Sumeru Health Care v. Hutchens, et al
Filing
80
MEMORANDUM OPINION and ORDER, entered as a Judgment by the Clerk, granting 43 Defendants' Motion for Summary Judgment as to all claims and DISMISSING this case. Signed by District Judge Thomas W Phillips on June 24, 2015. (AYB)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
SUMERU HEALTH CARE GROUP, L.C.
d/b/a/ THE CENTER FOR INTERNAL
MEDICINE AND PEDIATRICS
Plaintiff,
v.
MICHAEL T. HUTCHINS, individually
and as administrator of CLAIBORNE
COUNTY HOSPITAL, and BAPTIST
HEALTH SYSTEMS OF EAST
TENNESSEE, INC.
)
)
)
)
) No. 3:02-cv-447
)
)
)
)
)
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is the Defendants’ Motion for Summary Judgment. [doc. 43].
Plaintiff responded to Defendant’s brief [doc. 53] and Plaintiff filed a reply [doc. 60].
Defendants filed a supplemental brief [doc. 71], Plaintiff responded 1 [doc. 74], and Defendants
replied [doc. 78]. Oral argument was held on June 15, 2015. The Motion is now ripe for
disposition and will be GRANTED.
RELEVANT FACTS
This case arises from the Plaintiff’s plan to contract overseas physicians to serve citizens
of rural communities in East Tennessee and the Defendants’ alleged agreement to assist him in
succeeding with his business venture. Plaintiff, Sumeru Health Care Group, L.C. (“Sumeru”) is
an LLC that operated five medical clinics in Tennessee from the late 1990s until 2003. The LLC
was owned and controlled by Dr. Mohan Kutty. Defendant Hutchins was an employee of Baptist
1
Plaintiff’s supplemental brief is comprehensive and incorporates the earlier arguments.
Health Systems, a private company that contracted to provide administrative services to
Defendant Claiborne County Hospital (“CCH”). There is no dispute that he was an agent of CCH
and acted as its Administrator at all times relevant. CCH is a governmental entity owned by
Claiborne County.
In 1998, Dr. Kutty learned of Tennessee’s “State 20” program, which allowed foreign
born physicians to work in the United States if they agreed to work in “medically underserved”
communities in the state. (Kutty Depo at 165-66). Sumeru chose to place its clinics in Hawkins
County, Union County, and Claiborne County, Tennessee, as they had been identified as
medically underserved areas. (Kutty Depo at 172). To obtain the necessary H-1B visas, which
lifted certain residency restrictions on their temporary J-1 visas, the physicians were required to
enter employment agreements and to obtain immigration waivers from the Secretary of Health
and Human Services. Sumeru contracted with eighteen physicians (“the Physicians”) and
assisted them in obtaining the required waivers in exchange for their work at the clinics.
Sumeru opened its first clinic in Union County in 1998. (Kutty Depo. at 173-74). In
February of 1999, Dr. Kutty met with Mr. Hutchins and others about his continuing plans to
open a Sumeru clinic in Tazewell, Claiborne County. (Hutchins Depo. at 37-40). Dr. Kutty
testified that they specifically discussed a plan to bring in internists to staff both the Tazewell
Clinic and CCH’s Emergency Room, which would prevent patients from being transferred to
nearby counties. (Kutty Depo. at 208). Dr. Kutty also planned to bring a new cardiologist, Dr.
Naseem, to the area. (Kutty Depo. at 210). Dr. Kutty represented that the new physicians would
benefit CCH by increasing the hospital’s occupancy. (Kutty Depo at 217). It is disputed whether
Mr. Hutchins promised to grant the Physicians hospital privileges at CCH (Kutty Affidavit at ¶
33) or merely offered his general support for the plan. In any event, Plaintiff claims that it relied
on Mr. Hutchins’s representations at the meeting in its decision to base Sumeru’s operations in
Claiborne County and to station Dr. Naseem there, rather than at the clinic in Rogersville,
Tennessee. (Kutty Affidavit at ¶ 29-33).
Sumeru opened its clinic in Tazewell in February 2000. (Kutty Depo. at 222). The
Physicians began working in the CCH Emergency Room (“ER”) and admitting patients to CCH.
Sumeru claims that Mr. Hutchins began improperly enticing them to breach their employment
contracts within a few months. (Kutty Affidavit at ¶ 48). Dr. Kutty believed that some of the
Physicians, particularly Dr. Naseem, had stopped working full-time at the Tazewell Clinic and
were seeing patients at CCH. (Kutty Affidavit at ¶ 47-48). By early 2001, the relationship
between Sumeru/Kutty and the Physicians had soured. (Kutty Affidavit at ¶ 55). An attorney
acting on behalf of the Physicians sent Dr. Kutty a letter alleging that Sumeru had not paid the
Physicians’ salaries. On February 28, 2001, eight of the Physicians filed a complaint against Dr.
Kutty with the U.S. Department of Labor (“DOL”). The Tazewell clinic closed at the time of the
DOL complaint. (Kutty Affidavit at ¶ 11). None of the Physicians have since been employed by
CCH. Ultimately, all five Sumeru clinics failed. Sumeru alleges this was a result of CCH’s
actions.
Sumeru filed this action in August of 2002. In its Amended Complaint, Sumeru made
claims for (1) tortious interference with prospective business relationships, (2) fraud and/or
negligent representation, (3) breach of implied contract and breach of implied duty of good faith,
and (4) unfair competition. Plaintiff alleged that CCH caused its losses by inducing the
Physicians to violate their employment contracts by referring patients to CCH for services that
could have been performed at the clinics (Amended Compl. at ¶ 34), inducing improper billing
practices (Amended Compl. at ¶ 35; 44), providing financial incentives for the Physicians to
terminate their contracts (Amended Compl. at ¶ 40), and engaging in other unspecified conduct
intended to cause the Physicians to breach their agreements with CCH (Amended Compl. at ¶
45). This action was ultimately stayed pending the outcome of the DOL claims against Kutty.
[doc. 62].
A DOL investigation found that Sumeru had willfully failed to pay the Physicians’ wages
and had discriminated against them for whistleblowing. (D&O at pp. 2). On appeal, the DOL
held a sixteen-day administrative trial to determine the Physicians’ claims against Kutty. On
October 9, 2002, the Administrative Law Judge (“ALJ”) issued a “Decision and Order,”
determining that Dr. Kutty violated provisions of the Immigration and Nationality Act (“INA”).
The ALJ made multiple findings of fact and law relevant to the events involved in this action.
Most significantly, she rejected Dr. Kutty’s argument that he had ceased paying the Physicians
because they were moonlighting at other facilities (including CCH) and thus were not fulfilling
their obligations under the employment agreements. The agreements required that the Physicians
“should devote 40 hours per week to the practice of Primary Care for the Employer . . . . [and]
shall perform such medical duties . . . as Employer may reasonably require including hospital
rounds and call duties.” The ALJ determined that the Physicians were not “moonlighting”
because Dr. Kutty specifically directed them to work at other facilities and their time spent there
thus counted toward the required forty hours. (D&O at 72 n. 31). She further found that there
was no evidence that the Physicians received any payments for the alleged extracontractual
work. (D&O at 16, 72). Ultimately, the ALJ determined that “the doctors were fulfilling their
obligations and trying to build their practice despite difficult conditions, including insufficient
planning, over-expansion, poor management of key functions such as billing, and under-funding
of the clinics[.]” (D&O at 73). Therefore, Dr. Kutty was not justified in withholding their salaries
or terminating their employment. The ALJ attributed the failure to pay the Physicians to the
business’s financial difficulties. (D&O at 73).
The ALJ also determined that Sumeru’s failure to pay the Physicians was a violation of
the INA’s “required wage” and “no benching” provisions and that Sumeru wrongfully retaliated
against the Physicians for filing the complaint with the DOL. Dr. Kutty himself had testified that
he stopped paying the Physicians when he received a letter from an attorney demanding payment
in accordance with the INA, and later fired them during the DOL investigation. (D&O at 15).
The ALJ ordered Sumeru to pay the Physicians’ back salaries and imposed fines for the
violations. She also determined that Sumeru was the “alter ego” of Dr. Kutty and pierced the veil
to hold him personally liable for the judgment. (D&O at 100).
Dr. Kutty appealed the decision to the DOL’s Administrative Review Board (“ARB”),
which affirmed the ALJ and concluded that Dr. Kutty retaliated against the Physicians in
refusing to pay their salaries and then terminating their employment. (ARB Order at 12). His
proffered reasons, that the Physicians were not fulfilling the contracts, were adjudged
unsupported pretext. (ARB Order at 14). Kutty appealed the ARB’s decision to this Court, and
then to the Sixth Circuit Court of Appeals, both of which also affirmed. Kutty v. U.S. Dept. of
Labor, No. 3:05-cv-510 1011 WL 366476 (E.D. Tenn. August 19, 2011); Kutty v. U.S. Dept. of
Labor, 764 F.3d 540 (6th Cir. 2014). On January 20, 2015, United States Supreme Court denied
Dr. Kutty’s petition for certiorari, making the DOL judgment final. 135 S. Ct. 1162 (2015). On
April 4, 2015, having been notified that the appeals process was exhausted, this Court lifted the
stay [doc. 68] and now addresses the pending Motion for Summary Judgment [doc. 43].
STANDARD OF REVIEW
Defendants’ motion is brought pursuant to Federal Rule of Civil Procedure 56. Rule
56(a) sets forth the standard for governing summary judgment and provides in pertinent part:
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.” The procedure set
out in Rule 56(c) requires that “[a] party asserting that a fact cannot be or is genuinely disputed
must support the assertion.” This can be done by citation to materials in the record, which
include depositions, documents, affidavits, stipulations, and electronically stored information.
Fed. R. Civ. P. 56(e)(1)(A). Rule 56(c)(1)(B) allows a party to “show[ ] that the materials cited
do not establish the absence or presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.”
After the moving party has carried its initial burden of showing that there are no genuine
issues of material fact in dispute, the burden shifts to the non-moving party to present specific
facts demonstrating that there is a genuine issue for trial. Matsushita Elec. Indus. Co., v. Zenith
Radio Corp., 475 U.S. 574, 586-87 (1986). “The ‘mere possibility’ of a factual dispute is not
enough.” Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992) (citing Gregg v. AllenBradley Co., 801 F.2d 859, 863 (6th Cir. 1986)).
In order to defeat the motion for summary judgment, the non-moving party must present
probative evidence that supports its complaint. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249-50 (1986). The non-moving party’s evidence is to be believed, and all justifiable inferences
are to be drawn in that party’s favor. Id. at 255. The court determines whether the evidence
requires submission to a jury or whether one party must prevail as a matter of law because the
issue is so one-sided. Id. at 251-52.
III.
Analysis
Defendants’ Objection to Dr. Kutty’s Affidavit
Defendants object to Dr. Kutty’s affidavit [doc. 75]. Defendant argues that Plaintiff
cannot rely on Dr. Kutty’s affidavit, because it contradicts his deposition testimony. The Sixth
Circuit has held that “a party may not create a factual issue by filing an affidavit, after a motion
for summary judgment has been made, which contradicts [his] earlier deposition testimony.”
Reid v. Sears, Roebuck & Co., 790 F.2d 453, 460 (6th Cir. 1986). “Reid and its progeny have
thus barred the nonmoving party from avoiding summary judgment by simply filing an affidavit
that directly contradicts that party’s previous testimony.” Aerel, S.R.L. v. PCC Airfoils, L.L.C.,
448 F.3d 899, 907 (6th Cir. 2006).
The Court has considered the affidavits in light of Defendants’ objection. To the extent a
portion of Dr. Kutty’s affidavit directly contradicts his earlier deposition testimony, the Court
will not consider that portion of the affidavit.
Collateral Estoppel
Defendants argue that the doctrine of collateral estoppel should apply to preclude the
relitigation of facts determined by the ALJ. Collateral estoppel attaches to the findings of
administrative bodies as well as courts. United States v. Utah Const. & Min. Co., 384 U.S. 394,
422 (1966).The Sixth Circuit prescribes a four-part test to determine if collateral estoppel
applies:
(1) the precise issue raised in the present case must have been raised and actually litigated
in the prior proceeding; (2) determination of the issue must have been necessary to the
outcome of the prior proceeding; (3) the prior proceeding must have resulted in a final
judgment on the merits; and (4) the party against whom estoppel is sought must have had
a full and fair opportunity to litigate the issue in the prior proceeding.
Smith v. SEC, 129 F.3d 356, 362 (6th Cir. 1997). With regard to the ALJ’s factual findings, the
test is satisfied. The facts and issues, particularly those regarding the Physicians’ actions in
fulfilling their contracts and Dr. Kutty’s actions in failing to pay the Physicians and then
retaliating against them, were actually raised, argued, and litigated in an extensive proceeding,
after which the ALJ issued a detailed opinion. The ALJ’s decision that Dr. Kutty wrongfully
terminated the Physicians for complaining to the INA and that Dr. Kutty owed them back pay
required her to find that the Physicians fulfilled their obligations under the contracts and that Dr.
Kutty’s “moonlighting” claims were pretextual. The third prong was met when the ALJ’s order
became final earlier this year. Finally, Sumeru d/b/a The Center for Internal Medicine had a full
opportunity to participate in the administrative proceedings. Dr. Kutty and The Center for
Internal Medicine and Pediatrics were the named parties in the DOL action, and the proceedings
specifically concerned the events occurring as the Center was operating under the Sumeru name
in Tennessee. Dr. Kutty owned Sumeru, had the same interests as Sumeru in the DOL
proceedings, and was its primary agent in all matters relevant to both that case and this one.
Furthermore, the ALJ specifically found that Sumeru was Dr. Kutty’s alter ego, and that he was
its sole owner and operator.
Sumeru argues that collateral estoppel should not apply because the legal questions in
this action are not identical to those in the DOL action: “Collateral estoppel is not applicable in
this action where there is no identity of issues in the DOL litigation and the present litigation.”
(doc. 74 at pp. 23). Plaintiff’s argument centers on the differences between the legal claims and
the legal issues in the two cases. (see doc. 74 at pp. 23). This is misplaced. There is no argument
that the claims in the DOL case were identical to those in this action. They very clearly were
not—a federal wage and hour claim would never preclude a state tortious interference claim.
However, there is no argument that claim preclusion should apply here; CCH is arguing issue
preclusion as to questions of fact, e.g., the Physicians were not moonlighting. To be certain, the
DOL did not address whether there was a contract between Sumeru and CCH. However, to the
extent that they are relevant here, the facts that the ALJ did determine will control in this action.
The Claims
Both sides have filed extensive briefs with a number of nuanced arguments. The Court
does not find it necessary to address each action because it is evident that, even if the claims are
valid, the Plaintiff cannot meet the elements of any claim under the ALJ’s facts. Specifically,
Sumeru cannot show that its injuries were caused by the Defendants’ actions or that it suffered
any cognizable damages outside of those it caused itself. The ALJ found (1) that the Physicians
fulfilled their obligations under the employment agreements, (2) that Dr. Kutty willfully and
unjustifiably withheld their pay, and (3) that Dr. Kutty was not justified in terminating or
constructively terminating the Physicians’ employment. The ALJ also found that Sumeru was
suffering from financial difficulties due to undercapitalization and mismanagement. Based on
those facts, there is no scenario in which the Plaintiff’s losses can be attributed to CCH and/or
Mr. Hutchins. It is clear from the ALJ’s factual findings that the Physicians were performing as
was contemplated by their agreements, and it was Sumeru that caused its own demise when it
stopped paying their salaries. At oral argument, Plaintiff’s counsel represented that its injury
stemmed in part from the decision to move the base of Sumeru’s operations to the Tazewell
clinic and to place the cardiology equipment at that office, rather than another of the clinics. This
argument is speculative; Sumeru has produced no evidence to suggest that it would have been
successful had it placed the operation’s center anywhere else. In fact, the evidence and the ALJ’s
findings indicate that Sumeru’s financial difficulties were system-wide and ran far deeper than
the losses at the Tazewell clinic; indeed the mismanagement and under-funding would have
occurred in any event.
CONCLUSION
Based on the foregoing, Plaintiff cannot meet its burden of showing that there is any a
genuine issue of fact left for trial. Because the undisputed facts dictate that Plaintiff was the
cause of any alleged injury suffered, it cannot support its claims and Defendants are entitled to
judgment as a matter of law. The elements of causation and damages are common to all of
Plaintiff’s claims, and the lack thereof is equally fatal to each; the Court therefore declines to
address the parties’ additional arguments. Defendants’ Motion for Summary Judgment [doc. 43]
is hereby GRANTED as to all claims and this case is DISMISSED.
IT IS SO ORDERED.
Enter:
s/ Thomas W. Phillips
UNITED STATES DISTRICT JUDGE
ENTERED AS A JUDGMENT
s/ Debra C. Poplin
CLERK OF COURT
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