State Farm Mut. Auto. Ins. Co. v. Universal Rehab Servs., Inc.
| Decision Date | 30 March 2017 |
| Docket Number | Case No. 2:15-cv-10993 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. UNIVERSAL REHAB SERVICES, INC., PHYSIOFLEX, P.L.L.C., SUMMIT MEDICAL GROUP, P.L.L.C., DAVID JANKOWSKI, D.O., and AHMAD T. ABULABON, P.T., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
A. Procedural Background
On March 16, 2015, Plaintiff State Farm filed this lawsuit against Defendants Universal Rehab Services, Inc., PhysioFlex, PLLC, Ahmad T. Abulabon, P.T. (collectively the "Universal Defendants"), Summit Medical Group, PLLC, and David Jankowski, D.O. (collectively the "Summit Defendants"). On October 15, 2015, the Court denied Defendants' motions to dismiss. On October 29, 2015, the Universal Defendants filed an answer, affirmative defenses and a reliance upon jury demand; this responsive pleading did not include a counterclaim. (DE 40.)
On October 29, 2015, the Summit Defendants timely filed a combined answer, affirmative defenses and reliance upon jury demand. (DE 44.) In addition, Defendant Summit Medical Group (SMG) filed a counterclaim for (I) fraud/fraudulent misrepresentation, (II) civil conspiracy, and (III) declaratory relief. (DE 45.)
On February 23, 2016, the Court denied Plaintiff's motion to dismiss Defendant SMG's counterclaim. (DE 65.) A motion for reconsideration was also denied. (DE 104.) Thereafter, Plaintiff State Farm filed a response to SMG'scounterclaim. (DE 113.)
The scheduling order in this case contains a "Deadline to Amend" of May 11, 2016. (DE 39 at 1.) On May 6, 2016, the Universal Defendants filed a motion for leave to file a counterclaim. (DE 78.) The proposed counterclaim included counts for (i) unpaid PIP benefits; (ii) breach of settlement/release agreements; (iii) fraudulent misrepresentation; (iv) abuse of process; and (v) tortious interference with contractual relations. (DE 78-2.)
On or about June 16, 2016, Plaintiff's attorney sent counsel for the Universal Defendants what could be loosely characterized as a "Rule 11 letter" regarding the proposed counterclaims, albeit without serving an actual motion, as required by Fed. R. Civ. P. 11(c)(2). (DE 123-2.) See Ridder v. City of Springfield, 109 F.3d 288, 294-295 (6th Cir. 1997). On June 22, 2016, the Universal Defendants withdrew their motion. (DE 105.) The withdrawal of the motion - or at least the sealed version of it - was also confirmed by the Court on the record at the June 28, 2016 hearing. (DE 123-3 at 3 (p. 19).)1
Meanwhile, on May 11, 2016, Plaintiff State Farm filed a motion for leave to file a first amended complaint. (DE 85.) The Court granted that motion on June 29, 2016, noting the parties' stipulation to the amendment. (DE 106.)
On July 8, 2016, Plaintiff State Farm filed an amended complaint in which it set forth several claims: (I & V) common law fraud; (II & VI) violation of 18 U.S.C. § 1962(c) (RICO); (III) violation of 18 U.S.C. § 1962(d) (RICO); (IV & VII) unjust enrichment; and (VIII, IX and X) declaratory judgment. (DE 107.)
The Summit Defendants filed a joint answer, jury trial demand and affirmative defenses. (DE 115.) The following day, on July 22, 2016, the Universal Defendants filed an answer, affirmative defenses and reliance upon jury demand, and, notwithstanding their previous withdrawal of their motion for leave to file a counterclaim, their new answer for the first time included a counterclaim. (DE 116; see also DEs 117-119.) The various counterclaims consist of: (I) claim for unpaid PIP benefits; (II) breach of settlement/release agreements; (III) fraudulent misrepresentation; (IV) abuse of process; and (V) tortious interference with contractual relations. (DE 116 at 54-64.)
B. Instant Motion Currently before the Court is Plaintiff State Farm's October 10, 2016 motion to dismiss the Universal Defendants' July 22, 2016 counterclaims. (DE 123; see also DE 128-133.) The Universal Defendants have filed responses, and Plaintiff has filed a reply. (DEs 136, 138, 139.)2
Judge Roberts referred this motion to me for a report and recommendation. (DE 166.) I held a hearing on February 27, 2017.
C. Discussion
At the outset, Plaintiff argues that that the Universal Defendants' July 22, 2016 counterclaims should be stricken from the record, because they are untimely, Defendants did not seek leave of Court, and the delay is "unduly prejudicial." (DE 123 at 18-20.) In contrast to their earlier pleading, the Universal Defendants' July 22, 2016 filing not only responds to the first amended complaint but also adds new counterclaims.
The parties' September 25, 2015 joint discovery plan and Rule 26(f) conference report contained a "proposed case management and scheduling order" providing that "Amendments to Pleadings and Addition of Parties Requiring Consent or Leave of Court" would occur by December 1, 2015 for Defendants and by May 11, 2016 for Plaintiff. (DE 37 at 15.) Nonetheless, the Court's October 20, 2015 scheduling order did not mention "pleadings" and only set one, universal "Deadline to Amend" - May 11, 2016. (DE 39.)
Having counseled with Judge Roberts's chambers about the application of her initial scheduling order (DE 39), the undersigned is satisfied that the May 11, 2016 "Deadline to Amend" relates to the complaint and a motion to amend the complaint. Stated otherwise, this deadline does not apply to Defendants or to any of the other pleadings encompassed by Fed. R. Civ. P. 7(a). Notably, a "counterclaim" is not listed as a pleading within Fed. R. Civ. P. 7(a).
The Universal Defendants urge the Court to conclude that they were "entitled to file amended answers, including counterclaims, in response to State Farm's [first] amended complaint." (DE 138 at 17-18, et seq.) Plaintiff disagrees, specifically contending that the July 22, 2016 counterclaims "have no correlation to the scope of the Complaint's amendments." (DE 139 at 7.)
Nonetheless, the Court need not resolve the scope of Plaintiff's amendments here, nor does the Court need to address whether the Universal Defendants' July 22, 2016 counterclaim relates to Plaintiff's July 8, 2016 amendments. First, as detailed above, the May 11, 2016 deadline applies only to amendments to the complaint or to motions to amend the complaint. Second, even though a counterclaim could be treated as independent of an answer, the Universal Defendants' initial counterclaims here were filed in conjunction with their timely filed July 22, 2016 answer; therefore, leave was not required. See Fed. R. Civ. P. 15(a)(3). For these reasons, the Court sees no reason to treat the counterclaim as untimely.
Plaintiff seeks dismissal of each of the Universal Defendants' five counterclaims on the basis that they fail to state claims upon which relief may be granted and further asserting that any request for exemplary damages should be stricken. (DE 123 at 20-36; see also DE 139 at 9-13, Fed. R. Civ. P. 12(b)(6).) The Universal Defendants respond that their counterclaims are not futile. (DE 138 at 21-37.)
The Universal Defendants contend that "the treatment provided by [them] was reasonably necessary for State Farm's insureds' care, recovery, and/orrehabilitation." (DE 138 at 11-12.) "To recover for breach of contract under Michigan law, [the Universal Defendants] ha[ve] to prove: 1) the existence of a contract between [State Farm] and [the Universal Defendants], 2) the terms of the contract, 3) that [State Farm] breached the contract, and 4) that the breach caused [the Universal Defendants'] injury." Webster v. Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir. 1999).
The Court should conclude that this counterclaim survives dismissal, as it states a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). Namely, the counterclaim, as asserted, provides "a short and pain statement of the claim showing that the pleader is entitled to relief[,]" as required by Fed. R. Civ. P. 8(a)(2). (See DE 116 at 54-56 ¶¶ 84-92.) Plaintiff State Farm takes issue with the Universal Defendants' failure to put Plaintiff on notice of "the alleged breaches, namely the specific bills at issue." (DE 123 at 34.) However, as the Universal Defendants point out, their counterclaim generally alleges that ...
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