PONSOR, District Judge.
This is an action in ten counts by a Connecticut dentist against various corporate entities and individuals, charging that he was unlawfully terminated based upon his reporting legal and ethical violations.
Defendants filed a Motion to Dismiss directed at all ten counts, which was referred to Magistrate Judge Kenneth P. Neiman for report and recommendation.
On May 12, 2010, Judge Neiman issued his Report and Recommendation, to the effect that Counts VI, VII, IX and X should be dismissed, but the motion should be denied as to the remaining six counts. The conclusion of the Report and Recommendation admonished the parties at n. 3 that any objection to the Report and Recommendation would need to be filed within fourteen days. No objection has been filed.
Based on the merits of the Report and Recommendation and the absence of any objections, the court, upon de novo review, hereby ADOPTS the Report and Recommendation (Dkt. No. 33). The court hereby ALLOWS Defendant's Motion to Dismiss (Dkt. No. 26) with regard to Counts VI, VII, IX, and X, and otherwise DENIES the motion.
It is So Ordered.
NEIMAN, United States Magistrate Judge.
In a lengthy, ten-count complaint (spanning over 200 paragraphs), Patrick Dermesropian, D.D.S. ("Plaintiff")—a Connecticut dentist who practiced in both Illinois and Massachusetts—contends that certain individuals and entities—Dental Experts, LLC d/b/a Dental Dreams, LLC (hereinafter "Dental Dreams Illinois"); Dental Dreams LLC (hereinafter "Dental Dreams Massachusetts"); Field of Dreams Dental Management, LLC (hereinafter "Dental Dreams Management"); Sameera Hussain, D.D.S. ("Dr. S. Hussain"); Khurram Hussain ("K. Hussain"); Peter Stathakis ("Stathakis"); and David Wolle ("Wolle") (together "Defendants")—unlawfully fired him because he reported legal and ethical violations.
In particular, Plaintiff alleges that his termination violated Massachusetts' healthcare whistleblower statute, Mass. Gen. L. ch. 149, § 187 (Count I) and a similar Illinois law, 740 Ill. Comp. Stat. § 174/1 et seq. (Count II); constituted retaliatory discharge (Count III); and breached his employment contract (Count IV) as well as the implied covenants of good faith and fair dealing contained therein (Count V). Plaintiff also alleges that some or all Defendants tortiously interfered with his contract or contractual relations (Counts VI through VIII); violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. (Count IX); and engaged in a RICO conspiracy in violation of 18 U.S.C. § 1962(d) (Count X).
Defendants have moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss all ten counts for failing to state claims upon which relief may be granted. For the reasons described below, the court will recommend that the motion be allowed with regard to the tortious interference claims targeting Dental Dreams Illinois and Dental Dreams Massachusetts (Counts VI and VII) as well as the RICO claims (Counts IX and X). As for the other six counts, however, the court will recommend that Defendants' motion be denied.
When faced with a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must accept the allegations of the complaint as true, drawing all reasonable inferences in favor of the plaintiff. See Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994); Coyne v. City of Somerville, 972 F.2d 440, 443 (1st Cir.1992). The Supreme Court has held, however, that only a complaint that "state[s] a claim to relief that is plausible on its face" will survive a motion to dismiss. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).
For present purposes, the following background comes directly from Plaintiffs First Amended Verified Complaint and Demand for Jury Trial (cited as "Compl."). The facts and all reasonable inferences are stated in a light most favorable to Plaintiff, the party opposing dismissal. Young v. Lepone, 305 F.3d 1, 8 (1st Cir.2002).
Section eight of the Contract, titled "Termination," specified a number of conditions under which it could be terminated within the first year, including: (1) by either party, "for any reason upon one hundred twenty . . . days prior written notice"; (2) "[b]y written agreement of both parties"; or (3) "[i]f [Plaintiff] has breached the terms of [the Contract]." (Compl. ¶ 54.) Section eight also contained other provisions relating to violation of regulations or a failure to perform diligently. (Id.)
The Contract also provided that it would automatically renew each year for an additional one-year term unless either party provided one hundred twenty days written notice to the other party of his or its intent not to renew. (Compl. ¶ 54.) Finally, the Contract indicated that it was to be construed according to Illinois law. (Id.)
Plaintiff alleges in the Complaint that, in 2007, while working in Illinois, he observed another dentist falsifying procedure dates (essentially stating that procedures done in 2007 were performed in 2008) in order to facilitate reimbursement by the patient's insurance carrier. (Compl. ¶¶ 36-37.) Although Plaintiff reported the perceived misconduct to Dental Dreams Management and Wolle, no discipline was undertaken. (Compl. ¶¶ 39-44.) Plaintiff also reported this same dentist for "bribing" a receptionist to assign him the most desirable patients. (Compl. ¶¶ 48-49.) In response, Wolle instructed Plaintiff to ignore that misconduct too. (Compl. ¶ 50.)
Plaintiff also alleges that, while working in Springfield, he observed many more "improper practices," including the following:
(Compl. ¶ 60(a)-(c), (h)-(j).) Furthermore, Plaintiff alleges that Defendants threatened to discharge dentists who refused to comply with directives by the managers, even after a refusing dentist voiced his concerns regarding improprieties. (Compl. ¶ 68(d).) Plaintiff also asserts that Defendants told him to be "more aggressive" in his treatment plans, but that he refused to do so because he felt that they were pushing unethical behavior. (Compl. ¶¶ 71, 72.)
In September and October of 2008, Plaintiff reported a number of his concerns to the managers and Dr. S. Hussain. (Compl. ¶ 76.) The managers, however, advised Plaintiff that, in order to preserve his employment, he should "simply follow instructions." (Compl. ¶ 77.) Thereafter, when Plaintiff inquired about having received a payment for a service not yet provided, he was again told not to interfere. (Compl. ¶¶ 79, 80.)
Plaintiff also claims that he was not paid for all of his services because of Defendants' repeated failure to attempt to collect outstanding patient balances in good faith. (Compl. ¶¶ 137-38.) He also describes incidents where payments for his services were below the contract rate because the patient had reached the insurance limit for the year or because the patient's insurance had been exhausted by "unnecessary treatment." (Compl. ¶¶ 66, 67.) Plaintiff also describes Defendants' billing practices as being structured in such a way that the Internal Revenue Service ("IRS") believed that money retained by Defendants was actually being paid to dentists, including Plaintiff. (Compl. ¶ 95.) As a result, Plaintiff claims he was subjected to an IRS audit which resulted in a loss of compensation, emotional harm, and other damages. (Compl. ¶ 96.) In any event, on October 7, 2008, five weeks after Plaintiff began working in Massachusetts, Defendants terminated his employment without notice. (Compl. ¶ 87.)
As indicated, Plaintiff alleges that his termination breached the express and implied terms of the Contract, implicated a number of torts, and triggered statutory remedies under Illinois, Massachusetts, and federal law. Addressing the causes of action essentially in the order they appear in the complaint, the court will recommend that Defendants' motion to dismiss be allowed with respect to two of the tortious interference claims (Counts VI and VII) as well as the RICO claims (Counts IX and X) but that the motion be denied with respect to the other causes of action.
Defendants first argue that Plaintiff's claim under Massachusetts' healthcare whistleblower statute, Mass. Gen. Laws ch. 149, § 187 (Count I), cannot be based on alleged instances of financial fraud (see, e.g., Compl. ¶¶ 60, 68, 73 and 81) but only on allegations posing a direct risk to public health.
Defendants next argue that the Illinois Whistleblower Act, 740 Ill. Comp. Stat. § 174/1 et seq., the basis of Count III, does not have an "extraterritorial" effect and, therefore, cannot apply to Plaintiffs employment in Massachusetts which began on September 1, 2008. See Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801, 852 (Ill. 2005) (recognizing "the long-standing rule of construction in Illinois which holds that a `statute is without extraterritorial effect unless a clear intent in this respect appears from the express provisions of the statute'") (quoting Dur-Ite Co. v. Industrial Comm'n, 394 Ill. 338, 68 N.E.2d 717, 722 (Ill.1946)). Again, however, the court need not resolve the issue since numerous allegations (e.g., Compl. ¶¶ 36-44) focus solely on Illinois where Plaintiff lived and worked for at least one year prior to his transfer to Massachusetts. See also Avery, 296 Ill.Dec. 448, 835 N.E.2d at 854. ("recogniz[ing] that there is no single formula or bright-line test for determining whether a transaction occurs within [Illinois]" and that "each case must be decided on its own facts"). Accordingly, the court will recommend that Defendants' motion with respect to Count II be denied as well.
Defendants argue that Plaintiff was an "at-will" employee and, hence, cannot sue for breach of contract (Count IV) or breach of the implied contractual covenants of good faith and fair dealing (Count V). See Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1444-45 (7th Cir. 1992) (because an at-will employee under Illinois law can have no reasonable expectation that he will not be terminated, an employer has no responsibility under the covenant of good faith and fair dealing to refrain from firing an at-will employee).
As an initial matter, it appears clear from the facts alleged that Plaintiff was not an at-will employee since he signed a contract and was subject to its provisions. To be sure, as Defendants argue, Illinois law provides that "[c]ontracts of indefinite duration are terminable at the will of either party." Jespersen v. 3M Co., 183 Ill.2d 290, 233 Ill.Dec. 306, 700 N.E.2d 1014, 1016 (Ill.1998) (citing Duldulao v. St. Mary of Nazareth Hosp. Ctr., 115 Ill.2d 482, 106 Ill.Dec. 8, 505 N.E.2d 314, 317 (Ill.1987) ("Nearly all courts agree on the general rule, that an employment relationship without a fixed duration is terminable at will by either party.")). Here, Defendants argue, the Contract governing Plaintiffs work in Massachusetts was of "indefinite duration" and, therefore, the "Jespersen" rule vitiates his contract-based causes of action under Illinois law.
The court, however, disagrees. For one thing, the rule outlined in Jespersen "applies only if both the contract's duration and the manner in which the contract can be terminated are uncertain." Riverside Mktg., LLC v. SignatureCard, Inc., 425 F.Supp.2d 523, 531 (S.D.N.Y. 2006) (applying Illinois law) (emphasis added). While "perpetual contracts are disfavored," the Riverside court explained, such contracts are not terminable at-will where an objective event triggers termination, and an event is objective when it "has the effect of making the contract sufficiently definite in duration." Id. (citations and internal quotation marks omitted). In other words, "[a]n agreement without a fixed duration but which provides that it is terminable only for cause or upon the occurrence of a specific event is in one sense of indefinite duration, but is nonetheless terminable only upon the occurrence of the specified event and not at will." Jespersen, 233 Ill.Dec. 306, 700 N.E.2d at 1016 (emphasis added).
In the instant case, the Contract contains language making it renewable. See Lake Forest Acad. v. Am. Language Acad., 777 F.Supp. 610, 617 (N.D.Ill.1991) (holding that renewable contract is "neither terminable at will nor void for having the possibility of perpetual duration" solely from the renewal clause). However, the Contract is also terminable upon Plaintiffs material breach or upon one hundred twenty days notice. See Bell Enterprises Venture v. Santanna Natural Gas Corp., 2001 WL 1609417, at *3 (N.D.Ill.Dec.12, 2001) (distinguishing Jespersen to hold that "a contract of definite duration, which also grants the parties an unfettered right to terminate" is not terminable at-will) (emphasis in original). In short, because the Contract explicitly provides for termination upon the occurrence of specific, objective events, Plaintiff is not an at-will employee as Defendants suggest. Accordingly, the court will recommend that Defendants' motion with respect to Counts IV and V be denied.
Assuming that Plaintiff was an at-will employee, Defendants also argue that Plaintiffs retaliatory discharge cause of action (Count III) must be dismissed because he fails to cite "a clearly established public policy" that was offended by his termination. King v. Driscoll, 418 Mass. 576, 638 N.E.2d 488, 492 (Mass.1994) ("[W]e have recognized that an at-will employee has a cause of action for wrongful termination only if the termination violates a clearly established public policy."). Because this court finds no merit in Defendants' at-will argument, however, it will
The complaint also includes three separate claims alleging tortious interference with contractual relationships: that Dental Dreams Illinois tortiously interfered with Plaintiffs contractual relationship with Dental Dreams Massachusetts (Count VI); that Dental Dreams Massachusetts tortiously interfered with Plaintiffs contractual relationship with Dental Dreams Illinois (Count VII); and that Dental Dreams Management, along with the managers, tortiously interfered with Plaintiffs contractual relationship with both Dental Dreams Illinois and Dental Dreams Massachusetts (Count VIII). For the reasons that follow, the court will recommend that the motion to dismiss be allowed as to Counts VI and VIII, but denied as to Count VIII.
Counts VI and VII can be dealt with in short order. "[T]o prevail on a tortious interference claim, a plaintiff must demonstrate (1) that [he] had a business relationship, (2) that the defendant knew of this relationship, (3) that the defendant intentionally and maliciously interfered with the relationship, and (4) that the defendant's actions harmed [him]." Zimmerman v. Direct Fed. Credit Union, 262 F.3d 70, 75-76 (1st Cir.2001). An employee, however, may not "sue [his] employer for interfering with its own contract." Id. at 76. This reasoning has been expanded to bar a tortious interference claim between entities within a partnership. See Kunelius v. Town of Stow, 2008 WL 4372752, at **5-6 (D.Mass. Sep. 23, 2008) (citing cases).
In the instant case, the complaint alleges that Dental Dreams Illinois "owns and operates all of the nationwide Dental Dreams clinics through one or more locally-licensed dentists at each one of its locations." (Compl. ¶ 8 (emphasis added).) The complaint further asserts that Dental Dreams Illinois "is a provider of dental services with dental clinics and billing offices in northern Illinois, Texas, Massachusetts, Pennsylvania and Connecticut." (Compl. ¶ 6 (emphasis added)). The complaint also assumes that Dental Dreams Illinois is responsible for managing Dental Dreams Massachusetts. Because of this close relationship, Dental Dreams Illinois cannot have tortiously interfered with Plaintiffs contractual relationship with Dental Dreams Massachusetts, or vice versa. As a result, the court has little choice but to recommend that Defendants' motion with respect to Counts VI and VII be allowed.
Defendants argue that the same rule should be applied to Count VIII—the tortious interference claim targeting Dental Dreams Management and the managers— since they "maintained control" over both Dental Dreams Illinois and Dental Dreams Massachusetts. The court disagrees.
Ordinarily, "a defendant-supervisor is entitled to a qualified privilege in an employment-based tortious interference case." Zimmerman, 262 F.3d at 76. Within Massachusetts, however, "the privilege is not sacrosanct." Id. Rather, "proof of actual malice" can show "that a supervisor was not acting on the employer's behalf"
Here, Count VIII alleges facts sufficient to state a claim of tortious interference that is plausible on its face. Specifically, the complaint alleges that the managers—and by extension Dental Dreams Management—threatened Plaintiff with termination unless he followed unethical or illegal instructions. (Compl. ¶ 77.) From this a factfinder could infer that Plaintiff, in fact, was fired in retaliation for not following such instructions. And, as mentioned, such retaliation may indicate malice sufficient to a tortious inference cause of action against the managers and, by extension, Dental Dreams Management. Accordingly, the court will recommend that the motion to dismiss with respect to Count VIII be denied.
Finally, Defendants argue that Plaintiff has not met his burden of establishing standing, let alone any of the required elements, with regard to the two RICO claims (Counts IX and X). This court agrees with Defendants' standing argument and, accordingly, will recommend dismissal of Counts IX and X.
To succeed in a civil RICO action, a plaintiff must establish "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (citations omitted). Moreover, "if the pleadings do not state a substantive RICO claim upon which relief may be granted, then the conspiracy claim also fails." Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 21 (1st Cir.2000). Even more fundamentally, however, a plaintiff must demonstrate that he has standing to bring his RICO-based causes of action. See Sedima, 473 U.S. at 496, 105 S.Ct. 3275.
According to the Supreme Court, a RICO "plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation." Id. See also Willis v. Lipton, 947 F.2d 998, 1000 (1st Cir.1991) ("A plaintiff enjoys standing under section 1964(c) only if he can demonstrate (1) a violation of section 1962, and (2) harm `by reason of the violation." (quoting Sedima, 473 U.S. 479, 495-96, 105 S.Ct. 3275)); In re Actimmune Mktg. Litig., 614 F.Supp.2d 1037, 1053 (N.D.Cal.2009) (holding, post Iqbal, that a plaintiff is required to plead "an ascertainable loss that is in direct relation to the alleged fraudulent conduct."). Also, "[m]ere `cause in fact' is insufficient to confer RICO standing . . . since section 1964(c) establishes a proximate cause requirement as well." Willis, 947 F.2d at 1000. And, "[a]lthough the pleadings should generally be construed liberally, a greater level of specificity [has always been] required in RICO cases." Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 443 (1st Cir.2000) (citing inter alia, Garita Hotel Ltd. Pshp. v. Ponce Fed. Bank, F.S.B., 958 F.2d 15, 17 n. 1 (1st Cir.1992)).
Here, Plaintiff alleges several injuries caused by RICO predicate acts, i.e., that (1) he was terminated in violation of RICO, (2) he was denied payment for treating
Plaintiff first alleges that his termination is itself an injury suffered as a direct result of a RICO predicate act. Lost employment, however, may not to give rise to a RICO cause of action when the predicate act itself did not cause the dismissal. Willis, 947 F.2d at 1000-01. See also Pujol v. Shearson/American Express, Inc., 829 F.2d 1201, 1205 (1st Cir. 1987) (holding that termination meant to prevent employee from reporting RICO predicate acts did not convey standing under section 1964(c)); Nodine v. Textron, Inc., 819 F.2d 347, 349 (1st Cir.1987) (holding that termination of employee in retaliation for his reporting RICO predicate acts, while wrong, did not violate RICO).
Second, Plaintiff alleges that, "at least once," he was denied payment for treating patients whose insurance had been exhausted by other dentists' fraudulent billing practices. Whenever "fraud" is alleged, however, "a party must state with particularity the circumstances constituting fraud." Fed. R. Civ. P 9(b). Plaintiff's generic assertions—that on an unspecified number of occasions (at least once), during an undisclosed time period, with unnamed patient(s), he had not received full compensation for his services causing undisclosed monetary injury— meet neither the pleading standards of Iqbal nor the heightened pleading requirements of Rule 9(b), at least for RICO purposes. See Bessette, 230 F.3d at 443. See also Overton v. Torruella, 183 F.Supp.2d 295, 302 (D.Mass.2001) ("When RICO violations are alleged, `particular care is required to balance the liberality of the Civil Rules with the necessity of preventing abusive or vexatious treatment of defendants.'") (quoting Miranda v. Ponce Federal Bank, 948 F.2d 41, 44 (1st Cir. 1991)).
Third, Plaintiff alleges that Defendants' fraudulent billing practices led to his being investigated by the IRS, causing him to lose money and time defending himself. As indicated, however, in order to provide standing for a civil RICO action, the predicate act must be more than a mere "but for" cause of the injury; it must also be the proximate cause. Willis, 947 F.2d at 1000. Plaintiff has not made that allegation. Moreover, like his other fraudbased assertion, Plaintiff has neither pled with specificity what billing practice led to his garnering IRS attention nor provided any details pertaining to when this billing practice was in effect, when he was forced to defend himself, and how much time or money was spent on his defense. See also Miranda, 948 F.2d at 44; Overton, 183 F.Supp.2d at 302; Fed. R. Civ. P. 9(b).
Fourth, Plaintiff argues that he has "stated a claim for extortion (or, at least, attempted extortion)," in that he was pressured to give up certain "intangible rights" in order to retain his contractual rights. Unfortunately for Plaintiff, however, the attempted extortion was not successful because he neither participated in the alleged fraudulent behavior nor ceased to report said fraudulent behavior to management. (Compl. ¶¶ 83-85.). As a result, Plaintiff was not forced to give up any of his "intangible rights" and, therefore, could not have been injured by any attempted extortion for RICO purposes. See Camelio v. American Fed'n, 137 F.3d 666, 670-71 (1st Cir.1998) (extortion attempts intending to rob plaintiff of "property
Fifth and finally, Plaintiff alleges that he was emotionally injured because of predicate acts. However, "claims for personal injuries, such as emotional distress... are not cognizable under RICO." Zareas v. Bared-San Martin, 209 Fed.Appx. 1, 2 (1st Cir.2006) (citing Martin v. Fleet Nat'l Bank, 676 F.Supp. 423, 432 (D.R.I. 1987), and Van Schaick v. Church of Scientology of Cal., Inc., 535 F.Supp. 1125, 1137 (D.Mass.1982)). In short, because none of Plaintiff's alleged injuries provide him with RICO standing, the court will recommend that Defendants' motion be allowed with respect to Counts IX and X.
For the reasons stated, the court recommends that Defendants' motion to dismiss be ALLOWED with respect to Counts VI, VII, IX and X, but otherwise DENIED.
Mass. Gen. Laws ch. 149, § 187(b). See also Commodore v. Genesis Health Ventures, Inc., 63 Mass.App.Ct. 57, 824 N.E.2d 453, 460 (Mass.App.Ct.2005) ("The statute is specific to the health care industry and is designed to safeguard patient care by protecting the rights of health care providers who expose deficiencies in care that violate laws or regulations or professional standards that endanger public health.").
