Integra Healthcare, S.C. v. APP of Illinois HM, PLLC et al
Filing
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MEMORANDUM Opinion and Order. The court grants in part and denies in part Defendant APP's Motion to Dismiss 48 and Defendant Dr. Servatius' Motion to Dismiss 51 . Specifically, the court grants Defendants' motions to dismiss Integra's negligence-based claims (Counts III-IX) and denies Defendants' motions in all other respects. Signed by the Honorable Rebecca R. Pallmeyer on 8/9/2019. Notice mailed by judge's staff (ntf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
INTEGRA HEALTHCARE, S.C.,
Plaintiff,
v.
APP of ILLINOIS HM, PLLC, and AMBER
SERVATIUS,
Defendants.
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Case No. 18 C 3589
Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
Dr. Sachin Jain operates Plaintiff Integra Healthcare, S.C., a corporation that "provide[s]
healthcare services"—that is, physician staffing—to hospitals and nursing homes. Defendant
APP of Illinois HM, PLLC, is engaged in a similar business. Physicians employed by both parties,
including Dr. Jain and Defendant Dr. Amber Servatius, who works for APP, perform work as
"hospitalists," meaning that they provide primary care to hospitalized patients. In this lawsuit,
Integra alleges that Defendant APP, through a medical director, Defendant Dr. Servatius, has
interfered with Integra's contractual right to provide physician services at Vista Medical Center
East ("VMCE"), a hospital in Waukegan, Illinois, and to receive patient referrals from skilled
nursing facilities. This court has diversity jurisdiction under 28 U.S.C. § 1332. 1
In its First Amended Complaint, Integra has asserted the following claims:
tortious
interference with prospective economic advantage against Dr. Servatius (Count I); tortious
interference with prospective economic advantage against APP (Count II); negligence against Dr.
1
Integra is an Illinois corporation. (See First Amended Complaint [40] ¶ 4.) Dr.
Servatius resides in Wisconsin. (Id. ¶ 6; see also Servatius Decl. [13].) At a hearing on Integra's
motion for a temporary restraining order, Defendants confirmed that APP's sole member is Tony
Briningstool, a Tennessee resident. (See APP Local Rule 3.2 Notification as to Affiliates [17];
Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998) ("[T]he citizenship of an LLC for
purposes of . . . diversity jurisdiction is the citizenship of its members.").)
Servatius (Count III); "respondeat superior" against APP (Count IV); "willful and wanton" against
Dr. Servatius (Count V); "willful and wanton" against APP (Count VI); negligent hiring against APP
(Count VII); negligent retention against APP (Count VIII); and negligent supervision against APP
(Count IX).
Defendant APP has moved to dismiss all claims; Defendant Dr. Servatius,
represented by the same attorneys, has moved only for partial dismissal of Count I. (See
Servatius Mot. to Dismiss [51] ("Servatius Mot."), 1 (moving to dismiss Count I to the extent it is
"based on alleged interference with Integra's patients at" VMCE).) She has also moved to dismiss
Counts III and V. (See id.)
For the following reasons, the court dismisses Integra's negligence-based claims. The
court denies the motions to dismiss in all other respects.
BACKGROUND
A.
Dr. Jain's and Dr. Servatius' Employment at VMCE
VMCE is part of a network called Vista Health System ("VHS"). (See First Am. Compl.
¶¶ 10-11.) VHS contracts with companies like APP to staff physicians at its hospitals, including
VMCE. (See id. ¶ 12.) Between January 2012 and August 2014, VHS contracted with a company
called Apogee Physicians to staff physicians at VMCE. (See id. ¶ 13.) The court infers from
Integra's allegations that Dr. Jain began working at VMCE in April 2013, when Apogee placed
him there. (See id. ¶ 14.) In September 2014, EmCare replaced Apogee as VHS's staffing
contractor for VMCE, and Dr. Jain continued working at the facility. (Id. ¶¶ 16-17.) Then in
November 2016, APP replaced EmCare as VHS's staffing contractor for VMCE. (Id. ¶ 18.) Dr.
Jain continued working at VMCE after this change, but "not [as] part of APP's hospitalist team."
(Id. ¶¶ 20-21.) Although the First Amended Complaint does not otherwise explain this, the court
assumes that Dr. Jain is staffed at VMCE through his own company, Integra.
"APP's hospitalists have an exclusive agreement with VMCE that they will treat
[emergency room] patients that are admitted into the hospital" and do not have primary care
physicians (hereinafter "ER patients"). (Id. ¶ 20.) Despite this exclusive agreement, in November
2
2016, VMCE's Medical Executive Committee "granted [Dr.] Jain the right to see" such patients
once every two weeks. (Id. ¶ 21.) Nine months later, the Medical Executive Committee altered
the arrangement and "granted [Dr.] Jain the right to see" such patients once every thirty-two days.
(Id. ¶ 22.)
As noted, Dr. Servatius also works as a hospitalist at VMCE. She and Dr. Jain have
"worked alongside each other as hospitalists at VMCE" at "all relevant times." (Id. ¶ 19.) Since
November 2016, Dr. Servatius has worked as the medical director of APP's hospitalist team at
the facility. (Id. ¶¶ 21, 23.)
B.
Alleged Interference with Dr. Jain's Ability to Treat Patients at VMCE
According to Integra, Dr. Servatius' duties as medical director at some point included
creating the call schedule for doctors on APP's hospitalist team. (Id. ¶ 23.) Integra alleges that
Dr. Servatius manipulated the schedule to interfere with Dr. Jain's "right" to see ER patients.
(Id. ¶¶ 21, 23.) By Integra's account, Dr. Servatius created schedules that permitted Dr. Jain to
see only seventy-five percent "of the patients that were supposed to be under his care . . . ."
(Id. ¶ 23.) Integra also alleges that on at least one occasion, in September 2017, Dr. Servatius
"took [Dr.] Jain off the call completely and deprived him of his right to see any of th[e] patients that
were supposed to be under his care." (Id. ¶ 24.) "Subsequently," Integra alleges, "the VMCE
Medical Executive Committee permanently stripped [Dr.] Servatius of the right to create the call
schedule." (Id. ¶ 25.) Integra further alleges that "[a]t other times," "APP and/or [Dr.] Servatius
directed and/or allowed other doctors from the hospitalist group" to treat patients that were
"supposed to be under [Dr. Jain's] care." (Id. ¶ 26.) When this occurred, Integra alleges, "APP
would receive the revenues instead of Integra." (Id. ¶ 27.)
C.
Alleged Interference with Dr. Jain's Ability to Receive Skilled Nursing Referrals
According to Integra, it had "formal contracts" with certain entities to "treat their patients,"
and this "upset" Dr. Servatius. (Id. ¶¶ 28, 30, 31.) Integra provides specific references to only
three contracts. The first is a November 11, 2016 letter from Dr. Xavier Parreno stating, "I would
3
like Dr. Sachin Jain, MD to exclusively cover my patients at [VMCE] when they are hospitalized
as inpatients." (Ex. A to First Am. Compl. [40-1]; First Am Compl. ¶ 32 (citing same).) The second
contract is a November 11, 2016 letter from Orchard Medical Center ("Orchard") stating that it
would "be using Dr. Sachin Jain as [its] exclusive hospitalist [at VMCE] effective November 19th
at midnight." (Ex. B to First Am. Compl. [40-2]; First Am. Compl. ¶ 34 (citing same).) The third
contract is an undated "Physician Coverage Agreement" with Lake County Health Department
and Community Health Center ("Lake County"). (Ex. C to First Am. Compl. [40-3]; First Am.
Compl. ¶ 36 (citing same).) 2 The agreement authorized Dr. Jain "to provide medical services to
[Lake County's] patients admitted for medical care at" VMCE. (Ex. C to First Am. Compl.)
According to Integra, Dr. Servatius "interfered" with the Dr. Parreno contract "such that [Dr.
Parreno] canceled [it]." (First Am. Compl. ¶ 33.) Integra also alleges that "[Dr.] Servatius and/or
APP interfered" with the Orchard and Lake County contracts by "direct[ing] and/or allow[ing]"
hospitalists other than Dr. Jain to see Orchard and Lake County patients at VMCE. (Id. ¶¶ 35,
37.)
In addition, Integra alleges that Dr. Servatius "made several phone calls to physicians in
the community, made disparaging and false comments about [Dr.] Jain, and otherwise interfered
with his business contracts and relations with [them] in an attempt to get them to stop sending
Integra referrals." (Id. ¶ 28; see also id. ¶ 29 (asserting similar allegation concerning phone calls
to skilled nursing facilities).) It is unclear whether the allegations in paragraphs 28 and 29 refer
to Dr. Parreno, Orchard, and Lake County; to other physicians or entities; or to all of the above.
Integra further alleges that Dr. Servatius "directly threatened various skilled nursing facilities,
including but not limited to GlenLake Terrace, the Pavilion of Waukegan, and Rolling Hills, to not
refer patients to Integra if they wanted to receive patient referrals from VMCE." (Id. ¶ 38.)
2
A representative of Lake County signed the agreement on February 7, 2018. (See
id.) Dr. Jain purportedly signed the agreement two years earlier on February 8, 2016. (See id.)
It is unclear whether one of these dates is an error.
4
Integra alleges that Dr. Servatius and/or APP undertook the aforementioned conduct
intentionally and with malice. (See id. ¶ 40.) It also alleges that the conduct caused Integra
"financial harm, loss of reputation, and emotional distress." (See, e.g., id. ¶ 42.) Integra seeks
compensatory and punitive damages.
DISCUSSION
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Camasta v.
Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014); FED. R. CIV. P. 12(b)(6). "The
complaint need only contain a short and plain statement of the claim demonstrating entitlement
to relief." Pierce v. Zoetis, Inc., 818 F.3d 274, 277 (7th Cir. 2016); see FED. R. CIV. P. 8(a)(2).
"Although detailed factual allegations are unnecessary, the complaint must have 'enough facts to
state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (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, 556 U.S. 662, 678 (2009). In assessing a Rule 12(b)(6) motion, the
court accepts all well-pleaded facts in the complaint as true and draws all reasonable inferences
in the plaintiff's favor. Hutchinson v. Fitzgerald Equip. Co., 910 F.3d 1016, 1025 (7th Cir. 2018).
The parties agree that Illinois law governs the substantive claims in this diversity action.
A.
Negligence
Defendants move to dismiss Integra's negligence-based claims on the ground that they
are barred by Illinois' economic loss rule. Under that rule, also known as the Moorman doctrine,
a plaintiff "cannot recover for solely economic loss under the tort theories of strict liability,
negligence, and innocent misrepresentation." Moorman Mfg. Co. v. Nat'l Tank Co., 91 Ill.2d 69,
91, 435 N.E.2d 443, 453, 61 Ill. Dec. 746, 756 (1982). In Moorman, the Illinois Supreme Court
defined "economic loss" as "damages for inadequate value, costs of repair and replacement of
the defective product, or consequent loss of profits-without any claim of personal injury or damage
to other property." 91 Ill.2d at 82, 435 N.E.2d at 449, 61 Ill. Dec at 752. The Moorman doctrine
5
is based on the theory that tort law provides the appropriate remedy for losses stemming from
personal injury or damage to property, whereas contract law and the Uniform Commercial Code
provide the appropriate remedy for "economic losses occasioned by diminished commercial
expectations not coupled with injury to person or property." In re Illinois Bell Switching Station
Litig., 161 Ill.2d 233, 241, 641 N.E.2d 440, 444, 204 Ill. Dec. 216, 220 (1994).
1.
Whether Integra Seeks to Recover Purely Economic Losses
Integra claims that Defendants' negligence caused it to suffer "lost revenue, harm to
reputation, and emotional distress." (First Am. Compl. ¶¶ 73, 78, 82, 86, 98, 109, 123.) Integra
does not dispute that lost revenue and harm to reputation are considered economic losses. (See
Integra Opp. to Defs.' Mot. to Dismiss [54] ("Integra Opp."), 2-4; see also Cloverhill Pastry-Vend
Corp. v. Cont'l Carbonics Prods., Inc., 214 Ill. App. 3d 526, 530, 574 N.E.2d 80, 83, 158 Ill. Dec.
286, 289 (1st Dist. 1991) ("[D]amage to reputation" is "purely economic").)
And although
"emotional distress damages are noneconomic," Saleh v. Merchant, No. 14-CV-09186, 2018 WL
287748, at *9 (N.D. Ill. Jan. 4, 2018), Integra has not stated a claim for emotional distress
damages. For one thing, Integra has cited no authority for the proposition that a corporation can
suffer emotional distress. And as Defendants point out, numerous courts have rejected this
proposition. See, e.g., Fed. Deposit Ins. Co. v. Hulsey, 22 F.3d 1472, 1489 (10th Cir. 1994)
(affirming dismissal of claim for intentional infliction of emotional distress against corporation
because "a corporation lacks the cognizant ability to experience emotions" and thus "cannot suffer
emotional distress").
For another, under Illinois law, "a direct victim may not recover for emotional distress
suffered as a result of the defendant's alleged negligence unless the emotional distress 'was
accompanied by a contemporaneous physical injury to or impact on the plaintiff.'" Lewis v. CITGO
Petroleum Corp., 561 F.3d 698, 703 (7th Cir. 2009) (quoting Rickey v. Chicago Transit Auth., 98
Ill.2d 546, 550, 457 N.E.2d 1, 2, 75 Ill. Dec. 211, 212 (1983)); see also Schweihs v. Chase Home
Fin., LLC, 2016 IL 120041 ¶ 40, 77 N.E.3d 50, 60, 412 Ill. Dec. 882, 892 (citing Lewis, 561 F.3d
6
at 703, with approval). Even assuming that a corporation can suffer emotional distress—and
even if Dr. Jain himself were named as a Plaintiff in this case—the impact rule would doom this
claim because there is no allegation that the alleged emotional distress occurred
contemporaneously with a "physical injury to or impact on" Integra or Dr. Jain. Lewis, 561 F.3d
at 703. Instead, Integra appears to contend that it need not show a contemporaneous injury or
impact to recover emotional distress damages. (See Integra Opp. 4.) But Martin v. Wal-Mart
Stores, Inc., No. 07 C 3458, 2007 WL 3231414 (N.D. Ill. Oct. 26, 2007), the only case Integra
cites for this proposition, does not support it. In Martin, the court did not squarely address the
"impact" requirement. See generally id. Moreover, Martin pre-dates Lewis. Courts assessing
claims for emotional distress damages after Lewis have applied the impact requirement to direct
victims of negligence. See, e.g., Saleh, 2018 WL 287748, at *9. To the extent that Martin is
inconsistent with these cases, this court respectfully declines to follow it.
For the foregoing reasons, the court concludes that Integra seeks solely economic
damages. The court, therefore, must determine whether any exceptions to the Moorman doctrine
apply to Integra's negligence claims. As discussed below, the court concludes that none of the
exceptions is applicaple.
2.
Whether Exceptions to the Moorman Doctrine Apply to Integra's
Negligence Claims
The Illinois Supreme Court has traditionally recognized three exceptions to the Moorman
doctrine:
(1) where the plaintiff sustained damage, i.e., personal injury or property damage,
resulting from a sudden or dangerous occurrence; (2) where the plaintiff's
damages are proximately caused by a defendant's intentional, false
representation, i.e., fraud; and (3) where the plaintiff's damages are proximately
caused by a negligent misrepresentation by a defendant in the business of
supplying information for the guidance of others in their business transactions.
In re Chicago Flood Litig., 176 Ill. 2d 179, 199, 680 N.E.2d 265, 275, 223 Ill. Dec. 532, 542 (1997)
(internal citations omitted). The Illinois Supreme Court has also stated that the Moorman doctrine
7
applies to "the service industry only where the duty of the party performing the service is defined
by the contract that he executes with his client. Where a duty arises outside of the contract, the
economic loss doctrine does not prohibit recovery in tort for the negligent breach of that duty."
Congregation of the Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill. 2d 137, 162,
636 N.E.2d 503, 514, 201 Ill. Dec. 71, 82 (1994).
a.
Extracontractual Duties
Integra contends that the Moorman doctrine is inapplicable to its negligence claims
because Defendants owed and breached "extracontractual" duties. (See Integra Opp. 2 (quoting
Congregation of the Passion, 159 Ill. 2d at 164, 636 N.E.2d at 515, 201 Ill. Dec. at 83).) In this
regard, Integra maintains that because it was never party to a contract with Defendants, the duties
underlying its negligence claims "exist[] independently of any contract between them." (Id.)
Integra has not explained the source of these purported duties, however, and Congregation of
the Passion does not support its argument. In that case, the Illinois Supreme Court observed that
accountants, like attorneys, provide professional services to their clients pursuant to contracts,
but have a "duty to observe reasonable professional competence" that "exists independently of
any contract." 159 Ill. 2d at 163-64, 636 N.E.2d at 515, 201 Ill. Dec. at 83. The court held that
the economic loss doctrine "does not bar recovery in tort" for an accountant's breach of that
"extracontractual" duty. Id.
Here, the alleged relationship between Integra and the Defendants is unlike an attorneyclient or accountant-client relationship. The Defendants do not work for Integra; Integra alleges
to the contrary that Defendants are Integra's competitors. In this context, Integra's allegations
that Defendants owe it certain duties are contrived. (See, e.g., First Am. Compl. ¶¶ 70, 75, 79,
83, 94, 107, 118 (alleging that Defendants owed Integra duties to "exercise ordinary care so as
not to unlawfully interfere with [its] business arrangements"; "not hire and employ individuals it
knew or should have known were unfit for the position of Medical Director of the APP hospitalist
team at VMCE"; "retain only competent and qualified employees that did not cause harm to
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others"; and "supervise [Dr.] Servatius' performance as Medical Director to ensure that other
doctors and healthcare providers at VMCE would be free from harm and injury").) The court
declines Integra's suggestion that it impose on Defendants some ill-defined extracontractual duty
to exercise "reasonable professional competence" in favor of another medical service provider.
Cf. Congregation of the Passion, 159 Ill. 2d at 163-64, 636 N.E.2d at 515, 201 Ill. Dec. at 83; see
Gondeck v. A Clear Title & Escrow Exch., 47 F. Supp. 3d 729, 748 (N.D. Ill. 2014) ("The key to
Congregation of the Passion . . . is the professional relationship under which an accountant
provides services to her client, which the Supreme Court of Illinois likened to the professional
relationship under which an attorney provides services to her client."); Dahm v. First Am. Title Ins.
Co., No. 06 C 5031, 2008 WL 1701901, at *3 (N.D. Ill. Apr. 9, 2008) ("Illinois courts have allowed
tort recovery against attorneys and accountants based on an 'extra-contractual duty' theory. . . .
However, beyond that narrow range of professionals, courts have not imposed an extracontractual duty . . . and have held that the Moorman Doctrine applies to bar various tort claims.").
To the extent Integra is arguing that it can recover economic losses in tort merely because
it never had a contract with Defendants, again, the court is not persuaded. To the contrary, the
Moorman doctrine bars "[r]ecovery in tort for disappointed commercial expectations due to breach
of implied duties and warranties between non-contracting parties." Am. United Logistics, Inc. v.
Catellus Dev. Corp., 319 F.3d 921, 926 (7th Cir. 2003); see also Cmty. Bank of Trenton v.
Schnuck Mkts., Inc., 887 F.3d 803, 817 (7th Cir. 2018) (rejecting plaintiff's argument that an
extracontractual duty attaches merely "because there is no direct contract between th[e] parties");
City of Chicago v. Beretta U.S.A. Corp., 213 Ill.2d 351, 417-18, 423, 821 N.E.2d 1099, 1140,
1143, 290 Ill. Dec. 525, 566, 569 (2004) (determining that the Moorman doctrine barred plaintiffs'
claims despite absence of a contractual relationship).
Invoking Congregation of the Passion, Integra separately argues that "even if [it] had a
contractual relationship" with Defendants, Defendants would owe duties that arose outside of that
relationship.
(Integra Opp. 2.)
Specifically, according to Integra, Defendants owed (and
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breached) duties to (1) follow VMCE's directive that allows Dr. Jain to see ER patients, and (2)
"honor the informed consent of patients . . . admitted to VMCE that were supposed to be under
[Dr. Jain's] exclusive care." (Id.) But assuming such duties exist, they are unlike the independent
duties of accountants and attorneys to exercise "reasonable professional competence."
Congregation of the Passion, 159 Ill. 2d at 163-64, 636 N.E.2d at 515, 201 Ill. Dec. at 83. The
court notes, further, that the duties Integra has identified run to VMCE or to patients, not to Integra.
Setting aside the Moorman doctrine, Integra cannot prevail on a negligence claim based on duties
owed to third parties. See, e.g., Lewis, 561 F.3d at 702 ("To establish a valid claim for negligence"
in Illinois, "a party must demonstrate that the defendant owed him a duty" (emphasis added)). For
these reasons, Integra's attempt to escape the application of the Moorman doctrine by invoking
"extracontractual" duties is unavailing.
b.
Other Arguments
In another effort to evade the Moorman doctrine, Integra argues that the negligence claims
here fall under the exception to that doctrine for negligent misrepresentations made by defendants
in the "business of supplying information." In re Chicago Flood Litig., 176 Ill. 2d at 199, 680 N.E.2d
at 275, 223 Ill. Dec. at 542. Under this theory, Integra argues that Defendants supply information
to guide third parties in their business transactions and did so negligently by ordering other doctors
to treat Dr. Jain's patients and interfering with Integra's skilled nursing referrals. (See Integra
Opp. 3 (citing First Am. Compl. ¶ 71(b)-(f)).) The court concludes the exception for negligent
misrepresentations is inapplicable here. First, these alleged intentional acts do not support a
claim for damages "proximately caused by a negligent misrepresentation." In re Chicago Flood
Litig., 176 Ill. 2d at 199, 680 N.E.2d at 275, 223 Ill. Dec. at 542 (emphasis added). More
importantly, at least one Illinois court has determined that where a company is in the business of
"supply[ing] . . . skilled individual[s]," it is "not in the business of supplying information within the
meaning of the exception . . . ." Fox Assocs., Inc. v. Robert Half Int'l, Inc., 334 Ill. App. 3d 90, 97,
777 N.E.2d 603, 609, 267 Ill. Dec. 800, 806 (1st Dist. 2002). The court reached this conclusion
10
because the "ultimate result" of the relationship between the company and its client was a
"tangible product, a skilled person, not intangible analysis or ideas." Id. Like the company in Fox,
APP's business is to supply skilled professionals (medical staff) to medical facilities. Integra's
cited case about pharmacy benefit managers is inapposite because APP is not a PBM. (See
Integra Opp. 3 (citing Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Sav-Rx, No. 07 C
0916, 2007 WL 1423863, at *3 (N.D. Ill. May 10, 2007) (where plaintiff alleged that it "made
payments for prescriptions . . . in reliance on information that [defendant PBMs] provided in their
roles as managers of [plaintiff's] pharmacy benefits plan," plaintiff sufficiently pleaded that
defendant PBMs were in the business of supplying information for purposes of the exception)).)
Next, Integra argues that it has alleged property loss coupled with economic losses. (See
Integra Opp. 3.) According to Integra, it lost patients due to Defendants' negligence. Lost
patients, Integra continues, are like the lost "inventory" in In re Chicago Flood Litigation, for which
the court allowed recovery in tort. 176 Ill. 2d at 201-02, 680 N.E.2d at 276, 223 Ill. Dec. at 543.
Integra misunderstands In re Chicago Flood Litigation. In that case, the court determined that the
Moorman doctrine did not foreclose plaintiffs' claims for "lost perishable inventory as a result of
interrupted electrical service." Id. The court reasoned that plaintiffs' claims were for "property
loss, in the form of lost perishable injury, as a result of a tortious event" and that "[s]uch damages
[were] above and beyond [the] plaintiffs' disappointed commercial expectation in continuous
electrical service." Id. Integra's allegations lack these features. The contention that Integra "lost"
patients merely repackages the contention that it lost revenue due to Defendants' alleged
interference. Integra's label aside, its complaint seeks only to recover economic losses for
defeated commercial expectations.
Finally, Integra contends that the Moorman doctrine does not bar its negligence claims
because "open-ended tort liability" is not a risk in this case. (Integra Opp. 3-4 (quoting In re
Chicago Flood Litig., 176 Ill. 2d at 207, 680 N.E.2d at 278, 223 Ill. Dec. at 545).) This argument
does not alter the analysis.
Allowing Integra to recover its economic losses in tort would
11
undermine the purposes and legitimacy of the Moorman doctrine, regardless of whether openended tort liability is a concern on the particular facts of this case.
The court concludes that the Moorman doctrine forecloses Integra's negligence-based
claims (Counts III, VII, VIII, and IX), and therefore dismisses them. Because Integra concedes
that its "claims" for "respondeat superior" and "willful and wanton" are derivative of the negligence
claims, the court dismisses those claims as well (Counts IV, V, VI). (See Integra Opp. 1 (stating
that it "incorporates [its negligence allegations] by reference in its 'willful and wanton' claims, and
therein includes allegations of escalated forms of negligence"); id. at 2 (stating that it "pleads
respondeat superior as a theory of recovery . . . aimed at APP for the negligent conduct of its
agents").) 3
B.
Tortious Interference with Prospective Economic Advantage
Integra asserts claims for tortious interference with prospective economic advantage
against both Defendants. At least from a pleading perspective, these claims have more traction.
To prevail on these tortious interference claims under Illinois law, Integra must prove: "(1) [its]
reasonable expectation of entering into a valid business relationship; (2) the [Defendants']
knowledge of [Integra's] expectancy; (3) purposeful interference by the [Defendants] that prevents
[Integra's] legitimate expectancy from ripening into a valid business relationship; and (4) damages
to [Integra] resulting from such interference." Fellhauer v. City of Geneva, 142 Ill. 2d 495, 511,
568 N.E.2d 870, 878, 154 Ill. Dec. 649, 657 (1991); see also, e.g., Botvinick v. Rush Univ. Med.
Ctr., 574 F.3d 414, 417 (7th Cir. 2009).
1.
Defendant APP (Count II)
a.
Interference with Dr. Jain's Treatment of Patients at VMCE
Integra's tortious interference claim against APP is based in part on alleged interference
3
The court also notes that Integra's negligence claims make little sense because
Integra alleges that Defendants' conduct was intentional.
12
"with [Dr.] Jain's ability to treat patients at VMCE." (First Am. Compl. ¶ 61.) There are two types
of patients at issue: ER patients that VMCE allows Dr. Jain to see periodically (id. ¶¶ 20-22), and
patients that Dr. Jain has the exclusive right to see under contracts with Dr. Parreno, Orchard,
and Lake County (see id. ¶¶ 32-37.) 4 Integra alleges that APP's interference occurred "through
its employees/agents, including but not limited to [Dr.] Servatius." (See, e.g., id. ¶¶ 61-62.)
In its opening brief, APP addresses only alleged interference with ER patients. APP asks
the court to dismiss this claim based on the competitor's privilege. The competitor's privilege "is
an affirmative defense to the tort of intentional interference with prospective business advantage."
Gen. Motors Corp. v. State Motor Vehicle Review Bd., 224 Ill. 2d 1, 15, 862 N.E.2d 209, 220, 308
Ill. Dec. 611, 622 (2007). It allows competitors "to interfere with one another's prospective
business relationships provided their intent is, at least in part, to further their businesses and is
not solely motivated by spite or ill will." Imperial Apparel, Ltd. v. Cosmo's Designer Direct, Inc.,
227 Ill. 2d 381, 392, 882 N.E.2d 1011, 1019, 317 Ill. Dec. 855, 863 (2008). The privilege "does
not, however, encompass the use of improper competitive strategies that employ fraud, deceit,
intimidation, or deliberate disparagement." Id. Because the competitor's privilege is an affirmative
defense, a "[c]omplaint[] need not anticipate or attempt to defuse" it. U.S. Gypsum Co. v. Indiana
Gas Co., 350 F.3d 623, 626 (7th Cir. 2003). "[I]n some cases," however, "a complaint so clearly
4
The allegations concerning interference with patients from Dr. Parreno, Orchard,
and Lake County are confusing. Integra originally raises them in a section of its First Amended
Complaint titled "Interference with . . . patient referrals from skilled nursing facilities." (First Am.
Compl. 4.) But some allegations in that section, as well as in other portions of the First Amended
Complaint, suggest that Defendants not only interfered with referrals from those providers, but
also with Dr. Jain's ability to treat those providers' patients when they were actually admitted to
VMCE. (See id. ¶¶ 34-37, 39, 49, 56, 62, 66.) Furthermore, in its briefing, Integra states that its
claims concerning interference with patient treatment include interference with Dr. Parreno,
Orchard, and Lake County's patients. (See Integra Opp. 6.) The court, therefore, treats
allegations concerning Dr. Parreno, Orchard, and Lake County as relevant to alleged interference
with patient treatment and alleged interference with skilled nursing referrals. Separately, the court
notes that Dr. Jain's contract with Lake County does not appear to be exclusive. (See generally
Ex. C to First Am. Compl.) But because Defendants do not raise this issue in their briefing, the
court will, for present purposes, assume that the contract is exclusive.
13
reveals the existence of the defense that judgment on the pleadings is possible." Int'l Mktg., Ltd.
v. Archer-Daniels-Midland Co., 192 F.3d 724, 731 (7th Cir. 1999).
APP argues that Integra's pleadings establish the competitor's privilege defense. APP
characterizes the First Amended Complaint as alleging that APP and Integra compete directly for
the ER patients at issue. (APP Mem. in Supp. of Mot. to Dismiss [50] ("APP Mot."), 9 (citing First
Am. Compl. ¶ 20).) APP also characterizes the complaint as alleging that APP's "motivation for
interfering was to 'receive . . . revenues instead of Integra.'" (Id. (quoting First Am. Compl. ¶ 27).)
These allegations, APP maintain, show that if APP interfered with Dr. Jain's treatment of ER
patients, it did so "at least in part[] to further [its] business[]." (Id. (quoting Imperial Apparel, 227
Ill. 2d at 392, 882 N.E.2d at 1019, 317 Ill. Dec. at 863).)
Integra responds that APP mischaracterizes its allegations and that dismissal based on
the competitor's privilege is unwarranted at this stage. The court agrees that Integra's complaint
does not "clearly reveal[] the existence of" the privilege. Int'l Mktg., 192 F.3d at 731. Integra and
APP certainly appear to be competitors in the sense that both employ hospitalists who treat ER
patients at VMCE. In arguing that Integra's pleadings identify a business-related purpose for
APP's alleged interference, however, APP points to only one paragraph of the First Amended
Complaint. That paragraph states, "When APP doctors saw patients that were supposed to be
under [Dr.] Jain's care, APP would receive the revenues instead of Integra."
(First Am.
Compl. ¶ 27.) Viewed in the light most favorable to Integra, this allegation can reasonably be
interpreted as pleading only that APP received additional revenue as a result of the interference—
not that APP’s sole purpose in interfering was to increase its own revenue.
Integra also alleges that APP interfered "with malice." (First Am. Compl. ¶ 65.) APP
appears to contend that Integra's malice-related pleadings are insufficient because they are
based only on Dr. Servatius' conduct. (See APP Reply [55], 9-10.) According to APP, the
allegedly malicious conduct was outside the scope of Dr. Servatius' employment with APP,
including because it was "solely for [her] benefit." (See APP Reply 9-10 (quoting Dennis v. Pace
14
Suburban Bus Serv., 2014 IL App (1st) 132397, ¶ 12,19 N.E.3d 85, 90, 385 Ill. Dec. 527, 532).)
APP suggests that it is not liable for such conduct. (See APP Reply 9-10; see also, e.g., Adames
v. Sheahan, 233 Ill. 2d 276, 298, 909 N.E.2d 742, 754, 330 Ill. Dec. 720, 733 (2009) ("Pursuant
to the theory of respondeat superior, an employer can be held liable for the torts of his employee
when those torts are committed within the scope of the employment.").) The court is unwilling to
entertain this argument because elsewhere in its briefing, APP concedes that at least some of Dr.
Servatius' conduct—specifically, "her role in creating the call schedule at VMCE"—was within the
scope of her employment. (APP Mot. 10 n.6.) Furthermore, the same attorneys represent both
APP and Dr. Servatius in this matter. The court will not entertain an argument from Dr. Servatius'
attorneys that is adverse to her own interests. The court concludes that Integra has sufficiently
pleaded malice for purposes of defeating the competitor's privilege.
Because Integra sufficiently pleads malice and does not clearly plead that APP interfered
with the intent to further its business, this case is distinguishable from International Marketing,
which APP cites. There, the court determined that the competitor's privilege "appear[ed] on the
face of the complaint" because plaintiff (1) alleged that defendants interfered so that they "could
deal directly with [the customer]," and (2) did not sufficiently allege "ill will or spite." 192 F.3d at
732. Integra's case is also distinguishable from Essex Real Estate Grp., Ltd. v. River Works
L.L.C., No. 01 C 5285, 2002 WL 1822913, at *8 (N.D. Ill. Aug. 7, 2002), also cited by APP,
because in that case, unlike this one, plaintiff "fail[ed] to make any allegations that Defendant . . .
was motivated by spite or ill will." The court denies APP's motion to dismiss based on the
competitor's privilege.
In its reply, APP separately contends that the court should dismiss Integra's tortious
interference claim to the extent it is based on alleged interference with Dr. Jain's treatment of Dr.
Parreno, Orchard, and Lake County patients. (See APP Reply 8-9.) APP notes that patients
have the right to choose their own physician and that Integra has not alleged that APP interfered
with any patient's decision to choose Dr. Jain. APP concludes that Integra has failed to allege an
15
essential element of its claim: that APP interfered with the prospective economic advantage
Integra may have had under its contracts with Dr. Parreno, Orchard, and Lake County. (See id.
at 9.) Because APP makes this argument for the first time on reply, it is waived. See Thorncreek
Apartments III, LLC v. Mick, 886 F.3d 626, 636 (7th Cir. 2018). In any event, viewing the First
Amended Complaint in the light most favorable to Integra, it is reasonable to infer that some of
Dr. Parreno, Orchard, and Lake County's patients are admitted to VMCE but do not request a
specific hospitalist. By assigning other hospitalists to such patients, who are supposed to be
under Dr. Jain's exclusive care, APP could plausibly interfere with Integra's prospective economic
advantage. Integra alleges that APP did just this.
For the reasons just discussed, Integra has sufficiently alleged that APP interfered with
Dr. Jain's ability to treat patients at VMCE. And APP does not dispute that Integra has sufficiently
alleged the other elements of its claim: that Integra reasonably expected to treat patients under
arrangements it had with VMCE and other providers; that APP, through its employees or agents,
had knowledge of those arrangements; and that Integra suffered damage as a result of
Defendants' interference. See Fellhauer, 142 Ill. 2d at 511, 568 N.E.2d at 878, 154 Ill. Dec. at
657. Accordingly, the court denies APP's motion to dismiss the tortious interference claim to the
extent it is based on interference with Dr. Jain's treatment of patients at VMCE.
b.
Interference with Referrals from Skilled Nursing Facilities
Integra also asserts a claim against APP for tortious interference with prospective
economic advantage based on alleged interference with Integra's referrals from skilled nursing
facilities. As the court understands the First Amended Complaint, the skilled nursing facilities
include Dr. Parreno, Orchard, and Lake County, as well as GlenLake Terrace, the Pavilion of
Waukegan, and Rolling Hills. (See, e.g., First Am. Compl. ¶¶ 38, 48, 56, 62.) A major difference
between the two types of tortious interference claims that Integra asserts, therefore, is the manner
of interference alleged: for purposes of the claim concerning skilled nursing referrals, Integra
alleges that APP interfered only by making disparaging comments about Dr. Jain to, and
16
threatening, skilled nursing facilities. (See, e.g., id. ¶¶ 28-38.) As to the elements of the claim,
Integra alleges that it reasonably expected to receive referrals from the facilities; APP, through its
employees and agents, knew of that expectancy; APP, through its employees and agents,
interfered with that expectancy; and Integra suffered resultant damage.
(See, e.g., First
Am. ¶¶ 28-29, 38, 46, 48, 50-51, 56, 62-64, 68.)
APP contends that "Integra limits the allegations in connection with this claim to conduct
performed exclusively by Dr. Servatius." (APP Mot. 10.) APP maintains that Dr. Servatius'
conduct was outside the scope of her employment and thus that APP cannot be held liable for it
under the doctrine of respondeat superior. (See id. at 10-15.) The court agrees that Integra's
allegations for purposes of this claim concern only Dr. Servatius. Namely, the First Amended
Complaint identifies only Dr. Servatius as having made disparaging comments and threats to
skilled nursing facilities. Nonetheless, APP cannot dodge liability for Dr. Servatius' conduct. As
the court has previously explained, it is unwilling to entertain any argument from Dr. Servatius’
own lawyers that her conduct was outside the scope of her employment. And APP does not argue
that Integra's allegations are insufficient in any other respect. Accordingly, the court denies APP's
motion to dismiss this claim.
2.
Defendant Dr. Servatius (Count I)
a.
Interference with Dr. Jain's Treatment of Patients at VMCE
Integra also brings a tortious interference claim against Dr. Servatius in her individual
capacity based on alleged interference with Dr. Jain's treatment of VMCE patients. (See, e.g.,
First Am. Compl. ¶¶ 49-51.) According to Integra, Dr. Servatius knew that Dr. Jain had the right
to treat ER patients under an arrangement with VMCE and that he also had the right to treat
patients from Dr. Parreno, Orchard, and Lake County under contracts with those providers. (See
id. ¶¶ 23-24, 31-37, 49-50.) Integra alleges that Dr. Servatius interfered with Dr. Jain's
"reasonable expectancy of treating" these patients by manipulating APP's call schedule and
seeking "guidance from other physicians as to how she could avoid assigning patients to [Dr.]
17
Jain." (Id. ¶¶ 23-24, 39, 49.) Finally, Integra alleges that it suffered damage as a result of Dr.
Servatius' interference. (See id. ¶ 55.) Integra has sufficiently alleged the essential elements of
a claim for tortious interference with prospective economic advantage. See Fellhauer, 142 Ill. 2d
at 511, 568 N.E.2d at 878, 154 Ill. Dec. at 657.
Dr. Servatius moves to dismiss this claim but refers the court only to APP's briefing. (See
Servatius Mot. 1.) APP, for its part, relies solely on the competitor's privilege in moving to dismiss
the claim against Dr. Servatius. Specifically, APP argues that if the court dismisses the parallel
claim against APP based on the privilege, the court should likewise dismiss the claim against Dr.
Servatius because she was acting within the scope of her employment. (See APP Mot. 10 n.6.)
Because APP is not entitled to dismissal based on the competitor's privilege, this argument lacks
merit. Accordingly, the court denies Dr. Servatius' motion to dismiss this claim.
b.
Interference with Referrals from Skilled Nursing Facilities
Finally, Integra brings a tortious interference claim against Dr. Servatius in her individual
capacity based on alleged interference with Dr. Jain's ability to receive patient referrals from
skilled nursing facilities. (First Am. Compl. ¶ 48.) Dr. Servatius has not moved to dismiss this
claim (see Servatius Mot. 1), wisely, in the court's view, because Integra sufficiently alleges every
element of the claim. Specifically, Integra alleges that it "had a reasonable expectancy of entering
into a valid business relationship" with the skilled nursing facilities; Dr. Servatius "had knowledge
of said business expectancies"; Dr. Servatius "interfered with said business expectancies,"
including by threatening the facilities and making disparaging remarks about Dr. Jain; Dr.
Servatius' interference "caused a breach or termination of" Integra's business expectancies with
the facilities; and Integra suffered damage as a result. (First Am. Compl. ¶¶ 29, 38, 48, 50-51,
55; see Fellhauer, 142 Ill. 2d at 511, 568 N.E.2d at 878, 154 Ill. Dec. at 657.) The court will allow
this claim to proceed.
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C.
Integra's Request to Amend the First Amended Complaint
Integra asks the court for "leave to amend its complaint where necessary." (Integra Opp.
15.) The court denies this request. Integra has already had an opportunity to amend its complaint
and granting leave to amend for a second time would be futile.
See McCoy v. Iberdrola
Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014) ("While the federal courts 'should freely give
leave [to amend a pleading] when justice so requires' . . . a district court may deny leave for a
variety of reasons, including . . . futility." (quoting FED. R. CIV. P. 15(a)(2))). Here, Integra cannot
make any changes to the First Amended Complaint that would remove its negligence claims from
the purview of the economic loss doctrine. At Integra's request, the court also clarifies that the
dismissal of the claims in the original complaint was without prejudice; indeed, the court granted
Integra leave to amend.
CONCLUSION
For the foregoing reasons, the court grants in part and denies in part Defendant APP's
Motion to Dismiss [48] and Defendant Dr. Servatius' Motion to Dismiss [51]. Specifically, the court
grants Defendants' motions to dismiss Integra's negligence-based claims (Counts III-IX) and
denies Defendants' motions in all other respects.
ENTER:
Dated: August 9, 2019
_________________________________________
REBECCA R. PALLMEYER
United States District Judge
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