Love v. Nat'l Med. Enterprises

• Decision Date: 16 October 2000
• Docket Number: No. 99-20656,99-20656
• Parties: (5th Cir. 2000) JUSTIN LOVE; ET AL., Plaintiffs, BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Intervenor Plaintiff-Appellant, v. NATIONAL MEDICAL ENTERPRISES, ET AL., Defendants, NATIONAL MEDICAL ENTERPRISES, INC.; NME PSYCHIATRIC HOSPITALS, INC., formerly known as Psychiatric Institutes of America, Inc.; NME SPECIALTY HOSPITALS, INC.; NORTH HOUSTON HEALTH CARE CAMPUS, INC., doing business as Laurelwood Hospital, formerly known as Laurelwood Hospital, Inc.; BAYWOOD HOSPITAL, INC., doing business as Baywood Hospital; PSYCHIATRIC FACILITY AT AMARILLO, INC., doing business as Cedar Creek Hospital, formerly known as PIA Amarillo, Inc.; PIA DENTON, INC., doing business as Twin Lakes Hospital; PIA OF FORT WORTH, INC., doing business as Psychiatric Institutes of Fort Worth; PIA SAN ANTONIO, INC., doing business as Colonial Hills Hospital; PIA STAFFORD, INC., doing business as Stafford Meadows Hospital; PIA WAXAHACHIE, INC., doing business as Willowbrook Hospital; PSYCHIATRIC INSTITUTE OF BEDFORD, INC., doing business as Bedford Meadows Hospital; PSYCHIATRIC INSTITUTE OF SHERMAN, INC., doing business as Arbor Creek Hospital; BROOKHAVEN PSYCHIATRIC PAVILION, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 765

230 F.3d 765 (5th Cir. 2000)

JUSTIN LOVE; ET AL., Plaintiffs, BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Intervenor Plaintiff-Appellant, v. NATIONAL MEDICAL ENTERPRISES, ET AL., Defendants, NATIONAL MEDICAL ENTERPRISES, INC.; NME PSYCHIATRIC HOSPITALS, INC., formerly known as Psychiatric Institutes of America, Inc.; NME SPECIALTY HOSPITALS, INC.; NORTH HOUSTON HEALTH CARE CAMPUS, INC., doing business as Laurelwood Hospital, formerly known as Laurelwood Hospital, Inc.; BAYWOOD HOSPITAL, INC., doing business as Baywood Hospital; PSYCHIATRIC FACILITY AT AMARILLO, INC., doing business as Cedar Creek Hospital, formerly known as PIA Amarillo, Inc.; PIA DENTON, INC., doing business as Twin Lakes Hospital; PIA OF FORT WORTH, INC., doing business as Psychiatric Institutes of Fort Worth; PIA SAN ANTONIO, INC., doing business as Colonial Hills Hospital; PIA STAFFORD, INC., doing business as Stafford Meadows Hospital; PIA WAXAHACHIE, INC., doing business as Willowbrook Hospital; PSYCHIATRIC INSTITUTE OF BEDFORD, INC., doing business as Bedford Meadows Hospital; PSYCHIATRIC INSTITUTE OF SHERMAN, INC., doing business as Arbor Creek Hospital; BROOKHAVEN PSYCHIATRIC PAVILION, Defendants-Appellees.

No. 99-20656

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

October 16, 2000

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Texas

Before JOLLY, SMITH, and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Primarily at issue is which limitations accrual rule to apply for civil claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68, when injuries occur not only during, but outside, the limitations period. Summary judgment was awarded against Blue Cross and Blue Shield of Texas, Inc. on the ground that its RICO, and other, claims are time-barred. We VACATE and REMAND.

I.

In September 1991, the Texas Attorney General sued Psychiatric Institutes of America, Inc. (PIA). PIA, now known as NME Psychiatric Hospitals, Inc., is owned by appellee National Medical Enterprises, Inc. The action alleged, inter alia, that PIA's psychiatric hospitals deliberately solicited victims and submitted fraudulent claims against the Texas Crime Victims Compensation Fund.

Beginning that October, a Texas state legislative committee conducted hearings to investigate psychiatric hospital abuse in Texas. The hearings, which received extensive media coverage, uncovered evidence that some Texas psychiatric hospitals engaged in deceptive practices to recruit patients and based discharge decisions on insurance coverage.

Lane Melton, who worked in the special claims unit of Blue Cross and Blue Shield of Texas, Inc. (BCBST), and who, in 1991, was also president of the Texas chapter of the National Health Care Antifraud Association, testified before the state committee that November. Melton also had routine communications with the FBI and the offices of the United States Attorney and the Texas Attorney General during their investigations in 1991 of PIA and NME hospitals.

In July 1992, BCBST was asked to join an action filed by other insurers against Appellees. BCBST declined, not considering itself a victim of fraud.

In the fall of 1995, in connection with its litigation against another group of psychiatric hospitals, and at the direction of outside counsel, BCBST sent questionnaires to insureds regarding fraudulent claims. In reviewing the responses, BCBST discovered that one of the hospitals being sued had been previously owned by PIA, and that some of the alleged fraud had occurred during PIA's ownership.

In mid-February 1996, BCBST intervened in an action filed in 1995 in Texas state court by former patients against Appellees and others. BCBST alleged: it had provided insurance coverage to persons who received psychiatric or other health care services from Appellees from 1989-92; and Appellees engaged in a scheme to defraud BCBST through acts and practices calculated to maximize insurance-covered benefits, including deliberately misdiagnosing patients' conditions, determining the length of inpatient care based solely on the amount of insurance coverage, and misrepresenting that services were provided. Claiming fraud, intentional and negligent misrepresentation, and contractual and equitable subrogation, BCBST sought to recover the amount it had paid Appellees from 1989-92, on behalf of covered patients, for unnecessary medical expenses. The action was removed to federal court in late February 1996.

BCBST amended its complaint in April 1997, adding claims for civil RICO, unjust enrichment, and restitution. It filed a second amended complaint that July, presenting the same claims.

That September, Appellees moved to dismiss or strike the second amended complaint, asserting, inter alia, that it did not allege fraud with the particularity required by Fed. R. Civ. P. 9(b). And, approximately two and one-half months later, Appellees moved for summary judgment, contending that BCBST's claims were barred by the applicable statutes of limitations. BCBST responded in early 1998, asserting, inter alia: it exercised reasonable diligence in an effort to discover the bases for its claims; and the limitations periods were tolled under the doctrine of fraudulent concealment.

That May, the district court granted Appellees' motion to dismiss, holding that BCBST's claims, all of which rested on allegations of fraud, failed to satisfy Rule 9(b)'s particularity standard. The docket entry for that order states that the ruling "moot[ed]" Appellees' summary judgment motion. BCBST's appeal from that order was dismissed by our court for lack of appellate jurisdiction. Love v. National Med. Enters., Inc., No. 98-20606 (5th Cir. 15 Sept. 1998) (unpublished).

In late November 1998, the district court granted the former-patient plaintiffs' motion to sever their claims from BCBST's, and remanded those plaintiffs' claims to state court. Appellees moved for entry of final judgment that December. In addition to opposing the motion, BCBST sought leave to amend its complaint.

On 1 February 1999, without obtaining leave of court, BCBST filed a third amended complaint. It alleged: Appellees engaged in a fraudulent scheme beginning in 1988, and continuing into at least 1993; and BCBST sought to recover the amounts paid to Appellees for allegedly fraudulent insurance claims submitted from 1988 through 1995. In addition to the previous claims, it added civil conspiracy, breach of contract, and ERISA. It also claimed tolling of the statutes of limitations because Appellees allegedly fraudulently concealed facts supporting BCBST's claims, and because some of its claims arise out of the treatment of minors. In mid-February, Appellees moved to strike or dismiss the third amended complaint, on the grounds that: it was filed without leave of court; amendment would be futile because BCBST's claims are time-barred; and it failed to satisfy Rule 9(b).

One week later, the district court denied Appellees' motion for entry of final judgment and granted BCBST leave to file the third amended complaint. But, that April, the court granted summary judgment for Appellees sua sponte, holding that all of BCBST's claims are time-barred.

II.

BCBST contends that the district court erred by: granting summary judgment sua sponte against the new claims in its third amended complaint civil conspiracy, breach of contract, and ERISA (it does not do so for its other claims, even though they were likewise dismissed sua sponte); regarding its civil RICO claims, holding recovery is time-barred for insurance claims submitted within the four-year limitations period; and holding that its civil RICO claims accrued when it should have discovered the alleged fraudulent scheme, rather than when it discovered, or should have discovered, its injuries. In addition, BCBST maintains there is a material fact issue on whether, for all of its claims, which cover the period 1988-95, the limitations periods were tolled by fraudulent concealment and for insurance claims submitted for treatment of minors.

We review a summary judgment de novo, "viewing all facts, and the inferences to be drawn from them, in the light most favorable to the non-movants". Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994). Such judgment is appropriate "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". Fed. R. Civ. P. 56(c).

"[T]he substantive law will identify which facts are material". Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "dispute about a material fact is 'genuine,' ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party". Id.; see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

A.

First, we reject Appellees' contention that BCBST's notice of appeal was not timely filed, resulting in our lacking appellate jurisdiction. BCBST's motion for reconsideration was denied in early May 1999. Its notice of appeal, filed 2 July 1999, was untimely. Fed. R. App. P. 4(a)(1)(A), (4)(a)(4)(B)(ii). But, also on 2 July, within the 30-day period specified in Fed. R. App. P. 4(a)(5)(A)(i), BCBST moved for an extension of time to file its notice of appeal. The motion was granted on 12 July.

Appellees maintain: the extension did not resuscitate the 2 July notice; and BCBST was required, post-extension, to file another notice of appeal. In granting the extension, however, the district court stated that the notice "shall be filed by July 2, 1999". Having already filed its notice of appeal on that date, BCBST did not need to file another.

B.

BCBST challenges the procedure employed by the district court for...