State Farm Mutual Automobile Insurance Company v. Elite Health Centers Inc. et al
OPINION AND ORDER Denying 21 Motion to Dismiss. Signed by District Judge Sean F. Cox. (JMcC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
State Farm Mutual Ins. Co.,
Case No. 16-13040
Hon. Sean F. Cox
Elite Health Centers, Inc., et. al.
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS
Plaintiff State Farm Mutual Automobile Insurance Company (“State Farm”) brings this
action against 18 defendants. Specifically, State Farm claims that Defendants have submitted
fraudulent claims to the insurer under Michigan’s No-Fault Automobile Act. State Farm’s
complaint alleges several claims of common law fraud, civil conspiracy and unjust enrichment,
and a count for declaratory judgment.
Currently before the Court is Defendants Elite Health Centers, Inc., Elite Chiropractic,
P.C., Elite Rehabilitation, Inc., Midwest Medical Associates, Inc., Pure Rehabilitation, Inc.,
Derek L. Bittner D.C., Mark A. Radom, Derek Lawrence Bittner, D.C., Ryan Matthew
Lukowski, D.C., Michael P. Draplin, D.C., Mark J. Juska, M.D., and Superior Diagnostic, Inc.’s
Motion to Dismiss. Defendants Dearborn Center for Physical Therapy, LLC, Michigan Center
for Physical Therapy, Inc., Jayson Rosett, Noah H. Upfall and Michael J. Paley, M.D. have filed
concurrences to the Motion to Dismiss. Defendant Chintan Desai, M.D. has not concurred in the
motion and has instead filed a separate motion to dismiss, which the Court will address at a later
date in a separate Opinion & Order.
Defendants’ advance the following arguments in their motion: (1) the complaint fails to
plead any facts to support individual liability; (2) State Farm lacks standing to allege claims
arising from the incorporation of the entity defendants as non-profit corporations; (3) the fraud
claims fail because they do not meet the heightened pleading requirements of Rule 9(b); (4) the
civil conspiracy claims fail because the complaint fails to plead an underlying tort and because
the complaint fails to plead conspiracy with requisite specificity; (5) the unjust enrichment
claims fail because the complaint fails to identify which Defendants received which benefits and
because an express contract exists covering the subject matter at issue; and (6) the Court should
abstain from exercising jurisdiction over the declaratory judgment action.
Defendants’ motion has been fully briefed. The Court finds that oral argument would not
significantly aid in the decisional process and therefore orders that the instant motion will be
decided upon the briefs. See E.D. Mich. LR 7.1(f). For the reasons that follow, the Court shall
DENY Defendants’ motion.
Plaintiff State Farm is a corporation that engages in the business of insurance in
Michigan. State Farm brings this action against 18 defendants, all of which are alleged to have
played a role in a scheme to defraud the insurer: (1) Elite Health Centers, Inc.; (2) Elite
Chiropractic, P.C.; (3) Elite Rehabilitation, Inc.; (4) Midwest Medical Associates, Inc.; (5) Pure
Rehabilitation, Inc.; (6) Derek L. Bittner D.C., P.C.; (7) Mark A. Radom; (8) Derek Lawrence
Bittner D.C.; (9) Ryan Matthew Lukowski D.C.; (10) Michael P. Draplin D.C.; (11) Noel H.
Upfall D.O.; (12) Mark J. Juska; (13) Superior Diagnostic, Inc.; (14) Chintan Desai, M.D.; (15)
Michael J. Paley; (16) Dearborn Center for Physical Therapy, LLC; (17) Michigan Center for
Physical Therapy, Inc.; and (18) Jason Rosett.
At the center of the alleged scheme are Defendants Derek Lawrence Bittner, D.C., a
chiropractor, and Mark A. Radom, a layperson.
State Farm alleges that Bittner and Radom created, own and control several entities that:
(1) submit bills and supporting documentation to State Farm Mutual for chiropractic, physical
therapy and medical services purportedly rendered to patients that were not actually performed
or were not medically necessary; (2) that prescribe and refer patients to two locations owned by
Defendant Jayson Rosett for physical therapy services that are either not performed or not
medically necessary; and (3) that refer State Farm Mutual insureds to receive medically
unnecessary MRIs from Horizon Imaging, LLC and from Defendant Superior Diagnostics, Inc.
(Compl. at ¶ 1).
The Elite Entities
Defendant Derek L. Bittner D.C., P.C. (“Bittner P.C.”) is a Michigan professional
corporation, formed in 2000. (Compl. at ¶ 203). Bittner is the resident agent and president.
(Id.). Defendant Elite Chiropractic P.C. (“Elite Chiro”) is a Michigan professional corporation
formed in 2011. Derek Bittner is the resident agent and sole officer.
Bittner P.C. and Elite Chiro submitted bills to State Farm Mutual for chiropractic
services purportedly rendered at four locations: Sterling Heights, Detroit, Westland, and
Riverview. (Compl. at ¶ 205).
Defendant Elite Rehabilitation, Inc. (“Elite Rehab”) is a Michigan domestic non-profit
formed by Bittner in 2011. (Compl. at ¶ 206). Defendant Pure Rehabilitation, Inc., (“Pure
Rehab”) is a Michigan domestic non-profit corporation formed in March 2014 to replace Elite
Rehab. (Compl. at ¶ 207).
Defendant Elite Health Centers, Inc., (“Elite Health”) is a Michigan domestic non-profit
formed in 2011 by Bittner. (Compl. at ¶ 208). From 2013 through June 2014, Elite Health
submitted documentation for: (1) physical therapy under the assumed names Rehabilitation of
Sterling Heights and Rehabilitation of Detroit; (2) for medical exams under the name Pain
Specialists of Michigan; for surgery consultations under the name Prime Neurosurgery Group;
and (3) for neurological consultations under the name Pioneer Neurology Group. Defendant
Midwest Medical Associates, Inc. (“Midwest Medical”) is a Michigan domestic non-profit
corporation formed in March 2014 to replace Elite Health.
Defendant Ryan Matthew Lukowski, D.C. (“Lukowski”) is a licensed chiropractor.
(Compl. at ¶ 211). From Approximately 2012 through approximately February 2013, Lukowski
worked for the Elite Entities full-time at the Detroit location and once a week at the Sterling
Defendant Michael Patrick Draplin, D.C., (“Draplin”) is a licensed chiropractor. (Compl.
at ¶ 212). Draplin worked for the Elite Entities at the Detroit location, where he became the
primary Elite chiropractor after Lukowski left.
During this time, Lukowski and Draplin are alleged to have falsely purported to provide
legitimate chiropractic evaluations and treatment for a significant number of patients who
treated at Elite pursuant to the Predetermined Protocol, referred patients to Elite doctors for
medical exams pursuant to which medically unnecessary physical therapy could be prescribed
and ordered medically unnecessary MRIs.
The Elite Doctors
Defendant Noah Upfall, D.O. (“Upfall”) is a licensed doctor of osteopathy. (Compl. at ¶
213). Upfall worked for Elite Health and its successor, Midwest Medical, from 2011 through
Defendant Mark J. Juska, M.D. (“Juska”) is a licensed medical doctor. (Compl. at ¶
214). Juska worked at Elite Health and its successor, Midwest Medical, from late 2013 through
early 2015. Juska testified that: he was an employee of Michigan Sports and Spine Center, P.C.
(“Michigan Sports”); his boss was Jeff S. Pierce, D.O., who is the president of Michigan Sports;
Pierce arranged for him to work at Elite Health; there was a relationship or agreement between
Elite Health and Michigan Sports; and that he was paid by Michigan sports, not Elite Health.
Upfall and Juska are alleged to have falsely purported to examine, diagnose and prescribe
medically unnecessary physical therapy for patients who treated at the Elite Entities and made
referrals to other Elite doctors and ordered medically unnecessary MRIs.
Defendant Superior Diagnostic, Inc. (“Superior”) is a Michigan non-profit corporation
formed in 2014. (Compl. at ¶ 215). Superior is owned by Bittner and Radom, either directly or
indirectly through Midwest Medical, which in turn is owned by Bittner and Radom.
Bittner and Radom are alleged to have directed chiropractors, doctors and staff at the
Elite Entities to steer patients to Superior for medically unnecessary MRIs to serve Radom’s and
Bittner’s financial interests.
Defendant Chintan Desai, M.D. (“Desai”) is a licensed doctor and works as an
independent contractor with a teleradiology company where he remotely reviews MRIs for
Horizon, a mobile MRI truck located in a parking lot (which Radom allegedly has a financial
interest). (Compl. ¶¶ 22, 216).
Defendant Michael J. Paley, M.D. (“Paley”) is a licensed doctor and remotely reviews
MRIs from Horizon and Superior. (Compl. at ¶ 217).
Desai and Paley have allegedly provided fraudulent MRI reports for patients who treated
at Elite, which report abnormalities that do not exist and which over-read and exaggerate
abnormalities that may exist.
The Rosett Defendants
At all times relevant to this action, Defendant Jayson Rosett (“Rosett”) owned Defendant
Dearborn Center for Physical Therapy, LLC (“Dearborn Center”) and Defendant Michigan
Center for Physical Therapy, Inc. (“Michigan Center”) (collectively, “the Rosett PT Entities”).
(Compl. at ¶ 219).
Rosett is alleged to have directed the activities of those who were employed by and
associated with the Rosett PT Entities. From 2011 to present, the Rosett PT Entities allegedly
submitted medical records and supporting documents, which are fraudulent in that they
represented that physical therapy services were actually rendered and were medically necessary
when, in fact, they were not.
Factual Allegations Regarding Fraudulent Scheme
State Farm’s 116-page complaint details Defendants’ alleged schemed to defraud the
insurer. Below is a broad overview of the alleged facts.
Defendants’ scheme is alleged to have began in or about 2011 and has continued
uninterrupted since. State Farm alleges that Defendants Bittner and Radom are at the center of
the scheme. To facilitate this scheme and to circumvent Michigan laws–which limit the
circumstances under which a chiropractor and a layperson may own and control entities
providing professional services–Bittner and Radom are alleged to have fraudulently incorporated
several of the Defendant entities as non-profit corporations and have allegedly attempted to
conceal their respective interests and roles in these entities. (Compl. at ¶ 2).
State Farm further alleges that each of the individual physicians and chiropractors who
are named as defendants in this case are essential to the scheme because they falsely purported to
examine, diagnose and either order or provide medically necessary services tailored to the
unique needs of each patient. (Compl. at ¶ 3). The individual defendants are alleged to have
examined and diagnosed patients based upon a “predetermined protocol” of chiropractic,
physical therapy, medical and MRI services that are either not performed or are not medically
State Farm alleges that the bills and related documentation submitted by Defendants were
fraudulent because they falsely represented that: (1) patients were legitimately examined; (2)
patients were legitimately diagnosed with sprains and strains of the cervical, thoracic, and/or
lumbar regions of the spine; (3) each patient’s injury was a result of an auto accident; and (4)
patients were prescribed and received services that were medically necessary when in fact the
services were provided pursuant to a fraudulent “predetermined protocol.” (Compl. at ¶ 4).
Pursuant to the “predetermined protocol,” Defendants allegedly: (1) failed to perform
legitimate chiropractic examinations to determine the true nature of patients’ injuries; (2)
reported nearly identical chiropractic examination findings for patients; (3) implemented the
same chiropractic treatment plans regardless of the unique needs of each patient; (4) referred
patients for unnecessary MRIs to Horizon, in which Radom has a financial interest and Superior,
in which both Radom and Bittner have financial interests; (5) referred patients to doctors,
including Upfall and Juska, who purported to examine patients at Elite Health/Midwest Medical,
but who did not perform legitimate medical examinations and who prescribed medically
unnecessary services at Elite Rehab/Pure Rehab or at the Rosett PT Entities; (6) provided
medically unnecessary physical therapy concurrently with chiropractic services; (7) purported to
treat patients until patients stopped treatment on their own or until State Farm communicated that
it would no longer pay for further treatment; and (8) submitted fraudulent bills and supporting
documentation in order to obtain no-fault benefits.
State Farm further alleges that the “predetermined protocol” has resulted in: (1) patients
not being legitimately examined, diagnosed and treated for conditions they may have had; (2)
patients being subjected to treatment for conditions they may not have had; and (3) the use of
fraudulent bills and related documents to inflate the value of uninsured motorist claims against
State Farm and bodily injury claims against at-fault drivers.
As a result of Defendants’ material representations, State Farm alleges that it did not
discover, and should not have reasonably discovered, that its damages were attributable to fraud
State Farm initiated this action on August 22, 2016. (Doc. # 1, Compl.). State Farm’s
complaint asserts the following claims:
Common Law Fraud, against Bittner, Radom, Lukowski, Draplin, Juska,
Upfall, Superior, Desai, Paley, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health, Pure Rehab and Elite Rehab;
Civil Conspiracy, against Bittner, Radom, Lukowski, Draplin, Upfall,
Juska, Superior, Desai, Paley, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health, Pure Rehab and Elite Rehab;
Unjust Enrichment, against Bittner, Radom, Lukowski, Draplin, Upfall,
Juska, Superior, Desai, Paley, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health, Pure Rehab and Elite Rehab;
Common Law Fraud, against Bittner, Radom, Draplin, Upfall, Juska,
Superior, Desai, Paley, Rosett, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health and Rosett PT Entities;
Civil Conspiracy, against Bittner, Radom, Draplin, Upfall, Juska,
Superior, Desai, Paley, Rosett, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health and Rosett PT Entities;
Unjust Enrichment, against Bittner, Radom, Draplin, Upfall, Juska,
Superior, Desai, Paley, Rosett, Elite Chiro, Bittner P.C., Midwest Medical,
Elite Health and Rosett PT Entities;
Common Law Fraud, against Bittner, Radom and Superior;
Civil Conspiracy, against Bittner, Radom and Superior;
Unjust Enrichment, against Bittner, Radom and Superior; and
Declaratory Judgment, against Elite Entities, Rosett PT Entities and
(Compl. at ¶¶ 222-271). State Farm seeks monetary and declaratory relief.
On October 24, 2016, Defendants Bittner, Bittner P.C., Draplin, Elite Chiro, Elite Health,
Elite Rehab, Juska, Lukowski, Midwest Medical, Pure Rehab, Radom and Superior filed the
instant Motion to Dismiss. (Doc. # 21, Def.s’ Br.). Defendants Dearborn Center for Physical
Therapy LLC, Michigan Center for Physical Therapy, Inc., Jayson Rosett, Michael J. Paley and
Noel H. Upfall have concurred in the filing of the motion. (Doc. # 26, 27, 42). Defendant Desai
has not concurred in the motion and has instead filed a separate motion to dismiss. (Doc. # 58).
In their motion to dismiss, Defendants make the following arguments: (1) the complaint
fails to plead any facts to support individual liability; (2) State Farm Mutual lacks standing to
allege claims arising from the incorporation of the entity defendants as non-profit corporations;
(3) the fraud claims fail because they do not meet the heightened pleading requirements of Rule
9(b); (4) the civil conspiracy claims fail because the complaint fails to plead an underlying tort
and because the complaint fails to plead the conspiracy with requisite specificity; (5) the unjust
enrichment claims fail because the complaint fails to identify which Defendants received which
benefits and because an express contract exists covering the subject matter at issue; and (6) the
Court should abstain from exercising jurisdiction over the declaratory judgment action.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a case where the
complaint fails to state a claim upon which relief can be granted. When reviewing a motion to
dismiss under Rule 12(b)(6), a court must “construe the complaint in the light most favorable to
the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the
plaintiff.” DirectTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). Dismissal is appropriate
if the plaintiff failed to offer sufficient factual allegations that make the asserted claim plausible
on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). In practice, a complaint
must contain either direct or inferential allegations respecting all the material elements to sustain
a recovery under some viable legal theory. Lillard v. Shelby County Bd. of Educ., 76 F.3d 716,
726 (6th Cir. 1996).
“When a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint
and any exhibits attached thereto, public records, items appearing in the record of the case and
exhibits attached to defendant’s motion to dismiss so long as they are referred to in the
Complaint and are central to the claims contained therein.” Weiner v. Klais & Co., 108 F.3d 86,
89 (6th Cir. 1997).
The Sixth Circuit has instructed that at this “early stage,” courts should “take into
account economic or logistical circumstances that prevent [Plaintiffs] from obtaining evidence
supporting [their] claim[s] and adjust the plausibility threshold appropriately to account for these
difficulties.” El-Hallani v. Huntington Nat’l Bank, 623 F. App’x 730, 735 (6th Cir. 2015).
Challenges Against Personal Liability
Initially, Defendants argue that State Farm’s “conclusory allegations are insufficient to
pierce the corporate veil and hold individual officers, members, or employees of the Defendant
entities personally liable” for the acts alleged in the complaint. (Def.’s Br. at 11). This
argument is unavailing.
As State Farm correctly points out, “‘[i]t is beyond question that a corporate employee or
official is personally liable for all tortious ... acts in which he participates, regardless of whether
he was acting on his own behalf or on behalf of the corporation.’” (Pl.’s Resp. at 14, n. 6)
(quoting Attorney Gen. v. Ankerson, 148 F. App’x 260, 263 (6th Cir. 2005)).
Challenges As To Standing
Defendants also argue that State Farm lacks standing to allege claims arising from the
incorporation of the entity defendants as non-profit corporations. (Def.’s Br. at 16).
Specifically, Defendants argue that the “Michigan Non-Profit Act does not provide for a private
cause of action under these circumstances.” (Id. at 17). Defendants’ argument misses the mark.
Despite Defendants’ arguments to the contrary, there is no standing issue here. State
Farm does not bring a claim under the Michigan Non-Profit Act. Nor does State Farm dispute
that the defendant entities were properly incorporated as non-profits. Instead, State Farm alleges
that, while the defendant entities are incorporated as non-profits, their real purpose is to enable
Defendants Bittner and Radom to engage in fraud. Specifically, State Farm alleges that the nonprofit entities named as defendants in this case behave contrary to their non-profit corporate
status, and that this behavior makes these entities essential players in the scheme to defraud State
Farm out of money for the benefit of their owners.
Challenges to Fraud Claim
State Farm alleges common law fraud claims against Defendants in Counts I, IV, and
VIII of its complaint. In their motion, Defendants advance the following arguments against
Plaintiff’s fraud claims: (1) the complaint does not meet the heightened pleading requirements of
Rule 9(b) and the allegations against the individual defendants are conclusory and amount to
group pleading; (2) the complaint fails to identify “which ‘services’ were fraudulent” or “where”
and “when” the fraudulent statements were made; and (4) the complaint does not allege that
Defendant Radom made any fraudulent statements. Each of these arguments is without merit for
the reasons below.
Federal Rule of Civil Procedure 9(b) imposes a particularity requirement on fraud claims.
For State Farm to meet the requirement, its complaint must “(1) specify the statements that the
plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the
statements were made, and (4) explain why the statements were fraudulent.” Frank v. Dana
Corp., 547 F.3d 564, 570 (6th Cir. 2008) (internal quotations and citations omitted). To this end,
State Farm must, “at a minimum, ... allege the time, place and contents of the misrepresentation
upon which they relied.” Id.
“When read against the backdrop of Rule 8, it is clear that the purpose of Rule 9 is not to
reintroduce formalities to pleading, but is instead to provide defendants with a more specific
form of notice as to the particulars of their alleged misconduct.” Llewellyn Jones v. Metro Prop.
Grp., LLC, 22 F. Supp. 3d 760, 780-81 (E.D. Mich. 2014) (quotations and citations omitted).
Accordingly, “[t]he threshold test is whether the complaint places the defendant on sufficient
notice of the misrepresentation allowing the defendants to answer, addressing in an informed
way plaintiff[']s claim of fraud.” Id.
Here, State Farm has provided a 116-page description of how the Defendants’ alleged
scheme to defraud the insurer worked. Among the exhibits attached to the complaint are charts
detailing the fraudulent services purportedly rendered to each patient, the dates of service and the
amounts billed. (See Ex. 1, 3-5, 15, 17, 19-23 to Compl.).
A review of the allegations and exhibits makes it clear that Defendants have received
sufficient notice of the fraudulent misrepresentations they are alleged to have made: (1) Bittner
and Radom fraudulently created non-profit corporations and hired the individual defendants in
order to carry out and profit from the predetermined protocol of treatment; (2) Bittner, Lukowski
and Draplin falsely purported to provide legitimate chiropractic evaluations and treatment for a
significant number of patients who treated at the Elite Entities and unnecessarily referred
patients to Elite Health/Midwest Medical for medical exams; (3) Upfall and Juska falsely
purported to examine, diagnose and prescribe unnecessary physical therapy for patients who
treated at the Elite Entities, made unnecessary referrals to other Elite doctors and to the Rosett
PT Entities, and ordered unnecessary MRIs through Superior or Horizon; (4) Rosett directed the
activities of the Rosett PT Entities, which submitted fraudulent medical records and supporting
documentation; and (5) Paley and Desai provided fraudulent MRI reports for patients who
treated at the Elite Entities.
Numerous courts have similarly concluded that such documentation and explanation of
the fraudulent scheme satisfies Rule 9(b). See e.g. State Farm Mut. Auto Ins. Co. v. Universal
Health Grp., Inc., 2014 WL 5427170, at *4 (E.D. Mich. Oct. 24, 2014); State Farm Mut. Auto
Ins. Co. v. Pointe Physical Therapy, LLC, 107 F. Supp. 3d 772 (E.D. Mich. 2015); State Farm
Mut. Auto Ins. Co. v. Physiomatrix, Inc., 2014 WL 555199 (E.D. Mich. Feb. 12, 2014). As such,
State Farm’s complaint provides a level of detail that is sufficient at the pleading stage to satisfy
the particularity requirement of Rule 9(b).1
Challenges to Civil Conspiracy Claim
State Farm asserts civil conspiracy claims against Defendants in Counts II, IV and VIII.
Defendants argue that State Farm’s civil conspiracy claims fail because: (1) the complaint fails
Defendants also mention State Farm’s failure to offer evidence to support the
allegations contained within its complaint. Defendants miss the mark. At this stage in the
proceedings, State Farm is not required to produce evidence. Instead, the Court is required to
accept all factual allegations in the complaint as true.
Defendants also imply that State Farm’s fraud claim fails because State Farm’s reliance on the
alleged misrepresentations was not reasonable. This argument is without merit. State Farm has
alleged that it justifiably relied on Defendants’ misrepresentations. (Compl. at ¶¶ 194-97). At
this juncture, the Court must accept this allegation as true.
to allege an underlying tort; and (2) the complaint fails to allege a conspiracy.2 Defendants’
arguments are without merit.
“A civil conspiracy is a combination of two or more persons, by some concerted action,
to accomplish a criminal or unlawful purpose, or to accomplish a purpose not lawful by criminal
or unlawful means.” Admiral Ins. Co. v. Columbia Cas. Ins. Co., 194 Mich. App. 300, 358
(1992). A claim for civil conspiracy requires proof of an agreement to achieve the objective of
the conspiracy. Fremont Reorganizing Corp. v. Duke, 811 F. Supp. 2d 1323, 1341 (E.D. Mich.
2011). A plaintiff asserting civil conspiracy must also demonstrate some underlying tortious
conduct because civil conspiracy is not an independently actionable tort. Advocacy Org. for
Patients & Providers v. Auto Club Ins. Ass’n, 257 Mich. App. 365, 383 (2003). “Civil
conspiracy claims must be pled with some specificity: vague and conclusory allegations that are
unsupported by material facts” are insufficient to state a claim. Gutierrez v. Lynch, 826 F.2d
1534, 1538 (6 th Cir. 1987).
Because State Farm has sufficiently alleged fraud as the underlying tort for its conspiracy
To the extent that Defendants rely on the intracorporate-conspiracy doctrine for the
proposition that corporations generally cannot conspire with their board of directors, officers or
employees, this argument is not developed and the doctrine is not applicable here. First, this
doctrine does not apply “where the directors have an independent personal stake in a particular
action...” Blair v. Checker Cab Co., 219 Mich. App. 667, 674 (1996); Bear Hollow, LLC v.
Moberk, LLC, 2006 WL 1642126, at *13 (W.D.N.C. June 5, 2006) (“where the plaintiff alleges
that the corporate employees were controlled by personal motives or where their actions
exceeded the bounds of their authority, the intracorporate conspiracy doctrine is inapplicable”).
Here, State Farm persuasively points out that the individual defendants had a personal stake in
the alleged conspiracy, which can be demonstrated by the allegations of self-referrals.
Moreover, the doctrine is not applicable where, as here, the defendants are not all agents of the
same corporation. Bear Hollow, 2006 WL 1642126, at *13 (“Since Defendants and Cler are not
all agents of the same corporation, the intracorporate conspiracy doctrine is an inapplicable
claim, the Court need only address whether the conspiracy claim has been alleged with requisite
specificity. Here, State Farm alleges that each defendant has acted in concert and knowingly and
intentionally agreed and conspired to accomplish, through a common plan and design, an
unlawful and common purpose, i.e., to defraud the insurer through the submission of thousands
of fraudulent bills and supporting documentation.
At this juncture, the Court finds that the claim that Defendants knowingly conspired to
defraud State Farm is supported by allegations tending to show an agreement between
Defendants. State Farm’s 116-page complaint explains in detail each defendant’s role in the
overall conspiracy. In so doing, the complaint identifies the “predetermined protocol” that
governed Defendants’ actions (i.e., Defendants acted in furtherance of the conspiracy pursuant to
a common plan) and it identifies the actual fraudulent bills submitted or caused to be submitted
Challenges to Unjust Enrichment Claim
State Farm alleges unjust enrichment claims against Defendants in Counts III, VI and IX.
Defendants argue that State Farm’s unjust enrichment claims fail because: (1) the complaint fails
to allege which benefits the individual defendants received as the result of fraud or conspiracy;
and (2) because express contracts covering the same subject matter exist. (Def.s’ Br. at 24).
Defendants’ arguments are without merit.
In order to sustain an unjust enrichment claim, a plaintiff must establish: “(1) the receipt
of a benefit by the defendant from the plaintiff and (2) an inequity resulting to the plaintiff
because of the retention of the benefit by the defendant.” Morris Pumps v. Centerline Piping,
Inc., 273 Mich. App. 187, 195 (2006).
Defendants’ first argument–that State Farm fails to allege which benefits the individual
defendants received–is not persuasive in light of the allegations set forth in the complaint. The
complaint alleges that State Farm conferred a benefit upon the individual defendants by paying
their claims. The complaint further alleges that it would be inequitable to allow the individual
defendants to retain the benefit of payments made for services that were not rendered or were not
medically necessary. In so alleging, the complaint identifies which fraudulent services were
billed, the dates of the services and the amounts billed. These allegations permit the Court to
infer that the individual defendants benefitted at the expense of State Farm.
Defendants’ second argument–that the unjust enrichment claims fail because express
contracts exist between State Farm and its insureds–is not persuasive and has been consistently
rejected by other courts within this District. “[U]nless it is undisputed that there is an express
contract between the same parties covering the same subject matter, State Farm is entitled to
plead unjust enrichment as an alternative claim of relief.” State Farm Mut. Auto Ins. Co. v.
Physiomatrix, Inc., 2013 WL 509284, at *5 (E.D. Mich. Jan. 12, 2013). Here, State Farm
disputes the existence of an express contract between it and Defendants. As such, the Court shall
permit the unjust enrichment claims to go forward.
Defendants’ final arguments pertain to abstention. Specifically, Defendants argue that
the Court should abstain from ruling on State Farm’s claim for declaratory relief pursuant to: (1)
the Burford abstention doctrine; (2) the Colorado River abstention doctrine; (3) the Wilton
abstention doctrine; and (4) the Scottsdale factors. Defendants’ arguments are without merit
because each of these doctrines are inapplicable.
First, Defendants assert that the Court should abstain from hearing this action under
Burford v. Sun Oil Co., 319 U.S. 315 (1943). “Burford abstention is used to avoid conflict with
a state’s administration of its own affairs.” Rouse v. DaimlerChrysler Corp., 300 F.3d 711, 716
(6th Cir. 2002). Under this doctrine:
Where timely and adequate state-court review is available, a federal court sitting
in equity must decline to interfere with the proceedings or orders of state
administrative agencies: (1) when there are difficult questions of state law bearing
on policy problems of substantial public import whose importance transcends the
result in the case then at bar; or (2) where the exercise of federal review of the
question in a case and in similar cases would be disruptive of state efforts to
establish a coherent policy with respect to a matter of substantial public concern.
New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361 (1989).
Defendants argue that “Michigan’s No-Fault Act is a particularly unique state-law regime
which is unquestionably ‘of substantial public import.’” (Def.s’ Br. at 26). Defendants further
argue that the exercise of jurisdiction would impede Michigan’s ability “to control policy”
regarding “no-fault insurance.” (Id.). Defendants arguments are conclusory and unsupported by
any relevant authority.
Initially, it is worth noting that Defendants have not identified a single ongoing
proceeding or order of state administrative agencies with which this case would interfere.
Moreover, despite Defendants’ arguments to the contrary, “federal courts regularly decide issues
concerning Michigan’s no-fault scheme without raising the conflict issues Burford abstention is
intended to address.” State Farm Mut. Auto. Ins. Co. v. Warren Chiropractic & Rehab Clinic
P.C., 2015 WL 4724829, at *17 (E.D. Mich. Aug. 10, 2015); see also Universal Health, 2014
WL 5427170, at *10 (refusing to abstain on the basis that Michigan’s no-fault insurance system
As such, Defendants have failed to persuade the Court that abstention is warranted.
Colorado River Doctrine
Defendants next argue that the Court should abstain from presiding over this action
pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).
The Colorado River doctrine permits a federal court to abstain from exercising jurisdiction over
a matter “in deference to a parallel state-court proceeding if abstention will best promote the
values of efficient dispute resolution and judicial economy.” Gentry v. Wayne Cnty., 2010 WL
4822749, at *2 (E.D. Mich. Nov. 22, 2010).
Abstention under the Colorado River doctrine is appropriate if two requirements are met.
First, the Court must find that the concurrent state and federal actions are parallel. Romine v.
Compuserve Corp., 160 F.3d 337, 339-40 (6th Cir. 1998). Second, the Court must determine
whether abstention is appropriate by considering a number of factors. Id. at 340-41. Because
Defendants are contesting jurisdiction, it is their burden to prove that abstention is warranted.
See Answers in Gensis of Ky., 556 F.3d 459, 467 (6th Cir. 2009).
Here, Defendants have not satisfied the doctrine’s first requirement because they fail to
specifically identify a single parallel case. In an attempt to satisfy the doctrine’s threshold
inquiry, Defendants argue that “there are ongoing and active cases in Michigan courts between
State Farm and various Defendants, and/or State Farm insureds.” (Def.s’ Br. at 28). Defendants
generally conclude that “[t]his suit and the concurrent state suits are (or will be) parallel
proceedings” because “the state court cases will likely involve the same parties (either
Defendants directly or through individual insureds) and the same issues.” (Id.).
Defendants’ generalized and conclusory assertions are insufficient to establish that these
purported state court suits are parallel. Importantly, suits are only parallel “if substantially the
same parties litigate substantially the same issues,” and “involve the same plaintiff against the
same defendant.” Total Renal Care, Inc. v. Childers Oil Co., 743 F. Supp. 2d 609, 613-14 (E.D.
Ky. 2010). Here, Defendants have not sufficiently identified any state action, let alone a parallel
one. See Warren Chiropractic & Rehab Clinic, 2015 WL 4724829, at *15 (refusing to abstain
on the basis that there were similar ongoing cases in state court and concluding that
“Defendants’ generic reference to “scores” of other cases, without citation or explanation, is not
enough to show that these purported matters are parallel for purposes of the Colorado River
doctrine”). Because Defendants have not identified a parallel state court case, the Court need not
engage in the remainder of the Colorado River analysis. See Universal Health, 2014 WL
5427170, at *10.
Defendants also argue that the Court should abstain from hearing this action pursuant to
the doctrine outlined in Wilton v. Seven Falls Co., 515 U.S. 277 (1995). Pursuant to that
doctrine, a Court may dismiss or stay an action in which solely declaratory relief is sought. Id. at
288-90. Defendants’ arguments in support of abstention are without merit. To put it simply,
Wilton abstention is not appropriate where, as here, an action seeks monetary damages (through
common law fraud, unjust enrichment and civil conspiracy claims) in addition to declaratory
relief. See State Farm Mut. Ins. Co. v. Pointe Physical Therapy, LLC, 68 F. Supp. 3d 744, 758
(E.D. Mich. 2014).
Defendants’ final argument is that abstention is appropriate pursuant to the five factors
outlined in Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008). In Scottsdale, the
Sixth Circuit outlined a number of factors to assist district courts in determining whether to
exercise jurisdiction under the Declaratory Judgment Act: (1) whether the declaratory action will
settle the controversy; (2) whether the declaratory action will serve a useful purpose by
clarifying the legal relations at issue; (3) whether the declaratory action is merely intended to
advance “procedural fencing” or “a race for res judicata;” (4) whether the declaratory action will
increase friction between state and federal courts and improperly encroach upon state
jurisdiction; and (5) whether there exists a more effective alternative remedy. Scottsdale, 513
F.3d at 554.
Critical to the Court’s determination here is the notion that “[d]eclining to exercise
jurisdiction may be an abuse of discretion–even if all the factors set forth in Scottsdale weigh in
favor of doing so–if ‘a plaintiff seeks relief in addition to a declaratory judgment, such as
damages or injunctive relief, both of which a court must address.’” Warren Chiropractic &
Rehab Clinic, 2015 WL 4724829, at * 21 (quoting Adrian Energy Assocs. v. Mich. Pub. Serv.
Comm’n, 481 F.3d 414, 422 (6th Cir. 2007)). “This is because, in such a case, the entire benefit
derived from exercising discretion not to grant declaratory relief is frustrated, and a stay or
dismissal would not save any judicial resources.” Id. (internal quotation marks and citations
Here, Defendants unpersuasively argue that each of the five Scottsdale factors support
abstention. The main problem with this argument is that it overlooks the fact that State Farm
seeks monetary relief in addition to declaratory relief. Moreover, State Farm’s success on its
claim for monetary relief depends on the same allegations and proofs as its success on its claim
for declaratory relief. As such, the Court shall reject Defendants’ argument to abstain from
exercising jurisdiction on this basis.
CONCLUSION & ORDER
For the foregoing reasons, the Court shall DENY Defendants’ Motion to Dismiss (Doc. #
IT IS SO ORDERED.
s/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: March 6, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of record on
March 6, 2017, by electronic and/or ordinary mail.
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