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Home Orthopedics Corp. v. Rodriguez

United States Court of Appeals, First Circuit

March 25, 2015

HOME ORTHOPEDICS CORP., Plaintiff, Appellant,
v.
RAÚ L RODRÍGUEZ; JOSÉ A. LINARES; JULIO F. JULIÁ ; PAUL PINO, Defendants, Appellees, UNIDENTIFIED DIRECTORS AB, BC, CD, DE, EF, FG, GH, HI, IJ, JK, KL OF HUMANA HEALTH PLANS OF PUERTO RICO (D/B/A HUMANA); DIRECTORS LM, MN, NO, OP, PQ, QR, RS, ST, TU, UV, VW, WX OF MEDICAL CARD SYSTEM, INC. (MCS); A, B, C, D, E, F, G, H, I INSURANCE COMPANIES; LUIS GORIS-GARCÍA; ARLENE MARRERO; JAVIER MAGRIÑÁ -MELÉNDEZ, Defendants

Page 522

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Daniel R. Domínguez, U.S. District Judge.

Carlo Defendini-Dí az and Pagá n, Ortega & Defendini Law Offices, PSC, on brief for appellant.

Theresa M.B. Van Vliet, Patsy Zimmerman-Keenan, and Genovese Joblove & Battista, P.A., on brief for appellees Raú l Rodríguez, José A. Linares, and Paul Pino.

Roberto Santana Aparicio, Berenice B. Bellotti Sevilla, and Del Toro & Santana, on brief for appellee Julio F. Juliá .

Before Thompson, Baldock,[*] and Selya, Circuit Judges.

OPINION

Page 523

THOMPSON, Circuit Judge.

Home Orthopedics Corp., a medical equipment supplier based in Puerto Rico, sued the defendants for their alleged involvement in a scheme to help one guy collect a consulting fee Home Orthopedics agreed to pay him, but based on a contract it later discovered was phony. Fueled by Home Orthopedics' refusal to continue paying the fee, the defendants purportedly wielded their influence over players in the health insurance industry to jeopardize numerous contracts Home Orthopedics had with other clients.

Page 524

The Puerto Rico district court dismissed Home Orthopedics' numerous federal and Commonwealth law causes of action. Home Orthopedics now appeals the dismissal of its primary claim, brought under the Racketeer Influenced and Corrupt Organizations Act, or " RICO," disposed of for failure to state a claim. Home Orthopedics also appeals the district court's denial of its motions to conduct limited discovery and amend the complaint.

For the reasons discussed below, we affirm the district court.

BACKGROUND

Because we are reviewing a motion to dismiss for failure to state a claim, we recite the facts as they are alleged in the operative complaint and RICO case statement, in the light most favorable to Home Orthopedics.[1] Ocasio-Herná ndez v. Fortuño-Burset, 640 F.3d 1, 12-13 (1st Cir. 2011).

The Letter of Agreement

Since 2001, Home Orthopedics, a home medical equipment supplier and the leading company in Puerto Rico for orthotics, prosthetics, and diabetic shoes, supplied medical equipment to MMM HealthCare, Inc., a Puerto Rican health maintenance organization that we'll refer to as " the HMO." But in mid-2004, Defendant Clinical Medical Services, Inc. (" Clinical Medical" ), also a home medical equipment supplier in Puerto Rico, struck a deal with the HMO to be its exclusive provider of " durable medical equipment," a specific category of long-lasting medical equipment used by patients in the home, including, for instance, hospital beds, canes, and crutches.

In late 2004, Clinical Medical's president, Raú l Rodríguez (" Raú l" ), met with Home Orthopedics' president, Jesú s Rodríguez (" Jesú s" ), claiming that in addition to the exclusivity agreement for durable medical equipment, Clinical Medical had entered into an additional agreement with the HMO to be its exclusive provider of orthotic and prosthetic services. Raú l told Jesú s that Clinical Medical would need a subcontractor to actually provide those services, however, because Clinical Medical " did not know anything about orthotics and prosthetics."

The complaint doesn't say whether Jesú s agreed in that meeting to subcontract for Clinical Medical, but in February 2005, Jesú s received a faxed " Letter of Agreement" from Raú l. The letter, a copy of which was attached to the complaint, was an unsigned, draft agreement between Home Orthopedics and the HMO (even though Raú l sent Jesú s the contract and arranged for Jesú s to sign it, Clinical Medical was not actually a party to the contract). The agreement would allow Home Orthopedics to continue providing orthotic and prosthetic services to the HMO's subscribers, but at a 20 percent lower profit, reducing Home Orthopedics' sales reimbursement

Page 525

from 100 percent to 80 percent. Specifically, the agreement provided:

[Home Orthopedics] indicates its intent to enter into an agreement with [the HMO] to render Orthotic and Prosthetic services to patients enrolled in [the HMO]. By signing this Agreement, [Home Orthopedics] agrees to render professional healthcare services and to accept [80 percent reimbursement] as full payment for all Covered Services to patients referred to [Home Orthopedics].

The agreement was drafted in English, of which Jesú s functionally knew little. When Jesú s asked Raú l for an explanation of the agreement, Raú l " threatened" that Home Orthopedics was " being put out of business," and told Jesú s to " take it or leave it" because another prosthetics company was also interested in the deal.

Jesú s opted to take it. He signed the agreement, even though (as we gather from facts pleaded later in the complaint) he had not spoken with anyone from the HMO about it, and no one from the HMO had signed it yet.

Jesú s also agreed with Raú l that in exchange for choosing Home Orthopedics as the subcontractor, Clinical Medical would earn a 12.5 percent consultant's commission on Home Orthopedics' sales to the HMO, to be paid directly to Raú l. Under the deal with Clinical Medical, then, Home Orthopedics would start receiving only 67.5 percent of the sales it made to the HMO, as opposed to the 100 percent it had been making.

Raú l Gets Caught

With the new deal in place, business went on as usual, and in August 2005, Home Orthopedics sent the HMO an invoice. The HMO, though, sent Home Orthopedics a check accounting for 100 percent of the bill. Home Orthopedics thought the HMO made a mistake, and, in " good faith," reminded the HMO that it should have paid out only 80 percent under the terms of the Letter of Agreement. But the HMO responded that it had never seen that agreement and would " investigate[] the matter."

It's not clear from the complaint what happened in the meantime, but around October 2006, Jesú s found out from the HMO that Clinical Medical was not actually its exclusive provider of orthotics and prosthetics; Clinical Medical and the HMO had negotiated an agreement to that extent, but Clinical Medical allowed the exclusivity option to ...


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