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Contract – Pharmacy Management – Counterclaims – Statute of Limitations – Recoupment

Crescent Foods, Inc. v. Evason Pharmacies, Inc. (Lawyers Weekly No. 020-069-16, 18 pp.) (Gregory McGuire, J.) 2016 NCBC 74

Holding: Where defendant’s counterclaim for recoupment – seeking to recover expenses for plaintiff’s pharmacies, equipment and fixture purchases for the pharmacies, and refunds for unused and returned prescription drugs – arises from the same transaction as plaintiff’s claims, i.e., the obligations of each party pursuant to their pharmacy-management contract, defendant’s recoupment counterclaim is not subject to a statute of limitations.

Plaintiff’s motion to dismiss defendant’s counterclaims is granted as to defendant’s counterclaims for an accounting and for unfair trade practices. Otherwise, plaintiff’s motion is denied.

In response to defendant’s recoupment counterclaim, plaintiff asserts the affirmative defense of waiver.

Plaintiff contends that defendant knew of its rights under the parties’ contract but never asserted a right to reimbursement from plaintiff. In addition, each quarter when the gross profits were distributed “Defendant accepted the amounts it received and never repudiated the transactions.”

Plaintiff argues that these facts establish that defendant voluntarily waived its rights to seek recoupment of the expenses it paid. Nevertheless, at this early stage, the allegations in the counterclaim do not, as a matter of law, establish an unconditional or insurmountable equitable waiver defense that warrants dismissal.

Defendant concedes that its accounting counterclaim is based on plaintiff’s allegation that a fiduciary duty existed between the parties. Since the court has concluded that plaintiff failed to allege the existence of such a relationship, the court dismisses defendant’s counterclaim for an accounting.

Defendant’s conversion counterclaim alleges that plaintiff wrongfully retained a $42,498.35 dividend check sent to defendant by North Carolina Mutual Drug Company after the expiration of the parties’ contract.

Defendant has alleged the essential elements of conversion. First, defendant alleges that it was the rightful owner of the funds withheld by plaintiff because the funds were year-end dividends issued to defendant as a shareholder of Mutual Drug. Second, defendant alleges that wrongful conversion occurred when plaintiff retained the dividend payments for its own benefit, which deprived defendant of the use and benefit of the same. Taken as true, such an act by plaintiff denies defendant dominion over, and rights to, its dividend payments.

Plaintiff’s argument that the payment from Mutual Drug was a rebate that was rightfully payable to plaintiff is a fact issue that cannot be resolved on a motion to dismiss under N.C. R. Civ. P. 12(b)(6).

Defendant attempts to repackage its conversion counterclaim as a violation of the North Carolina Unfair and Deceptive Trade Practices Act. There is no alleged deception; plaintiff has conceded that it received the payment and had it in its possession. Defendant alleges no other “egregious, immoral, oppressive, [or] unscrupulous” conduct that would support an unfair trade practices claim.

Since defendant’s conversion counterclaim stands, and since defendant has alleged that “Plaintiff was aware that the dividends retained by the Plaintiff were property of the Defendant and Plaintiff disregarded the right of the Defendant and retained the same with willful and wanton disregard of the rights of the Defendant,” defendant may be able to recover punitive damages.

Motion granted in part and denied in part.

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