Liberty Mutual Fire Insurance Company et al v. Maple Manor Neuro Center Inc. et al

Filing 23

OPINION AND ORDER DENYING DEFENDANT'S 20 MOTION TO DISMISS Signed by District Judge Linda V. Parker. (AFla)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LIBERTY MUTUAL FIRE
INSURANCE COMPANY, LM
GENERAL INSURANCE COMPANY,
And SAFECO INSURANCE COMPANY
OF ILLINOIS
Plaintiffs,
Civil Case No. 20-13170
Honorable Linda V. Parker

v.

MAPLE MANOR NEURO CENTER INC.,
STELLA EVANGELISTA, JOSE L.
EVANGELISTA,
Defendants.
________________________________/
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO
DISMISS (ECF NO. 20)
This dispute arises from no-fault insurance benefits that Plaintiffs
(collectively, “Liberty Mutual”) paid to Defendants for the treatment of its
insureds. Liberty Mutual is an insurance company providing no-fault insurance
coverage in Michigan. Defendants Stella Evangelista and Jose Evangelista own
Maple Manor Neuro Center Inc. (“Maple Manor”). On December 2, 2020, Liberty
Mutual filed a Complaint alleging that Defendants engaged in a scheme to submit
false and fraudulent medical records, bills, and invoices through interstate wires,
which sought payment for treatment and services from an unlicensed healthcare

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provider. (ECF No. 1.) Liberty Mutual alleges that the Defendants’ conduct
violates the federal Racketeer Influenced Corrupt Organizations Act (“RICO”), 18
U.S.C. § 1962(c) and (d), and state law.
Liberty Mutual asserts in its Complaint: (i) federal claims against Stella and
Jose Evangelista for violations of RICO and a RICO conspiracy (Counts I and II)1;
(ii) a common law claim against all Defendants (Count III); (iii) a payment under
mistake of fact claim against Maple Manor (Count IV); (iv) an unjust enrichment
claim against all Defendants (Count V); and (v) a request for declaratory relief
(Count VI).2 (ECF No. 1.)
On January 29, 2021, Defendants filed a motion to dismiss Liberty Mutual’s
Complaint. (ECF No. 20.) The motion is fully briefed. (ECF Nos. 21, 22.)
Finding the facts and legal arguments sufficiently presented in the parties’ briefs,
the Court is dispensing with oral argument pursuant to Eastern District of
Michigan Local Rule 7.1(f).
I.

1

Standard for Rule 12(b)(6) Motion

18 U.S.C. § 1962(c), and (d).

2

Following Liberty Mutual's initiation of this lawsuit, Maple Manor filed a related
complaint in state court seeking declaratory relief, which Liberty Mutual
subsequently removed to federal court. Maple Manor Neuro Center Inc. v. Liberty
Mutual Fire Insurance Company et al., Civil Case No. 20-cv-13288-LVP-KGA
(E.D. Mich. 2020). This Court dismissed the lawsuit with prejudice on December
23, 2021. Id., ECF No. 21.
2

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A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of
the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134
(6th Cir. 1996). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must
contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” To survive a motion to dismiss, a complaint need not contain
“detailed factual allegations,” but it must contain more than “labels and
conclusions” or “a formulaic recitation of the elements of a cause of action . . ..”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not
“suffice if it tenders ‘naked assertions’ devoid of ‘further factual enhancement.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).
As the Supreme Court provided in Iqbal and Twombly, “[t]o survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly,
550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The
plausibility standard “does not impose a probability requirement at the pleading
stage; it simply calls for enough facts to raise a reasonable expectation that
discovery will reveal evidence of illegal [conduct].” Twombly, 550 U.S. at 556.

3

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In deciding whether the plaintiff has set forth a “plausible” claim, the court
must accept the factual allegations in the complaint as true. Erickson v. Pardus,
551 U.S. 89, 94 (2007). This presumption is not applicable to legal conclusions,
however. Iqbal, 556 U.S. at 668. Therefore, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do not suffice.” Id.
(citing Twombly, 550 U.S. at 555).
Ordinarily, the court may not consider matters outside the pleadings when
deciding a Rule 12(b)(6) motion to dismiss. Weiner v. Klais & Co., Inc., 108 F.3d
86, 88 (6th Cir. 1997) (citing Hammond v. Baldwin, 866 F.2d 172, 175 (6th Cir.
1989)). A court that considers such matters must first convert the motion to
dismiss to one for summary judgment. See Fed. R. Civ. P 12(d). However,
“[w]hen a court is presented with a Rule 12(b)(6) motion, it may consider the
[c]omplaint and any exhibits attached thereto, public records, items appearing in
the record of the case and exhibits attached to [the] defendant’s motion to dismiss,
so long as they are referred to in the [c]omplaint and are central to the claims
contained therein.” Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430
(6th Cir. 2008). The court may take judicial notice only “of facts which are not
subject to reasonable dispute.” Jones v. Cincinnati, 521 F.3d 555, 562 (6th Cir.
2008) (quoting Passa v. City of Columbus, 123 F. App’x 694, 697 (6th Cir. 2005)).

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In addition to the pleading requirements set forth above, Federal Rule of
Civil Procedure 9(b) requires “a party [t]o state with particularity the
circumstances constituting fraud or mistake.” The pleading must “allege the time,
place, and content of the alleged misrepresentation … the fraudulent scheme; the
fraudulent intent of the defendants; and the injury resulting from the fraud.”
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 515 (6th Cir.
2007) (quotation marks omitted). “Rule 9(b)’s ‘particularity rule serves an
important purpose in fraud actions by alerting defendants to the precise misconduct
with which they are charged and protecting defendants against spurious charges of
immoral and fraudulent behavior.’” United States ex rel. Prather v. Brookdale
Senior Living Cmtys., Inc., 838 F.3d 750, 771 (6th Cir. 2016) (quoting United
States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1313 (11th Cir.
2002), cert. denied, 549 U.S. 889 (2006)).
II.

Factual Background

Liberty Mutual is an insurance company authorized to conduct business in
Michigan. (Compl. ¶¶ 8-11, ECF No. 1 at Pg ID 3.) Maple Manor “billed Liberty
for treatment that was not lawfully rendered to patients . . . .” (Id. ¶ 15, Pg ID 4.)
As owners of Maple Manor, Stella and Jose Evangelista are responsible for the
unlawful treatment of Liberty Mutual’s insured customers. (Id. ¶¶ 18, 21, Pg ID

5

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4.) Stella and Jose Evangelista are licensed medical professionals. (Id. ¶ 66, Pg ID
14.)
On March 7, 2016, Marcus Evangelista incorporated Maple Manor under the
laws of the State of Michigan. (Id. ¶ 26, Pg ID 5.) Maple Manor’s Articles of
Incorporation state that its purpose is to provide “therapy services such as physical
therapy, occupational therapy, and speech therapy.” (Id. ¶ 27, Pg ID 5-6.) On July
3, 2017, Maple Manor filed an Annual Report with the Michigan Department of
Licensing and Regulatory Affairs (“LARA”), identifying the nature of business in
which the corporation engaged in as a “medical office.” (Id. ¶ 28, Pg ID 6.)
Subsequent annual reports in 2018, 2019, and 2020 identify “therapy” or “therapy
services” as the nature of the corporation’s business. (Id. ¶¶ 29-31, Pg ID 6.)
Further, Stella Evangelista has previously testified in court that Maple Manor is a
healthcare provider that provides physical therapy, occupational therapy, and
speech therapy. (Id. ¶¶ 33-34, Pg ID 7.) As a medical treatment provider, Maple
Manor was therefore required to be licensed. (Id. ¶¶ 35, 36, Pg ID 7-8.) Prior to
filing its Complaint, Liberty Mutual learned that Maple Manor was not licensed to
provide the treatment that is at issue in this Complaint. (Id. ¶ 36, Pg ID 8.)
The Michigan No-Fault Act provides for payment of medical and
rehabilitative benefits for injured victims of motor vehicle accidents. (Id. ¶ 37, Pg
ID 8 (citing Mich. Comp. Laws § 500.3107(1)(a).) However, “[o]nly treatment
6

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that is ‘lawfully render[ed]’ is compensable under the No-Fault Act. Mich. Comp.
Laws § 500.3157(1).” (Id. ¶ 39, Pg ID 8.) Liberty Mutual alleges that Defendants’
treatment of its insureds was not lawfully rendered and is therefore not
reimbursable. (Id. ¶¶ 40, 54, 55, Pg ID 8, 9, 11, 12.) Specifically, the Complaint
cites Cherry v. State Farm Mutual Automobile Insurance Company, 489 N.W.2d
788 (Mich. App. 1992).3 (Id. ¶ 40, Pg ID 8.) Maple Manor billed Liberty Mutual
for medical treatment to Liberty Mutual’s insured clients without the required
license to perform the services. (Id. ¶ 41, Pg ID 8-9.)
To explain the billing for unlawful treatment without a license, Liberty
Mutual states:
42. Each bill submitted to Liberty Mutual by Maple Manor
Neuro Center was submitted using a Health Insurance Claim
Form (“HICF”).
43. The American Medical Association (“AMA”) publishes
instructions for properly completing HICFs that were developed
by the National Uniform Claim Committee (“NUCC”).
44. The NUCC Reference Instruction Manual provides specific
instructions detailing how healthcare providers must complete
each HICF.
45. According to version 7.0 of the NUCC Reference
Instruction Manual that was published in July 2019, Item
The Michigan Court of Appeals held in Cherry “that only treatment lawfully
rendered, including being in compliance with licensing requirements, is subject to
payment as a no-fault benefit.” Cherry, 489 N.W.2d at 790. The Cherry court also
held that “[t]he practice of medicine or the administering of medical treatment can
be lawfully performed only by licensed physicians.” Id.
3

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Number 31 of each HICF identifies “the Physician or Supplier”
of the medical treatment and “refers to the authorized or
accountable person and the degree, credentials, or title.”
(Id. ¶¶ 42-45, Pg ID 9.) Liberty Mutual then gives a specific example in which
Maple Manor is listed as the Physician or Supplier in Item Number 31. (Id. ¶ 46,
Pg ID 9, 10.) “The NUCC Reference Instruction Manual also instructs healthcare
providers such as [Maple Manor] that Item Number 33 of each HICF ‘identifies the
provider that is requesting to be paid for the services rendered.’” (Id. ¶ 47, Pg ID
10.) In another example, Maple Manor is listed as the provider requesting to be
paid for services rendered in Item Number 33. (Id. ¶ 48, Pg ID 10.) The NUCC
Reference Instruction Manual also instructs healthcare providers to include the
federal taxpayer identification number (TIN) of the billing provider from Item
Number 33 in Item Number 25. (Id. ¶ 49, Pg ID 10.) In its final example, Liberty
Mutual shows that Maple Manor lists its TIN in Item Number 25. (Id. ¶ 50, Pg ID
11.) In sum, each HICF submitted by Maple Manor contains its name in Item
Numbers 31 and 33 and its TIN in Item Number 25. (Id. ¶ 51, Pg ID 11.) As such,
Maple Manor is the provider of the services rendered to Liberty Mutual’s insured
clients. (Id. ¶ 51, Pg ID 11.)
Defendants submitted bills and medical records warranting that such bills
and records related to lawfully rendered and licensed treatment of patients. (Id. ¶
58, Pg ID 12.) Maple Manor misrepresented that it was a licensed “medical
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office” that could render the treatment of “therapy” despite its lack of licensure.
(Id. ¶ 60, Pg ID 12-13.) “Each claim for payment (and accompanying medical
records) under Michigan’s No-Fault Act submitted to Liberty Mutual by the
defendants constitutes a misrepresentation because the treatment underlying the
claim was not lawful . . . .” (Id. ¶ 62, Pg ID 13.) Based on the misrepresentation,
Liberty Mutual paid over $449,970 to Maple Manor for the benefit of its owners
Stella and Jose Evangelista. (Id. ¶¶ 70, 72, Pg ID 15.)
The objective of the scheme “was to collect No-Fault payments to which the
[D]efendants were not entitled because the medical services provided were not
lawfully rendered.” (Id. ¶ 74, Pg ID 15.) All the relevant documents to Liberty
Mutual’s claims, including medical records, HICFs, and requests for payment,
traveled through interstate wires or the mail. (Id. ¶ 77, Pg ID 16.) Consequently,
Defendants committed wire and mail fraud, as defined in 18 U.S.C. §§ 1341 and
1343. (Id. ¶ 90, Pg ID 18.) Defendants agreed to pursue the same objective. (Id. ¶
92, Pg ID 18.)
Liberty Mutual’s Complaint references the treatment at issue with the
patient’s initials as set out in Exhibit 1. (Compl. Ex. 1, ECF No. 1-2.) The dates
of service for the claims submitted to Liberty Mutual range from 2017 until 2019.
(Id.) In addition, Liberty Mutual’s Complaint contains a chart explaining when,

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how, and by whom the fraudulent medical records, invoices, and bills were faxed
or mailed to them in Exhibit 2. (Id. Ex. 2, ECF No. 1-3.)
II.

Law and Analysis
A. Civil RICO Claims
Liberty Mutual alleges that Defendants violated 18 U.S.C. §§ 1962(c) and

(d). These sections provide as follows:
(c) It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce,
to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to
violate any of the provisions of subsection (a), (b), or (c)
of this section.
18 U.S.C. § 1962(c), (d). To establish a RICO violation, the plaintiff must
demonstrate “(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.” Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th
Cir. 2006) (quoting Sedima, SPRL v. Imrex Co., 473 U.S. 479, 496 (1985)). To
establish a RICO conspiracy claim under subsection (d), the plaintiff “must
successfully allege all the elements of a RICO violation, as well as alleging ‘the
existence of an illicit agreement to violate the substantive RICO provision.’”
Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 411 (6th Cir.
2012) (quoting United States v. Sinito, 723 F.2d 1250, 1260 (6th Cir. 1983)).
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Defendants maintain that this case is a simple “state-court billing dispute”
that Liberty Mutual attempts to recast as a federal Civil RICO claim. (ECF No.
20-1 at Pg ID 191.) Defendants argue that Liberty Mutual fails to adequately plead
a RICO claim concerning each element under § 1962(c). (ECF No. 20-1 at Pg ID
199-208.) The Court will address each element in turn.
1. Racketeering Activity
Defendants contend that Liberty Mutual’s allegations are insufficient to
establish that they engaged in the racketeering activity of mail or wire fraud
because they do not meet the minimum particularity requirement under Rule 9(b).
(ECF No. 20-1 at Pg ID 200 (quoting Fed. R. Civ. P. 9(b).) Defendants
specifically contend that Liberty Mutual “fail[s] to identify a single person at
[Maple Manor] who allegedly communicated anything to [Liberty Mutual], let
alone what specifically was communicated, and when and where it was
communicated.” (Id. at 206 (emphasis in original.))
To establish a pattern of racketeering activity, Liberty Mutual must show
that Defendants committed at least two predicate racketeering acts within ten years
of each other that demonstrate criminal conduct of a continuing nature. 18 U.S.C.
§ 1961(5). “The alleged predicate acts may consist of offenses ‘which are
indictable’ under any of a number of federal statutes, including the mail (18 U.S.C.
§ 1341) and wire fraud statutes (18 U.S.C. § 1343).” Moon v. Harrison Piping
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Supply, 465 F.3d 719, 723 (6th Cir. 2006) (citing 18 U.S.C. § 1961(1)). As set
forth earlier, Rule 9(b) imposes heightened pleading requirement for fraud claims.
To satisfy the particularity requirement of Federal Rule of Civil Procedure 9(b),
plaintiff must allege the time, place, and contents of the misrepresentation. Bender
v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984).
Liberty Mutual generally alleges that the racketeering activity consists of
Defendants, through mail and fax, submitting false and fraudulent claims for
unlawfully rendered treatment. Liberty Mutual’s Complaint explains when, how,
and by whom the fraudulent medical records, invoices, and bills in Exhibit 2 were
faxed or mailed to Liberty Mutual. (Compl. Ex. 2, ECF No. 1-3.) According to
Liberty Mutual, Defendants’ misrepresentation was that the treatment was lawful
when, in fact, it was provided by Maple Manor, an unlicensed healthcare provider
or facility. (Compl. ¶¶ 1, 52, 55, 87, ECF No. 1 at Pg ID 1, 11, 12, 17.) Liberty
Mutual further alleges that every time the Defendants submitted their claims for
no-fault benefits, they were warranting that they related to lawfully rendered and
licensed treatment of patients. (Id. ¶ 58, Pg ID 12.) However, Maple Manor did
not possess a license for the medical services it provided. (Id. ¶ 60, Pg ID 12-13.)
Stella and Jose Evangelista “submitted, or caused to be submitted, . . . .” the false
or fraudulent records. (Id. ¶ 105, Pg ID 21.) Accordingly, the Court concludes

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that Liberty Mutual has adequately pled facts to establish at least two predicate acts
of mail fraud with the requisite particularity.
However, it is unclear whether Defendants’ acts are indictable, as it is not
clear at this stage whether the medical treatment at issue was rendered to patients
by unlicensed individuals or entities. Liberty Mutual cites Cherry to support its
contention that treatment was rendered without the required license and was
therefore not lawfully rendered. (Id. ¶¶ 40, 41, Pg ID 8-9 (citing Cherry, 498
N.W.2d 788).) However, a court in this district interpreting Cherry held that it
“did not impose a licensing requirement in all instances; it merely states that
licensing requirements must be met if a license is required to provide certain
services.” Allstate Ins. Co. v. Frankel, 259 F.R.D. 274, 279 (E.D. Mich. 2009). In
Frankel, an insurer filed a complaint against an unlicensed medical facility to
determine if their services were “lawfully rendered” under the Michigan no-fault
act. Id. at 276. The insurer argued that both the facilities and the individuals
rendering services must have proper license for them to be considered as lawfully
rendered under the no-fault act. Id. at 279. The Frankel court, however, disagreed
and determined that the defendants were “entitled to no-fault insurance benefits:
(a) if the services they provided were reasonably necessary for the insureds’ care,
recovery, or rehabilitation; and (b) the services provided were: (i) within the scope
of the [facilities’] operating licenses; (ii) rendered by individuals who did not need
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a license to provide the services; or (iii) rendered by individuals who had the
requisite license.” Id. The court held that if an “individual lawfully rendered
services that the facility itself could not render because it required a license to
perform that service, [the insurer] must pay the individual who lawfully rendered
services, not the facility.” Id.
Defendants assert in their motion to dismiss that Maple Manor is merely a
billing agent which bills on behalf of licensed medical providers. (ECF No. 20-1
at Pg ID 193.) Liberty Mutual responds that this is an improper “fact” to consider
in deciding the motion as the Complaint plainly alleges that Maple Manor billed
for performing treatment at issue. 4 (ECF No. 21 at Pg ID 270-71.) Assuming the

4

Defendants argue that Liberty Mutual does not have standing to challenge Maple
Manor’s status as a corporation or its licensure. (ECF No. 20-1 Pg ID 214 (citing
Sterling Heights Pain Mgmt., PLC v. Farm Bureau Gen. Ins. Co. of Michigan, 966
N.W.2d 456 (Mich. App. 2020).) In Sterling, an insurance company challenged a
provider’s incorporation status as a professional legal corporation, requiring all
members and managers to be licensed to render the same professional service,
when two members listed on a LARA report were found to not be licensed
physicians. Sterling, 966 N.W.2d at 457. The plaintiff responded that all the
treatment rendered was performed by licensed physicians. Id. at 458. The
Michigan Court of Appeals held that the plaintiff had no standing to challenge
whether an entity is properly incorporated and that “only the Attorney General has
standing to bring claims alleging incorporation defects.” Id. at 460; see also Miller
v. Allstate Ins. Co., 751 N.W.2d 463 (Mich. 2008). The court noted that the
insurance company did not dispute whether the facility was licensed to render
treatment or whether a licensed physician provided treatment to the insured person.
Id. As such, Sterling is not on point. Liberty Mutual’s Complaint does not allege
that Maple Manor is improperly incorporated; it instead asserts that Maple Manor
billed Liberty Mutual for unlicensed treatment of its insureds.
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factual allegations in the Complaint are true—which the Court must do in deciding
Defendants’ motion— Liberty Mutual has pled sufficient facts to meet the
racketeering element. However, Frankel leads the Court to understand that Liberty
Mutual’s claims fail if the treatment was rendered by a licensed provider and billed
by Maple Manor.
2. Enterprise
Liability under § 1962(c) requires proof of the existence of two distinct
entities: “(1) a ‘person’ and (2) an ‘enterprise’ that is not simply the same person
referred to by a different name.” Cedric Kushner Promotions Ltd. v. King, 533
U.S. 158, 161 (2001). The Sixth Circuit explained the distinctness requirement as
follows:
A RICO ‘person’ can be either an individual or a corporation.
[18 U.S.C. §] 1961(3). A RICO ‘enterprise’ includes any
individual, partnership, corporation, association, or other legal
entity, and any union or group of individuals associated in fact
although not a legal entity.’ Id.§ 1961(4). The enterprise itself
is not liable for RICO violations; rather, the ‘persons’ who
conduct the affairs of the enterprise through a pattern of
racketeering activity are liable.
In re ClassicStar Mare Lease Litig., 727 F.3d 473, 490 (6th Cir. 2013) (citing
United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1111 (D.C.Cir.2009)).
“[I]ndividual defendants are always distinct from corporate enterprises because
they are legally distinct entities, even when those individuals own the corporations
or act only on their behalf.” Id. at 492.
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Defendants argue that Liberty Mutual must allege the existence of an
organization with participants other than the named defendants. (ECF No. 20-1 at
Pg ID 201 (citing Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1483 (6th Cir.
1989) (finding that the plaintiff failed to meet the enterprise element of a RICO
claim when she alleged that an individual was both the person and enterprise for
purposes of her RICO claim.) Liberty Mutual responds that its “Complaint names
[Maple Manor], [as] a legal entity incorporated under the laws of the State of
Michigan, as the RICO enterprise.”5 (ECF No. 21 at Pg ID 276-77; see also ECF
No. 21 at Pg ID 277 n.3.) The Court agrees with this contention that Liberty
Mutual has named Maple Manor, a formal legal entity, as the enterprise in which
persons, Stella and Jose Evangelista, conducted the alleged RICO prohibited
behavior. Moreover, Liberty Mutual’s RICO claim is against Stella and Jose
Evangelista. (See Compl. ¶¶ 99-108, ECF No. 1 at Pg ID 19-21.) In Cedric
Kushner Promotions, the Supreme Court noted the following regarding
distinctness:
linguistically speaking, the employee and the corporation are
different ‘persons,’ even where the employee is the
corporation’s sole owner. After all, incorporation’s basic
purpose is to create a distinct legal entity, with legal rights,
5

Liberty Mutual also notes that it is not alleging an association-in-fact. (ECF No.
21 at Pg ID 276-77.) See 18 U.S.C. § 1961(4) (An enterprise under the Act
“includes any individual, partnership, corporation, association, or other legal
entity, and any union or group of individuals associated in fact although not a legal
entity.”)
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obligations, powers, and privileges different from those of the
natural individuals who created it, who own it, or whom it
employs.
Cedric Kushner Promotions Ltd., 533 U.S. at 159. Liberty Mutual has pled
sufficient facts to show the existence of persons distinct from an enterprise.
3. “Conducting the Affairs” of the Enterprise
To support a RICO violation, “[a] defendant’s participation must be in the
conduct of the affairs of a RICO enterprise, which ordinarily will require some
participation in the operation or management of the enterprise itself.” Stone v.
Kirk, 8 F.3d 1079, 1091 (6th Cir. 1993) (quoting Bennet v. Berg, 710 F.2d 1361,
1364 (8th Cir.) (en banc), cert. denied, 464 U.S. 1008 (1983)). The Sixth Circuit
has held:
participation in the conduct of an enterprise’s affairs requires
proof that the defendant participated in the operation or
management of the enterprise. RICO liability is not limited to
those with primary responsibility for the enterprise’s affairs;
only some part in directing the enterprise’s affairs is required.
However, defendants must have conducted or participated in
the conduct of the enterprise’s affairs, not just their own affairs.
Ouwinga, 694 F.3d at 792 (6th Cir. 2012) (citing Reves v. Ernst & Young, 507 U.S.
170, 179 (1993) (emphasis in original) (internal quotations and citations omitted)).
This “can be accomplished either by making decisions on behalf of the enterprise
or by knowingly carrying them out.” Id. (quoting United States v. Fowler, 535
F.3d 408, 418 (6th Cir. 2008)). Participation, for purposes of RICO, “has a
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narrower meaning than ‘aid and abet.’” Stone v. Kirk, 8 F.3d at 1091 (quoting
Reves, 507 U.S. at 178).
Defendants argue that there is no evidence that Jose and Stella Evangelista
“ever conducted business in their individual capacity, nor is there any evidence
wherein they undertook any action inconsistent with the corporate form.” (ECF
No. 20-1 at Pg ID 208.) However, Liberty Mutual alleges that Stella and Jose
Evangelista owned and managed Maple Manor and “were responsible for all
actions taken by [Maple Manor] and its staff.” (Compl. ¶ 90, ECF No. 1 at Pg ID
18.) This allegation, which must be accepted as true for purposes of Defendants’
motion, suggests that Stella and Jose Evangelista exercised significant control over
the enterprises’ affairs. As such, Liberty Mutual satisfies the conduct element
required for a RICO claims against the Defendants.
4. Pattern and Continuity Element
A party asserting a civil RICO violation must show a pattern of racketeering
activity. To show a pattern of racketeering activity, “a plaintiff must show ‘that
the racketeering predicates are related, and that they amount to or pose a threat of
continued criminal activity.’” Heinrich, 668 F.3d at 409 (emphasis in original)
(citing H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237-39 (1989)).
“This requirement has come to be called the ‘relationship plus continuity’ test.” Id.
The relationship requirement “of this test is satisfied by showing the predicate acts
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have ‘similar purposes, results, participants, victims, or methods of commission, or
otherwise are interrelated by distinguishing characteristics and are not isolated
events.’” Id. (quoting H.J. Inc., 492 U.S. at 240.) The continuity requirement is
satisfied “by showing either a ‘close ended’ pattern (a series of related predicate
acts extending over a substantial period of time) or an ‘open-ended’ pattern (a set
of predicate acts that pose a threat of continuing criminal conduct extending
beyond the period in which the predicate acts were performed).” Id. at 409-10
(citing H.J. Inc., 492 U.S. at 241-42).
Liberty Mutual states that it is alleging open-ended continuity. (ECF No. 21
at Pg ID 278.) Liberty Mutual asserts in its Complaint that Maple Manor
submitted false documentation for insurance claims in the ordinary course of
business and that this conduct persisted over two years. (Compl. ¶¶ 84, 101, ECF
No. 1 at Pg ID 17, 20; see also Ex. 1, ECF No. 1-2 at Pg ID 35-58.) The alleged
facts suggest a possible threat of continuing criminal conduct beyond the period in
which the identified predicate acts were performed. See H.J. Inc., 492 U.S. at 242
(noting that “the threat of continuity may be established by showing that the
predicate acts or offenses are part of an ongoing entity’s regular way of doing
business.”) Further, there was no built-in endpoint or foreseeable end to the
alleged scheme as claims could have continued to come into Liberty Mutual
seeking payment for unlawful treatment of its insureds. See State Farm Mut. Auto.
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Ins. Co. v. Warren Chiropractic & Rehab Clinic P.C., No. 4:14-CV-11521, 2015
WL 4724829, at *10 (E.D. Mich. Aug. 10, 2015).
B. Civil RICO Conspiracy Claim
Defendants argue that a RICO conspiracy claim under § 1962(d) fails as a
matter of law because the RICO claim is without merit. (ECF No. 20-1 at Pg ID
209 (citing Ashe v. Corley, 992 F.2d 540, 544 (5th Cir. 1993) (holding that
defendant was not a separate and distinct entity from enterprise.).) Given the
Court’s holding that Liberty Mutual has pled sufficient facts to state an underlying
RICO claim, the Court also concludes that its civil conspiracy survives on this
basis.
C. State Law Claims
Defendants raise several arguments supporting dismissal of Liberty Mutual’s
state law claims against them. Liberty Mutual alleges common law fraud under
Michigan law against all Defendants.6 Defendants argue Liberty Mutual has failed

6

To state a claim of fraud under Michigan law, the plaintiff must allege:
(1) the defendant made a material representation; (2) the
representation was false; (3) when the defendant made the
representation, the defendant knew that it was false, or made it
recklessly, without knowledge of its truth as a positive
assertion; (4) the defendant made the representation with the
intention that the plaintiff would act upon it; (5) the plaintiff
acted in reliance upon it; and (6) the plaintiff suffered damage.
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to plead fraud with the requisite particularity under Federal Rule Civil Procedure
9(b). (ECF No. 20-1 Pg ID 210.) In particular, Defendants argue that “[t]he
Complaint fails to identify the particular representation made by any one of the
Defendants. It does not identify the speaker, where are when the fraudulent
statement(s) were made, or the substance of the fraudulent statements.” (Id. (citing
Indiana State Dist. Council of Laborers Fund v. Omnicare, Inc., 583 F.3d 935,
942-43 (6th Cir. 2009).) As discussed above with respect to Liberty Mutual’s civil
RICO claim, Liberty Mutual alleges sufficient facts to state its fraud claim with
particularity.
Liberty Mutual also alleges a claim for payment under mistake of fact
against Maple Manor. This claim has been described as follows:
The rule is general that money paid under a mistake of material
facts may be recovered back, although there was negligence on
the part of the person making the payment; but this rule is
subject to the qualification that the payment cannot be recalled
when the situation of the party receiving the money has been
changed in consequence of the payment, and it would be
inequitable to allow a recovery.
Johnson Controls, Inc. v. Jay Indus., Inc., 459 F.3d 717, 729 n.15 (6th Cir. 2006)
(quoting Gen. Motors Corp. v. Enter. Heat & Power Co., 86 N.W.2d 257, 260
(Mich. 1957) (additional quotation marks and citation omitted)). Defendants seek

Howard v. Chase Home Fin., LLC, 555 F. App’x 567, 572 (6th Cir. 2014)
(quoting M & D, Inc. v. W.B. McConkey, 585 N.W.2d 33, 36 (Mich. Ct.
App. 1998)).
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dismissal of this claim, arguing that they cannot discern the nature of the
allegations, there is no mistake here, and multiple state court judges have rejected
this sort of claim. (ECF No. 20-1 at Pg ID 212.) Defendants’ arguments are
waived. McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir. 1997) (quoting
Citizens Awareness Network, Inc. v. United States Nuclear Regulatory Comm'n, 59
F.3d 284, 293–94 (1st Cir.1995) (“It is not sufficient for a party to mention a
possible argument in the most skeletal way, leaving the court to ... put flesh on its
bones.”) Accordingly, the Court concludes that Liberty Mutual has adequately
pled facts to survive dismissal of its payment under mistake of fact claim.
In its unjust enrichment claim, Liberty Mutual seeks to recover payments it
made to Defendants for the treatment of its insured clients. Under Michigan law,
“to sustain a claim of quantum meruit or unjust enrichment, 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., 729 N.W.2d 898, 904 (Mich.
Ct. App. 2006) (citing Barber v. SMH (US), Inc., 509 N.W.2d 791, 796 (Mich. Ct.
App. 1993)). However, an unjust enrichment claim is precluded by the existence
of an express contract, but only where the contract is “between the same parties on
the same subject matter.” Chrysler Realty Co. v. Design Forum Architects, Inc.,
544 F. Supp. 2d 609, 617 (E.D. Mich. 2008) (emphasis in original) (quoting Morris
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Pumps v. Centerline Piping, Inc., 729 N.W.2d 898, 903-04 (Mich. Ct. App. 2006));
see also KSR Int’l Co. v. Delphi Auto. Sys., LLC, 523 F. App’x 357, 363 (6th Cir.
2013) (“[A] contract will not be implied if there is an express contract between the
same parties on the same subject matter.”)
Defendants argue that Liberty Mutual “fail[s] to sufficiently allege that
remedies at law are inadequate or unavailable.” (ECF No. 20-1 Pg ID 212 (citing
Kingsley Assocs., Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 506 (6th Cir.1995)
(finding that the parties entered into an implied-in-fact contract and were thus
precluded additional recovery under the theory of unjust enrichment.) Defendants
fail to develop whether an alternative remedy exists in a contract covering the same
parties on the subject matter. Also, Defendants argue that Jose and Stella
Evangelista never received any individual benefits to support unjust enrichment.
(ECF 20-1 Pg ID 213.) However, it is uncontested that they owned Maple Manor
and presumably would have received a benefit from that ownership. As such, the
unjust enrichment claim survives.
D. Declaratory Judgment
Count VI of Liberty Mutual’s Complaint seeks declaratory judgment under
28 U.S.C. § 2201. Specifically, Liberty Mutual requests a judgment “declaring
that [Maple Manor], Stella Evangelista, and Jose Evangelista, jointly and severally,
fraudulently billed for unlicensed, and therefore unlawful, treatment that is not
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compensable under applicable provisions of the Michigan No-Fault Act.” (Compl.
¶ 143, ECF No. 1 at Pg ID 28.) Further, Liberty Mutual asks in its demand for
relief that the Court declare as follows:
(a) DECLARE that Liberty Mutual has no obligation to pay any
pending and previously-denied No-Fault claims submitted by
[Maple Manor], Stella Evangelista, and Jose Evangelista,
jointly and severally, for any or all of the reasons set out in the
within Complaint;
(b) DECLARE that [Maple Manor], Stella Evangelista, and
Jose Evangelista, jointly and severally, cannot seek payment
from Liberty Mutual pursuant to the Michigan No-Fault Act,
Mich. Comp. Laws § 500.3101, et seq., any policy of insurance,
any assignment of benefits, any lien of any nature, or any other
claim for payment related to the unlawful and fraudulent
conduct detailed in the within Complaint;
(c) DECLARE that [Maple Manor], Stella Evangelista, and
Jose Evangelista, jointly and severally, cannot balance bill or
otherwise seek payment from any person insured under a
Liberty Mutual `y [sic] or for whom Liberty Mutual is the
responsible payor related to the unlawful and fraudulent
conduct detailed in the within Complaint; and
(d) GRANT such other relief as this Court deems just and
appropriate under Michigan law and the principles of equity.
(Compl., ECF No. 1 at Pg ID 31-32.)
The Declaratory Judgment Act, 28 U.S.C. § 2201(a), imbues authority in the
court to exercise its jurisdiction and discretion in granting declaratory relief, and at
times the better exercise of discretion favors abstention. See Bituminous Cas.
Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004). The Sixth
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Circuit has articulated several factors to be considered by a district court faced with
a complaint seeking relief under § 2201(a). Travelers Indem. Co. v. Bowling
Green Pro. Assocs., PLC, 495 F.3d 266, 271 (6th Cir. 2007) (quoting Grand Trunk
W. R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984)).
Defendants’ motion to dismiss reiterates the argument that Maple Manor is
merely a billing agent which bills on behalf of licensed medical providers and that
Liberty Mutual lacks standing under Sterling. (ECF No. 20-1 at Pg ID 213-14.)
Defendants do not argue for abstention or otherwise argue how Liberty Mutual has
failed to state a claim. However, if the Court were to consider the Grand Trunk
factors, it would conclude that it should exercise jurisdiction over Liberty Mutual’s
claim for the reasons in a factually similar case in this district. See State Farm
Mut. Auto. Ins. Co. v. Pointe Physical Therapy, LLC, 68 F. Supp. 3d 744, 755
(E.D. Mich. 2014).

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VI.

Conclusion
For the reasons set forth above, the Court holds that Liberty Mutual has

sufficiently pled its claims in its Complaint against each Defendant to survive a
motion to dismiss.
Accordingly,
IT IS ORDERED, Defendants’ motion to dismiss the Complaint (ECF No.
20) is DENIED.
IT IS SO ORDERED.

s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: January 10, 2022

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