Prime Healthcare Servs., Inc. v. Servs. Emps. Int'l Union, Case No.: 14-cv-2553-GPC (RBB)

• Citation: 147 F.Supp.3d 1094
• Decision Date: 23 November 2015
• Docket Number: Case No.: 14-cv-2553-GPC (RBB)
• Parties: Prime Healthcare Services, Inc., Plaintiff, v. Services Employees International Union, et al., Defendants.
• Court: U.S. District Court — Southern District of California

147 F.Supp.3d 1094

Prime Healthcare Services, Inc., Plaintiff,

v.Services Employees International Union, et al., Defendants.

Case No.: 14-cv-2553-GPC (RBB)

United States District Court, S.D. California.

Signed November 23, 2015

Amanda Catherine Fitzsimmons, DLA Piper LLP, San Diego, CA, David S. Durham, Kathleen Sue Kizer, DLA Piper, San Francisco, CA, Edward Smith Scheideman, III, Victoria Ann Bruno, DLA Piper LLP, Washington, DC, for Plaintiff.

Glenn Rothner, Hannah Selma Weinstein, Rothner Segall and Greenstone, Pasadena, CA, Andrew Dean Roth, Leon O. Dayan, Bredhoff & Kaiser PLLC, Washington, DC, Fern M. Steiner, Smith, Steiner, Vanderpool & Wax, APC, San Diego, CA, Theodore Franklin, Bruce A. Harland, Jannah Manansala, Weinberg Roger and Rosenfeld, Alameda, CA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT AND DENYING PLAINTIFF'S MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT

[ECF Nos. 74, 81]

Hon. Gonzalo P. Curiel

, United States District Judge

INTRODUCTION

Plaintiff Prime Healthcare Services, Inc. (“Prime Healthcare” or “Plaintiff”) brings this civil action against Defendants Service Employees International Union (“SEIU”), Service Employees International Union— United Healthcare Workers West (“UHW”), Change to Win, CTW Investment Group, Mary Kay Henry, Dave Regan, and Tom Woodruff (collectively, “Defendants”) for alleged violations of the Racketeering Influenced and Corrupt Organizations Act (“RICO”) and the Labor Management and Relations Act (“LMRA”). (ECF No. 74.) Prime Healthcare alleges that these various union-related entities and individuals are engaged in strong-armed, extortionate tactics and other illegal conduct to enrich themselves through the acquisition of Prime Healthcare's property. (SAC ¶ 6, ECF No. 73.) Presently before the Court are Defendants' motion to dismiss Plaintiff's Second Amended Complaint (“SAC”) (ECF No. 74), and Plaintiff's motion for leave to file a Third Amended Complaint (“TAC”) (ECF No. 81). The Parties have fully briefed both motions. (ECF Nos. 77-79, 82-84.) The Court heard oral argument on the motion to dismiss on August 28, 2015. (See ECF No. 80.) For the reasons set forth below, the Court GRANTS Defendants' motion to dismiss Plaintiff's SAC and DENIES Plaintiff's motion for leave to file a TAC.

FACTUAL BACKGROUND

A. The Parties

Plaintiff Prime Healthcare is a hospital management company which, along with an affiliated foundation, operates thirty-four acute care hospitals in eleven states, including fifteen hospitals in California. (Id. ¶¶ 1, 22-23.) Prime Healthcare describes itself as “largely non-union.” (Id. ¶ 3.)

Defendant SEIU is an unincorporated labor association that represents units of workers and negotiates terms and conditions of employment for the workers it represents. (Id. ¶ 24.) Defendant UHW is a local union affiliate of SEIU located in California. (Id. ¶ 25.) UHW represents individuals working in California's hospitals and clinics, including nurses, aids, case managers, clerks, maintenance workers, and housekeeping staff, and negotiates terms and conditions of employment for the healthcare workers it represents. (Id. )

Defendant Change to Win (“CtW”) is a union federation made up of three member unions: SEIU, the International Brotherhood of Teamsters, and the United Farm Workers of America. (Id. ¶ 30.) Defendant CtW Investment Group is the investment arm of CtW. (Id. ¶ 35.) Prime Healthcare alleges that CtW approves of SEIU's tactics, and supports them through CtW Investment Group. (Id. ¶¶ 31-35.)

The remaining Defendants are individual executives of the above entities. Defendant Mary Kay Henry is the President of SEIU and Secretary-Treasurer of CtW. (Id. ¶ 27.) Defendant Dave Regan is President of UHW, Vice President of SEIU, and Vice President of the SEIU Leadership Council. (Id. ¶ 28.) Defendant Tom Woodruff is the Executive Director of CtW's Strategic Organizing Center, and also previously served as an SEIU International Executive Vice President for more than a decade. (Id. ¶ 36.)

B. Alleged Unlawful Conduct

Prime Healthcare alleges that Defendants have unlawfully conspired to force Prime Healthcare to unionize its hospitals through a “corporate campaign” that employs extortion. (Id. ¶¶ 5, 8, 47.) According to the SAC, Defendants have allegedly:

• Attempted to thwart Prime Healthcare's acquisition of additional hospitals;

• Produced false and misleading reports and studies for the sole purpose of damaging Prime Healthcare's business goodwill; • Worked with complicit media outlets to publicize sham and baseless allegations;

• Initiated certain sham and baseless complaints causing regulatory and administrative investigations, sham and baseless litigation, and inquiries by accreditation agencies;

• Coerced, harassed, and threatened patients who use Prime Healthcare's services;

• Persuaded writers, government agencies, and politicians to raise specious allegations about Prime Healthcare's conduct;

• Targeted the California Hospital Association (“CHA”) with sham ballot initiatives to obtain property of CHA member hospitals (including Prime Healthcare); and

• Violated federal labor laws.

(Id. ¶¶ 9, 115.)

The vast majority of these allegations are based upon conduct between 2010 and September 21, 2012. In its earlier order, the Court ruled that allegations based upon activities before September 21, 2012 are barred under the doctrine of res judicta. To avoid this ruling, Plaintiff has advanced a theory of admissibility which will be addressed herein at section A.

Prime Healthcare alleges that through their extortionate activities, Defendants have acquired and are attempting to acquire substantial money and property, including tens of millions of dollars, Prime Healthcare's business goodwill, Prime Healthcare's rights to grow its business through hospital acquisitions and oppose unionization of its employees, Prime Healthcare's rights to make autonomous business decisions, access to Prime Healthcare's private property, and Prime Healthcare's customers and related revenues. (Id. ¶¶ 14, 113.)

C. Prior Prime Healthcare Litigation

On November 15, 2011, Prime Healthcare previously brought an antitrust action alleging that SEIU, UHW, and several Kaiser-related entities had conspired to eliminate Prime Healthcare from the healthcare services market and increase healthcare workers' wages. See Prime Healthcare Servs., Inc. v. Serv. Emps. Int'l Union , No. (S.D.Cal.)

(“Prime Healthcare I ”). On September 21, 2012, Prime Healthcare filed a first amended complaint. (Id. at ECF No. 46.) On July 25, 2013, this Court dismissed Prime Healthcare's first amended complaint under Federal Rule of Civil Procedure 12(b)(6), but granted leave to amend. See

Prime Healthcare I , 2013 WL 3873074 (S.D.Cal. July 25, 2013). After Prime Healthcare did not file a second amended complaint, this Court granted the defendants' motion to dismiss with prejudice for lack of prosecution under Federal Rule of Civil Procedure 41(b). See

id. Prime Healthcare's appeal of this Court's dismissal orders is still pending. See Prime Healthcare I , No. 13-57185 (9th Cir.).

PROCEDURAL HISTORY

On August 25, 2014, Prime Healthcare filed the instant action in the Northern District of California (“Prime Healthcare II ”). (ECF No. 1.) On October 24, 2014, the Northern District of California ordered the case transferred to the Southern District of California. (ECF No. 38.) On November 14, 2014, the case was reassigned to the undersigned judge. (ECF No. 45.)

On November 17, 2014, Prime Healthcare filed its First Amended Complaint (“FAC”), which superseded its original complaint. (ECF Nos. 47, 52.) On December 16, 2014, Defendants filed a motion to dismiss the FAC. (ECF No. 50.) On April 1, 2015, the Court granted in part and denied in part Defendants' motion to dismiss Prime Healthcare's FAC, granting Prime Healthcare leave to amend “to correct the deficiencies [the Court] identified” if possible. (Order at 41, ECF No. 70.)

On May 1, 2015, Prime Healthcare filed the operative SAC, which superseded its FAC. (ECF Nos. 73, 47.) Prime Healthcare alleges eight RICO claims, 18 U.S.C. §§ 1961 et seq .

(counts I-VIII), and three LMRA claims, 29 U.S.C. §§ 186 et seq . (counts IX-XI). (ECF No. 73 ¶¶ 323-94.)

On May 15, 2015, Defendants filed a motion to dismiss the SAC.¹ (ECF No. 74.) Prime Healthcare filed its opposition on July 24, 2015. (ECF No. 78.) Defendants filed their reply on August 7, 2015. (ECF No. 78.) The Court held a motion hearing on August 28, 2015. (See ECF No. 80.)

On September 14, 2015, while the motion to dismiss was still pending, Plaintiff filed a motion for leave to file a TAC. (Mot. Leave TAC, ECF No. 81.) Defendants filed a response on October 23, 2015 (ECF No. 83) and Plaintiff filed a reply on November 6, 2015 (ECF No. 84).

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)

tests the sufficiency of a complaint. Navarro v. Block , 250 F.3d 729, 732 (9th Cir.2001). Dismissal is warranted under Rule 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc. , 749 F.2d 530, 534 (9th Cir.1984) ; see also

Neitzke v. Williams , 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson , 749 F.2d at 534

. While a plaintiff need not give “detailed factual allegations,” a plaintiff must plead sufficient facts that, if true, “raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal , 556 U.S....