Ambrose v. Coffey

• Decision Date: 31 March 2010
• Docket Number: No. CIV S-08-1664 LKK/GGH.,CIV S-08-1664 LKK/GGH.
• Citation: 696 F. Supp.2d 1119
• Parties: Joseph AMBROSE, D.C., Plaintiff, v. Gary COFFEY, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

696 F. Supp.2d 1119

Joseph AMBROSE, D.C., Plaintiff, v. Gary COFFEY, et al., Defendants.

No. CIV S-08-1664 LKK/GGH.

United States District Court, E.D. California.

March 31, 2010.

Daniel A. Horowitz, Law Office of Daniel Horowitz, Lafayette, CA, Martin L. Jaspovice, Richard Jay Simons, Jessica Brown Redditt, Furtado, Jaspovice & Simons, Hayward, CA, for Plaintiff.

Dana A. Suntag, The Suntag Law Firm, A Professional Corporation, Stockton, CA, Dennis B. Kass, Evelina Maria Serafini, Manning & Marder, Kass, Ellrod, Ramirez, LLP, Los Angeles, CA, Brian J. Finn, Manning & Marder, San Francisco, CA, for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior District Judge.

Plaintiffs bring suits arising out of an investigation of them, their arrests, and their criminal prosecutions. Numerous motions are at issue here. They include two motions for reconsideration, two motions to dismiss, and one motion for judgment on the pleadings.

I. BACKGROUND

A. Procedural History

On July 18, 2008, plaintiff Joseph Ambrose ("Ambrose") filed a complaint against Gary Coffey ("Coffey"), James C. Weydert ("Weydert"), William Reynolds ("Reynolds"), Travelers Property and Casualty Company of America ("Travelers"), Zenith Insurance Company ("Zenith"), and the County of San Joaquin ("County"). On August 20, 2008, Travelers and Reynolds moved to dismiss all causes of action pled against them, and on August 28, 2008, the County, Coffey, and Weydert also moved to dismiss all claims against them. Ambrose voluntarily dismissed Zenith on September 4, 2008. On November 13, 2008, the court granted defendants' motions to dismiss Ambrose's complaint in part, and granted Ambrose leave to amend his complaint. Ambrose filed an amended complaint on September 18, 2009.

On May 28, 2009, plaintiffs Richard Sausedo ("Sausedo") and Pedram Vaezi ("Vaezi") filed a complaint against Travelers, Reynolds, County, Weydert, and Coffey, Sausedo v. Travelers Prop. & Cas. Co., 2:09-cv-01477-LKK-GGH, arising out of their arrests under similar facts. Plaintiffs concurrently filed a notice of related cases to Ambrose v. Coffey, 2:08-cv-01664-LKK-GGH. On June 16, 2009, the court consolidated Ambrose and Sausedo.

On July 27, 2009, plaintiff Michael Yates ("Yates") filed a virtually identical complaint as Sausedo against the same defendants, Yates v. Travelers Prop. & Cas. Co., 2:09-cv-02062-LKK-GGH. Yates filed a notice of related cases with his complaint to Ambrose and Sausedo. On August 3, 2009, the court ordered the cases related, and on September 2, 2009, the court consolidated Yates with Ambrose and Sausedo.

On September 21, 2009, plaintiff Wilmer D. Origel ("Origel") filed a complaint virtually identical to those of Sausedo and Yates, Origel v. Travlers Prop. & Cas. Co, 2:09-02640-LKK-GGH. On October 2, 2009, Origel filed a notice of related cases with Ambrose, Sausedo, and Yates. On October 30, 2009, the court ordered Origel related to Ambrose, Sausedo, and Yates. On January 27, 2009, the court consolidated Origel with Ambrose, Sausedo, and Yates.

On December 24, 2009, this court granted Weydert, and Coffey's motion to dismiss on grounds of qualified immunity; plaintiffs did not oppose dismissal of their claims against the County. On January 12, 2010, plaintiffs Sausedo and Vaezi, Yates, and Origel filed amended complaints. On January 26, 2010, County, Weydert, and Coffey moved to dismiss these complaints. Travelers and Reynolds also moved to dismiss these complaints at that time. On January 27, 2010, these plaintiffs filed two separate, but identical, motions for reconsideration of this court's order. On February 5, 2010, Travelers and Reynolds filed a motion for judgment on the pleadings as to plaintiff Ambrose's complaint. All motions were timely opposed.

B. Factual Allegations¹

1. Plaintiffs' Chiropractic Practice

Plaintiffs Ambrose, Yates, Sausedo, Vaezi, and Origel are all Doctors of Chiropractic licensed by the State of California Board of Chiropractic Examiners ("BCE"). Ambrose First Amended Complaint, Doc. 45, ("AFAC") ¶ 2; Yates First Amended Complaint, Doc. 66, ("YFAC") ¶ 3; Origel First Amended Complaint, Doc. 67, ("OFAC") ¶ 3; Sausedo and Vaezi First Amended Complaint, Doc. 65, ("SFAC") ¶ 3. The BCE is a state agency charged with regulating the chiropractic profession. YFAC ¶ 8; OFAC ¶ 8; SFAC ¶ 8. In their capacity as chiropractors, plaintiffs all provided services to patients who received medical benefits through workers' compensation insurance. AFAC ¶ 2; YFAC ¶ 3; OFAC ¶ 3; SFAC ¶ 3. As part of their practice, plaintiffs performed a chiropractic procedure called Manipulation Under Anesthesia ("MUA"). AFAC ¶¶ 8; YFAC ¶¶ 9, 17; OFAC ¶¶ 9, 14; SFAC ¶¶ 9, 17. Plaintiff Ambrose explains in his FAC that during an MUA, a chiropractor performs manipulation of a patient who has been anesthetized by a medical doctor. AFAC ¶ 8. But for the addition of anesthesia and the setting of a hospital, plaintiffs allege MUAs employ the same techniques as routine chiropractic practice. YFAC ¶ 12; OFAC ¶ 12; SFAC ¶ 12.

On September 13, 1990, the BCE adopted a policy statement, to wit: "a proper chiropractic adjustment, if within the scope of practice § 302, is not made illegal simply because the patient is under anaesthesia." AFAC ¶ 8; YFAC ¶ 9; OFAC ¶ 9; SFAC ¶ 9. Plaintiff Ambrose alleges that MUAs have been recognized as a lawful practice of chiropracty ever since. AFAC ¶ 8. The other plaintiffs argue that in response to subsequent concerns that MUAs exceeded chiropracty's legitimate scope, the BCE signed a "Final Statement of Reasons" recognizing MUAs on October 21, 2004. YFAC ¶ 13; OFAC ¶ 13; SFAC ¶ 13. The BCE reasoned that because chiropractors did not administer the anesthesia themselves, MUAs fell within the scope the BCE's regulations. YFAC ¶ 13; OFAC ¶ 13; SFAC ¶ 13. The BCE reaffirmed its position that MUAs are within the scope of chiropractic practice on January 20, 2005. YFAC ¶ 14; OFAC ¶ 14; SFAC ¶ 14.

Plaintiffs Yates, Origel, Sausedo, and Vaezi contend that Suzanne Honor, the worker's compensation manager of the Division of Worker's Compensation ("DWC") for the State of California, regularly spoke at DWC educational conferences on how to properly bill MUAs. YFAC ¶ 15; OFAC ¶ 15; SFAC ¶ 15.

Moreover, the State Compensation Insurance Fund ("SCIF") regularly pre-approved MUAs, and the Worker's Compensation Appeals Board ("WCAB") on several occasions ordered payment for MUAS from defendant Travelers. AFAC ¶ 8; YFAC ¶¶ 16, 18; OFAC ¶¶ 16, 18; SFAC ¶¶ 16, 18. In reliance upon the statements of state agencies, the plaintiffs all believed that MUAS were within the scope of their chiropractic practice and, consequently, performed them. AFAC ¶ 8; YFAC ¶ 17; OFAC ¶ 17; SFAC ¶ 17. Plaintiffs Sausedo and Vaezi routinely performed MUAS at Med-1 Medical Center. SFAC ¶ 17. Plaintiff Yates performed MUAS as an employee of Sierra Hills Surgery Center. YFAC ¶ 17. Plaintiff Origel was a part owner of both facilities. OFAC ¶ 27.

2. Travelers Initiates Criminal Investigations

Defendants Travelers, a licensed insurance provider within California, provides workers' compensation benefits. AFAC ¶ 3; YFAC ¶ 4; OFAC ¶ 4; SFAC ¶ 4. Plaintiffs allege that Travelers owed them all substantial debts for chiropractic services to be paid for through workers' compensation insurance. Id. Plaintiffs Yates, Origel, Sausedo and Vaezi allege that Travelers had unsuccessfully challenged MUA payments owed to chiropractors associated with Sierra Hills and Med-1. YFAC ¶ 24; OFAC ¶ 25; SFAC ¶ 24. They further allege that on December 24, 2003, the WCAB mandated that Travelers pay liens against them for MUAS performed at Sierra Hills. YFAC ¶ 25; OFAC ¶ 26; SFAC ¶ 25.

Plaintiffs allege that the number and frequency of MUAs they performed to be paid through worker's compensation, led Travelers to pursue criminal actions against them in order to prevent future claims and to avoid paying outstanding claims. AFAC ¶ 8; YFAC ¶ 20; OFAC ¶ 20; SFAC ¶ 20. Plaintiffs contend that defendant Reynolds, an employee of Travelers acting under the authorization of his employer, submitted Requests for Prosecution to District Attorney offices in Alameda, Contra Costa, Stanislaus, and San Joaquin counties in 2002. AFAC ¶ 10; YFAC ¶¶ 5, 22, 23; OFAC ¶¶ 23, 24; SFAC ¶¶ 23, 23. San Joaquin County prosecutors responded to Reynolds request, and plaintiffs allege that Reynolds took an active role in the subsequent investigation of Med-1 Medical Center and Sierra Hills with agents of the San Joaquin County District Attorney's Office, including defendant Coffey. AFAC ¶ 11; YFAC ¶ 23; OFAC ¶ 24; SFAC ¶ 23. According to plaintiffs, all defendants were aware that MUAs were within the scope of practice of licensed chiropractors. AFAC ¶ 8; YFAC ¶ 8; OFAC ¶ 8; SFAC ¶ 8.

During the investigation plaintiff Ambrose purports to have entered into a "No Prosecution Agreement" with defendant Weydert on September 18, 2003. AFAC ¶ 6. According to Ambrose, Weydert agreed not to prosecute Ambrose for insurance fraud in exchange for a statement under oath regarding billing procedures at Med-1 Medical Center, Unique Health Care Management, and plaintiff Origel's practice. Id. The agreement specified that it was subject to termination upon a finding of material dishonesty and a motion to withdraw granted by a judicial officer. Id.

3. District Attorney Files and Dismisses Criminal Charges Against Plaintiffs

Defendants Weydert filed a criminal complaint against Origel, part-owner of Med-1 and Sierra Hills, on January 5, 2005, alleging a variety of criminal offenses related to the practice of administering and billing MUAs. OFAC ¶¶ 27, 29. Origel was arrested on January 19, 2005. OFAC ¶ 27. Following the arrest, Travelers moved for a stay of all collection efforts by Med-1 and Sierra Hills for the payment of MUAs performed by plaintiffs and other chiropractors. YFAC ¶ 26; OFAC ¶ 27; SFAC ¶ 26. On May 1, 2006, a preliminary...