EGAN NURSING SERVICES, INC. v. SCHEUR (E.D.La. 2003)

G. THOMAS PORTEOUS, JR., United States District Judge.

Before the Court is a Motion to Dismiss for Lack of Subject Matter Jurisdiction under FRCP Rule 12(b)(1), Motion to Dismiss under FRCP Rule 12(b)(6), and a Motion to Dismiss under 28 U.S.C. § 1367 filed on behalf of the Defendant, SMA PPO, Inc. The Court, having entertained oral arguments, considered the arguments of counsel, the evidence presented, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.

I. BACKGROUND:

The Plaintiffs, Egan Nursing and Barry Eagan, filed their complaint with this Court on August 16, 2002. Jurisdiction is based on 18 U.S.C. § 1964, 28 U.S.C. § 1331, 1337, 1367(a) and the Court's Pendent Jurisdiction. The Plaintiff alleges claims based on 18 U.S.C. § 1961 (the "RICO" Act) as well as various theories of Louisiana law including but not limited to breach of contract, unjust enrichment, breach of fiduciary duty and negligence.

On or about November 4, 1999, the Southeast Medical Alliance, L.L.C. ("SMA") was acquired by the Venture Health Partnership Group, L.L.C. ("VHPG LLC"). The VHPG LLC is an HMO acquisition and management company comprised of the principals of the Sheur Management Group, Inc. ("SMG"). At the time of the acquisition, SMA was owned by East Jefferson General Hospital, West Jefferson Medical Center, Terrebonne General Medical Center, Slidell Memorial Hospital Medical Center, and the Tulane Educational Fund (hereinafter referred to collectively as the "Selling Entities"). The sale was finalized on December 31, 2000. The selling entities stated the reason for selling was to focus on health care provision rather than health care insurance. On April 24, 2000, VHPG LLC announced that the name of SMA had been changed to the "Oath of Louisiana."

Egan Nursing Services, Inc. provided an assortment of ancillary health care services including, but not limited too, home health care, infusion therapy, durable medical equipment, social works services, and various other therapies. Egan Nursing Services is solely owned by Peter Egan, Plaintiff, and his wife Pamela B. Egan. The Plaintiffs allege that Egan Nursing and, therefore, Peter Egan suffered economic loss due to the sale of SMA to the Defendant Barry Scheur and his entity, SMG.

The Louisiana Department of Insurance ("LDI") placed The Oath for Louisiana in receivership in April, 2002. The Louisiana Insurance Code determines the process of liquidation. In accordance with liquidation procedure, the LDI filed a Petition for Liquidation and Injunctive Relief in April, 2002. The Nineteenth judicial District Court of East Baton Rouge found that there were sufficient grounds for ordering liquidation and entered an Order of Liquidation on The Oath for Louisiana and Venture Health Partnership Group of Louisiana on May 29, 2002. The Plaintiffs allege that it contracted with The Oath of Louisiana and was owed approximately $853,000.00 when The Oath was placed in receivership.

SMA PPO, INC. only existed for five days. It came into existence on December 27, 2000 and was sold to PPO Plus, LLC, who has never done business with The Oath, on December 31, 2000.

A. ARGUMENTS OF SMA PPO IN SUPPORT OF MOTION TO DISMISS:

(1) Ripeness Lack of Subject Matter Jurisdiction pursuant to FRCP 12(b)(1):

The Defendant argues that the case is not ripe for adjudication because The Oath is still under liquidation. The Plaintiffs' Complaint alleges that they will be damaged if The Oath's liquidation-estate is unable to pay all of an alleged $853,000.00 open-account obligation once The Oath's liquidation is completed. Since the liquidation proceedings are still ongoing, the amount of Plaintiffs damages remain unknown. The Court, therefore, lacks subject matter jurisdiction if the Plaintiffs' claims are not ripe.

(2) Standing — Failure to State a Claim Upon Which Relief can be Granted under 12(b)(6):

The Defendant argues that the Plaintiffs have no standing to sue under RICO because Peter Egan, as a stockholder in Egan Nursing Services, cannot assert a RICO claim in his individual capacity for damages allegedly suffered by Egan Nursing Services. Peter Egan, as an individual lacks standing to prosecute RICO claims for damage to a corporation. Peter Egan's RICO claim, therefore, must be dismissed.

In regard to Egan Nursing Services, the Defendant argues that Egan Nursing Services cannot sue under RICO for indirect injuries. The Plaintiffs injuries arise out of the alleged acts of Defendants in dealing with The Oath of LA and the subsequent bankruptcy of The Oath. The Plaintiffs' RICO claims therefore must be dismissed because any RICO action would belong to The Oath's liquidation-estate rather than to the Plaintiffs.

(3) 28 U.S.C. s. 1367: Supplemental Jurisdiction requires dismissal of pendent state law claims:

If the Court determines that the Plaintiffs have failed to state a RICO claim, all pendent state law claims must be dismissed.

The Plaintiffs argue that their claims are ripe for adjudication because the 19th JDC lacks jurisdiction to hear the Plaintiffs' RICO claims. The 19th JDC has jurisdiction over bankruptcy and related matters but not over RICO claims. The bankruptcy court cannot satisfy the damages the Plaintiffs are seeking in this Court.

The Plaintiffs also argue that Plaintiffs have standing to sue SMA PPO because SMA PPO was a conspirator engaged in the bust-out scheme. As the creditor of Egan Nursing Services, a corporation stripped by a bust-out scheme, Peter Egan has standing to assert the RICO claim. The Plaintiffs' Complaint has sufficiently alleged that SMA PPO was engaged as a conspirator in the bust-out scheme. (SEE Opp p. 6-9 for S.Ct. 5th Cir. cases supporting this).

The Plaintiff further argues that they have a valid RICO claim and neither it nor the state law claims should be dismissed.

The Defendant argues that the ripeness of the matter turns on the state court proceeding because the 19th JDC has not liquidated Egan's claim against The Oath. The Plaintiffs' Opposition misconstrues controlling law and erroneously applies cited law to the facts as plead. No active case or controversy exists here because Plaintiffs have not received an immediate injury but only an indirect one and, the relief requested would not redress any injury because an injury has yet to occur. Moreover, neither Peter Egan nor Egan Nursing Services have standing because they have not alleged a direct injury by SMA PPO's purported racketeering activity. Neither the Plaintiffs' Complaint nor the RICO Case Statement state any allegations concerning any "bust-out" scheme. Furthermore, the Plaintiffs' Opposition fails to demonstrate any cause of action, under any theory of recovery, against SMA PPO.

The issue of ripeness turns on the "fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Pacific Gas Electric Co. v. State Energy Resources Conservation and Development Commission, 461 U.S. 190, 201, 103 S.Ct. 1713, 1720, 75 L.Ed.2d 752 (1983). Perhaps the most important consideration in determining whether a claim is ripe for adjudication is the extent to which "the claim involved uncertain and contingent events that may not occur as anticipated, or indeed may not occur at all." 13A Wright and Miller, Federal Practice and Procedure § 3532.2 at 141 (1984).

The Court need not discuss the other arguments of SMA PPO, Inc. because the Plaintiffs' claims are not ripe for adjudication. There is no certainty that the Plaintiffs will not be completely satisfied by the bankruptcy proceedings being held in the 19th JDC. Until the Plaintiffs' damages are certain, there is no issue for the Court to address.

Accordingly,

IT IS ORDERED that the Defendant's, SMA PPO, Inc.'s, Motion to Dismiss for Lack of Subject Matter Jurisdiction is hereby GRANTED.