Case 1:17-cv-10242-IT Document 17 Filed 04/14/17 Page 1 of 24

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

GOVERNMENT OF BERMUDA,

Plaintiff,

v.

LAHEY CLINIC, INC. (a.k.a. LAHEY

HOSPITAL & MEDICAL CENTER, C.A. No. 17-10242-IT
BURLINGTON), and LAHEY CLINIC
HOSPITAL, INC., ORAL ARGUMENT REQUESTED

Defendants.

DEFENDANTS MEMORANDUM IN SUPPORT OF MOTION TO DISMISS

Terence J. Lynam (pro hac vice)

Robert S. Salcido (pro hac vice)
AKIN GUMP STRAUSS HAUER & FELD LLP
1333 New Hampshire Avenue, NW
Washington, D.C. 20036
tlynam@akingump.com
rsalcido@akingump.com

Wayne A. Budd (BBO# 063320 )

E. Abim Thomas (BBO# 657342)
GOODWIN PROCTER LLP
100 Northern Avenue
Boston, Massachusetts 02210
WBudd@goodwinlaw.com
AThomas@goodwinlaw.com

Counsel for Lahey Clinic, Inc. and Lahey

Clinic Hospital, Inc.
 Case 1:17-cv-10242-IT Document 17 Filed 04/14/17 Page 2 of 24

TABLE OF CONTENTS

INTRODUCTION ...................................................................................................................... 1

SUMMARY OF COMPLAINT ................................................................................................... 2

ARGUMENT .............................................................................................................................. 4
I. LEGAL STANDARD ON MOTION TO DISMISS ............................................. 4
II. THE COMPLAINT SHOULD BE DISMISSED FOR FAILURE TO
ALLEGE FRAUD WITH PARTICULARITY...................................................... 5
A. The Complaint Fails to Allege that Dr. Brown Engaged in Official
Acts for the Benefit of Lahey .................................................................... 6
III. THE RICO COUNTS SHOULD BE DISMISSED............................................... 9
A. The Alleged Violations Did Not Proximately Cause the Alleged
Injury ....................................................................................................... 9
1. The alleged injury regarding the MRI and CT scans is
indirect........................................................................................ 10
2. The alleged injury regarding the consulting agreements .............. 13
B. The Complaint Fails to Allege a Pattern of Racketeering ........................ 13
C. The Complaint Fails to Allege a RICO Enterprise ................................... 15
D. The RICO Conspiracy Count also Fails .................................................. 17
E. The RICO Claims are Barred by the Statute of Limitations ..................... 17
IV. THE STATE LAW CLAIMS SHOULD BE DISMISSED .................................. 19
A. Unfair Business Practices. ...................................................................... 19
B. Unjust Enrichment. ................................................................................. 19
C. Civil Conspiracy. .................................................................................... 20
D. Fraud. ..................................................................................................... 20

CONCLUSION ......................................................................................................................... 20
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Defendants Lahey Clinic, Inc. and Lahey Clinic Hospital, Inc. (Lahey) submit this

Memorandum in Support of their Motion to Dismiss the Complaint pursuant to Federal Rules of

Civil Procedure 12(b)(6) and 9(b).

INTRODUCTION

Lahey is a non-profit academic medical center incorporated in Massachusetts that has

served the citizens of this state by supplying high quality care since its founding by Frank Lahey,

MD in 1923. Like many large hospitals, Lahey also treats international patients and has

developed an international reputation by sending Lahey doctors to other countries to provide

medical services there. One of these countries is Bermuda, where Lahey doctors have traveled

for at least 20 years, supplying much needed medical care. See Compl. 27. This lawsuit

concerns Laheys relationship with Dr. Ewart Brown, a medical doctor in Bermuda, who owns

and operates two clinics there. Id. 8. In addition to, and while maintaining his medical practice

and clinics, Dr. Brown has for many years been active in Bermuda politics. He was elected to

the Bermuda House of Assembly in 1993 and held different elected positions from then through

2010, the last four years of which he served as Premier of Bermuda. Id. 17-21.

Dr. Browns political party, the Progressive Labor Party (id. 17), is currently not the

majority political party in Bermuda. The Attorney General of Bermuda, a member of the current

majority party, filed this lawsuit purportedly on behalf of the Government of Bermuda. The

Complaint alleges RICO violations as well as common law fraud. The Attorney Generals action

is baseless and appears more designed to smear Dr. Browns name, and Lahey as the vehicle for

doing so, rather than allege sufficient facts on which relief can be granted. As discussed below,

the Complaint should be dismissed under Rules 12(b)(6) and 9(b).

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SUMMARY OF COMPLAINT

After obtaining his Medical degree and a Master of Public Health degree in the United

States, Dr. Brown returned to Bermuda in 1990 and founded a clinic called Bermuda Health Care

Services (BHCS). Compl. 8, 15-16. He later opened another clinic called Brown-Darrell

Clinic (BDC and, together with BHCS, the Brown Clinics). Id. 8. Bermuda is a small

island with a population of approximately 65,000.1 Serving in the House of Assembly or

Parliament is not a full-time job and many members maintain their non-government employment

while serving in the Parliament.2 As the Complaint acknowledges, Dr. Brown maintained his

medical practice throughout his tenure as an elected official and was actively engaged in the

daily operations of the Brown Clinics, including their finances and direct patient care. Id. 25.

The Complaint makes no allegation that it was illegal for him to do so, nor could it.

Stripped of its characterizations and conclusory terms, the actual facts alleged in the

Complaint describe a routine business arrangement whereby an off-island medical provider

(Lahey) utilized the services and advice of a local medical practitioner who has a large medical

practice there (Dr. Brown) to facilitate its presence on the island, assist in its provision of care

and advise it on relevant medical and business issues and opportunities presented there. In 2001

Lahey entered into the first of several consulting agreements with Dr. Brown and BHCS, which

define the relationship between them. Id. 28.3 The 2001 agreement between Lahey and BHCS

1
Govt of Bermuda, Dept of Statistics, BERMUDA DIGEST OF STATISTICS (2014), available at
https://www.gov.bm/sites/default/files/2014-Digest-of-Statistics-Final-revised-9Feb15.pdf.
2
In Bermuda, MPs are part-time and many hold full time jobs in the private sector. House of Assembly
for the Legislature, THE HOUSE OF ASSEMBLY AT SESSIONS HOUSE at 4, available at
http://www.parliament.bm/uploadedFiles/Content/Visitors_Info/Legislature_Publications/Session%20House%20Br
ochure%202014.pdf.
3
Because these agreements are described in the Complaint, the Court may consider their full terms in
deciding this motion to dismiss. Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30 (1st Cir. 2001) (in
ruling on motion to dismiss for failure to state claim, court properly considered settlement agreement referred to in
complaint; document was central to plaintiff's claim; and authenticity of agreement was not disputed).

2
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described BHCS as the largest free-standing clinic on Bermuda, which is qualified to assist

Lahey in its provision of services there. The agreement specifies the services that BHCS will

provide for Lahey, including case management services such as verification of insurance

coverage; completion of patient medical histories; assistance in negotiations with Bermuda-based

payors over service and resolution of service or payment disputes; scheduling of appointments

and travel and accommodation arrangements for patient visits to Lahey; provision of space and

the coordination of public medical education and training programs. Lahey-BHCS Agreement,

January 1, 2001 (attached hereto as Exhibit A). Under a separate agreement Dr. Brown provided

consulting services to Lahey in connection with its provision of health care services in the West

Indies as well as Bermuda. Lahey-Brown Agreement, January 1, 2001 (attached hereto as

Exhibit B). The Complaint does not assert that Dr. Brown or BHCS failed to provide any of

these services. The 2001 agreements ran until December 2003 and new agreements were

executed periodically thereafter, finally ending in early 2016. Compl. 29.

There is no allegation that it was illegal under Bermuda law for Dr. Brown, a practicing

physician, to enter into a consulting agreement with a hospital to advise it regarding its provision

of health care in Bermuda. Instead, the Complaint simply repeatedly characterizes the consulting

arrangement as a clear conflict of interest, citing Laheys own Conflict of Interest Policy. Id.

31, 42-43. But a RICO complaint must be based on predicate acts of racketeering involving

violations of criminal statutes, not corporate conflicts policies.4 Furthermore, a third party such

4
For example, the Complaint alleges generally that Laheys consulting payments to Dr. Brown were
against the law, citing as support a Lahey compliance plan prohibiting payment for referrals under federal
healthcare programs. Id. 43. However, no federal healthcare program is involved in Laheys business in
Bermuda. The consulting agreement provided that BHCS would supply case management services to Lahey for
Laheys Bermudian patients a term specifically defined in the agreement as patients of Lahey who are residents
of Bermuda and are not covered by or eligible for any United States governmental or private health insurance
program. Ex. A at 1-2 (emphasis added). Therefore, even assuming arguendo that the relationship with BHCS
and Dr. Brown would otherwise fall under Laheys prohibition on remuneration for referrals (which it does not),
there is no basis to apply the Lahey compliance plan to Laheys relationship with BHCS or Dr. Brown.

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as the Bermuda Attorney General lacks standing to assert violations of Laheys internal policies,

but even if he had standing, these provisions do not establish that the consulting agreements even

violated such policies and certainly do not establish a violation of law giving rise to RICO

liability. The Plaintiffs reliance on them illustrates how unfounded the Complaint is.

The Complaint makes a similar reference to a Ministerial Code of Conduct that Dr.

Brown was subject to (id. 23), as well as an obligation that members of Bermudas

Parliament report on a form called a Register of Interests information of any pecuniary

interest or other material benefit which a Member receives which might reasonably be thought

by others to influence his or her actions, speeches or votes in Parliament, or actions taken in his

or her capacity as a Member. Id. 47. The Complaint alleges that Dr. Brown failed to disclose

the Lahey consulting agreement in the Register of Interests. Id. 48. Given the subjective

language of this provision, it is unclear whether Dr. Brown even had an obligation to report the

Lahey agreement in the Register of Interests. However, even assuming he did, his failure to do

so does not establish any liability on Laheys part. There is no allegation that Lahey had any

knowledge of this obligation; that it knew that Dr. Brown failed to report the agreement; or

that this failure would render the agreement illegal.

ARGUMENT
I. LEGAL STANDARD ON MOTION TO DISMISS

Under Rule 12(b)(6), a complaint may be dismissed when, as here, the plaintiff can prove

no set of facts that would entitle it to relief. Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir. 1997).

While a court must accept as true the factual allegations and draw all reasonable inferences in

plaintiffs favor, legal conclusions made in the guise of factual allegations will not be given a

presumption of truthfulness. Meijer, Inc. v. Ranbaxy Inc., No. 15-11828-NMG, 2016 WL

4697331, at *8 (D. Ma. Sept. 7, 2016) ([T]he tenet that a court must accept as true all of the

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allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of

the elements of a cause of action, supported by mere conclusory statements, do not suffice.)

(quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). These pleading requirements are

particularly important in a civil RICO case, where particular care is required to balance the

liberality of the Civil Rules with the necessity of preventing abusive or vexatious treatment of

defendants. Miranda v. Ponce Fed. Bank, 948 F.2d 41, 44 (1st Cir. 1991). See Bessette v. Avco

Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000), amended on denial of reh'g (Dec. 15, 2000)

([a]lthough the pleadings should generally be construed liberally, a greater level of specificity is

required in RICO cases) (internal citations omitted).5

II. THE COMPLAINT SHOULD BE DISMISSED FOR FAILURE TO ALLEGE

FRAUD WITH PARTICULARITY

The Complaint alleges RICO violations premised on predicate acts constituting fraud,

e.g., mail and wire fraud and violations of the Foreign Corrupt Practices Act (FCPA), Travel Act

and federal money laundering statute. Compl. 123. These alleged predicate acts are premised

on the allegation of a fraudulent scheme whereby the fees that Lahey paid to Dr. Brown were

illegal bribes as opposed to legitimate consulting fees paid to a medical professional to assist

Lahey in its provision of medical services. However, the Complaint is devoid of allegations that

Dr. Brown engaged in official acts in his governmental capacity to benefit Lahey. It provides no

specifics as to what Dr. Brown allegedly did that constituted fraud and corruption relating to his

government position as opposed to acts taken in his day-to-day work as a physician and operator

of two medical clinics in Bermuda. It is not sufficient merely to allege fraud and the violation of

5
Civil RICO is an unusually potent weaponthe litigation equivalent of a thermonuclear device. The
very pendency of a RICO suit can be stigmatizing and its consummation can be costly; a prevailing plaintiff, for
example, stands to receive treble damages and attorneys fees. Miranda, 948 F.2d at 44. For these reasons, it
would be unjust if a RICO plaintiff could defeat a motion to dismiss simply by asserting an inequity attributable to a
defendants conduct and tacking on the self-serving conclusion that the conduct amounted to racketeering. Id.

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these fraud-based statutes; the Complaint must provide the particularity required by Rule 9(b).

The Complaint here fails to do so and should be dismissed. See Van Schaick v. Church of

Scientology of Cal., Inc., 535 F. Supp. 1125, 1140-41 (D. Mass. 1982) (dismissing fraud claims

for failure to allege the specificity required under Rule 9(b)).

A. The Complaint Fails to Allege that Dr. Brown Engaged in Official Acts for the
Benefit of Lahey

Under United States law, bribery requires a quid pro quo, i.e., an offer of something of

value in return for official acts. McDonnell v. United States, 136 S. Ct. 2355, 2372 (2016)

(bribery requires quid pro quo corruption). See, e.g., the FCPA (15 U.S.C. 78dd-2(a)(1)(A))

(barring payment of anything of value to influence an act or decision of a foreign official in his

official capacity). It is not sufficient simply to allege the conclusory term bribery; the

Complaint must specify with particularity what official acts Dr. Brown allegedly did in his

official capacity to benefit Lahey. That is the essence of the alleged fraud, which is missing in

the Complaint:

1. The Complaint alleges that Dr. Brown used his role as Premier to introduce Lahey

to high-ranking Bermudian officials such as the Minister of Health. Compl. 50. However, a

public official introducing someone to another pubic official does not rise to the level of an

official act, for which bribery laws would apply. McDonnell, 136 S. Ct. at 2372 (Setting up a

meeting, talking to another official, or organizing an event (or agreeing to do so) without

more does not fit that definition of official act under the bribery statute). The Complaint

similarly alleges that in a 2008 email to a Lahey employee, Dr. Brown offered to speak with the

BHB [Bermuda Hospital Board]s Chief of Staff and connect him with Lahey directly. Id. 60.

There is no allegation that Dr. Brown actually did anything, such as speak to the Chief of Staff,

or that if he did, it was done in his capacity as a government official and not as a longstanding

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practicing physician. Such contact, if it occurred, does not constitute an official act under

McDonnell and would have been consistent with Dr. Browns lawful consulting agreement.

2. The Complaints allegations regarding a contract that BHB awarded do not

establish an official act by Dr. Brown. Indeed, the Complaint alleges that Lahey did not bid on

the BHB contract (id. 55); that another hospital, Johns Hopkins, was initially awarded the

contract but that decision was reversed and the contract was awarded to a company called

Kurron (id. 56); and that Dr. Brown merely informed a Lahey employee that Kurron had won

the contract (id. 57). None of these allegations constitute any acts that Dr. Brown performed in

his official capacity for Laheys benefit.

3. The Complaint makes the vague allegation that Dr. Brown used his influence and

connections to ensure that Lahey was favored over other United States healthcare providers for

lucrative contracts relating to FutureCare, a public insurance plan. Id. However, no contracts

awarded to Lahey are identified; the Complaint simply alleges that FutureCare and another

insurance plan paid Lahey for the services it performed. Id. Payments by insurance companies

for services rendered do not constitute official acts by Dr. Brown. Equally vague is the

allegation that Dr. Brown was also instrumental in securing a prestigious appointment for Lahey

as a clinical advisor for KEMHs [the hospitals] General Surgery and Outpatient Care services.

Id. 61. The Complaint provides no specificity regarding the alleged influence and

connections Dr. Brown used regarding these unidentified lucrative contracts or how he was

instrumental and in particular whether he engaged in any official acts.

4. The Complaint focuses on a contractual arrangement that Lahey developed not

with any government entity but with Dr. Browns clinic whereby Laheys radiology department

in Massachusetts would read MRI and CT scans performed at Dr. Browns clinic. Id. 68-70.

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The Complaint does not allege that Lahey doctors made the decisions to order these diagnostic

tests; rather, it alleges that 50-something doctors in Bermuda referred thousands of patients for

the scans, that the scans were performed on equipment at Dr. Browns clinic and that the imaging

results are forwarded electronically from Bermuda to Lahey . . . for interpretation. Id. 100,

71. Lahey doctors interpreted the scans and forwarded their reports back to the clinic in

Bermuda within 24 hours and Lahey was paid a fee for this work. Id. 71. The gravamen of the

Complaint is that these scans were medically unnecessary. Id. 70.6 Here, because there is no

allegation in the Complaint that Lahey played any role in the decision by the 50-something

doctors in Bermuda fraudulently to order these allegedly unnecessary scans let alone the

identity of the various non-Clinic doctors who allegedly ordered them, the patients they allegedly

referred, the specific services the patients received, and a description of why any of the relevant

services were fraudulently medically unnecessary in light of the patients condition, or any

discrete claim that was submitted, the Plaintiff cannot satisfy Rule 9(b). See, e.g., Hagerty, 844

F.3d at 33; EV3, 153 F. Supp. 3d at 536, n.38.

5. The Complaint alleges that in 2012 Lahey assisted Dr. Brown in purchasing the

MRI system by securing preferential pricing through its vendors. Compl. 72. Even if it did,

the Complaint fails to allege how such a routine act is illegal in any way or how it could have

involved an official act since Dr. Brown no longer served in the Parliament in 2012 (id. 21).

6
In general, to state that health care services are fraudulent because they are medically unnecessary, the
plaintiff, to comply with Rule 9(b), must identify with specificity representative examples of the physicians who
ordered the relevant medically unnecessary services; the patients who received the unlawful services; and specific
claims that were submitted as part of the scheme. See, e.g., United States ex rel. Hagerty v. Cyberonics, Inc., 844
F.3d 26, 32 (1st Cir. 2016); United States ex rel. DAgostino v. EV3, Inc., 153 F. Supp. 3d 519, 536, n.38 (D. Mass.
2015), affd, 845 F.3d 1 (1st Cir. 2016). Plaintiff does not identify a single fraudulently medically unnecessary
claim that a Bermuda doctor ordered and cannot seriously contend that each of the thousands of claims was
fraudulently medically unnecessary, and thus the Complaint does not satisfy Rule 9(b). Hagerty, 844 F.3d at 33
(finding that where plaintiff provides no basis for his estimate [that] 10,000 unnecessary procedures were
performed and the evidence and arguments proceed more by insinuation than any factual or statistical evidence that
would strengthen the inference of fraud beyond possibility[,] the Complaint does not satisfy Rule 9(b)) (quotations
omitted).

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6. The Complaint alleges that Dr. Brown paid kickbacks, which he dubbed as

commissions to Bermuda doctors to induce referrals for diagnostic scanning at his clinics. Id.

92. However, even if he did, there is no allegation that Lahey was aware of these purported

kickbacks, agreed to them, or even that they were illegal under Bermuda law. The Complaint

fails to identify physicians who purportedly participated in the kickback scheme; the patients

they referred; and the claims submitted under the scheme and thus cannot satisfy Rule 9(b).7

In sum, the Complaint attempts to transform a routine consulting arrangement between a

hospital and a doctor into a fraudulent bribery scheme without providing any particulars of

official acts by Dr. Brown constituting the fraud. For these reasons, the Complaint should be

dismissed pursuant to Rule 9(b). See Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir. 1985) (mere

allegations of fraud, corruption or conspiracy . . . are too conclusional to satisfy the particularity

requirement, no matter how many times such accusations are repeated).

III. THE RICO COUNTS SHOULD BE DISMISSED

Counts I, II, and III allege violations of RICO under 18 U.S.C. 1962 (a), (b) and (c),

respectively. Count IV alleges a RICO conspiracy under 1962(d). To state a successful claim

under RICO, a plaintiff must allege an injury proximately caused by the (1) conduct (2) of an

enterprise (3) through a pattern (4) of racketeering activity. 18 U.S.C. 1964(c), 1962; Sedima,

S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985).

A. The Alleged Violations Did Not Proximately Cause the Alleged Injury

A plaintiff seeking to assert civil RICO claims must establish that it has standing under

18 U.S.C. 1964(c), i.e., that it suffered an injury to its business or property proximately

7
As a general matter, when alleging kickbacks, the plaintiff, to comply with Rule 9(b), must identify some
representative examples of the physicians who participated in the scheme; the identity of the patients who were
referred; and the approximate date, location, content, or amount of any claim submitted under the scheme. See
generally United States ex rel. Tessitore v. Infomedics, Inc., 847 F. Supp. 2d 256, 263 (D. Mass. 2012).

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caused by the defendants RICO violation. See Holmes v. Sec. Invr Prot. Corp., 503 U.S. 258,

265-68 (1992). A person injured by reason of defendants RICO violation may not rely on

but-for causation; 1964(c) requires that the defendants specified acts of racketeering were

the proximate cause of the plaintiffs injuries. See Anza v. Ideal Steel Supply, 547 U.S. 451, 456-

57 (2006) (defendants alleged defrauding of state tax authority was not the proximate cause of

the plaintiffs lost sales). By demanding that RICO plaintiffs show some direct relation

between the injury asserted and the injurious conduct alleged, the proximate cause requirement

is a key limitation on an expansive reading of the injury requirement. Holmes, 503 U.S. at 266-

68. Three factors are examined to determine whether an alleged RICO violation is a sufficiently

proximate cause of the alleged injury: (1) the directness of the injury; (2) the difficulty of

apportioning damages among potential victims; and (3) whether there are direct victims of the

alleged violation that could better vindicate the policies underlying RICO. Id. at 268-69. These

factors cannot be satisfied here, no matter how artfully the Complaint is plead.

1. The alleged injury regarding the MRI and CT scans is indirect

When a court examines a RICO claim for proximate causation, the central question it

must ask is whether the alleged violation led directly to the plaintiffs injuries. Anza, 547 U.S.

at 461. The injury alleged here is far from direct it is an alleged financial injury resulting from

unnecessary MRI and CT scans performed at Dr. Browns clinic. Compl. 70. The allegation is

that insurance companies in Bermuda provided coverage for these scans; the Bermuda

government subsidizes this insurance for certain Bermudians; and that the Standard Premium

Rate, which affects the subsidy, more than doubled between 2007 and 2016 in part as a result

of the conduct of Lahey, Brown and the Brown Clinics. Id. 83-86. The Complaint relies on

a highly attenuated chain of causation to establish this alleged injury, falling far short of

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establishing that any action by Lahey was the proximate cause: (1) some 50-something (Id.

100) individual Bermuda doctors ordered the MRI and CT scans; (2) the scans were done at Dr.

Browns clinics, not at Lahey; (3) Lahey radiologists merely read the scans after they were

transmitted to Massachusetts and issued a report of the results; (4) the Bermuda insurance

companies decided whether to cover the cost of the scans and at what amount; (5) the Bermuda

government, on an annual basis, determined the amount of the subsidy to provide to the

insurance companies, a decision based only in part as a result of the volume of scans at the

Brown Clinics. Id. 83-85. It is clear that Laheys actions in reading the scans did not

proximately cause the alleged financial injury. Rather, the Bermuda insurance companies made

an independent decision whether to cover the costs of the scans and at what coverage level and

the Bermuda government then made an independent decision regarding its annual subsidy to the

insurance companies for all health care costs incurred, only part of which would relate to the

coverage provided for the scans. The intervening independent acts of these two entities are the

proximate cause of the alleged increased costs resulting from the scans. See R.I. Laborers

Health & Welfare Fund ex rel. Trs. v. Philip Morris, Inc., 99 F. Supp. 2d 174, 178-79 (D.R.I.

2000) (dismissing RICO complaint where alleged injuries were dependent on acts of others).

The Complaint also alleges that [o]verscanning not only leads to increased health costs,

but it also has the potential to cause even greater physiological and psychological harm to the

patient. Id. 101. This alleged injury to the patients (assuming it occurred) was proximately

caused by their doctors decision to order an unnecessary scan, not by Laheys later reading of

the scan. The Complaint makes broad allegations that MRI and CT scans are actually harmful to

patients. Id. 101-104. Even if that were true, that is a matter that the affected Bermuda

patients should take up with their doctor who ordered the scan in the first place. Indeed, the

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patients are the directly injured parties. A RICO claim cannot be maintained simply because of a

general interest in deterring injurious conduct, since directly injured victims can generally be

counted on to vindicate the law as private attorneys general, without any of the problems

attendant upon suits by plaintiffs injured more remotely. Holmes, 503 U.S. at 266-68.

Furthermore, claims for psychological harm (id. 101, 104) such as emotional distress, are

not business or property and are not cognizable under RICO. See Van Schaick, 535 F. Supp. at

1137 (dismissing RICO claim alleging emotional distress).

Proximate cause is also not established when the complaint shows how difficult it would

be to apportion damages. Id. When determining damages is unduly difficult and speculative, the

element of proximate causation recognized in Holmes is meant to prevent these types of

intricate, uncertain inquiries from overrunning RICO litigation. Anza, 547 U.S. at 460. That

admonition is particularly applicable here. The alleged damages resulting from the allegedly

unnecessary and harmful scans would be unduly complex and difficult to determine and

apportion. The proof would require an expert review of thousands of currently unidentified MRI

and CT scans over many years and require a fact-finder to determine which were necessary and

which were notan area of testimony that could clearly be subject to clinical disagreement

among medical professionals. Because this is not a medical malpractice case, even if some scans

were determined to be unnecessary, that would not necessarily be probative of a RICO violation.

Assuming fraud could be determined, the fact-finder would then have to apportion the

responsibility among the actors involved, i.e., the 50-something doctors who ordered the scans,

Dr. Brown and his clinic, and then determine what, if any, responsibility should be ascribed to

Laheys role in reading the scans. To determine damages related to the alleged injury in the form

of Bermudas increased subsidy for health insurance, an equally complex and difficult process

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would be necessary. That exercise would require an analysis of the entire healthcare budget for

Bermuda on an annual basis; how the subsidy was determined each year; what portion of any

increase was attributable to reimbursement for increased MRI and CT scans; and what subset of

the amount was attributable to fraudulent scans. This difficulty in determining and apportioning

damages defeats proximate cause.

2. The alleged injury regarding the consulting agreements

The Complaint makes the general allegation that Lahey and Dr. Brown defraud[ed] the

Bermudian Government of millions of dollars[,] but that allegation refers to the MRI and CT

scans discussed above. Id. 113, 113(b). As for the consulting agreements, the alleged injury

appears to be the broad assertion that Lahey deprived the people of the right to honest services.

Id. However, a claim of mail or wire fraud premised on the theory of deprivation of honest

services requires proof of the payment of a bribe or kickback. Skilling v. United States, 561 U.S.

358, 407-09 (2010). As discussed in Section II.A supra, bribery requires proof of a quid pro

quo, i.e., action by a public official in his official capacity in return for an offer or payment of

something of value. The Complaint fails to allege any such official act. Furthermore, Plaintiff

must allege injury in its business or property to maintain a civil RICO action. 1964(c). The

deprivation of honest services is an intangible injury that does not satisfy this requirement. See

Wallace v. Powell, 2010 WL 3398995, at *8-10 (M.D. Pa. Aug. 24, 2010) (RICO injury must be

economic, i.e., a concrete financial loss; citizens who were deprived of the intangible right of

honest services are not in a position to bring suit). Therefore, no RICO damages are alleged to

have been proximately caused by the consulting agreements.

B. The Complaint Fails to Allege a Pattern of Racketeering

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RICO requires proof of a pattern of racketeering, i.e., the commission of at least two

related predicate acts, which must have the same or similar purposes, participants, victims, or

methods, or otherwise be interrelated by distinguishing characteristics, over a span of years.

Rectrix Aerodome Ctrs., Inc. v. Barnstable Mun. Airport Commn, 632 F. Supp. 2d 120, 125 (D.

Mass. 2009) (quoting Feinstein v. Resolution Tr. Corp., 942 F.2d 34, 44 (1st Cir. 1991). As the

Court stated in Sedima, [t]he target of [RICO] is thus not sporadic activity. The infiltration of

legitimate business normally requires more than one racketeering activity and the threat of

continuing activity to be effective. It is this factor of continuity plus relationship which

combines to produce a pattern. 473 U.S. at 528 n. 14 (quoting S. Rep. No. 91617).

The Complaint fails to satisfy these RICO requirements. While it alleges continuity in

that Lahey has had a long-standing consulting relationship with Dr. Brown, the mere fact of a

consulting relationship does not establish fraud. Rather, in order to satisfy these requirements,

the Complaint must allege a pattern of official acts by Dr. Brown that constitute the alleged

predicate acts of violating the FCPA, the Travel Act, or mail and wire fraud under the deprivation

of honest services theory. However, even when viewed in the light most favorable to the

Plaintiff, the Complaint alleges very sporadic activity over many years, none of which satisfies

the continuity test. For example, it alleges that Dr. Brown introduced Lahey to the Minister of

Health; Dr. Brown sent an email informing Lahey that Kurron won a contract; and Dr. Brown

was instrumental and used his influence and connections to benefit Lahey. The lack of

specificity accompanying these latter allegations is fatal to finding any continuity or pattern. The

allegations involving Laheys reading of MRI and CT scans are equally deficient as they fail to

establish any relationship between Laheys actions and the alleged fraud, which is that doctors in

Bermuda fraudulently ordered unnecessary scans.

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C. The Complaint Fails to Allege a RICO Enterprise

Under RICO, an enterprise includes any individual, partnership, corporation,

association, or other legal entity, and any union or group of individuals associated in fact

although not a legal entity. 1961(4). The Complaint alleges that Lahey and/or the

association-in-fact of Lahey, Brown and the Brown Clinics is an enterprise. Compl. 120,

136, 152. The and/or structure creates several options for discerning what the alleged

enterprise is: (1) Lahey by itself (the first half of the or option); or (2) the association-in-fact of

Lahey, Brown and the Brown Clinics (the second half of the or option).8

Each option fails to state a RICO enterprise. As a threshold matter, option (1) cannot

satisfy RICO because Lahey cannot be both the person under 1962(c) and the enterprise, as

that would violate the requirement that they be distinct.9 However, even if the enterprise is

assumed to be option (2), the association-in-fact of Lahey, Brown and the Brown Clinics, there

are other defects that permeate all the RICO counts. First, there is no allegation that the Brown

Clinics are a legal entity, such as a corporation or partnership. The Complaint alleges merely

that each clinic is a private medical clinic in Bermuda owned by Dr. Brown. Compl. 9-10.

Therefore, it fails to allege facts establishing that the Brown clinics can be part of an association-

in-fact under 1961(4). That leaves the alleged association-in-fact as at most Lahey and Dr.

Brown. But the association-in-fact must be separate and apart from the pattern of racketeering

activity itself. United States v. Turkette, 452 U.S. 576, 583 (1981) (The enterprise is not the

pattern of racketeering activity; it is an entity separate and apart from the pattern of activity in

8
The use of and yields a third option that the enterprise is combination of Lahey and the association-in-
fact of which Lahey is also a member. This option is redundant and nonsensical.
9
See Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001) ([T]o establish liability under
1962(c) one must allege and prove the existence of two distinct entities: (1) a person; and (2) an enterprise that is
not simply the same person referred to by a different name.). The entity cannot do double duty as both the
RICO defendant and the RICO enterprise. Libertad v. Welch, 53 F.3d 428, 442 (1st Cir. 1995) (citing Miranda,
948 F.2d at 44-45).

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which it engages.). The association-in-fact groups must constitute a larger unit, over and

above their separate structures and operations. Libertad, 53 F.3d at 442. The Complaint fails to

satisfy these requirements. The Lahey-Brown relationship is not alleged to be an ongoing

organization; it is based on a consulting agreement that by its terms involves occasional

consulting about Laheys provision of medical services in Bermuda. This association has no

decision-making structure Dr. Brown operates his clinics; Lahey does not. Lahey manages its

doctors in Bermuda; Dr. Brown does not. Indeed, each operates independently of the other. On

occasion, Lahey sees patients at Dr. Browns clinic and consults with him on Bermuda

healthcare. There is also no organization or association regarding the scans done at Dr.

Browns clinics. Lahey does not decide whether to order a scan and there is no allegation that

Lahey was even aware of Dr. Browns alleged kickbacks to Bermuda doctors.

The association-in-fact is based solely on the broad allegation that Laheys and Dr.

Browns relationship was permeated by bribery and conflicts of interest. Thus the Complaint

fails to allege an enterprise that has an existence apart from the alleged predicate acts. The

Complaint essentially alleges a bribery conspiracy between Lahey and Dr. Brown (assuming

quid pro quo official acts were alleged, which they are not). But not every conspiracy is an

enterprise. Burdett v. Miller, 957 F.2d 1375, 1379 (7th Cir. 1992). There are no facts alleged

supporting the conclusory statement that Dr. Browns consulting relationship with Lahey

constituted an association-in-fact enterprise. Were these allegations to suffice, then the parties to

virtually every contractual relationship alleged to be fraudulent in some way would be deemed a

RICO enterprise.

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D. The RICO Conspiracy Count also Fails

Count IV alleges a RICO conspiracy in that Lahey, Dr. Brown and the Brown Clinics

agreed and conspired to violate 1962 (a)-(c). Compl. 168. There are no additional factual

allegations supporting this claim. Any claim under section 1962(d) based on a conspiracy to

violate the other subsections of section 1962 necessarily must fail if the substantive claims are

themselves deficient. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1191 (3d Cir. 1993).

Because Counts I-III fail to state a claim under RICO, Count IV is equally defective in alleging a

conspiracy to violate RICO.

E. The RICO Claims are Barred by the Statute of Limitations

A civil action under RICO is subject to a four-year statute of limitations, which begins to

run when the plaintiff knew or should have known of its injury. Rotella v. Wood, 528 U.S. 549,

553 (2000); Rodriquez v. Banco Cent., 917 F.2d 664, 665-66 (1st Cir. 1990). A plaintiff who is

not reasonably diligent in discovering its civil RICO claim may not rely upon fraudulent

concealment to toll the limitations period or to estop a defendant from asserting a limitations

defense. Klehr v. A.O. Smith Corp., 521 U.S. 179, 194-95 (1997) (RICO seeks not only to

compensate victims but also to encourage those victims themselves diligently to investigate and

thereby to uncover unlawful activity.). The allegations regarding Laheys contact with Dr.

Brown when he was the Premier are alleged to have occurred from 2007 to January 2009, which

is eight to ten years ago. Compl. 50-62. Dr. Browns last term holding political office in

Bermuda ended on October 28, 2010. Id. 21. Six years then passed before the Attorney

General, with an election looming in the near future, contacted Lahey and the parties entered into

a tolling agreement on October 12, 2016. Id. 112. The tolling agreement did not cure any

running of the statute of limitations before its execution. Therefore, the RICO claims should be

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dismissed because they were filed two years after the four-year statute had run on any RICO

claims based on Dr. Browns role as a Bermuda government official.

Plaintiff alleges that fraudulent concealment of the schemes tolls any applicable statute

of limitations. Compl. VI. No affirmative act of concealment is alleged. Plaintiff merely

alleges that Lahey did not disclose its payment of fees under its consulting agreements with Dr.

Brown. However, Plaintiff neither alleges any basis for imposing such a duty on Lahey nor

explains how that disclosure should have taken place. The allegation that Dr. Brown failed to

disclose his agreements with Lahey in the Parliaments Register of Interests does not establish

any act of concealment by Lahey. Indeed, there is no allegation that Lahey knew of such an

obligation and agreed that Dr. Brown would not fulfill it. Furthermore, Laheys relationship with

Dr. Brown and BHCS was well-known in Bermuda such that a sophisticated plaintiff like the

Government of Bermuda could easily have learned the details of the relationship years ago if it

had a need or interest in doing so. However, only the present political party in power, acting

through the current Bermuda Attorney General, chose to do so, six years later. The statute of

limitations continued to run regardless of which political party was in power in Bermuda. The

current Attorney Generals conclusory allegations of fraudulent concealment are woefully

insufficient to overcome the fact that this case was filed at least two years after the statute of

limitations had expired.

The plaintiffs lack of diligence applies equally to the allegations of financial injury

caused by unnecessary scans. According to the Complaint, the frequency of these scans

skyrocketed and more than doubled between 2004 and 2012, as did the Government-set

standard premium insurance rate. Id. 85-86, 95-96. The Government should be charged with

knowledge of its own costs. If those costs increased due to the increased scans, then the

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Government had sufficient knowledge to investigate whether the cause was unnecessary

scanning. There is no allegation that Lahey did anything to conceal the volume of scans from

Government scrutiny. Therefore, to the extent Plaintiffs RICO claims are based on the far-

fetched theory that Bermuda doctors fraudulently ordered medically unnecessary scans as a

predicate act of fraud by Lahey (as opposed to mere negligence by the 50-something doctors

who ordered them), those RICO claims are barred by the four-year statute of limitations.

IV. THE STATE LAW CLAIMS SHOULD BE DISMISSED

A. Unfair Business Practices. Count V alleges a violation of M.G.L. C. 93A 11,

which prohibits unfair or deceptive acts or practices in the conduct of any trade or commerce.

Id. at 2(a). There is no allegation that Lahey and the Bermuda Government engaged in trade or

commerce with each other, or any allegation of a contractual relationship or even a consumer

relationship between them. Plaintiff simply alleges a violation of this statute based on the RICO

allegations in the earlier counts. See Szalla v. Locke, 421 Mass. 448, 452, 657 N.E.2d 1267,

1270 (1995) (C. 93A does not apply where there is no exchange of goods or services between the

parties). For these reasons and those discussed under Counts I-IV, Count V should also be

dismissed.

B. Unjust Enrichment. Count VI alleges an equitable claim for unjust enrichment,

which is defined as retention of money or property of another against the fundamental

principles of justice or equity and good conscience. Santagate v. Tower, 64 Mass. App. Ct.

324, 329, 833 N.E.2d 171, 176 (App. Ct. 2005). This Count also fails to state a claim. There is

no allegation that the Government of Bermuda conferred a benefit on Lahey for which Lahey did

not provide value. This claim is also barred by laches because there has been an unjustified,

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unreasonable, and prejudicial delay in raising [this] claim, Santagate, 64 Mass. App. Ct. at 333,

833 N.E.2d at 178, as described above with the RICO counts.

C. Civil Conspiracy. Count VII alleges a claim for civil conspiracy to defraud,

which requires first, a common design or an agreement, although not necessarily express,

between two or more persons to do a wrongful act and, second, proof of some tortious act in

furtherance of the agreement. Aetna Cas. Sur. Col. v. P & B Autobody, 43 F.3d 1546, 1564 (1st

Cir. 1994). The particularity requirements of Fed. R. Civ. P. 9(b) must be satisfied where a

complaint charges conspiracy to defraud. See Hayduk, 775 F.2d at 444. Count VII does not

satisfy Rule 9(b). For this reason and the others discussed above regarding the RICO counts, it

should be dismissed.

D. Fraud. Count VIII alleges common law fraud in that Lahey allegedly made or

caused to be made false reports, statements and claims related to the scans. This claim is also

subject to Rule 9(b)'s heightened pleading requirement. For this reason and the others stated

above, it should be dismissed. See Fiorillo v. Winiker, 85 F. Supp. 3d 565, 574 (D. Mass. 2015).

CONCLUSION

For the reasons stated, the Complaint should be dismissed under Rules 12(b)(6) and 9(b).

Dated: April 14, 2017 Respectfully submitted,

LAHEY CLINIC, INC. (a.k.a. LAHEY HOSPITAL &

MEDICAL CENTER, BURLINGTON), and LAHEY
CLINIC HOSPITAL, INC.,

By its attorneys,

/s/Terence J. Lynam

Terence J. Lynam (pro hac vice)

Robert S. Salcido (pro hac vice)
AKIN GUMP STRAUSS HAUER & FELD LLP
1333 New Hampshire Avenue, NW

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Washington, D.C. 20036

tlynam@akingump.com
rsalcido@akingump.com

Wayne A. Budd (BBO# 063320 )

E. Abim Thomas (BBO# 657342)
GOODWIN PROCTER LLP
100 Northern Avenue
Boston, Massachusetts 02210
WBudd@goodwinlaw.com
AThomas@goodwinlaw.com

Counsel for Lahey Clinic, Inc. and Lahey

Clinic Hospital, Inc.

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CERTIFICATE OF SERVICE

IT IS HEREBY CERTIFIED that on this 14th day of April, 2017 the foregoing

Memorandum In Support of Defendants Motion to Dismiss, filed through the ECF system, will

be sent electronically to the registered participants on the Notice of Electronic Filing and paper

copies will be sent to any non-registered participants.

/s/ Terence J. Lynam