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Thursday, January 23, 2020

CVS, accused of hiding unused gift cards from Delaware, wins false claims lawsuit

State Court

By Charmaine Little | Oct 3, 2019


WILMINGTON, Del. (Legal Newsline) - CVS Health Corporation and other companies were granted their motion to dismiss after being accused of cheating Delaware out of unredeemed gift cards.

The Superior Court of the State of Delaware granted CVS Health the motion on Sept. 24 against plaintiff-relator William Sean French who, acting on behalf of the state, initiated the qui tam lawsuit via the Delaware False Claims and Reporting Act (DFCRA). 

He alleged that CVS Health Corporation and several other related companies came up with a scheme to swindle the State of Delaware out of money with unredeemed gift cards that CVS Health issued.

French alleged the state was entitled to unredeemed gift cards according to Delaware’s Unclaimed Property Law (DUPL). CVS and the other defendants filed a motion to dismiss, but it was ruled moot following French’s first amended complaint on Oct. 18, 2018. CVS and the other defendants then filed a motion to dismiss the amended complaint.

At stake in the matter are potentially millions of unclaimed dollars. CVS and its affiliates have sold hundreds of millions of dollars in cards since 2003, the lawsuit said, but not all of the money on those cards was used. 

Under DUPL, all money not used after five years is to be transferred to the State Escheator as unclaimed property. French accused CVS and its affiliates of deliberately not transferring the unused money and of conspiring to hide it from the state.

However, French had sued another company previously, making the same argument. The defendants argued that his suit against CVS constituted collateral estoppel, and the court agreed.

“CVS, not French, is correct here," the court said in its ruling. "The doctrine of collateral estoppel ‘prohibits a party who has litigated one cause of action from relitigating in a second cause of action matters of fact that were, or necessarily must have been, determined in the first action.’”

Ultimately, the said doctrine is for cases in which the same issue was raised in both cases and was argued and decided in the first lawsuit, while the determination was vital to a previous judgment.

The court said considering French already raised the same issue in a previous complaint (that CVS Health was not a party in), the defendants have the right to enforce collateral estoppel.

Judge Paul R. Wallace ruled on the case.

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