HomeMy WebLinkAbout2016-08-08 16-290 Council Documents (13) Case 2:11-cv-00196-DBH Document 127 Filed 04/01/14 Page 1 of 56 PagelD#: 1829
• UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
CRC HEALTH GROUP,INC., et al., )
)
Plaintiffs )
)
v. ) No. 2:11-cv-196-DBH
)
TOWN OF WARREN, )
)
Defendant )
RECOMMENDED DECISION ON MOTIONS
FOR PARTIAL SUMMARY JUDGMENT AND
MEMORANDUM DECISION ON MOTION TO EXCLUDE
Plaintiffs CRC Health Group, Inc. ("CRC Health") and CRC Recovery, Inc. ("CRC
Recovery") (together, "CRC" or"plaintiffs") seek summary judgment as to their claims that the
III
defendant Town of Warren ("Town") engaged in intentional discrimination in violation of the
Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12131 et seq., when it enacted a
moratorium on methadone clinics and failed to offer a reasonable accommodation to CRC. See
Plaintiffs' Motion for Partial Summary Judgment Based Upon Intentional Facial Discrimination
("Plaintiffs' S/J Motion") (ECF No. 107) at 1, 17; Third Amended Complaint (ECF No. 27)
¶¶46-56.
The Town moves for summary judgment as to CRC's claim for lost profits,partly on the
basis of a separate motion to exclude the lost profits opinion testimony of expert Allan M.
Feldman, Ph.D., and as to any claims by CRC Health. See Defendant's Motion for Partial
Summary Judgment("Defendant's SIJ Motion") (ECF No. 110) at 1-2, 16; Motion In Limine To
Exclude Lost Profits Testimony by Dr. Allan M. Feldman ("Motion To Exclude") (ECF No.
112) at 1, 17.
4111
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For the reasons that follow, I deny the Motion To Exclude, recommend that the court •
grant the Plaintiffs' SIJ Motion as to intentional, facial discrimination but otherwise deny it, and
recommend that the court grant the Defendant's S/J Motion as to CRC Health but otherwise deny
it.
I. Applicable Legal Standards
A. Federal Rule of Civil Procedure 56
Summary judgment is appropriate "if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(a); Santoni v. Potter, 369 F.3d 594, 598 (1st Cir.2004). "A dispute is genuine if the evidence
about the fact is such that a reasonable jury could resolve the point in the favor of the non-
moving party." Rodriguez-Rivera v. Federico Trilla Reg'l Hosp. of Carolina, 532 F.3d 28, 30
(1st Cir.2008) (quoting Thompson v. Coca-Cola Co., 522 F.3d 168, 175 (1st Cir.2008)). "A fact •
is material if it has the potential of determining the outcome of the litigation." Id. (quoting
Maymi v. P.R. Ports Auth., 515 F.3d 20, 25 (1st Cir.2008)).
The party moving for summary judgment must demonstrate an absence of evidence to
support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In
determining whether this burden is met, the court must view the record in the light most
favorable to the nonmoving party and give that party the benefit of all reasonable inferences in
its favor. Santoni, 369 F.3d at 598. Once the moving party has made a preliminary showing that
no genuine issue of material fact exists, the nonmovant must "produce specific facts, in suitable
evidentiary form, to establish the presence of a trialworthy issue." Triangle Trading Co. v.
Robroy Indus., Inc.,200 F.3d 1,2 (1st Cir. 1999)(citation and internal punctuation omitted);Fed.
R. Civ. P. 56(c). "As to any essential factual element of its claim on which the nonmovant
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• would bear the burden of proof at trial, its failure to come forward with sufficient evidence to
generate a trialworthy issue warrants summary judgment to the moving party." In re Spigel, 260
F.3d 27, 31 (1st Cir.2001) (citation and internal punctuation omitted). When, as here,the parties
stipulate to facts for purposes of summary judgment, the court gives the nonmoving party the
benefit of inferences from the stipulated facts. See, e.g., Albedyll v. Wisconsin Porcelain Co.
Revised Ret. Plan, 947 F.2d 246, 254 (7th Cir. 1991).
B. Local Rule 56
The evidence that the court may consider in deciding whether genuine issues of material
fact exist for purposes of summary judgment is circumscribed by the local rules of this district.
See Loc. R. 56. The moving party must first file a statement of material facts that it claims are
not in dispute. See Loc. R. 56(b). Each fact must be set forth in a numbered paragraph and
• supported by a specific record citation. See id. The nonmoving party must then submit a
responsive "separate, short, and concise" statement of material facts in which it must "admit,
deny or qualify the facts by reference to each numbered paragraph of the moving party's
statement of material facts[.]" Loc. R. 56(c). The nonmovant likewise must support each denial
or qualification with an appropriate record citation. See id. The nonmoving party may also
submit its own additional statement of material facts that it contends are not in dispute, each
supported by a specific record citation. See id. The movant then must respond to the nonmoving
party's statement of additional facts, if any, by way of a reply statement of material facts in
which it must "admit, deny or qualify such additional facts by reference to the numbered
paragraphs" of the nonmovant's statement. See Loc. R. 56(d). Again, each denial or
qualification must be supported by an appropriate record citation. See id.
Failure to comply with Local Rule 56 can result in serious consequences. "Facts
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contained in a supporting or opposing statement of material facts, if supported by record citations •
as required by this rule, shall be deemed admitted unless properly controverted." Loc. R. 56(f).
In addition, "[t]he court may disregard any statement of fact not supported by a specific citation
to record material properly considered on summary judgment" and has "no independent duty to
search or consider any part of the record not specifically referenced in the parties' separate
statement of fact." Id.; see also, e.g., Sanchez-Figueroa v. Banco Popular de P.R., 527 F.3d 209,
213-14 (1st Cir. 2008); Fed. R. Civ. P. 56(e)(2) ("If a party fails to properly support an assertion
of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the
court may . . . consider the fact undisputed for purposes of the motion[.]").
II. Stipulated Facts (All Motions)
Through wholly owned subsidiaries, CRC Health operates 134 treatment facilities in 26
states and treats approximately 30,000 patients per day, making it the largest and most •
geographically diversified for-profit provider of substance abuse treatment. The Parties' Joint
Stipulations of Facts ("Factual Stip.") (ECF No. 106) ¶ 1. CRC Health has many subsidiaries,
including CRC Corporation. Id. ¶ 2. CRC Corporation has many subsidiaries, including CRC
Recovery, a Delaware corporation. Id. ¶ 3. CRC Corporation wholly owns and operates CRC
Recovery. Id. The Town of Warren is a Maine municipal corporation. Id. ¶4. Its population as
reported by the 2010 census is 4,750. Id. ¶ 5. It has 2,546 registered voters. Id. The Town
consists of a 46.6 square mile area. Id. ¶6. CRC Health, CRC Corporation, and CRC Recovery
are all for-profit corporations. Id.¶7.
In October 2010, CRC Recovery was qualified to do business in Maine under the
assumed name of"MidCoast Treatment Center" for the purpose of operating a methadone clinic
in Maine. Id. ¶ 8. In October 2010, CRC Recovery filed for a license from the State of Maine
•
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• Department of Health and Human Services as an outpatient methadone treatment facility. Id.
¶9.
On October 7, 2010, CRC Recovery's prospective landlord, Vixen Land Holdings, LLC
("Vixen"), applied to the Warren Planning Board for a permit for "business and professional
offices" at 44 School Street in Wan-en, Maine. Id. ¶ 10. The 44 School Street property consists
of a former elementary school building and 5.37 acres of land located in the village area of
Warren, between Route 90 and Main Street. Id ¶ 11. Vixen did not own 44 School Street, but
had a contract to buy that property from the Town. Id. ¶ 12. The Town later terminated the
contract,purportedly for Vixen's failure to meet a financing contingency. Id.
On October 15, 2010, Vixen and CRC Health entered into a letter of intent for a lease of
the 44 School Street property. Id. ¶ 13. On November 4, 2010, after a short hearing, the
• Planning Board granted Vixen a land use permit for "business and professional offices" at 44
School Street. Id. ¶ 14. At that time, there was no moratorium, nor were methadone clinics
listed as a prohibited use under the Town's Land Use Ordinance or Site Plan Review Ordinance.
Id.1115.
On November 19, 2010, the Planning Board Chair wrote to the Board of Selectmen
requesting approval to rescind Vixen's November 4, 2010, approval. Id. ¶ 16. The Board Chair
raised three issues: (1) the Sanitary District rescinded its approval; (2) the applicant provided
"incomplete or misleading information when he came before the Planning Board on November
4, 2010;" and (3) the Planning Board reviewed the application under the Land Use Ordinance
rather than the Site Plan Review Ordinance. Id.¶ 17. At the December 2, 2010, Planning Board
meeting, the Board voted to rescind Vixen's permit. Id. ¶ 18.
•
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At the December 13,2010, Town Meeting,the voters approved a 180—day moratorium on II/
methadone clinics. Id. ¶ 19. On May 12, 2011, CRC filed this suit. Id. ¶20. On June 1, 2011,
the voters approved an extension of the moratorium through August 2, 2011. Id. ¶ 21. On
August 2, 2011, the voters approved a warrant lifting the moratorium and enacting a Large
Facilities Ordinance. Id.¶22. The moratorium was in effect for 232 days (December 13,2010—
August 2, 2011). Id. ¶23.
On August 31, 2011, the parties participated in a mediation and entered into a settlement,
which included, among other terms, that approval would be sought from the Planning Board for
a methadone clinic under the Town's recently adopted Large Facilities Ordinance. Id. ¶24. The
court later denied the Town's motion to enforce the settlement. Id.
On October 12, 2011, CRC Recovery filed with the Planning Board applications for site
plan approval of a methadone clinic under the Large Facilities Ordinance for alternative
1111
locations at 1642 Atlantic Highway and 1767 Atlantic Highway. Id. ¶ 25. CRC Recovery later
withdrew the application for 1642 Atlantic Highway and proceeded with the application for 1767
Atlantic Highway. Id.¶26.
On December 15, 2012, the Planning Board determined that CRC Recovery's application
was substantially complete. Id. ¶ 27. The Board had a number of additional meetings, and
ultimately voted to approve CRC Recovery's application on June 5, 2012. Id. ¶28. On July 12,
2012, the Board issued written findings of fact approving CRC Recovery's permit under the
Large Facility Ordinance. Id.¶29.
On June 19, 2012, a group of CRC Recovery's neighbors filed an appeal of CRC
Recovery's approval to the Warren Zoning Board of Appeals. Id. ¶ 30. The Zoning Board met
on August 16, 2012, and September 11, 2012. Id. ¶ 31. Before the Zoning Board could vote on
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• the appeal, on October 1, 2012, CRC Recovery notified the Board that it would withdraw its
application. Id. ¶ 32. The Zoning Board voted on October 4, 2012, to remand the matter to the
Planning Board. Id. ¶ 33. On November 1, 2012, the Planning Board voted to allow CRC
Recovery to withdraw its application. Id. ¶34.
No CRC entity currently has right, title, or interest in any property in Warren. Id. ¶ 35.
No CRC entity currently has plans to operate a clinic in Warren. Id. ¶ 36. The only remedy
CRC now seeks is damages. Id.¶37.
III. Plaintiffs' S/J Motion
A. Factual Background
The parties' statements of material facts, credited to the extent that they are either
admitted or supported by record citations in accordance with Local Rule 56, with disputes
resolved in favor of the Town as nonmovant, reveal the followi
• ng.'
CRC worked with Vixen to locate an appropriate site for a comprehensive treatment
clinic (a methadone clinic under the Town's later-adopted moratorium ordinance) in the mid-
coast area of Maine after the only one in the region, located in Rockland, closed. Plaintiffs'
Statement of Material Facts Not in Dispute Pursuant to Local Rule 56(b) ("Plaintiffs' SMF")
(ECF No. 108)111; Deposition of Joseph Pritchard("Pritchard Dep.") (ECF No. 104-9), attached
to Joint Summary Judgment Record("Joint Record") (ECF No. 104). at 30-32, 76-77, 90-91.2
Eventually, Vixen located a site for CRC's clinic in the Town of Warren at the "Brick
1 Statements that are qualified are assumed to be admitted subject to that qualification, unless a qualification
indicates otherwise. To the extent that I have incorporated one side's qualification into the statement of the other,I
have determined that the qualification is supported by the record citation(s)given. I have omitted qualifications that
are unsupported by the citation(s) given or redundant. I have also attempted to omit statements that merely track
those to which the parties have stipulated,which are set forth above.
2 I have substituted the phrase "worked with Vixen" for"engaged Vixen"in response to the Town's assertion that
the only formal agreement between CRC and Vixen was a letter of intent to lease space. Defendant's Opposing
. Statement of Material Facts and Additional Facts("Defendant's Opposing SMF")(ECF No. 117)¶1.
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School House" site at 44 School Street, which was owned by the Town. Plaintiffs' SMF ¶ 2; •
Defendant's Opposing SMF ¶ 2. On September 30, 2010, Town Manager Grant Watmough
signed the contract to sell the site to Vixen. Id. On October 15, 2010, CRC signed a letter of
intent with Vixen to lease 5,000 square feet of the Brick School House site. Id.3 CRC proposed
to treat recovering alcoholics or substance abusers. Plaintiffs' SMF ¶ 6; Affidavit of Philip L.
Herschman, Ph.D. ("Herschman Aff.") (ECF No. 11-4), attached to Motion for Preliminary
Injunction(ECF No. 11),¶4.4
On October 7, 2010, Vixen through its principal Bob Emery applied to the Town for a
site plan review for Business and Professional Offices — deemed complete by the Town — as
permitted by section 16(S), Land Use Standards, Town of Warren Land Use Ordinance, which is
defined in section 18(C) to include the "place of business for doctors, . . . psychiatrists,
psychologists, counsellors, but not including financial institutions or personal services."
Plaintiffs' SMF 7; Defendant's Opposing SMF 7. •
¶ PP g ¶
The Fire Department, Road Commissioner, Code Enforcement Officer, and Sanitary
District all signed off on the site plan review. Id. ¶ 11.5 On November 5, 2010, the Town's
Code Enforcement Officer, Bill O'Donnell, signed Planning Board Permit No. 1975TB. Id.
¶ 12.
Shortly thereafter, on December 2, 2010, on extremely short notice, a warrant for a
3 I overrule the Town's objection and request to strike paragraph 2 on the basis that it is not sufficiently short and
concise to pass muster pursuant to Local Rule 56. Defendant's Opposing SMF 112. I omit the final three sentences
of paragraph 2,Plaintiffs' SMF¶2,which the Town denies,Defendant's Opposing SMF¶2,viewing the evidence
in the light most favorable to the Town as nonmovant.
4 I omit the remainder of paragraph 6, Plaintiffs' SMF ¶ 6, sustaining the Town's objection that it contains legal
conclusions rather than statements of fact,Defendant's Opposing SMF¶6, and concluding that the remaining facts
set forth therein are neither admitted nor supported by the citation given. I overrule the Town's objection as to the
portion of the statement set forth above that Dr. Herschman's testimony is inadmissible because he is an
undesignated expert. As the Chief Clinical Officer of CRC Health,Herschman Aft.. ¶ 1, Dr. Herschman need not
have been designated as an expert to testify as to the population the Warren clinic was intended to serve.
5 I omit paragraphs 9 and 10, Plaintiffs' SMF ¶¶ 9-10, sustaining the Town's objections that they are legal
conclusions rather than statements of fact,Defendant's Opposing SMF¶¶9-10.
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• Special Town Meeting was issued for the purpose of enacting an ordinance titled "an ordinance
to enact a moratorium on methadone clinics"("Moratorium Ordinance"). Id. ¶ 13.6 Community
comments both during and outside of the meeting included: "you are bringing addicts in to our
town," "go back to Rockland[,]" and "[w]e don't want them here." Plaintiffs' SMF ¶ 14;
Pritchard Dep. at 133.7 Members of the audience at the Special Town Meeting wore
"Methadon't" buttons. Plaintiffs' SMF ¶ 14; Pritchard Dep. at 207-08; Deposition of Grant
Watmough ("Watmough Dep.") (ECF No. 104-6), attached to Joint Record, at 35, 109, 111.
There was also a petition with a"signature page to get the selectmen thrown out for doing this to
them[,]"Plaintiffs' SMF¶ 15; Pritchard Dep. at 133, and to "cancel and rescind the purchase and
sale agreement with Vixen LLC relative to 'The Brick School House,"' Plaintiffs' SMF ¶ 14;
Defendant's Opposing SMF¶ 14.
• The minutes of the December 13, 2010, Special Town Meeting during which the
moratorium was enacted do not reflect that any evidence was presented to the Board to justify
the moratorium. Id. ¶ 16.8 The Moratorium Ordinance singled out methadone clinics from all
other types of lawful medical uses and referenced methadone 14 to 15 times. Id.¶ 17.9 Nowhere
did the ordinance reference "high intensity use," the justification later asserted by the Town for
6 I omit the remainder of paragraph 13, Plaintiffs' SMF¶ 13 which the Town denies, Defendant's Opposing SMF
¶ 13,viewing the evidence in the light most favorable to the Town as nonmovant.
7 The Town objects to,and requests to strike,paragraph 14 on several bases:that(i)it violates the Local Rule 56(b)
requirement that a movant set forth a "separate, short, and concise statement of material facts, each set forth in a
separately numbered paragraph(s)," (ii) it "contains numerous statements that are inadmissible hearsay or not
supported by admissible evidence, such as an internet link to a newspaper website[,]" and (iii) the final sentence
lacks a citation to record evidence. Defendant's Opposing SMF ¶ 14. While the paragraph is not a model of a
separate, short, and concise statement of material facts, I decline to strike it on that basis. I sustain the hearsay
objection with respect to CRC's reliance on the internes link to a newspaper website, and otherwise deny it for
failure to identify other specific hearsay. I sustain the objection to the final sentence of the paragraph on the basis
that it is unsupported by any record citation.
8 My recitation includes a portion of the Town's qualification of this statement. Defendant's Opposing SMF¶ 16.
The Town further qualifies the statement by noting that, although the minutes may not refer to evidence, the
Moratorium Ordinance itself contained findings of fact. Id.
9 My recitation includes the relevant portion of the Town's qualification of this statement. Defendant's Opposing
• SMF¶17.
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the moratorium. Id.1° •
On December 27, 2010, CRC sent the Town a letter requesting a reasonable
accommodation under the ADA, stating that: (1) the Town's enactment of a blanket moratorium
on methadone clinics throughout the Town, while allowing comparable medical uses, constituted
facial discrimination under the ADA, (2) the Town's actions in first approving the requested use
and then withdrawing the approval in the face of community prejudice constituted intentional
discrimination under the ADA, and, (3) alternatively, CRC requested a reasonable
accommodation under the ADA. Plaintiffs' SMF¶ 19;Exh. 56,filed on Exhibit CD.11
On December 30, 2010, the Town's attorney responded, stating that CRC lacked standing
to claim discrimination under the ADA. Plaintiffs' SMF ¶20; Defendant's Opposing SMF ¶20.
On January 13, 2011, CRC responded, citing caselaw supporting its claim for provider and
organizational standing. Id. ¶ 21.12 The only thing that the Town did in response to the
reasonable accommodation request was to draft and later redraft an ordinanceg
ro osin to •
P p
regulate methadone clinics. Id.¶23.13
1° The Town qualifies this statement, asserting that, although the ordinance did not use the words "high intensity
use,"it contained findings of fact that the nature of the use required study to evaluate compatibility with neighboring
uses. Defendant's Opposing SMF ¶ 17; Exh. 43, filed on compact disc per ECF No. 104-10 ("Exhibit CD"),
attached to Joint Record,at[3]. The Town adds that the purpose of the moratorium was for the Town to be able to
manage an expanded use or high intensity use,the scope of which had not previously been addressed. Defendant's
Opposing SMF¶ 17;Deposition of Patrick Mellor,Esq. ("Mellor Dep.")(ECF No. 104-7),attached to Joint Record,
at 55,57-58.
11 I overrule the Town's objections that this statement sets forth legal conclusions, not facts, and that testimony by
CRC's own counsel is inadmissible unless counsel intends to testify as a witness at trial. Defendant's Opposing
SMF¶ 19. The statement is provided not for the truth of its assertions, but to indicate the position taken by CRC
following the enactment of the moratorium.
12 The Town asserts the same objections interposed in response to paragraph 19,Defendant's Opposing SMF¶21,
which I overrule for the same reason.
13 I omit paragraph 22,Plaintiffs' SMF¶22,which the Town denies,Defendant's Opposing SMF¶22,viewing the
evidence in the light most favorable to the Town as nonmovant. The Town qualifies paragraph 23, asserting that it
drafted and redrafted an ordinance after the moratorium went into effect and engaged with CRC's' counsel in
extensive discussions concerning the content of what became the Large Facilities Ordinance. Defendant's Opposing
SMF¶23;Mellor Dep. at 38-39, 145-46. I omit paragraphs 24 through 31, 34, and 35,Plaintiffs' SMF¶¶24-31,
34-35, sustaining the Town's objection and request to strike those paragraphs on the basis that CRC relies on expert
testimony by undesignated experts, which is inadmissible for purposes of summary judgment, Defendant's •
(continued on next page)
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• On March 1, 2011, the Town rescinded Vixen's contract to purchase the "Old Brick
School" site, purportedly because Vixen failed to show proof of financing, notwithstanding
Vixen's letter dated January 24, 2011, stating that it had funds to close. Plaintiffs' SMF ¶ 18;
Exhs. 4, 77, filed on Exhibit CD.14
Vixen had no assets at the time it issued a letter claiming to have the funds available to
fund the purchase of 44 School Street or for a roughly six-year period prior to that time.
Additional Facts ("Defendant's Additional SMF"), commencing on page 15 of Defendant's
Opposing SMF, Ill; Intervenors' Interrog. Ans. 7117-18.15 The closing date listed in paragraph
4 of the purchase and sale agreement between Vixen and the Town was May 6, 2011.
Defendant's Additional SMF ¶ 2; Exh. 36, filed on Exhibit CD. The renovations needed to
prepare the 44 School Street location for opening as a clinic would have required seven to 12
• months. Defendant's Additional SMF 113; Deposition of Robert N. Emery, Jr. ("Emery Dep.")
(ECF No. 109-1), attached to Plaintiffs' Record, at 66-67.
A Planning Board applicant has an obligation to be honest about the scope and intensity
of a proposed use. Defendant's Additional SMF 114; Mellor Dep. at 66-67. CRC and Emery met
with the Town of Warren Selectmen in executive session to discuss CRC's interest in operating a
Opposing SMF ¶¶ 24-31, 34-35; Harriman v. Hancock Cnty., 627 F.3d 22, 33 (1st Cir. 2010). While in certain
narrow circumstances lay opinion testimony is admissible,see, e.g., Harriman,627 F.3d at 33,CRC did not respond
to the request to strike or otherwise indicate that any of the challenged testimony,most if not all of which appears to
be in the nature of expert testimony, would be admissible. See Loc. R. 56(e) (permitting responses to requests to
strike statements of fact). I also omit paragraph 31,Plaintiffs' SMF¶32,sustaining the Town's objection that it is a
conclusory statement of government policy, Defendant's Opposing SMF¶32,paragraph 33,Plaintiffs' SMF¶33,
sustaining the Town's objection that it relies on citation to inadmissible evidence in the form of website links that
appear to be inactive, Defendant's Opposing SMF ¶ 33, and paragraph 36, Plaintiffs' SMF ¶ 36, sustaining the
Town's objection that it is unsupported by the citation given,Defendant's Opposing SMF¶36.
14 The Town qualifies this statement,asserting that it acted because Vixen did not supply a lender's commitment for
financing. Defendant's Opposing SMF¶18;Watmough Dep. at 116;Exh.77,filed on Exhibit CD. The Town adds
that Vixen had no assets of any kind. Defendant's Opposing SMF¶ 18;Intervenors' Answers to Defendant's First
Set of Interrogatories ("Intervenors' Interrog. Ans.") (ECF No. 109-2), attached to Plaintiffs' Summary Judgment
Record("Plaintiffs' Record")(ECF No. 109),¶18.
15 CRC filed no reply to the Town's statement of additional facts. ECF Docket. Thus,the Town's additional facts
• are deemed admitted to the extent supported by record citations as required by Local Rule 56. Loc.R.56(f).
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methadone clinic in Warren. Defendant's Additional SMF 115; Mellor Dep. at 111, 148. Emery, •
who presented Vixen's application to the Planning Board on November 4, 2011, for approval for
business and professional offices, never told the Board that CRC was involved. Defendant's
Additional SMF ¶ 6; Mellor Dep. at 30, 34. Emery led the Planning Board to believe that he did
not yet have any tenants. Defendant's Additional SMF ¶ 7; Mellor Dep. at 64-65. In fact, CRC
and Vixen had entered into a letter of intent to lease the space. Defendant's Additional SMF¶ 8;
Pritchard Dep. at 115; Burke Dep. at 86; Exh. 2, filed on Exhibit CD. Emery led the Planning
Board to believe that the proposed use would be like a lawyer's, accountant's, or real estate
agent's professional office. Defendant's Additional SMF ¶ 9; Mellor Dep. at 68, 70. The
Planning Board did not know that CRC was interested in a high-intensity use. Defendant's
Additional SMF ¶ 10; Mellor Dep. at 70-71. Because the Planning Board did not have accurate
and complete information concerning the nature of the proposed use, it did not use all of the •
ordinance tools at its disposal to regulate that use. Defendant's Additional SMF ¶ 11; Mellor
Dep. at 63.
The Moratorium Ordinance contains findings of fact that (i) "a Methadone Clinic
presents the potential for new and unknown impacts, including public safety concerns and
concerns about compatibility with surrounding uses[,]" (ii) "the application of the Town's
existing Comprehensive Plan, Land Use Ordinance, and Site Plan Review Ordinance and other
land use ordinances and regulations is inadequate to prevent the possibility of serious public
harm from an inappropriately located Methadone Clinic[,]" and (iii) "the Town needs a
reasonable amount of time to study the land use implications of Methadone Clinics and to
develop reasonable regulations governing their location and operation[.]" Defendant's
Additional SMF ¶¶ 13-15; Moratorium Ordinance (ECF No. 104-2), attached to Joint Record, at
•
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• [1].
There were various reasons why the Town adopted the Moratorium Ordinance that have
nothing to do with the patrons of the proposed clinic. Defendant'sAdditional SMF¶ 16• Mellor
Dep. at 63-64, 149-51. These included that Vixen had applied to the Planning Board for
approval but had been dishonest concerning the nature of the proposed use. Defendant's
Additional SMF¶ 17; Mellor Dep. at 63. The Town was concerned about the compatibility of an
intense business use in a residential village area. Defendant's Additional SMF¶ 18; Mellor Dep.
at 63-64. The moratorium identified methadone clinics, but only because that was the specific
high intensity use proposed at that time. Defendant's Additional SMF ¶ 19; Mellor Dep. at 75-
76.
After the Moratorium Ordinance passed, a Town committee convened and repeatedly met
• for the purpose of drafting an ordinance to fill the identified gap in the Town's land use scheme.
Defendant's Additional SMF ¶ 20; Mellor Dep. at 38-39. The Town's goal was to "ensure that
uses in the village were compatible with the character of the village and the traffic patterns of the
village and the residential nature of the village." Defendant's Additional SMF 1121; Mellor Dep.
at 76-77.
The Town repeatedly solicited and received input from CRC's representatives in an effort
to accommodate CRC's needs but still allow the Town to appropriately regulate high intensity
uses in the village district. Defendant's Additional SMF¶22; Mellor Dep. at 157-58.
The Town extended the moratorium for a couple of additional months by enacting the
Ordinance To Extend a Moratorium. Defendant's Additional SMF ¶ 23; An Ordinance To
Extend a Moratorium Pursuant to 30-A MRSA 4356 (ECF No. 104-3), attached to Joint Record.
That ordinance contained findings of fact that (i) "the application of the Town's existing
411
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Comprehensive Plan, Land Use Ordinance, Site Plan Review Ordinance and other land use •
ordinances and regulations is inadequate to prevent the possibility of serious public harm from an
inappropriately located outpatient addiction treatment clinic[,]" (ii) "the problem giving rise to
the need for the Moratorium still exists[,]" and (iii) "progress . . . is being made to alleviate the
problem giving rise to the need for the Moratorium[.]" Id. ¶¶25-27.
Abutters appealed CRC's approval at 1767 Atlantic Highway to the Zoning Board of
Appeals. Defendant's Additional SMF ¶ 28; Affidavit of Paul L. Gibbons ("Gibbons Aff.")
(ECF No. 117-1), attached to Defendant's Opposing SMF, ¶ 7. A Zoning Board decision is
appealable under Maine Rule of Civil Procedure 80B to Superior Court, and such an appeal
would likely have been filed. Defendant's Additional SMF¶29; Gibbons Aff. 119. A Rule 80B
appeal in Knox County would likely have taken two years. Defendant's Additional SMF ¶ 30;
Gibbons Aff. ¶ 10. A Law Court appeal would have taken about 18 additional months. •
Defendant's SMF¶31; Gibbons Aff. ¶ 11.
B. Discussion
Title II of the ADA provides that "no qualified individual with a disability shall, by
reason of such disability, be excluded from participation in or be denied the benefits of the
services, programs, or activities of a public entity, or be subjected to discrimination by any such
entity." 42 U.S.C. § 12132. To prevail on a Title II ADA claim, a plaintiff must demonstrate:
(1) that he is a qualified individual with a disability; (2) that he was either
excluded from participation in or denied the benefits of some public entity's
services, programs, or activities or was otherwise discriminated against; and
(3)that such exclusion, denial of benefits, or discrimination was by reason of the
plaintiffs disability.
Buchanan v. Maine, 469 F.3d 158, 170-71 (1st Cir. 2006) (citation and internal quotation marks
omitted). A treatment provider such as CRC has standing to sue on its own behalf when"denied
1111
14
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• a zoning permit because it cares for and/or associates with individuals who have disabilities."
MX Grp., Inc. v. City of Covington, 293 F.3d 326, 335 (6th Cir. 2002).
"Courts have construed [42 U.S.C. § 12132] to authorize several different types of ADA
claims: (i) those brought under an intentional discrimination (or `disparate treatment') theory;
(ii)those brought under a disparate impact theory; and (iii) those brought under a `failure to
accommodate' theory." Grider v. City & Cnty. of Denver, Civil Action No. 10-cv-00722-MSK-
MJW, 2011 WL 721279, at *3 (D. Colo. Feb. 23, 2011) (citations omitted).
"There are two types of disparate treatment cases: ones that involve a facially
discriminatory policy, and ones that involve more typical individualized decision-making."
Daveri Dev. Grp., LLC v. Village of Wheeling, 934 F. Supp. 2d 987, 996 (N.D. Ill. 2013). See
also, e.g., Lapid Ventures, LLC v. Township of Piscataway, Civ. No. 10-6219 (WJM), 2011 WL
2429314, at *7 (D.N.J. June 13, 2011) ("To succeed on a claim of disparate treatment, Plaintiffs
•
must show that either Ordinance 10-03 was passed with the desire to discriminate and that this
discriminatory purpose was a `motivating factor' behind the challenged action, or that the
regulation uses a facially discriminatory classification.").
"Disparate impact analysis focuses on facially neutral policies or practices that may have
a discriminatory effect." Boykin v. Gray, Civil Action No. 10-1790 (PLF),2013 WL 5428780, at
*4 (D.D.C. Sept. 30, 2013) (citation and internal quotation marks omitted). "An ADA claim
based on a disparate impact theory requires a plaintiff to allege: (i) the existence and application
of a facially-neutral practice; and (ii) that the neutral application of that practice nevertheless has
a significantly disproportionate adverse impact upon disabled persons." Grider, 2011 WL
721279, at *4.
15
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CRC seeks summary judgment as to the Town's liability for violating Title II of the ADA •
on two theories, disparate treatment (through the enactment of a facially discriminatory
moratorium or, alternatively, because discriminatory purpose was a motivating factor in the
ordinance's enactment) and failure to accommodate. See Plaintiffs' S/J Motion at 11-17.16
The Town argues that summary judgment is unwarranted because (i) CRC fails to make
the requisite threshold showing that its prospective clients were"disabled"within the meaning of
the ADA, (ii) there are disputed issues of fact with respect to causation, including whether the
Town enacted the moratorium for non-discriminatory reasons and whether the moratorium
caused CRC's alleged lost profits, (iii) the Town did not fail to grant a reasonable
accommodation to CRC, and (iv) the court's grant of the Town's motion for partial summary
judgment on damages would render CRC's motion moot. See Memorandum in Opposition to
Plaintiffs' Motion for Partial Summary Judgment("Defendant's S/J Opposition") (ECF No. 116) •
at 1-2.
For the reasons discussed below, I conclude that CRC demonstrates its entitlement to
summary judgment as to the Town's liability for violation of Title II of the ADA on the basis of
disparate treatment in the form of the Town's enactment of a facially discriminatory ordinance,
but not on the basis of the Town's alleged failure to offer a reasonable accommodation. I need
not, and do not, reach CRC's alternative disparate treatment argument (that, even if the
ordinance was facially neutral, it was enacted with discriminatory purpose).17
16 CRC states, in passing, that it prevails on all three theories (disparate treatment, failure to accommodate, and
disparate impact). See Plaintiffs' S/J Motion at 11. However, it offers reasoned argument only with respect to its
disparate treatment and failure-to-accommodate theories. See id.at 11-17.
17 In its operative third amended complaint, CRC seeks declaratory relief, preliminary and permanent injunctive
relief, and damages based on the Town's enactment of the moratorium, replacement of the moratorium with the
Large Facilities Ordinance, and failure to grant reasonable accommodations. See Third Amended Complaint(ECF
No.27)¶¶1,46-56. CRC since has narrowed its case,having withdrawn its motion for a preliminary injunction,see
ECF No. 62 at 2,and any claims for permanent injunctive or declaratory relief,see ECF No. 102 at 1. It now seeks •
(continued on next page)
16
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• 1. Threshold Showing of Disability
For purposes of the ADA, an individual is disabled if he or she (i) has "a physical or
mental impairment that substantially limits one or more major life activities[,]" (ii) has "a record
of such an impairment[,]" or (iii) is "regarded as having such an impairment[.]" 42 U.S.C.
§ 12102(1). "[Major life activities include, but are not limited to, caring for oneself,performing
manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking,
breathing, learning, reading, concentrating, thinking, communicating, and working." Id.
§ 12102(2)(A).
The Town argues that (i) drug addiction is not recognized for purposes of the ADA as
disabling per se, and, thus, an individualized inquiry must be undertaken, and, (ii) absent proof
that its prospective clients were disabled, CRC lacks standing to bring associational
• discrimination ADA claims. See Defendant's SIJ Opposition at 3-7. The Town observes that
CRC offers no evidence respecting any individual who might have patronized its proposed clinic
and failed to designate an expert on the subject of the characteristics of persons receiving
methadone treatment. See id. at 9. It acknowledges that CRC's chief clinical officer, Dr.
Herschman, testified regarding the characteristics of its prospective clients. See id. at 11-13.
However, it argues that this testimony is inadmissible because Dr. Herschman was not
designated as an expert and, in any event, even if the testimony were admissible, it would not
establish the disability of CRC's prospective clients. See id. at 11-12.
CRC rejoins that, (i) in circumstances such as this, in which a municipality prevents a
treatment provider from opening a facility, it defies reason to require it to establish that its
only a damages remedy in connection with the Town's enactment of the moratorium and is no longer pursuing any
remedy related to the Large Facilities Ordinance,with the caveat that it may seek to introduce evidence concerning
• that ordinance in support of its claim that the moratorium violated the ADA. See id.
17
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prospective clients would have been disabled, and, (ii) in any event, the Town relies on •
authorities that predate or ignore the ADA Amendments Act of 2008 ("ADAAA"). See
Plaintiffs' Reply to Defendant's Opposition to Plaintiffs' Motion for Partial Summary Judgment
("Plaintiffs' S/J Reply") (ECF No. 122) at 1-6. CRC observes that, with respect to the "regarded
as" prong of the definition of disability, the ADAAA eliminated the need for proof that a
defendant regards an individual as significantly limited in a major life activity, and with respect
to the "actual disability" prong, the United States Department of Justice has construed drug
addiction as a per se disabling impairment pursuant to the ADA—a construction that it asserts is
entitled to deference. See id. at 3.
I need not determine whether drug addiction is disabling per se or whether, regardless,
CRC's evidence otherwise establishes that its prospective clients would have actually been
disabled. Pursuant to the ADA as amended by the ADAAA, "[a]n individual meets the •
requirement of`being regarded as having such an impairment' if the individual establishes that
he or she has been subjected to an action prohibited under this chapter because of an actual or
perceived physical or mental impairment whether or not the impairment limits or is perceived to
limit a major life activity." 42 U.S.C. § 12102(3)(A).
Drug addiction is an "impairment" for purposes of the ADA. See, e.g., 28 C.F.R.
§ 35.104 ("The phrase physical or mental impairment includes, but is not limited to, . . . drug
addiction, and alcoholism.");A Helping Hand, LLC v. Baltimore Cnty., Md., 515 F.3d 356, 367
(4th Cir. 2008) ("Unquestionably, drug addiction constitutes an impairment under the ADA.").
"[I]t is well-established that community views may be attributed to government bodies
when the government acts in response to those views." Helping Hand, 515 F.3d at 366. The
Town convened a Special Town Meeting on December 2, 2010, on extremely short notice for the
•
18
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• purpose of consideration of the enactment of a moratorium on methadone clinics. See Plaintiffs'
1 SMF ¶ 13; Defendant's Opposing SMF ¶ 13. Community comments both during and outside of
1 the meeting included: "you are bringing addicts in to our town," "go back to Rockland[,]" and
"[w]e don't want them here." Plaintiffs' SMF ¶ 14; Pritchard Dep. at 133. Members of the
audience at the Special Town Meeting wore "Methadon't" buttons. Plaintiffs' SMF ¶ 14;
Pritchard Dep. at 207-08; Watmough Dep. at 35, 109, 111. The Town thereafter imposed a
moratorium solely on methadone clinics. See Plaintiffs' SMF ¶ 17; Defendant's Opposing SMF
¶ 17.
I am mindful that the Moratorium Ordinance as ultimately enacted, and the Town's
attorney, identified concerns about methadone clinics other than the nature of their clientele. See
Defendant's Additional SMF ¶¶ 13-19; Moratorium Ordinance; Mellor Dep. at 63-64, 75-76,
• 149-51. Yet, this evidence does not undermine CRC's evidence that there was vocal public
opposition to the siting of a methadone clinic in the Town, that the opposition centered on the
fact that CRC proposed to serve drug addicts, and that, on short notice, the Town convened a
Special Town Meeting to consider the enactment of a moratorium on methadone clinics. See
Plaintiffs' SMF¶¶ 13-15; Pritchard Dep. at 133; Watmough Dep. at 109, 111.
CRC, therefore, makes the requisite threshold showing that its prospective clients were
disabled for purposes of the ADA.
2. Causation
The Town next argues that CRC must be denied summary judgment because there are
trialworthy issues as to whether the alleged disability of its prospective clients was the cause-in-
fact of the moratorium and whether the moratorium was the cause of CRC's alleged inability to
open a clinic and resulting alleged lost profits. See Defendant's S/J Opposition at 13-14.
1III
19
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a. Liability •
As CRC argues, see Plaintiffs' S/J Motion at 12-15, the moratorium was discriminatory
on its face in that it expressly singled out methadone clinics for less favorable zoning treatment
than other facilities, including other medical facilities, see, e.g., MX Grp., 293 F.3d at 344
("[T]he blanket prohibition of all methadone clinics from the entire city is discriminatory on its
face."); Bay Area Addiction Research & Treatment, Inc. v. City of Antioch, 179 F.3d 725, 729,
735 (9th Cir. 1999) (zoning ordinance barring the operation of any new substance abuse clinics,
including methadone clinics, within 500 feet of residential areas discriminatory on its face);
Habit Mgmt., Inc. v. City of Lynn, 235 F. Supp.2d 28, 29 (D. Mass. 2002) (prohibition on
methadone clinics within two miles of any school discriminatory on its face). Facial
discrimination is "by its very terms" intentional discrimination. Lovell v. Chandler, 303 F.3d
1039, 1057 (9th Cir. 2002).
Nonetheless, CRC acknowledges that "a defendant may justify a facially discriminatory
law by showing `(1) that the restriction benefits the protected class or (2) that [the restriction]
responds to legitimate safety concerns raised by the individuals affected, rather than being based
on stereotypes.' Plaintiffs' S/J Motion at 7-8 (quoting Community House, Inc. v. City of Boise,
490 F.3d 1041, 1050 (9th Cir. 2006)).18 The Town contends that, in this case, there is a triable
issue as to its justification. See Defendant's S/J Opposition at 15-17. It elaborates that:
18 Insofar as appears from my research, the First Circuit has not had occasion to delineate
a standard for determining the propriety or acceptability of justifications for facial discrimination under either the
Fair Housing Act or the ADA insofar as it pertains to zoning actions. In Community House,the United States Court
of Appeals for the Ninth Circuit followed the approach of the United States Courts of Appeals for the Sixth and
Tenth Circuits and rejected that of the United States Court of Appeals for the Eighth Circuit. See Community House,
490 F.3d at 1050. In the absence of controlling First Circuit authority, and in view of both sides' reliance on the
Community House standard,I follow that standard here. •
20
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III1. "Common sense suggests that the Town and its residents may well have had
legitimate safety concerns about the location of a methadone clinic serving recovering drug
addicts in their community." Id. at 15.
2. "Methadone clinics have in fact been associated with crime[,]" a proposition for
which it cites a 2004 U.S. Government Accountability Office ("GAO") study as well as four
cases, United States v. Moore, 423 U.S. 122, 135 (1975), United States v. Cap Quality Care,
Inc., 486 F. Supp.2d 47 (D. Me. 2007), United States v. Shinderman, No. CRIM. 05-67-P-H,
2006 WL 522105 (D. Me. Mar. 2, 2006) (rec. dec., aff'd as modified, May 25, 2006), and Jordan
v. Cap Quality Care, Inc., Civil Action Docket No. CV-04-248, 2009 Me. Super. LEXIS 78 (Me.
Super. Ct. Mar. 16,2009). See id. at 16.
3. In extending the moratorium for a few additional months, the Town made
411
findings of fact that "the application of the Town's existing Comprehensive Plan, Land Use
Ordinance, Site Review Ordinance and other land use ordinances and regulations is inadequate to
prevent the possibility of serious public harm from an inappropriately located outpatient
addiction treatment clinic[,]" "the problem giving rise to the need for the Moratorium still
exists[,]" and "progress is being made to alleviate the problem giving rise to the need for the
Moratorium[.]" Id. at 16-17 (citations and internal quotation marks omitted).
4. The moratorium was enacted to buy time to address concerns about high-intensity
business uses in the Town's residential village district and was also partly the result of Vixen's
dishonest presentation when it applied for a permit for property that it intended to acquire for
CRC's proposed clinic. See id. at 17. Vixen did not disclose to the Planning Board, when it
applied for a permit, that the property would be used for a methadone clinic or that CRC was its
intended tenant. See id. The controversy, thus,was to some degree of Vixen's making. See id.
III
21
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CRC rejoins that the Town(i)received no evidence and made no findings that methadone •
clinics in general would adversely impact the Town and (ii) did not respond to legitimate safety
concerns. See Plaintiffs' SIJ Reply at 4 n.8 & 7. CRC adds that the authors of the 2004 GAO
study were more concerned with the effect that surrounding neighborhoods would have on
methadone clinic patients than the effect such patients would have on those neighborhoods. See
id. at 4 n.8.
Pursuant to the Community House test, "[g]eneralized perceptions about disabilities and
unfounded speculations about threats to safety are specifically rejected as grounds to justify
exclusion." Montana Fair Hous., Inc. v. City of Bozeman, 854 F. Supp.2d 832, 839 (D. Mont.
2012) (citation and internal quotation marks omitted). A municipality must "demonstrate an
objectively legitimate basis for discrimination[.]" Id.
The Town offers no objectively legitimate basis for the enactment of the moratorium or •
for the findings of fact set forth in its Moratorium Ordinance or its resolution continuing the
moratorium. The Town points to the 2004 GAO study and the above-cited caselaw as evidence
that methadone clinics are associated with crime. However, there is no evidence that the Town
considered these materials in enacting or continuing the moratorium. In any event, as CRC
points out, the GAO study decried the negative impact of neighborhood crime on drug
rehabilitation patients and clinic professionals rather than the clinics' and patients' negative
impact on their neighborhoods. See U.S. Gov't Accountability Office, GAO-04-946T, Drug
Rehabilitation Clinics: Illegal Drug Activities Near Some District of Columbia Clinics
Undermine Clinic Services and Patient Rehabilitation 4 (2004) ("Although these clinics are
intended to help those in need of rehabilitation, patients who seek treatment must navigate their
way to and from the clinics in an environment in which illegal sales of narcotics are daily
•
22
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. occurrences. The efforts of patients who are seeking rehabilitation, and clinic professionals who
serve them, are significantly undermined by this criminal activity that surrounds them.").19
The Town, thus, raises no genuine issue of fact as to whether it enacted and continued the
moratorium in response to legitimate safety concerns raised by the individuals affected, rather
than stereotypes.
b. Damages
The Town next resists summary judgment on the ground that CRC fails to show a causal
connection between the alleged discriminatory conduct and its damages. See Defendant's SIJ
Opposition at 18-19. However, CRC correctly points out that it seeks partial summary judgment
solely as to liability, which does not entail a showing of proof of damages. See Plaintiffs' S/J
Reply at 6-7; see also, e.g., Means v. St. Joseph Cnty. Bd. of Comm'rs,No. 3:10-CV-00003 JD,
• 2011 WL 4361567, at *6 (N.D. Ind. Sept. 16, 2011) (rejecting argument that plaintiff failed to
state viable claims for violation of Title II of the ADA and section 504 of the Rehabilitation Act
because he failed to allege entitlement to compensatory damages; noting, "Without allegation or
proof of actual compensable harm, [the plaintiff] may only be entitled to no more than nominal
damages, but his claim is sufficient to survive a motion to dismiss."); Azimi v. Jordan's Meats,
19 Nor does the Town explain how the cited caselaw supplies an objectively legitimate basis for its safety fears. The
caselaw concerns (i) the prosecution of a physician in the District of Columbia for conducting an unauthorized
methadone maintenance program inconsistent with all accepted methods of treating addicts, through which he
effectively operated as a"pusher,"Moore, 423 U.S. at 124-26, (ii)the prosecution of the medical director of CAP
Quality Care, Inc. ("CAP Quality"), a Maine corporation providing methadone maintenance treatment, for using a
DEA registration belonging to another, aiding the acquisition of a controlled substance by deception, falsifying
pharmacy records,and making false statements regarding health care matters,see Shinderman,2006 WL 522105,at
*1, (iii)the government's suit against CAP Quality to recover civil penalties for administering methadone in split
doses, contrary to applicable regulations, see CAP Quality, 486 F. Supp.2d at 49, and(iv)a civil suit against CAP
Quality and three of its employees arising from a man's death from methadone poisoning after ingesting methadone
supplied by a CAP Quality patient, see Jordan, 2009 Me. Super.LEXIS 78, at *1-*3. It is not apparent that these
specific incidents reflect risks to the Town and its residents posed by methadone clinics generally.
•
23
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g
Inc., 382 F. Supp.2d 154, 156 (D. Me. 2005) affd, 456 F.3d 228 (1st Cir. 2006) (noting, in civil •
rights action, that"[c]ausation of damages cannot be assumed by the finding of liability").
Lack of proof of damages, hence, does not doom CRC's bid for summary judgment as to
liability.
3. Reasonable Accommodation
The Town next resists summary judgment as to CRC's claim of failure to make
reasonable accommodations, arguing that it reasonably accommodated CRC and, in any event,
no accommodation was required. See Defendant's S/J Opposition at 20. CRC counters that the
Town ignored its requests and, thus, constructively denied them, violating the ADA. See
Plaintiffs' S/J Reply at 7.
As the Town notes, see Defendant's S/J Opposition at 20, an accommodation need not be
made when it would fundamentally alter a program or activity, see, e.g., 28 C.F.R. •
§ 35.130(b)(7) ("A public entity shall make reasonable modifications in policies, practices, or
procedures when the modifications are necessary to avoid discrimination on the basis of
disability, unless the public entity can demonstrate that making the modifications would
fundamentally alter the nature of the service,program,or activity.").
CRC suggests that the Town denied it a reasonable accommodation by virtue of its
unreasonable delay in offering any accommodation. See Plaintiffs' S/J Motion at 16-17. This
presumably refers to the initial enactment and continuation of the moratorium, which lasted a
total of 232 days, culminating in the adoption of a Large Facilities Ordinance pursuant to which
CRC applied for, and was granted, a permit to operate a methadone clinic. See Factual Stip.
IN 19-23, 29. However, as the Town observes, see Defendant's SIJ Opposition at 20, an
accommodation from the moratorium to allow methadone clinics would have fundamentally
•
24
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• altered the Moratorium Ordinance,see, e.g., Bay Area Addiction, 179 F.3d at 734-35 (concluding
that reasonable modification provision of section 35.130(b)(7) "does not apply to facially
discriminatory laws[;]" observing, "[T]he urgency ordinance could only be rendered facially
neutral by expanding the class of entities that may not operate within 500 feet of a residential
neighborhood to include all clinics at which medical services are provided, or by striking the
reference to methadone clinics entirely. Either modification would fundamentally alter the
zoning ordinance[.]"). Hence, CRC fails to make a persuasive case of entitlement to summary
judgment on its failure-to-accommodate claim.
4. Impact of Grant of Defendant's S/J Motion
The Town finally argues that the court's grant of its motion for summary judgment on
damages would obviate the need to address liability, mooting CRC's motion, because the only
• remedy CRC seeks is damages. See Defendant's SIJ Opposition at 2. However, as CRC points
out,see Plaintiffs' SIJ Reply at 1 n.1, the Town seeks summary judgment only as to CRC's claim
for lost profits, not its claims for frustration-of-mission and nominal damages, see Defendant's
SIJ Motion at 1. Thus,the grant of the Town's motion would not moot CRC's motion.
For the foregoing reasons, I recommend that the court grant CRC's motion for summary
judgment as to the Town's liability for violation of Title II of the ADA on CRC's theory of
intentional, facial discrimination, but deny the motion insofar as it is predicated on CRC's theory
of failure to accommodate.
•
25
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IV. Defendant's S/J Motion •
A. Factual Background
The parties' statements of material facts, credited to the extent that they are either
admitted or supported by record citations in accordance with Local Rule 56, with disputes
resolved in favor of CRC as nonmovant, reveal the following.20
Bain Capital Partners, LLC ("Bain Capital") owns CRC Health. Defendant's
Statement of Material Facts ("Defendant's SMF") (ECF No. 111) ¶ 1; Plaintiffs' Opposing
Statement of Material Facts Pursuant to Local Rule 56(C) and (G) in Opposition to Defendant's
Motion for Partial Summary Judgment("Plaintiffs' Opposing SMF") (ECF No. 115)¶ 1.
CRC Recovery does not own or operate any treatment clinics and has no assets but does
serve as general partner of Camp Recovery Centers, L.P., another entity. Id. ¶ 7. According to
CRC, the reason it named CRC Health as a plaintiff is because, through CRC Health's wholly •
owned subsidiaries, it owns and operates drug and alcohol treatment programs. Id. ¶ 8. If CRC
Recovery collected damages, the money likely would flow up to parent companies, CRC
Corporation and then to CRC Health. Id. ¶9.
As of the time that the Town enacted the moratorium on methadone clinics, neither CRC
Health nor CRC Recovery had applied for any permits from the Town. Id.¶ 16. As of that time,
the only interest that either CRC Health or CRC Recovery had was a letter of intent with Vixen.
Id. ¶ 18.21 At present, neither CRC Health nor CRC Recovery has any right, title, or interest in
any property in Warren. Id. ¶ 19. Neither has any pending applications with the Town or any
20 Statements that are qualified are assumed to be admitted subject to that qualification, unless a qualification
indicates otherwise. To the extent that I have incorporated one side's qualification into the statement of the other,I
have determined that the qualification is supported by the record citation(s)given. I have omitted qualifications that
are unsupported by the citation(s)given or redundant.
21 My recitation includes CRC's qualification. •
26
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• plans to locate any facility there. Id. ¶¶20-21. CRC Recovery would have operated the Warren
clinic. Id. ¶ 22. Dr. Feldman has not done any evaluation of damages to CRC Health separate
from damages to CRC Recovery. Id. ¶ 23. Dr. Feldman has not formed any separate opinion
with respect to the losses attributable to CRC Health as compared with those attributable to CRC
Recovery. Id. ¶ 24. He lumps the two together and offers one opinion. Id. There is no
distinction between the damages claimed by CRC Health and CRC Recovery. Id.¶25.22
B. Discussion
The Town moves for summary judgment as to CRC's claim for lost profits on two
alternative grounds: that (i) Title II of the ADA does not provide a lost-profits remedy to for-
profit businesses proposing to serve disabled persons and, (ii) even if it does, the opinions of
CRC's damages expert, Dr. Feldman, are inadmissible because they have no reliable basis and
• his methodology is unsound. See Defendant's SIJ Motion at 1-2. With respect to Dr. Feldman,
the Town incorporates by reference its separately filed motion to exclude his opinions. See id. at
2. The Town also seeks summary judgment as to CRC Health on the basis that it suffered no
damages distinct from those suffered by its subsidiary CRC Recovery, the only CRC entity that
actually took steps toward opening a methadone clinic in Warren. See id.
CRC counters that the authority on which the Town relies for the proposition that lost
profits are not recoverable, Discovery House, Inc. v. Consolidated City of Indianapolis, 319 F.3d
277 (7th Cir. 2003), is not only non-binding on this court but also unpersuasive. See Plaintiffs'
Opposition to Defendant's Motion for Partial Summary Judgment ("Plaintiffs' S/J Opposition")
(ECF No. 114) at 2-3. It incorporates by reference its opposition to the motion to exclude Dr.
22 I have omitted statements of fact that I deemed irrelevant to resolution of the Defendant's S/J Motion, including
the entirety of CRC's statement of additional facts. See CRC's Opposing Statement of Material Facts in Opposition
• to Motion for Partial Summary Judgment,commencing on page 3 of Plaintiffs' Opposing SMF.
27
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Feldman's testimony. See id. at 3 n.1. Finally, it argues that a parent corporation such as CRC •
Health has standing to bring suit on behalf of its wholly owned subsidiary and that proof that the
financial gain from a subsidiary's profits would have flowed directly to the parent company also
provides a basis for standing to sue for damages. See id. at 16-17.
For the reasons that follow, I deny the Motion To Exclude and recommend that the court
grant Defendant's SIJ Motion with respect to CRC Health and otherwise deny it.
1. Availability of Lost Profits as Damages Pursuant to Title II of the ADA
In Discovery House, the United States Court of Appeals for the Seventh Circuit reversed
a million-dollar judgment awarded to Discovery House, a for-profit corporation operating drug-
addiction rehabilitation programs, as compensation for profits lost during the period between a
zoning board's unlawful denial of a permit to open a methadone clinic in Indianapolis and a
decision of the Indiana Appeals Court permitting the opening of the clinic. See Discovery •
House, 319 F.3d at 278-79. Discovery House had sought only compensatory damages, not
equitable relief, because the Indiana Appeals Court had already determined that it could open the
clinic. See id. at 280.
The Seventh Circuit held that Discovery House did not have standing to seek lost profits
pursuant to the two statutes on which it had relied, the ADA and the Rehabilitation Act ("RA").
See id. at 281. It reasoned that (i) Discovery House sought relief"which perhaps indirectly will
benefit its clients, but which primarily is designed to benefit its for-profit business[,]" (ii) "the
nature of the relief sought is a relevant consideration in evaluating standing[,]" and,
(iii)"[l]ooking . . . to the nature of the relief sought and the statutes under which standing is
asserted, we see no way that either the ADA or the RA contemplates a recovery for lost profits
for a business like that of the Discovery House." Id. at 280. The court acknowledged that,
411
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1 • pursuant to Bell v. Hood, 327 U.S. 678, 684 (1946), in cases such as this in which Congress does
not expressly provide a remedy, "federal courts may use any available remedy to make good the
wrong done." Id. at 281 (citation and internal quotation marks omitted). Yet, it explained:
Discovery House has a claim to standing under the ADA and the RA only because
I it runs a business which provides services — like dispersing methadone — to
persons presumably covered by those Acts. If it were running a plumbing
business, it could hardly claim relief under either statute. It follows, in our view,
that the remedies we may find (other than those specifically set out in the statute)
must, at the very least, be those which directly benefit the disabled. It would
stretch the principle of Bell v. Hood too far to find that Discovery House has
standing to recover lost profits under these statutes.
Id.
The Town urges the court to adopt the Seventh Circuit's reasoning, which it argues is
consistent with the framework established by the Supreme Court for determining what remedies
are available under statutes that do not provide express remedial schemes. See Defendant's SIJ
411 Motion at 6-7. It notes that, in such circumstances, there is a "presumption in favor of
appropriate relief[,]" id. at 7 (quoting Franklin v. Gwinnett Cnty. Pub. Sch., 503 U.S. 60, 72
(1992)), and that, in exercising "a measure of latitude to shape a sensible remedial scheme that
best comports with the statute[,]" the "general rule that all appropriate relief is available . . .
yields where necessary to carry out the intent of Congress or to avoid frustrating the purposes of
the statute involved[,]" id. at 7-8 (quoting Gebser v. Lago Vista Independent School District, 524
U.S. 274,284 (1998)).
The Town reasons that the "appropriate" and "sensible" means to accomplish Title II's
objective of ensuring that discriminatory obstacles are not placed in the path of disabled people
is injunctive relief, and that it is neither appropriate nor sensible "to provide a tort-like money
damages remedy for theoretical lost profits claimed by an entity that no longer even intends to
4111 serve disabled persons." Id. at 8. It adds that, unlike in the case of a nonprofit entity, in which a
29
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damages award could be expected to flow back into an ADA-favored mission, an award of •
damages to a for-profit business would simply enrich its shareholders (in this case, Bain Capital),
creating a disincentive for such entities to take the risks of opening and operating a clinic that
would provide actual services to the disabled. See id. at 9-10. It concludes that the remedy
pressed by CRC is even further out of alignment with the ADA's objectives than the remedy
rejected in Discovery House, "which at least involved a clinic that did eventually open[.]" Id. at
11.
The Town acknowledges that, in Addiction Specialists, Inc. v. Township of Hampton,411
F.3d 399 (3d Cir. 2005), the United States Court of Appeals for the Third Circuit criticized
Discovery House. See id. at 12-14. However, the Town contends that Addiction Specialists is
distinguishable in that the plaintiff in that case, unlike CRC, had not abandoned its quest to open
a methadone clinic and the defendant in that case, unlike the Town, had argued that no damages
of anykind were available. See id. at 12.23 The Town contends that, in anyevent, the Third •
Circuit misread Discovery House as standing for the proposition that "an entity bringing suit
under the ADA and RA must necessarily assert the rights of its members rather than bringing suit
'in its own right.' Id. at 12-13 (quoting Addiction Specialists, 411 F.3d at 407)).
CRC rejoins that Discovery House preceded and does not survive Thompson v. North Am.
Stainless, LP, 131 S. Ct. 863 (2011), in which the Supreme Court applied a "zone of interests"
test for purposes of standing to sue pursuant to Title VII of the Civil Rights Act. See Plaintiffs'
SIJ Opposition at 1-2. It adds that, even before Thompson, the Third Circuit in Addiction
Specialists and other courts rightly criticized the Seventh Circuit's reasoning. See id. at 2-3
23 "[T]he Town's position is that any damages awarded to CRC should be limited to making it whole for its out-of-
pocket expenses lost as a result of the moratorium imposed by Warren." Defendant's Reply to Plaintiffts']
Opposition to Defendant's Motion for Partial Summary Judgment("Defendant's S/J Reply")(ECF No. 120)at 3-4.
1111
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• (citing, inter alia, MX Grp. and START, Inc. v. Baltimore Cnty., Md., 295 F. Supp.2d 569, 581-
82 (D. Md. 2003)).
Discovery House is framed as a decision regarding standing. The Seventh Circuit
reasoned that (i) an association has standing to sue on behalf of its members when it seeks relief
that, "if granted, will inure to the benefit of those members of the association actually injured[,]"
(ii) the ADA and the RA do not expressly provide for lost profits, (iii) Discovery House has a
claim to standing only because it provides services to disabled persons, and (iv) it follows that
the only remedies available, apart from those expressly provided in the statutes, are those that
"directly benefit the disabled." Discovery House, 319 F.3d at 280-81.
Nonetheless, the Town argues that Discovery House fundamentally is not about standing,
but about whether it is appropriate to imply a remedy of lost profits. See Defendant's SIJ Motion
• at 13-14. It argues that the Seventh Circuit drew on principles of associational standing merely
to support the general proposition that remedies must be evaluated in terms of their relationship
to the injuries an action seeks to redress. See id. at 13. It points out that the Seventh Circuit did
not suggest that Discovery House itself was asserting associational standing and acknowledged
that other circuit courts of appeals had held that a plaintiff such as Discovery House has standing
to sue either to enforce the rights of others (i.e., associational standing) or on its own behalf. See
id.
Regardless of whether Discovery House concerns standing or the appropriate scope of
implied remedies, I find it unpersuasive and recommend that the court decline to follow it.
To the extent that Discovery House held that a for-profit corporation has no standing to
sue for lost profits in an ADA case, it erred in applying principles of associational standing to a
plaintiff that sought redress for its own injuries. The plaintiff in Thompson, like CRC, was not
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among the class of persons protected by the statute pursuant to which he filed suit: he had been •
fired not because he had made a charge under Title VII but because his fiancée had. See
Thompson, 131 S. Ct. at 867. Nonetheless,the Court held, he had standing to sue because he fell
within the zone of interests protected by the statute. See id. at 870. He was "not an accidental
victim of the retaliation—collateral damage, so to speak, of the employer's unlawful act[,]" but,
rather, his firing was "the employer's intended means of harming [his fiancée]." Id. The Court
imposed no additional requirement that, to demonstrate standing, the plaintiff show that any
relief awarded to him would inure to the benefit of the class of persons whom Title VII was
designed to protect. See id. Plainly, it would not have.
There is no material distinction, for purposes of standing, between CRC, which claims
that the moratorium was the Town's intended means of harming its prospective disabled clients,
and the plaintiff in Thompson. This court has assumed, without deciding, that the Thompson •
zone of interests test likely applies in ADA cases. See Leavitt v. SW& B Constr. Co., LLC, 766
F. Supp. 2d 263, 283 (D. Me. 2011). CRC, accordingly, has standing to sue, including standing
to sue for lost profits.24
To the extent that Discovery House held that it is inappropriate to construe the ADA to
afford a remedy of lost profits, its reasoning likewise is unpersuasive. The Seventh Circuit
observed that "federal courts may use any available remedy to make good the wrong done."
24 Even prior to Thompson, the Third Circuit in Addiction Specialists rejected the notion that a methadone clinic
lacked standing pursuant to the ADA to sue for its own damages, including lost profits. See Addiction Specialists,
411 F.3d at 408. The court did not reach the question of whether the plaintiff's lost profits "would be the correct
measure of damages if and when this suit reaches the damages stage." Id. However,it reasoned that,"Because the
broad language of the ADA and RA enforcement provisions evidences a Congressional intent to extend standing to
the full limits of Article III,we hold that the prudential limits imposed in pure associational standing cases do not
apply to [the plaintiff's]claims asserted on its own behalf" Id.at 407. The Third Circuit reasoned that the Seventh
Circuit in Discovery House ignored the fact that"the protections of the ADA and RA have been extended to shield
entities themselves from discrimination"; noting, "[a]lthough [the plaintiff] is protected by these statutes only by
virtue of its association with disabled individuals, [the plaintiff's] standing to sue arises from its own alleged
injuries,not those of its clients." Id.(emphasis in original). •
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• Discovery House, 319 F.3d at 281 (quoting Bell, 327 U.S. at 684). However, it concluded, "[i]t
would stretch the principle of Bell v. Hood too far to find that DiscoveryHouse has standingto
p p
I recover lost profits under these statutes." Id. This was so, it reasoned, because Discovery House
had a claim to standing under the ADA and RA only on the strength of its provision of services
to the class of persons sought to be protected and, thus, any implied remedies should at the least
directly benefit that class of persons. See id.
� This is a crabbed reading of the principle of Bell v. Hood. Applying that principle in
Franklin, the Supreme Court observed: "That a statute does not authorize the remedy at issue in
so many words is no more significant than the fact that it does not in terms authorize execution to
issue on a judgment." Franklin, 503 U.S. at 68 (citation and internal quotation marks omitted).
The Court added, "absent clear direction to the contrary by Congress, the federal courts have the
• power to award any appropriate relief in a cognizable cause of action brought pursuant to a
federal statute." Id. at 70-71. The Court noted that it had"followed a common-law tradition and
regarded the denial of a remedy as the exception rather than the rule[,]" and that "this has been
the prevailing presumption in our federal courts since at least the early 19th century." Id. at 71-
72 (citation and internal punctuation omitted).
Beyond this, as CRC notes, see Plaintiffs' S/J Opposition at 10, in Barnes v. Gorman,
536 U.S. 181 (2002), in holding punitive damages unavailable pursuant to Title VI of the Civil
Rights Act of 1964, the Supreme Court analogized remedies available pursuant to Title VI to
those typically available for breach of contract, which include compensatory but not punitive
damages,see Barnes, 536 U.S. at 187.25
25 Lost profits are a form of compensatory damages that may be recoverable in a breach of contract action. See,
e.g., Days Inns Worldwide, Inc. v. Investment Props. of Brooklyn Ctr., LLC,Civ.No. 10-609(MJD/JJK),2011 WL
• 4538076, at *5 (D. Minn. Aug. 26, 2011) (rec. dec., aff'd Sept. 29, 2011). The parties disagree over which
(continued on next page)
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The Court observed that "Title VI invokes Congress's power under the Spending Clause •
to place conditions on the grant of federal funds" and that it had "repeatedly characterized this
statute and other Spending Clause legislation as much in the nature of a contract: in return for
federal funds, the [recipients] agree to comply with federally imposed conditions." Id. at 185-86
(citations and internal quotation marks omitted) (emphasis in original). It applied the contract
analogy to the question of the scope of damages remedies, reasoning:
A funding recipient is generally on notice that it is subject not only to those
remedies explicitly provided in the relevant legislation, but also to those remedies
traditionally available in suits for breach of contract. Thus we have held that
under Title IX,which contains no express remedies, a recipient of federal funds is
nevertheless subject to suit for compensatory damages and injunction, forms of
relief traditionally available in suits for breach of contract. Like Title IX, Title VI
mentions no remedies—indeed, it fails to mention even a private right of action . .
. . But punitive damages, unlike compensatory damages and injunction, are
generally not available for breach of contract.
Id. at 187 (citations omitted). In a footnote,the Court remarked:
Justice STEVENS believes that our analysis of Title VI does not carryover to the
Y
ADA because the latter is not Spending Clause legislation, and identifies `tortious
conduct.' Perhaps he thinks that it should not carry over, but that is a question for
Congress, and Congress has unequivocally said otherwise. The ADA could not
be clearer that the `remedies, procedures, and rights . . . this subchapter provides'
for violations of § 202 [Title II] are the same as the `remedies, procedures, and
rights set forth in' § 505(a)(2) of the Rehabilitation Act, which is Spending Clause
legislation.
Id. at 189 n.3 (citations omitted) (emphasis in original). As CRC notes, see Plaintiffs' S/J
Opposition at 11, the Seventh Circuit in Discovery House made no mention of Barnes.
Indeed, in START, the United States District Court for the District of Maryland
recognized the seeming tension between Barnes and Discovery House, observing: "While Barnes
substantive test for proving lost profits applies in this case, with the Town contending that CRC cannot meet the
applicable standard. See Defendant's S/J Motion at 1 n.1.;Plaintiffs' S/J Opposition at 3 n.1. However,the Town
does not press this as a basis for summary judgment,see Defendant's S/J Motion at 1 n.1, and that issue,therefore,
is not before the court.
1111
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isuggests that Title II [of the ADA] generally permits compensatory awards, the Seventh Circuit
recently held that a for-profit drug treatment clinic could not seek lost profits as a remedy for the
denial of a zoning permit." START, 295 F. Supp.2d at 581 (citations omitted). Although the
court reserved a final ruling on the question of remedies until the plaintiff's claims were
adjudicated on the merits, it observed:
The logic of Discovery House . . . is in tension with other decisions . . . which
have held that medical providers like START may pursue ADA claims not merely
as a matter of third-party standing to assert the rights of their patients, but rather
because the ADA confers the right to sue upon entities who are injured by
discrimination because of their association with disabled persons. If START
itself has an affirmative claim based on discrimination against it, it would seem
that START should be entitled to relief for any injury it suffered, regardless of the
effect, direct or indirect, on the disabled individuals with whom it associated.
START, 295 F. Supp.2d at 581-82 (citations and internal quotation marks omitted).
Finally, CRC persuasively argues that the availability of lost profits as part of a damages
IIIaward harmonizes with, rather than undercutting, the remedial aims of statutory schemes such as
the ADA for the simple reason that such awards tend to deter unlawful discrimination. See
Plaintiffs' S/J Motion at 11-12 (observing that the Supreme Court, in Albemarle Paper Co. v.
Moody, 422 U.S. 405 (1975), recognized that awards of monetary damages pursuant to Title VII
of the Civil Rights Act serve as "the spur or catalyst"to eliminate unlawful discrimination). The
Town's argument that the availability of lost profits awards would tend to deter for-profit entities
such as CRC from providing services to the disabled, see Defendant's S/J Motion at 9-10, is at
best strained. Those entities would not be in a position either to realize their expected profits or
to receive an award of lost profits as compensation for harm suffered as a consequence of
unlawful discrimination against the disabled unless they endeavored to provide services to
disabled clients.
•
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9
Nor can any award of lost profits fairly be described as"reward[ing] CRC with a windfall •
for not providing services to the disabled after having decided to abandon its Warren project."
Defendant's SIJ Reply at 4 (emphasis in original). Rather, "[r]ecovery of lost profits is
predicated . . . on the principle that an injured party is to be placed in the same position he would
have been in had the contract been performed" — or, in the case of CRC, but for the Town's
alleged unlawful discrimination. Knightsbridge Mktg. Servs., Inc. v. Promociones Y Proyectos,
S.A., 728 F.2d 572, 575 (1st Cir. 1984).
For the foregoing reasons, I recommend that the court decline the Town's invitation to
follow Discovery House in holding that CRC has no standing to seek lost profits or, alternatively,
that lost profits exceed the scope of remedies appropriately awarded pursuant to Title II of the
ADA and, hence, are unavailable as a matter of law.
2. Defendant's Motion To Exclude
1111
The Town next moves for summary judgment as to CRC's claim for lost profits on the
basis of its motion to exclude the testimony of Dr. Feldman pursuant to Federal Rule of 702 and
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). See Defendant's S/J Motion at 14;
Motion To Exclude at 1-2. For the reasons that follow I conclude that this challenge, as well,
falls short.
a. Applicable Legal Standard
Rule 702 provides:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to determine a fact in
issue;
(b) the testimony is based on sufficient facts or data; •
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•
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts
of the case.
Fed. R. Evid. 702. Under Rule 702, "it is the responsibility of the trial judge to ensure that an
expert is sufficiently qualified to provide expert testimony that is relevant to the task at hand and
to ensure that the testimony rests on a reliable basis." Beaudette v. Louisville Ladder, Inc., 462
F.3d 22, 25 (1st Cir. 2006).
As the First Circuit has observed, "Daubert does not require that the party who proffers
expert testimony carry the burden of proving to the judge that the expert's assessment of the
situation is correct." United States v. Mooney, 315 F.3d 54, 63 (1st Cir. 2002) (citation and
internal quotation marks omitted). "It demands only that the proponent of the evidence show
• that the expert's conclusion has been arrived at in a scientifically sound and methodologically
reliable fashion." Id. (citation and internal quotation marks omitted). That said, "nothing in
either Daubert or the Federal Rules of Evidence requires a district court to admit opinion
evidence which is connected to existing data only by the ipse dixit of the expert, A court may
conclude that there is simply too great an analytical gap between the data and the opinion
proffered." Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77, 81 (1st Cir. 1998)
(citation and internal quotation marks omitted).
b. Background
Dr. Feldman is a former professor of economics at Brown University, having retired from
teaching in 2009, although he continues to research and publish on economics. See Deposition
of Allan M. Feldman, Ph.D. ("Feldman Dep. I") (ECF No. 104-4), attached to Joint Record, at 4.
He has not taught or published on the subject of calculation of business losses, but has consulted
III
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as an expert on the subject and has testified on four or five occasions regarding business losses •
over the past 20 years. See id. at 5, 32. He has calculated lost profits for going concerns, but it
has been some time — about 10 years — since he has done so. See id. at 24. He does not recall
having calculated lost profits for a startup venture like the proposed clinic in Warren. See id.
The opinion at issue is contained in a supplemental report of Dr. Feldman dated July 15,
2013, in which he estimated the losses to CRC resulting from the Town's actions based on four
delay scenarios (permanent abandonment of the clinic, a one-year delay, a two-year delay, and a
three-year delay) and three different projected patient populations (520, 395, and 245 patients).
See Supplemental Report [dated July 15, 2013] on Losses To CRC Health Group, Inc. and CRC
Recovery, Inc. Resulting from Actions of the Town of Warren, Maine ("Operative Feldman
Report"), Exh. 124, filed on Exhibit CD, at 7. Estimated lost profits ranged from a high of
$1,253,000 for permanent abandonment, assuming a patient population of 520, to nothing in any
scenario assuming a patient population of 245, taking into account a MaineCare reimbursement
rate of$60 per week. See id.
The Operative Feldman Report superseded three prior reports by Dr. Feldman and
contains the sum total of opinions that he intends to express in the case, aside from background
information contained in the earlier reports. See Continued Deposition of Allan M. Feldman,
Ph.D. ("Feldman Dep. II") (ECF No. 104-5), attached to Joint Record, at 6-7.
In his initial report dated January 31, 2013, Dr. Feldman did not offer a lost profits
opinion, but concluded that CRC clinics in general are very profitable and that, once established,
the Warren clinic would likely earn roughly $750,000 per year. See Exh. 110, filed on Exhibit
CD, at 11. He relied for his general conclusions regarding CRC clinic profitability on
spreadsheets supplied by CRC reflecting the profitability of its CTCs, or comprehensive
•
38
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• treatment clinics, generally and of its startup CTCs, see id. at 4-7, and for his conclusions
regarding projections for the Warren clinic on two spreadsheets supplied by CRC,the CRC 2011
Budget for Application/CRC Maine Clinic and the "ROI-CTC Startup Maine v9 MH"
spreadsheet("ROI-CTC"),see id. at 7.26
In a revised report dated April 18, 2013, Dr. Feldman for the first time offered a lost
profits opinion, using the four delay scenarios and three patient population assumptions
contained in the Operative Feldman Report. See [Revised Report dated April 18, 2013] ("April
18 Report"), Exh. 111, filed on Exhibit CD, at 23. Estimated lost profits ranged from a high of
$4,411,000 assuming a permanent delay and a patient population of 520 to a low of $32,000
assuming a one-year delay and a patient population of 245. See id. He relied only on the ROI-
CTC, which he explained he had learned was more up to date than the CRC 2011 Budget for
• Application/CRC Maine Clinic. See id. at 9. He derived the patient population figure of 520
from the ROI-CTC, and made alternative estimates of patient populations of 395 and 245. See
id. at 10.
Dr. Feldman issued an addendum dated April 23, 2013, in which he applied a different
methodology to his delay calculations,which he continued to base on data derived from the ROI-
CTC. See Exh. 112, filed on Exhibit CD, at 1-3. This change resulted in higher estimated losses
for delay of one to three years, for example, a loss of$95,000 assuming a patient population of
245 and a one-year delay. See id. at 4.
In the Operative Feldman Report, Dr. Feldman made corrections to take into account new
information received, including points raised by the Town's expert, Mark G. Filler. See
Operative Feldman Report at 2-6. These included a correction to reflect a reduction in Maine's
• 26"ROI"stands for"return on investment." See Motion To Exclude at 4.
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Medicaid reimbursement rate effective April 1, 2012, from $72 to $60 per week. See id at 4-5.27 •
Dr. Feldman stated that he was also now aware that the new Maine law placed a 24-month cap
on state funding for Medicaid methadone patients, which he understood went into effect on or
around the beginning of 2013, but it was not yet clear whether that was a "hard" cap (strictly
enforced with no exceptions) or a "soft" cap (easily avoided with many exceptions), and so he
had made no changes based on that information. See id. at 6.
Dr. Feldman has no knowledge of, or experience, education, or training in, addiction
treatment or the health-care industry, and is not an expert on financial models used in that
industry, Medicaid programs, private insurance, or Medicaid and insurance reimbursement
trends. See Feldman Dep. I at 30-31.
During his first deposition on May 22, 2013, Dr. Feldman testified that his profit numbers
were based on the ROI-CTC (marked as Exh. 108), see id. at 52, 80, that he did not undertake •
any independent steps to verify the data in that document, see id. at 82, that he accepted those
numbers at face value and incorporated them straight into his own analysis, see id., and that his
opinions were totally built on that document with one exception involving the addition of one
staffing position, see id. at 81-82. He agreed that the ROI-CTC was a series of projections
related to the future performance of the clinic, including a forecast of future expenses and future
revenue, and, with respect to his expertise, such forecasts for a clinic like the CRC clinic were
"only slightly connected to what I do as an economist." Id. at 82-83. During his second
deposition on August 20, 2013, Dr. Feldman confirmed that, but for accounting for the changed
Medicaid reimbursement rate, he continued to rely on revenue and expense projections in the
ROI-CTC. See Feldman Dep. II at 32-33.
27 Dr.Feldman uses the terms"MaineCare"and"Medicaid"interchangeably. See Operative Feldman Report at 4,7. •
40
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• Dr. Feldman testified that his opinions in this case were "based on a general
methodology, which is widely used having to do . . . with the calculation of profits year by year"
and the use of a discounted cash flow analysis to convert those amounts to present value.
Feldman Dep. I at 10-11. He also followed a "comparables" approach to the extent that he
reviewed earnings figures for other startup methadone clinics operated by CRC. Id. at 15.
However, he assumed that the Warren clinic would reach profitability sooner than other CRC
startup clinics based not only on the ROI-CTC but also on information gleaned from Joseph
Pritchard, former Vice President of Operations for CRC. See id. at 16; see also Pritchard Dep. at
47-49.
Pritchard, who was involved in the creation and review of the CTC-ROI, see Pritchard
Dep. at 13-17, learned in July 2010 that Turning Tide, a methadone clinic in Rockland, Maine,
. was being shut down, and viewed its closure as an excellent opportunity for CRC, see April 18
Report at 3. He spoke with Guy Cousins, director of the Maine Office of Substance Abuse, who
told him that he believed a new clinic could support 300 patients initially. See id.;Pritchard Dep.
at 21. CRC typically collects and analyzes demographic data to estimate potential patient
population but did not do so with respect to the Warren clinic because of the unusual
circumstance that the Rockland clinic was closing. See Pritchard Dep. at 28-29; Feldman Dep. I
at 73. Dr. Feldman testified that, in his opinion, knowing that a provider with 180 to 200 patients
has just shut down is more tangible and gives a higher level of confidence than estimating
demand by analyzing demographic data. See Feldman Dep. I at 19-20.
Pritchard explained to Dr. Feldman that he had projected that the new CRC clinic would
quickly capture the 180 to 200 patients who had been at Turning Tide and would expand its
patient base within five years to 520 patients, partly by way of offering additional services
i
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beyond the provision of methadone. See Feldman Dep. I at 54-55. However, Pritchard told Dr. •
Feldman it would be "plausible" for him to do a couple of calculations involving alternate
estimates of patient populations, one of which might be an ultimate number between 375 and
400. See id. at 55.
Prior to preparing the Operative Feldman Report, Dr. Feldman also spoke with Michael
Harrison, a senior analyst at CRC who prepared the ROI-CTC spreadsheets. See Feldman Dep.
II at 12, 68. Dr. Feldman learned that Harrison was "basically the scrivener" of the spreadsheets,
entering information based on conversations with other people at CRC. See id. at 13-14.
c. Discussion
The Town argues that:
1. Dr. Feldman's lost profits opinion is based on insufficient facts or data in that he
relied on CRC's untested and unverified forecasts from the ROI-CTC. See Motion To Exclude •
at 11.
2. Dr. Feldman did not apply principles or methodologies to the ROI-CTC; instead,
he simply adopted it and made further calculations. See id. at 16. As a result, his opinion is
merely a conduit for hearsay testimony contained in the ROI-CTC and is, therefore,
inadmissible. See id.
CRC rejoins that(i)Dr. Feldman's methodology for calculating lost profits is reliable and
sound, (ii) Dr. Feldman relied on sufficient facts and data to render his
opinion, (iii) the Town's
p
criticisms of Dr. Feldman's reliance on specific factual assumptions contained in the ROI-CTC
go the weight, not the admissibility, of his testimony, (iv) Dr. Feldman properly relied on the
ROI-CTC, which was prepared under the supervision of Pritchard, and (v) Dr. Feldman's
opinions are not merely a conduit for hearsay testimony, both because the ROI-CTC is
•
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1111 admissible pursuant to the business records exception to the hearsay rule, Federal Rule of
Evidence 803(6), and because an expert may base his opinion on facts or data not ordinarily
admissible if experts would reasonably rely on such facts or data in forming an opinion. See
Plaintiffs' Opposition to Defendant's Motion in Limine To Exclude Lost Profits Testimonyby
Y
Dr. Allan M. Feldman("Exclude Opposition") (ECF No. 113) at 13-20.
In its reply brief, the Town elaborates that its "argument for the exclusion of Dr.
Feldman's testimony rests not on any general objection to the use of a `discounted cash flow'
methodology to calculate lost profits, but on the fact that Dr. Feldman's `opinion' is based on
expert analysis performed by CRC personnel who have not been designated as experts in this
case." Reply in Support of Motion To Exclude Dr. Allan M. Feldman ("Exclude Reply") (ECF
No. 121) at 1. It reasons:
[T]he real meat of the expert opinion Dr. Feldman seeks to offer lies not in the
discount-rate calculations he performed, but instead in the `projections related to
the future performance of the clinic' that forms the basis for his calculations. And
that creates a problem for CRC, because the projections Dr. Feldman used also
constitute expert opinion — but not the expert opinion of Dr. Feldman, CRC's
designated expert witness.
Id. at 2. It adds, "The inherent problem created by Dr. Feldman presenting the work of another
as his own expert opinion is exacerbated in this case by the weak empirical foundation on which
the numbers in the ROI-CTC document rest." Id. at 3.
For the proposition that Dr. Feldman's opinion is based on insufficient facts or data, the
Town cites Downeast Ventures, Ltd. v. Washington County, Civil No. 05-87-B-W, 2007 WL
679887 (D. Me. Mar. 1, 2007), Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 427 F. Supp.2d
1022 (D. Kan. 2006), which Magistrate Judge Kravchuk cited in Downeast Ventures, and three
other cases, Capital Concepts, Inc. v. Mountain Corp., 936 F. Supp.2d 661 (W.D. Va. 2013),
. MDK, Inc. v. Village of Grafton,No. 03-C-0026, 2005 WL 6748915 (E.D. Wis. Aug. 22, 2005),
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and Otis v. Doctor's Assocs., Inc., No. 94 C 4227, 1998 WL 673595 (N.D. Ill. Sept. 14, 1998). •
See Motion To Exclude at 8-11.
In Downeast, Magistrate Judge Kravchuk excluded an expert's testimony as to profits
estimated to have been lost because of the defendants' allegedly wrongful interference in a steel
building construction venture that the plaintiff's principal testified the company would have
pursued. See Downeast, 2007 WL 679887, at *3. The expert had based his projected sales
figures "entirely on [the plaintiff's principal's] subjective expectations." Id. Magistrate Judge
Kravchuk observed: "I am not simply concerned that the evidence is weak. I am concerned that
there is not sufficient data upon which to base a projection." Id. She stated that she was not
persuaded that the expert could turn those expectations into evidence merely by characterizing
them as reasonable based on his own, albeit considerable, experience as an accountant. See id.
She cited Sunlight Saunas for the proposition that, standing alone, the mere facts that each •
building would realize $250,000 in revenue and that the plaintiff intended to pursue that line of
work were "insufficient data on which to base a lost profits projection." Id. She noted that, in
Sunlight Saunas, the court had granted a Daubert motion with respect to an "expert's economic
loss calculation that was based on the plaintiff's own sales projections, without any explanation
of the basis for those projections or independent market analysis[.]" Id.
She distinguished three cases cited by the plaintiff, Great N. Storehouse, Inc. v. Peerless
Ins. Co., No. CIV. 00-7-B, 2000 WL 1900299 (D. Me. Dec. 29, 2000), Whitney v. Wal-Mart
Stores, Inc.,No. 03-65-P-H, 2003 WL 22961210 (D. Me. Dec. 16, 2003) (rec. dec.,aff'd Jan. 21,
2004), and McLaughlin v. Denharco, Inc., 129 F. Supp.2d 32 (D. Me. 2001), on the basis that, in
Great Northern, "the owner actually supplied data to the expert[,]" in Whitney, "the expert relied
on data supplied by the plaintiff concerning his past annual bonuses to determine a percentage
•
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111 figure to apply to calculate the value of lost future bonuses[,]" and, in McLaughlin, "the expert
relied on photographs and testimony concerning past usage of a machine to form an opinion that
`metal fatigue' caused it to break[.]" Id. at *4. She concluded, `Because the quantity of data on
likely sales is nil in this case, I conclude that [the expert's] projection of steel building
construction revenue is unreliable and must be excluded from the trial." Id.
In Capital Concepts, a copyright infringement case, the court excluded an expert's
testimony regarding the defendants' costs related to the production and sale of allegedly
infringing t-shirts when the defendants had failed to disclose information that was necessary to
calculate those costs accurately, such as invoices, and the expert"relied solely upon information
provided to him by [the defendants' employee], and his report [was] devoid of any analysis
concerning the determination of direct costs and the amounts thereof." Capital Concepts, 936
• F. Supp.2d at 671. The court reasoned:
It would be inappropriate to permit [the expert] to opine that Defendants' direct
costs are reasonable when he has made no such determination on his own, but has
simply relied upon and re-published information provided to him in summary
format by Defendants. An expert cannot simply parrot his client's findings or
calculations and then pass that data off as his own expert opinion.
Id. at 671-72 (footnote omitted).
In MDK, the court excluded testimony of an expert regarding profits lost as the result of
the closure of a tavern based on an unconstitutional ordinance when the expert relied on
responses of seven owners of burlesque clubs to a "confidential questionnaire" apparently
prepared by the plaintiff's counsel. See MDK, 2005 WL 6748915, at *1. The court reasoned
that the questionnaire responses did not constitute sufficient facts or data upon which to base the
opinion "because none of the information in the responses is in any manner verified, and as a
result, I cannot reasonably conclude that it is accurate." Id. The court observed, "Although the
•
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information is financial in nature, it is entirely unsupported by any financial documents such as •
tax returns or financial statements." Id. It further noted:
Plaintiff correctly notes that an expert may reach conclusions based on
inadmissible evidence. However, experts may do so only if the evidence is of a
type reasonably relied upon by experts in the particular field. As explained, the
club owners' responses are not reliable sources of information, and therefore a
reasonable accountant attempting to calculate lost profits would not rely on them.
Id. at *2 (citations and internal quotations marks omitted).
In Otis, the court excluded expert testimony regarding profits lost following the failure of
a fast food franchise restaurant, allegedly as a result of the defendant's fraud in inducing the
plaintiff to enter into a development agent agreement. See Otis, 1998 WL 673595, at *1. The
court noted that the expert relied on projections contained in the agreement but had not
performed "any independent market analysis to verify the reasonableness or accuracy of the
projections" or "any comparative analysis which measured the [agreement's] projections against •
actual results achieved by other fast food chicken franchise restaurants[,]" and neither party had
supplied the court with a detailed explanation of precisely how the formula contained in the
agreement operated. See id. at *1-*2. It reasoned that the plaintiff had made no showing that the
formula was accurate or had been tested for accuracy or that the average weekly sales estimates
contained in the agreement had "any basis in fact or fast food market reality." Id. at *4. The
court found that the plaintiff had not shown that its expert's methodology was "anything more
than an exercise in arithmetic based on inherently unreliable values." Id.
The Town argues that in this case, as in Downeast, Sunlight Saunas, Capital Concepts,
MDK, and Otis, Dr. Feldman merely republished expense and revenue forecasts provided to him
by CRC, with no independent evaluation, testing, or validation of his client's own opinions
regarding its projected revenues, expenses, and related variables. See Motion To Exclude at 11.
111
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• It contends that there is no material distinction between CRC's estimate that the Warren clinic
ultimately would attract 520 clients and the plaintiff's principal's subjective expectations
concerning demand for new buildings conveyed to the expert in Downeast. See Exclude Reply
at 5. It argues that Dr. Feldman's reliance on the ROI-CTC is "particularly troubling" because
he testified that he had done nothing to test how the 24-month eligibility cap on MaineCare
reimbursement for methadone treatment would impact the profitability of the proposed clinic and
had not"checked"to see whether the ROI-CTC assumed that all MaineCare patients of the clinic
in Year 1 remained patients in Year 5, although in documentation in his file he conceded that this
was the case. See Motion To Exclude at 13-14.
The Town adds that Dr.Feldman knows nothing about the experience, education, or other
qualifications of the authors of the ROI-CTC and that he learned that Harrison,who prepared the
III
document, acted as a scrivener and included assumptions and forecasts by other unknown
persons. See id. at 15. It reasons that, because CRC has not designated any of its employees as
expert witnesses to speak to the issue of the projections contained in the ROI-CTC, and such
opinions would be beyond the scope of permissible lay opinion testimony, Dr. Feldman offers
what amounts to inadmissible hearsay or double hearsay. See id. at 15-16.
The Town cites Hutchinson v. Groskin, 927 F.2d 722, 725 (2d Cir. 1991), for the
proposition that Dr. Feldman did not apply principles and methods reliably to the facts of the
case, reasoning that there is no methodology to cutting and pasting a third party's forecast of
revenues and expenses and related assumptions into an expert's report. See id. at 16-17. In
Hutchinson, the United States Court of Appeals for the Second Circuit reversed a judgment in
favor of a defendant physician in a medical malpractice case on the basis of the trial court's error
in permitting defense counsel to use letters by three physicians in examining expert witnesses.
IIII
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See Hutchinson, 927 F.2d at 723. The court reasoned that, "[b]y asking [the defendant's expert •
physician] to identify the documents, offer his own opinion regarding plaintiff's prognosis, and
then state whether his opinion was consistent with those expressed in the documents, defense
counsel used [the defendant's expert] as a conduit for hearsay testimony[,]" introducing the
purported opinions of physicians who were not designated as experts during discovery and
whom the plaintiff had no opportunity to examine. Id. at 725.
CRC rejoins that Downeast is distinguishable in that, here, as in Great Northern,
Whitney, and McLaughlin, the plaintiff supplied actual data to the expert. See Exclude
Opposition at 14-16. It distinguishes Sunlight Saunas on the basis that the plaintiff there
provided no coherent explanation of how it arrived at its projections, Otis on the basis that the
underlying data were target estimates rather than financial projections or any actual data, Capital
Concepts on the ground that the expert's report in that case was devoid of any analysis
111
concerning the determination or amounts of direct costs, and MDK on the basis that it was
unclear how the information on which the expert relied was derived. See id. at 17 &n.14.
It defends Dr. Feldman's decision not to take into account the two-year cap on
MaineCare payments on the basis that he explained that it remains to be seen whether the cap
will be a hard or soft cap and, depending how it is applied, it could have a significant or minimal
impact on damages. See id. at 17-18; Feldman Dep. II at 34-35, 39-40. It argues that, in any
event,this criticism, like others raised by the Town, goes to weight rather than admissibility. See
Exclude Opposition at 18.
Finally, it protests that it is not attempting to evade requirements for experts by
presenting testimony through a layperson that can only be presented through an expert witness.
See id. at 19. It states that Pritchard, who was intimately familiar with its business, treatment
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• clinics, budgets, and projections and was subject to cross-examination by the Town, was
competent to testify on those matters without qualifying as an expert, the ROI-CTC is admissible
pursuant to the business records exception to the hearsay rule and, in any event, an expert may
base his opinion on facts or data not ordinarily admissible if experts would reasonably rely on
such facts and data in formulating an opinion. See id. at 19-20. It argues that Hutchinson is
plainly distinguishable, involving an attempt by a defendant in a medical malpractice suit to
bolster his expert's opinion by introducing letters from three doctors who were not disclosed as
experts during discovery. See id. at 20 n.16.
CRC carries its burden of demonstrating the admissibility of Dr. Feldman's testimony.
As CRC observes, see Exclude Opposition at 10, "[w]hen the adequacy of the foundation for the
expert testimony is at issue, the law favors vigorous cross-examination over exclusion[,]"
• Kirouac v. Donahoe, No. 2:11-cv-00423-JAW, 2013 WL 173475, at *2 (D. Me. Jan. 16, 2013)
(citations and internal quotation marks omitted). "If the factual underpinnings of the expert's
opinions are in fact weak,that is a matter affecting the weight and credibility of their testimony."
Id. (citations and internal punctuation omitted). See also, e.g., McLaughlin, 129 F. Supp.2d at 36
("The jury may disbelieve some of the plaintiff's statements that form part of the basis for [the
expert's] conclusions . . . [b]ut this determination is for the jury at trial.").
As CRC acknowledges, see Exclude Opposition at 10, the line between weight and
admissibility is crossed when an expert's opinion is so insufficiently buttressed by factual
underpinnings that it amounts to pure speculation, see, e.g., Seahorse Marine Supplies, Inc. v.
Puerto Rico Sun Oil Co., 295 F.3d 68, 82 (1st Cir. 2002) ("There is a distinction between proof
which allows the jury to make a just and reasonable inference of damages and proof which only
•
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provides a basis for pure speculation or guesswork.") (citations and internal punctuation •
omitted). However, that is not this case.
CRC correctly distinguishes Downeast on the basis that, in this case, CRC supplied data
to its expert, not only in the form of its specific projections for the Warren clinic but also in the
form of historic data concerning the profitability of CRC clinics generally and CRC startup
clinics in particular. In Downeast, the plaintiff offered speculative projections for an entirely
untried business; in this case, the running of methadone clinics was CRC's business. Dr.
Feldman took that data into account, as well as Pritchard's explanations for the manner in which
the Warren clinic projections were undertaken and the reason why CRC viewed the clinic as
likely to achieve profitability more quickly than a typical CRC startup. In this respect, as CRC
argues, see Exclude Opposition at 16, this case is more closely aligned with Great Northern,
Whitney, and McLaughlin than with Downeast. There is underlying data, and its asserted •
weaknesses, for example, CRC's decision to forgo its customary demographic analysis given the
closing of the Turning Tide clinic, go to weight rather than admissibility.
As CRC argues, see id. at 17 & n.14, this case also is distinguishable from Sunlight
Saunas, Capital Concepts, MDK, and Otis, which involved experts' reliance on data that was
neither validated nor explained. In this case, Pritchard explained to Dr. Feldman the reasons why
CRC was interested in establishing a clinic in Warren, the steps it took to estimate the patient
base, and the manner in which the ROI-CTC was compiled. There is no indication that CRC,
like the defendants in Capital Concepts or the plaintiff in MDK, withheld financial data
underpinning its projections.
To the extent that the Town suggests that Dr. Feldman's refusal to make adjustments for
the two-year MaineCare cap on methadone payments, in itself, undermines reliance on the
•
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411 factual underpinnings of his opinion sufficiently to merit its exclusion, Dr. Feldman offers a
reasonable explanation. He testified that "it's not at all clear that it's a hard cap or a soft cap[,]
[s]o it's not obvious that it's going to have a major effect[,]" and "it's not clear how that effect
should be quantified." Feldman Dep. II at 61. He noted that he "could make some assumptions
about it,but I think they would be excessively arbitrary." Id. The Town points out that,by using
the ROI-CTC data, Dr. Feldman in effect does make an assumption that the Town characterizes
as "very speculative": that the cap would have no effect on the clinic's profitability. See Motion
To Exclude at 15. Yet, the Town does not contest that it is unclear whether the cap will be a
hard or soft one. Given this uncertainty, reasonable people could disagree as to whether it ought
to be factored in and, if so, how. This criticism, hence, goes to the weight, rather than the
admissibility, of the Feldman opinion.
• Turning, finally, to the issue of Dr. Feldman's methodology, I agree with CRC that
Hutchinson is distinguishable. Whereas, in Hutchinson, the physician expert effectively
introduced similar opinions from undesignated physician experts who could not be subjected to
cross-examination, Dr. Feldman does not introduce a lost profits opinion from an undesignated
expert. The ROI-CTC does not calculate lost profits as such; rather, it projects revenues,
expensesand a d net revenues for a five-year period for the Warren clinic. See ROI-CTC. While
the ROI-CTC data is central to Dr. Feldman's opinion, and he relied on it, it is more accurately
characterized as foundation for his opinion than a competing expert opinion. Moreover, unlike
the authors of the opinion letters in Hutchinson, an author of the ROI-CTC, Pritchard, has been
made available for cross-examination.
Setting aside whether, as CRC contends and the Town contests, the ROI-CTC itself is
admissible pursuant to the business records exception to the hearsay rule, Pritchard at the least is
•
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qualified to testify as a layperson, based on his personal involvement in the Warren clinic project
111
and the preparation of the ROI-CTC, as to the manner in which that document was prepared and
the rationales behind its projections. See, e.g., R.I Spiece Sales Co. v. Bank One, NA, No. 1:03-
CV-175-TS, 2005 WL 3005484, at *1 (N.D. Ind. Nov. 9, 2005) ("those who have special
knowledge of[a] business and its operations may also testify as to the facts of the business that
underlie profit expectations under Federal Rule of Evidence 701 without qualifying as
experts").28 The jury, thus, will be positioned to assess whether some or all of the CRC
information upon which Dr. Feldman's opinion rests is worthy of credence.
3. Bid for Summary Judgment as to Plaintiff CRC Health
The Town finally seeks summary judgment as to CRC Health on the basis that it has not
stated a claim and has no standing to press a claim in this case. See Defendant's SIJ Motion at
14-16. I agree.
It is undisputed that CRC Health owns CRC Corporation, which in turn owns CRC
p �
Recovery. See Factual Stip. IN 1-3. CRC Recovery, not CRC Health, was qualified to do
business in Maine, applied to the State of Maine for a license to operate a methadone clinic, and
would have actually operated a clinic in Warren. See id. ¶¶ 8-9; Defendant's SMF ¶ 22;
Plaintiffs' Opposing SMF¶22.
This court has noted:
28 While the creation of the ROI-CTC was a team effort, for purposes of Rule 701, knowledge acquired through
others can qualify as personal knowledge. See, e.g., Lightning Lube, Inc. v. Witco Corp.,4 F.3d 1153, 1175 (3d Cir.
1993)("[I]t is logical that in preparing a damages report the author may incorporate documents that were prepared
by others,while still possessing the requisite personal knowledge or foundation to render his lay opinion admissible
under Fed.R.Evid.701.")(citation and internal punctuation omitted);National Starch&Chem. Trading Co. v. M/V
Star Inventana,No. 05-91-P-S,2006 WL 1876996,at *3 (D.Me. July 5,2006)("A witness may testify under Rule
701 about inferences that he could draw from his perception of a business's records, or facts or data perceived by
him in his corporate capacity.")(citation and internal quotation marks omitted).
•
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0 Constitutional standing limitations require that a plaintiff have suffered a distinct
and palpable injury in order to pursue a claim in federal court. Standing doctrine
embraces several judicially self-imposed limits on the exercise of federal
jurisdiction, such as the general prohibition on a litigant's raising another person's
legal rights. An individual plaintiff must show that he himself has been injured.
The ultimate burden of proving injury rests with the plaintiff, and a defendant
may obtain summary judgment on the ground of lack of standing unless affidavits
or other submissions indicate that a genuine issue of material fact exists
concerning standing.
Injury arising solely out of harm done to a subsidiary corporation is generally
insufficient to confer standing on a parent corporation. If that is the case,the even
1 more attenuated relationship between a subsidiary and a subsidiary of a separate
subsidiary of a parent corporation cannot possibly support the assertion of a claim
by the former when the injury, if any,was suffered by the latter.
American Towers, Inc. v. Town of Falmouth, Me., 217 F. Supp.2d 154, 157 (D. Me. 2002)
(citations and internalpunctuation omitted).
)
CRC argues that American Towers is distinguishable because it involved two different
• subsidiaries, rather than a parent and its wholly owned subsidiary, and an injury arising solely
out of harm done to a subsidiary. See Plaintiffs' S/J Opposition at 17 n.6. It asserts that "if a
parent can prove that the financial gain from the subsidiary's profits would have flowed directly
into the parent company, that is also a basis for standing to sue for damages." Id. at 16 (citing St.
Jude Med., Inc. v Access Closure, Inc., No. 08-CV-4101, 2010 WL 4968147, at *6 (W.D. Ark.
Dec. 1, 2010). It contends that CRC Health might have standing if it could prove that the
financial gain from the subsidiary's profits would have flowed directly into the parent company.
See id. at 17. It adds that Pritchard testified that, in investigating whether to open a clinic in
Warren, part of his work was for CRC Health and part of it for CRC Recovery, as a result of
which "any diversion of resources or frustration of mission damages would flow to CRC Health
Group." Id.
0
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That American Towers involved two subsidiaries rather than a parent and a subsidiary is a •
distinction without a difference. "Wrongdoing to a subsidiary does not confer standing upon the
parent company, even where the parent is the sole shareholder of the subsidiary." Tullett
Prebon, PLC v. BGC Partners, Inc., Civil Action No. 09-5365 (SRC), 2010 WL 2545178, at *4
(D.N.J. June 18, 2010),aff'd, 427 Fed.Appx. 236 (3d Cir. 2011).
Nor does CRC succeed in distinguishing American Towers on the basis that CRC Health
raises a triable issue that it suffered an injury distinct from that to CRC Recovery. St. Jude does
not stand for the proposition that a parent corporation has standing if it can prove that a
subsidiary's lost profits would have flowed directly to it. The parent corporation in that case
disclaimed any bid to recover lost profit damages, instead seeking "the decrease in its own
market value due to the lost sales of its wholly-owned subsidiaries." St. Jude, 2010 WL
4968147, at *6. Assuming, without deciding, that CRC Health could demonstrate standing if it •
adduced evidence of a decrease in its market value as a result of the alleged injury to CRC
Recovery, it points to no such evidence. See Plaintiffs' SIJ Opposition at 16-17.29 Indeed, it
does not even identify any evidence that CRC Recovery's profits would have flowed directly to
it. See id.
CRC's reliance on Pritchard's testimony also falls short of staving off summary judgment
as to CRC Health. First, it presents that testimony solely in the body of its opposing brief— a
circumstance that counsels disregard of that evidence for violation of Local Rule 56. See Loc. R.
56(f). In any event, even were the Pritchard testimony cognizable, it is far from clear that,
because Pritchard performed part of his work on the Warren clinic for CRC Health and part of it
29 The United States District Court for the District of New Jersey rejected the notion that a parent corporation can
sue for diminution in its market value based solely on harm to a subsidiary. See Tullett,2010 WL 2545178,at*4-
*5. •
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• for CRC Recovery, any diversion of resources or frustration of mission damages would flow to
CRC Health. CRC adduces no evidence as to underlying agreements between the corporations
regarding shared services or their manner of allocating costs.
The facts that are properly in evidence for purposes of summary judgment point to one
conclusion: that CRC Health suffered no injury distinct from that suffered by CRC Recovery.
See Defendant's SMF ¶¶ 23-25; Plaintiffs' Opposing SMF ¶¶ 23-25 (Dr. Feldman has done no
evaluation of damages to CRC Health separate from those to CRC Recovery and has lumped
losses for the two together and offered one opinion; there is no distinction between damages
claimed by CRC Health and those claimed by CRC Recovery); id. ¶¶ 8-9 (the reason CRC
named CRC Health as a plaintiff is because,through CRC Health's wholly owned subsidiaries, it
owns and operates drug and alcohol treatment programs; if CRC Recovery collected damages,
• the money likely would flow up to CRC Corporation and then to CRC Health).
The Town, accordingly, is entitled to summary judgment as to CRC Health.
V. Conclusion
For the foregoing reasons, I DENY the Motion To Exclude, recommend that the court
GRANT the Plaintiffs' SIJ Motion to the extent predicated on their theory of intentional, facial
discrimination but otherwise DENY it, and recommend that the court GRANT the Defendant's
S/J Motion as to CRC Health but otherwise DENY it.
NOTICE
A party may file objections to those specified portions of a magistrate judge's report or
proposed findings or recommended decisions entered pursuant to 28 U.S.C. §636(b)(1)(B)for
which de novo review by the district court is sought, together with a supporting memorandum
and request for oral argument before the district judge, if any is sought, within fourteen (14)
days after being served with a copy thereof A responsive memorandum and any request for
•
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oral argument before the district judge shall be filed within fourteen (14) days after the filing •
of the objection.
Failure to file a timely objection shall constitute a waiver of the right to de novo review
by the district court and to appeal the district court's order.
Dated this 31st day of March, 2014.
/s/ John H.Rich III
John H.Rich III
United States Magistrate Judge
•
•
56