Lahey Case Dismissed In Massachusetts Court

March 9, 2018

[Updated with video + AG + Shadow AG + Lahey comments] “Lahey’s Motion to Dismiss is allowed,” the Massachusetts District Court has ruled, with the Order of Dismissal stating “the complaint is hereby dismissed. This case is closed.”

Attorney-General Kathy Simmons said “from our perspective it is closed, and we don’t intend to proceed any further.”

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Background

In February 2017, the Bermuda Government filed a lawsuit in Massachusetts alleging that Lahey conspired with Dr Ewart Brown, with payments to Dr Brown “disguised as consulting fees,” in return for which Dr Brown “ensured that Lahey received preferential treatment when bidding on healthcare contracts issued by the Bermudian Government.”

Dr Brown previously denied the allegations, calling them a “litany of lies,” while Trevor Moniz, who was Attorney-General when the lawsuit was filed, said “Government believes it has substantial claims against Lahey”.

In April 2017, Lahey Clinic filed a Motion to Dismiss, and the Bermuda Government subsequently filed in opposition to the Motion.

On January 8, 2018, Lahey filed [PDF] a “notice of additional authority issued after briefing on Lahey’s Motion to Dismiss,” and on January 22, 2018, the Bermuda Government filed [PDF] a “Supplemental Response in Opposition” to Lahey’s motion, saying their Motion to Dismiss should be denied.

The January 8, 2018 filing from Lahey said the Plaintiff’s alleged injury consists of “a financial injury in the form of plaintiff’s payments to Bermuda insurers for the increased costs of allegedly unnecessary medical scans and alleged payments of millions of dollars on contracts tainted by bribes.”

“The alleged financial injury occurred in Bermuda where plaintiff claims that as an ‘end-payor’ it paid more to Bermuda insurance companies than it should have due to the increased cost of allegedly unnecessary scans,” Lahey stated, adding that, “the plaintiff has failed to allege a domestic injury, as required under civil RICO. For this reason, as well as the others previously briefed, this complaint should be dismissed.”

The January 22, 2018 filing from the Bermuda Government in response to Lahey’s filing alleges that, “For nearly two decades, Lahey, acting from its Burlington, Massachusetts-based headquarters, orchestrated a complex scheme that resulted in Bermuda’s payment of tens of millions of dollars for services begotten by Lahey’s bribery and corruption of the highest levels of Bermuda’s government.

“Eight months after briefing on its Motion to Dismiss closed, Lahey has attempted to introduce a new argument that it never raised in its extensive initial briefing, namely, that Bermuda’s Complaint does not allege a ‘domestic’ injury to its business or property. Lahey’s new argument fares no better than the other ones it has raised because Bermuda’s Complaint alleges numerous ‘domestic’ injuries to its business and property in the US.”

The motion to dismiss was then heard, and in March 2018 the court ruled.

Case Dismissed

The Court’s ruling said, “Pursuant to the court’s Memorandum and Order [#48] issued on March 8, 2018, allowing Defendant’s Motion to Dismiss the Plaintiff’s Complaint Pursuant to Fed. R. Civ. P. 12[b][6] and 9[b] [#16], the complaint is hereby dismissed. This case is closed.”

The Memorandum by Judge Indira Talwani stated, “Bermuda has not shown that it suffered any injuries in the United States as a result of the alleged scanning scheme. Without such an injury, Bermuda’s RICO claims as to the scanning scheme arise out of extraterritorial injuries and must be dismissed.”

“The Kurron Bermuda project involved developing the ‘FutureCare’ public insurance plan. Bermuda alleges that ‘Brown used his influence and connections to ensure that Lahey was favored over other potential U.S. healthcare providers, including Johns Hopkins, for lucrative contracts relating to ‘FutureCare.’

“As FutureCare is a Bermudian public insurer which reimburses healthcare costs of Bermudian residents, the court cannot, without more, find any injury from these contracts to business or property in the United States. While entities like Johns Hopkins, whose domestic profits were competitively injured by such contracts, might have a valid domestic injury claim, Bermuda does not.”

“The question presented in this case is whether Bermuda may bring an action for the various injuries alleged under RICO’s private right of action.

“It may well be that Bermuda’s allegations as to Lahey’s commission of various predicate acts would suffice for criminal charges under §1963[a] or civil enforcement proceedings brought by the Attorney General under 1964[a]-[b]; however, the focus of this motion is whether Bermuda, as a private party, may bring these charges under §1964[c].

“That depends on whether Bermuda has alleged domestic injuries to business or property caused by Lahey’s conduct. The injuries in this case are assessed in turn.”

“Bermuda also brings claims under Massachusetts General Laws c. 93A, § 11 [for unfair business practices] and common law claims under theories of unjust enrichment, civil conspiracy, and fraud.

“Given the early stage of this litigation and the fact that the parties have not yet begun the arduous task of discovery, retaining jurisdiction over Bermuda’s pendent state law claims would not serve such interests. Accordingly, Bermuda’s state-law claims are dismissed without prejudice.”

Update 1.20pm: Attorney-General Kathy Simmons held a press conference, and said “from our perspective it is closed, and we don’t intend to proceed any further.”

“The result is what I had anticipated from the beginning, however given the politically charged nature of the case, and as Attorney-General, the decision to proceed had to be based on sound legal principles, logical analysis, and by an independent assessor devoid of any political influences,” she said.

When asked about costs, the Attorney-General said they do not have a final cost at this stage and will come back with a definitive cost, but said it is “well over $1 million”

Update 2.00pm: The Attorney-General’s full statement follows below:

This is to advise that the District Court of Massachusetts has come to a decision in the case that was brought against the Lahey Clinic by the Bermuda Government.

I must say from the outset that the result is what I had anticipated from the beginning. However, given the politically charged nature of the case, and as Attorney-General, the decision to proceed had to be based on sound legal principles, logical analysis and by an independent assessor, devoid of any political influences.

It was of paramount importance, especially in light of the impending international assessment, that Bermuda affirms itself as a mature financial centre where sound legal decision-making is based on the rule of law.

In her decision, District Judge Indira Talwani, as the independent assessor, determined that Bermuda has not shown that it suffered any domestic injury as a result of the alleged bidding scheme and that Bermuda failed to meet the basic showing that the preferred provider scheme led to an economic injury.

Consequently, Judge Talwani found that as Bermuda could not show that it suffered any injury within the United States as a result of the alleged scanning scheme, Bermuda’s claims under the Racketeer Influenced and Corrupt Organizations Act arise out of extraterritorial injuries and must be dismissed.

Therefore, Judge Talwani has ordered that Lahey’s Motion to Dismiss the action brought against them is allowed; and therefore she has determined that Bermuda’s claims against Lahey are dismissed, and that the case is now closed.

Update 2.53pm: Lahey Clinic said, “Lahey Hospital & Medical Center has a 25 year track record of caring for the people of Bermuda while maintaining the highest ethical standards for all business relationships. We were confident that the claims made in the suit were baseless and are pleased with this dismissal.

“Our team of physicians looks forward to continuing to improve the health of Bermuda residents, create programs to address significant public health issues and provide the care the people of Bermuda need and deserve.”

Update 4.43pm: Shadow Attorney-General Trevor Moniz said, “The dismissal of the Government’s civil case against Lahey Clinic comes as a disappointment. As Attorney-General, I made the decision to issue proceeding following an exhaustive investigation. Throughout the entire process, I acted on the basis of legal advice and in the best interests of the community.

“Ultimately, the case was dismissed on a technical ground, namely that there is insufficient ‘domestic injury’ in the US to bring a case before the American Courts. This is a fast-moving area of the law, with the US Supreme Court only deciding to narrow the relevant legal test in the summer of 2016 – well after the investigation into Lahey’s affairs began. A further appeal would be needed to clarify this point.

“It is important to point out that the case was based on compelling evidence, and that the complaint was meticulously well-sourced – in many instances, with the very words of those involved.

“Indeed, the Honourable District Judge stated as follows: ‘It may well be that Bermuda’s allegations as to Lahey’s commission of various predicate acts would suffice for criminal charges … or civil enforcement proceedings brought by the Attorney General [of the USA].’

Mr Moniz said that “in other words,” the federal judge is saying that criminal acts may have allegedly been committed, with the Shadow Attorney-General the judge “pointedly noted that American institutions such as Johns Hopkins may have a ‘valid domestic injury claim’ against Lahey within the US.”

“Finally, it was a great blow to the case that members of the former Opposition, including the present Premier and Deputy Premier, filed objections to the case proceeding,” said Mr Moniz, a reference to the Amici Curiae in May 2017.

The Order of Dismissal follows below [PDF here]

The 16-page Memorandum and Order follows below [PDF here]

click here Bermuda Govt's lawsuit against Lahey

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