Mason et al v. Health Management Associates, Inc. et al
Filing
115
ORDER adopting the Magistrate Judge's 105 Memorandum and Recommendations. HMA Defendants' 81 Motion to Dismiss is granted in part and denied in part, EMCare Defendants' 86 Motion to Dismiss is granted in part and denied in part and Defendant Community Health System, Inc.'s 95 Motion to Dismiss is denied as moot. Signed by District Judge Kenneth D. Bell on 10/24/2019. (nvc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:10-CV-00472-KDB-DSC
THOMAS L. MASON M.D. et al.,
Plaintiffs,
v.
ORDER
HEALTH MANAGEMENT
ASSOCIATES, LLC et al.,
Defendants.
THIS MATTER is before the Court on the HMA Defendants’1 Motion to Dismiss (Doc.
No. 81), the EmCare Defendants’2 Motion to Dismiss (Doc. No. 86), Defendant Community
Health System, Inc.’s Motion to Dismiss (Doc. No. 95), and the Honorable Magistrate Judge David
S. Cayer’s Memorandum and Recommendation (“M&R”) (Doc. No. 105), recommending that
Defendants’ motions be granted in part and denied in part.
The Court has carefully reviewed and considered de novo the M&R, Plaintiffs’3 Third
Amended Complaint (Doc. No. 67), the HMA Defendants’ motion to dismiss (Doc. No. 95), the
EmCare Defendants’ motion to dismiss (Doc. No. 86), the parties’ briefs, and all other relevant
portions of the record. For the reasons stated herein, the Court ADOPTS the Magistrate Judge’s
The “HMA Defendants” are collectively, Health Management Associates, LLC f/k/a
Health Management Associates, Inc. (“HMA”), Statesville HMA, LLC d/b/a Davis Regional
Medical Center (“Davis Hospital”), and Mooresville Hospital Management Associates, LLC d/b/a
Lake Norman Regional Medical Center’s (“Lake Norman Hospital,” together with Davis Hospital,
the “Hospitals”).
2
The “EmCare Defendants” are collectively, EmCare Holdings, Inc., Emergency Medical
Services, L.P., and Envision Healthcare Corporation.
3 Plaintiffs are Mid-Atlantic Emergency Medication Associates, PPLC (“MEMA”),
Thomas L. Mason, M.D., and Steven G. Folstad, M.D. (collectively, Drs. Folstad and Mason are
the “Doctors”).
1
1
recommendation contained in the M&R as discussed below and GRANTS IN PART and
DENIES IN PART Defendants’ motions to dismiss.
I. BACKGROUND
This case arises out of the operations of emergency medical departments at two hospitals
in the Charlotte area. Taking the allegations set forth in the Complaint as true, Plaintiff MidAtlantic Emergency Medical Associates, PPLC (“MEMA”) is a professional medical corporation
that provides emergency room (“ER”) medical services under professional services agreements
with hospitals in the Charlotte area. (Complaint, Doc. No. 67, at ¶¶1-2). MEMA physicians
provided ER services to two hospitals then-owned and operated by Defendant Health Management
Associates, LLC (“HMA”). Id. at ¶ 2. MEMA provided services to Davis Regional Medical Center
beginning in 2000 and Lake Norman Regional Medical center beginning in 1996. Id. Plaintiffs
claim HMA unlawfully terminated these contracts on May 3, 2010. Id.
Plaintiffs Thomas Mason and Steven Folstad are principals of MEMA and board-certified
emergency medicine physicians. Id. at ¶ 3. Mason served as Lake Norman’s Chief of Staff, a
member of the Lake Norman’s Medical Executive Committee for thirteen years, and as the
Emergency Medical Department Medical Director at Lake Norman Hospital from 2007 until
MEMA’s contract was terminated. Id. at ¶ 3. Folstad worked as the ER Medical Director at Davis
Hospital from 2000 to 2008 before becoming MEMA’s CEO. Id. at ¶ 4.
Plaintiffs claim that the HMA Defendants, with the help of the EmCare Defendants,
submitted false claims to Medicare, Medicaid, other federally-funded healthcare programs, private
healthcare insurers, and patients throughout their time at the two hospitals. Id. at ¶¶ 16-17.
Plaintiffs allege that HMA terminated their contracts in retaliation for their refusal to participate
in this fraudulent scheme. Id. at ¶ 18.
2
Plaintiffs originally brought this action as qui tam relators on their own behalf and on behalf
of the United States and the states of North Carolina, Florida, Georgia, Oklahoma, Tennessee, and
Texas against HMA, its successor in interest Community Health System, Inc., and EmCare for
violations of the federal False Claims Act, 31 U.S.C. § 3730 et. seq. Id. at ¶ 19. In December 2017,
EmCare paid $33 million to settle government claims. Id. at ¶ 20. In September 2018, HMA and
Community Health System paid $262 million to settle government claims. Id.
Plaintiffs filed their Third Severed Amended Complaint (“TAC”) on April 26, 2019
containing their remaining claims against Defendants. (Doc. No. 67). In it, Plaintiffs allege
retaliation under the federal False Claims Act, retaliation under the North Carolina False Claims
Act, defamation, and slander per se against the HMA Defendants only and claims for tortious
interference with a contractual relationship, unfair and deceptive trade practices, and civil
conspiracy against all Defendants. (Doc. No. 67, at ¶¶ 203-248).
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
However, “Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion, of entitlement to
relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007).
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of
the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City
of Goldsboro, 178 F.3d 231, 243–44 (4th Cir. 1999). In considering a motion to dismiss, the court
assumes the truth of all facts alleged in the complaint and the existence of any fact that can be
proved, consistent with the complaint's allegations. Erickson v. Pardus, 551 U.S. 89, 94 (2007).
“The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to
3
offer evidence to support the claims.” Revene v. Charles County Comm'rs, 882 F.2d 870, 872 (4th
Cir. 1989) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
However, the “‘[f]actual allegations must be enough to raise a right to relief above the
speculative level’ and have ‘enough facts to state a claim to relief that is plausible on its face.’”
Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616 n.26 (4th Cir. 2009) (quoting Twombly,
550 U.S. at 555); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.”). “[A]
plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels
and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly,
550 U.S. at 555 (citations omitted). Moreover, a court “need not accept the legal conclusions
drawn from the facts” nor “accept as true unwarranted inferences, unreasonable conclusions, or
arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. Pshp., 213 F.3d 175, 180 (4th Cir.
2000).
The Federal Magistrates Act of 1979, as amended, provides that “a district court shall
make a de novo determination of those portions of the report or specific proposed findings
or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby v. Davis, 718
F.2d 198, 200 (4th Cir. 1983). However, de novo review is not required by the statute “when a
party makes general or conclusory objections that do not direct the court to a specific error in the
magistrate judge's proposed findings and recommendations.” Orpiano v. Johnson, 687 F.2d 44, 47
(4th Cir. 1982). Moreover, the statute does not on its face require any review at all of issues that
are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby v. Davis, 718
F.2d at 200.
4
III. DISCUSION
The HMA Defendants and the EmCare Defendants object to the Magistrate Judge’s
recommendation to deny their motions to dismiss Plaintiffs’ claims for retaliation under the federal
and North Carolina False Claims Act, unfair and deceptive trade practices, tortious interference
with contractual relationship, and defamation and slander per se. (Doc. Nos. 110, 111). Defendants
also object to the Magistrate Judge’s recommendation to dismiss Plaintiffs civil conspiracy claim
without prejudice to Plaintiffs’ right to argue the remedy of joint and several liability under a
theory of civil conspiracy. (Doc. Nos. 110, 111).
A. Community Health System, Inc.’s Motion to Dismiss
Plaintiffs voluntarily dismissed Defendant Community Health System on July 12, 2019.
(Doc. No. 99). Accordingly, the Magistrate Judge recommends Community Health System’s
Motion to Dismiss (Doc. No. 95) be denied as moot and no parties have objected to his
recommendation. Having carefully reviewed the Magistrate Judge’s M&R, the relevant portions
of the record, and applicable legal authority, this Court is satisfied that there is no clear error as to
the Magistrate Judge’s recommendation to deny as moot Community Health System’s motion to
dismiss, to which no objection was made. Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310,
315 (4th Cir. 2005). Accordingly, this Court finds that it should adopt the findings and
recommendations set forth in the M&R as its own solely for the purpose of deciding this motion
and that Community Health System’s motion to dismiss (Doc. No. 95) be denied as moot.
B. The HMA Defendants’ and the EmCare Defendants’ Motions to Dismiss
1. False Claims Act Retaliation Claims
Plaintiffs claim the HMA Defendants retaliated against them in violation the federal and
North Carolina False Claims Act (FCA). The anti-retaliation section of the federal FCA states:
5
(h) Relief from retaliatory actions.—(1) In general.—Any employee, contractor, or
agent shall be entitled to all relief necessary to make that employee, contractor, or
agent whole, if that employee, contractor, or agent is discharged, demoted,
suspended, threatened, harassed, or in any other manner discriminated against in
the terms and conditions of employment because of lawful acts done by the
employee, contractor, agent or associated others in furtherance of an action under
this section or other efforts to stop 1 or more violations of this subchapter.
31 U.S.C. § 3730(h)(1) (emphasis added). The purpose of the FCA is to expose fraud that the
government itself cannot easily uncover by encouraging private parties to report fraudulent
conduct. See U.S. ex rel. Rebushka v. Crane Co., 40 F.3d 1509, 1511 (8th Cir. 1994); U.S. ex rel
Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2nd Cir. 1990). Consistent with this purpose,
Congress amended the FCA retaliation statute in 2009 “by omitting the word ‘employee’ as the
only potentially culpable party, and adding ‘contractor’ or ‘agent’ to ‘employee’ as identifiers of
a possible aggrieved party.” U.S. ex rel Bias v. Tangipahoa Parish Sch. Bd., 816 F.3d 315, 323-24
(5th Cir. 2016). “The 2009 amendments sought to correct what Congress viewed as the unduly
narrow interpretation that the courts had given to the term ‘employee.’” U.S. ex rel. Abou-Hussein
v. Sci. Applications Int’l Corp., 2012 WL 6892716, at *3 (D.S.C. May 3, 2012); see also Bias, 816
F.3d at 324 (“Because the FCA is ‘remedial,’ its provisions are to be construed ‘broadly to
effectuate its purpose.’”).
Defendants argue that the 2009 amendment expanded the possible aggrieved parties from
just “employee(s)” to also include “contractor(s)” and “agent(s),” but did not expand retaliation
protections available to individuals to also include entities. The Court will not attempt to discern
the intent of Congress beyond the words it used: “contractor” and “agent.” MEMA is alleged to
have been a “contractor” of Defendants and are therefore permitted to assert a claim for
impermissible retaliation.
6
While the Court would apply the ordinary meaning of the words Congress placed in the
statute in any event, there is no legislative history to suggest that Congress considered, but
declined, including entities among those protected from retaliation. Nor is there legislative history,
or caselaw, suggesting that an entity made up of “employees” is excluded from retaliation
protection, either before or after the amendment.
Even if defendants are correct, and entities that are “contractors” or “agents” are not
protected from retaliation, the question becomes whether MEMA, a group of physicians, should
be considered a group of “individuals” rather than an “entity.” The physicians, through MEMA,
allegedly complained of HMA’s fraudulent conduct, and HMA, through MEMA, allegedly
retaliated against the physicians.4
Further, MEMA, along with the individual plaintiff physicians, were “Relators” in the qui
tam action, and named as such in the Settlement Agreement. (Doc. No. 96-1, at 2, 12, 16, 38).
MEMA, the alleged contractor, was in practical effect simply a corporate structure through which
the individuals both complained and were retaliated against. Given the remedial nature of the antiretaliation statute, the plain language of the statue allows MEMA to bring claims of retaliation in
violation of both the federal and state False Claims Acts.
Plaintiffs have plausibly alleged that the Doctors were agents of the HMA Defendants. The
Complaint alleges that both Doctors served as ER directors at the hospitals and that Mason served
on the Medical Executive Committee and as Chief of Staff at Lake Norman Hospital. (Complaint,
MEMA is a “professional medical corporation,” (Doc. No. 67, at ¶ 1), “which at the time
was the largest group of board-certified emergency physicians in the Charlotte area.” Id. at ¶ 179.
“MEMA was a contractor and agent of the HMA defendants.” Id. at ¶ 205. The complaint
repeatedly alleges that individual plaintiff physicians and “other [physician] members of MEMA”
complained to HMA about its fraudulent practices. See id. at ¶ 18.
4
7
Doc. No. 67, ¶¶ 3-4). See Diggs v. Novant Health, Inc., 628 S.E.2d 851, 862-63 (N.C. Ct. App.
2006) (holding a hospital had an agency relationship with anesthesiologists where the hospital held
itself out as providing anesthesia services and appointed anesthesiologist to serve as director of
department); Univ. of N. Carolina v. Shoemate, 437 S.E.2d 892, 898 (N.C. Ct. App. 1994) (stating
that an agency relationship arises when “a person, by words or conduct, represents or permits it to
be represented that another is his agent”); Willoughby v. Wilkins, 310 S.E.2d 90, 96 (N.C. Ct. App.
1983) (noting ER doctor’s performance “in such a manner as to further the best interest of
[defendant] hospital” suggested doctor was an agent of the hospital). It is ultimately up to a jury
to decide whether there was such an agency relationship, but Plaintiffs have met the low burden
of pleading a plausible claim to survive the motion to dismiss stage. Hylton v. Koontz, 532 S.E.2d
252, 257 (N.C. Ct. App. 2000) (“Unless there is but one inference that can be drawn from the facts,
whether an agency relationship exists is a question of fact for the jury.”).
Plaintiffs filed a request for clarification in the form of an objection to the M&R that seeks
to clarify whether the Magistrate Judge’s recommendation for the federal FCA retaliation claim
extends to the claims arising under the North Carolina False Claims Act. (Doc. No. 109). North
Carolina General Statute § 1-616(c) states that the North Carolina False Claims Act “shall be
interpreted and construed so as to be consistent with the federal False Claims Act, 31 U.S.C. §
3729, et seq., and any subsequent amendments to that act.” Therefore, because the HMA
Defendants’ motion to dismiss retaliation claims under the federal FCA is denied, so is their motion
to dismiss retaliation claims under the North Carolina False Claims Act.
2. North Carolina UDTPA Claim
Plaintiffs claim unfair and deceptive trade practices against both the HMA Defendants and
the EmCare Defendants. Under the UDTPA, “[u]nfair methods of competition in or affecting
8
commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared
unlawful.” N.C.G.S. § 75-1.1. The “learned profession” exception to the UDTPA requires a twopart analysis: (1) “the person or entity performing the alleged act must be a member of a learned
profession”; and (2) “the conduct in question must be a rendering of professional services.” Sykes
v. Health Network Solutions, Inc., 828 S.E.2d 467, 472 (N.C. 2019). “There is no dispute that
doctors and hospitals are members of a learned profession.” Hamlet H.M.A., LLC v. Hernandez,
821 S.E.2d 600, 606 (N.C. Ct. App. 2018). Conduct that is integral to the role of ensuring the
provision of adequate medical care is considered a rendering of professional services. See id. at
607; Wheeles v. Maria Parham Med. Ctr., Inc., 768 S.E.2d 119, 124 (N.C. Ct. App. 2014).
In 2018, the North Carolina Court of Appeals held that a business dispute between a
hospital and physician did not fall under the learned profession exception of the UDTPA. Hamlet
H.M.A., LLC, 821 S.E.2d at 608 (“This case involves a business deal, not rendition of professional
medical services.”). The court explained that the learned profession exception does not apply
merely because the participants are medical professionals. Id. “For example, if a physician entered
into a lease agreement for space in a medical office building owned by a group of physicians or
hospital and then seeks to bring a UDTP claim based upon a dispute over the lease, it should be
treated no differently than a similar lease arrangement for parties in any other business. The fact
that medical services will be provided in the building does not mean that the lease arrangement
arises from rendition of professional services and has no effect on the quality of the medical care
provided.” Id.
The Magistrate Judge, relying on Hamlet H.M.A., recommends that the Defendants’
motions to dismiss the UDTPA claims be denied. (Doc. No. 105, at 7). The HMA Defendants and
the EmCare Defendants object, arguing that the learned profession exception should apply in this
9
case. Plaintiffs argue that the Defendants are not members of a learned profession nor were they
rendering professional services when they engaged in and conspired to commit healthcare fraud,
retaliated against Plaintiffs, and defamed Plaintiffs. (Doc. No. 67, ¶ 237).
Because this claim arises out of the business relationship between Plaintiffs and
Defendants, the learned profession exception does not apply. Plaintiffs’ unfair and deceptive trade
practices claims arise out of the professional service agreements with the HMA Defendants, not
the rendering of medical care. Even the EmCare Defendants assert that this suit arises from a
“garden-variety business dispute.” (Doc. No. 87, at 7). Therefore, Defendants’ motions to dismiss
Plaintiffs’ UDTPA claims are denied.
3. Tortious Interference with Contractual Relationship Claim
Plaintiffs claim tortious interference with contractual relationship against both the HMA
Defendants and the EmCare Defendants. Under North Carolina law, the elements for tortious
interference with contract are: “(1) a valid contract between the plaintiff and a third person which
confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the
contract; (3) the defendant intentionally induces the third person not to perform the contract; (4)
and in doing so acts without justification; (5) resulting in actual damage to plaintiff.” Beverage
Sys., LLC v. Assoc. Beverage Repair, LLC, 784 S.E.2d 457, 699 (N.C. 2016) (internal quotations
and citations omitted).
“Officers, directors, shareholder, and other corporate fiduciaries have a qualified privilege
to interfere with contractual relations between the corporation and a third party.” Broussard v.
Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 351-352 (4th Cir. 1998) (internal quotations
omitted). “However, the conduct is not privileged or justified if the officer’s motives are improper,
as when his acts are performed in his own best interest and adverse to that of his firm.” Albright v.
10
Charlotte-Mecklenburg Bd. of Educ., No. 3:17-cv-4610, 2017 WL 6028362 (W.D.N.C. Dec. 5,
2017) (internal quotations omitted). Retaliation is an improper motive. See MCI Constrs. V. Hazen
& Sawyer, P.C., 405 F. Supp. 2d 621, 630 (M.D.N.C. 2005); B.V.I. Inuds. v. Microsoft Corp., 1987
U.S. App. LEXIS 18745, at *7-9 (4th Cir. Aug. 11, 1987).
The HMA Defendants contend that Plaintiffs have failed to show that HMA had no
legitimate business interest in terminating the contract. HMA also submits that, as the Hospitals’
parent company, it was privileged to interfere with the Hospitals’ contractual relationships. The
EmCare Defendants argue that they were justified in their actions because they had a legitimate
business interest as a competitor of the Plaintiffs and that the Plaintiffs failed to allege EmCare
induced HMA to terminate the contract.
Plaintiffs have alleged sufficient facts that the HMA Defendants were motivated to retaliate
against them for refusing to participate in their fraudulent healthcare scheme. This improper
motive takes the HMA Defendants outside of the protection provided by the privilege.
Additionally, the question of whether the HMA Defendants and the EmCare Defendants had a
legitimate business interest and acted in good faith is one for the jury to decide. See Albright v.
Charlotte-Mecklenburg Bd. of Educ., No. 3:17-cv-4610, 2017 WL 6028362 (W.D.N.C. Dec. 5,
2017) (“Because whether the act was justified or in good faith depends upon the circumstances
surrounding the interference, the actor’s motive or conduct, the interests sought to be advanced,
the social interest in protecting the freedom of action of the actor, and the contractual interests of
the other party, the question is often one of fact that cannot be resolved on a motion to dismiss.”).
Plaintiffs have alleged that the EmCare Defendants intentionally induced HMA to
terminate the contract. In their TAC, Plaintiffs state that “[i]in order for the EmCare Defendants
to maximize its financial benefits under the PPPA and the HMA, they sought to induce hospital
11
administrators to terminate MEMA’s Lake Norman Hospital Agreement and Davis Hospital
Agreement so that EmCare could bid on them.” (Doc. No. 67, ¶ 178; see also id. at ¶ 220). Taking
this statement and similar statements in light of the factual allegations pled, Plaintiffs have met the
low standard of Federal Rule of Civil Procedure 8(a)(2) and the question of whether the EmCare
Defendants intentionally induced HMA to terminate the contract is one for the merits. For these
reasons, the Court agrees with the Magistrate Judge’s recommendation and will deny the HMA
Defendants’ and the EmCare Defendants’ motions to dismiss Plaintiff’s tortious interference with
contract claim.
4. Defamation and Slander Per Se Claim
Plaintiffs allege defamation and slander per se against the HMA Defendants. “In order to
recover for defamation [in North Carolina], a plaintiff must allege and prove that the defendant
made false, defamatory statements of or concerning the plaintiff, which were published to a third
person, causing injury to the plaintiff’s reputation.” Boyce & Isley, PLLC v. Cooper, 710 S.E.2d
309, 317 (N.C. Ct. App. 2011) (quoting Tyson v. L’eggs Products, Inc., 351 S.E.2d 834, 843 (N.C.
Ct. App. 1987)). “Rhetorical hyperbole and expressions of opinion not asserting provable facts are
protected speech.” Daniels v. Metro Magazine Holding Co., LLC, 634 S.E.2d 586, 590 (N.C. Ct.
App. 2006).
There are four circumstances in which a plaintiff may allege that a false publication
constitutes defamation per se: “(1) [when the publication] charges that a person has committed an
infamous crime; (2) it charges a person with having an infectious disease; (3) it tends to subject
one to ridicule, contempt, or disgrace, or (4) it tends to impeach one in his trade or profession.”
Ellis v. Northern Star Co., 388 S.E.2d 127, 130 (N.C. 1990) (quoting Flake v. News Co., 195
12
S.E.2d 55, 60–61 (N.C. 1938)); see also Losing v. Food Lion, LLC, 648 S.E.2d 261, 263 (N.C. Ct.
App. 2007).
Plaintiffs allege that HMA’s Lake Norman Hospital CEO told the Board of Directors that
MEMA was replaced because its ER physicians did not want to practice quality medicine and
refused to use HMA’s quality program. (Doc. No. 67, at ¶¶ 198, 231). They also allege that the
HMA Defendants told numerous other physicians that MEMA was terminated because of its
failure to commit to HMA’s quality program and because of MEMA’s patient satisfaction scores.
Id. at ¶ 231. The HMA Defendants contend that the Plaintiffs failed to allege third-party
publications, that the alleged statements are privileged, non-actionable opinions, are not “of and
concerning” the Doctors, and that HMA and the Hospitals cannot be liable for the intentional torts
of their employees.
These alleged statements, if true, do impeach the Plaintiffs in their trade, business, or
profession by implying that they were performing unsatisfactory work and were not interested in
giving quality medical treatment. See Eli Research, 312 F. Supp. 2d at 762-63 (“Allegations that
Eli is mismanaged, treats its employees and contractors unethically, and performs shoddy work
can impugn Eli’s corporate reputation by injuring its business goodwill.”). These statements are
“of and concerning” MEMA and all of its physicians and are statements of fact, not opinion.
Plaintiffs have sufficiently alleged that these statements were made by agents of the HMA
Defendants on behalf of HMA and the Hospitals.
There is divided authority as to whether a statement by one company’s officer, agent, or
employee to another officer, agent, or employee of the same company has been published if kept
within the confines of the company office. Some jurisdictions hold that such communications are
not communications to a third party, and therefore are not published. See, e.g., 1 Robert D. Sack,
13
Sack on Defamation: Libel, Slander, and Related Problems § 2:5.4[A] (5th ed. 2019). Other courts
hold that such communications may constitute publication but are likely covered by a qualified
privilege. Id. at §2:5.4[B]. “The distinction is that a statement that is not published is not
actionable; a statement that is qualifiedly privileged is actionable if the appropriate level of
‘malice’ on the part of the speaker is established.” Id. North Carolina courts tend to apply the latter
of the two approaches.5 Despite the HMA Defendants’ objections, the Court finds that the
Plaintiffs have sufficiently pled the publication element of their defamation and slander per se
claim under North Carolina substantive law. The complaint states that these statements were made
“in bad faith, with malice, and with a direct intent to harm Plaintiffs” and that “[t]he HMA
Defendants were aware at the time they made these statements that they were false.” (Doc. No. 67,
at ¶ 233). Therefore, Plaintiffs’ complaint sufficiently states a claim for slander per se against the
HMA Defendants.
The HMA Defendants assert that North Carolina courts apply the “no third-party
communication” approach. However, the caselaw indicates otherwise. In Satterfield v. McLellan
Stores Co., 2 S.E.2d 709 (N.C. 1939), the North Carolina Supreme Court refused to hold that there
was a third-party communication when the plaintiff requested a separation notice and the manager
dictated what to put into the separation notice to a stenographer. Id. at 711. The notice was sent to
the plaintiff. Id. The court explained that while publication can happen between officers, agents,
and employees of a single company, the facts of this case indicated otherwise because “[the
manager and stenographer] had a duty to perform in connection with the production. Under such
circumstances, the stenographer is not a third person within the contemplation of law with respect
to publication of libelous matter.” Id. It then refused to consider the question of privilege because
it had already found there was no publication. Id.
Thus, North Carolina courts do recognize third-party publication between officers, agents,
and employees of a single company in certain circumstances. Such communications are generally
protected by a qualified privilege, unless a plaintiff can overcome the privilege with a showing of
malice. See, e.g., Brodkin v. Novant Health, Inc., 824 S.E.2d 868, 874-75 (N.C. Ct. App. 2019)
(holding statements made by one doctor to a hospital administrator expressing concerns about
another doctor’s treatment of patients was privileged); Arnold v. Sharpe, 251 S.E.2d 452, 456
(N.C. 1979) (noting that a qualified privilege applies when a bank employee forwarded a copy of
a libelous document to the bank’s president); Hartsfield v. Harvey C. Hines Co., 157 S.E. 16, 19
(N.C. 1931) (applying qualified privilege to statements made between agents of one business).
5
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5. Civil Conspiracy Claim
Finally, Plaintiffs claim civil conspiracy against the HMA Defendants and the EmCare
Defendants. North Carolina courts do not recognize an independent cause of action for civil
conspiracy. Toomer v. Garrett, 574 S.E.2d 76, 92 (N.C. Ct. App. 2002). “A cause of action for a
civil conspiracy under North Carolina law is really an action for damages caused by acts in
furtherance of the conspiracy and not for the conspiracy itself.” Jackson v. Blue Dolphin Comm.,
LLC, 226 F. Supp. 2d 785, 791 (W.D.N.C. 2002); see also Bell v. American International Ind.,
No. 1:17-cv-111, 2018 WL 2745238, at *6 n. 5 (M.D.N.C. June 7, 2018); SouthWood v. CCDN,
LLC, Bo. 7:09-cv-81, 2016 WL 1389596, at *1 n.3 (E.D.N.C. Apr. 7, 2016). The elements of civil
conspiracy are: “(1) an agreement between two or more individuals; (2) to do an unlawful act or
to do a lawful act in an unlawful way; (3) resulting in injury to plaintiff inflicted by one or more
of the conspirators; and (4) pursuant to a common scheme.” Piraino Bros., LLC v. Atlantic Fin.
Grp., Inc., 712 S.E.2d 328, 333 (N.C. Ct. App. 2011).
The Magistrate Judge recommends that the motions to dismiss the civil conspiracy claim
“be granted to the extent it seeks dismissal of the cause of action for civil conspiracy,” but that the
“dismissal be without prejudice to Plaintiffs’ right to argue the remedy of joint and several liability
under a theory of civil conspiracy should they prevail on one or more of the remaining claims for
relief.” (Doc. No. 105, at 10). The HMA Defendants and the EmCare Defendants object, arguing
that Plaintiffs’ civil conspiracy claim should be dismissed with prejudice. Specifically, the HMA
Defendants argue that Plaintiffs released their civil conspiracy claim in a prior Settlement
Agreement and that HMA could not have conspired with the Hospitals.
The Court agrees with the Magistrate Judge’s recommendation. The allegations in the TAC
can be fairly read as alleging that the HMA Defendants and EmCare Defendants agreed to engage
15
in a fraudulent healthcare scheme and to terminate MEMA and the Doctors when that scheme was
threatened. (Doc. No. 67, ¶¶ 40, 41, 74, 245-248). Plaintiffs contend that this fraudulent scheme
resulted in tortious interference with contract, violation of North Carolina’s UDTPA, and
retaliation against Plaintiffs for their refusal to participate in the healthcare fraud. (Doc. No. 67, ¶
246). The Settlement Agreement, signed by the HMA Defendants and Plaintiffs, referenced claims
that were reserved and released all others. (Doc. No. 96-1, at 17). Because the Court is dismissing
the independent claim of civil conspiracy, and only allowing it as a theory of liability as to
damages, it is not covered by the Settlement Agreement. Defendants were aware of the allegations
and potential damages against them at the time the Settlement Agreement was signed, and civil
conspiracy is not a new independent cause of action.
IV. CONCLUSION
IT IS, THEREFORE, ORDERED that:
1. The Magistrate Judge’s M&R, (Doc. No. 105), is ADOPTED; and
2. HMA Defendants’ Motion, (Doc. No. 81), is GRANTED IN PART and DENIED IN
PART; and
3. EmCare Defendants’ Motion, (Doc. No. 86), is GRANTED IN PART and DENIED IN
PART; and
4. Defendant Community Health System, Inc.’s Motion, (Doc. No. 95), is DENIED AS
MOOT.
Signed: October 24, 2019
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