FREEDOM MEDICAL, INC. v. GILLESPIE et al

Filing 597

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 7/23/13.7/24/13 ENTERED AND COPIES E-MAILED AND MAILED TO PRO SE AND UNREPRESENTED PARTIES.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
FREEDOM MEDICAL, INC.
v.
THOMAS R. GILLESPIE, III,
et al.

:
:
:
:
:
:

CIVIL ACTION

NO. 06-3195

MEMORANDUM
McLaughlin, J.

July 23, 2013

The plaintiff, Freedom Medical, Inc. (“Freedom
Medical”), instituted this suit against a number of former
employees, several companies they control, and various associated
individuals.

Freedom Medical alleges that the defendants

combined together to steal its inventory and business
opportunities as part of an association-in-fact enterprise in
violation of the Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. § 1962(c), and that the defendants
conspired to violate this provision of the RICO statute.

Freedom

Medical also brings a number of state law claims against various
sets of defendants.
Freedom Medical has filed a motion seeking the entry of
final judgment pursuant to Federal Rule of Civil Procedure 54(b)
on certain of its claims or, in the alternative, certification of
the Court’s May 23, 2013 order, which granted summary judgment in
favor of four defendants on Freedom Medical’s RICO conspiracy
claim, for interlocutory appeal.

The Court will deny the motion.

I.

Background
In a May 23, 2013 memorandum and order, this Court

granted summary judgment in the defendants’ favor on (a) all
claims against defendant Sandra “Dawn” Hall, which included the
substantive RICO claim under § 1962(c) and the RICO conspiracy
claim referenced above, as well as state law claims for
conversion and civil conspiracy, and (b) the same two RICO claims
against defendants U.S. Med-Equip, Inc., Gregory Salario, and
Gurmit Bhatia (collectively, the “U.S. Med Defendants”).

The

Court found that Freedom Medical had failed to establish a
genuine issue of material fact demonstrating the defendants’
participation in a RICO enterprise or agreement to facilitate a
RICO violation.

In that same order, the Court denied the U.S.

Med Defendants’ motion for summary judgment on the state law
claims against them.
In a separate order, bearing today’s date, the Court
has denied without prejudice Freedom Medical’s motion for default
judgment against defendants Signature Medical Ltd., LLC and
Signature Emergency Products, LLC (“SEP” and, together, the
“Signature Defendants”) on all claims against them, except for
one.

The Court has entered judgment against SEP on Freedom

Medical’s state law misappropriation of trade secrets claim.
In addition to the claims remaining against the U.S.
Med and Signature Defendants, Freedom Medical has unresolved

-2-

claims against five other defendants.

II.

Analysis
Freedom Medical has moved for the entry of final

judgment pursuant to Federal Rule of Civil Procedure 54(b) on all
claims against Ms. Hall, its RICO claims against the U.S. Med
Defendants, and all claims against the Signature Defendants.

In

the alternative, Freedom Medical seeks an order certifying the
Court’s May 23 order for interlocutory appeal.

The Court finds

that neither requested certification is appropriate under the
circumstances, and will deny Freedom Medical’s motion in full.

A.

Final Judgment Under Rule 54(b)
Rule 54(b) provides that, when an action involves more

than one claim for relief, “the court may direct entry of a final
judgment as to one or more, but fewer than all, claims or parties
only if the court expressly determines that there is no just
reason for delay.”

Certification of a final decision under Rule

54(b) entails two separate findings: that (1) there has been a
final judgment on the merits; and (2) there is “no just reason
for delay.”

Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195,

202 (3d Cir. 2006) (quotation marks and citation omitted).
In determining whether no just reason for delay exists,
a district court should consider the following factors: (1) the

-3-

relationship between the adjudicated and unadjudicated claims;
(2) the possibility that the need for review might or might not
be mooted by future developments in the district court; (3) the
possibility that the reviewing court might be obliged to consider
the same issue a second time; (4) the presence or absence of a
claim or counterclaim which could result in a setoff against the
judgment to be made final; and (5) other factors, such as delay,
economic and solvency considerations, shortening the time of
trial, frivolity of competing claims, expense, and the like.

Id.

at 203; Allis-Chalmers Corp. v. Phila. Elec. Co., 521 F.2d 360,
364 (3d Cir. 1975).
Rule 54(b) requests need not be granted routinely.
Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 10 (1980).

A

district court must be careful “to assure that application of the
Rule effectively ‘preserves the historic federal policy against
piecemeal appeals.’”

Id. at 8 (quoting Sears, Roebuck & Co. v.

Mackey, 351 U.S. 427, 438 (1956)).

The decision of whether to

grant a Rule 54(b) motion is left to “the sound judicial
discretion of the district court.”

Id.

With respect to the claims against the Signature
Defendants, the Court finds that certification of final judgment
is not warranted.

Aside from Freedom Medical’s misappropriation

of trade secrets claim against SEP, there has been no final
judgment on the merits as to these claims, the Court having

-4-

denied without prejudice Freedom Medical’s motion for default
judgment on all but that one claim.1

The trade secrets claim

against SEP also is not ripe for Rule 54(b) certification, which
Freedom Medical seeks so that it may execute on its judgment.
The Court has not calculated the damages due to SEP’s
misappropriation, and will wait to do so until it can hold a
hearing or make complete findings regarding the full scope of
damages to be assessed against the Signature Defendants.
The Court’s May 23 memorandum and order did render a
final, merits-based judgment on all claims against Ms. Hall and
the RICO claims against the U.S. Med Defendants.

Due

consideration of the factors pertinent to a Rule 54(b) analysis
nevertheless counsels against certification of that decision or
any portion of it as a final judgment.
The Court fails to see how the interest of sound
judicial administration is served by permitting an immediate
appeal of those few decided claims.

Freedom Medical argues that,

if the Court of Appeals is allowed to review the Court’s entry of
summary judgment now and reverses that order in any part, the
parties could conduct a single trial on all claims rather than
one trial now and a second trial later, should Freedom Medical
succeed on an appeal at the conclusion of this litigation.

1

Yet,

The instant motion for entry of final judgment was filed
before the Court denied in large measure Freedom Medical’s motion
for default judgment against the Signature Defendants.
-5-

that is true in any suit involving multiple claims, some of which
are disposed of on summary judgment.

It is hardly a factor

unique to the circumstances of this case and, if relied upon,
would greatly expand the “narrow exception” to the rule against
piecemeal litigation provided by Rule 54(b).
Shuta, 142 F.3d 601, 610 (3d Cir. 1998).

See Waldorf v.

Meanwhile, a stay

pending appeal would only mire these proceedings in further delay
with the possibility that the Court of Appeals would ultimately
affirm this Court’s decision.
Nor would an immediate appeal of the order granting
summary judgment in favor of Ms. Hall and the U.S. Med Defendants
expedite or streamline proceedings before the Court at this
stage.

See Berckeley Inv. Grp., 455 F.3d at 203.

Appellate

review of the Court’s May 23 order, no matter the outcome, would
not resolve the RICO claims against the remaining defendants.
That is because the Court limited its May 23 decision to a
consideration of the particular moving defendants’ RICO
liability.

It did not definitively address the viability of all

claims based on the RICO enterprise alleged in the second amended
complaint.

Imposition of RICO liability against the remaining

defendants is still possible and will, in any event, require
separate findings that they participated in the affairs of the
alleged enterprise through their own patterns of racketeering
activity and that they agreed to facilitate a RICO violation.

-6-

See 18 U.S.C. § 1962(c)-(d).
Even so, the adjudicated and unadjudicated claims in
this suit substantially overlap, weighing against the entry of
final judgment under Rule 54(b).

The crux of Freedom Medical’s

lawsuit is that all of the named defendants were members of a
single RICO enterprise.

Plainly, the RICO claims against Ms.

Hall, the U.S. Med Defendants, and the remaining defendants
present common issues of law and fact, such as the scope,
activities, and duration of the alleged enterprise itself.
Moreover, the remaining state law claims against the
U.S. Med Defendants share a common factual basis with the
adjudicated § 1962(c) claim against them.

The state law claims

are primarily based on allegations that the U.S. Med Defendants
converted Freedom Medical inventory; diverted its business
opportunities through unlawful dealings with Freedom Medical
employees, primarily, former defendant Thomas Gillespie; and
conspired with all named defendants to harm Freedom Medical’s
business interests.

The substantive RICO claim is grounded in

the same set of facts.

The difference is that the RICO claim

requires a finding that the U.S. Med Defendants engaged in these
activities as participants in a larger enterprise.

Still, the

Third Circuit would need to review much of the same evidence now
to resolve Freedom Medical’s RICO claims as it would upon any
appeal following final judgment on Freedom Medical’s state law

-7-

claims.2
The same is true of the state law claims against Ms.
Hall for civil conspiracy and conversion.

Freedom Medical

alleges that the members of the RICO conspiracy, including Ms.
Hall, also constituted an unlawful conspiracy under state law.
The adjudicated claim against Ms. Hall is, therefore, identical
to a claim left unadjudicated against the remaining defendants.
The conversion claim against Ms. Hall is predicated on her
alleged participation in stealing Freedom Medical equipment as
part of a theft operation run by her husband, Clifford Hall, and
others, using his two Signature businesses as vehicles to move
the stolen inventory.

Mr. Hall, the Signature Defendants, and

others implicated in this theft ring continue to be defendants in
this suit, and similar conversion claims are pending against
2

Despite this connection between the RICO and state law
claims against the U.S. Med Defendants, it is highly unlikely
that an immediate appeal of the Court’s decision with respect to
the RICO claims would somehow dispose of any factually related
state law claims. That is primarily due to the fact that the
motion underlying the Court’s May 23 memorandum and order was a
motion for summary judgment by the U.S. Med Defendants, not
Freedom Medical. To reverse this Court’s May 23 decision, the
Third Circuit would need only to find the existence of triable
issues of fact on Freedom Medical’s RICO claims. See Fed. R.
Civ. P. 56(a). On appeal, the Third Circuit need not, and it is
improbable that it would, reach the issue of whether Freedom
Medical (the non-movant) is entitled to judgment on its RICO
counts, which could, though not necessarily, resolve some of its
outstanding state law claims. In other words, as it now stands,
a trial is necessary to adjudicate Freedom Medical’s state law
claims against the U.S. Med Defendants. Even if the Court of
Appeals reversed the order that Freedom Medical wishes
immediately to appeal, that would almost certainly still be the
case.
-8-

them.
Given the factual similarity of the adjudicated and
unadjudicated claims and the possibility for duplicative appeals,
it is more sensible to deny certification of final judgment at
this point and leave appellate review until this action is more
conclusively resolved.
Further, Freedom Medical and the U.S. Med Defendants
are presently set to attend a settlement conference on July 30,
2013.

If they settle their claims at or following that

conference, appellate review of the Court’s May 23 decision, at
least with respect to the U.S. Med Defendants, will be
unnecessary.
Finally, the U.S. Med Defendants have counterclaims
against Freedom Medical.

They alleged these counterclaims in

their answer to the first amended complaint.

Freedom Medical

contends that these claims were somehow waived by the U.S. Med
Defendants’ failure to reassert them when answering the second
amended complaint.

It cites no authority, however, for the

proposition that pending counterclaims are mooted by the filing
of an amended complaint.

Freedom Medical’s citation to Rule

13(a) without additional interpretative authority does not prove
its point.

At this time, the Court finds that the U.S. Med

Defendants’ claims are not waived.

These potential grounds for a

setoff judgment provide further cause to reject Freedom Medical’s

-9-

request for Rule 54(b) certification.
For the foregoing reasons, the Court will not direct
the entry of final judgment pursuant to that rule.

B.

Interlocutory Appeal
The Court next addresses Freedom Medical’s request for

interlocutory appeal of the May 23 order, which, among other
things, granted summary judgment in favor of Ms. Hall and the
U.S. Med Defendants on Freedom Medical’s RICO conspiracy claim.
Specifically, Freedom Medical asks the Court to certify the
following question for immediate appellate consideration: “Is the
enterprise element of a § 1962(c) violation also a necessary
element of a § 1962(d) RICO conspiracy claim?”

Pl.’s Br. at 11.

A district court may certify an order for interlocutory
appeal where it is “of the opinion” that (1) the order “involves
a controlling question of law”; (2) as to which there is
“substantial ground for difference of opinion”; and (3) an
immediate appeal “may materially advance the ultimate termination
of the litigation.”

28 U.S.C. § 1292(b).

The statute

authorizing interlocutory appeals leaves the certification
decision to the discretion of the district court.

See Bachowski

v. Usery, 545 F.2d 363, 368 (3d Cir. 1976); Douris v. Schweiker,
229 F. Supp. 2d 391, 408 (E.D. Pa. 2002) (similarly interpreting
§ 1292(b)).

-10-

Freedom Medical reads this Court’s prior opinion as
granting summary judgment in favor of Ms. Hall and the U.S. Med
Defendants on the RICO conspiracy claim because the record
evidence failed to establish a supposedly necessary antecedent:
the defendants’ participation in a RICO enterprise in violation
of § 1962(c).

Freedom Medical argues that whether such

enterprise participation is a necessary element of a RICO
conspiracy claim presents both a controlling issue of law and one
about which there is substantial ground for difference of
opinion.
Freedom Medical misstates this Court’s May 23 opinion.
The Court did not conclude that a defendant must participate in
the direction of a RICO enterprise to also be liable for
conspiring to violate § 1962(c).

As Freedom Medical correctly

notes, the Court found that the summary judgment record did not
reasonably establish the U.S. Med Defendants’ participation in a
RICO enterprise.

Accordingly, there was no evidence of a

freestanding § 1962(c) violation from which a reasonable
factfinder could simply infer an agreement to violate that
section of the RICO statute.
The Court did not stop there, however.

It went on to

find that the summary judgment record lacked any other evidence
that the U.S. Med Defendants had agreed to aid a § 1962(c)
violation, regardless of whether the U.S. Med Defendants had

-11-

violated or agreed to violate that statutory provision by their
own conduct.

The Court’s opinion made clear that a RICO

conspiracy claim can be based solely on a defendant’s
“agree[ment] to facilitate commission of conduct prohibited under
RICO.”

Freedom Med., Inc. v. Gillespie, No. 06-3195, 2013 WL

2292023, at *21 (E.D. Pa. May 23, 2013) (citing In re Ins.
Brokerage Antitrust Litig., 618 F.3d 300, 372-73 & n.71 (3d Cir.
2010); Smith v. Berg, 247 F.3d 532, 538 (3d Cir. 2001)).

As this

Court stated, “[t]o be held liable as a RICO conspirator, a
defendant need not himself commit or agree to undertake all acts
necessary to make out a § 1962(c) violation.”

Id. (citing

Salinas v. United States, 522 U.S. 52, 65 (1997)).

Thus, the

question proposed by Freedom Medical is not germane to the order
that it seeks to appeal.
Moreover, even accepting Freedom Medical’s
characterization of this Court’s holding, it has not demonstrated
that a substantial ground for difference of opinion exists within
this circuit.

Freedom Medical argues only that the Third Circuit

Court of Appeals’ interpretation of the RICO anti-conspiracy
provision conflicts with the interpretation articulated by other
courts of appeals.

However, this Court is bound by the law as

stated by the Court of Appeals for the Third Circuit, not any
other court of appeals.

A circuit split between our Court of

Appeals and the courts of appeals for other circuits does not

-12-

make Third Circuit precedent any less binding and cannot be said
to create a “substantial ground for difference of opinion” when
it comes to issues of law before this Court.
Finally, Freedom Medical has failed to establish how an
interlocutory appeal would “materially advance the ultimate
termination of the litigation.”

It is true that an immediate

appeal might result in a speedier resolution of the adjudicated
claims against Ms. Hall and the U.S. Med Defendants, which
Freedom Medical could not otherwise appeal until the conclusion
of this action.

Nevertheless, immediate appeal on an issue of

law pertaining to RICO conspiracy liability would do nothing to
advance resolution of the many other substantive RICO and state
law claims that remain pending.
The Court will, therefore, also deny Freedom Medical’s
motion for interlocutory appeal.

An appropriate order issues separately.

-13-