State Farm Mutual Automobile Insurance Company v. Elite Health Centers Inc. et al

Filing 76

OPINION and ORDER Denying 58 MOTION to Dismiss The Complaint for Failure to Join a Necessary Party and Failure to State a Claim. Signed by District Judge Sean F. Cox. (JMcC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
State Farm Mutual Ins. Co.,
Plaintiff,

Case No. 16-13040

v.

Hon. Sean F. Cox

Elite Health Centers, Inc., et. al.,
Defendants.
___________________________________/
OPINION & ORDER DENYING DEFENDANT’S 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 Defendant Chintan Desai’s “Motion to Dismiss the
Complaint for Failure to Join a Necessary Party and Failure to State a Claim.” (Doc. # 58, Def.’s
Mo.”). Defendant brings his motion pursuant to Rules 9(b), 12(b)(6), 12(b)(7) and 19 of the
Federal Rules of Civil Procedure. In his motion, Defendant advances two main arguments.
First, Defendant argues that Plaintiff’s complaint should be dismissed because State Farm failed
to join Horizon Imaging, LLC. Defendant claims that Horizon is a necessary and indispensable
party pursuant to Federal Rule of Civil Procedure 19. Defendant alternatively argues that the
complaint’s common law fraud, civil conspiracy, and unjust enrichment claims fail to state a
claim upon which relief could be granted.
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Defendant’s 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 Defendant’s motion.
BACKGROUND
A.

Factual Background
Plaintiff State Farm is a corporation that engages in the business of insurance in

Michigan. Plaintiff brings this action against 18 defendants, all of which played a role in an
alleged scheme to defraud the insurer.
1.

The Defendants

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).
a.

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.

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Bittner’s wife, Ryan Bittner, D.C., is the secretary. (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; (3) for surgery
consultations under the name Prime Neurosurgery Group; and (4) 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.
b.

Defendant Chiropractors

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

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Heights location.
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.
State Farm alleges that Lukowski and Draplin: (1) falsely purported to provide legitimate
chiropractic evaluations and treatment for a significant number of patients who were treated at
Elite pursuant to the Predetermined Protocol; (2) referred patients to Elite doctors for medical
exams pursuant to which medically unnecessary physical therapy could be prescribed; and (3)
ordered medically unnecessary MRIs.
c.

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
February 2014.
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 Sportsj 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 examined, diagnosed and prescribed
medically unnecessary physical therapy for patients who treated at the Elite Entities and made
referrals to other Elite doctors and ordered medically unnecessary MRIs.

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d.

MRI Defendants (Defendant Desai)

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. is a licensed doctor and works as an independent
contractor with a teleradiology company where he remotely reviews MRIs for non-party Horizon
Imaging, LLC, a mobile MRI truck located in a parking lot (in 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 non-party Horizon and Defendant Superior.
(Compl. at ¶ 217).
Desai and Paley 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.
e.

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

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associated with the Rosett PT Entities. From 2011 to present, the Rosett PT Entities allegedly
submitted medical records and supporting documents, which were fraudulent in that they
represented that physical therapy services were actually rendered and were medically necessary
when, in fact, they were not.
2.

Allegations Regarding Fraudulent Scheme

State Farm’s 116-page complaint details Defendants’ alleged schemed to defraud the
insurer. The following 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
necessary.
As a result of Defendants’ material representations, State Farm alleges that it did not

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discover, and should not have reasonably discovered, that its damages were attributable to fraud
until recently.
B.

Procedural Background
On June 24, 2016, State Farm filed its complaint against all 18 Defendants and Horizon

Imaging, LLC, which is now a non-party to the instant action. (See civil case no. 16-12380).
The case was assigned to Judge Rosen. Horizon Imaging, LLC, was named as a defendant in
seven of the ten counts. Because Judge Rosen determined that State Farm failed to sufficiently
allege diversity with respect to Horizon, he dismissed the case on August 1, 2016.
Approximately one month later, on August 22, 2016, State Farm initiated the instant
action. (Doc. # 1, Compl). Horizon Imaging, LLC, is not named as a defendant in this action,
but allegations involving Horizon are still included in the complaint. This case was eventually
transferred to the undersigned by text-only order.
State Farm has named 18 entities and individuals as defendants in this action: (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. State Farm Mutual’s
complaint asserts the following claims:
Count I

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;

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Count II

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;

Count III

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;

Count IV

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;

Count V

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;

Count VI

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;

Count VII

Common Law Fraud, against Bittner, Radom and Superior;

Count VIII

Civil Conspiracy, against Bittner, Radom and Superior;

Count IX

Unjust Enrichment, against Bittner, Radom and Superior; and

Count X

Declaratory Judgment, against Elite Entities, Rosett PT Entities and
Superior

(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 a
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 concurred in the filing of the motion. (Doc. # 26, 27, 42).
On March 6, 2017, this Court entered an Opinion & Order denying Defendants’ Motion
to Dismiss. (Doc. # 59, O&O). In its Opinion & Order, the Court determined, inter alia, that
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Plaintiff’s 116-page complaint was sufficiently detailed and that it satisfied the particularity
requirement of Rule 9(b).
Defendant Desai filed the instant motion to dismiss on March 1, 2017 – five days before
this Court issued its Opinion & Order. (Doc. # 58, Def.’s Mo.). In it, Defendant argues that the
entire complaint should be dismissed because State Farm failed to join Horizon Imaging, LLC, a
necessary and indispensable party. Alternatively, Defendant argues State Farm’s common law
fraud, civil conspiracy, and unjust enrichment claims fail because they are not plead with
requisite specificity. State Farm filed a response to the motion (Doc. # 72, Pl.’s Resp.),
Defendant filed a reply (Doc. # 73, Def.’s Reply). Based upon the arguments set forth in
Defendant’s reply, State Farm was permitted to file a sur-reply. (Doc. # 75, Pl.’s Sur-Reply).
APPLICABLE STANDARDS
A.

Federal Rule of Civil Procedure 12(b)(6)
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).

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B.

Federal Rule of Civil Procedure 12(b)(7)
Federal Rule of Civil Procedure 12(b)(7) requires courts to dismiss a plaintiff’s cause of

action if the plaintiff fails “to join a party under Rule 19.” Fed. R. Civ. P. 12(b)(7).
ANALYSIS
A.

Whether Plaintiff’s Failure to Join Horizon Warrants Dismissal of this Action
Defendant argues that Horizon Imaging, LLC, is an indispensable party whose absence

requires the Court to dismiss the instant action. Rule 19 governs whether a particular party is
required to be joined to a lawsuit and, if yes, whether the court should proceed with the action in
the event that joinder is not feasible.
In making this determination, courts employ a three-part test. “First, the court must
determine whether the person or entity is a necessary party under Rule 19(a).” Glancy v.
Taubman Centers, Inc., 373 F.3d 656, 666 (6th Cir. 2004). “Second, if the person or entity is a
necessary party, the court must then decide if joinder of that person or entity will deprive the
court of subject matter jurisdiction.” Id. “Third, if joinder is not feasible because it will
eliminate the court’s ability to hear the case, the court must analyze the Rule 19(b) factors to
determine whether the court should in equity and good conscience dismiss the case because the
absentee is indispensable.” Id. (citation and internal quotation marks omitted).
Thus, a person or entity “is only indispensable, within the meaning of Rule 19, if (1) it is
necessary, (2) its joinder cannot be effected, and (3) the court determines that it will dismiss the
pending case rather than proceed in the case without the absentee.” Id. (citation omitted).
1.

Horizon Imaging Is Not A Necessary Party Under Rule 19(a)

A party is necessary under Rule 19(a) if:

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(A) in that person’s absence, the court cannot accord complete relief among existing
parties; or
(B) that person claims an interest relating to the subject of the and is so situated that
disposing of the action in the person’s absence may:
(i) as a practical matter impair or impede the person’s ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the interest.
Fed. R. Civ. P. 19(a)(1)(A)-(B). If the threshold requirements of Rule 19(a) are not satisfied, the
Court need not engage in the Rule 19(b) inquiry. See GGNSC Louisville Hillcreek, LLC v.
Watkins, 2016 WL 815295, at *3 (W.D. Ky. Feb. 29, 2016) (“Because the parties are not
required to be joined under Rule 19(a), the Court need not address Rule 19(b)); School Dist. of
Pontiac v. Secretary of U.S. Dept. of Educ., 584 F.3d 253, 264-65 (6th Cir. 2009). Here,
Defendant advances several arguments in support of his position that Horizon is a necessary
party under Rule 19(a). The Court finds Defendant’s arguments unpersuasive.
a.

Complete Relief

First, Defendant summarily argues that “if Horizon is not joined the Court cannot ‘accord
complete relief among existing parties...’” (Def.’s Mo. at 12). In making this argument,
Defendant merely points to the allegations in State Farm’s complaint pertaining to Horizon’s
role in the fraudulent scheme. (Id.). Defendant’s argument is without merit. Defendant is
essentially arguing that Horizon is a necessary party because of the part it played in the alleged
scheme, i.e., because Horizon is a joint tortfeasor and is at the center of State Farm’s allegations.
However, ‘[a] person’s status as a joint tortfeasor does not make that person a necessary party,
much less an indispensable party.” Temple v. Synthes Corp., 498 U.S. 5, 7-8, (1990);
PaineWebber, Inc. v. Cohen, 276 F.3d 197, 204 (6th Cir. 2001).
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To the extent that Defendant argues that complete relief cannot be accorded “[b]ecause
State Farm is seeking return of funds paid to Horizon,” this argument is equally unpersuasive.
See School Dist. of Pontiac, 584 F.3d at 265 (explaining that complete relief is determined as
between persons already parties, “and not as between a party and the absent person whose
joinder is sought”). Accordingly, because State Farm brought this suit against 18 joint
tortfeasors, the non-joinder of Horizon (to whom a percentage of the fault may be allocated),
does not affect whether State Farm will be able to recover complete relief as between itself and
the 18 other defendants in this case.
b.

Ability to Protect Interest

Next, Defendant argues that “there can be no dispute that Horizon has an interest related
to the subject of this action and that it would have been joined if not for its status as a nondiverse party.” (Def.’s Mo. at 11). Despite Defendant’s assertions to the contrary, Horizon has
not claimed an interest relating to this action.
However, even assuming that Horizon has claimed an interest, Defendant has not
explained how Horizon’s absence precludes it from protecting this interest. Instead, Defendant
summarily concludes that “[p]roceeding in [Horizon’s] absence will impede Horizon’s ability to
defend itself and protect its interests.” (Id. at 11-12). This is not persuasive. Regardless of how
Defendant dresses his argument, it is based on Horizon’s status/conduct as a joint tortfeasor. If
the Court were to accept Defendant’s argument, then every absent tortfeasor would be
considered a necessary party because the failure to join unavoidably deprives the absent party of
an opportunity to defend.
Moreover, an absent party’s interests are only “impeded when that party could become

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legally bound by the result of the present action that they were not a part of.” Boggs v.
Landmark 4 LLC, 2012 WL 3485288, at *4 (N.D. Ohio Aug. 13, 2012) (citing American Express
Travel Related Servs. Co. v. Bank One–Dearborn, 195 F. App’x 458, 461 (6th Cir. 2006)). In
order for an absent party’s interests to be legally bound by a previous action, the party must have
had a full and fair opportunity to litigate the issue in the original suit. Id. (citation omitted).
Here, the resolution of the issues will not have a preclusive effect against Horizon
because “it is not a party here” and therefore, it “will not have had a ‘full and fair’ opportunity to
defendant itself . . . .” Id. at *4. Nor is State Farm seeking declaratory relief that would affect
Horizon. To the extent that Defendant attempts to argue in his reply brief that he and Horizon
are in privity and that res judicata may preclude Horizon from protecting its interests in the
future, this argument is directly at odds with Defendant’s statement in his motion that “[a]ny
judgment rendered by this Court will not be binding on Horizon...” (Def.’s Mo. at 12).
Defendant further argues that even an “indirect effect” on a joint tortfeasor’s interests
may render the absent party necessary if its interests are more significant than those of a routine
joint tortfeasor. (Def.’s Reply at 4). Defendant claims that Horizon’s active participation in the
alleged scheme renders its interests more significant than those of a routine joint tortfeasor. (Id.
at 4). In making this argument, Defendant relies on Boles v. Greeneville Housing Authority, 468
F.2d 476 (6th Cir. 1972). However, Boles is clearly distinguishable.
In Boles, the plaintiffs brought an action for declaratory and injunctive relief as to a
partially completed urban renewal project which had been approved by non-party Department of
Housing and Developing (“HUD”). The Sixth Circuit noted that the plaintiffs’ attack on the plan
indirectly attacked non-party HUD’s administrative decision to approve the plan. More

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specifically, the court reasoned that HUD was “at least arguably indispensable” because in order
to grant the relief sought by the plaintiffs, it would be compelled to hold that: (1) HUD
misinterpreted its own guidelines; and (2) that HUD misconceived its function and prerogatives
under the Urban Renewal Act. Boles, 468 F.2d at 479.
Here, unlike the plaintiffs in Boles, State Farm does not seek declaratory and injunctive
relief as to a federal agency’s interpretation of its own guidelines. In fact, State Farm does not
seek declaratory relief that would implicate Horizon at all. Although Defendant asserts that
Horizon’s interests are indirectly affected, he fails to identify how. And the mere fact that the
Court may evaluate Horizon’s conduct in determining whether a fraudulent scheme exists, is
insufficient to render Horizon’s interests more significant than those of a routine joint tortfeasor.
Defendant also relies on Laker Airways, Inc. v. British Airways, PLC, 182 F.3d 843, 398
(11th Cir. 1999), for the proposition that an absent tortfeasor who emerges as an “active
participant” in a complaint’s allegations is a necessary party. (Def.’s Reply at 6). This argument
is unpersuasive. Even assuming Laker Airways was binding upon the Court, it is distinguishable
from the instant case. In Laker Airways, the court explained that the absent joint tortfeasor was
the “only entity that can allocate slots at Gatwick Airport. Without [the absent tortfeasor], BA
would not be able to manipulate ... the slot allocation process.” Laker Airways, 182 F.3d at 848.
Here, Horizon’s role in the alleged scheme is not as significant as the absent tortfeasor’s role in
Laker Airways. More importantly, in Laker Airways, a finding against the named defendant
would have led to specific, governmental action taken against the absent tortfeasor. Id. (“In
order to prove its antitrust claims, Laker would be required to show that [the absent tortfeasor]
acted in ‘other than independent manner.’ Such a ruling would surely implicate the interests of

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[the absent tortfeasor] because the United Kingdom’s enabling legislation, ASAR, requires that
the Secretary of State for Transport withdraw its approval of an appointed coordinator if its
behavior is not neutral.”). Here, Defendant has not identified a specific legal interest that would
be impaired by a finding in State Farm’s favor.
c.

Substantial Risk of Incurring Double or Inconsistent Obligations

In his final attempt to bring Horizon within Rule 19(a)’s purview, Defendant argues that
“if State Farm and/or Horizon are left to litigate their statutory rights/obligations in a different
forum, this could expose Desai, a Florida resident, and others to the potential for multiple
litigation in Michigan and inconsistent results.” (Def.’s Mo. at 12-13). Defendant makes this
argument without attempting to identify how he would be subject to multiple proceedings.
Additionally, the Sixth Circuit has held that while it is possible that multiple proceedings and
inconsistent results can occur when joint tortfeasors are not parties in the same suit, this
possibility does not create the type of prejudice that warrants a finding that joint tortfeasors are
necessary parties under Rule 19. PainWebber Inc. v. Cohen, 276 F.3d 197, 204 (6th Cir. 2001).
B.

Whether State Farm Has Sufficiently Alleged Its Claims Against Defendant Desai
Defendant alternatively argues that State Farm has failed to sufficiently allege its

common law fraud, civil conspiracy and unjust enrichment claims against Defendant Desai.
Defendant’s arguments are without merit for the reasons below.
1.

Challenges to Fraud Claims

State Farm alleges common law fraud claims against Defendant Desai in Counts I and
IV. Defendant argues that “State Farm’s fraud allegations against Desai ... are wholly deficient.”
(Def.’s Mo. at 17). Specifically, Defendant argues that the fraud claims fail because: (1) the

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claims fail to meet the heightened pleading requirements of Rule 9(b); (2) because Desai did not
submit any bill to State Farm or make any statement to State Farm; and (3) because State Farm
did not rely on Desai’s MRIs.
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. 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.” Llewellyn Jones v. Metro Prop.
Grp., LLC, 22 F. Supp. 3d 760, 780-81 (E.D. Mich. 2014) (citation and internal quotation marks
omitted).
Here, State Farm has provided a 116-page description of how the 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.).
State Farm’s allegations and exhibits sufficiently put Defendant Desai on notice of the
fraudulent misrepresentations he is alleged to have made: Desai is alleged to have knowingly
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

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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).
To the extent that Defendant argues that he did not personally submit bills to State Farm,
this argument is without merit. State Farm has alleged that Defendant made fraudulent findings
in MRI reports, intending State Farm to rely on such reports. Defendant’s fraudulent findings
played a hand in causing bills to be submitted to State Farm. At this juncture, State Farm’s
allegations are sufficient. See State Farm Mut. Auto. Ins. Co. v. Universal Health Grp., Inc.,
2014 WL 5427170, at *3 (E.D. Mich. Oct. 24, 2014) (“A party that causes a fraudulent bill to be
submitted to an insurer may be as liable for fraud as the person whose name was on the
fraudulent submission”).
And finally, to the extent that Defendant argues that State Farm’s fraud claims fail
because State Farm could not or did not rely on any misrepresentation made by Defendant, this
argument is without merit. First, Defendant’s argument as to whether or not State Farm relied on
the MRI findings pertain to questions of fact, not sufficiency of the pleadings (i.e., Defendant
implies that the allegations are contradictory and/or self-serving). Moreover, State Farm has
alleged that it justifiably relied on Defendants’ misrepresentations. At this juncture, the Court
must accept this as true.
2.

Challenges to Civil Conspiracy Claims

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State Farm alleges civil conspiracy claims against Defendant Desai in Counts II and V.
Defendant argues that State Farm’s civil conspiracy claims fail because: (1) the complaint fails
to allege an underlying tort; and (2) the complaint fails to allege a conspiracy. (Def.’s Mo. at
23).
“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 (6th Cir. 1987).
Because State Farm has sufficiently alleged fraud as the underlying tort for its conspiracy
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 Desai knowingly conspired to defraud

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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 each Defendant’s
actions (i.e., Defendants acted in furtherance of the conspiracy pursuant to a common plan) and
it identifies the fraudulent reports and fraudulent bills submitted or caused to be submitted by
Defendants.
3.

Challenges to Unjust Enrichment Claims

State Farm alleges unjust enrichment claims against Defendant Desai in Counts III and
VI. Defendant argues that the unjust enrichment claims fail because Defendant Desai “never
billed State Farm for services nor did he receive any benefits from State Farm. It was Horizon
who billed for MRI services and Horizon who was paid by State Farm for those services.”
(Def.’s Mo. at 23).
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).
Here, 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. 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 Defendant Desai benefitted at the expense of State Farm, (i.e., Defendant provided

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fraudulent reports for unnecessary MRIs, State Farm relied on the fraudulent information, and
Defendant was paid money for fraudulent reports).
CONCLUSION & ORDER
For the foregoing reasons, the Court shall DENY Defendant Desai’s Motion to Dismiss.
IT IS SO ORDERED.
s/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: May 31, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of record on
May 31, 2017, by electronic and/or ordinary mail.
s/Jennifer McCoy
Case Manager

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