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Sorensen v. Polukoff

United States District Court, D. Utah

July 31, 2018

SHERMAN G. SORENSEN, M.D., Plaintiff,
v.
GERALD I. POLUKOFF, M.D.; ZABRISKIE LAW FIRM, LLC, a Utah limited liability company; RHOME ZABRISKIE, J.D.; FLEMING, NOLEN & JEZ, LLP, a Texas limited liability partnership; and RAND P. NOLEN, J.D., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING DEFENDANTS' RENEWED MOTION TO DISMISS AND DENYING DEFENDANTS' CONDITIONAL MOTION FOR RETENTION OF SUPPLEMENTAL JURISDICTION

          Ted Stewart, Judge

         This matter is before the Court on Defendants' second Motion to Dismiss (“SMD”), Dr. Sherman Sorensen's (“Plaintiff”) Motion for Preliminary Injunction, and Defendants' Conditional Motion for Retention of Supplemental Jurisdiction. For the following reasons, the Court will grant the SMD as to Plaintiff's federal claims, deny the Motion for Retention of Supplemental Jurisdiction, thereby declining to exercise supplemental jurisdiction over Plaintiff's state-law claims, and deny the Motion for Preliminary Injunction.

         I. BACKGROUND

         Plaintiff formed the Sorensen Cardiovascular Group (“SCG”) in 2006 and provided cardiology services in Salt Lake City, Utah, until December 2011. Plaintiff is known for his expertise in patent foramen ovale (“PFO”) closures and atrial septal defect (“ASD”) closures, both of which are used to fix a defect in the septum between the upper atrial chambers of the heart.

         In 2009, Dr. Gerald Polukoff met with Plaintiff about working for SCG as a Cardiologist and learning more about PFO closure techniques. However, Dr. Polukoff did not start working at SCG until June 2011. Then, in July 2011, Plaintiff suffered a heart attack and decided to retire at the end of the year. Plaintiff discussed his retirement with Dr. Polukoff, and the decision was made to either pay out the rest of Dr. Polukoff's contract or turn SCG over to him. “Dr. Polukoff indicated that he would consider the offer, but that he would need to ensure the financial viability of SCG before deciding to either accept or reject.”[1]

         SCG stored its patient billing records on a series of hard drives that were maintained by TecCon, Inc.[2] Plaintiff claims that Dr. Polukoff was not authorized to access these hard drives, but Dr. Polukoff allegedly met with TecCon on October 7, 2011, and was provided with a hard drive to take offsite and remote access to SCG's billing records.

         A month later, Dr. Polukoff informed Plaintiff that he would not assume ownership of SCG. Plaintiff paid out the rest of Dr. Polukoff's contract and terminated his employment. Plaintiff learned soon after Dr. Polukoff's termination that Dr. Polukoff had remote access to SCG's billing records and that a backup hard drive might be missing. Plaintiff instructed TecCon to terminate Dr. Polukoff's access and sent an email asking Dr. Polukoff if he “was aware of a missing backup hard drive. Dr. Polukoff denied any knowledge of a missing hard drive and indicated to Dr. Sorensen that he would look through his things for a hard drive, but never indicated as to whether one was ultimately found.”[3]

         On December 6, 2012, Dr. Polukoff initiated a qui tam action against Plaintiff, SCG, St. Mark's Hospital, Intermountain Healthcare, Intermountain Medical Center, and HCA Healthcare (“HCA”) in the United States District Court for the Middle District of Tennessee. Dr. Polukoff alleged “that Dr. Sorensen had performed medically unnecessary PFO closures on patients and conspired with the other defendants in the qui tam action to improperly bill the United States Government by submitting false claims for reimbursement under Medicare and Medicaid.”[4]

         As part of the qui tam action, Dr. Polukoff allegedly delivered a SCG hard drive to Mr. Rand Nolen and Fleming, Nolen, & Jez, L.L.P (“FNJ”) who were located in Texas and acting as co-counsel for Dr. Polukoff in the qui tam action. Counsel for Plaintiff then sent a letter to Mr. Nolen demanding the return of the hard drive and demanding that Dr. Polukoff and his attorneys provide declarations under oath that they did not alter or copy any of the files on the hard drive. The hard drive has not been returned to Plaintiff.

         Eventually, Dr. Polukoff's claims against HCA were dismissed, and the case was transferred to this Court where the Honorable Judge Jill Parrish dismissed the remainder of the action with prejudice on January 19, 2017. Dr. Polukoff appealed the decision, with the United States intervening on the appeal only, and the Tenth Circuit reversed and remanded the action, holding that Dr. Polukoff's amended complaint against Dr. Sorensen, St. Mark's, and Intermountain Medical Center satisfied the pleading requirements of Rules 12(b)(6) and 9(b).[5]

         On January 19, 2018, Plaintiff brought this action against Dr. Polukoff, Mr. Nolen, FNJ, Rhome Zabriskie, and the Zabriskie Law Firm, LLC (collectively, “Defendants”) asserting claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) along with several state claims. According to Plaintiff, Mr. Nolen and FNJ used the patient billing information on the SCG hard drive to identify Plaintiff's former patients and sent that information to Mr. Zabriskie and the Zabriskie Law Firm (collectively, “Law Firm Defendants”). Plaintiff alleges that the Law Firm Defendants are now working together and using the confidential patient information from the hard drive to target and solicit Plaintiff's former patients to participate in medical malpractice lawsuits against Plaintiff.

         The Court granted in part Defendants' first Motion to Dismiss, dismissing the RICO claims for failure to sufficiently plead at least two predicate acts. The Court allowed Plaintiff to file an Amended Complaint and Defendants have now filed this SMD.

         II. STANDARD OF REVIEW

         In considering a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6), all well-pleaded factual allegations, as distinguished from conclusory allegations, are accepted as true and viewed in the light most favorable to Plaintiff as the nonmoving party.[6] Plaintiff must provide “enough facts to state a claim to relief that is plausible on its face, ”[7] which requires “more than an unadorned, the-defendant-unlawfully harmed-me accusation.”[8] “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'”[9]

         “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.”[10] As the Court in Iqbal stated,

only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief.[11]

         III. DISCUSSION

         Because this Court's jurisdiction rests on federal question jurisdiction, the Court deems it appropriate to first consider the SMD as it relates to Plaintiff's federal claims.

         A. CIVIL RICO CLAIM

         In this action, federal jurisdiction rests on Plaintiff's RICO claims. Section 1964(c) of RICO provides a private right of action for persons injured in their business or property by reason of a violation of § 1962. Plaintiff claims that Defendants violated 18 U.S.C. § 1962(c), which provides:

[i]t shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

         “That is, RICO vests a private citizen with substantive rights to avoid ‘injur[ies]' to ‘his business or property' caused by a pattern of racketeering activity, and it explicitly creates a federal cause of action to vindicate those federal rights.”[12] “To survive a Rule 12(b)(6) motion, a civil RICO claim must allege ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'”[13] Then, if the complaint meets the Rule 12(b)(6) and Rule 9(b) requirements for pleading a violation of § 1962, the Court must determine whether the pleadings plausibly allege “that the plaintiff's business or property was injured; and []that the defendant's violation is the cause of that injury.”[14]

         Defendants argue that dismissal is warranted because Plaintiff failed to sufficiently plead a § 1962 violation and failed to plead an actual injury to his business or property. The Court agrees that Plaintiff failed to plead a § 1962 violation as he failed to plead the two predicate acts necessary to establish a pattern of racketeering.[15]

         A “‘pattern of racketeering activity' requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.”[16] Additionally, “RICO's legislative history reveals Congress' intent that to prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.”[17]

         Plaintiff asserts that Defendants engaged in the predicate acts of mail fraud, wire fraud, the transportation of stolen goods, and the receipt of stolen goods. “To establish the predicate act of mail fraud, [Plaintiff] must allege ‘(1) the existence of a scheme or artifice to defraud or obtain money or property by false pretenses, representations or promises, and (2) use of the United States mails for the purpose of executing the scheme.”[18] “The elements of wire fraud are very similar, but require that the defendant use interstate wire, radio or television communications in furtherance of the scheme to defraud.”[19]

“[T]he common thread among . . . these crimes is the concept of ‘fraud.' Actionable fraud consists of (1) a representation; (2) that is false; (3) that is material; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent it be acted on; (6) the hearer's ignorance of the falsity of the representation; (7) the hearer's reliance; (8) the hearer's right to rely on it; and (9) injury.” Failure to adequately allege any one of the nine elements is fatal to the fraud claim.[20]

         Finally, “the particularity requirement of Rule 9(b), Federal Rule of Civil Procedure, applies to claims of mail and wire fraud, ” so the Complaint “must set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof . . . and must also identify the purpose of the mailing within the defendant's fraudulent scheme.”[21] The policy of simplicity which underlies Rule 9(b)'s heightened pleading requirements “requires a court to read Rule 9(b)'s requirements in harmony with Rule 8's call for a ‘short and plain statement of the claim' which presents ‘simple, concise, and direct' allegations.”[22] However, “the threat of treble damages and injury to reputation which attend RICO actions justify requiring plaintiff to frame its pleadings in such a way that will give the defendant, and the trial court, clear notice of the factual basis of the predicate acts.”[23]

         1. Mail Fraud

         Plaintiff alleges that the Law Firm Defendants are sending solicitation letters to Plaintiff's former patients which contain false statements that Plaintiff performed unnecessary PFO closures. Plaintiff alleges that, along with similar envelopes that can be ascertained through discovery, letters were sent sometime in 2016, on June 14, 2017, and on June 27, 2017, and Plaintiff believes that “the number of fraudulent uses of the mail number in the hundreds if not thousands, and continue today.”[24] In support of this, Plaintiff lists the names of twenty-two patients who allegedly filed complaints after the hard drive was used to identify them and send them letters.

         One of these letters, the 2016 letter, is allegedly from the Zabriskie Law Firm and was found on Reddit.com. The letter is not provided in the Amended Complaint, but allegedly states that “more than 400 patients have joined this litigation. In cases where there are no obvious side effects [the Zabriskie Law Firm] still assess[es] a value exceeding $100, 000.”[25]

         The June 14 letter is also not provided in the Amended Complaint, and Plaintiff does no more than state that it exists, but the June 27 letter is provided and was allegedly sent unsolicited to one of Plaintiff's patients. The letter is signed by Rhome Zabriskie and is on the Zabriskie Law Firm letterhead, but the patient's identifying information has been redacted from the letter and an un-redacted version has not been provided to the Court.

         The letter, entitled “PFO/ASD litigation update letter, ” begins by stating, “I think you will be interested to hear that we conducted the first of what will be hundreds of hearings before the Department of Professional Licensing (DOPL).”[26] The letter explains that in the first hearing, the “DOPL panel found that our claim against the doctor (performing an unnecessary pfo/asd closure procedure) had merit. Keep in mind that the facts in this client's case were nearly identical to the facts in your case.”[27] The letter states that the claim may now be filed and many other cases are being scheduled for hearings. The letter ends by stating:

We are still very interested in your case and would love the opportunity to represent you. If you still have the paperwork that we provided for your signature, please get it signed and returned to us as soon as possible. If you do not have that paperwork, please contact my office immediately and let us know so that we can send you new paperwork. Please act on this quickly as there are time-deadlines for filing. Also, it would be ideal if we could keep your case on pace with others as we work these matters closer to verdict or settlement.[28]

         Plaintiff concludes from this letter that “the only way Mr. Nolen, FNJ, Mr. Zabriskie, or the Zabriskie Law firm could state that two patients' cases were nearly identical would be if the Stolen Hard Drive was accessed to view the patient's records and medical services received.”[29]

         Defendants argue that, “the Zabriskie Law Firm letters are in no way improper. Sorensen places paramount importance upon a single sentence stating the case was ‘nearly identical' to the recipient's case. But nothing is false, fraudulent, or misleading about that statement.”[30] In other words, “[a]lthough Sorensen highlights what he disagrees with in the contents of the letter, he fails to offer well-pled facts demonstrating it was used as part of a mail fraud scheme.”[31]

         The Court previously found that Plaintiff had “show[n] how the mailings fit in with Defendants' alleged scheme, ”[32] but, Plaintiff's Amended Complaint fails to plead with particularity that a scheme to defraud by false pretenses, representations, or promises exists. The June 27 letter does not name Plaintiff, and the patient's name is redacted. More significantly, however, Plaintiff fails to show any false representations or promises in the letters. Instead, he argues that the hard drive must have been accessed. But this is beside the point. Plaintiff must provide specific factual allegations demonstrating the falsity of the statements. This he has not done. Instead, he makes the conclusory statement that the statements are false. This is insufficient.

         For these reasons, Plaintiff failed to plead with particularity that the Defendants are using the mail to defraud or obtain money by false pretenses, representations or promises. Therefore, the Court will not consider mail fraud as a predicate act in Plaintiff's RICO claim.

         2. Wire Fraud

         Plaintiff alleges that Defendants are also using the internet “to solicit patients and fraudulently induce them into filing malpractice claims against Plaintiff.”[33] In support of these allegations, the Amended Complaint contains an advertisement Rhome Zabriskie placed in the Salt Lake Tribune (the “Advertisement”) and screenshots of posts from the Zabriskie Law Firm's website and Facebook page.

         The Advertisement, entitled “Utah Lawyer Exposes PFO and ASD Heart Surgery Scandal in Salt Lake: The Bernie Madoff of Heart Surgery Hits Utah Hard, ” was run on May 15, 2016. A screenshot of the advertisement is included in the Amended Complaint, but the image is too small, and the resolution is too low to be legible. However, Plaintiff alleges that it contains the following false allegations:

1. The American Medical Association and the FDA indicate that in the vast majority of cases, patients are exposed to more risk with surgery than by simply leaving the hole alone;
2. I discovered there were terrible abuses to PFO and ASD by a local cardiologist (we'll call Dr. X)
3. This deception resulted in bias with some local radiologists who began offering MRI reads skewed in favor of Dr. X's unethical PFO and ASD surgery practices;
4. On multiple occasions my source claims to have seen Dr. X deliberately punch out and enlarge otherwise clinically insignificant holes in the hearts of patients, only to close the holes by using the expensive and permanently-implanted closure devises[sic]; and
5. According to the FDA advisory, many of Dr. X's patients are also now at risk of developing potentially fatal heart tissue erosion.[34]

         Plaintiff also argues that, while not named in Advertisement, he is the only doctor in Utah that would have performed the number of PFO and ASD closures mentioned in the Advertisement, and Defendants could not know how many procedures were performed without accessing the hard drive.

         Next, the Amended Complaint provides a screenshot of a Zabriskie Law Firm webpage that states, “[r]ecent evidence shows that many of these procedures were performed in violation of FDA and AMA standards.”[35] Plaintiff argues that “[t]his information is false because prior to 2012, the time the surgeries were performed, no ...


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