Wesley Health System, LLC v. Forrest County Board of Supervisors et al
Filing
296
MEMORANDUM OPINION AND ORDER denying 276 Motion for Sanctions; granting in part and denying in part 283 Motion to Strike. Signed by District Judge Keith Starrett on 5/12/2014 (scp)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
WESLEY HEALTH SYSTEM, LLC
d/b/a WESLEY MEDICAL CENTER
V.
PLAINTIFF
CIVIL ACTION NO. 2:12-CV-59-KS-MTP
FORREST COUNTY BOARD OF
SUPERVISORS d/b/a FORREST GENERAL
HOSPITAL, et al.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
For the reasons stated below, the Court grants in part and denies in part
Spruill’s Motion to Strike [283] and denies Spruill’s Motion for Sanctions [36, 276].
A.
Motion to Strike [283]
In support of its response to Spruill’s motion for sanctions, Plaintiff provided
notes [281-1] from a meeting between representatives of the Southeast Trauma Care
Region and Plaintiff. Plaintiff’s attorney, Kathryn Gilchrist [286-1], took the notes
during the meeting. Spruill argues that the Court should strike the notes as hearsay.
Hearsay is an out-of-court statement offered to prove the truth of the matter
asserted therein. FED. R. CIV. P. 801(c). While the Court can not accept the notes as
evidence of the matters asserted within them, it can accept the notes [281-1] and
affidavit [286-1] as evidence that Plaintiff received such information from its attorney
prior to filing its complaint. Therefore, the Court grants Spruill’s Motion to Strike [283]
insofar as the Court will not consider the notes [281-1] as evidence of the matters
asserted within them, but the Court denies the motion insofar as it will consider the
notes [281-1] and affidavit [286-1] as evidence that Plaintiff’s attorney provided it with
such information prior to the initiation of this litigation.
B.
Motion for Sanctions [36, 276] – Rule 11
Rule 11 provides that when a lawyer submits a pleading to the court, he certifies
that any representation made therein “is not being presented for any improper
purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of
litigation;” that the claims “are warranted by existing law or by a non-frivolous
argument for extending, modifying, or reversing existing law or for establishing new
law;” and that “the factual contentions have evidentiary support or, if specifically so
identified, will likely have evidentiary support after a reasonable opportunity for
further investigation or discovery.” FED. R. CIV. P. 11(b).
“Rule 11 does not require that the legal theory espoused in a filing prevail.” CJC
Holdings, Inc. v. Wright & Lato, Inc., 989 F.2d 791, 792 (5th Cir. 1993). Rather, the
Court considers “factual questions regarding the nature of the attorney’s prefiling
inquiry and the factual basis of the pleading or other paper.” Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 399, 110 S. Ct. 2247, 110 L. Ed. 2d 359 (1990). The
Court also determines whether the attorneys charged with violating Rule 11 “fulfilled
their duty of reasonable care into the relevant law.” CJC Holdings, 989 F.2d at 792.
“Even if erroneous, a legal posture does not violate Rule 11 unless it is unreasonable
from the point of view both of existing law and of its possible extension, modification,
or reversal.” Id. “[A] trial court should not impose Rule 11 sanctions for advocacy of a
plausible legal theory, particularly where . . . the law is arguably unclear.” Id.
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Plaintiff alleged [21] that Spruill committed a substantive RICO violation under
18 U.S.C. § 1962(c) and participated in a RICO conspiracy under 18 U.S.C. § 1962(d).
Section 1962(d), the conspiracy provision, does not require an overt act or even an
“agreement to commit or facilitate each and every part of the substantive offense.”
Salinas v. United States, 522 U.S. 52, 63, 118 S. Ct. 469, 139 L. Ed. 352 (1997). But
Section 1962(c) requires at least two acts of “racketeering activity.” Id. Accordingly,
Plaintiff alleged [21] that all Defendants – including Spruill – committed the predicate
acts of kidnapping and wire fraud. Spruill’s motion for sanctions [36, 276] specifically
focuses on these allegations. He contends that Plaintiff’s claims that he committed the
crimes of kidnapping and wire fraud were frivolous and without basis.
Among other arguments in response [41, 281], Plaintiff contends that its claims
against Spruill were never premised on the claim that he personally committed each
element of the pertinent crimes. Rather, Plaintiff claims that its allegations were based
on the theory that Spruill had committed kidnapping and wire fraud by directing or
causing others to commit the requisite acts.
To commit wire fraud, it is not necessary for a party to actually use wire
communications. United States v. Simpson, 741 F.3d 539, 548 (5th Cir. 2014). Rather,
one may commit wire fraud by causing the use of wire communications in furtherance
of a scheme to defraud. Id. (citing United States v. Stalnaker, 571 F.3d 428, 436 (5th
Cir. 2009)). Additionally, Mississippi has adopted the Fifth Circuit’s law of aiding and
abetting. See Wilson v. State, 967 So. 2d 32, 39 (Miss. 2007); Milano v. State, 790 So.
2d 179, 184-85 (Miss. 2001).
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The guilt of a defendant in a criminal case may be established without
proof that the defendant personally did every act constituting the offense
alleged. . . . [A]nything a person can do for himself may also be
accomplished by that person through the direction of another person as
his or her agent . . . .
If another person is acting under the direction of the defendant . . . , then
the law holds the defendant responsible for the acts and conduct of such
other persons just as though the defendant had committed the acts or
engaged in such conduct.
Milano, 790 So. 2d at 185 (quoting FIFTH CIRCUIT PATTERN JURY INSTRUCTIONS
(CRIMINAL) 2.06 (1998)). Accordingly, in Mississippi a defendant may commit
kidnapping where he directs an agent to commit the acts required by the statute. Cf.
Wilson, 967 So. 2d at 38 (defendant was guilty of shoplifting where she did not
personally commit each element of the crime, but acted in concert with others).
Prior to filing its complaint [1], Plaintiff knew that Spruill was the CEO of AAA,
and that Forrest General controls AAA. Plaintiff interviewed a number of patients
prior to filing its suit. Some claimed that AAA transported them to Forrest General
despite their request to be taken to Wesley, and some claimed AAA personnel lied to
them in order to convince them to go to Forrest General.
Additionally, Plaintiff’s attorney provided it with a memo [281-1] that contained
factual representations concerning an alleged meeting between the leadership of the
Southeast Trauma Care Region (“SETCR”) and Plaintiff’s representatives.1 Plaintiff’s
attorney reported that Spruill, the CEO of AAA, attended the meeting in his capacity
1
As stated above, the Court does not consider the memo [281-1] as evidence
that its contents are true. Rather, the Court considers it as evidence that Plaintiff
received such information – whether ultimately true or false – from its attorney.
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as the executive director of the SETCR, along with Evan Dillard, Forrest General’s
CEO. Gilchrist represented that Spruill denied that AAA took patients to Forrest
General against their will, and that he claimed patients were allowed to go to the
hospital of their choosing upon signing a form. But Gilchrist concluded that the form
did not allow patients to choose their destination facility, and that it merely allowed
patients to deny treatment or transport altogether. She also reported that Spruill and
Dillard refused to amend the regional trauma plan to insert language specifically
allowing patients to choose their destination facility, and that they claimed the practice
was already part of AAA’s operating procedures.
Therefore, prior to filing its complaint, Plaintiff had reason to believe that
Spruill was both AAA’s CEO and the executive director of the SETCR, the entity that
promulgates the regulations governing EMS services in this region. Plaintiff also had
reason to believe that Forrest General’s CEO occupied a position of leadership in the
SETCR, and that Forrest General controlled AAA. Plaintiff’s attorney reported that the
SETCR – represented by Spruill and Forrest General’s CEO – refused to adopt
language allowing patient destination choice, claiming that the principle was already
part of AAA’s operating procedures. But Plaintiff later received reports from patients
that AAA was, in fact, refusing to transport them to Wesley, despite Spruill’s alleged
representations to the contrary. In the Court’s opinion, all of this information provides
sufficient basis for Plaintiff’s good-faith belief that Spruill – in his capacity as AAA’s
CEO and as the executive director of the state agency creating EMS regulations in this
area – directed or caused AAA’s agents to transport patients to Forrest General despite
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their desire to receive treatment at Wesley.
Indeed, as this case proceeded, Forrest General and AAA did not contest many
of the key facts alleged by Plaintiff, including the allegation that AAA transported
patients to Forrest General despite their desire to receive treatment at Wesley. Forrest
General and AAA merely argued – and the Court agreed – that state law required AAA
to transport the patients to Forrest General. It is undisputed that Forrest General
effectively controls both AAA and the SETCR, and that the SETCR promulgates the
regulations which require AAA to transport trauma patients to Forrest General despite
their desire to receive treatment at Wesley. Within the context of this unabashedly
incestuous regulatory scheme – which necessarily brings more patients to Forrest
General and fewer to Plaintiff, its only regional competitor – Plaintiff had some basis
for its belief that Spruill directed or controlled the actions of AAA’s employees in
diverting patients to Forrest General.
In summary, Plaintiff’s RICO claims were novel, and its application of
Mississippi’s kidnapping statute was particularly creative. Mere novelty, however, is
not sanctionable under Rule 11. CJC Holdings, 989 F.2d at 794 (“misapplication of
Rule 11 can . . . stifle the creativity of litigants in pursuing novel factual or legal
theories”). Plaintiff’s Section 1962(c) RICO claim – including the allegation that Spruill
committed the predicate acts of kidnapping and wire fraud by controlling or directing
the actions of others – was plausible and, therefore, not frivolous. See id. (Rule 11 not
intended to bar novel factual or legal theories); MAXXAM, 523 F.3d at 580 (where
litigant’s legal theory was creative but plausible and logical, Rule 11 sanctions were
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inappropriate).
For all of these reasons, the Court denies Spruill’s Motions for Sanctions [36,
276] under Rule 11. The Court emphasizes, however, that it ultimately rejected
Plaintiff’s legal theories and claims. As far as the record in this case demonstrates,
Wade Spruill did not commit predicate acts of kidnapping or wire fraud.
C.
Motion for Sanctions [36, 276] – 28 U.S.C. § 1927
Spruill also seeks sanctions under 28 U.S.C. § 1927, which provides: “Any
attorney . . . who so multiplies the proceedings in any case unreasonably and
vexatiously may be required by the court to satisfy personally the excess costs,
expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C.
§ 1927. “An award of attorneys’ fees under § 1927 requires evidence of bad faith,
improper motive, or reckless disregard of the duty owed to the court.” Lawyers Title
Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 871 (5th Cir. 2014) (punctuation
and footnote omitted). “[S]anctions under § 1927 are punitive in nature and require
clear and convincing evidence that sanctions are justified. An unsuccessful claim is not
necessarily actionable. Section 1927 sanctions should be employed only in instances
evincing a serious and standard disregard for the orderly process of justice . . . .” Id. at
872 (punctuation and footnotes omitted).
Spruill has not presented clear and convincing evidence of “bad faith, improper
motive, or reckless disregard of the duty owed to the court.” Id. at 871. For this reason
and the reasons stated in the Court’s Rule 11 analysis, the Court denies his request for
Section 1927 sanctions.
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D.
Conclusion
For all of the reasons stated above, the Court grants in part and denies in
part Spruill’s Motion to Strike [283] and denies Spruill’s Motion for Sanctions [36,
276].
SO ORDERED AND ADJUDGED this, the 12th day of May, 2014.
s/ Keith Starrett
UNITED STATES DISTRICT JUDGE
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