Rizzi v. Hall

IN THE UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

WESTERN DIVISION

RAYMOND M. RIZZI, D.P.M., )

)

Plaintiff, )

)

v. ) No. 4:23-cv-00006-DGK

)

MICHAEL HALL, M.D., )

REBECCA H. ALLISON, & )

ENCOMPASS MEDICAL GROUP, P.C., )

)

Defendants. )

ORDER GRANTING MOTION TO DISMISS

This lawsuit arises from Plaintiff Dr. Raymond Rizzi’s employment with Defendant

Encompass Medical Group, P.C. (“Encompass”). Beginning in 2012, Plaintiff worked for

Encompass pursuant to an employment agreement and then, from 2021 until his termination, under

a revised employment agreement. After Defendant Dr. Michael Hall (“Hall”) became president

of Encompass, the relationship between the parties deteriorated. Encompass eventually

terminated Plaintiff. Plaintiff responded by suing Defendants for breach of contract, various

financial torts, and defamation.

Now before the Court is Defendants’ 12(b)(6) motion to dismiss for failure to state a claim.

ECF No. 8. Because the Petition1 fails to state a claim, the motion is GRANTED. Plaintiff’s

claims are dismissed without prejudice.

Standard of Review

A claim may be dismissed if it fails “to state a claim upon which relief can be granted.”

1 Although in federal court the initial pleading is called a “complaint” instead of a “petition,” because this case was

removed from Missouri state court where the initial pleading is called and captioned a petition, the Court uses that

term to avoid confusion.

Fed. R. Civ. P. 12(b)(6). In ruling on a motion to dismiss, the Court “must accept as true all of

the complaint’s factual allegations and view them in the light most favorable to the Plaintiff.”

Stodghill v. Wellston School Dist., 512 F.3d 472, 476 (8th Cir. 2008) (cleaned up). To avoid

dismissal, a complaint must include “enough facts to state a claim to relief that is plausible on its

face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

The Plaintiff need not demonstrate the claim is probable, only that it is more than just possible.

Id.

In reviewing the complaint, the court construes it liberally and draws all reasonable

inferences from the facts in the plaintiff’s favor. Monson v. Drug Enforcement Admin., 589 F.3d

952, 961 (8th Cir. 2009). The court generally ignores materials outside the pleadings but may

consider materials that are part of the public record or materials that are necessarily embraced by

the pleadings. Miller v. Toxicology Lab. Inc., 688 F.3d 928, 931 (8th Cir. 2012).

Background

The Petition alleges Encompass hired Plaintiff in 2013 to work as a podiatrist in its clinics

under the terms of an employment agreement (the “Agreement”). Pet. ¶ 5, ECF No. 1-1. The

Agreement required Plaintiff to work full-time for Encompass and provided that all of Plaintiff’s

billings were to go through Encompass. Agreement § 1.3, ECF No. 9-1 (“Employee . . . shall not

directly or indirectly engage in, carry on or be employed by any other business or profession that

interferes with Employee’s practice of medicine on behalf of Employer . . . . All amounts paid

by any persons or entities for professional services rendered by Employee shall be turned over to

and be the property of Employer.”). From the Agreement’s inception, however, Plaintiff has been

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performing care at non-Encompass facilities, including two facilities which he operated,

Centerpoint Advanced Wound Care and Centerpoint Surgery Center (collectively “Centerpoint”).

Pet. ¶¶ 6–8, 28, 31. Encompass knew this and never objected. Pet. ¶¶ 6, 8, 28, 31.

After Defendant Hall became the president of Encompass, Defendants began complaining

about the propriety of this arrangement. Pet. ¶ 31. At Hall’s behest, Encompass’s CEO,

Defendant Rebecca Allison, then “unilaterally” forced a new financial arrangement on Plaintiff by

threatening to terminate him unless he agreed to amend the Agreement so that Encompass would

handle all of Plaintiff’s outside billings. Pet. ¶ 32. On February 15, 2021, Plaintiff signed an

Amendment to the Agreement (“the Amendment”), referenced in the Petition, authorizing him to

take home a percentage of receipts earned outside of Encompass, but placing Encompass in charge

of all billings. Pet. ¶¶ 32-33; Amendment, ECF No. 9-2. The new arrangement was essentially

a 50%-50% split on Plaintiff’s outside fees. Pet. ¶ 33; Amendment § I.B.

On or about October 26, 2021, Encompass notified Plaintiff that it was terminating his

employment without cause pursuant to the Agreement. Pet. ¶¶ 32, 42; Agreement § 3.2 (“Either

party hereto shall have the right to terminate this Agreement, without cause, at any time during the

term of this Agreement by giving sixty (60) days prior written notice to the other party.”)

Plaintiff filed this lawsuit in the Circuit Court of Jackson County, Missouri, and Defendants

subsequently removed it to federal court pursuant to diversity jurisdiction. The Petition brings

claims for tortious interference with business expectancies (Count I), breach of contract (Count

II), quantum meruit (Count III), unjust enrichment (Count IV), recission and restitution (Count V),

slander and defamation (Count VI), and conversion (Count VII).

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Discussion

A. A combination of Kansas and Missouri law governs Plaintiff’s claims.

The first issue for the Court concerns which state’s law applies to which claims.

Defendant argues a mix of law applies; Plaintiff contends Missouri law governs all his claims.

As Defendant notes, “[f]ederal courts sitting in diversity apply the choice-of-law rules of

the forum state. Under Missouri law, a choice of law clause in a contract generally is enforceable

unless application of the agreed-to law is contrary to a fundamental policy of Missouri.”

Suggestions in Supp. at 9, ECF No. 9 (quoting Eagle Tech. v. Expander Americas, Inc., 783 F.3d

1131, 1137 (8th Cir. 2015).). The Agreement contains a choice-of-law provision stating that it

“shall be governed by the laws of the State of Kansas,” and its application is not contrary to a

fundamental policy of Missouri. Agreement ¶ 6.6. Thus, Kansas law governs its interpretation.

Under Missouri’s choice-of-law rules, this also means Kansas law governs several of

Plaintiff’s claims. “In Missouri, whether a choice-of-law provision that, by its terms, applies to

contract actions also reaches non-contract claims depends on whether resolution of the claim

relates to interpretation of the contract.” Davis v. Citibank, N.A., No. 4:14 CV-1129-CDP, 2015

WL 928117, at *2 (E.D. Mo. Mar. 4, 2015). And when tort claims are “closely related to the

interpretation of the contract,” then the choice-of-law clause will reach both types of claims.

Bradbury v. Network Enters., Inc., No. 4:12 CV-575-CEJ, 2013 WL 587884, at *1 (E.D. Mo. Feb.

13, 2013) (applying choice-of-law clause selection to claims for tortious interference with contract

and unjust enrichment); see also Nw. Airlines, Inc. v. Astraea Aviation Servs., Inc., 111 F.3d 1386,

1392 (8th Cir. 1997) (applying choice-of-law selection to unjust enrichment claim because it is

“closely related to the interpretation of the contracts and fall[s] within the ambit of the express

agreement” of the choice-of-law provision). Because resolution of Plaintiff’s claims for breach

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of contract, quantum meruit, unjust enrichment, and recission and restitution are integrally related

to interpretation of the Agreement, and what is contained or not contained in the Agreement,

Kansas law governs these claims. The remaining claims are governed by Missouri law.

Plaintiff’s arguments, including his assertion that under Erie Railroad Company v.

Thompkins, 304 U.S. 64 (1938), the Court must apply Missouri law to all of Plaintiff’s claims, are

not persuasive.

B. The Petition fails to state a claim for tortious interference with a business

expectancy.

Count I asserts a claim for tortious interference with business expectancy against all

Defendants. This claim is governed by Missouri law, and under Missouri law the elements are:

“(1) a contract or valid business expectancy; (2) defendant’s knowledge of the contract or

relationship; (3) a breach induced or caused by defendant’s intentional interference by the

defendant inducing or causing a breach of the expectancy; (4) absence of justification; and (5)

damages.” Bishop & Assocs., LLC v. Ameren Corp., 520 S.W.3d 463, 472 (Mo. 2017).

Defendants argue the Petition fails to plead the first, third, and fourth elements.

Plaintiff responds that he has pled “ample specific ultimate facts which must be presumed

to be true for purposes of evaluating whether enough has been alleged to state a cause of action,”

and that Defendants are impermissibly “resorting to documents outside the pleadings,” apparently

meaning the Amendment. Suggestions in Opp’n at 11, ECF No. 11.

As a threshold matter, the Court may consider the Amendment since it is a document that

is “necessarily embraced by the pleadings.” Miller, 688 F.3d at 931. And although the Petition

routinely makes conclusory references to ultimate facts, it frequently fails to plead sufficient

specific facts, a defect which leaves it ripe for a motion to dismiss. That said, the Court rules as

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follows with respect to the elements of Plaintiff’s tortious interference claim.

First, it fails to plead a valid business expectancy. “In order to have a claim for

interference with a valid business expectancy, it is necessary to determine if the expectancy

claimed was reasonable and valid under the circumstances alleged. If it is not, there was nothing

for defendants to have interfered with.” Gott v. First Midwest Bank of Dexter, 963 S.W.2d 432,

438 (Mo. Ct. App. 1998). “A business expectancy that is contrary to the terms of a contract on

which the expectancy depends is unreasonable.” Stehno v. Sprint Spectrum, L.P., 186 S.W.3d

247, 251 (Mo. 2006). Plaintiff claims the interference occurred in 2019, 2020, and 2021 when he

was employed by Encompass and the Agreement expressly prohibited him from operating an

outside private practice. Hence, Plaintiff’s references to a business expectancy in the Petition—

such as his interest in his income and billings from his outside medical practice—runs counter to

the terms of the Agreement and is unreasonable.

Second, Plaintiff has not sufficiently pled Defendants’ intentional interference with any

alleged expectancy. As the Missouri Supreme Court has observed,

Under Missouri law, no liability arises for interfering with a contract

or business expectancy if the action complained of was an act that

the defendant had a definite legal right to do without any

qualification. A company is justified in attempting to enforce its

rights under a non-compete agreement so long as it has a reasonable,

good faith belief in the validity of the agreement.

Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 614 (Mo. 2006). “If the

defendant has a legitimate interest, economic or otherwise, in the expectancy plaintiff seeks to

protect, then the plaintiff must show that the defendant employed improper means in seeking to

further only his or her own interests.” W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 20 (Mo. 2012)

(holding no party can interfere in a business in which it has a legitimate expectancy). Here,

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Encompass had a contractual right to direct where Plaintiff provided services and to the payments

generated by his work at any location, including Centerpoint. Encompass could not interfere with

its own business expectancy.

Third, Plaintiff has not sufficiently alleged lack of justification. When, as in this case, the

defendant has a legitimate economic interest in the expectancy the plaintiff seeks to protect, then

the plaintiff must show the defendant employed improper means, such as defamation, to further

only his own interests. Stehno, 186 S.W.3d at 252. The plaintiff carries the burden of showing

this lack of justification. Id. Plaintiff has not met his burden here. Although he has alleged an

improper means, defamation by Dr. Hall, this allegation is insufficient with respect to Defendants

Encompass and Allison, because no facts are pled in support of the Petition’s conclusory allegation

that they sanctioned or approved Dr. Hall’s conduct. More importantly, Plaintiff cannot show

lack of justification because, as discussed in Section E below, Plaintiff has failed to plead the

existence of any defamatory statements. All of the alleged defamatory statements are either too

vague or not defamatory as a matter of law.

Count I is dismissed.

C. The Petition fails to state a claim for breach of contract.

Count II alleges breach of contract against Defendants Encompass and Allison. This

claim is governed by Kansas law, and under Kansas law the elements are: “(1) the existence of a

contract between the parties; (2) consideration; (3) the plaintiff’s performance or willingness to

perform in compliance with the contract; (4) defendant’s breach of the contract; and (5) that

plaintiff suffered damage caused by the breach.” Ryan Dev. Co., L.C. v. Indiana Lumbermens

Mut. Ins. Co., 783 F. Supp. 2d 1179, 1182 (D. Kan. 2011).

As an initial matter, this claim fails against Allison because the Petition does not allege that

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Plaintiff and Allison ever had a contract.

This claim fails with respect to all three Defendants because the Petition fails to identify

any contract provision Defendants allegedly breached. Although Plaintiff complains Encompass

did not give him an accounting and it breached a fiduciary relationship with him, nothing in the

contract requires Encompass to provide an accounting or places it in a fiduciary relationship with

Plaintiff. While not providing an accounting or breaching a fiduciary relationship can be the basis

for other causes of action, such allegations are not the basis for a breach of contract claim here.

Count II is dismissed.

D. The Petition fails to state a claim for quantum meruit, unjust enrichment, and

rescission and restitution.

Defendant contends the claims for quantum meruit (Count III), unjust enrichment (Count

IV), and rescission and restitution (Count V) fail because under Kansas law these causes of action

are not available when there is a valid, written contract. Plaintiff responds that these are merely

alternative causes of action to submit to the jury in the event no contract is found.

The Petition pled the existence of a contract, and Defendants vehemently agree there is a

contract. Thus, these equitable claims must fail. See Fusion, Inc. v. Nebraska Aluminum

Castings, Inc., 934 F. Supp. 1270, 1275 (D. Kan. 1996) (“Courts applying Kansas law have

concluded that quantum meruit and restitution are not available theories of recovery when a valid,

written contract addressing the issue exists.”); Rezac Livestock Comm’n Co., Inc. v. Pinnacle Bank,

255 F. Supp. 3d 1150, 1175 (D. Kan. 2017) (holding plaintiffs may not recover under a theory of

unjust enrichment when a contract controls the relationship between the parties); Nordstrom v.

Miller, 605 P.2d 545, 554 (1980) (“Rescission is an equitable remedy designed to afford relief

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from contracts entered into through mistake, fraud or duress.”).2

Counts III, IV, and V are dismissed.

E. The Petition fails to state a claim for slander and defamation.

Count VI alleges a claim for slander and defamation against Dr. Hall.3 The allegations

here can be grouped into three sets. First, allegations that Dr. Hall made unspecified “comments

both orally and in writing regarding Dr. Rizzi’s professional competence” to individuals “in the

local medical community who might otherwise send Plaintiff patient referrals.” Pet. ¶ 74.

Second, that Dr. Hall “specifically accused Plaintiff of the crime of felony stealing and repeated

the allegation to staff and third parties though the allegation of this crime was known by Defendant

Hall to be false.” Pet. ¶ 71. Third, that Dr. Hall made two specific comments about Plaintiff’s

professional skills. Paragraph 72 alleges that in March of 2021, Dr. Hall told an elderly patient

of Plaintiff’s that, “So Dr. Rizzi is who you are seeing and what you really need is a real doctor

now.” And paragraph 73 alleges that in November of 2021, Dr. Hall told a physician that renting

office space and facilities to Plaintiff would be unwise “since Rizzi is nothing but trouble and too

lazy to work hard enough to pay the rent. He will bring you nothing but issues and trouble.”

Defendants contend the unspecified comments are insufficient to state a claim, and that the

two specific comments are statements of opinion under Missouri law for which there is no liability.

Plaintiff does not respond to Defendants’ assertion that the unspecified comments in the

2 Although the Petition makes a conclusory allegation that the Amendment was “made under duress and threat of

Plaintiff’s termination and therefore was not voluntarily made,” Pet. ¶ 59, this conclusory statement is insufficient to

plead duress under Kansas law. See Comeau v. Mt. Carmel Med. Ctr., Inc., 869 F. Supp. 858, 865 (D. Kan. 1994)

(identifying three elements for economic duress).

3 Although slander (an untrue defamatory statement that is spoken orally) and defamation (an untrue statement made

in writing or orally) are separate causes of action, the elements of each are identical under Missouri law. So the

record is clear, the Court treats Count VI as a defamation claim only and so refers to it as defamation. Compare

Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62, 70 (Mo. 2000) (stating defamation elements) with Custom Hardware

Eng’g & Consulting, Inc. v. Dowell, 919 F. Supp. 2d 1018, 1034 (E.D. Mo. 2013) (stating the same elements).

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first group are too vague to survive a motion to dismiss but argues the allegation of felony stealing

is actionable. Plaintiff also argues the specific comments are actionable under Topper v. Midwest

Division, Inc., 306 S.W.3d 117, 129–30 (Mo. Ct. App. 2010).

The Court rules as follows. The allegations in the first category concerning unspecified

“comments both orally and in writing” regarding Dr. Rizzi’s competence made to people in the

local medical community are too vague to survive a motion to dismiss. They fail to provide any

facts about either the comments or the audience; they are only slightly better than bald conclusions.

See Brown v. Circle, No. 2:19-CV-04135-NKL, 2019 WL 6720494, at *4 (W.D. Mo. Dec. 10,

2019) (dismissing defamation claim where the complaint merely alleged defendant communicated

defamatory statements “to third-parties, including, but not limited to, Defendants, Defendant’s

employees, and the public”).

The allegations in the second category are a closer call since they are somewhat more

specific, but an allegation that Dr. Hall repeated some unspecified accusation that Plaintiff stole to

unidentified “staff and third parties” (which could pretty much be anyone) is the sort of “naked

assertions devoid of further factual enhancement” that Iqbal is designed to curtail. Iqbal, 556

U.S. at 678.

While the allegations in the third set are pled with sufficient particularity, they fail to state

a claim because they are not defamatory statements; they are statements of opinion as a matter of

law. The Missouri Supreme Court has recognized that the First Amendment dictates that “there

can be no liability under state defamation law for statements of opinion.” Smith v. Humane Soc’y

of United States, 519 S.W.3d 789, 799 (Mo. 2017) (holding that defendant’s allegations that

plaintiff’s dog kennel was “one of the ‘worst puppy mills in Missouri’” was not defamatory

because it was not a factual statement that could be proven or disproven). The allegedly

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defamatory statements here—that Plaintiff is not a “real doctor” and is “nothing but trouble and

too lazy to work hard enough to pay the rent” and will only bring “issues and trouble”—are

analogous to those in Smith. While these statements have negative connotations and one could

imagine metrics whereby a jury could objectively measure them, they cannot reasonably be

interpreted as asserting actual, objective facts which can be proven false. See id. at 800–802.

Hence, they are not actionable as defamatory.

Count VI is dismissed.

F. The Petition fails to state a claim for conversion.

Count VII alleges conversion against all three Defendants. Under Missouri law, to

establish a claim for conversion a plaintiff must prove: “(1) plaintiff was the owner of the property

or entitled to its possession; (2) defendant took possession of the property with the intent to

exercise some control over it; and (3) defendant thereby deprived plaintiff of the right to

possession.” Weicht v. Suburban Newspapers of Greater St. Louis, Inc., 32 S.W.3d 592, 596 (Mo.

Ct. App. 2000). Actions for conversion are normally limited to personal property, but “funds

placed in the custody of another for a specific purpose” and then diverted may give rise to a claim

for conversion. Dillard v. Payne, 615 S.W.2d 53, 55 (Mo. 1981). That is, the plaintiff must

identify specific chattel placed into custody for a specific purpose. See Express Scripts, Inc. v.

Walgreen Co., No. 4:08-CV-1915-TCM, 2009 WL 4574198, at *5 (E.D. Mo. Dec. 3, 2009)

(quoting Dillard and collecting cases).

In this case, the Petition alleges Defendants converted general “outside receivables, money,

billings, and income” relating to services Plaintiff performed at Centerpoint. Pet. ¶¶ 79-81. It

fails to state a claim here for two reasons. First, it fails to sufficiently describe or identify as

specific chattel the money Defendants allegedly converted. In fact, from the Petition and

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Agreement it appears Plaintiff entrusted no property to Encompass, but instead contracted that

Encompass would have all ownership rights in receipts he generated at Centerpoint. Thus,

Plaintiff’s claim is only for conversion of money, which does not exist in Missouri.

Second, the Agreement eviscerates any claim Plaintiff has that he was the owner of this

property or entitled to its possession. Under the Agreement (both before and after the

Amendment), Encompass had the contractual right to sole ownership over all receipts Plaintiff

generated at Centerpoint. Agreement ¶¶ 1.3, 1.4(b). Encompass cannot convert property it

rightfully owns. Any property rights Plaintiff had in the receipts he generated at Centerpoint were

transferred to Encompass pursuant to the Agreement.

Consequently, Count VII is dismissed.

Conclusion

For the reasons discussed above, Defendants’ motion to dismiss is GRANTED. All of

Plaintiff’s claims are dismissed without prejudice.

IT IS SO ORDERED.

Date: June 2, 2023 /s/ Greg Kays

GREG KAYS, JUDGE

UNITED STATES DISTRICT COURT

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