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Shepherd v. Costco Wholesale Corp.

Court of Appeals of Arizona, First Division

April 30, 2019

GREG SHEPHERD, Plaintiff/Appellant,
v.
COSTCO WHOLESALE CORPORATION, Defendant/Appellee.

          Appeal from the Superior Court in Maricopa County No. CV2017-052615 The Honorable Aimee L. Anderson, Judge Retired

          Joshua Carden Law Firm PC, Scottsdale By Joshua W. Carden Counsel for Plaintiff/Appellant

          Cavanagh Law Firm, Phoenix By Karen C. Stafford, Cassandra V. Meyer Counsel for Defendant/Appellee

          Presiding Judge Jennifer M. Perkins delivered the opinion of the Court, in which Judge Lawrence F. Winthrop joined. Judge Jon W. Thompson dissented in part and concurred in part.

          OPINION

          PERKINS, JUDGE

         ¶1 Greg Shepherd challenges the dismissal of his complaint against Costco Wholesale Corporation ("Costco") alleging numerous tort claims stemming from Costco's alleged failure to cancel an unwanted prescription and disclosure of the prescription information to his ex-wife. We reverse and remand for further proceedings on Shepherd's negligence and punitive damages claims but affirm the dismissal of his other claims. Further, we hold that HIP A A's requirements may inform the standard of care in a negligence action for wrongful disclosure of healthcare information.

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶2 Because Shepherd appeals from the grant of a motion to dismiss, we state the facts alleged in his operative complaint and must assume they are true for purposes of this appeal. Southwest Non-Profit Housing Corp. v. Nowak, 234 Ariz. 387, 389, ¶ 4 (App. 2014).

         ¶3 Shepherd saw his physician in January 2016 for a check-up and a refill of his usual prescription. During that visit, his physician offered him an erectile dysfunction ("E.D.") medication sample, which he accepted. Shortly thereafter, Costco told Shepherd that his regular prescription and a full prescription of the E.D. medication were ready for pickup. Shepherd told Costco he did not want the E.D. prescription, and Costco acknowledged his cancellation request.

         ¶4 Approximately one month later, Shepherd called Costco to check on another refill of his regular prescription and was told it and a full prescription of the E.D. medication were ready for pickup. Shepherd again told Costco he did not want the E.D. medication.

         ¶5 Shepherd called Costco again the next day to authorize his ex- wife, with whom he was exploring possible reconciliation, to pick up his regular prescription. Costco gave her the regular prescription and the E.D. medication. She did not accept or pay for the E.D. medication but joked with a Costco employee about Shepherd "not picking it up yet" and told Shepherd's children and some friends about the medication. She also stopped reconciliation efforts with Shepherd.

         ¶6 Shepherd complained to Costco headquarters and received a written response that allegedly acknowledged the disclosure of medical information to his ex-wife violated both the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and Costco's privacy policy. Shepherd then sued Costco alleging negligence, breach of fiduciary duty, fraud, negligent misrepresentation, intentional infliction of emotional distress, intrusion upon seclusion, and public disclosure of private facts based on Costco's "public disclosure of an embarrassing medication that [he] twice rejected."

         ¶7 Costco moved to dismiss the complaint. The trial court granted the motion, finding (1) Costco was entitled to immunity from suit under Arizona Revised Statutes ("A.R.S.") section 12-2296, (2) HIPAA preempted the claims, and (3) Shepherd failed to allege sufficient facts to support his claims. Shepherd now appeals.

         DISCUSSION

         ¶8 We review the dismissal of a complaint pursuant to Arizona Rule of Civil Procedure 12(b)(6) de novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). We are required to accept as true all well-pled facts and give Shepherd the benefit of all reasonable inferences arising therefrom. Botma v. Huser, 202 Ariz. 14, 15, ¶ 2 (App. 2002). We will affirm the dismissal only if Shepherd would not have been entitled to relief under any facts susceptible of proof in his complaint. Coleman, 230 Ariz. at 356, ¶ 8.

         I. Negligence

         ¶9 A plaintiff must prove four elements to establish a negligence claim: (1) a duty requiring the defendant to conform to a certain standard of care, (2) the defendant's breach of that standard, (3) a causal connection between the defendant's conduct and the resulting injury, and (4) actual damages. Quiroz v. ALCOA Inc., 243 Ariz. 560, 563-64, ¶ 7 (2018).

         ¶10 In his complaint, Shepherd alleged Costco's duty of care arose from "the regulations governing pharmacy conduct, HIPAA laws, and Costco's own privacy policy." On appeal, he again contends Costco violated HIPAA and A.R.S. §§ 12-2291 to -2297.

          A. Statutory Authorization

         ¶11 Under Arizona law, "all medical records and payment records, and the information contained in medical records and payment records, are privileged and confidential." A.R.S. § 12-2292(A). But this information may be disclosed "without the written authorization of the patient or the patient's health care decision maker as otherwise authorized by state or federal law, including [HIPAA] privacy standards." A.R.S. § 12-2294(C). HIPAA, in relevant part, allows covered entities such as Costco to "disclose to . . . any . . . person identified by the individual, the protected health information directly relevant to such person's involvement with the individual's health care." 45 C.F.R. § 164.510(b)(1)(i).

         ¶12 Here, Costco disclosed the E.D. prescription to Shepherd's ex- wife, whom he had expressly authorized to receive prescription information. Shepherd contends HIPAA only authorizes the disclosure of "filled prescriptions," but even assuming Shepherd's contention is correct, the E.D. prescription was filled, albeit erroneously.

         ¶13 Shepherd also contends he objected to such disclosure when he requested that the E.D. prescription be cancelled but he bases this contention on a HIPAA provision that applies only to disclosures that take place in the presence of the patient. 45 C.F.R. § 164.510(b)(2)(ii). The portion of the relevant regulation addressing disclosures made when the individual is not present grants covered entities such as Costco the ability to use professional judgment to reasonably infer the individual's best interest in allowing another to act on his behalf to pick up filled prescriptions. 45 C.F.R. § 164.510(b)(3). Costco did not need to exercise such ...


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