DERMESROPIAN v. Dental Experts, LLC

Citations: 718 F. Supp. 2d 143; 2010 U.S. Dist. LEXIS 58332; 2010 WL 2428760Docket: C.A. 09-30087-MAP

Court: District Court, D. Massachusetts; June 11, 2010; Federal District Court

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Patrick Dermesropian, D.D.S., a dentist from Connecticut, has filed a ten-count complaint against various corporate entities and individuals, claiming wrongful termination due to his reporting of legal and ethical violations. The defendants, including Dental Experts, LLC and several individuals, sought to dismiss all counts. Magistrate Judge Kenneth P. Neiman reviewed the case and recommended dismissing Counts VI, VII, IX, and X while denying the motion for the remaining six counts. The court adopted this recommendation after a de novo review, allowing the dismissal of the specified counts and referring the case back to Judge Neiman for a pretrial scheduling conference. Dermesropian's claims include violations of Massachusetts and Illinois whistleblower statutes, retaliatory discharge, breach of contract, tortious interference, and RICO violations. The court emphasized that, in considering the motion to dismiss, all allegations must be accepted as true, drawing reasonable inferences in favor of the plaintiff.

The Supreme Court established that a complaint must present a claim for relief that is "plausible on its face" to withstand a motion to dismiss, as outlined in Bell Atl. Corp. v. Twombly and further clarified in Ashcroft v. Iqbal. A claim achieves facial plausibility when the plaintiff provides factual content that allows the court to reasonably infer the defendant's liability for the alleged misconduct.

In this case, the background is drawn from the Plaintiffs First Amended Verified Complaint. The plaintiff was hired by the defendants in Illinois on August 1, 2007, and later transferred to Springfield, Massachusetts, in summer 2008 after entering an "Independent Contractor Agreement" that commenced on September 1, 2008. This agreement stipulates a one-year initial term with provisions for termination by either party with 120 days written notice or for other specified breaches, and it renews automatically unless notice is given.

The plaintiff alleges witnessing misconduct by another dentist in Illinois, involving falsified procedure dates for insurance reimbursement, which he reported without any disciplinary action taken against the offending dentist. He also reported the dentist for bribing a receptionist for patient assignments, which was similarly ignored. While in Springfield, the plaintiff claims to have observed further improper practices, including interference by untrained management in patient treatments, directives for aggressive treatment plans leading to unnecessary procedures, and fraudulent billing practices by the defendants.

Defendants allowed Dr. Azad to use Dr. S. Hussain's DEA registration number despite Dr. Azad lacking his own registration and not being affiliated with the Springfield Clinic. They also permitted clinic staff to enter food facilities in infected lab coats, posing health risks, and failed to protect patient privacy as mandated by HIPAA. Plaintiff alleges Defendants threatened dentists with discharge for voicing concerns about unethical practices and instructed him to adopt aggressive treatment plans, which he resisted. After reporting his concerns to management, he was advised to comply with directives to retain his job. Plaintiff claims he was not compensated for all services due to Defendants' failure to collect patient balances and that payments were often below contract rates due to patients reaching insurance limits or unnecessary treatments. He further alleges that Defendants’ billing practices misled the IRS, leading to an audit that caused him financial and emotional harm. Defendants terminated Plaintiff's employment without notice shortly after he began working. The court is set to recommend granting Defendants' motion to dismiss regarding two tortious interference claims and RICO claims, while denying it for other causes of action. Defendants contest Plaintiff's claim under Massachusetts' healthcare whistleblower statute, arguing it should only address public health risks, while Plaintiff contends it includes financial integrity issues.

The court refrains from delving deeply into the allegations concerning public health risks noted in the complaint, including claims about nonmedical professionals directing treatment, unnecessary treatments being administered, improper disposal of contaminated garments, and misuse of a DEA authorization number. Consequently, the court recommends denying the Defendants' motion regarding Count I. 

In relation to Count II, the court addresses the Defendants' assertion that the Illinois Whistleblower Act does not apply extraterritorially and cannot pertain to the Plaintiff’s employment in Massachusetts, citing legal precedent. However, since many allegations are focused on the Plaintiff's time in Illinois prior to moving to Massachusetts, the court suggests denying the Defendants' motion for Count II as well.

For Counts IV and V, concerning breach of contract and breach of implied covenants, the Defendants argue that the Plaintiff, being an "at-will" employee, cannot pursue these claims. The court finds this argument unconvincing, noting that the Plaintiff signed a contract, indicating he was not an at-will employee. Although Illinois law allows indefinite contracts to be terminated at will, the court clarifies that this rule applies only when both the duration and termination conditions are ambiguous. Therefore, the court will also recommend denying the Defendants' motion regarding Counts IV and V.

Perpetual contracts, while generally disfavored, are not terminable at-will if termination is triggered by an objective event that defines the contract's duration. A contract lacking a fixed duration but allowing termination only for cause or specified events is considered indefinite but terminable only upon those events. In this case, the Contract is renewable and is not void due to potential perpetual duration. It stipulates termination upon the Plaintiff's material breach or with 120 days' notice, thus indicating that the Plaintiff is not an at-will employee, contradicting the Defendants' assertions. Consequently, the court recommends denying the Defendants' motion concerning Counts IV and V.

Regarding Count III, Defendants argue that the Plaintiff's retaliatory discharge claim should be dismissed for failing to identify a violated public policy. Although at-will employees can claim wrongful termination only if it contravenes established public policy, the court finds no validity in the Defendants' at-will argument, recommending that their motion on Count III also be denied. The Plaintiff's situation may be complicated by the fact that certain retaliatory discharge claims are typically exclusive to at-will employees. Nevertheless, due to the preliminary nature of the proceedings and the unclear scope of the Plaintiff's claim, the court believes Count III should proceed.

The complaint includes three tortious interference claims: Count VI alleges that Dental Dreams Illinois interfered with Plaintiff's relationship with Dental Dreams Massachusetts; Count VII claims that Dental Dreams Massachusetts interfered with the relationship with Dental Dreams Illinois; and Count VIII asserts that Dental Dreams Management and its managers interfered with both relationships. The court recommends allowing the motion to dismiss Counts VI and VII but denying it for Count VIII. To succeed in a tortious interference claim, the Plaintiff must show a business relationship, the defendant's awareness of it, intentional and malicious interference, and resultant harm.

An employee cannot sue their employer for interference with its own contract, a principle that extends to tortious interference claims between partners. In this case, the complaint states that Dental Dreams Illinois operates nationwide clinics managed by locally licensed dentists and assumes responsibility for Dental Dreams Massachusetts. Due to the close relationship between these entities, tortious interference claims between them are barred, leading the court to recommend granting the defendants' motion regarding Counts VI and VII. 

However, the court disagrees with the defendants’ position concerning Count VIII, which targets Dental Dreams Management and its managers. Typically, a supervisor enjoys a qualified privilege in employment-related tortious interference claims; however, in Massachusetts, this privilege can be challenged by evidence of "actual malice" or unlawful retaliation. The complaint alleges that managers threatened the plaintiff with termination unless he complied with unethical directives, suggesting potential retaliatory motives that could support a tortious interference claim against the managers and Dental Dreams Management. Thus, the court recommends denying the motion to dismiss Count VIII.

Regarding Counts IX and X, which involve RICO claims, the court agrees with the defendants that the plaintiff has not established standing or met the necessary elements for these claims. To prevail in a civil RICO action, a plaintiff must demonstrate conduct of an enterprise through a pattern of racketeering activity. Furthermore, if the substantive RICO claim is insufficient, the associated conspiracy claim also fails. The court will recommend the dismissal of Counts IX and X based on the lack of standing and insufficient pleading.

A RICO plaintiff must demonstrate standing by proving injury to business or property caused by the RICO violation and establishing both a violation of section 1962 and harm "by reason of the violation." Courts require a specific pleading of an ascertainable loss directly linked to alleged fraudulent conduct, and mere "cause in fact" is insufficient due to the proximate cause requirement in section 1964(c). While pleadings are generally liberally construed, RICO cases necessitate greater specificity.

The plaintiff claims several injuries due to RICO predicate acts: termination from employment, denial of payment for medical services linked to fraudulent billing practices, fraudulent attempts by defendants to divert tax burdens, extortion, and emotional damages. However, the court finds these claims insufficient for establishing RICO standing. 

Specifically, the plaintiff's termination does not create a RICO cause of action as it must be linked to the predicate act. Previous rulings indicate that retaliation for reporting RICO acts does not confer standing. Claims regarding denial of payment lack the necessary specificity required for fraud allegations under Rule 9(b) and do not meet pleading standards. Additionally, the claim of IRS investigation due to fraudulent billing fails to establish proximate cause necessary for RICO standing, as it reflects merely a "but for" relationship rather than a direct causal link to the alleged violations.

Plaintiff has failed to specify the billing practices that allegedly drew IRS scrutiny, lacking details on when these practices occurred, the defense efforts made, and the associated costs. The claim of attempted extortion is undermined by the fact that Plaintiff did not engage in the alleged fraudulent conduct nor did he relinquish any rights, thereby not suffering any injury that would support RICO standing. Additionally, emotional distress claims are not actionable under RICO as established in relevant case law. Consequently, the court recommends granting Defendants' motion to dismiss concerning Counts VI, VII, IX, and X, while denying it for other counts. The document also notes the procedural requirements for filing objections to the findings and recommendations within fourteen days.