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Cincinnati Insurance Co. v. Richie Enterprises LLC

United States District Court, W.D. Kentucky, Bowling Green Division

March 4, 2014



JOSEPH H. McKINLEY, Jr., Chief District Judge.

This matter is before the Court on two dispositive motions: (1) the motion for declaratory judgment [DN 21] of Plaintiff Cincinnati Insurance Company ("Cincinnati"); and (2) the summary judgment motion [DN 20] of Defendant Richie Enterprises, LLC ("Richie"). Fully briefed, this matter is ripe for decision. For the following reasons, Cincinnati's motion for declaratory judgment [DN 21] is DENIED and Richie's summary judgment motion [DN 20] is GRANTED in part and DENIED in part.


Richie is a pharmaceutical drug distributor incorporated in Kentucky. On June 26, 2012, the State of West Virginia, through its Attorney General ("AG"), sued Richie and twelve other pharmaceutical drug distributors, alleging that they illegally distributed controlled substances by supplying physicians and drugstores with drug quantities in excess of legitimate medical need. (See Compl. [DN 20-2] ¶¶ 2-3.) According to the AG, Richie and the other drug distribution companies became an integral part of the "pill mills" in West Virginia. (Id. ¶ 4.) The AG thus states that they are liable for the harms caused to the State of West Virginia. (Id. ¶ 2.)

In the West Virginia complaint, the AG asserts eight causes of action against Richie and the other drug distribution companies. In Count I, the AG alleges that the defendants violated the state's Uniform Controlled Substances Act since they "failed to diligently respond to suspicious orders which the [d]efendants have filled" and "failed to provide effective controls and procedures to guard against diversion of controlled substances in contravention of West Virginia law." (Id. ¶ 16.) The AG alleges that through these failures, the defendants "willfully and repeatedly violated the Uniform Controlled Substances Act and corresponding regulations." (Id. ¶ 17.)

In Count II, the AG alleges that the defendants "willfully turned a blind eye towards the actual facts by regularly distributing large quantities of controlled substances to customers" and "negligently acted with others to violate West Virginia's drug laws...." (Id. ¶ 26.) Further, the AG alleges that the defendants are liable for "their negligence and by their reckless disregard of the customs, standards and practices within [d]efendants' own industry." (Id. ¶ 28.) In Count III, the AG alleges that the defendants violated the state's Consumer Credit and Protection Act by engaging in unfair or deceptive acts or practices in the conduct of trade or commerce. (Id. ¶¶ 29-35.) The AG further alleges that these violations "were and are willful." (Id. ¶ 36.)

In Count IV, the AG alleges that the defendants created a public nuisance by engaging in a pattern of distributing controlled substances well-known to be abused "in such quantities and with such frequency that the defendants knew or should have known that these substances were not being prescribed and consumed for legitimate medical purposes." (Id. ¶ 42.) In Count V, the AG alleges that the defendants "have been enriched unjustly by neglecting its duty of distributing drugs only for proper medical purposes...." (Id. ¶ 49.)

In Count VI, the AG alleges a negligence claim against the defendants, stating that they had and breached "a duty to exercise reasonable care in the marketing, promotion and distribution of controlled substances." (Id. ¶¶ 52-53.) In addition, the AG alleges that the defendants "were negligent in failing to guard against third-party misconduct, i.e. the conduct of the so-called pill mill' physicians and staff as well as corrupt pharmacists and staff and, in fact, by their actions the [d]efendants participated in such misconduct." (Id. ¶ 55.) The AG alleges that the defendants were negligent "in not acquiring and utilizing special knowledge and special skills that relate to the dangerous activity in order to prevent and/or ameliorate such distinctive and significant dangers." (Id. ¶ 58.) Further, the AG alleges that the defendants "breached their duty to exercise the degree of care, prudence, watchfulness, and vigilance commensurate to the dangers involved in the transaction of its business." (Id. ¶ 59.)

In Count VII, the AG seeks a court-approved medical monitoring program for prescription drug users in West Virginia to aid in diagnosis, treatment, and research. (Id. ¶¶ 61-66.) Finally, in Count VIII, the AG alleges violations of the state's Antitrust Act. According to the AG, the defendants conspired with pill-mill physicians and pharmacists to restrain and monopolize trade, resulting in a restraint of trade (or having an anti-trust competitive effect on trade) by seeking to gain an advantage over law-abiding, careful wholesale distributors. (Id. ¶¶ 67-74.)

Once it was named as a defendant in the West Virginia lawsuit, Richie sought insurance defense from Cincinnati under its commercial general liability policy ("CGL policy"). Cincinnati, however, refused to provide Richie with a defense after concluding that West Virginia's claims against Richie do not fall within the CGL policy's limits. Cincinnati then filed this declaratory judgment action, seeking the Court's declaration that it has no duty to either defend or indemnify Richie with respect to the West Virginia action.

This matter is now before the Court because Cincinnati has filed a motion for declaratory judgment. In this motion, Cincinnati essentially seeks summary judgment on its declaratory claim. Richie has responded to Cincinnati's motion. Also, Richie has filed its own summary judgment motion. The Court will consider the parties' motions below.


Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying that portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48 (1986).

Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party must do more than show that there is some "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586 (1986). The Federal Rules of Civil Procedure require the non-moving party to present specific facts showing that a genuine factual issue exists by "citing to particular parts of materials in the record" or by "showing that the materials cited do not establish the absence... of a genuine dispute[.]" Fed.R.Civ.P. 56(c)(1). "The mere existence of a scintilla of evidence in support of the ...

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