ALLSTATE NEW JERSEY INSURANCE COMPANY et al v. SUMMIT PHARMACY, INC. et al
Filing
68
OPINION. Signed by Chief Judge Jerome B. Simandle on 5/1/2014. (dmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALLSTATE NEW JERSEY INSURANCE
CO., et al.,
Plaintiffs,
HONORABLE JEROME B. SIMANDLE
Civil Action
No. 13-5809 (JBS/KMW)
v.
SUMMIT PHARMACY, INC., et al.,
Defendants.
APPEARANCES:
Douglas M. Alba, Esq.
Pringle Quinn & Anzano
9000 Midlantic Drive
Suite 110
Mt. Laurel, NJ 08054
-andEdward R. Bonanno, Esq.
Pringle Quinn Anzano
701 Seventh Avenue
Belmar, NJ 07719
Attorneys for Plaintiffs
Jonathan E. Levitt, Esq.
William Lim, Esq.
Frier & Levitt LLC
84 Bloomfield Avenue
Pine Brook, NJ 07058
Attorneys for the Summit Defendants
Frank Brennan, Esq.
Thomas F. Flynn, III, Esq.
Flynn & Associates, P.C.
2091 Springdale Road, Suite 2
Cherry Hill, NJ 08003
Attorneys for the SJHW Defendants
OPINION
Christopher J. Stanchina, Esq.
222 New Road
Suite 206
Linwood, NJ 08221
Attorney for ASAP Defendants
SIMANDLE, Chief Judge:
I.
INTRODUCTION
Six Plaintiff insurance companies sued 54 named Defendants,
identified infra, in the Superior Court of New Jersey, asserting
claims under the federal Racketeering Influenced and Corrupt
Organization Act (“RICO”), the New Jersey RICO statute, the New
Jersey Insurance Fraud Prevention Act (“NJIFPA”), and the New
Jersey Codey Act. Defendants removed this case to this Court
based on federal question jurisdiction. Plaintiffs allege that
Defendants provided unlawful prescription services and seek over
$2.2 million in damages, declaratory judgment, and disgorgement.
This matter comes before the Court on six motions:
Plaintiffs’ motion for preliminary injunction to stay personal
injury protection arbitrations [Docket Item 17]; three motions
to dismiss from three groups of Defendants [Docket Items 21, 22,
& 44]; Plaintiffs’ third motion to amend/correct complaint
[Docket Item 35]; and Plaintiffs’ motion to seal [Docket Item
50].
Plaintiffs’ federal RICO claims and RICO conspiracy claims
will be dismissed with prejudice because Plaintiffs failed to
demonstrate that they have standing under RICO, that a RICO
2
enterprise existed, and that there were predicate acts. This
case was in federal court because of federal question
jurisdiction based on the federal RICO claims. As the federal
claims will be dismissed with prejudice, the Court will not
exercise supplemental jurisdiction over the state law claims
between non-diverse parties and will remand the state law claims
to state court so that New Jersey state courts can adjudicate
questions of state law. Plaintiffs’ motion to seal is granted,
and their motion for preliminary injunction is dismissed without
prejudice to refiling same in the Superior Court of New Jersey.
II.
BACKGROUND1
A.
Plaintiffs
Plaintiffs Allstate New Jersey Insurance Company, Allstate
Indemnity Company, Allstate Property and Casualty Insurance
Company, Allstate New Jersey Property and Casualty Insurance
1
The three pending motions to dismiss were directed at
Plaintiffs’ Second Amended Complaint [Docket Items 9-4, 9-5, &
9-6]. The Background section summarizes the allegations in
Plaintiffs’ proposed Third Amended Complaint (“TAC”), which is
attached to Plaintiffs’ motion to amend and which was filed
after the first two motions to dismiss were filed. The TAC is
213 pages long and the Second Amended Complaint is 111 pages
long. Given the length of these complaints, the Court focused on
the most recent pleading. Furthermore, Plaintiffs had notice of
the arguments identified in the motions to dismiss before they
submitted their TAC. (The motion to dismiss that was filed after
the TAC exactly copies the arguments from one of the earlier
motions). If the TAC does not remedy the problems identified in
the motions to dismiss, then further amendment would be futile.
At oral arguments, the parties agreed that focusing upon the TAC
was proper, and this Court has done so in this analysis.
3
Company, Allstate Insurance Company, and Encompass Insurance
Company issue automobile insurance policies in New Jersey and
provide Personal Injury Protection (“PIP”) benefits. (Proposed
Third Amended Complaint (“TAC”) ¶¶ 1, 88.)
B.
Defendants
Defendant Summit Pharmacy offers prescription medications
to individuals who have been in automobile and work accidents.
(TAC ¶ 2.) From 2007 to the present, Summit Pharmacy provided
prescription medications to Plaintiffs’ insureds and billed
Plaintiffs for those services. (TAC ¶ 5.) Summit Pharmacy’s
offices are in Phoenix, Arizona. (TAC ¶ 3.)
Defendant Summit Testing, Inc., provides drug screening and
bloodwork analysis. (TAC ¶ 6.) From 2013 to the present, Summit
Testing provided drug screening and bloodwork analysis to
Plaintiffs’ insureds and billed Plaintiffs for those services.
(TAC ¶ 9.) Plaintiffs allege that Summit Testing does not exist
as a corporation in Arizona or New Jersey and has not obtained
authority from the New Jersey Secretary of State to transact
business in New Jersey. (TAC ¶¶ 10-12.)
Defendant Jonathan Mortion is Summit Pharmacy’s Chief
Executive Officer. (TAC ¶ 13.) Defendant Joel Morton is Summit
Pharmacy’s Chief Medical Officer and General Supervisor. (TAC ¶
14.) Defendant Laurie Meade is Summit Pharmacy’s Chief Operating
Officer and President. (TAC ¶ 15.) Defendants James Scullin,
4
Luke O’Brien, and Charles McWade are on Summit Pharmacy’s Board
of Directors. (TAC ¶¶ 16-18.) Defendant Apral Jones is Summit
Pharmacy’s Pharmacist-in-Charge. (TAC ¶ 19.) Defendants Sherri
Oxford, Cang Nguyen, Lonny Allis, Mauricio Franco, Stephen
Persons, Matt Peters, Tien Lai, and Jeff Schwartz are Summit
Pharmacy pharmacists. (TAC ¶¶ 20-27.) Defendants Jessica Lee,
Melisa Fuentes Flaa, William Crane, Jill M. Salajka, Kimberly
Bastian, Janine Centanzo, Nataleigh Walling, Libby Fuentes,
Ashley Levin, Meliza Miranda, Nick Centanzo, Eva Jee,
Christopher Virginia, Jessica Starkovich, and Phanida Phivilay
work or have worked for Summit Pharmacy in sales, marketing,
business development, operations, or client relations. (TAC ¶¶
28-42.) Summit Pharmacy, Summit Testing, and all Defendants who
work for Summit Pharmacy or Summit Testing are referred to
collectively as the “Summit Defendants”.
Defendant South Jersey Health and Wellness, LLC, (“SJHW”)
is a New Jersey licensed healthcare professional and operates
one facility in New Jersey. (TAC ¶¶ 43-44.) Defendants Daniel
DePrince, III, D.O., an osteopath, and Anthony C. Carabasi,
D.C., a chiropractor, co-own SJHW. (TAC ¶¶ 45-48.) SJHW employs
Defendants Michael Edenzon, D.C.; Charles G. Avetian, D.O.; and
Leslie Davis, P.A. (TAC ¶¶ 49-56.)
Defendant Neurology Pain Associates (“NPA”), P.C., is a
licensed healthcare professional with two facilities in New
5
Jersey. (TAC ¶¶ 57-58.) It conducts business as Neurological
Trauma Associates, which is also named as a Defendant. (TAC ¶
59.) Defendant Russell Abrams, M.D., owns Neurological Pain
Associates and employed Defendant Keith Preis, M.D. from 2007 to
the present. (TAC ¶¶ 60-61.) SJHW, its owners, and its
employees, together with Neurology Pain Associates and
Neurological Trauma Associates and their employees are referred
to collectively as the “SJHW/NPA Defendants”.
Defendant Advanced Spine and Pain, LLC, (“ASAP”) is a
licensed New Jersey healthcare professional and has operated 16
facilities in New Jersey from 2008 to the present. (TAC ¶¶ 6465.) Defendant L.P. Cares, LLC is a New Jersey licensed
healthcare professional. (TAC ¶ 66.) Defendants Young J. Lee,
M.D., and Milind D. Patharkar, M.D., co-own ASAP and LP Cares.
(TAC ¶¶ 67-70.) Patharkar and Lee employ Defendants R. Todd
Rinnier, D.O.; Eileen Manabat, M.D.; Adaku U. Nwachuku, D.O.;
Chioma Ezeadichie, D.O.; Tracey Hessert, N.P., Kyriaki Sandy
Revenidis, APN; Maraynn Masci, APN; and Ijeoma Menkiti, ANP-BC.
(TAC ¶ 71.) ASAP, LP Cares, the owners, and the employees are
collectively referred to as the “ASAP/LP Defendants”.
In addition to the named Defendants, Plaintiffs also sued
Defendants ABC Corps. 1-25, XYZ PCs 1-25, John Does 1-25, Jane
Does 1-25, Dr. John Roes 1-25, and Dr. Jane Roes 1-25. (TAC ¶¶
80-87.)
6
C.
Summit’s Marketing Campaign
In 2007, Summit Pharmacy billed Plaintiffs approximately
$15,146.07; in 2008, it billed $7,852.85 to Plaintiffs; in 2009,
it billed $262,250.04 to Plaintiffs; in 2010, it billed
$1,687,242.02 to Plaintiffs; in 2011, it billed $1,441,161.16;
in 2012, it billed $1,435,187.32. (TAC ¶ 113.) In total,
Plaintiffs have paid Summit Pharmacy $2,296,074.84 and handled
claims from 914 individuals whom Plaintiffs insure and whom
Defendants served. (TAC ¶¶ 90-91.)
Plaintiffs allege that, since 2009, Summit Pharmacy and its
sales staff advertised to healthcare providers in order to
unlawfully steer patients to Summit Pharmacy. (TAC ¶ 114.) This
advertising campaign included sponsoring the following events:
the Philadelphia Bar Association’s Bench and Bar Conference in
Atlantic City in 2009; the Philadelphia Bar Association’s
Workers Compensation Section spring party at the Manayunk
Brewery in June 2010; the New Jersey Association for Justice’s
(“NJAJ”) “Important Statewide Auto Meeting” in Voorhees, New
Jersey in 2011; the NJAJ’s 2011 Boardwalk seminar, at which
Summit Pharmacy also hosted a party that several individual
Defendants attended; the 2011 NJAJ seminar titled “The Current
PIP System is Under Attack”; the 2011 Delaware Trial Lawyers
Association’s Annual Convention; the 2011 Annual NJAJ golf
outing; the 2011 American Board of Trial Advocates National
7
Board of Directors meeting; the 2012 National Association of
Trial Lawyers Executives’ (“NATLE”) winter meeting; the 2012
NATLE annual meeting; the 2012 Workers Injury Law and Advocacy
Group’s annual conference in Las Vegas; the 2012 New Jersey
Orthopedic Society’s annual fall symposium; and the NJAJ’s 2013
“Four Concurrent Seminars” in Edison, New Jersey. (TAC ¶¶ 11521, 125, 127, 130, 133, 135, 136, & 139.)
Summit Pharmacy representatives also attended the 2011 New
York Workers Compensation golf tournament; the American
Association for Justice (“AAJ”) conference in New York in 2011;
the 2011 New England Workers Compensation Conference in Rhode
Island; the 2011 Workers Injury and Advocacy group conference in
San Diego, California; and the 2012 AAJ convention in Arizona
and the 2012 AAJ conference in Chicago. (TAC ¶¶ 122, 124, 126,
126, 128, 131, & 134.)
Summit Pharmacy held a sales meeting at P.J. Whelihan’s
restaurant in South Jersey in 2011; hosted holiday parties,
which several Defendant medical providers attended, at the Four
Seasons Hotel in Philadelphia in 2011, 2012, and 2013; and was
the lone exhibitor at the New Jersey Institute for Continuing
Legal Education’s PIP seminar in 2013 in New Brunswick, New
Jersey. (TAC ¶¶ 123, 129, 137, 138, & 140.)
8
In October 2012, Defendant Kimberly Bastian, a Summit sales
representative, and Robert Ty Countess, an SJHW employee,2
attended a Philadelphia Eagles football game. (TAC ¶ 136.) Since
2008, the Summit Defendants and Drs. Lee and Patharkar of
ASAP/LP attended Callaway Golf outings, skeet-shooting events,
NJAJ conventions in Atlantic City, and a Madonna concert in Las
Vegas. (TAC ¶ 141.)
D. Defendants’ Alleged Steering of Patients
Plaintiffs allege that Defendants had an unlawful steering
scheme to deny Plaintiffs’ insureds the right to fill their
prescriptions at a pharmacy of their choice and directed
Plaintiffs’ insureds from their respective pharmacies to
Defendant Summit Pharmacy. (TAC ¶ 112.)
Plaintiffs provided examples of this alleged steering
behavior. For example, Defendant Dr. Preis told patient D.C.3 to
fill her prescriptions at Summit Pharmacy, instead of her
regular pharmacy. (TAC ¶ 144.) Dr. Preis “made it seem like . .
. you don’t have to worry about anything” because Summit
Pharmacy would overnight mail the prescriptions, insurance would
pay, D.C. would not have any co-pays, and “[i]t would be no cost
to me.” (TAC ¶ 144.) Dr. Preis told patient B.R. that she would
need to fill her prescription through Summit Pharmacy and, when
2
Countess was originally named as a Defendant in this action,
but Plaintiffs dismissed him. [Docket Item 66.]
3
The TAC refers to patients by their initials only.
9
she asked why her regular pharmacy would not suffice, he
responded that the medications “were specially prescribed, the
medication was somehow couldn’t get it at Wal-Mart or CVS . . .
.” (TAC ¶ 145.) Dr. Preis told patient J.T. that he would send
her prescription to Summit, not her regular pharmacy, because “I
didn’t have health insurance so he didn’t give me a
prescription.” (TAC ¶ 146.)
Defendant Deprince at SJHW directed patient J.P. to use
Summit Pharmacy, and J.P. said “I don’t think they gave me an
option. I think they just told us.” (TAC ¶ 53.) SJHW personnel
told patient D.G. that “because it was a car accident and
Allstate should be paying for it, I should go through them
(Summit) and have them deliver it because they (Allstate) should
be paying for it.” (TAC ¶ 151.)
Plaintiffs conducted an internal review of Defendant ASAP’s
claims and determined that 56% of ASAP’s patients were referred
to Summit Pharmacy from 2010 to 2011. (TAC ¶ 153.) Defendant Dr.
Eileen Manabat of ASAP told patient M.R. to fill her
prescription cream medication at Summit Pharmacy because WalMart could not provide the medication. (TAC ¶ 155.) Defendant
Dr. R. Todd Rinnier of ASAP treated patient F.S. who filled his
prescriptions at CVS except for “the cream that came through the
mail,” which Dr. Rinnier ordered. (TAC ¶ 157.) Defendant Dr. Lee
of ASAP treats patient H.S. and orders H.S.’s medications
10
through Summit Pharmacy. (TAC ¶ 159.) Patient K.J.J., who sees
Drs. Patharkar and Nwachuku at ASAP, learned that she would not
have co-pays for medications filled through Summit Pharmacy and
learned about Summit Pharmacy from a pamphlet in the doctor’s
office. (TAC ¶ 161.)
Plaintiffs paid Summit Pharmacy for these prescription
services in reliance on Summit Pharmacy’s “misrepresentations in
its claims for reimbursement that it had provided the
prescription services in accordance with the applicable state
statutes and regulations . . . .” (TAC ¶ 166.)
E. Other Unlawful Acts
Plaintiffs also pleaded other unlawful acts.
They allege that Summit Pharmacy provided prescription
services in violation of New Jersey and Arizona registration,
licensing, and medical record requirements. (TAC ¶ 167.) From
2007 through September 28, 2009, Summit Pharmacy allegedly
shipped prescriptions to Plaintiffs’ insureds in New Jersey even
though it was not properly registered as an out-of-state
pharmacy with the New Jersey Board of Pharmacy. (TAC ¶ 168.)
Plaintiffs allege that Summit Pharmacy filled prescriptions
without requiring legally necessary co-payments and submitted
claim forms that misled Plaintiffs into believing that
copayments had been made. (TAC ¶¶ 143, 339.) Defendant Sherri
Oxford filled prescriptions for Plaintiffs’ insureds while her
11
license was suspended for six months. (TAC ¶ 169.) Summit
Pharmacy also allegedly filled prescriptions without having
prescription orders from a medical practitioner. (TAC ¶ 170.)
When it submitted bills to Plaintiffs, Summit Pharmacy falsely
represented and/or implied that it provided prescription
services in accordance with requisite laws and regulations. (TAC
¶¶ 183(E), 374.)
Plaintiffs also allege that the ASAP/LP Defendants
generated illegal self-referrals by referring patients from ASAP
to LP Cares for anesthesia services. (TAC ¶ 410.) As a result,
Plaintiffs allege that, from the same procedures, ASAP submitted
claims for pain management services and LP Cares submitted
claims for anesthesia. (TAC ¶¶ 411-427.)
In addition, ASAP personnel continued to write
prescriptions for patient K.J.J. even after she tested positive
for cocaine, which should have disqualified her from ASAP’s
care. (TAC ¶¶ 162-63.)
F. Plaintiffs’ Allegations of New Evidence Outside the TAC
After briefing on the motions was complete, Plaintiffs
filed a letter titled “Submission of New Discovered Evidence to
the Court.” [Docket Item 56.] In this letter, Plaintiffs allege
that Summit Testing stopped submitting claims in September 2013
and Defendants Joel Morton, Jonathan Morton, and James Scullin
of Summit Pharmacy created a new corporation named Phoenix
12
Toxicology & Lab Services, LLC (“Phoenix”), which began
submitting claims in January 2014. [Id. at 3.] Plaintiffs allege
that Phoenix had submitted the same claims for reimbursement
that had previously been paid to Summit Testing and that Phoenix
was not legally a corporation and had no certificate of
authority from the New Jersey Secretary of State when it
performed these services. [Id.
at 2-4.]
Plaintiffs also allege that Defendant Kimberly Bastian, a
sales representative for Defendant Summit Pharmacy, visited
SJHW’s offices in 2013. [Id. at 5.]
Plaintiffs’ investigation also revealed that Summit
Pharmacy has two new directors: Jack Anderson and James
Vandervelden, who is Managing Partner and Founder of Pleasant
Bay Capital Partners. One of Pleasant Bay’s investments is
Summit Pharmacy. [Id. at 6.]
The Summit Defendants responded [Docket Item 57] and
disputed the allegations in Plaintiffs’ letter.4
G. Claims for Relief
The TAC asserts 25 counts over 148 pages that, when
condensed, reveal the following:
Plaintiffs assert federal and state RICO claims and RICO
conspiracy claims against all Defendants. Plaintiffs assert that
4
They also argued that Plaintiffs’ letter was an unauthorized
sur-reply and should be stricken.
13
Defendants were associated-in-fact and engaged in an enterprise
to obtain money from Plaintiffs. The predicate acts were mail
fraud and also, with the state RICO claims, health care claims
fraud. Plaintiffs also assert claims under the NJIFPA and,
against the ASAP/LP Defendants only, under the Codey Act.
Plaintiffs assert that Defendants are not entitled to any
of the monies that Plaintiffs have paid them. Plaintiffs seek
compensatory and treble damages, interest, costs of suit,
attorneys’ fees, disgorgement, a constructive trust and
equitable lien on Defendants’ assets until disgorgement is
complete, declaratory judgment that Plaintiffs need not pay any
benefits to Defendants, revocation or suspension of the
corporate Defendants’ charters and the individual Defendants’
licenses, and injunctive relief.
H. Procedural History
Plaintiffs filed this action on August 8, 2013 in New
Jersey Superior Court against 31 of the named Defendants.
[Docket Item 1-1.] Plaintiffs filed an amended complaint in
Superior Court on August 22, 2013 and added six Defendants.
[Docket Item 1-2.] Some of the Defendants filed a notice of
removal to federal court. [Docket Item 1.] Plaintiffs filed a
motion to remand. [Docket Item 3.] Defendants filed a second
notice of removal [Docket Item 9] because Plaintiffs had filed a
second amended complaint in Superior Court on October 3, 2013
14
naming additional Defendants [Docket Items 9-4, 9-5, & 9-6]. The
Court issued an Opinion and Order [Docket Items 14 & 15] denying
Plaintiffs’ motion to remand because, inter alia, the Court had
original jurisdiction under 28 U.S.C. § 1331 over the federal
RICO claims.
Plaintiffs filed a motion for preliminary injunction to
stay pending PIP arbitrations. [Docket Item 17.] The ASAP
Defendants5 [Docket Item 21] and the Summit Defendants [Docket
Item 22] filed motions to dismiss. Plaintiffs opposed both
motions, but their opposition to the ASAP Defendants’ motion
included a cross-motion for leave to file the TAC [Docket Items
35 & 36]. The SJHW/NPA Defendants also filed a motion to
dismiss. [Docket Item 44.] Plaintiffs filed a motion to seal.
[Docket Item 50.]
The Court heard oral argument on April 22, 2014.6
5
LP Cares was not part of the ASAP Defendants’ motion to dismiss
because it was named for the first time in the TAC.
6
At oral argument, the parties agreed to consider whether this
case would be appropriate for mediation. Plaintiffs filed a
letter on April 28, 2014 [Docket Item 63] notifying the Court
that they want to proceed without mediation. Defendants
expressed interest in mediation [Docket Items 62, 64, & 65],
although the Summit Defendants placed several conditions upon
their willingness to mediate. Local Civil Rule 301.1(d) permits
the Court to refer any civil action to mediation without the
parties’ consent, but the Court declines to do so in this case
because, as explained infra, Plaintiffs’ federal claims will be
dismissed with prejudice and the remaining state law claims
should be adjudicated by a state court.
15
III. MOTIONS TO DISMISS AND MOTION TO AMEND
A. Parties’ Arguments
1. Motions to Dismiss
The SJHW/NPA Defendants and the ASAP Defendants argue that
Plaintiffs did not meet the specificity requirements of Rule
9(b); did not plead statutory insurance fraud; failed to allege
knowing and intentional wrongdoing; did not plead facts showing
an agreement between the Defendants; did not plead facts showing
that the SJHW/NPA Defendants intentionally used the US mails to
defraud; cannot seek disgorgement of funds that the SJHW/NPA
Defendants did not receive; and failed to join the insureds as
interested parties.
The Summit Defendants argue that Plaintiffs did not satisfy
Fed. R. Civ. P. 9(b); failed to demonstrate a pattern of
racketeering activity; failed to plead any predicate acts with
particularity; did not plead facts indicating the existence of a
steering agreement; failed to plead the existence of an
enterprise engaged in racketeering activity; did not satisfy the
causation element of Article III standing or the causation and
injury requirements for RICO standing; did not show that Summit
Pharmacy’s claims were fraudulent or that the Summit Defendants
were required to collect co-pays before submitting claims; did
not show that the Summit Defendants had the scienter to commit
16
fraud; and did not plead sufficient facts to allege claims
against individual Defendants.7
In their opposition briefs to the motions to dismiss,
Plaintiffs argue that the NJIFPA does not require intent to
deceive, scienter, or intentional wrongdoing; that they pleaded
sufficient facts to show a steering agreement; that the Court
can reasonably infer that the Defendant medical providers
steered patients to Summit Pharmacy because they were solicited
to do so; that the New Jersey RICO statute is broader in scope
than the federal statute; and that the Plaintiffs were not
required to join the insureds as defendants because the
fraudulent conduct pertains to the Defendants only, not the
insureds. Plaintiffs also request leave to amend a fourth time
if the Court finds the motions to dismiss meritorious.
2. Plaintiffs’ Motion to Amend
Plaintiffs argue that leave to file the TAC should be
granted because Defendants will not be prejudiced, amendment
would not be futile, and there was no undue delay or bad faith.
7
Summit Pharmacy also made factual statements: It described the
PIP insurance billing process, noted that co-pay amounts vary
depending on the PIP policy, emphasized that its claim forms do
not include co-pay amounts, asserted that there were no
misrepresentations about co-pays because they do not appear on
the claim form, and alleged that Summit Pharmacy only learns a
patient’s copay amount when it receives the insurance company’s
explanation of benefits after filling the prescription. Summit
Pharmacy also noted that it is a compounding pharmacy and can
fill prescriptions that regular retail pharmacies cannot fill.
17
Plaintiffs added LP Cares and the Codey Act claims to the TAC
because they discovered the relationship between ASAP and LP
Cares during their investigations.
In their opposition to Plaintiffs’ motion to amend, the
Summit Defendants argued that adding LP Cares constitutes
misjoinder under Fed. R. Civ. P. 20(a)(2) because the
allegations against LP Cares are not connected to the RICO
claims.
The ASAP Defendants argue, in opposition to Plaintiffs’
motion to amend, that the referrals between ASAP and LP Cares
fall within exceptions to the Codey Act’s self-referral
prohibition; liability under the NJIFPA requires intentional
wrongdoing; Plaintiffs’ failure to plead the particulars of the
alleged steering agreement violates Fed. R. Civ. P. 9(b);
Plaintiffs have not pled that the ASAP Defendants were aware of
Summit Pharmacy’s failure to follow regulations; and Plaintiffs
failed to plead an enterprise, mail fraud, a pattern of
racketeering activity, or an agreement to participate in the
enterprise’s conduct.
B. Standards of Review
A complaint will survive a motion to dismiss if it contains
“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) (citation omitted). Although a court must
18
accept as true all factual allegations in a complaint, that
tenet is “inapplicable to legal conclusions,” and “[a] pleading
that offers labels and conclusions or a formulaic recitation of
the elements of a cause of action will not do.” Id. (citation
omitted).
In this case, because Plaintiffs have alleged fraud,
heightened pleading standards apply. Federal Rule of Civil
Procedure 9(b) mandates that “[i]n alleging fraud or mistake, a
party must state with particularity the circumstances
constituting fraud or mistake.” This rule requires “at a
minimum” that plaintiffs support their fraud allegations “with
all of the essential factual background that would accompany the
first paragraph of any newspaper story-that is, the who, what,
when, where and how of the events at issue.” In re Rockefeller
Ctr. Properties, Inc. Sec. Litig., 311 F.3d 198, 217 (3d Cir.
2002) (citation omitted). Plaintiffs can also “use alternative
means of injecting precision and some measure of substantiation
into their allegations of fraud.” Seville Indus. Mach. Corp. v.
Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).
Under Fed. R. Civ. P. 15(a)(2), a party may amend its
pleading with the court’s leave, and “[t]he court should freely
give leave when justice so requires.” However, the court may
deny leave to amend on grounds “such as undue delay, bad faith,
dilatory motive, prejudice and futility.” Calif. Pub. Employees’
19
Ret. Sys. V. Chubb Corp., 394 F.3d 126, 165 (3d Cir. 2004). An
amendment is futile where “the complaint, as amended, would fail
to state a claim upon which relief could be granted” under Fed.
R. Civ. P. 12(b)(6). In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1434 (3d Cir. 1997).
A “district court ruling on a motion to dismiss may not
consider matters extraneous to the pleadings” except that a
“document integral to or explicitly relied upon in the complaint
may be considered . . . .” Id. at 1426 (citations omitted)
(emphasis in original). This rule also applies to motions to
amend. See Downey v. Coal. Against Rape & Abuse, Inc., 143 F.
Supp. 2d 423, 449 n.5 (D.N.J. 2001) (applying Rule 12(b)(6)
standard regarding consideration of documents and facts outside
of the pleadings in addressing motion to amend under Fed. R.
Civ. P. 15(a)); cf. Hassoun v. Cimmino, 126 F. Supp. 2d 353, 369
n.24 (D.N.J. 2000) (“Defendants have pointed to no authority
directing this Court to look beyond the pleadings in considering
. . . opposition to a motion to amend”).
C. RICO Claim Analysis
To plead a RICO violation under 18 U.S.C. § 1962(c),
Plaintiffs must have standing under RICO. They must also allege:
1) the conduct 2) of an enterprise 3) through a pattern 4) of
racketeering activity. 18 U.S.C. § 1962(c). The RICO statute
also prohibits conspiring to engage in such conduct. 18 U.S.C. §
20
1962(d). “[A] defendant may be held liable for conspiracy to
violate section 1962(c) if he knowingly agrees to facilitate a
scheme which includes the operation or management of a RICO
enterprise.” Smith v. Berg, 247 F.3d 532, 538 (3d Cir. 2001).
For reasons next explained, Plaintiffs’ federal RICO claims
will be dismissed because Plaintiffs have not pleaded RICO
standing, an enterprise, and a predicate act of racketeering
activity.
1. Standing
Plaintiffs’ RICO claims fail because Plaintiffs lack RICO
standing.
To sustain a RICO claim, Plaintiffs must show that
Defendants’ actions were the proximate cause of their injuries.
RICO has a “standing requirement of injury to plaintiff's
business or property by reason of the RICO violation.” In re
Sunrise Sec. Litig., 916 F.2d 874, 883 (3d Cir. 1990). In other
words, “the 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 violation.” Sedima,
S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). There
must be “some direct relation between the injury asserted and
the injurious conduct alleged.” Holmes v. Sec. Investor Prot.
Corp., 503 U.S. 258, 268 (1992). The direct injury requirement
is integral to RICO standing analysis: “When a court evaluates a
21
RICO claim for proximate causation, the central question it must
ask is whether the alleged violation led directly to the
plaintiff's injuries.” Anza v. Ideal Steel Supply Corp., 547
U.S. 451, 461 (2006).
Plaintiffs argue that Defendants unlawfully steered
insureds from the insureds’ usual pharmacies of choice to Summit
pharmacy. Plaintiffs lack RICO standing because, even if
Defendants did unlawfully preclude Plaintiffs’ insureds from
choosing their pharmacies, Plaintiffs have not alleged that this
steering harmed Plaintiffs directly. For example, Plaintiffs
have not alleged that the steering caused Plaintiffs to pay more
than they otherwise would have paid to the insureds’ regular
pharmacies. See, e.g., Plumbers & Pipefitters Local 572 Health &
Welfare Fund v. Merck & Co., Inc., 12-1379 (MAS), 2013 WL
1819263, at *7 (D.N.J. Apr. 29, 2013) (holding that plaintiff
health insurance providers failed to establish standing and
dismissing RICO claims against drug manufacturers, who
subsidized cost of brand-name drugs, because “there is no
allegation that . . . Plaintiffs were compelled to pay for that
prescription in lieu of a cheaper alternative medication”).
Plaintiffs also have not pleaded that Defendants prescribed
medications that were medically unnecessary, that Summit
Pharmacy billed Plaintiffs for medications that it did not
actually provide, that Summit Pharmacy overcharged for
22
medications, or that Defendants submitted bills for fake
patients.
Absent tangible financial loss from the predicate acts,
Plaintiffs lack RICO standing. Under RICO, “a showing of injury
requires proof of a concrete financial loss and not mere injury
to a valuable intangible property interest.” Maio v. Aetna,
Inc., 221 F.3d 472, 483 (3d Cir. 2000) (citation omitted).
Plaintiffs’ argument that their insureds could not choose their
preferred pharmacies does not establish concrete financial loss
to Plaintiffs.
At oral argument, Plaintiffs argued that Defendants failed
to comply with New Jersey healthcare laws and regulations and,
therefore, based on New Jersey case law requiring compliance
with New Jersey healthcare laws and regulations, Plaintiffs
should not have had to pay the Summit Defendants anything.
Plaintiffs’ argument is not that Defendants’ conduct caused
Plaintiffs tangible financial losses; Plaintiffs’ argument is
that Defendants’ conduct precludes Defendants from receiving
insurance payments under state law. This argument does not
establish federal RICO standing because it is not connected to
the federal RICO predicate act. RICO standing stems from the
RICO predicate act: “the 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 violation.”
23
Sedima, 473 U.S. at 496. In other words, “[a]ny recoverable
damages occurring by reason of a violation of § 1962(c) will
flow from the commission of the predicate acts.” Id. at 497; see
also Bonavitacola Elec. Contractor, Inc. v. Boro Developers,
Inc., 87 F. App'x 227, 233 (3d Cir. 2003) (“[t]o have standing,
a RICO plaintiff must also show that the alleged RICO violations
proximately caused injury to the plaintiff's business
property”).
Plaintiffs allege that Defendants violated New Jersey laws
and regulations, but the laws that they cite are not predicate
acts for federal RICO claims. For example, Plaintiffs allege
that Defendants violated, inter alia, N.J.S.A. 39:6A-4, which
states that, under PIP coverage, “[m]edical expense benefit
payments shall be subject to any deductible and any copayment
which may be established as provided in the policy”; N.J.S.A.
45:14-65e, which states that it is grossly unprofessional for a
pharmacy to distribute “premiums or rebates of any kind
whatsoever in connection with the sale of drugs and
medications”; N.J. Admin. Code 13:39-3.10, which states that
“[i]t shall be unlawful for a pharmacist to enter into an
arrangement with a health care practitioner who is licensed to
issue prescriptions for the purpose of directing or diverting
patients to or from a specified pharmacy or restraining in any
way a patient's freedom of choice to select a pharmacy”; and
24
Allstate Ins. Co. v. Orthopedic Evaluations, Inc., 300 N.J.
Super. 510, 516 (App. Div. 1997), which states that, under the
PIP coverage laws, “in order to be eligible for recognition,
[healthcare services] must also comply with any other
significant qualifying requirements of law that bear upon
rendition of the service.” None of the state laws and
regulations that Plaintiffs cite appear in the federal RICO
statute as predicate acts. The federal statute defines
racketeering activity as, inter alia, “any act or threat
involving murder, kidnapping, gambling, arson, robbery, bribery,
extortion, dealing in obscene matter, or dealing in a controlled
substance or listed chemical . . . which is chargeable under
State law and punishable by imprisonment for more than one year”
and various other offenses indictable under federal criminal
laws. 18 U.S.C. § 1961(1). Even if Defendants are not entitled
to payment because of their failure to comply with New Jersey
laws and regulations, Plaintiffs have not shown financial losses
specifically caused by a predicate act under federal RICO. That
is the relevant inquiry for federal RICO standing, and
Plaintiffs’ have not satisfied their burden.
Plaintiffs have not alleged concrete financial losses
attributable to federal RICO predicate acts and, as a result,
their federal RICO claims will be dismissed with prejudice for
lack of standing.
25
2. Enterprise
Even if Plaintiffs had standing, their federal RICO and
RICO conspiracy claims would still fail because they have not
alleged the existence of a RICO enterprise.
Plaintiffs allege that Defendants operated as an
association-in-fact enterprise. (TAC ¶ 178.) “[A]n associationin-fact enterprise must have at least three structural features:
a purpose, relationships among those associated with the
enterprise, and longevity sufficient to permit these associates
to pursue the enterprise’s purpose.” Boyle v. United States, 556
U.S. 938, 946 (2009). While an association-in-fact enterprise
“need not have a hierarchical structure or a ‘chain of
command,’” there must be some decision-making: “decisions may be
made on an ad hoc basis and by any number of methods—by majority
vote, consensus, a show of strength, etc.” Id. at 948. “[T]he
group must function as a continuing unit . . . .” Id.
Plaintiffs’ allegations regarding the existence of an
enterprise are insufficient because Plaintiffs failed to allege
the relationship element of the enterprise definition.
Plaintiffs allege that Defendant Summit Pharmacy sponsored or
hosted events, such as holiday parties, which Defendant medical
providers attended. In addition, Summit Pharmacy employees
attended a Madonna concert, golf tournaments, and skeet-shooting
26
events with some of the individual Defendants. Plaintiffs have
not alleged that the alleged enterprise had any decision-making
abilities or even met once to make a concerted decision.
Attendance at a holiday party or a Madonna concert does not show
a RICO enterprise. Furthermore, Plaintiffs have not alleged any
planning, cooperation, or coordination, except the coordination
necessary for Summit Pharmacy to invite individual Defendants to
holiday parties or for some Defendants to attend a concert or
golf tournaments together. These allegations do not show
relationships that form the basis of a RICO enterprise.
In In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 380
(3d Cir. 2010), the Third Circuit upheld the dismissal of
certain RICO claims brought by Plaintiffs who had purchased
insurance from brokers who allegedly had steered clients to
minimize competition and inflate prices. The Third Circuit found
insufficient the plaintiffs’ allegations
that each insurer entered into a similar contingentcommission agreement . . .; that each insurer knew the
identity of the broker's other insurer-partners and
the details of their contingent-commission agreements;
that each insurer entered into an agreement with the
broker not to disclose the details of its contingentcommission agreements; that the brokers utilized
certain devices, such as affording “first” and “last
looks,” to steer business to the designated insurer;
and that . . . insurers adopted similar reporting
strategies . . . . [T]hese allegations do not
plausibly imply concerted action . . . .
27
Id. at 374. The Brokerage Antitrust court emphasized that the
Plaintiffs’ allegations “fail the basic requirement that the
components function as a unit” and “do not plausibly imply
anything more than parallel conduct by the insurers.” Id. The
same reasoning applies to Plaintiffs’ allegations in this case.
The fact that many of the Defendants’ patients used Summit
Pharmacy and attended Summit Pharmacy’s holiday parties does not
show that Defendants functioned as a unit. Plaintiffs have not
plausibly alleged the existence of an enterprise.
Plaintiffs suggest that the Court can infer the existence
of a steering enterprise because of the quantity of
prescriptions filled at Summit Pharmacy and because of the
extent of Summit Pharmacy’s marketing and holiday parties. But
“[f]actual allegations must be enough to raise a right to relief
above the speculative level . . . .” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). Plaintiffs have not sustained that
burden; they have alleged nothing more than parallel conduct and
an aggressive advertising campaign from Summit Pharmacy.
Plaintiffs’ RICO claims will be dismissed with prejudice for
failure to plead the relationship element of a RICO enterprise.8
Because, as explained supra, the existence of an enterprise
is essential for pleading a RICO conspiracy claim, Plaintiffs’
8
Because Plaintiffs have not satisfied the relationship element,
the Court need not examine the purpose and longevity elements.
28
RICO conspiracy claims will also be dismissed with prejudice for
failure to plead a plausible enterprise. Cf. In re Managed Care
Litig., 00-1334-MD, 2009 WL 812257, at *6 (S.D. Fla. Mar. 26,
2009) (granting motion to dismiss RICO conspiracy claims because
“[p]laintiffs also attempt to infer the existence of conspiracy
by reference to various meetings and conferences attended by
Defendants. Once again, just like parallel conduct, mere
opportunity to conspire alone without direct evidence of
agreement is insufficient to infer the existence of a
conspiracy”).
Plaintiffs have not alleged the existence of a RICO
enterprise under federal RICO law. As a result, Plaintiffs’
federal RICO and RICO conspiracy claims will be dismissed with
prejudice.
3. Predicate Offenses
In addition to the standing and enterprise flaws,
Plaintiffs’ federal RICO claims have a third deficiency because
Plaintiffs have not pleaded a plausible predicate offense.
Plaintiffs allege that the predicate act was federal mail
fraud, 18 U.S.C. § 1341, which is a predicate offense under
federal RICO, 18 U.S.C. § 1961(1).
To allege mail fraud, Plaintiffs must describe: 1) the
existence of a scheme to defraud, 2) the use of the mails in
furtherance of the fraudulent scheme, and 3) culpable
29
participation by the defendants. United States v. Hannigan, 27
F.3d 890, 892 (3d Cir. 1994).
Plaintiffs failed to allege a scheme to defraud. The
gravamen of the TAC is an alleged steering agreement, but
Plaintiffs have not alleged any facts supporting the existence
of an agreement to defraud Plaintiffs. They have not alleged
that Defendants submitted false statements or statements that
were intended to deceive by, for example, charging inflated
prices, prescribing medically unnecessary medications, or
submitting claims for medications that were not actually
provided. The facts in this case contrast with facts in cases in
which courts have held that plaintiffs successfully pleaded a
scheme to defraud. Cf., e.g., Allstate Ins. Co. v. Rozenberg,
590 F. Supp. 2d 384, 388 (E.D.N.Y. 2008) (plaintiff insurer
adequately alleged scheme to defraud because it “contend[ed]
that [defendant] subjected their claimants to a battery of
unnecessary tests and that the results of these examinations
were often deliberately misrepresented or fabricated in order to
justify further costly but unneeded treatments. . . . based upon
these fabricated testing results, the Defendants submitted
invoices to the Plaintiffs demanding payments for services that
were not medically necessary or, in some cases, never rendered
at all”); Feiler v. New Jersey Dental Ass'n, 191 N.J. Super.
426, 436 (Ch. Div. 1983) (billing statements to insurance
30
companies were misrepresentations because when “Feiler does a
procedure for which he tells the insurance carrier he charges
$100, then collects $80 from the carrier and, by prearrangement,
forgives the patient’s copayment, he has lied to the carrier.
His charge is really $80 . . . and the carrier should pay only
$64”). In such cases, there was a deliberate scheme to
misrepresent, which is absent here.
Plaintiffs emphasize that the unlawful steering was the
predicate act, but unlawful steering does not establish mail
fraud. Plaintiffs have not cited any cases holding that
steering, absent deception, rigged bids, or affirmative
misrepresentation, constitutes a RICO predicate act. Plaintiffs
also argue that the misrepresentation was the implied
representation, required under New Jersey law, that their bills
and services complied with all New Jersey regulations. As
discussed above, however, violations of the New Jersey laws that
Plaintiffs cite do not establish federal RICO predicate acts.
Plaintiffs have also emphasized that Summit Pharmacy
allegedly did not charge co-pays, but that alleged conduct does
not show mail fraud. Plaintiffs have not identified any specific
statements in which Defendants falsely stated that co-pays were
collected; nor have Plaintiffs alleged, as in the Feiler case,
supra, that Defendants falsely inflated their charges to the
Plaintiffs based on their alleged failure to collect co-pays.
31
The Southern District of New York dismissed mail-fraud-based
RICO claims against manufacturers of name-brand drugs who were
subsidizing co-pays because “Plaintiffs d[id] not . . . allege
that they have been provided with any records from either
Defendants or pharmacies falsely stating that an insured paid
the co-pay unaided by a co-pay subsidy coupon.” Am. Fed'n of
State, Cnty. & Mun. Employees Dist. Council 37 Health & Sec.
Plan v. Bristol-Myers Squibb Co., 948 F. Supp. 2d 338, 347
(S.D.N.Y. 2013). The Bristol-Myers court noted that courts have
sustained breach-of-contract claims based on failure to collect
co-pays because “health insurers may create contracts that
relieve them of the duty to pay physicians and dentists who
routinely waive co-pays.” Id. at 350. A breach-of-contract claim
is not a predicate act under federal RICO. While acknowledging
“policy arguments in favor of a preference for rules that secure
co-pay schemes against efforts to side-step them,” the BristolMyers court noted the absence of “any sort of general rule that
routine and hidden waiver of co-pays, even in the absence of a
contractual obligation to enforce the co-pay requirement, states
a claim for fraud.” Id. at 351. Plaintiffs failed to plead the
predicate act of mail fraud.
Dismissal of Plaintiffs’ federal RICO claims will be with
prejudice because further amendment would be futile. Plaintiffs’
federal RICO claims have three fundamental flaws, i.e.,
32
standing, enterprise, and predicate act, each of which is
individually sufficient to dismiss the claims. The lack of
enterprise also necessitates dismissal of Plaintiffs’ RICO
conspiracy claims.
Plaintiffs requested leave to file another amended
complaint if the Court were inclined to grant Defendants’
motions to dismiss. This request is denied. The TAC is 213 pages
long and was filed after Plaintiffs had notice of the arguments
in the motions to dismiss. Plaintiffs have submitted four
different complaints and still failed to plausibly plead federal
RICO claims. Filing another prolix complaint would be futile.
See Mann v. Brenner, 375 F. App'x 232, 240 n.9 (3d Cir. 2010)
(district court properly granted motion to dismiss and denied
motion to amend because two amended complaints had been filed
and “the District Court was well within its discretion in
finding that allowing [the plaintiff] a fourth bite at the apple
would be futile”). The Court’s denial of Plaintiffs’ motion to
amend is without prejudice to Plaintiffs’ right to seek leave to
amend their state law claims in state court.
D. Remaining State Law Claims and Supplemental Jurisdiction
The only remaining claims are state law claims under the
New Jersey RICO statute, the NJIFPA and, against the ASAP/LP
Defendants only, the Codey Act. “The district courts may decline
to exercise supplemental jurisdiction . . . if . . . the
33
district court has dismissed all claims over which it has
original jurisdiction . . . .” 28 U.S.C. § 1367(c)(3). “The
decision to retain or decline jurisdiction over state-law claims
is discretionary” and “should be based on considerations of
judicial economy, convenience and fairness to the litigants.”
Kach v. Hose, 589 F.3d 626, 650 (3d Cir. 2009) (citations
omitted).
In this case, the Court declines to exercise supplemental
jurisdiction. The motion to dismiss stage is an “early stage in
the litigation,” and, therefore, “dismissal of the pendent state
claims in a federal forum will result in neither a waste of
judicial resources nor prejudice to the parties.” Freund v.
Florio, 795 F. Supp. 702, 711 (D.N.J. 1992); see also Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure,
§ 3567.3 (3d ed.) (“[a]s a general matter, a court will decline
supplemental jurisdiction if the underlying claims are dismissed
before trial”).
In addition, the parties dispute state law questions such
as whether the NJIFPA requires intentional wrongdoing; whether
New Jersey law requires pharmacies to collect a co-pay prior to
filling a prescription for a patient who has PIP insurance; and
whether the NJIFPA precludes waiver of co-pays. New Jersey state
courts should make these determinations of state law. See Gov't
Employees Ins. Co. v. MLS Med. Grp. LLC, Civ. 12-7281 (SRC),
34
2013 WL 6384652, at *11 n.4 (D.N.J. Dec. 6, 2013) (noting, in
case involving NJIFPA claims based on PIP benefits, that “a
dismissal of the RICO claim would leave no federal question on
the face of the operative complaint and would thus militate in
favor of dismissing the remaining state claims without
prejudice, so that they may proceed in state court”).
The Court will remand Plaintiffs’ state law claims to the
Superior Court. See Borough of W. Mifflin v. Lancaster, 45 F.3d
780, 788 (3d Cir. 1995) (“[w]hile § 1367(c) does not specify
what disposition the district court is to make of state claims
it decides not to hear, . . . we believe that in a case that has
been removed from a state court, a remand to that court is a
viable alternative to a dismissal without prejudice”).
IV.
MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs seek a preliminary injunction staying all of
Defendant Summit Pharmacy’s PIP arbitrations, arbitration
awards, and appeals of arbitration awards until Plaintiffs’
NJIFPA claims have been litigated. Plaintiffs argue that, in PIP
arbitration, they are precluded from asserting fraud issues and
cannot recover damages, attorneys’ fees, or investigation costs.
Plaintiffs also assert that discovery for PIP arbitrations is
limited and would prevent them from establishing patterns of
fraudulent conduct. The ASAP and Summit Defendants opposed
Plaintiffs’ motion.
35
Because the Court will remand state law claims and because
the injunction motion is based upon NJIFPA claims, the Court
will dismiss Plaintiffs’ motion for preliminary injunctive
relief without prejudice. In their briefing regarding this
preliminary injunction motion, the parties debated the interplay
between the NJIFPA and the PIP arbitration system. These issues,
arising between non-diverse parties at an early stage of
litigation, are best decided in state court.
Furthermore, Plaintiffs have not shown that irreparable
harm would result if the injunction does not issue or if there
is a delay in issuing the injunction. In order to obtain a
preliminary injunction, Plaintiffs must show, inter alia, “that
they are likely to experience irreparable harm without an
injunction.” Adams v. Freedom Forge Corp., 204 F.3d 475, 484 (3d
Cir. 2000). “The irreparable harm requirement is met if a
plaintiff demonstrates a significant risk that he or she will
experience harm that cannot adequately be compensated after the
fact by monetary damages. Id. at 484-85.
In their briefing, Plaintiffs asserted that, absent a stay,
they would endure extensive costs that they cannot recover.
Plaintiffs did not explain what these costs would be or why they
cannot be recovered if they prevail in this litigation. At oral
argument, Plaintiffs argued that, if the case were remanded to
state court, delay would ensue, but they did not explain how
36
they would be irreparably harmed by any delay that may result
between now and when the state court could issue an injunction.
If Plaintiffs demonstrated that a remand would cause irreparable
harm due to delay, the Court would have taken that into account
in the consideration of fairness to the litigants under §
1367(c)(3), supra, but such is not the case here. Plaintiffs’
motion for preliminary injunction will be dismissed without
prejudice to their right to seek an injunction in state court.
V.
MOTION TO SEAL
Plaintiffs filed a motion to seal certain documents with
personal patient identification information, which had been
inadvertently filed without redaction. The Summit Defendants
filed opposition. [Docket Item 54.] They do not oppose sealing
the documents, but they argue that Plaintiffs should be required
to implement privacy breach procedures under the Health
Insurance Portability and Accountability Act (“HIPAA”) and
indemnify the Summit Defendants for consequences from the
disclosures.
Sealing personal patient information is clearly in the
public interest. Plaintiffs’ motion is granted.
The Court will not address the Summit Defendants’ issues
regarding HIPAA and indemnification because those issues are
beyond the scope of this motion to seal.
37
VI.
CONCLUSION
Defendants’ motions to dismiss will be granted in part.
Plaintiffs’ federal RICO and RICO conspiracy claims will be
dismissed with prejudice. The state law claims will be remanded
to state court as the Court declines to exercise supplemental
jurisdiction when there are no federal claims remaining.
Plaintiffs’ motion to amend will be denied without prejudice to
Plaintiffs’ right to seek leave to file an amended complaint in
state court. Plaintiffs’ motion to seal will be granted.
Plaintiffs’ motion for preliminary injunction is dismissed
without prejudice to Plaintiffs’ right to refile such motion in
state court.
An accompanying Order will be entered.
May 1, 2014
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
38
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