Mruz v. Caring, Inc.

Decision Date28 January 1998
Docket NumberNo. Civ.A. 97-1468.,Civ.A. 97-1468.
Citation991 F.Supp. 701
CourtU.S. District Court — District of New Jersey
PartiesJohn H. MRUZ, Vasilike D. Nika, and Jane A. Johnson, Plaintiffs, v. CARING, INC., Caring Residential Services, Inc., Caringhouse Projects, Inc., Caring Medical Day Services, Inc., Caring Fellowship Centers, Inc., Caring International, Inc., Comprehensive Eldercaring, Inc., Coastal Support Services, Inc., Ann J. Underland, Carlisle W. Underland, Garfield L. Greene, Lewis W. Field, Mary E. Haynie, Ian Meklinsky, Esq., and Fox, Rothschild, O'Brien & Frankel, Defendants.

Susan B. Pliner, Gary Green, Steven H. Griffiths, Sidkoff, Pincus & Green, Merchantville, NJ, for plaintiffs John H. Mruz, Vasilike D. Nika, and Jane A. Johnson.

Patrick G. Brady, Jed M. Milstein, Carpenter, Bennett & Morrissey, Newark, NJ, for defendants Caring, Inc., Caring Residential Services, Inc., CaringHouse Projects, Inc., Caring Medical Day Services, Inc., Caring Fellowship Centers, Inc., Caring International, Inc., Comprehensive ElderCaring, Inc., Coastal Support Services, Inc., Ann J. Underland, Carlisle W. Underland, Garfield L. Greene, Lewis W. Field, and Mary E. Haynie.

Paul A. Rowe, Alan S. Naar, Gary K. Wolinetz, Andrew M. Baer, Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, Woodbridge, NJ, for defendants Ian Meklinsky, and Fox, Rothschild, O'Brien & Frankel.


ORLOFSKY, District Judge.

This action arises out of Plaintiffs' discovery and investigation of alleged Medicaid and tax fraud committed by some of the Defendants and the eventual termination of Plaintiffs' employment. Plaintiffs allege in their Complaint that Defendants, entities and individuals associated with CARING, Inc., and the law firm and one of its attorneys hired to represent CARING, Inc., terminated their employment in violation of the protections provided to "whistleblowers" under the Federal False Claims Act ("FCA"), 31 U.S.C. § 3730(h). Plaintiffs also allege that some of the Defendants, including CARING, Inc.'s outside law firm, Fox, Rothschild, O'Brien & Frankel and Ian Meklinsky, Esq., an attorney associated with the firm, violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., by engaging in a campaign to retaliate for, and, through intimidation and harassment, to dissuade Plaintiffs from investigating and reporting the alleged Medicaid and tax fraud to law enforcement officials. Plaintiffs also allege that the retaliatory discharge was a violation of the New Jersey Conscientious Employee Protection Act ("CEPA"), N.J.S.A. §§ 34:19-1 et seq. and, alternatively, a violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act ("New Jersey RICO"), N.J.S.A. §§ 2C:41-1 et seq. Finally, Plaintiffs appear to allege a number of state law causes of action under New Jersey law, including, at least, defamation.

Defendants, CARING, Inc., CARING Residential Services, Inc., CARINGHouse Projects, Inc., CARING Medical Day Services, Inc., CARING Fellowship Centers, Inc., CARING International, Inc., Comprehensive ElderCARING, Inc., Coastal Support Services, Inc., Ann J. Underland, Carlisle W. Underland, Garfield L. Greene, Lewis W. Field, and Mary E. Haynie, and Defendants, Ian Meklinsky, Esq., and Fox Rothschild, O'Brien & Frankel, have now moved pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss certain counts of the Complaint. In ruling on the motions, the Court must determine: 1) who may be held liable for an unlawful discharge under the "whistleblower" provision of the Federal False Claims Act, 31 U.S.C. § 3730(h); 2) whether Plaintiffs have standing to maintain this action under 18 U.S.C. § 1964(c) of RICO; 3) whether Plaintiffs have adequately alleged a pattern of racketeering activity within the meaning of 18 U.S.C. § 1961(5); 4) whether Plaintiffs have adequately alleged the participation in the operation or management of the RICO enterprise by the Attorney Defendants, Meklinsky and Fox, Rothschild; and 5) whether Plaintiffs have properly pled their state common law causes of action.1 For the reasons set forth below, Defendants' motions will be granted in part and denied in part.

I. Facts and Procedural History

Plaintiff, John H. Mruz ("Mruz"), served as Vice-President of Development and Administration on behalf of Defendants, CARINGHouse Projects, Inc. ("CARINGHouse") and Coastal Support Services, Inc. ("Coastal"), between June 12, 1995, and October 31, 1996. Plaintiffs' Complaint ¶ 1 (dated Mar. 21, 1997) (hereinafter Compl.). Between June 13, 1986, and October 31, 1996, Plaintiff, Jane A. Johnson ("Johnson"), served as Vice-President of Projects and Finance on behalf of CARINGHouse, CARING Fellowship Centers, Inc., ("CARING Fellowship"), CARING Medical Day Service ("CARING Medical"), and as Personnel Director on behalf of Defendants, CARING, Inc. ("CARING"), CARING Residential Services, Inc. ("CARING Residential"), CARINGHouse, CARING Medical, CARING Fellowship, CARING International, Inc. ("CARING International"), Comprehensive ElderCARING, Inc. ("Comprehensive"), and Coastal. Id. at ¶ 2.2 Plaintiff, Vasilike D. Nika ("Nika"), served as Executive Assistant to the President of Coastal between March 13, 1995 and October 31, 1996. Id. at ¶ 3.

Defendant, Ann J. Underland ("Ann Underland"), is a member of one or more of the boards of trustees or directors of the CARING Corporations, and the person who chose board members. Id. at ¶ 20. Ann Underland allegedly "dominated and dictated the actions" of the CARING Corporations. Id.; see also id. at ¶¶ 21, 36(a). Defendant, Carlisle W. Underland ("Carlisle Underland"), is the son of Ann Underland and a member of one or more of the boards of the CARING Corporations, id. at ¶ 22, as are Defendants, Garfield L. Greene ("Greene"), Lewis W. Field ("Field"), and Mary E. Haynie ("Haynie"), id. at ¶¶ 24, 26, 28.3

The Complaint alleges that sometime in approximately March, 1996, Plaintiffs began to suspect that Ann Underland was conducting the affairs of the CARING Corporations so as to benefit her and some of the other CARING Individual Defendants personally. Id. at ¶ 36(a). Whatever this might mean, Plaintiffs also allege that Ann Underland and, it appears, the other CARING Individual Defendants, were causing the CARING Corporations to violate various, although unspecified, Federal and New Jersey laws. Id. at ¶ 36(b).

In particular, Plaintiffs allege that the CARING Corporations "appeared" to be receiving Medicaid funds substantially in excess of the amounts which should have properly been received, and that these surplus monies were being secretly diverted for the personal benefit of the CARING Individual Defendants. Id. at ¶ 37(a); see also id. at ¶ 37(d). Additionally, the CARING Corporations are alleged to have improperly accounted for money which was used to pay the personal expenses of Ann Underland, without the knowledge of members of the boards of the CARING Corporations. Id. at ¶ 37(b). Thus, Plaintiffs allege that the CARING Corporations, Ann Underland, and some or all of the other CARING Individual Defendants "engaged in activities that seemed to be federal tax fraud, failure to pay federal taxes, fraud in the receipt of federal Medicaid and other governmental funds, improper use of funds, and failure to properly spend funds." Id. at ¶ 37(f).

Eventually, Plaintiffs began to refuse to perform various aspects of their jobs which, without their knowledge, had been assisting the CARING Corporate and Individual Defendants in the alleged fraud. Plaintiffs also brought to the attention of Ann Underland and the members of the boards of the CARING Corporations the allegedly fraudulent conduct. See id. at ¶¶ 36(c), 38. Because of the allegedly hostile reactions of the CARING Individual Defendants to Plaintiffs' disclosures of misconduct, Plaintiffs contacted various governmental authorities, see, e.g., id. at ¶¶ 39-40, including the Federal Bureau of Investigation ("FBI") and the New Jersey Inspector General, and investigated whether there might be a basis for prosecuting a False Claims Act action. Id. at ¶¶ 40-41.

On September 24, 1996, Plaintiffs delivered a memorandum to Ann Underland which outlined many of their concerns and invited the CARING Corporations to initiate their own internal investigation and to institute corrective measures. Id. at ¶ 42; see also id. at Exh. A. It was at this point, Plaintiffs allege, that Ann Underland and the other CARING Individual Defendants commenced a "conspiracy, scheme, and campaign ... that used the mail and the interstate wire ... to retaliate against, harass, and intimidate Plaintiffs, as well as to punish Plaintiffs for being [whistleblowers] and for refusing to participate in said Defendants' schemes to violate the law." Id. at ¶ 44; but see id. at ¶ 48 (alleging that conspiracy to retaliate, harass, and intimidate began at a later moment). The actions constituting the "scheme,"4 as alleged, are, inter alia: 1) Ann Underland and Greene's isolation of Plaintiffs from other board members, id. at ¶¶ 45, 47; 2) in essence, preventing Plaintiffs from causing an investigation of the finances of the CARING Corporations to be conducted; and 3) deceiving the board members about the Plaintiffs and Plaintiffs' efforts to investigate the factual bases of their memorandum, id. at ¶¶ 44-47.

Several days after receipt of Plaintiffs' memorandum, CARING's board of directors delivered a memorandum to Plaintiffs which indicated, inter alia: 1) that a full investigation of the matters brought to their attention in the September 24, 1996, memorandum would occur; 2) that Greene would act on the board's behalf in all matters relating to the investigation; 3) that Defendant, Fox, Rothschild, O'Brien & Frankel ("Fox, Rothschild") had been hired to assist in the investigation; and 4) that Plaintiffs would be required to meet with Defendant, Ian Meklinsky, Esq. ("Meklinsky"...

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