Group v. Yoser

• Decision Date: 19 January 2011
• Docket Number: No. 09–2216.,09–2216.
• Citation: 765 F.Supp.2d 1023
• Court: U.S. District Court — Western District of Tennessee
• Parties: VRF EYE SPECIALITY GROUP, PLC, Plaintiff,v.Seth L. YOSER, M.D., James Baize, and Medical Solutions, LLC, Defendants.

765 F.Supp.2d 1023

VRF EYE SPECIALITY GROUP, PLC, Plaintiff,

v.Seth L. YOSER, M.D., James Baize, and Medical Solutions, LLC, Defendants.

No. 09–2216.

United States District Court, W.D. Tennessee, Western Division.

Jan. 19, 2011.

Thomas K. Potter, III, James A. Haltom, Burr & Forman LLP, Nashville, TN, Stephen F. Libby, The Law Offices of Stephen F. Libby, Memphis, TN, for Plaintiff.Daniel D. Warlick, Stephen F. Libby, Law Office of Dan Warlick, Nashville, TN, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST SETH L. YOSER, M.D.

SAMUEL H. MAYS, JR., District Judge.

Plaintiff VRF Eye Specialty Group, PLC (“VRF” or the “Practice”) alleges that Defendant Seth L. Yoser, M.D. (“Yoser”) participated in a scheme in which he illegally procured medication from VRF, and, along with his co-defendants James Baize (“Baize”) and Medical Solutions, LLC (“Medical Solutions”), resold that medication to VRF and various third parties. ( See Compl. ¶¶ 1–29, ECF No. 1.) VRF argues that Yoser's actions violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–68, and various state laws. ( See Compl. ¶¶ 30–64.)

Before the Court is VRF's Motion for Summary Judgment on its claims against Yoser filed on June 29, 2010. ( See Mot. for Summ. J. Against Yoser, ECF No. 26.) (“Pl.'s Mot.”) Yoser responded on November 1, 2010. ( See Def. Seth M. Yoser, M.D.'s Resp. to Pl.'s Mot. for Summ. J., ECF No. 44.) VRF replied on November 12, 2010. ( See VRF's Reply Supporting Summ. J. Against Yoser, ECF No. 46.) (“Pl.'s Reply”) For the following reasons, the Court GRANTS IN PART and DENIES IN PART VRF's Motion for Summary Judgment on its claims against Yoser.

I. Background ¹

Organized as a limited liability company (“LLC”), VRF is a Memphis, Tennessee-based, multi-physician, medical practice that treats patients with vision problems. (Statement of Uncontested Material Facts Supporting VRF's Mot. for Summ. J. Against Yoser ¶ 1, ECF No. 26–2.) (“Pl.'s Statement”). Yoser practiced medicine at VRF from the time he entered into VRF's Operating Agreement (the “Agreement”) until his expulsion on May 30, 2008. ( Id. ¶ 3.) Under the Agreement, VRF's members were required to meet certain practice standards. ( Id. ¶ 4; see also Ex. A §§ 6.7, 6.12, ECF No. 26–4.) If members failed to abide by those standards, they faced expulsion “for cause,” with continuing liability for resulting damages set off against any amounts VRF owed them. (Pl.'s Statement ¶ 4; see also Ex. A §§ 6.7, 6.12.)

After learning facts that led VRF to believe Yoser had engaged in professional misconduct,² Thomas Brown, VRF administrator, and Dr. Subba Gollamudi, chair of VRF's executive committee, confronted Yoser on May 14, 2008. ( Id. ¶ 6.) The following day, VRF's members met to discuss Yoser's misconduct and voted to suspend him for the remainder of May, pending the results of an investigation. ( Id. ¶ 7.) VRF states that the subsequent investigation revealed that Yoser had committed professional misconduct.³ ( Id. ¶ 8.) On May 30, 2008, VRF's members expelled Yoser after concluding that he had committed professional misconduct.⁴ (Pl.'s Statement ¶¶ 10–11.)

On May 12, 2009, Yoser was charged with thirty-five counts of criminal wrongdoing, including ten counts of mail fraud, twenty-three counts of unlicensed wholesale distribution of prescription drugs, and wire fraud. ⁵ (Ex. 5, ECF No. 26–13.) Yoser entered a plea of guilty to all charges and was sentenced to forty-two months in prison and ordered to make a restitution payment of $400,000.00 to VRF.⁶ ( See Ex. 6, ECF No. 26–14; Pl's Statement ¶ 13; Def. Seth M. Yoser, M.D.'s Resp. to Statement of Uncontested Material Facts ¶ 14, ECF No. 44–4 (“Def.'s Statement”); Ex. A, at 5, ECF No. 44–1.)

During his criminal proceeding, Yoser admitted that between July 2002 and May 12, 2008, he devised and implemented a scheme to enrich himself financially by defrauding VRF and Medicaid through false billings and representations. (Pl.'s Statement ¶ 15.) Yoser procured unused prescription drugs from VRF and illicitly resold those drugs. ( See id. ¶¶ 17, 23.) At the time, VRF had a system to monitor the use of medication by its members. ( See id. ¶ 9.) VRF marked each vial of medication with two identical labels containing a unique letter-number code. ( See id.) When dispensing medication to a patient, a treating physician was required to place one label on the patient's chart and the other on the patient's payment ticket. ( See id.) The Agreement required VRF physicians to administer only one dose of medication from each vial and discard the remainder. ( See id.) To covertly procure the unused prescription drugs he resold, Yoser would obtain the number of vials he believed necessary to treat his patients on a particular day, but, as he treated his patients, he would administer multiple doses of medication from a single vial.⁷ ( See id.) That process allowed Yoser to obtain more vials than he actually used and provided him with sufficient labels to affix to his patients' charts so that VRF could bill them or their insurance providers, allowing his scheme to continue. ( See id.) Yoser also performed placebo injections on patients and took “leftover medication[ ]” from VRF. (Pl.'s Statement ¶¶ 16, 22.) In that way, Yoser acquired the medication he resold.

Once Yoser had covertly obtained medication from VRF, he resold it through Medical Solutions, a Cordova, Tennessee-based entity. (Pl.'s Statement ¶¶ 2, 24.) Yoser used the U.S. Postal Service and interstate wire transfers to resell medication to third parties, including some outside Tennessee. ( Id. ¶¶ 23, 25.) Specifically, Yoser or Medical Solutions received the following payments for medication he had wrongfully procured from VRF: 1) $758,400.00 from Retina Specialist P.A. of Corpus Christi, Texas, for 607 vials of Visudyne and 16 vials of Lucentis; 2) $89,900.00 from West Memphis Eye Center of Memphis, Tennessee, for 65 vials of Visudyne; 3) $190,500.00 from ARK–LA–TEX Retinal Consultants of Shreveport, Louisiana, for 162 vials of Visudyne; 4) $54,400.00 from Retina Associates P.A. of Little Rock, Arkansas, for 40 vials of Visudyne; 5) $375,010.00 from Hughes Eye Center of Jackson, Tennessee, for 156 vials of Lucentis, 55 vials of Visudyne, and 24 vials of Avastin; and 6) $1,952,000.00 from VRF itself for 620 vials of Visudyne and 615 vials of Lucentis. (Pl.'s Statement ¶¶ 26–31.)

The parties dispute the impact of Yoser's scheme on VRF. VRF contends that Yoser injured VRF in its business and property. (Pl's Statement ¶ 33; Pl's Reply 5–8.) According to Yoser, his scheme did not damage VRF's property, and VRF received full restitution for any business losses. (Def.'s Statement ¶ 34.)

The parties also dispute the extent to which Yoser must indemnify VRF for its costs and fees. Under the Agreement, Yoser is liable to VRF for “any and all damages caused by the acts or omissions that gave rise to his Expulsion for Cause, including, without limitation, attorneys' fees and disbursements incurred in connection therewith.” (Pl.'s Statement ¶ 35; see also Ex. A § 6.12(c)(ii).) Yoser contests the “amount, mode, method, necessity and reasonableness” of VRF's costs and fees. (Def.'s Statement ¶ 35.) Specifically, Yoser contests the “reasonableness, necessity and relationship to” VRF's alleged damages of the following amounts: 1) $31,764.00 in fees and expenses paid to Southern Professional Group (“SPG”); 2) $35,188.00 in fees and expenses paid to Waller Lansden Dortch & Davis, PLLC (“Waller Lansden”); 3) $142,254.56 in fees and expenses paid to Burr & Forman, LLP (“Burr & Forman”); and 4) an additional $55,468.59 in attorney's fees and expenses paid to Burr & Forman for legal work on this action. (Def.'s Statement ¶¶ 36–39.)

On April 10, 2009, VRF brought this suit against Yoser, Baize, and Medical Solutions, alleging civil violations of RICO and various state-law claims. (Compl.¶¶ 30–64.) Yoser answered VRF's Complaint on June 22, 2009, and amended his answer on September 2, 2009. ( See Answer, ECF No. 12; Am. Answer, ECF No. 18.) On June 29, 2010, VRF filed the motion now before the court, seeking summary judgment on its its two civil RICO claims and its state-law claims for breach of duty and conversion.⁸ ( See Pl.'s Mot. 1.) VRF requests indemnification for fees and expenses, treble damages under RICO, and a declaratory judgment. ( Id.)

II. Jurisdiction and Choice of Law

Because VRF alleges that Yoser's misconduct constitutes a civil violation of RICO, 18 U.S.C. § 1962(c), the Court has federal question jurisdiction. See 28 U.S.C. § 1331; 18 U.S.C. § 1964(d) (“Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court....”); Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 318 (6th Cir.1999) (noting that RICO claims provide basis for federal question jurisdiction). The Court has supplemental jurisdiction over VRF's state-law claims. See 28 U.S.C. § 1367(a).

State substantive law applies to state-law claims brought in federal court. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Whether characterized as contract or tort claims, Tennessee substantive law applies to VRF's state-law claims. VRF and Yoser entered into the Agreement, which includes a choice of law provision stating that it “shall be governed in all respects, including validity, interpretation and effect by, and shall be enforceable in accordance with the internal laws of the State of Tennessee, without regard to conflicts of laws principles.” (Ex. A § 16.15.) The injury that VRF alleges occurred in Tennessee, and the parties agree that Tennessee law applies. Therefore, the Court will apply Tennessee substantive law to VRF's state-law claims.

III. Standard of Review

Under...