Allstate Insurance Company et al v. Orthopedic, P.C. et al

Filing 71

OPINION and ORDER Denying Defendants' 23 MOTION to Dismiss Counts I-XIV and XIX and To Strike Portions of Plaintiff's Complaint, (Amended Answer and Response due by 4/8/2019). Signed by District Judge Stephen J. Murphy, III. (DPar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ALLSTATE INSURANCE
COMPANY, et al.,

Case No. 2:18-cv-10193

Plaintiffs,

HONORABLE STEPHEN J. MURPHY, III

v.
ORTHOPEDIC, P.C., et al.,
Defendants.

/

OPINION AND ORDER
DENYING DEFENDANTS' MOTION TO DISMISS AND TO STRIKE [23]
On January 17, 2018, Plaintiffs Allstate Insurance Company, Allstate Fire and
Casualty Insurance Company, and Allstate Property and Casualty Insurance
Company (collectively "Allstate") filed a complaint against eleven defendants. ECF
1.1 On April 16, 2018, Defendants Dr. Muhammad Awaisi, Dr. Grace Patterson, Dr.
Kevin Crawford, Orthopedic, P.C., and US Healthcare MI, P.C. (collectively "Awaisi
Defendants") filed a motion to dismiss multiple counts and to strike specific
allegations from Allstate's complaint. ECF 23. On April 17, 2018, Awaisi Defendants
filed an answer. ECF 29. The Court has reviewed the briefs and finds that a hearing

Defendants Standard Care, Inc., Optimum Health, P.C., Convenient Ride, LLC, and
Michael Daneshvar, D.P.T. answered the complaint. ECF 22. Defendant Pontiac
Labs, LLC defaulted. See ECF 41. Allstate and Defendant Oakland Physicians
Medical Center, LLC d/b/a Pontiac General Hospital ("PGH") stipulated to PGH's
dismissal. ECF 69.
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is unnecessary. See E.D. Mich. LR 7.1(f). For the reasons below, the Court will deny
Awaisi Defendants' motion to dismiss and to strike.
BACKGROUND
Allstate alleged that Defendants participated in a scheme to defraud it by
submitting medical bills for unnecessary or unreasonable medical treatments.
Allstate summarized the relevant facts in its response brief. See ECF 32, PgID 1357–
60. Allstate brought claims alleging Defendants violated the Racketeer Influenced
and Corrupt Organizations Act ("RICO"), committed common law fraud, engaged in
a civil conspiracy, caused payment under mistake of fact, and were unjustly enriched.
ECF 1, PgID 267–75. Allstate also seeks declaratory relief. Id. at 276–77.
STANDARD OF REVIEW
I.

Rule 12(f) Standard
Rule 12(f) permits a federal court to "strike from a pleading . . . any redundant,

immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "A court has
liberal discretion to strike such filings as it deems appropriate." Van Loo v. Cajun
Operating Co., 64 F. Supp. 3d 1007, 1012 (E.D. Mich. 2014) (citation and internal
marks omitted). Despite courts' discretion, "[m]otions to strike are viewed with
disfavor and are not frequently granted." Operating Eng'rs Local 324 Health Care
Plan v. G & W Constr. Co., 783 F.3d 1045, 1050 (6th Cir. 2015) (citing Brown &
Williamson Tobacco Corp. v. United States, 201 F.2d 819, 822 (6th Cir. 1953)). A court
should strike a matter if it "can confidently conclude that the portion of the pleading
to which the motion is addressed is redundant or is both irrelevant to the subject
matter of the litigation and prejudicial to the objecting party." Jackson v. Broughton,
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No. 09–11438, 2010 WL 2993993, at *1 (E.D. Mich. July 28, 2010) (citation omitted)
(emphasis in original).
An immaterial matter is one "which has no essential or important relationship
to the claim for relief." Llewellyn-Jones v. Metro Prop. Grp., LLC, 22 F. Supp. 3d 760,
776 (E.D. Mich. 2014) (citation omitted). An impertinent matter "consists of
statements that do not pertain, and are not necessary, to the issues in question." Id.
(citation omitted). Finally, a scandalous matter "generally refers to any allegation
that unnecessarily reflects on the moral character of an individual or states anything
in repulsive language that detracts from the dignity of the court." Id. (quoting Pigford
v. Veneman, 215 F.R.D. 2, 4 (D.D.C. 2003)).
II.

Rule 12(b)(6) Standard
When analyzing a motion to dismiss under Rule 12(b)(6), the Court views the

complaint in the light most favorable to the plaintiff, presumes the truth of all wellpleaded factual allegations, and draws every reasonable inference in favor of the nonmoving party. Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir.
2008). To survive a motion to dismiss, "the complaint must contain either direct or
inferential allegations respecting all the material elements to sustain a recovery
under some viable legal theory." Nat'l Hockey League Players Ass'n v. Plymouth
Whalers Hockey Club, 419 F.3d 462, 468 (6th Cir. 2005) (citation omitted). Plaintiff
must "allege facts "sufficient 'to raise a right to relief above the speculative level,' and
to 'state a claim to relief that is plausible on its face.'" Hensley Mfg. v. ProPride, Inc.,
579 F.3d 603, 609 (6th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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555, 570 (2007)). If "a cause of action fails as a matter of law, regardless of whether
the plaintiff's factual allegations are true," then the Court must dismiss it. Winnett
v. Caterpillar, Inc., 553 F.3d 1000, 1005 (6th Cir. 2009).
DISCUSSION
I.

Motion to Strike
Awaisi Defendants move to strike paragraphs 114–44, 147–53, 155–64, 191–

96, 213–20, 226, and 236–40 from Allstate's complaint. See ECF 23, PgID 897.
A. Non-Awaisi Defendant Allegations.
Awaisi Defendants move to strike allegations related to a non-moving codefendant and three non-parties. First, Awaisi Defendants move to strike paragraphs
236–40, which relate to Dr. Daneshvar. See ECF 23, PgID 897. Awaisi Defendants
maintain that the "only possible reason Plaintiffs included the[ir] highly prejudicial
allegations is to convince the Court that Dr. Daneshvar is a terrorist." Id. at 912. Dr.
Daneshvar answered the complaint and did not move to strike the allegations. See
ECF 22.
Second, Awaisi Defendants move to strike paragraphs 148–50, which describe
non-party Dr. James Beale's alleged disciplinary history. See ECF 1, PgID 25. Third,
Awaisi Defendants move to strike paragraphs 151–53, which describe federal
criminal proceedings against non-party Dr. Walayat Khan. See id. at 26. Finally,
Awaisi Defendants move to strike paragraphs 155–58, which describe federal civil
proceedings against non-party Dr. Saleem Bin Shakoor. See id. at 26–27.

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As "the objecting party," Awaisi Defendants must show that the allegations are
"prejudicial" to them. Jackson, 2010 WL 2993993, at *1 (citation omitted). The Court
cannot "confidently conclude that the portion of the pleading" related to Dr.
Daneshvar and non-parties is prejudicial to the Awaisi Defendants. Id. The Court
declines to exercise its discretion and will not strike paragraphs 148–53, 155–58, or
236–40.
B. Dr. Awaisi's Disciplinary History.
Awaisi Defendants seek to strike allegations related to Dr. Awaisi's
disciplinary history because they are "inflammatory, irrelevant, and salacious." ECF
23, PgID 910. Allstate argues that the allegations "are precisely the types of actions
that are alleged to have been used to victimize Allstate (and its insureds)" in the
complaint. ECF 32, PgID 1384–85. The Court is not confident that the allegations are
both irrelevant to Allstate's claims and prejudicial to Dr. Awaisi. At trial, Dr. Awaisi
may challenge Allstate's efforts to introduce evidence that he believes is prejudicial
and irrelevant under the relevant Federal Rule of Evidence. The Court declines to
exercise its discretion and will not strike paragraphs 114–39 or 159–64.
C. Dr. Ram Gunabalan's Allegations.
Awaisi Defendants also move to strike paragraphs referencing non-party Dr.
Ram Gunabalan's affidavit. ECF 23, PgID 911. Awaisi Defendants maintain that Dr.
Gunabalan's affidavit does not mention Awaisi Defendants and is not relevant to the
alleged scheme to defraud Allstate. Id. Even if the allegations are irrelevant, Awaisi
Defendants fail to show that the allegations are prejudicial to them. See Jackson,

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2010 WL 2993993, at *1. The Court therefore declines to exercise its discretion and
will not strike paragraphs 139–44, 147, or 191–96.
D. Dr. Grace Patterson's Exam Results and Board Certification.
Awaisi Defendants next move to strike allegations related to Dr. Patterson's
certification efforts and a concierge service provided to her patients. ECF 23, PgID
912. Awaisi Defendants argue that the alleged conduct is not "illegal or even
improper" and is not "related in any way to the insurance fraud scheme alleged in the
Complaint." Id. Awaisi Defendants do not show that the irrelevant allegations are
also prejudicial to Dr. Patterson. See Jackson, 2010 WL 2993993, at *1. The Court
declines to exercise its discretion and will not strike paragraphs 213–20.
E. Dr. Kevin Crawford's Separate Litigation with Allstate
Finally, Awaisi Defendants move to strike a paragraph about Dr. Crawford's
litigation with Allstate in a separate case. ECF 23, PgID 913. Awaisi Defendants
claim that the allegation is "scandalous and immaterial." Id. Paragraph 226 states
Like US Healthcare, Summit [a physicians group owned by
Dr. Crawford] solicited patients who were involved in
alleged motor vehicle accidents and used a predetermined
treatment protocol to submit the highest possible amount
of damages for No-Fault benefits to Allstate. See Allstate
Insurance Co., et al. v. Summit Physicians Group, PLLC,
et al., 16-cv-13657-BAF-DRG.
ECF 1, PgID 39–40. Awaisi Defendants claim that Allstate "include[d] [the] reference
to this other lawsuit as 'evidence' of Dr. Crawford's participation in the alleged
fraudulent scheme." ECF 23, PgID 913. As Awaisi Defendants recognize, allegations

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in a complaint are not evidence, but are "just that: allegations." Id. (emphasis in
original).
The allegation described above neither "unnecessarily reflects on the moral
character" of Dr. Crawford nor uses "repulsive language" detracting from the dignity
of the Court. See Llewellyn-Jones, 22 F. Supp. 3d at 776. The allegation is therefore
not scandalous. Further, Awaisi Defendants provide no support for their conclusion
that the allegation is immaterial. The Court will not strike paragraph 226.
II.

Motion to Dismiss
Awaisi Defendants ask the Court to abstain from considering Allstate's claim

for declaratory relief and move for Allstate's RICO claims to be dismissed pursuant
to Jackson v. Sedgwick Claims Mgmt. Servs., Inc., 731 F.3d 556 (6th Cir. 2013) (en
banc).
A. Abstention Doctrines.
Awaisi Defendants propose five bases for the Court to abstain from deciding
Allstate's claim for declaratory relief. None is convincing.
1. Covenant2 and abstention.
Awaisi Defendants argue that, if the Court grants Allstate's request for
declaratory relief, "all unpaid bills do not have to be paid, [and] th[e] Court will have
unfairly determined the rights of insureds who are not parties to th[e] case" which
would be inconsistent "with the ruling of the Michigan Supreme Court in Covenant."
ECF 23, PgID 919–20. But Awaisi Defendants do not identify an abstention doctrine

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Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191 (2017).
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that supports their Covenant argument. See generally id. at 918–20. Moreover,
Allstate requests a declaratory judgment that Defendants: "cannot balance bill or
otherwise seek payment from any person insured under an Allstate policy or for whom
Allstate is the responsible payor[.]" ECF 1, PgID 267 (emphasis added). Awaisi
Defendants' underdeveloped and unsupported argument about the Michigan
Supreme Court's Covenant decision fails to show that Allstate did not state a claim
to declaratory judgment relief that is plausible on its face.
2. The other abstention doctrines.
Awaisi Defendants also ask the Court to abstain based on Burford, Colorado
River, Wilton and Brillhart, and Scottsdale.3 See ECF 23, PgID 920–928. Awaisi
Defendants used an identical motion from a different case in the District. Compare
ECF 23, PgID 920–28 with State Farm Mut. Auto. Ins. Co. v. Vital Cmty. Care, P.C.,
4:17-cv-11721, [hereinafter "Vital Community Care"] (E.D. Mich. 2017) ECF 21, PgID
344–53.4
In Vital Community Care, Judge Linda Parker thoroughly analyzed why the
abstention doctrines did not apply. See Vital Community Care, No. 17-11721, 2018

Burford v. Sun Oil Co., 319 U.S. 315 (1943); Colo. River Water Conservation Dist. v.
United States, 424 U.S. 800 (1976); Wilton v. Seven Falls Co., 515 U.S. 277 (1995);
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942); Scottsdale Ins. Co. v. Flowers,
513 F.3d 546 (6th Cir. 2008).

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Defense counsel representing Awaisi Defendants also represented the moving
defendants in Vital Community Care.
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WL 2194019, at *4–*5.5 State Farm had sued various medical-service providers for
an alleged fraudulent scheme. Id. at *1. State Farm claimed the defendants violated
RICO and sought declaratory relief against them. Id.
Awaisi Defendants presumably used the same brief in this case as the
defendants in Vital Community Care because of the similarity of fact issues and legal
allegations. But Judge Parker decided the issue in Vital Community Care shortly
after the brief was filed here. The Court agrees with and adopts Judge Parker's
persuasive analysis, and declines to apply the abstention doctrines relied on by
Awaisi Defendants.
B. Jackson v. Sedgwick Argument.
Awaisi Defendants also argue that Allstate's RICO claims must be dismissed
pursuant to the Sixth Circuit's decision in Jackson v. Sedgwick. Again, Awaisi
Defendants' argument related to Jackson v. Sedgwick is copied from the defendants'

Awaisi Defendants objected to Allstate's filing a notice of supplemental authority
without leave of the Court. See ECF 36, PgID 1423–24. The Court agrees that, in the
future, Allstate must seek leave when required by the Local Rules.
Awaisi Defendants further argue that Allstate filed the notice "for the
improper and misleading purpose of giving this Court the impression that the
decisions in State Farm v. Vital Community Care, et al.," somehow binds the Court
and aver that Vital Community Care "involves completely different parties, factspecific allegations," and State Farm's complaint lacked scandalous materials. ECF
36, PgID 1423–24.
The Court does not credit their argument for three reasons. First, a notice of
supplemental authority does not mislead the Court about whether an opinion is
binding. Second, Awaisi Defendants used a motion to dismiss in this case that is
materially identical to the Vital Community Care defendants' motion to dismiss,
which suggests that the parties and fact-specific allegations are similar. Third,
whether Allstate included scandalous material in a complaint does not relate to a
Rule 12(b)(6) analysis of the sufficiency of that complaint.
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brief in Vital Community Care. Compare ECF 23, PgID 928–32 with Vital Community
Care, ECF 21, PgID 364–69.6
In Vital Community Care, Judge Parker persuasively explained why Jackson
v. Sedgwick does not require dismissal of RICO claims materially indistinct from the
ones alleged here. See Vital Community Care, 2018 WL 2194019, at *6. Awaisi
Defendants' use of the defendants' brief from Vital Community Care implies that the
legal issues are identical here. The Court agrees with and adopts Judge Parker's
analysis, and rejects Awaisi Defendants' argument.
Awaisi Defendants' copied-and-pasted arguments from other similar cases in
the District fail. The Court (1) declines to abstain from considering Allstate's request
for a declaratory judgment and (2) determines that Awaisi Defendants fail to show
that Allstate's complaint does not state a plausible claim to relief, as required by Rule
12(b)(6).
ORDER
WHEREFORE, it is hereby ORDERED that Defendants' motion to dismiss
and to strike [23] is DENIED.

Granted, in the brief here, Awaisi Defendants substituted "Plaintiff" for "State
Farm." And the Vital Community Care brief included two paragraphs not copied into
Awaisi Defendants' brief. See Vital Community Care, ECF 21, PgID 367.
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IT IS FURTHER ORDERED that Awaisi Defendants shall FILE an
amended answer and respond to the contested allegations no later than April 8,
2019.
SO ORDERED.
s/ Stephen J. Murphy, III
STEPHEN J. MURPHY, III
United States District Judge
Dated: March 18, 2019
I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on March 18, 2019, by electronic and/or ordinary mail.
s/ David P. Parker
Case Manager

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