By Sarah Hogsed
Register News Writer
The former owners of M&M Drug and the pharmacy that currently operates in its old building have won two victories while defending themselves against a lawsuit brought by a national pharmacy chain.
U.S. District Judge Karl S. Forester last month ruled against CVS’s request for a preliminary injunction against Spencer Drugs, which would have shut down the business at 110 Big Hill Avenue in Richmond until the lawsuit was settled.
Spencer Drugs operates under the name Madison Drug at the location.
Also in September, Forester dismissed CVS’s claim of unfair competition against the former owners, John and Mary Ann McKinney, Spencer Drugs and the Louise McCord Wagers Trust, which owns the building.
CVS entered into a contract in May 2011 with the McKinneys to buy M&M Drug’s inventory and prescription files, according to the lawsuit filed in January. The purchase price was “in excess of $1.1 million,” court documents show.
CVS claims it “purchased the goodwill that the McKinney family had established with their customers over the fifty years that it operated M&M Drug,” the suit states.
The McKinneys agreed to not compete, directly or indirectly, with CVS drugstores for a period of 10 years within a 10 mile radius, according to the suit, and in return were paid an additional $200,000.
Madison Drug opened at the location in November 2012 but it is not run by the McKinneys.
CVS alleged that the McKinneys represented that they owned the building, but in fact, the building is owned by the Louise McCord Wagers Trust. The trust was created after the death of John McKinney’s grandmother in 2003 and is overseen by his mother, Eleanor McCord McKinney.
However, the process of discovery after the lawsuit was filed revealed the McKinneys had disclosed documents to CVS that indicated they leased or rented the property from the trust, according to the ruling.
“John Newman, CVS’s Regional Director of Pharmacy Acquisitions, admitted he was told the ‘family’ owned the property, and he incorrectly assumed that meant the McKinneys,” the ruling stated. “... he also admitted that his affidavit stating the McKinneys repeatedly represented that they owned the property at the time they signed the agreement was not a true statement.”
The court ruled that the harm in shutting down Madison Drug without a final decision on whether wrongdoing took place would cause irreparable injury to the business as well as the Wagers Trust, and so the request was denied.
CVS also alleged that Madison Drug used the former business’ name, M&M Drug, in soliciting customers in advertisements and elsewhere. However, the judge noted that CVS’s contract had purchased the use of M&M Drug’s trademarked name for only six months.
The new pharmacy opened Nov. 1, 2012, more than six months after the McKinneys sold M&M Drug’s assets to CVS.
Forester dismissed CVS’s claim of unfair competition. However, the chain’s claims of tortious interference against the defendants remain to be resolved.
Counterclaims against CVS brought by the McKinneys and the Wagers Trust were dismissed at an earlier date, according to court documents. CVS also has moved to drop claims of fraud and negligent misrepresentation against the defendants.
Sarah Hogsed can be reached at email@example.com or 624-6694.