GOVERNMENT EMPLOYEES INSURANCE CO. et al v. TRI-COUNTY NEUROLOGY AND REHABILITATION, LLC et al

Filing 38

OPINION. Signed by Judge Madeline C. Arleo on 12/4/15. (dc, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
____________________________________
:
GOVERNMENT EMPLOYEES INS. CO., :
GEICO INDEMNITY CO., GEICO
:
Civil Action No. 14-8071
GENERAL INS. CO. and GEICO
:
CASUALTY
:
:
Plaintiffs,
:
:
v.
:
:
TRI- COUNTY NEUROLOGY AND
:
OPINION
REHABILITATION, LLC, NABIL YAZGI, :
M.D., and THOMAS SENATORE, D.C.
:
:
Defendants.
:
____________________________________:
ARLEO, UNITED STATES DISTRICT JUDGE
This matter comes before the Court by way of Defendants Tri-County Neurology and
Rehabilitation, LLC (“Tri-County”), Nabil Yazgi, M.D. (“Dr. Yazgi”), and Thomas Senatore,
D.C. (“Dr. Senatore”) (collectively, “Defendants”) Motion to Dismiss. Dkt. No. 23. Plaintiffs
Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Co.
and GEICO CASUALTY (collectively “GEICO” or “Plaintiffs”) oppose the motion. Dkt. No.
25. The parties appeared before the Court on November 30, 2015 for oral argument. For the
reasons set forth on the record and expressed below, the Court GRANTS Defendants’ motion
but grants Plaintiffs leave to re-plead certain claims.
I.

BACKGROUND
GEICO, a Maryland corporation, is authorized to conduct business and issue automobile

insurance policies in New Jersey. Compl., Dkt. No. 1, ¶ 10. Under New Jersey law, automobile
insurers are required to provide Personal Injury Protection Benefits (“PIP Benefits”) to Insureds.
1

Id. ¶ 19. An insured can assign his or her right to PIP Benefits to healthcare services providers in
exchange for those services, and a healthcare services provider may submit claims directly to an
insurance company in order to receive payment for medically necessary services. Id. ¶ 20. An
insurer, such as GEICO, is only required to pay PIP benefits for reasonable, necessary, and
appropriate treatment. Id. ¶ 21.
Defendant Tri-County is a New Jersey professional limited liability corporation, which
purports to have Dr. Yazgi, a licensed doctor, and Dr. Senatore, a licensed chiropractor, as its coowners and sole members. Id. ¶¶ 11-13. This action arises out of GEICO’s allegations that
numerous pending and already-paid PIP claims made by Tri-County to GEICO are fraudulent
due to one or more of the following defects: (1) Tri-County’s “illegal” corporate practice
structure, id. ¶¶ 32-43; (2) Tri-County’s improper referral relationships, id. ¶¶ 44-49; (3) Dr.
Yazgi’s “miscoded” examinations, id. ¶¶50-114; and (4) Dr. Yazgi’s “unnecessary”
electrodiagnostic testing, id. ¶¶ 115-159.
On December 29, 2014, GEICO filed a Complaint seeking declaratory judgment against
Tri-County that it is not obligated to pay more than $2,279,000 in purportedly fraudulent pending
claims for medical services that Tri-County provided to GEICO’s insureds because the services
were “fraudulent” as stated above (Count One). GEICO also seeks to recover $68,000 in
allegedly fraudulent charges already paid in Counts Two through Six, which include: violation of
New Jersey Insurance Fraud Prevention Act (“IFPA”) against all Defendants (Count Two);
violation of RICO, 18 U.S.C. 1962(c) against Defendants Yazgi and Senatore (Count Three);
violation of RICO, 18 U.S.C. 1962(d) against Defendants Yazgi and Senatore (Count Four);
common law fraud against all Defendants (Count Five); and unjust enrichment against all

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Defendants (Count Six). On April 20, 2015, Defendants moved to dismiss the Complaint in its
entirety. Dkt. No. 23.
II.

LEGAL STANDARD
When considering a Rule 12(b)(6) motion to dismiss, the court accepts as true all of the

facts in the complaint and draws all reasonable inferences in favor of the plaintiff. Phillips v.
Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). Dismissal is inappropriate even where “it
appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits.”
Id. The facts alleged, however, must be “more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). The allegations in the complaint “must be enough to raise a right to relief
above the speculative level.” Id. Accordingly, a complaint will survive a motion to dismiss if it
provides a sufficient factual basis such that it states a facially plausible claim for relief. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009).
III.

ANALYSIS
a. Declaratory Judgment Claim (Count One)
In Count One, Plaintiffs seek a declaration that GEICO is not obligated to pay

$2,279,000.00 in pending PIP claims submitted by Tri-County to GEICO. Defendants contend
that the disputes over these pending PIP benefits claims must be decided through New Jersey’s
statutorily mandated arbitration process, and that the declaratory. The Court agrees.
The New Jersey statute governing the resolution of PIP claim disputes provides that:
Any dispute regarding the recovery of medical expense benefits or
other benefits provided under personal injury protection coverage .
. . arising out of the operation, ownership, maintenance or use of an
automobile may be submitted to dispute resolution on the initiative
of any party to the dispute, as hereinafter provided.

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N.J.S.A. 39:6A-5.1(a). The statute provides that “[d]isputes involving medical expense benefits
may include, but not necessarily be limited to, matters concerning:
(4) the eligibility of the provider performing the treatment or
service to be compensated under the terms of the policy or under
regulations promulgated by the commissioner, including whether
the person is licensed or certified to perform such treatment; (5)
whether the disputed medical treatment was actually performed; . .
. . (7) the necessity or appropriateness of consultations by other
health care providers; (8) disputes involving application of and
adherence to fee schedules promulgated by the commissioner; and
(9) whether the treatment performed is reasonable, necessary . . . .
N.J.S.A. 39:6A-5.1(c). The statute also provides that “[a]ll decisions of a dispute resolution
professional shall be binding.” Id.
In considering the same statutory scheme, Judge Chesler in Gov’t Emps. Ins. Co. v. MLS
Med. Group LLC, No. 12-7281, 2013 U.S. Dist. LEXIS 171983 (D.N.J. Dec. 6, 2013) granted
dismissal of a nearly identical claim for declaratory judgment brought by GEICO against another
healthcare provider.1 The court found that “[r]ather than a jurisdictional issue, Defendant’s
position that the dispute must be submitted to arbitration would appear to raise an argument that
the declaratory judgment claim fails to plead a claim upon which this Court may grant relief.”
Id. at *14. The Court declined to entertain the claim based on abstention. The Court explained:
[i]n any event, the question of whether the Court dismisses the
claim under Rule 12(b)(1) or 12(b)(6) is largely academic. Even
assuming there is a basis for subject matter jurisdiction over the
declaratory judgment claim, the Court will, in its discretion,
decline to exercise its power to adjudicate the claim for a
declaratory judgment under 28 U.S.C. § 2201.

1

Two other District Court cases have recently considered similar cases involving GEICO’s
allegations of fraudulent billing of other healthcare providers. See, e.g., Gov’t Emples. Ins. Co.
v. Korn, No. 14-5742, 2015 U.S. Dist. LEXIS 121754 (D.N.J. Sept. 14, 2015) (Irenas, J.); Gov’t
Emples. Ins. Co. v. Zuberi, No. 15-4895, 2015 U.S. Dist. LEXIS 133789 (D.N.J. Oct. 1, 2015)
(Linares, J.). Neither case, however, addressed whether the court should decline to entertain the
declaratory judgment issue and send the PIP claims to arbitration as mandated by New Jersey’s
statutory scheme.
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Id. at *14-15 (citing Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995). The Court explained
how “[t]he claim, though couched in the language of the Declaratory Judgment Act, at bottom
requests that this Court disrupt the statutory scheme created by the New Jersey legislature
mandating that disputes regarding claims for PIP benefits be decided through arbitration.” Id. at
*17. The Court, applying Burford abstention, concluded that “declining to entertain a claim
arising under federal law that would interfere with this state statutory scheme is prudent course.”
Id. at *18 (citing Burford v. Sun Oil Co., 319 U.S. 315 (1943)).
The District Court’s decision in MLS is consistent with New Jersey case law.2 In State
Farm Mut. Auto. Ins. Co. v. Molino, 289 N.J. Super. 406, 410 (App. Div. 1996), the court
explained that “any ‘dispute’ concerning ‘payment’ of PIP benefits due ‘pursuant to this act’ is
subject to binding arbitration at the claimant’s option.” The court held that the statute compels
plaintiff to submit to binding arbitration the dispute over defendant’s entitlement to certain PIP
benefits. Id. Similarly, in State Farm Mut. Auto. Ins. Co. v. Sabato, 337 N.J. Super. 393, 394
(App. Div. 2001), the court explained that the language of the statute mandating PIP arbitration
must be “read as broadly as the words themselves indicate, that statutory arbitrators are
authorized to determine both factual and legal issues, and that coverage issues are to be decided
by the arbitrator in the same manner as issues dealing with the extent of injury and the amount of
2

Plaintiffs rely on a decision issued by the New Jersey Law Division, Allstate Ins. Co. v Lopez,
311 N.J. Super. 660 (Law Div. 1998) (granting motion to stay arbitration in case where insurer
asserted that insureds, drivers, passengers, and health care providers, were part of an insurance
fraud ring that had staged accidents to defraud insurer). The Court, in line with Judge Chesler in
MLS, finds Lopez to be distinguishable. See MLS, 2013 U.S. Dist. LEXIS 171983, at *12-14;
see also State Farm Mut. Auto. Ins. Co. v. Sabato, 337 N.J. Super. 393, 397 (App. Div. 2001).
Lopez was a case with “434 defendants . . . . [i]nvolving what is believed to be part of the
largest automobile accident fraud ring documented in United States history.” 311 N.J. Super. at
662. The Law Division reasoned that the massive and conspiratorial nature of the fraud went
beyond the question of fraud as it related to the occurrence of an underlying accident. Id. at 67172. This case does not involve the same complexities as Lopez—it only involves three
defendants, one healthcare facility, and fraud issues that are not overly complicated.
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recovery.” The Sabato Court held that threshold issues of whether coverage exists, including an
insurer’s fraud-based defenses, must be resolved in the mandatory arbitration proceedings. Id.
Judge Chesler’s decision is also in line with the Third Circuit’s decision in Chiropractic
Am. v. Lavecchia, 180 F.3d 99 (3d Cir. 1999). In Chiropractic, a case involving New Jersey’s
no-fault automobile insurance law,3 the Third Circuit upheld the decision of the district court to
abstain on Burford grounds. 180 F.3d at 103. In concluding that abstention was appropriate, the
Third Circuit noted that federal intervention would prevent New Jersey from maintaining a
coherent regulatory policy. Id. The court found that “the Act and the regulations promulgated
by the Commissioner represent a complex legislative and regulatory package designed to reform
automobile insurance law in New Jersey, and that the courts of New Jersey are in the best
position to consider the validity of the applicable regulations under state law . . . .” Id.
Based on these decisions, the Court is satisfied that Burford abstention is appropriate
here. Burford abstention is designed to prevent federal courts from interfering with “a state’s
efforts to regulate areas of law in which state interests predominate and in which adequate and
timely state review of the regulatory scheme is available.” Chiropractic, 180 F.3d at 104 (citing
Burford, 319 U.S. at 332-34 (1943)). Burford abstention is a two-step process. First, a court
must determine whether timely and adequate state law review is available. Matusow v. TransCnty. Title Agency, LLC, 545 F.3d 241, 247 (3d Cir. 2008) (quoting Riley v. Simmons, 45 F.3d
764, 771 (3d Cir. 1995)). Second, the court must determine “(i) whether the particular regulatory
scheme involves a matter of substantial public concern; (ii) whether it is the sort of complex
3

In Chiropractic, individual chiropractors and other professional organizations challenged, on
constitutional grounds, several New Jersey regulations under the state’s no-fault automobile
insurance law. While the regulations at issue in Chiropractic are different than those in this case,
both cases deal whether the Court should adjudicate claims involving New Jersey’s no-fault
automobile insurance statutory scheme.
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technical regulatory scheme to which the Burford abstention doctrine usually is applied; and (iii)
whether federal review of a party’s claims would interfere with the state’s efforts to establish and
maintain a coherent regulatory policy.” Hi-Tech Trans., LLC v. New Jersey, 382 F.3d 295, 304
(3d Cir. 2004).
First, the Court finds that timely and adequate state law review is available to the parties
through the statutorily mandated arbitration of PIP claims set forth in N.J.S.A. 39:6A-5.1(a).
Plaintiffs have not demonstrated the absence of such review.
Next, the Court turns to whether adjudication of the claim would interfere with New
Jersey’s no-fault insurance statutory scheme. First, the Court finds that the adjudication of PIP
claims presents a matter of public concern. The New Jersey legislature has created a scheme that
serves New Jersey drivers, their passengers, insurers, health care service providers and those who
represent them. See Chiropractic, 180 F.3d at 105. The statutory provision governing PIP
disputes is part of New Jersey’s Automobile Insurance Cost Reduction Act, N.J.S.A. 39:6A-1 to
-35, whose purpose is “to establish an informal system of settling tort claims arising out of
automobile accidents in an expeditious and least costly manner, and to ease the burdens and
congestion of the State’s courts.” N.J.S.A. 39:6A-24. Accordingly, the Act and regulations
pertain to a matter in which the state has a substantial and important interest.
Next, in accordance with the Third Circuit’s finding in Chiropractic, the Court finds that
New Jersey’s no-fault insurance scheme is the sort of complex regulatory scheme to which
Burford abstention applies. See Chiropractic, 180 F.3d at 106 (discussing New Jersey’s no-fault
automobile insurance law under the Automobile Insurance Cost Reduction Act, N.J. Stat. Ann. §
39:6A-1.1 et seq.). As the Third Circuit explained, “[t]here can be no doubt that the Act and

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regulations at issue here constitute a complex regulatory solution to the state’s no-fault insurance
problem.” See Chiropractic, 180 F.3d at 106.
Finally, the Court finds that federal review would in fact interfere with New Jersey’s
efforts to establish and maintain its no-fault automobile insurance scheme. See id. (“We believe
that ‘the regulatory system [has] as a central purpose uniformity to achieve important local
interests that would be frustrated by federal court review.’”) (internal citations omitted)).
In accordance with MLS and Chiropractic, the Court finds that abstention under Burford
is appropriate in this case.

The Court will therefore decline to exercise jurisdiction over

Plaintiffs’ claim for Declaratory Judgment.4 Count One is dismissed.
b. Counts Two through Six
In addition to seeking declaratory relief for the pending PIP benefit disputes, in Counts
Two through Six, GEICO seeks to recover $68,000 in allegedly fraudulent charges.
i. Collateral Estoppel
First, Defendants contend that Plaintiffs’ claims in Counts Two through Six amounts to
an attempt to re-litigate issues that were or could have been raised in PIP arbitration, and are
therefore barred by the doctrine of collateral estoppel. Plaintiffs argue that none of the $68,000
that it seeks to recover was paid pursuant to an arbitration award but was paid voluntarily by
GEICO in reliance on Defendants’ fraudulent billing. This Court is satisfied that the application
of collateral estoppel cannot be decided now.
4

The Court also notes that the Declaratory Judgment Act, 28 U.S.C. § 2201(a) (“DJA”), gives
district courts “unique and substantial discretion” to exercise or decline to exercise jurisdiction
over declaratory judgment actions. See Wilton v. Seven Falls Co., 515 U.S. 277 (1995); Maxum
Indem. Co. v. Heyl & Patterson, Inc., No. 11-1111, 2011 U.S. Dist. LEXIS 102291 (W.D. Pa.
Sept. 12, 2011) (declining to exercise jurisdiction over declaratory judgment action where
insurance company sought declaration that insured not entitled to coverage, in connection with
an arbitration proceeding). Because the Court finds Burford abstention to be appropriate in this
case, it will not conduct an analysis of abstention under the DJA.
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Judge Chesler rejected the same argument in MLS: “[a]t this stage of the litigation, and
on the record presented, the Court cannot conclude that Defendant has met its burden of
establishing the affirmative defense of collateral estoppel, as to the IFPA claim or any other
claim for relief predicated on the already-paid PIP benefits, and

that “[t]o establish that

collateral estoppel bars any claim asserted by GEICO in this lawsuit, Defendant would, at a
minimum, have to present evidence that the fraud issues on which GEICO bases its claims were
actually
From the face of the Complaint, the Court cannot determine whether the claims were
arbitrated; whether the arbitrator’s decision was based on an actual finding concerning the
alleged fraudulent scheme, billing practice, medical necessity of treatment or any other issues
raised by Counts Two through Six. These issues call for a fact-intensive inquiry into the
arbitration record on a claim-by-claim basis, and Defendants, at this stage, have not presented
any evidence that would demonstrate that the fraud claims are barred by collateral estoppel.
ii. Plaintiffs Fail to Plead their Fraud Claims in Counts Two through Six
with Particularity
Counts Two through Six consist of claims against Defendants under the New Jersey
Insurance Fraud Prevention Act (“IFPA”) (Count Two), the civil RICO statute (Counts Three
and Four); for common law fraud (Count Five), and for unjust enrichment (Count Six).
Defendants contend that Plaintiffs fail to plead these fraud claims with particularity, as required
by Rule 9(b). See MLS, 2013 U.S. Dist. LEXIS 171983 (dismissing without prejudice GEICO’s
IFPA claim, RICO claims, common law fraud claim, and unjust enrichment claim for failing to
comply with Rule 9(b)). The Court agrees.
Rule 9(b) imposes a heightened pleading requirement concerning allegations of fraud
over and above that required by Rule 8(a). In re Toshiba Am. HD DVD Mktg. & Sales Practices

9

Litig., No. 08-939, 2009 WL 2940081, at *8 (D.N.J. Sept. 11, 2009) (citing Maniscalco v.
Brother Int’l Corp. (USA), 627 F. Supp. 2d 494, 500 (D.N.J. 2009)). Rule 9(b) states “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b). Plaintiffs may satisfy this requirement by pleading the
“‘date, place or time’ of the fraud, or through ‘alternative means of injecting precision and some
measure of substantiation into their allegations of fraud.’” Lum v. Bank of Am., 361 F.3d 217,
224 (3d Cir. 2004) (quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786,
791 (3d Cir.1984)). “Plaintiffs also must allege who made a misrepresentation to whom and the
general content of the misrepresentation.” Id.
1. IFPA (Count Two)
New Jersey enacted the IFPA in order “to confront aggressively the problem of insurance
Fraud . . . [by] requiring the restitution of fraudulently obtained insurance benefits.” N.J.S.A.
l7:33A-2. In relevant part, a person violates the IFPA if he or she:
(1) Presents or causes to be presented any written or oral statement
as part of, or support of or opposition to, a claim for payment or
other benefits pursuant to an insurance policy or the "Unsatisfied
Claim and Judgment Fund Law," P.L. 1952, c. 174 (C.39:6-61 et
seq.), knowing that the statement contains any false or misleading
information concerning any fact or thing material to the claim; or
(2) Prepares or makes any written or oral statement that is intended
to be presented to any insurance company, the Unsatisfied Claim
and Judgment Fund or any claimant thereof in connection with, or
in support of or opposition to any claim for payment or other
benefit pursuant to an insurance policy or the "Unsatisfied Claim
and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.),
knowing that the statement contains any false or misleading
information concerning any fact or thing material to the claim . . . .
N.J.S.A. 17:33A-4(a).

Furthermore, a person violates the IFPA if he “knowingly assists,

conspires with, or urges any person or practitioner to violate” any of the IFPA’s provisions, id.
l7:33A-4(b), or “if, due to the assistance, conspiracy or urging of any person or practitioner, he
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knowingly benefits, directly or indirectly, from the proceeds derived from a violation” of the
IFPA, id. l7:33A-4(c). “Any insurance company damaged as a result of a violation of any
provision of [the IFPA] may sue therefore in any court of competent jurisdiction to recover
compensatory damages,” id. 17:33A-7(a), and “shall recover treble damages if the court
determines that the defendant has engaged in a pattern of violating [the IFPA],” id. l7:33A-7(b).
Plaintiffs’ IFPA claim does not contain any claim-specific allegations of fraud, which
identifies with specificity the offending statement, why the statement is false or misleading, and
the basis for the claimant’s knowledge of its alleged falseness. There is no claim-by-claim
analysis as to the statements made in the billing forms and/or treatment records, or statements as
to why the diagnoses/CPT codes were false or exaggerated, and why the treatment/testing
administrated was medically unnecessary. GEICO purports to identify numerous examples of
fraudulent claims by Tri-County by attaching a chart to the Complaint as Exhibit 1. This chart,
however, merely provides the provider name, claim number, document type mailed, date
received, and amount billed. There is no explanation of how or why the claims are fraudulent.
These conclusory allegations are insufficient to place Defendants on notice of their precise
misconduct. The IFPA claim must be dismissed for failure to meet the pleading requirements of
Rule 9(b). The Court will, however, dismiss the claim without prejudice and with leave to replead, as the deficiencies could potentially be remedied by stating additional and claim-specific
factual allegations to support the IFPA claim.
2. RICO Claims—Counts Three and Four
In Counts Three and Four, Plaintiffs allege that Defendants violated 18 U.S.C. §§ 1962(c)
and (d). As to the RICO claims, 18 U.S.C. § 1962(c) provides, “[i]t shall be unlawful for any
person employed by or associated with any enterprise engaged in, or the activities of which

11

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.” Id. A properly pled violation of 18 U.S.C. § 1962(c) requires a plaintiff to allege
“(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” In re Ins.
Brokerage Antitrust Litig., 618 F.3d 300, 362 (3d Cir. 2010) (quoting Lum, 361 F.3d at 223).
“Racketeering activity,” also known as a predicate act, is defined in the statute at 18 U.S.C. §
1961(1), which lists various state and federal crimes. A “pattern” of racketeering activity
requires the commission of at least two acts of racketeering within a ten-year period. 18 U.S.C.
§ 1961(5).
In this case, the pattern of racketeering is alleged to consist of mail fraud, in violation of
18 U.S.C. § 1341. When the predicate acts alleged are mail fraud, a plaintiff must not only plead
the elements of mail fraud but must also satisfy the heightened Rule 9(b) pleading standard. See
Warden v. McLelland, 288 F.3d 105, 114 (3d Cir. 2002). To state a claim for mail fraud under
18 U.S.C. § 1341, a plaintiff must allege: “(1) the existence of a scheme to defraud; (2) the use of
the mails, whether the United States Postal Service or a private carrier, in furtherance of the
fraudulent scheme; and (3) culpable participation by the defendant (i.e., participation by the
defendant with specific intent to defraud). United States v. Dobson, 419 F.3d 231, 236–37 (3d
Cir.2005)).

Rule 9(b) further requires that “a party must state with particularity the

circumstances constituting fraud or mistake.”

Fed .R. Civ. P. 9(b).

The plaintiff may

accomplish this by “identify[ing] the purpose of the mailing within the defendant’s fraudulent
scheme and specify[ing] the fraudulent statement, the time, place, and speaker and content of the
alleged misrepresentation.” Annulli v. Panikkar, 200 F.3d 189, 200 n. 10 (3d Cir.1999),
overruled on other grounds by Rotella v. Wood, 528 U.S. 549 (2000)).

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In other words,

Plaintiffs’ pleading must contain the “who, what, when and where details of the alleged fraud.”
District 1199P Health & Welfare Plan v. Janssen, L.P., 784 F. Supp. 2d 508, 527 (D.N.J. 2011)
(quoting Allen Neurosurgical Assoc., Inc. v. Lehigh Valley Health Network, No. 99–4653, 2001
U.S. Dist. LEXIS 284, at *8, (E.D. Pa. Jan.18, 2001)).
Plaintiffs fail to plead the RICO claims with particularity.

The Court finds that the

RICO claims suffer from the same deficiencies as the IFPA claimThis is insufficient to meet the
pleading requirements of Rule 9(b), and Counts Three and Four therefore fail to state a claim.
These Counts are dismissed without prejudice and with leave to re-plead.
3. Common Law Fraud and Unjust Enrichment (Counts Five and
Six)
Under New Jersey law, the five elements of common-law fraud are: (1) a material
misrepresentation of a presenting existing or past fact; (2) knowledge or belief by the defendant
of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by
the other person; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582,
610 (1997) (citing Jewish Ctr. Of Sussex Cnty. v. Whale, 86 N.J. 619, 624-25 (1981)).
With respect to unjust enrichment, the doctrine “rests on the equitable principle that a
person shall not be allowed to enrich himself unjustly at the expense of another.” Assocs.
Comm. Corp. v. Wallia, 211 N.J. Super. 231, 243 (App. Div. 1986) (citing Callano v. Oakwood
Park Homes Corp., 91 N.J. Super. 105, 108 (App. Div. 1966)). “A cause of action for unjust
enrichment requires proof that ‘defendant[s] received a benefit and that retention of that benefit
without payment would be unjust.” County of Essex v. First Union Nat. Bank, 373 N.J. Super.
543, 549-50 (App. Div. 2004) (quoting VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554
(1994)), aff’d, remanded by, 186 N.J. 46 (2006).

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Plaintiffs’ common law fraud claim and unjust enrichment claim are predicated on the
same factual allegations pled in support of the IFPA and RICO claims. For the reasons discussed
above, the allegations are insufficient to meet the pleading requirements of Rule 9(b). Counts
Five and Six are dismissed without prejudice with the opportunity to re-plead.
IV.

CONCLUSION
For the reasons set forth above, the Court will dismiss Plaintiffs’ declaratory judgment

claim with prejudice. The remainder of the claims will be dismissed without prejudice for failure
to state a claim upon which relief may be granted. The Court will grant Plaintiffs leave to file an
Amended Complaint re-pleading the IFPA, RICO, common law fraud, and unjust enrichment
claims. The Court emphasizes, however, that any amended complaint must contain factual
allegations focused on individual PIP claims alleged to be fraudulent and not rely on broad
conclusory assertions as to the nature of Defendants’ alleged misconduct.

This opinion

supplements the reasoning set forth on the record on November 30, 2015.
Dated: December 4, 2015
/s Madeline Cox Arleo___________
HON. MADELINE COX ARLEO
UNITED STATES DISTRICT JUDGE

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