Sanchez v. Triple-S Management, Corp.
| Citation | 492 F.3d 1 |
| Decision Date | 13 June 2007 |
| Docket Number | No. 06-1925.,06-1925. |
| Court | United States Courts of Appeals. United States Court of Appeals (1st Circuit) |
| Parties | Jose SANCHEZ; Nilsa Irizarry; Conjugal Partnership Sanchez-Irizarry, d/b/a, Laboratorio Clinico Irizarry Guash; Delma Rodriguez; Wilmer Roldan; Conjugal Partnership Roldan-Rodriguez, d/b/a Laboratorio Salimar; Maite Rolon-Balseiro; Cesar Del-Valle-Vague; Conjugal Partnership Del-Valle-Rolon, d/b/a Laboratorio Clinico Rolon; Oim Enterprises, Inc., d/b/a Laboratorio Clinico Ramos; Elba Rivera-Martinez; Conjugal Partnership Melendez-Rivera; Jose Zayas; Ana Hernandez-Rivera; Conjugal Partnership Zayas-Hernandez; Frances Gutierrez-Martinez; Conjugal Partnership Garraton-Gutierr; Nestor Allende-Ortiz; Rosa Asparo-Plana; Conjugal Partnership; Allende-Asparo; Medical Geriatrics and Administrative Services, Inc.; Outpatient Administrative Services, Inc.; Jose E. Varela-Rosario; Migdalia Quiles-Rodriguez; Conjugal Partnership Varela-Quiles, d/b/a Farmacia San José, d/b/a Farmacia De Aqui; Ana Delia Marrero; Conjugal Partnership Torres-Marrero, d/b/a Farmacia San Antonio; Alicia Feliberti-Irizarry; Guillermo J. Fernandez; Elizabeth Sanchez De Leon; Conjugal Partnership Ruiz-Sanchez; Lydia Ayala-Diaz; Julia Naveira; Conjugal Partnership; Vazquez-Naveira; Luis Carmelo Alamo Cruz; Conjugal Partnerhsip Alamo-Cruz; Jose William Vazquez; Isolina Ruiz; Jose Vega; Conjugal Partnership Vega-Ruiz; Frances Matos-Ortiz; Wilfredo Burgos Santiago; Conjugal Partnership Burgos-Matos; Jorealis Vigo-Gonzalez; Aymette Vigo-Gonzalez; Lendis Ojeda-Alemany; Karla Ojeda-Alemany; Daniel Aquino Rivera; Doris Miranda Ramos; Conjugal Partnership Aquino-Miranda; Alejandra Ojeda-Alemany; Danieric Aquino-Miranda; Darryl Aquino-Miranda; Edgardo Rodriguez-Marrero; Roy Brown; Sammy Garau-Diaz; Ketty Diaz-Garcia; Aedna Martinez-Lazu; Andrés Romero-Dest; Ana I. Rodriguez-Marrero; Daisy Morales-Perez; Carmen Ortiz-Roque, Plaintiffs, Appellants, v. TRIPLE-S MANAGEMENT, CORP.; Triple-S, Inc.; Seguros Triple S, Inc.; Seguros De Vida Triple-S, Inc., SSS; Interactive Systems, Inc.; Triple-C, Inc.; Accesso-Salud, Inc.; MC-21 Corporation; CPA Ramon M. Ruiz-Comas; Miguel Vazquez-Deynes; Crispulo Rivera-Ofray; MD Belisario Matta; MD Fernando L. Longo; MD Wilmer Rodriguez-Silva; MD Fernando Ysern-Borras; MD Emigdio Buonomo; MD Angel W. Hernandez-Colón, Defendants, Appellees. |
Cherie K. Durand, with whom Paul H. Hulsey, Reynaldo Quinones, Hulsey Litigation Group, LLC and G. Robert Blakey were on brief, for appellants.
Gael Mahony, with whom Holland & Knight, LLP, Salvador Antonetti-Zequeira, César T. Alcover-Acosta, José L. Ramírez Coll, and Fiddler, González & Rodríguez were on brief, for appellees.
Eduardo A. Zayas-Marxuach, with whom Roberto C. Quiñones-Rivera and McConnell Valdés were on brief, for appellee, MC-21 Corporation.
Before LYNCH, Circuit Judge, STAHL, Senior Circuit Judge, and HOWARD, Circuit Judge.
The plaintiffs appeal from the entry of summary judgment for the defendants on claims asserting violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. (2000) ("RICO"). We affirm.
The plaintiffs commenced this suit as a putative class action, purporting to represent, among others, providers of medical products and services covered under policies issued or administered by the defendants, as well as the subscribers to those policies. The defendants include a number of insurance companies and similar businesses, such as claims administrators, who allegedly joined together with a number of others in a RICO "enterprise." 18 U.S.C § 1961(4). The enterprise has allegedly engaged in efforts to "acquire control" of, "capitalize," and "convert" the assets of Triple-S, Inc., a now-defunct insurance company which, the plaintiffs say, had restricted the use of those assets to charitable purposes.1
The complaint asserted twelve numbered counts, each setting out a separate RICO violation in the form of a different scheme. In relevant part, these alleged schemes have enriched the enterprise by overcharging subscribers and underpaying providers for medical products and services that were covered under insurance policies issued by the defendant insurers. To carry out these schemes, the defendants have allegedly made a number of mailings in violation of the mail fraud statute, 18 U.S.C. § 1341, and transmissions in violation of the wire fraud statute, id. § 1343. One of the schemes has also allegedly relied on extortion in violation of the Hobbs Act. Id. § 1951(b)(2). The plaintiffs characterize these crimes as the "pattern of racketeering activity" underlying their RICO claims. See id. § 1961(1).
In response to the complaint, the defendants moved to dismiss, arguing, inter alia, that the plaintiffs had failed to plead mail and wire fraud with the requisite particularity. See Fed.R.Civ.P. 9(b). The plaintiffs rejoined that, insofar as their claims relied on transmissions from the defendants to the plaintiffs, they had sufficiently pleaded them. In support of this point, the plaintiffs submitted an appendix explaining that "through their communications with the plaintiffs [sic] classes the defendants failed to disclose, misrepresented and covered up" the alleged overcharges and underpayments. The plaintiffs stated that the communications thus "misled them to believe that" they were paying the correct charge or receiving the correct payment.
The district court denied the motion to dismiss in part, ruling that the plaintiffs had adequately pleaded "communications that fraudulently induced Plaintiff subscribers and providers to accept lower reimbursements and higher charges."2 Nevertheless, the district court ordered the plaintiffs to amend part of their complaint to identify certain of those communications in accordance with Rule 9(b). The plaintiffs then filed an amended complaint asserting only those four counts that had survived the motion to dismiss. Three of these counts alleged that the defendants made mailings and wire transmittals "[f]or the purpose of executing and concealing" various "artifices," consisting of claim practices that have resulted in the overpayment of deductibles by subscribers or the underpayment of providers for their services to the subscribers.3 The fourth count alleged that the defendants violated the Hobbs Act by threatening the providers with economic injury in the form of exclusion from the network of insurance plans administered by the defendants, audits of the providers' accounts, withholding of payments, and denial of patient referrals.
Subsequent to the amended complaint, the district court approved the parties' joint proposed scheduling order. The order provided that fact discovery would consist of two phases of roughly four months each, with the first to conclude before the plaintiffs filed their motion for class certification, and the second to commence after briefing on that motion had been completed. The order noted, however, that
class certification discovery will in part overlap with merits discovery in that plaintiffs may request general or "template" documents in addition to documents referring to the named plaintiffs and take [Fed.R.Civ.P.] 30(b)(6) depositions of the [defendant] corporations to ascertain their claims procedures ... and similar factual issues without discovery as to damages and similar merit-intensive discovery.
While the order provided a deadline for the filing of dispositive motions, it also noted that the "[p]arties may file dispositive motions earlier, if they understand that the issue(s) are ripe."
After several months of discovery, including the depositions of the named plaintiffs and Triple S (by way of several Rule 30(b)(6) designates) and the exchange of voluminous written discovery, the plaintiffs moved for class certification. The defendants opposed the motion on the grounds that, inter alia, the plaintiffs lacked standing to maintain the claims set forth in the amended complaint which, apart from being fatal to class certification in its own right, also meant that the plaintiffs could not satisfy the "typicality" and "adequacy" requirements of Fed.R.Civ.P. 23. The defendants argued that, according to the plaintiffs' own deposition testimony, they had suffered no harm from the alleged racketeering activity, viz., the violations of the mail and wire fraud statutes and the Hobbs Act. In particular, the defendants noted that the plaintiffs could not say how the communications they received from the defendants concealed their alleged schemes.
In response, the district court issued an order directing the plaintiffs to show cause within ten working days why summary judgment should not enter against them based on the deficiencies in proof identified by the defendants. While the court acknowledged "that an objection to class certification is not the proper vehicle through which to attack standing," it reasoned that the "Defendants' arguments and the corresponding facts are so compelling that ... it would be a poor use of judicial resources to proceed with class certification ... without first establishing whether this case is even remotely viable."
Before reaching this conclusion, the court analyzed the plaintiffs' deposition testimony in detail, finding that it did not support their allegations of mail and wire fraud or extortion. The district court determined, for example, that none of the physicians serving as plaintiffs was "able to identify a single incident of fraudulent concealment" in the correspondence they received from the defendants. Yet the court recognized the possibility that the plaintiffs' "testimony as to whether or not their injuries were incurred through the transmission of `fraudulent' communications or the infliction of `extortion' relies on ... incomplete understanding of various terms of art." Accordingly, the show cause order would "give Plaintiffs a last opportunity to present a...
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