Kwoun v. Southeast Mo. Pro. Standards Review Org.

Citation622 F. Supp. 520
Decision Date19 September 1985
Docket NumberNo. S84-259C(D).,S84-259C(D).
PartiesSoung O. KWOUN, et al., Plaintiffs, v. SOUTHEAST MISSOURI PROFESSIONAL STANDARDS REVIEW ORGANIZATION, et al., Defendants.
CourtU.S. District Court — Eastern District of Missouri

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George L. Fitzsimmons, Fitzsimmons & McMichael, P.C., Clayton, Mo., John C. Rasp, Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, Mo., for Sandler, Legan and other defendants.

Bruce Granger, (of counsel for Deputy Regional Atty.) Kansas City, Mo., Henry J. Fredericks, Asst. U.S. Atty., St. Louis, Mo., for Federal defendants.

Richard R. Kordenbrock, Brinker, Doyen & Kovacs P.C., Clayton, Mo., for Bregant.

Christopher J. Holthaus, Stephen H. Gilmore, St. Louis, Mo., Irwin M. Roitman, Clayton, Mo., for plaintiffs.

William L. Webster, Atty. Gen., Jerry L. Short, Asst. Atty Gen., Jefferson City, Mo., for Clark.

MEMORANDUM

WANGELIN, District Judge.

This matter is before the Court upon six separate motions to dismiss the abovestyled action or, in the alternative, for summary judgment. Said motions were brought by defendants Howard, Nicholson, Kram, and Secretary of Health and Human Services; defendants Southeast Missouri Professional Standards Review Organization (SEMO PSRO) and named physicians (SEMO Doctors); defendant Legaspi and defendant Bregant. Each of the above named defendants incorporate Defendants' Suggestions in Support of Motions of defendant SEMO PSRO and others to dismiss or, in the alternative, for summary judgment filed with this Court January 18, 1985 as argument in support of their individual and collective motions.

FACTUAL BACKGROUND

Plaintiffs' cause of action arises out of an initial determination by the Health Care Financing Administration (hereinafter HCFA), which is a branch of the Department of Health and Human Services, to exclude the plaintiff from the medicare reimbursement program. The plaintiff was notified on September 11, 1981 that the agency was suspending his receipt of reimbursement under the Medicare Program pending any administrative appeals pursuant to 42 U.S.C. § 1320c.

Plaintiff subsequently filed an action before Administrative Law Judge Francis J. Eyerman. The ALJ exonerated plaintiff Dr. Kwoun from all accusations against him. Plaintiffs filed this action alleging defendants' conduct in the above mentioned proceedings constituted violations of 42 U.S.C. § 1981 (Count I); 42 U.S.C. § 1985(2) (Count II); 42 U.S.C. § 1985(3) (Count III); and the Fifth Amendment (Count IV). Plaintiffs' further assert tort claims for malicious prosecution (Count V); intentional infliction of emotional distress (Count VI); and prima facie tort (Count VII).

In determining the sufficiency of a complaint in the face of a motion to dismiss for failure to state a claim pursuant to Federal Rule 12(b)(6), the accepted rule as articulated by the United States Supreme Court is that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). If, on a motion to dismiss or a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. Fed.R.Civ.P. 12(c). Under Rule 56,

the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

Defendants appear to raise challenges under both Rule 12(b)(6) and Rule 56(c), and accordingly, to the extent that the Court will consider matters outside the pleadings on a given claim, the ruling shall be based on Rule 56(c).

A.

Defendants' first ground for dismissal is that the three corporate plaintiffs do not have a cause of action in that the complaint only alleged claims by plaintiff Kwoun not the three corporate plaintiffs. Defendants further assert that because the corporate plaintiffs are not members of a race, they cannot assert a cause of action under 42 U.S.C. §§ 1981 or 1985. Moreover, defendants assert that because no sanctions were brought against the corporate plaintiffs, they have no cause of action for denial of equal protection or due process or a claim for malicious prosecution.

Defendants' motion to dismiss for failure to state a cause of action as to three corporate plaintiffs must be denied. The complaint regarding these three plaintiffs is sufficient since it "... contains allegations from which an inference fairly may be drawn that evidence of material points will be introduced at trial." 5 Wright & Miller, Federal Practice & Procedure, § 1216 at 122-123 (1969). Moreover, corporations may file claims under 42 U.S.C. § 1981 as well as § 1985 and the United States Constitution. Des Vergners v. Seekonk Water District, 601 F.2d 9 (1st Cir. 1979). The relationship between plaintiff Kwoun and each of the corporate plaintiffs is articulated in the Amended Complaint. In each instance, plaintiff Kwoun is either the principal stockholder or trustee of the plaintiff corporations and the plaintiff corporations are or have provided medical service. Given the possibility of alleged harm to plaintiff Kwoun, this Court finds that there is an inference that the plaintiff corporations in which plaintiff Kwoun was involved were also injured.

Thus, because the corporate plaintiffs may have been damaged by defendants' actions and because corporations are persons for purposes of civil rights and Fifth Amendment claims, the corporate plaintiffs do have a cause of action and defendants' motion to dismiss will be denied.

B.

Next, defendants assert that defendant SEMO doctors should be dismissed because defendant SEMO PSRO is a Missouri not-for-profit corporation which can be sued in its corporate name and that the inclusion of defendants SEMO doctors is surplusage. This contention also fails.

Corporate officers and directors have personal liability under the federal civil rights acts if they intentionally cause a corporation to infringe on the rights secured by those acts. Tillman v. Wheaton-Haven Recreation Association, 517 F.2d 1141, 1146 (4th Cir.1975). In Clark v. Universal Builders, Inc., 501 F.2d 324 (1974), the Seventh Circuit found that the concept of separate identity between shareholders, directors, and officers and their corporations is not sacrosanct. It demands even less respect if it becomes clear that the corporation is used as a shield to violate the civil rights of others. Id. at 340 n. 23. Plaintiffs' amended complaint alleges that defendant doctors through defendant SEMO PRSO have abridged plaintiffs' civil rights. As such plaintiffs' amended complaint is sufficient to state a cause of action against both defendant SEMO PRSO and defendant SEMO doctors.

C.

Defendants' next contention is that plaintiffs' claim under 42 U.S.C. §§ 1981, 1985(2), 1985(3), the Fifth Amendment, and their state claims are precluded by the Medicare Act. In support of this contention defendants cite Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981).

In Middlesex County Sewerage Authority the Court determined that when remedial devices provided in a particular Act are sufficiently comprehensive, they may suffice to demonstrate Congressional intent to preclude the remedy of suits under the civil rights acts. Id. at 20, 101 S.Ct. at 2626.

The scope of the preclusion provision has engendered much litigation and little consensus. It is agreed by all of the circuits that the central target of a Section 405(h) preclusion is "any action envisioning recovery on any claim emanating from" the Medicare Act. Association of American Medical Colleges v. Califano, 569 F.2d 101, 107 (D.C.Cir.1977).

The holding in Middlesex County Sewerage Authority created a narrow exception to the Supreme Court's 1981 holding in Main v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980) that 42 U.S.C. § 1983 authorizes a cause of action for violations of federal statutory rights. The Court in Middlesex was concerned that administrative procedures contained in particular statutes should not be circumvented. Middlesex, 453 U.S. at 20, 101 S.Ct. at 2626.

Defendants cite V.N.A. of Greater Tift City, Inc. v. Heckler, 711 F.2d 1020 (11th Cir.1983) for the proposition of the Medicare Acts' exclusivity. While defendants correctly state the principle of V.N.A. of Greater Tift City, Inc., the facts here are distinguishable. In V.N.A. the plaintiffs' claims were seeking recovery on a claim directly related to provisions of the Act and the Court held that plaintiffs were limited to the provisions of the Act when seeking a remedy. Here, however, plaintiffs are alleging separate claims unrelated to the Act. The only connection between the Act and plaintiffs' claims is that plaintiffs' claims arose during other proceedings under the Act. Plaintiff Kwoun has availed himself of the remedies available under the Act for his claims under the Act. Now plaintiffs are seeking redress for alleged wrongs which arose separate and apart from the Act. Accordingly, defendants' assertion that the Medicare Act precludes plaintiffs' action is...

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