Opinion
Case No. 2:01-CV-1143
September 5, 2002
OPINION AND ORDER
This matter is before the Court for consideration of the Motion to Dismiss filed by Defendants Gerald Steiman and Columbus Neurological Group, Inc. (Doc. #3) and the Motion to Dismiss filed by Defendants Nationwide Mutual Insurance Co., the Benefits Administrative Committee of the Nationwide Ins. Co. Long-Term Disability Plan, the Nationwide Ins. Co.'s Long-Term Disability Plan and Audrey M. Wolfe (Doc. #7). For the reasons that follow, the motions are granted.
I.
Plaintiff Gerianne Morrison ["Plaintiff"], brings this action challenging the decision of her former employer, Defendant Nationwide Insurance Company ["Nationwide"], to deny her long-term disability benefits. Also named as Defendants are: the Benefits Administrative Committee of the Nationwide Insurance Company's Long-Term Disability Plan; the Nationwide Long-Term Disability Plan; Audrey M. Wolfe, a Plan Administrator; Dr. Gerald Steiman; and the Columbus Neurological Group, Inc. Plaintiff asserts claims under the Employee Retirement Income'Security Act of 1974 ["ERISA"], 29 U.S.C. § 1132; the civil provisions of the Racketeer Influenced and Corrupt Organizations Act ["RICO"], 18 U.S.C. § 1962; as well as state law claims for negligence, fraud, and wrongful portrayal of Plaintiff in a false light. The Court has jurisdiction under 28 U.S.C. § 1331 and 1367.
Plaintiff was employed by Nationwide as a business technology consultant. ( Complaint at ¶ 10). During her employment, Plaintiff was diagnosed with syringomyelia, a disorder of the spinal cord which causes progressive paralysis and severe pain. ( Id. at ¶ 14). Plaintiff ceased working on account of her condition and applied for long-term disability benefits under the Nationwide plan. ( Id. at ¶ 15). In connection with the application for benefits, Plaintiff underwent an independent medical examination by Dr. Steiman. ( Id. at ¶¶ 17-19).
According to Plaintiff, Dr. Steiman "spoke with [Plaintiff] only briefly, performed no medical tests and examined [Plaintiff] only perfunctorily." ( Id. at ¶ 20). Dr. Steiman concluded that Plaintiff was not disabled and reported his findings to Nationwide, in a letter. ( Id. ¶ 21). Plaintiff claims that, in his letter to Nationwide, Dr. Steiman falsely stated that he examined Plaintiff's spine and performed medical tests. ( Id. at ¶ 22). Following Dr. Steiman's report, Plaintiff was denied long term disability benefits under the plan. Plaintiff appealed the denial but the decision was upheld. ( Id. at ¶¶ 26-27).
Plaintiff seeks relief under ERISA for alleged wrongful denial of long-term disability benefits. Plaintiff also claims that Dr. Steiman and his employer, the Columbus Neurological Group, Inc., have united with Nationwide "in the common purpose of denying disability, insurance, or other benefits to persons who are legally entitled to them" for purposes of the civil RICO statute. ( Id. at ¶ 40). Plaintiff claims that each of the Defendants, with the exception of the Plan itself, "was a knowing and willing participant in a scheme to defraud [Plaintiff] of her long-term disability benefits though . . . [a] fraudulent medical opinion." ( Id. at ¶ 42). Plaintiff further claims that these Defendants engaged in mail and wire fraud. ( Id.). In addition to the RICO claim, Plaintiff asserts claims against Defendants Steiman and the Columbus Neurological Group, Inc. for common law fraud, negligence and wrongful portrayal of Plaintiff in a false light.
Defendants Steiman and the Columbus Neurological Group, Inc. seek dismissal of all of the claims asserted against them. The Nationwide Defendants seek dismissal of Plaintiffs RICO claim.
II.
A motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) "should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). All well-pleaded allegations must be taken as true and be construed most favorably toward the non-movant. Schuer v. Rhodes, 416 U.S. 232, 236 (1974); Mayer v. Mylod, 988 F.2d 635, 637 (6th Cir. 1993). While a court may not grant a Rule 12(b)(6) motion based on disbelief of a complaint's factual allegations, Lawler v. Marshall, 898 F.2d 1196, 1199 (6th Cir. 1990), the court "need not accept as true legal conclusions or unwarranted factual inferences." Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). Consequently, a complaint will not be dismissed pursuant to Rule 12(b)(6) unless there is no law to support the claims made, the facts alleged are insufficient to state a claim, or there is an insurmountable bar on the face of the complaint.
III.
A. Defendants Dr. Steiman and Columbus Neurological Group, Inc.'s Motion to Dismiss Civil RICO claim
Defendants Dr. Steiman and the Columbus Neurological Group contend that Plaintiff's civil RICO claim fails as a matter of law because Plaintiff cannot satisfy certain essential elements of the claim. Plaintiff disputes this assertion.
The RICO statute, which targets criminal conduct, also contains a civil liability component. 18 U.S.C. § 1964 (c) provides for a cause of action to anyone "injured in his business or property by reason of a violation of section 1962." Such an injured person can recover treble damages, costs and attorney's fees. Id.
Section 1962 imposes criminal liability on those engaged in "a pattern of racketeering activity." See 18 U.S.C. § 1962 (a-d). In this case, Plaintiff asserts a violation of § 1962(c), which provides:
The Court notes that, in her memorandum contra, Plaintiff identifies the violation as arising under § 1964(c). As Defendant points out, the substantive RICO provisions are found at § 1962. Thus, the Court presumes Plaintiff refers to § 1962(c).
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.18 U.S.C. § 1962 (c).
A "pattern of racketeering activity" requires "at least two acts of racketeering activity. . . ." 18 U.S.C. § 1961 (5). "Racketeering activity" is defined as "any act which is indictable" under several enumerated statutes, including the offenses alleged by Plaintiff herein — mail fraud in violation of 18 U.S.C. § 1341 and wire fraud in violation of 18 U.S.C. § 1343. See 18 U.S.C. § 1961 (1)(B). An "enterprise" is defined to include "any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C. § 1961 (4).
In sum, to impose civil liability, a Plaintiff must show (1) conduct (2) of an enterprise (3) engaged in or affecting interstate commerce (4) through a pattern (5) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 496 (1985). Defendants assert that Plaintiff fails to plead these elements.
1. Violation of § 1962(c)
a. Enterprise
The existence of an enterprise is shown "by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." United States v. Turkettte, 452 U.S. 576, 583 (1981). The "`continuity of structure exists where there is an organizational pattern or system of authority that provides a mechanism for directing the group's affairs on a continuing, rather than an ad hoc, basis.'" Walker v. Jackson Public Schools, No. 01-1937, 01-1938, 2002 WL 1809088 (6th Cir. Aug. 5, 2002), quoting United States v. Kragness, 830 F.2d 842, 856 (8th Cir. 1987). In order to successfully plead the enterprise requirement, the Plaintiff must offer facts to support the existence of a chain of command or hierarchy. VanDenBroeck v. Commonpoint Mortgage Co., 210 F.3d 696, 700 (6th Cir. 2000).
As the Supreme Court has stated, "[t]he `enterprise' is not the `pattern of racketeering activity;' it is an entity separate and apart from the pattern of activity in which it engages." United States v. Turkette, 452 U.S. at 584. Merely pleading that an enterprise exists is insufficient for purposes of Rule 12(b)(6). Walker, 2002 WL 1809088 at *1.
In this case, Plaintiff alleges that Dr. Steiman and the Columbus Neurological Group, Inc. have, for many years, "earned income through the provision to employers and others of fraudulent and illegitimate medical opinions." ( Complaint at ¶ 36). According to Plaintiff, one such employer is Defendant Nationwide. Plaintiff claims that "Defendants Nationwide, Wolfe, the Benefits Committee, Steiman and Columbus Neurological Group are and have for a considerable period of time been united in the common purpose of denying disability, insurance, or other benefits to persons who are legally entitled to them, thus forming an `enterprise' for purposes of RICO." ( Id. at ¶ 40).
The Court concludes that the facts pleaded by Plaintiff do not show a continuity of structure on the part of the Defendants or a hierarchy under which action is taken. Rather, Plaintiff simply claims that the alleged pattern of racketeering activity among the Defendants amounts to the creation of an enterprise. As the Supreme Court has held, however, the evidence of enterprise is separate and distinct from the pattern of racketeering activity. United States v. Turkette, supra. Plaintiff's complaint fails to meet this standard.
b. Pattern of Racketeering Activity
Defendants contend that Plaintiff fails to plead facts to support a "pattern of racketeering activity" because the allegations of mail and wire fraud are insufficiently pled. Plaintiff disputes this contention.
In order to establish "racketeering activity" the Plaintiff must allege at least two predicate acts that occurred within a ten year time period. H.J, Inc. v. Northwesern Bell Telephone Co., 492 U.S. 229, 237-38 (1989). Here, Plaintiff claims that the Defendants engaged in mail and wire fraud "notably (but not exclusively) by the transmission of Defendant Steiman's December 4, 1998 letter to other Defendants." ( Complaint at ¶ 42).
Under Fed.R.Civ.P. 9(b), the circumstances constituting fraud must be pled with "particularity." The Sixth Circuit holds that, at a minimum, the Plaintiff must allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of the Defendants and the resulting injury to Plaintiff, in order to satisfy the pleading standard. Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993).
In order to establish mail and wire fraud, the Plaintiffs must plead the existence of "(1) a scheme to defraud, and (2) use of the mails, or of an interstate electronic communication, respectively, in furtherance of the scheme." Advocacy Organization for Patients and Providers v. Auto Club Ins. Assoc., 176 F.3d 315, 322 (6th Cir. 1999). In order to show a scheme to defraud, the Plaintiff must show:
[I]ntentional fraud, consisting in deception intentionally practiced to induce another to part with property or to surrender some legal right, and which accomplishes the designed end. To allege intentional fraud, there must be proof of misrepresentations or omissions which were reasonably calculated to deceive persons of ordinary prudence and comprehension. Thus, the plaintiffs must allege with particularity a false statement of fact made by the defendant which the plaintiff relied on.Id. (citation and emphasis omitted).
In this case, Defendants assert that Plaintiff fails to plead that the Defendants made a false statement on which Plaintiff relied because the complaint indicates that Plaintiff, at all times, believed Dr. Steiman's representations regarding Plaintiff's condition to be false. In response, Plaintiff argues that she relied to her detriment on the representation that Dr. Steiman would perform an independent medical examination. "In reliance on th[is] representation, the Plaintiff appeared for the medical examination. Based on the fraudulent medical opinion of Steiman, Nationwide denied Plaintiff's application for LTD benefits resulting in injury to the Plaintiff." ( Memorandum contra at 5).
The Court concludes that Plaintiff's claims that Defendant Dr. Steiman misrepresented his independence and made false statements regarding the extent of Plaintiff's examination are properly pled for purposes of Rule 9(b). Further, it is clear from the complaint that Plaintiff relied on the purported independence of Dr. Steiman in seeking long-term disability benefits to her detriment, as the benefits were denied on account of Dr. Steiman's opinion.
Plaintiff's fraud claim nevertheless fails because she does not plead more than one predicate act. While Plaintiff asserts that Defendants have engaged in similar acts of fraud in the past, presumably also using the mail and/or wire, the RICO statute requires the showing of a "pattern of racketeering activity," which consists of two or more acts of racketeering. 18 U.S.C. § 1961 (5). In fact, the existence of two acts by themselves are generally insufficient to support a RICO claim. A Plaintiff must show that there is a pattern, i.e., that the predicate acts are "related and that they amount to or pose a threat of continued criminal activity." H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239 (1989).
Plaintiff's allegations in support of the element of a "pattern of racketeering activity" show only one act. No second act is described in terms of time, parties and method. Thus, the Court concludes that Plaintiff's complaint with respect to the element of establishing a "pattern of racketeering activity" is deficient.
c. Interstate Commerce
Defendants contend that Plaintiff fails to allege any impact of the purported enterprise on interstate commerce, as required by § 1962(c). Plaintiff argues that because Defendant Nationwide is a multi-state and multi-national corporation whose employees participate in the long-term disability plan, Defendants' purported racketeering activity affects interstate commerce.
The requirement that the enterprise activity must "affect" interstate commerce means that it must have a "detrimental influence on" interstate commerce, e.g., by draining money from the economy. The Plaintiff need not prove a profit-seeking motive to establish an affect on interstate commerce. See National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 258-60 (1994); United States v. Garcia, 143 F. Supp.2d 791 (E.D. Mich. 2000).
The Court concludes that if Plaintiff had successfully pleaded the first two elements of her RICO claim — enterprise and pattern of racketeering activity — the Defendants' decision to withhold payments of long-term disability benefits to Plaintiff would have some affect on the interstate commerce, particularly since the defendant operates a large, interstate and international insurance business. Since Plaintiff has not satisfied the first two elements, however, the interstate commerce requirement is of no consequence.
2. Injury under 18 U.S.C. § 1964 (c)
Defendants assert that Plaintiff's complaint fails to assert the sort of injury cognizable under the civil provision of the RICO statute. As stated above, the civil remedy authorizes recovery by one who is injured "in his business or property by reason of" the RICO violation. 18 U.S.C. § 1964(c).
In Sedima v. Imrex Co., Inc., 473 U.S. 479 (1985), the Supreme Court rejected the notion that Plaintiff must demonstrate a separate injury from the injury suffered as a consequence of the predicate act under § 1962(c). Thus, the fact that Plaintiff alleges no separate harm from that suffered as a result of the predicate acts is not fatal to her claim. Nonetheless, because the Court concludes that the § 1962(c) claim is insufficient, Plaintiff's RICO claim is properly dismissed.
The Court observes that if Plaintiff claimed a violation of § 1962(a) or (b), she would have to demonstrate an injury separate from that arising from the predicate acts. See Advocacy Organization for Patients and Providers, 176 F.3d 315 (6th Cir. 1999); Vemco v. Camardella, 23 F.3d 129 (6th Cir. 1994).
State Law Claims
Defendants Dr. Steiman and the Columbus Neurological Group also move to dismiss Plaintiff's state law claims for negligence, fraud and false light.
In light of the dismissal of Plaintiff's RICO claim against these Defendants, the Court declines to exercise supplemental jurisdiction over the remaining state law claims. The Sixth Circuit holds that jurisdiction may be declined under 28 U.S.C. § 1367 for any one of the following reasons:
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdictionCampenella v. Commerce Exchange Bank, 137 F.3d 885, 891 (6th Cir. 1998).
Although the ERISA claim remains against the Nationwide Defendants, resolution of the claim will proceed in a different manner than Plaintiff's state law claims against Defendants Steiman and the Columbus Neurological Group. The remaining ERISA claim will be decided on the record compiled by the Plan and will, presumably, not involve a trial. In contrast, the state claims are all triable to a jury. Further, the operative facts of the state law claims are not sufficiently related to those on which the remaining federal claim is based to cause this Court to deem it appropriate to exercise supplemental jurisdiction. For these compelling reasons, the Court declines to entertain Plaintiff's state law claims against Dr. Steiman and the Columbus Neurological Group. The claims are dismissed without prejudice to refiling in state court.
B. Nationwide Defendants' Motion to Dismiss
The Nationwide Defendants have filed a separate motion to dismiss Plaintiff's claim under the RICO statute, 18 U.S.C. § 1964 (c). For the reasons stated above, the motion is granted.
III.
In light of the foregoing, the Motion to Dismiss filed by Defendants Gerald Steiman and Columbus Neurological Group, Inc. ( Doc. #3) is GRANTED. The Motion to Dismiss filed by Defendants Nationwide Mutual Insurance Co., the Benefits Administrative Committee of the Nationwide Ins. Co. Long-Term Disability Plan, the Nationwide Ins. Co.'s Long-Term Disability Plan and Audrey M. Wolfe ( Doc. #7) as to Plaintiff's RICO claim is GRANTED.
The only remaining claim in this action is Plaintiff's claim under ERISA against the Nationwide Defendants.