Home Orthopedics Corp. v. Rodríguez
| Decision Date | 25 March 2015 |
| Docket Number | No. 12–2387.,12–2387. |
| Citation | 781 F.3d 521 |
| Parties | HOME ORTHOPEDICS CORP., Plaintiff, Appellant, v. Raúl RODRÍGUEZ; José A. Linares; Julio F. Juliá; Paul Pino, Defendants, Appellees, Unidentified Directors AB, BC, CD, DE, EF, FG, GH, HI, IJ, JK, KL of Humana Health Plans of Puerto Rico (d/b/a Humana); Directors LM, MN, NO, OP, PQ, QR, RS, ST, TU, UV, VW, WX of Medical Card System, Inc. (MCS); A, B, C, D, E, F, G, H, I Insurance Companies; Luis Goris–García; Arlene Marrero; Javier Magriñá–Meléndez, Defendants. |
| Court | U.S. Court of Appeals — First Circuit |
Carlo Defendini–Díaz and Pagán, Ortega & Defendini Law Offices, PSC, on brief for appellant.
Theresa M.B. Van Vliet, Patsy Zimmerman–Keenan, and Genovese Joblove & Battista, P.A., on brief for appellees Raúl Rodríguez, José A. Linares, and Paul Pino.
Roberto Santana Aparicio, Berenice B. Bellotti Sevilla, and Del Toro & Santana, on brief for appellee Julio F. Juliá.
Before THOMPSON, BALDOCK,* and SELYA, Circuit Judges.
Home Orthopedics Corp., a medical equipment supplier based in Puerto Rico, sued the defendants for their alleged involvement in a scheme to help one guy collect a consulting fee Home Orthopedics agreed to pay him, but based on a contract it later discovered was phony. Fueled by Home Orthopedics' refusal to continue paying the fee, the defendants purportedly wielded their influence over players in the health insurance industry to jeopardize numerous contracts Home Orthopedics had with other clients.
The Puerto Rico district court dismissed Home Orthopedics' numerous federal and Commonwealth law causes of action. Home Orthopedics now appeals the dismissal of its primary claim, brought under the Racketeer Influenced and Corrupt Organizations Act, or “RICO,” disposed of for failure to state a claim. Home Orthopedics also appeals the district court's denial of its motions to conduct limited discovery and amend the complaint.
For the reasons discussed below, we affirm the district court.
Because we are reviewing a motion to dismiss for failure to state a claim, we recite the facts as they are alleged in the operative complaint and RICO case statement, in the light most favorable to Home Orthopedics.1 Ocasio–Hernández v. Fortuño–Burset, 640 F.3d 1, 12–13 (1st Cir.2011).
Since 2001, Home Orthopedics, a home medical equipment supplier and the leading company in Puerto Rico for orthotics, prosthetics, and diabetic shoes, supplied medical equipment to MMM HealthCare, Inc., a Puerto Rican health maintenance organization that we'll refer to as “the HMO.” But in mid–2004, Defendant Clinical Medical Services, Inc. (“Clinical Medical”), also a home medical equipment supplier in Puerto Rico, struck a deal with the HMO to be its exclusive provider of “durable medical equipment,” a specific category of long-lasting medical equipment used by patients in the home, including, for instance, hospital beds, canes, and crutches.
In late 2004, Clinical Medical's president, Raúl Rodríguez (“Raúl”), met with Home Orthopedics' president, Jesús Rodríguez (“Jesús”), claiming that in addition to the exclusivity agreement for durable medical equipment, Clinical Medical had entered into an additional agreement with the HMO to be its exclusive provider of orthotic and prosthetic services. Raúl told Jesús that Clinical Medical would need a subcontractor to actually provide those services, however, because Clinical Medical “did not know anything about orthotics and prosthetics.”
The complaint doesn't say whether Jesús agreed in that meeting to subcontract for Clinical Medical, but in February 2005, Jesús received a faxed “Letter of Agreement” from Raúl. The letter, a copy of which was attached to the complaint, was an unsigned, draft agreement between Home Orthopedics and the HMO (even though Raúl sent Jesús the contract and arranged for Jesús to sign it, Clinical Medical was not actually a party to the contract). The agreement would allow Home Orthopedics to continue providing orthotic and prosthetic services to the HMO's subscribers, but at a 20 percent lower profit, reducing Home Orthopedics' sales reimbursement from 100 percent to 80 percent. Specifically, the agreement provided:
[Home Orthopedics] indicates its intent to enter into an agreement with [the HMO] to render Orthotic and Prosthetic services to patients enrolled in [the HMO]. By signing this Agreement, [Home Orthopedics] agrees to render professional healthcare services and to accept [80 percent reimbursement] as full payment for all Covered Services to patients referred to [Home Orthopedics].
The agreement was drafted in English, of which Jesús functionally knew little. When Jesús asked Raúl for an explanation of the agreement, Raúl “threatened” that Home Orthopedics was “being put out of business,” and told Jesús to “take it or leave it” because another prosthetics company was also interested in the deal.
Jesús opted to take it. He signed the agreement, even though (as we gather from facts pleaded later in the complaint) he had not spoken with anyone from the HMO about it, and no one from the HMO had signed it yet.
Jesús also agreed with Raúl that in exchange for choosing Home Orthopedics as the subcontractor, Clinical Medical would earn a 12.5 percent consultant's commission on Home Orthopedics' sales to the HMO, to be paid directly to Raúl. Under the deal with Clinical Medical, then, Home Orthopedics would start receiving only 67.5 percent of the sales it made to the HMO, as opposed to the 100 percent it had been making.
With the new deal in place, business went on as usual, and in August 2005, Home Orthopedics sent the HMO an invoice. The HMO, though, sent Home Orthopedics a check accounting for 100 percent of the bill. Home Orthopedics thought the HMO made a mistake, and, in “good faith,” reminded the HMO that it should have paid out only 80 percent under the terms of the Letter of Agreement. But the HMO responded that it had never seen that agreement and would “investigate[ ] the matter.”
It's not clear from the complaint what happened in the meantime, but around October 2006, Jesús found out from the HMO that Clinical Medical was not actually its exclusive provider of orthotics and prosthetics; Clinical Medical and the HMO had negotiated an agreement to that extent, but Clinical Medical allowed the exclusivity option to expire. At that point, Home Orthopedics stopped paying Raúl his consulting fee.2
Raúl was displeased. He demanded Jesús pay him for the fees he earned in 2005 and 2006, and when Jesús wouldn't budge, defendants José Linares and Paul Pino, also executives at Clinical Medical, started calling and sending letters to Jesús to try to “collect the money owed to Raúl.”3 Raúl also “frequently called [Jesús] requesting payments and threatened him with the ‘loss of his business.’ ”
By mid- to late–2008, Raúl warned Jesús that he would “see [him] bleed drop by drop until [he] remain[ed] without a business.” Eventually Jesús, “under duress,” relented and paid Raúl $150,000—on top of the $600,000 he had already paid-via numerous payments made throughout 2008.4
Raúl wasn't satisfied, and, apparently undeterred by Jesús's refusal to pay more money, Clinical Medical filed a lawsuit against Home Orthopedics in Puerto Rico state court in April 2009. Raúl tried to get Jesús to settle the case, warning that his attorneys “have a great influence in the Puerto Rico courts.” Jesús didn't bite, and in fall 2009, started receiving collection calls and emails from Pino. He also received a written settlement demand (and follow-up correspondence regarding the settlement demand) from Linares and Pino.
In the meantime, other companies in the health insurance field started terminating their contracts with Home Orthopedics, which Raúl had warned Jesús would happen if he didn't “cooperate.” The first was in November 2006, shortly after Home Orthopedics stopped paying Raúl, when Medical Card System, Inc. terminated its contract with Home Orthopedics, supposedly for lack of proper credentialing (Home Orthopedics asserts that it had the proper credentials). After failed attempts to get Medical Card System to change its mind, Home Orthopedics hired someone to help negotiate a new services agreement with the managed care organization. During that negotiation meeting, defendant Julio F. Juliá, a friend of Raúl's who had recently begun working at Medical Card System, interrupted to falsely claim that Medical Card System could not negotiate directly with Home Orthopedics because Home Orthopedics had an exclusivity agreement with Clinical Medical.
In June 2007, First Medical, an insurance company, terminated its contract with Home Orthopedics without explanation; so did Humana Health Plans of Puerto Rico, a healthcare network, on August 1, 2009.
In September 2009, Home Orthopedics made a deal to be the “exclusive announced company of orthotics and prosthetics” at Medical Card System's convention. Medical Card System, however, cancelled the exclusivity deal and returned Home Orthopedics' payment for exclusivity, instead deciding to allow other companies to advertise along with Home Orthopedics.
Finally, in March 2010, Medical Card System terminated its new services agreement with Home Orthopedics, but this time, without giving any reason.
Convinced that the defendants—some of whom worked with Raúl, and others of whom worked for the companies that terminated their contracts with Home Orthopedics—were all in cahoots to help Raúl strongarm more money, Home Orthopedics filed suit in June 2011 in the Puerto Rico federal district court. The amended complaint, which is now the operative one in this case, sought relief against numerous defendants for violating numerous federal and Commonwealth laws, including RICO (18 U.S.C. §§ 1962(b), (c), and (d) ).5 Home Orthopedics' theory of the case was that the defendants' above-described...
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