Opinion
Case No.: 06-31766 Case No.: 06-31986 Adversary Proc. No.: 07-3006
07-29-2014
In Re: JEMSEK CLINIC, P.A. Debtor. In Re: JOSEPH GREGORY JEMSEK Debtor. BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, Plaintiff, Counterclaim Defendant Counterclaim Plaintiff v. JEMSEK CLINIC, P.A. AND JOSEPH JEMSEK, M.D. an individual, Defendants, Counterclaim Plaintiffs Counterclaim Defendants
Chapter 11
FINDINGS OF FACT AND CONCLUSIONS OF LAW RECOMMENDING ENTRY OF A FINAL ORDER (1) DENYING MOTION OF THE JEMSEK DEFENDANTS FOR LEAVE TO REINSTATE FIRST AMENDED COUNTERCLAIMS (PROPOSED THIRD AMENDED COUNTERCLAIM) AND (2) GRANTING FINAL JUDGMENT TO BLUE CROSS BLUE SHIELD OF NORTH CAROLINA
THIS MATTER came before this bankruptcy court on the Defendants/Counterclaim Plaintiffs Jemsek Clinic, P.A.'s and Joseph G. Jemsek's (the "Jemsek Defendants") Motion To Withdraw Their Second Amended Counterclaims and for Leave to Re-File First Amended Counterclaims, filed on April 7, 2014 and Motion by Plaintiff/Counter-Defendant Blue Cross and Blue Shield of North Carolina's, ("BCBSNC") for Entry of Final Judgment, filed May 1, 2014. Responses, including briefs, have been filed to each motion. A hearing was held on May 13, 2014 at which Dan Taylor and Chad Hansen appeared on behalf of BCBSNC and William Blakely, Cotton Wright, and Michael Martinez appeared on behalf of the Jemsek Defendants.
As noted below, the portion of this Motion seeking to withdraw the Second Amended Counterclaim was consensually granted on April 10, 2014. (ECF No. 384.)
In order to permit comparison of the newly proposed counterclaims to those previously filed in this proceeding, the Jemsek Defendants were instructed to lodge their proposed Third Amended Counterclaim with the Clerk. BCBSNC was afforded an opportunity to respond. The proposed counterclaim was filed on June 2, 2014 (ECF No. 409), and BCBSNC filed its supplemental objection on June 10, 2014 (ECF No. 410).
Based upon the aforementioned documents and the record in this adversary proceeding, this bankruptcy court enters the following findings of fact, conclusions of law, and recommendation for consideration by the U.S. District Court.
FACTS AND PROCEDURAL HISTORY
A. The Adversary Proceeding and the Original Counterclaims
U.S. District Judge Conrad recently observed that this is a "peripatetic case" with a "convoluted history." (Order Denying Plaintiff BCBSNC's Motion to Withdraw Reference, ECF No. 377.) Indeed, it is an epic tale, based upon not just one, but two legal disputes: the first an adversary proceeding before this bankruptcy court; the other a Multidistrict Litigation ("MDL") class action case before the U.S. District Court for the Southern District of Florida.
The bankruptcy proceeding began in September 2006 when BCBSNC sued the Jemsek Defendants in North Carolina Superior Court. Blue Cross and Blue Shield of North Carolina v. Jemsek Clinic, P.A. & Joseph G. Jemsek, M.D., No. 06-CVS-18432. BCBSNC asserted nine separate causes of action against the Jemsek Defendants. The Jemsek Defendants were health providers who treated quite a number of BCBSNC members suffering from Lyme disease. The BCBSNC claims were founded upon the contention that for several years, the Jemsek Defendants had submitted fraudulent insurance claims to BCBSNC and thereby obtained improper payments. The BCBSNC action sought to recover these payments.
Shortly after the action was filed, the Jemsek Defendants filed Chapter 11 and removed the suit to this bankruptcy court. On January 24, 2007, the Jemsek Defendants filed an Answer which denied any liability to BCBSNC. They also interposed nine counterclaims against BCBSNC (the "Counterclaims"), ranging from breach of contract to tortious interference with a business relationship. (ECF No. 5.)
The premise of the Counterclaims was this: having paid the Jemsek Defendants' claims without exception for five years, BCBSNC was well aware that the Jemsek Defendants' treatments were both necessary and highly effective. However, these patient treatments were also very expensive. Thus, supposedly in order to reduce its costs, BCBSNC stopped paying the Jemsek Defendants for treatments provided to its members, and thereafter tried to discredit Dr. Jemsek through false statements to the North Carolina Medical Board (the "Medical Board") and the Center for Disease Control ("CDC"). The resulting suspension of Dr. Jemsek's medical license, coupled with the payment cutoff is said to have ruined his practice and forced the Jemsek Defendants into bankruptcy. The Counterclaims seek an affirmative recovery from BCBSNC in excess of $20 million. (Id. at 28.)
Shortly thereafter, BCBSNC filed a second adversary proceeding in bankruptcy court against Dr. Jemsek contesting dischargeability of its alleged debt. (See Adv. Pro No. 07-3008, Case no. 06-31986.) The two adversary proceedings were subsequently consolidated for purposes of discovery and pretrial matters (See ECF No. 40) and will therefore be referred to going forward as the "adversary proceeding."
Over the ensuing seven years, this adversary proceeding has been vociferously litigated in this bankruptcy court and elsewhere, without ever reaching the point of a trial.
B. The Love Injunction and the First Amended Counterclaims
At the time the adversary proceeding began, and unbeknownst to the Jemsek Defendants, BCBSNC was also a named Defendant in a class action case in the U.S. District Court for the Southern District of Florida, entitled Love, et al. v. Blue Cross & Blue Shield Association, No. 03-21296-CIVMORENO, (S.D. Fla.) (the "Love Case" and "Love Court").
The class action was founded on allegations quite similar to those made in the Jemsek Defendants' counterclaims. The Love Complaint alleged that BCBSNC and other Blue Cross entities had adopted business practices intended to systematically deny, reduce, or delay payments to medical providers in order to reduce the insurers' operating costs. The Love Case was already in its fourth year when the Jemsek Defendants filed their Counterclaims in the bankruptcy adversary proceeding. However, only BCBSNC was aware of its existence.
On April 27, 2007, the Love class plaintiffs and the named defendants reached a proposed settlement in the class action (the "Love Settlement"). In aid of that settlement, on May 31, 2007, the Love Court entered a preliminary injunction which enjoined further litigation on the class claims.
Notice of the proposed Love Settlement was then given to the putative class members on July 27, 2007. The Notice described the class action, the claims, and the proposed settlement. It also described the process by which a party could "opt-out" of the settlement and pursue its claims independently. The Jemsek Defendants received the Love Notice, but failed to appreciate its significance. The opt out period expired on September 24, 2007 without the Jemsek Defendants taking the steps necessary to preserve their Counterclaims, participate in the Love Settlement, or even realize that action was required.
Neither set of attorneys in this adversary proceeding were aware of the Love Case, much less of an injunction. Thus, the adversary proceeding continued on for almost a year as the parties engaged in contentious and exhaustive discovery.
Then, on March 21, 2008, BCBSNC announced its "discovery" that the Jemsek Defendants' Counterclaims had been previously enjoined by a class action settlement in Florida. See BCBSNC's Mot. for Amendment of Stay Order Pending Appeal filed March 21, 2008 and Am. Mot. for Amendment of Stay Order, filed March 31, 2008 (the "Amended Motion"). (ECF Nos. 83, 84.)
As described in greater detail in this Court's September 22, 2010 Order (ECF No. 169), BCBSNC's "discovery" was disingenuous for several reasons. BCBSNC was a named, and active, defendant in the Love case and had been involved in Love for four years before this adversary proceeding ever began. The case was close to settlement when the Jemsek Defendants filed their Counterclaims in the adversary proceeding. By that point, BCBSNC was fully informed about not just the class action, but its allegations, and importantly, the scope of the proposed settlement and injunction. Despite this, BCBSNC never mentioned Love in its Reply or other filings in this adversary proceeding until March 2008.
Further, BCBSNC continued to litigate the Counterclaims in this Court for more than a year after they had been enjoined by the Love Court. As both the Love Court and 11th Circuit Court of Appeals would subsequently conclude (at BCBSNC's urging), the claims asserted in these two actions were legally and factually identical. Thomas, et al. v. Blue Cross and Blue Shield Assn., et al., 2009 WL 1483522 (11th Cir. May 28, 2009). While before March 2008 BCBSNC's local attorneys may have been unaware of the Love Case, the insurer was fully informed.
Against this backdrop, the Jemsek Defendants asked this bankruptcy court to allow them to press forward with their Counterclaims. They argued that the Love injunction was either inapplicable to their Counterclaims or else it had been waived by BCBSNC's continued prosecution of this matter.
However, BCBSNC sought the aid of the Love Court, asking it to enforce the injunction against the Jemsek Defendants. The Love Court obliged, holding that eight of the ten Counterclaims were related to the Love "fee for service claims" which had been settled and enjoined. (the "Enjoined Counterclaims") The Enjoined Counterclaims included the Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Quantum Meruit, Violation of the North Carolina Unfair and Deceptive Trade Practices Act, Fraudulent Misrepresentation, and Negligent Misrepresentation claims. The Jemsek Defendants were ordered to withdraw these eight counterclaims from this adversary proceeding.
Two counterclaims were not enjoined, those being defamation and tortious interference with a business relationship. The defamation claim asserted that BCBSNC had made untrue, disparaging statements about the Jemsek Defendants to the North Carolina Medical Board and the Center for Disease Control (the "CDC"). The tortious interference cause asserted that BCBSNC had influenced a Medical Board action against Dr. Jemsek that resulted in the suspension of his medical license.
Under North Carolina law, the tort is actually known as tortious interference with a contract. See Holleman v. Aiken, 193 N.C. App. 484, 500 (2008). For consistency, we will use the Jemsek Defendants' terminology.
The Love Court concluded that these two claims hinged on whether BCBSNC intentionally communicated defamatory and false information to the Medical Board and the CDC thus damaging Jemsek's reputation. Love v. Blue Cross & Blue Shield Ass'n, 03-21296-CIV-MORENO, 2008 WL 4097607, at *8 (S.D. Fla. Sept. 4, 2008). They were not related to any "fee for service claim," meaning they fell outside the Love settlement and injunction. Id.
The Jemsek Defendants appealed the Love Court's injunction to the Eleventh Circuit Court of Appeals and lost. (See Thomas, et al. v. Blue Cross and Blue Shield Assn., et al., 2009 WL 1483522 (11th Cir. 2009) (unpublished)), and then grudgingly complied. They amended their counterclaims on December 17, 2008. (ECF No. 124.) (the "First Amended Counterclaims").
The First Amended Counterclaims jettisoned the eight Enjoined Counterclaims. The two counterclaims not enjoined, (1) defamation and (2) tortious interference with business relationship, were re pled.
C. Dismissal of the BCBSNC Claims
Later, in the adversary proceeding, BCBSNC's primary claims in this action were be dismissed with prejudice. (ECF No. 169.) BCBSNC's Motion for Leave to File an Interlocutory Appeal was denied by the U.S. District Court. (See Order dated August 30, 2011, ECF No. 211.) With dismissal of BCBSNC's claims, the Jemsek Defendants' First Amended Counterclaims were the lonely remaining claims in this adversary proceeding.
D. Discovery in the Adversary Proceeding
Discovery in this Adversary Proceeding has been far reaching in scope, contentious, and extremely costly. There have been two discovery periods in the proceeding. The first occurred in 2007-2008. After a hiatus occasioned by the Florida proceedings, a second written discovery period was conducted between 2012-2013.
During the initial discovery phase, BCBSNC produced 22,887 pages of documents to the Jemsek Defendants in paper and TIFF3 image format. (Dawson Aff ¶ 6, ECF No. 260.) During the second discovery phase, BCBSNC produced another 240,000 more pages of documents to the Jemsek Defendants.
After several extensions, the second written discovery period ended March 28, 2013.
A number of depositions were then taken, both of fact witnesses and experts. After more wrangling, including an unsuccessful request by the Jemsek Defendants to require BCBSNC to reproduce all of the aforementioned written discovery in "native" form, discovery finally ended on November 22, 2013. The adversary proceeding finally appeared ready to enter its trial phase, or so it seemed.
E. The Second Amended Counterclaims and the Second Love Injunction Proceeding.
At the conclusion of discovery, the Jemsek Defendants again sought leave to further amend their remaining counterclaims. (ECF No. 291.) Their motion minimized the nature of the request, explaining that it "only seeks to conform the pleadings to the evidence and to clarify the counterclaims with more specific facts as a result of the information learned in discovery." (ECF No. 291 at 1-2.) The Second Amended Counterclaims would only add "additional bases and allegations relating to the Jemsek Defendants' defamation and tortious interference claims." (Id. at 3.)
BCBSNC did not oppose that motion (ECF No. 296.), so leave to amend was granted on January 15, 2014. The Jemsek Defendants filed their Second Amended Counterclaims the same day. (ECF Nos. 297, 303.)
Notably, in the Second Amended Counterclaims, the Jemsek Defendants dropped the contention that BCBSNC had made defamatory statements to the Medical Board and to the CDC. Instead, the Second Amended Counterclaims changed the factual premise of the two remaining causes of action (defamation and tortious interference with a business relationship) to statements allegedly made by BCBSNC to (1) members who were also patients of the Jemsek Defendants and (2) other BCBSA licensees.
The allegedly disparaging statements were that (1) the Jemsek Defendants' diagnosis and treatment of Lyme disease did not fall within the generally accepted standard of medical care and (2) BCBSNC was conducting a fraud investigation into the Jemsek Defendants.
While BCBSNC did not oppose the Jemsek Defendants amending their Counterclaims to conform to the evidence garnered in discovery, it was quite opposed to the newly cast counterclaims. From BCBSNC's perspective, with the change in the factual averments, the Second Amended Counterclaims were now "related to...fee for service claim[s]" and barred by the Love Injunction. On February 3, 2014, BCBSNC sought (and obtained) a stay of these proceedings while it sought a ruling from the Love Court . (ECF No. 305.) Given that the Love Court had previously held that the defamation and tortious interference claims from the Jemsek Defendants' First Amended Counterclaims were not barred by Love Injunction, the Jemsek Defendants were opposed. (ECF No. 341.) However, a more limited stay was granted. (See Order Referencing Motion for Stay, dated February 12, 2014, ECF No. 348.)
The Motion to Stay the Adversary Proceeding alternatively asked for a stay pending a decision by the U.S. District Court in this District on BCBSNC's Motion to Withdraw the Reference. (ECF No. 305.)
On this occasion, the Love Court agreed with BCBSNC that both the defamation and the tortious interference claims were barred by the Love Injunction. On March 17, 2014 the U.S. District Court enjoined the Second Amended Counterclaims. Love v. Blue Cross and Blue Shield Association, Case No. 03-21296-CIV-MORENO (S.D. Fla.). (See ECF No. 378.)
The change in the Love Court's ruling was occasioned not just by the change in the pled facts of the Second Amended Counterclaims, but also due to a change in the law. In the first ruling, Judge Moreno had held that the original claims for defamation and tortious inference did not relate to "fee for service." Afterward, the Eleventh Circuit had held otherwise, in a factually similar Love dispute. See Thomas v. Blue Cross and Blue Shield Ass'n (Kolbusz), 594 F.3d 814 (11th Cir. 2010).
With this, Judge Moreno had no difficulty concluding that the Jemsek Defendants' most recent counterclaims ran afoul of the Love Injunction. The defamation and tortious interference with business relationship counterclaims were released claims in that "they arise out of and relate to the matters in Love." (Id. at 6.) He enjoined the Jemsek Defendants from "pursuing each claim against BCBSNC" and gave them twenty (20) days to withdraw the claims for defamation and tortious interference with business relationship. (Id.)
The Jemsek Defendants sought clarification, asking whether the March 17, 2014 Order ("Motion for Clarification") enjoined all potential causes of action for defamation and tortious interference with business relations or whether only the causes pled in the Second Amended Counterclaims were enjoined. The Love Court declined to speculate. Its ruling applied to the only operable pleading before this bankruptcy court, the Second Amended Counterclaims for Defamation and Tortious Interference with Business Relationship. (See Order Granting the Jemsek Defendants' Motion to Clarify dated April 4, 2014, Ex. D, ECF No. 380). These infringed on the Love Settlement and were enjoined. Id. The Jemsek Defendants did not appeal that ruling, and that order is now final.
F. The Jemsek Defendants' Pending Motion to Amend
In order to comply with the Love Court's latest injunction, the Jemsek Defendants filed the current Motion in bankruptcy court. The first part of this motion sought leave to dismiss the Second Amended Counterclaims. That portion of the Motion was granted, with the consent of BCBSNC. (ECF Nos. 383, 384.)
Thus enjoined from prosecuting their last two counterclaims, the Jemsek Defendants appeared to have no claims left against BCBSNC. However, in a last gasp effort to keep some claims alive, in this motion, the Jemsek Defendants have also asked this bankruptcy court to "re-instate" the First Amended Counterclaims that they previously withdrew. BCBSNC, of course, is opposed.
G. BCBSNC's Pending Motion for Final Judgment
Meanwhile, BCBSNC has countered with a Motion for Entry of Final Judgment in the adversary proceeding. (ECF No. 387.) This Motion is based on the unusual procedural posture of this adversary proceeding. The First Amended Counterclaims were previously withdrawn in favor of the Second Amended Counterclaims. The Second Amended Counterclaims have been enjoined. Therefore, the Jemsek Defendants have no pending Counterclaims; nor does BCBSNC. Assuming the reinstatement motion is denied, BCBSNC asserts that this adversary proceeding is concluded. It asks for final judgment, presumably an order dismissing this action with prejudice.
Since neither party presently holds any claims against the other, BCBSNC says denial of the reinstatement motion will fully resolve the adversary proceeding. Thus its request for "final judgment" presumably is for a judgment dismissing the adversary proceeding (including its dischargeability component) with prejudice.
H. The Hearing and the Proposed Third Amended Counterclaims
At the May 13, 2014 hearing, it was agreed that the First Amended Counterclaims no longer exists as a legal document. Having been amended, it is 'dead paper,' lacking any legal significance. See Crysen/Montenay Energy Co. v. Shell Oil Co. (In re Crysen/Montenay Energy Co.), 226 F.3d 160, 162 (2d. Cir. 2000) ("[A]n amended pleading ordinarily supersedes the original and renders it of no legal effect") (citing Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure §1476 (2d ed. 1990)).
It also became apparent at that hearing that the counterclaims which the Jemsek Defendants were describing were somewhat different than the First Amended Counterclaims. Before deciding these Motions, it was necessary to see the newly proposed counterclaims. To that end, the Jemsek Defendants were instructed to lodge the newly proposed counterclaims, denominated as their "Third Amended Counterclaim."
I. Similarities and Differences between the First Amended Counterclaims and the proposed Third Amended Counterclaims
Like the previously filed counterclaims, the proposed Third Amended Counterclaim suggests that BCBSNC disparaged the Jemsek Defendants in order to reduce the sums it would have to pay for its members' medical treatments. However, the proposed Third Amended Counterclaim is also somewhat different than the First Amended Counterclaims.
The First Amended Counterclaims accused BCBSNC of two different torts, defamation and tortious interference with contracts. In the Third Amended Counterclaim, the defamation claim has been abandoned.
The tortuous interference claim from the First Amended Counterclaims remains, but has been limited. As to this tort, the First Amended Counterclaims maintained that BCBSNC had interfered with two of the Jemsek Defendants' business relationships: (a) Dr. Jemsek's medical license (par. 43-44) and (b) his relationships with his member patients (par. 45). The tortious interference claim found in the proposed Third Amended Counterclaim drops the member patient relationship and complains only of BCBSNC's interference with the Jemsek Defendants' "relationship" with the North Carolina Medical Board, meaning his medical license. (ECF No. 407, ¶¶ 57-59.)
CONCLUSIONS OF LAW
Nothing has been simple or easy in this adversary proceeding. The two current motions continue that pattern.
In short, seven years into this action, the Jemsek Defendants ask this bankruptcy to "reinstate" a variant of the counterclaims they once held in this proceeding, for the reason that the subsequent iteration of those counterclaims have been enjoined through an MDL class action settlement. (ECF No. 382.)
The request is even more bizarre in that the Jemsek Defendants acknowledge that they presently have no factual evidence to support their proposed counterclaim. Their ability to successfully prosecute, or even sufficiently plead, the proposed Third Amended Counterclaim, is dependent on their success on a yet-to-be heard motion to reopen discovery in this adversary proceeding, to say nothing of their subsequent ability to uncover factual support for that counterclaim.
A Motion to Reopen Discovery was filed on May 9, 2014, too close to the hearing date on May 13, 2014 to be heard. It has been held in abeyance while the present motions are considered.
Meanwhile, and on the assumption that the Jemsek Defendants' motion will be denied, BCBSNC asks that judgment be entered in its favor—on counterclaims that do not presently exist.
Adding a final layer of mud to the morass, BCBSNC seeks final judgment, even though all agree that jurisdictionally, the Jemsek Defendants' counterclaims are Stern "core" proceedings. While this bankruptcy court has the power to grant the motion to reinstate/amend the counterclaims, denial equates to a dismissal of the action with prejudice. Denial of that motion and entry of a final judgment in this adversary proceeding will require an order of the U.S. District Court. (See Order Denying the Motion to Withdraw Reference, dated March 11, 2014, ECF No. 377.)
In Stern v. Marshall, 131 S. Ct. 2594 (2011), the Supreme Court held 28 U.S.C. §157(b)(2)(C)'s delegation of authority to an Article I bankruptcy court to enter a final order on a counterclaim filed by a debtor against a creditor unconstitutional, where the ruling is not necessary to determine the creditor's filed claim against the estate.
Therefore, having concluded that the Jemsek Defendants' motion should be denied, and the BCBSNC motion granted, this Court submits proposed findings of fact, conclusions of law and a recommendation to the U.S. District Court as to the two motions.
DISCUSSION
I. The Jemsek Defendants' Motion for Leave to Re-Instate First Amended Counterclaims/Amend to the Third Amended Counterclaim Should be Denied.
The Jemsek Defendants' request to interpose their proposed Third Amended Counterclaim should be denied, for three reasons. First, the proposed Third Amended Counterclaim is an amended pleading, not a reinstated one. Second, allowing the Jemsek Defendants to file the proposed Third Amended Counterclaim would be prejudicial to BCBSNC and futile because it could not survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Third, in all likelihood, the Third Amended Counterclaim is barred by the settlement in Love.
F.R.B.P 7012 adopts Rule 12 with only a few modifications, not relevant here.
A. The Proposed Third Amended Counterclaim is an Amended Claim, Not a Reinstated One. As Such, it is Governed by FRCP 15.
As noted, a previously amended pleading is "dead paper." The Federal Rules of Civil Procedure do not permit a party to "refile" such a pleading. Rather, the party must amend pursuant to Rule 15 of the Federal Rules of Civil Procedure. We will construe the present motion as a motion to amend, without consent of the opposing party.
Angles v. Dollar Tree Stores, Inc., 494 F. App'x 326, 328 (4th Cir. 2012) ("Federal Rule of Civil Procedure 15 governs the amendment of pleadings and, in pertinent part, it provides that 'a party may amend its pleading only with the opposing party's written consent or the court's leave.'").
B. The Jemsek Defendants' Motion To Amend Should be Denied Under Rule 15 because the Proposed Third Amended Counterclaim is Prejudicial and Futile.
The Motion to Reinstate/Amend should be denied under Rule 15 because the Proposed Third Amended Counterclaim is prejudicial to BCBSNC and because it would be futile.
While courts should freely give leave to amend when just so requires, the Fourth Circuit has "interpreted Rule 15(a) to provide that "leave to amend a pleading should be denied only when the amendment 1) would be prejudicial to the opposing party, 2) there has been bad faith on the part of the moving party, or 3) the amendment would have been futile." Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006); see also Johnson v. Oroweat Foods Co., 785 F.2d 503 , 509 (4th Cir.1986); Foman v. Davis, 371 U.S. 178, 182, (1962).
1. The Motion to Amend is Futile.
A motion to amend is futile if the proposed pleading would not survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995). In order 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) (emphasis added). "A claim has facial plausibility when the plaintiff pleads sufficient factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. However, "plausible" requires "more than a sheer possibility that a defendant has acted unlawfully." Id. (emphasis added). The allegations in the complaint must also "raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, "the complaint must allege sufficient facts to establish [the] elements" of the claim. Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012).
The sole claim alleged in the Third Amended Counterclaim is a claim for "tortious interference with business relationship." (ECF No. 407 ¶¶ 56-62.)
While BCBSNC makes a good argument that a medical license is not a "contract" within the meaning of this tort, we need not delve into the elements of a claim for tortious interference with business relationship. The reason is that the Jemsek Defendants have admitted they have no facts to support their claim, and their claim is dependent on the Court's granting their Motion to Compel and Reopen Discovery. In short, all they have are allegations. Without sufficient facts, the claim is not plausible on its face and the court can't draw the reasonable inference that BCBSNC is liable for the alleged misconduct. Plausibility requires more than a sheer possibility, which is all that the Jemsek Defendants have alleged. As such, the proposed third amended counterclaim would not likely survive a Motion to Dismiss.
In his deposition, Dr. Jemsek admitted that he had no proof that BCBSNC at all influenced the North Carolina Medical Board in its proceedings against him. (See ECF No. 388, Ex. A (11/22/2013 Dep. of Joseph G. Jemsek at 455:6-18).) Further, Valerie Van Epern, the Rule 30(b)(6) designee for the Jemsek Clinic, P.A., testified that there was no evidence that BCBSNC made any defamatory statements to the CDC. (See ECF No. 388 Ex. B (9/30/2013 Jemsek Clinic, P.A. 30(b)(6) Dep. Of Valerie Van Epern at 237:20-238:20).)
2. The Motion to Amend is Prejudicial.
Whether an amended complaint is prejudicial to the opposing party is "determined by the nature of the amendment and its timing." Laber, 438 F.3d at 427. For example, an amended complaint would be prejudicial if it "raises a new legal theory that would require the gathering and analysis of facts not already considered by the [defendant, and] is offered shortly before or during trial." Id. However, delay alone is not a reason to deny a Motion to Amend. Id.
While delay alone is not a reason to deny a Motion to Amend, it is a strong consideration, especially when the delay is significant. For example, in Alinsky v. United States, the Seventh Circuit upheld the district court's denial of the Plaintiff's motion to amend when it came approximately three years after the start of the litigation and approximately eight months after the plaintiffs completed discovery. 415 F.3d 639, 648 (7th Cir. 2005); See also Zahra v. Town of Southold, 48 F.3d 674, 686 (2d Cir.1995) (upholding the denial of a motion to amend a complaint that was filed two and one-half years after the commencement of the action and three months prior to trial).
In this instance, the Motion to Amend would be highly prejudicial to BCBSNC. The Proposed Third Amended Counterclaim is now the forth pleading which the Jemsek Defendants have sought to file in this adversary proceeding. The Jemsek Defendants moved to amend their pleadings after they were ordered by the Love Court to withdraw seven of their nine counterclaims before this Court in 2008. (ECF No. 118.) The motion was granted, and the Jemsek Defendants filed the First Amended Counterclaims on December 17, 2008. (ECF Nos. 123, 124.) Then, after the close of discovery, the Jemsek Defendants again moved to amend their pleadings for the stated purpose of "conform[ing] the pleadings to the evidence and to clarify the counterclaims with more specific facts as a result of information learned in discovery." (ECF No. 291 at 1-2.) That motion was granted as well, and the Jemsek Defendants filed their Second Amended Counterclaims on January 27, 2014. (ECF No. 303). Since, those claims have recently been enjoined by the Love Court, (See ECF No. 378), the Jemsek Defendants seek to further amend.
It is now 2014. This lawsuit was filed in 2006. Discovery ended in November 2013. Dispositive Motions have been filed. Now after eight exhausting years of litigation and extensive, wide-ranging discovery, the Jemsek Defendants propose to amend again. Allowing the Jemsek Defendants to file this proposed counterclaim, eight years into the case and after two prior but similar sets of counterclaims have been enjoined, would be excessive.
The Jemsek Defendants justified the amendment from the First Amended Counterclaims to the Second Amended Counterclaims as being necessary to conform their claims against BCBSNC to the evidence obtained in discovery. Unfortunately, those counterclaims which were allegedly supported by the evidence were enjoined.
Now, the Jemsek Defendants wish to file a pleading which they admittedly "do not currently have evidence" to support. (ECF No. 407 at 2 n.2.). Instead, the sole claim they now wish to litigate is entirely predicated on a motion to compel and this court's prospective willingness to re-open discovery. The Jemsek Defendants have acknowledged they cannot prevail on this claim if the Court does not grant that motion. (Id.) In essence, the Jemsek Defendants wish to re-start this litigation from the beginning, and to begin with a 'fishing trip.' They seek permission to file a new pleading, conduct new discovery, and then proceed with new dispositive motions. This should not be allowed. As the Bankruptcy Court of Southern Mississippi explained when similarly denying a motion to amend in In re Fish & Fisher, Inc., "it is as if in a poker game, after the players have placed their bets, and after they have turned over their cards, a losing player now wants to draw again to improve his hand. 09-02747-EE, 2012 WL 2377581, at *9 (Bankr. S.D. Miss. June 25, 2012).
It is readily apparent that the Jemsek Defendants are desperate to find a way around the Love Settlement and the Love Court's injunctions. Another federal court should not lend its aid to such an endeavor. The proposal smacks of bad faith and manipulation.
C. The Proposed Third Amended Counterclaim is Likely Barred by the Love Settlement and Injunction.
Finally, the Proposed Third Amended Counterclaim in all likelihood is barred by the Love Settlement, just like the First Amended Counterclaims and the Second Amended Counterclaims before it.
When most recently, the Love Court enjoined the Jemsek Defendants Second Amended Counterclaims (ECF No. 378-1 at 7.), the Jemsek Defendants asked the Love Court to limit its ruling to specific allegations. That request was rejected. The Love court held that the entire Second Amended Counterclaims were barred by the Love settlement. (ECF No. 382-3 at 2.) Essentially, the Love Court said that its order meant exactly what it said, i.e. the Jemsek Defendants were enjoined from pursuing claims based on the factual allegations contained in the Second Amended Counterclaims.
The factual allegations of the proposed Third Amended Counterclaim are almost exactly the same as those contained in the now-barred Second Amended Counterclaims. Specifically, the Third Amended Counterclaim is based on the allegation that BCBSNC, through its relationship with a Dr. Rhyne, influenced the Medical Board by not fully disclosing an alleged conflict of interest and by investigating and limiting the Jemsek Defendants' ability to practice medicine. (ECF No. 407, ¶ 59; see also ¶¶ 32-55.)
The now-barred Second Amended Counterclaims based its tortious interference claim, in part, on almost the exact same, albeit broader, allegation: that BCBSNC's failure to disclose its relationship with Dr. Rhyne tortiously interfered with the Jemsek Defendants' business relationships. (ECF No. 303 ¶ 104; see also id. ¶¶ 75-93.) In fact, Paragraphs 75-93 of the Second Amended Counterclaims—which described the Second Amended Counterclaims' basis for the supposed tortious interference regarding Dr. Rhyne alleged in Paragraph 104—are included almost verbatim (with only minor stylistic Changes) in Paragraphs 32-39, 42-45 and 48-55 of the Third Amended Counterclaim— which describes the Third Amended Counterclaim's basis for the supposed tortious interference regarding Dr. Rhyne alleged in Paragraph 59. (Compare ECF. No. 303 ¶¶ 75- 93, with ECF No. 407, ¶¶ 32-39, 42-45, and 48-55.)
Because the claim alleged in the proposed Third Amended Counterclaim was also alleged in the now-barred Second Amended Counterclaims, this newly proposed pleading is likely barred by the Love Settlement.
For all of the aforementioned reasons, this Court concludes that the Motion to reinstate (amend) its counterclaims should be DENIED.
II. The BCBSNC Motion for Final Judgment should be Granted.
BCBSNC's primary claims have previously been dismissed with prejudice. The Jemsek Defendants' counterclaims have been enjoined and dismissed and further amendment is not in order. Consequently, there are presently no claims to be decided in this adversary proceeding. If the Motion to Reinstate/Amend is denied, all that remains to be done in the action is to grant a judgment of dismissal with prejudice and to close the file.
Apart from possible appeals of prior interlocutory orders in the action.
--------
Thus, it appears that the BCBSNC Motion is well founded and should be GRANTED.
Accordingly, this bankruptcy court recommends the Jemsek Defendants' Motion for Leave to Re-Instate First Amended Counterclaims/Amend to the Third Amended Counterclaim be DENIED, and that the BCBSNC Motion for Final Judgment be GRANTED.
/s/_________
J. Craig Whitley
United States Bankruptcy Judge