State Farm Mut. Auto. Ins. Co. v. Mallela
| Decision Date | 20 September 2001 |
| Docket Number | No. CV-00-4923 (CPS).,CV-00-4923 (CPS). |
| Citation | 175 F.Supp.2d 401 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. Robert MALLELA et alia, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Evan H. Krinick, Rivkin, Radler & Kremer, Uniondale, NY, Craig J. Bruno, Bruno, Gerbino & Macchia, LLP, Melville, NY, Steven D. Brower, Bruno, Gerbino & Macchia, LLP, Melville, NY, Timothy Kollar, Katten Muchin Zavis, LLP, Chicago, IL, Ross O. Silverman, Jenny Louise Johnson, Gil M. Soffer, Katten Muchin Zavis, Chicago, IL, for plaintiff.
Barry M. Fallick, Rochman Platzer Fallick & Sternheim, LLP, New York City, John Mark Lane, Shapiro & Lane, Mamoroneck, NY, Jason M. Ewasko, Martin P. Russo, MPR Law Practice, P.C., Peekskill, NY, Joseph J. LaBarbera, LaBarbera & Lambert, P.C., New York City, David J. Sobel, Sobel & Seidell, LLP, Smithtown, NY, Evan S. Schwartz, Quadrino & Schwartz, P.C., Garden City, NY, Roy W. Breitenbach, Garfunkel, Wild, & Travis, P.C., Great Neck, NY, Lloyd Andrew Gura, Mound, Cotton & Wollan, New York City, Marina Tylo, Brooklyn, NY, Mark L. Furman, Lifshutz, Polland & Associates P.C., New York City, Charles G. Eichinger, Islandia, NY, Craig J. Bruno, Bruno, Gerbino & Macchia, LLP, Melville, NY, Steven Jay Harfenist, Friedman & Harfenist, Lake Sucess, NY, Evan H. Krinick, Rivkin, Radler & Kremer, Uniondale, NY, for defendants.
Plaintiff State Farm Mutual Automobile Insurance Company ("State Farm") brings this diversity action against defendants Robert Mallela and Swapnadip Lahiri (collectively, the "Licensed Defendants"), Tatiana Rybuk and Paul Schneider (collectively, the "Unlicensed Defendants"), Advanced Physical Medicine and Rehabilitation d/b/a Mill Basin Physical Medicine ("Advanced"), Ridgewood Medical Specialists and Hempstead Village Medical ("Ridgewood"), Allied Medical Healthcare, P.C. ("Allied"), Astoria Physical Medicine and Rehabilitation, P.C. ("Astoria"), Atlantic Medical Practice, P.C. ("Atlantic"), Avenue U Medical Services, P.C. ("Avenue U"), Bay Medical Health Care & Diagnostic, P.C. ("Bay Medical"), Bettercare Health Care Pain Management and Rehab, P.C., sued herein as Bettercare Healthcare Pain and Management, P.C. d/b/a Firstcare of Bettercare Healthcare ("Bettercare"), Canarsie Medical Services, P.C. ("Canarsie"), Central Medical Rehabilitation, P.C. ("Central Medical"), Central Suffolk Medical Services, P.C. ("Central Suffolk"), Citywide Medical Practice, P.C. ("Citywide"), DAKA Medical, P.C. d/b/a Island Health Professionals ("DAKA"), Farragut Medical Care, P.C. ("Farragut"), First Queens Physical Medical and Rehabilitation, P.C. ("First Queens"), Flatbush Medical Services, P.C. ("Flatbush"), Fordham Medical Pain and Treatment, P.C. ("Fordham"), Franklin Medical Rehabilitation, P.C. ("Franklin"), Grand Central Healthcare and Physical Medicine, P.C. ("Grand Central"), Health First Medical Practice, P.C. ("Health First"), Mallela Medical Services, P.C. ("Mallela Medical"), Medical Services of Bayside, P.C ("Bayside"), Mid-Island Medical Healthcare, P.C. ("Mid-Island"), Mid-Queens Medical Services, P.C. ("Mid-Queens"), Millennium Medical Diagnostics, P.C. ("Millennium"), N.Y. Alea Medical, P.C. ("Alea"), N.Y. Pro Care Medical & Rehabilitation, P.C. ("Pro Care"), Oceanview Medical Care, P.C. ("Oceanview"), Patient's Choice Medical Services, P.C. ("Patient's Choice"), Pelham Physical Medicine and Rehabilitation, P.C. ("Pelham"), Sterling Medical Diagnostic, P.C. ("Sterling"), Triborough Medical Diagnostic, P.C. ("Triborough"), Urban Medical Diagnostics, P.C. ("Urban"), Valley Physical Medicine & Rehabilitation, P.C. ("Valley Physical"), Valley Rehabilitation and Medical Offices, P.C. ("Valley Rehabilitation"), Victory Medical, P.C. ("Victory"), and Yonkers Medical Services, P.C. d/b/a Injury Relief Medical Care ("Yonkers") (collectively, the "PC Defendants"), stating claims of fraud, unfair trade practices, and unjust enrichment. The gravamen of plaintiff's complaint is that the defendants engaged in a fraudulent scheme pursuant to which the PC Defendants and the Unlicensed Defendants falsely used the names of the Licensed Defendants on certificates of incorporation filed with New York State to obtain certificates of authority to practice medicine. Plaintiff, which issues automobile insurance policies and has compensated the PC Defendants for services rendered to plaintiff's policyholders, seeks monetary, declaratory, and injunctive relief.
Defendants Fordham, Sterling, Millennium, Triborough, Central Medical, and Urban (the "Counterclaimants") counterclaim for breach of contract, unjust enrichment, and deceptive practices in violation of N.Y. General Business Law § 349. Counterclaimants also seek attorney's fees, costs, and interest, relying in part on § 349.1
Valley Physical (the "Moving Defendants") now move to dismiss plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.2 Plaintiff cross-moves to dismiss those of the Counterclaimants' claims that are based on General Business Law § 349. For the reasons set forth below, the Moving Defendants' motions to dismiss are granted, as is plaintiff's motion to dismiss.
Unless otherwise noted, the following facts are drawn from plaintiff's complaint and are assumed to be true for the purposes of these motions.
Plaintiff State Farm is an Illinois corporation with its principal place of business in Illinois. State Farm engages in the business of selling automobile insurance in New York.
Defendant Robert Mallela, M.D. is a New Jersey resident who has been licensed to practice medicine and has engaged in the practice of medicine in New York since 1994. Defendant Swapnadip Lahiri is a New Jersey resident who is also licensed to practice medicine in New York and has engaged in the practice of medicine in New York since 1993. Defendant Tatiana Rybuk is a New York resident who has never been licensed to practice medicine in New York. On October 27, 1999, Rybuk pled guilty in New York State court to the felonies of attempted enterprise corruption, a scheme to defraud, and twelve counts of insurance fraud and admitted that she owned and controlled several unlawfully licensed professional service corporations, including defendants Avenue U, Canarsie, and Flatbush. Defendant Paul Schneider is a New York resident who has never been licensed to practice medicine in New York. On October 27, 1999, Schneider pled guilty in New York State court to the felonies of attempted enterprise corruption, a scheme to defraud, and twelve counts of insurance fraud and admitted that he owned and controlled several unlawfully licensed professional service corporations, including defendants Avenue U, Canarsie, and Flatbush.
The PC Defendants are all New York professional service corporations with principal places of business in New York. Each certificate of incorporation of the PC Defendants falsely states that one or both of the Licensed Defendants has been, at varying points in time, the PC Defendants' sole shareholder(s), director(s), and officer(s). According to the complaint, the Licensed Defendants were in fact sham shareholders, directors, and officers, who were paid a fee to allow the true owner or owners of each PC Defendant to obtain unlawfully a certificate of authority for the PC Defendant to practice medicine.
Under New York's Comprehensive Motor Vehicle Insurance Reparation Act (the "No-fault Law"), New York Insurance Law §§ 5101 et seq., State Farm, as an automobile insurer, is obligated to indemnify its insureds for, inter alia, reasonable and necessary medical services for injuries sustained by occupants of its insureds' covered motor vehicles that arise from the use or operation of those vehicles. Specifically, plaintiff is required "to reimburse a [covered] person for basic economic loss on account of personal injury arising out of the use or operation of a [covered] motor vehicle," § 5102(b), where "basic economic loss" is defined to include:
[a]ll necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health law, whether or not such services are rendered directly by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services.
N.Y.Ins.Law § 5102(a)(1). Under 11 N.Y.C.R.R. § 65.15(o)(1)(vi), one of the regulations implementing the No-fault Law, A health care provider may receive an assignment of benefits from a covered person who is treated by that provider. If a provider receives such an assignment, the covered person's insurer "shall pay the provider[] of services ... directly." 11 N.Y.C.R.R. § 65.15(j)(1).
Section 5106 of the No-fault law and the regulations pursuant thereto provide thirty days within which an insurer must either pay or deny a claim for benefits. See N.Y.Ins.Law § 5106; 11 N.Y.C.R.R. § 65.15(g)(3). No-fault benefits are deemed "overdue" if not paid within that period, and overdue payments bear interest at a rate of 2% per month. § 5106; 11 N.Y.C.R.R. § 65.15(h). In the alternative, an insurer may,...
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