Court Dismisses State Law Claims in Lawsuit Against CVS

On Friday, the Southern District of New York granted a request by CVS to dismiss state claims in a lawsuit filed against it for allegedly breaching a contract, infringing copyright, and misappropriation of trade secrets by copying proprietary software developed by Framework, the plaintiff. 

The initial complaint in the matter was filed in February of 2020, it alleged that CVS Health Corporation, CVS Pharmacy Inc., Caremark RX LLC, Procare Pharmacy LLC, and Encompass RX LLC illegally used its software products and tailored them to provide the defendants more profit. The plaintiff, Framework MI Inc., alleged that the defendants acted intentionally and harmed it by using its software to develop a competing system. An amended complaint filed a few months later contained similar allegations.

According to the memorandum and order granting the request, Framework owns the copyright for Cleo Suite, which is a management software for pharmacies. It provides licenses to pharmacies who can then customize the system to their individual preferences. Framework and Encompass RX entered an agreement in 2015, which required Encompass to keep trade secrets and proprietary information confidential. Encompass was purchased by a CVS subsidiary in 2018, around the same time that CVS was in negotiations with Framework for use of its services. 

Framework alleged that CVS dragged out the negotiations in order to gain access to its systems through Encompass, that it accessed the confidential proprietary products, copied them, and used the software for the pharmacies in its network without reaching a deal.

CVS asked the court in a motion filed in September to dismiss the state law claims except the copyright claim, alleging that the state law claims are preempted by the Copyright Act. The court granted this request, ruling that the plaintiff was not able to show how its claims could stand without their reliance on copyright and that the claims were preempted. 

Further, the court determined that the plaintiff’s amended complaint did not sufficiently plead that CVS disclosed information to a third party breaching the contract between Framework and Encompass. The memorandum and order cited additional “infirmities” of the first amended complaint, in addition to the court’s determination that Framework.

The lawsuit will continue to address the plaintiff’s fourth claim alleging copyright infringement under United States law. Framework MI Inc. is represented by Frier & Levitt. CVS and other defendants are represented by Shipman & Goodwin.