Mason v. Health Management Associates, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

CIVIL ACTION NO. 3:10-CV-00472-KDB-DSC

THOMAS L. MASON M.D. et al.,

Plaintiffs,

v. ORDER

HEALTH MANAGEMENT

ASSOCIATES, LLC et al.,

Defendants.

THIS MATTER is before the Court on the HMA Defendants’1 Motion to Dismiss (Doc.

No. 81), the EmCare Defendants’2 Motion to Dismiss (Doc. No. 86), Defendant Community

Health System, Inc.’s Motion to Dismiss (Doc. No. 95), and the Honorable Magistrate Judge David

S. Cayer’s Memorandum and Recommendation (“M&R”) (Doc. No. 105), recommending that

Defendants’ motions be granted in part and denied in part.

The Court has carefully reviewed and considered de novo the M&R, Plaintiffs’3 Third

Amended Complaint (Doc. No. 67), the HMA Defendants’ motion to dismiss (Doc. No. 95), the

EmCare Defendants’ motion to dismiss (Doc. No. 86), the parties’ briefs, and all other relevant

portions of the record. For the reasons stated herein, the Court ADOPTS the Magistrate Judge’s

1 The “HMA Defendants” are collectively, Health Management Associates, LLC f/k/a

Health Management Associates, Inc. (“HMA”), Statesville HMA, LLC d/b/a Davis Regional

Medical Center (“Davis Hospital”), and Mooresville Hospital Management Associates, LLC d/b/a

Lake Norman Regional Medical Center’s (“Lake Norman Hospital,” together with Davis Hospital,

the “Hospitals”).

2 The “EmCare Defendants” are collectively, EmCare Holdings, Inc., Emergency Medical

Services, L.P., and Envision Healthcare Corporation.

3 Plaintiffs are Mid-Atlantic Emergency Medication Associates, PPLC (“MEMA”),

Thomas L. Mason, M.D., and Steven G. Folstad, M.D. (collectively, Drs. Folstad and Mason are

the “Doctors”).

recommendation contained in the M&R as discussed below and GRANTS IN PART and

DENIES IN PART Defendants’ motions to dismiss.

I. BACKGROUND

This case arises out of the operations of emergency medical departments at two hospitals

in the Charlotte area. Taking the allegations set forth in the Complaint as true, Plaintiff Mid-

Atlantic Emergency Medical Associates, PPLC (“MEMA”) is a professional medical corporation

that provides emergency room (“ER”) medical services under professional services agreements

with hospitals in the Charlotte area. (Complaint, Doc. No. 67, at ¶¶1-2). MEMA physicians

provided ER services to two hospitals then-owned and operated by Defendant Health Management

Associates, LLC (“HMA”). Id. at ¶ 2. MEMA provided services to Davis Regional Medical Center

beginning in 2000 and Lake Norman Regional Medical center beginning in 1996. Id. Plaintiffs

claim HMA unlawfully terminated these contracts on May 3, 2010. Id.

Plaintiffs Thomas Mason and Steven Folstad are principals of MEMA and board-certified

emergency medicine physicians. Id. at ¶ 3. Mason served as Lake Norman’s Chief of Staff, a

member of the Lake Norman’s Medical Executive Committee for thirteen years, and as the

Emergency Medical Department Medical Director at Lake Norman Hospital from 2007 until

MEMA’s contract was terminated. Id. at ¶ 3. Folstad worked as the ER Medical Director at Davis

Hospital from 2000 to 2008 before becoming MEMA’s CEO. Id. at ¶ 4.

Plaintiffs claim that the HMA Defendants, with the help of the EmCare Defendants,

submitted false claims to Medicare, Medicaid, other federally-funded healthcare programs, private

healthcare insurers, and patients throughout their time at the two hospitals. Id. at ¶¶ 16-17.

Plaintiffs allege that HMA terminated their contracts in retaliation for their refusal to participate

in this fraudulent scheme. Id. at ¶ 18.

Plaintiffs originally brought this action as qui tam relators on their own behalf and on behalf

of the United States and the states of North Carolina, Florida, Georgia, Oklahoma, Tennessee, and

Texas against HMA, its successor in interest Community Health System, Inc., and EmCare for

violations of the federal False Claims Act, 31 U.S.C. § 3730 et. seq. Id. at ¶ 19. In December 2017,

EmCare paid $33 million to settle government claims. Id. at ¶ 20. In September 2018, HMA and

Community Health System paid $262 million to settle government claims. Id.

Plaintiffs filed their Third Severed Amended Complaint (“TAC”) on April 26, 2019

containing their remaining claims against Defendants. (Doc. No. 67). In it, Plaintiffs allege

retaliation under the federal False Claims Act, retaliation under the North Carolina False Claims

Act, defamation, and slander per se against the HMA Defendants only and claims for tortious

interference with a contractual relationship, unfair and deceptive trade practices, and civil

conspiracy against all Defendants. (Doc. No. 67, at ¶¶ 203-248).

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).

However, “Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion, of entitlement to

relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007).

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of

the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City

of Goldsboro, 178 F.3d 231, 243–44 (4th Cir. 1999). In considering a motion to dismiss, the court

assumes the truth of all facts alleged in the complaint and the existence of any fact that can be

proved, consistent with the complaint's allegations. Erickson v. Pardus, 551 U.S. 89, 94 (2007).

“The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to

offer evidence to support the claims.” Revene v. Charles County Comm'rs, 882 F.2d 870, 872 (4th

Cir. 1989) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

However, the “‘[f]actual allegations must be enough to raise a right to relief above the

speculative level’ and have ‘enough facts to state a claim to relief that is plausible on its face.’”

Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616 n.26 (4th Cir. 2009) (quoting Twombly,

550 U.S. at 555); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“While legal conclusions can

provide the framework of a complaint, they must be supported by factual allegations.”). “[A]

plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels

and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly,

550 U.S. at 555 (citations omitted). Moreover, a court “need not accept the legal conclusions

drawn from the facts” nor “accept as true unwarranted inferences, unreasonable conclusions, or

arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. Pshp., 213 F.3d 175, 180 (4th Cir.

2000).

The Federal Magistrates Act of 1979, as amended, provides that “a district court shall

make a de novo determination of those portions of the report or specific proposed findings

or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby v. Davis, 718

F.2d 198, 200 (4th Cir. 1983). However, de novo review is not required by the statute “when a

party makes general or conclusory objections that do not direct the court to a specific error in the

magistrate judge's proposed findings and recommendations.” Orpiano v. Johnson, 687 F.2d 44, 47

(4th Cir. 1982). Moreover, the statute does not on its face require any review at all of issues that

are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby v. Davis, 718

F.2d at 200.

III. DISCUSION

The HMA Defendants and the EmCare Defendants object to the Magistrate Judge’s

recommendation to deny their motions to dismiss Plaintiffs’ claims for retaliation under the federal

and North Carolina False Claims Act, unfair and deceptive trade practices, tortious interference

with contractual relationship, and defamation and slander per se. (Doc. Nos. 110, 111). Defendants

also object to the Magistrate Judge’s recommendation to dismiss Plaintiffs civil conspiracy claim

without prejudice to Plaintiffs’ right to argue the remedy of joint and several liability under a

theory of civil conspiracy. (Doc. Nos. 110, 111).

A. Community Health System, Inc.’s Motion to Dismiss

Plaintiffs voluntarily dismissed Defendant Community Health System on July 12, 2019.

(Doc. No. 99). Accordingly, the Magistrate Judge recommends Community Health System’s

Motion to Dismiss (Doc. No. 95) be denied as moot and no parties have objected to his

recommendation. Having carefully reviewed the Magistrate Judge’s M&R, the relevant portions

of the record, and applicable legal authority, this Court is satisfied that there is no clear error as to

the Magistrate Judge’s recommendation to deny as moot Community Health System’s motion to

dismiss, to which no objection was made. Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310,

315 (4th Cir. 2005). Accordingly, this Court finds that it should adopt the findings and

recommendations set forth in the M&R as its own solely for the purpose of deciding this motion

and that Community Health System’s motion to dismiss (Doc. No. 95) be denied as moot.

B. The HMA Defendants’ and the EmCare Defendants’ Motions to Dismiss

1. False Claims Act Retaliation Claims

Plaintiffs claim the HMA Defendants retaliated against them in violation the federal and

North Carolina False Claims Act (FCA). The anti-retaliation section of the federal FCA states:

(h) Relief from retaliatory actions.—(1) In general.—Any employee, contractor, or

agent shall be entitled to all relief necessary to make that employee, contractor, or

agent whole, if that employee, contractor, or agent is discharged, demoted,

suspended, threatened, harassed, or in any other manner discriminated against in

the terms and conditions of employment because of lawful acts done by the

employee, contractor, agent or associated others in furtherance of an action under

this section or other efforts to stop 1 or more violations of this subchapter.

31 U.S.C. § 3730(h)(1) (emphasis added). The purpose of the FCA is to expose fraud that the

government itself cannot easily uncover by encouraging private parties to report fraudulent

conduct. See U.S. ex rel. Rebushka v. Crane Co., 40 F.3d 1509, 1511 (8th Cir. 1994); U.S. ex rel

Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2nd Cir. 1990). Consistent with this purpose,

Congress amended the FCA retaliation statute in 2009 “by omitting the word ‘employee’ as the

only potentially culpable party, and adding ‘contractor’ or ‘agent’ to ‘employee’ as identifiers of

a possible aggrieved party.” U.S. ex rel Bias v. Tangipahoa Parish Sch. Bd., 816 F.3d 315, 323-24

(5th Cir. 2016). “The 2009 amendments sought to correct what Congress viewed as the unduly

narrow interpretation that the courts had given to the term ‘employee.’” U.S. ex rel. Abou-Hussein

v. Sci. Applications Int’l Corp., 2012 WL 6892716, at *3 (D.S.C. May 3, 2012); see also Bias, 816

F.3d at 324 (“Because the FCA is ‘remedial,’ its provisions are to be construed ‘broadly to

effectuate its purpose.’”).

Defendants argue that the 2009 amendment expanded the possible aggrieved parties from

just “employee(s)” to also include “contractor(s)” and “agent(s),” but did not expand retaliation

protections available to individuals to also include entities. The Court will not attempt to discern

the intent of Congress beyond the words it used: “contractor” and “agent.” MEMA is alleged to

have been a “contractor” of Defendants and are therefore permitted to assert a claim for

impermissible retaliation.

While the Court would apply the ordinary meaning of the words Congress placed in the

statute in any event, there is no legislative history to suggest that Congress considered, but

declined, including entities among those protected from retaliation. Nor is there legislative history,

or caselaw, suggesting that an entity made up of “employees” is excluded from retaliation

protection, either before or after the amendment.

Even if defendants are correct, and entities that are “contractors” or “agents” are not

protected from retaliation, the question becomes whether MEMA, a group of physicians, should

be considered a group of “individuals” rather than an “entity.” The physicians, through MEMA,

allegedly complained of HMA’s fraudulent conduct, and HMA, through MEMA, allegedly

retaliated against the physicians.4

Further, MEMA, along with the individual plaintiff physicians, were “Relators” in the qui

tam action, and named as such in the Settlement Agreement. (Doc. No. 96-1, at 2, 12, 16, 38).

MEMA, the alleged contractor, was in practical effect simply a corporate structure through which

the individuals both complained and were retaliated against. Given the remedial nature of the anti-

retaliation statute, the plain language of the statue allows MEMA to bring claims of retaliation in

violation of both the federal and state False Claims Acts.

Plaintiffs have plausibly alleged that the Doctors were agents of the HMA Defendants. The

Complaint alleges that both Doctors served as ER directors at the hospitals and that Mason served

on the Medical Executive Committee and as Chief of Staff at Lake Norman Hospital. (Complaint,

4 MEMA is a “professional medical corporation,” (Doc. No. 67, at ¶ 1), “which at the time

was the largest group of board-certified emergency physicians in the Charlotte area.” Id. at ¶ 179.

“MEMA was a contractor and agent of the HMA defendants.” Id. at ¶ 205. The complaint

repeatedly alleges that individual plaintiff physicians and “other [physician] members of MEMA”

complained to HMA about its fraudulent practices. See id. at ¶ 18.

Doc. No. 67, ¶¶ 3-4). See Diggs v. Novant Health, Inc., 628 S.E.2d 851, 862-63 (N.C. Ct. App.

2006) (holding a hospital had an agency relationship with anesthesiologists where the hospital held

itself out as providing anesthesia services and appointed anesthesiologist to serve as director of

department); Univ. of N. Carolina v. Shoemate, 437 S.E.2d 892, 898 (N.C. Ct. App. 1994) (stating

that an agency relationship arises when “a person, by words or conduct, represents or permits it to

be represented that another is his agent”); Willoughby v. Wilkins, 310 S.E.2d 90, 96 (N.C. Ct. App.

1983) (noting ER doctor’s performance “in such a manner as to further the best interest of

[defendant] hospital” suggested doctor was an agent of the hospital). It is ultimately up to a jury

to decide whether there was such an agency relationship, but Plaintiffs have met the low burden

of pleading a plausible claim to survive the motion to dismiss stage. Hylton v. Koontz, 532 S.E.2d

252, 257 (N.C. Ct. App. 2000) (“Unless there is but one inference that can be drawn from the facts,

whether an agency relationship exists is a question of fact for the jury.”).

Plaintiffs filed a request for clarification in the form of an objection to the M&R that seeks

to clarify whether the Magistrate Judge’s recommendation for the federal FCA retaliation claim

extends to the claims arising under the North Carolina False Claims Act. (Doc. No. 109). North

Carolina General Statute § 1-616(c) states that the North Carolina False Claims Act “shall be

interpreted and construed so as to be consistent with the federal False Claims Act, 31 U.S.C. §

3729, et seq., and any subsequent amendments to that act.” Therefore, because the HMA

Defendants’ motion to dismiss retaliation claims under the federal FCA is denied, so is their motion

to dismiss retaliation claims under the North Carolina False Claims Act.

2. North Carolina UDTPA Claim

Plaintiffs claim unfair and deceptive trade practices against both the HMA Defendants and

the EmCare Defendants. Under the UDTPA, “[u]nfair methods of competition in or affecting

commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared

unlawful.” N.C.G.S. § 75-1.1. The “learned profession” exception to the UDTPA requires a two-

part analysis: (1) “the person or entity performing the alleged act must be a member of a learned

profession”; and (2) “the conduct in question must be a rendering of professional services.” Sykes

v. Health Network Solutions, Inc., 828 S.E.2d 467, 472 (N.C. 2019). “There is no dispute that

doctors and hospitals are members of a learned profession.” Hamlet H.M.A., LLC v. Hernandez,

821 S.E.2d 600, 606 (N.C. Ct. App. 2018). Conduct that is integral to the role of ensuring the

provision of adequate medical care is considered a rendering of professional services. See id. at

607; Wheeles v. Maria Parham Med. Ctr., Inc., 768 S.E.2d 119, 124 (N.C. Ct. App. 2014).

In 2018, the North Carolina Court of Appeals held that a business dispute between a

hospital and physician did not fall under the learned profession exception of the UDTPA. Hamlet

H.M.A., LLC, 821 S.E.2d at 608 (“This case involves a business deal, not rendition of professional

medical services.”). The court explained that the learned profession exception does not apply

merely because the participants are medical professionals. Id. “For example, if a physician entered

into a lease agreement for space in a medical office building owned by a group of physicians or

hospital and then seeks to bring a UDTP claim based upon a dispute over the lease, it should be

treated no differently than a similar lease arrangement for parties in any other business. The fact

that medical services will be provided in the building does not mean that the lease arrangement

arises from rendition of professional services and has no effect on the quality of the medical care

provided.” Id.

The Magistrate Judge, relying on Hamlet H.M.A., recommends that the Defendants’

motions to dismiss the UDTPA claims be denied. (Doc. No. 105, at 7). The HMA Defendants and

the EmCare Defendants object, arguing that the learned profession exception should apply in this

case. Plaintiffs argue that the Defendants are not members of a learned profession nor were they

rendering professional services when they engaged in and conspired to commit healthcare fraud,

retaliated against Plaintiffs, and defamed Plaintiffs. (Doc. No. 67, ¶ 237).

Because this claim arises out of the business relationship between Plaintiffs and

Defendants, the learned profession exception does not apply. Plaintiffs’ unfair and deceptive trade

practices claims arise out of the professional service agreements with the HMA Defendants, not

the rendering of medical care. Even the EmCare Defendants assert that this suit arises from a

“garden-variety business dispute.” (Doc. No. 87, at 7). Therefore, Defendants’ motions to dismiss

Plaintiffs’ UDTPA claims are denied.

3. Tortious Interference with Contractual Relationship Claim

Plaintiffs claim tortious interference with contractual relationship against both the HMA

Defendants and the EmCare Defendants. Under North Carolina law, the elements for tortious

interference with contract are: “(1) a valid contract between the plaintiff and a third person which

confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the

contract; (3) the defendant intentionally induces the third person not to perform the contract; (4)

and in doing so acts without justification; (5) resulting in actual damage to plaintiff.” Beverage

Sys., LLC v. Assoc. Beverage Repair, LLC, 784 S.E.2d 457, 699 (N.C. 2016) (internal quotations

and citations omitted).

“Officers, directors, shareholder, and other corporate fiduciaries have a qualified privilege

to interfere with contractual relations between the corporation and a third party.” Broussard v.

Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 351-352 (4th Cir. 1998) (internal quotations

omitted). “However, the conduct is not privileged or justified if the officer’s motives are improper,

as when his acts are performed in his own best interest and adverse to that of his firm.” Albright v.

Charlotte-Mecklenburg Bd. of Educ., No. 3:17-cv-4610, 2017 WL 6028362 (W.D.N.C. Dec. 5,

2017) (internal quotations omitted). Retaliation is an improper motive. See MCI Constrs. V. Hazen

& Sawyer, P.C., 405 F. Supp. 2d 621, 630 (M.D.N.C. 2005); B.V.I. Inuds. v. Microsoft Corp., 1987

U.S. App. LEXIS 18745, at *7-9 (4th Cir. Aug. 11, 1987).

The HMA Defendants contend that Plaintiffs have failed to show that HMA had no

legitimate business interest in terminating the contract. HMA also submits that, as the Hospitals’

parent company, it was privileged to interfere with the Hospitals’ contractual relationships. The

EmCare Defendants argue that they were justified in their actions because they had a legitimate

business interest as a competitor of the Plaintiffs and that the Plaintiffs failed to allege EmCare

induced HMA to terminate the contract.

Plaintiffs have alleged sufficient facts that the HMA Defendants were motivated to retaliate

against them for refusing to participate in their fraudulent healthcare scheme. This improper

motive takes the HMA Defendants outside of the protection provided by the privilege.

Additionally, the question of whether the HMA Defendants and the EmCare Defendants had a

legitimate business interest and acted in good faith is one for the jury to decide. See Albright v.

Charlotte-Mecklenburg Bd. of Educ., No. 3:17-cv-4610, 2017 WL 6028362 (W.D.N.C. Dec. 5,

2017) (“Because whether the act was justified or in good faith depends upon the circumstances

surrounding the interference, the actor’s motive or conduct, the interests sought to be advanced,

the social interest in protecting the freedom of action of the actor, and the contractual interests of

the other party, the question is often one of fact that cannot be resolved on a motion to dismiss.”).

Plaintiffs have alleged that the EmCare Defendants intentionally induced HMA to

terminate the contract. In their TAC, Plaintiffs state that “[i]in order for the EmCare Defendants

to maximize its financial benefits under the PPPA and the HMA, they sought to induce hospital

administrators to terminate MEMA’s Lake Norman Hospital Agreement and Davis Hospital

Agreement so that EmCare could bid on them.” (Doc. No. 67, ¶ 178; see also id. at ¶ 220). Taking

this statement and similar statements in light of the factual allegations pled, Plaintiffs have met the

low standard of Federal Rule of Civil Procedure 8(a)(2) and the question of whether the EmCare

Defendants intentionally induced HMA to terminate the contract is one for the merits. For these

reasons, the Court agrees with the Magistrate Judge’s recommendation and will deny the HMA

Defendants’ and the EmCare Defendants’ motions to dismiss Plaintiff’s tortious interference with

contract claim.

4. Defamation and Slander Per Se Claim

Plaintiffs allege defamation and slander per se against the HMA Defendants. “In order to

recover for defamation [in North Carolina], a plaintiff must allege and prove that the defendant

made false, defamatory statements of or concerning the plaintiff, which were published to a third

person, causing injury to the plaintiff’s reputation.” Boyce & Isley, PLLC v. Cooper, 710 S.E.2d

309, 317 (N.C. Ct. App. 2011) (quoting Tyson v. L’eggs Products, Inc., 351 S.E.2d 834, 843 (N.C.

Ct. App. 1987)). “Rhetorical hyperbole and expressions of opinion not asserting provable facts are

protected speech.” Daniels v. Metro Magazine Holding Co., LLC, 634 S.E.2d 586, 590 (N.C. Ct.

App. 2006).

There are four circumstances in which a plaintiff may allege that a false publication

constitutes defamation per se: “(1) [when the publication] charges that a person has committed an

infamous crime; (2) it charges a person with having an infectious disease; (3) it tends to subject

one to ridicule, contempt, or disgrace, or (4) it tends to impeach one in his trade or profession.”

Ellis v. Northern Star Co., 388 S.E.2d 127, 130 (N.C. 1990) (quoting Flake v. News Co., 195

S.E.2d 55, 60–61 (N.C. 1938)); see also Losing v. Food Lion, LLC, 648 S.E.2d 261, 263 (N.C. Ct.

App. 2007).

Plaintiffs allege that HMA’s Lake Norman Hospital CEO told the Board of Directors that

MEMA was replaced because its ER physicians did not want to practice quality medicine and

refused to use HMA’s quality program. (Doc. No. 67, at ¶¶ 198, 231). They also allege that the

HMA Defendants told numerous other physicians that MEMA was terminated because of its

failure to commit to HMA’s quality program and because of MEMA’s patient satisfaction scores.

Id. at ¶ 231. The HMA Defendants contend that the Plaintiffs failed to allege third-party

publications, that the alleged statements are privileged, non-actionable opinions, are not “of and

concerning” the Doctors, and that HMA and the Hospitals cannot be liable for the intentional torts

of their employees.

These alleged statements, if true, do impeach the Plaintiffs in their trade, business, or

profession by implying that they were performing unsatisfactory work and were not interested in

giving quality medical treatment. See Eli Research, 312 F. Supp. 2d at 762-63 (“Allegations that

Eli is mismanaged, treats its employees and contractors unethically, and performs shoddy work

can impugn Eli’s corporate reputation by injuring its business goodwill.”). These statements are

“of and concerning” MEMA and all of its physicians and are statements of fact, not opinion.

Plaintiffs have sufficiently alleged that these statements were made by agents of the HMA

Defendants on behalf of HMA and the Hospitals.

There is divided authority as to whether a statement by one company’s officer, agent, or

employee to another officer, agent, or employee of the same company has been published if kept

within the confines of the company office. Some jurisdictions hold that such communications are

not communications to a third party, and therefore are not published. See, e.g., 1 Robert D. Sack,

Sack on Defamation: Libel, Slander, and Related Problems § 2:5.4[A] (5th ed. 2019). Other courts

hold that such communications may constitute publication but are likely covered by a qualified

privilege. Id. at §2:5.4[B]. “The distinction is that a statement that is not published is not

actionable; a statement that is qualifiedly privileged is actionable if the appropriate level of

‘malice’ on the part of the speaker is established.” Id. North Carolina courts tend to apply the latter

of the two approaches.5 Despite the HMA Defendants’ objections, the Court finds that the

Plaintiffs have sufficiently pled the publication element of their defamation and slander per se

claim under North Carolina substantive law. The complaint states that these statements were made

“in bad faith, with malice, and with a direct intent to harm Plaintiffs” and that “[t]he HMA

Defendants were aware at the time they made these statements that they were false.” (Doc. No. 67,

at ¶ 233). Therefore, Plaintiffs’ complaint sufficiently states a claim for slander per se against the

HMA Defendants.

5 The HMA Defendants assert that North Carolina courts apply the “no third-party

communication” approach. However, the caselaw indicates otherwise. In Satterfield v. McLellan

Stores Co., 2 S.E.2d 709 (N.C. 1939), the North Carolina Supreme Court refused to hold that there

was a third-party communication when the plaintiff requested a separation notice and the manager

dictated what to put into the separation notice to a stenographer. Id. at 711. The notice was sent to

the plaintiff. Id. The court explained that while publication can happen between officers, agents,

and employees of a single company, the facts of this case indicated otherwise because “[the

manager and stenographer] had a duty to perform in connection with the production. Under such

circumstances, the stenographer is not a third person within the contemplation of law with respect

to publication of libelous matter.” Id. It then refused to consider the question of privilege because

it had already found there was no publication. Id.

Thus, North Carolina courts do recognize third-party publication between officers, agents,

and employees of a single company in certain circumstances. Such communications are generally

protected by a qualified privilege, unless a plaintiff can overcome the privilege with a showing of

malice. See, e.g., Brodkin v. Novant Health, Inc., 824 S.E.2d 868, 874-75 (N.C. Ct. App. 2019)

(holding statements made by one doctor to a hospital administrator expressing concerns about

another doctor’s treatment of patients was privileged); Arnold v. Sharpe, 251 S.E.2d 452, 456

(N.C. 1979) (noting that a qualified privilege applies when a bank employee forwarded a copy of

a libelous document to the bank’s president); Hartsfield v. Harvey C. Hines Co., 157 S.E. 16, 19

(N.C. 1931) (applying qualified privilege to statements made between agents of one business).

5. Civil Conspiracy Claim

Finally, Plaintiffs claim civil conspiracy against the HMA Defendants and the EmCare

Defendants. North Carolina courts do not recognize an independent cause of action for civil

conspiracy. Toomer v. Garrett, 574 S.E.2d 76, 92 (N.C. Ct. App. 2002). “A cause of action for a

civil conspiracy under North Carolina law is really an action for damages caused by acts in

furtherance of the conspiracy and not for the conspiracy itself.” Jackson v. Blue Dolphin Comm.,

LLC, 226 F. Supp. 2d 785, 791 (W.D.N.C. 2002); see also Bell v. American International Ind.,

No. 1:17-cv-111, 2018 WL 2745238, at *6 n. 5 (M.D.N.C. June 7, 2018); SouthWood v. CCDN,

LLC, Bo. 7:09-cv-81, 2016 WL 1389596, at *1 n.3 (E.D.N.C. Apr. 7, 2016). The elements of civil

conspiracy are: “(1) an agreement between two or more individuals; (2) to do an unlawful act or

to do a lawful act in an unlawful way; (3) resulting in injury to plaintiff inflicted by one or more

of the conspirators; and (4) pursuant to a common scheme.” Piraino Bros., LLC v. Atlantic Fin.

Grp., Inc., 712 S.E.2d 328, 333 (N.C. Ct. App. 2011).

The Magistrate Judge recommends that the motions to dismiss the civil conspiracy claim

“be granted to the extent it seeks dismissal of the cause of action for civil conspiracy,” but that the

“dismissal be without prejudice to Plaintiffs’ right to argue the remedy of joint and several liability

under a theory of civil conspiracy should they prevail on one or more of the remaining claims for

relief.” (Doc. No. 105, at 10). The HMA Defendants and the EmCare Defendants object, arguing

that Plaintiffs’ civil conspiracy claim should be dismissed with prejudice. Specifically, the HMA

Defendants argue that Plaintiffs released their civil conspiracy claim in a prior Settlement

Agreement and that HMA could not have conspired with the Hospitals.

The Court agrees with the Magistrate Judge’s recommendation. The allegations in the TAC

can be fairly read as alleging that the HMA Defendants and EmCare Defendants agreed to engage

in a fraudulent healthcare scheme and to terminate MEMA and the Doctors when that scheme was

threatened. (Doc. No. 67, 4] 40, 41, 74, 245-248). Plaintiffs contend that this fraudulent scheme

resulted in tortious interference with contract, violation of North Carolina’s UDTPA, and

retaliation against Plaintiffs for their refusal to participate in the healthcare fraud. (Doc. No. 67, §

246). The Settlement Agreement, signed by the HMA Defendants and Plaintiffs, referenced claims

that were reserved and released all others. (Doc. No. 96-1, at 17). Because the Court is dismissing

the independent claim of civil conspiracy, and only allowing it as a theory of liability as to

damages, it is not covered by the Settlement Agreement. Defendants were aware of the allegations

and potential damages against them at the time the Settlement Agreement was signed, and civil

conspiracy is not a new independent cause of action.

IV. CONCLUSION

IT IS, THEREFORE, ORDERED that:

1. The Magistrate Judge’s M&R, (Doc. No. 105), is ADOPTED; and

2. HMA Defendants’ Motion, (Doc. No. 81), is GRANTED IN PART and DENIED IN

PART; and

3. EmCare Defendants’ Motion, (Doc. No. 86), is GRANTED IN PART and DENIED IN

PART; and

4. Defendant Community Health System, Inc.’s Motion, (Doc. No. 95), is DENIED AS

MOOT.

Signed: October 24, 2019

Kenneth D. Bell Cy,

United States District Judge i f

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