Allstate Insurance Company et al v. Community Medical Imaging, P.C. et al

Filing 27

MEMORANDUM & ORDER, Allstate's motion for 24 preliminary injunctive relief is GRANTED. All pending No-Fault collection arbitrations by Defendants CMI and CMIBK against Plaintiffs are stayed and Defendants are enjoined from filing any further No Fault collection arbitrations or lawsuits against Allstate pending resolution of the instant federal action. Allstate's request that the court waive their obligation to post security is also GRANTED. So Ordered by Judge Nicholas G. Garaufis on 8/28/2024. (TLH)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
AllSTATE INSURANCE COMPANY, AllSTATE
INDEMNTIY COMPANY, AllSTATE FIRE &
CASUALTY INSURANCE COMPANY, and
AllSTATE PROPERTY & CASUALTY
INSURANCE COMPANY,

MEMORANDUM & ORDER
24-CV-01832 (NGG) (LKE)

Plaintiffs,
-againstCOMMUNITY MEDICAL IMAGING, P.C.,
COMMUNITY MEDICAL IMAGING OF
BROOKLYN, P.C., ANDREW J. MCDONNELL,
M.D., GRIGORIY VAYNSHTEYN, a/k/a
GREGORYVAYNSHTEYN, and GLOBAL
STONE ASSOCIATES, INC.,
Defendants.
NICHOLAS G. GARAUFIS, United States District Judge.
Plaintiffs Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty Insurance Company, and
Allstate Fire and Casualty Insurance Company (collectively, "Allstate" or "Plaintiffs") bring this action against Community
Medical Imaging, P.C. ("CMI"), Community Medical Imaging of
Brooklyn, P.C. ("CMIBK") (collectively, "PC Defendants"), Andrew J. McDonnell, M.D. ("McDonnell"), Grigoriy Vaynshteyn
a/k/a GregoryVaynshteyn (''Vaynshteyn"), and Global Stone ABsociates, Inc. ("Global Stone") (collectively, "Defendants"),
alleging that Defendants defrauded Allstate in violation of the
Racketeering Influenced and Corrupt Organizations Act ("RICO,"
18 U.S.C. § 1962(c), (d)), by submitting hundreds of fraudulent
bills for no-fault insurance payments. (See Compl. (Dkt. 1) 'ff)

1

419-500.) Plaintiffs also allege common law fraud and unjust enrichment and seek a declaratory judgment as to all past, present,
or future bills. (Id. 'I'! 501-44.)
Before the court is Allstate's motion for a preliminary injunction
to stay all 99 pending no-fault insurance collection arbitrations
that PC Defendants commenced against Allstate. (See Not. of
Mot. (Dkt. 24-1); Mot. to Stay (Dkt. 24-2) at 1 & n.1.) Additionally, Plaintiffs request that this court waive their obligation to
post security for the injunction. (See id. at 23-24.) For the reasons
set forth below, Plaintiffs' motion for injunctive relief is
GRANTED and their request for oral argument is DENIED as
moot. Allstate's request that the court waive their obligation to
post security is also GRANTED.
I.

BACKGROUND 1
A.

New York's No-Fault Insurance Scheme

Under New York's Comprehensive Motor Vehicle Insurance Reparations Act (N.Y. Ins. Law§ 5101, et seq.), and the regulations
promulgated pursuant thereto (N.Y. Comp. Codes R. & Regs.
(''N.Y.C.R.R.") tit. 11 § 65, et seq.) (collectively, "the No-Fault
Laws"), an automobile insurer is required to provide certain nofault insurance benefits ("Personal Injury Protection" or "NoFault benefits") to the individuals that they insure ("Insureds").
No-Fault benefits cover up to $50,000 per eligible person for reasonable expenses incurred for necessary medical services
resulting from automobile accidents. See N.Y. Ins. Law §
5102(a) (1); 11 N.Y.C.R.R. § 65-1.1. This legislative scheme is designed to "ensure prompt compensation for losses incurred by
accident victims without regard to fault or negligence, to reduce
the burden on the courts and to provide substantial premium savings to New York motorists." State Farm Mut. Auto. Ins. Co. v.
The following background is taken from the allegations of the Complaint
and declarations submitted by Allstate in connection with this motion.
1

2

Herschel Kotkes, M.D., P.C., No. 22-CV-03611 (NRM) (RER),

2023 WL 4532460, at *1 (E.D.N.Y. July 13, 2023)). 2
Insureds may assign their No-Fault benefits to healthcare providers in exchange for services, and in tum, the provider, rather than
the Insured, files no-fault claims with the insurance company directly. (Compl. 'l'l 96-97.) See also 11 N.Y.C.R.R. § 65-3.ll(a)
(providing that the benefits may be paid only "directly to the applicant" or "upon assignment by the applicant . . . directly to
providers of health care services"). Providers are prohibited from
receiving No-Fault benefits, however, if they "fail[] to meet any
applicable New York State or local licensing requirement necessary to perform such healthcare services." 11 N.Y.C.R.R. § 653.16(a)(12); see also StateFannMut. Ins. Co. v. Mallela, 4 N.Y.3d
313, 320-21 (N.Y. 2005). This includes, inter alia, that unlicensed professionals, i.e., non-physicians, may not own or control
a medical professional corporation, serve as a director or officer
of said corporation, enter into any agreements with the corporation's shareholders, or receive shares or otherwise derive
economic benefit from the corporation's professional services.
(Compl. 'l'l 86-92); see N.Y. Bus. Corp. Law§§ 1507, 1508; New
York Education Law§ 6530(19); see also Allstate Ins. Co. v. Lyons,
843 F. Supp. 2d 358, 371 (E.D.N.Y. 2012). Licensed healthcare
services providers, including physicians, are also prohibited from
engaging in fraudulent activity, including ordering excessive
tests or treatment not warranted by the condition of the patient,
making material misrepresentations regarding a provider's eligibility to seek or collect payment under New York's No-Fault laws,
and/or accepting ldckbacks in exchange for patient referrals.
(Compl. 'l'l 94-109); see, e.g., N.Y. Bus. Corp. Law§§ 1503, 1507;
New York Education Law§ 6530; N.Y. Ins. Law§ 5102(a).

When quoting cases, and unless otherwise noted, all citations and quotation marks are omitted, and all alterations are adopted.

2

3

Moreover, insurers are only given 30 days to review and investigate claims before paying those claims to avoid risk of penalty for
denying or delaying a claim. See 11 N.Y.C.R.R. § 65-3.S(a); see
also Med. Soc'y of State v. Serio, 100 N.Y.2d 854,861 (N.Y. 2003).
After 30 days, interest begins to accrue at a rate of two percent
per month. See N.Y. Ins. Law§ 5106(a). Claimants may dispute
unpaid no-fault claims either in a state civil action or in an arbitration proceeding. See 11 N.Y.C.R.R. § 65-4.1, et seq.; N.Y. Ins.
Law§ 5106(a). In No-Fault collection actions, including arbitrations before the American Arbitration Association ("MA"), the
proceedings are conducted through "an expedited, simplified affair meant to work as quickly and efficiently as possible." Allstate
Ins. Co. v. Mun, 751 F.3d 94, 99 (2d Cir. 2014). And these proceedings typically have "limited opportunities for pre-hearing
discovery or examinations of witnesses during the hearing,"
which "can produce differing-and often inconsistent-results."
(Michael Flaherty Declaration ("Flaherty Deel.") (Dkt. 24-3) 'l'l
7-8.) Moreover, New York's No-Fault laws impose mandatory,
non-refundable fees upon insurers to help fund the costs of the
no-fault arbitration system. (Id. 'I 19); see 11 N.Y.C.R.R. § 654.2 (c) (1). These fees are apportioned to insurers based on the
number of collection arbitrations filed against them, meaning
that costs to the insurers increase with each new arbitration filed
regardless of whether the insurer prevails in the action. (Flaherty
Deel. 'I 19); see 11 N.Y.C.R.R. § 65-4.2(c)(l).

B. Operation of the Alleged Scheme
According to Allstate, the Defendants' fraudulent scheme began
with Grigoriy Vaynshteyn, an unlicensed person who has been
implicated in prior No-Fault schemes. (Compl. '1'138-40, 117 (citing no-fault cases).) Defendant Vaynshteyn initially managed
and controlled Professional Health Radiology, P.C. ("PHR"),
CMI's predecessor. (Id. 'f 117.) "[O]n paper," PHR was owned by
non-party Stewart Bakst, M.D. but "control over PHR's operation

4

and finances resided with Vaynshteyn." (Id. 'l 118.) After PHR
closed, Vaynshteyn arranged for McDonnell to purchase the assets of PHR. (Id. 'l'l 119-20.) McDonnell worked for a different
imaging provider, non-party Professional Health Imaging, P.C.
("PHI"), which was also allegedly controlled by unlicensed persons, including Vaynshteyn. (Id.) McDonnell purchased PHR's
assets without conducting meaningful due diligence, which included a failure to investigate PHR's litigation history and a
failure to obtain a fair market valuation of PHR. (Id. '!ff 121-22.)
Thereafter, PHR and PC Defendant CMI entered into an asset sale
agreement. (Id. ff 124.) Plaintiffs assert this agreement was a
"sham" for several reasons, including that (1) shortly after PHR
purchased assets, including diagnostic imaging equipment, from
Vaynshteyn for $360,000, it was then forced to sell the same
equipment to CMI for $90,000-a fraction of the price and significantly below market value, (id. 'l'l 125-26); (2) CMI never
paid the $90,000 to PHR, (id. 'I 127); (3) CMI began operating
out of PHR's facility two months prior to the completion of the
CMI-PHR asset sale, (id. 'l 128); 3 (4) CMI was operated and conn·olled in the same manner as its predecessor, with Vaynshteyn
managing the corporation without a formal hiring process, (id. ff
129); and (5) CMI retained all of PHR's employees, and even
continued using the same phone number. (Id. ff 130.) More to
the point, Allstate alleges that Vaynshteyn's personal accountant
handled CMI's bookkeeping, Vaynshteyn's sister handled CMI's
billing, and Vaynshteyn handled all other matters concerning
personnel, negotiated leases, management of other locations,
and even preparation of McDonnell for legal matters with insurance companies, amounting to his "total control" over CMI. (Id.
ff'l 131-36.)
CMI later moved from this facility in Rego Park, New York to a new facility located at 159-16 Union Turnpike, Fresh Meadows, New York ("Fresh
Meadows Facility''). (Id. '!Cf 117, 133.)
3

5

In late 2020, Vaynshteyn desired to "have a facility that was his
and grow his own business," which led to the incorporation of
the imaging facility, CMIBK, on or about May 18, 2021. (Id. 'l'l
143-45.) CMIBK was located at 2102 Avenue Z, Brooklyn, New
York ("Brooklyn Facility''). (Id. 'I 145.) Vaynshteyn had his personal business corporation, Global Stone, serve as CMIBK's
landlord at the Brooklyn Facility. (Id. 'I 146.) Global Stone and
CMIBK entered into a "medical diagnostic imaging facility, equipment and maintenance agreement," that ''was designed such that
Vaynshteyn could exert control over CMIBK through Global
Stone, and gain ownership of the professional fees paid to
CMIBK." (Id. 'I 148). This agreement required CMIBK to pay
Global Stone $50,000 a month for imaging facility space, medical
imaging equipment, and maintenance services. (Id. '1149.) While
an opinion on the fair market value of the CMIBK-Global Stone
agreement was sought, Allstate contends that the opinion was a
"sham" designed only to create the illusion of an arms-length
deal. (Id.'['[ 150-51.) Rather than being an arms-length deal, Allstate alleges that the marketing value was grossly overstated and
that only sources of information used in the opinion were that of
Vaynshteyn and Global Stone. (Id. '['[ 151-62.) Even assuming
the opinion was based on credible data and assumptions, Allstate
alleges that the entire process was "still a charade" as CMIBK began operating from the Brooklyn Facility location before having
a fair market valuation, let alone a lease to use the space. (Id. 'l'l
162-63.)
As to McDonnell-PC Defendants' only treating provider for the
relevant period-Allstate alleges that he concurrently worked
300 miles away as a full-time medical officer at the Veterans
Health Administration (''VHA") and at another imaging provider
where he interpreted approximately 40 film per day. (Id. '['[ 13738, 140, 142, 164.) He has additionally admitted that CMIBK was

6

managed by unlicensed persons in his absence, given McDonnell's VHA duties and other positions, and that Vaynshteyn's
Hmainjob" was manager of CMI. (Id. '! 167.)

C. Evidence of the Alleged Scheme
Allstate alleges that Defendants were engaged in a scheme to
submit fraudulent no-fault insurance claims through patient referrals to the PC Defendants. (See id. '!'! 178-203.) PC Defendants
relied on these referrals to submit fraudulent bills to Allstate for
medically unnecessary services, namely MRI services. (Id. fj'[ 20411.) Allstate notes that claimants were often referred to PC Defendants for early imaging without justification. (Id. '[ 205.)
Further, Allstate alleges that the Defendants manipulated submission of charges to circumvent No-Fault laws providing for
reductions in amounts charged for "Multiple Diagnostic Procedures." (Id. 'l 292.) 4 Specifically, Allstate submits that PC
Defendants would intentionally place seven-day buffers between
MRis to circumvent No-Fault laws triggering reductions in billing

Under New York's No-Fault laws, healthcare providers and insurers look
to the Workers' Compensation Fee Schedule ("Fee Schedule") to determine
the level of reimbursement payable on legitimate claims. (Id. IJIJ 105-07).
The Fee Schedule also contains "Ground Rules" for billing radiology services like an MRI. (Id. tJ 291.) Pursuant to Radiology Ground Rule 3 (A)(C), when 2 or more body parts are imaged in the same session, the provider must discount the procedure with the lesser fee by 50% (for 2
contiguous parts) or 25% (for 2 remote (e.g., bilateral) parts or for 3 or
more parts, whether contiguous or remote). (Id. tJ 293.) For services rendered on or after October 1, 2020, Ground Rule 3(F) was amended to state
that "Imaging studies taken within 7 days of the first x-ray/imaging studies
and related to the injury or problem necessitating the first x-ray/imaging
studies, and which could have been reasonably performed at one time,
shall be subject to Radiology Ground Rule 3's discounting requirements."
(Id. '! 295.) Courts have found that this discounting process reduces costs
to consumers and discourages fraud. (Id. '! 294 (citing Brentwood Pain &
Rehab. Servs., P.C. v. Allstate Ins. Co., 508 F. Supp. 2d 278, 294 (S.D.N.Y.
2007).)
4

7

claims. (See id. 'l'l 291-331.) Allstate also alleges that the PC Defendants created and submitted statutory claim forms (i.e., NF-3
bills) that falsely certified their eligibility to collect No-Fault payments under New York law, even though they knew they were
illegally operated and controlled and thus ineligible to collect NoFault payments. (Id. 'l 16.)
In support of their claims, Allstate has submitted evidence, in the
form of tables and excerpted transcripts from legal proceedings,
purporting to show the Defendants' fraudulent conduct. (See generally id.) For example, Allstate illustrates that CMIBK repeatedly
submitted NF-3 forms listing Stewart Bakst, the previous owner
of PHR, as its owner for claims submitted in 2022. (Id. 'l'l 17476.) Non-party Bakst, however, has been deceased since 2017five years before CMIBK submitted these forms. (Id. 'l 175.)
Allstate also provides "False Medical Billing Exemplars" that they
claim demonstrate PC Defendants' fraudulent billing practices.
(Id. 'l'l 212-90.) Additionally, two tables appended to Allstate's
Complaint identify 99 payments totaling $964,190.25 that Allstate has made to PC Defendants, and which Plaintiffs allege are
fraudulent and non-compensable No-Fault claims. (See CMI
Claims (Dkt. 1-5); CMIBK Claims (Dkt. 1-6) .)

D. Procedural History
Allstate commenced this action on March 12, 2024, alleging 12
causes of action, including violations of the RICO Act, 18 U.S.C.
§ 1962(c), (d), common law fraud, and unjust enrichment, and
seeking damages in the amount of $964,190.00. (Compl. 'l'l 418524.) The Complaint also seeks declaratory relief in the form of
judgments declaring that Defendants' "activities are unlawful,
and that Allstate has no obligation to pay the pending, previously
denied, and/or any future No-Fault claims[.]" (Id. 'l'l 525-44.)
On June 10, 2024, Allstate filed the instant fully briefed motion
for injunctive relief. (See Mot. to Stay; Defs.' Opp. to Mot. to Stay
C'Defs.' Opp.") (Dkt. 24-5); Reply (Dkt. 24-7).)

8

II. LEGAL STANDARD

A party seeking a preliminary injunction must "demonstrate (1)
irreparable harm absent injunctive relief; and (2) either a likelihood of success on the merits, or a serious question going to the
merits to make them a fair ground for trial, with a balance of
hardships tipping decidedly in the plaintiffs favor." See Allstate
Ins. Co. v. Elzanaty, 929 F. Supp. 2d 199, 217 (E.D.N.Y. 2013).
"Likelihood of success is not the focus at the early stages of a case
such as this, because any likelihood of success inquiry would be
premature. Instead, the Court looks to whether there is a serious
question going to the merits to make them a fair ground for trial."
Id.
III. DISCUSSION

The courts in this district are acutely familiar with these actions,
and have routinely granted injunctive relief for similar no-fault
insurance fraud schemes. See, e.g., Gov't Emps. Ins. Co. v. Q Pharmacy RX, Inc., No. 23-CV-9085 (ARR) (TAM), 2024 WL 3823491,
at *6 (E.D.N.Y. Aug. 15, 2024); Gov'tEmps. Ins. Co. v. Clarke, No.
23-CV-04605 (FB) (SJB), 2024 WL 2387788, at *3 (E.D.N.Y.
May 23, 2024); Allstate Ins. Co. v. Pierre, No. 23-CV-06572
(NGG) (LB), 2024 WL 85088, at *8 (E.D.N.Y. Jan. 8, 2024);
Kotkes, 2023 WL 4532460, at *13; Gov't Emps. Ins. Co. v. Binns,
No. 22-CV-1553 (NGG) (PK), 2022 WL 4539361, at *10
(E.D.N.Y. Sept. 28, 2022); Gov'tEmps. Ins. Co. v. Landow, No. 21CV-1440 (NGG) (RER), 2022 WL 939717, at *14 (E.D.N.Y. Mar.
29, 2022); Allstate Ins. Co. v. Metro Pain Specialists Pro. Corp., No.
21-CV-5586 (DG) (RER), 2022 WL 2467571, at *7 (E.D.N.Y.
June 2, 2022); Gov't Emps. Ins. Co. v. Relief Med., P.C., 554 F.
Supp. 3d 482, 506 (E.D.N.Y. 2021); Gov't Emps. Ins. Co. v.
Wallegood, Inc., No. 21-CV-1986 (PKC) (RLM) (Dkt. 36), at 21
(E.D.N.Y. July 16, 2021); Gov't Emps. Ins. Co. v. Beynin, No. 19CV-06118 (DG) (PK), 2021 WL 1146051, at *10 (E.D.N.Y. Mar.
25, 2021); Gov't Emps. Ins. Co. v. Big Apple Med. Equip., Inc., No.

9

20-CV-5786 (PKC) (JRC) (Dkt. 52), at 22 (E.D.N.Y. Mar. 25,
2021); Gov't Emps. Ins. Co. v. Wellmart RX, Inc., 435 F. Supp. 3d
443, 456 (E.D.N.Y. 2020); State Farm Mut. Auto. Ins. Co. v. Parisien, 352 F. Supp. 3d 215, 235 (E.D.N.Y. 2018). Upon review
of the facts in this case, the same result is warranted here.
A. Stay of All Pending and Future No-Fault Collection
Arbitrations

Allstate asks this court to issue a preliminary injunction (1) staying all No-Fault collection arbitrations filed against Allstate by PC
Defendants, and (2) enjoining PC Defendants (and their agents)
from filing additional No-Fault collection arbitrations or lawsuits
against Allstate until Allstate's declaratory judgment claims in
this action are resolved. (Mot. to Stay at 1-2.)
1.

Irreparable Harm

A party seeking preliminary injunctive relief must show that
"there is a continuing harm which cannot be adequately redressed by final relief on the merits and for which money
damages cannot provide adequate compensation." Kamerling v.
Massanari, 295 F.3d 206, 214 (2d Cir. 2002). The harm "must
be shown to be actual and imminent, not remote or speculative."
Id.
Allstate argues that it will suffer irreparable harm because (1)
there is a significant risk of inconsistent results in the arbitration
proceedings, (2) the continued arbitration of the Defendants' NoFault claims will waste resources, and (3) the potential for insufficient monetary compensation. (Mot. to Stay at 13, 16.)
The crux of Allstate's irreparable harm argument hinges on the
risk of inconsistent outcomes resulting from the resolution of PC
Defendants' pending and newly filed collection actions against
Allstate. (Mot. to Stay at 16.) At the time of this filing, there were
a total of 99 arbitrations pending between the parties-SO between CMI and Allstate, and 49 between CMIBK and Allstate. (Id.

10

at 14.) To the extent that inconsistent outcomes have occurred
and continue to occur, and are given preclusive effect, Allstate
argues it will be deprived of the opportunity to litigate significant
portions of its fraud complaint absent the injunction. (Id. at 15.)
In response to Defendants argument that Allstate has failed to
establish irreparable harm, Allstate points to several instances
where inconsistent outcomes have already occurred involving
these same claims billed by CMI and CMIBK. In relevant part,
Allstate notes that it has uprevailed in several prior arbitrations"
where evidence showed that CMI and CMIBK billed for medically
unnecessary MRis that were taken within days of the reported
accident. (Reply at 3; see also Ex. 1 to Reply ("Example Allstate
Arbitration Awards") (Dkt. 24-7) at ECF 13-27) .) In other cases,
however, arbitrators have ruled against Allstate, awarding Defendants with No-Fault payments and reaching opposite
conclusions about the "medical necessity of the MRis even when
faced with nearly identical facts." (Reply at 3; see also Exs. 2 and
3 to Reply ("Example Defs. Arbitration Awards") (0kt. 24-7) at
ECF 29-48).) Accordingly, these examples show that inconsistent
outcomes of arbitrations between Allstate and PC Defendants
have occurred, and are liltely to continue to occur.
Defendants attempt to challenge this argument by referencing
Gov't. Emps. Ins. Co. v. Mahmood, where this court denied
GEICO's request for injunctive relief, in part, because of the relatively small number of arbitrations involved. No. 23-CV-04388
(NGG) (TAM), 2024 WL 113958, at *6 (E.D.N.Y. Jan. 10, 2024).
(See Defs.' Opp. at 10.) However, that case is distinguishable
from the case at bar. In Mahmood, there were several factors the
court considered in denying the plaintiffs motion for injunctive
relief, including that many of the claims fell under New Jersey
law that differs from that of New York's No-Fault regime, and the
lad<. of evidence regarding the defendants' alleged fraud. 2024
WL 113958, at *7-8 (noting that in many no-fault insurance

11

fraud cases, there are allegations that defendants "practiced
without a license; unlicensed laypersons illegally controlled their
practices; or there were related criminal proceedings indicating
that defendants operated a fraudulent enterprise" that were not
present in Mahmood).
Here, however, Allstate has alleged that Defendant Vaynshteyn
controlled PC Defendants as an unlicensed layperson that was
unauthorized to practice medicine, (Compl. t'ft'f 2-3, 38, 42); that
the PC Defendants used referring providers also known to be involved in No-Fault schemes, (id. 'l 191 (citing cases)); and that
the Defendants have been implicated in other No-Fault schemes,
including actions both in this court and in New York state courts.
(See id. 'f'I 35, 40 (citing cases).) This evidence, as compared to
that considered in Mahmood, is substantial and weighs in favor
of injunctive relief.
Moreover, this court has previously opined that courts in this Circuit have yet to establish that irreparable harm turns on a precise
number of inconsistent judgments. See Gov't Emps. Ins. Co. v.
Barakat, 22-CV-07532 (NGG) (RML), 2024 WL 22769, at *6, n.5
(E.D.N.Y. Jan 2, 2024). Indeed, courts, including this one, have
found irreparable harm where there were fewer than 99 pending
cases. See) e.g.,, id. at *5-6 (finding that 43 pending no-fault arbitration actions risked inconsistent judgments); Pierre, 2024 WL
85088, at *5-6 (finding that 40 pending no-fault arbitration actions created a risk of inconsistent outcomes between the
collection actions and the declaratory judgment at issue); Relief
Med., P.C., 554 F. Supp. 3d at 502-03 (finding that 39 pending
arbitrations risked inconsistent judgments).
While it is true that Allstate is a "billion dollar company" as compared to the small PC Defendants here, that is not relevant to the
court's assessment of Allstate's potential irreparable harm. (See
Defs.' Opp. at 10.) As Defendants correctly note, Allstate does not

12

argue that its potential for financial harm is the result of Defendants' insolvency, but Allstate does argue that continued No-Fault
arbitrations may cause, to an extent, irrecoverable financial loss.
(Id.) Allstate alleges that PC Defendants "have no right to participate in the No-fault system," and thus for every mandatory, nonrecoverable fee Allstate must pay whenever the Defendants file
an arbitration with the AM, and the attorney's fees Allstate must
pay if Defendants prevail, that is evidence of irreparable harm
absent a stay. (Mot. to Stay at 17.) Even so, the "[m]ere litigation
expense, even substantial and unrecoupable cost, does not constitute irreparable injury." Gov't. Emps. Ins. Co. v. Mayzenberg, 17CV-2802 (ILG), 2018 WL 6031156, at *5 (E.D.N.Y. Nov. 16,
2018).
Here, Allstate has focused its motion for injunctive relief on the
risk of inconsistent rulings, rather than solely focusing on unrecoverable damages or wasted time and resources spent on
arbitration. (See Mot. to Stay at 13-17.) Taking these harms together, the court concludes that Allstate has sufficiently alleged
irreparable harm.
2.

Serious Question Going to the Merits

"District courts in the Second Circuit have generally found that
likelihood of success is not the focus at the early stages of a case
involving an alleged scheme to defraud an insurer of assigned
no-fault benefits because any likelihood of success inquiry would
be premature." Relief Med., P.C., 554 F. Supp. 3d at 498. Instead,
"the Court looks to whether there is a serious question going to
the merits to make them a fair ground for trial." Elzanaty, 929 F.
Supp. 2d at 217; Kotkes, 2023 WL 4532460, at *10. "A serious
question can be found when a plaintiff has adequately detailed a
complicated scheme of alleged fraud activity, and its request for
relief does not rest on mere hypotheticals." Metro Pain Specialists,
2022 WL 2467571, at *5.

13

The Complaint and exhibits attached thereto provide a detailed
review of the alleged No-Fault scheme sufficient to establish that
there is a serious question going to the merits. Indeed, the Complaint alleges (1) that McDonnell, despite being the only licensed
owner of the entities, had no real control over PC Defendants due
to his general absence from the facilities, (Compl. '!If 136-42,
164-65); (2) that non-physician Vaynshteyn unlawfully controlled CMI and CMIBK, as well as other facilities, (id. '!'I 11736); (3) that CMIBK entered into a one-sided agreement with
Global Stone (Vaynshteyn's company) for its facility and equipment needs and used a sham market value opinion to aid in that
agreement, (id. 'f'f 148-63); and (4) in operating the entities, Defendants falsified information, including using Stewart Bakst's
name and credentials to submit medical claims long after Bakst's
death, (id. '!'I 170-77), made unlawful patient referrals, (id. Cf'[
178-203), and incurred fraudulent billing for unnecessary and
excessive MRI services yielding hundreds of false claims submitted to Allstate in violation of various New York state licensing
laws. (Id. '!If 204-331, 418.)
The evidence presented is a far cry from "mere hypotheticals"
and is more than sufficient to conclude that Allstate has raised
serious questions going to the merits of its declaratmy judgment
claim. See Parisien, 352 F. Supp. 3d at 234.
3.

Balance of Hardships

As the court finds that there are "serious question[s] going to the
merits," it must further inquire as to whether that there is a ''balance of hardships tipping decidedly" in Allstate's favor. Citigroup
Glob. Markets, Inc. v. VCG Special Opportunities Master Fund Ltd.,
598 F.3d 30, 35 (2d Cir. 2010). The court "need not pause on
this question for long, as the irreparable harm factors discussed
above also tip the equities squarely in [Plaintiffs'] favor." Parisien,
352 F. Supp. 3d at 234.

14

/

It is more efficient and will benefit both parties to adjudicate all
pending claims in a single action. See Elzanaty, 929 F. Supp. 2d
at 222 (noting that "all parties will benefit from having the issue
of fraudulent incorporation determined in one action"). Moreover, if the preliminary injunction is granted and Allstate fails to
prove its claims, "then, at worst, [Defendants'] recovery of the
no-fault benefits to which they are entitled will be delayed but
will come with accrued interest." State Farm Mut. Auto. Ins. Co.
v. Eclipse Med. Imaging, P.C., 700 F. Supp. 3d 4, 18 (E.D.N.Y.
2023). The court finds that the balance of hardships squarely in
Allstate's favor. 5
Accordingly, Allstate's motion to stay pending and future no-fault
arbitration proceedings is GRANTED.
B. Authority to Enjoin Future No-Fault Collection
Lawsuits

In addition to the arbitration proceedings, Allstate seeks a stay
enjoining Defendants from commencing any No-Fault insurance
collection lawsuits against Plaintiffs pending the disposition of its
declaratory judgment claim in this action. (Mot. to Stay at 1213.)

The Anti-Injunction Act "bars a federal court from enjoining a
proceeding in state court unless that action is expressly authorized by Act of Congress, or where necessary in aid of its
jurisdiction, or to protect or effectuate its judgments." Relief Med.,

The court notes-and rejects-Defendants' argument that injunctive relief would violate CMI's First Amendment rights such that the All-Writs Act
must be invoked. (See Defs.' Opp. at 30-31.) Allstate's requested relief is
only temporary, and the All-Writs Act provides for the issuance of injunctions where, as here, it is "necessary to prevent a state court from so
interfering with a federal court's consideration or disposition of a case as
to seriously impair the federal court's flexibility and authority to decide
that case.'' Parisien, 352 F. Supp. 3d at 225.
5

15

P.C.J 554 F. Supp. 3d at 495 (quoting Doc.Js Assocs.J LLC v. Tripathi, 794F. Appx 91, 93 (2d Cir. 2019)). While the Anti-Injunction
Act may limit federal district courts' authority to enjoin pending
state court proceedings, Mayzenberg, 2018 WL 6031156, at *7
(citing 28 U.S.C. § 2283), there is no dispute that the Act does
not "prevent a federal court from restraining a party from instituting future state proceedings." Relief Med., P.C., 554 F. Supp.
3d at 496 (emphasis added) (collecting cases). Accordingly,
courts look to the "traditional standards" for such injunctive relief. Mayzenberg, 2018 WL 6031156, at *9.
For the reasons already discussed, Allstate's motion to enjoin future state court collection lawsuits by Defendants pending
disposition of the declaratory judgment action is therefore
GRANTED.
C. Security for the Injunction

Allstate also asks the court to waive the security requirement of
Fed. R. Civ. P. 65(c), arguing that a bond is not needed here and
that it is in the public interest to issue the requested injunction.
(Mot. to Stay at 23-24.)
Rule 65(c) provides that "the court may issue a preliminary injunction or a temporary restraining order only if the movant gives
security in an amount that the court considers proper to pay the
costs and damages sustained by any party found to have been
wrongfully enjoined or restrained." Further, an exception to the
bond requirement is available in cases pertaining to New York's
no-fault insurance laws, and fraud against the healthcare system
generally, implicate the "enforcement of public interests," an exception to Rule 65(c)'s requirement of security. See Mayzenberg,
2018 WL 6031156, at *10.
Allstate relies onMayzenbergwhere the court explained that New
York's No-Fault insurance statutes were "designed to protect accident victims regardless of fault by enabling them to obtain

16

necessary medical attention without concern of the ability to pay.
It is of course in the public's interest to enforce those laws." Id.
Additionally, Allstate argues that the issuance of injunction does
not endanger the public interest because a stay Order will "stop
ineligible providers from participating in the No-Fault system."
(Mot. to Stay at 24.)
Defendants, on the other hand, argue that issuing a stay would
infringe upon the Defendants' First Amendment rights, and thus
harm the public interest, as well clog the federal courts whereas
it is in the public's interest to encourage resolution of these claims
in arbitration and state courts. (See Defs.' Opp. at 31-32.) 6
The court has already rejected Defendants' First Amendment argument, see supra note 7, and finds their secondary argument
without merit. Allstate undoubtedly has the ability to pay any
and all eventual No-Fault awards, (see Mot. to Stay at 23), and
this court has already determined that a preliminary injunction
will not result in prejudice to the Defendants. Barakat, 2024 WL
22769, at *8. This court is well equipped to solve these claims
and finds an injunction serves the public interest.
The court therefore WANES Rule 65(c)'s security requirement.
Defendants' additional requests for a consolidated hearing and
an expedited trial are DENIED. See, e.g., Clarke, 2024 WL
2387788, at *3.
IV. CONCLUSION

For the reasons stated above, Allstate's motion for preliminary
injunctive relief is GRANTED. All pending No-Fault collection arbitrations by Defendants CMI and CMIBK against Plaintiffs are
6 The court notes it need not consider the public interest in this action involving private parties, see Kelly v. Honeywell Int'l, Inc., 933 F.3d 173, 18384 (2d Cir. 2019), but given the Defendants' assertion that the public interest will be harmed in the event of a stay, the court briefly considers the
argument here, in the context of the security requirement.

17

stayed and Defendants are enjoined from filing any further NoFault collection arbitrations or lawsuits against Allstate pending
resolution of the instant federal action. Allstate's request that the
court waive their obligation to post security is also GRANTED.
SO ORDERED.

Dated:

BrooklynJ New York
August ~2, 2024
s/Nicholas G. Garaufis
NICHOLAS G. GARAUFIW
United States District Judge

18