Luttrell v. Brannon et al
Filing
149
MEMORANDUM AND ORDER - It is ordered that the various motions filed by defendants: 85 Motion to Dismiss for Failure to State a Claim; 87 Motion to Dismiss for Failure to State a Claim; 106 Motion to Dismiss Counts 3, 4, 5, and 6 of Plaintiff 's First Amended Complaint; 108 Motion to Dismiss for Failure to State a Claim; and 131 Motion to Dismiss and for Motion for Summary Judgment are GRANTED IN PART AND DENIED IN PART. With respect to certain claims, as more fully set forth herein, plaintiff is granted leave to file, on or before July 3, 2018, a second amended complaint, by which he may attempt to cure certain pleading deficiencies. Signed by District Judge John W. Lungstrum on 06/19/2018. (ses)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CHARLES R. LUTTRELL,
)
)
Plaintiff,
)
)
v.
)
)
JAMES K. BRANNON, M.D.;
)
ORTHOPEDIC SCIENCES, INC.;
)
JOINT PRESERVATION INSTITUTE
)
OF KANSAS, L.L.C.;
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DOCTORS HOSPITAL, L.L.C.;
)
MAURICIO GARCIA, M.D.;
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THE HEADACHE & PAIN CENTER, P.A.; )
and
)
PATIENTFIRST HEALTHCARE
)
ALLIANCE, P.A.,
)
)
Defendants.
)
)
_______________________________________)
Case No. 17-2137-JWL
MEMORANDUM AND ORDER
This matter comes before the Court on various motions to dismiss filed by James
Brannon and Joint Preservation Institute of Kansas, L.L.C. (“JPI”) (Doc. # 87); by
Orthopedic Sciences, Inc. (“OSI”) (Doc. # 85); by Mauricio Garcia and The Headache &
Pain Center, P.A. (“HPC”) (Doc. # 106); and by PatientFirst Healthcare Alliance, P.A.
(“PatientFirst”) (Doc. # 108); and on a motion for judgment on the pleadings or for
summary judgment by Doctors Hospital, L.L.C. (“DH”) (Doc. # 131). For the reasons set
forth below, each motion is granted in part and denied in part. Specifically, the
following claims are dismissed:
RICO (Count III): Claims for damages other than those representing
payments by plaintiff for unnecessary medical treatment; claims based on
predicate acts of mail fraud or wire fraud (plaintiff may amend); claims based
on predicate acts of controlled substance violations under Kansas law; claims
against JPI, OSI, DH, and PatientFirst based on predicate acts of controlled
substance violations under federal law (plaintiff may amend); claims based
on predicate acts of money laundering (plaintiff may amend); claims under
18 U.S.C. § 1962(a).
Fraud (Count V): All claims.
KCPA (Count VI): All claims (plaintiff may amend to allege claims based
on acts of billing).
Conspiracy (Count IV): All claims (plaintiff may amend to allege claims
based on surviving RICO and KCPA claims).
Product liability (Counts VII and VIII): All claims against JPI, HPC, DH,
and PatientFirst; claim against OSI for failure to warn based on direct (not
vicarious) liability (Count VIII).
With respect to certain claims, as more fully set forth herein, plaintiff is granted leave to
file, on or before July 3, 2018, a second amended complaint, by which he may attempt to
cure certain pleading deficiencies. Defendants’ motions are otherwise denied.
I.
Background
By his first amended complaint, plaintiff alleges that he was prescribed medications
by Dr. Brannon and Dr. Garcia for pain management and that Dr. Brannon performed
various surgeries on him. Included in that treatment by Dr. Brannon was hip surgery using
a BGSS device; plaintiff alleges that the surgery failed (requiring another procedure by
another doctor) and that the surgery recommended and performed by Dr. Brannon was not
appropriate given plaintiff’s actual medical condition. Plaintiff alleges that the two
2
physicians entered into a scheme that also involved the other defendants, which entities are
related to the doctors and to each other. According to plaintiff’s complaint, JPI was Dr.
Brannon’s practice entity; OSI, the manufacturer of the device, was majority owned by Dr.
Brannon, who also invented the device; DH (whose president was Dr. Garcia) and HPC
(for whom Dr. Brannon and Dr. Garcia were directors) provided facilities for plaintiff’s
treatment; and DH and HPC were entirely owned by PatientFirst, whose owners and
directors included Dr. Brannon and Dr. Garcia and whose president was Dr. Garcia.
Plaintiff has asserted various claims against defendants. In Counts I and II, plaintiff
asserts medical malpractice claims against Dr. Brannon. He asserts federal RICO claims
against all defendants in Count III. In Counts IV and V, he asserts civil conspiracy and
fraud claims against all defendants. In Count VI, he asserts a claim under the Kansas
Consumer Protection Act against all defendants other than Dr. Garcia. In Counts VII and
VIII, plaintiff asserts product liability claims (implied warranty of fitness, strict liability
failure to warn) against all defendants other than Dr. Garcia and HPC. In Counts IX and
X, plaintiff asserts than OSI, JPI, and PatientFirst are vicariously liable for the acts of Dr.
Brannon, and that PatientFirst is the alter ego of subsidiaries HPC and DH. Finally, in
Count XI, plaintiff asserts a claim for punitive damages against all defendants.
II.
Motion to Dimsiss Standard
The Court will dismiss a cause of action for failure to state a claim pursuant to Fed.
R. Civ. P. 12(b)(6) only when the factual allegations fail to “state a claim to relief that is
plausible on its face,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when
3
an issue of law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The
complaint need not contain detailed factual allegations, but a plaintiff’s obligation to
provide the grounds of entitlement to relief requires more than labels and conclusions; a
formulaic recitation of the elements of a cause of action will not do. See Bell Atlantic, 550
U.S. at 555. The Court must accept the facts alleged in the complaint as true, even if
doubtful in fact, see id., and view all reasonable inferences from those facts in favor of the
plaintiff, see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the
“[f]actual allegations must be enough to raise a right to relief above the speculative level.”
Bell Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is “not whether
[the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence
to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
III.
Initial Procedural Matters
Separate motions and briefs have been filed by defendants Brannon/JPI,
Garcia/HPC, OSI, DH, and PatientFirst. In addition to making particular arguments for
dismissal of particular claims against them, defendants (except for OSI) have also joined
in other arguments by other defendants that would also apply to them. The Court
appreciates such economy; it notes, however, that if one defendant’s legal argument turns
on its own particular circumstances, the Court will not necessarily consider that argument
as made by another defendant that has not specifically briefed how the argument applies
also to it.
4
Defendant DH filed an answer to plaintiff’s amended complaint, and it subsequently
filed a motion to dismiss or for summary judgment. Plaintiff correctly notes that a party
may not move to dismiss under Rule 12(b)(6) once it has answered. The Rules also provide
for a motion for judgment on the pleadings, however, see Fed. R. Civ. P. 12(c), and the
Court has therefore considered DH’s motion under that rule.
Defendant HPC did not file an answer before filing its motion to dismiss.
Nevertheless, plaintiff argues that HPC should be precluded from pursuing such relief
because DH has answered and DH and HPC are both alter egos of defendant PatientFirst.
The Court rejects this argument. HPC and DH are separate parties, and plaintiff has not
cited any authority suggesting that his allegations of alter ego liability somehow preclude
the two defendants from acting separately in litigating this suit. In addition, as with DH,
there can be no prejudice to plaintiff, as HPC could simply pursue the same arguments in
a motion for judgment on the pleadings.
IV.
RICO
A.
Injury to Business or Property
In Count III of his amended complaint, plaintiff asserts claims against all defendants
under the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§ 1961 et seq. RICO allows for a civil action by a person “injured in his business or
property” by a violation of Section 1962 of the Act. See id. § 1964(c); see also Sedima,
S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496-97 (1985) (a RICO plaintiff “only has
standing if, and can only recover to the extent that, he has been injured in his business or
5
property by the conduct constituting the offenses”). Congress has thus excluded personal
injuries from the kinds of injury that may underlie a RICO claim. See RJR Nabisco, Inc.
v. European Community, 136 S. Ct. 2090, 2108 (2016). A private plaintiff cannot recover
for emotional, personal, or speculative future injuries under RICO. See Safe Streets
Alliance v. Hickenlooper, 859 F.3d 865, 888-89 (10th Cir. 2017). The circuit courts agree
that the requirement of injury to “business or property” excludes all personal injuries
including pecuniary losses flowing therefrom. See Jackson v. Sedgwick Claims Mgmt.
Servs., Inc., 731 F.3d 556, 564-65 & n.4 (6th Cir. 2013) (citing cases).
Defendants argue that plaintiff’s RICO claims should be dismissed because he has
not plausibly alleged an injury to his business or property as required. In his amended
complaint, plaintiff alleges as follows:
Plaintiff has standing to bring these RICO claims because Plaintiff was
economically injured and experienced violations of Plaintiff’s property in the
following included, but not limited to ways: co-pays, out-of-pocket medical
costs, increased Medicaid liens, reduced earning capacity, lost wages,
incidental costs and future medical costs including drug rehabilitation
treatment, therapy, orthopedic surgery, among other economic damages to
be proved at trial.
Defendants argue that any such damages constitute personal injuries or pecuniary damages
that flow from his personal injuries sustained as a result of the allegedly negligent medical
care.
In response, plaintiff argues that although he seeks personal injury damages in his
other claims, his RICO claims are limited to damages for the money he paid, as a result of
defendants’ scheme to defraud, for unnecessary medical treatment, which payments
constitute an injury to property under the statute. Plaintiff thus does not dispute that other
6
damages listed in the allegation quoted above would not be recoverable under RICO. For
instance, damages for reduced earning capacity, lost wages, and future medical costs would
represent pecuniary damages that flowed directly from the personal injury suffered from
the alleged medical malpractice. Accordingly, plaintiff’s RICO claims are dismissed to
the extent that they seek damages other than amounts that he paid out of pocket for
unnecessary medical treatment.1
In arguing that his payments for unnecessary treatment constitute an injury to
property under RICO, plaintiff relies on the recent case of Blevins v. Aksut, 849 F.3d 1016
(11th Cir. 2017). In that case, the Eleventh Circuit recognized the general rule precluding
claims under RICO for both personal injuries and pecuniary losses flowing therefrom. See
id. at 1021. It nevertheless held that “[i]n the context of unnecessary medical treatment,
payment for the treatment may constitute an injury to property” under RICO, because the
payments themselves are economic injuries that were for the procedures and did not flow
from any personal injuries. See id.
Defendants urge the Court not to follow Blevins. They argue that Blevins goes
against the majority rule recognized by the Sixth Circuit in Jackson; but the Eleventh
Circuit recognized that general rule (even citing Jackson for it) and held that the alleged
injuries fell outside the scope of that prohibition because they did not flow from personal
injuries. See id. (citing Jackson, 731 F.3d at 565). Moreover, the cases cited by defendant
1
Plaintiff also alleges increased Medicaid liens, but such liens would only require
satisfaction if plaintiff recovers from defendants, and plaintiff has not explained how he
has suffered injury because of payments made by another party. Plaintiff would be entitled
to recover under RICO only those amounts that he paid for medical treatment.
7
as establishing that majority rule did not discuss how the rule applied to payments for
unnecessary medical treatment. Defendants have cited only one unpublished case that
involved such an injury, Gotlin ex rel. County of Richmond v. Lederman, 483 F. App’x 583
(2d Cir. 2012).
In Gotlin, the plaintiff alleged that the defendants fraudulently
misrepresented the efficacy of a particular medical treatment, which caused the victims to
undergo therapy unnecessarily. See id. at 585. With no analysis, the court upheld the
district court’s conclusion that the monetary losses for the amounts paid for the treatment
were incidental to personal injuries and thus did not confer standing under RICO. See id.
at 586.
The Court concludes that the Tenth Circuit would most likely follow Blevins in this
case. See, e.g., Cory v. Aztec Steel Bldg., Inc., 468 F.3d 1226, 1232 (10th Cir. 2006) (noting
Congress’s directive that RICO be liberally construed to effectuate its remedial purposes).
Plaintiff’s alleged injury in paying for unnecessary treatment did not flow from any
personal injury suffered because he received that treatment; rather, the personal injury
resulted from his decision to have the allegedly unnecessary treatment in the first place. In
addition, the Court rejects defendants’ argument that plaintiff has not pleaded sufficient
facts to state a plausible claim that he underwent unnecessary medical treatment.
Accordingly, defendants’ motion to dismiss plaintiff’s RICO claims on the basis of a lack
of standing is denied to the extent that plaintiff seeks damages consisting of payments that
he made for unnecessary medical treatment.
B.
Enterprise Under 18 U.S.C. § 1962(c)
8
Plaintiff has asserted claims under both Section 1962(a) and Section 1962(c) of
RICO. Section 1962(c) provides in relevant part as follows:
It shall be unlawful for any person employed by or associated with any
enterprise . . . to conduct or participate, directly or indirectly, in the conduct
of such enterprise’s affairs through a pattern of racketeering activity . . . .
See 18 U.S.C. § 1962(c). “Enterprise” is defined by the Act to include “any individual,
partnership, corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity.” See id. § 1961(4). The Supreme
Court has confirmed that “to establish liability under § 1962(c) one must allege and prove
the existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply
the same ‘person’ referred to by a different name.” See Cedric Kushner Promotions, Ltd.
v. King, 533 U.S. 158, 161 (2001). Defendants argue that plaintiff has not satisfied this
distinctness requirement because he generally alleges that all of the defendants formed a
single group, acted for each other, and essentially are indistinguishable from each other.
The Court rejects this argument at the pleading stage. Plaintiff has alleged that
defendants collectively formed an association-in-fact and thus formed an enterprise under
the statute. It is true that plaintiff has alleged that PatientFirst is the alter ego of its two
subsidiaries, DH and HPC, and he has alleged that corporate entities are vicariously liable
for the acts of Dr. Brannon.
Plaintiff has also alleged an “interconnected” and
“interwoven” group of defendants. The Supreme Court has held, however, that a corporate
enterprise and its employee are distinct from each other for purposes of this requirement,
even if the employee is the corporation’s sole owner. See id. at 163. Thus, the fact that
the parties forming the enterprise may be related by ownership does not necessarily doom
9
plaintiff’s RICO claims. Defendants cite Roberts v. C.R. England, Inc., 318 F.R.D. 457
(D. Utah 2017), in which the court rejected a RICO claim for lack of distinctness. See id.
at 489-90. In that case, however, plaintiff had alleged that the defendant and the enterprise
were alter egos of each other. See id. at 489. In this case, plaintiff has not alleged that all
of the defendants are alter egos of each other.
The Court also rejects OSI’s argument that plaintiff’s complaint fails to satisfy the
requirement in Section 1962(c) that the person have conducted or participated in the
enterprise’s affairs. OSI notes that the Tenth Circuit has held that the defendant must have
had some part in directing the enterprise’s affairs. See Safe Streets, 859 F.3d at 883.
Moreover, “a defendant must do more than simply provide, through its regular course of
business, goods and services that ultimately benefit the enterprise.” See id. at 884 (quoting
George v. Urban Settlement Servs., 833 F.3d 1242, 1251 (10th Cir. 2016)). OSI argues
that it simply provided the BGSS device that was implanted in plaintiff during surgery.
According to plaintiff’s allegations, however, OSI was not simply a disinterested party who
did nothing more than supply a good that ultimately benefited the enterprise; rather,
plaintiff has alleged that OSI joined with others in a scheme to benefit its owner. In Safe
Streets, the Tenth Circuit also reiterated that “the defendant need not have primary
responsibility for the enterprise’s affairs, a formal position in the enterprise, or significant
control over or within the enterprise to be liable under RICO,” and that the enterprise
member need only have played “a bit part” in conducting the enterprise’s affairs. See Safe
Streets, 859 F.3d at 883-84 (internal quotations omitted) (quoting George, 833 F.3d at
10
1251). The Court concludes that plaintiff has alleged sufficient facts to satisfy the
enterprise element of liability under Section 1962(c).2
C.
Continuity
Both Section 1962(c) and Section 1962(a) require a showing of a pattern of
racketeering activity, consisting of at least two predicate acts. See 18 U.S.C. §§ 1961(5),
1962(a), (c). In order to satisfy this requirement, there must be both a relationship between
the predicate acts and some element of continuity. See H.J. Inc. v. Northwestern Bell Tel.
Co., 492 U.S. 229, 239 (1989).
The Supreme Court has explained the continuity
requirement as follows:
“Continuity” is both a closed- and open-ended concept, referring
either to a closed period of repeated conduct, or to past conduct that by its
nature projects into the future with a threat of repetition. It is, in either case,
centrally a temporal concept---and particularly so in the RICO context, where
what must be continuous, and the relationship these predicates must bear one
to another, are distinct requirements. A party alleging a RICO violation may
demonstrate continuity over a closed period by proving a series of related
predicates extending over a substantial period of time. Predicate acts
extending over a few weeks or months and threatening no future criminal
conduct do not satisfy this requirement: Congress was concerned in RICO
with long-term criminal conduct. Often a RICO action will be brought before
continuity can be established in this way. In such cases, liability depends on
whether the threat of continuity is demonstrated.
See id. at 241-42 (citations omitted) (emphasis in original).
Defendant OSI argues that plaintiff has not pleaded facts (such as a those involving
other victims) to support a reasonable inference that there is a threat of future violations by
defendants here. In the above excerpt, however, the Supreme Court made clear that the
2
The Court rejects the argument that the roles of the particular defendants in the
alleged scheme have not been pleaded with sufficient detail.
11
continuity requirement may be satisfied either by showing an open-ended pattern, with the
threat of violations continuing into the future, or a closed-ended pattern consisting of
repeated conduct in the past of sufficient duration. Plaintiff has alleged predicate acts
occurring over a period of several years with respect to his medical treatment. Thus,
plaintiff has pleaded sufficient facts to meet this requirement.
D.
Predicate Acts – Mail Fraud and Wire Fraud
In his complaint, plaintiff asserts four types of predicate violations: mail fraud in
violation of 18 U.S.C. § 1341; wire fraud in violation of 18 U.S.C. § 1343; dealing in a
controlled substance in violation of 18 U.S.C. § 841 and Kansas statutes; and money
laundering in violation of 18 U.S.C. § 1956.
See 18 U.S.C. § 1961(1) (defining
“racketeering activity” to include particular violations). Plaintiff alleges that defendants
committed mail and wire fraud in billing and accepting payments for unnecessary medical
treatments relating to his pain management through prescription medications and to his hip
surgery. Plaintiff also alleges wire fraud based on false advertising with respect to an
article in the Kansas City Business Journal concerning the price of surgery using the BGSS
device.
OSI argues that it cannot have committed mail fraud or wire fraud because it was
not involved in the mailing of the bills or the receipt of payments for plaintiff’s treatment.
OSI further notes that plaintiff has alleged that “defendants” generally committed the
predicate acts. In a case cited by OSI, however, the First Circuit noted that predicate acts
under RICO may include aiding and abetting the listed offenses, see Aetna Cas. Sur. Co.
v. P & B Autobody, 43 F.3d 1546, 1560 (1st Cir. 1994), and this Court has reached the
12
same conclusion, see Independent Drug Wholesalers Group, Inc. v. Denton, 1993 WL
191393, at *3 (D. Kan. May 13, 1993) (Lungstrum, J.). In addition, a person who
“knowingly causes [something] to be delivered by mail” may be guilty of mail fraud, see
18 U.S.C. § 1341, and a person causes the mails to be used if he “does an act with
knowledge that the use of the mails will follow in the ordinary course of business, or where
such use can reasonably be foreseen, even though not actually intended.” See Pereira v.
United States, 347 U.S. 1, 8-9 (1954); see also Aetna, 43 F.3d at 1560 (“plaintiff does not
need to prove that each defendant personally used the mails but only that the defendant
acted with knowledge that the use of the mails will follow in the ordinary course of
business, or acted in circumstances where such use can be reasonably foreseen”) (quoting
United States v. Maze, 414 U.S. 295, 299 (1974)). Thus, the fact that OSI did not itself
send out the bills or receive the payments is not dispositive.
OSI and the other defendants are correct, however, that plaintiff has merely referred
to “defendants” generally in alleging these predicate acts, and therefore the particular basis
for finding violations by each defendant is unknown. Plaintiff’s RICO claims are therefore
subject to dismissal. See Robbins v. Oklahoma, 519 F.3d 1242, 1250 (10th Cir. 2008)
(plaintiff must give fair notice of the wrongful conduct by each defendant). Plaintiff is
granted leave, however, to amend his complaint to allege how each defendant committed
13
particular predicate acts (including whether RICO liability is asserted against any
defendant only vicariously3).4
Finally, the Court rejects OSI’s argument that the allegedly false statement
concerning price in the magazine article represented mere puffery, as the price of the device
would have a sufficient basis in fact. OSI also argues that the magazine is the entity that
transmitted the article by wire (over the internet); but the wire fraud statute also applies to
one who “causes [material] to be transmitted” by wire, see 18 U.S.C. § 1343, and OSI has
not provided any authority to suggest that it could not have committed wire fraud as a
matter of law merely because some other party made the transmission.
E.
Predicate Acts – Dealing in a Controlled Substance
RICO includes in its definition of racketeering activity “dealing in a controlled
substance or listed chemical . . . which is chargeable under State law and punishable by
imprisonment for more than one year;” and “dealing in a controlled substance or listed
chemical . . . punishable by any law of the United States.” See 18 U.S.C. § 1961(1). In his
complaint, plaintiff alleges violations of K.S.A. § 65-4123, which prohibits the distribution
or dispensing of controlled substances except by valid prescription order. As defendants
Until plaintiff makes clear his asserted basis for each defendant’s liability, the
Court defers ruling on PatientFirst’s argument that there cannot be vicarious RICO liability,
which issue was not adequately briefed by the parties.
3
4
The Court rejects the argument by defendants Garcia and HPC that these frauds
have not been alleged with sufficient particularity. Plaintiff has sufficiently identified the
particular bills and payments and alleged that they were fraudulent because the treatments
were unnecessary.
14
point out, however, violation of that statute is only a misdemeanor and therefore not
punishable by more than one year of imprisonment, as required for treatment as a predicate
act under RICO. See K.S.A. § 65-4127c.5 Accordingly, the Court dismisses plaintiff’s
RICO claims to the extent based on predicate violations of Kansas law.
With respect to the predicate federal controlled substance offenses, plaintiff has only
identified specific conduct by Dr. Brannon, Dr. Garcia, and HPC relating to his receipt of
prescription pain medications. Accordingly, plaintiff’s claims against the other defendants
are subject to dismissal, although plaintiff may amend his complaint to make clear how
each defendant is alleged to have violated federal controlled substance law.6
F.
Predicate Acts – Money Laundering
Plaintiff also alleges money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(ii)
as predicate acts. A person violates that statute by conducting a financial transaction
involving the proceeds of specified unlawful activity while knowing that the transaction is
designed to avoid a reporting requirement under federal or state law. See id. The specified
unlawful activity may include the offenses listed in RICO as possible predicate acts. See
id. § 1956(c)(7)(A). Plaintiff alleges that the “enmeshed relationships between Brannon,
OSI, PatientFirst, and [DH] were created in order to avoid or under report” three federal
5
Plaintiff did not respond to this argument in his briefs.
6
The Court again rejects the argument that plaintiff has not pleaded sufficient facts
with respect to the treatments being unnecessary or other details about the particular
prescriptions.
15
reporting obligations, and that “Brannon and OSI, and by extension, PatientFirst, Garcia
and [DH] undertook a common scheme” to defraud plaintiff and Missouri Medicaid.
Plaintiff’s allegations are not sufficient, however, to allege plausibly a money
laundering violation by any defendant. Specifically, plaintiff has not alleged that any
particular defendant knowingly conducted financial transactions involving proceeds from
specified offenses, with the transactions designed to avoid reporting violations. It is not
enough for plaintiff simply to have alleged reporting violations by Dr. Brannon and OSI.
Accordingly, plaintiff’s RICO claims are subject to dismissal to the extent based on
predicate money laundering violations. If plaintiff can allege the necessary facts, he is
granted leave to amend his complaint to state a cognizable claim based on predicate money
laundering by specific defendants.
G.
Liability Under 18 U.S.C. § 1962(a)
The title of Count III of plaintiff’s amended complaint indicates that plaintiff also
asserts a claim under Section 1962(a) of RICO, which provides in relevant part as follows:
It shall be unlawful for any person who has received any income derived,
directly or indirectly, from a pattern of racketeering activity . . . in which
such person has participated as a principal . . . to use or invest, directly or
indirectly, any part of such income, or the proceeds of such income, in
acquisition of any interest in, or the establishment or operation of, any
enterprise which is engaged in, or the activities of which affect, interstate or
foreign commerce.
See 18 U.S.C. § 1962(a). Count III contains only the following allegations that appear to
be directed to Section 1962(a):
132. Upon information and belief, a portion of the profits derived
from the predicate acts of racketeering activity were invested back into OSI,
JPI, PatientFirst and [DH].
16
133. But for these reinvestments, Brannon and OSI would not have
been in a position to continue to operate and sell the Titanium Hip Tool which
directly and proximately harmed Plaintiff.
Dr. Garcia and HPC argue that plaintiff has not alleged any basis for their liability
under Section 1962(a) by these allegations, which mention only the other defendants.
Plaintiff has not responded to this argument by Dr. Garcia and HPC, and the Court agrees
that these allegations do not state such a claim against those defendants. Accordingly,
plaintiff claim under Section 1962(a) against Dr. Garcia and HPC are hereby dismissed.
The Court further concludes that plaintiff has not pleaded sufficient facts to state a
claim against the other defendants under this section of RICO. Again, in his briefs, plaintiff
has not addressed any argument directed specifically at liability under Section 1962(a), and
thus it appears that he has abandoned this claim. Plaintiff has alleged that the use of the
device harmed him, but such an allegation suggests personal injury damages, and as
discussed above, plaintiff’s RICO claims are limited to claims for economic damages for
payments actually made by plaintiff for unnecessary treatments.
Moreover, a plaintiff must plead and prove that such damages were caused not by
the underlying racketeering activity, but specifically by the defendant’s investment of
racketeering proceeds in an enterprise. See Grider v. Texas Oil & Gas Corp., 868 F.2d
1147, 1149-51 (10th Cir. 1989). Plaintiff’s bare allegation of reinvestment back into OSI,
BPI, DH, and PatientFirst are not sufficient. In Brittingham v. Mobil Corp., 943 F.2d 297
(3d Cir. 1991), the Third Circuit explained why mere reinvestment is not enough:
The causal connection is tenuous at best. The direct cause of plaintiffs’
alleged injuries was the fraudulent conduct. Plaintiffs have neither alleged
17
nor demonstrated a connection with the use or investment of racketeering
income other than the normal reinvestment of corporate profits.
If this remote connection were to suffice, the use-or-investment injury
requirement would be almost completely eviscerated when the alleged
pattern of racketeering is committed on behalf of a corporation. RICO’s
pattern requirement generally requires long-term continuing criminal
conduct. Over the long term, corporations generally reinvest their profits,
regardless of the source. Consequently, almost every racketeering act by a
corporation will have some connection to the proceeds of a previous act.
Section 1962(c) is the proper avenue to redress injuries caused by the
racketeering acts themselves. If plaintiffs’ reinvestment injury concept were
accepted, almost every pattern of racketeering activity by a corporation
would be actionable under § 1962(a), and the distinction between § 1962(a)
and § 1962(c) would become meaningless.
See id. at 305 (citation omitted). Plaintiff has not alleged any facts that would suggest
anything other than normal reinvestment of profits here.
Plaintiff has alleged only
predicate acts involving him as the victim, and he has not alleged facts to support a
plausible claim that the reinvestment of profits from treating a single patient allowed Dr.
Brannon and OSI to continue to operate long enough for Dr. Brannon to convince plaintiff
to have unnecessary hip surgery, when otherwise they would have been unable to do so.
Finally, although plaintiff has alleged reinvestment in JPI, DH, and PatientFirst, he has not
alleged reinvestment by those entities, as required for a claim against them. Accordingly,
plaintiff’s claims under RICO’s Section 1962(a) are dismissed in their entirety.
V.
Fraud
A.
Subsumed in Medical Malpractice Claims
In Count V of his amended complaint, plaintiff asserts a claim for fraud against all
defendants. Plaintiff alleges that Dr. Brannon misrepresented or failed to state facts
18
relating to whether plaintiff had a particular hip condition; the appropriateness, benefits,
and risks of particular surgery for plaintiff; the benefits, superiority, and price of implanting
a particular device in that surgery; and Dr. Brannon’s conflict of interest arising from his
relationship to other defendants. Plaintiff further alleges that, with respect to these
misrepresentations and omissions, Dr. Brannon was acting not only individually but also
as agent or employee of JPI, OSI, HPC, DH, and PatientFirst. Finally, in a single sentence,
plaintiff alleges upon information and belief that “all defendants engaged in the fraudulent
distribution of Schedule II narcotics without any legitimate purpose as more fully set forth
elsewhere in this Complaint.”
Defendants Brannon and JPI argue that plaintiff cannot maintain his fraud claim
under Kansas law because the claim is subsumed within plaintiff’s medical malpractice
and informed consent claims.7 In Bonin v. Vannaman, 261 Kan. 199 (1996), the Kansas
Supreme Court held that the plaintiff’s fraud claim against his treating physician was more
properly considered a claim for malpractice. See id. at 210. The court explained:
It is true that Dr. Vannaman’s alleged conduct fulfills all of the elements of
fraud by silence . . . . However, Dr. Vannaman’s alleged conduct was also
proscribed by a legal duty which he had an obligation to uphold. When it is
alleged that such a legal duty is violated, the law has classified the cause of
action created by this breach as a form of negligence called malpractice, not
fraud or breach of contract, even if the violation of such duty also technically
fulfills the elements of fraud or breach of contract. [Plaintiff] does not allege
a valid claim of fraud against Dr. Vannaman.
This does not mean that a doctor can never be liable for fraud or
breach of contract. Instead, this simply means that a fraud or breach of
contract cause of action can only be based on a physician’s misconduct if that
With respect to plaintiff’s state-law claims, all parties have applied the law of
Kansas, where plaintiff received his medical treatment from defendants.
7
19
misconduct is beyond a breach of the legal duty which every doctor has the
obligation to uphold.
See id. (citation omitted). The court also repeated its reasoning from an earlier case:
As malpractice covers every way in which a patient is injured through the
dereliction of a doctor in his professional capacity, the approach, depending
on the facts, can be through any of several familiar forms of action. But no
matter what the approach, it remains an action for malpractice, not one for
deceit, contract, or anything else.
See id. at 211 (quoting Noel v. Proud, 189 Kan. 6, 10 (1961)); see also Williamson v.
Amrani, 283 Kan. 227, 240 (2007) (Bonin and other cases have held that “a plaintiff cannot
bring a claim for breach of contract or fraud where the gravamen of the claim is medical
malpractice”).
In Kelly v. VinZant, 287 Kan. 509 (2008), the supreme court applied this rule from
Bonin in upholding the dismissal of a fraud claim. See id. at 516-19. After quoting the
pertinent language from Bonin, the court summed up its application of the rule as follows:
“As Bonin states, when fraud is a part of the informed consent process, the claim is for
malpractice, not fraud.” See id. at 518. Moreover, the court stated that “[t]he conclusion
that the claim sounds in medical malpractice, not fraud, does not change even if the fraud
vitiates the consent.” See id.
In this case, all of the alleged misrepresentations and omissions by Dr. Brannon
were made in the context of the informed consent process prior to plaintiff’s hip surgery.
Indeed, in Count II of the amended complaint, plaintiff asserts a professional negligence
claim against Dr. Brannon, based on a lack of informed consent, based on a failure to
disclose facts relating to whether plaintiff had a particular hip condition; the
20
appropriateness, benefits, and risks of a particular surgical procedure; and Dr. Brannon’s
financial conflict of interest. Thus, under the rule of Bonin and Kelly, plaintiff’s fraud
claim is subsumed within his informed consent claim and is subject to dismissal.
In response to this argument, plaintiff emphasizes that he alleges intentional conduct
(not merely negligence) by which interrelated defendants sought to profit. The Kansas
Supreme Court has made clear, however, that this rule applies even to conduct that would
otherwise satisfy all of the elements of fraud, including intentional conduct. Plaintiff also
notes the statement from Bonin (repeated in Kelly) that a doctor can be liable for fraud in
the right circumstances. As an example, plaintiff cites Robinson v. Shah, 23 Kan. App. 2d
812 (1997). In that case, the court held that the plaintiff could maintain a fraud claim
against a doctor based on the doctor’s conduct in concealing his original malpractice, which
resulted in the expiration of the statute of limitations for a malpractice action. See id. at
824. That case is easily distinguished from the present case, however. In Kelly, the
supreme court discussed Robinson as follows:
Indeed, there is also Kansas precedent holding that when alleged fraud
occurs separately from and subsequent to the malpractice and gives rise to
damages separate and distinct from those flowing from the malpractice, a
plaintiff is entitled to allege and prove such a cause of action. Typically,
these actions arise from fraudulent statements intended to conceal
malpractice.
See Kelly, 287 Kan. at 518 (citing Robinson, 23 Kan. App. 2d 812). In the present case,
plaintiff has not alleged fraud occurring after the original malpractice that resulted in harm
separate from the harm suffered from the malpractice. Rather, plaintiff has alleged fraud
21
based on the same facts that form the basis for his malpractice claim, and he has not alleged
any separate damages resulting from the fraud.
As set forth by the Kansas Supreme Court, a fraud claim “can only be based upon a
physician’s misconduct if that misconduct is beyond a breach of the legal duty which every
doctor has the obligation to uphold.” See Bonin, 261 Kan. at 210; accord Kelly, 287 at
517. Plaintiff argues that the alleged fraud goes beyond a doctor’s normal legal duty, but
he has not explained why a doctor would not be required, as a part of the informed consent
process, to disclose and state truthfully the matters on which this fraud claim is based.
Indeed, in his informed consent, plaintiff asserts just such a duty. As summed up by the
supreme court, “when fraud is part of the informed consent process, the claim is for
malpractice, not fraud.” See Kelly, 287 Kan. at 518. The fraud alleged by plaintiff occurred
as a part of the informed consent process. Accordingly, plaintiff cannot maintain an action
for fraud.
Although plaintiff did not rely on the allegation in arguing that his fraud claim was
not subsumed, the Court notes that plaintiff also alleges in this count, in conclusory fashion,
that defendants engaged in the fraudulent distribution of narcotics without a legitimate
purpose. As a preliminary matter, this allegation, devoid of any details concerning
representations or omissions made by any particular defendant, fails to satisfy the
requirement that fraud be alleged with particularity. See Fed. R. Civ. P. 9(b). In addition,
the proper prescription of medication falls within the normal professional duties of
22
physicians, and thus any fraud claim based on such conduct would be precluded by the rule
from Bonin and Kelly discussed herein.8
B.
Immunity Under K.S.A. § 40-3403(h)
Plaintiff’s fraud claims against JPI, HPC, DH, and PatientFirst—and his other statelaw claims against those defendants—fail for an independent reason. K.S.A. § 40-3403(h)
provides as follows:
A health care provider who is qualified for coverage under the [health care
stabilization] fund shall have no vicarious liability or responsibility for any
injury or death arising out of the rendering or the failure to render
professional services inside or outside this state by any other health care
provider who is also qualified for coverage under the fund.
The Kansas Supreme Court has interpreted this statue broadly, holding that the statute
“absolves a health care provider not just from vicarious liability but from any
responsibility, including independent liability, where the injured party’s damages are
derivative of and dependent upon the rendering of or the failure to render professional
services by another health care provider.” See Cady v. Schroll, 298 Kan. 731, 732, 745
(2014). Immunity under the statute does not depend on the type of health care provider or
the relationship between providers. See id. at 746. Nor does immunity depend on the
theory of liability asserted; instead, the focus is on the source or cause of the plaintiff’s
injuries. See id. at 746, 747.
8
Plaintiff has not asserted a medical malpractice claim against Dr. Garcia relating
to his prescription of medication for plaintiff (Counts I and II were asserted only against
Dr. Brannon), and the conclusory fraud allegation discussed above does not even mention
Dr. Garcia specifically. Thus, plaintiff would be required to obtain leave to amend his
complaint to assert such a malpractice claim against Dr. Garcia.
23
In its various briefs, plaintiff has not disputed that JPI, HPC, and DH are “health
care providers” under the Kansas statutes. Plaintiff does argue that PatientFirst is merely
a holding company and not really a health care provider. Plaintiff has not cited any law to
support that argument, however, and the term is defined by statute to include “a
professional corporation organized pursuant to the professional corporation law of Kansas
by persons who are authorized by such law to form such a corporation and who are
healthcare providers as defined by this subsection.” See K.S.A. § 40-3401(f).
In opposing application of this statute, plaintiff again argues that he has alleged not
only malpractice but also a scheme among many defendants to make money. The alleged
scheme, however, was based on the medical treatment and care of plaintiff, and plaintiff
has not explained how his claims against these entity defendants do not arise out of another
health care provider’s rendering of or failure to render professional services. As noted
above, the Kansas Supreme Court has directed that the statute be applied broadly, without
regard to the particular theory of liability asserted. Accordingly, plaintiff’s fraud claims
against JPI, HPC, DH, and PatientFirst are dismissed for this reason as well.9
VI.
KCPA
A.
Application of Immunity Under K.S.A. § 40-3403(h)
In Count VI of his amended complaint, plaintiff asserts claims against all defendants
other than Dr. Garcia under the Kansas Consumer Protection Act (KCPA), K.S.A. §§ 50-
9
This statute would also apply to any attempt by plaintiff to impose liability on Dr.
Garcia for the injuries arising from his treatment by Dr. Brannon and vice versa.
24
623 et seq. In that count, plaintiff alleges that Dr. Brannon, as inventor of the device,
engaged in the manufacture, sale, and distribution of products; and that he “individually
and through his various entities including OSI, JPI, PatientFirst, [HPC] and [DH]”
manufactured, marketed, and sold to plaintiff the BGSS device that he used during the hip
surgery on plaintiff. Plaintiff then alleges that “defendants” engaged in deceptive acts or
practices in connection with their consumer transactions with plaintiff (presumably in
violation of Section 50-626) through misrepresentations and omissions relating to the
suitability and benefits of the BGSS device for plaintiff; the price of the surgery using the
BGSS; plaintiff’s suffering from a particular hip condition; the suitability, benefits, and
risks of the surgery using the device for plaintiff; and Dr. Brannon’s conflict of interest
from his relationship to the entity defendants. Plaintiff also alleges that defendants through
their conduct engaged in unconscionable acts and practices in violation of Section 50-627.
Plaintiff alleges that defendants unfairly and improperly profited from these violations.
Finally, plaintiff alleges as follows:
Plaintiff is not asserting this cause of action against Dr. Brannon personally
for personal injuries alleged to have resulted from medical negligence but is
restricting this claim to those damages arising from the sale of the Product
not sounding in personal injury (i.e. price gauging [sic], etc.). To the extent
Dr. Brannon was acting as an employee and/or agent of the other defendants,
however, plaintiff is seeking all damages against the other defendants to
which he is entitled under the [KCPA].
It thus appears from the complaint that, in asserting his claims under the KCPA,
plaintiff alleges only affirmative conduct in violation of the Act by Dr. Brannon. The
conduct of which he complains is the same conduct underlying his malpractice and fraud
claims, which are based solely on conduct by Dr. Brannon. Plaintiff certainly has not
25
identified with particularity any affirmative conduct by any of the entity defendants in
violation of the statute, as required by Rule 9(b). See Gonzalez v. Pepsico, Inc., 489 F.
Supp. 2d 1233, 1247 (D. Kan. 2007) (“Allegations of unfair trade practices under the
KCPA must be pleaded with particularity in accordance with Rule 9(b).”) (citations
omitted).10 Finally, the above-quoted allegation indicates that his claims against the entity
defendants are based on Dr. Brannon’s conduct as “employee and/or agent of the other
defendants.” Thus, plaintiff asserts only claims of derivative liability against the entity
defendants under the KCPA.
As discussed above, however, Section 40-3403(h) provides immunity for JPI, HPC,
DH, and PatientFirst against such claims. Again, these claims arise out of conduct by Dr.
Brannon in the informed consent process, and thus they arise out of the rendering of or
failure to render professional services by Dr. Brannon, a health care provider. Plaintiff has
not argued that Section 40-3403(h) should not apply to particular state-law claims, and as
noted above, the applicability of this immunity does not depend on the theory of liability
asserted. See Cady, 298 Kan. at 746, 747.
There is one exception, however, within plaintiff’s KCPA allegations. In addition
to the allegedly deceptive or unconscionable conduct cited above, plaintiff’s complaint also
contains the following allegation (in ¶ 250.e):
Pursuant to KSA 50-627(b)(2), the price of the BGSS products and procedure
charged by the Defendants grossly exceeded the price at which similar
10
Plaintiff has not disputed that his claims under the KCPA based on
misrepresentations and omissions must be pleaded with particularity under Rule 9(b).
26
products and/or procedures were obtainable in similar transactions by similar
customers.
Financial damages resulting from the act of billing plaintiff (or the act of selling a product
for a particular price) would arguably fall outside the scope of Section 40-3403(h)’s
immunity from liability for “injury or death arising out of the rendering of or the failure to
render professional services.” Defendants have not addressed the specific application of
this immunity to a claim by plaintiff under the KCPA for financial injuries relating to
billing or the sale of a product. Thus, the Court will not apply Section 40-3403(h) to that
particular KCPA claim at this time. All other claims under the KCPA against JPI, HPC,
DH, and PatientFirst, however, are dismissed on the basis of that immunity.
B.
K.S.A. § 50-635(b)
Various defendants argue that plaintiff’s KCPA claim is precluded by the following
provision of the Act:
The Kansas consumer protection act does not allow for a private cause of
action or remedy against a licensed health care provider for causes of action
for personal injury or death resulting, or alleged to have resulted, from
medical negligence.
See K.S.A. § 50-635(b). This statute was added to the KCPA by the Kansas Legislature in
2007 in response to the Kansas Supreme Court’s decision in Williamson v. Amrani, 283
Kan. 227 (2007). See Kelly, 287 Kan. at 522 (this amendment “effectively overruled”
Williamson); Stormont-Vail Healthcare, Inc. v. Zoble, 2010 WL 4157102, at *4 (Kan. Ct.
App. Oct. 8, 2010) (unpub. op.) (Kansas Legislature amended the KCPA in response to
Williamson). In Williamson, the plaintiff asserted a claim against her surgeon under the
KCPA based on alleged misrepresentations about the benefits and effectiveness of
27
plaintiff’s surgery. See Williamson, 283 Kan. at 228. The Kansas Supreme Court held that
the physician-patient relationship fell within the scope of the KCPA, and that the rule of
Bonin—that fraud claims based on the breach of a doctor’s professional duty, including
claims of fraud occurring in the informed consent process—did not apply to the KCPA, by
which the legislature had created a specific statutory cause of action. See id. at 240-42.
Thus, by adding Section 50-635(b) to the KCPA, the legislature evinced an intent
to preclude claims under the KCPA based on the breach of a doctor’s professional duty.
As described above, plaintiff has alleged deceptive and unconscionable acts under the
KCPA occurring during the informed consent process, consisting of misrepresentations
and omissions relating to plaintiff’s surgery. Just as such allegations may not support a
fraud claim under Kansas law, they also may not serve as the predicate for a claim under
the KCPA. Accordingly, the Court dismisses these KCPA claims against Dr. Brannon and
the other health care provider defendants (JPI, DH, HPC, PatientFirst). In addition,
because plaintiff has asserted a claim against OSI only derivatively based on the conduct
of Dr. Brannon, the Court also dismisses the claim against that defendant.
Again, however, there is one exception in the plaintiff’s pleading of the KCPA
claims—the allegation that the excessive price charged for plaintiff’s surgery and the
BGSS device constituted an unconscionable act (¶ 250.e). By that allegation, which
suggests a purely financial injury, plaintiff has not asserted a claim for “personal injury or
death,” and thus that claim falls outside the scope of Section 50-635(b). See StormontVail, 2010 WL 4157102, at *4 (amendment did not exempt health care providers from
coverage under the KCPA for such conduct as pricing of or billing for services).
28
Accordingly, the immunities provided by Section 40-3403(h) and Section 50-635(b) do not
preclude plaintiff’s claim under the KCPA against any of the defendants based specifically
on the pricing of his procedure. All other KCPA claims against all defendants are
dismissed, however.
C.
Doctors Hospital – K.S.A. § 65-442(b)
Because DH remains a defendant to a limited claim under the KCPA (based on ¶
250.e of the amended complaint), the Court addresses DH’s argument that it is immune
from liability to plaintiff on the state-law claims under K.S.A. § 65-442(b), which provides
as follows:
There shall be no liability on the part of and no action for damages shall arise
against any licensed medical care facility by a person because of the
rendering of or failure to render professional services within such medical
care facility by a person licensed to practice medicine and surgery if such
person is not an employee or agent of such medical care facility.
See id. DH seeks summary judgment on the issue of the applicability of this statute, on the
basis of its CEO’s affidavit stating that DH is a licensed medical care facility and that Dr.
Brannon (who by contract was an independent contractor through JPI for HPC) was not an
employee of DH and merely had privileges there.
Plaintiff argues that consideration of summary judgment on this issue be deferred
pursuant to Fed. R. Civ. P. 56(d) so that he may obtain discovery concerning Dr. Brannon’s
relationship with DH and the other defendants. DH argues in reply that plaintiff has not
met the requirements for such a request. The Court need not resolve that issue, however.
The statute on which DH relies requires that the practitioner not be an employee or agent
of the facility. Agency is clearly a broader concept than mere employment, and DH has
29
provided evidence only that Dr. Brannon was not an employee. Thus, DH has not met its
initial burden of establishing the absence of a material fact concerning the application of
this statute. See Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10th Cir. 2003)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). Accordingly, the Court
denies DH’s motion for summary judgment on this issue.11
D.
Aggrieved Consumer
Defendants also argue that plaintiff has not sufficiently alleged that he is an
“aggrieved consumer” as required for a private action for damages or civil penalty under
the KCPA. See K.S.A. § 50-634(b). The “aggrieved consumer” provision requires a causal
connection between loss or injury to the plaintiff and a violation of the Act. See Finstad v.
Washburn Univ. of Topeka, 252 Kan. 465, 473-74 (1993).
In his amended complaint, plaintiff alleges that defendants unfairly profited from
their deceptive and unconscionable acts and that he is therefore entitled to damages or a
civil penalty. He has not alleged, however, that he suffered any injury or loss as a result of
any violation of the KCPA. The entirety of plaintiff’s KCPA claims are subject to
dismissal for this reason as well.
In response, plaintiff argues that he does not merely seek damages in this count but
that he also seeks a civil penalty. The KCPA, however, also requires a consumer seeking
a civil penalty to have been “aggrieved”. See K.S.A. § 50-634(b). Plaintiff also argues
(but has not alleged in this count) that defendants’ violations have caused him to be subject
The Court denies plaintiff’s conclusory request for an award of fees and costs
incurred in responding to DH’s motion.
11
30
to excessive liens in favor of Missouri Medicaid, which made payments for plaintiff’s
treatment and surgeries. As discussed above in the context of the RICO claims, however,
such liens would only require satisfaction if plaintiff recovers from defendants. Plaintiff
has not provided authority or explained how he suffered any financial loss (as a result of a
billing or pricing violation) based on payments that someone else made for his treatment.
In summary, the only KCPA claim that could survive for plaintiff is one based on
unconscionable billing or pricing, but such a claim is also subject to dismissal because
plaintiff has not alleged facts to show that he suffered any financial injury from such a
violation. It is not clear that plaintiff could not allege such facts, particularly in light of his
allegations elsewhere in the complaint that he did make at least some payments out-ofpocket for his treatment. Thus, plaintiff is granted leave to amend his complaint to attempt
to plead a sufficient claim for this particular KCPA violation.
E.
Sale of a Medical Device
Finally, the Court addresses some defendants’ argument that there was no
“consumer transaction” here, as required under the KCPA, see K.S.A. § 50-627(a), because
the BGSS device was sold to DH, not to plaintiff, and that the device is not a consumer
good available for purchase by the public. See Ellibee v. Aramark Correctional Servs.,
Inc., 37 Kan. App. 2d 430, 432 (2007) (“the KCPA’s protection is limited to individuals
who directly contract with suppliers for goods or services”) (citing CIT Group/Sales Fin.,
Inc. v. E-Z Pay Used Cars, Inc., 29 Kan. App. 2d 676, 685 (2001)). With respect to medical
devices, defendants rely especially on cases from Ohio interpreting a similar consumer
31
protection statute. See, e.g., Smith v. Smith & Nephew, Inc., 5 F. Supp. 3d 930, 932 (S.D.
Ohio 2014) (citing cases).12
The Court notes, however, that the KCPA defines “consumer transaction” to include
the sale or disposition not only of property (goods), but also of services. See K.S.A. § 50624(c). Thus, plaintiff could rely on his obtaining medical services from Dr. Brannon as
the requisite “consumer transaction” to which the alleged unconscionable practice must
relate. Indeed, this makes some sense with respect to the remaining claim based on billing
or pricing, as any such billing would be directed to him. Plaintiff’s complaint is not clear
on this issue, however, as he bases this count on his allegation that Dr. Brannon and the
other defendants marketed and sold the BGSS device to plaintiff, and he pleads that he
seeks only damages “arising from the sale of the Product” from Dr. Brannon. Accordingly,
if plaintiff attempts to amend his complaint to allege sufficient facts to support a KCPA
claim based on billing or pricing, he should also make clear the consumer transaction on
which he relies. Moreover, to the extent he either relies on a sale of the BGSS device as
the pertinent transaction or alleges injury from the sale of the device to him (and the sale
12
Plaintiff suggests that, for purposes of the KCPA, he could be considered a thirdparty beneficiary of a sale of the device from OSI to DH. Plaintiff relies on Bohls v. Oakes,
75 S.W.3d 473 (Tex. Ct. App. 2002), in which the court recognized that a third-party
beneficiary could qualify as a consumer of goods or services in certain circumstances. See
id. at 479. In Ellibee, however, the Kansas Court of Appeals rejected a third-party
beneficiary argument based on Bohls where no representations had been made directly to
the plaintiff. See Ellibee, 37 Kan. App. 2d at 432-33 (noting that under Bohls a relevant
inquiry was whether the alleged misrepresentations were made to the plaintiff seeking
third-party-beneficiary status). Similarly in this case, plaintiff has not alleged that OSI or
DH made any misrepresentations to him concerning OSI’s sale of the device to DH, and
thus plaintiff would not be entitled to rely on a third-party-beneficiary theory here.
32
of medical treatment to him), he must allege facts supporting a plausible claim that the
device was sold directly to him and not merely to DH for use in his surgery.
VII.
Civil Conspiracy
In Count IV of the amended complaint, plaintiff asserts a claim for civil conspiracy.
That count, however, does not identify the particular cause of action underlying the
conspiracy claim. Dr. Garcia and HPC presume that plaintiff is attempting to assert a claim
for a conspiracy to violate RICO, and they argue that the conspiracy claim should therefore
be dismissed to the same extent that the RICO claims against them are dismissed. In
response, plaintiff argues that the conspiracy claim is also based on underlying fraud and
KCPA claims. Again, however, the complaint does not make that clear. Accordingly, the
conspiracy claim is subject to dismissal, but plaintiff is granted leave to amend the
complaint to identify the particular causes of action underlying the conspiracy claim. Of
course, in so doing, plaintiff should recognize that such a claim may survive only to the
extent that the underlying claims have survived. In this case, that means that there can be
no conspiracy claim based on an underlying fraud claim; and a claim based on any
underlying KCPA claim would be limited to the narrow theory that plaintiff has been
allowed to pursue herein.
VIII. Product Liability Claims
In Counts VII and VIII of the amended complaint, plaintiff has asserted claims
against all defendants other than Dr. Garcia for breach of the implied warranty of fitness
33
and for strict liability failure to warn. Such claims arise out of plaintiff’s medical treatment
by Dr. Brannon and the informed consent process; therefore, as discussed above,
defendants JPI, DH, HPC, and PatientFirst are protected by immunity from such state-law
liability, and these claims are therefore dismissed as asserted against those defendants. 13
Defendant OSI, the alleged manufacturer of the BGSS device that is the subject of
these product claims, argues that plaintiff’s failure-to-warn claim against it must be
dismissed under the learned intermediary doctrine. As recognized by the Tenth Circuit,
Kansas has adopted the learned intermediary rule, under which “the manufacturer’s duty
to warn its customer is satisfied when the prescribing physician is made aware of the risks
and dangers of the product, since the patient cannot obtain the medical product except
through the physician.” See Ralston v. Smith & Nephew Richards, Inc., 275 F.3d 965, 974
(10th Cir. 2001) (citing Humes v. Clinton, 246 Kan. 590 (1990)).
Where a product is available only . . . through the services of a physician, the
physician acts as a “learned intermediary” between the manufacturer or seller
and the patient. It is his duty to inform himself of the qualities and
characteristics of those products which he prescribes or administers to or uses
on his patients, and to exercise an independent judgment, taking into account
his knowledge of the patient as well as the product. The patient is expected
to and, it can be presumed, does place primary reliance upon that judgment.
The physician decides what facts should be told to the patient. Thus, if the
product is properly labeled and carries the necessary instructions and
warnings to fully apprise the physician of the proper procedures for use and
the dangers involved, the manufacturer may reasonably assume that the
physician will exercise the informed judgment thereby gained in conjunction
with his own independent learning, in the best interest of the patient. It has
also been suggested that the rule is made necessary by the fact that it is
13
Because the common-law claims against PatientFirst have been dismissed, the
Court need not address that defendant’s argument for dismissal of those claims based on
the statute of limitations.
34
ordinarily difficult for the manufacturer to communicate directly with the
consumer.
See Humes, 246 Kan. at 602 (quoting Terhune v. A.H. Robins Co., 577 P.2d 975, 978
(Wash. 1978)), quoted in part in Ralston, 275 F.3d at 974-75.
By its terms, this doctrine applies here to OSI. Plaintiff has alleged that Dr. Brannon
is the inventor of the BGSS device and the controlling owner of OSI. Thus, plaintiff has
alleged no facts to support a plausible conclusion that OSI knew more about the device and
its proper use than Dr. Brannon, who as the treating physician chose to use the device in
plaintiff’s surgery. Accordingly, since the prescribing physician had the same knowledge
that OSI had, OSI must have discharged its duty to provide information to Dr. Brannon,
the physician, and the doctrine thus precludes this claim as asserted against OSI.
Plaintiff argues that the rule should not apply here because JB and OSI are
essentially one and the same. Plaintiff has not cited any authority, however, to suggest that
the rule does not apply in such circumstances. Indeed, the rule is most apt in such a
circumstance as, again, the manufacturer cannot have any more knowledge than the
prescribing physician in such case.
The claim is dismissed, however, only to the extent that plaintiff has asserted a direct
claim against OSI in this count. Although plaintiff has not alleged facts to support a claim
that Dr. Brannon and OSI are alter egos, he has alleged that Dr. Brannon acted as OSI’s
agent and that OSI is therefore vicariously liable for Dr. Brannon’s acts. Thus, although
the learned intermediary doctrine shields OSI from direct liability for a failure to warn,
plaintiff may still maintain a vicarious claim against OSI.
35
IT IS THEREFORE ORDERED BY THE COURT THAT the various motions filed
by defendants (Doc. ## 85, 87, 106, 108, 131) are granted in part and denied in part, as
set forth herein. With respect to certain claims, as more fully set forth herein, plaintiff is
granted leave to file, on or before July 3, 2018, a second amended complaint, by which he
may attempt to cure certain pleading deficiencies.
IT IS SO ORDERED.
Dated this 19th day of June, 2018, in Kansas City, Kansas.
s/ John W. Lungstrum
John W. Lungstrum
United States District Judge
36
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