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Pain and Surgery Ambulatory Surgical Center v. Liberty Mutual Ins. Co.

June 19, 2007

RE: PAIN AND SURGERY AMBULATORY SURGICAL CENTER
v.
LIBERTY MUTUAL INS. CO.



The opinion of the court was delivered by: William J. Martini Judge

LETTER OPINION

Dear Litigants:

This matter comes before the Court on Defendants' motion to dismiss Count Three of Plaintiff's Complaint and Plaintiff's motion to dismiss the Counterclaim and Third-Party Complaint. There was no oral argument. Fed. R. Civ. P. 78. For the reasons stated below, Defendants' motion is GRANTED, and Plaintiff's motion is DENIED.

BACKGROUND

This suit arises out of an insurance company's refusal to pay facility fees to a medical center. In New Jersey, drivers are covered under New Jersey's no-fault automobile insurance system (No-Fault Act, N.J.S.A. 39-6A1-35). The No-Fault Act requires automobile insurance companies, like Defendant Liberty Mutual Insurance Company ("Liberty Mutual"), to provide drivers with Personal Injury Protection ("PIP") coverage including payment of reasonable medical expenses.

Plaintiff Pain & Surgery Ambulatory Surgical Center ("P&S") is a medical center where patients receive surgical procedures. For Liberty Mutual policyholders injured in automobile-related accidents and treated at P&S, P&S sought PIP payments from Liberty Mutual for incurred medical facility fees. Liberty Mutual refused to pay these fees and asserted that P&S was not eligible to charge facility fees because of: (1) self-referral violations under the Codey Law, N.J.S.A. 45:9-22.5; (2) failure to meet New Jersey licensing requirements of a surgical facility; and (3) improper usage of the facility by non-owner physicians. P&S contests these assertions and has filed this diversity suit alleging improper withholding of PIP benefits and seeking interest on overdue PIP benefits, attorney's fees and costs, consequential and punitive damages, and a declaration from the Court regarding its status as an ambulatory surgery center.

In response, Liberty Mutual filed a counterclaim against P&S and a third-party complaint against Wyckoff Surgical Center, LLC ("Wyckoff") and several individual doctors/shareholders of P&S and Wyckoff (Kristappa Sangavaram, Robert Agresti, John C. Quinn, and Rey N. Bello) for alleged insurance fraud. Liberty Mutual contends that P&S misrepresented its status as a certified Medicare provider prior to its actual certification in order to fraudulently induce Liberty Mutual to pay facility fees. In order to charge facility fees, a surgical practice must first become a certified Medicare provider. N.J.A.C. 13:35-6.17. P&S only became a certified Medicare provider on November 24, 2004. Liberty Mutual, however, asserts that it paid facility fees incurred before November 24, 2004 to P&S based on alleged misrepresentations that P&S was a surgical practice authorized to charge facility fees. With regards to the Third-Party Complaint, Liberty Mutual argues that the Third-Party Defendants fraudulently induced it to pay facility fees to P&S and Wyckoff when they knew that Wyckoff was never licensed to charge facility fees and that P&S charged facility fees for services it rendered prior to its certification. Furthermore, Liberty Mutual claims that Defendants Kristappa Sangavaram and Robert Agresti "violated N.J.A.C. 13:35 6.16 by ow[n]ing Wyckoff with a layperson." Countercl. and Third Party Compl. ¶ 58.

Liberty Mutual's motion to dismiss Count Three of P&S's Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), and P&S and Rey Bello's motion to dismiss Liberty Mutual's Counterclaim and Third-Party Complaint for failure to plead fraud with particularity pursuant to Fed. R. Civ. P. 9(b) is now before the Court.

ANALYSIS

A. Standard of Review

In deciding a motion to dismiss under Fed. R. Civ. P. 12(b), all allegations in the complaint must be taken as true and viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc., v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the plaintiff's claims are based upon those documents. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after viewing the allegations in the complaint in the light most favorable to the plaintiff, it appears beyond doubt that no relief could be granted "under any set of facts that could be proved consistent with the allegations," a court may dismiss a complaint for failure to state a claim. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Zynn v. O'Donnell, 688 F.2d 940, 941 (3d Cir. 1982).

B. Motion to Dismiss

1. Liberty Mutual's Motion to Dismiss

In Count Three of the Complaint, P&S asserts a bad faith claim against Liberty Mutual for its denial of PIP benefits and seeks compensatory, consequential, and punitive damages. Liberty Mutual argues that P&S cannot claim punitive or consequential damages in New Jersey, and that New Jersey's no-fault statute is the exclusive remedy for claims of overdue payment of PIP benefits. Therefore, Liberty Mutual ...


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