Liberty Mut. Fire Ins. Co. v. Maple Manor Neuro Ctr., Inc.

• Decision Date: 10 January 2022
• Docket Number: Civil Case 20-13170
• Court: U.S. District Court — Eastern District of Michigan
• Parties: LIBERTY MUTUAL FIRE INSURANCE COMPANY, LM GENERAL INSURANCE COMPANY, And SAFECO INSURANCE COMPANY OF ILLINOIS Plaintiffs, v. MAPLE MANOR NEURO CENTER INC., STELLA EVANGELISTA, JOSE L. EVANGELISTA, Defendants.

LIBERTY MUTUAL FIRE INSURANCE COMPANY, LM GENERAL INSURANCE COMPANY, And SAFECO INSURANCE COMPANY OF ILLINOIS Plaintiffs, v. MAPLE MANOR NEURO CENTER INC., STELLA EVANGELISTA, JOSE L. EVANGELISTA, Defendants.

Civil Case No. 20-13170

United States District Court, E.D. Michigan, Southern Division

January 10, 2022

OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS (ECF NO. 20)

LINDA V. PARKER U.S. DISTRICT JUDGE

This dispute arises from no-fault insurance benefits that Plaintiffs (collectively, “Liberty Mutual”) paid to Defendants for the treatment of its insureds. Liberty Mutual is an insurance company providing no-fault insurance coverage in Michigan. Defendants Stella Evangelista and Jose Evangelista own Maple Manor Neuro Center Inc. (“Maple Manor”). On December 2, 2020, Liberty Mutual filed a Complaint alleging that Defendants engaged in a scheme to submit false and fraudulent medical records, bills, and invoices through interstate wires, which sought payment for treatment and services from an unlicensed healthcare provider. (ECF No. 1.) Liberty Mutual alleges that the Defendants' conduct violates the federal Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) and (d), and state law.

Liberty Mutual asserts in its Complaint: (i) federal claims against Stella and Jose Evangelista for violations of RICO and a RICO conspiracy (Counts I and II)^[1]; (ii) a common law claim against all Defendants (Count III); (iii) a payment under mistake of fact claim against Maple Manor (Count IV); (iv) an unjust enrichment claim against all Defendants (Count V); and (v) a request for declaratory relief (Count VI).^[2] (ECF No. 1.)

On January 29, 2021, Defendants filed a motion to dismiss Liberty Mutual's Complaint. (ECF No. 20.) The motion is fully briefed. (ECF Nos. 21, 22.) Finding the facts and legal arguments sufficiently presented in the parties' briefs the Court is dispensing with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f).

I. Standard for Rule 12(b)(6) Motion A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” To survive a motion to dismiss, a complaint need not contain “detailed factual allegations, ” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action . . ..” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not “suffice if it tenders ‘naked assertions' devoid of ‘further factual enhancement.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).

As the Supreme Court provided in Iqbal and Twombly, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The plausibility standard “does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal [conduct].” Twombly, 550 U.S. at 556.

In deciding whether the plaintiff has set forth a “plausible” claim, the court must accept the factual allegations in the complaint as true. Erickson v. Pardus, 551 U.S. 89, 94 (2007). This presumption is not applicable to legal conclusions, however. Iqbal, 556 U.S. at 668. Therefore, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).

Ordinarily, the court may not consider matters outside the pleadings when deciding a Rule 12(b)(6) motion to dismiss. Weiner v. Klais & Co., Inc., 108 F.3d 86, 88 (6th Cir. 1997) (citing Hammond v. Baldwin, 866 F.2d 172, 175 (6th Cir. 1989)). A court that considers such matters must first convert the motion to dismiss to one for summary judgment. See Fed. R. Civ. P 12(d). However, “[w]hen a court is presented with a Rule 12(b)(6) motion, it may consider the [c]omplaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to [the] defendant's motion to dismiss, so long as they are referred to in the [c]omplaint and are central to the claims contained therein.” Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). The court may take judicial notice only “of facts which are not subject to reasonable dispute.” Jones v. Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008) (quoting Passa v. City of Columbus, 123 Fed.Appx. 694, 697 (6th Cir. 2005)).

In addition to the pleading requirements set forth above, Federal Rule of Civil Procedure 9(b) requires “a party [t]o state with particularity the circumstances constituting fraud or mistake.” The pleading must “allege the time, place, and content of the alleged misrepresentation … the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud.” United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 515 (6th Cir. 2007) (quotation marks omitted). “Rule 9(b)'s ‘particularity rule serves an important purpose in fraud actions by alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral and fraudulent behavior.'” United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750, 771 (6th Cir. 2016) (quoting United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1313 (11th Cir. 2002), cert. denied, 549 U.S. 889 (2006)).

II. Factual Background

Liberty Mutual is an insurance company authorized to conduct business in Michigan. (Compl. ¶¶ 8-11, ECF No. 1 at Pg ID 3.) Maple Manor “billed Liberty for treatment that was not lawfully rendered to patients . . . .” (Id. ¶ 15, Pg ID 4.) As owners of Maple Manor, Stella and Jose Evangelista are responsible for the unlawful treatment of Liberty Mutual's insured customers. (Id. ¶¶ 18, 21, Pg ID 4.) Stella and Jose Evangelista are licensed medical professionals. (Id. ¶ 66, Pg ID 14.)

On March 7, 2016, Marcus Evangelista incorporated Maple Manor under the laws of the State of Michigan. (Id. ¶ 26, Pg ID 5.) Maple Manor's Articles of Incorporation state that its purpose is to provide “therapy services such as physical therapy, occupational therapy, and speech therapy.” (Id. ¶ 27, Pg ID 5-6.) On July 3, 2017, Maple Manor filed an Annual Report with the Michigan Department of Licensing and Regulatory Affairs (“LARA”), identifying the nature of business in which the corporation engaged in as a “medical office.” (Id. ¶ 28, Pg ID 6.) Subsequent annual reports in 2018, 2019, and 2020 identify “therapy” or “therapy services” as the nature of the corporation's business. (Id. ¶¶ 29-31, Pg ID 6.) Further, Stella Evangelista has previously testified in court that Maple Manor is a healthcare provider that provides physical therapy, occupational therapy, and speech therapy. (Id. ¶¶ 33-34, Pg ID 7.) As a medical treatment provider, Maple Manor was therefore required to be licensed. (Id. ¶¶ 35, 36, Pg ID 7-8.) Prior to filing its Complaint, Liberty Mutual learned that Maple Manor was not licensed to provide the treatment that is at issue in this Complaint. (Id. ¶ 36, Pg ID 8.)

The Michigan No-Fault Act provides for payment of medical and rehabilitative benefits for injured victims of motor vehicle accidents. (Id. ¶ 37, Pg ID 8 (citing Mich. Comp. Laws § 500.3107(1)(a).) However, “[o]nly treatment that is ‘lawfully render[ed]' is compensable under the No-Fault Act. Mich. Comp. Laws § 500.3157(1).” (Id. ¶ 39, Pg ID 8.) Liberty Mutual alleges that Defendants' treatment of its insureds was not lawfully rendered and is therefore not reimbursable. (Id. ¶¶ 40, 54, 55, Pg ID 8, 9, 11, 12.) Specifically, the Complaint cites Cherry v. State Farm Mutual Automobile Insurance Company, 489 N.W.2d 788 (Mich. App. 1992).^[3] (Id. ¶ 40, Pg ID 8.) Maple Manor billed Liberty Mutual for medical treatment to Liberty Mutual's insured clients without the required license to perform the services. (Id. ¶ 41, Pg ID 8-9.)

To explain the billing for unlawful treatment without a license, Liberty Mutual states:

42. Each bill submitted to Liberty Mutual by Maple Manor Neuro Center was submitted using a Health Insurance Claim Form (“HICF”).

43. The American Medical Association (“AMA”) publishes instructions for properly completing HICFs that were developed by the National Uniform Claim Committee (“NUCC”).

44. The NUCC Reference Instruction Manual provides specific instructions detailing how healthcare providers must complete each HICF.

45. According to version 7.0 of the NUCC Reference Instruction Manual that was published in July 2019, Item Number 31 of each HICF identifies “the Physician or Supplier” of the medical treatment and “refers to the authorized or accountable person and the degree, credentials, or title.”

(Id. ¶¶ 42-45, Pg ID 9.) Liberty Mutual then gives a specific example in which Maple Manor is listed as the Physician or Supplier in Item Number 31. (Id. ¶ 46, Pg ID 9, 10.) “The NUCC Reference Instruction Manual also instructs healthcare providers such as [Maple Manor] that Item Number 33 of each HICF ‘identifies the provider that is requesting to be paid for the services rendered.'” (Id...