Rehkop v. Berwick Healthcare Corp.

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
9-12-1996
Rehkop v. Berwick Healthcare
Precedential or Non-Precedential:
Docket 95-7600
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 95-7600
___________
ROBERT A. REHKOP,
Appellant
v.
BERWICK HEALTHCARE CORPORATION; BERWICK HOSPITAL
CENTER; WYOMING VALLEY HEALTH CARE SYSTEM, INC.; ALEX
KERIS; DAVID KASPUTIS; HENRY MANDEL; DAVID MATISSE;
THOMAS SPATT; THE BOARD OF DIRECTORS OF THE BERWICK
HEALTHCARE CORPORATION
___________
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civ. No. 95-cv-00668)
___________
Argued
June 4, 1996
Before: BECKER and MANSMANN, Circuit Judges,
and BROTMAN, District Judge.*
(Filed September 12, 1996)
___________
Jeffrey C. Dohrmann, Esquire (ARGUED)
Rieders, Travis, Mussina,
Humphrey & Harris
161 West Third Street
P.O. Box 215
Williamsport, PA 17703
COUNSEL FOR APPELLANT
Deborah Martin-Norcross, Esquire
Stephen R. Wirth, Esquire
Roger S. Kaplan, Esquire (ARGUED)
Jackson Lewis, Schnitzler & Krupman
101 Park Avenue
37th Floor
New York, NY 10178-3898
* Honorable Stanley S. Brotman of the United States
District Court for the District of New Jersey, sitting by
designation.
Kevin C. Quinn, Esquire
Elliott, Reihner, Siedzikowski,
North & Egan
400 Spruce Street
300 Mellon Bank Building
Scranton, PA 18503
COUNSEL FOR APPELLEES BERWICK HEALTHCARE,
BERWICK HOSPITAL CENTER, ALEX KERIS, HENRY
MANDEL, DAVID MATISSE, THOMAS SPATT, THE BOARD
OF DIRECTORS OF THE BERWICK HEALTHCARE CORPORATION
Sidney R. Steinberg, Esquire
Jonathan P. Sprague, Esquire (ARGUED)
Post & Schell
1800 JFK Boulevard
19th Floor
Philadelphia, PA 19103
COUNSEL FOR APPELLEE WYOMING VALLEY
HEALTH CARE SYSTEM, INC.
Robert J. Gillespie, Jr., Esquire
Joseph C. Zola, Esquire (ARGUED)
Mylotte, David & Fitzpatrick
Bicentennial Building
15 Public Square
Suite 200
Wilkes-Barre, PA 18701-1797
COUNSEL FOR DAVID KASPUTIS
___________
OPINION OF THE COURT
__________
MANSMANN, Circuit Judge.
In this civil RICO complaint, Robert A. Rehkop alleged
that he was discharged from his position as a Certified
Registered Nurse Anesthetist in retaliation for refusing to
complete what he contends were fraudulent Medicare, Medicaid, and
Medical Assistance forms and for reporting this activity to the
FBI. The district court dismissed the complaint, holding that
Rehkop did not suffer an injury "substantially caused" by the
RICO enterprise pursuant to 18 U.S.C. § 1962(c). The court
further dismissed the section 1962(d) conspiracy count, after
finding Rehkop's claim under section 1962(c) deficient.
We hold that the district court correctly dismissed the
section 1962(c) count. Nonetheless, in light of our opinion in
Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162 (3d Cir. 1989),
Rehkop is not precluded from alleging a RICO conspiracy under
section 1962(d). Thus we will reverse the district court's
dismissal of the conspiracy count and remand also for
reinstatement of the pendent state law claims.
I.
In January of 1990, Rehkop was hired as a Certified
Registered Nurse Anesthetist by the Berwick Healthcare
Corporation to provide services at the Berwick Hospital Center.
Berwick Hospital Center provided anesthesia services to
the public, participating in Medicare, Medicaid and Medical
Assistance as these programs are established and administered by
the United States of America and the Commonwealth of
Pennsylvania. An anesthesiologist, David Kasputis, M.D., was
hired to provide the anesthesia services; Alex Keris was the
Chief Nurse Anesthetist and Manager of the Anesthesia Department.
Keris was Rehkop's direct supervisor. For the anesthesia
services provided, Keris and Kasputis submitted claims for
payment to the federal and state programs and received payment
for covered patients.
Rehkop alleges that Keris and Kasputis submitted
fraudulent claims and received payment, through the United States
Postal Service, to which they were not entitled, subjecting them
to civil and criminal penalties under 42 U.S.C. §§ 1320a, 7a and
7b and Pa. Stat. Ann. tit. 62, § 1407 and constituting mail fraud
under 18 U.S.C. § 1341.
Rehkop further alleges that he was required to complete
claim forms, but when he learned that the claims were fraudulent,
he refused to do so. He contends that he reported the activity
to Henry Mandel, Vice-President of Human Resources of Berwick
Hospital Center. Although Mandel advised Rehkop that he would
discuss the matter with Chief Financial Officer David Matisse,
Mandel did not contact Rehkop, so Rehkop approached Matisse
directly. Matisse allegedly told Rehkop that he had discussed
the situation with both Thomas Spatt, Chief Executive Officer of
Berwick Hospital Center, and with the Board of Directors of
Berwick Healthcare Corporation and was told not to pursue the
matter. Rehkop then reported these activities to the Federal
Bureau of Investigation.
Rehkop contends that it was after these conversations
that he began to receive unfounded and untrue disciplinary
actions signed by Keris. He also experienced lengthy delays in
the payment of funds due him for his professional services and as
reimbursement for expenses. On October 31, 1994, Keris informed
Rehkop that he was terminated.
Subsequently, Rehkop filed a complaint in the United
States District Court for the Middle District of Pennsylvania
alleging that the Berwick Healthcare Corporation, the Berwick
Hospital Center, the Wyoming Valley Healthcare System, Inc., Alex
Keris, David Kasputis, Henry Mandel, David Matisse, Thomas Spatt,
and the Board of Directors of the Berwick Healthcare Corporation
conspired to commit and did commit mail fraud (by submitting
fraudulent claims for reimbursement) from approximately January,
1990 through at least October 31, 1994. Specifically, Rehkop
alleged that in furtherance of the conspiracy, they undertook a
plan of activity which led to his termination in order to conceal
the conspiracy and to impeach his credibility should he assist
the government in prosecuting them. Rehkop avers that these acts
constitute "predicate acts" which violate 18 U.S.C. § 1962(c) and
that each of the defendants entered into a conspiracy to commit
these acts in violation of 18 U.S.C. § 1962(d).
All of the defendants filed motions to dismiss in which
they contended that Rehkop lacked standing to pursue a civil RICO
claim against them. By orders dated October 10, 1995, the
district court granted these motions and dismissed Rehkop's
complaint in its entirety, pursuant to Fed. R. Civ. P. 12(b)(6).
II.
In enacting RICO, Congress declared that
[a]ny person injured in his business or
property by reason of a violation of section
1962 of this chapter may sue therefor in
any appropriate United States district court
. . . .
18 U.S.C. § 1964(c). In order to have standing to pursue a
claim under section 1964(c), a plaintiff must first demonstrate
that the defendant committed a violation of one or more
subsections of section 1962, and second, that the violation was a
substantial cause of the injury to his business or property.
Shearin v. E.F. Hutton Group, Inc., 885 F.2d at 1164.
In Shearin v. E.F. Hutton Group, Inc., the plaintiff,
like Rehkop, maintained that she was terminated from her job at
Hutton Trust in furtherance of a RICO conspiracy and
additionally, that the defendants allegedly violated 18 U.S.C. §§
1962(a), (b), (c) and (d). The starting point for our analysis
of Shearin's standing under section 1964(c) was the Supreme
Court's opinion in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479(1985). In Sedima the Supreme Court interpreted section 1964(c)
as requiring that the injury relied upon by a plaintiff be the
result of a section 1962 violation. 473 U.S. at 495. Applying
the Sedima standard for RICO standing in Shearin's civil case, we
held that Shearin had failed to plead injury resulting from
defendant's violation of sections 1962(a) or (c). 885 F.2d at
1167-68. Shearin contended that E.F. Hutton caused her injury,
first, in hiring her away from her previous job and then in
firing her from Hutton when she refused to "play the good
soldier." Id. at 1168. We concluded that neither job loss could
be said to have resulted from violations of any of RICO's first
three subsections or from the predicate acts necessary to
establish them. Rather, "if the Hutton Companies' predicate acts
under section 1962(a) or (c) injured anybody, they injured those
Hutton customers whom the securities scheme defrauded." Id.Although we held that Shearin lacked standing to pursue
a civil RICO remedy for racketeering activity pursuant to section
1962(c), we found that she had standing to bring an action for
alleged conspiracy in violation of RICO's section 1962(d). We
observed that "while the section 1962(a) and (c) violations she
alleges injured only customers, that is not so with respect to
the alleged section 1962(d) conspiracy." 885 F.2d at 1168.
Shearin's contentions that "Hutton Trust hired her as window
dressing to perpetuate the fraud that it was a legitimate
company" and her contention that she "was fired to preserve the
same fraud when she would not participate" qualified as predicate
acts under section 1962(d). Id. Accordingly, we held that
Shearin's hiring and firing plausibly constituted overt acts that
could establish a conspiracy, and "[a]ssuming that the hiring and
firing were injuries, those injuries did occur ``by reason of'
Huttons' violation of section 1962(d)." 885 F.2d at 1168-69.
Thus we concluded that Shearin's allegations stated a claim for
relief pursuant to section 1964(c).
III.
In Count I of his complaint, Rehkop alleged that while
he was employed as a nurse anesthetist at the Berwick Hospital
Center, the defendants conspired to defraud Medicare and Medicaid
by filing fraudulent claims for payment using the U.S. Postal
Service. Rehkop averred that these acts constituted "predicate
acts" which violate 18 U.S.C. § 1962(c), upon which a civil RICO
claim may be based pursuant to 18 U.S.C. § 1964(c). A violation
of § 1962(c) requires (1) the conduct (2) of an enterprise (3)
through a pattern of racketeering activity. Sedima, 473 U.S. at
495. In addition, the plaintiff only has standing if he has been
injured in his business or property by the conduct constituting
the violation. Id.Here, in addressing Rehkop's assertion that the
defendants violated 18 U.S.C. § 1962(c), the district court
concluded that the filing of fraudulent claims with Medicare and
Medicaid may constitute a predicate act providing the basis for
liability under section 1962(c). See United States v. Khan, 53
F.3d 507 (2d Cir. 1995). We agree with this conclusion. We also
agree with the court's conclusion that Rehkop's complaint,
however, failed to allege that he suffered an injury which was
substantially caused by the defendants' alleged violations of
section 1962(c). In this regard, the district court observed
that the only injury Rehkop alleged was his firing from Berwick
Hospital Center. The defendants' alleged racketeering
activities, however, did not substantially cause Rehkop to lose
his job. Rather, the direct victims of the alleged racketeering
were the Medicare and Medicaid programs and the taxpayers. Thus,
Rehkop did not have standing to sue the defendants pursuant to
section 1964(c) based upon their alleged violations of section
1962(c). Shearin, 885 F.2d at 1168.
Rehkop also claimed that the defendants entered into a
conspiracy to commit violations of section 1962(c) in violation
of 18 U.S.C. section 1962(d) which provides that: "It shall be
unlawful for any person to conspire to violate any of the
provisions of subsections (a), (b), or (c) of this section." The
district court held that Rehkop lacks standing to pursue a
conspiracy claim under section 1962(d) because, in its opinion,
such a claim requires that the plaintiff state a viable cause of
action under another section of 1962 as well. Insofar as Rehkop
could not go forward on his section 1962(c) claim, the court
reasoned, his section 1962(d) claim also failed.
The district court's decision was influenced by
Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993),
which it viewed as superseding Shearin. The court, however,
misconstrued our holding in Lightning Lube. There we held that
in order to state a violation of section 1962(d) for conspiracy
to violate subsection (a), (b), or (c), the plaintiff must
establish that the defendants violated (or were going to violate)
one of those subsections. The problem in Lightning Lube was that
the actions alleged to constitute violations of subsections
1962(a), (b), and (c) were not violations of these subsections,
and thus they also failed to serve as the object of a section
1962(d) conspiracy.
Lightning Lube is thus distinguishable. In this case,
Rehkop's allegations state a violation of section 1962(c). The
reason he cannot pursue such a claim is that he was not harmed by
the section 1962(c) violation. Nonetheless, the defendants'
alleged violation of section 1962(c) can serve as the object of a
section 1962(d) conspiracy, and if Rehkop was harmed by reason of
the conspiracy, he may pursue a section 1962(d) claim.
Thus, this case is within Shearin's rule that a
plaintiff's allegation that he or she was harmed in furtherance
of a conspiracy under 1962(d) states a claim for relief under
section 1964(c). Although the defendants contend that Rehkop has
failed to allege a distinct RICO enterprise; that he has failed
to plead his allegations of fraud with sufficient particularity
as required by Fed. R. Civ. P. 9(b); and that he has not
adequately pled the existence of a conspiracy, we need not reach
these issues at this juncture. On remand, the plaintiff will
have ample opportunity to amend so as to sharpen his pleadings
and refine his theories.
We acknowledge that a majority of courts have disagreed
with Shearin and have held that only injuries caused by RICO
predicate acts provide standing to sue for conspiracy claims.
We need not defend Shearin here. It is the law of this circuit,
and there will be time to explore its correctness if the issue
goes en banc. See section 9.1 of our Internal Operating
Procedures; O. Hommel Company v. Ferro Corporation, 659 F.2d
340, 354 (3d Cir. 1981) (". . .a panel of this court cannot
overrule a prior panel precedent.").
Although other courts of appeals have taken a different
path than we did in Shearin, the Supreme Court has not spoken on
this issue and Congress has not acted to remedy the division. As
a result, we continue to be bound by our Internal Operating
Procedures and appropriately must follow our precedent set forth
in Shearin. Therefore, Rehkop's termination, as with Shearin's
hiring and firing, is sufficient to constitute an overt act of an
alleged conspiracy and an injury sustained by reason of a
violation of section 1962.
IV.
Accordingly, we will reverse the judgment of the
district court dismissing the section 1962(d) claim. In
addition, we will vacate the judgment of the district court
dismissing Rehkop's claims pursuant to the Pennsylvania
Whistleblower Law, Pa. Stat. Ann. tit. 43, §§ 1421 et seq., and
wrongful discharge so that they may be reconsidered by the
district court. In all other respects, we will affirm the
judgment of the district court.
Each side to bear its own costs.