State Farm Mut. Auto. Ins. Co. v. Slade Healthcare, Inc.

Decision Date31 March 2019
Docket NumberCivil No. ELH-17-3696
Citation381 F.Supp.3d 536
CourtU.S. District Court — District of Maryland

Robert Thomas Smith, Katten Muchin Rosenman LLP, Washington, DC, Charles J Lanzalotti, Pro Hac Vice; Bennett Bricklin and Saltzburg LLC, Marlton, NJ, Edward J Bradley, Jr., Pro Hac Vice; James T. Moughan, Pro Hac Vice; Bennett Bricklin and Saltzburg LLC, Philadelphia, PA, John W. Reale, Pro Hac Vice; Ross O. Silverman, Pro Hac Vice; Silke G. Watson, Pro Hac Vice; Katten Muchin Rosenman LLP, Emily Jean Prentice, Pro Hac Vice; Robins Kaplan Miller and Ciresi LLP, Chicago, IL, for Plaintiffs.

Steven A. Allen, Pessin Katz Law PA, Towson, MD, Andrew P. Baratta, Pro Hac Vice, Baratta Russell and Baratta, Huntingdon Valley, PA, for Defendants Slade Healthcare, Inc., Alameda Medical Center, Inc., Mount Clare Medical Center, Inc., Liberty Medical & Injury Center, Inc., Eastside Medical Center, Inc., Mondawmin Medical Center, Inc., Yevgeniy Barg, Mikhail Podinovsky, Elina Morin.

Steven A. Allen, Pessin Katz Law PA, Towson, MD, for Defendants Erdman Medical Center, Inc., Alexander Morin.

Peter T. Kandel, Eric Kirk, Kandel & Associates PA, Baltimore, MD, for Defendants Michael Mozes Enoch, Patricia Bey, Nava Bazzazieh, Randy Hallman, Timothy Owen, Wayne Sodano, Lance Miller, Tiffany Butler, Ekele Enyinnaya, Scot Kampmann, Stephen Doyle, Ronald Mukamal.


Ellen L. Hollander, United States District Judge

Plaintiffs State Farm Mutual Automobile Insurance Company ("State Farm Mutual") and State Farm Fire and Casualty Company ("State Farm Fire") (collectively, "State Farm") filed suit against twenty-three defendants, alleging fraud and unjust enrichment in connection with medical treatment provided to individuals injured in motor vehicle accidents. These individuals were eligible for so called "no-fault benefits" from State Farm under Maryland's personal injury protection law. ECF 1 ("Complaint").1 State Farm seeks compensatory damages as well as a declaratory judgment that it need not pay outstanding medical claims during the pendency of this suit. The 315-paragraph Complaint is supported by 40 exhibits. See ECF 1-2 to ECF 1-41. Jurisdiction is founded on diversity of citizenship. See 28 U.S.C. § 1332 ; ECF 1, ¶ 13.

The defendants consist of four related groups, who allegedly acted in concert. The first group is composed of six medical clinics: (1) Mondawmin Medical Center, Inc. ("Mondawmin"); (2) Alameda Medical Center, Inc.; (3) Mount Clare Medical Center, Inc.; (4) Erdman Medical Center, Inc.; (5) Liberty Medical & Injury Center, Inc.; and (6) Eastside Medical Center, Inc. ("Eastside") (collectively, the "Clinics"). ECF 1, ¶¶ 17-36. The second group consists of twelve physicians and chiropractors who provided treatment and services for the patients of the Clinics: Ronald Mukamal, M.D.; Michael Mozes Enoch, M.D.; Patricia Bey, M.D.; Nava Bazzazieh, D.C.; Randy Hallman, D.C.; Timothy Owen, D.C.; Wayne Sodano, D.C.; Lance Miller, D.C.; Tiffany Butler, D.C.; Ekele Enyinnaya, D.C.; Scot Kampmann, D.C.; and Stephen Doyle, D.C. (collectively, the "Providers"). Id. ¶¶ 37-53.

The third group comprises four of the officers and directors of the Clinics: Yevgeniy Barg; Mikhail Podinovsky (also known as Michael Podin); Alexander Morin; and Elina Morin (collectively, the "Owners"). Id. ¶¶ 54-58. They allegedly designed and directed the fraudulent scheme. Id. ¶ 8. The remaining defendant is Slade Healthcare, Inc. ("Slade"), whose website advertises the Clinics' services and the Providers' medical background. Id. ¶¶ 49-53; see, e.g. , id. ¶¶ 37-39. Slade allegedly recruited and directed patients to the Clinics. Id. ¶ 8.

In a section of the suit titled "Causes of Action," plaintiff sets forth eighteen claims for relief. See ECF 1 at 68-85. They include, multiple claims for common law fraud, unjust enrichment, and declaratory judgment. Id.

The Clinics, Owners, and Slade (ECF 43) and the Providers (ECF 52) answered in part and countersued, which they subsequently amended. ECF 65 (the Clinics, Owners, and Slade's Amended Counterclaim); ECF 66 (the Providers' Amended Counterclaim) (collectively, the "Amended Counterclaim"). The Amended Counterclaims allege defamation (ECF 65, ¶¶ 25-32; ECF 66, ¶¶ 25-32); tortious interference with prospective business advantage (ECF 65, ¶¶ 33-41; ECF 66, ¶¶ 33-41); and civil conspiracy. ECF 65, ¶¶ 42-46; ECF 66, ¶¶ 42-46.2

In addition, the Clinics, Owners, and Slade jointly moved to dismiss under Fed. R. Civ. P. 12(b)(6) (ECF 44), supported by a memorandum of law (ECF 44-1) (collectively, the "Clinic Motion") and exhibits. See ECF 44-2 to ECF 44-3. They seek dismissal of State Farm's declaratory judgment claims and claims of fraud and unjust enrichment as to claim payments made by State Farm prior to December 14, 2014. ECF 44-1. However, as to the counts of fraud and unjust enrichment, these defendants do not assert that the Complaint fails to state a claim.

Pursuant to Rule 12(b)(6), the Providers have also moved to dismiss (ECF 55), supported by a memorandum of law. ECF 55-1 (collectively, the "Provider Motion"). Like the Clinics, Owners, and Slade, the Providers seek dismissal of State Farm's declaratory judgment claims and claims of fraud and unjust enrichment as to payments made prior to December 14, 2014. ECF 55-1. In addition, the Providers seek dismissal of all unjust enrichment claims, but they do not seek dismissal of all the fraud claims. Id.

State Farm opposes the Clinic Motion. ECF 68. The Clinics, Owners, and Slade replied (ECF 71) and submitted additional exhibits. ECF 71-1 to ECF 71-10. State Farm also opposes the Provider Motion. ECF 68. The Providers replied. ECF 72. In addition, the Clinics, Owners, and Slade filed a letter (ECF 88) notifying the Court of a recent decision issued by Judge Catherine Blake in State Farm Mut. Auto. Ins. Co. v. Carefree Land Chiropractic, LLC , CCB-18-1279, 2018 WL 6514797 (D. Md. Dec. 11, 2018). State Farm responded. ECF 89.

For its part, State Farm has filed a motion to dismiss the Amended Counterclaim (ECF 69), pursuant to Rule 12(b)(6), supported by a memorandum of law (ECF 69-1) (collectively, the "State Farm Motion") and exhibits. ECF 69-2 to ECF 69-4. The defendants jointly oppose the State Farm Motion (ECF 77) and State Farm has replied. ECF 81.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons set forth below, I shall deny the Clinic Motion and the Provider Motion and grant the State Farm Motion.

I. Factual Background3

This dispute concerns alleged fraud with regard to thousands of medical claims submitted to State Farm in connection with treatment rendered by defendants to patients who had motor vehicle insurance through State Farm. The Providers and Clinics provide chiropractic and rehabilitative medical services at the Clinics. Slade maintains a website that "advertises the services provided by the Clinics and provides prospective patients with phone numbers they can call to make appointments at any of Slade's locations." ECF 1, ¶ 51

Pursuant to Maryland's personal injury protection law (the "PIP" law), Md. Code (2017 Repl. Vol., 2018 Supp.), § 19-505(a)(1)-(3) of the Insurance Article ("Ins."), a motor vehicle liability insurer must provide coverage for the medical expenses of persons involved in motor vehicle accidents. Ins. § 19-505(a)(1)-(3) provides, in part: "[E]ach insurer that issues, sells, or delivers a motor vehicle liability insurance policy in the State shall provide coverage for [ ] medical, hospital, and disability benefits" to the named insured, any family member residing in the insured's household, any individual injured while using the insured motor vehicle with the permission of the named insurer, any individual injured while in the insured motor vehicle, or any individual injured in an accident involving the insured motor vehicle while a pedestrian or operating an animal-operated vehicle or a bicycle. See ECF 1, ¶ 59.

The PIP benefits cover at least $ 2,500 of "all reasonable and necessary [medical] expenses that arise from a motor vehicle accident and that are incurred within 3 years after the accident[.]" Ins. § 19-505(b)(2)(i) ; ECF 1, ¶ 60. Notably, these benefits are "payable without regard to ... the fault or nonfault of the named insured or the recipient of benefits in causing or contributing to the motor vehicle accident[.]" Id. § 19-507(a)(1); ECF 1, ¶ 61. Such benefits are often referred to as "no fault" benefits.

Insurers, such as State Farm, must "make all payments of [these] benefits [to covered individuals, such as accident victims] ... periodically as claims for the benefits arise and within 30 days after the insurer receives satisfactory proof of claim." Ins. § 19-508(a); ECF 1, ¶ 62. If an insurer fails to make timely payment, it must pay the claimant "simple interest" on the overdue payments "at the rate of 1.5% per month." Ins. § 19-508(c); Code of Maryland Regulations

State Farm alleges that the defendants are engaged in a fraudulent medical billing scheme. According to plaintiff, from at least April 2010 through the suit's commencement on December 14, 2017, the Clinics and Providers have provided treatment and submitted medical bills that "exploit patients' insurance benefits rather than address the patients' true unique needs." ECF 1, ¶¶ 7, 17. In particular, State Farm asserts that the medical bills and supporting documentation are "the product of a fraudulent, predetermined treatment protocol (the ‘protocol’) provided by the Clinics and Providers to accident victims." Id. ¶ 3. According to State Farm, the Protocol is intended to, id. :

(a) enable the Defendants to fully exploit and collect the patients' No-Fault Benefits, which were typically $ 2,500; (b) not refer the patients to any other health care provider for any other reason, including

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