Allstate Insurance Company et al v. Medical Evaluations, P.C. et al
Filing
37
ORDER Denying Defendants' 29 Motion to Dismiss and Denying Plaintiffs' 32 Motion for Sanctions. Signed by District Judge Matthew F. Leitman. (Monda, H)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ALLSTATE INSURANCE COMPANY et al.,
Plaintiffs,
Case No. 13-cv-14682
Hon. Matthew F. Leitman
v.
MEDICAL EVALUATIONS, P.C. et al.,
Defendants.
_________________________________/
ORDER DENYING DEFENDANTS’ MOTION TO DISMISS (ECF #29)
AND DENYING PLAINTIFFS’ MOTION FOR SANCTIONS (ECF #32)
Introduction
In this action, Plaintiffs Allstate Insurance Company and Allstate Property
and Casualty Insurance Company (together, “Allstate”), allege that Defendants
fraudulently billed Allstate for medical services. Specifically, Allstate claims that
Defendants “engage[d] in a scheme to defraud Allstate by submitting, or causing to
be submitted, false and fraudulent medical records, bills, and invoices…through
the U.S. Mail seeking reimbursement under the Michigan No-Fault Act, Mich.
Comp. Laws § 500.3101, et seq., for treatment and services that were not actually
provided, were medically unnecessary, and were not lawfully rendered.” (Compl.,
ECF #1, at ¶1.)
Allstate says that “[t]he purpose of the fraudulent scheme
perpetrated by the defendants was to generate claims to, and collect payment from,
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Allstate pursuant to Michigan’s No-Fault Act...” (Id. at ¶3.)
Allstate asserts
numerous causes of action against Defendants, including civil claims under the
Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C. §1964(c).
(See, e.g., id. at ¶¶706-723; 733-750.)
Defendants have filed a Motion to Dismiss. (See ECF #29.) The motion
contains two discrete arguments. First, Defendants argue that Allstate’s RICO
claims are barred by the recent decision in Jackson v. Sedgwick Claims Mgmt.
Servs., 731 F.3d 556 (6th Cir. 2013) (en banc). (See id. at 20-28, Pg. ID 443-451.)
Second, Defendants argue that “if this Court … dismiss[es] the RICO claims, this
Court will not have any basis for federal jurisdiction…” (Id. at 28-30, Pg. ID 451453.) Allstate vigorously disputes Defendants’ assertions and has filed both an
opposition to Defendants’ motion (see ECF #30) and a motion requesting the Court
sanction Defendants (see ECF #32).
For the reasons stated below, the Court will DENY both motions.1
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Plaintiffs moved to dismiss Allstate’s claims under Federal Rule of Civil
Procedure 12(b)(6) and for judgment on the pleadings under Rule 12(c). (See ECF
#29.) The Court agrees with Allstate that a motion under Rule 12(c) is premature
because the pleadings in this action are not “closed” as that rule requires. See, e.g.,
Dunn-Mason v. JP Morgan Chase Bank Nat. Ass’n, 2013 WL 4084676 at *4 (E.D.
Mich. Aug. 13, 2013) (finding that because a defendant filed a motion to dismiss,
and had not yet filed an answer to a complaint, “the pleadings … are not ‘closed’
for purposes of Rule 12(c)”). Nevertheless, for the reasons stated herein, the Court
finds no grounds to dismiss Allstate’s claims under either of these rules.
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Analysis
A.
The Sixth Circuit’s Decision in Jackson Does Not Require Dismissal of
Allstate’s RICO Claims
In Jackson, the Sixth Circuit, sitting en banc, held that employee-plaintiffs
could not assert RICO claims against their employers and others based upon the
allegedly-fraudulent denial of workers-compensation benefits. The Sixth Circuit
stressed that a RICO claim lies only for an injury to “business or property,” not for
“personal injuries,” Jackson, 731 F.3d at 563-64, and the court concluded that the
denial of workers-compensation benefits is not “an injury to [the employee’s]
‘business or property’ that is compensable under 1964(c).” Id. at 558-59. In the
Sixth Circuit’s words, “the losses [the employees] allege are simply a shortcoming
in the compensation they were entitled to receive for a personal injury.” Id. at 566.
Unlike the employee-plaintiffs in Jackson, Allstate is not seeking to recover
for personal injuries in this action. Indeed, as Allstate aptly notes, as a corporation,
it cannot suffer a personal injury. Allstate is seeking to recover for alleged injuries
to both its property and its business – injuries that arose when the Defendants
allegedly fraudulently induced Allstate to pay large volumes of dishonest claims.
As several courts have recognized, the type of injury Allstate alleges is
compensable under RICO. See, e.g, Allstate Ins. Co. v. Lyons, 843 F.Supp.2d 358,
373-374 (E.D.N.Y. 2012) (“[t]he alleged RICO violations of each [doctor and
health-care provider] proximately caused Allstate’s financial injury and therefore
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Allstate may properly bring this suit”); Allstate Ins. Co. v. Linea Latina de
Accidentes, 781 F.Supp.2d 837, 845 (D. Minn. 2011) (refusing to dismiss RICO
claims against chiropractic clinics and doctors related to alleged scheme under
Minnesota No-Fault regime and finding that Allstate “adequately alleged concrete
financial loss”). And, as another court in this district specifically confirmed earlier
this year, the Sixth Circuit’s en banc decision in Jackson did nothing to change that
settled rule. See State Farm Mutual Automobile Ins. Co. v. Physiomatrix, Inc.,
2014 WL 555199 at *2 (E.D. Mich. Feb. 12, 2014) (“State Farm’s injuries arise
from the payment of allegedly fraudulent claims … Such an injury is clearly not
‘personal’ and is an injury to State Farm’s ‘business or property’”).
Moreover, the decision in Jackson was motivated, in part, by federalism
concerns that are not present here (or at least not present to the same degree).
Jackson, 731 F.3d at 566-68.
The Sixth Circuit in Jackson was concerned that,
among other things, (1) allowing the employee-plaintiffs to proceed with their
RICO claims would displace Michigan’s “comprehensive administrative system”
for reviewing and adjudicating workers-compensation claims and, (2) exposing
employers to treble damages and attorneys’ fees would displace the employer
liability limits that were an essential feature of Michigan’s workers-compensation
system. Id.; see also id. at 559-61. Here, Defendants have not identified any
aspect of Michigan’s No-Fault system that compares to the comprehensive
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administrative system Michigan enacted to address and adjudicate workerscompensation claims. Thus, allowing Allstate’s RICO claims to proceed does not
“create[] a form of federal collateral review” of state administrative benefits
determinations as did the RICO claim in Jackson.
Id. at 568.
Nor have
Defendants identified any state-law liability limit that would be undermined by
allowing Allstate to proceed with its claims. Indeed, Defendants have not pointed
to any provision of the No-Fault Act that limits their liability in the same manner
that Michigan’s workers-compensation statute limited employer liability.
Defendants’ best argument that Jackson bars Allstate’s RICO claims rests on
a portion of the Sixth Circuit’s opinion criticizing the employee-plaintiff’s theory
of liability as too far-reaching.
The Sixth Circuit said that “there is nothing
preventing an employer from turning this theory [i.e., that fraud within the
workers-compensation system may give rise to a RICO claim] on its ear and
accusing employees of a pattern of mail or wire fraud designed to support benefits
claims.” Id. at 568 (emphasis in original) (citation omitted). Defendants insist that
this passage “ma[kes] clear” that the ruling “work[s] both ways, barring both the
insured and the entity responsible for paying the insurance from [bringing] RICO
cases based off the personal injury.” (ECF #29 at 16, Pg ID 439.)
Defendants read too much into this lone statement. The Sixth Circuit was
not faced with a claim by an employer or workers-compensation insurer, so the
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court’s holding does not encompass such claims. Indeed, the Sixth Circuit did not
undertake any analysis as to whether an employer or insurer suffers an injury to
“business or property” when it is fraudulently induced to pay benefits by a health
care provider; apart from the one sentence quoted by Defendants, the court said
nothing about a possible claim by an employer or insurer.
Furthermore, the context of the Sixth Circuit’s statement cuts against
Defendant’s proposed interpretation. The statement appears in the portion of the
Sixth Circuit’s opinion addressing the court’s federalism concerns – in which the
court expresses its reluctance to allow RICO claims to displace Michigan’s
comprehensive administrative scheme for finally resolving workers-compensation
benefits disputes.
Seen in this context, the statement is best understood as the
Sixth Circuit’s observation that allowing any of the parties to a workerscompensation benefits dispute – including an employer – to bring a RICO claim
raises federalism concerns because no matter which party brings the claim, the
result is the displacement of the comprehensive state system. As noted above,
Defendants here have failed to identify any state administrative system for
adjudicating No-Fault disputes that would be displaced (or frustrated in any way)
by Allstate’s RICO claim. Therefore, contrary to Defendants’ argument, the Sixth
Circuit’s statement they cite does not require dismissal.
Allstate’s RICO claims.
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Jackson is no bar to
B.
Defendants’ Challenge to the Court’s Subject-Matter Jurisdiction is
Moot and, in Any Event, is Wholly Without Merit
Defendants’ argument that this Court would lack subject-matter jurisdiction
if this Court dismissed Allstate’s RICO claims is moot because the Court has
declined to dismiss the claims. But even if the Court had dismissed the RICO
claims, Defendants’ subject matter-jurisdiction argument would be devoid of merit.
Allstate’s Complaint specifically alleges two separate bases on which this
Court has subject-matter jurisdiction, and only one of those bases would be
impacted had the Court dismissed Allstate’s RICO claims. Specifically, Allstate
alleges that this Court has federal-question jurisdiction under 28 U.S.C. §1331
based on its RICO claims (see ECF #1 at ¶101) and that the Court also has
diversity jurisdiction under 28 U.S.C. §1332 (id.).
There is no reasonable
argument that the dismissal of Allstate’s RICO claims would have had any impact
upon this Court’s diversity jurisdiction. Simply put, dismissal of the RICO claims,
if the Court had ordered that relief, would plainly not have deprived this Court of
original subject-matter jurisdiction.
C.
The Court Rejects Allstate’s Request to Sanction Defendants
Allstate requests sanctions on two primary grounds. First, it contends that
Defendants’ subject matter jurisdiction argument – discussed immediately above –
was “frivolous.” (ECF #30 at 16, Pg. ID 575.)
The Court agrees that the
jurisdictional argument Defendants presented was patently without merit. The
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Court, however, declines to sanction Defendants because the argument was so brief
and took so little effort to address.2 Had this baseless argument caused the Court,
or Plaintiffs, to extend any meaningful effort, the Court would not have hesitated to
impose sanctions. The Court cautions Defendants to avoid such patently meritless
arguments as this action proceeds.
Second, Allstate asserts that the merits of Defendants’ arguments in favor of
dismissal of the RICO claims “find no support in longstanding and wellestablished law.” (Id. at 17-32, Pg. ID 576-591.) However, while the Court has
rejected Defendants’ arguments that Jackson precludes Allstate’s RICO claims, it
does not find Defendants’ arguments so lacking in merit as to warrant imposition
of sanctions. There was a good-faith basis for Defendants’ arguments. Allstate
also stresses that another court in this district rejected the same Jackson-based
argument made by Defendants here.
(See id., citing Physiomatrix, 2014 WL
555199.) But a ruling by another court in this district, of course, is not binding on
this Court. Defendants were thus entirely free to try to convince this Court that the
other court erred. While this Court has great respect for the court in Physiomatrix,
and ultimately agreed with the result reached by that court, the existence of
2
For the same reasons, even though, as indicated above, the Court agrees with
Allstate that Defendants’ motion under Rule 12(c) was premature because the
pleadings in this matter are not closed, it also declines Allstate’s request to
sanction Defendants on this ground. (See ECF #30 at 17, Pg. ID 576.)
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Physiomatrix did not, in and of itself, make Defendants’ instant motion
sanctionable.
Accordingly, IT IS HEREBY ORDERED THAT Defendants’ Motion to
Dismiss (ECF #29) is DENIED and that Plaintiffs’ Motion for Sanctions (#ECF
#32) is DENIED.
s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: June 6, 2014
I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on June 6, 2014, by electronic means and/or ordinary
mail.
s/Holly A. Monda
Case Manager
(313) 234-5113
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