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Dr. Erik Natkin, Do PC v. American Osteopathic Association

United States District Court, D. Oregon

April 22, 2019

DR. ERIK NATKIN, DO PC, a Utah corporation; and DR. ERIK NATKIN, DO, an individual, Plaintiffs,

          Benjamin Natkin, Law Offices of Benjamin Natkin; Clark E. Rasche, Watkinson Laird Rubenstein, PC. 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 Postdoctoral Training Institute, OPTI-West Educational Consortium.


          Michael H. Simon United States District Judge.

         United States Magistrate Judge Stacie Beckerman issued Findings and Recommendation (“F&R”) in this case on October 18, 2018. ECF 174. Judge Beckerman recommended that the motions to dismiss filed by Defendants Samaritan Health Services, Inc. (“SHSI”), Good Samaritan Hospital Corvallis (“Good Sam”), Albany General Hospital, Mid-Valley Healthcare, Inc., Samaritan Pacific Health Services, Inc., Samaritan North Lincoln Hospital, (collectively, the “Sister Hospitals”) (SHSI, Good Sam, and the Sister Hospitals are collectively referred to as the “Samaritan Entities”) and Dr. Luis R. Vela, DO (“Vela”) (collectively with the Samaritan Entities, the “Samaritan Defendants”); American Osteopathic Association (“AOA”); Western University of Health Sciences (“Western”); and Osteopathic Postdoctoral Training Institute, OPTI-West Educational Consortium (“OPTI-West”) be granted in part and denied in part.

         Plaintiffs Dr. Erik Natkin, DO (“Natkin”) and Dr. Erik Natkin, DO PC (“Natkin PC”) timely filed an objection (ECF 183), as did each of the Defendants. ECF 180 (OPTI-West); ECF 179 (Samaritan Defendants); ECF 178 (Western); ECF 177 (AOA). The Court reviews de novo those portions of Judge Beckerman's F&R to which Plaintiffs and Defendants have objected. In so doing, the Court has considered the objections, the responses, the F&R, the Second Amended Complaint (“SAC”), 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.


         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 prescribes no 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)).


         A more detailed background was set out in the F&R (ECF 126) on the motions to dismiss the First Amended Complaint. Most of the same factual allegations, along with some new factual allegations, are included in the SAC. Briefly, Plaintiff Dr. Erik E. Natkin was a resident at Good Sam, a subsidiary of SHSI and sister-hospital to the other Samaritan Entity hospitals. Plaintiffs allege that Natkin was unfairly targeted by Vela, a Residency Program Director and Director of Medical Education (“DME”) at Natkin's residency program. After receiving positive performance reviews, Vela accused Natkin of colluding with another resident to portray an attending physician in a negative light. Vela also allegedly violated the bylaws and other governing documents of the residency program by having Natkin suspended and ultimately terminated, without appropriate process.

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


         Plaintiffs object that the F&R: (1) improperly concluded that Defendants were not engaged in a conspiracy or joint venture and improperly rejected the alleged agency relationship between the parties; (2) improperly found that Plaintiffs alleged no antitrust injury; (3) improperly dismissed Plaintiffs' fraud claim; (4) improperly dismissed Plaintiffs' fair procedure claim against AOA; (5) improperly concluded that Plaintiffs' wrongful termination claims are not statutory claims; (6) improperly evaluated the contract claims because AOA, OPTI-West, SHSI, Good Sam, and the Sister Hospitals were either parties to certain contracts through agency or conspiracy and are liable for breach of contract or they are not parties to the contracts and are liable for interference with contract; (7) failed properly to evaluate certain aspects of Plaintiffs' defamation claims and intentional interference with economic relations based on defamation; (8) failed to address all the reasons proffered by Plaintiffs in arguing against OPTI-West's reliance on the Horowitz doctrine; and (9) improperly dismissed Plaintiffs' California Fair Practices Act Claim.[1] Plaintiffs also raise the new argument that Defendants should be judicially estopped from disputing their interconnected relationships because they argued this relationship to their benefit in obtaining a transfer of this case to the District of Oregon and in defeating Plaintiffs' motion to retransfer venue back to the Central District of California.

         The Samaritan Defendants object to the F&R's analyses and conclusions about: (1) the denial of Vela's and SHSI's motion to dismiss Plaintiffs' wrongful termination claims against them because they were not Natkin's employer; (2) the denial of Vela's motion to dismiss Plaintiffs' Eighth Claim for intentional interference with contract because he was an agent of the contracting party and thus cannot be a third party for purposes of this type of claim; (3) the denial of Good Sam, Vela, and SHSI's motion to dismiss Plaintiffs' defamation claims that rely on the truthful statement that Natkin was terminated from his fourth year of residency; and (4) any dismissals of Plaintiffs' claims recommended to be without prejudice, arguing that they should be with prejudice. Western objects to the F&R's analysis and conclusion that Plaintiffs allege sufficient facts from which it can be inferred that Vela is an employee or nonemployee agent of Western, and thus that any claims survive against Western. OPTI-West objects to the F&R's analyses and conclusions that OPTI-West's motion to dismiss not be granted against Plaintiffs' Sixth and Eight Claims for Relief alleging intentional interference with contract, and that the Horowitz doctrine does not apply. Finally, AOA objects to the F&R's analysis and conclusion that Plaintiffs' breach of contract claim against AOA not be dismissed.

         The Court discusses the objections, organized by the claims as alleged in the SAC, after discussing the portions of the F&R to which no objections were filed and Plaintiffs' arguments about judicial estoppel and joint action.

         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:

1. The F&R's recommendation not to dismiss Plaintiffs' claim for unfair procedure (Third Claim) against OPTI-West.
2. The F&R's recommendation not to dismiss Plaintiffs' defamation claims against SHSI, Good Sam, and Vela that are based on representations that Natkin was on probation multiple times.
3. The F&R's recommendation not to dismiss Plaintiffs' intentional interference with prospective economic advantage claims against SHSI.
4. The F&R's conclusion that there is no agency relationship between the various entities, other than between Western and OPTI-West, AOA and OPTI-West, and Good Sam and the other Samaritan Entities to which Plaintiffs objected.

         B. Judicial Estoppel

         Plaintiffs contend that Defendants should be judicially estopped from contesting their joint relationship. The decision to impose judicial estoppel is left to the discretion of the district court. New Hampshire v. Maine, 532 U.S. 742, 750 (2001). In considering whether to apply the doctrine of judicial estoppel, district courts may consider several questions, including:

(1) Is the party's later position “clearly inconsistent with its earlier position?” (2) Did the party succeed in persuading a court to accept its earlier position, creating a perception that the first or second court was misled? and (3) Will the party seeking to assert an inconsistent position “derive an unfair advantage or impose an unfair detriment on the opposing party?”

Baughman v. Walt Disney World Co., 685 F.3d 1131, 1133 (9th Cir. 2012) (quoting New Hampshire, 532 U.S. at 750-51). This is not an exhaustive enumeration of the factors that a court may consider. New Hampshire, 532 U.S. at 751. The Ninth Circuit has explained that the “second New Hampshire factor-that one of the courts has been misled-is often dispositive.” Baughman, 685 F.3d at 1133. Judicial estoppel is appropriate where “a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position.” Id.

         Plaintiffs argue that Defendants' positions relating to their interconnected relationships in their motions to dismiss are clearly inconsistent with their positions taken before the U.S. District Court in California in litigating their motions on jurisdiction and venue and before Judge Beckerman in litigating Plaintiffs' motion to retransfer the case back to California. Plaintiffs also contend that Defendants “persuaded” the district court in California and Judge Beckerman of various positions about Defendants' interconnected relationship. This is not an accurate representation of Defendants' arguments or the bases of the courts' decisions.

         Regarding the arguments of Defendants before the district court in California, OPTI-West filed no motion before that court and thus did not make any representation or “persuade” that court of anything. The court instead reviewed Plaintiffs' complaint and underlying documents and concluded that OPTI-West had consented to personal jurisdiction in Oregon by accepting the forum selection clause in the contract it entered with the Samaritan Entities, which the court noted forms the basis of Plaintiffs' third-party beneficiary contract claims. AOA argued that venue was not appropriate in California and that Plaintiffs failed to state a claim against AOA because the wrongdoing involved Vela and Good Sam and had nothing to do with AOA. This is the opposite of arguing that AOA was so interconnected with Good Sam or the Samaritan Entities that they were all essentially one entity for liability purposes. Indeed, AOA asserted no argument or claim that it was connected to any other defendant through agency, joint venture, or conspiracy.

         Similarly, Western argued that Plaintiffs' complaint was “devoid” of any allegations that Western was involved in any conspiracy, defamation, unfair business practice, or breach of contract. Western joined in the other defendants' motions to transfer venue if the district court in California decided not to dismiss Plaintiffs' claims against Western, noting that the underlying contracts cited by Plaintiffs had Oregon forum selection clauses, most of the witnesses and documents were in Oregon, and Oregon provided adequate remedies. Western made no argument that it was in a conspiracy, joint venture, agency relationship, or any other interconnected relationship with any other defendant.

         The Samaritan Defendants moved to dismiss the claims against them because the district court in California lacked personal jurisdiction over them and venue was improper in California. In the alternative, they moved to transfer the case to Oregon. They presented no argument that they were interconnected with any other defendant.

         Before Judge Beckerman, Defendants made similar arguments. They argued that Plaintiffs were making an improper motion for reconsideration, that Plaintiffs' allegations focused on conduct in Oregon, that venue was proper in Oregon, that all defendants had consented to jurisdiction in Oregon, that the district court in California did not have personal jurisdiction over all defendants, that Plaintiffs had consented to jurisdiction in Oregon, and that the district court in California had correctly decided the motion to transfer. In making these arguments they focused on the allegations in Plaintiffs' complaint and the attached documents and the decision of the district court in California. They did not argue that all the defendants were interconnected with one another.

         Plaintiffs do not cite or quote any purported assertion by any defendant to support Plaintiffs' argument for judicial estoppel. Plaintiffs cite only portions of the opinions of the courts. The conclusions cited by Plaintiffs, however, were not arguments made by Defendants. As the courts stated in their opinions, the conclusions mainly were based on Plaintiffs' allegations, not Defendants' assertions and arguments. The courts also relied on the documents incorporated by reference into Plaintiffs' complaint. Accordingly, judicial estoppel is not appropriate.

         C. Joint Action

         1. Conspiracy

         Plaintiffs assert that they allege two conspiracies. Plaintiffs object that the F&R focuses only on the first alleged conspiracy, to wrongfully accredit the Samaritan Entities' residency program, and ignores the second alleged conspiracy, to wrongfully terminate and uphold Natkin's termination without providing fair procedure. Plaintiffs contend that the Court previously found the second alleged conspiracy sufficient to withstand the first motion to dismiss. That is not an accurate characterization of the Court's finding. The Court held that Oregon law would provide a common law right to fair procedure and that Plaintiffs' First Amended Complaint sufficiently stated a claim for this cause of action against Good Sam, Opti-West, and Vela. The Court expressly found, however, that Plaintiffs did not sufficiently allege a conspiracy or joint action. That a plaintiff alleges a particular cause of action against more than one defendant does not mean that the plaintiff has alleged a conspiracy involving those defendants. Plaintiffs do not allege facts plausibly supporting that Defendants conspired to deprive Natkin of fair procedure, versus independently being involved in that alleged deprivation. For the first alleged conspiracy, the Court agrees with and adopts the reasoning and conclusions of the F&R.

         2. Joint Venture

         Plaintiffs object that the F&R misapplied the law of joint venture and joint enterprise, and that whether a joint venture or enterprise exists is generally a question of fact. In a case involving a hospital residency program, the California Court of Appeals described when this is an issue fact versus an issue of law:

Whether the parties to a contract have created a joint venture or some other relationship involving cooperative effort, depends upon their actual intention which must be determined in accordance with ordinary rules governing interpretation of contracts. Where the evidence bearing on the issue is conflicting, the existence of a joint venture is primarily a question of fact. On the other hand, where there is no conflicting extrinsic evidence concerning the interpretation of the contract creating the relationship, the issue is one of law.

Cty. of Riverside v. Loma Linda Univ., 118 Cal.App.3d 300, 313 (Ct. App. 1981) (citations omitted). The court also explained that “[t]he term ‘joint venture' usually connotes a commercial objective. It exists where there is ‘an agreement between the parties under which they have a community of interest, that is, a joint interest, in a common business undertaking, an understanding as to the sharing of profits and losses, and a right of joint control.'” Id. (quoting Holtz v. United Plumbing & Heating Co., 49 Cal. 2d 501, 506-507 (1957)).

         The contracts are unambiguous on this issue, and Plaintiffs' allegations do not plausibly suggest any extrinsic evidence concerning the interpretation of the contract. As a result, at this stage in the litigation whether the parties created a joint venture is an issue of law. The Court has reviewed the issue de novo. The Court agrees with and adopts the reasoning of the F&R.

         3. ...

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