ACJK, Inc. v. Humana Pharmacy Solutions, Inc.

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF ILLINOIS
In Re 	)
) 	Case No. 	23-30045
ACJK, Inc., 	)
) 	Chapter 11
Debtor. 	)
___________________________________ )
)
ACJK, Inc., 	)
)
Plaintiff, 	)
v. 	) 	Adv. No. 	25-03009
)
HUMANA PHARMACY 	)
SOLUTIONS, INC., 	)
)
Defendant. 	)
Before the Court is Humana Pharmacy Solutions, Inc.’s Rule 12(c) Motion
for Judgment on the Pleadings. For the reasons set forth herein, the Motion for
Judgment on the Pleadings will be denied.
I. 	Factual Background
ACJK, Inc. (“Debtor”), a corporation that operated a retail pharmacy in
Granite City, Illinois, commenced its Chapter 11 case by filing a voluntary
petition on January 30, 2023. The pharmacy closed nine days before the filing,
and the Debtor’s confirmed Chapter 11 plan is a liquidating plan.
Many of the background facts relevant here are not in dispute. When the
pharmacy 	was 	operating, 	it 	provided 	prescription 	medications 	to 	Medicare
O P I N I O N
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beneficiaries. 	According 	to 	the 	parties, 	Medicare 	beneficiaries 	receive
prescription medication benefits through the Medicare Part D program and,
under that program, Pharmacy Benefit Managers (“PBMs”) administer such
benefits. Humana served as a PBM and entered into a contract with the Debtor’s
franchisor, 	Medicap 	Pharmacies, 	Inc., 	to 	administer 	the 	Debtor’s 	Medicare
transactions. 	Medicap, 	in 	turn, 	delegated 	some 	of 	its 	franchise-related
obligations to Cardinal Health, Inc.
PBMs are compensated by receiving a portion of the proceeds from each
administered 	transaction; 	such 	payments 	are 	called 	Direct 	and 	Indirect
Renumerations Fees (“DIR Fees”). Medicap or Cardinal processed all the Debtor’s
claims for payment from Medicare Part D and offset DIR Fee payments due to
PBMs from the amounts ultimately remitted to the Debtor. In 2015, Medicap
ceased its relationship with the Debtor, but Cardinal continued to perform all
the administrative obligations previously performed by it and by Medicap.
On January 29, 2025, just one day short of two years after the main case
filing, the Debtor filed an adversary complaint against Humana and five other
PBMs. Count I of the complaint sought relief from all defendants asking for an
accounting and turnover of alleged postpetition transfers. The remaining twelve
counts sought to recover alleged prepetition fraudulent transfers from each of
the defendants under both the Bankruptcy Code and Illinois law. This Court’s
predecessor, Judge Laura K. Grandy, set a status on the complaint due to several
concerns. After a hearing held on February 12, 2025, Judge Grandy entered an
order giving the Debtor 21 days to file separate amended complaints in separate
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adversary proceedings against each defendant and requiring that the amended
complaints be signed by the Debtor’s attorney. Judge Grandy found that the
complaint violated Federal Rule of Civil Procedure 20(a)(2) because the claims
against the several defendants did not arise out of the same transaction and
therefore should not have been lumped together in one complaint. She also found
that, in filing the complaint, the Debtor’s attorney violated Federal Rule of Civil
Procedure 11 by not signing the complaint as the attorney of record. Rather, only
the Debtor’s principal had signed the complaint.
The Debtor failed to comply with the order to file separate complaints in
separate 	proceedings 	and 	instead 	filed 	a 	First 	Amended 	Complaint 	that
continued to include all defendants and was signed by the Debtor’s principal and
by an attorney other than the attorney of record who filed it.1 The Debtor also
filed several motions seeking relief from the order for separate filings which were
denied. The Court ultimately ordered that the claims be severed so that there
would be separate adversary proceedings against each defendant and required
the Debtor’s attorney to pay filing fees for each of the severed cases. As a result,
the same First Amended Complaint filed in the original proceeding was docketed
in separate, newly opened proceedings against each defendant.
1 The amended complaint was filed by attorney of record Steve Stanton, but the electronic signature affixed to the
amended complaint belonged to Joseph Bogdan. Mr. Bogdan had been employed as special counsel in the bankruptcy
case to assist the Debtor in the PBM litigation. And although Mr. Stanton filed a notice of appearance in the original
adversary proceeding purportedly on Mr. Bogdan’s behalf, this Court does not recognize appearances entered by proxy
and, in any event, Mr. Bogdan is not shown as an attorney of record in that proceeding or any other. As it stands, it is
entirely unclear what Mr. Bogdan’s role is in this litigation. Despite his electronic signature appearing on several filed
documents alongside Mr. Stanton’s electronic signature, those documents were filed not by him but by Mr. Stanton.
It is not even clear to the Court that Mr. Bogdan is licensed to practice law in the District Court for the Southern
District of Illinois.
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The First Amended Complaint is similar to the original complaint. Count I
seeks an accounting and turnover of avoidable postpetition transfers. Counts
VIII and IX request avoidance under both the Bankruptcy Code and Illinois law
of alleged prepetition fraudulent conveyances made to Humana. The remaining
counts seek relief against other defendants now named in other proceedings and
are not relevant here.
Humana filed a motion to dismiss the amended complaint asserting that
the three counts seeking relief against it failed to state claims upon which relief
could be granted. As to Count I, Humana asserted that the Debtor failed to
identify specific postpetition transfers and therefore also failed to plead that the
transfers were not authorized by the court or by statute. Further, Humana said
that any such transfers made were contractual recoupments of DIR Fees and
could not be recovered as a matter of law. As to Counts VIII and IX, Humana
asserted that any prepetition transfers made were payments on debts owed by
the Debtor to Humana and therefore were made in exchange for reasonably
equivalent value and were not constructively fraudulent as alleged. After the
matters raised in the motion to dismiss were fully briefed and arguments were
heard, Judge Grandy denied the motion to dismiss finding that resolution of the
issues turned on disputed facts rather than solely on matters of law.
After 	denial 	of 	its 	motion 	to 	dismiss, 	Humana 	filed 	an 	answer 	and
affirmative defenses. Shortly thereafter, due to the impending retirement of
Judge Grandy, the case was reassigned to this Court. Humana then filed the
instant Motion for Judgment on the Pleadings.
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In large measure, the Motion for Judgment on the Pleadings is identical to
the previously denied motion to dismiss. As to Count I, Humana again says that
it is deficient because it fails to identify any specific transfers to be recovered.
Humana adds that the Debtor has admitted the validity of the contract allowing
it to charge DIR Fees and that, as a matter of law, it does not matter if the
collection 	of 	the 	fees 	were 	recoupments 	or 	setoffs—neither 	are 	recoverable
transfers. As to Counts VIII and IX, again Humana asserts that any payments
made to it were debt payments and therefore constituted reasonably equivalent
value as a matter of law.
In responding to the Motion for Judgment on the Pleadings, the Debtor
says that “Humana is seeking a second bite at the apple[.]” The Debtor claims
that the issues raised in the Motion were already decided by this Court’s
predecessor. The Debtor also responded to the substantive arguments made by
Humana as to each count. Humana filed a reply asserting that the Debtor had
waived the issue of the preclusive effect of the prior decision denying the motion
to dismiss. Humana also repeated its substantive arguments about each count.
The matter has been fully briefed and is ready for decision.
II. 	Jurisdiction
This Court has jurisdiction over proceedings “arising under title 11, or
arising in or related to cases under title 11” pursuant to 28 U.S.C. §1334. All
bankruptcy cases and proceedings filed in the Southern District of Illinois have
been referred to the bankruptcy judges. SDIL-LR Br1001.1; see 28 U.S.C.
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§157(a). Matters concerning the administration of the estate, proceedings to
determine, avoid, or recover fraudulent conveyances, and other proceedings
affecting the liquidation of the assets of the estate or the adjustment of the
debtor-creditor relationship are core proceedings. 28 U.S.C. §157(b)(2)(A), (H),
(O).
While 	statutorily 	core, 	there 	is 	some 	disagreement 	about 	whether
fraudulent conveyance actions are constitutionally core in the wake of the
Supreme Court’s decisions in Stern v. Marshall, 564 U.S. 462, 493 (2011), and
Executive Benefits Insurance Agency v. Arkinson, 573 U.S. 25, 37-38 (2014).
Compare Maxwell v. United States (In re Horizon Group Mgmt., LLC), 617 B.R. 581,
585 (Bankr. N.D. Ill. 2020) (finding fraudulent transfer action under §548
constitutionally core), with Brandt v. FDIC (In re Equip. Acquisition Res., Inc.), 560
B.R. 501, 504 (Bankr. N.D. Ill. 2016) (finding that state-law fraudulent transfer
claims as well as §548 claims are not constitutionally core). But the prevailing
opinion in this Circuit is that avoidance of fraudulent transfers under §548 are
constitutionally core. In any event, the First Amended Complaint also asserts a
state-law fraudulent conveyance cause of action against Humana which does not
arise exclusively under the Bankruptcy Code and does not strictly arise in a
bankruptcy case, and this Court is therefore exercising “related to” jurisdiction
in this proceeding. Absent consent of the parties, the Court’s authority to enter
final judgment on at least the state-law fraudulent conveyance action is limited.
Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 669 (2015); Exec. Benefits,
573 U.S. at 37-38; Stern, 564 U.S. at 493; 28 U.S.C. §157(c).
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Here, the First Amended Complaint contains generic statements that the
proceeding 	is 	core 	and 	that 	the 	Court 	has 	jurisdiction, 	but 	it 	does 	not
contemplate that one or more of the causes of action asserted might be non-core
and likewise does not affirmatively state that the Debtor consents to entry of a
final judgment by this Court. Nevertheless, there is little question that, in
commencing this proceeding and seeking relief from the bankruptcy court, the
Debtor consents to the Court’s jurisdiction. See Horwitz v. Alloy Auto. Co., 992
F.2d 100, 103 (7th Cir. 1993) (“Silence does not imply consent, but affirmatively
invoking the bankruptcy court’s jurisdiction most assuredly supplies whatever
consent is necessary.”) (citations omitted). Humana, on the other hand, expressly
withheld consent to the entry of final orders in its answer to the First Amended
Complaint. 	Of 	course, 	Humana 	also 	filed 	its 	Motion 	for 	Judgment 	on 	the
Pleadings, but that does not necessarily mean that it now consents to entry of
final orders by the Court. Nor does it matter.
This Court has authority to enter orders on preliminary matters to the
extent they do not constitute a final adjudication on the merits of underlying
causes of action over which the Court does not have constitutional authority to
enter a final order. See Lordstown Motors Corp. v. Hon Hai Precision Indus. Co.
(In re Nu Ride Inc.), 666 B.R. 510, 512 (Bankr. D. Del. 2024). Section 157(c)
expressly authorizes bankruptcy courts to hear non-core but related proceedings
and limits only the courts’ ability to enter final orders or judgment. Denial of a
motion for judgment on the pleadings is an interlocutory, not final, order. Vieira
v. Oleksy (In re Oleksy), 646 B.R. 427, 431 (Bankr. D.S.C. 2022). Because
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Humana’s Motion for Judgment on the Pleadings will be denied, the order
entered here will not be a final order for which consent of the parties is required.
There are thus no jurisdictional impediments to the entry of this Opinion and
the corresponding order.
III. 	Legal Analysis
Having reviewed the filings of both the Debtor and Humana and the record
in this case, it is clear to this Court that the law-of-the-case doctrine controls
the decision here. The issues raised in the Motion for Judgment on the Pleadings
are substantially the same as the issues decided with respect to the motion to
dismiss. Absent compelling circumstances, this Court should not revisit the
issues.
The law-of-the-case doctrine holds that “when a court decides upon a rule
of law, that decision should continue to govern the same issues in subsequent
stages in the same case.” Christianson v. Colt Indus. Operating Corp., 486 U.S.
800, 816 (1988) (relying on Arizona v. California, 460 U.S. 605, 618 (1983)). The
doctrine “establishes a presumption that a ruling made at one stage of a lawsuit
will be adhered to throughout the suit.” Avitia v. Metro. Club of Chicago, Inc., 49
F.3d 	1219, 	1227 	(7th 	Cir. 	1995) 	(citations 	omitted). 	Although 	motions 	to
reconsider interlocutory orders are governed by Rule 54(b), the Seventh Circuit
has made clear that such motions are also governed by the law-of-the-case
doctrine and that reconsideration is authorized only when “there is a compelling
reason, such as a change in, or clarification of, law that makes clear that the
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earlier ruling was erroneous.” Santamarina v. Sears, Roebuck & Co., 466 F.3d
570, 572 (7th Cir. 2006) (citations omitted); Fed. R. Civ. P. 54(b); Fed. R. Bankr.
P. 7054. Generally, the law of the case controls throughout a case “unless the
evidence on a subsequent trial was substantially different, controlling authority
has since made a contrary decision of law applicable to such issues, or the
decision was clearly erroneous[.]” White v. Murtha, 377 F.2d 428, 431-32 (5th
Cir. 1967).
The Debtor raised the law of the case only in the conclusion paragraph of
its response to the Motion for Judgment on the Pleadings by making the
assertion that Humana was “seeking a second bite at the apple on the issue”
that Judge Grandy denied. The Debtor did not develop its argument, did not
specifically refer to the law-of-the-case doctrine, and cited no case law in support
of its position. Humana responded only in a footnote in its reply arguing that the
Debtor had waived the issue by not claiming that the prior decision on the motion
to dismiss had a preclusive effect on the pending Motion. Further, Humana
asserted that even if there was no waiver, there would still be no preclusive effect
because the prior decision was clearly erroneous.
The failure to raise the preclusive effect of a prior order or to cite the law-
of-the-case doctrine can constitute a waiver of the issue. Franchise Tax Bd. of
California v. Hyatt, 587 U.S. 230, 235 n.1 (2019). But courts may also raise the
issue sua sponte. United States v. Anderson, 772 F.3d 662, 669 (11th Cir. 2014).
Courts have an independent interest in the “continuity, finality, and efficiency”
provided by the law-of-the-case doctrine. Id.
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The Debtor raised the law of the case sufficiently to bring it to the Court’s
attention and did not waive the issue. Certainly, it should have developed the
argument and, in not doing so, risked that this Court would not independently
raise 	and 	research 	the 	issue. 	Likewise, 	however, 	Humana 	dismissed 	the
argument in a footnote and thereby also passed on the opportunity to fully brief
the issue. Nevertheless, the doctrine controls the decision here.
It is clear and not disputed that the Motion for Judgment on the Pleadings
raises the same issues as the prior motion to dismiss. Humana’s response to the
argument was not that the Motion for Judgment on the Pleadings raises different
issues. To the contrary, its response was that Judge Grandy’s decision on the
motion to dismiss was clearly erroneous and therefore should not be given
preclusive effect. Having found that Humana is raising the same issues in its
Motion for Judgment on the Pleadings as were previously decided by Judge
Grandy, this Court can deny preclusive effect to her decision only if it finds that
new evidence is being presented, the law has changed, or the prior decision was
clearly erroneous. White, 377 F.2d at 431-32.
Humana makes no argument that any new evidence is available. Judge
Grandy, in denying the motion to dismiss, found that the parties were arguing
facts rather than law. She noted that Humana was insisting that, because it had
a 	contractual 	right 	to 	payment, 	all 	payments 	received 	were 	of 	reasonably
equivalent value while the Debtor was responding by saying that, without an
accounting, it could not know that what it was paid under the contract was
correct. This factual dispute still exists; Humana does not claim otherwise.
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Further, Humana makes no claim that the law has changed on any
relevant issue. Humana does cite to a prior decision by this Court involving the
same Debtor: ACJK, Inc. v. Small Business Financial Solutions, LLC (In re ACJK,
Inc.), 2024 WL 4047140, at *1 (Bankr. S.D. Ill. Sept. 4, 2024). In Small Business,
this Court dismissed fraudulent transfer claims finding that “dollar-for-dollar
credit for payment on a debt is, on its face, reasonably equivalent value.” Id. at
*10. But in Small Business, the amount paid to the creditor was not in dispute
and the decision relied on the Debtor’s admission that it received credit from
Small Business for the payment; the absence of any additional allegations that
might raise a question about the reasonable equivalence of value exchanged was
also a factor in the decision. Id. at *10-11. Here, neither the amounts paid to
Humana nor the amounts owed to Humana at any relevant point are known;
without such information, a dollar-for-dollar analysis cannot be made. Further,
the Debtor alleges that the fees deducted here were “excessive” and at times even
exceeded the amount of the underlying transaction for which they were assessed.
There is therefore a question as to whether reasonably equivalent value was
exchanged. Small Business provides no support to Humana.
Humana’s only serious argument is that the prior order on the motion to
dismiss was so clearly erroneous that it may be disregarded by this Court. In
considering the argument, this Court must be cognizant of the Seventh Circuit
standard for departing from the law of the case when there is a change in
assigned judges. “Litigants have a right to expect that a change in judges will not
mean going back to square one.” Williams v. Commissioner, 1 F.3d 502, 503 (7th
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Cir. 1993). A judge coming into a case midstream cannot alter previous rulings
“merely because [she] has a different view of the law or facts from the first judge.”
Id.
The argument made now is the same as previously made; Humana says it
had a contractual right to payment, that ends the inquiry, and the adversary
case must be dismissed. But this Court agrees with Judge Grandy that, without
knowing what was due and what was paid, it cannot be determined as a matter
of law that Humana was paid only what was owed to it or that the transfers are
not avoidable. The fact that the payments may be in the nature of recoupment
or setoff is not a complete defense, and whether they are indeed unrecoverable
setoffs or recoupments cannot be determined at this stage of the litigation based
on the limited facts in the record. The payment structure among the Debtor,
Cardinal, and Humana, as described in the complaint, was complex and multi-
layered. The Debtor makes a good case that, at a minimum, it is entitled to an
accounting. The fact that it might be able to get information from Cardinal does
not mean that Humana does not have to account for what it received. This Court
cannot 	find 	that 	Judge 	Grandy’s 	prior 	decision 	was 	clearly 	erroneous 	or
erroneous at all. The Motion for Judgment on the Pleadings must be denied.
IV. 	Conclusion
The law-of-the-case doctrine controls here. The prior order denying the
motion to dismiss will not be revisited by this Court under the guise of a Motion
for 	Judgment 	on 	the 	Pleadings. 	Humana 	has 	failed 	to 	provide 	a 	credible
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argument that any of the factors that might allow reconsideration are present
here.
This Opinion is to serve as Findings of Fact and Conclusions of Law
pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
See written Order.
ENTERED: February 20, 2026
/s/ Mary P. Gorman
_________________________________________
UNITED STATES BANKRUPTCY JUDGE
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