Auburn Medical Center, Inc. v. Andrus

Decision Date12 June 1998
Docket NumberNo. Civ.A. 97-D-192-E.,Civ.A. 97-D-192-E.
Citation9 F.Supp.2d 1291
PartiesAUBURN MEDICAL CENTER, INC., Plaintiff, v. Terry ANDRUS, et al., Defendants.
CourtU.S. District Court — Middle District of Alabama

K. Anderson Nelms, Montgomery, AL, Hugh V. Smith, Jr., Montgomery, AL, David J. Llewellyn, Conyers, GA, for Plaintiff.

Ivan Wood, Houston, TX, James E. Williams, James F. Mozingo, Montgomery, AL, Scott G. Camp, Houston, TX, Ronald G. Davenport, Montgomery, Al, David R. Boyd, Montgomery, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

Before the court are Motions to Dismiss filed by the various Defendants: (1) McCauley Associates and R. Mack Freeman, filed March 18, 1997; (2) James E. Sanders, filed April 7, 1997; (3) John V. Denton, filed April 7, 1997; (4) Terry Andrus, Carey Owen and Kenneth Robinson, filed April 7, 1997; and (5) E.L. Spencer, Thomas M. Botsford, Rhett E. Riley, James W. Mathews, Paul H. Waddy, William D. Lazenby, James P. Himmelwright, R. Kenneth McKemie, Lucinda S. Cannon, Nelson Hillyer, and Jo Lovell ("the Board Member Defendants"), filed April 7, 1997. On April 21, 1997, Plaintiff filed a Response to the Motion to Dismiss by Defendants McCauley & Associates and R. Mack Freeman Jr., to which those Defendants replied on June 30, 1997. On May 21, 1997, Plaintiff filed a Response to the Motion to Dismiss by Terry Andrus, Carey Owen, Kenneth Robinson, the Members of the Board of Directors, and James E. Sanders ("Pl.'s Resp. to Defs.' Mot. to Dis."). On June 20 1997, Defendants Terry Andrus, Carey Owen, Kenneth Robinson, John Denson, and the Board Member Defendants filed a Brief in Support of their Motions to Dismiss.

After careful consideration of the arguments of counsel, the relevant law and the record as a whole, the court finds that Defendants' Motions are due to be granted.

BACKGROUND

The Parties before the court have a history steeped in litigation; the instant action is but the latest battle in this long-running conflict. Plaintiff Auburn Medical Center is an Alabama corporation holding a Certificate of Need ("CON") issued by the State Health Planning and Development Agency ("SHPDA"), pursuant to the laws of the State of Alabama and SHPDA regulations, to construct, equip and operate a sixty-four (64) bed general acute care facility in Auburn, Lee County, Alabama.

East Alabama Health Care Authority, d/b/a East Alabama Medical Center ("EAMC") operates a hospital facility in Opelika, Lee County, Alabama. Defendant Terry Andrus is the administrator of EAMC and both Carey Owens and Kenneth Robinson are EAMC employees. Defendant James E. Sanders is the Director of Certificate of Need Operations of Review of SHPDA. Defendant John V. Denson is and was at all times relevant to this action the General Counsel of EAMC. The Board Member Defendants all served as members of the Board of Directors of EAMC. Defendant R. Mack Freeman, Jr. at all times relevant to this action was employed as an architect for EAMC. Defendant McCauly Associates, Inc. at all times relevant to this action was contracted to provide services for EAMC.

On February 18, 1997, Plaintiff Auburn Medical Center filed a Complaint against the several Defendants, alleging a conspiracy of activities among them, the objective of which was to prevent the construction of Plaintiff's hospital, Auburn Medical Center, pursuant to its State issued Certificate of Need ("CON"), by interfering with its ability to obtain financing, doctor support, and market share. Plaintiff contends that Defendants, through the above described conspiracy, engaged in a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. Plaintiff seeks damages and injunctive relief under RICO for Defendants' alleged conspiracy to commit multiple criminal acts of mail fraud in violation of 18 U.S.C. § 1341. Further, Plaintiff alleges a § 1983 claim for deprivation of Due Process in violation of the Fifth and Fourteenth Amendments to the United States Constitution, as well as a claim under the All Writs Act, 28 U.S.C. § 1651.

MOTION TO DISMISS STANDARD

When ruling on a motion to dismiss for failure to state a claim, the court must assume that the factual allegations in the complaint are true. Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989); Fed.R.Civ.P. 12(b)(6). Assuming that the facts are true, a complaint may be dismissed under Federal Rule of Civil Procedure 12(b)(6) only "if it is clear that no relief could be granted" under any set of facts that could be proved consistent with the allegations.1 Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). On a motion to dismiss for failure to state a claim upon which relief may be granted, the movant "sustains a very high burden." Jackam v. Hospital Corp. of America Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir.1986) (citing Currie v. Cayman Resources Corp., 595 F.Supp. 1364, 1376 (N.D.Ga.1984)). The Court of Appeals for the Eleventh Circuit has held that "motions to dismiss for failure to state a claim should be denied unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims." Jackam, 800 F.2d at 1579 (quoting Bracewell v. Nicholson Air Servs., Inc., 680 F.2d 103, 104 (11th Cir.1982)).

DISCUSSION
I. RICO Claims

Section 1962(c) of RICO prohibits conducting or participating in the conduct of an enterprise "through a pattern of racketeering activity." Sedima v. Imrex Co., 473 U.S. 479, 482, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985).2 Section 1964(c) of Title 18 of the United States Code provides a private right of action for "any person who is injured in his business or property by reason of a violation of [18 U.S.C.] section 1962." 18 U.S.C. § 1964(c). To recover under civil RICO, section 1964(c) requires a private plaintiff to plead an additional element: the plaintiff must show that he, she, or it suffers, or has suffered, an injury as a result of the racketeering activity. Pelletier v. Zweifel, 921 F.2d 1465, 1499 (11th Cir.1991).

To state a claim under RICO a plaintiff must allege each of the following: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, 473 U.S. at 482, 105 S.Ct. 3275. To establish a pattern of racketeering activity there must be at least two predicate acts of racketeering activity, one of which occurred after the effective date of the statute, and the last of which occurred within ten years after the commission of a prior act of racketeering activity. 18 U.S.C. § 1961(5). These racketeering predicates must be related and amount to, or threaten the likelihood of, continued criminal activity. H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 237-38, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). "Racketeering activity" is defined as any act indictable under certain provisions of the United States Code. 18 U.S.C. § 1961(1).

A. Plaintiff Fails to Establish Requisite Predicate Acts.

Plaintiff alleges that Defendants conspired to commit mail fraud in violation of 18 U.S.C. § 1341, which is a specified predicate act that will sustain a RICO claim. 18 U.S.C. § 1961(1)(B). The essential elements of a mail fraud claim are: (1) a scheme to defraud; (2) that the defendant "caused" a use of the mails; and (3) that the mailing was for the purpose of executing the scheme. United States v. Hewes, 729 F.2d 1302 (11th Cir.1984). Plaintiff alleges that Defendants engaged in numerous instances of mail fraud, which may be grouped into two categories. For the reasons outlined below, the court finds that Plaintiff fails to establish that Defendants have engaged in the requisite predicate acts of mail fraud for purposes of sustaining its RICO claim.

1. Fraudulent Application and Amended Application for CON

The first and last instances of mail fraud alleged by Plaintiff involve EAMC's application and amended application for a CON. Plaintiffs allege that the first application occurred in response to Plaintiff's October 1983 filing with SHPDA of an application for a CON approving and allowing for the construction of a 64-bed hospital and facility in Auburn, Lee County, Alabama. (Compl.¶ 39.) Plaintiff contends that at that point, Defendants entered into a conspiracy to prevent the issuance of Plaintiff's CON by submitting a competing CON application on behalf of EAMC for the construction and operation of a 54-bed addition to its existing facility in neighboring Opelika, Lee County, Alabama. (Compl.¶ 39.) Plaintiff contends that such actions constitute a violation of the Mail Fraud statute because:

said competing CON application [was] filed on behalf of EAMC based on the fraudulent pretense that EAMC actually desired to obtain said CON and build said 54 bed addition to serve the need for additional hospital beds.... In fact, EAMC did not intend to serve the need for additional beds in the Lee County area, but rather intended to stop its competitors, Auburn, from serving the need for additional hospital beds in the Lee County area. Said fraudulent application was filed through the United States Mail in violation of the Mail Fraud Statute of 18 U.S.C. § 1342, as it was an attempt to deprive Auburn of its property right through false and fraudulent pretenses through the use of the United States Mail.

(Compl. ¶ 40.)

Plaintiff contends that Defendants further violated the Mail Fraud statute on or about March 8, 1995, by filing an amended application on behalf of EAMC for a CON for an Ambulatory Surgery Center to be located at Auburn. Plaintiff contends that the amended application contained false information and false representations, that Defendants knew that said application contained false information, and that said application was filed via the United States Mail. (Compl.¶ 75-78.) Plaintiff contends that the amended application was filed with SHPDA...

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