Luttrell v. Brannon et al
Filing
191
MEMORANDUM AND ORDER granting 156 Motion to Dismiss granting 158 Motion to Dismiss Counts III, IV, and VI of Plaintiff's Second Amended Complaint; granting 160 Motion to Dismiss; granting 162 Motion to Dismiss; dismissing with prejudice Counts III, IV, VI, and X of the Second & dismissing with prejudice Count IX as against PatientFirst Healthcare Alliance, P.A. only. See order for details. Signed by District Judge Holly L. Teeter on 12/17/18. (msb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CHARLES R. LUTTRELL,
Plaintiff,
v.
CASE NO. 2:17-CV-02137-HLT
JAMES K. BRANNON, et al.,
Defendants.
MEMORANDUM AND ORDER
This case arises out of Defendants’ medical treatment of Plaintiff Charles R. Luttrell for
roughly two and a half years. Plaintiff alleges Defendants not only provided him with inadequate
medical care, but also engaged in a complicated scheme to defraud both Plaintiff and Missouri
Medicaid. Plaintiff’s Second Amended Complaint—the operative complaint—asserts ten causes
of action1 against various Defendants, including: a claim under the federal Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq; a civil conspiracy claim; a
claim under the Kansas Consumer Protection Act (“KCPA”), K.S.A. § 50-623, et seq; a vicarious
liability claim; an alter ego liability claim; and a punitive damages claim.2 Defendants seek
dismissal of these claims, alleging various pleading defects. Because the Court concludes the
RICO, civil conspiracy, KCPA, and alter ego liability claims contain fatal pleading deficiencies,
it dismisses these claims. The Court also dismisses in part Plaintiff’s vicarious liability and
punitive damages claims, as more fully discussed below.
1
The Second Amended Complaint technically enumerates an eleventh cause of action for Fraud (Count V), but
properly recognizes that Plaintiff’s fraud claim is “subsumed [by Plaintiff’s] Medical Malpractice (Count I) and
Informed Consent (Count II) claims.” Doc. 151 at 77.
2
The Second Amended Complaint identifies seven Defendants. Not all claims are asserted against all Defendants.
I.
BACKGROUND
The following facts are from the well-pleaded allegations of the Second Amended
Complaint and, consistent with the well-established standards for evaluating motions to dismiss
under Federal Rule of Civil Procedure 12(b)(6), the Court assumes the truth of these facts for
purposes of analyzing Defendants’ motions to dismiss.
A.
The Parties
Defendant James Brannon, M.D. (“Dr. Brannon”) and Defendant Mauricio Garcia, M.D.
(“Dr. Garcia”) are physicians who provided Plaintiff medical treatment between 2012 and March
of 2015. Doc. 151 at 5. Dr. Brannon is also a surgeon and the designer of a surgical device known
as the Titanium Hip Tool Locking Plate Bone Graft Stabilization System (“Hip Tool”). Id. at 3.
Defendant Orthopedic Sciences, Inc. (“OSI”) manufactures the Hip Tool for sale. Id. at 19.
Dr. Brannon is the president and 90% owner of OSI. Id. He is also a sales representative of OSI
and markets OSI’s products. Id.
Defendant Joint Preservation Institute of Kansas, L.L.C. (“JPI”) is Dr. Brannon’s practice
entity. Dr. Brannon is the designated manager and 100% owner of JPI. Id. at 19.
Defendant Headache & Pain Center, P.A. (“HPC”) provides facilities for patient treatment.
Id. at 19. Dr. Brannon and Dr. Garcia are the sole two members of the Board of Directors for HPC.
Id. at 18. HPC contracts with JPI to allow Dr. Brannon to perform joint preservation surgeries at
HPC, during which surgeries Dr. Brannon implants the Hip Tool. Id. HPC pays JPI significantly
more for each joint preservation surgery than any other procedure performed at HPC. Id.
Defendant Doctors Hospital, L.L.C. (“Doctors Hospital”) is an ambulatory surgical center
that also contracts with JPI to provide facilities where Dr. Brannon conducts joint preservation
surgeries. Id. at 18-19. Doctors Hospital pays JPI significantly more for each joint preservation
surgery than any other procedure performed at Doctors Hospital. Id. at 19.
2
Defendant PatientFirst Healthcare Alliance, P.A. (“PatientFirst”) is the owner of HPC and
Doctors Hospital. Id. at 18. Dr. Brannon and Dr. Garcia are the sole owners of PatientFirst and sit
on its Board of Directors. Id.
B.
The Dispute
Plaintiff has suffered right hip pain for years. Id. at 6. He established a physician-patient
relationship with Dr. Brannon when he sought evaluation for that hip pain. Id. For roughly two
and a half years between 2012 and the early spring of 2015, Dr. Brannon, Dr. Garcia, and HPC
routinely provided Plaintiff prescriptions for narcotic pain medications to address the hip pain. Id.
at 5. Dr. Brannon and Dr. Garcia were the primary physicians prescribing these medications. Id.
Dr. Brannon ultimately diagnosed Plaintiff with avascular necrosis (death of bone tissue)
of the right hip. Id. Dr. Brannon advised Plaintiff that the traditional treatment for this condition
was total hip replacement, but that, in Plaintiff’s case, this was unnecessary. Id. Instead,
Dr. Brannon recommended a joint preservation surgery he “invented” himself. Id. During the joint
preservation surgery, Dr. Brannon would implant a Hip Tool in Plaintiff. Id. Dr. Brannon
convinced Plaintiff to undergo the joint preservation surgery and implantation of the Hip Tool in
lieu of total hip replacement. Id. Plaintiff underwent the joint preservation surgery at Doctors
Hospital and the Hip Tool was implanted on March 4, 2015. Id.
Before his surgery, on February 18, 2015, Plaintiff underwent an x-ray of his right hip at
Doctors Hospital. Id. The x-ray revealed that his right hip was normal in appearance and there
were no findings of avascular necrosis. Id. at 6-7. Dr. Brannon knew the results of the x-ray before
he performed joint preservation surgery on Plaintiff. Id. at 7. Despite knowing the results of the xray, Dr. Brannon continued with the joint preservation surgery and implantation of the Hip Tool.
Id. Bone samples were taken during the surgery and subsequent pathology reports “argued against
avascular necrosis.” Id. at 7-8.
3
Following the joint preservation surgery, Plaintiff experienced severe pain and discomfort
in his right hip. Id. at 10. He sought treatment from a different doctor, Dr. David Anderson (“Dr.
Anderson”), who diagnosed Plaintiff with a fracture caused by implantation of the Hip Tool. Id.
Dr. Anderson concluded the joint preservation surgery, including the Hip Tool, failed. Id. He also
diagnosed Plaintiff with severe osteoarthritis of the right hip, “a clear contraindication” for the
joint preservation surgery that Dr. Brannon recommended and performed. Id. Ultimately,
Dr. Anderson performed a total hip replacement surgery on Plaintiff’s right hip and removed the
Hip Tool. Id. at 10-11. During surgery, Dr. Anderson took bone samples. Id. at 11. Subsequent
pathology reports confirmed there was no evidence of avascular necrosis. Id.
Plaintiff ultimately alleges that Defendants perpetrated a complex scheme to supply him
with powerful narcotic pain medications to make him suggestable to Dr. Brannon’s
recommendations to undergo an overly expensive and unnecessary medical procedure (the joint
preservation surgery) to implant an overly expensive and unnecessary surgical device (the Hip
Tool). Id. at 11-14. Defendants specifically targeted Plaintiff because they could profit from
Plaintiff’s Missouri Medicaid benefits. Id. at 9. Plaintiff further alleges that Defendants’
interrelationships advanced the very purpose of Defendants’ scheme, allowing Defendants to
conceal numerous conflicts of interest (Defendants’ financial gain versus Plaintiff’s medical care),
none of which were disclosed to Plaintiff. Id. at 11-14.
II.
PROCEDURAL HISTORY
Plaintiff filed suit on March 3, 2017. Doc. 1. The original Complaint included eight causes
of action and a claim for punitive damages. Id. Plaintiff originally identified only Dr. Brannon,
OSI, JPI, and Doctors Hospital as defendants. Id. On December 21, 2017, Plaintiff filed a First
Amended Complaint adding Dr. Garcia, HPC, and PatientFirst as additional defendants. Doc. 84.
The First Amended Complaint also added three additional causes of action. Id. Dr. Brannon, JPI,
4
Garcia, HPC, and PatientFirst subsequently filed various motions to dismiss, and Doctors Hospital
filed a motion for judgment on the pleadings or motion for summary judgment. Docs. 85, 87, 106,
108, 131. Defendants’ various motions included requests for dismissal of Plaintiff’s RICO, KCPA,
and civil conspiracy claims. Docs. 85, 87, 106, 108, 131.
The Court ruled on Defendant’s motions on June 19, 2018, granting dismissal in part,
denying dismissal in part, and granting Plaintiff leave to amend certain claims. Doc. 149 at 1-2.
Relevant to the Second Amended Complaint and Defendants’ instant motions are the following
rulings:
RICO Claims: The Court dismissed all claims except those predicated on damages
representing Plaintiff’s out-of-pocket expenses for unnecessary medical treatment.
KCPA Claims: The Court dismissed all claims but granted Plaintiff leave to amend
to allege claims based on acts of billing or pricing to the extent Plaintiff suffered
financial injury or loss from such acts.
Civil Conspiracy: The Court dismissed all claims but granted Plaintiff leave to
amend to allege claims based on Plaintiff’s surviving RICO and KCPA claims.
Id. at 2, 8, 31, 33.
III.
STANDARD
Under Rule 12(b)(6), to survive a motion to dismiss, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
The plaintiff’s claim is facially plausible if he pleads sufficient factual content to allow the Court
“to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The
plausibility standard requires “more than a sheer possibility that a defendant has acted unlawfully”
but “is not akin to a ‘probability requirement.’” Id. “Where a complaint pleads facts that are
‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557).
5
This standard results in two principles that underlie a court’s analysis. Id. First, “the tenet
that a court must accept as true all of the allegations contained in a complaint is inapplicable to
legal conclusions.” Id. Stated differently, though the court must accept well-pleaded factual
allegations as true, it is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555 (internal citations and quotations omitted). “Second, only a
complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S.
at 679. “[W]here the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the pleader is
entitled to relief.’” Id. (quoting FED. R. CIV. P. 8(a)(2) (original brackets omitted)). “In keeping
with these [two] principles, a court considering a motion to dismiss can choose to begin by
identifying pleadings that, because they are no more than conclusions, are not entitled to the
assumption of truth.” Id. “When there are well-pleaded factual allegations, a court should assume
their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id.
IV.
ANALYSIS
As noted above, Plaintiff asserts RICO (Count III), civil conspiracy (Count IV), KCPA
(Count VI), vicarious liability (Count IX), alter ego liability (Count X), and punitive damages
(Count XI) claims. Because the Court concludes the RICO, civil conspiracy, KCPA, and alter ego
liability claims contain a fatal pleading deficiency, it dismisses these claims. Plaintiff’s vicarious
liability claim against PatientFirst is also dismissed in its entirety and is dismissed in part as to OSI
and JPI. Finally, because these dismissals leave the punitive damages claim as Plaintiff’s sole
remaining claim against Dr. Garcia, HPC, Doctors Hospital, and PatientFirst, the Court dismisses
6
the punitive damages claim against these Defendants.3 The Court’s analysis and findings as to each
of these claims is discussed in turn below.
A.
RICO (Against All Defendants)
RICO “prohibits certain conduct involving a ‘pattern of racketeering.’” Anza v. Ideal Steel
Supply Corp., 547 U.S. 451, 453 (2006). “One of RICO’s enforcement mechanisms is a private
right of action, available to any person injured in his business or property by reason of a violation
of [ ] RICO’s substantive restrictions.” Id. (internal quotations and citations omitted). To plead a
violation of RICO, a plaintiff must allege that a defendant: “(1) conducted the affairs; (2) of an
enterprise; (3) through a pattern; (4) of racketeering activity.” George v. Urban Settlement Servs.,
833 F.3d 1242, 1248 (10th Cir. 2016) (internal citations omitted).
Plaintiff alleges Defendants committed violations of § 1962(c) of RICO through numerous
predicate acts of: (1) mail fraud in violation of 18 U.S.C. § 1341; (2) wire fraud in violation of
18 U.S.C. § 1346; (3) dealing in a controlled substance in violation of 18 U.S.C. § 841 and
21 C.F.R. § 1306.04(a); and (4) money laundering in violation of 18 U.S.C. § 1956. Doc. 151
at 28. The Supreme Court has confirmed that “to establish liability under § 1962(c) of RICO 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.” Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 161 (2001). Section 1962(c) also requires not merely that the claimed
RICO violation was a “but for” cause of the plaintiff’s injury but was the proximate cause as well.
Anza, 547 U.S. at 456-57. If a plaintiff fails to sufficiently plead the required distinctness between
the person and the enterprise, or fails to sufficiently plead that the defendant’s alleged RICO
violation was the proximate cause of his injury, his claims are subject to dismissal. See, e.g., id. at
3
Kansas law does not recognize an independent claim for punitive damages. See discussion infra, at Part IV.F.
7
461 (dismissing RICO § 1962(c) claim for lack of proximate cause); Brannon v. Boatman’s First
Nat’l Bank of Okla., 153 F.3d 1144, 1149-50 (10th Cir. 1998) (dismissing RICO § 1962(c) claim
for lack of distinctness between “person” and “enterprise”). Because the Second Amended
Complaint is deficient both in pleading the required distinctness between person and enterprise,
and proximate cause, the Court dismisses Plaintiff’s RICO claims.4
1.
Plaintiff fails to sufficiently allege that Defendants’ RICO violations
were the proximate cause of out-of-pocket expenses for unnecessary
medical treatment.
As noted above, the Court’s previous Order limited Plaintiff’s RICO claims to those
predicated on damages representing Plaintiff’s out-of-pocket expenses for unnecessary medical
treatment. Defendants contend the Second Amended Complaint fails to sufficiently allege that
Defendants RICO violations proximately caused Plaintiff to incur out-of-pocket medical expenses.
The Court agrees.
a.
Mail Fraud
Plaintiff first contends Defendants violated RICO by engaging in mail fraud. Plaintiff
alleges Defendants: (1) prescribed Plaintiff unnecessary narcotic pain medications; (2) subjected
Plaintiff to unnecessary surgery and implantation of an unnecessary surgical device; (3) intended
to defraud Missouri Medicaid by receiving payment for unnecessary medical treatment; (4) used
the United States mail to submit Health Insurance Claim Forms (“HICFs”) to Missouri Medicaid;
and (5) used the United States mail to submit bills directly to Plaintiff. Doc. 151 at 41-59. Plaintiff
further alleges “upon information and belief” that each Defendant had knowledge that the United
4
In their various motions, all Defendants argue Plaintiff failed to sufficiently plead proximate cause. Docs. 157 at
12-15, 159 at 5-10, 161 at 5-9, 167 at 4-9. Only OSI raises the pleading deficiency of lack of distinctness between
the “person” and the “enterprise”. Doc. 157 at 4-7. The Court ultimately concludes the distinctness issue applies to
all Defendants. See discussion, infra, at Part IV.A.2. But because all Defendants raise the proximate cause
deficiency, the Court first considers this argument and then analyzes the distinctness issue.
8
States mail would be used to bill Missouri Medicaid and Plaintiff for the unnecessary medications,
surgery, and medical treatment. Doc. 151 at 47-51, 55-59. But critically lacking from the Second
Amended Complaint are two things: (1) a specific, particularly pled reference to a single bill sent
to Plaintiff rather than Missouri Medicaid;5 and (2) any allegation that Plaintiff actually incurred
out-of-pocket expenses due to these alleged activities by Defendants.
Plaintiff theorizes that Defendants harmed him by fraudulently inducing Missouri
Medicaid into paying for unnecessary medications, surgery, and medical care. Defendants
allegedly reinvested the proceeds from the fraud to generate a larger customer base (i.e., more
patients), which allowed them to further defraud those customers and Missouri Medicaid,
generating inflated profits. But absent any allegations of a single bill sent to Plaintiff and any outof-pocket expenses incurred by Plaintiff, the Court can only conclude the direct victim of this
conduct—as alleged by Plaintiff under the Second Amended Complaint—was Missouri Medicaid,
not Plaintiff. See Anza, 547 at 457-58 (conducting direct victim and proximate cause analysis).
The Court therefore concludes Plaintiff cannot maintain its RICO claim for mail fraud.
b.
Wire Fraud
Second, Plaintiff contends Defendants violated RICO by engaging in wire fraud. Plaintiff’s
RICO wire fraud claims suffer from the same fatal flaw as his RICO mail fraud claims—he has
not sufficiently alleged that any wire fraud by Defendants proximately caused Plaintiff to incur
any out-of-pocket expenses for unnecessary medical treatment. Although Plaintiff alleges
Defendants knew or should have known that bills would be submitted and paid by use of wire, and
5
Plaintiff goes into great detail about the HICFs sent to Missouri Medicaid and has attached copies of numerous
HICFs to the Second Amended Complaint as Exhibits E and F. Doc. 151 at 45-47, 52-55; Doc. 151-1 at Exs. E and
F. The Court has searched the Second Amended Complaint for similar allegations or exhibits evidencing bills sent
directly to Plaintiff and/or payments made by Plaintiff and finds none. Doc. 151 at 41-59; see also Doc. 151-1
(containing all exhibits to the Second Amended Complaint).
9
that Defendants intended to and did receive money from Missouri Medicaid by wire, Plaintiff has
again failed to include a single allegation that this conduct caused Plaintiff to actually incur outof-pocket expenses. Doc. 151 at 59-61. Once again, the Court can only conclude based on the facts
alleged that Missouri Medicaid was the direct victim of Defendants’ conduct, not Plaintiff. See
Anza, 547 at 457-58. This pleading deficiency is fatal to Plaintiff’s wire fraud RICO claims.
c.
Dealing in a Controlled Substance
Third, Plaintiff contends Defendants violated RICO by dealing in a controlled substance.
Plaintiff alleges Dr. Brannon, Dr. Garcia, and HPC repeatedly prescribed Plaintiff narcotic
medications that were not medically necessary. Doc. 151 at 61-64. Plaintiff then states “[a]s a
dicrect and proximate result of such [conduct], Plaintiff suffered and incurred economic damages,
including but not limited to directly paying for unnecessary medical treatment in the form of copays for office visits.” Id. at 63. Plaintiff further alleges “upon information and belief” that
PatientFirst, Doctors Hospital, JPI, and OSI were aware of Dr. Brannon’s, Dr. Garcia’s, and HPC’s
conduct and that the conduct was performed for the purpose of submitting bills for unnecessary
narcotic medications. Id.
The Court finds that these allegations also fall short of alleging that Defendants’ conduct
of dealing in a controlled substance proximately caused Plaintiff to incur out-of-pocket expenses
for unnecessary medical treatment. Plaintiff has alleged in conclusory fashion that he “suffered
and incurred economic damages, including but not limited to directly paying for unnecessary
medical treatment in the form of co-pays” but has failed to include any particular allegations as to
when those alleged expenses were incurred or the amount of the expenses.6 Id. at 61-64. This
allegation is no more than a legal conclusion. And, although “a court must accept as true all of the
6
Plaintiff also fails to include as exhibits copies of any invoices or records of payments made.
10
allegations contained in a complaint” when considering a motion to dismiss, that tenant “is
inapplicable to legal conclusions.” Twombly, 550 U.S. at 555 (internal citations and quotations
omitted).7 The Court therefore finds that this pleading deficiency is fatal to Plaintiff’s RICO claims
for dealing in a controlled substance.
d.
Money Laundering
Fourth (and finally), Plaintiff alleges Defendants violated RICO through money
laundering. Plaintiff contends Defendants engaged in money laundering in three separate ways by:
(1) failing to fully report payments made to physicians as required by the Physician’s Payments
Sunshine Act, 42 U.S.C. § 1320a-7h; (2) participating in a scheme that resulted in impermissible
kickback payments to Dr. Brannon in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a7b; and (3) impermissibly referring a Medicare patient for designated health services to an entity
with which the physician has a financial relationship and submitting claims to Medicare for
services resulting from the prohibited referral in violation of the Physician Self-Referral Law, 42
U.S.C. § 1395nn. Doc. 151 at 64-76.
Plaintiff’s allegations that Defendants’ money laundering activity caused Plaintiff to incur
out-of-pocket expenses are more numerous than the allegations in the RICO claims for mail fraud,
wire fraud, and dealing in a controlled substance; but they are no more particular or thorough and
still fail to sufficiently allege proximate cause. Plaintiff alleges Defendants fraudulently billed both
Plaintiff and Missouri Medicaid for unnecessary narcotic prescriptions, pain management care, the
joint preservation surgery, and the Hip Tool. Doc. 151 at 65-67. Plaintiff further alleges that
Defendants received “funds” from Plaintiff and Missouri Medicaid for “unnecessary medical
7
This is particularly true given that Federal Rule of Civil Procedure 9(b) requires that a “plaintiff[ ] must sufficiently
allege each element of a RICO violation and its predicate acts of racketeering with particularity . . . .” Farlow v.
Peat, Marwick, Mitchell & Co., 956 F.2d 982, 989 (10th Cir. 1992).
11
treatment” and that both Plaintiff and Missouri Medicaid paid for the Hip Tool and other supplies
and devices. Doc. 151 at 66. Finally, Plaintiff alleges both he and Missouri Medicaid paid for the
joint preservation surgery. Doc. 151 at 67. Once again, however, Plaintiff has not included any
particularized allegations as to the dates and amounts of his out-of-pocket expenses allegedly
incurred as opposed to those paid by Missouri Medicaid.8 Absent additional details, these
statements amount to no more than legal conclusions and fail to sufficiently allege a RICO money
laundering claim.
e.
Dismissal with Prejudice
For the reasons discussed supra, at Parts IV.A.1.a. through IV.A.1.d., Plaintiff fails to
sufficiently allege that Defendants’ RICO violations were the proximate cause of any out-ofpocket expenses for unnecessary medical treatment. Plaintiff’s RICO claims are therefore subject
to dismissal for failure to state a claim. Because: (1) the Court’s previous Order put Plaintiff on
notice of that his RICO claims must be based solely on out-of-pocket expenses for unnecessary
medical treatment; (2) Plaintiff was given the opportunity to amend his complaint accordingly;
and (3) Plaintiff has failed to correct the pleading deficiency, the dismissal of Plaintiff’s RICO
claims is with prejudice.
2.
Plaintiff fails to sufficiently allege the existence of an enterprise distinct
from Defendants.
Even if the Court were to conclude Plaintiff had sufficiently alleged that Defendants’ RICO
violations proximately caused Plaintiff to incur out-of-pocket expenses for unnecessary medical
8
As noted above, other portions of the Second Amended Complaint include detailed allegations of the numerous
HICFs sent to Missouri Medicaid along with attached exhibits. Those allegations and exhibits support Plaintiff’s
claims that Defendants billed and received funds from Missouri Medicaid for very specific amounts on very specific
dates, but shed no light on Plaintiff’s alleged injury in the form of out-of-pocket expenses. Rule 9(b)’s heightened
pleading requirements have not been satisfied. Farlow, 956 F.2d at 989 (recognizing applicability of Rule 9(b) to
RICO allegations of predicate acts).
12
treatment, Plaintiff’s RICO claims are still subject to dismissal because Plaintiff has not alleged
an enterprise that is distinct from Defendants. As noted above, the Supreme Court has recognized
that § 1962(c) creates a pleading requirement of two distinct entities: “(1) a ‘person’; and (2) an
‘enterprise’ that is not simply the same ‘person’ referred to by a different name.” Cedric, 533 U.S.
at 161. The Tenth Circuit has also recognized that the statute “requires that the ‘person’ conducting
the enterprise’s affairs be distinct from the ‘enterprise.’” George v. Urban Settlement Servs., 833
F.3d 1242, 1249 (2016).
The Second Amended Complaint contains a fatal flaw—the list of RICO persons and the
RICO enterprise alleged are exact the same. Plaintiff alleges that “[e]ach and every Defendant is
a culpable person under the RICO Statute” and then further describes how each Defendant meets
the legal definition of “person” under RICO. Doc. 151 at 39. Plaintiff also alleges that
“Dr. Brannon, Garcia, OSI, JPI, Doctors Hospital, [HPC,] and PatientFirst undertook a common
enterprise to supply Plaintiff with powerful narcotic pain medications and convince him that he
required a highly unusual and overly expensive medical procedure to correct a non-existent
medical problem.” Doc. 151 at 11. Plaintiff further alleges that “Defendants formed an enterprise
and association-in-fact” with each other “or exerted direct control over each other.” Doc. 151 at 32.
Plaintiff has, thus, alleged that all Defendants are “persons” and all Defendants are members of
the “enterprise”, eliminating any distinctness between the two entities. Importantly, Plaintiff does
not allege anyone other than Defendants are members of the enterprise. See generally Doc. 151.
This flaw in pleading is not limited to these three statements in the Second Amended Complaint.
Here and elsewhere in the Second Amended Complaint, Plaintiff alleges that all Defendants
engaged in the racketeering activities. See, e.g., Doc. 151 at 32 (“Defendants[ ] . . . engage[d] in
13
‘racketeering activity’ in violation of [RICO] by committing certain predicate acts, including mail
fraud, wire fraud, dealing in a controlled substance, and money laundering.”)
Because Plaintiff alleges that all Defendants engaged in the racketeering activity and all
Defendants also constitute the enterprise—with no other individuals, entities, or associations
participating in the enterprise—the RICO “person” and the RICO “enterprise” alleged are identical
entities. The “enterprise” cannot be the same as the “person”, merely referred to by a different
name. Kushner, 533 U.S. at 161. Plaintiff’s RICO claim is, thus, also subject to dismissal for failure
to sufficiently allege the existence of an enterprise distinct from Defendants.9 See Zavala v. WalMart Stores, Inc., 447 F. Supp. 2d 379, 383 (2006) (dismissing RICO claim where list of identified
“persons” was identical to members of the “enterprise”).10
B.
KCPA (Against All Defendants Except Dr. Garcia)
Count VI of the Second Amended Complaint asserts a claim against all Defendants (with
the exception of Dr. Garcia)11 for violation of KCPA. Defendants seek dismissal of Plaintiff’s
KCPA claims on multiple grounds. Relevant to the Court’s analysis is Defendants’ contention that
9
The Court recognizes that OSI is the only Defendant who raised the “distinctness” argument as grounds for dismissal
of the RICO claim under the Second Amended Complaint. But, because OSI raised the issue, Plaintiff had notice
of the argument and a full opportunity to respond. Moreover, “[a] district court may dismiss a case sua sponte under
Federal Rule Civil Procedure 12(b) when it is ‘patently obvious’ that the plaintiff could not prevail on the facts
alleged.” Andrews v. Heaton, 483 F.3d 1070, 1074 n.2 (10th Cir. 2007) (internal quotations and citations omitted).
Because the lack of distinctness between the “person” and “enterprise” make it patently obvious that Plaintiff cannot
prevail on his RICO claims on the facts alleged against any of the Defendants, the Court applies the argument—
and dismisses Plaintiff’s RICO claims—as to all Defendants.
10
The District of New Jersey reached the same conclusion in Zavala, 447 F. Supp. at 382-84. The plaintiffs in Zavala
sued Wal-Mart and its janitorial contractors alleging RICO violations. Id. In their complaint, the plaintiffs identified
Wal-Mart and its janitorial contractors as “persons” for RICO purposes. Id. at 382-83. The plaintiffs then also
identified the RICO enterprise as an association-in-fact between Wal-Mart and its contractors. Id. at 383. The
plaintiffs identified no other persons or entities as participating in the enterprise. Id. Both Wal-Mart and its
contractors participated in the alleged predicate acts (i.e., the RICO violations). Id. The court concluded that the
plaintiffs’ “failure to allege a RICO ‘person’ distinct from the RICO ‘enterprise’ require[d] that [the plaintiffs’
RICO claim] be dismissed for failure to state a claim upon which relief can be granted.” Id. at 383-84.
11
For purposes of the Court’s discussion of Plaintiff’s KCPA claim, the Court’s references to “Defendants” do not
include Dr. Garcia.
14
Plaintiff fails to adequately allege that he is an “agreived consumer” for purposes of KCPA. The
Court agrees.
KCPA imposes liability against “supplier[s]”12 that engage in any deceptive or
unconscionable act or practice in connection with a consumer transaction. K.S.A. §§ 50-626, -627.
To recover under KCPA, an “aggrieved consumer” must establish a causal connection between
the alleged violation and the loss or injury alleged. Finstad v. Washburn Univ. of Topeka, 252 Kan.
465, 474 (1993) (discussing § 50-634(b)).
In Count VI, Plaintiff alleges Dr. Brannon invented the Hip Tool and Defendants
collectively manufactured, marketed, and ultimately sold the Hip Tool to Plaintiff, as well as the
surgery required to install the Hip Tool. Doc. 151 at 78. Plaintiff alleges Defendants were,
therefore, “suppliers” and (presumably) the sale of the Hip Tool and/or the medical services
provided during the surgery required to install the Hip Tool constitute a “consumer transaction”
for purposes of KCPA.13 Id. Plaintiff also alleges various ways in which Defendants allegedly
engaged in one or more deceptive acts or practices in connection with this/these consumer
transaction(s), all of which conduct allegedly constitutes “unconscionable acts and practices”
under KCPA. Id. at 79-82. Finally, Plaintiff alleges that “as a result of Defendants’ deceptive and
unconscionable acts and practices, [D]efendants unfairly and improperly profited at the expense
12
KCPA defines “supplier” as “a manufacturer, distributor, dealer, seller, lessor, assignor, or other person who, in the
ordinary course of business, solicits, engages in or enforces consumer transactions, whether or not dealing directly
with the consumer.” K.S.A. § 50-624. It excludes from the definition “any bank, trust company or lending institution
which is subject to state or federal regulation with regard to disposition of repossessed collateral by such bank, trust
company or lending institution.” Id.
13
Plaintiff specifically alleges Defendants were suppliers but the allegations as to what constitutes the alleged
“consumer transaction” are not a model of clarity. The Court, however, concludes it is reasonable to infer from the
allegations in the Second Amended Complaint that Plaintiff contends that either (or both) the sale of the Hip Tool
and the medical services provided during the surgery required to install the Hip Tool constitute a “consumer
transaction” for purposes of KCPA.
15
of Plaintiff who was forced to pay co-pays, medical costs, and other out-of-pocket expenses.” Id.
at 82.14
These allegations are insufficient to establish a causal connection between Defendants’
alleged violations of KCPA and Plaintiff’s claimed loss or injury. Plaintiff’s only allegation that
he has suffered any injury or loss as a result of Defendants’ violation of KCPA is the conclusory
statement that “as a result of Defendants’ deceptive and unconscionable acts and practices,
[D]efendants unfairly and improperly profited at the expense of Plaintiff who was forced to pay
co-pays, medical costs, and other out-of-pocket expenses.” Id. at 82. Like the pleading deficiency
in Plaintiff’s RICO claims, there are no particularized allegations as to the dates or amounts of copays, medical costs, or other out-of-pocket expenses Plaintiff allegedly incurred. Id. at 77-83. And
Plaintiff has not included any exhibits from which Defendants (or the Court) could glean this
information. Id. at 61-64. This allegation amounts to no more than a legal conclusion—the truth
of which the Court is not bound to accept. See Twombly, 550 U.S. at 555 (internal citations and
quotations omitted).15 The Court therefore finds that this pleading deficiency is fatal to Plaintiff’s
KCPA claim. Because the Court’s previous Order put Plaintiff on notice of this pleading deficiency
and Plaintiff has failed to correct it accordingly, the dismissal of Plaintiff’s KCPA claims is with
prejudice.
C.
Civil Conspiracy (Against All Defendants)
Count IV of the Second Amended Complaint asserts a claim for civil conspiracy against
all Defendants. Doc. 151 at 76-77. Plaintiff identifies Defendants’ alleged RICO and KCPA claims
14
Pursuant to K.S.A. § 50-634(b), Plaintiff seeks to recover “the greater of damages sustained by Plaintiff as
determined by the jury or a civil penalty as provided by [§] 50-636(a) . . . .”
15
As is the case with RICO claims, Rule 9(b)’s heightened pleading requirements also apply to KCPA claims. See
Gonzalez v. Pepsico, Inc., 489 F. Supp. 2d 1233, 1247 (D. Kan. 2007).
16
as the particular causes of action underlying the conspiracy claim. Id. Defendants argue Plaintiff’s
conspiracy claim is subject to dismissal on the same grounds as the underlying RICO and KCPA
claims and the Court agrees. Plaintiff’s civil conspiracy claim is entirely dependent on the viability
of his RICO and KCPA claims, which the Court has dismissed in their entirety. See discussion
supra, at Parts IV.A. and IV.B. Plaintiff’s civil conspiracy claim is, therefore, also dismissed with
prejudice.
D.
Vicarious Liability (Against OSI, JPI, and PatientFirst)
Count IX asserts a claim for vicarious liability against OSI, JPI, and PatientFirst. Plaintiff
alleges that Dr. Brannon acted as an agent, employee, and/or representative of OSI, JPI, and
PatientFirst and that these Defendants are therefore vicariously liable for Dr. Brannon’s conduct
“as set forth in more detail elsewhere in [the Second Amended Complaint] . . . .” Doc. 151 at 8788. PatientFirst seeks dismissal of Plaintiff’s vicarious liability claim in its entirety. Doc. 163 at
10-12. OSI and JPI do not specifically seek dismissal of the vicarious liability claim. See generally,
Docs. 157, 161. As a threshold matter, however, because the Court has dismissed Plaintiff’s RICO,
KCPA, and civil conspiracy claims in their entirety, with prejudice, Plaintiff’s vicarious liability
claims against OSI, JPI, and PatientFirst that are predicated on Plaintiff’s underling RICO, KCPA,
and civil conspiracy claims are also subject to dismissal with prejudice. Andrews, 483 F.3d at 1074
n.2 (“A district court may dismiss a case sua sponte under Federal Rule Civil Procedure 12(b)
when it is ‘patently obvious’ that the plaintiff could not prevail on the facts alleged.”).
The Court also agrees with PatientFirst that Plaintiff’s remaining vicarious liability claims
against it are subject to dismissal because K.S.A. § 40-3403(h) provides PatientFirst with
immunity from such claims. Plaintiff’s only remaining vicarious liability claims against
PatientFirst are predicated on Dr. Brannon’s alleged professional negligence (Count I), lack of
informed consent (Count II), breach of the implied warranty of fitness (Count VII), and strict
17
liability failure to warn (Count VIII). Such claims arise out of Plaintiff’s medical treatment by
Dr. Brannon and the informed consent process, and PatientFirst is, therefore, protected by
immunity from such state-law liability under K.S.A. § 40-3403(h).
Section 40-3403(h) provides that:
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 statute broadly, holding that it “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.” 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. 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. Id. at 74647.
Plaintiff’s sole argument against application of § 40-3403(h) is that PatientFirst should not
be permitted to seek dismissal of Plaintiff’s vicarious liability claims on the basis of § 40-3403(h)
immunity under Plaintiff’s Second Amended Complaint because PatientFirst did raise this
argument in its motion dismiss filed in response to Plaintiff’s First Amended Complaint. Doc. 173
at 24-25. The Court rejects this argument.
The Tenth Circuit recognizes that “[i]t is well established that an amended complaint
ordinarily supersedes the original and renders it of no legal effect.” Davis v. TXO Prod. Corp., 929
F.2d 1515, 1517 (10th Cir. 1991) (internal quotations and citations omitted). “Such a rule
18
establishes to which complaint opposing parties should direct any subsequent motion.” Id. (citation
omitted). When filed, Plaintiff’s Second Amended Complaint superseded—for all purposes—his
First Amended Complaint and PatientFirst was not only entitled, but also required, to respond to
the Second Amended Complaint as the operative complaint, as if it were the first and only
complaint filed by Plaintiff. In response to the Second Amended Complaint, PatientFirst chose to
file a motion to dismiss for failure state a claim pursuant to Rule 12(b)(6) fairly raising several
defenses to several of Plaintiff’s claims, including statutory and case law in support of a claim of
immunity from vicarious liability pursuant to § 40-3403(h). Doc. 163 at 10-12. Plaintiff was on
notice of this defense but chose not to respond to the merits of the argument. Doc. 173 at 24-25.
The Court finds no reason to reject PatientFirst’s claim of immunity under § 40-3403(h) and
Plaintiff’s vicarious liability claim against PatientFirst is, therefore, dismissed in its entirety, with
prejudice.
E.
Alter Ego (Against PatientFirst)
Count X of the Second Amended Complaint asserts a claim for alter ego liability against
PatientFirst for the conduct of its wholly-owned subsidiaries—HPC and Doctors Hospital. Plaintiff
acknowledges that, should the Court dismiss all claims against HPC and Doctors Hospital,
Plaintiff’s claim for alter ego liability would also be subject to dismissal. Doc. 173 at 25. Counts III
(RICO), IV (Civil Conspiracy), VI (KCPA) and XI (Punitive Damages) are the only claims
asserted against HPC and Doctors Hospital. Because the Court concludes all of these claims are
subject to dismissal with prejudice, Plaintiff’s alter ego liability claim against PatientFirst is also
subject to dismissal with prejudice.
F.
Punitive Damages (Against All Defendants)
Count XI of the Second Amended Complaint asserts a claim for punitive damages against
all Defendants. Because the Court has dismissed all of Plaintiff’s underlying claims asserted
19
against Dr. Garcia, HPC, Doctors Hospital, and PatientFirst with prejudice, Plaintiff’s claim for
punitive damages against these Defendants is, therefore, also subject to dismissal with prejudice.
See In re Cessna 208 Series Aircraft Prod. Liab. Litig., 2009 WL 975101, at *3 (D. Kan. 2009)
(“Kansas does not recognize an independent claim for punitive damages.”) (citing K.S.A. § 60–
3702(a); Stevens v. Jayhawk Realty Co., 236 Kan. 90, 91 (1984)).16 The Court does not, however,
dismiss Plaintiff’s punitive damages claim as to Dr. Brannon, OSI, and JPI—the only remaining
Defendants.
V.
CONCLUSION
Plaintiff’s RICO, civil conspiracy, KCPA, and alter ego liability claims contain fatal
pleading deficiencies and are therefore subject to dismissal with prejudice. The Court also
dismisses with prejudice Plaintiff’s vicarious liability claim against PatientFirst because
PatientFirst is entitled to immunity. Plaintiff’s vicarious liability claims against OSI and JPI are
dismissed with prejudice to the extent such claims are based on Plaintiff’s RICO, civil conspiracy,
and KCPA claims. Finally, because dismissal of these claims leaves the punitive damages claim
as Plaintiff’s sole remaining claim against Dr. Garcia, HPC, Doctors Hospital, and PatientFirst,
the Court also dismisses Plaintiff’s punitive damages claim against Dr. Garcia, HPC, and Doctors
Hospital.
THE COURT THEREFORE ORDERS that Defendant Orthopedic Sciences, Inc.’s Motion
to Dismiss (Doc. 156) is GRANTED.
16
Doctors Hospital, HPC, and Patient First have not raised the issue of dismissal of Plaintiff’s punitive damages claim.
It is patently obvious, however, that Plaintiff could not prevail on his punitive damages claim against HPC, Doctors
Hospital and PatientFirst under the facts alleged because the Court has dismissed all underlying claims against these
Defendants and Kansas law does not recognize an independent claim for punitive damages. See Andrews, 483 F.3d
at 1074 n.2. (recognizing a district court’s ability to dismiss sua sponte pursuant to Rule 12(b) when it is ‘patently
obvious’ that the plaintiff could not prevail on the facts alleged).
20
THE COURT FURTHER ORDERS that Defendants Mauricio Garcia, M.D., and The
Headache & Pain Center, Pain Center, P.A.’s Motion to Dismiss Counts III, IV, and VI of
Plaintiff’s Second Amended Complaint (Doc. 158) is GRANTED.
THE COURT FURTHER ORDERS that Defendants James Brannon, M.D. and Joint
Preservation Institute of Kansas, L.L.C.’s Motion to Dismiss (Doc. 160) is GRANTED.
THE COURT FURTHER ORDERS that Defendants Doctors Hospital L.L.C. and
PatientFirst Healthcare Alliance, P.A.’s Motion to Dismiss (Doc. 162) is GRANTED.
THE COURT FURTHER ORDERS that Counts III, IV, VI, and X of the Second Amended
Complaint are DISMISSED WITH PREJUDICE.
THE COURT FURTHER ORDERS that Count IX as against PatientFirst Healthcare
Alliance, P.A. only is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
DATED: December 17, 2018
/s/ Holly L. Teeter
HOLLY L. TEETER
UNITED STATES DISTRICT JUDGE
21
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