Liberty Mut. Fire Ins. Co. v. Acute Care Chiropractic Clinic P.A.

• Decision Date: 13 February 2015
• Docket Number: Case No. 14–cv–2651 SRN/HB.
• Parties: LIBERTY MUTUAL FIRE INSURANCE COMPANY, LM Insurance Corporation, LM General Insurance Corporation, The First Liberty Insurance Corporation, Safeco Insurance Company of Indiana, and Safeco Insurance Company of Illinois, Plaintiffs, v. ACUTE CARE CHIROPRACTIC CLINIC P.A., Arthur Guzhagin D.C., Healthy Living Chiropractic Clinic P.C., Lake Nicollet Clinic P.A., Midwest Chiropractic Clinic P.C., Najah Ibrahim, Southwest Management LLC, and St. Paul Wellness Clinic P.A., Defendants.
• Court: U.S. District Court — District of Minnesota

88 F.Supp.3d 985

LIBERTY MUTUAL FIRE INSURANCE COMPANY, LM Insurance Corporation, LM General Insurance Corporation, The First Liberty Insurance Corporation, Safeco Insurance Company of Indiana, and Safeco Insurance Company of Illinois, Plaintiffs

v.ACUTE CARE CHIROPRACTIC CLINIC P.A., Arthur Guzhagin D.C., Healthy Living Chiropractic Clinic P.C., Lake Nicollet Clinic P.A., Midwest Chiropractic Clinic P.C., Najah Ibrahim, Southwest Management LLC, and St. Paul Wellness Clinic P.A., Defendants.

Case No. 14–cv–2651 SRN/HB.

United States District Court, D. Minnesota.

Signed Feb. 13, 2015.

Travis J. Adams and Bryan J. Chant, Law Offices of Thomas P. Stilp, Golden Valley, MN, for Plaintiffs.

Adam A. Gillette and Douglas L. Elsass, Fruth, Jamison & Elsass, Minneapolis, MN, for Defendants Acute Care Chiropractic Clinic P.A., Arthur Guzhagin D.C., Healthy Living Chiropractic Clinic P.C., Lake Nicollet Clinic P.A., St. Paul Wellness Clinic P.A., and Midwest Chiropractic Clinic P.C.

Leny K. Wallen–Friedman, Paul M. Floyd, and Diana Young Morrissey, Wallen–Friedman & Floyd, P.A., Minneapolis, MN, for Defendants Najah Ibrahim and Southwest Management LLC.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, District Judge.

I. INTRODUCTION

This matter is before the Court on Defendants Acute Care Chiropractic Clinic P.A., Arthur Guzhagin D.C., Healthy Living Chiropractic Clinic P.C., Lake Nicollet Clinic P.A., Midwest Chiropractic Clinic P.C., and St. Paul Wellness Clinic P.A.'s (collectively, “Defendants”) Motion to Dismiss [Doc. No. 8]. For the reasons set forth below, the motion is denied.

II. BACKGROUND

In 1974, the State of Minnesota enacted the Minnesota No–Fault Automobile Insurance Act, or the “No–Fault Act”, in order to facilitate the orderly and efficient administration of justice within the state, in response to the detrimental impact of automobile accidents on uncompensated injured persons. See Minn.Stat. § 65B.42 (2014). The No–Fault Act calls for a minimum payment of $20,000 in medical expense benefits and $20,000 in income loss, replacement services loss, funeral expense loss, survivor's economic loss, and survivor's replacement services loss benefits to victims of automobile accidents, without regard to fault for the accident. See Minn.Stat. § 65B.44, subd. 1. Victims of motor vehicle accidents who are seeking medical treatment for their injuries are required to submit benefit applications with their primary insurance companies. See Minn.Stat. § 65B.55, subd. 1.

A. The Parties

Plaintiffs Liberty Mutual Fire Insurance Company, LM Insurance Corporation, LM General Insurance Corporation, The First Liberty Insurance Corporation, Safeco Insurance Company of Indiana, and Safeco Insurance Company of Illinois are insurance companies that do business in the State of Minnesota and issue policies that conform to the No–Fault Act. See Minn.Stat. § 65B.41 et seq. (Compl. ¶ 4 [Doc. No. 1].)

Defendants Acute Care Chiropractic Clinic P.A., Healthy Living Chiropractic Clinic P.C., Lake Nicollet Clinic P.A., Midwest Chiropractic Clinic P.C., and St. Paul Wellness Clinic P.A. [hereinafter, “Defendant Clinics”], are health clinics and providers who provide chiropractic care for car accident victims (id. ¶ 26), and submit patient bills to Plaintiffs pursuant to the No–Fault Act (id. ¶ 43). Dr. Arthur Guzhagin is a licensed chiropractor in the State of Minnesota and is the “paper owner” of the Defendant Clinics.¹ (Id. ¶ 16.) Najah Ibrahim is a layperson, who is a citizen of Minnesota, and is not a licensed medical professional.² (Id. ¶ 19.) Southwest Management, LLC [hereinafter, “Southwest Management”] is a lay, limited liability company, whose sole member is Ibrahim. (Id. ¶ 20.)

B. Defendants are Allegedly “Associated–in–Fact”

This lawsuit arises from Defendant Clinics allegedly fraudulently billing Plaintiffs for medical treatment provided to car accident victims. Plaintiffs claim that while each clinic is legally incorporated separately, Defendants are “associated-in-fact.” (Id. ¶ 53.) Or, in other words, Defendants are allegedly run as a single enterprise. Plaintiffs allege that Defendants “colluded [in order] to submit illegal and unlawful charges to insurance carriers, including Plaintiffs.” (Id. )

Specifically, Plaintiffs claim that:

Upon information and belief, Defendant Clinics are operated in a consolidated fashion ... [as] Defendant Clinics commingle funds between their various financial accounts, operate in an underfunded fashion and pay expenses for one clinic from another clinics operating account, use same or similar electronic patient care record systems, grant direct and indirect access to confidential patient care records to chiropractors working at other Defendant Clinics.

(Id. ¶ 25.)

To support their claim that Defendant Clinics are run in an underfunded fashion, Plaintiffs allege that the “Defendant Clinics do not pay practice relief physicians for services rendered.” (Id. ¶ 41.) In fact, Plaintiffs claim that “Defendant Clinics require [ ] employee chiropractors [to] pay practice relief physicians from their personal financial accounts.” (Id. ) As an example, Plaintiffs allege that Confidential Informant 4 [hereinafter, “CI–4”], a practice relief physician employed by Acute Care, was paid by Giles from Giles' personal checking account. (Id. ¶ 38.)

Plaintiffs support their claim that Defendant Clinics are a single enterprise with several alleged facts. First, Plaintiffs allege that the interconnected relationship between all Defendant entities is demonstrated by the fact that a single clinic's employees receives payment from a different clinic or entity, for whom the employee does not actually work. (See id. ¶ 36.) For instance, Confidential Informant 3 [hereinafter, “CI–3”] was hired to serve as a full-time physician at Healthy Living, Midwest Chiropractic, and St. Paul Wellness. (Id. ) CI–3 was allegedly paid by certain Defendant Clinics for services that he rendered while working at a completely different Defendant Clinic. Specifically, (1) St. Paul Wellness, (2) Southwest Management, (3) Healthy Living, and (4) Midwest Chiropractic, allegedly paid CI–3 for chiropractic services that he actually rendered only at St. Paul Wellness. (Id. ) Moreover, although he was never employed by Southwest Management, Southwest Management issued an IRS–1099 tax form to CI–3 for his work at St. Paul Wellness. (Id. ¶ 40.)

To further substantiate their claim that Defendants are associated-in-fact, Plaintiffs claim that Brooke Giles, a licensed chiropractor and employee of Dr. Guzhagin, provided deposition testimony on November 22, 2013, in the matter of Ali v. Safeco Insurance Company, wherein she confirmed that at least three of the Defendant Clinics are “one in the same.” (Id. ¶ 37.) Giles discussed the singular, overarching ownership structure of Acute Care, Midwest Chiropractic, and Lake Nicollet, while also explaining that these three facilities share access to patient health care records. (Id. )

C. Defendant Clinics are Allegedly Owned by Layperson Defendant Ibrahim and/or Lay Company Defendant Southwest Management

In addition to alleging that Defendant Clinics are associated-in-fact, Plaintiffs claim that although Defendant Guzhagin incorporated and legally owns each Defendant Clinic, Defendant Clinics are actually owned by lay person Ibrahim and/or his corporation Southwest Management. (Id. ¶ 25.)

Plaintiffs bolster their allegation about Ibrahim's ownership-in-fact by describing Ibrahim's relationship with the Defendant Clinics. Specifically, Plaintiffs allege that “Ibrahim and/or Southwest Management is an established ‘marketer’ or runner having operated services such as 1–800–PAIN–TEAM and promotes the Defendant Clinics by bringing new patients to the Defendant Clinics for treatment after motor vehicle accidents.” (Id. ¶ 26.) In fact, Confidential Informant 1 [hereinafter, “CI–1”] stated that as an employee of Healthy Living Chiropractic, he was aware that Ibrahim worked as a “marketer” for that clinic. (Id. ¶ 34.) However, Minnesota law prohibits Defendant Clinics from employing a “runner”, or someone “who for a pecuniary gain directly procures or solicits prospective patients ... at the direction of, or in cooperation with, a health care provider when the person knows or has reason to know that the provider's purpose is to perform or obtain services or benefits under or relating to a contract of motor vehicle insurance.” (Id. ¶ 28 (citing Minn.Stat. § 609.612 (2013).))

Chiropractors who work for the Defendant Clinics are allegedly told that Ibrahim is a “friend of Guzhagin.” (Id. ¶ 26.) For instance, Giles stated in deposition testimony in another case that Ibrahim was a friend of Guzhagin and would refer patients to the clinics. (Id. ¶ 37.) Additionally, “Ibrahim is [allegedly] granted access to office space at the Defendant Clinics and is considered by the Confidential Informants to have influence on the management and operation of the clinics.” (Id. ¶ 26.)

Plaintiffs further allege that Defendant Guzhagin affirmatively misrepresented that the Defendant Clinics were operated separately and owned solely by Dr. Guzhagin. (See id. ¶ 61.) They claim that Dr. Guzhagin wrote, in an undated letter to Michael Struebing of Liberty Mutual Insurance Company, that “I am the sole owner of the clinics. You also asked whether the facilities work in conjunction with one another or are operated separately. The clinics are operated separately.” (Id. ) Although the letter was undated, Struebing allegedly received this letter on July 11, 2013. (Id. )

Plaintiffs claim that Ibrahim's alleged ownership of the clinics violates the Corporate Practice of Medicine Doctrine (“CPMD”), which prohibits chiropractic clinics from being owned in whole, or part, by unlicensed laypersons. See, e.g., Isles Wellness, Inc. v. Progressive N. Ins. Co., 725 N.W.2d 90, 95 (Minn.2006) [hereinafter, “Isles II ”]; Isles Wellness, Inc. v. Progressive N. Ins. Co., 703 N.W.2d 513,...