Allstate Ins. Co. v. Bogoraz

• Decision Date: 10 June 2011
• Docket Number: No. 10–CV–5286 (SJF)(ETB).,10–CV–5286 (SJF)(ETB).
• Citation: 818 F.Supp.2d 544
• Court: U.S. District Court — Eastern District of New York
• Parties: ALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Allstate New Jersey Insurance Company, and Deerbrook Insurance Company, Plaintiffs, v. Arthur BOGORAZ, Aviyon Medical Rehabilitation, LLC, Primavera Medical Rehabilitation, PLLC, Competent Medical Rehabilitation, PLLC, Trastevere Medical Rehabilitation, LLC, Dr. Natalia Gurevich Medical, P.C., Main Diagnostic Medical, P.C., Sharp Imaging Radiology, P.C., Sharp Radiology, P.C., Rapid Scan Radiology, P.C., Snoop Radiology Imaging, PC.C, Natalia Gurevich, M.D., Robert David Solomon, M.D., Charles Leo Cooper, M.D., and Matthew Abramowitz, Defendants.

818 F.Supp.2d 544

ALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Allstate New Jersey Insurance Company, and Deerbrook Insurance Company, Plaintiffs,

v.Arthur BOGORAZ, Aviyon Medical Rehabilitation, LLC, Primavera Medical Rehabilitation, PLLC, Competent Medical Rehabilitation, PLLC, Trastevere Medical Rehabilitation, LLC, Dr. Natalia Gurevich Medical, P.C., Main Diagnostic Medical, P.C., Sharp Imaging Radiology, P.C., Sharp Radiology, P.C., Rapid Scan Radiology, P.C., Snoop Radiology Imaging, PC.C, Natalia Gurevich, M.D., Robert David Solomon, M.D., Charles Leo Cooper, M.D., and Matthew Abramowitz, Defendants.

No. 10–CV–5286 (SJF)(ETB).

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

June 10, 2011.

Jasmine Garcia–Vieux, Nathan A. Tilden, Richard D. King, Smith & Brink PC, Garden City, NY, Michael W. Whitcher, Smith & Brink, P.C., Braintree, MA, for Plaintiffs.

Matthew J. Conroy, Blodnick, Conroy, Fazio & Diglio, P.C., Garden City, NY, Jeffrey J. Sherrin, David Eugene Nardolillo, O'Connell and Aronowitz, Albany, NY, for Defendants.

ORDER

FEUERSTEIN, District Judge.

On November 16, 2010, plaintiff Allstate Insurance Company and related entities (“plaintiff” or “Allstate”) commenced this action against Charles Leo Cooper M.D. (“defendant” or “Cooper”), inter alia, claiming that defendant violated 18 U.S.C. § 1962 (“section 1962”) and New York General Business Law § 349, inter alia, by conspiring with co-defendant Arthur Bogoraz (“Bogoraz”) and defrauding plaintiff On March 22, 2011, defendant moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth herein, defendant's motion is granted only insofar as the claim pursuant to N.Y. General Business Law § 349 is dismissed and is otherwise denied.

I. Background

Section 1962(c) states:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which 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.

18 U.S.C. § 1962(c). It is also unlawful to “conspire to violate” section 1962(c). 18 U.S.C. § 1962(d). N.Y. General Business Law § 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service” in New York State. N.Y. Gen. Bus. § 349(a).

Plaintiff's claims are based upon the allegations that Bogoraz, an attorney, and defendant conspired to obtain benefits from Allstate in violation of New York State's “No–Fault Laws.” N.Y. Ins. Law § 5101, et seq. ; 11 N.Y.C.R.R. § 65, et seq. Pursuant to these statutes, Allstate is required to provide “Personal Injury Protection Benefits (“no-fault benefits”) to claimants and to treating physicians or medical professional service corporate providers to whom claimants have assigned their no-fault benefits.” See compl. ¶ 81. A New York professional service corporation may only issue shares to

individuals who are authorized by law to practice ... a profession which such corporation is authorized to practice and who are or have been engaged in the practice of such profession in such corporation or a predecessor entity, or who will engage in the practice of such profession in such corporation within thirty [30] days of the date such shares are issued.

N.Y. Bus. Corp. § 1507. Only a professionally licensed individual may be a director or officer of the professional services corporation. Id. § 1508. Sharp Radiology was a medical professional service corporation, compl. ¶ 61, and therefore only physicians may share in its ownership. See Mallela, 4 N.Y.3d at 319, 794 N.Y.S.2d 700, 827 N.E.2d 758. Plaintiff alleges that defendant's company applied for and received no-fault reimbursement benefits but was ineligible a fraudulently incorporated medical professional service corporation. Id. ¶¶ 79–111.

Defendant, a doctor licensed to practice medicine in New York state, owned Charles Leo Cooper, M.D., P.C., a New York medical professional service corporation. Id. ¶¶ 18, 131. On or about March 18, 2008, Bogoraz, “or someone acting at Bogoraz's direction,” filed paperwork with the New York Department of State seeking to change the name of defendant's company to Sharp Radiology, P.C. (“Sharp Radiology”). Id. ¶ 133. Following the change of name, Cooper did not control the business conducted as Sharp Radiology, and Bogoraz had exclusive decision making authority. Id. ¶¶ 134–38. Plaintiff claims that, although Cooper did not authorize Bogoraz to institute collection actions for no-fault benefits due for services performed by Sharp Radiology, maintain its corporate records, select, direct or control the handling of its business affairs, or hire or supervise any employees, defendant “purported to be the sole owner, officer, and shareholder of Sharp Radiology” in violation of N.Y. Bus. Corp. §§ 1507 and 1508. Id. ¶¶ 60–63, 134–38.

Plaintiff alleges that Bogoraz and Cooper entered into an agreement pursuant to which Bogoraz “agreed to supply patients and provided medical billing services to Sharp Radiology” and Bogoraz and defendant would share the no-fault benefits collected from insurers. Id. ¶ 183–84. Bogoraz exercised “dominion and control” over Sharp Radiology during the relevant period of this action. Id. ¶ 181. Plaintiff attaches Bogoraz's affidavit to the complaint in support of these allegations. Id. at Exhibit 4.

Plaintiff alleges that Cooper's conduct violated 18 U.S.C. §§ 1962(c), 1962(d), N.Y. Gen. Bus. § 349 and asserts claims of fraud and unjust enrichment.

II. Discussion

A. Legal Standard

1. Rule 12(b)(6) Motion to Dismiss

In deciding a motion to dismiss, the Court must liberally construe the claims, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. See Goldstein v. Pataki, 516 F.3d 50, 56 (2d Cir.2008) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002)). However, this standard “is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 1950.

In determining a motion to dismiss pursuant to Rule 12(b)(6), the Court must limit itself to the facts alleged in the complaint, which are accepted as true; to any documents attached to the complaint as exhibits or incorporated by reference therein; to matters of which judicial notice may be taken; or to documents upon the terms and effect of which the complaint “relies heavily” and which are, thus, rendered “integral” to the complaint. Chambers, 282 F.3d at 152–53.

2. Pleading Standard

Federal Rule of Civil Procedure 8(a)(2) requires only a “short and plain statement of the claim showing that the pleader is entitled to relief,” in order to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The standard of review on a motion made pursuant to Rule 12(b)(6) and Rule 8 of the Federal Rules of Civil Procedure requires that a plaintiff plead sufficient facts “to state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 547, 127 S.Ct. 1955. A complaint must give the defendant “fair notice of what the ... claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007). See also Boykin v. KeyCorp, 521 F.3d 202, 214 (2d Cir.2008). However, a “pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Iqbal, 129 S.Ct. at 1949 (2009) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of further factual enhancement.' ” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. The plausibility standard requires “more than a sheer possibility that defendant has acted unlawfully.” Iqbal, 129 S.Ct. at 1949.

Rule 9(b) of the Federal Rules of Civil Procedure provides that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Speculative and conclusory allegations of intent are insufficient. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d Cir.2004). Although Rule 9(b) does not require a plaintiff to plead intent under its heightened pleading standard, all pleadings must comply with the requirements of Rule 8. Iqbal, 129 S.Ct. at 1954.

B. Analysis

1. Allegations of Underlying Fraud

New York requires no-fault insurance carriers to reimburse patients for “basic economic loss.” Insurance Law § 5102, et seq. Patients covered by no-fault insurance may assign their claims to their health care providers rather than seek reimbursement from insurance carriers directly. See N.Y. Comp.Codes R. & Regs. tit. 11, § 65–3.11. On April 4, 2002, the Superintendent of Insurance interpreted the law to exclude payments made to unlicensed or fraudulently licensed providers from the meaning of “basic economic loss,” rendering these corporations ineligible for reimbursement. See N.Y....