Sanchez v. Triple-S Management, Corp.

United States Court of Appeals
For the First Circuit

No. 06-1925

JOSE SANCHEZ; NILSA IRIZARRY; CONJUGAL PARTNERSHIP SANCHEZ-
IRIZARRY, d/b/a, Laboratorio Clinico Irizarry Guash; DELMA
RODRIGUEZ; WILMER ROLDAN; CONJUGAL PARTNERSHIP ROLDAN-RODRIGUEZ,
d/b/a Laboratorio Salimar; MAITE ROLON-BALSEIRO; CESAR DEL-VALLE-
VAGUE; CONJUGAL PARTNERSHIP DEL-VALLE-ROLON, d/b/a Laboratorio
Clinico Rolon; OIM ENTERPRISES, INC., d/b/a Laboratorio Clinico
Ramos; ELBA RIVERA-MARTINEZ; CONJUGAL PARTNERSHIP MELENDEZ-
RIVERA; JOSE ZAYAS; ANA HERNANDEZ-RIVERA; CONJUGAL PARTNERSHIP
ZAYAS-HERNANDEZ; FRANCES GUTIERREZ-MARTINEZ; CONJUGAL PARTNERSHIP
GARRATON-GUTIERR; NESTOR ALLENDE-ORTIZ; ROSA ASPARO-PLANA;
CONJUGAL PARTNERSHIP; ALLENDE-ASPARO; MEDICAL GERIATRICS AND
ADMINISTRATIVE SERVICES, INC.; OUTPATIENT ADMINISTRATIVE
SERVICES, INC.; JOSE E. VARELA-ROSARIO; MIGDALIA QUILES-
RODRIGUEZ; CONJUGAL PARTNERSHIP VARELA-QUILES, d/b/a Farmacia San
José, d/b/a Farmacia De Aqui; ANA DELIA MARRERO; CONJUGAL
PARTNERSHIP TORRES-MARRERO, d/b/a Farmacia San Antonio; ALICIA
FELIBERTI-IRIZARRY; GUILLERMO J. FERNANDEZ; ELIZABETH SANCHEZ DE
LEON; CONJUGAL PARTNERSHIP RUIZ-SANCHEZ; LYDIA AYALA-DIAZ; JULIA
NAVEIRA; CONJUGAL PARTNERSHIP; VAZQUEZ-NAVEIRA; LUIS CARMELO
ALAMO CRUZ; CONJUGAL PARTNERHSIP ALAMO-CRUZ; JOSE WILLIAM
VAZQUEZ; ISOLINA RUIZ; JOSE VEGA; CONJUGAL PARTNERSHIP VEGA-RUIZ;
FRANCES MATOS-ORTIZ; WILFREDO BURGOS SANTIAGO; CONJUGAL
PARTNERSHIP BURGOS-MATOS; JOREALIS VIGO-GONZALEZ; AYMETTE VIGO-
GONZALEZ; LENDIS OJEDA-ALEMANY; KARLA OJEDA-ALEMANY; DANIEL
AQUINO RIVERA; DORIS MIRANDA RAMOS; CONJUGAL PARTNERSHIP AQUINO-
MIRANDA; ALEJANDRA OJEDA-ALEMANY; DANIERIC AQUINO-MIRANDA; DARRYL
AQUINO-MIRANDA; EDGARDO RODRIGUEZ-MARRERO; ROY BROWN; SAMMY
GARAU-DIAZ; KETTY DIAZ-GARCIA; AEDNA MARTINEZ-LAZU; ANDRÉS
ROMERO-DEST; ANA I. RODRIGUEZ-MARRERO; DAISY MORALES-PEREZ;
CARMEN ORTIZ-ROQUE

Plaintiffs, Appellants,

v.

TRIPLE-S MANAGEMENT, CORP.; TRIPLE-S, INC.; SEGUROS TRIPLE S,
INC.; SEGUROS DE VIDA TRIPLE-S, INC., SSS; INTERACTIVE SYSTEMS,
INC.; TRIPLE-C, INC.; ACCESSO-SALUD, INC.; MC-21 CORPORATION; CPA
RAMON M. RUIZ-COMAS; MIGUEL VAZQUEZ-DEYNES; CRISPULO RIVERA-
OFRAY; MD BELISARIO MATTA; MD FERNANDO L. LONGO; MD WILMER
RODRIGUEZ-SILVA; MD FERNANDO YSERN-BORRAS; MD EMIGDIO BUONOMO; MD
ANGEL W. HERNANDEZ-COLÓN,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. José Antonio Fusté, U.S. District Judge]

Before

Lynch, Circuit Judge,

Stahl, Senior Circuit Judge,

and Howard, Circuit Judge.

Cherie K. Durand, with whom Paul H. Hulsey, Reynaldo Quinones,
Hulsey Litigation Group, LLC and G. Robert Blakey were on brief,
for appellants.
Gael Mahony, with whom Holland & Knight, LLP, Salvador
Antonetti-Zequeira, César T. Alcover-Acosta, José L. Ramírez Coll,
and Fiddler, González & Rodríguez were on brief, for appellees.
Eduardo A. Zayas-Marxuach, with whom Roberto C. Quiñones-
Rivera and McConnell Valdés were on brief, for appellee, MC-21
Corporation.

June 13, 2007
 HOWARD, Circuit Judge. The plaintiffs appeal from the

entry of summary judgment for the defendants on claims asserting

violations of the Racketeer Influenced and Corrupt Organizations

Act, 18 U.S.C. §§ 1961 et seq. (2000) ("RICO"). We affirm.

I.

The plaintiffs commenced this suit as a putative class

action, purporting to represent, among others, providers of medical

products and services covered under policies issued or administered

by the defendants, as well as the subscribers to those policies.

The defendants include a number of insurance companies and similar

businesses, such as claims administrators, who allegedly joined

together with a number of others in a RICO "enterprise." 18 U.S.C.

§ 1961(4). The enterprise has allegedly engaged in efforts to

"acquire control" of, "capitalize," and "convert" the assets of

Triple-S, Inc., a now-defunct insurance company which, the

plaintiffs say, had restricted the use of those assets to

charitable purposes.1

The complaint asserted twelve numbered counts, each

setting out a separate RICO violation in the form of a different

1
With the exception of MC-21 Corporation, the defendant entities
are subsidiaries of defendant Triple-S Management Corporation
("Triple S"), a holding company created when Triple-S, Inc. was
reorganized. MC-21, for its part, is under contract with the
defendant insurers to serve as the exclusive manager of the
prescription drug benefits they provide; the plaintiffs allege that
the other members of the enterprise "have a proprietary economic
interest in MC-21, either directly, or indirectly."

-3-
scheme. In relevant part, these alleged schemes have enriched the

enterprise by overcharging subscribers and underpaying providers

for medical products and services that were covered under insurance

policies issued by the defendant insurers. To carry out these

schemes, the defendants have allegedly made a number of mailings in

violation of the mail fraud statute, 18 U.S.C. § 1341, and

transmissions in violation of the wire fraud statute, id. § 1343.

One of the schemes has also allegedly relied on extortion in

violation of the Hobbs Act. Id. § 1951(b)(2). The plaintiffs

characterize these crimes as the "pattern of racketeering activity"

underlying their RICO claims. See id. § 1961(1).

In response to the complaint, the defendants moved to

dismiss, arguing, inter alia, that the plaintiffs had failed to

plead mail and wire fraud with the requisite particularity. See

Fed. R. Civ. P. 9(b). The plaintiffs rejoined that, insofar as

their claims relied on transmissions from the defendants to the

plaintiffs, they had sufficiently pleaded them. In support of this

point, the plaintiffs submitted an appendix explaining that

"through their communications with the plaintiffs [sic] classes the

defendants failed to disclose, misrepresented and covered up" the

alleged overcharges and underpayments. The plaintiffs stated that

the communications thus "misled them to believe that" they were

paying the correct charge or receiving the correct payment.

-4-
 The district court denied the motion to dismiss in part,

ruling that the plaintiffs had adequately pleaded "communications

that fraudulently induced Plaintiff subscribers and providers to

accept lower reimbursements and higher charges."2 Nevertheless,

the district court ordered the plaintiffs to amend part of their

complaint to identify certain of those communications in accordance

with Rule 9(b). The plaintiffs then filed an amended complaint

asserting only those four counts that had survived the motion to

dismiss. Three of these counts alleged that the defendants made

mailings and wire transmittals "[f]or the purpose of executing and

concealing" various "artifices," consisting of claim practices that

have resulted in the overpayment of deductibles by subscribers or

the underpayment of providers for their services to the

subscribers.3 The fourth count alleged that the defendants

violated the Hobbs Act by threatening the providers with economic

injury in the form of exclusion from the network of insurance plans

2
The district court granted the motion as to other counts of the
complaint on a number of grounds, including failure to plead them
with particularity. The plaintiffs have not appealed from any
aspect of the district court's ruling on the motion to dismiss.
3
The amended complaint also alleged, as additional predicate acts
underlying one of these counts, violations of the anti-kickback
provisions of the Medicare Act, 42 U.S.C. § 1320a-7b(b) (Supp.
2006). The plaintiffs, however, did not rely on this theory at
summary judgment, and have not done so here. Accordingly, we do
not consider it.

-5-
administered by the defendants, audits of the providers' accounts,

withholding of payments, and denial of patient referrals.

Subsequent to the amended complaint, the district court

approved the parties' joint proposed scheduling order. The order

provided that fact discovery would consist of two phases of roughly

four months each, with the first to conclude before the plaintiffs

filed their motion for class certification, and the second to

commence after briefing on that motion had been completed. The

order noted, however, that

class certification discovery will in part overlap with
merits discovery in that plaintiffs may request general
or 'template' documents in addition to documents
referring to the named plaintiffs and take [Fed. R. Civ.
P.] 30(b)(6) depositions of the [defendant] corporations
to ascertain their claims procedures . . . and similar
factual issues without discovery as to damages and
similar merit-intensive discovery.

While the order provided a deadline for the filing of dispositive

motions, it also noted that the "[p]arties may file dispositive

motions earlier, if they understand that the issue(s) are ripe."

After several months of discovery, including the

depositions of the named plaintiffs and Triple S (by way of several

Rule 30(b)(6) designates) and the exchange of voluminous written

discovery, the plaintiffs moved for class certification. The

defendants opposed the motion on the grounds that, inter alia, the

plaintiffs lacked standing to maintain the claims set forth in the

amended complaint which, apart from being fatal to class

certification in its own right, also meant that the plaintiffs

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could not satisfy the "typicality" and "adequacy" requirements of

Fed. R. Civ. P. 23. The defendants argued that, according to the

plaintiffs' own deposition testimony, they had suffered no harm

from the alleged racketeering activity, viz., the violations of the

mail and wire fraud statutes and the Hobbs Act. In particular, the

defendants noted that the plaintiffs could not say how the

communications they received from the defendants concealed their

alleged schemes.

In response, the district court issued an order directing

the plaintiffs to show cause within ten working days why summary

judgment should not enter against them based on the deficiencies in

proof identified by the defendants. While the court acknowledged

"that an objection to class certification is not the proper vehicle

through which to attack standing," it reasoned that the

"Defendants' arguments and the corresponding facts are so

compelling that . . . it would be a poor use of judicial resources

to proceed with class certification . . . without first

establishing whether this case is even remotely viable."

Before reaching this conclusion, the court analyzed the

plaintiffs' deposition testimony in detail, finding that it did not

support their allegations of mail and wire fraud or extortion. The

district court determined, for example, that none of the physicians

serving as plaintiffs was "able to identify a single incident of

fraudulent concealment" in the correspondence they received from

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the defendants. Yet the court recognized the possibility that the

plaintiffs' "testimony as to whether or not their injuries were

incurred through the transmission of 'fraudulent' communications or

the infliction of 'extortion' relies on . . . incomplete

understanding of various terms of art." Accordingly, the show

cause order would "give Plaintiffs a last opportunity to present a

crystal clear picture of how their allegations are factually

supported." The court also preemptively rejected any argument that

the incomplete state of discovery would prevent the plaintiffs from

doing so, because their claims relied "on fraudulent communications

that were delivered to [them] and on acts of extortion that were

inflicted directly upon them."

Despite this admonishment, the plaintiffs rejoined that

the district court would "create reversible error" by entering

summary judgment before they had the opportunity to complete the

discovery allowed by the scheduling order. The plaintiffs did not,

however, ask for an extension of time to respond to the order to

show cause. Instead, they submitted nearly three hundred pages of

evidentiary materials, including the declarations of twelve

plaintiffs and two expert witnesses and a number of exhibits. Each

of the plaintiffs attested to receiving documents from at least one

of the defendants, but stated:

It is impossible for a layman or a Plaintiff or class
representative to articulate the specifics of the
scheme/fraud solely from the documents received from the
Defendants because of the concealed nature of their

-8-
 fraud. Therefore, I rely on the experts hired for this
case to explain how the Defendant's [sic] practices form
a RICO scheme.

Each of the plaintiffs claimed that, for the same reason, he or she

could not "articulate the specifics [sic] damages suffered from the

scheme/fraud" and relied on the experts to explain that as well.4

The plaintiffs' experts, for their part, verified that

"[a] lay person to the insurance industry cannot understand the

underlying . . . scheme/fraud because of its complexity, and the

substantial time and resources which would have to be expended to

understand the scheme." While the experts provided some examples

of each of the defendants' claim practices cited in the amended

complaint, their explanations of how those "schemes" were

fraudulent were decidedly less comprehensive. The experts attested

that each individual provider

has no way of knowing of the specifics of the scheme due
to the overwhelming amount [sic] of documents the . . .
provider receives from Triple-S on a monthly basis and
because important information regarding the scheme is
omitted from those documents. The time and resources
needed to go through the documents would be overwhelming
and a substantial hardship. Additionally, the documents
received by the . . . provider, while not fraudulent on
their face, are used in furtherance of the scheme for
Triple-S to obtain an economic benefit that it does not
rightfully deserve.

The experts gave a similar account of the alleged scheme to defraud

the subscribers, explaining that they "would have no way of knowing

4
The quoted language appears in identical form in each of the
plaintiffs' declarations, including the typographical errors.

-9-
of [it] since part of this is reflected in the documents received

by the [providers] of which the subscriber does not get copies."5

Based on these materials, the district court determined

that the plaintiffs were advancing a new theory of mail and wire

fraud: while they had asserted in response to the motion to dismiss

that the transmissions from the defendants to the plaintiffs

"misled them to believe that" they were paying the correct charge

or receiving the correct payment, they were now arguing that those

transmissions were "not fraudulent on their face." But the

district court concluded that, under either theory, the plaintiffs

could not survive summary judgment.

Treating the plaintiffs' new theory--that the defendants'

transmissions violated the mail and wire fraud statutes because

they failed to disclose the entirety of their schemes--as a

proposed amendment to their complaint, the district court ruled

that the plaintiffs had not alleged the underlying schemes with the

particularity demanded by Fed. R. Civ. P. 9(b). The court further

ruled that the plaintiffs were not entitled to further discovery

before satisfying this pleading requirement. The district court

also agreed with the defendants that the plaintiffs' original

theory of mail and wire fraud and their claim of extortion had been

5
The substantive portions of each expert's declaration were
identical to those of the other's.

-10-
fatally undermined by their deposition testimony. Accordingly, the

court entered summary judgment for the defendants.

II.

The plaintiffs challenge the district court's decision on

procedural and substantive grounds. First, they argue that the

district court erred in entering summary judgment sua sponte before

the plaintiffs had an opportunity to engage in discovery as to the

merits of their claims. Second, the plaintiffs argue that even the

limited evidence they were able to marshal at the time the court

ordered summary judgment was sufficient to demonstrate genuine

issues of material fact. We review these questions de novo. See,

e.g., John G. Alden, Inc. of Mass. v. John G. Alden Ins. Agency of

Fla., Inc., 389 F.3d 21, 24 (1st Cir. 2004).

A.

A district court can enter summary judgment even though

none of the parties asks for it. See Celotex Corp. v. Catrett, 477

U.S. 317, 326 (1986). Nevertheless, given the potential for

unfairness lurking in this approach, we have ruled it out-of-bounds

unless two separate conditions obtain. See Berkovitz v. Home Box

Office, Inc., 89 F.3d 24, 29 (1st Cir. 1996). First, the discovery

process "must be sufficiently advanced that the parties have

enjoyed a reasonable opportunity to glean the material facts." Id.

Second, the district court must provide "the targeted party

-11-
appropriate notice and a chance to present its evidence on the

essential elements of the claim or defense." Id.

The plaintiffs argue that the district court's course of

action satisfied neither of these criteria, insisting that a

district court cannot order summary judgment sua sponte unless and

until discovery has been completed. But we have never adopted such

a hard and fast rule. To the contrary, we have determined that a

district court properly considered summary judgment on its own

initiative once "discovery had proceeded to the point where the

parties understood the material facts" at issue. Penobscot Indian

Nation v. Key Bank of Me., 112 F.3d 538, 562 (1st Cir. 1997)

(finding first condition satisfied where "parties had compiled a

voluminous record that included depositions of all the parties

involved" in event giving rise to claims); see also Frederique-

Alexandre v. Dep't of Natural & Envtl. Res., 478 F.3d 433, 438-39

(1st Cir. 2007) (reaching same conclusion where "discovery had

proceeded to the point where [non-targeted party] was able to move

for summary judgment" on relevant issue). We have even affirmed

summary judgment entered sua sponte before any discovery had taken

place, where the decision was based on legal conclusions

independent of any potentially available evidence. Bank v. Int'l

Bus. Machs. Corp., 145 F.3d 420, 431 (1st Cir. 1998) (upholding sua

sponte summary judgment on contract claim unsupportable in light of

unambiguous language of agreement).

-12-
 These decisions comport with the rule that sua sponte

summary judgment must wait until "the parties have enjoyed a

reasonable opportunity"--not necessarily the full duration of the

discovery period--"to glean the material facts."6 Cf. Aetna Cas.

Sur. Co. v. P & B Autobody, 43 F.3d 1546, 1568 (1st Cir. 1994)

(drawing distinction between discovery being "merely 'sufficiently

advanced'" and "complete" for purposes of sua sponte summary

judgment). Of course, what amounts to a "reasonable opportunity"

largely depends on the state of the particular litigation and the

nature of the issue decided by the sua sponte summary judgment

procedure. Cf. Bank, 145 F.3d at 431 (observing that district

court could not have properly relied on extrinsic evidence in

entering sua sponte summary judgment on contract claim before

discovery commenced). Here, given the circumstances at hand, we

conclude that the plaintiffs did have "a reasonable opportunity to

glean the material facts" before the district court ordered summary

judgment on its own initiative.

Our conclusion follows largely from the fact that the

district court decided to consider sua sponte summary judgment

6
Levya v. On The Beach, Inc., 171 F.3d 717 (1st Cir. 1999), on
which the plaintiffs rely, is not to the contrary. There, we noted
that because the parties "disagree[d] about the status of pretrial
discovery . . . it [was] unclear whether the first condition
precedent to a sua sponte summary judgment was met." Id. at 720.
Accordingly, we did not decide that issue, but reversed the entry
of sua sponte summary judgment based on the district court's
failure to satisfy the second condition, i.e., adequate notice.

-13-
against the plaintiffs based on what they said at their own

depositions. After reviewing that testimony in detail, the court

made the preliminary determination that the defendants'

interactions with the plaintiffs did not amount to violations of

the mail or wire fraud statutes or the Hobbs Act. The court then

stuck by that determination after reviewing the plaintiffs'

testimony a second time during its evaluation of their response to

the show cause order. In this context, discovery obtained from the

defendants could not have altered the outcome which, in the

district court's view, was ordained by the plaintiffs' own

deposition testimony.7 See Morales v. A.C. Orssleff's EFTF, 246

F.3d 32, 33 (1st Cir. 2001) (noting propriety of summary judgment

where plaintiff's deposition testimony "foreclosed any possibility

of recovery from defendant").

Furthermore, by the time the plaintiffs were called upon

to answer the show cause order, the discovery period had been

running for nearly twelve months; during this time, the plaintiffs

had taken the depositions of a number of Triple S employees

pursuant to Rule 30(b)(6) and procured voluminous documents and

other written discovery responses. This discovery enabled the

parties to file comprehensive briefing, together with numerous

evidentiary materials, on the plaintiffs' motion for class

7
As we discuss in Part B, infra, the district court was correct
that the plaintiffs' deposition testimony failed to support their
claims.

-14-
certification. To support the motion, in fact, the plaintiffs

asserted that the Rule 30(b)(6) "depositions established myriad

examples of the uniformity and standardization of Defendants'

practices that apply across the classes, namely in terms of

pricing, standard communications, and automated systems that cover

up the frauds the Plaintiffs allege or make them nearly impossible

to detect." By even the plaintiffs' contemporaneous account, then,

discovery was "sufficiently advanced that the parties ha[d] enjoyed

a reasonable opportunity to glean the material facts" under

consideration by the district court, Berkovitz, 89 F.3d at 29,

namely, whether the "standard communications" supported the

plaintiffs' claims.

The plaintiffs, however, maintain that they were not

given the chance required by the first Berkovitz prong--nor, for

that matter, the notice required by the second prong--because the

district court entered summary judgment sua sponte before they

could take the "merits discovery" permitted by the scheduling

order. Seizing on our statement in Berkovitz that "[w]hen a court

charts a procedural route, lawyers and litigants are entitled to

rely on it," 89 F.3d at 30, the plaintiffs contend that the

district court unfairly changed course by entertaining summary

judgment in advance of the discovery cutoff. As just discussed,

though, Berkovitz does not demand the completion of discovery

before the entry of sua sponte summary judgment no matter what.

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 Moreover, the scheduling order specifically contemplated

both that "class certification discovery [would] in part overlap

with merits discovery" and that the parties could file dispositive

motions prior to the deadline for doing so, "if they underst[ood]

that the issue(s) [were] ripe." So the plaintiffs could not

reasonably have believed, based on the order, that they would under

no circumstances have to oppose summary judgment prior to the

completion of merits discovery. And, when the district court gave

them ten working days to do so by issuing the order to show cause,

the plaintiffs did not seek an extension of time to respond. Under

these circumstances, the plaintiffs had "appropriate notice and a

chance to present [their] evidence on the essential elements of the

claim[s]" that the district court found insufficient in entering

summary judgment.8 Berkovitz, 89 F.3d at 29. The sua sponte

nature of the summary judgment order was not error.

B.

The plaintiffs also question the substance of the summary

judgment order. Summary judgment can enter "against a party who

fails to make a showing sufficient to establish the existence of an

8
Again, Levya does not help the plaintiffs: there, we found the
notice inadequate for sua sponte summary judgment in favor of
individual defendants where the district court had previously
announced that it would consider summary judgment against the
corporate defendants only. 171 F.3d at 720. Here, in contrast,
the district court specifically informed the plaintiffs that it was
considering summary judgment against them, and the basis for its
potential ruling, allowing them to address the issue.

-16-
element essential to that party's case, and on which that party

will bear the ultimate burden of proof at trial." Celotex, 477

U.S. at 322. An essential element of the plaintiffs' case was mail

and wire fraud, or extortion, which they characterized as the

"pattern of racketeering activity" underlying their RICO claims.

See 18 U.S.C. §§ 1961, 1962(a). The plaintiffs argue that their

deposition testimony, together with their submissions in response

to the show cause order, sufficed to create genuine issues of

material fact as to whether the defendants had engaged in mail and

wire fraud, as well as extortion. We consider the mail and wire

fraud allegations first.

Mail or wire fraud requires proof of (1) a scheme to

defraud based on false pretenses; (2) the defendant's knowing and

willing participation in the scheme with the specific intent to

defraud; and (3) the use of interstate mail or wire communications

in furtherance of the scheme. See, e.g., United States v. Cheal,

389 F.3d 35, 41 (1st Cir. 2004); Perez v. Volvo Car Corp., 247 F.3d

303, 312-13 (1st Cir. 2001). As we have recounted, the district

court entered summary judgment against the plaintiffs on their mail

and wire fraud claims because (1) their deposition testimony did

not support the allegations of mail and wire fraud set forth in the

amended complaint and (2) the materials submitted in response to

the show cause order advanced a new theory of mail and wire fraud

which, even if treated as a second amendment to the complaint, was

-17-
not stated with the particularity required by Rule 9(b). The

plaintiffs insist, however, that they "consistently alleged" the

same theory of mail and wire fraud all along--that the defendants'

transmissions "fail to disclose" or "conceal" how they process the

plaintiffs' requests for payment--and that they had sufficient

evidence to avoid summary judgment on that theory.

Taking the plaintiffs at their word that they did not

shift theories in response to the show cause order,9 we

nevertheless believe that the district court properly entered

summary judgment on the mail and wire fraud-based claims. A

defendant's failure to disclose information, without more, cannot

make out a violation of the mail and wire fraud statutes. See,

e.g., Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1065,

(11th Cir. 2007); United States v. Gray, 405 F.3d 227, 235-36 (4th

Cir. 2005); United States v. Autuori, 212 F.3d 105, 118 (2d Cir.

2000); United States v. Cochran, 109 F.3d 660, 665 (10th Cir.

1997); Emery v. Am. Gen. Fin., Inc., 71 F.3d 1343, 1347 (7th Cir.

1995); United States v. Kamer, 781 F.2d 1380, 1386 (9th Cir. 1986).

The authorities are less uniform on what "more" must be shown to

transform a non-actionable nondisclosure into fraud in this

context. Some courts have required a duty to disclose, triggered

by an independent statutory scheme, the relationship between the

9
We therefore do not consider what the district court treated as
the plaintiffs' "original" theory--that the communications from the
defendants were facially "misleading."

-18-
parties, or the defendant's "partial or ambiguous statements that

require further disclosure in order to avoid being misleading,"

Autuori, 212 F.3d at 119, while others have held that withholding

information with the intent to deceive is enough, see, e.g., Grey,

405 F.3d at 235-36; Emery, 71 F.3d at 1348.

We considered the issue in Bonilla v. Volvo Car Corp.,

150 F.3d 62 (1st Cir. 1998). There, we took the view that, without

"a legal, professional or contractual duty" to disclose, the

failure to do so generally cannot support a mail or wire fraud

claim, though we acknowledged the existence of a "shadowy area"

where nondisclosures in the absence of such a duty, if deliberate,

could arguably "be treated as artifices to defraud under the

federal statutes."10 Id. at 70. We nevertheless observed that

"[i]t would be a truly revolutionary change to make a criminal out

of every salesman (assuming the use of the mails or telephone) who

did not take the initiative to reveal negative information about

the product and who--a jury might find--secretly harbored in his

heart the hope that the buyer would never ask." Id.

For present purposes, however, we need not attempt to

delineate the "shadowy area" where a failure to disclose,

10
We expressed a similar view of the federal bank fraud statute, 18
U.S.C. § 1344 (2000), in United States v. Moran, 312 F.3d 480 (1st
Cir. 2002). There, we noted that "federal bank fraud, consistent
with its statutory purpose, extends to active concealment even in
the absence of a fiduciary, statutory, or other independent legal
duty of disclosure where the defendant acts with the requisite
intent to mislead or deceive." Id. at 489 n.10.

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accompanied by the necessary intent, might transmogrify into a

"scheme to defraud" under the mail and wire fraud statutes. Though

the district court rejected the plaintiffs' fraud-by-nondisclosure

theory on the ground that they had not alleged it with

particularity, the plaintiffs make no effort to explain how their

theory even states a claim predicated on mail and wire fraud. They

do not say whether the defendants have a duty to disclose "the

actual manner in which the payment requests were processed" or, if

so, what the source of that duty is; they do not say whether the

defendants "fail[ed] to disclose" or "conceal[ed]" this information

with the intent to deceive the plaintiffs. Instead, they proceed

on the assumption that nondisclosure alone can support mail and

wire fraud claims. As we have discussed, that is not the law, in

this circuit or elsewhere.

To excuse this shortcoming, the plaintiffs argue that

they cannot explain how the defendants' actions amount to a "scheme

to defraud" without further discovery, because "[t]he schematics of

the fraudulent conduct are, as in many RICO enterprises, within the

control of the Defendants." We agree with the district court that

this argument is "paradigmatically antithetical to Rule 9(b)'s

requirement." As we have held, "the rule does not permit a

complainant to file suit first, and subsequently to search for a

cause of action." Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir.

1985); see also Feinstein v. Resolution Trust Corp., 942 F.2d 34,

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42 (1st Cir. 1991) ("It is not enough for a plaintiff to file a

RICO claim, chant the statutory mantra, and leave the

identification of predicate acts to the time of trial."). The

plaintiffs have taken this proscribed approach here: they have

charged the defendants with schemes to defraud in violation of the

mail and wire fraud statutes, yet maintain that "[i]t is impossible

for a layman or a Plaintiff or class representative to articulate

the specifics of [each] scheme/fraud." By way of these statements,

made in the declarations the plaintiffs submitted in response to

the show cause order, they have essentially conceded what the

district court suspected--that they cannot personally provide any

information about the alleged fraud.

The plaintiffs did, as they emphasize, submit

declarations from two expert witnesses "to explain how the

Defendant's [sic] practices form a RICO scheme," but, as the

district court concluded, those declarations fall short of that

objective. Each declaration provides examples of the defendants'

various claim practices challenged by the amended complaint,

followed by the conclusion that the defendants send the plaintiffs

documents "in furtherance of the scheme for Triple-S to obtain an

economic benefit that it does not rightfully deserve."11 The

11
The plaintiffs argue that, if the district court had properly
drawn all justifiable inferences from the evidence in their favor
as required by the summary judgment standard, see Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 254 (1986), these and like
statements would have sufficed to demonstrate a genuine issue of

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declarations do not explain, however, how any of these "schemes"

equates with a "scheme to defraud" under the mail and wire fraud

statutes--other than the statement that each individual plaintiff

"would have no way of knowing of [the] scheme" and, again, simple

nondisclosure does not mail or wire fraud make.

As the district court reasoned, the expert declarations

(or even certain snippets of the plaintiffs' own deposition

testimony) might have buttressed a theory that the defendants'

claim practices violated the express or implied terms of their

contracts with the plaintiffs, but "breach of contract itself [does

not] constitute a scheme to defraud. Rather, the scheme must be

intended to deceive another, by means of false or fraudulent

pretenses, representations, promises, or other deceptive conduct."

McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786,

791 (1st Cir. 1990) (citations omitted). Neither the experts'

declarations--nor, by the plaintiffs' own admission, their own

declarations or deposition testimony--so much as hint at such a

scheme. Accordingly, "it is not simply details that [the

plaintiffs] lack, but the substance of a RICO claim." N. Bridge

Assocs., Inc. v. Boldt, 274 F.3d 38, 44 (1st Cir. 2001). The

plaintiffs therefore had no right to further discovery to develop

material fact on their fraud-based claims. Given the statements'
complete lack of specificity, we disagree. The purpose of summary
judgment "is not to replace conclusory allegations of the complaint
. . . with conclusory allegations of an affidavit." Lujan v. Nat'l
Wildlife Fed'n, 497 U.S. 871, 888-89 (1990).

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their ill-defined theory of mail and wire fraud. See id.; see also

Ahmed v. Rosenblatt, 118 F.3d 886, 889 (1st Cir. 1997). The

district court correctly entered summary judgment for the

defendants on the plaintiffs' fraud-based claims. See Murr

Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1070

(8th Cir. 1995) ("A district court may enter summary judgment

dismissing a complaint alleging fraud if the complaint fails to

satisfy the requirements of Rule 9(b).").12

The plaintiffs also challenge the district court's entry

of summary judgment on their claim premised on extortion in

violation of the Hobbs Act. The Act outlaws extortion or attempted

extortion affecting interstate commerce, see, e.g., United States

v. Capozzi, 347 F.3d 327, 335 (1st Cir. 2003), defining extortion

as "the obtaining of property from another, with his consent,

induced by wrongful use of actual or threatened force, violence, or

fear, or under color of official right." 18 U.S.C. § 1951(b)(2).

12
The plaintiffs question the district court's ruling that they had
not pleaded fraud with particularity after it had ruled to the
contrary in denying, in part, the defendants' motion to dismiss.
But, absent "a particularly egregious abuse of discretion,"
district courts are free to reconsider their interlocutory orders.
Harlow v. Children's Hosp., 432 F.3d 50, 55-56 (1st Cir. 2005).
The plaintiffs make no effort to explain how the district court
abused its discretion in deciding that the fraud-based claims in
the amended complaint--once understood in light of the voluminous
materials submitted on the motion for class certification and in
response to the show cause order--were not pleaded with sufficient
particularity. See Murr Plumbing, 48 F.3d at 1070 (upholding
district court's dismissal of claims at summary judgment as
deficient under Rule 9(b) despite its prior denial of motions to
dismiss on that basis).

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In this context, "fear" includes "economic fear," but only if the

fear is independently shown to be "wrongful," because "there is

nothing inherently wrongful about the use of economic fear to

obtain property," as opposed to the use of threatened force or

violence to do so. United States v. Sturm, 870 F.2d 769, 772-73

(1st Cir. 1989). For this reason, "economic fear is wrongful under

the Hobbs Act only if the plaintiff had a pre-existing statutory

right to be free from the defendant's demand" for the property.

George Lussier Enters., Inc. v. Subaru of New Eng., Inc., 393 F.3d

36, 40 (1st Cir. 2004).

By way of recapitulation, the plaintiffs complained of

extortion in the form of threats of exclusion from the network of

insurance plans administered by the defendants, audits of the

providers' accounts with the defendants, withholding of payments,

and denial of patient referrals. But the district court, in

deciding to issue the order to show cause, noted that most of the

plaintiffs could not testify to receiving such threats and, even

among those who could, none could claim that they rose to the level

of "wrongful economic fear" prohibited by the Hobbs Act. When the

plaintiffs' response failed to convince the district court

otherwise, it entered summary judgment against them on the

extortion-based claim.

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 On appeal, the plaintiffs do not rely on the testimony of

those among them who recounted having actually been threatened.13

We need not consider, then, whether the district court was correct

in classifying those threats as mere "lawful hard bargaining"

rather than "wrongful economic fear" actionable as extortion.

George Lussier Enters., 393 F.3d at 51. Instead, the plaintiffs

argue that they did not have to receive the alleged threats

directly to experience extortion, which can result from "implicit"

threats as well as explicit ones. We agree that a threat need not

be explicit to be extortionate: under the appropriate

circumstances, a rock thrown through a window can be just as

effective as a threatening letter in convincing the victim to

relinquish his property. This is the lesson of the cases, on which

the plaintiffs heavily rely, that upheld extortion convictions

based on implied threats. See United States v. Lisinski, 728 F.2d

887, 889-92 (7th Cir. 1984) (affirming conviction of defendant who

"preyed upon or exploited" restauranteur's fear that he would lose

13
Nor do the plaintiffs make more than the most ephemeral reference
to their claim that the defendants threatened economic harm through
means besides audits, such as exclusion from the network or loss of
patient referrals. Accordingly, while some of the plaintiffs
stated in their declarations that they were forced to make
unfavorable deals with the defendants to avoid these consequences,
we do not consider any claim based on that aspect of the
defendants' conduct. See, e.g., Casillas-Diaz v. Palau, 463 F.3d
77, 83 (1st Cir. 2006) ("'issues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,
are deemed waived'" (quoting United States v. Zannino, 895 F.2d 1,
17 (1st Cir. 1990))).

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liquor license, even though defendant never expressly threatened

that result); United States v. Glasser, 443 F.2d 994, 1007 (2d Cir.

1971) (affirming conviction of unionized window installers for

throwing acid on windows installed by nonunionized counterparts).

To succeed on their RICO claim based on the alleged Hobbs

Act violations, however, the plaintiffs must show not only that

extortion occurred, but that "they suffered a direct injury as a

result of [it]." George Lussier Enters., 393 F.3d at 51. The

plaintiffs do not point us to anything in their deposition

testimony or declarations suggesting that they did.14 Instead, they

rely solely on their experts' declarations that "Defendants use

their audit practices in an abusive manner as a means of forcing

the providers to accept unilateral changes to the contract and

inhibiting questions or complaints from those providers regarding

their practices." But this statement, even taken at face value,

does not suggest that any of the plaintiffs themselves ever

acquiesced to these demands. The plaintiffs cannot press a RICO

claim based on attempts at extortion that did not succeed in

harming them. See Camelio v. Am. Fed'n, 137 F.3d 666, 670-71 (1st

14
The plaintiffs do refer to the testimony of one of the physicians
among them, arguing that the district court erroneously concluded
that she was never threatened with an audit when she had stated in
her deposition only that she had never been audited. In fact, the
plaintiffs argue, this physician had been threatened with an audit,
as she attested in her subsequent declaration. The declaration
does not, however, state that the physician ever gave up any rights
as a result of the claimed threat and therefore does not cure the
deficiency in the plaintiffs' extortion-based claim.

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Cir. 1998). The plaintiffs have not shown that the district court

erroneously entered summary judgment on their RICO claim predicated

on the defendants' alleged violations of the Hobbs Act.

III.

For the foregoing reasons, we affirm the district court's

entry of summary judgment for the defendants.

So ordered.

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