Medical Emergency Service Associates v. Foulke

• Decision Date: 06 January 1986
• Docket Number: No. 85 C 4604.,85 C 4604.
• Citation: 633 F. Supp. 156
• Parties: MEDICAL EMERGENCY SERVICE ASSOCIATES (MESA) S.C., Plaintiff, v. Douglas J. FOULKE, M.D., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

633 F. Supp. 156

MEDICAL EMERGENCY SERVICE ASSOCIATES (MESA) S.C., Plaintiff, v. Douglas J. FOULKE, M.D., et al., Defendants.

No. 85 C 4604.

United States District Court, N.D. Illinois, E.D.

January 6, 1986.

Jenner & Block, Chicago, Ill., for plaintiff.

Burke, Griffin, Chomicz & Wienke, P.C., Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

GETZENDANNER, District Judge:

This case is before the court on the motion to dismiss of defendants Douglas J. Foulke, M.D. and Waukegan Associates, Ltd. ("Waukegan"), and the motion to dismiss or in the alternative for summary judgment and the motion for Rule 11 sanctions of defendants Howard J. Croft, M.D., Julio Mancera, M.D., and William Helvey, M.D.

The sole basis for this court's jurisdiction is Count I which purports to charge a civil RICO violation, 18 U.S.C. § 1961 et seq. The remaining counts are all state law based. For the reasons stated, Count I is dismissed for failure to state a claim and, the court electing not to exercise jurisdiction over the state law claims, the pendent counts are dismissed without prejudice.

The plaintiff is Medical Emergency Service Associates S.C. ("MESA"), an Illinois Medical Corporation in the business of providing emergency room physicians to hospitals under contract for a fee. The complaint alleges that the defendant doctors were employees of MESA, but MESA now concedes that only Dr. Foulke was an employee and that the other physicians were independent contractors. On behalf of MESA, the doctors were providing emergency room services to Victory Memorial Hospital and at some point they decided to terminate their relationship with MESA, persuade the hospital to terminate its relationship with MESA, and provide the same emergency room services to the hospital through defendant Waukegan.

To turn this apparent state law case into a federal RICO case, the plaintiff attempts to allege a mail fraud case based on an employee's breach of the fiduciary duties of disclosure and loyalty. The plaintiff alleges that the doctors owed MESA a fiduciary duty by virtue of their employment relationship and they breached that duty inter alia by failing to disclose to MESA the existence of their plan to form a new enterprise to replace MESA as the provider of emergency medical services for Victory Memorial. All of the defendants are alleged to have conspired in the plan and in the breach of the fiduciary duties owed by one or more of the doctors. Various mailings are alleged to be in furtherance of the plan and each of these is designated a predicate act under § 1961. All of the mail frauds are alleged to constitute a pattern of racketeering under § 1961. Each of the defendants is alleged to be a person employed by and associated with an association in fact, which in turn consisted of the association of each of the defendants.

Defendants have all moved to dismiss for failure to state a claim based on the failure to allege fraud with particularity, the failure to allege mailings in furtherance of a scheme to defraud, and the failure to allege a pattern of racketeering. On the last of these issues, defendants principally rely on the now famous footnote 14 in Sedima, S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985), and on Judge Milton I. Shadur's opinion in Northern Trust Bank/O'Hare, N.S. v. Inryco, Inc., 615 F.Supp. 828 (N.D.Ill.1985). My own analysis of the pattern issue, which is somewhat different from Judge Shadur's, is set forth in the memorandum opinion and order of November 27, 1985 in Graham v. Slaughter, 624 F.Supp. 222 (N.D.Ill.1985). Since the analysis in that case is heavily relied on here, a copy of that opinion will be included in the mailing of this opinion.

In this case there is a single wrongful transaction and a single injury. The loss to MESA occurred when the defendant doctors broke with MESA and created (or joined) Waukegan in connection with the rendering of emergency room medical services to Victory Memorial. Although numerous mailings are alleged in furtherance of the scheme, and assuming that each would constitute a separate offense and a separate predicate act, each mailing did not result in a separate injury or separate transaction. Accordingly, each mailing is not a separate criminal episode.

This case falls within that part of Inryco with which I agree. Multiple mailings in furtherance of a single criminal episode are insufficient to allege a pattern of racketeering under § 1961. This conclusion appears to be inconsistent with two circuit court opinions. In R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350 (5th Cir.1985), two mailings related to the same transaction were...