- cipal place of business in San Antonio, Bexar County, Texas. 2. The plaintiff, BLAUSER’S PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 3. The plaintiff, PARKERS PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 4. The plaintiff, CHARLES GRIFFIN d/b/a Dellview Drug Store, is a resident of San Antonio, Bexar County, Texas. a Os 6 as os ee Pee vn - 3a Complaint 5. The plaintiff, JAMES POLLOCK d/b/a Pollock’s Pharmacy, is a resident of San Antonio, Bexar County, Texas. 6. The plaintiff, THOMAS J. PARMA d/b/a Parma’s Pharmacy, is a resident of San Antonio, Bexar County, Texas. 7. The plaintiff, CRAIG BELL d/b/a Bell Pharmacy, is a resident of San Antonio, Bexar County, Texas. 8. The plaintiff, GEORGE STONE d/b/a Olmos Phar- macy, is a resident of San Antonio, Bexar County, Texas. 9. The plaintiff, ALAMO HEIGHTS PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 10. The plaintiff, PATTS DRUG, INC. d/b/a Patt’s Drug Store No. 1, is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 11. The plaintiff, BAYLOR PARSONS d/b/a Parsons Pharmacy, is a resident of San Antonio, Bexar County, Texas. 12. The plaintiff, HIGHLAND HILLS PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 13. The plaintiff, ECONODOSE SYSTEMS, INC. d/b/a Medical Center Pharmacy, is a corporation organ- ized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 14. The plaintiff, GUSTAVE HNCIR d/b/a Turners Pharmacists, is a resident of San Antonio, Bexar County, Texas. 4a Complaint 15. The plaintiff, PHYSICIAN & SURGEONS PHAR- MACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 16. The plaintiff, CARLOS DIAZ d/b/a Valley View Pharmacy, is a resident of San Antonio, Bexar County, Texas. 17. The plaintiff, ALFRED SANGALLI d/b/a Star Drug Store is a resident of San Antonio, Bexar County, Texas. 18. The plaintiff, BLANCO PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 19. “he plaintiff, BLANCO SOUTHSIDE PHAR- MACY, INC., is a corporation, organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 20. The plaintiff, DAN PARADA d/b/a Dan’s Phar- macy, is a resident of San Antonio, Bexar County, Texas. 21. The plaintiff, RODOLFO L. DAVILA, INC. d/b/a Davila Pharmacy, is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. 22. The plaintiff, DELLMAR PHARMACIES, INC. d/b/a Dellmar Pharmacy #4, is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antoniv Bexar County, Texas. 28. The plainiiff, RONG, INC. d/b/a Economy Phar- macy #1, is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. = 5a Complaint 24. The plaintiff, ZARZARMORA PHARMACY, INC., is a corporation organized and existing under the laws of the State of Texas, with its principal i i place of busine San Antonio, Bexar County, Texas. Pa 25. The plaintiff, WHITE CROSS PROFESSI PHARMACY, INC. d/b/a White Cross #1 and Wate Cross #4, is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in San Antonio, Bexar County, Texas. All of Plaintiffs own and operate one or more phar- macies in San Antonio, Bexar County, Texas, and are in the business of compounding and dispensin ~ drugs for public sale. pensing prescription III 1. Defendant GROUP LIFE AND HEALTH IN SUR- ANCE COMPANY, a/k/a BLUE SHIELD and/or BLUE CROSS-BLUE SHIELD OF TEXAS, may be served by serving the Insurance Commissioner of the State of Texas in Austin, Texas. Such defendant is hereinafter referred to as “BLUE CROSS-BLUE SHIELD.” 2. Defendant WALGREEN TEXAS COMPAN Ya WALGREEN DRUG STORES, may be served by a its Agent for Service, Mary Wilson, 8110 Kempwood, Houston, Texas. Such defendant is herei weary Ph ont ereinafter referred 3. Defendant SOMMERS DRUG STORES CO . a/k SOMMERS REXALL DRUG STORES, CO., ae te served by serving its Agent for Service, Walter M. Corri- gan, 3130 E. Houston Street, San Antonio, Texas. Such defendant is hereinafter referred to as “SOMMERS.” 6a Complaint 4. Defendant RIEGER-MEDI-SAVE, INC., d/b/a GIBSONS PHARMACY, may be served by serving the Secretary of State of the State of Texas. Such defendant is hereinafter referred to as “GIBSONS.” IV 1. The defendant, WALGREEN TEXAS CO., is a corporation organized and existing under the laws of the State of Texas, and operates numerous drug stores en- gaged in the business of compounding and dispensing prescription drugs for public sale under the name of WALGREEN DRUG STORES and in various GLOBE DISCOUNT STORES. 2. The defendant, REIGER-MEDI-SAVE, INC., is a corporation organized and existing under the laws of the State of Texas, which operates numerous drug stores en- gaged in the business of compounding and dispensing prescription drugs for public sale in GIBSON DISCOUNT STORES. 3. The defendant, SOMMERS DRUG STORES CO., is a corporation organized and existing under the laws of the State of Texas, which operates numerous drug stores engaged in the business of compounding and dispensing prescription drugs for public sale under its own name. Vv 1. All of said defendants, other than BLUE CROSS- BLUE SHIELD, are in competition with plaintiffs in con- nection with the compounding and dispensing of prescrip- tion drugs for public sale in San Antonio and Bexar County, Texas. 2. Defendant GROUP LIFE AND HEALTH INSUR- ANCE COMPANY a/k/a Blue Shield and/or Blue Cross- 7a Complaint Blue Shield of Texas, is one of the largest, if not the largest, company engaged in the business of selling in- surance coverage providing for payment of part of the cost to its policyholders of drugs and pharmaceutical products, all as more fully set out below. VI COUNT ONE 1. Defendants have and are engaged in an agreement, combination and conspiracy to fix the retail price of drugs and pharmaceuticals. Such agreement, combination and conspiracy has been carried out by their entering into an Agreement between defendants and BLUE CROSS-BLUE SHIELD whereby said parties agree upon and fix prices and charges to be charged to the generai public for the compounding and dispensing of prescription drugs. Spe- cifically, defendant BLUE CROSS-BLUE SHIELD and each of the other defendants have entered into a Partici- pating Drug Pharmacy Agreement, hereinafter called “Agreement”, Said Agreement specifies the amount to be received by each pharmacy for the sale of drugs and other pharmaceuticals dispensed by Defendants to BLUE CROSS-BLUE SHIELD policyholders who have purchased coverage under the BLUE CROSS-BLUE SHIELD pre- paid prescription policies. Under such Agreement Blue Cross-Blue Shield agrees to pay for each drug provided an amount equal to the total of the acquisition cost of such drug as defined therein plus a fixed dispensing fee of $2.00 less the applicable policy deductibles. 2. Basically pharmacies which join in such Agreement are reimbursed by BLUE CROSS-BLUE SHIELD for 100% of the acquisition cost, plus the $2.00 fee which is paid by the customer. Pharmacies which have not signed said Agreement are only reimbursed for 75% of the ac- 8a Complaint quisition cost thereof in addition to the $2.00 fee paid by their customers. Such contract and performance under it result in acquisitive, pernicious and blatant economic coercion to foree BLUE CROSS-BLUE SHIELD policy[-] holders to deal only with pharmacies which have entered into such Agreement and become part of the unlawful combination, agreement and conspiracy with BLUE CROSS-BLUE SHIELD. Failure to deal with such phar- macists results in such policyholder and pharmacy cus- tomer not receiving full reimbursement for the cost of the particular drugs and prescriptions covered by their BLUE CROSS-BLUE SHIELD policy. Defendants and all other pharmacies which have executed such Agreement have entered into a combination[,] conspiracy and agree- ment to fix prices for the sale of drugs and pharmaceu- ticals, which is a per se violation of the Federal Anti- Trust Laws, specifically Section 1 of the Sherman Act, and are engaged in horizontal price fixing with respect to dispensing of drugs and pharmaceuticals. COUNT TWO 1. The foregoing allegations of this complaint are in- corporated in this Count Two. 2. The foregoing activities of defendants constitute a group boycott in violation of the Federal Anti-Trust Laws in that the purpose and necessary effect of said combina- tion, agreement and conspiracy is to cause persons holding prepaid prescription coverage under the applicable BLUE CROSS-BLUE SHIELD policies to not deal with plain- tiffs and other pharmacies similarly situated, but to deal only with pharmacies which are members of, have partici- pated and joined in such unlawful agreement, combina- tion and conspiracy in violation of the Sherman Act. 9a Complaint COUNT THREE 1. The allegations of Count One above are hereby in- corporated by reference. 2. The effect of the combination, agreement and con- spiracy is to allocate territories to pharmacists who have signed the Agreement and impose territorial restrictions, all of which are per se violations of the Sherman Act. COUNT FOUR 1. The allegations of Count One are incorporated here- in by reference. 2. The actions alleged constitute violations of the Fed- eral Anti-Trust Law set out above and the Texas Busi- ness and Commerce Code and defendants, and each of them, should be enjoined on final hearing from: A. From agreeing on and fixing prices which in- dividual pharmacists may charge, B. From engaging in group boycotts, C. From continuing to utilize and observe the pro- visions of the Participating Drug Pharmacy Agree- ment, D. From requiring pharmacists to enter into con- tracts which violate the Federal and State Anti- Trust Laws, E. From entering into any contracts the effect of which is to maintain or set retail prices between such pharmacies and their customers, or F. Issuing any contract which distinguishes inso- far as reimbursement for the purchase price of drugs and other pharmaceuticals between pharmacies which 10a Complaint are part of the illegal agreement, combination and conspiracy, and those which are not part thereof. G. From agreeing to allocate territories. COUNT FIVE 1. The foregoing allegations in Count One of this Com- plaint are incorporated herein by reference. 2. The court has jurisdiction under the causes of ac- tion alleged in this Count under the doctrine of pendent jurisdiction. 3. All of such acts and conduct alleged above violate the Texas Business and Commerce Code, Sections 15.01 et seq., commonly known as the Texas Anti-Trust Laws. COUNT SIX Plaintiffs’ damages and damages to other pharmacies similarly situated who have likewise been injured by de- fendants’ unlawful acts are substantial and are in all probability in millions of dollars, the exact extent of which cannot be determined until Plaintiffs’ discovery from defendants is completed and the full extent of such agreement, combination and conspiracy is determined. COUNT SEVEN Plaintiffs are entitled to recover reasonable attorneys’ fees from defendants in the amount of not less than $50,000. WHEREFORE each of plaintiffs pray that they have judgment jointly and severally against defendants for treble their damages, for reasonable attorneys’ fees, for costs of suit and for injunctive relief as above alleged, lla Complaint and for such other and further relief to which Plaintiffs are entitled. No immediate emergency action is sought at this time. /3/ Joel H. Pullen JOEL H. PULLEN of TINSMAN & Houser, INC. 1900 NBC Building San Antonio, Texas 78205 Attorneys for Plaintiff Now come Plaintiffs and demand a jury. /s8/ Joel H. Pullen JOEL H. PULLEN 12a ANSWER OF DEFENDANT RIEGER/MEDI-SAVE PHARMACIES, INC., JUNE 20, 1975 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] ORIGINAL ANSWER OF DEFENDANT, RIEGER/MEDI-SAVE PHARMACIES, INC. Rieger/Medi-Save Pharmacies, Inc., incorrectly desig- nated as Rieger-Medi-Save, Inc., answers plaintiff’s Orig- inal Complaint as follows: FIRST DEFENSE The Complaint fails to state a claim against Rieger/ Medi-Save Pharmacies, Inc. upon which relief may be granted. SECOND DEFENSE This Court lacks jurisdiction over the matters alleged in the Complaint because of the lack of any requisite effect on commerce. THIRD DEFENSE The Complaint fails to state a cause of action against this defendant because Group Life and Health Insurance Company, with whom it is alleged to have conspired, com- bined and agreed, is not a proper party nor capable of such actions under the Anti-Trust Laws of the United States, because of exemption under the McCarran- Ferguson Act (15 USC § 1011, et seq.) . 13a Answer of Defendant Rieger/Medi-Save Pharmacies, Inc. FOURTH DEFENSE The Complaint fails to state a proper cause of action against defendant in its pendant allegations, based on the Texas Anti-Trust Laws, because such an action is not properly maintainable in absence of a proper cause of action under federal law. FIFTH DEFENSE The Complaint should be dismissed as to this defend- ant because the service of process upon it was improper and insufficient. SIXTH DEFENSE To the extent the allegations of Plaintiffs’ Original Complaint are directed to Rieger/Medi-Save Pharmacies, Inc., it answers paragraph by paragraph, as follows: I The allegations of Paragraph I are denied, e i tf , except it is admitted that plaintiffs’ do purport to bring this pron under the statutes indicated. II This defendant is without knowledge or information sufficient to form a belief as to the truth of the allega- tions of Paragraph II, suo-paragraphs 1.-25. III Defendant is without knowledge sufficient to form a belief as to the truth of the allegations of Paragraph III, sub-paragraphs 1.-3. The allegations of Paragraph III, sub-paragraph 4. are denied. 14a Answer of Defendant Rieger/Medi-Save Pharmacies, Inc. IV It is admitted that the defendant, Rieger/Medi-Save Pharmacies, Inc., operates certain drug stores engaged in the business of compounding and dispensing prescription drugs for public sale in certain Gibson Discount stores. The balance of the allegations of Paragraph IV, sub- paragraph 2. are denied. This defendant is without knowledge or information sufficient to form a belief as to the truth of the allegations of Paragraph IV, sub-paragraphs 1. and 3. V This defendant admits that it is engaged in competition with plaintiffs in the compounding and dispensing of prescription drugs for publie sale in certain areas of San Antonio and Bexar County, Texas. This defendant is without information sufficient to form a belief as to the truth of the balance of the allegations of Paragraph V, sub-paragraphs 1. and 2. VI COUNT ONE This defendant admits that it entered into an agreement by and between itself and Group Life and Health In- surance Company, subject to terms provided therein. The balance of the allegations of Paragraph VI, sub- paragraphs 1. and 2. are denied. COUNT TWO This defendant adopts, in response to the allegations of COUNT TWO, sub-paragraph 1., its respective answers to Paragraphs I through Paragraph VI, COUNT ONE, sub-paragraph 2. ee — 15a Answer of Defendant Rieger/Medi-Save Pharmacies, Inc. The allegations of COUNT TWO, sub-paragraph 2., are denied. COUNT THREE This defendant adopts, in response to the allegations of COUNT THREE, sub-paragraph 1., its answer to the al- legations of COUNT ONE, sub-paragraphs 1. and 2. of the Complaint. The allegations of COUNT THREE, sub-paragraph 2. are denied. COUNT FOUR This defendant adopts, in response to the allegations contained in COUNT FOUR, sub-paragraph 1., its an- swer to COUNT ONE, sub-paragraphs 1. and 2. The allegations of COUNT FOUR, sub-paragraph 2., are denied. COUNT FIVE This defendant adopts, in response to COUNT FIVE, sub-paragraph 1., its answer to COUNT ONE, sub- paragraphs 1. and 2. The allegations of COUNT FIVE, sub- and 8. are denied. ee COUNT SIX The allegations of COUNT SIX are denied. COUNT SEVEN The allegations of COUNT SEVEN are denied. This defendant denies that plaintiffs are entitled to any of the relief demanded or prayed for, and further denies 16a Answer of Defendant Rieger/Medi-Save Pharmacies, Ine. that it has violated any of the provisions of any acts upon which this action is based. OTHER PARTIES To the extent that the allegations of the Complaint are directed to persons or corporations other than Rieger/ Medi-Save Pharmacies, Inc., this defendant is without knowledge or information sufficient to form a belief as to the truth of such allegations. Except as expressly admitted herein, all the allegations of this Complaint relating to Rieger/Medi-Save Pharma- cies, Inc. are denied. WHEREFORE, Rieger/Medi-Save Pharmacies, Inc. prays that plaintiffs take nothing by their suit, that it recover its costs and for such other and further relief to which it may be justly entitled. Respectfully submitted, CHARLES R. SHADDOX By /s/ C. R. Shaddox 2000 Frost Bank Tower San Antonio, Texas 78205 Attorneys for Defendant, Of Counsel: Rieger/Medi-Save Groce, LOCKE & HEBDON Pharmacies, Inc. 2000 Frost Bank Tower San Antonio, Texas 78205 Defendant, RIEGER/MEDI-SSAVE PHARMACIES, INC., hereby demands a jury. /s/ C. R. Shaddox CHARLES R. SHADDOX [Certificate of Service Omitted in Printing] 17a ANSWER OF DEFENDANT THE SOMMERS DRUG STORES COMPANY, JUNE 23, 1975 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] ANSWER OF DEFENDANT THE SOMMERS DRUG STORES COMPANY THE SOMMERS DRUG STORES COMPANY (“Som- mers”), one of the Defendants herein, files this, its An- swer to Plaintiffs’ Original Complaint, and would show: First Defense The Original Complaint fails to state a claim against Sommers upon which relief can be granted. Second Defense The Court lacks jurisdiction over the subject matter because: A. No cause of action has been shown to exist under the acts of Congress regulating commerce or protecting trade and commerce against restraints and monopolies ; B. The lack of any requisite effect on interstate com- merce; C. All of the parties are residents of the State of Texas and no diversity jurisdiction exists; and, D. In the absence of jurisdiction under federal law there is no pendent jurisdiction. Third Defense The Complaint fails to state a claim upon which relief can be granted against Sommers under the antitrust laws ——s- 18a Answer of Defendant The Sommers Drug Stores Co. ited States because the Defendant GROUP ape AND HEALTH INSURANCE COMPANY ( = Cross”) is engaged in the “business of insurance } = all matters alleged by Plaintiffs herein arise out : 4 “business of insurance”, which is regulated by the Insu ance Commissioner of the State of Texas and gy = from the provisions of the Sherman and oe “— pursuant to the McCarran-Ferguson Act (1 S.C. § 1011, et seq.). Fourth Defense i intiffs’ Original Sommers answers the allegations of Plain Complaint in paragraphs numbered to correspond with those of the Original Complaint, as follows: I. Sommers denies the allegations centained in Part I of the Complaint. Il. i i in Part Il As to each and every allegation contained in of the Complaint, Sommers denies that it has knowledge or information thereof sufficient to form a belief in con- nection therewith. III. Sommers admits as alleged in Part It, Paragraph No. 3 of the Complaint that its agent for service is Walter N. Corrigan, 3130 E. Houston Street, San Antonio, —— As to each and every other allegation contained in sai Part III of the Complaint, Sommers denies that it has knowledge or information sufficient to form a belief in connection therewith. 19a Answer of Defendant The Sommers Drug Stores Co. IV. As to Part IV, Paragraph No. 3 of the Complaint, Sommers admits that it is a corporation duly authorized to do business in Texas and whose principal place of business is Texas, but would show that it is organized under the laws of the State of Maryland, operating nu- merous drug stores (in Texas only) engaged in the busi- ness of compounding and dispensing prescription drugs for public sale under its own name. As to each and every other allegation contained in said Part IV, Sommers does not have knowledge or information sufficient to form a belief in connection therewith. V. As to each and every allegation contained in Part V of the Complaint, Sommers denies that it has knowledge or information thereof sufficient to form a belief in con- nection therewith, except that Sommers admits that it is in competition with other drug stores in San Antonio and Bexar County, Texas. VI. COUNT ONE Sommers admits that it entered into a Participating Drug Pharmacy Agreement on the terms provided there- in, solely between itself and Blue Shield. As to each and every other allegation contained in Part VI, Count One of the Complaint, Sommers denies the allegations as to itself, and denies that it has any knowledge or informa- tion thereof sufficient to form a belief in connection with allegations made as to other Defendants referred to there- in, 20a Answer of Defendant The Sommers Drug Stores Co. COUNT TWO As to the allegations contained in Count Two, Para- graph No. 1, Sommers has previously responded to the incorporated “foregoing allegations” of the Complaint, which answers are here repeated. As to the allegations contained in Count Two, Para- graph No. 2, Sommers denies the allegations. COUNT THREE As to the allegations contained in Count Three, Para- graph No. 1, Sommers has previously responded to the incorporated Count One of the Complaint, which answers ’ are here repeated. As to the allegations contained in Count Three, Para- graph No. 2, Sommers denies the allegations. COUNT FOUR As to the allegations contained in Count Four, Para- graph No. 1, Sommers has previously responded to the incorporated Count One of the Complaint which answers are here repeated. As to each and every allegation contained in Count Four, Paragraph No. 2 of the complaint, Sommers de- nies the allegations. COUNT FIVE As to the allegations contained in Count Five, Para- graph No. 1, Sommers has previously responded to the incorporated Count One of the Complaint which answers are here repeated. 2la Answer of Defendant The Sommers Drug Stores Co. As to each and every allegation contained in Count Five, Paragraphs ; the allegations and 3 of the Complaint, Sommers denies COUNT SIX As to Count Six, Sommers denies the allegations. COUNT SEVEN As to Count Seven, Sommers denies the allegations, WHEREFORE Defendant, THE § . * OMMERS DRUG STORES COMPANY, prays judgment that the Plaintiffs ’ and that Defendant recover its ¢ a osts ; to which it may be justly entitled. aoe Sater eels Respectfully submitted, GRESHAM, Davis, GREGORY, WortTuy & Moore 1800 Frost Bank Tower San Antonio, Texas 78205 By /s/ Richard B. Moore Attorneys for Defendant, The Sommers Drug Stores Company 22a Answer of Defendant The Sommers Drug Stores Co. DEFENDANT SOMMERS’ DEMAND FOR JURY COMES NOW the Defendant, THE SOMMERS DRUG STORES COMPANY, and as is provided by Rule 38 of the Federal Rules of Civil Procedure in United States District Courts (28 U.S.C.A.), requests trial by jury in the above numbered and styled cause. Dated June 23, 1975. GRESHAM, DAVIS, GREGORY, WortTHyY & MOORE — 1800 Frost Bank Tower San Antonio, Texas 78205 Attorneys for Defendant, The Sommers Drug Stores Company By /s/ Richard B. Moore RICHARD B. MOORE [Certificate of Service Omitted in Printing] ANSWER OF DEFENDANT GROUP LIFE AND HEALTH INSURANCE COMPANY, JUNE 22, 1975 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] ANSWER OF DEFENDANT GROUP LIFE AND HEALTH INSURANCE COMPANY GROUP LIFE AND HEALTH INSURANCE COM- PANY, also known as Blue Shield of Texas (“Blue Shield”) (incorrectly designated as Blue Shield and/or Blue Cross-Blue Shield of Texas), one of the Defendants herein, answers Plaintiffs’ Original Complaint in this action as follows: FIRST DEFENSE The Original Complaint should be dismissed pursuant to Rules 12(b) (6) and 56, Federal Rules of Civil Proce- dure, because it fails to state a claim against Blue Shield for which relief can be granted. SECOND DEFENSE The Original Complaint should be dismissed pursuant to Rules 12(b) (1) and 56, Federal Rules of Civil Procedure, because the matters alleged therein do not have the requisite effect on interstate commerce. Therefore, the Court lacks subject matter jurisdiction of this action. THIRD DEFENSE The Original Complaint should be dismissed pursuant to Rules 12(b) (1), 12(b) (6) and 56, Federal Rules of Civil Procedure, because there is no diversity of citizenship 24a Answer of Defendant Group Life and Health Ins. Co. under 28 U.S.C. § 1332. Jurisdiction, if any, is under the antitrust laws of the United States. As shown in Blue Shield’s Second Defense above, no federal question arises under the antitrust laws. Therefore, Plaintiffs have failed to state a proper cause of action and the Court does not have subject matter jurisdiction by reason of diversity of citizenship. FOURTH DEFENSE The Original Complaint should be dismissed pursuant to Rules 12(b) (1), 12(b) (6) and 56, Federal Rules of Civil Procedure, because in the absence of any cause of action based upon federal law, as shown in Blue Shield’s Second Defense and Third Defense, above, this Court may not entertain Plaintiffs’ pendent claims based upon al- leged violations of the Texas antitrust laws. FIFTH DEFENSE . The Original Complaint should be dismissed pursuant to Rules 12(b) (6) and 56, Federal Rules of Civil Procedure, because the same fails to state a cause of action against Blue Shield. Blue Shield is engaged in the “business of insurance”, and all matters alleged by Plaintiffs herein arise out of the “business of insurance”, which “business” is regulated by state law. Therefore, Blue Shield is ex- empted from application of the Sherman and Clayton Acts by the provisions of the McCarran-Ferguson Act (15 U.S.C. § 1011, et seq.). SIXTH DEFENSE The claims set forth in the Original Complaint are barred in whole or in part by laches. 25a Answer of Defendant Group Life and Health Ins. Co. SEVENTH DEFENSE Blue Shield answers the allegations of the Original Complaint in paragraphs numbered to correspond with those of the Original Complaint, as follows: I, Denied ; however, Blue Shield admits that proper causes of action may arise under the statutes alleged. Il. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 18, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 and 25. Blue Shield is without knowledge or information sufficient to form a belief as to the truth of the allegations. Blue Shield is without knowledge or information suffi- cient to form a belief as to the truth of the allegations contained in the last (unnumbered) paragraph of para- graph II of the Original Complaint. Ill. 1. Blue Shield denies the first sentence. The second sentence requires no admission or denial; however, this Defendant states that it has been incorrectly designated as “Blue Shield and/or Blue Cross-Blue Shield of Texas”. 2. Blue Shield is without knowledge or information suf- ficient to form a belief as to the truth of the first sen- tence. The second sentence requires no admission or denial. 3. Blue Shield is without knowledge or information sufficient to form a belief as to the truth of the first sentence. The second sentence requires no admission or denial. 26a Answer of Defendant Group Life and Health Ins. Co. 4. Blue Shield is without knowledge or information sufficient to form a belief as to the truth of the first sen- tence. The second sentence requires no admission or denial. IV. 1, 2 and 3. Blue Shield is without knowledge or infor- mation sufficient to form a belief as to the truth of the allegations. V. 1. Blue Shield is without knowledge or information sufficient to form a belief as to the truth of the allegations. 2. Blue Shield admits that it is one of the largest companies engaged in the business of selling insurance coverage in the State of Texas providing for payment of part of the cost to its policyholders of prescription drugs; however, denies the remainder of this paragraph. VI. COUNT ONE 1. Blue Shield denies the first, second, fourth and fifth sentences. Blue Shield admits the third sentence and says that the Agreement is a document which speaks for itself. 2. Blue Shield admits the first sentence and denies the second, third, fourth and fifth sentences. COUNT TWO 1. For each allegation incorporated by reference from the Original Complaint, Blue Shield incorporates its an- swering paragraph with the same force and effect as if the answer were set forth here in full. 2. Denied. 27a Answer of Defendant Group Life and Health Ins. Co. COUNT THREE 1. For each allegation incorporated by reference from Count One of the Criginal Complaint, Blue Shield incor- porates its answering paragraph with the same force and effect as if the answer were set forth here in full. 2. Denied. COUNT FOUR 1. For each allegation incorporated by reference from Count One of the Original Complaint, Blue Shield incor- porates its answering paragraph with the same force and effect as if the answer were set forth here in full. 2. Denied. COUNT FIVE 1. For each allegation incorporated by reference from Count One of the Original Complaint, Blue Shield in- corporates its answering paragraph with the same force and effect as if the answer were set forth here in full. 2. Denied. 3. Denied. COUNT SIX Denied. COUNT SEVEN Blue Shield denies the allegations of Count Seven and says that Plaintiffs are not entitled, in law, or in fact, to any recovery or relief from Blue Shield. WHEREFORE, Blue Shield prays that Plaintiffs take nothing by their suit herein, that it recover its costs and 28a Answer of Defendant Group Life and Health Ins. Co. have such other and further relief to which it may be justly entitled. Respectfully submitted, Cox, SMITH, SMITH, HALE & GUENTHER INCORPORATED 500 National Bank of Commerce Building San Antonio, Texas 78205 512/224-4281 /s/ J. Burleson Smith J. BURLESON SMITH [Certificate of Service Omitted in Printing] ANSWER OF DEFENDANT WALGREEN TEXAS CO., JUNE 27, 1975 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] ANSWER OF DEFENDANT WALGREEN TEXAS CO. WALGREEN TEXAS CO. (“WALGREEN”), one of the Defendants herein, files this, its Original Answer to Plaintiffs’ Complaint: FIRST DEFENSE Plaintiffs’ Original Complaint should be dismissed for the reason that it fails to state a claim for which relief can be granted under the Anti-Trust Laws of the United States in that the matters alleged by Plaintiffs did not occur in or substantially affect interstate commerce. SECOND DEFENSE Plaintiffs’ Complaint should be dismissed for the rea- son that, since no federal question arises under the Anti- Trust Laws and there is no diversity of citizenship be- tween Plaintiffs and Defendants, this Court does not have jurisdiction. THIRD DEFENSE Plaintiffs’ Original Complaint should be dismissed for the reason that it fails to state a cause of action against this Defendant because the Defendant GROUP LIFE AND HEALTH INSURANCE COMPANY, with whom it is alleged to have conspired, is engaged in the “busi- ness of insurance” and which “business” is regulated by 30a Answer of Defendant Walgreen Texas Co. the Insurance Commissioner of the State of Texas, and, therefore, under the Anti-Trust Laws of the United States, any of such actions are exempt under the McCarran- Ferguson Act (15 U.S.C., Sec. 1011, et seq.). FOURTH DEFENSE Plaintiffs’ Complaint should be dismissed because, in the absence of any cause of action based upon federal law, this Court has no pendent jurisdiction to entertain any claim based upon an alleged violation of the Texas Anti- Trust Laws. FIFTH DEFENSE WALGREEN answers the allegations of Plaintiffs’ Complaint as follows: I This Defendant denies the allegations contained in Para- graph I of the Complaint that Plaintiffs have any cause of action against it, but would admit that Plaintiffs pur- port to bring such action under the Statutes as alleged. II This Defendant does not have sufficient information as to the allegations with respect to the Plaintiffs as contained in Paragraph II of the Complaint, therefore, can neither admit nor dery such allegations. Ill This Defendant admits the allegations contained in Paragraph III of the Complaint. 31a Answer of Defendant Walgreen Texas Co. IV This Defendant admits the allegations contained in Sub-Paragraph 1 of Paragraph IV of the Complaint, and, as to Sub-Paragraphs 2 and 3, this Defendant does not have sufficient information regarding the correct cor- porate names or incorporation of the other Defendants, therefore, can neither admit nor deny such allegations, but admits such Defendants do operate drug stores en- gaged in compounding and dispensing of prescription drugs. V This Defendant admits the allegations contained in Paragraph V of the Complaint. VI COUNT ONE This Defendant admits it has entered into a Partici- pating Drug Pharmacy Agreement with the Defendant GROUP LIFE AND HEALTH INSURANCE COMPANY as alleged in Paragraph VI, Count One of the Complaint, however, denies that the operation under such Agreement, as set out by its terms and conditions, is any conspiracy or combination to fix retail prices of drugs and pharma- ceuticals and further denies that this Defendant has com- mitted any act which is in violation of the Federal Anti- Trust Laws. COUNT TWO This Defendant hereby incorporates by reference its answers to Plaintiffs’ Complaint, as incorporated in Sub- Paragraph 1 of Count Two of the Complaini. 32a Answer of Defendant Walgreen Texas Co. This Defendant denies the allegations contained in Sub- Paragraph 2 of Count Two of Plaintiffs’ Complaint. COUNT THREE This Defendant hereby incorporates by reference its answers to the allegations of Count One, which are in- corporated by reference in Sub-Paragraph 1 of Count Three of the Complaint. This Defendant denies the allegations contained in Sub- Paragraph 2 of Count Three of the Complaint. COUNT FOUR This Defendant hereby incorporates by reference its answers to the allegations of Count One, which are in- corporated by reference in Sub-Paragraph 1 of Count Four of the Complaint. This Defendant denies the allegations contained in Sub- Paragraph 2 of Count Four of the Complaint. COUNT FIVE This Defendant hereby incorporates by reference its answers to the allegations of Count One, which are in- corporated by reference in Sub-Paragraph 1 of Count Five of the Complaint. This Defendant denies the allegations contained in Sub- Paragraphs 2 and 3 of Count Five of the Complaint. COUNT SIX This Defendant denies the allegations contained under Count Six of the complaint. 83a Answer of Defendant Walgreen Texas Co. COUNT SEVEN This Defendant denies the allegations contained in Count Seven of the Complaint. Defendant WALGREEN TEXAS CO. prays that Plain- tiffs recover nothing of and from this Defendant, and that this suit be dismissed at the cost of Plaintiffs. Respectfully submitted, /s/ Wm. C. Church, Jr. Wo. C. CHURCH, JR. 8700 Tesoro Drive, Suite 120 Post Office Box 17409 San Antonio, Texas 78217 (512) 828-8261 Attorney jor Defendant Walgreen Texas Co. Of Counsel: KAMPMANN, CHURCH & BURNS 8700 Tesoro Drive, Suite 120 San Antonio, Texas 78217 84a JOINT MOTION TO SUSPEND DISCOVERY AND TO MODIFY ORDER PRELIMINARY TO PRE-TRIAL CONFERENCE, JANUARY 21, 1976 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] JOINT MOTION TO SUSPEND DISCOVERY AND TO MODIFY ORDER PRELIMINARY TO PRE-TRIAL CONFERENCE Plaintiffs and Defendants, Group Life and Health In- surance Company, also known as Blue Shield of Texas, Walgreen Texas Co., The Sommers Drug Stores Company and Rieger/Medi-Save Pharmacies, Inc., jointly move the Court for an order suspending discovery in this action and modifying the Court’s Order Preliminary to Pre-Trial Conference entered herein on August 7, 1975. In support of this Motion, Plaintiffs and Defendants would show that: 1. Plaintiffs have filed this action against Defendants alleging violations of the Federal antitrust laws and the antitrust laws of the State of Texas. 2. In their respective answers fiied herein, Defendants have each asserted numerous defenses to Plaintiffs’ allega- tions, including among others, the defense of the antitrust exemption provided under the McCarran-Ferguson Act (15 U.S.C. § 1011, et seq.), which defenses, if determined to be valid, will be dispositive of this action. 8. Plaintiffs and Defendants have completed substan- tial discovery through production of documents and depo- sitions. ————— 35a Joint Motion to Suspend Discovery 4. Extensive additional discovery is planned (notices for 20 proposed depositions have been filed) and will be necessary to properly prepare for the trial of this case. 5. Plaintiffs and Defendants, by and through their respective attorneys of record, have agreed that in order to prevent the unnecessary expenditure of money, time and effort of the parties and time and effort of the Court, the validity of the McCarran-Ferguson defenses, as as- serted by Defendants, should be presented to the Court for a determination prior to continuing with costly and time consuming discovery procedures. WHEREFORE, Plaintiffs and Defendants jointly move the Court to enter an Order as follows: A. Suspending all discovery in this action in order that Defendants may present their McCarran-Ferguson Act defenses to the Court for determination. B. On or before thirty (30) days after the entry of an Order Suspending Discovery, Defendants shall file appro- priate motions to dismiss based upon their defenses as- serted under the McCarran-Ferguson Act, together with a supporting materials and memorandum riefs, C. On or before twenty (20) days after the motions and briefs of Defendants are filed, Plaintiffs shall file their responses and briefs, together with any necessary supporting materials. D. On or before ten (10) days after the responses and briefs of Plaintiffs are filed, Defendants shall file any replies that they deem necessary, together with any necessary supplemental supporting materials. All dis- covery shall be suspended pending a final determination of the validity of the McCarran-Ferguson Act defenses asserted by Defendants. _ 36a Joint Motion to Suspend Discovery E. If it is ultimately determined by the Court or by an appellate court that the McCarran-Ferguson Act de- fenses of Defendants are not valid, the parties shall com- plete discovery on the merits within ninety (90) days after the date of such final determination. F. A conference of attorneys will be held on or before thirty (30) days after the completion of discovery. G. Counsel for the respective parties will submit their proposed agreed pre-trial orders within sixty (60) days after the completion of discovery. H. In the event counsel are unable to agree on a form of a proposed agreed pre-trial order, then counsel for each party is directed to submit his version of an appropriate pre-trial order within ten (10) days after the expiration of the date set forth in Paragraph G hereof. Respectfully submitted, TINSMAN & HOUusER, INC. 1900 National Bank of Commerce Bldg. San Antonio, Texas 78205 By: /s/ Joel H. Pullen JOEL H. PULLEN Attorneys for Plaintiffs Cox, SMITH, SMITH, HALE & GUENTHER INCORPORATED 500 National Bank of Commerce Bldg. San Antonio, Texas 78205 37a Joint Motion to Suspend Discovery By: /s/ Keith E. Kaiser By: /8/ By: /s/ By: /s/ KEITH E. KAISER Attorneys for Defendant Group Life and Health Insurance Company GROCE, LOCKE & HEBDON 2000 Frost Bank Tower San Antonio, Texas 78205 Charles R. Shaddox CHARLES R. SHADDOX Attorneys for Defendant Rieger/Medi-Save Pharmacies, Inc. KAMPMANN, CHURCH & BURNS 120 Tesoro Building 8700 Tesoro Drive San Antonio, Texas 78217 William C. Church, Jr. WILLIAM C. CHURCH, JR. Attorneys for Defendant Walgreen Texas Co. GRESHAM, Davis, GREGORY, WortTHY & Moore 1800 Frost Bank Tower San Antonio, Texas 78205 Richard B. Moore RICHARD B. Moore Attorneys for Defendant The Sommers Drug Stores Company 38a ORDER OF UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS APPROVING JOINT MOTION TO SUSPEND DISCOVERY AND TO MODIFY ORDER PRELIMINARY TO PRE-TRIAL CONFERENCE, JANUARY 23, 1976 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION Civil Action No. SA-75-CA-131 RoYAL DruG COMPANY, INC. d/b/a/ ROYAL PHARMACY OF CASTLE HILLS and DISCO PRESCRIPTION PHARMACY, BLAUSER’S PHARMACY, INC., PARKERS PHARMACY, INC., CHARLES GRIFFIN d/b/a DELLVIEW DRUG STORE, JAMES POLLOCK, d/b/a/ POLLOCK’S PHARMACY, THOMAS J. PARMA, d/b/a PARMA’S PHARMACY, CRAIG BELL, d/b/a BELL PHARMACY, GEORGE STONE, d/b/a OLMOS PHAR- MACY, ALAMO HEIGHTS PHARMACY, INC., PATTS DRUG, INC. d/b/a PaTT’s DruG STORE No. 1, BAYLOR PARSONS d/b/a PARSONS PHARMACY, HIGHLAND HILLS PHAR- MACY, INC., ECONODOSE SYSTEMS, INC. d/b/a MEDICAL CENTER PHARMACY, GUSTAVE HNCIR, d/b/a TURNERS PHARMACISTS, PHYSICIAN & SURGEONS PHARMACY, INC., CARLOS DiAZ d/b/a VALLEY VIEW PHARMACY, ALFRED SANGALLI, d/b/a STAR DRUG STORE, BLANCO PHARMACY, INC., BLANCO SOUTHSIDE PHARMACY, INC., DAN PARADA d/b/a DAN’S PHARMACY, RODOLFO L. DAviLA, INC. d/b/a DAVILA PHARMACY, DELLMAR PHARMACIES INC. d/b/a DELLMAR PHARMACY #4, RONG, INC. d/b/a ECONOMY PHARMACY #1, ZARZAMORA PHARMACY, INC. and WHITE CROSS PROFESSIONAL PHARMACY, INC. d/b/a WHITE Cross #1 and d/b/a WHITE Cross #4 Vv. Group LIFE AND HEALTH INSURANCE COMPANY a/k/a BLUE SHIELD and/or BLUE CROSS-BLUE SHIELD OF 39a Order Approving Joint Motion to Suspend Discovery TEXAS, WALGREEN TEXAS COMPANY, SOMMERS DRUG STORE, RIEGER-MEDI-SAVE, INC. d/b/a GIBSONS PHAR- MACY ORDER APPROVING JOINT MOTION TO SUSPEND DISCOVERY AND TO MODIFY ORDER PRELIMINARY TO PRE-TRIAL CONFERENCE On this 23rd day of January, 1976, came on to be con- sidered the Joint Motion to Suspend Discovery and to Modify Order Preliminary to Pre-Trial Conference filed by the parties herein. Having reviewed the Motion and the file in this cause, the Court finds that reasonable grounds exist for the granting of such Motion. Accordingly, it is hereby ORDERED that the Joint Motion to Suspend Discovery and to Modify Order Pre- liminary to Pre-Trial Conference should be and the same is hereby and in all things GRANTED. 1. As of this date, all discovery in this action is suspended in order that Defendants may present their McCarran-Ferguson Act defenses to the Court for deter- mination. 2. On or before thirty (30) days after date hereof, Defendants shall file appropriate motions to dismiss based upon their defenses asserted under the McCarran- Ferguson Act, together with any appropriate supporting materials and memorandum briefs. 3. On or before twenty (20) days after the motions and briefs of Defendants are filed, Plaintiffs shall file their responses and briefs, together with any necessary supporting materials. 4. On or before ten (10) days after the responses and briefs of Plaintiffs are filed, Defendants shall file any replies that they deem necessary, together with any nec- 40a Order Approving Joint Motion to Suspend Discovery essary supplemental supporting materials. All discovery shall be suspended pending a final determination of the validity of the McCarran-Ferguson Act defenses asserted by Defendants. 5. If it is ultimately determined by the Court or by an appellate court that the McCarran-Ferguson Act defenses of Defendants are not valid, the parties shall complete discovery on the merits within ninety (90) days after the date of such final determination. 6. A conference of attorneys will be held on or before thirty (30) days after the completion of discovery. 7. Counsel for the respective parties will submit their proposed agreed pre-trial orders within sixty (60) days after the completion of discovery. 8. In the event counsel are unable to agree on a form of a proposed agreed pre-trial order, then counsel for each party is directed to submit his version of an appropriate pre-trial order within ten (10) days after the expiration of the date set forth in Paragraph 7 hereof. ENTERED this 23rd day of January, 1976. /s/ John H. Wood, Jr. JOHN H. Woop, JR. United States District Judge APPROVED: TINSMAN & HOUusER, INC. 1900 National Bank of Commerce Bldg. San Antonio, Texas 78205 By: /s/ Joel H. Pullen : JOEL H. PULLEN Attorneys for Plaintiffs Order Approving Joint Motion to Suspend Discovery By: /s/ By: /s/ By: /s/ By: /s/ 4la Cox, SMITH, SMITH, HALE & GUENTHER INCORPORATED 500 National Bank of Commerce Bldg. San Antonio, Texas 78205 Keith E. Kaiser KEITH E. KAISER Attorneys for Defendant Group Life and Health Insurance Company GROCE, LOCKE & HEBDON 2000 Frost Bank Tower San Antonio, Texas 78205 Charles R. Shaddox CHARLES R. SHADDOX Attorneys for Defendant Rieger/Medi-Save Pharmacies, Inc. KAMPMANN, CHURCH & BURNS 120 Tesoro Building 8700 Tesoro Drive San Antonio, Texas 78217 William C. Church, Jr. WILLIAM C. CHURCH, JR. Attorneys for Defendant Walgreen Texas Co. GRESHAM, DAVIS, GREGORY, WORTHY & MOORE 1800 Frost Bank Tower San Antonio, Texas 78205 Richard B. Moore RICHARD B. MOORE Attorneys for Defendant The Sommers Drug Stores Company 42a MOTION OF DEFENDANT GROUP LIFE AND HEALTH INSURANCE COMPANY TO DISMISS, FEBRUARY 23, 1976 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION (Caption Omitted in Printing] MOTION OF DEF 2NDANT GROUP LIFE AND HEALTH INSURANCE COMPANY TO DISMISS Defendant Group Life and Health Insurance Company, also known as Blue Shield of Texas (“Blue Shield”) (in- correctly designated by Plaintiffs as Blue Shield and/or Blue Cross-Blue Shield of Texas), moves the Court to dis- miss Plaintiffs’ Original Complaint pursuant to Rules 12(b) and 56, Federal Rules of Civil Procedure, and bases this Motion on the following grounds: 1. This Court lacks jurisdiction over the subject mat- ter of the Complaint because Blue Shield is engaged in the “business of insurance’, and all matters alleged by Plain- tiffs herein arise out of the “business of insurance’, which “business” is regulated by state law. Therefore, Blue Shield is exempted from the application of the Sherman and Clayton Acts by the provisions of the McCarran- Ferguson Act (15 U.S.C. § 1011, et segq.). 2. The Complaint fails to state a claim against Blue Shield upon which relief can be granted because, as shown in paragraph 1 above, the Court lacks jurisdiction over the subject matter. 43a Motion of Defendant Group Life and Health to Dismiss 3. In the absence of any action based upon federal iaw, as shown above, this Court may net entertain Plaintiffs’ pendent claims based upon alleged violations of the Texas antitrust laws. 4. Blue Shield further moves the Court to treat this Motion as one for summary judgment pursuant to Rule 56, Federal Rules of Civil Procedure, and to consider the following: A. The Affidavit to Steve G. McDonald which is attached hereto as Exhibit “A” and incorporated herein by reference; and B. The oral depositions of A. W. Pogue, Robert C. McAnelly, Paul D. Connor and Donald H. Bunnell, previously filed in the records of this proceeding, and incorporated herein by reference. 5. This Motion is supported by a memorandum brief filed contemporaneously herewith. WHEREFORE, Blue Shield prays that this Court dis- miss Plaintiffs’ Original Complaint and that this Motion be treated as one for summary judgment. Respectfully submitted, Cox, SMITH, SMITH, HALE & GUENTHER INCORPORATED 590 National Bank of Commerce Bldg. San Antonio, Texas 78205 44a Motion of Defendant Group Life and Health to Dismiss /s/ J. Burleson Smith J. BURLESON SMITH /s/ Keith E. Kaiser KEITH E. KAISER /s/ R. Laurence Macon R. LAURENCE MACON [Certificate of Service Omitted in Printing] 45a AFFIDAVIT OF STEVE G. McDONALD IN SUPPORT OF MOTION OF DEFENDANT GROUP LIFE AND HEALTH INSURANCE COMPANY TO DISMISS, FEBRUARY 23, 1976 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] AFFIDAVIT OF STEVE G. McDONALD IN SUPPORT OF MOTION OF DEFENDANT GROUP LIFE AND HEALTH INSURANCE COMPANY TO DISMISS STATE OF TEXAS ) ) COUNTY OF DALLAS ) The witness, having been duly sworn, deposes and says: 1. My name is Steve G. McDonald. I reside at 6517 Turner Way, Dallas, Texas. 2. I make this Affidavit in support of the Motion of Defendant Group Life and Health Insurance Company to Dismiss and I have personal knowledge of the facts set forth herein. 3. I am an attorney and I have been licensed to practice in the State of Texas continuously since 1966. I am em- ployed by Group Hospital Service, Inc. (“GHS”). 4. With the exception of a nine-month period, I have been continuously employed by GHS since 1960. Since January, 1966, I have been in the legal division of GHS as one of its associate counsel. 5. GHS is a non-profit corporation duly organized and existing under Chapter 20 of the Texas Insurance Code, Tex. Ins. Code Ann. art. 20.01, et seg. GHS issues pre- 46a Affidavit of Steve G. McDonald paid coverage which provides hospital benefits to its sub- scribers through contracts between the company and hos- pitals. GHS also issues prepaid coverage which provides benefits to its subscribers on an indemnity basis for medi- cal and surgical care. 6. The Blue Cross service mark is owned by the Blue Cross Association. GHS is authorized by the Blue Cross Association to use the Blue Cross service mark and oper- ates under the name of Blue Cross of Texas. Hereinafter, GHS will be referred to as “Blue Cross”. 7. Group Life and Health Insurance Company (“GL&H”) is a corporation duly organized and existing under Chapter 3 of the Texas Insurance Code, Tex. Ins. Code Ann. art. 3.01, et seq., and is authorized by the State Board of Insurance of the State of Texas to transact the business of life, health and accident insurance within the State of Texas. 8. The Blue Shield service mark is owned by the Na- tional Association of Blue Shield Plans. GL&H is au- thorized by the National Association of Blue Shield Plans to use the Blue Shield service mark and operates under the trade name of Blue Shield of Texas. Hereinafter, GL&H will be referred to as “Blue Shield”. 9. With the exception of a few qualifying shares issued to directors of Blue Shield, all of the stock of Blue Shield is owned by Blue Cross, a non-profit corporation. 10. The legal staff of Blue Cross, of which I am a member, provides legal services to Blue Shield pursuant to a management contract between the two companies. 11. Since 1968, I have been primarily responsible for the filing of Blue Shield’s policy forms and related docu- ments with the Commissioner of Insurance of the State of Texas. Since 1966, I have participated in the prepara- tion of Blue Shield’s policy forms and related documents. 47a Affidavit of Steve G. McDonald 12. In 1969, Blue Shield determined to issue prescrip- tion drug insurance coverage in the form of a supple- mental policy to certain of its medical-surgical policies. I assisted in the preparation of the supplemental policy. A true and correct copy of the supplemental policy is at- tached hereto as Exhibit “A” and incorporated herein by reference. 13. Thereafter, I assisted in the preparation of the Participating Drug Pharmacy Agreement, the purposes of which were to comply with and effectuate the terms and provisions of the prescription drug insurance policy, to satisfy Blue Shield’s contractual obligations to its in- sureds and to establish an efficient system of claims- settlement procedures for the insureds under the policy. A true and correct copy of the Participating Drug Phar- macy Agreement is attached hereto as Exhibit “B” and incorporated herein by reference. 14. On March 14, 1969, prior to issuance or use of the prescription drug insurance policy or the Participating Drug Pharmacy Agreement, I forwarded two copies of each to the State Board of Insurance, pursuant to the provisions of Tex. Ins. Code Ann. art. 3.42. A true and correct copy of my letter of transmittal dated March 14, 1969, is attached hereto as Exhibit “C” and incorporated herein by reference. 15. Thereafter, Blue Shield received from the Commis- sioner of Insurance a copy of Official Order No. 29701, dated June 18, 1969, which disapproved the prescription drug insurance program. A true and correct copy of Official Order No. 29701, dated June 18, 1969, is attached hereto as Exhibit “D” and incorporated herein by ref- erence. 16. As a result of the disapproval order, Blue Shield did not issue or use the proposed prescription drug insur- ance program. 48a Affidavit of Steve G. McDonald 17. Subsequently, Blue Shield received from the Com- missioner of Insurance a copy of Official Order No. 30413, dated September 30, 1969, which Order exempted the pre- scription drug insurance program from the approval re- quirements of Tex. Ins. Code Ann. art. 3.42, and which authorized Blue Shield to issue and use the program in the State of Texas. A true and correct copy of Official Order No. 30413, dated September 30, 1969, is attached hereto as Exhibit “E” and incorporated herein by ref- erence. 18. It is Blue Shield’s policy that the option of enter- ing into a Participating Drug Pharmacy Agreement is available to any licensed pharmacy in the State of Texas. In 1969, Blue Shield made a statewide mailing to licensed pharmacies advising them of this option. 19. Since September 30, 1969, Blue Shield has con- ducted the prescription drug insurance program as au- thorized by the exemption order (Exhibit “E”’). 20. The exemption order (Exhibit “E”) did not relieve Blue Shield from any of the regulatory requirements set out in the Texas Insurance Code, nor did it relieve Blue Shield from any of the regulation or supervision estab- lished by the State Board of Insurance. In conducting the prescription drug insurance program, Blue Shield has continued to be subject to all of the statutory and admin- istrative regulations of the State of Texas and the State Board of Insurance. 21. In 1974 Blue Shield agreed with Bexar County Medical Foundation to provide certain group hospitaliza- tion and medical-surgical insurance coverage to Bexar County groups desiring such coverage. Included in the proposed coverage was prescription drug insurance. 22. I assisted in preparing the prescription drug in- surance policy form and other documents necessary for 49a Affidavit of Steve G. McDonald Blue Shield to be able to provide such coverage. The pre- scription drug insurance program prepared for use in connection with such coverage is virtually identical to the program submitted to the State Board of Insurance in 1969. - 23. On September 23, 1974, prior to issuance or use of any of the policies proposed under the agreement with Bexar County Medical Foundation, I forwarded a copy of each of them to the State Board of Insurance, pursuant to Tex. Ins. Code Ann. art. 3.42. True and correct copies of the prescription drug insurance policy and my letter of transmittal dated September 23, 1974, are attached hereto as Exhibits “F” and “G”, respectively, and incorporated herein by reference. 24. Thereafter, Blue Shield received from the Commis- sioner of Insurance a copy of Official Order No. 45511, dated October 1, 1974, which approved, among other things, the Bexar County prescription drug insurance program. A true and correct copy of Official Order No. 45511, dated October 1, 1974, is attached hereto as Ex- hibit “H” and incorporated herein by reference. Since receipt of Official Order No. 45511, Blue Shield has been issuing the prescription drug insurance to groups in Bexar County, Texas. 25. After receipt of the approval order (Exhibit “H’”), Blue Shield offered to virtually all licensed pharmacies in San Antonio, Tc..as, the opportunity of entering into a Participating Drug Pharmacy Agreement. 26. Blue Shield has not been notified by the Commis- sioner of Insurance of Texas of any intention to amend, modify or withdraw the approval order (Exhibit “H’’). 27. The Attorney Generai of Texas has initiated no action against Blue Shield as a result of its issuance or use of the prescription drug insurance program. 50a Affidavit of Steve G. McDonald 28. In all operations under the prescription drug insur- ance program, Blue Shield has transacted no business other than the business of insurance pursuant to the au- thority granted by the State Board of Insurance. Blue Shield’s conduct under the program has always been with a view toward strict compliance with the statutory and regulatory requirements of the State of Texas and the state agencies that regulate Blue Shield’s business. 29. Blue Shield is not engaged in the sale or dispens- ing of prescription drugs as a manufacturer, wholesaler or retailer. Blue Shield is engaged solely in transacting the business of life, health and aecident insurance. 30. Nine of the eighteen Plaintiffs in this action are Participating Pharmacies pursuant to a Participating Drug Pharmacy Agreement with Blue Shield. /s/ Steve G. McDonald Steve G. MCDONALD - SUBSCRIBED AND SWORN TO BEFORE ME this 19 day of February, 1976. /s/ Betty Jane McKinney BETTY JANE MCKINNEY Notary Public in and for Dallas County, Texas 5la GROUP LIFE AND HEALTH INSURANCE COMPANY DRUG SUPPLEMENT POLICY, DATED APRIL 1, 1969 (ATTACHED AS “EXHIBIT A” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS GROUP LIFE & HEALTH Insurance Company {L0GO] Dallas, Texas has issued this DRUG S""PPLEMENT to the EXPERIENCE RATED GROUP MEDICAL-SURGICAL INSURANCE POLICY NO. 123456 issued heretofore or simultaneously herewith, to XYZ COMPANY, INC. (therewith and herein called the Employer) as of April 1, 1969 (herein called the supplemental policy date) and thereby agrees to provide the additional benefits detailed herein, all in accordance with the conditions and provisions here- of, including those set out on the following pages which are a part of this supplement as fully as if recited over the signatures hereto affixed. This supplement becomes effective on the supplemental policy date, and is issued in consideration of the applica- tion herefor made by the Employer. It will be continued 52a Group Life and Health Drug Supplement Policy in force subject to the timely payment of premiums here- for, until terminated in accordance with the provisions of the Article captioned “Termination of Drug Coverage. IN WITNESS WHEREOF, the Insurer has caused this supplement to be executed at its Home Office in Dallas, Texas. President Countersigned : Registrar (Disapproved By Order No. 29701, June 18, 1969, Commissioner of Insurance, State of Texas] 58a Group Life and Health Drug Supplement Policy ARTICLE I—SUPPLEMENTAL DEFINITIONS AS USED HEREIN: A. GROUP HOSPITALIZATION CONTRACT means an instrument issued by Group Hospital Service, Inc. of Dallas, Texas to the Employer, bearing the same num- ber as that appearing on the “Experience Rated Group Medical-Surgical Insurance Policy” described on the face page hereof, including any supplements thereto. GROUP MEDICAL-SURGICAL INSURANCE POL- ICY means the “Experienced Rated Group Medical- Surgical Insurance Policy” described on the face page hereof. BASIC COVERAGE means the total amount of pro- tection afforded a participant by both the group hos- pitalization contract and the group medical-surgical insurance policy on account of expense incurred for drugs and medicines. COVERED DRUGS means any Prescription Legend Drug or injectable insulin: (1) which is ordered by a physician; (2) for which a written prescription order is cus- tomarily prepared; (3) for which a separate charge is customarily made; and (4) which is not entirely consumed at the time and place that the prescription order is written. PRESCRIPTION LEGEND DRUG means any medici- nal substance—the label of which, under the Federal Food, Drug, and Cosmetic Act, as amended, is re- quired to bear the legend: “Caution: Federal Law prohibits dispensing without prescription.” 54a Group Life and Health Drug Supplement Policy . DRUG DEDUCTIBLE means the amount to be paid by a participant toward the cost of the initial pur- chase of each covered drug and toward the cost of each refill purchase of each covered drug and for each such purchase and is equal to the amount specified in Item 20 of the schedule. . PRESCRIPTION ORDER means a request for medi- cation by a physician. . PHARMACY means a licensed establishment where Preseription Legend Drugs are dispensed by a person who is not a practitioner of the healing arts and who is licensed to dispense such drugs under the laws of the state in which he practices. . PROVIDER means any pharmacy, physician, or any other person or organization legally licensed to dis- pense drugs. . PARTICIPATING PROVIDER means a provider lo- cated in the State of Texas with which the Insurer or Group Hospital Service, Inc. of Dallas, Texas, has entered into a written contract for the rendition of covered drugs for which benefits are provided by this supplement, or any provider located outside the State of Texas with which any other Blue Cross or Blue Shield Plan has entered into such a contract. NON-PARTICIPATING PROVIDER means a pro- vider who is not a participating provider. ARTICLE II—TERMS AND PROVISIONS All definitions, limitations, and provisions recited in the group medical-surgical insurance policy are hereby adopted and shall be construed to apply in like man- ner and with equal force to this supplement, any pro- visions insofar as they are in conflict with provisions 55a Group Life and Health Drug Supplement Policy herein contained, in which case the provisions of this supplement shall govern in any interpretations of rights or obligations aecruing hereunder. B. It is hereby specially declared that the non-duplication provisions set forth in Article IV, Section F, of the group medical-surgica! insurance policy are applicable to this supplement except insofar as they are modified by the provisions of the following subsections: 1. Determination of drug benefits under this supple- ment shall be made in relation to each “claim,” consisting of any combination of charges for cov- ered drugs which are incurred within a calendar year and submitted at one time by or on behalf of a participant to the Insurer at his request for pay- ment of drug benefits applicable thereto. 2. When the non-duplication provisions are applica- ble, the benefits of the other coverage and all bene- fits provided under the basic coverage on the items composing the claim shall be deducted from the charges for all such items, and the Insurer will pay the remainder; provided, however, that in no event shall these provisions be construed to in- crease the amount of total benefits which would be payable under this supplement on account of such claim in the absence of other coverage. ARTICLE III—BENEFITS A. Subject to the exclusions, limitations, and all other terms and provisions set forth herein, any participant shall be entitled to receive covered drugs from any participating provider as a benefit hereunder and shall be required to pay no more than the drug deductible for each of such covered drugs. 56a Group Life and Health Drug Supplement Policy B. Any participant receiving covered drugs from a non- participating provider shall be entitled to benefits equal to 75% of the result of the usual and customary charges for such covered drugs as determined by the Insurer, reduced by the drug deductible for such cov- ered drugs; except that for covered drugs received from a non-participating provider located outside of the State of Texas, such participant shall be entitled to benefits equal to 100% of the usual and customary charges for such covered drugs, reduced by the drug deductible for each such covered drugs. C. Payment of benefits by the Insurer to the provider or to the Employer, as the Insurer may elect, shall con- stitute full discharge of all responsibility of the In- surer to the employee on account of care rendered to any participant under his coverage. ARTICLE IV—LIMITATIONS AND EXCLUSIONS In addition to the limitations and exclusions stipulated in Article VI of the group medical-surgical insurance policy, it is provided that no drug benefit shall be available for any of the following: A. Any charge for a contraceptive medication, even if such medication is a Prescription Legend Drug, and any charge for therapeutic devices or appliances (in- cluding but not by way of limitation, hypodermic needles, syringes, support garments, and other non- medicinal substances) regardless of their intended use. B. Any charge for services other than Covered Drugs, including administration of a Prescription Legend Drug or injectable insulin. C. The charge for more than a 34-day supply of a medi- cation, except that Blue Cross-Shield will cover 100 57a Group Life and Health Drug Supplement Policy unit doses (e.g. tablet or capsule) of a natural thyroid product and 100 unit doses of nitroglycerine. . The charge for any prescription refill in excess of the number specified by the physician, or any refill dis- pensed after one year from the physician’s order. . Covered Drugs for which no charge is customarily made. . Covered Drugs to the extent that a benefit is provided therefor under the basic coverage. ARTICLE V—TERMINATION OF DRUG COVERAGE A. This supplement and coverage of all participants here- under shall automatically terminate: 1. When the group medical-surgical insurance policy is terminated for any reason; 2. Upon default in payment of supplemental pre- miums, subject to the grace period and reinstate- ment provided for in the group medical-surgical insurance policy; 3. Upon cancellation of this supplement in any man- ner as specified in the group medical-surgical in- surance policy for cancellation thereof. . The coverage of any participant under this supple- ment shall automatically terminate when his coverage under the group medical-surgical insurance policy is terminated, subject, howeve>, to refund of supplemen- tal premiums paid in advance, as therein provided. C. Under no circumstances shall the Plan be obligated to notify any participant of the termination of this sup- plement or of his coverage hereunder. 58a Group Life and Health Drug Supplement Policy D. No conversion privilege afforded a participant under the group medical-surgical insurance policy shall be deemed to apply to this supplement. ARTICLE VI—GENERAL PROVISIONS DISCLOSURE AUTHORIZATION. In consideration of the Insurer’s having waived physical examination in connection with the application herefor, the em- ployee on behalf of himself and his covered dependents and sponsored dependents shail be deemed te have authorized any provider to make available to the In- surer information relating to ali prescription orders, copies thereof and other records as needed by the Insurer. . The Insurer shall not be liable for any claim or de- mand for injuries or damage arising out of or in connection with the manufacturing, compounding, dis- pensing or use of any Prescription Legend Drugs or insulin, whether or not covered under this supplement. . The Insurer reserves the right to deny benefits for any drug prescribed or dispensed in a manner contrary to normal medical or pharmaceutical practice. PARTICIPATING DRUG PHARMACY AGREEMENT (ATTACHED AS “EXHIBIT B” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS PARTICIPATING DRUG PHARMACY AGREEMENT between GROUP LIFE & HEALTH INSURANCE COMPANY (Herein ealled Blue Shield) Dallas, Texas and (Herein called the Partictpating Pharmacy ) (Type ef Organization) (Address ) Pharmacy Permit No. 1. The Participating Pharmacy agrees that all phar- macists dispensing drugs in its behalf are to be con- * sidered participating pharmacists. The pharmacists currently employed by the Participating Pharmacy are: Name License No. 60a Participating Drug Pharmacy Agreement . The Participating Pharmacy shall dispense drugs for which benefits are provided under Blue Shield’s Drug Supplement CC-OHDS-2 or any other supplement or contract upon written notice by Blue Shield, to per- sons who are entitled to benefits under such supple- ments, all in accordance with the terms of such in- struments. . The Participating Pharmacy agrees to accept as full payment for each drug provided under Section 2, above, of this agreement an amount equal to the total of the acquisition cost for such drug and a profes- sional dispensing fee of $ . Acquisition cost, as used in this agreement, means the actual cost of a drug to the Participating Pharmacy, as deter- mined under rules and regulations published by Blue Shield. . Blue Shield agrees to pay to the Participating Phar- macy for each drug dispensed under Section 2 of this agreement an amount equal to the excess, if any, of the amount stipulated in Section 3, above, of this agreement over the drug deductible amount, if any, stipulated in the instrument under which drug bene- fits are available, and the Participating Pharmacy agrees that its charge for such drug to any other person shall not exceed such drug deductible. . Blue Shield agrees to provide the Participating Phar- macy with a manual which will stipulate the drugs for which benefits are available and drug deductible ap- plicable to each person to whom drugs are to be dis- pensed under Section 2 of this agreement, and in which identification codes for certain of the drugs for which benefits are provided will be stipulated. The Participating Pharmacy agrees to include on those claims for benefits the code for the drug for which 6la Participating Drug Pharmacy Agreement claim is made if such code is shown in the Participat- ing Pharmacy’s current manual. . All contracts or transactions in which the Participating Pharmacy engages involving dispensing of drugs shall be between the Participating Pharmacy and the patient and Blue Shield shall not be a party thereto. . The Participating Pharmacy agrees that Blue Shield shall have the right to inspect all records pertaining to persons eligible for benefits under its drug supple- ments at any time during regular business hours. . The Participating Pharmacy agrees not to engage in any advertising relative to Blue Shield drug supple- ments without prior approval of Blue Shield. . This agreement may be terminated at any time by either party by giving at least 15 days prior written notice to the other party. GROUP LIFE & HEALTH INSURANCE COMPANY Dated at Dallas, Texas this —day of. ,19—. By President Dated at , Texas this —day of. —-, 19—. By. Title: LETTER OF TRANSMITTAL OF POLICY AND AGREEMENT TO STATE BOARD OF INSURANCE, DATED MARCH 4, 1969 (ATTACHED AS “EXHIBIT C” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS GROUP LIFE & HEALTH Insurance Company [LOGO] March 14, 1969 Mr. Robert C. McAnelly Supervisor, AHGL Policy Unit State Board of Insurance 1110 San Jacinto Austin, Texas 78701 Re: Form No. CC-OHDS-2 Form No. PDPA-1 Dear Mr. McAnelly: We submit herewith for your approval Form No. CC- OHDS-2 which is a Drug Supplement to our Custom Cov- erage Group Medical-Surgical Insurance Policy, Form No. MSCC-1, which was approved by your department under Order No. 19427 on 9-27-65. We will use application Form No. MSCC-App. 1, which was approved under the same order number. IT am also enclosing Form PDPA-1 which is the Partici- pating Drug Pharmacy Agreement that Group Life & Health Insurance Company will enter into with pharma- cies for the provision of benefits under this supplement. 68a Letter of Transmittal of Policy and Agreement I am enclosing a duplicate copy of the supplement and agreement together with this letter in order that you may stamp them and return to us. If we can furnish additional information concerning these filings, please advise. Sincerely yours, Group LIFE & HEALTH INSURANCE COMPANY /s/ Steve G. McDonald STEVE G. MCDONALD [Disapproved By Order No. 29701, Jun. 18, 1969, Commissioner of Insurance, State of Texas] 64a OFFICIAL ORDER NO. 29701 OF TEXAS COMMISSIONER OF INSURANCE, JUNE 18, 1969 (ATTACHED AS “EXHIBIT D” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS No. 29701 OFFICIAL ORDER of the COMMISSIONER OF INSURANCE of the STATE OF TEXAS AUSTIN, TEXAS Date June 18, 1969 Subject Considered : APPROVAL OF FORMS General remarks and official action taken: On this date came on for consideration by the Commis- sioner of Insurance application for approval of Form No. CC-OHDS-2 filed by Group Life & Health insurance Company and the Commissioner, having found that said form does not comply with the requirements of Article 3.42, Texas Insurance Code, as amended, hereby disap- proves said form under authority of the cited statute, and herenow states his grounds for such disapproval as fol- lows: Under provision of said form the differentiation of bene- fits as between “participating provider” dispensed drugs and “non-participating provider” dispensed drugs consti- tutes unfair discrimination within the meaning of Article 21.21, Texas Insurance Code. 65a Official Order No. 29701 of Texas Commissioner of Ins. The provisions of said .orm are violative of the anti-trust and monopoly statutes of this state. Prepared, recommended and approved by: /8/ R. C. McAnelly R. C. MCANELLY, Supervisor Health and Group Life Policy Unit Life Division COMMISSIONER OF INSURANCE By /s/ Don B. Odum Don B. ODUM Section Manager Life Division 66a OFFICIAL ORDEE NO. 30413 OF TEXAS COMMISSIONER OF INSURANCE, DATED SEPTEMBER 30, 1969 (ATTACHED AS “EXHIBIT E” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS No. 30413 OFFICIAL ORDER of the COMMISSIONER OF INSURANCE of the STATE OF TEXAS AUSTIN, TEXAS Date Sep. 30, 1969 Subject Considered: POLICY FORM APPROVAL— EXEMPTION FROM THE REQUIREMENTS OF ARTICLE 3.42, TEXAS INSURANCE CODE General remarks and official action taken: Pursuant to the authority granted by Article 3.42, Para- graph (e) of the Texas Insurance Code, the Commissioner of Insurance hereby exempts from the requirements of said Article Policy Form CC-OHDS-2 submitted by Group Life and Health Insurance Company, Dallas, Texas; and this exemption shall remain effective pending further or- ders from the Commissioner of Insurance. To the extent that this exemption order conflicts with Comm:ssioner’s Order No. 29701, dated June 18, 1969, Order No. 29701 is superseded. 67a Official Order No. 30413 of Texas Commissioner of Ins. This exemption order shall also apply to any form, iden- tical in content to Form CC-OHDS-2, delivered, issued or used in this state by any licensed insurer. This exemption order is issued and published for the rea- son that, in the opinion of the Commissioner, Article 3.42 of the Texas Insurance Code may not practicably be ap- plied at this time to the forms covered by the exemption. The exempt forms are described as drug service contracts, which confer upon the policyholder the right to obtain certain prescribed drugs at a cost fixed in the contract, the insurer having entered into participating agreements with dispensing pharmacies to supply the prescribed drugs to its policyholders. The policy forms herein exempt, used in connection with the participating agreements with pharmacies as described above, have raised questions under the Texas anti-trust and anti-monopoly laws, and such questions have been re- ferred to the Attorney General of the State of Texas. Pending such time as these questions are resolved, the exemptions authorized by this Order are granted for the purpose of preventing any competitive advantages which foreign insurance companies, issuing policies outside of Texas but including Texas residents under their coverage, might have over domestic companies seeking to issue equiv- alent policy contracts. /8/ Clay Cotten CLAY COTTEN Commissioner of Insurance Prepared by: /s/ Paul D. Connor PAUL D. CONNOR Assistant to the Commissioner 68a GROUP LIFE AND HEALTH INSURANCE COMPANY DRUG SUPPLEMENT POLICY, DATED OCTOBER 1, 1974 (ATTACHED AS “EXHIBIT F” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS [LoGo] GROUP LIFE & HEALTH INSURANCE CO. (Herein called Blue Shield of Texas) Dallas, Texas has issued this DRUG SUPPLEMENT to the EXPERIENCE RATED GROUP HOSPITALIZATION AND MEDICAL-SURGICAL CONTRACT NO. 34567 issued heretofore or simultaneously herewith, to ABC COMPANY (therewith and herein called the Employer) as of October 1, 1974 (herein called the supplemental contract date) and thereby agrees to provide the additional benefits detailed herein, all in accordance with the conditions and provisions here- of, including those set out on the following pages which are a part of this supplement as fully as if recited over the signatures hereto affixed. This supplement becomes effective on the supplemental contract date, and is issued in consideration of the appli- [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] 69a Group Life and Health Ins. Co. Drug Supplement Policy cation herefor made by the Employer. It will be continued in force subject to the timely payment of premiums here- for, until terminated in accordance with the provisions of the Article captioned “Termination of Drug Coverage.” IN WITNESS WHEREOF, Blue Shield of Texas has caused this supplement to be executed at its Home Office in Dallas, Texas. /s/ Tom L. Beauchamp, Jr. President /s/ (Illegible] Secretary Countersigned : Registrar [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] 70a Group Life and Health Ins. Co. Drug Supplement Policy ARTICLE I—SUPPLEMENTAL DEFINITIONS AS USED HEREIN: A. BASIC CONTRACT means the “Experience Rated Group Hospitalization and Medical-Surgical Con- tract” described on the face page hereof. B. BASIC COVERAGE means the total amount of pro- tection afforded a participant by the basic contract on account of expense incurred for drugs and medi- cines. C. COVERED DRUGS means any Prescription Legend Drug or injectable insulin: (1) which is ordered by a physician; (2) for which a written prescription order is cus- tomarily prepared ; (3) for which a separate charge is customarily made; (4) which is not entirely consumed at the time and place that the prescription order is written; and (5) which is received by the participant while cov- ered hereunder. D. PRESCRIPTION LEGEND DRUG means any me- dicinal substance—the label of which, under the Fed- eral Food, Drug, and Cosmetic Act, as amended, is required to bear the legend: “Caution: Federal Law prohibits dispensing without prescription.” E. DRUG DEDUCTIBLE means the amount to be paid by a participant toward the cost of the initial pur- [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] Tla Group Life and Health Ins. Co. Drug Supplement Policy chase of each covered drug and toward the cost of each refill purchase of each covered drug and for each such purchase and is equal to two dollars ($2.00). F. PRESCRIPTION ORDER means a request for medi- cation by a physician. G. PHARMACY means a licensed establishment where Prescription Legend Drugs are dispensed by a person who is not a practitioner of the healing arts and who is licensed to dispense such drugs under the laws of the state in which he practices. H. PROVIDER means any pharmacy, physician, or any other person or organization legally licensed to dis- pense drugs. I. PARTICIPATING PROVIDER means a provider located in the State of Texas with which Blue Shield of Texas or Group Hospital Service, Inc. of Dallas, Texas, has entered into a written contract for the rendition of covered drugs for which benefits are pro- vided by this supplement, or any provider located outside the State of Texas with which any other Blue Cross or Blue Shield Plan has entered into such a contract. J. NON-PARTICIPATING PROVIDER means a pro- vider who is not a participating provider. ARTICLE II—TERMS AND PROVISIONS A. All definitions, limitations, and provisions recited in the basic contract are hereby adopted and shall be construed to apply in like manner and with equal force to this supplement and any other provisions [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] — ae Wwar'er Tr 72a Group Life and Health Ins. Co. Drug Supplement Policy B. insofar as they are in conflict with provisions herein contained, in which case the provisions of this supple- ment shall govern in any interpretation of rights or obligations accruing hereunder. It is hereby specially declared that the non-duplication provisions set forth in Article V, Section E, of the basic contract are applicable to this supplement ex- cept insofar as they are modified by the provisions of the following subsections: 1. Determination of drug benefits under this supple- ment shall be made in relation to each “claim,” consisting of any combination of charges for cov- ered drugs which are incurred within a calendar year and submitted at one time by or on behalf of a participant to Blue Shield of Texas at his request for payment of drug benefits applicable thereto. 2. When the non-duplication provisions are applica- ble, the benefits of the other coverage and all bene- fits provided under the basic coverage on the items composing the claim shall be deducted from the charges for all such items, and Blue Shield of Texas will pay the remainder; provided, however, that in no event shall these provisions be con- strued to increase the amount of total benefits which would be payable under this supplement on account of such claim in the absence of other coverage. ARTICLE III—BENEFITS A. Subject to the exclusions, limitations, and all other terms and provisions set forth herein, any participant [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] 73a Group Life and Health Ins. Co. Drug Supplement Policy shall be entitled to receive covered drugs from any participating provider as a benefit hereunder and shall be required to pay no more than the drug de- ductible for each of such covered drugs. B. Any participant receiving covered drugs from a non- participating provider shall be entitled to benefits equal to 75% of the result of the reasonable charge for such covered drugs as determined by Blue Shield of Texas, reduced by the drug deductible for such covered drugs; except that for covered drugs received from a non-participating provider located outside of the State of Texas, such participant shall be entitled to benefits equal to 100% of the reasonable charge for such covered drugs, reduced by the drug deducti- ble for each such covered drugs. C. Payment of benefits by Blue Shield of Texas to the provider or to the employee, as Blue Shield of Texas may elect, shall constitute full discharge of all re- sponsibility of Blue Shield of Texas to the employee on account of care rendered to any participant under his coverage. ARTICLE IV—LIMITATIONS AND EXCLUSIONS In addition to the limitations and exclusions stipulated in Article VIII of the basic contract, it is provided that no drug benefit shall be available for any of the following: A. Any charge for a contraceptive medication, even if such medication is a Prescription Legend Drug, and any charge for therapeutic devices or appliances (in- cluding but not by way of limitation, hypodermic needles, syringes, support garments, and other non- medicinal substances) regardless of their intended use; [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] T4a Group Life and Health Ins. Co. Drug Supplement Policy B. F. G. Any charge for services other than Covered Drugs, including administration of a Prescription Legend Drug or injectable insulin; The charge for more than a 34-day supply of a medi- cation, except that Blue Shield of Texas will cover 100 unit doses (e.g. tablet or capsule) of a natural thyroid product and 100 unit doses of nitroglycerine; The charge for any prescription refill in excess of the number specified by the physician, or any refill dispensed after one year from the physician’s order; Covered Drugs for which no charge is customarily made; Covered Drugs to the extent that a benefit is provided therefor under the basic coverage ; Covered Drugs which are not medically necessary. ARTICLE V—TERMINATION OF DRUG COVERAGE A. This supplement and coverage of all participants hereunder shall automatically terminate: 1. When the basic contract is terminated for any reason ; 2. Upon default in payment of supplemental premi- ums, subject to the grace period and reinstate- ment provided for in the basic contract; 3. Upon cancellation of this supplement in any man- ner as specified in the basic contract for cancella- tion thereof. The coverage of any participant under this supple- ment shall automatically terminate when his cover- [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texar! Tba Group Life and Health Ins. Co. Drug Supplement Policy age under the basic contract is terminated, subject, however, to refund of supplemental premiums paid in advance, as therein provided. Under no circumstances shall Blue Shield of Texas be obligated to notify any participant of the termi- nation of this supplement or of his coverage here- under. No conversion privilege afforded a participant under the basic contract shall be deemed to apply to this supplement. ARTICLE VI—GENERAL PROVISIONS DISCLOSURE AUTHORIZATION. In consideration of Blue Shield of Texas having waived a physical examination in connection with the application here- for, the employee on behalf of himself and his cov- ered dependents shall be deemed to have authorized any provider to make available to Blue Shield of Texas information relating to all prescription orders, copies thereof and other records as needed by Blue Shield of Texas. Blue Shield of Texas shall not be liable for any claim or demand for injuries or damage arising out of or in connection with the manufacturing, compounding, dispensing or use of any Prescription Legend Drug or insulin, whether or not covered under this supple- ment. Blue Shield of Texas reserves the right to deny bene- fits for any drug prescribed or dispensed in a manner contrary to normal medical or pharmaceutical prac- tice. [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] 76a LETTER OF TRANSMITTAL OF POLICY TO STATE BOARD OF INSURANCE, DATED SEPTEMBER 23, 1974 (ATTACHED AS “EXHIBIT G” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS GROUP LIFE & HEALTH Insurance Company [Loco] Main at North Central Expressway P. 0. Box 5403 Dallas, Texas 75222 September 23, 1974 Mr. A. W. Pogue, Manager Headquarters Section, Life Division State Board of Insurance 1110 San Jacinto Austin, Texas 78786 Re: MF-1, Experience Rated Group Hospitalization and Medical-Surgical Contract MF-1-DS-1, Drug Supplement MF-1-APP-1, Group Application Blank MF-1-OA-1, Operating Agreement MF-1-IA-1, Insurance Agreement Dear Mr. Pogue: We submit herewith for your approval the above de- scribed new contract forms. We anticipate entering into a health care program agree- ment with the Bexar County Medical Foundation wherein [Approved By Order No. 45511, Oct. 1, 1974, Commissioner of Insurance, State of Texas] 77a Letter of Transmittal of Policy Blue Shield of Texas will provide benefits as set forth in Form Nos. MF-1, Article VII, and MF-1-DS-1 to groups desiring this coverage. The Bexar County Medi- cal Foundation will provide medical-surgical benefits as set forth in a separate contract, a copy of which will be sent to you in a few days for information purposes only. We are also submitting for your approval the operating and reinsurance agreements between Blue Cross and Blue Shield of Texas and the Bexar County Medical Foundation. The attached list indicates our internal stock control numbers used for these various forms. Within the next few weeks we will submit the certificate- booklet and enrollment application card for your ap- proval. We are submitting two copies of each form described above, together with an extra copy of this letter. Will you please stamp the extra copy of each “approved” and return to us for our files. These same forms are being concurrently filed by Group Hospital Service, Inc. If additional information is needed regarding this filing, please call me in order that we may discuss the matter more in detail by telephone. Yours very truly, Group LIFE & HEALTH INSURANCE Co. /s/ Steve G. McDonald STEVE G. MCDONALD SGMcD:je Encs. ec: Mr. Joe Hawkins, Mr. John Holden 78a Letter of Transmittal of Policy 1600-974 1601-974 1602-974 1603-974 1604-974 1605-974 1606-974 1607-974 1608-974 1609-974 1610-974 1611-974 1612-974 1613-974 1618-974 1619-974 1620-974 1621-974 1622-974 1623-974 1624-974 1625-974 1626-974 1627-974 1628-974 1629-974 1630-974 1631-974 1632-974 1633-974 1634-974 1635-974 Face Page Article I Article I Article I Article I Article II Article IT Article II Article III Article IV Article IV Article V Article V Article V Article VII Article VII Article VII Article VIII Article VIII Article IX Article IX Article X Article XI Article XI Article XI Face Page Article I Article II Article ITI Article IV Article V Article VI MF-1, Experience Rated Group Hospitalization and Medical-Surgical Contract (between Blue Cross and Blue Shield and the Group) (Page 2) (Page 3) (Page 4) (Page 2) (Page 3) (Page 2) (Page 2) (Page 3) (Page 2) (Page 3) (Page 2) (Page 2) (Page 2) (Page 3) MF-1-DS-1, Drug Supplement MF-1-APP-1, Group Application Blank 1636-974 1637-974 Page 1 Page 2 79a OFFICIAL ORDER NO. 45511 OF TEXAS COMMISSIONER OF INSURANCE, DATED OCTOBER 1, 1974 (ATTACHED AS “EXHIBIT H” TO AFFIDAVIT OF STEVE G. McDONALD, FEBRUARY 23, 1976) UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS No. 45511 OFFICIAL ORDER of the COMMISSIONER OF INSURANCE of the STATE OF TEXAS AUSTIN, TEXAS Date Oct. 1, 1974 Subject Considered: General remarks and official action taken: On this date came on for consideration by the Commis- sioner of Insurance applications for approval of the forms described herein; and the Commissioner, having found that each of said forms complies with the require- ments of Article 3.42, Texas Insurance Code, as amend- ed, hereby approves each of said forms under authority of the cited statute: Submitted By: Identifying Form Nos : Group Hospital Service, Inc. MF-1 with; Group Life & Health Insurance Company MF-1-APP-1 attached; MF-1-DS-1. This approval is extended for use as the insurer portion of a Group Comprehensive Medical Care Plan and such approval is limited and does not constitute approval of the said form for any other use under the Texas Insurance Code. 80a Official Order No. 45511 of Texas Commissioner of Ins. /3/ Don B. Odum Don B. ODUM COMMISSIONER OF INSURANCE Prepared, recommended and approved by: /s/ Mildred R. Kurt (Mrs.) MiLprRep R. Kurt, Supervisor Health and Group Life Policy Unit Life Division 8la MOTION OF DEFENDANT WALGREEN TEXAS CO. TO DISMISS, FEBRUARY 23, 1976 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION [Caption Omitted in Printing] MOTION OF DEFENDANT, WALGREEN TEXAS CO., TO DISMISS Defendant, WALGREEN TEXAS CO., respectfully moves the Court to dismiss Plaintiffs’ Original Complaint pursuant to Rules 12(b) and 56, Federal Rules of Civil Procedure. 1. This Motion is based on the specific grounds that this Court lacks jurisdiction over the subject matter of the Complaint, all as set out and detailed in the Motion To Dismiss of the principal Defendant, GROUP LIFE AND HEALTH INSURANCE COMPANY, and which grounds are hereby adopted in full by Defendant, WALGREEN TEXAS CO. 2. Defendant, WALGREEN TEXAS CO., in support of this Motion to Dismiss, would adopt in full the argument [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0857%3A03. Public record. Not legal advice.