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Natkin v. American Osteopathic Association

United States District Court, D. Oregon

January 17, 2018

DR. ERIK NATKIN, DO PC, a Utah corporation; and DR. ERIK NATKIN, DO, an individual, Plaintiffs,
v.
AMERICAN OSTEOPATHIC ASSOCIATION, et al., Defendants.

          Benjamin Natkin, Law Offices of Benjamin Natkin Clark E. Rasche, Watkinson Laird Rubenstein Of Attorneys for Plaintiffs.

          John F. McGrory, Jr. and Blake J. Robinson, Davis Wright Tremaine LLP, Of Attorneys for Defendants Samaritan Health Services, Inc., Good Samaritan Hospital Corvallis, Albany General Hospital, Mid-Valley Healthcare, Inc., Samaritan Pacific Health Services, Inc., Samaritan North Lincoln Hospital, and Dr. Luis R. Vela, DO.

          Michael Porter, Miller Nash Graham & Dunn LLP, Mark H. Meyerhoff and Christopher S. Frederick, Liebert Cassidy Whitmore, Of Attorneys for Defendant Western University of Health Sciences.

          Michael C. Lewton, Cosgrave Vergeer Kester LLP, John R. Danos, Wilson, Elser, Moskowitz, Edelman & Dicker LLP, Of Attorneys for Defendant American Osteopathic Association.

          Thomas R. Rask, III, Kell Alterman & Runstein, LLP, Robert P. Johnston, Law Offices of Vera and Barbosa, Of Attorneys for Defendant Osteopathic Postdoctorial Training Institute, OPTI-West Educational Consortium.

          OPINION AND ORDER

          Michael H. Simon. United States District Judge.

         United States Magistrate Judge Stacie Beckerman issued Findings and Recommendation (“F&R”) in this case on August 30, 2017. ECF 126. Judge Beckerman recommended that the motions to dismiss filed by Defendants Samaritan Health Services, Inc. (“SHS”), Good Samaritan Hospital Corvallis (“Good Sam”), Albany General Hospital, Mid-Valley Healthcare, Inc., Samaritan Pacific Health Services, Inc., Samaritan North Lincoln Hospital, (collectively, the “Samaritan Entities”) and Dr. Luis R. Vela, DO (collectively with the Samaritan Entities, the “Samaritan Defendants”), American Osteopathic Association (“AOA”), and Western University of Health Sciences (“Western”) (collectively, the “Moving Defendants”) be granted in part and denied in part.

         Plaintiffs timely filed an objection (ECF 136), as did the Samaritan Defendants (ECF 135). The Court reviews de novo those portions of Judge Beckerman's F&R to which Plaintiffs and the Samaritan Defendants have objected. In so doing, the Court has considered the objections, the responses, the F&R, the First Amended Complaint (“FAC”), and the underlying briefing before Judge Beckerman. For the reasons discussed below, the Court adopts in part the F&R. The motions to dismiss are granted in part and denied in part.

         STANDARDS

         A. Review of a Magistrate's Findings and Recommendation

         Under the Federal Magistrates Act (“Act”), the Court may “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1). If a party files objections to a magistrate's findings and recommendations, “the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id.; Fed.R.Civ.P. 72(b)(3).

         For those portions of a magistrate's findings and recommendations to which neither party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474 U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to require a district judge to review a magistrate's report to which no objections are filed.”); United States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court must review de novo magistrate's findings and recommendations if objection is made, “but not otherwise”). Although in the absence of objections no review is required, the Magistrates Act “does not preclude further review by the district judge[] sua sponte . . . under a de novo or any other standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed.R.Civ.P. 72(b) recommend that “[w]hen no timely objection is filed, ” the Court review the magistrate's recommendations for “clear error on the face of the record.”

         B. Motion to Dismiss

         A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the plaintiff's legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

         A complaint must contain sufficient factual allegations to “plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

         BACKGROUND

         The Court adopts the Background section of the F&R, including the terms used therein. Briefly, Plaintiff Dr. Erik E. Natkin was a resident at Good Sam, a subsidiary of SHS and sister-hospital to the other Samaritan Entities. Plaintiffs allege that Dr. Natkin was unfairly targeted by Dr. Vela, a Residency Program Director and Director of Medical Education (“DME”) at Dr. Natkin's residency program. After receiving positive performance reviews, Dr. Vela accused Dr. Natkin of colluding with another resident to portray an attending physician in a negative light. Dr. Vela also allegedly violated the bylaws and other governing documents of the residency program by having Dr. Natkin suspended and ultimately terminated, without appropriate process.

         Dr. Vela and SHS allegedly conveyed false and misleading information about Dr. Natkin to the Oregon Medical Board, which required Dr. Natkin to undergo a six-month investigation to clear his medical license. Dr. Vela and SHS also allegedly conveyed false and misleading information about Dr. Natkin to the Federation of State Medical Boards' Credential Verification Service (“FCVS”), which allegedly precluded Dr. Natkin from completing his residency in orthopedic surgery and obtaining Board certification. In addition, these actions have caused difficulty for Dr. Natkin in obtaining medical licenses in other states and in practicing as a covered doctor under certain insurance plans. Finally, Dr. Vela allegedly defamed Dr. Natkin to numerous other doctors throughout the country, preventing Dr. Natkin from obtaining other jobs, including a fourth-year orthopedic surgical residency that was specially-created for Dr. Natkin in Philadelphia. The program director in Philadelphia withdrew the job offer after he contacted Dr. Vela, who allegedly conveyed false and misleading information about Dr. Natkin.[1]

         DISCUSSION

         Plaintiffs object to the F&R's analysis and conclusions regarding: (1) sustaining the evidentiary objection to the Declaration of Dr. Natkin submitted in support of Plaintiffs' response brief; (2) dismissing Plaintiffs' antitrust claim; (3) applying Oregon law to, and dismissing, Plaintiffs' breach of fiduciary duty claims against AOA, Osteopathic Postdoctorial Training Institute, OPTI-West Educational Consortium (“Opti-West”), and Western; (4) dismissing Plaintiffs' breach of fiduciary duty claims against the Samaritan Defendants; (5) dismissing the breach of contract claims against the Samaritan Entities other than Good Sam; (6) dismissing Plaintiffs' third-party beneficiary contract claims; (7) dismissing Plaintiffs' defamation claims; and (8) dismissing Plaintiffs' California Fair Practices Act Claim.[2] The Samaritan Defendants object to the F&R's analysis and conclusions regarding: (1) denying their motion to dismiss Dr. Natkin's breach of contract claim against Good Sam; (2) denying their motion to dismiss Dr. Natkin's claim for breach of the covenant of good faith and fair dealing (“GFFD”) against Good Sam; and (3) denying their motion to dismiss Plaintiffs' wrongful termination claim. The Court discusses the objections, organized by the claims as alleged in the FAC, after discussing the portions of the F&R to which no objections were filed and the evidentiary objection of Plaintiffs.

         A. Portions of the F&R to which No Objections Were Filed

         For the portions of the F&R which no party has objected, the Court follows the recommendation of the Advisory Committee and reviews those matters for clear error on the face of the record. No such error is apparent and the Court adopts these portions of the F&R. For clarity, the Court sets forth below these portions:[3]

1. The F&R's recommendation to apply Oregon law to all of the Samaritan Defendants' claims-both contract and tort.
2. The F&R's recommendation to dismiss Plaintiff Natkin PC's breach of contract claim (count 11) as against the Samaritan Defendants.
3. The F&R's recommendation to dismiss Plaintiff Natkin PC's breach of the implied covenant of GFFD claims (counts 12 and 13).
4. The F&R's recommendation to dismiss Plaintiff Dr. Natkin's breach of the implied covenant of GFFD claims (counts 12 and 13) as against the Samaritan Defendants other than Good Sam.
5. The F&R's recommendation to deny AOA's motion to dismiss Plaintiffs' breach of contract claim (counts five through eight) against AOA.
6. The F&R's recommendation to dismiss counts 12 and 13 as against AOA, for breach of the implied covenant of GFFD. In counts 12 and 13, Plaintiffs do not allege against AOA the breach of the covenant of GFFD with respect to the alleged contract between Plaintiffs and AOA as set forth in counts five through eight. Instead, counts 12 and 13 focus solely on the contract between the Samaritan Entities, specifically, Good Sam and Dr. Natkin. If Plaintiffs intend to allege breach of the covenant of GFFD by AOA with respect to the contract between AOA and Dr. Natkin, Plaintiffs must specifically so plead. The allegations relating to the alleged breach of the duty of GFFD contained in counts 12 and 13 do not encompass the alleged contract between AOA and Dr. Natkin.
7. The F&R's recommendation to dismiss counts five through eight (breach of contract) as against Western. The Court notes for clarification that for the same reasons Judge Beckerman dismissed these counts against Western, the Court also dismisses counts five through eight against the Samaritan Defendants and Opti-West. Thus, counts five through eight only remain against AOA.
8. The F&R's recommendation to dismiss counts 12 and 13 (breach of the implied covenant of GFFD) as against Western.
9. The F&R's recommendation to dismiss Plaintiffs' wrongful termination claim (count 10) against all Defendants other than Good Sam.
10. The F&R's conclusion to consider the additional evidence offered by the Moving Defendants, as evidence appropriate under the incorporation-by-reference doctrine.

         B. Evidentiary Objection

         The F&R sustained the Samaritan Defendants' objections to Plaintiffs' proffered evidence because Plaintiffs provided no argument why the evidence should be considered. In their objection, Plaintiffs explain that the motions to dismiss were briefed in California, before this case was transferred, and under the local rules in California Plaintiffs were not provided an opportunity to file a response to the evidentiary objections raised by the Samaritan Defendants in their reply filings (unlike in this District). Plaintiffs therefore object to the F&R's sustaining the Samaritan Defendants' objection to the declaration of Dr. Natkin and provide their argument for why the evidence should be considered.

         Plaintiffs argue that Dr. Natkin's declaration introduces the “compendium” of the Samaritan Entities' written policies in effect during the year of Dr. Natkin's termination and are referenced in the FAC, and that declaration avers facts that could be alleged in an amended complaint. Whether the facts stated by Dr. Natkin in his declaration could be alleged in an amended complaint is irrelevant to whether the declaration is admissible in response to a motion to dismiss. Dr. Natkin's declaration primarily discusses his ties to California and his personal belief about the facts of his experience at Good Sam and the underlying factual encounters that were the basis of his termination. See, e.g., ECF 46 at 2-4 ¶¶ 3-13 (discussing Dr. Natkin's connections to California); 15 (“I think it was wrong for me to get fired”); 16 (“I have never deliberately set out to make any attending physician look bad or incompetent: not Dr. Richard Stanley, DO, nor any other attending.” (emphasis in original)); 18 (“I have never met or seen or seen Doug Boysen”). These are facts outside the pleadings and are not properly considered in motion under Rule 12 of the Federal Rules of Civil Procedure.

         Dr. Natkin's declaration does, however, attach as an exhibit a copy of the written policies of the Samaritan Entities, and Dr. Natkin authenticates the exhibit in paragraph 17 of his declaration. The Samaritan Defendants object that paragraph 17 lacks authentication and foundation. Dr. Natkin avers, however, that he makes his declaration based on personal knowledge and there is no indication that a resident would not have knowledge (or copies) of the Resident Handbook or the Good Sam medical staff rules and regulations. To the contrary, it makes sense that a resident would have knowledge of, and copies of, these documents. Further, the Samaritan Defendants do not state that the exhibit does not contain accurate copies of the policies in place during Dr. Natkin's residency.[4] The Court therefore finds that the authentication of the document is not sufficiently challenged. Accordingly, the exhibit attached to the declaration of Dr. Natkin is properly considered on a motion to dismiss because it is incorporated by reference in the FAC.

         Plaintiffs also object to the F&R sustaining the objection to the declaration of Plaintiffs' counsel and its attached exhibit, an agreement between Opti-West and Good Samaritan Regional Medical Center. Plaintiffs argue that the agreement supports Plaintiffs' third-party beneficiary claim and that the declaration demonstrates Plaintiffs' diligence in attempting to obtain documents in discovery. This agreement, however, is not incorporated by reference in the FAC. If Plaintiffs choose to file a second amended complaint, Plaintiffs may incorporate this document by reference (or attach it as an exhibit). More importantly, however, Plaintiffs' efforts in discovery are outside the pleadings and not germane to the consideration of a motion under Rule 12.

         The Samaritan Defendants' objection is sustained in part and overruled in part. It is sustained with respect to the declaration of counsel and its exhibit and the declaration of Dr. Natkin, except for paragraph 17 authenticating the written policies of the Samaritan Defendants. It is overruled with respect to the written policies themselves.

         C. Claims

         The Court notes that Defendant Opti-West did not file a motion to dismiss, but instead filed an answer. Nonetheless, the Court sua sponte applies its analyses below to the claims alleged against Opti-West. A trial court may sua sponte dismiss claims under Federal Rule of Civil Procedure 12(b)(6), even shortly before trial. See, e.g., Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987). Moreover, a trial court “may properly on its own motion dismiss an action as to defendants who have not moved to dismiss where such defendants are in a position similar to that of moving defendants or where claims against such defendants are integrally related.” Silverton v. Dep't of Treasury, 644 F.2d 1341, 1345 (9th Cir. 1981). Although Silverton involved a nonmoving defendant who had not yet appeared, the decision did not limit its holding, and the cases it cited to support its holding involved defendants who had appeared but had not filed a motion or joined in the motions filed by other defendants. Thus, the Court does not find Silverton and its progeny limited only to cases where the nonmoving defendant has not yet appeared, which is also consistent with Omar.

         1. First Claim-Antitrust

         Plaintiffs allege that Defendants collectively acted to prevent Dr. Natkin from completing his residency, which precluded him from becoming board certified, from obtaining a fellowship in orthopedic hand surgery, and from entering the market anywhere in the United States as an orthopedic surgeon, with or without a subspecialty in orthopedic hand surgery or other orthopedic subspecialty. Plaintiffs also allege that the actions by Defendants have prevented patients from receiving the benefit of Dr. Natkin's care as an orthopedic surgeon, orthopedic hand surgeon, or other orthopedic surgical specialty. Plaintiffs further allege that Dr. Natkin and patients have been harmed because a growing number of medical insurance companies require a physician with whom they contract to have board certification. Thus, Dr. Natkin cannot contract with those insurers, and their insureds do not have the option of being treated by Dr. Natkin. Plaintiffs claim that the actions by Defendants constitute an unlawful combination in restraint of trade affecting interstate commerce in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1.

         The Moving Defendants argue that Plaintiffs fail to state a claim for an antitrust violation because Plaintiffs fail to allege “antitrust injury.” The Samaritan Defendants also argue that Plaintiffs fail to allege a restraint of trade because Dr. Natkin is free to practice medicine anywhere other than with the Samaritan Defendants. Western also argues that Plaintiffs fail to sufficiently allege facts demonstrating that Western was part of any conspiracy or engaged in conduct that unreasonably restrained trade.

         a. Antitrust Injury

         “To have standing as an antitrust plaintiff, a party must demonstrate antitrust injury, meaning it must show ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful.'” Int'l Longshore & Warehouse Union v. ICTSI Oregon, Inc., 863 F.3d 1178, 1186 (9th Cir. 2017) (quoting Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990)). “An injury caused by an antitrust violation will not count as an antitrust injury ‘unless it is attributable to an anti-competitive aspect of the practice under scrutiny.'” Id. (quoting Atl. Richfield, 495 U.S. at 334). “The antitrust laws were enacted for the protection of competition, not competitors.” Atl. Richfield, 495 U.S. at 338 (emphasis in original) (quotation marks omitted). Thus, personal economic injury, such as loss of income from market exclusion, is not enough to support a claim under Section 1 of the Sherman Act. Les Shockley Racing, Inc. v. Nat'l Hot Rod Ass'n, 884 F.2d 504, 508 (9th Cir. 1989). When considering antitrust standing on a motion to dismiss, the Court must determine whether Plaintiffs “could show any set of facts, consistent with the allegations of [the] complaint, that would constitute a violation of the antitrust laws.” Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 735 (9th Cir. 1987) (quotation marks omitted).

         In Summit Health, Ltd. v. Pinhas, the Supreme Court addressed the issue of the interstate commerce requirement in a Section 1 antitrust claim with regard to the alleged exclusion of a single ophthalmologist from the Los Angeles market. 500 U.S. 322 (1991). Although Summit Health involved the interstate commerce requirement of an antitrust claim, it touched upon the anticompetitive effect of the alleged conduct, noting that:

For if a violation of the Sherman Act occurred, the case is necessarily more significant than the fate of “just one merchant whose business is so small that his destruction makes little difference to the economy.” The case involves an alleged restraint on the practice of ophthalmological services. The restraint was accomplished by an alleged misuse of a congressionally regulated peer review process, which respondent characterizes as the gateway that controls access to the market for his services. The gateway was closed to respondent, both at Midway and at other hospitals, because petitioners insisted upon adhering to an unnecessarily costly procedures. The competitive significance of respondent's exclusion from the market must be measured, not just by particularized evaluation of his own practice, but rather, by a general evaluation of the impact of the restraint on other participants and potential participants in the market from which he has been excluded.

Id. at 332 (citation omitted).

         After Summit Health, courts sometimes have struggled with when, in the context of a doctor or other medical professional being denied privileges at hospital or similar circumstances, a claim will be sufficient under Section 1 of the Sherman Act. The Court has reviewed numerous cases involving allegations in the medical context similar to Plaintiffs' claim. The Court notes that most of these cases arise in the context of summary judgment, because “[a]fter Summit Health, the adequacy of a physician's contentions regarding the effect on competition is typically resolved after discovery, either on summary judgment or after trial.” Brader v. Allegheny Gen. Hosp., 64 F.3d 869, 876 (3d Cir. 1995). Circumstances may, however, ...


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