Gov't Emps. Ins. Co. v. Stelton Radiology Corp.

• Decision Date: 11 May 2022
• Docket Number: Civ. 20-18532 (KM) (JBC)
• Parties: GOVERNMENT EMPLOYEES INSURANCE CO., GEICO INDEMNITY CO., GEICO GENERAL INSURANCE COMPANY and GEICO CASUALTY CO., Plaintiffs, v. STELTON RADIOLOGY CORPORATION, DMITRIY STOLYAR, OLGA GALKINA, RAPID IMAGING CORP., DYNAMIC MEDICAL IMAGING LLC, STEVEN P. BROWNSTEIN, M.D., EAST BRUNSWICK IMAGING CENTER, LLC, ROMAN SHAPOSHNIKOV, and SOUTH PLAINFIELD RADIOLOGY CORPORATION, Defendants.
• Court: U.S. District Court — District of New Jersey

GOVERNMENT EMPLOYEES INSURANCE CO., GEICO INDEMNITY CO., GEICO GENERAL INSURANCE COMPANY and GEICO CASUALTY CO., Plaintiffs, v. STELTON RADIOLOGY CORPORATION, DMITRIY STOLYAR, OLGA GALKINA, RAPID IMAGING CORP., DYNAMIC MEDICAL IMAGING LLC, STEVEN P. BROWNSTEIN, M.D., EAST BRUNSWICK IMAGING CENTER, LLC, ROMAN SHAPOSHNIKOV, and SOUTH PLAINFIELD RADIOLOGY CORPORATION, Defendants.

Civ. No. 20-18532 (KM) (JBC)

United States District Court, D. New Jersey

May 11, 2022

OPINION

KEVIN MCNULTY, United States District Judge.

Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company, and GEICO Casualty Co. (collectively “GEICO”), are automotive insurers. GEICO alleges that defendants, who are medical facilities and their owners submitted or caused to be submitted thousands of fraudulent claims for reimbursement of medical expenses. GEICO seeks to recover more than $5, 900, 000.00 that it paid to defendants. The amended complaint contains twenty-two Counts, including unjust enrichment, common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and violations of the New Jersey Insurance Fraud Prevention Act (“NJIFPA”). Defendants Dynamic Medical Imaging LLC and Steven P Brownstein (collectively the “Dynamic defendants”) now move to dismiss the counts pleaded against them for failure to state a claim, under Rule 12(b)(6). (DE 71.) Defendants Stelton Radiology Corporation, Dmitriy Stolyar, Olga Galkina, Rapid Imaging Corp., East Brunswick Imaging Center, LLC, Roman Shaposhnikov, and South Plainfield Radiology Corporation (collectively the “Stelton defendants”) move to compel arbitration and in the alternative dismiss the Counts pleaded against them under Rule 12(b)(6). (DE 77.) For the reasons set forth below, both motions are GRANTED in part and DENIED in part.

I. BACKGROUND^[1]

The allegations of the amended complaint are as follows: GEICO is an automotive insurer which has sued defendants to recover amounts GEICO paid on fraudulent “no-fault, ” “personal injury protection” (“PIP”) claims. Those claims were primarily for MRIs that are alleged to have been medically unnecessary or otherwise un-reimbursable. (Am. Compl. ¶ 1, 7.) The defendants are a set of New Jersey radiology facilities and their owners. (Id. ¶ 8-18.) No longer included as a defendant is Allen Pomerantz, who performed most of the allegedly fraudulent MRIs at the various radiology facilities and served as the medical director at Stelton Radiology, Rapid Imaging, and South Plainfield Radiology. (Id. ¶ 19-20.)

In short, GEICO alleges that thousands of insured drivers from New York and New Jersey who suffered at worst minor soft tissue injuries in minor automobile crashes were referred to defendants' businesses and given medically unnecessary MRIs.^[2] (Id. ¶ 61-66.) Under New York and New Jersey law, automobile insurance policies provide benefits for personal injuries sustained in an accident involving the covered automobile, regardless of whether the driver was at fault for the accident. (Id. ¶ 31-32, 49-51.) This coverage is called “personal injury protection, ” or “PIP.” (Id.) When insureds receive treatment, they can assign their right to PIP benefits to their medical providers, who can then seek direct reimbursement from insurance companies. (Id. ¶ 32, 51.) Defendants are such medical providers, i.e., assignees of their patients' PIP benefits.

GEICO alleges that its payments to defendants were fraudulently obtained for several reasons. The core allegation is that defendants billed for and exaggerated the results of medically unnecessary MRIs that were provided based on pre-determined protocols to generate profits for the defendants. GEICO also alleges that the treatments did not qualify for PIP reimbursement for other reasons, including that Pomerantz was an independent contractor not an employee (id. ¶ 129), and that Stelton Radiology, Rapid Imaging and South Plainfield Radiology operated without legitimate medical directors (id. ¶ 138140).

GEICO's insurance policies with its insureds include a “GEICO Decision Point Review Plan and Precertification Requirements” (“DPRP”). (DE 77-3, Ex. 1.) The DPRP allows the assignment of benefits from insureds to medical providers but requires the providers to submit disputes to Alternative Dispute Resolution after an internal appeal process. (Id. at 9.) The section of the DPRP titled “Dispute Resolution” states in full:

If there is a dispute as to any issue arising under this Decision Point Review/Precertification Plan, or in connection with any claim for Personal Injury Protection benefits, a request for the resolution of that dispute may be made by the Insured/Eligible Injured Person, GEICO, or a treating health care provider who has a valid Assignment of Benefits from the Insured or Insured/Eligible Injured Person. The request for dispute resolution may also include a request by any of these parties for review by a Medical Review Organization.

If we, GEICO, and/or any person seeking Personal Injury Protection benefits, do not agree as to the recovery of such benefits, or with any decision made or arising pursuant to this Decision Point Review/Precertification Plan, then the matter is required and can only be resolved by a dispute resolution organization pursuant to New Jersey law rather than in the Superior Court of New Jersey. A health care provider is required to have fully complied with all aspects of this Decision Point Review/Precertification Plan, including but not limited to having fully complied with the Internal Appeal Process, prior to filing any claim or action in dispute resolution.

(Id. at 10 (emphasis added).) In addition, GEICO provides a standard form that allows its insureds to assign their benefits to providers in exchange for medical services. That form requires that the provider agree to “submit disputes as defined in the Plan to the Internal Dispute Resolution process set forth therein.” “After final determination, ” it continues, “I (we) will submit disputes not resolved by the Inter[n]al Dispute Resolution process to the Personal Injury Protection dispute resolution process set forth in N.J.A.C. 11:3-5.” (Id. at 13.) Thus, GEICO policy requires medical providers who were assigned benefits to send all disputes “in connection with any claim for Personal Injury Protection benefits” to GEICO's internal dispute resolution process and then to arbitration, not to court. (Id. at 10.)

GEICO seeks to recover more than $5.9 million in reimbursements that it paid in reliance on defendants' allegedly fraudulent billing. (Id. ¶ 160.) GEICO's amended complaint asserts twenty-two causes of action. Count 1 seeks a declaratory judgment against the radiology facilities that GEICO does not have to pay outstanding PIP claims and that during the time period at issue the facilities did not comply with the law. (Id. ¶ 162-168.) Counts 2, 7, 11, 15, and 19 allege violations of the New Jersey Insurance Fraud Prevention Act (“NJIFPA”), N.J. Stat. Ann. §17:33A-1 et seq., against each radiology facility and its owner(s). (Id. ¶ 169-172, 201-204, 225-228, 249-252, 273-276.)

Counts 3, 8, 12, 16, and 20 allege civil violations of RICO, 18 U.S.C. § 1962(c), based on predicate racketeering acts of mail fraud. (Id. ¶ 173-180, 205-212, 229-236, 253-260, 277, 284.) Count 4 alleges conspiracy to violate RICO, 18 U.S.C. § 1962(d), against Stolyar and Galkina. (Id. ¶ 181-188.) Counts 5, 9, 13, 17 and 21 allege common law fraud against each facility and its owner(s). (Id. ¶ 189-194, 213-218, 237-242, 261-266, 285-290.) Finally, Counts 6, 10, 14, 18, and 22 allege unjust enrichment against each facility and its owner(s). (Id. ¶ 195-200, 219-224, 243-248, 267-272, 291-296.)

This case was first filed on October 2, 2020, in the United States District Court for the Eastern District of New York. (DE 1.) In December 2020, plaintiffs consented to transfer the case to this district. (DE 27.) On January 26, 2021, the Stelton defendants moved to compel arbitration and dismiss the complaint. (DE 31.) On May 28, 2021, GEICO dismissed its claims against Pomerantz. (DE 45.) On July 15, 2021, GEICO moved to amend its complaint (DE 50) and Judge James B. Clark granted that motion on August 30, 2021 (DE 61). GEICO filed its amended complaint on September 8, 2021. (DE 65.) The Dynamic defendants moved to dismiss the Counts pleaded against them, i.e., Counts 1, 11, 12, 13, and 14, on September 22, 2021. (DE 71.) The Stelton defendants moved to dismiss and compel arbitration on Counts 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 15, 16, 17, 18, 19, 20, 21, and 22, i.e. all of the Counts pleaded against the Stelton defendants, on October 6, 2021. (DE 77.) GEICO filed briefs in opposition to the two motions (DE 75, 80) and defendants filed replies (DE 78, 84). These motions are now fully briefed and ripe for decision.

II. LEGAL STANDARDS

A. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Sci. Prods., Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trs. Thereof v. Tishman Constr. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

Federal Rule of Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and...