Court Opinion

ID: 4524166
Source: CourtListenerOpinion
Date Created: 2020-04-09 21:00:25.374207+00
Date Added: 2024-06-11T12:10:09.522291
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        APR 9 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

BLUE OAK MEDICAL GROUP, a                       No.    18-56610
California Medical Corporation,
                                                D.C. No.
                Plaintiff-Appellant,            2:18-cv-03867-RGK-SK

 v.
                                                MEMORANDUM*
STATE COMPENSATION INSURANCE
FUND, a California Corporation; et al.,

                Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Central District of California
                   R. Gary Klausner, District Judge, Presiding

                          Submitted February 12, 2020**
                              Pasadena, California

Before: BYBEE, COLLINS, and BRESS, Circuit Judges.

      Blue Oak Medical Group (“Blue Oak”) appeals the district court’s dismissal

under Federal Rule of Civil Procedure 12(b)(6) of Blue Oak’s first amended

complaint against Express Scripts, Inc. (“Express Scripts”) and State Compensation

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Insurance Fund (“State Fund”). We have jurisdiction under 28 U.S.C. § 1291 and

affirm.

         Blue Oak is a network of occupational medical clinics in Southern California

that provides treatment for workers injured on the job. State Fund is a state-created

non-profit workers’ compensation insurer. See Cal. Ins. Code §§ 11770, 11775.

State Fund has allowed Blue Oak to participate in its network of medical providers.

Express Scripts is a nationwide pharmacy service that serves as State Fund’s

designated “pharmacy benefit network.” See Cal. Lab. Code § 4600.2(a); Cal. Code

Regs. tit. 8, § 9792.27.8(d).

         In its first amended complaint, Blue Oak alleged that State Fund and Express

Scripts violated the Racketeer Influenced and Corrupt Organizations Act (RICO),

18 U.S.C. § 1962(c), by fraudulently inducing Blue Oak to dispense patient

medications and then failing to reimburse Blue Oak. Blue Oak also asserted a RICO

conspiracy claim, id. § 1962(d), and a claim under California Business and

Professions Code § 17200, which were both derivative of the underlying RICO

claim.

         Reviewing de novo, Eclectic Props. E., LLC v. Marcus & Millichap Co., 751

F.3d 990, 995 (9th Cir. 2014), we agree with the district court that Blue Oak failed

to state a claim upon which relief can be granted. One of the several elements a

RICO plaintiff must allege is “racketeering activity.” 18 U.S.C. § 1962(c); Eclectic

                                           2
Props., 751 F.3d at 997. Here, Blue Oak alleged that State Fund and Express Scripts

had engaged in the predicate “racketeering activity” of mail and wire fraud. See 18

U.S.C. §§ 1341, 1343. Mail and wire fraud require Blue Oak to allege, among other

things, “a scheme to defraud,” Eclectic Props., 751 F.3d at 997, which “covers any

scheme to deprive another of money or property by means of false or fraudulent

pretenses, representations, or promises.” United States v. Brugnara, 856 F.3d 1198,

1207 (9th Cir. 2017) (quotations omitted).      Fraud must also be pleaded with

particularity under Federal Rule of Civil Procedure 9(b). See Odom v. Microsoft

Corp., 486 F.3d 541, 553–54 (9th Cir. 2007) (en banc).

      Blue Oak’s operative first amended complaint fails to plead a scheme to

defraud Blue Oak into supplying medications with the promise of reimbursement.

It is undisputed that State Fund could contract with a pharmacy benefit network like

Express Scripts to be its exclusive provider of medications. See Cal. Lab. Code

§ 4600.2(a); Cal. Code Regs. tit. 8, § 9792.27.8(d). In its first amended complaint,

Blue Oak expressly alleged it was aware that State Fund had entered into such an

arrangement with Express Scripts: “[O]n or about November 1, 2015, [State Fund]

had announced a policy that all prescription drugs must be dispensed only through

Express Scripts.”

      In addition, State Fund’s written responses to Blue Oak’s requests for

authorization—which Blue Oak relied upon in its amended complaint and which the

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district court could therefore consider in ruling on a motion to dismiss, see United

States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003)—specifically stated:

“Authorization of medication does not constitute approval to dispense medications

from the physician’s office. All medication should be filled by an Express Scripts

Network pharmacy.” Under these circumstances, Blue Oak has not alleged any

scheme to defraud or false statements to the effect that Blue Oak would be

reimbursed for medications it provided. Moreover, to the extent that Blue Oak

experienced persistent difficulties in dealing with Express Scripts after medications

were approved, Blue Oak has failed to allege sufficient facts to establish that the

approvals were thereby fraudulent when issued.

      Because Blue Oak’s other claims are derivative of its RICO claim, those

claims fail as well. See Howard v. Am. Online Inc., 208 F.3d 741, 751 (9th Cir.

2000); Smith v. State Farm Mut. Auto. Ins. Co., 113 Cal. Rptr. 2d 399, 414 (Cal. Ct.

App. 2001).

      The district court also did not abuse its discretion in denying leave to amend.

Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). The district court

had previously allowed Blue Oak to amend once. See Zucco Partners, LLC v.

Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009). In seeking leave to amend a

further time, Blue Oak “did not propose any new facts or legal theories” to remedy

the deficiencies in its first amended complaint. Gardner v. Martino, 563 F.3d 981,

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991 (9th Cir. 2009).

      AFFIRMED.

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