Montana Board of Pharmacy v. Kennedy

October 27 2010

DA 10-0025

IN THE SUPREME COURT OF THE STATE OF MONTANA
2010 MT 227

MONTANA BOARD OF PHARMACY,

Plaintiff and Appellee,

v.

THOMAS E. KENNEDY,
d/b/a CANADIAN CONNECTION,

Respondent and Appellant.

APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. CDV 04-610
Honorable Kathy Seeley, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Thomas E. Kennedy, self-represented litigant; Billings, Montana

For Appellee:

Steve Bullock, Montana Attorney General; Michael L. Fanning,
Annjeanette Lindle; Special Assistants Attorney General;
Helena, Montana

Submitted on Briefs: August 25, 2010

Decided: October 27, 2010

Filed:

__________________________________________
Clerk
W. William Leaphart delivered the Opinion of the Court.

¶1 Thomas E. Kennedy d/b/a Canadian Connection (Kennedy) appeals from the order

of the District Court for the First Judicial District, Lewis and Clark County, denying his

motion for summary judgment and granting summary judgment in favor of the Montana

Board of Pharmacy (the Board). We affirm.

¶2 We consider the following issues on appeal:

¶3 Whether the District Court erred in granting the Board’s motion for summary

judgment, permanently enjoining Kennedy from engaging in the practice of pharmacy or

assisting in the unlicensed practice of pharmacy, in violation of § 37-7-301, MCA, and in

denying Kennedy’s motion for summary judgment seeking dissolution of the preliminary

injunction and reversal of his contempt of court conviction.

FACTUAL AND PROCEDURAL BACKGROUND

¶4 This case arises out of a nearly decade-long battle between the Board and

Kennedy, which has played out in several lawsuits involving multiple business entities.

The earliest legal proceeding involved Rx Depot, Inc. (Rx Depot), a company of which

Kennedy’s wife Sandra was the titular owner, but that Kennedy himself admittedly

operated. Like Canadian Connection, Rx Depot assisted individuals with prescription

drug orders, advising and enabling its customers to order prescription medicines from

low-cost, out-of-state sources, in return for a commission paid by the foreign pharmacy.

In August 2003, District Judge Jeffrey Sherlock of the First Judicial District entered a

preliminary injunction against Sandra Kennedy d/b/a Rx Depot, enjoining Rx Depot from
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continuing business on the grounds that its activities were violative of various provisions

of the Montana Pharmacy Act, § 37-7-101, et seq., MCA (“the Act”). Several months

later, the United States District Court for the Northern District of Oklahoma granted a

preliminary injunction against Rx Depot’s parent company (also named “Rx Depot,

Inc.”), which enjoined all affiliates and d/b/a entities such as Mrs. Kennedy’s. Judge

Sherlock’s injunction was then dissolved, as he concluded that the federal injunction was

binding on Mrs. Kennedy’s Rx Depot franchise, thereby eliminating any threat of

irreparable harm, and also for lack of adequate notice.

¶5 Kennedy subsequently ceased doing business as Rx Depot, but carried on virtually

identical business activities under the new name “Canadian Connection.” The Board

continued its pursuit of Kennedy by filing a new petition seeking to enjoin Canadian

Connection from engaging in its now-familiar prescription drug business. An initial

hearing on the petition for injunctive relief was held in Judge Honzel’s Court in the First

Judicial District in September, 2004, after which Judge Honzel granted the Board’s

petition for injunctive relief. Kennedy was undeterred by the injunction. Canadian

Connection continued business as usual in defiance of Judge Honzel’s order, and

Kennedy even penned a letter to Governor Schweitzer in July of 2007 openly

proclaiming that he was violating the injunction. Far from attempting to fly under the

radar, Kennedy continued to aggressively promote his business, arguing earnestly and

openly for the need for his services as a matter of public policy, and repeatedly asserting

that his activities were outside the Board’s regulatory authority.
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¶6 The Board invited Kennedy to its meetings to discuss his business and seek a

resolution, but Kennedy declined all such invitations on the basis of his continued

position that the Board had (and has) no authority over him as he is not, in the commonly

used sense of the word, a pharmacist. In 2007, the Board served discovery requests on

Kennedy and filed a motion for sanctions on the basis of Kennedy’s continued

disobedience of Judge Honzel’s order. Responding pro se as he had in the initial

proceedings, Kennedy offered up a number of arguments against the motion for

sanctions, and responded to each discovery request seeking information about his

activities at Canadian Connection by invoking his Fifth Amendment privilege against

self-incrimination. After a hearing in January 2009, the Court (now under the Hon.

Kathy Seeley after the retirement of Judge Honzel) issued an order finding Kennedy in

contempt of court for violating Judge Honzel’s preliminary injunction of 2004, imposing

a $4,000 civil penalty and ordering Kennedy to immediately comply with all portions of

the injunction.

¶7 Kennedy appealed the finding of contempt of court to this Court, but we dismissed

his appeal as contempt orders are not appealable except within strictly drawn parameters,

which were not met in this case. Board of Pharmacy v. Canadian Connection, DA 09-

0151. We also declined a writ of supervisory control. Kennedy v. District Court, OP 09-

0366. The parties filed cross-motions for summary judgment in District Court, the Board

seeking to permanently enjoin Kennedy from his business activities, and Kennedy

seeking dissolution of the preliminary injunction and reversal of the contempt of court
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conviction. A hearing was held on the motions for summary judgment in November

2009, after which Judge Seeley issued an order granting the Board’s motion and denying

Kennedy’s. It is from this order that Kennedy appeals.

STANDARD OF REVIEW

¶8 We review a district court’s grant or denial of a motion for summary judgment de

novo. State v. Butte-Silver Bow County, 2009 MT 414, ¶ 17, 353 Mont. 497, 220 P.3d

1115, Goettel v. Estate of Ballard, 2010 MT 140, ¶ 10, 356 Mont. 527, 234 P.3d 99.

Applying the criteria contained in M. R. Civ. P. 56, we determine whether the moving

party has established both the absence of a genuine issue of material fact and entitlement

to judgment as a matter of law. Goettel, ¶ 10, citing Watson v. Dundas, 2006 MT 104,

¶ 16, 332 Mont. 164, 136 P.3d 973, Grimsrud v. Hagel, 2005 MT 194, ¶ 14, 328 Mont.

142, 119 P.3d 47.

¶9 The determination of the existence of genuine issues of material fact “is one that is

not always easily ascertained . . . mere disagreement about the interpretation of a fact or

facts does not amount to genuine issues of material fact.” Gilko v. Permann, 2006 MT

30, ¶ 25, 331 Mont. 112, 130 P.3d 155, quoting Sprunk v. First Bank Sys., 252 Mont.

463, 466, 830 P.2d 103, 105 (1992). Important in the determination is “whether the

material facts are actually disputed by the parties or whether the parties simply interpret

the facts differently.” Sprunk, 252 Mont. at 466, 830 P.2d at 105.

¶10 We review a district court’s findings of fact to determine if they are clearly

erroneous. Goettel, ¶ 11, citing Watson, ¶ 17, Ramsey v. Yellowstone Neurosurgical
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Assocs., P.C., 2005 MT 317, ¶ 13, 329 Mont. 489, 125 P.3d 1091. We review a district

court’s conclusions of law and statutory interpretations for correctness. Signal

Perfection, Ltd., v. Rocky Mt. Bank—Billings, 2009 MT 365, ¶ 10, 353 Mont. 237, 224

P.3d 604.

DISCUSSION

¶11 Kennedy presents numerous issues. As with many pro se litigants, it is difficult to

tell precisely what Kennedy seeks to appeal, as nearly all the findings adverse to

Kennedy in the various District Court cases are contested at some point in his brief.

Nevertheless, it is clear that Kennedy has invested considerable time and effort on the

arguments he advances, and we do not find his principal contentions unclear. Kennedy

appeals the order of the District Court granting summary judgment in favor of the Board,

and denying his motion for reversal of the contempt of court conviction and for

dissolution of the 2004 injunction. We affirm the District Court both with respect to its

grant of summary judgment in favor of the Board, and with respect to its denial of

Kennedy’s motion for summary judgment.

¶12 Whether the District Court erred in finding that there was no issue of material

fact precluding a determination that Kennedy’s business activities were prohibited by

the Act.

¶13 In determining whether the District Court correctly entered summary judgment in

favor of the Board, we consider several sub-issues. First, we consider whether the

District Court’s findings of fact regarding Canadian Connection’s business activities were
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clearly erroneous. We then consider whether the District Court correctly concluded that

these activities fall within the applicable statutory parameters regulating the unlicensed

practice of pharmacy. We conclude with whether the permanent injunction was

appropriately entered through a grant of summary judgment.

¶14 The District Court’s grant of the Board’s motion for summary judgment turned on

its finding that Kennedy was in violation of § 37-7-301, MCA, which provides:

37-7-301. Unlawful practice. Except as provided in 37-7-307 through 37-
7-309, it is unlawful for a person to:
(1) engage in the practice of pharmacy unless licensed by the board; or
(2) assist in the practice of pharmacy unless registered by the board as a
pharmacy technician.

¶15 The “practice of pharmacy” is defined in § 37-7-101(33), MCA, as:

(a) interpreting, evaluating, and implementing prescriber orders;
(b) administering drugs and devices pursuant to a collaborative practice
agreement and compounding, labeling, dispensing, and distributing drugs
and devices, including patient counseling;
(c) properly and safely procuring, storing, distributing, and disposing of
drugs and devices and maintaining proper records;
(d) monitoring drug therapy and use;
(e) initiating or modifying drug therapy in accordance with collaborative
pharmacy practice agreements established and approved by health care
facilities or voluntary agreements with prescribers;
(f) participating in quality assurance and performance improvement
activities;
(g) providing information on drugs, dietary supplements, and devices to
patients, the public, and other health care providers; and
(h) participating in scientific or clinical research as an investigator or in
collaboration with other investigators.

¶16 Kennedy argues that the Board’s motion for summary judgment was improperly

granted because an issue of material fact remains: namely, that he was not “practicing

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pharmacy” or “assisting in the practice of pharmacy.” We observe that Kennedy here

confuses a disputed fact with a conclusion of law. That Kennedy was “practicing

pharmacy” was a legal conclusion reached by the District Court, not an issue of fact, such

as the nature and extent of his business activities. We will not, however, fail to address

the substance of Kennedy’s argument because of this simple (though oft-repeated) error.

From a review of the record, it is apparent that few of the facts are actually in

controversy; rather, Kennedy simply disagrees with their characterization and the

conclusions reached as a result. This is suggested by the fact that this appeal stems from

cross-motions for summary judgment, indicating that Kennedy also believed that there

were no material facts in dispute with respect to the activities carried on by his business.1

Indeed, he says as much in his brief, despite scattered assertions to the contrary:

“[a]ppellant also believes the facts are uncontroverted.”

¶17 The District Court’s order made clear that it relied upon several sources in

constructing the factual record. First, the District Court found convincing the direct

testimony of Rebecca Deschamps, the former executive director of the Board of

Pharmacy, who described her personal experiences visiting Kennedy’s “storefront” place

1
We note here, however, that the filing of cross-motions for summary judgment, by itself, does
not establish that there are no issues of material fact. Rather, applicable rules of civil procedure
“do not bar either party from claiming the existence of issues of fact sufficient to prevent entry of
summary judgment against it, in spite of simultaneous motions for summary judgment by
opposing parties.” Ike v. Jefferson Nat’l Life Ins. Co., 267 Mont. 396, 399, 884 P.2d 471, 474
(1994). A court must therefore “evaluate each party’s motion on its own merits, taking care in
each instance to draw all reasonable inferences against the party whose motion is under
consideration.” Id. at 400, 474, quoting Heublein, Inc., v. United States, 996 F.2d 1455, 1461
(2nd Cir. 1993).
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of business while posing as a prospective customer. Second, the District Court drew an

adverse inference from Kennedy’s invocation of his Fifth Amendment right against self-

incrimination in response to the Board’s discovery requests, which sought in 2007 to

determine more clearly the scope and character of Kennedy’s continued activities. No

less important were Kennedy’s own admissions that he continued to violate the 2004

Order, his descriptions of his business during hearings before the lower court, and the

proper deference accorded by Judge Seeley to Judge Honzel’s findings of fact

accompanying the 2004 order granting a preliminary injunction.

¶18 Kennedy takes issue with an alleged overreliance by the District Court on the

testimony of Mrs. Deschamps, who is of course not an unbiased witness, and who

testified to events occurring three years before the hearing. Kennedy asserts that “based

only on the testimony given at the contempt hearing by a surprise witness, the Court has

judged that Appellant is practicing pharmacy.” He repeats similar assertions throughout.

We find nothing in the record that suggests that the District Court improperly relied upon

Mrs. Deschamps’ testimony, even were it the only source relied upon by the District

Court—but it is manifestly not the only source. As mentioned in the preceding

paragraph, numerous sources contributed to the extensive factual record.

¶19 Kennedy provided the Court with some insight into his business activities in his

direct testimony during the hearing of January 15, 2009, on the Board’s motion to hold

Kennedy in contempt of court for failure to abide by the 2004 Order. During this

hearing, while still strongly disputing the conclusion that his activities fit within the
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statutory description of the “practice of pharmacy,” Kennedy acknowledged that he

routinely consults with patients about prescription medications; has patients fill out

detailed questionnaires inquiring into the patient’s medical history, allergy information,

other prescriptions currently taken, and the like; recommends generic substitutes for

brand-name drugs; discusses the possibility of splitting larger doses of medicine into

smaller doses; “assists Montana consumers to purchase prescription drugs . . . in spite of

[the 2004 injunction]”; arranges for patient counseling by entities unlicensed in Montana;

and promotes his business as a source of prescription medication through promotional

literature and advertising. His testimony largely corroborated Mrs. Deschamps’

description of her experiences.

¶20 We also agree with the District Court that Kennedy’s responses to the Board’s

2007 discovery requests properly support, at the least, a negative inference from the

refusal to answer, if not simply an order that the requests be admitted under M. R. Civ. P.

36(a) and 37(a)(3). We also agree with the Board and the District Court that any

deficiencies in the factual record that are alleged by Kennedy are due in no small part to

his refusal to provide the Board with meaningful responses to the factual inquiries in the

Board’s discovery requests. Instead, Kennedy invoked his Fifth Amendment privilege

against self-incrimination in response to each of the Board’s requests. It is clear that the

privilege was validly asserted, given the criminal penalties imposed by the Act in § 37-7-

323, MCA, but he cannot escape the consequences of his refusal to disclose the facts

surrounding his business activities.
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¶21 It is a general and long-standing principle that “[s]ilence is often evidence of the

most persuasive character,” United States ex rel. Bilokumsky v. Tod, 263 U.S. 149,

153-54, 44 S. Ct. 54, 56 (1923), when “it would have been natural under the

circumstances to object to the assertion in question.” United States v. Hale, 422 U.S.

171, 176, 95 S. Ct. 2133, 2136 (1975). In Baxter v. Palmigiano, 425 U.S. 308, 96 S. Ct.

1551 (1976), the United States Supreme Court explained that “the Fifth Amendment does

not forbid adverse inferences against parties to civil actions” when they claim the

privilege. Baxter, 425 U.S. at 318, 96 S. Ct. at 1558, citing John H. Wigmore, Evidence

in Trials at Common Law vol. 8, § 439 (John T. McNaughton ed., rev ed., Little, Brown

& Co. 1961). Baxter has been widely followed in the Circuit courts, as noted in La Salle

Bank Lake View v. Seguban, 54 F.3d 387, 390 (7th Cir. 1995): “[t]he rule that adverse

inferences may be drawn from Fifth Amendment silence in civil proceedings has been

widely recognized by the circuit courts of appeals . . . in the two decades since Baxter

was decided.” (citations omitted). It has likewise been widely accepted in our own

circuit. See, e.g., Singh v. Gonzalez, 491 F.3d 1019, 1024 (9th Cir. 2007), United States

v. Solano-Godines, 120 F.3d 957, 962 (9th Cir. 1997); see generally Robert Heidt, The

Conjurer’s Circle - The Fifth Amendment Privilege in Civil Cases, 91 Yale L.J. 1062,

1126-32 (1982).

¶22 In addition to the “persuasive character” of silence, an equally important rationale

for the principle of adverse inference is that the opposing party is often greatly

disadvantaged by the inability to obtain discovery. LaSalle, 54 F.3d at 390 n. 4. We find
11
this rationale highly noteworthy here. Had Kennedy simply complied with the Board’s

discovery requests, the alleged overreliance on Mrs. Deschamps’ testimony would have

been avoided.

¶23 We have not addressed Baxter or the principle of adverse inference in our previous

jurisprudence, and are reluctant to dive into unexplored waters in pro se proceedings

without adequate briefing from both parties. We therefore decline to explicitly

incorporate the doctrine here, but we recognize its widely-accepted application. As the

District Court observed, similar principles are codified in our Rules of Civil Procedure

which can be used to much the same end. Immediately after noting the adverse inference

principle in Baxter, Judge Seeley explained that “Rule 36(a) of the Montana Rules of

Civil Procedure also provides authority for the Court to order requests admitted if

meaningful answers are not provided.”

¶24 The rule states in part: “[i]f the court determines that an answer does not comply

with the requirements of this rule, it may order either that the matter is admitted or that an

amended answer be served.” M. R. Civ. P. 36(a). We have repeatedly made use of this

rule and M. R. Civ. P. 37(a)(3) to treat evasive or nonexistent responses to discovery

requests as admissions, and have used the admissions obtained as the basis for summary

judgment. All-States Leasing Co. v. Top Hat Lounge, 198 Mont. 1, 649 P.2d 1250

(1982), followed in Wight v. Gonzalez, 249 Mont. 268, 270, 815 P.2d 598, 600 (1991).

¶25 We also accord due deference to the 2004 Findings of Fact issued by Judge

Honzel, which we conclude are not clearly erroneous. These findings were supported by
12
substantial evidence, the evidence was not misapprehended, and no mistake was

committed. Judge Honzel found that Canadian Connection operates for a fee “paid by

the Canadian pharmacy which fills the prescription,” and that Kennedy provides a form

which is then transmitted to unlicensed pharmacies in Canada, which includes customer

information, a brief medical questionnaire, and a customer agreement.

¶26 We concur with Judge Seeley’s characterization of the factual record in this case

as “extensive,” and with her conclusion that there were no genuine issues of material fact

precluding summary judgment. We now apply the facts to the relevant statutes, in order

to determine whether the District Court correctly concluded that the factual record

establishes that Kennedy’s activities were violative of the Act, thereby entitling the Board

to summary judgment as a matter of law. We review conclusions of law de novo.

¶27 On careful examination of the record before us, we agree with the District Court

that even when viewed in the light most favorable to Kennedy, the facts clearly

demonstrate that he has been engaging in numerous activities defined by statute as the

“practice of pharmacy.” It is clear, for example, that Kennedy has interpreted, evaluated

and implemented prescriber orders, which meets the definition of the “practice of

pharmacy” under § 37-7-101(33)(a), MCA; has provided information on drugs to patients

and the public, which is the “practice of pharmacy” under § 37-7-101(33)(g), MCA; and

has been assisting unlicensed pharmacies in the practice of pharmacy through virtually all

phases of his business model, under any reasonable interpretation of “assist” (which is

not defined in the Act). As it is undisputed that Kennedy has no license to practice
13
pharmacy, his activities fall within the conduct prohibited by the statute. It is not

necessary for this Court to set forth exactly which parts of the definition apply to

Kennedy, as we conclude that the District Court had a number of plausible grounds to

find Kennedy in violation of § 37-7-301, MCA, and correctly did so. We also observe

that in light of this conclusion, we find no merit in Kennedy’s argument that he is not

within the authority of the Board of Pharmacy to regulate under § 37-7-201(2), MCA,

and not subject to injunctive actions as a result, under § 37-1-317, MCA.

¶28 Whether the District Court properly granted a permanent injunction on a

motion for summary judgment.

¶29 We turn to the question of whether the District Court correctly granted a

permanent injunction on summary judgment. Section 27-19-102, MCA, states in part:

27-19-102. When final injunction may be granted to prevent breach of
obligation. Except where otherwise provided . . . a final injunction may be
granted to prevent the breach of an obligation existing in favor of the
applicant where:
(1) pecuniary compensation would not afford adequate relief;
(2) it would be extremely difficult to ascertain the amount of compensation
which would afford adequate relief;
(3) the restraint is necessary to prevent a multiplicity of judicial
proceedings; or
(4) the obligation arises from a trust.

¶30 The District Court found that “pecuniary compensation would not afford the type

of protection the Board’s regulatory statutes are designed to afford the public,” and that a

permanent injunction was necessary to “preclude the multiplicity of proceedings that

have been the hallmark of this case.” It is clear from our prior jurisprudence that

14
summary judgment is an appropriate vehicle for the issuance of a permanent injunction in

the proper circumstances. Virginia City v. Olsen, 2002 MT 176, ¶¶ 15-17, 310 Mont.

527, 52 P.3d 383, Cole v. Flathead County, 236 Mont. 412, 418, 771 P.2d 97, 101

(1989). Where the District Court has clearly outlined the grounds underlying its

summary judgment ruling, a permanent injunction may be properly granted on summary

judgment. We conclude that the District Court correctly did so here.

¶31 Whether the District Court properly denied Kennedy’s motion for summary

judgment.

¶32 We review the denial of a motion for summary judgment de novo. We consider

the evidence in the light most favorable to the Board in determining whether Kennedy is

entitled to judgment as a matter of law on the claims he raises in his motion for summary

judgment. First, Kennedy argues that the issuance of the preliminary injunction was

improper because the Board lacked authority to regulate his activities. Second, Kennedy

seeks reversal of his contempt of court conviction, arguing that the penalty was

improperly applied because his activities are outside the reach of the applicable sections

of the Act. We conclude that the District Court correctly denied Kennedy’s motion for

summary judgment as to both of these contentions, given our conclusion that the Board

was entitled to summary judgment on the issue of whether Kennedy was “practicing

pharmacy” under the Act, placing Kennedy squarely within the Board’s regulatory

authority.

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¶33 Affirmed as to both the grant of the Board’s motion and the denial of Kennedy’s

motion, and remanded to District Court for such action as may be necessary to enforce

the District Court’s January 16, 2009 contempt order.

/S/ W. WILLIAM LEAPHART

We concur:

/S/ MIKE MCGRATH
/S/ JAMES C. NELSON
/S/ JIM RICE
/S/ BRIAN MORRIS

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