Illinois Farmers Insurance Company et al v. Guthman et al
ORDER granting 60 Motion to Dismiss/General; granting in part and denying in part 62 Motion to Dismiss/General(Written Opinion) Signed by Senior Judge David S. Doty on September 7, 2017. (JRC)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Illinois Farmers Insurance Company,
21st Century Insurance Company,
Bristol West Casualty Insurance
Company, and Mid-Century
Civil No. 17-270(RHK/SER)
Timothy W. Guthman, D.C.,
Inver Family Chiropractic, P.A.,
Team Chiropractic, P.A., a/k/a
Team Chiropractic, Inc.,
Team Chiropractic Service Corporation,
Alianza Chiropractic Clinic,
Rehabilitations Professionals, Inc.,
Gregory Peter Steiner, D.C.,
Chiropractic Wellness Center, Inc.,
Apple Valley Wellness Center,
Centro Hispano de Ayuda,
Silvia Ross, a/k/a Silvia Pena,
Zulema Calderon, a/k/a Sulema Calderon,
Zulema Levya, and Zulema Manjarrez,
Laura Pimental, a/k/a Analaura Pimental,
Duqueiro Cano, a/k/a “El Duque,”
Richard S. Stempel, Bradley L. Doty,1 Gregory Maus, Stempel
& Doty, PLC, Hopkins, Minnesota, for Plaintiffs.
Minneapolis, Minnesota, for Defendants Timothy W. Guthman,
D.C., Inver Family Chiropractic, P.A., Team Chiropractic,
P.A., Alianza Chiropractic Clinic, Centro Hispano de Ayuda,
Silvia Pena Ross, Laura Pimentel, and Duqueiro Cano.
Counsel is not related to the undersigned.
David W. Asp, Kristen G. Marttila, Lockridge Grindal Nauen
P.L.L.P., Minneapolis, Minnesota, for Defendants Gregory
Peter Steiner, D.C., Chiropractic Wellness Center, Inc.,
and Rehabilitation Professionals, Inc.
This matter is before the court upon the motion to dismiss
Wellness Center, Inc. (Steiner Defendants) and the motion to
dismiss by defendants
Timothy W. Guthman, D.C., Inver Family
Chiropractic Clinic, Centro Hispano de Ayuda, Silvia Pena Ross,
Laura Pimentel and Duqueiro Cano (Guthman Defendants).
a review of the file, record, and proceedings herein, and for
the following reasons, the court grants the Steiner Defendants’
motion and grants in part the Guthman Defendants’ motion.
This fraud action arises out of defendants’ alleged scheme
Insurance Company, 21st Century Insurance Company, Bristol West
Casualty Insurance Company, and Mid-Century Insurance Company
issue automobile-insurance policies in Minnesota.
Under the Minnesota No-Fault Automobile Insurance Act,
Minn. Stat. § 65B.41 et seq., insurers are required to provide
necessary medical expenses – in each automobile policy sold in
The Act is designed to expedite payments to those
“relieve the severe economic distress of uncompensated victims”
Minn. Stat. § 65B.42.
Insurers must make these
payments within 30 days of being billed by a medical provider.
Id. § 65B.54.
Compl. ¶¶ 12, 16-17.
Plaintiffs allege that they took advantage
of the no-fault insurance system by billing for (1) medically
unnecessary treatments at their clinics2 or (2) services that
Id. ¶ 26.3
The runners, in turn, would provide cash
to accident victims to entice them to go to the clinics, which
then “billed [plaintiffs] for services not rendered,” “provided
The clinics include defendants Inver Family Chiropractic,
Team Chiropractic, and Alianza Chiropractic Clinic, each of
which is owned by Guthman; and Chiropractic Wellness Center,
which is owned by Steiner.
The alleged runners are defendants Ross, Pimentel, and
Cano. Defendant Sulema Calderon is also alleged to be a runner
but is not a party to the instant motions.
treatment modalities and therapy to maximize the charges [they]
could submit for no-fault medical benefits.”
Id. ¶¶ 25, 40.
plaintiffs ostensibly “paid claims faster than other no-fault
Id. ¶ 39.
Ultimately, plaintiffs paid more than
Id. ¶ 38.4
Plaintiffs commenced this matter in early 2017, alleging
Defendants moved to dismiss, and plaintiffs
violation of the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1962(c) (Count 1) and § 1962(d) (Count
Stat. § 325F.69 (Count 3); civil conspiracy (Count 4); commonlaw
enrichment (Count 7).
The Guthman Defendants and the Steiner
Defendants now move to dismiss all of these claims.
These same allegations form the basis of a criminal case
pending against Guthman, charging him with conspiracy to commit
mail fraud and health-care fraud. See United States v. Guthman,
Crim. No. 17-67 (D. Minn. filed Mar. 22, 2017).
Standard of Review
accepted as true, to state a claim to relief that is plausible
on its face.’”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,
594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662,
plaintiff [has pleaded] factual content that allows the court to
draw the reasonable inference that the defendant is liable for
the misconduct alleged.”
Iqbal, 556 U.S. at 678 (citing Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
complaint need not contain detailed factual allegations, it must
raise a right to relief above the speculative level.
sufficient to state a claim.
Iqbal, 556 U.S. at 678 (citation
and internal quotation marks omitted).
The RICO Claims
Congress enacted RICO in 1970 as part of the Organized
Crime Control Act, Public Law No. 91-452, in an effort to combat
mob-related activities and organized crime.
The statute makes
it unlawful for “any person employed by or associated with any
indirectly, in the conduct of such enterprise’s affairs through
such as murder, kidnapping, robbery, and, relevant here, mail
penalties, RICO provides a civil remedy for persons injured by a
violation of its substantive provisions.
See id. § 1964(c).
“(1) conduct (2) of an enterprise (3) through a pattern (4) of
Crest Constr. II, Inc. v. Doe, 660 F.3d
346, 353 (8th Cir. 2011).
clinics, and the runners violated RICO by associating with each
other to achieve the purpose of billing and receiving improper
no-fault benefit payments.
Defendants argue that this claim
fails as a matter of law because, among other things, plaintiffs
have not alleged the existence of an “enterprise” distinct from
the alleged racketeering activity itself.
The court agrees.
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
requires a discrete structure and existence uniting its members
as a cognizable group.
Nelson v. Nelson, 833 F.3d 965, 968 (8th
Although such association need not have regular
meetings or a chain of command, it must comprise something more
than a pattern of racketeering activity.
Id.; see also United
States v. Turkette, 452 U.S. 576, 583 (1981) (“The ‘enterprise’
is not the ‘pattern of racketeering activity’; it is an entity
separate and apart from the pattern of activity in which it
A plaintiff, therefore, must demonstrate that the
alleged enterprise would exist in the absence of the alleged
Crest Constr., 660 F.3d at 354-55.
enterprise encompasses more than what is necessary to commit the
predicate RICO offense.”
Diamonds Plus, Inc. v. Kolber, 960
F.2d 765, 770 (8th Cir. 1992); see also Sebrite Agency, Inc. v.
Platt, 884 F. Supp. 2d 912, 919 n.4 (D. Minn. 2012) (“[T]he
Eighth Circuit has continued to require that a RICO enterprise
have a structure that is separate and distinct from the pattern
of racketeering activity.”).
The court recently addressed the “enterprise” element of a
Insurance Co. v. Mobile Diagnostic Imaging, Inc., No. 13-2820,
2014 WL 4104789 (D. Minn. Aug. 19, 2014) (“MDI”), the plaintiffs
– three of the four insurance companies in this case – alleged
services were then submitted to each patient’s insurer for nofault benefits.
The plaintiffs sued under RICO alleging that
the defendants (Appleman, MDI, and each of the chiropractors
receiving kickbacks) had “devised schemes to defraud Plaintiffs
and/or scans incentivized by the payment of kickbacks.”
The court rejected the claim as a matter of law:
allegations of the complaint are true, the relationship between
entirely of fraud.
Without that alleged fraud, then, there
enterprise distinct from the alleged racketeering activity, the
RICO claim failed.
See also Stephens, Inc. v. Geldermann, Inc.,
962 F.2d 808, 815-16 (8th Cir. 1992) (holding that plaintiff
because “[t]he only common factor that linked all these parties
together and defined them as a distinct group was their direct
The same result must follow here.
The gravamen of the amended complaint is that defendants
associated for the purpose of defrauding plaintiffs out of nofault benefits by funneling accident victims to the clinics in
order to provide unnecessary treatment or to bill for treatment
activity, no enterprise would exist.
The RICO claims thus fail.
Plaintiffs respond that the enterprise independently exists
without the fraudulent acts because the clinics are otherwise
This argument, however, ignores the allegations in
the amended complaint.
For example, plaintiffs seem to suggest
the runners served some type of legitimate purpose – finding
alleged that the runners were used to solicit accident victims
in exchange for payment.
See Am. Compl. ¶¶ 34-36.
runners, not just the clinics.
Id. ¶ 31.
As a result, the fact
that part of the “enterprise” may have been engaged in lawful
(affirming dismissal of RICO claim despite fact that members of
alleged enterprise “carried on other legitimate activities”);
MDI, 2014 WL 4104789, at *15 n.11 (“Components of each alleged
activities .... But the enterprise itself – that is, the thing
that connects or that is made up of the component parts – does
nothing except engage in fraud, according to the complaint.”)
Because the amended complaint does not plausibly allege an
See Jennings v. Bonus Bldg. Care, Inc., No. 4:13-CV-
663, 2014 WL 1806776, at *10 (W.D. Mo. May 7, 2014) (“If no one
defendant has caused injury through racketeering activity, then
§ 1962(d) conspiracy liability cannot attach to any defendant.”)
(citing Beck v. Prupis, 529 U.S. 494, 505 (2000)).
III. The Remaining Claims
Minnesota Consumer Fraud Act
Minnesota’s Consumer Fraud Act prohibits the use of “fraud,
statement or deceptive practice ... in connection with the sale
assert a claim under the Act as a “private attorney general.”
Id. § 8.31, subdiv. 3a.
To do so, the plaintiff must seek a
Buetow v. A.L.S. Enters., Inc., 888 F. Supp.
2d 956, 959 (D. Minn. 2012).
“Merchandise” is defined to include services.
Stat. § 325F.68, subdiv. 2.
Defendants argue that plaintiffs do not seek any public
benefit because plaintiffs do not allege fraudulent or false
defendants’ fraudulent conduct and inappropriate treatment of
Several courts, including this one, have held that claims
seeking injunctive relief are more likely to serve a public
benefit than claims seeking damages.
See, e.g., Buetow, 888 F.
Supp. 2d at 961; In re Levaquin Prods. Liab. Litig., 752 F.
Supp. 2d 1071, 1076-77 (D. Minn. 2010).
But “a request for
benefit,” In re Levaquin, 752 F. Supp. 2d at 1077, particularly
where the relief “is at best incidental to [a] request for money
damages,” MDI, 2014 WL 4104789, at *20.
That is the case here.
Indeed, the amended complaint makes clear that the injunction
plaintiffs seek is not intended to benefit the public at large,
but only plaintiffs and their insureds.
See Am. Compl. ¶ 151
Moreover, a review of the amended complaint as a whole reveals
that plaintiffs do not truly seek a public benefit.
than 100 paragraphs and 41 pages, plaintiffs repeatedly cite the
damage defendants’ alleged conduct caused them.
¶¶ 24, 125, 149.
See, e.g., id.
As in MDI, the court concludes that the
request for injunctive relief was merely “incidental” to and
serve the public interest necessary to bring a private cause of
Select Comfort Corp. v. Tempur Sealy Int’l, Inc., 11 F. Supp. 3d
because the relief sought, including injunctive relief, was not
“primarily aimed at altering the defendant’s conduct”) (internal
quotation and citation omitted).
Other Fraud-based Claims
The remaining claims assert a civil conspiracy (Count 4),
common-law fraud (Count 5), no-fault fraud (Count 6), and unjust
enrichment (Count 7).
Each is predicated on the existence of a
fraudulent scheme perpetrated by defendants.
Compl. ¶¶ 156, 159, 166, 173.
See, e.g., Am.
According to plaintiffs, that
scheme resulted in the submission of hundreds of false claims,
for which plaintiffs paid more than $750,000.6
Plaintiffs have provided charts listing all of the
allegedly fraudulent claims submitted, including the claim
number, the amount, and the date.
See Am. Compl. Ex. 2.
Plaintiffs believe that every claim submitted by Guthman,
Steiner, and their clinics from the inception of the fraud –
approximately 2010 – was fraudulent.
Drobnak v. Andersen Corp., 561 F.3d 778,
784 (8th Cir. 2009).
This requires a plaintiff to “state with
particularity the circumstances constituting fraud” or, in other
words, “identify the who, what, where, when, and how of the
U.S. ex rel. Thayer v. Planned Parenthood of
Heartland, 765 F.3d 914, 917 (8th Cir. 2014) (internal quotation
marks and citations omitted).
Courts must read Rule 9(b) “in
defendant to respond specifically, at an early stage of the
Schaller Tel. Co. v. Golden Sky Sys., Inc.,
298 F.3d 736, 746 (8th Cir. 2002) (internal quotation marks and
“[C]onclusory allegations that a defendant’s
conduct was fraudulent and deceptive are not sufficient.”
The crux of defendants’ motions with respect to the fraudbased claims is that they are not adequately pleaded under Rule
The court agrees, in part.
The Guthman Defendants
does not meet the Eighth Circuit’s interpretation of Rule 9(b)
as set forth in U.S. ex rel. Joshi v. St. Luke’s Hospital, Inc.,
441 F.3d 552 (8th Cir. 2006).
In Joshi, the court held that a
plaintiff must plead at least a few “representative examples of
the alleged fraudulent conduct, specifying the time, place,
and content of the acts and the identity of the actors” to
In an attempt to comply with Joshi, plaintiffs identified
examples of the purported fraud.
See Am. Compl. ¶¶ 68-114.
Generally speaking, those examples specify when the claims were
made, the particular claim numbers, who submitted them, and what
plaintiffs allege that following a car accident on February 21,
2012, Guthman and Inver Family Chiropractic billed more than
$19,000 for services treating the insured’s neck and back “even
though the policyholder had suffered a torn ACL in his left
knee” and “never had any neck pain.”
Id. ¶¶ 75-76.
the amended complaint alleges that following a car accident on
December 18, 2011, plaintiffs were billed for treatment to a
(i) “adjustments” to the wife, even though she “did not receive
adjustments due to being in too much pain,” and (ii) mechanical
traction for the husband that was not actually provided.
In another instance, plaintiffs allege that a child
injured in a car accident complained only of neck pain, but
claimed that the patient reported “severe pain throughout her
neck, upper back, chest and right knee.”
Id. ¶ 103.
argue that each of these examples are emblematic of the broader
fraudulent scheme alleged.
The Guthman Defendants attempt to minimize these examples
reliability – most notably the corroboration of a cooperating
witness - are sufficient to plausibly allege fraud.
id. ¶ 40 (alleging that Guthman ordered the cooperating witness
to pay accident victims to obtain treatment in the clinic, even
though the patients denied being injured).7
allegations of improper solicitation are insufficient to give
rise to a fraud claim.
In MDI, the court found the fraud claim
The Guthman Defendants argue that the court should
disregard allegations provided by the witness because he or she
But plaintiffs identified the witness at oral
argument and the allegations are detailed enough to identify the
person in any event.
See Am. Compl. ¶¶ 48, 55.
reliance on an anonymous witness is not uncommon in cases
involving healthcare fraud.
See, e.g., State Farm Mut. Auto.
Ins. Co. v. Healthcare Chiropractic Clinic, Inc., Civ. No. 152527, 2015 WL 6445324 (D. Minn. Oct. 23, 2015).
lacking, because even if patients had been improperly solicited,
that did not mean they were improperly treated:
One of the major weaknesses of plaintiffs’
case is their failure to recognize that the
payment of kickbacks (on the one hand) and
the medical necessity and reasonableness ...
of an MRI scan (on the other hand) are
entirely separate questions.
2014 WL 4104789, at *10.
As already noted, however, the alleged
scheme here involves not only soliciting victims, but also the
submission of patently false and fraudulent claims.
therefore have complied with Rule 9(b) with respect to Guthman
and his clinic.
Plaintiffs have failed to do so, however, with respect to
Although plaintiffs provide some allegations that
the runners solicited patients for treatment at the clinics, see
Am. Compl. ¶ 92, in most instances the allegations lack any
policyholder was solicited for treatment with Defendants Guthman
and Defendant Inver Family [Chiropractic] by an agent of the
Defendants”); id. ¶ 96 (alleging that “the policyholder received
England, No. 09-2850, 2010 WL 3893797, at *10 (D. Minn. Sept.
30, 2010); Moua v. Jani-King of Minn., Inc., 613 F. Supp. 2d
1103, 1111 (D. Minn. 2009).
More important, plaintiffs seem to overlook the distinction
between payments to the runners and the allegedly fraudulent
As recognized in MDI, even if kickbacks to the runners
provided – and the billing - was improper.
2014 WL 4104789, at
In other words, the fact that the runners were paid does
not necessarily mean that they were involved in the fraudulent
Plaintiffs argue that the runners were aware of
the scheme, but they make no such allegation.
As a result, the
amended complaint does not plausibly allege that the runners
knowingly participated in a scheme to defraud.
The Steiner Defendants
Much like the allegations against the runners, the amended
complaint is significantly less detailed with respect to Steiner
that Ross, a runner, performed medical services on policyholders
despite not having a license to do so, and for which plaintiffs
See Am. Compl. ¶¶ 80-87, 99-102.
But unlike the
allegations with respect to Guthman, plaintiffs do not provide
In the examples provided in the amended complaint,
plaintiffs do not allege that the patients did not actually need
the treatment provided or that the bills submitted for those
services were unreasonable.
See id. ¶¶ 85, 100, 101.
plaintiffs provided sufficient other “reliable indicia that lead
complaint does not cite to any first-hand knowledge of Steiner’s
billing practices or other “reliable indicia” to suggest that
Though plaintiffs point to the cooperating witness, there is no
indication the witness was involved in billing or knew that
Steiner was providing medically unnecessary treatment.
result, the fraud-based claims against the Steiner Defendants
fail as a matter of law.
Based on the foregoing, and all the files, records, and
proceedings herein, IT IS HEREBY ORDERED that:
The Guthman Defendants’ motion to dismiss [ECF No. 62]
is granted in part as follows:
The motion is granted as to the claims against
Ross, Pimentel, Cano, and Centro Hispano de Ayuda, and the
(Counts 1 and 2) and the Minnesota Consumer Fraud Act claim
(Count 3) against Guthman, Inver Family Chiropractic, Team
Chiropractic, and Alianza Chiropractic, and those claims
are dismissed with prejudice;
In all other respects, the Guthman Defendants’
motion is denied; and
The Steiner Defendants’ motion to dismiss [ECF No. 60]
is granted, and all claims asserted against those defendants are
dismissed with prejudice.
Dated: September 7, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court
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