UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
THIRD PARTY COMPLAINT OF EBW LASER, INC.
GE HEALTHCARE FINANCIAL SERVICES, a component of GENRAL ELECTRIC COMPANY, Plaintiff,
Civil Action No. 1:03CV00514
EBW Laser, Inc.
Third Party Plaintiff,
ALCON LABORATORIES, INC., and REFRACTIVE HORIZONS, L.P.
Third Party Defendants.
Defendant, complaining of the Third Party Defendants, alleges and says:
1. Defendant EBW Laser, Inc., (hereinafter EBW Laser) is a corporation duly formed and operating in North Carolina.
2. Third Party Defendant Alcon Laboratories, Inc., (hereinafter "Alcon") is a Delaware corporation with substantial business dealings in North Carolina.
3. Third Party Defendant Refractive Horizons, L.P. (hereinafter "Refractive") is a Texas limited partnership with substantial dealings in North Carolina.
4. The Defendant asserts that the actions of the Third Party Defendants complained of in this Third Party Complaint directly relate to the Complaint filed by Plaintiff GE Healthcare Financial Services (hereinafter "GE") on June 30, 2003, 1:03CV00514. Defendants in this action are cited by name as the reason the debt was not paid in the GE action and the debt as may be found to be owed by EBW Laser in that action is owed by the Third Party Defendants for reasons hereinafter stated.
5. Jurisdiction of this action is founded upon 18 U.S.C. §§1961 1968 and pursuant to 28 U.S. C. §1441 and venue is founded upon 28 U.S.C. §1391. The matter in controversy exceeds, exclusive of interest and costs, the sum specified by 28 U.S.C. §1332.
6. On March 30 2000, Defendant EBW Laser executed a contract with Summit Technology, Inc., to obtain through third party leases a number of Autonomous LadarVision Systems, highly sophisticated machines designed to correct vision in human eyes. Among these third party leases are the same leases being sued upon by GE in the original complaint. On information and belief, later that same year, Defendant Alcon purchased the assets and liabilities of Summit Technologies, Inc., including the aforementioned contract. Alcon divided the rights and responsibilities of that contract so that they were partially performed or intended to be performed by Alcon and other portions were partially performed or intended to be performed by Refractive.
7. During the remainder of 2000 after the purchase of Summit Technologies, Inc., and into 2001, Third Party Defendant Alcon became aware of extremely serious problems with the Autonomous LadarVision Systems which it had purchased as a part of the deal with Summit Technologies, Inc. Reports began to come in from doctors around the nation through Third Party Defendant Refractive and Alcon's repair personnel and other sources that the Autonomous LadarVision Systems, or some of them, were badly malfunctioning. The machines were designed to automatically calculate the depth and type of laser cut on the eye which could not be independently verified and in truth, on some machines, the results were wildly erratic. Sometimes when the machines indicated a sufficient laser cut would be made, no laser cut would be made at all. At other times the cut would be, in any case, greatly different than the machine indicated. This necessitated thousands of patients to have their eyes redone, often multiple times, and some patients to have uncorrectable, terrible results."
8. The existence of these malfunctioning machines caused a conundrum for Third Party Defendant Alcon and Third Party Defendant Refractive. It they reported these numerous malfunctioning to the Federal Drug Administration as required by law and notified doctors around the country to look out for this possibility, then the sales of the Autonomous LadarVision Systems for which Third Party Defendant Alcon had just paid a premium might crash. The FDA might well force a recall and review the entire design of the machine and thousands of patients might well sue Alcon for product liability. To avoid those eventualities, Third Party Defendants Alcon and Refractive entered into a criminal enterprise to defraud and deceive the doctors and the companies who used the machines (9 of which EBW Laser, Inc., was one). The deception operated in this fashion. Each time a doctor or company reported one of these widespread malfunctions, the Third Party Defendants would pretend it was the first they had heard of it. The Third Party Defendants would then suggest all sorts of fanciful and untrue possible causes for the malfunction, having full knowledge that the known malfunction was common with the machine. The Third Party Defendants would then feign an "inspection" of the patient records to "discover" the cause of the problem when they already knew they already knew the cause. Much or all of the deception perpetrated on the doctors or companies took place through the United States mails, over United States wires, and inside the territorial boundaries of the United States. In the second phase of the deception, if any doctor and/or company became suspicious or uncooperative, the Third Party Defendants intimated and threatened said doctors or companies and induced fear of economic hard so said doctors and/or companies who suspected a malfunction of the machine would not disseminate their suspicion to the Federal Drug Administration or in doctor conferences.
9. The acting agents for the Third Party Defendants, Alcon and Refractive, were the President and officers of Alcon, the employees who dealt with the doctors and companies who owned Autonomous LadarVision Systems. All actions of the criminal enterprise were taken on behalf of participants,. Third Party Defendants Alcon and Refractive."
10. The criminal enterprise had as its purpose to avoid the legally required reporting of malfunctioning machines to the Food and Drug Administration, to continue to deceive the doctors and corporations who had the malfunctioning machines and to deceive the makers of new contracts with the Third Party Defendants so that they would have no knowledge of the malfunctioning machines. Third Party Defendant Alcon also wished to do a stock issue and it wished not to make otherwise required disclosures to the Securities and Exchange Commission and to the public so that its stock issue would be successful and raise more money. All of these goals of the criminal enterprise depended on the continued denial that the machines were malfunctioning even though the Third Party Defendants knew or should have known that they were. In the event any doctor or company being deceived suggested consulting the Federal Drug Administration or bringing up the p4roblem at doctor conventions, the goal of the criminal enterprise then continued in the form of defeating any widespread dissemination of the truth by intimidation and inducements of fear of economic harm.
11. The Defendant EBW Laser first became the target of the Third Party Defendants' criminal enterprise because it had two of the defective machines. When the Defendant EBW Laser and the doctors with whom they had contracted first reported the wildly erratic results, Third Party Defendants, as was their deceptive practice, made no disclosure that they had received essentially the same reports from doctors around the nation including from some of the nation's most respected surgeons. The Third Party Defendants instead by mail and telephone inside the boundaries of territorial United States, told the Defendant and the contracted doctors that there must be something wrong with their techniques or perhaps there was too much humidity in the room. They deceptively failed to disclose that they had had the same reports from other doctors and they had given them the same false explanations. The Third Party Defendants then through a sham of reviewing patient records reported false conclusions instead of attributing the results to the malfunctioning machines.
12. The Third Party Defendants had in January 2001, negotiated a contract with Defendant whereby Defendant would pay per procedure fees such that for each person on whose eyes surgery was performed, the Defendant would pay a fee to the Third Party Defendants. This contract was negotiated and was transmitted through the United States mails or telephonically and was wired all in the territorial United States. The malfunctioning machines necessitated repeated surgical procedures on the same person either to perform the task originally attempted which was not done because of the malfunctioning machine or to correct damage done at the other extreme by the malfunctioning machine. All of this was well-known to the Third Party Defendants because of repeated complaints by respected doctors around the United States and from records of their own maintenance personnel. They nevertheless deceptively failed to disclose these facts to Defendant EBW Laser and negotiated the contract intentionally keeping the EBW Laser in the dark. The negotiation of the contract which took place in December 200 and January 2001 was deceptive in that it failed to disclose serious continuing malfunctions of the machine well-known to the Third party Defendants which would necessitate many more repeat procedures than could reasonably be expected and which the Third Party Defendants led the Defendant to believe would be expected.
13. During 2001, two of the Defendant's machines began to seriously malfunction. One of those two is the subject of the complaint filed by Plaintiff GE. In the case of the GE machine, the subject of the original lawsuit located in Maryland, the machine performed erratically. The machine's settings would always indicate that everything was in good order, but at times the laser would not cut at all. At other times it would perform erratically and vary wildly from patient to patient and even from eye to eye on the same patient. Repeatedly, maintenance personnel were called in and in numerous phone conversations, the Third Party Defendants always repeated the same deceptive statements similar to what had been repeated around the country to a number of doctors and companies reporting similar problems with the machine. EBW Laser was told telephonically within the territorial United States as was the doctor with whom they were contracting that perhaps the doctor needed to work on her technique or humidity problems might be causing it. Always carefully and intentionally omitted was the true state of affairs which was known and appreciated by the Third Party Defendants that a number of machines were malfunctioning the same way around the country which could only reasonably indicate a machine problem and not a wide-spread doctor problem.
14. Defendant EBW Laser became extremely concerned about the number of repeat surgeries and the fact it was having to pay procedure fees for these repeated surgeries. EBW Laser was also concerned that the medical practice in Maryland had been severely damaged and the medical practice in Albuquerque, New Mexico, where the other malfunctioning machine was located had also been badly hurt because of the machine's down time and repetitive problems. In telephonic conversations in the territorial United States, the Defendant EBW Laser confronted the Third Party Defendants with their suspicions that the machines were malfunctioning, and that some kind of mitigation of the fees needed to be made. The Third Party Defendants continued their deceptive behavior and insisted that these problems were unique and that they had not heard of anything else like this occurring. In fact, the Third Party Defendants were by 2001 already dealing legally with the problem and had had repeated conversations about the malfunctioning machines. The criminal enterprises goal of cover-up by deception and intimidation was well under way and their deceptive actions toward Defendant were only a relatively small part of it. The Third Party Defendants agreed to defer the disputed procedure fees while negotiations were ongoing as to how much the procedure fees would be mitigated. In March 2003, Defendant EBW Laser through J. Mark McDaniel communicated telephonically to the Third Party Defendants that he would like to bring the negotiation to a conclusion because he wished to transfer service contracts into a different corporate name and he was both clearing that with the Third Party Defendants, as was required, and wrapping up all unfinished business. McDaniel on behalf of the Defendant EBW Laser then communicated that he had heard rumors that Alcon had had the same sort of problems with other machines that doctors were being bought out, and that machines were being replaced or substantially rebuilt as the machines for EBW Laser had been. He wanted to know if those rumors were true. McDaniel had unknowingly triggered the other technique of the criminal enterprise. The first technique was to hide the problem by deception: the other part of the technique was to keep the problem from official disclosure or acknowledgement by economic intimidation and threats.
15. Alcon responded to EBW Laser's inquiries by false and deceptive denials, but also by a lawsuit demanding all the disputed money upfront. Even though Third Party Defendants obtained a Court Order so that any further procedures fees would be paid directly to them and the disputed fees would be determined by a Court, the Third Party Defendants then proceeded with a massive economic intimidation campaign. First, they called the doctors with whom EBW Laser had contracts and told them that they would be cutting off the machines so that the doctors could no longer perform surgery on EBW Laser machines. When the doctors attempted to make arrangement to pay both procedure fees and maintenance directly to the Third Party Defendants, they offered the doctors only one alternative - cease doing business with EBW Laser and allow the Third Party Defendants to substitute the machines with new contracts for them or else they would cut them off. All of these contracts were made with the full knowledge that EBW Laser was in a contractual relationship with these doctors and that the Third Party Defendants were tortuously interfering with those third party relationships. These contacts wee made both telephonically and written offers were made through the mail and th4rough the wires.
16. Third Party Defendants had as its purpose to further the criminal enterprise so that EBW Laser would cease discussing the malfunctioning of the machines, pay the Third Party Defendants every5hing without negotiation, and have no risk of disclosure of the Third Party Defendants' criminal enterprise. The Third Party Defendants meant to and did put the Defendant in fear of economic harm by eliminating their ability to pay their leases knowing that some leases had personal guarantees, eliminating their source of income from doctors with whom the Defendant had contracts, and virtually destroying the economic integrity of the Defendant. Numerous acts were taken to forward this criminal enterprise in the mail, telephonically, and over the wires within the territorial United States.
17. As a direct and proximate result of the Third Party Defendants' deception conducted through the mails and wires of the United States and as a victim of the Third Party Defendants' criminal enterprise, the Defendant has suffered actual damages both present and legally recognized prospective damages in the millions of dollars with the exact amount to be proven at trial.
SECOND CAUSE OF ACTION
18. Numbers 1-17 are hereby replead.
19. The actions of the Third Party Defendants in failing to disclose critical information known to it of widespread malfunctioning machines and failing to disclose that numerous extra follow-up procedures would be needed because of those malfunctions while at the same time establishing a payment schedule for those same procedures was deceptive within the meaning of the North Carolina Unfair Trade Practice Act and constituted an unfair trade practice.
20. The actions of the Third Party Defendants in repeatedly making false and/or deceptive statements to Defendant and its representatives concerning the cause of the problems with procedures that the Defendant was experiencing when the Third Party Defendants were responsible for the maintenance and upkeep of the machines was deceptive within the meaning of North Carolina's Unfair Trade Practice Act and would constitute unfair trade practice.
21. As a direct proximate result of the Third Party Defendants' deceptive conduct in violation of the North Carolina Unfair Trade Practice Act, the Defendant has suffered actual and legally allowable prospective damages in an exact amount to be proven at trial.
22. The Defendant asserts that the issues raised and the evidence necessary to prove the Unfair Trade Practice claim would be similar to and would tend to duplicate the evidence put forth in the Federal RICO claim in this complaint and it would be proper to append this matter.
Trial by jury on all factual matters is hereby demanded.
WHEREFORE, the Defendant prays that the following damages be awarded from the Third Party Defendants jointly and severely:
1. That the Defendant be granted damaged (sic) for actual and (sic) legally allowable prospective damages in an amount to be proven at trial.
2. That the amount of said damages be trebled pursuant to RICO and/or the North Carolina Unfair Trade Practice Act.
3. That the Defendant be granted an award of reasonable attorney's fees pursuant to RICO and/or the North Carolina Unfair Trade Practice Act.
4. For such other and further relief as the Court deems just and proper.
This the ____ day of July, 2003
Douglas S. Harris
Attorney for Third Party Plaintiff/Defendant
State Bar Number 9843
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