Government of Bermuda v. Lahey Clinic, Inc. et al
Judge Indira Talwani: ORDER entered. MEMORANDUM AND ORDER ALLOWING 16 Motion to Dismiss the Plaintiff's Complaint Pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b). (DaSilva, Carolina)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
GOVERNMENT OF BERMUDA,
LAHEY CLINIC, INC., et al.,
Civil Action No. 17-cv-10242-IT
MEMORANDUM AND ORDER
March 8, 2018
The Government of Bermuda (“Bermuda”) brings a federal claim under the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and state claims
under Massachusetts General Laws c. 93A, § 11, and common law theories of conspiracy, fraud,
and unjust enrichment against Defendants Lahey Clinic, Inc., and Lahey Clinic Hospital, Inc.
(collectively, “Lahey”). Before the court is Lahey’s Motion to Dismiss the Plaintiff’s Complaint
Pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b) [#16]. For the reasons set forth below, Lahey’s
motion is ALLOWED.
I. Standard of Review
A motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss a
complaint for failure to state a claim upon which relief can be granted is properly allowed when
the complaint does not 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
Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). Considering the complaint in the light
most favorable to the plaintiff, see Germanowski v. Harris, 854 F.3d 68, 71 (1st Cir. 2017), the
court will “determine whether the factual allegations are sufficient to support the reasonable
inference that the defendant is liable.” Saldivar v. Racine, 818 F.3d 14, 18 (1st Cir. 2016)
(quoting Cardigan Mtn. Sch. v. N.H. Ins. Co., 787 F.3d 82, 84 (1st Cir. 2015)).
II. Allegations in the Complaint
This case involves an alleged conspiracy between Lahey and Dr. Ewart Brown
(“Brown”). Brown is the former Premier of Bermuda, a longstanding Member of Bermuda’s
Parliament, and the owner of two private health clinics in Bermuda. Compl. ¶ 8 [#1]. Bermuda
alleges that Lahey paid Brown bribes disguised as “consulting fees,” gave him discounts on
medical equipment and services, and made political donations to his campaign, in return for
which Brown ensured Lahey: 1) “made millions of dollars reading and interpreting medically
unnecessary MRI and CT scans performed at Brown’s clinics”; 2) “received preferential
treatment when bidding on healthcare contracts issued by the Bermudian Government”; and
3) “obtained privileged access to Bermudian patients that it could service at its facilities in
Massachusetts and in Bermuda.” Id. ¶ 1; see also ¶¶ 9, 31, 45. The Complaint describes these
three distinct schemes are as follows.
A. Scanning Scheme
In the “scanning scheme,” Lahey and Brown allegedly conspired to conduct medically
unnecessary scans at Brown’s two on-island clinics (the “Brown Clinics”) for profit. Pursuant to
exclusive contracts between Lahey and the Brown Clinics, Lahey interpreted imaging results
forwarded electronically from the Brown Clinics in Bermuda to Lahey in Massachusetts and sent
electronic reports back to the Brown Clinics for a fee. Compl. ¶¶ 70-71. Brown allegedly paid
this fee out of the money he received from insurers after submitting claims for reimbursement.
Id. ¶ 70. Lahey also assisted with certain scans performed at the Brown Clinics from its campus
in Massachusetts “by giving specific instructions on how to carry out the scan including where
the patient should be positioned.” Id. ¶ 82. Brown allegedly induced patient referrals for
diagnostic scanning at the Brown Clinics “by offering paid kickbacks, which he dubbed
‘commissions,’ ranging from between 5% to 17.5% of reimbursements to local physicians.” Id.
As a direct result of this scheme, the Brown Clinics allegedly conducted and Lahey
interpreted “thousands of medically unnecessary tests” at Bermuda’s expense. Id. ¶ 70. Bermuda
paid Brown for these tests when he submitted claims for reimbursement to Bermuda public
insurers; Brown in turn paid Lahey’s fees. Id. 1 Bermuda alleges Lahey “must have known” these
tests were unnecessary “for several years,” due to the fact that Bermuda was conducting scans
“at a rate disproportionate to like nations.” Id. ¶ 81.
The Complaint alleges a secondary effect of the scanning scheme, namely that “MRI and
CT scanning on the island increased exponentially,” causing Bermudian insurance rates to
increase. Id. ¶ 70. In Bermuda, insurers are required to provide each insured a minimum package
of medical benefits called Standard Health Benefits. Id. ¶ 83. The government subsidizes
payment of Standard Health Benefit “claims” for certain Bermudians. Id. ¶ 84. Each year, the
Ministry of Health, Seniors and Environment determines a Standard Premium Rate for the
Standard Health Benefits based on the claims experience of all insured participants. Id. ¶ 85. The
Complaint alleges that “[i]n part as a result of [the scanning scheme] . . . the Standard Premium
Rate for the Standard Health Benefits package provided to each Bermudian citizen more than
The Complaint further alleges that Brown “pushed for deep discounts” on the scanning
services, which “Lahey willingly granted,” enabling him to keep a larger portion of the
reimbursement he received from the Bermudian Government. Compl. ¶ 73. Lahey also allegedly
provided Brown with significant extensions on overdue bills. Id. ¶ 74.
doubled between Fiscal Year 2007 ($140.92) and Fiscal Year 2016 ($338.07).” Id. ¶ 86. Insured
Bermudians paid higher premiums, and Bermuda provided higher subsidies. Id. ¶ 85. Brown
allegedly influenced this increase further by “constantly appl[ying] pressure to government
officials to increase remuneration for tests undertaken by the Brown Clinics and read by Lahey,
notwithstanding their already high price tag.” Id. ¶ 90.
B. Bidding Scheme
In the second alleged scheme, Lahey secured several lucrative subcontracts over other
healthcare service providers as a result of its relationship with Brown. The Complaint describes
subcontracts for two specific projects.
The first project was a $13.5 million, five-year contract to develop a long-term healthcare
strategy for the island and “revamp” Bermuda’s state-run hospital, King Edward Memorial
Hospital (“KEMH”). Brown allegedly “used his role as Premier” to facilitate a meeting between
Lahey and the Bermuda Minister of Health to discuss Lahey’s involvement in the “new”
hospital. Compl. ¶ 50. Brown then secured the KEMH contract for a U.S.-based healthcare
management and consulting company known as Kurron Shares of America, Inc. (“Kurron
America”). Brown allegedly controlled Kurron America through his relationship with its owner,
a former business associate, and used this control to facilitate a subcontract on the project with
Lahey. Id. 2
The second project involved an annual $1.3 million contract with a separate company,
Kurron Bermuda, to develop “FutureCare,” a Bermudian public insurance plan for citizens over
65. Id. ¶ 59. Brown allegedly used his “influence and connections to ensure that Lahey was
Bermuda allegedly terminated its contract with Kurron America in 2011 because it was “mired
in scandal due to high payments to health consultants.” Id. ¶ 52.
favored over other potential U.S. healthcare providers, including Johns Hopkins, for lucrative
contracts relating to ‘FutureCare.’” Id. 3
C. Preferred Provider Scheme
In the third scheme, Bermuda public insurers made Lahey a “preferred provider” of
medically necessary services not available in Bermuda, allegedly due to “Lahey’s continued
payments to and exploitation of Brown.” Compl. ¶ 63. Lahey is one medical service provider in a
“network” of preferred providers. Id. ¶ 64. As a result, Lahey treats “[h]undreds of Bermudians”
who travel to Lahey in Massachusetts each year for treatment, id., and it also “services
Bermudians remotely from its campus in Massachusetts,” id. ¶ 66. Bermuda’s Health Insurance
Plan, a basic government-funded health plan for persons of all ages, paid 60% of usual and
customary charges for medically necessary services by in-network providers such as Lahey, and
50% for out-of-network providers. Id. ¶ 64. FutureCare paid 75% of these services for innetwork providers, and 65% for out-of-network providers. Id. Bermuda alleges that between
2010 and 2016, Bermuda’s Health Insurance Plan and FutureCare paid Lahey over $10 million
for services Lahey performed at its facilities in Massachusetts as a preferred provider, id. ¶ 59,
and the Bermudian Government Employees Health Insurance paid Lahey over $29 million for
such services, id. ¶ 79. Payments for Lahey’s Massachusetts services, “once approved,” were
allegedly made “from and/or through Bermuda’s bank accounts, or those of its agents, in the
United States.” Id. ¶ 65.
In several instances, the Complaint refers more generally to “contracts” Lahey obtained as a
result of the alleged conspiracy. See, e.g., Compl. ¶ 2 (“Brown . . . directed lucrative healthcare
contracts to Lahey); id. ¶ 50 (“Lahey continued to be involved in the planning and development
of the Urgent Care Center on Bermuda’s East End as well as additional contracts for the
hospital”) (emphasis added); id. ¶ 109 (“Bermuda also worked with Lahey on contracts that
Lahey received from the Government.”). The Complaint includes no details of any such
contracts except as they relate to the bidding or preferred provider schemes described herein.
RICO prohibits racketeering activity, which the statute defines to encompass “dozens of
state and federal offenses, known in RICO parlance as predicates.” RJR Nabisco, Inc. v.
European Cmty., 136 S.Ct. 2090, 2096 (2016). “Violations of § 1962 are subject to criminal
penalties, § 1963(a), and civil proceedings to enforce those prohibitions may be brought by the
Attorney General, §§ 1964(a)-(b).” Id. at 2097. Bermuda alleges several predicate offenses in
violation of 18 U.S.C. §§1962(a), (b), and (c), stating that “in order to promote Lahey’s interests
in Bermuda, and pursuant to written ‘consultancy agreements,’ Lahey bribed Brown with everincreasing consulting fees in violation of the Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd1, et seq.), the Travel Act (18 U.S. Code § 1952), the Money Laundering Control Act (18 U.S.C.
§ 1956), the Massachusetts Commercial Bribery Statute (G.L. c.271 § 39), and mail and wire
fraud statutes (18 U.S.C. §§ 1341, 1343, 1346).” Compl. ¶ 113(a). According to Bermuda, Lahey
knew these predicate acts were part of racketeering activity and willingly engaged in a
conspiracy in violation of 18 U.S.C. § 1962(d). See id. ¶ 169.
In addition to providing for criminal or civil prosecution by the United States government
for racketeering activity, RICO creates a private right of action for “[a]ny person injured in his
business or property by reason of a violation” of those prohibitions listed in § 1962. See 18
U.S.C. § 1964(c); RJR Nabisco, 136 S.Ct. at 2097. A private RICO “plaintiff only has standing
if, and can only recover to the extent that, he has been injured in his business or property by the
conduct constituting the [RICO] violation.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496
In RJR Nabisco, the Supreme Court considered whether RICO’s private right of action
applies extraterritorially. The Court found that this issue involved two questions: first, whether
RICO’s substantive provisions apply to conduct occurring outside the United States, and second,
whether RICO’s private right of action affords relief for conduct occurring outside the United
States. In considering these two questions, the Court began with the presumption against
extraterritoriality. This presumption holds that absent clearly expressed congressional intent to
the contrary, federal laws will be construed to have only domestic application. See Morrison v.
Nat’l Australia Bank Ltd., 561 U.S. 247, 280 (2010). The Court found that Congress’s
incorporation of RICO predicates which plainly apply to at least some foreign conduct provided
a “clear, affirmative indication that § 1962 applies to foreign racketeering activity . . . to the
extent that the predicates alleged in a particular case themselves apply extraterritorially.” RJR
Nabisco, 136 S.Ct. at 2101-02. As to the second question, the Court reasoned that “the creation
of a private right of action raises issues beyond the mere consideration whether underlying
primary conduct should be allowed or not.” Id. at 2106. It thus applied the presumption against
extraterritoriality separately to RICO’s private right of action and found that “[n]othing in
§ 1964(c) provides a clear indication that Congress intended to create a private right of action for
injuries suffered outside of the United States.” 146 S.Ct. at 2108. From this the Supreme Court
concluded that “Section 1964(c) requires a civil RICO plaintiff to allege and prove a domestic
injury to business or property and does not allow recovery for foreign injuries.” Id. at 2110
According to RJR Nabisco, if a statute is not extraterritorial, courts must determine
whether an individual case involves a domestic application of the statute in question by looking
to the statute’s “focus.” 136 S.Ct. at 2101. “If the conduct relevant to the statute’s focus occurred
in the United States, then the case involves a permissible domestic application even if other
conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country,
then the case involves an impermissible extraterritorial application regardless of any other
conduct that occurred in U.S. territory.” Id. Two cases cited by Plaintiff suggest that there is a
permissible domestic application of § 1964(c) if a RICO defendant’s predicate acts occurred in
the United States. See Tatung Co., Ltd. v. Shu Tze Hsu, 217 F. Supp. 3d 1138, 1155 (C.D. Cal.
2016) (finding foreign corporation suffered a domestic injury when it was harmed “in the course
of doing business” in the United States); Akishev v. Kapustin, No. CV 13-7152(NLH) (AMD),
2016 WL 7165714 (D.N.J. Dec. 8, 2016) (finding domestic injury when foreign plaintiffs
“traveled” to the United States via the internet and purchased cars falsely advertised on a U.S.based website that were never delivered or were otherwise misrepresented). “Other courts have
considered the ‘domestic injury’ question under varying circumstances, but most of them did not
focus on where the RICO predicate acts occurred; rather, most of the courts appear to have
focused on where plaintiffs’ injuries were felt.” Cevdet Aksut Ogullari Koll. Sti v. Cavusoglu,
245 F. Supp. 3d 650, 657 (D.N.J. 2017). In RJR Nabisco, the majority rejected the dissent’s
assertion “that a RICO plaintiff may sue for foreign injury that was caused by the violation of a
predicate statute that applies extraterritorially,” stating that such an approach “fails to appreciate
that the presumption against extraterritoriality must be applied separately to both RICO’s
substantive prohibitions and its private right of action.” 136 S. Ct. at 2108. Treating RICO’s
provisions separately leads to the conclusion that “the ‘focus’ of § 1964(c) is the injury suffered
and not the predicate acts that caused the injury.” Cevdet, 245 F. Supp. 3d at 657.
The question presented in this case is whether Bermuda may bring an action for the
various injuries alleged under RICO’s private right of action. It may well be that Bermuda’s
allegations as to Lahey’s commission of various predicate acts would suffice for criminal
charges under § 1963(a) or civil enforcement proceedings brought by the Attorney General under
§ 1964(a)-(b); however, the focus of this motion is whether Bermuda, as a private party, may
bring these charges under § 1964(c). That depends on whether Bermuda has alleged domestic
injuries to business or property caused by Lahey’s conduct. The injuries in this case are assessed
A. Scanning Scheme
Bermuda asserts that, as a result of Lahey’s relationship with Brown, it paid “millions of
dollars for thousands of medically unnecessary diagnostic imaging tests read by Lahey in the
United States.” See Compl. ¶¶ 69, 70, 77, 94, 113. It further alleges that “Defendants’ actions
had the direct and proximate effect of increasing the premiums for [standard Bermudian health]
benefits, and causing Bermuda to pay . . . increased healthcare costs.” Id. ¶ 113(b).
Bermuda has not alleged that it suffered an injury to its U.S.-held business or property.
First, the Complaint alleges that payment for scans reviewed by Lahey were made by the Brown
Clinics out of their own accounts. Id. ¶ 70. These alleged facts are analogous to a scheme found
by the Second Circuit to fail the domestic injury requirement. There, as here, the “relevant
property always remained abroad, and these injuries did not arise from any preexisting
connection between [the plaintiff] and the United States.” Bascuñán v. Elsaca, 874 F.3d 806, 819
(2d Cir. 2017). The relevant transaction in this case allegedly resulted in unnecessary payments
in Bermuda. This alleged scheme did not cause injury to U.S. business or property.
Bermuda alleges further that “Brown constantly applied pressure to government officials
to increase remuneration for tests undertaken by the Brown Clinics and read by Lahey.” Compl.
¶ 90. Nowhere does the complaint allege that these payments were made from bank accounts
located in the United States. In Bascuñán, the Second Circuit held that money is “tangible
property” which satisfies RJR Nabisco’s domestic injury requirement “if plaintiff’s property was
located in the United States when it was stolen or harmed, even if the plaintiff himself resides
abroad.” 874 F.3d at 820-21. There, the court found the original geographic location of
misappropriated funds to be dispositive: “[A] defendant’s use of the U.S. financial system to
conceal or effectuate his tort does not, on its own, turn an otherwise foreign injury into a
domestic one.” Id. at 819. Bascuñán’s well-reasoned logic shows that there is no domestic injury
here, where the Complaint does not allege misappropriation of domestic funds.
The other alleged injury from the scanning scheme, the increase in the Standard Premium
Rate for Bermudian public insurance, also fails to satisfy the domestic injury requirement. The
complaint alleges that, as a result of the increased scanning and vociferous lobbying by Brown,
the Bermudian Ministry of Health, Seniors and Environment increased the Standard Premium
Rate for public insurance, which in turn, “ha[d] an impact on the costs of premiums paid by the
insured population and the level of subsidies provided by the Government.” Compl. ¶¶ 85-86.
Bermuda does not allege that the Standard Health Benefits or Standard Premium Rate applied to
reimbursements outside Bermuda. Since Bermuda does not allege the insurance reimbursements
for scans conducted in Bermuda were paid from U.S.-based bank accounts, Bermuda does not
state a specific injury to its U.S. business or property. 4
Bermuda has not shown that it suffered any injuries in the United States as a result of the
alleged scanning scheme. Without such an injury, Bermuda’s RICO claims as to the scanning
scheme arise out of extraterritorial injuries and must be DISMISSED.
Bermuda also alleges that the scanning scheme created physiological and psychological risks
for patients being “overscanned.” Compl. ¶ 101. Assuming Bermuda would have standing to
assert such injuries, they occurred in Bermuda where the scans were performed, and are
furthermore not the type of injury “to business or property” required by the RICO statute. See 18
U.S.C. § 1964(c); see also Van Schaick v. Church of Scientology of Cal., Inc., 535 F. Supp.
1125, 1137 (D. Mass. 1982) (dismissing a RICO claim alleging emotional distress).
B. Bidding Scheme
Bermuda also alleges that as a result of its relationship with Lahey, “Brown ensured that
Lahey received preferential treatment when bidding (and, indeed, even when not bidding) on
healthcare contracts,” and that, as a result, it was “the victim of a corrupt bidding process.”
Compl. ¶ 113(a). The Complaint only specifically describes how Brown secured subcontracts for
Lahey as to two projects: one with Kurron America, and one with Kurron Bermuda. See id.
¶¶ 51-59. Even assuming Lahey’s participation in these subcontracts inflicted the type of
“competitive injury” prohibited by RICO’s substantive provisions, 5 Bermuda’s bidding scheme
claims are also barred by the presumption against extraterritoriality.
The projects in question both involved Bermuda-based work whose effects were felt in
Bermuda. Cf. Elsevier Inc. v. Pierre Grossmann, IBIS Corp., No. 12 CIV. 5121 (KPF), 2017 WL
5135992, at *4 (S.D.N.Y. Nov. 2, 2017) (discussing how the domestic injury inquiry “focus[es]
on where the plaintiff felt the effects of the injury rather than where the defendant committed the
injury-inducing acts”). 6 The complaint does not allege that payments for the Kurron America
“Competitive injury,” as alleged here, could theoretically constitute an “intangible injury” to
business, rather than a tangible injury to property in the form of money. Though not dispositive
in this case, the Second Circuit suggested that residency may be relevant to the domestic injury
inquiry. See Bascuñán, 874 F.3d at 824 (“[W]e do not hold that a plaintiff’s place of residence is
never relevant to the domestic injury inquiry . . . A plaintiff’s residence may often be relevant –
perhaps even dispositive—in determining whether certain types of business or property injuries
constitute a domestic injury.”); see also id. at 823 (suggesting that for the “diminished value of
ownership in a company . . . the clear locational nexus was the shareholder’s place of
Presumably as an extension of this work, Bermuda alleges that Brown established a partnership
between KEMH and Lahey “wherein Lahey physicians would travel to Bermuda from
Massachusetts and see patients at the state-run hospital.” Id. ¶ 58 (emphasis added). Brown also
secured Lahey “a prestigious appointment . . . as a Clinical Advisor for KEMH’s General
Surgery and Outpatient Care services.” Id. ¶ 61. To the extent these acts constitute an injury to
Bermuda, they were both based in Bermuda and thus fail to satisfy the domestic injury
project or any other KEMH-related work were made from Bermuda’s U.S.-based bank accounts
or, in fact, paid by Bermuda at all. This is not sufficient to satisfy RICO’s domestic injury
requirement. See, e.g., Newman v. Jewish Agency for Israel, No. 16-CV-7593, 2017 WL
6628616, at *4 (S.D.N.Y. Dec. 28, 2017) (dismissing a RICO claim under the domestic injury
requirement for alleging deprivation of funds without offering specific allegations concerning
where the accounts were located or used).
The Kurron Bermuda project involved developing the “FutureCare” public insurance
plan. Bermuda alleges that “Brown used his influence and connections to ensure that Lahey was
favored over other potential U.S. healthcare providers, including Johns Hopkins, for lucrative
contracts relating to ‘FutureCare.’” Id. ¶ 59. As FutureCare is a Bermudian public insurer which
reimburses healthcare costs of Bermudian residents, the court cannot, without more, find any
injury from these contracts to business or property in the United States. While entities like Johns
Hopkins, whose domestic profits were competitively injured by such contracts, might have a
valid domestic injury claim, Bermuda does not. Cf. Elsevier, Inc. v. Grossman, 199 F. Supp. 3d
768, 789 (S.D.N.Y. 2016) (considering whether racketeering activity “had some effect on
Plaintiffs’ relationships with actual or prospective U.S. customers”).
Bermuda has not shown that it suffered any domestic injuries as a result of the alleged
bidding scheme. Without such an injury, Bermuda’s RICO claims as to the bidding scheme must
C. Preferred Provider Scheme
Bermuda finally alleges that, as a product of the preferred provider scheme, it sustained
“injury to property in the United States resulting from Bermuda’s payment of tens of millions of
dollars from and through bank accounts in the United States to Lahey, in the United States, for
services that Lahey corruptly obtained and carried out in the United States.” Compl. ¶¶ 107,
113. 7 Since Bermuda alleges payment for these services was made “from and/or through
Bermuda’s bank accounts, or those of its agents, in the United States,” id. ¶ 65, 8 the domestic
aspect of the injury requirement is met as to these services.
Bermuda faces a different standing problem, however, as to this scheme. Bermuda claims
that it was injured by paying for “overseas services in the United States tainted by bribes.” Id.
¶ 132. Bermuda’s allegations boil down to the following assertion: because Lahey potentially
obtained a greater opportunity to service Bermudian residents by becoming a preferred provider
through bribery, paying Lahey for even medically necessary services is inherently injurious to
Bermuda. Such injury is insufficient to establish standing under RICO.
“[T]he requirement of injury in one’s ‘business or property’ limits the availability of
RICO’s civil remedies to those who have suffered injury in fact.” Holmes v. Sec. Inv’r Prot.
Corp., 503 U.S. 258, 279 (1992). This means that to have standing, it must be the case that a
plaintiff’s injury “fairly can be traced to the challenged action and is likely to be redressed by a
favorable decision.” Valley Forge Christian Coll. v. Ams. United for Separation of Church &
State, Inc., 454 U.S. 464, 472 (1982) (internal quotations omitted). Civil RICO injuries are
further limited by statute: “All civil RICO injuries are, by the terms of the statute itself, economic
As previously discussed, the distinction between sending money “from” or “through” a bank
account is material to the domestic injury analysis. See Bascuñán, 874 F.3d at 819 (rejecting the
argument that mere “use of bank accounts located within the United States” creates domestic
injury because “[t]o hold otherwise would subvert the intended effect of the ‘domestic injury’
requirement articulated by the RJR Nabisco Court”).
The court assumes, without deciding, that payment through a domestic agent is analogous to
domestic payment by a principal. See, e.g., Elsevier, 2017 WL 5135992, at *2 (substituting the
actions of domestic employees for the actions of their foreign employer for purposes of the
domestic injury analysis).
losses of one kind or another. A plaintiff bringing a civil RICO claim . . . cannot, for example,
recover for ‘personal injuries.’” Bascuñán, 874 F.3d at 817 (emphasis added). Furthermore, any
“recoverable damages” under § 1962(c) must “flow from the commission of the predicate acts.”
Sedima, 473 U.S. at 497.
Although at the pleading stage of a RICO case, “general factual allegations of injury
resulting from the defendant’s conduct may suffice,” Bermuda fails to meet this basic showing
that the preferred provider scheme led to an economic injury. See Nat’l Org. for Women, Inc. v.
Scheidler, 510 U.S. 249, 256 (1994). As a preferred provider, Lahey provided “medically
necessary services not available in Bermuda” to Bermudians traveling abroad. Compl. ¶ 64.
Bermuda does not allege that Bermuda paid more for Lahey’s services than it would have with
another provider, that Bermudian patients received lower-quality services, or that Bermuda paid
for any services for which it would not have paid otherwise. Bermuda’s own involvement in the
claims adjudication process further illustrates that Lahey’s provision of these services did not
injure Bermuda economically. Bermuda “negotiate[d] agreements for covered services and
established rates with overseas providers,” and each claim for services was adjudicated “pursuant
to policies set by the Bermudian Government” by Bermuda’s claims processing agents who
“specialize in cost containment.” Id. ¶ 65. While this case might be different if brought by a
plaintiff who could allege competitive injury as a result of this scheme, such as by Lahey’s U.S.
competitors, Bermuda simply does not allege that it suffered costs it would not have otherwise
Bermuda generally alleges that Lahey and Brown’s scheme led to “the receipt of dishonest
services from an elected government official or Lahey itself.” Compl. ¶ 113(a). The dishonest
services statute is a criminal proscription of “fraudulent schemes to deprive another of honest
services through bribes or kickbacks supplied by a third party who [has] not been deceived.”
Skilling v. United States, 561 U.S. 358, 404 (2010). While the statute may serve as a predicate
Thus, Bermuda does not have standing, because it has not shown that it suffered any
injury to business or property as a result of the alleged preferred provider scheme. As a result,
Bermuda’s RICO claims as to the preferred provider scheme must be DISMISSED.
IV. State Law Claims
Bermuda also brings claims under Massachusetts General Laws c. 93A, § 11 (for unfair
business practices) and common law claims under theories of unjust enrichment, civil
conspiracy, and fraud. “[W]hen all federal claims have been dismissed, it is an abuse of
discretion for a district court to retain jurisdiction over the remaining pendent state law claims
unless doing so would serve ‘the interests of fairness, judicial economy, convenience, and
comity.’” See Wilbur v. Curtis, 872 F.3d 15, 23 (1st Cir. 2017); see also Carnegie-Mellon Univ.
v. Cohill, 484 U.S. 343, 355 (1988) (“When the balance of these factors indicates that a case
properly belongs in state court, as when the federal-law claims have dropped out of the lawsuit in
its early stages and only state-law claims remain, the federal court should decline the exercise of
jurisdiction by dismissing the case without prejudice.”). Given the early stage of this litigation
and the fact that the parties have not yet begun the arduous task of discovery, retaining
jurisdiction over Bermuda’s pendent state law claims would not serve such interests.
Accordingly, Bermuda’s state-law claims are DISMISSED without prejudice.
offense to a civil RICO action, it fails to satisfy the economic injury requirement of § 1964(c) on
its face. See 18 U.S.C. § 1346 (“the term ‘scheme or artifice to defraud’ includes a scheme or
artifice to deprive another of the intangible right of honest services.”) (emphasis added). A claim
that dishonest services fraud resulted in an inherent loss of competitive business opportunities
does not satisfy the pleading obligations under RICO. See, e.g., World Wrestling Entm’t, Inc. v.
Jakks Pac., Inc., 530 F. Supp. 2d 486, 520 (S.D.N.Y. 2007), aff’d, 328 F. App’x 695 (2d Cir.
2009) (dismissing a RICO claim premised on dishonest services for lack of economic injury
when there was no “proof as to what a non-corrupt business process would have yielded”). Thus,
alleging the receipt of dishonest medical services, without alleging specific economic injury
resulting from such services, does not save Bermuda’s claim.
For the foregoing reasons, Lahey’s Motion to Dismiss [#16] is ALLOWED.
IT IS SO ORDERED.
March 8, 2018
/s/ Indira Talwani
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?