2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-18-2011

Kenneth Zahl v. NJ Dept Law Public Safety

Precedential or Non-Precedential: Non-Precedential

Docket No. 10-2022

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1

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

Nos. 10-2022, 10-2516

____________

KENNETH ZAHL, M.D.,

 Appellant 

v.

THE NEW JERSEY DEPARTMENT OF LAW AND 

PUBLIC SAFETY DIVISION OF CONSUMER AFFAIRS, 

STATE BOARD OF MEDICAL EXAMINERS; 

ATTORNEY GENERAL OF THE STATE OF NEW JERSEY; 

STATE OF NEW JERSEY; DOUGLAS J. HARPER, 

individually, and in his official capacity 

as Senior Deputy Attorney General of the State of 

New Jersey and as an appointed 

Special Counsel to the Attorney General and the New Jersey State Board 

of Medical Examiners; HARRY KOSOVSKY; 

GERTRUDE KOSOVSKY; KAREN KOSOVSKY; KEVIN 

MCKEOWN; BONNIE BLACKMAN, MD; 

PHILLIP RUBINFELD, MD; MARY 

SUE BRITTLE, JOHN AND JANE DOES 1-100 

 

____________

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY

(D.C. No. 06-cv-03749)

District Judge: Honorable Jose L. Linares

 
2

Submitted Under Third Circuit LAR 34.1(a)

April 29, 2011

 

BEFORE: BARRY, HARDIMAN and TASHIMA*, Circuit Judges, 

(Filed May 18, 2011)

 

*

The Honorable A. Wallace Tashima, Senior United States Circuit Judge for the 

Ninth Circuit, sitting by designation.

OPINION

TASHIMA, Circuit Judge:

Dr. Kenneth Zahl brought this action alleging that New Jersey authorities 

criminally conspired with his ex-wife, her family, and his former employees to 

obtain revocation of Zahl=s medical license. The District Court dismissed Zahl=s 

claims and twice denied him leave to amend. Zahl appeals the denials of leave to 

amend. We will affirm.

I

Zahl, an anesthesiologist, lost a divorce case in New York in 1999 and a 

professional disciplinary proceeding in New Jersey in 2006. In the divorce 

proceeding, a New York court found that Zahl had Amanipulated the finances of his 

solely owned corporation to reduce his income@ in an effort to reduce his child 
3

support obligations. Kosovsky v. Zahl, 684 N.Y.S.2d 524, 526 (N.Y. App. Div. 

1999). In the professional disciplinary proceeding, the New Jersey Supreme Court 

affirmed the New Jersey Board of Medical Examiners= (ABME@) revocation of 

Zahl=s New Jersey medical license. The Supreme Court upheld the BME=s findings 

of Zahl=s misconduct, summarizing them as follows: 

[O]ver a course of years and under varying circumstances, Zahl 

repeatedly engaged in deceitful and fraudulent conduct. He 

over-billed Medicare, retained duplicate payments from his patient=s 

insurance company, made misrepresentations to his own disability 

carrier, and inserted his colleagues= names into patient records for 

patients they did not treat. 

In re License Issued to Zahl, 895 A.2d 437, 446 (N.J. 2006) (AZahl I@). Later, the 

BME revoked Zahl=s license a second time after finding that he had committed 

further violations during a stay of the first revocation order pending appeal. In re 

Zahl, 2010 WL 4054235 (N.J. Super. Ct. App. Div. July 30, 2010), cert. denied, 13 

A.3d 362 (N.J. 2011). 

Zahl believes that the results of the divorce case and the professional 

disciplinary case followed from criminal conspiracies between state authorities and 
4

persons surrounding his ex-wife. He filed an action in federal district court in New 

York alleging that his ex-wife and persons connected to her conspired with New 

York State Supreme Court justices during the divorce proceedings in violation of 

the Racketeer Influenced and Corrupt Organizations Act (ARICO@) and other federal 

laws. See Zahl v. Kosovsky, 2011 WL 779784, at *1 (S.D.N.Y. Mar. 03, 2011); id. 

at *4 (A[Zahl] characterizes the Matrimonial Part of the New York State Supreme 

Court and other participants in the litigation and related matters as a >Matrimonial 

Mafia Enterprise= and the >NY Matrimonial Mafia Inc.= in connection with his 

RICO claims.@). The district court dismissed the action on statute of limitations, 

abstention, and jurisdictional grounds. Id. at *6-*14.

Zahl filed this case based on similar allegations about the professional 

discipline proceeding. He named the BME, prosecutors at the New Jersey Attorney 

General=s office, his ex-wife, his ex-wife=s parents, and two of his former 

employees, among others, as defendants in a complaint that alleged a Acalculated, 

vengeful and vindictive conspiratorial scheme to extortionately and fraudulently 

interfere with, deprive and obtain through wrongful means Dr. Zahl=s right to 

practice medicine and right to conduct his business without fraudulent and 

extortionate influences and pressures.@ A952 (amended complaint & 122). He 
5

asserted claims under RICO and 42 U.S.C. ' 1983 (for violation of his equal 

protection rights), among other federal and state law claims. 

In a series of six opinions issued between March 2008 and April 2010, the 

District Court dismissed all of the claims.1 It also denied Zahl leave to file a 

proposed Second Amended Complaint (ASAC@) and a proposed Third Amended 

Complaint (ATAC@), because it found that the proposed amendments did not state 

valid claims and were therefore futile. On this appeal, Zahl challenges only two of 

the District Court=s rulings: (1) its denial of leave to file amended RICO claims in 

the SAC; and (2) its denial of leave to file an amended ' 1983 equal protection 

claim in the TAC. 

 

1 Only one defendant remained in the case after the District Court=s six 

opinions: Mary Sue Brittle, Zahl=s former administrative employee, who never 

appeared and against whom default was entered in 2009. A8. To enable Zahl=s 

appeal, the District Court entered judgment under Fed. R. Civ. P. 54(b) with respect 

to all defendants, except Brittle. A8. 

We briefly summarize Zahl=s prolix factual allegations. A86-93. Defendant 

Bonnie Blackman, his former employee and an acquaintance of his ex-wife, 

initiated the disciplinary proceedings by filing a false complaint with the BME 

alleging that Zahl used improper billing practices. Zahl=s ex-wife and her family, 

the Kosovskys, also provided false information to the BME through their private 
6

investigator, defendant Kevin McKeown. Defendant Phillip Rubinfield, an 

anesthesiologist with designs on Zahl=s practice who testified at the disciplinary 

hearing, and defendant Brittle, Zahl=s administrative employee, also provided false 

information during the investigation. Vindictive and malignant animus motivated 

all of these private (i.e., non-governmental) defendants; their aim was to ruin Zahl, 

force him to leave the country for the Dominican Republic (where his mother was 

born), and, in the case of Rubinfield, to acquire his anesthesiology practice. The 

prosecutors assigned to the case, led by defendant Douglas Harper, shared the 

private defendants= vindictive and malignant animus, and they intentionally violated 

Zahl=s constitutional rights during the disciplinary proceedings by withholding 

documents and suborning perjury. 

II

Although the parties do not raise the issue, we must first determine whether 

the District Court abused its discretion in certifying this case under Federal Rule of 

Civil Procedure 54(b), after finding no just reason to delay the appeal. See 

Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 202 (3d Cir. 2006) (A[W]e apply 

an abuse of discretion standard of review to the District Court=s determination that 

there is no just cause for delay.@); Gerardi v. Pelullo, 16 F.3d 1363, 1368 (3d Cir. 
7

1994) (A[W]e consider the validity of a Rule 54(b) certification ourselves.@). The 

District Court had dismissed all defendants but one, Brittle, who had yet to appear 

in the action. As the District Court noted, our analysis of the claims against the 

other defendants will apply to the claims against Brittle, foreclosing any possibility 

that the certification will cause us to consider Athe same issue a second time.@ 

Berckeley Inv. Grp., 455 F.3d at 203 (quoting Allis-Chalmers Corp. v. Phila. Elec. 

Co., 521 F.2d 360, 364 (3d Cir. 1975)). Therefore, we conclude that the Rule 54(b) 

certification was proper and that we have jurisdiction over this appeal. See Pichler 

v. UNITE, 542 F.3d 380, 385 n.6 (3d Cir. 2008). 

We review the District Court=s denial of leave to amend for abuse of 

discretion, even when the denial is based on a finding of futility. Travelers Indem. 

Co. v. Dammann & Co., 594 F.3d 238, 243 n.3 (3d Cir. 2010). 

Futility means that the complaint, as amended, would fail to state a 

claim upon which relief could be granted. In determining whether a 

claim would be futile, the district court applies the same standard of 

legal sufficiency as applies under Federal Rule of Civil Procedure 

12(b)(6). If a district court concludes that an amendment is futile 

based upon its erroneous view of the law, it abuses its discretion.

Id. at 243 (citations, internal quotation marks, and alterations omitted). 

In assessing a complaint=s legal sufficiency, the court must accept all wellpleaded facts as true and then Adetermine whether the facts alleged . . . are sufficient 
8

to show that the plaintiff has a >plausible claim for relief.=@ Fowler v. UPMC 

Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct. 

1937, 1950 (2009)). The complaint=s factual allegations must be sufficient to 

Anudge[] the[] claims across the line from conceivable to plausible . . . .@ Great W. 

Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 177 (3d Cir. 2010) 

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 

III

Zahl argues that the District Court erroneously held that the Aclass of one@

equal protection claim, asserted under ' 1983 in the proposed TAC, was futile. The 

claim would assert that the state prosecutors, conspiring with the private 

defendants, sought revocation of Zahl=s medical license out of Avindictive@ and 

Amalevolent@ animus, rather than for legitimate reasons.

A[A]n equal protection claim can in some circumstances be sustained even if 

the plaintiff has not alleged class-based discrimination, but instead claims that she 

has been irrationally singled out as a so-called >class of one.=@ Engquist v. Or. Dep=t 

of Agric., 553 U.S. 591, 601 (2008). To proceed on such a claim, the plaintiff must 

allege that he or she has been Aintentionally treated differently from others similarly 

situated and that there is no rational basis for the difference in treatment.@ Id. 
9

(quoting Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)); Renchenski v. 

Williams, 622 F.3d 315, 337-38 (3d Cir. 2010). 

The TAC seeks to satisfy these requirements by alleging that other physicians 

who engaged in similar or more serious misconduct received more lenient discipline 

than Zahl. A2097-99. It also alleges that the prosecutors singled Zahl out for 

license revocation because they met with the private defendants and became 

Asteeped in [their] malevolent animus towards Dr. Zahl.@ A2090. This malevolent 

animus, according to the TAC, drove the prosecutors to commit acts of misconduct, 

such as withholding exculpatory evidence and suborning perjury during the 

administrative proceedings. A2094-95.

The result of the professional disciplinary litigation undermines Zahl=s 

claims. The federal courts must accord the New Jersey Supreme Court=s decision 

whatever preclusive effect it would have in New Jersey courts. Exxon Mobil Corp. 

v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005) (AThe Full Faith and Credit 

Act, 28 U.S.C. ' 1738, . . . requires the federal court to give the same preclusive 

effect to a state-court judgment as another court of that State would give.@) (internal 

quotation marks omitted); Turner v. Crawford Square Apts. III, L.P., 449 F.3d 542, 

548 (3d Cir. 2006). New Jersey follows the standard doctrine of issue preclusion, 
10

which plainly bars re-litigation of Zahl=s professional misconduct. See Hernandez 

v. Region Nine Hous. Corp., 684 A.2d 1385, 1392 (N.J. 1996) (quoting Restatement 

(Second) of Judgments ' 27 at 250 (1982) (AWhen an issue of fact or law is actually 

litigated and determined by a valid and final judgment, the determination is 

conclusive in a subsequent action between the parties, whether on the same or a 

different claim.@)). Therefore, for purposes of this action, it is established that Zahl 

Arepeatedly engaged in deceitful and fraudulent conduct.@ Zahl I, 895 A.2d at 446.

In light of the state court findings, the TAC does not plausibly allege that 

prosecutors sought revocation of Zahl=s license without a rational basis, as a Aclass 

of one@ claim requires. Perhaps, as the TAC alleges, other physicians have kept 

their licenses after committing worse offenses (though, as defendants note, the 

allegations do not state that prosecutors declined to seek revocation in those cases). 

A2097-99. But prosecutorial decisions are necessarily subjective, and the TAC=s 

list of comparators falls well short of creating a plausible inference that the 

prosecutors here had no rational basis for seeking to revoke the license of a doctor 

who repeatedly falsified patient records, overbilled Medicare, lied about his own 

disability status, and then blamed his employees and his ex-wife for his misconduct. 

See United States v. LaBonte, 520 U.S. 751, 762 (1997) (A[D]iscretion is an 
11

integral feature of the criminal justice system, and is appropriate, so long as it is not 

based upon improper factors.@); Zahl I, 895 A.2d at 444-45 (noting that the BME 

has the power to revoke the medical license of a physician who engages in fraud 

and deception). 

Zahl argues that his claim is viable under Esmail v. Macrane, in which the 

Seventh Circuit held that a liquor store owner had adequately stated a Aclass of one@

claim by alleging that city officials revoked his liquor license in a Aspiteful effort to 

>get= [the plaintiff] for reasons wholly unrelated to any legitimate state objective.@

53 F.3d 176, 180 (7th Cir. 1995). But unlike the plaintiff in Esmail, who 

successfully recovered his liquor license when the state courts determined that he 

had not committed any appreciable misconduct, Zahl cannot plausibly allege that 

prosecutors targeted him for Areasons wholly unrelated to any legitimate state 

objective.@ Id. Rather, given the state courts= findings about Zahl=s misconduct, the 

claim that New Jersey prosecutors pursued him for illegitimate reasons, without any 

rational basis, warrants dismissal under Iqbal. See, e.g., Santiago v. Warminster 

Twp., 629 F.3d 121, 134 (3d Cir. 2010) (dismissing as implausible civil rights claim 

against police officer). 
12

Because the proposed ' 1983 equal protection claim fails against the state 

actors, it also fails against the private defendants, whose liability depends on their 

having acted in concert with the state actors. See Am. Mfrs. Mut. Ins. Co. v. 

Sullivan, 526 U.S. 40, 49-50 (1999) (holding that ' 1983 liability requires state 

action); cf. Jennings v. Shuman, 567 F.2d 1213, 1220 (3d Cir. 1977) (AA private 

citizen, acting in concert with public officials, is liable under ' 1983.@).

Because we conclude that Zahl=s class of one equal protection claim is 

implausible in light of his established misconduct, we need not decide whether the 

District Court correctly concluded that Engquist, 553 U.S. 591, extends beyond the 

public employment context to bar Aclass of one@ claims premised on prosecutorial 

decisions. See United States v. Sanchez, 562 F.3d 275, 279 (3d Cir. 2009) (AAn 

appellate court may affirm a result reached by the District Court on different 

reasons, as long as the record supports the judgment.@) (internal quotation marks 

omitted).

IV

Zahl also argues the District Court erroneously held that the RICO claims in 

the proposed SAC were futile. The SAC asserts RICO claims under 18 U.S.C. '

1962(b), (c), and (d), based on allegations that the defendants committed mail fraud, 
13

wire fraud, and extortion in furtherance of a criminal conspiracy to deprive Zahl of 

his practice and medical license. 

All of Zahl=s proposed RICO claims require him to plead that the defendants 

engaged in a Apattern of racketeering activity.@ See H.J. Inc. v. Nw. Bell Tel. Co., 

492 U.S. 229, 232-33 (1989). This element contains two prongs. First, a plaintiff 

must show that the defendants= predicate crimes are Arelated@ B that is, that the 

crimes have Asimilar purposes, results, participants, victims, or methods of 

commission, or otherwise are interrelated by distinguishing characteristics . . . .@ Id. 

at 240 (quoting 18 U.S.C. ' 3575). Second, and most relevant here, the plaintiff 

must show that the defendants= criminal conduct is Acontinuous@ B that it Aamount[s] 

to or threaten[s] long-term criminal activity.@ Id. at 243 n.4; see also Kehr 

Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1412 (3d Cir. 1991) (A[R]elated 

predicate acts in furtherance of a single scheme can constitute a pattern if the acts 

constitute or present the threat of long-term continuous criminal activity.@). 

The Third Circuit considers the following factors as relevant to RICO 

continuity: Athe number of unlawful acts, the length of time over which the acts 

were committed, the similarity of the acts, the number of victims, the number of 
14

perpetrators, and the character of the unlawful activity.@ Id. at 1412-13 (quoting 

Barticheck v. Fidelity Union Bank/First Nat=l State, 832 F.2d 36, 39 (3d Cir. 1987).

We agree with the District Court that the SAC does not plead RICO 

continuity. Although the SAC accuses the defendants of Afraud@ in nearly every 

sentence, it identifies only a few acts that, judging by the contents of the pleading 

alone (without considering the state court litigation), might plausibly be construed 

as fraudulent. Defendant Blackman, Zahl=s former employee, is accused of making 

false accusations about Zahl=s professional misconduct. A1448 (SAC & 58); A1449

(SAC & 62). Similarly, defendant McKeown, Zahl=s ex-wife=s private investigator, 

is accused of providing authorities with false information about Zahl. A1443 (SAC 

& 35). Such concrete allegations of illegality collectively constitute a needle within 

the haystack of the 98-page SAC. They are clearly insufficient plausibly to allege 

that the defendants engaged in Along-term criminal activity.@ See Kehr Packages, 

926 F.2d at 1414 (holding that the RICO-continuity analysis of an allegedly 

fraudulent scheme must focus on Athe instances of deceit constituting the underlying 

fraudulent scheme@).

Moreover, the outcome of the state court proceedings injects the RICO 

claims with the same crippling implausibility that undermines the equal protection 
15

claim. The crux of Zahl=s RICO theory is that the defendants conspired to deprive 

Zahl of his license and medical practice by falsely accusing him of professional 

fraud and deceit. But the state court litigation has already conclusively established 

that Zahl did, in fact, engage in professional fraud and deceit. Furthermore, many 

of the SAC=s allegations about deceitful acts by the defendants are directly 

contradicted by the state courts= findings. For example, the SAC accuses Blackman 

of falsely alleging to state investigators that Zahl improperly added her name to the 

records of procedures in which she was not involved, A1450 (SAC & 68), but the 

state courts found that these allegations were true. See Zahl I, 895 A.2d at 446. 

Zahl would therefore be collaterally estopped from proving many of his already 

paltry allegations of criminality. See Hernandez, 684 A.2d at 1392. As a result, the 

SAC falls well short of plausibly alleging RICO continuity; thus, the District Court 

correctly rejected the proposed RICO claims as futile.2 

V

For all of the foregoing reasons, the judgment of the District Court will be

AFFIRMED.

 

2 Relying on Gamboa v. Velez, 457 F.3d 703 (7th Cir. 2006), the District 

Court also held that allegations of a single malicious prosecution can never 

establish RICO continuity. We need not, and do not reach this issue.