Allstate Ins. Co. v. Cmty. Med. Imaging

• Docket Number: 24-CV-01832 (NGG) (LKE)
• Decision Date: 28 August 2024
• Citation: Allstate Ins. Co. v. Cmty. Med. Imaging, 24-CV-01832 (NGG) (LKE) (E.D. N.Y. Aug 28, 2024)
• Parties: ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE FIRE & CASUALTY INSURANCE COMPANY, and ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiffs, v. COMMUNITY MEDICAL IMAGING, P.C., COMMUNITY MEDICAL IMAGING OF BROOKLYN, P.C., ANDREW J. MCDONNELL, M.D., GRIGORIY VAYNSHTEYN, a/k/a GREGORY VAYNSHTEYN, and GLOBAL STONE ASSOCIATES, INC., Defendants.
• Court: U.S. District Court — Eastern District of New York

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ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE FIRE & CASUALTY INSURANCE COMPANY, and ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiffs, v. COMMUNITY MEDICAL IMAGING, P.C., COMMUNITY MEDICAL IMAGING OF BROOKLYN, P.C., ANDREW J. MCDONNELL, M.D., GRIGORIY VAYNSHTEYN, a/k/a GREGORY VAYNSHTEYN, and GLOBAL STONE ASSOCIATES, INC., Defendants.

No. 24-CV-01832 (NGG) (LKE)

United States District Court, E.D. New York

August 28, 2024

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE

PlaintiffsAllstate Insurance Company, Allstate Indemnity CompanyAllstate 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 Gregory Vaynshteyn(“Vaynshteyn”), and Global Stone Associates, 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.(SeeCompl.(Dkt. 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.¶¶ 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.(Seeid. 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 no-fault 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.SeeN.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. 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 turn, the provider, rather than the Insured, files no-fault claims with the insurance company directly.(Compl. ¶¶ 96-97.)See also11 N.Y.C.R.R. § 65-3.11(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. § 65-3.16(a)(12);see alsoState Farm Mut. 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. ¶¶ 86-92);seeN.Y. Bus. Corp. Law§§ 1507,1508;New York Education Law § 6530(19);see alsoAllstate 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 kickbacks in exchange for patient referrals.(Compl. ¶¶ 94-109);see, e.g.,N.Y. Bus. Corp. Law§§ 1503,1507;New York Education Law § 6530;N.Y. Ins. Law § 5102(a).

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.See11 N.Y.C.R.R. § 65-3.8(a);see alsoMed. 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.SeeN.Y. Ins. Law § 5106(a).Claimants may dispute unpaid no-fault claims either in a state civil action or in an arbitration proceeding.See11 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(“AAA”), 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 Deck”)(Dkt. 24-3) ¶¶ 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.¶ 19);see11 N.Y.C.R.R. § 65-4.2(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.(FlahertyDecl. ¶ 19);see11 N.Y.C.R.R. § 65-4.2(c)(1).

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. ¶¶ 38-40,117(citing no-fault cases).)Defendant Vaynshteyn initially managed and controlled Professional Health Radiology, P.C.(“PHR”), CMI's predecessor.(Id.¶ 117.)“[O]n paper,” PHR was owned by non-partyStewart Bakst, M.D. but “control over PHR's operation and finances resided with Vaynshteyn.”(Id.¶ 118.)After PHR closed, Vaynshteyn arranged for McDonnell to purchase the assets of PHR.(Id.¶¶ 119-20.)McDonnell worked for a different imaging provider, non-partyProfessional 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.¶¶ 121-22.)

Thereafter, PHR and PCDefendant CMI entered into an asset sale agreement.(Id.¶ 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.¶¶ 125-26); (2) CMI never paid the $90,000 to PHR, (id.¶ 127); (3) CMI began operating out of PHR's facility two months prior to the completion of the CMI-PHR asset sale, (id.¶ 128);^[3](4) CMI was operated and controlled in the same manner as its predecessor, with Vaynshteyn managing the corporation without a formal hiring process, (id.¶ 129); and (5) CMI retained all of PHR's employees, and even continued using the same phone number.(Id.¶ 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.¶¶ 131-36.)

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.¶¶143-45.)CMIBK was located at 2102 Avenue Z, Brooldyn, New York (“Brooklyn Facility”).(Id.¶ 145.)Vaynshteyn had his personal business corporation, Global Stone, serve as CMIBKs landlord at the Brooklyn Facility.(Id.¶ 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.¶ 148).This agreement required CMIBK to pay Global Stone $50,000 a month for imaging facility space, medical imaging equipment, and maintenance services.(Id.¶ 149.)While an opinion on the fair market value of the CMIBK-Global Stone...