Government Employees Insurance Co. et al v. Threeonix Supply Corp. et al

Filing 125

ORDER ADOPTING IN PART AND MODIFYING IN PART REPORT AND RECOMMENDATIONS. For the reasons set forth in the attached Memorandum and Order, the Report and Recommendation issued by Magistrate Judge Pohorelsky on March 6, 2013 122 is adopted in part and modified in part. The court finds that judgment should be entered in favor of plaintiffs and against defendants as follows: (1) plaintiffs are awarded a total of $146,720.28 in damages on their RICO, unjust enrichment, and fraud claims against defendants. Defendants Leica and Branfenbrener are jointly and severally liable in the amount of $48,906.76, and defendant Branfenbrener is individually liable in the amount of $97,813.52; and (2) plaintiffs' request for a declarator y judgment that plaintiffs are not obligated to pay the outstanding unpaid claims to defendant Leica in the amount of $392,065.84 is denied without prejudice to renew. Plaintiffs shall file a status letter via ECF no later than April 5, 2013 in dicating whether they intend to re-file their motion for a declaratory judgment or withdraw the claim for a declaratory judgment. The Clerk of the Court is respectfully requested to enter partial judgment in accordance with this Order. Because plain tiffs may renew their request for a declaratory judgment, the Clerk of the Court is respectfully instructed not close this case. Plaintiffs' counsel is directed to serve a copy of this Order upon defendants Leica and Branfenbrener and to file proof of service on the docket no later than April 5, 2013.Ordered by Judge Kiyo A. Matsumoto on 3/30/2013. (Kelley, Jamuna)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------- X
GOVERNMENT EMPLOYEES INSURANCE CO.,
GEICO INDEMNITY CO., GEICO GENERAL
INSURANCE COMPANY, and GEICO CASUALTY
COMPANY,
Plaintiffs,
-against-

NOT FOR PUBLICATION
ORDER ADOPTING IN
PART AND MODIFYING IN
PART REPORT
AND RECOMMENDATION
11-CV-3781 (KAM)(VVP)

LEICA SUPPLY, INC. and GRIGORY
BRANFENBRENER,
Defendants.
-------------------------------------X
MATSUMOTO, United States District Judge:
On July 26, 2011, Government Employees Insurance
Company, GEICO Indemnity Company, GEICO General Insurance
Company, and GEICO Casualty Company (collectively, “plaintiffs”)
commenced the instant action against remaining defendants Leica
Supply, Inc. (“Leica”) and Grigory Branfenbrener
(“Branfenbrener,” and collectively with Leica, “defendants”) 1
asserting claims pursuant to the Racketeer Influenced and
Corrupt Organizations statute (“RICO”) and New York common law
for fraud and unjust enrichment, seeking recovery of funds that
defendants fraudulently obtained from plaintiffs by submitting
false claims for payment for durable medical equipment and
1

Subsequent to the commencement of this action, plaintiffs
dismissed their claims against all other named defendants in this action
pursuant to settlements or voluntary dismissals.

orthotic devices.

(See generally ECF No. 1, Complaint dated

7/26/11 (“Compl.”).)

Plaintiffs further seek a declaratory

judgment that defendant Leica has no right to receive payment
for any pending claims submitted by Leica to plaintiffs.
¶ 152(A).)

(Id.

Plaintiffs properly served a copy of the Summons and

Complaint upon defendants.

(ECF No. 8, Executed Summons as to

Leica; ECF No. 57, Executed Summons as to Branfenbrener.)
Defendants failed to answer or otherwise respond to the
Complaint, despite having received proper service, notice, and
an opportunity to respond.
Accordingly, at plaintiffs’ request, the Clerk of the
Court issued an entry of default against defendant Leica on
November 1, 2011 and against defendant Branfenbrener on December
19, 2011.

(ECF No. 30, Request for Certificate of Default

against Leica; ECF No. 38, Clerk’s Entry of Default against
Leica; ECF No. 70, Request for Certificate of Default against
Branfenbrener; ECF No. 71, Clerk’s Entry of Default against
Branfenbrener.)

On April 3, 2012, plaintiffs filed a motion for

entry of default judgment against defendant Branfenbrener.

(ECF

No. 106, Motion for Default Judgment against Branfenbrener; ECF
No. 106, Exh. 8, Certificate of Service of Default Motion on
Branfenbrener.)

In addition, on April 4, 2012, plaintiffs filed

a motion for entry of default judgment against defendant Leica.

2

(ECF No. 109, Motion for Default Judgment against Leica; ECF No.
109, Exh. 8, Affidavit of Service of Default Motion on Leica.)
By Order dated July 30, 2012, the court referred
plaintiffs’ default motions against defendants to Magistrate
Judge Viktor V. Pohorelsky for a Report and Recommendation.
(Order Referring Motions dated 7/30/12.)

On March 6, 2013,

Judge Pohorelsky issued a Report and Recommendation recommending
that the court grant plaintiffs’ motions for entry of default
judgment against defendants and award plaintiffs a total of
$146,720.20, for which Leica and Branfenbrener are jointly and
severally liable in the amount of $48,906.76, and for which
Branfenbrener is individually liable in the amount of
$97,813.52.

(See ECF No. 122, Report and Recommendation dated

3/6/13 (“R&R”) at 1, 15.)

Judge Pohorelsky further recommended

that the court enter a declaratory judgment “stating that
plaintiffs are not obligated to pay any of the outstanding
claims in the amount of $392,065.84 submitted by Leica.”

(Id.

at 15.)
Judge Pohorelsky directed plaintiff to serve a copy of
the R&R on defendants and to file proof of service with the
court.

(Id. at 16.)

On March 8, 2013, plaintiff properly

served the R&R on defendants.

(ECF Nos. 123-124, Certificates

of Service of R&R on Defendants.)

3

In his R&R, Judge Pohorelsky

further notified the parties of the right to file written
objections within fourteen days of receipt of the R&R.
15.)

(R&R at

To date, neither party has filed an objection to the R&R,

and the time to do so has since passed.
DISCUSSION
In reviewing a Report and Recommendation, a district
“court may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge.”
U.S.C. § 636(b)(1).

28

Where a party makes specific and timely

objections to a magistrate judge’s findings or recommendations,
the district court must apply a de novo standard of review to
the portions of the R&R to which the objection is made.

Mazzei

v. Abbott Labs. & Co., No. 10-CV-1011, 2012 WL 1101776, at *1
(E.D.N.Y. Apr. 2, 2012) (citing Fed. R. Civ. P. 72(b)(3); Arista
Records, LLC v. Doe 3, 604 F.3d 110, 116 (2d Cir. 2010)); see
also 28 U.S.C. § 636(b)(1).
Where no proper objection to a Report and
Recommendation has been timely made, the district court “‘need
only satisfy itself that that there is no clear error on the
face of the record.’”

Jarvis v. N. Am. Globex Fund, L.P., 823

F. Supp. 2d 161, 163 (E.D.N.Y. 2011) (quoting Wilds v. United
Parcel Servs., 262 F. Supp. 2d 163, 169 (S.D.N.Y. 2003)); see
also Urena v. New York, 160 F. Supp. 2d 606, 609-10 (S.D.N.Y.

4

2001).

Moreover, where “the objecting party makes only

conclusory or general objections, or simply reiterates the
original arguments, the Court will review the report and
recommendation strictly for clear error.”

Zaretsky v. Maxi-

Aids, Inc., No. 10-CV-3771, 2012 WL 2345181, at *1 (E.D.N.Y.
June 18, 2012) (internal quotation marks omitted); see also
Soley v. Wasserman, 823 F. Supp. 2d 221, 228 (S.D.N.Y. 2011).
Upon a careful review of the record and Judge
Pohorelsky’s well-reasoned R&R, the court hereby adopts in part
and modifies in part the R&R.

The court adopts Judge

Pohorelsky’s R&R as the opinion of the court in all respects,
except for his recommendation that plaintiffs’ request for a
declaratory judgment be granted. 2

(See R&R at 13-15.)

Judge Pohorelsky recommends that the court grant
plaintiffs’ motion for a declaratory judgment that plaintiffs
are not obligated to pay the outstanding unpaid claims to
defendant Leica in the amount of $392,065.84.

(R&R at 13-15.)

As Judge Pohorelsky notes, “[a]ccording to the Declaratory
Judgment Act, a court may exercise its discretion to issue a
declaratory judgment . . . in cases where the party seeking the
2

The court notes that the calculation of treble damages awarded
under RICO against defendant Branfenbrener, as set forth in Judge
Pohorelsky’s R&R, requires minor adjustment due to a minor mathematical
error. (See R&R at 13, 15.) Upon independent calculation, the court finds
that plaintiffs are entitled to treble damages in the amount of $146,720.28,
rather than $146,720.20.

5

declaratory judgment can demonstrate the existence of an actual
case or controversy.”

(R&R at 13-14 (citing 28 U.S.C. §

2201(a); Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83,
95 (1993)).)

The Second Circuit has held that a court

considering the exercise of its authority under the Declaratory
Judgment Act must consider “(1) whether the judgment will serve
a useful purpose in clarifying or settling the legal issues
involved and (2) whether a judgment would finalize the
controversy and offer relief from uncertainty.”

Niagara Mohawk

Power Corp. v. Hudson River-Black River Regulating Dist., 673
F.3d 84, 105 (2d Cir. 2012) (citation omitted).

The Second

Circuit, however, has also noted with approval that other
circuits have added to these considerations “(1) whether the
proposed remedy is being used merely for ‘procedural fencing’ or
a ‘race to res judicata’; (2) whether the use of a declaratory
judgment would increase friction between sovereign legal systems
or improperly encroach on the domain of a state or foreign
court; and (3) whether there is a better or more effective
remedy.”

Chevron Corp. v. Camacho Naranjo, 667 F.3d 232, 245

(2d Cir. 2012).

Lastly, the United States Supreme Court has

cautioned that
Ordinarily it would be uneconomical as well
as vexatious for a federal court to proceed
in a declaratory judgment suit where another

6

suit is pending in a state court presenting
the same issues, not governed by federal
law, between the same parties. Gratuitous
interference with the orderly and
comprehensive disposition of a state court
litigation should be avoided.
Brillhart v. Excess Ins. Co., 316 U.S. 491, 495 (1942); see also
Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995); Travelers
Ins. Co. v. Carpenter, 411 F.3d 323, 338 (2d Cir. 2005) (“The
Brillhart abstention doctrine allows a district court in its
discretion to abstain from rendering a declaratory judgment when
the questions in controversy between the parties to the federal
suit . . . can better be settled in the proceeding pending in
the state court.” (internal quotations omitted)).
In this case, many of the unpaid claims in dispute
between plaintiffs and LEICA appear to be subject to pending
litigation.

As established by the review, analysis, and

evaluation of GEICO Manager Sunil Khandpur, the amount of unpaid
claims that remain active and in dispute between plaintiffs and
Leica is $392,065.84.

(See ECF No. 109, Exh. C, Declaration of

Sunil Khandpur (“Khandpur Decl.”) ¶ 8.)

In his Declaration, Mr.

Khandpur avers that his computation of the amount of unpaid
claims is based, in part, on GEICO-generated spreadsheets
“showing the total number of active lawsuits with the total
amount in dispute for all pending actions.”

7

(Id. ¶ 5(b).)

The

spreadsheets referenced by Mr. Khandpur are attached to his
Declaration as Exhibits C-1 and C-2.

(ECF No. 109, Exh. C-1,

GEICO-Generated Spreadsheet C-1 Setting Forth Unpaid Leica
Claims (“Spreadsheet C-1”); ECF No. 109, Exh. C-2, GEICOGenerated Spreadsheet C-2 Describing Unpaid Leica Claims
(“Spreadsheet C-2”).)

Mr. Khandpur explains that Spreadsheet C-

1 “contains GEICO’s total exposure for Leica claims, which is
comprised of the total amount in litigation, combined with the
total amount received in billing, but not yet in suit or paid.”
(Khandpur Decl. ¶ 5(b).)

Moreover, as set forth in Spreadsheet

C-1, $282,190.87 of the $392,065,84 in unpaid claims is
categorized as “Total Litigation Ad Damnum.”

(Spreadsheet C-1.)

Spreadsheet C-1 further indicates that there are 133 total suits
pending between Leica and plaintiffs.

(Id.)

The record before the court does not specify whether
any of the pending suits described in Spreadsheet C-1 are state
or federal court suits, whether those suits predate the instant
action, the procedural posture of the suits, or whether those
suits involve questions of state or federal law.

Without

further clarification from plaintiffs, the court finds that the
pendency of 133 lawsuits presents the palpable risk that the
issuance of a declaratory judgment by this court would aid
plaintiffs in “procedural fencing” or a “race to res judicata,”

8

or would “encroach on the domain” of any state court tribunals
adjudicating any pending suits between plaintiffs and Leica.
Chevron Corp., 667 F.3d at 245.
Accordingly, in an abundance of caution, the court
denies plaintiffs’ motion for a declaratory judgment without
prejudice to renew upon a more detailed description of the
status, nature, and procedural posture of the pending actions
referenced in Mr. Khandpur’s Declaration and Spreadsheet C-1. 3
CONCLUSION
For the foregoing reasons, the court finds that
judgment should be entered in favor of plaintiffs and against
defendants as follows:
(1)

plaintiffs are awarded a total of $146,720.28 in
damages on their RICO, unjust enrichment, and fraud
claims against defendants.

Defendants Leica and

Branfenbrener are jointly and severally liable in the

3

The court notes that this approach is consistent with the result
reached in a recent case before this court involving the same GIECO
plaintiffs seeking a default judgment in the instant action. See Gov’t Emps.
Ins. Co. v. Li-Elle Serv., Inc., No. 12-CV-2157, 2013 WL 829274, at *3
(E.D.N.Y. Mar. 6, 2013). The court acknowledges that, in Li-Elle, the record
demonstrated that there were “several dozen lawsuits filed by Li-Elle against
plaintiffs in New York Civil Court, Bronx, New York, Kings, and Queens
Counties,” many of which predated the commencement of the federal action and
involved questions of New York state contract law. Id. Although the record
in this case provides no such clarity as to the 133 pending lawsuits between
plaintiffs and Leica referenced in Spreadsheet C-1, the court finds that
denial without prejudice is appropriate in order to ensure that this court
does not aid plaintiffs in any potential procedural fencing and does not
encroach upon the domain of any other court adjudicating pending suits
between plaintiffs and Leica.

9

amount of $48,906.76, and defendant Branfenbrener is
individually liable in the amount of $97,813.52; 4 and
(2)

plaintiffs’ request for a declaratory judgment that
plaintiffs are not obligated to pay the outstanding
unpaid claims to defendant Leica in the amount of
$392,065.84 is denied without prejudice to renew.
Plaintiffs shall file a status letter via ECF no later
than April 5, 2013 indicating whether they intend to
re-file their motion for a declaratory judgment or
withdraw the claim for a declaratory judgment.
The Clerk of the Court is respectfully requested to

enter partial judgment in accordance with this Order.

Because

plaintiffs may renew their request for a declaratory judgment,
the Clerk of the Court is respectfully instructed not close this
case.

Plaintiffs’ counsel is directed to serve a copy of this

Order upon defendants Leica and Branfenbrener and to file proof
of service on the docket no later than April 5, 2013.
SO ORDERED.
Dated:

March 30, 2013
Brooklyn, New York
_______ ____/s/____________
Kiyo A. Matsumoto
United States District Judge
4

As set forth in Judge Pohorelsky’s R&R, plaintiff asserts RICO
claims only against Branfenbrener. (R&R at 4, 10, 13.) Thus, defendant
Branfenbrener alone is liable for the treble damages awarded under RICO.

10