Court Opinion

ID: 216915
Source: CourtListenerOpinion
Date Created: 2011-05-18 16:47:28+00
Date Added: 2024-06-11T17:28:30.376201
License: Public Domain

NOT PRECEDENTIAL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

                             1
                        Submitted Under Third Circuit LAR 34.1(a)
                                     April 29, 2011

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

                                    (Filed May 18, 2011)

                                         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

       *
               The Honorable A. Wallace Tashima, Senior United States Circuit Judge for the
Ninth Circuit, sitting by designation.

                                              2
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

                                          3
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

                                          4
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.

      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

      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.

                                           5
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.

                                           6
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 well-

pleaded facts as true and then Adetermine whether the facts alleged . . . are sufficient

                                           7
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.

                                            8
(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,

                                           9
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

                                           10
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).

                                           11
      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,

                                           12
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

                                          13
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

                                          14
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.

                                          15