Jones et al v. RAM Medical Inc et al

Filing 70

ORDER denying 17 Motion to Dismiss; denying 23 Motion to Dismiss; denying 31 Motion to Dismiss; denying 35 Motion to Dismiss. Signed by Honorable Terry L Wooten on 8/8/2011. (hcic)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Heyward Thomas Jones,
and Rosalee Jones,

)
)
Plaintiffs,
)
)
vs.
)
)
Ram Medical, Inc., and
)
Medline Industries, Inc.,
)
)
Defendants.
)
)
___________________________________ )

Civil Action No. 4:10-cv-2974-TLW

ORDER

This matter is now before the Court for consideration of two motions to dismiss filed by
Defendant Ram Medical, Inc., (“Ram Medical”), and two motions to dismiss filed by Defendant
Medline Industries, Inc., (“Medline”). (Docs. # 17, 23, 31, and 35). On January 6, 2011, Ram
Medical filed a motion to dismiss. (Doc. # 17). On January 14, 2011, Medline filed a motion to
dismiss. (Doc. # 23). Plaintiffs Heyward and Rosalee Jones1 filed an Amended Complaint on
January 24, 2011. (Doc. # 26). Ram Medical then filed a motion to dismiss on February 4, 2011,
(Doc. # 31), and Medline filed a motion to dismiss on February 7, 2011. (Doc. # 35).2 Plaintiffs
filed a response in opposition to Ram Medical’s motion to dismiss and to Medline’s motion to
dismiss on February 22, 2011. (Docs. # 37 and 39). Medline filed a reply on March 8, 2011.

1

This Court acknowledges that Plaintiff Rosalee Jones seeks recovery only under a claim for
“loss of consortium.” While this Order may often refer to the “Plaintiffs,” the Court notes that it
does not intend to imply that Rosalee seeks or is entitled to recovery under any other cause of
action.
2
  Ram Medical’s two motions are substantially similar. This Court notes that the first motion
includes the argument that the South Carolina Unfair Trade Practices Act (“SCUTPA”) does not
permit recovery for personal injury. A corresponding argument is not included in Ram Medical’s
second motion to dismiss. Nevertheless this Court has reviewed and considered the arguments
put forth by Ram Medical against Plaintiffs’ SCUTPA claim.
1 

(Doc. # 49). The Court has carefully considered the pleadings, motions, and memoranda of the
parties, and this matter is now ripe for disposition.
Standard of Review
Federal Rule of Civil Procedure 8(a)(2) provides that a pleading must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” It has been noted
that “[a] motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can
be granted is a challenge to the legal sufficiency of a complaint, as governed by Rule 8.” Federal
Trade Commission v. Innovative Marketing, Inc., 654 F. Supp.2d 378, 384 (D. Md. 2009). The
Supreme Court has recently held that “[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007)). The Supreme Court noted that “[a] claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged,” and noted that “[d]etermining whether a complaint states a
plausible claim for relief will . . . be a context-specific task that requires the reviewing court to
draw on its judicial experience and common sense.” Id. See Harman v. Unisys Corp., 2009 WL
4506463 *2 (4th Cir. 2009). The Court added that “the tenet that a court must accept as true all
of the allegations contained in the complaint is inapplicable to legal conclusions” and that,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. The Court further noted that “[w]hen there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.” Id. at 1950.

2 

This Court further notes that allegations of fraud pled as the basis of a RICO claim must
meet the heightened pleading requirements set forth in Rule 9(b) of the Federal Rules of Civil
Procedure. Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir. 1989) (citing Schreiber
Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1400-01 (9th Cir. 1986) (“plaintiff must
plead ‘circumstances of the fraudulent acts that form the alleged pattern of racketeering activity
with sufficient specificity pursuant to Fed. R. Civ. P. 9(b)’”)). Rule 9(b) states, “In alleging fraud
or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
Medline has also filed a motion pursuant to Rule 12(b)(1) of the Federal Rules of Civil
Procedure for lack of subject matter jurisdiction. In analyzing a motion under 12(b)(1), “all facts
alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same
procedural protection as he would receive under rule 12(b)(6) consideration.” Adams v. Bain,
697 F.2d 1213, 1219 (4th Cir. 1982).
Discussion
Plaintiffs brought this suit against Medline and Ram Medical, alleging eleven causes of
action in the Amended Complaint. The lawsuit stems from allegations that Defendants sold,
manufactured, and or marketed counterfeit and otherwise defective surgical mesh. The surgical
mesh in question is used to reinforce soft tissues in the body where a weakness exists, such as in
the repair of hernias. Plaintiffs contend the United States Food and Drug Administration
(“FDA”) has determined that the surgical mesh manufactured or caused to be manufactured and
sold by Defendants is counterfeit. (Am. Compl ¶ 12). Plaintiffs also allege that while certain lots
of the mesh were represented to be of the C.R. Bard/Davol brand name and manufactured by
C.R. Bard, they were actually counterfeit products manufactured in China. Id.

3 

Plaintiff Heyward Jones underwent a surgical procedure which allegedly involved the
implantation of the counterfeit surgical mesh. Heyward alleges that after his surgery he
developed a severe abdominal staph infection which required multiple corrective surgical
procedures. (Am. Compl. ¶ 20). Heyward now seeks recovery from Defendants on claims of
negligence, products liability, breach of warranty, fraud, violation of the South Carolina Unfair
Trade Practices Act (“SCUTPA”), and violation of the Federal Racketeer Influenced and Corrupt
Organizations Act, (“RICO”). Plaintiff Heyward’s spouse seeks compensation for loss of
consortium.
Breach of Warranty Claims
Defendant Ram Medical first contends that all of Plaintiffs’ breach of warranty claims
fail because the warranty provisions of South Carolina’s Uniform Commercial Code (“UCC”) do
not govern the instant transaction. Ram Medical argues Article II of the UCC applies only to
transactions in goods, and the instant transaction is a contract for services. Ram Medical notes
that South Carolina caselaw makes clear that health care providers offer services, not products.
See In re Breast Implant Product Liability Litig., 503 S.E.2d 445, 452 (S.C. 1998). Accordingly,
Ram Medical contends that a transaction where a physician implants surgical products into a
patient is not governed by the UCC because the provision of health care constitutes the sale of
services.
This Court finds Ram Medical’s position unpersuasive. Ram Medical has not established
that it is a health care provider. The pleadings assert that Ram Medical is a dealer in goods,
namely medical products. (Am. Compl. ¶ 3). Moreover, Plaintiffs contend the predominant
factor test used to analyze transactions that contain both the sale of goods and services favors a
finding that the UCC governs the instant transaction. If the predominant factor is the sale of
4 

goods with labor incidentally involved, the UCC applies. See Ranger Constr. Co. v. Dixie Floor
Co., 433 F.Supp. 442, 445 (D.S.C. 1977). Plaintiffs contend the South Carolina Court of Appeals
has noted that in most cases in which the contract includes both services and the sale of goods,
courts have applied the UCC. Plantation Shutter Co., Inc. v. Ezell, 492 S.E.2d 404 (S.C. Ct. App.
1997). This Court is persuaded by the arguments put forth by the Plaintiffs. Accordingly, this
Court finds that at this stage of the litigation, the Plaintiffs have sufficiently pled that the UCC
applies to the instant transaction.
Express Warranty
Ram Medical argues it did not create an express warranty under South Carolina law. In
order to establish a cause of action for breach of express warranty in South Carolina, a plaintiff
must prove (1) the existence of an express warranty, (2) breach of the express warranty, and (3)
damages proximately caused by the breach. Thomas v. Louisiana-Pacific Corp., 246 F.R.D. 505,
511 (D.S.C. 2007). Ram Medical argues that while the South Carolina Court of Appeals has
determined that a manufacturer’s assertions in an advertisement may create an express warranty,
no South Carolina court has held that a distributor creates an express warranty through another’s
marketing, advertising, packaging, promotional material, or label by selling another’s goods. See
Triple E, Inc., v. Hendrix & Dail, Inc., 543 S.E.2d 245 (S.C. Ct. App. 2001). Ram Medical
argues the formation of an express warranty requires reliance by the plaintiff on an affirmation of
fact or promise by the party against home the purported warranty is sought to be enforced. Id. at
247. Ram Medical contends it did not package or label the product in question, but merely
acquired and re-sold the product. Therefore, Ram Medical argues it should not be held liable for
any affirmations made by the manufacturer of the products in question.

5 

The Plaintiffs contend the existence of an express warranty running from Ram Medical to
Plaintiff Jones has been properly pled. The Plaintiffs note that S.C. Code. § 36-2-102(1) provides
“Any affirmation of fact or promise, including those on containers or labels, made by the seller
to the buyer, whether directly or indirectly, which relates to the goods and becomes a basis of the
bargain creates an express warranty that the goods conform to the affirmation or promise.” S.C.
Code § 36-2-318 explains further, “A seller’s warranty whether express or implied extends to
any natural person who may be expected to use, consume or be affected by the goods and whose
person or property is damaged by breach of the warranty.”
Plaintiffs note they have pled that Defendants expressly warranted to Plaintiff’s treating
physicians that the mesh had certain qualities and characteristics which were in fact untrue. (Am.
Comp. ¶ 58). Moreover, Plaintiffs note that the FDA has traced the alleged malfeasance of
manufacturing and labeling the mesh as a product created by C.R. Bard to the named
Defendants. The Court finds persuasive the position set forth by the Plaintiffs. Accordingly, the
Court finds the Plaintiffs have sufficiently pled a claim for breach of an express warranty against
Ram Medical.
Ram Medical also contends Plaintiffs have not pled facts sufficient to sustain an action
for breach of an express warranty because Plaintiffs have not pled the language alleged to have
created the express warranty. This Court finds the language present in the Amended Complaint
as well as the Amended Complaint’s reference to an alleged photocopy of the actual surgical
sticker included by Defendants in the packaging which stated the product was “Bard Mesh” is
sufficient to state a claim for breach of an express warranty.

6 

Implied Warranty of fitness for a Particular Purpose
Medline contends that Plaintiffs’ cause of action for breach of implied warranty of fitness
for a particular purpose fails because the purpose alleged by the Plaintiff is the usual purpose for
the mesh and not some particular purpose different from its usual use. Medline argues further
that there are no specific facts from which one could reasonably conclude that Plaintiff knew
what brand of mesh his surgeon would use or to conclude that Plaintiff relied on any
representations Medline may have made.
Ram Medical argues further that this cause of action should fail because the vendor had
no reason to know when the contract was formed that the purchaser was relying on the vendor’s
skill or judgment in furnishing the goods. Ram Medical also contends it had no reason to know
of the “particular purpose” for which the mesh would be used.
S.C. Code § 36-2-315 reads, “Where the seller at the time of contracting has reason to
know any particular purpose for which the goods are required and that the buyer is relying on the
seller's skill or judgment to select or furnish suitable goods, there is . . . an implied warranty that
the goods shall be fit for such purpose.” Plaintiffs assert that Defendants had reason to know of
the particular purpose for which the mesh was to be used and that Defendants knew the buyer
was relying on Defendants’ skill or judgment. (Am. Comp. ¶ 69). Plaintiffs assert this particular
purpose is the use of the surgical mesh for implantation into the human body to reinforce a port
used in conjunction with an adjustable gastric band. Id. at ¶ 70.
Plaintiffs also assert that Defendants argument concerning whether Plaintiff’s use of the
product differed from its ordinary use is foreclosed by South Carolina caselaw. In Soaper v.
Hope Indus., Inc., 424 S.E.2d 493, 495 (S.C. 1992) the South Carolina Supreme Court stated,
“Where the particular purpose for which a product is purchased is also the ordinary or intended
7 

purpose of the product, the warranties of merchantability and of fitness for a particular purpose
merge and are cumulative, such that a plaintiff may proceed upon either theory.” The court
further noted, “Where a product is not fit for any purpose, it is not fit for its particular purpose.”
The Court finds that, at this stage of the litigation, Plaintiffs have sufficiently pled its
claim for breach of implied warranty of fitness for a particular purpose. Moreover, the Court
finds the controlling caselaw on this issue supports a finding that Plaintiff’s may proceed on this
cause of action.
South Carolina Unfair Trade Practices Act
Both Medline and Ram Medical argue Plaintiffs SCUTPA claim fails to state a claim
upon which relief may be granted because Plaintiffs seek recovery for personal injury, and the
SCUTPA does not permit recovery for personal injury damages. S.C. Code § 39-5-20(a) declares
unlawful “[u]nfair methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce . . . .” Defendants state the only case to have entertained this
specific question held that SCUTPA is not a proper remedy for personal injury. Little v. Brown
Williamson Tobacco Corp., 1999 WL 33291385 (D.S.C. Mar. 3, 1999).
Plaintiffs argue that the statute provides for recovery for the losses allegedly suffered in
this action. S.C. Code Ann. § 39-5-140(a) explains, “Any person who suffers any ascertainable
loss of money or property, real or personal, as a result of the use or employment by another
person of an unfair or deceptive method, act or practice declared unlawful by § 39-5-20 may
bring an action individually, but not in a representative capacity, to recover actual damages.” In
Little, which is cited by the Defendants, the court noted that the “plaintiffs may have an action to
recover their medical costs, lost earnings, and any other alleged out-of-pocket expenses” under
the SCUTPA. Little, 1999 WL 33291385 at * 11 (citing S.C. Code § 39-5-140(a)). Accordingly,
8 

the Court finds the Plaintiffs have sufficiently pled an injury for which recovery may be sought
under the SCUTPA.
Ram Medical next argues SCUTPA does not apply to “[a]ctions or transactions permitted
under laws administered by any regulatory body or officer acting under statutory authority of this
State or the United States or actions or transactions permitted by any other South Carolina state
law.” S.C. Code § 39-5-40(a). Ram Medical contends the FDA regulates the product, packaging,
and labeling from which Plaintiff’s allegations arise. Therefore, according to the Defendant,
because the FDA regulates packaging and labeling, Plaintiffs cannot recover under SCUTPA as a
matter of law.
Plaintiffs have alleged that Defendants marketed and distributed a counterfeit product.
Moreover, Plaintiffs contend Ram Medical is currently under investigation by the FDA for
alleged violations of FDA regulations. Therefore, Plaintiffs’ have alleged that Defendants have
acted in a manner which is clearly not permitted under FDA regulations. Accordingly, this Court
finds the Plaintiff’s pleadings sufficient to state a claim for relief under SCUPTA.
Finally Ram Medical argues Plaintiff Rosalee Jones cannot recover under SCUPTA
because she has not alleged an ascertainable loss and seeks to recover in a representative
capacity. Plaintiffs note that Rosalee Jones has only joined in the eleventh cause of action for
loss of consortium and has not joined in the claim for violation of the SCUPTA. Accordingly,
this Court finds that since Rosalee Jones is not seeking recovery under the SCUPTA, there is no
issue to be resolved.
Federal Racketeer Influenced and Corrupt Organizations Act (“RICO”)
To establish a claim under RICO, a plaintiff must show: (1) a violation of 18 U.S.C. §
1962, (2) an injury to business or property, and (3) that the injury was caused by the violation of
9 

§ 1962. See Palmetto State Medical Ctr. V. Operation Lifeline, 117 F.3d 142, 148 (4th Cir.
1997). Under § 1962(c), a plaintiff must allege:
(1) a defendant person (2) employed or associated with (3) an enterprise, engaged
in, or the activities of which affect, interstate or foreign commerce, (4) conducts
or participates in the conduct of the affairs of the enterprise (5) through a pattern
of racketeering activity.
Sadighi v. Daghighfekr, 36 F. Supp.2d 279, 295-96 (D.S.C. 1999).
It is noted that “RICO treatment is reserved for conduct ‘whose scope and persistence pose a
special threat to social well-being.’” GE Inv. Private Placement Partners II v. Parker, 247 F.3d
543, 551 (4th Cir. 2001) (quoting Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir.
1989).
Medline notes that in RICO cases, “Any allegation of personal injury and pecuniary
losses occurring therefrom are not sufficient to meet the statutory requirement of injury to
‘business or property.’” Blast v. Cohen, Dunn & Sinclair, P.C., 59 F.3d 492, 495 (4th Cir. 1995)
citing Doe v. Roe, 958 F.2d 763, 767-70 (7th Cir. 1992). Both Defendants argue Plaintiffs’
RICO claim should be dismissed. First, Defendants contend RICO was enacted to deal with
commercial losses resulting from racketeering activity and has been uniformly held inapplicable
to actions for personal injury, including economic loss from personal injury. 18 U.S.C. § 1964(c)
states that civil remedies under RICO are limited to “[a]ny person injured in his business or
property by reason of a violation of section 1962 of this chapter . . . .” In support, Defendants cite
Drake v. B.F. Goodrich Co., 782 F.2d 638, 644 (6th Cir. 1986), Grogan v. Platt, 835 F.2d 844
(11th Cir. 1988), and Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir. 1988). Medline
argues further that because Plaintiffs have failed to allege recoverable damages, this Court does
not have subject matter jurisdiction over this claim and therefore it should be dismissed pursuant
10 

to Rule 12(b)(1). Defendants argue all of the damages Plaintiffs allege are pecuniary losses
occurring from the alleged personal injury and therefore are not damages recoverable under a
RICO cause of action.
Plaintiffs respond by noting that while damages for personal injuries are sought under
other causes of action, Plaintiffs seek additional damages under RICO that do not stem from
personal injury. Plaintiffs note recovery is sought for economic loss, the cost of the counterfeit
surgical mesh, the costs of implanting and explanting the counterfeit mesh, and loss of income.
(Am. Compl. ¶ 134). In support, the Plaintiff cites In re Cordis Corp. Pacemaker Product
Liability Litig., 1992 WL 754061 (S.D. Ohio 1992). Plaintiffs contend this case is perhaps one of
the only cases which specifically addresses a scenario factually similar to the case at hand.
Cordis involved litigation over the dissemination of defective pacemakers.
In Cordis, the plaintiffs brought a class action suit against Cordis, a manufacturer of
pacemakers, for injuries suffered from the implantation of an allegedly defective pacemaker. The
defendants moved to dismiss the RICO claim for, among other reasons, failure to allege injuries
for which RICO provides a remedy. The court stated that “RICO does not provide a remedy for
physical injuries or emotional harm.” Id. at *3. However, the court noted that the plaintiffs also
sought recovery of “property damages such as the cost of the pacemakers and the cost of
implanting and explanting them.” Id. The court in Cordis stated:
[J]ust as a consumer who purchases a product, sold in violation of antitrust
statutes, can suffer an injury to his or her property (the inflated price of the
product), a consumer who purchases a defective product, sold in violation of
RICO, can also suffer an injury to his or her property (the diminished value of the
product and costs associated with implanting and explanting the product).
Id.

11 

This Court finds certain caselaw concludes that RICO does not provide a remedy for
physical injuries or emotional harm. Moreover, certain caselaw holds it does not provide a
remedy for pecuniary injury in the form of lost income or lost wages. However, this Court finds
the Plaintiff in the instant litigation has sufficiently pled damages related to the cost of the
surgical mesh as well as the cost of implanting and explanting the mesh to survive a motion to
dismiss.
Defendants next contend that Plaintiffs have failed to plead a “pattern of racketeering,”
which requires a series of identifiable predicate acts that fall within the scope of 18 U.S.C. §
1961. Defendants provide four reasons for why Plaintiffs have failed to establish a pattern of
racketeering activity as a matter of law: “(1) Plaintiffs fail to establish the requisite predicate
acts of mail and wire fraud, (2) Plaintiffs fail to establish related and continuing predicate acts,
(3) Plaintiffs fail to establish predicate acts occurring over a substantial period of time, and (4)
Plaintiffs allege only a limited, narrow scheme which is insufficient to establish a pattern of
racketeering.” Def. Summ J. at p. 8, (Doc. 31-1).
As to Defendants first challenge, the Fourth Circuit has noted “A pattern of racketeering
requires at least two predicate acts.” Al-Abood v. El-Shamari, 217 F.3d 225, 238 (4th Cir. 2000).
See also 18 U.S.C. § 1961(5). These predicate acts include “trafficking in goods or services
bearing counterfeit marks,” “mail fraud,” and “wire fraud.” 18 U.S.C. § 1961(1) (citing 18
U.S.C. §§ 2320, 1341, and 1343). Defendants argue Plaintiff has alleged nothing more than
garden-variety personal injury products liability claims predicated upon broad, conclusory
allegations insufficient to constitute a RICO cause of action.
This Court finds that Plaintiffs have satisfied the pleading requirements set forth under
Rules 8(a) and 9(b) of the Federal Rules of Civil Procedure as to the requirement that two or
12 

more predicate acts of racketeering be pled. First, the Court finds Plaintiffs have sufficiently pled
two or more instances of trafficking in counterfeit goods. Plaintiffs have alleged that Defendants
intentionally manufactured, distributed, and sold surgical mesh that they knew was counterfeit.
(Am. Compl. ¶ 118). Plaintiffs note that they have alleged that Defendants’ trafficking resulted
in the distribution of at least fifteen lots of counterfeit mesh to numerous states. Id. at ¶ 119
Plaintiffs note further that this allegation is supported by an FDA notice of recall in which the
FDA identifies the specific lot numbers of the counterfeit mesh that Defendants placed into the
stream of commerce. Plaintiffs have also pled that the FDA notice of recall states that RAM
Medical sold the counterfeit products. Finally, Plaintiffs have pled that Defendants’ predicate
acts of trafficking in counterfeit goods have resulted in the implantation of counterfeit surgical
mesh in a number of individuals. (Am. Compl. ¶ 120). Accordingly, this Court finds that
Plaintiffs have sufficiently pled allegations of two or more predicate acts of racketeering activity
in relation to the trafficking goods bearing counterfeit marks.
As to the claim of mail fraud, 18 U.S.C. § 1341 states, “Whoever, having devised or
intending to devise any scheme or artifice to defraud, or for obtaining money or property by
means of fraudulent pretenses,” uses the mails “for the purpose of executing such scheme or
artifice or attempting to do so” is guilty of mail fraud. “The gravamen of the offense is the
scheme to defraud, and any ‘mailing that is incident to an essential part of the scheme satisfies
the mailing element,’ even if the mailing itself ‘contain[s] no false information.’” Bridge v.
Phoenix Bond & Indemnity Co., 553 U.S. 639, 647 (2008) (citing Schmuck v. United States, 489
U.S. 705, 712-15 (1989)).
As to the claim of wire fraud, 18 U.S.C. § 1343 states, “Whoever, having devised or
intending to devise any scheme or artifice to defraud, or for obtaining money or property by
13 

means of false or fraudulent pretenses . . . transmits or causes to be transmitted by means of wire,
radio, or television communication in interstate or foreign commerce, any writings, signs, signal,
pictures, or sounds for the purpose of executing such scheme or artifice” shall be guilty of wire
fraud. For a wire fraud claim, the plaintiff must allege “1) a scheme to defraud and 2) the use of a
wire communication in furtherance of that scheme.” United States v. Bollin, 264 F.3d 391, 407
(4th Cir. 2001).
With regard to both mail fraud and wire fraud claims, Rule 9(b) of the Federal Rules of
Civil Procedure requires that allegations of fraud be pleaded with particularity. Accordingly, a
RICO claim premised upon either wire fraud or mail fraud predicate acts must be pleaded with
particularity. See Mylan Lab. Inc. v. Matkari, 7 F.3d 1130, 1137 (4th Cir. 1993).
This Court finds that Plaintiffs have adequately pled facts with sufficient particularity to
satisfy Rule 9(b) that two or more predicate acts of racketeering activity have occurred through
Defendants’ alleged mail fraud and wire fraud. The Court finds that ¶¶ 123 and 124 of Plaintiffs’
Amended Complaint allege a scheme to defraud through the mail with sufficient particularity as
to the time, place, and content of the alleged fraud to satisfy the requirements of Rule 9(b). In
addition, the Court finds that ¶¶ 127 and 128 of Plaintiffs’ Amended Complaint similarly satisfy
the same Rule 9(b) requirements. Therefore, this Court finds that the plaintiffs have sufficiently
established the requisite predicate acts of mail and wire fraud at this stage of the litigation.
Defendants next challenge Plaintiffs’ ability to allege a pattern of related, continuing
predicate acts sufficient to state a RICO claim. “To establish a pattern of racketeering activity,
the plaintiff must show that the predicate acts are related and that they ‘amount to or pose a
threat of continued criminal activity.’” GE Inv. Private Placement Partners II, v. Parker, 247 F.3d
543, 549 (4th Cir. 2001) (citing H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)). “It is
14 

this factor of continuity plus relationship which combines to produce a pattern.” H.J. Inc. v. Nw.
Bell Tel. Co., 492 U.S. at 239. To be deemed related, predicate acts “must have ‘the same or
similar purposes, results, participants, victims, or methods of commission, or otherwise [be]
interrelated by distinguishing characteristics and [not be] isolated events.’” ePlus Tech. Inc. v.
Aboud, 313 F.3d 166, 182 (4th Cir. 2002) (citing H.J. Inc. at 240).
It is further noted, “The continuity aspect . . . refers ‘either to a closed period of repeated
conduct, or to past conduct that by its nature projects into the future with a threat of repetition.’”
ePlus Tech, 313 F.3d at 182 (citing H.J. Inc. at 241). Moreover, “‘Predicate acts extending over a
few weeks or months and threatening no future criminal conduct do not satisfy this requirement:
Congress was concerned in RICO with long-term criminal conduct.’” Id. (citing H.J. Inc. at 242).
“Thus, it is clear that predicate acts of racketeering activity must be part of a prolonged criminal
endeavor.” Id.
Defendants argue Plaintiffs reference only a single, narrow alleged scheme and do not
sufficiently allege that the acts are related. Plaintiffs contend the element of relatedness has been
sufficiently alleged. Plaintiffs point to the FDA Notice of Recall and argue that Defendants have
distributed and sold fifteen lots of counterfeit surgical mesh. Plaintiffs allege there are potentially
one hundred fifty individual victims that have been implanted with counterfeit surgical mesh.
Am. Compl. ¶ 120). Plaintiffs argue further that the purpose of the sale was to defraud individual
patients into paying full price for an inferior counterfeit good, which is common to all potential
victims. Id. at ¶ 129 Plaintiffs allege the results were common in that each victim paid for and
was implanted with a counterfeit product. Plaintiffs next contend the participants were common
because the FDA has implicated seven distributors who were responsible for the dissemination
of the counterfeit mesh. Plaintiffs allege the victims who are individual patients who trusted the
15 

source of the products provided to their healthcare providers were also common. Finally,
Plaintiffs argue the method of commission was common in that Defendants established
distribution networks to disseminate counterfeit products. This Court finds persuasive the
arguments set forth by the Plaintiffs. Accordingly, this Court finds Plaintiffs have sufficiently
pled the element of “relatedness.”
Defendants argue Plaintiffs have failed to sufficiently allege the element of “continuity.”
Courts have described continuity as being either “open-ended” or “close-ended.” “Open-ended
continuity may be established where, for example, the ‘related predicates themselves involve a
distinct threat of long-term racketeering activity,’ or where the predicate acts ‘are part of an
ongoing entity’s regular way of doing business . . . or of conducting or participating in an
ongoing and legitimate RICO enterprise.’” GE Inv. 247 F.3d at 549) (citing H.J. Inc., 492 U.S. at
242-43). Defendants argue Plaintiffs have failed to assert specific allegations establishing the
alleged predicate acts present a threat of future criminal activity. Additionally, Defendants argue
that because Plaintiffs assert the alleged predicate acts continued only through March 15, 2010,
they have conceded a close-end nature to the alleged predicate acts.
Plaintiffs disagree, and argue that the inquiry extends to whether there is the “threat” of
continuation because [o]ften a RICO action will be brought before continuity can be established .
. . . In such cases, liability depends on whether the threat of continuity is demonstrated.” H.J.
Inc. 492 U.S. at 242. Open-ended continuity “may be established by showing that ‘predicate acts
or offenses are part of an ongoing entity’s regular way of doing business.’” Anderson v. Found.
For Advancement, Educ. And Emp’t of Am. Indians, 155 F.3d 500, 505 (4th Cir. 1998) (citing
H.J. Inc., at 242). Plaintiffs assert that the distribution and sale of surgical products through
various channels is the primary component of Defendants’ ongoing business operations.
16 

Plaintiffs argue further that Defendants’ activities are alleged to have taken place during the
scope of Defendants’ business operations. Plaintiffs argue Defendants’ distribution networks
allowed for dissemination of the fifteen lots of counterfeit surgical mesh. Plaintiffs contend the
distribution networks remain in operation and therefore the threat that Defendants continue to
distribute counterfeit medical products remains. Finally, Plaintiffs assert that Defendants ongoing
business relationships with questionable and evasive foreign suppliers further supports its
argument that there remains the threat of continued racketeering activity. This Court finds that,
based on the allegations set forth in Plaintiffs’ Amended Complaint, Plaintiffs have sufficient
pled “open-ended” continuity at this stage of the litigation.
This Court finds that Plaintiff has pled allegations sufficient to satisfy the “continuity”
requirement of a RICO claim at this stage of the litigation. Plaintiff has done so by satisfying the
pleading requirements for “open-ended” continuity. Therefore, this Court finds that it need not
address the question of whether Plaintiff can satisfy the requirements of “close-ended” continuity
at this time.
Finally, Defendants argue the alleged enterprise and Defendants are not distinct entities
as required by 18 U.S.C. § 1962(c). This Court notes that “[t]he enterprise must be distinct from
the persons alleged to have violated § 1962(c).” Palmetto State Med. Cent. V. Operation
Lifeline, 117 F.3d 142, 148 (4th Cir. 1997) (citing New Beckley Mining Corp. v. Int’l Union,
United Mine Workers of Am., 18 F.3d 1161, 1163 (4th Cir. 1994)). An “enterprise” “includes
any individual, partnership, corporation, association, or other legal entity, and any union or group
of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). Moreover,
“From the terms of RICO, it is apparent that an association-in-fact enterprise must have at least
three structural features: a purpose, relationships among those associated with the enterprise, and
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longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle v. U.S.,
129 S.Ct. 2237, 2244 (2009). Defendants contend the Amended Complaint fails to sufficiently
identify any entity comprising the enterprise other than the named defendants.
Plaintiffs’ allegations state that the enterprise operated separately and distinctly from the
named Defendants and that the “enterprise” consists of at least five additional entities which
have been implicated in the enterprise’s activities by the FDA. (Am. Compl. ¶ 105). Moreover,
Plaintiffs allege that the enterprise includes an unnamed overseas supplier. Id. at ¶ 106. Plaintiffs
assert further that the enterprise executed a scheme to defraud and conceal from Plaintiffs the
fact that the surgical mesh was counterfeit, that the enterprise established standard operating
procedures for gathering and disseminating counterfeit medical devices and required the actors to
violate FDA safety regulations, and that the enterprise was in operation for a number of years
during which the enterprise disseminated at least fifteen lots of counterfeit surgical mesh to the
general public. (Am. Compl. ¶¶ 104, 106, 110, and 119). The Court finds that Plaintiffs have
adequately pled the existence of an “enterprise” to survive Defendants’ motions to dismiss.
Accordingly, Defendants’ motions to dismiss Plaintiffs RICO cause of action are denied.
CONCLUSION
For the foregoing reasons, defendants’ motions to dismiss Plaintiffs’ Fourth, Fifth, Sixth,
Ninth, and Tenth causes of action are DENIED. (Docs. # 17, 23, 31, and 35).

IT IS SO ORDERED.
s/Terry L. Wooten______
TERRY L. WOOTEN
United States District Judge

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August 8, 2011
Florence, South Carolina

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