Allstate Ins. Co. v. Elzanaty, No. 11–cv–3862 (ADS)(ARL).

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Writing for the CourtSPATT
Citation916 F.Supp.2d 273
PartiesALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, and Allstate Property & Casualty Insurance Company, Plaintiffs, v. Hisham ELZANATY, Hisham Ahmed Elsherbiny, Alan Goldenberg, Can Medical, P.C., and Uptown Health Care Management, Inc., d/b/a East Tremont Medical Center, New York Neuro & Rehab Center, and Jerome Family Health Center, Defendants.
Decision Date07 January 2013
Docket NumberNo. 11–cv–3862 (ADS)(ARL).

916 F.Supp.2d 273

ALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, and Allstate Property & Casualty Insurance Company, Plaintiffs,
v.
Hisham ELZANATY, Hisham Ahmed Elsherbiny, Alan Goldenberg, Can Medical, P.C., and Uptown Health Care Management, Inc., d/b/a East Tremont Medical Center, New York Neuro & Rehab Center, and Jerome Family Health Center, Defendants.

No. 11–cv–3862 (ADS)(ARL).

United States District Court,
E.D. New York.

Jan. 7, 2013.


[916 F.Supp.2d 280]


The Law Offices of Robert P. Macchia & Associates, by Robert Phillip Macchia, Esq., Mehmet F. Gokce, Esq., of Counsel, Mineola, NY, Smith & Brink, P.C., by Michael W. Whitcher, Esq., Nathan A. Tilden, Esq., Richard D. King, Esq., of Counsel, Garden City, NY, for the Plaintiffs.

Blodnick, Conroy, Fazio & Diglio, P.C., by Edward K. Blodnick, Esq., Steven R. Talan, Esq., Thomas R. Fazio, Esq., of Counsel, Garden City, NY, for the Defendants Hisham Elzanaty, Hosam Ahmend El–Sherbiny, Alan Goldenberg, and Uptown Health Care Management, Inc.


MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

Presently pending before the Court is: (1) a second motion filed by Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property & Casualty Insurance Company (“Allstate” or “the Plaintiffs”) to dismiss and stay the Defendants' counterclaims (DE 96–97); (2) a motion to dismiss and/or abstain filed by Hisham Elzanaty, Hisham Ahmed Elsherbiny, Alan Goldenberg, CAN Medical, P.C., and Uptown Health Care Management, Inc., d/b/a East Tremont Medical Center, New York Neuro & Rehab Center, and Jerome Family Health Center (“the Defendants”) (DE 162–65); (3) a motion to amend filed by Allstate (DE 190–91); and (4) a motion to compel arbitration filed by the Defendants (DE 223–24). The parties have created a complicated patchwork of litigation in every avenue possible, including arbitration, state, and federal proceedings. Through this complex web of motion practice, the parties seek this Court's assistance in sorting out the confusion they have initiated. Due to the recent filing of a motion to compel arbitration by the Defendants on January 2, 2013, the Court necessarily must reserve decision on Allstate's motion to dismiss and stay and the Defendants' motion to compel arbitration until the latter motion is fully briefed. However, this Order will address the other two pending motions.

[916 F.Supp.2d 281]

I. BACKGROUND

On August 11, 2011, the Plaintiffs filed the instant case against the Defendants, seeking damages under the federal RICO statute in connection with the Defendants' creation and perpetration of an insurance fraud scheme. The Plaintiffs also seek declaratory relief and damages under state law, including claims for: (1) common law fraud; (2) unjust enrichment; and (3) unfair and deceptive business practices in violation of N.Y. Gen. Bus. Law § 349. In short, Allstate alleges that the Defendant Hisham Elzanaty, while working in concert with coconspirator licensed medical professional Jadwiga Pawlowski M.D.; their fraudulently incorporated medical professional services corporations—JP Medical, P.C., Accurate Medical, P.C., Nolia Medical, P.C., and Quality Medical Healthcare Provider P.C. (the “Pawlowski Defendants”); and co-conspirator management company, Uptown, d/b/a East Tremont Medical Center, New York Neuro & Rehab Center, and Jerome Family Health Center (“Uptown”); defrauded the Plaintiffs of millions of dollars over the course of many years. The Complaint states that the Defendants accomplished their fraudulent scheme by creating fictitious medical facilities that held themselves out to Allstate as legitimately incorporated medical entities under New York State law, so that they could obtain payments from Allstate under New York's No–Fault insurance scheme.

Before the Court delves into the specific allegations concerning this matter, it will be useful to review New York State's no-fault insurance scheme that forms the basis of the litigation.

A. Governing Law

Before 1973, New York State had only common law tort remedies for most injuries associated with automobile accidents. However, in 1973, the New York State Legislature passed the precursor to today's Comprehensive Motor Vehicle Insurance Reparations Act (the “Act”), see N.Y. Ins. Law §§ 5101 et seq. (formerly N.Y. Ins. Law §§ 670 et seq.), which instituted a no-fault insurance scheme. See Medical Soc'y v. Serio, 100 N.Y.2d 854, 860, 768 N.Y.S.2d 423, 800 N.E.2d 728 (2003). “The purpose of the Act was to create a simple, efficient system that would provide prompt compensation to accident victims without regard to fault, and in that way reduce costs for both courts and insureds.” State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 503 (2d Cir.2004) (citing Serio, 100 N.Y.2d at 860, 768 N.Y.S.2d 423, 800 N.E.2d 728). The Act permits injured parties to recover benefits from insurers for “basic economic loss”—including medical expenses—that arise out of the use or operation of a covered motor vehicle. SeeN.Y. Ins. Law § 5102.

The Superintendent of Insurance is charged with promulgating regulations to implement the Act. “The regulations permit covered parties to assign their benefits to health care providers, who in turn submit claims to insurers for treatment and services given to the injured individual.” Mallela, 372 F.3d at 503 (citing 11 N.Y.C.R.R. § 65–3.11). In order to ensure prompt and efficient compensation, the regulations establish strict and brief time periods for processing a claim. Insurers must request any necessary “verification” of claims within ten days of receiving a completed claim. See 11 N.Y.C.R.R. § 65.15(d). Upon getting verification, insurers have thirty days within which to pay or deny a benefits claim. See 11 N.Y.C.R.R. § 65.15(g).

In 2001, the New York State Insurance Department added a specific regulation that states:

[916 F.Supp.2d 282]

A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.

11 N.Y.C.R.R. § 65–3.16(a)(12). Thus, in order for a provider to be eligible for reimbursement, a provider must meet all relevant New York State or local licensing requirements. This regulation forms the core of the instant dispute.


For instance, New York forbids non-physicians from employing physicians or controlling their practices. Accordingly, under New York's Business Corporation Law, all professional service corporations (“P.C.s”) that are licensed to practice medicine must be owned and controlled only by licensed physicians. N.Y. Bus. Corp. Law §§ 1507, 1508. In order to obtain the necessary licensing, under the N.Y. Business Corporation Law § 1503, a certificate of incorporation must list the names of all shareholders, directors, and officers, and include documentation certifying that such individuals are licensed to practice medicine. The Attorney General is given the power to bring an action to dissolve a P.C. if the corporation “procured its formation through fraudulent misrepresentation or concealment of a material fact.” N.Y. Bus. Corp. Law § 1101(a)(1). New York also assigns criminal penalties to those who fraudulently obtain a license, N.Y. Educ. Law § 6512, or knowingly submit false documents to a public office, N.Y. Penal Law § 175.10. If a P.C. is not actually owned and controlled by a licensed physician and thus fraudulently incorporated, it may not submit assigned claims for no-fault insurance benefits. See State Farm v. Mallela, 4 N.Y.3d 313, 827 N.E.2d 758, 794 N.Y.S.2d 700 (2005).

Also relevant to the present case are what are known as “Article 28 facilities”. The New York State Department of Health (“DOH”) licenses and regulates Article 28 facilities. “The DOH oversees the establishment and construction of hospitals in New York State pursuant to Article 28 of the Public Health Law and issues operating certificates specifying the kinds of services the facilities are authorized to provide.” New York ex rel. Spitzer v. Saint Francis Hosp., 94 F.Supp.2d 399, 403 (S.D.N.Y.2000). “Under both Federal law ... and State law (Public Health Law §§ 2801–a, 2802), a party wishing to establish or expand a health clinic or hospital must first submit an application to a [certificate of need (“CON”) ] program to determine the public need for such proposal, the applicant's competence and the financial feasibility of the proposed service.” Arnot–Ogden Mem. Hosp. v. Guthrie Clinic, Inc., 122 A.D.2d 413, 505 N.Y.S.2d 232 (1986); see Spitzer, 94 F.Supp.2d at 403 (“The CON process must also be followed in seeking DOH approval for the establishment of a new hospital corporation via the DOH's Public Health Council.” (citing N.Y. Pub. Health Law § 2801–a(1))). This procedure is required only of clinics and hospitals, and not of private physicians. See Clifton Springs Sanitarium Co. v. Axelrod, 115 A.D.2d 949, 950, 497 N.Y.S.2d 525 (1985). The CON process has been described as follows:

To obtain approval from the Public Health Council, a facility must go through a three-step process. First, the facility submits an application for approval of its proposed certificate of incorporation to the Public Health Council. N.Y. Pub. Health Law § 2801–a(2). The Council then forwards the certificate and other supporting documents to the state hospital review and planning

[916 F.Supp.2d 283]

council and the health systems agency that has geographical jurisdiction of the area where the proposed hospital is to be located, in this case, the Hudson Valley Health Systems Agency, Inc. See id. The state hospital review and planning council and the health systems agency then offer their recommendations to the Public Health Council.

Spitzer, 94 F.Supp.2d at 403.


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    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 23, 2017
    ...because they tend to facilitate a proper decision on the merits." MHANY Mgmt., 843 F. Supp. 2d at 340; Allstate Ins. Co. v. Elzanaty, 916 F. Supp. 2d 273, 302 (E.D.N.Y. 2013) (same) (citing Sokolski v. Trans Union Corp., 178 F.R.D. 393, 396 (E.D.N.Y. 1998)).Page 8 This liberal standard only......
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    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 7, 2014
    ...will not make a ruling as to whether [plaintiff's] claims are barred by the statute of limitations.” Allstate Ins. Co. v. Elzanaty, 916 F.Supp.2d 273, 300 (E.D.N.Y.2013). As a preliminary matter, the Court notes that plaintiff's causes of action under RICO accrued when plaintiff discovered ......
  • Sky Med. Supply Inc. v. SCS Support Claims Servs., Inc., No. 12–CV–6383 (JFB)(AKT).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 7, 2014
    ...will not make a ruling as to whether [plaintiff's] claims are barred by the statute of limitations.” Allstate Ins. Co. v. Elzanaty, 916 F.Supp.2d 273, 300 (E.D.N.Y.2013). As a preliminary matter, the Court notes that plaintiff's causes of action under RICO accrued when plaintiff discovered ......
  • Fresh Air for the Eastside, Inc. v. Waste Mgmt. of N.Y., L.L.C., 6:18-CV-06588-EAW
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Western District of New York
    • September 16, 2019
    ...have rejected the application of this doctrine where parallel state proceedings do not exist. See Allstate Ins. Co. v. Elzanaty , 916 F. Supp. 2d 273, 289 (E.D.N.Y. 2013) ("In light of th[e] dismissal [of the state action] and the fact that there is no state court parallel proceeding, Color......
  • Request a trial to view additional results
48 cases
  • Guerrero ex rel. Situated v. GC Servs. Ltd., CV 15-7449 (DRH) (AKT)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 23, 2017
    ...because they tend to facilitate a proper decision on the merits." MHANY Mgmt., 843 F. Supp. 2d at 340; Allstate Ins. Co. v. Elzanaty, 916 F. Supp. 2d 273, 302 (E.D.N.Y. 2013) (same) (citing Sokolski v. Trans Union Corp., 178 F.R.D. 393, 396 (E.D.N.Y. 1998)).Page 8 This liberal standard only......
  • Sky Med. Supply Inc. v. SCS Support Claims Servs., Inc., No. 12–CV–6383 JFBAKT.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 7, 2014
    ...will not make a ruling as to whether [plaintiff's] claims are barred by the statute of limitations.” Allstate Ins. Co. v. Elzanaty, 916 F.Supp.2d 273, 300 (E.D.N.Y.2013). As a preliminary matter, the Court notes that plaintiff's causes of action under RICO accrued when plaintiff discovered ......
  • Sky Med. Supply Inc. v. SCS Support Claims Servs., Inc., No. 12–CV–6383 (JFB)(AKT).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 7, 2014
    ...will not make a ruling as to whether [plaintiff's] claims are barred by the statute of limitations.” Allstate Ins. Co. v. Elzanaty, 916 F.Supp.2d 273, 300 (E.D.N.Y.2013). As a preliminary matter, the Court notes that plaintiff's causes of action under RICO accrued when plaintiff discovered ......
  • Fresh Air for the Eastside, Inc. v. Waste Mgmt. of N.Y., L.L.C., 6:18-CV-06588-EAW
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Western District of New York
    • September 16, 2019
    ...have rejected the application of this doctrine where parallel state proceedings do not exist. See Allstate Ins. Co. v. Elzanaty , 916 F. Supp. 2d 273, 289 (E.D.N.Y. 2013) ("In light of th[e] dismissal [of the state action] and the fact that there is no state court parallel proceeding, Color......
  • Request a trial to view additional results

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