Act For Health v. United Energy Workers

NOT RECOMMENDED FOR PUBLICATION
File Name: 19a0415n.06
No. 18-5900
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ACT FOR HEALTH, dba Professional Case )
Management; PROFESSIONAL CASE )
MANAGEMENT OF KENTUCKY, LLC, )
)
Plaintiffs-Appellants, )
)
v. )
ON APPEAL FROM THE
)
UNITED STATES DISTRICT
UNITED ENERGY WORKERS HEALTHCARE )
COURT FOR THE WESTERN
CORP; KENTUCKY ENERGY WORKERS )
DISTRICT OF KENTUCKY
HEALTHCARE, LLC; BRIGHTMORE HOME )
CARE OF KENTUCKY LLC; JOHN FALLS, an )
individual; TRAVIS SHUMWAY, an individual; )
CHAD SHUMWAY, an individual; and )
NICHOLAS BAME, an individual, )
)
Defendants-Appellees )
BEFORE: COOK, McKEAGUE, and WHITE, Circuit Judges.
HELENE N. WHITE, Circuit Judge. Plaintiff Act for Health, dba Professional Case
Management, and its wholly owned subsidiary, Professional Case Management of Kentucky
(“PCMK,” and collectively with Act for Health, “PCM” or “Plaintiffs”), appeal the district court’s
dismissal of their amended complaint for failure to state a claim. Plaintiffs compete with three
affiliated corporate defendants—United Energy Workers Healthcare Corp. (“UEW”), Kentucky
Energy Workers Healthcare, LLC (“KEW”), and Brightmore Home Care of Kentucky
(“Brightmore”)—in providing home-health services. PCM alleges that UEW and KEW were
operating without the required license to provide home-health services and, after the Kentucky
No. 18-5900, Act for Health, et al. v. United Energy Workers Healthcare Corp., et al.
Officer of Inspector General investigated them, Defendants John Falls, Travis Shumway, and Chad
Shumway formed Brightmore to continue to illegally service UEW and KEW clients. PCM also
alleges that UEW and KEW solicit PCM’s patients and offer free, unrelated services (such as lawn
care) to induce patients to switch from PCM, and also misclassify their employees as independent
contractors to gain an advantage in the market.
PCM filed this diversity action alleging several state-law claims, including unfair
competition, tortious interference with contract and/or prospective business relations, and civil
conspiracy. Finding no error in the district court’s dismissal of PCM’s First Amended Complaint
for failure to state a claim, we affirm.
I.
The federal Energy Employees Occupational Illness Compensation Program Act
(EEOICPA) of 2000 provides “benefits to individuals or their survivors for illnesses incurred from
exposure to toxic substances while working for the Department of Energy or certain related
entities.” Watson v. Solis, 693 F.3d 620, 622 (6th Cir. 2012); see 42 U.S.C. § 7384, et seq. Eligible
individuals may receive healthcare services, including home-health services and personal-care
services, from designated providers that are reimbursed by the Department of Labor. See 42 U.S.C.
§§ 7384e, 7384t; 20 C.F.R. §§ 30.400, 30.403.
Providers are also subject to state healthcare regulations. Kentucky has different
requirements for providers of home-health services, i.e., “home health agencies,” and providers of
personal-care services, i.e., “personal services agencies.” To establish a home-health agency, an
entity must obtain a “certificate of need” from the Kentucky Cabinet for Health and Family
Services (“KCHFS”). Ky. Rev. Stat. § 216B.061(1)(a); id. § 216B.015(9), (13). Home-health
agencies provide “health and health related services” in a patient’s place of residence “as required
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by a plan of care prescribed by a licensed physician.” 902 Ky. Admin. Reg. 20:081, § 2. “Health
services” are defined as “clinically related services provided within the Commonwealth to two . . .
or more persons, including but not limited to diagnostic, treatment, or rehabilitative services.” Ky.
Rev. Stat. § 216B.015(14).
To provide personal-care services, an entity must obtain certification from the KCHFS to
operate a “personal services agency.” Ky. Rev. Stat. § 216.712(1); see also 906 Ky. Admin. Reg.
1:180, § 2. A “personal services agency” is an organization “that directly provides or makes
provision for personal services.” Ky. Rev. Stat. § 216.710(8). The term “personal services” is
defined to include assisting with ambulation and activities of daily living, facilitating the self-
administration of medications, and providing attendant care; but the definition specifically
excludes services “that require the order of a licensed health-care professional to be lawfully
performed in Kentucky” as well as services performed by any “health-care entity or health-care
practitioner otherwise licensed, certified, or regulated by local, state, or federal statutes or
regulations.” Ky. Rev. Stat. § 216.710(7)(b)(6), (9).
Plaintiffs’ amended complaint alleges that since 2002, PCM has been providing home-
health services to EEOICPA-eligible patients in Kentucky. PCM is an enrolled EEOICPA home-
health care provider with the U.S. Department of Labor (DOL), and PCMK is a licensed home-
health agency in Kentucky with a certificate of need to provide home-health services in four
Kentucky counties. To operate this business, PCM locates eligible persons and assists them in
enrolling in and obtaining benefits through the EEOICPA program; it also identifies, recruits and
trains qualified home-health providers to serve patients. These activities require a considerable
investment of time, effort, and money.
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PCM’s amended complaint alleges that neither UEW nor KEW has obtained a certificate
of need in any of the four counties where PCM is licensed to operate; therefore they are not licensed
home-health agencies in those counties. Nonetheless, UEW and KEW provide home-health
services in those four counties. UEW and KEW solicit PCM’s patients and offer free, unrelated
services such as lawn care to induce patients to switch from PCM. They also misclassify their
employees by classifying their nurses and other providers as independent contractors, thereby
gaining an economic advantage in the market.
After an investigation, in August 2016 the Kentucky Officer of Inspector General (OIG)
concluded that UEW’s provision of services in Kentucky “exceeded the scope of its Personal
Services Agency certification in connection with six out of six patients sampled by OIG.” (R. 148,
PID 1224.) That month, Falls and the Shumways formed Brightmore, which also lacks the
necessary licensure, and Brightmore began providing home-health services to clients of UEW and
KEW.
PCM’s amended complaint asserts, in relevant part, claims of (1) unfair competition
against UEW, KEW, and Brightmore; (2) tortious interference with contract and/or prospective
business relations against all Defendants; and (3) civil conspiracy against all Defendants. 1 The
district court granted Defendants’ motion to dismiss the amended complaint for failure to state a
claim. Acknowledging that the “boundaries” of an unfair-competition claim under Kentucky law
“are somewhat unclear” (R. 195, PID 1655), the district court dismissed the claim because it could
find no case “in which a claim of unfair competition has been successful against a competitor who
allegedly has an unfair advantage in the marketplace. Rather, . . . the only cases in which unfair
1
PCM also brought a claim against UEW, KEW, and Brightmore for violation of Kentucky Revised Statute
216B’s requirements for home-health agencies, but PCM does not appeal the dismissal of that claim.
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competition claims have been successful in Kentucky is in the realm of trademarks.” (Id. at PID
1660.)
The district court rejected the tortious-interference-with-contract claim on the basis that the
relevant contracts are at-will and thus are not breached when patients opt to switch providers. The
district court found that PCM’s claim of tortious interference with prospective business relations
fails because the amended complaint does not plead “significantly wrongful conduct,” such as
“fraudulent misrepresentation, deceit, coercion, physical violence, civil suits, criminal
prosecutions, or any other conduct analogous to these examples.” (Id. at PID 1670, 1672.) In
arguing that it alleged “significantly wrongful conduct,” PCM relied on Defendants’ alleged
operation without a proper license, misclassification of their employees as independent
contractors, forming Brightmore for the purpose of continuing to provide unauthorized healthcare
services in Kentucky, and solicitation of PCM’s patients by offering services unrelated to
healthcare in violation of the federal Anti-Kickback Statute. The district court rejected these
arguments. Finally, because PCM’s other claims failed, the district court dismissed the civil-
conspiracy claim as well.
Plaintiffs appealed.
II.
This court reviews “de novo a district court’s decision to grant a motion to dismiss for
failure to state a claim under” Federal Rule of Civil Procedure 12(b)(6), construing the complaint
in the light most favorable to Plaintiffs. Jackson v. Prof'l Radiology Inc., 864 F.3d 463, 467 (6th
Cir. 2017) (citing Lambert v. Hartman, 517 F.3d 433, 438-39 (6th Cir. 2008)). “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. 662, 678 (2009) (internal
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quotation marks and citation omitted). If this court confronts a question that “has not yet been
resolved by the [Kentucky] courts, we must attempt to predict what the [Kentucky] Supreme Court
would do if confronted with the same question.” Himmel v. Ford Motor Co., 342 F.3d 593, 598
(6th Cir. 2003) (citing Stalbosky v. Belew, 205 F.3d 890, 893-94 (6th Cir. 2000)).
A. Unfair Competition
PCM argues that the district court interpreted the scope of a Kentucky unfair-competition
claim too narrowly. PCM relies primarily on two Kentucky cases, as well as several cases from
other jurisdictions, in arguing that an unfair-competition claim covers the conduct alleged here,
i.e., providing competing services without proper licensure and in violation of statutes.
Covington Inn Corp. v. White Horse Tavern, Inc., 445 S.W.2d 135 (Ky. 1969), involved a
dispute about whether the “White House Inn” was deceptively similar to the “White House
Tavern.” In defining the contours of an unfair-competition claim, the Court of Appeals of
Kentucky explained:
The common law doctrine of unfair competition has long been recognized
and its coverage has been expanded to meet many varying types of business
conditions. A fair discussion of the principles involved appears thus in 52 Am.Jur.,
Trade-marks, Trade-names, Etc., section 86 (page 564):
‘Unfair competition, as a justiciable wrong under the common law,
is a limited concept, although the scope of the doctrine, which has in recent
years been expanded in some jurisdictions in varying degrees, cannot be
precisely defined. It is a species of fraud or deceit. A universally
recognized, and the most common, form or mode of unfair competition is
the simulation by one person of the name, symbols, or devices employed by
a business rival, so as to induce the purchase of his goods under a false
impression as to their origin or ownership and thus secure for himself
benefits properly belonging to his competitor.
‘As stated by some authorities, the essence of the wrong is the sale
of one’s own goods for those of another person, and it has sometimes been
declared that nothing less than conduct tending to pass or ‘palm’ off one’s
own merchandise, services, or business as that or those of another will
constitute unfair competition. According to other authorities, however, the
doctrine of unfair competition is not limited to such passing off of one’s
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goods, services, or business for those or that of another, but extends to
others acts done or practices employed for the purpose of pirating the trade
of a competitor. It has been held to apply to misappropriation as well as
misrepresentation, to the selling of another’s goods as one’s own—to
misappropration [sic] of what equitably belongs to a competitor. Also, the
doctrine has been extended in many cases, especially the more recent, so as
to afford protection and relief against the unjust appropriation of, or injury
to, the good will or business reputation of another, even though he is not a
competitor.’
Id. at 137-38. The Kentucky court then stated that the “Kentucky cases hereinafter cited recognize
the above principles” and went on to discuss numerous cases, all of which addressed whether
similar business names were deceptive. Id. at 138-39. “The foregoing authorities,” the court
explained, “collectively impel the conclusion that unfair competition consists of either (1) injuring
the plaintiff by taking his business or impairing his good will, or (2) unfairly profiting by the use
of the plaintiff's name, or a similar one, in exploiting his good will.” Id. at 139. A necessary
element of either theory, however, is “actual or intended deception of the public for business
reasons.” Id.
PCM highlights some of this language to argue that Covington recognized a broad claim
of unfair competition—beyond just passing off one’s goods or business for those of another—that
encompasses the allegations here. Some of the language in Covington read in isolation supports
PCM’s argument, but read as a whole, Covington does not recognize the expansive unfair-
competition claim for which PCM advocates. First, Covington concerned whether one business’s
name was deceptively similar to another’s, so there would seem to be no reason for the court to
determine that an unfair-competition claim extends to the actions alleged here. Second, all the
cases that Covington discussed involved confusion of business names. Id. at 138-39.
Further, no Kentucky court applying Covington has interpreted it in the way PCM
advocates. In Kenney v. Hanger Prosthetics & Orthotics, Inc., 269 S.W.3d 866 (Ky. Ct. App.
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2007), the most recent Kentucky appellate case we are aware of to apply Covington, the court
explained:
Originally, unfair competition “dealt generally with the palming off of one’s goods
as those of a rival trader. Thus, the essence of common-law unfair competition is
the bad-faith misappropriation of the labors and expenditures of another likely to
cause confusion or to deceive purchasers as to the source or the origin of goods.”
54A Am.Jur.2d, Monopolies, Restraints of Trade, and Unfair Trade Practices §
1107 (1996) (footnotes omitted). Unfair competition has since been “extended to
outlawing ‘parasitism’ under the principle that one may not appropriate a
competitor’s skill, expenditures, and labor.” Id.
Kenney, 269 S.W.3d at 871. Although it later acknowledged that “courts [in other jurisdictions]
have held unfair competition encompasses many actions,” the Kentucky court rejected the
plaintiff’s proposed unfair-competition claim—involving allegations that the plaintiff’s former
employer and one of its employees had interfered with the plaintiff’s venture by telling potential
customers that the plaintiff was barred from competing in certain geographic locations, id.at 869—
because the plaintiff had not cited any Kentucky case recognizing such a claim under similar facts,
id. at 871.
Nor do district courts in Kentucky support PCM’s interpretation of Covington. In Auto
Channel, Inc. v. Speedvision Network, LLC, the district court explained that “Kentucky has only
recognized the claim of unfair competition in the realm of trademarks and defines unfair
competition ‘as passing off, or attempting to pass off, upon the public the goods or business of one
man as being the goods or business of another.’” 144 F. Supp. 2d 784, 789-90 (W.D. Ky. 2001)
(quoting Newport Sand Bank Co. v. Monarch Sand Min. Co., 137 S.W. 784, 785 (Ky. 1911)).
In Raheel Foods, LLC v. Yum! Brands, Inc., the plaintiffs, franchisees of the defendants,
alleged that the defendants arbitrarily refused to approve the purchase of the plaintiffs’ franchises,
instead using the information about the proposed buyers obtained from the plaintiffs to sell the
proposed buyers different stores or franchises. No. 3:16-CV-00451-GNS, 2017 WL 217751, at
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*1-*2 (W.D. Ky. Jan. 18, 2017). In discussing the unfair-competition claim, the district court
stated that “in light of Covington Inn, [it] is not convinced that the doctrine of unfair competition
is categorically limited to the ‘realm of trademarks,’ [but] it does appear that most, if not all, cases
applying the doctrine involve the allegation that one party is using another party’s trademark with
the intent to deceive the public.” Id. at *7 n.4. Despite it being “unclear exactly how far the
doctrine extends past trademarks,” the district court nevertheless held that “it is clear that it does
not apply here.” Id. It explained:
Plaintiffs’ arguments to the contrary are unpersuasive. Plaintiffs maintain that
unfair competition applies where there is “some competitive aspect” between the
parties, and the defendant acts “unfairly in a manner which invades the plaintiffs
protected rights.” (Pls.’ Opp’n 18-19). They contend their claim is sufficiently
pled because Defendants acted unfairly by improperly interfering in their
prospective business relations, which harmed their protected right to conduct their
businesses. The language quoted by Plaintiffs—albeit out of context—does come
from Covington Inn. See Covington Inn, 445 S.W.2d at 138. Moreover,
the Covington Inn court did note that one form of unfair competition is “injuring
the plaintiff by taking his business . . . .” Id. at 139. This clause however, cannot
be read in isolation. The opinion as a whole does not support Plaintiffs’ broad
conception of unfair competition because it makes clear that actual or intended
deception of the public is an “essential element” of the tort. See id. at 139.
Raheel Foods, 2017 WL 217751, at *7 (alteration in original).
Acknowledging that deception of the public is a required element under Kentucky law,
PCM argues that Defendants’ actions are deceptive because they do not notify their patients that
they are operating unlawfully.2 As Defendants point out, however, this allegation is not contained
in PCM’s amended complaint. Further, this theory of deception has no support in Kentucky
caselaw, which requires that the deception relate to the source or origin of the goods or services.
See Kenney, 269 S.W.3d at 781.
2
PCM also argues on appeal that Defendants’ actions were deceptive because “they have deceptively
advertised misclassified positions” (Appellants’ Br. at 24), but this argument was not made below and fails for the
same reasons that its other deception argument fails.
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PCM also relies heavily on McCormack v. Cole, 97 S.W.2d 33 (Ky. 1936), a case involving
the dismissal of licensed taxi drivers’ suit against competitors for operating without the proper
certificates and permits, “whereby they were in unlawful and unfair competition with plaintiffs.”
Id. at 34. Because the trial court had not issued a reasoned decision, the Kentucky high court
surmised that the trial court may have concluded “that plaintiffs could not maintain this action
because the relief sought involved an injunction to prevent defendants from violating the statute
with which they were charged and thereby committing a crime, and that equity would not enjoin
the violation of the criminal laws of the commonwealth.” Id. The court explained, however, that
this reasoning would be erroneous “since such injunctive relief may be obtained by one who
sustains property damage because of the violation” and cited two cases to support that proposition
Id. The court continued:
But, independently of those decisions, section 2739j-92 of the statute . . . expressly
prescribes that: “Any common carrier, contract carrier [taxi drivers] or any other
person, firm or corporation may, at the instance of the Commission or of any person
having an interest in the subject-matter, be enjoined by the courts of this State from
any violation of the provisions of this Act, or of any order, rule, regulation or
requirement of the Commission.” That section is section 24 of article 4 of the act
. . . and it is complete authority for the maintenance of this action to obtain the relief
sought by plaintiffs.
Id. at 34-35 (alteration in original).
PCM argues that McCormack recognized two independent bases for its decision: a
common-law claim of unfair competition for violation of a statute, and a statutory claim. PCM
reads McCormack too broadly in arguing that it recognized a broad claim for unfair competition
based on a violation of any statute. First, the two cases McCormack cited both addressed the same
act governing common carriers and relied on that act for authority in granting injunctive relief.
See Slusher v. Safety Coach Transit Co., 17 S.W.2d 1012, 1012 (Ky. 1929); Hazard Bus Co. v.
Wells, 11 S.W.2d 413 (Ky. 1928). Second, as Defendants point out, “[n]o case since 1936 cites
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McCormack in a discussion of unfair competition.” (Appellees’ Br. at 17.) Prior to citations by
the district court in this action, only one case had cited McCormack at all, and it was for the
proposition that failure to object to the joinder of defendants waives that objection. See Bradford
v. Sagraves, 556 S.W.2d 166, 168 (Ky. Ct. App. 1977).
PCM also relies on cases from other states and the residual clause of the Restatement
(Third) of Unfair Competition § 1. Some of those authorities support PCM’s position that an
unfair-competition claim can be based on violations of state licensure laws or civil statutes. See,
e.g., Malden Transportation, Inc. v. Uber Techs., Inc., 286 F. Supp. 3d 264, 273-79 (D. Mass.
2017) (holding that the plaintiffs stated a valid claim of unfair competition under statutory and
common law against Uber for operating its services in violation of licensing regulations and
statutes); Restatement (Third) of Unfair Competition § 1 (1995) (indicating that liability for unfair
competition can attach to “[o]ne who causes harm to the commercial relations of another by
engaging in . . . other acts or practices of the actor determined to be actionable as an unfair method
of competition, taking into account the nature of the conduct and its likely effect on both the person
seeking relief and the public”). But these authorities do not change the fact that Kentucky cases
do not appear to have adopted such a theory. Although this court may consider other states’ laws
and the Restatements, in determining Kentucky law the primary focus of our analysis is on prior
decisions of Kentucky’s highest and intermediate appellate courts, see Garden City Osteopathic
Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995), and, as discussed above, those cases
suggest that Kentucky’s concept of an unfair-competition claim is much narrower than the
authorities cited.
Although the answer has not been definitively provided by Kentucky courts, the appellate
caselaw in Kentucky suggests that an unfair-competition claim does not extend to PCM’s
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allegations here. Accordingly, we affirm the district court’s dismissal of PCM’s unfair-
competition claim.
B. Tortious Interference With Contract or Prospective Business Relationship
In general, a claim for tortious interference with a contract under Kentucky law requires
pleading (1) the existence of a contract, (2) the defendant’s knowledge of the contract, (3) intent
by the defendant to cause a breach, (4) and conduct which caused a breach, (5) that resulted in
damages, (6) in the absence of any privilege or justification to excuse that conduct. Snow Pallet,
Inc. v. Monticello Banking Co., 367 S.W.3d 1, 5-6 (Ky. Ct. App. 2012). The district court
dismissed PCM’s claim, reasoning that PCM could not adequately plead breach of any contract
because PCM’s contracts with its patients are at-will and are not breached when a patient chooses
a different provider. Thus, PCM’s claim was more appropriately analyzed as tortious interference
with prospective business relations.
An action for intentional interference with a prospective business relationship requires (1)
the existence of a valid business relationship or its expectancy, (2) that the defendant had
knowledge thereof, (3) that the defendant intentionally interfered, and (4) that the defendant did
so with an improper motive (5) causing (6) special damages. Halle v. Banner Indus. of N.E., Inc.,
453 S.W.3d 179, 187 (Ky. Ct. App. 2014).
The parties agree that under Kentucky law, claims against a competitor for tortious
interference with an at-will contract and tortious interference with a prospective business
relationship both require the plaintiff to establish that the defendant employed wrongful means.
Because PCM has not sufficiently alleged wrongful means, its claim fails under either theory.
Kentucky courts have adopted Restatement (Second) of Torts (hereafter Restatement)
§ 766 (1979) (addressing intentional interference with a contract and prospective contractual
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relation), and § 767 (listing factors to consider in determining whether an actor’s conduct in
intentionally interfering with a contract or a prospective contractual relation of another is
improper). See Nat’l Collegiate Athletic Ass’n v. Hornung, 754 S.W.2d 855, 857 (Ky. 1988); see
also Sparkman v. Consol Energy, Inc., 571 S.W.3d 569, 571 (Ky. 2019) (“[The Kentucky Supreme
Court] has never strayed from the Restatement (Second) of Torts when analyzing tortious
interference claims and does not elect to do so today.”). And this court has predicted that Kentucky
would also adopt § 768, which applies where the parties are competitors, providing:
(1) One who intentionally causes a third person not to enter into a prospective
contractual relation with another who is his competitor or not to continue an
existing contract terminable at will does not interfere improperly with the other’s
relation if
(a) the relation concerns a matter involved in the competition between the
actor and the other and
(b) the actor does not employ wrongful means and
(c) his action does not create or continue an unlawful restraint of trade and
(d) his purpose is at least in part to advance his interest in competing with
the other.
(2) The fact that one is a competitor of another for the business of a third person
does not prevent his causing a breach of an existing contract with the other from
being an improper interference if the contract is not terminable at will.
See Ventas, Inc. v. HCP, Inc., 647 F.3d 291, 309 (6th Cir. 2011).
In explaining the interplay between Restatement § 767 and § 768, this court held that it
was proper to instruct the jury to consider the factors listed in § 767 in determining whether a party
employed “wrongful means” under § 768.
In seeking guidance, the district court properly looked to § 767, as many
other courts have done, to illuminate the meaning of “wrongful” conduct under
§768.
Part of the same Restatement, § 767 immediately proceeds § 768, and both
sections relate to tortious interference. Section 768 stands simply as “special
application of the factors determining whether an interference is improper or not,
as stated in § 767.” Moreover, § 767 specifically defines “improper interference,”
a phrase also used in § 768, and that the Kentucky Supreme Court has interpreted
to mean “wrongful,” the operative word under § 768.
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Finally, we address HCP’s policy argument that the “district court’s [ ]
effort to ‘blend’ § 767 with § 768 diluted the competitive protections § 768 is
designed to provide.” We do not agree. To the extent the district court’s hybrid
approach may have increased the likelihood of liability under the facts of this case,
the approach did not dilute the competitive protections of § 768. Robust
competition may also require regulation, and unfair competitive practices certainly
do not fall within the protections of § 768. Although courts should be circumspect
in adjudicating claims between competitors, wrongful and anti-competitive conduct
should not be insulated from liability. Indeed, the public interest in full and fair
competition is furthered by imposing liability on a market player, such as HCP, for
fraudulently leveraging a public market to sabotage a competitor, as liability for
such conduct will deter similar future conduct and promote economic certainty in
the marketplace.
Under these circumstances, we find that the district court properly resolved
the interplay between §§ 767 and 768 as a matter of Kentucky law by instructing
the jury pursuant to § 768 and also using certain factors listed in § 767 to explicate
§ 768.
Ventas, Inc., 647 F.3d 310-11 (alteration in original) (internal citations omitted).
A comment to the Restatement § 768 explains that “[t]he predatory means discussed in
§ 767, Comment c, physical violence, fraud,3 civil suits and criminal prosecutions, are all wrongful
in the situation covered by this Section,” but “persuasion and . . . limited economic pressure” are
not. Restatement § 768 cmt. (e). Restatement § 767 further identifies “unlawful conduct” as
conduct that may make an interference wrongful. Restatement § 767 cmt. (c).
The parties dispute whether “wrongful means” under Restatement § 768 includes only
those means specifically identified in comment (e), i.e., physical violence, fraud, civil suits and
criminal prosecutions, or whether it also includes unlawful conduct, which is mentioned in § 767
comment (c). Ventas instructs that one must look to § 767 “to illuminate the meaning of ‘wrongful’
conduct under § 768.” 647 F.3d at 310. And nothing in § 768 expressly limits “wrongful means”
3
Defendants argue that PCM must plead wrongful means under the heightened pleading standard of Rule
9(b) to the extent that it alleges Defendants interfered by fraud or deceit. PCM does not appear to rely on fraud or
deceit to establish interference. Rather, it relies on conduct in violation of multiple statutes. Therefore, we do not
address this argument.
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to physical violence, fraud, civil suits and criminal prosecutions. See also Sparkman, 571 S.W.3d
at 572 (finding that “wrongful means” under Restatement § 769 includes the wrongful means
discussed in § 767 comment (c) because a comment in § 769 refers back to § 767 comment (c)).
Although the Kentucky Supreme Court in Hornung gave examples of wrongful means consisting
of fraud, deceit, or coercion, it did not suggest that those were the only means that are considered
wrongful under the Restatement. 754 S.W.2d at 858. Nonetheless, we do not read § 767 as
creating a bright-line rule that any unlawful conduct constitutes wrongful means for purposes of
bringing a tortious-interference claim. Rather, our task is to determine whether the Kentucky
Supreme Court would find that the statutory violations alleged in this case qualify as wrongful
means for purposes of a tortious-interference-with-prospective-business-relationship claim.
PCM cites no caselaw from Kentucky holding that a violation of a licensing statute
constitutes wrongful means for a tortious-interference claim against a competitor. Most other
courts that have addressed the meaning of “wrongful means” under Restatement § 768 have
concluded that it requires alleging conduct that is independently actionable. See DP-Tek, Inc. v.
AT & T Glob. Info. Sols. Co., 100 F.3d 828, 833-35 (10th Cir. 1996) (discussing cases and
concluding that “we are convinced the weight of authority supports the conclusion that the
wrongful means test of section 768 requires independently actionable conduct”); Amerinet, Inc. v.
Xerox Corp., 972 F.2d 1483, 1507 (8th Cir. 1992) (‘“[W]rongful means,’ as those words are used
in Restatement Section 768(b), ‘refer[] to means which are intrinsically wrongful—that is, conduct
which is itself capable of forming the basis for liability of the actor.’” (alterations in original)
(quoting Conoco, Inc. v. Inman Oil Co., 774 F.2d 895, 907 (8th Cir. 1985))). This formulation is
consistent with the Kentucky Supreme Court’s discussion of improper interference, as fraud,
deceit, and coercion are potentially all independently actionable. See 754 S.W.2d at 858.
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No. 18-5900, Act for Health, et al. v. United Energy Workers Healthcare Corp., et al.
Here, PCM’s amended complaint included a claim for violation of the home-health agency
licensing statute, Ky. Rev. Stat. Ch. 216B, but the district court dismissed that claim, finding that
that there was no private right of action under the statute. The district court further found that
PCM could not bring its statutory claim under Ky. Rev. Stat. § 446.070, which provides in part
that “[a] person injured by the violation of any statute may recover from the offender such damages
as he sustained by reason of the violation,” because PCM was not in the class of persons intended
to be protected by the statute and the alleged injury was not the type of injury against which
Chapter 216B was designed to protect. PCM does not appeal the dismissal of that claim, thus
abandoning the statutory claim on appeal. Defendants argue that allowing PCM to repackage its
now-abandoned statutory claim as a tortious-interference claim would “circumvent the Kentucky
Legislature’s decision not to allow a private right of action to enforce its licensing rules by allowing
PCM to rebrand its claim as . . . tortious interference.” (Appellees’ Br. at 37 n.17.)
This argument finds support in cases in other jurisdictions. For example, in Settimo
Associates v. Environ Systems, Inc., 17 Cal. Rptr. 2d 757, 758 (Cal. Ct. App. 1993), a contractor
sued a competing contractor for being awarded contracts for projects that involved work that was
outside the scope of the competitor’s specialty license. The court held that the plaintiff failed to
state a claim for unlawful interference with contracts:
The Business and Professions Code which contains statutory licensing regulations
neither creates nor denies any civil remedy to bidders who lose projects to
unlicensed competitors. Granted, Environ’s conduct amounted to a misdemeanor
and foreclosed any possibility of its suing to enforce an awarded contract.
However, these regulatory sections fall within the responsibility of the Contractors’
Licensing Board to sanction such misconduct. They do not create any action for
civil damages in a competing bidder.
Id. at 759 (citations omitted); see also Warde v. Kaiser, 887 F.2d 97, 102-03 (6th Cir. 1989) (“Even
if the defendant agents committed a technical violation of [an insurance notice statute] and its
implementing regulations . . . [,] nothing in Tennessee’s insurance laws purports to make such a
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No. 18-5900, Act for Health, et al. v. United Energy Workers Healthcare Corp., et al.
failure actionable at the instance of a competing insurance agent. . . . [W]e do not believe that the
Tennessee courts would treat the Shannons’ rescission of the Midland Mutual coverage as having
been procured through ‘wrongful means.’”); Whitey’s Boat Cruises, Inc. v. Napali-Kauai Boat
Charters, Inc., 132 P.3d 1213, 1223-29 (Haw. 2006), as corrected (Apr. 25, 2006) (rejecting claim
by commercial tour boat operators against competitors for tortious interference with prospective
business advantage based on the competitors operating without required county and state permits
where the rules and regulations relating to those permits did not authorize private cause of action
and were not enacted to protect business interests or competition); Klinger v. Morrow Cty. Grain
Growers, Inc., 794 P.2d 811, 812-13 (Or. Ct. App. 1990) (rejecting the plaintiff’s argument that a
competitor gasoline station that allowed customers to serve themselves in making gasoline
purchases, in violation of a state statute that conferred no private cause of action on a competitor,
engaged in “improper means” necessary to establish a tortious-interference claim: “It would make
no sense for an intentional interference claim to be maintainable simply because the defendant
violated a statute that has no nexus with the business or economic relationships allegedly
harmed.”).
Although some other courts have listed violation of a statute as an example of wrongful
means, see Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 n.5 (Tenn. 2002); Leigh
Furniture & Carpet Co. v. Isom, 657 P.2d 293, 308 (Utah 1982), overruled on other grounds by
Eldridge v. Johndrow, 345 P.3d 553 (Utah 2015), we are not aware of any court finding wrongful
means based on allegations similar to those here.4 Thus, although the issue is a close one, we are
4
Trau-Med simply listed in a footnote examples of improper means and included statutory violations. 71
S.W.3d at 701 n.5. Leigh held that filing two “groundless lawsuits” to damage another’s business constitutes improper
means, as well as breaching a contract “for the immediate purpose of injur[ing] the other contracting party” by harming
its business. 657 P.2d at 308-09. Neither case found “wrongful means” based on a licensing violation.
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not persuaded that the Kentucky courts would conclude that PCM adequately pled a claim for
tortious interference with prospective business relationships.
For the same reason, PCM’s claim of tortious interference premised on violation of state
and federal wage and hour laws also fails. PCM does not cite a case where any court has allowed
a tortious-interference claim to proceed on that basis. Allowing such a claim would effectively
turn competitors into enforcers of wage and hour laws. See Lexington Nat’l Ins. Corp. v. Ranger
Ins. Co., 326 F.3d 416, 420 (3d Cir. 2003) (“[I]f a business may assert a valid claim against a
competitor for unlawfully reducing its costs by underpaying its taxes it follows that a business
could assert a claim against a competitor predicated upon a theory that it is obtaining an economic
advantage by underpaying its employees in violation of minimum wage act or similar laws. . . . If
we hold that Lexington has pled a claim on which relief may be granted we will invite a tidal wave
of litigation as businesses find opportunities to meddle in their competitors’ affairs.”).
PCM’s final argument that a violation of the Anti-Kickback Statute5 constitutes wrongful
means is also unpersuasive. Although there have been cases allowing tortious-interference claims
to proceed, or suggesting that they might succeed, under this theory, those cases are
distinguishable. In American Health Systems, Inc. v. Visiting Nurse Ass’n of Greater Philadelphia,
No. CIV.A. 93-542, 1994 WL 314313, at *2 (E.D. Pa. June 29, 1994), the plaintiff alleged that a
competitor home-health agency and hospitals engaged in a scheme where the hospitals referred
patients to the competitor in exchange for the competitor’s payment of salaries of certain
employees at the hospitals, payments which the competitor disguised, all in violation of the Anti-
5
The district court found that the Anti-Kickback Statute does not prohibit inducements to patients, and
therefore held that PCM’s allegation that Defendants induced PCM’s patients to switch providers by offering them
unrelated services such as free lawn care failed to state a claim for tortious interference. On appeal, Defendants
concede that, “contrary to the [district c]ourt’s approach, the Anti-Kickback Statute prohibits inducements to patients
as well as to providers.” (Appellees’ Br. at 44-45.)
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Kickback Statute. In response to the defendants’ argument that the RICO claims must be dismissed
because the Anti-Kickback Statute provides no private right of action, the district court stated that
“defendants are not insulated from civil liability simply because their alleged fraudulent conduct
also violated a criminal statute,” but nevertheless struck all references to the Anti-Kickback
Statute in the complaint. Id. at *5. Underpinning the court’s rationale was that the claims could
proceed because the complaint alleged fraudulent activity, which also happened to violate a federal
statute. Here, PCM does not argue that Defendants’ alleged actions of performing lawn care for
prospective patients is inherently fraudulent or tortious. Thus, American Health Systems is
distinguishable.
PCM also cites Synthes (U.S.A.) v. Globus Medical, Inc., No. CIV.A. 04-CV-1235, 2005
WL 2233441 (E.D. Pa. Sept. 14, 2005), relying on the district court’s acknowledgement in that
case that some courts “have left open the possibility that conduct allegedly violating the anti-
kickback statute may form the basis for liability under some recognized common law cause of
action, assuming all other element of the cause of action are present.” Id. at *5 (quoting Reliable
Ambulance Serv., Inc. v. Mercy Hosp. of Laredo, No. 04-02-00188-CV, 2003 WL 21972724, at
*6 n.1 (Tex. Ct. App. Aug. 20, 2003)). But Synthes actually supports Defendants’ position.
Although the court stated that “[t]he mere fact the Anti-Kickback provision prohibits Synthes’
conduct does not mean that the same conduct cannot provide a basis for civil liability under another
state or federal statute,” it reasoned that the pertinent “question then is whether the underlying
conduct violates Pennsylvania state law.” Id. at *6. Because “[a]bsent the Anti-
Kickback implications, the underlying conduct itself—i.e., sponsoring conferences, providing
research grants, and offering promotional incentives—is not inherently unfair or tortious,” the
court held that the plaintiff could not base its tortious-interference or unfair-competition claim on
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No. 18-5900, Act for Health, et al. v. United Energy Workers Healthcare Corp., et al.
violation of the Anti-Kickback Statute. Id. Thus, the two cases that PCM primarily relies on are
not helpful to it.6
Defendants cite Synthes, discussed above, as well as Reliable Ambulance Service, 2003
WL 21972724, where the court explained that it “found no other jurisdiction that has recognized
an action for damages or injunctive relief based solely on the allegation that the anti-kickback
statute was violated.” Id. at *6. After citing several cases that rejected such a claim, the court
cautioned that “recognizing a common law cause of action by a competitor for damages and
injunctive relief for violation of the anti-kickback statute would be inconsistent with the intent of
Congress.” Id.
Although this question would be better answered by the Kentucky courts, given the existing
caselaw, the absence of a private cause of action, and PCM’s failure to argue how the alleged Anti-
Kickback Statute violations are inherently tortious or wrongful, we conclude that the alleged Anti-
Kickback Statute violations in this case do not constitute wrongful means necessary to sustain a
tortious-interference claim against a competitor under Kentucky law.
Accordingly, we affirm the dismissal of PCM’s tortious-interference claim.
C. Civil Conspiracy
. The parties agree that the viability of the civil-conspiracy claim depends on whether PCM
stated an underlying, substantive tort claim. Because we conclude that the district court properly
dismissed PCM’s other claims, we affirm the dismissal of the civil-conspiracy claim as well.
III.
For the reasons stated, we affirm the district court’s judgment.
6
PCM also cites cases that merely left open the possibility that alleged violations of the Anti-Kickback
Statute could supply part of the basis for a state-law tortious-interference claim. See State Med. Oxygen & Supply,
Inc. v. Am. Med. Oxygen Co., 750 P.2d 1085, 1088-89 (Mont. 1988).
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