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Shepherd v. Costco Wholesale Corp. - 3/8/2021

Arizona Supreme Court holds that a plaintiff is not required to allege bad faith or rebut the good faith presumption in their complaint when asserting a claim of negligent disclosure of medical information and that HIPAA may inform the standard of care in a negligence claim.


A man’s former wife went to the Costco pharmacy to pick up prescription drugs for the man.  In addition to giving her the correct prescription, the pharmacy gave her a prescription medicine the man had repeatedly told the pharmacy he did not want.  The disclosure of this second prescription led to the breakdown of reconciliation efforts between the former spouses.

The man sued Costco on several theories.  Costco moved to dismiss the action based on immunity under A.R.S. § 12-2296 and preemption by HIPAA.  Section 12-2296 provides healthcare providers immunity from liability for damages if they acted in good faith when disclosing medical information pursuant to applicable law.  The Superior Court dismissed the entire complaint with prejudice.  The Court of Appeals affirmed the dismissal except for the man’s claim for negligent disclosure of medical information.

On the issue of immunity under A.R.S. § 12-2296, the Supreme Court held that because a complaint need not anticipate an affirmative defense, a plaintiff does not have to allege bad faith or rebut the good faith presumption of section 12-2296 in their complaint so long as the complaint contains some allegations from which the plaintiff may be able to prove some set of facts showing lack of good faith.

The Supreme Court went on to define good faith for the purposes of section 12-2296.  The Court, adopting the definition of good faith in Ramirez v. Health Partners of Southern Arizona, 193 Ariz. 325 (App. 1998), concluded that a healthcare provider acts in good faith where it acts under an honest belief, without malice or a design to defraud or to seek an unconscionable advantage.

Regarding HIPAA, the Supreme Court held that while HIPAA does not provide a private right of action itself, the act does not prohibit a state law claim for negligent disclosure of medical information, and HIPAA may be used to inform the standard of care in a negligence claim.  Additionally, HIPAA does not undermine the immunity afforded by § 12-2296 because a plaintiff must still rebut by clear and convincing evidence the statutory presumption of good faith.

Justice Montgomery authored the unanimous Opinion; Justices Gould and Beene did not participate. 

Posted by: Bryce Talbot

Posted On: 3/22/2021