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Liberty Mutual Insurance Co. v. Healthcare Integrated Services

July 2, 2008

LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
v.
HEALTHCARE INTEGRATED SERVICES, INC., DEFENDANT-APPELLANT/CROSS-RESPONDENT, AND EDGEWATER DIAGNOSTIC IMAGING, P.A., HEALTHCARE IMAGING SERVICES OF EDGEWATER, INC., EDGEWATER IMAGING ASSOCIATES, L.P., MONMOUTH DIAGNOSTIC IMAGING, P.A., HEALTHCARE IMAGING SERVICES OF MONMOUTH, INC., MONMOUTH IMAGING ASSOCIATES, L.P., WAYNE MRI, P.A., HEALTHCARE IMAGING SERVICES OF WAYNE, INC., WAYNE IMAGING ASSOCIATES, L.P., HEALTHCARE IMAGING SERVICES OF RITTENHOUSE SQUARE, INC., RITTENHOUSE SQUARE IMAGING, P.C., RITTENHOUSE SQUARE IMAGING ASSOCIATES, L.P., KINGS MEDICAL DIAGNOSTIC IMAGING, P.C., M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C., HIS IMAGING, L.L.C., MEADOWLANDS DIAGNOSTIC IMAGING, P.A., RIVER IMAGING, P.A., STEPHEN ZINN, M.D., P.A., OMNI MEDICAL IMAGING, INC., SJG MEDICAL, INC., STEPHEN A. ZINN, M.D., PRACTICE MANAGEMENT CORPORATION, ELLIOT H. VERNON, JERALD L. FISHER, SHAWN A. FRIEDKIN, MITCHELL HYMOWITZ, MUNR KAZMIR, M.D., DOMINICK A. POLIMENI, JOSEPH J. RAYMOND, MANMOHAN A. PATEL, MICHAEL WEISS, MICHAEL LICAMELE, LYNN FOX, ROBERT BACA, SCOTT MCGRORY, MARK VERNON, DENISE KANZE, JANET ROMANIELLO, CHRISTINA ORBAN, DENISE KALLAS, DENISE LOTITO, KEVIN ANDERSON, MARTHA MINEHAN, CHRIS SCHEMENSKI, PAULETTE D'AURIA, ROBERT MASKULYAK, COLEEN GAVIN, DON DEMARTINO, MICHAEL RUTKIN, WILLIAM CRESCENZI, CALVIN SPRUNG, A.M. CARRICK, MELANIE BUCKHOLZ, R. TIGHE, PETER LIETO, C. STOUT, M. SARGENT, ABE GROSSMAN, JATIN GAJARAWALA, M.D., ARNOLD OLEFSON, M.D., THURAIASAH VIJAYANATHAN, M.D., JAY GARSMAN, M.D., GEORGE BRAFF, M.D., ARTHUR GREENE, M.D., DILIP KAPADIA, M.D., ROBERT WALLNER, M.D., ALLEN CUMMINGS, M.D., ZELIG WEINSTEIN, M.D. AND STANLEY SPRECHER, M.D., DEFENDANTS.
STATE OF NEW JERSEY, INTERVENOR-RESPONDENT.
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
HEALTHCARE INTEGRATED SERVICES, INC., DEFENDANT-APPELLANT, AND EDGEWATER DIAGNOSTIC IMAGING, P.A., HEALTHCARE IMAGING SERVICES OF EDGEWATER, INC., EDGEWATER IMAGING ASSOCIATES, L.P., MONMOUTH DIAGNOSTIC IMAGING, P.A., HEALTHCARE IMAGING SERVICES OF MONMOUTH, INC., MONMOUTH IMAGING ASSOCIATES, L.P., WAYNE MRI, P.A., HEALTHCARE IMAGING SERVICES OF WAYNE, INC., WAYNE IMAGING ASSOCIATES, L.P., HEALTHCARE IMAGING SERVICES OF RITTENHOUSE SQUARE, INC., RITTENHOUSE SQUARE IMAGING, P.C., RITTENHOUSE SQUARE IMAGING ASSOCIATES, L.P., KINGS MEDICAL DIAGNOSTIC IMAGING, P.C., M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C., HIS IMAGING, L.L.C., MEADOWLANDS DIAGNOSTIC IMAGING, P.A., RIVER IMAGING, P.A., STEPHEN ZINN, M.D., P.A., OMNI MEDICAL IMAGING, INC., SJG MEDICAL, INC., STEPHEN A. ZINN, M.D., PRACTICE MANAGEMENT CORPORATION, ELLIOT H. VERNON, JERALD L. FISHER, SHAWN A. FRIEDKIN, MITCHELL HYMOWITZ, MUNR KAZMIR, M.D., DOMINICK A. POLIMENI, JOSEPH J. RAYMOND, MANMOHAN A. PATEL, MICHAEL WEISS, MICHAEL LICAMELE, LYNN FOX, ROBERT BACA, SCOTT MCGRORY, MARK VERNON, DENISE KANZE, JANET ROMANIELLO, CHRISTINA ORBAN, DENISE KALLAS, DENISE LOTITO, KEVIN ANDERSON, MARTHA MINEHAN, CHRIS SCHEMENSKI, PAULETTE D'AURIA, ROBERT MASKULYAK, COLEEN GAVIN, DON DEMARTINO, MICHAEL RUTKIN, WILLIAM CRESCENZI, CALVIN SPRUNG, A.M. CARRICK, MELANIE BUCKHOLZ, R. TIGHE, PETER LIETO, C. STOUT, M. SARGENT, ABE GROSSMAN, JATIN GAJARAWALA, M.D., ARNOLD OLEFSON, M.D., THURAIASAH VIJAYANATHAN, M.D., JAY GARSMAN, M.D., GEORGE BRAFF, M.D., ARTHUR GREENE, M.D., DILIP KAPADIA, M.D., ROBERT WALLNER, M.D., ALLEN CUMMINGS, M.D., ZELIG WEINSTEIN, M.D. AND STANLEY SPRECHER, M.D., DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket Nos. L-2189-01 and L-149-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 6, 2008

Before Judges Coburn, Fuentes & Grall.

We consolidate these appeals from orders entered in civil actions filed under the New Jersey Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30. The actions, which were consolidated in the Law Division, involve the same parties and allegations of violations of N.J.S.A. 17:33A-4. The plaintiffs are Liberty Mutual Insurance Co. (Liberty Mutual) and the State of New Jersey. Healthcare Integrated Services, Inc. (HIS), is one of several defendants in the actions. Liberty Mutual alleged violations of the IFPA and sought compensatory damages, including reasonable costs of investigation and costs of suit and counsel fees, and treble damages, based on a pattern of violation. N.J.S.A. 17:33A-7a, b. The State also alleged violations of the IFPA but sought civil penalties pursuant to N.J.S.A. 17:33A-5.*fn1

HIS appeals from orders granting summary judgment on liability in favor of Liberty Mutual, striking its affirmative defenses, and awarding compensatory damages, including fees and costs, in a total amount of $1,848,139.38.*fn2 Liberty Mutual cross appeals from an order denying a portion of the counsel fees it incurred in pursuing its claim. HIS also appeals from orders granting partial summary judgment on liability in favor of the State, striking HIS's affirmative defenses against the State, and assessing a civil penalty against HIS in the amount of $1,005,000 plus counsel fees of $4920. The orders have been certified as final pursuant to Rule 4:42-2. Other than HIS, none of the defendants in these civil actions are presently participating in either appeal.*fn3

We begin by addressing Liberty Mutual's application to dismiss HIS's appeal as moot. This court previously denied Liberty Mutual's motion but authorized the parties to argue the issue on appeal. Liberty Mutual contends that HIS's appeal is moot because the United States Bankruptcy Court for the District of New Jersey has entered an order which states that "Liberty Mutual Insurance Company's claim be and is hereby allowed in the amount of $2,048,251.50."

The order upon which Liberty Mutual relies does not moot HIS's appeal. Federal law permits the Bankruptcy Court to reconsider an order allowing or disallowing a claim for cause.

11 U.S.C.A. § 502(j). Despite the pendency of HIS's bankruptcy petition, the validity of Liberty Mutual's claims against HIS were litigated in state court pursuant to a grant of relief from the automatic stay. See 11 U.S.C.A. § 362. We have no doubt that the Bankruptcy Court would find cause for reconsideration of its order if this court were to reverse the award in Liberty Mutual's favor, and we see no basis for assuming that the Bankruptcy Court's order reflects an adjudication of the merits of the claim, which were properly determined in state court. See Rooker v. Fid. Trust Co., 263 U.S. 413, 415-16, 44 S.Ct. 149, 150, 68 L.Ed. 362, 365 (1923); D.C. Ct. of App. v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 1311, 75 L.Ed. 2d 206, 218 (1983).

The violations of the IFPA at issue on HIS's appeal involve claims for personal injury protection (PIP) benefits for diagnostic tests paid by Liberty Mutual during a period beginning in 1995 and ending in 2003. N.J.S.A. 39:6A-4. This court has held that a provider of such services is not entitled to reimbursement for services covered by PIP unless the provider and the services are in compliance with relevant laws and regulations. Allstate Ins. Co. v. Orthopedic Evaluations, Inc., 300 N.J. Super. 510, 516 (App. Div.), certif. granted and cause remanded on other grounds, 151 N.J. 67 (1997). Our courts have also recognized that a violation of the IFPA can be based on a submission of a claim for PIP benefits for medical services rendered by or through an entity that is not in compliance with laws and regulations. Varano, Damian & Finkel, L.L.C. v. Allstate Ins. Co., 366 N.J. Super. 1, 5-7 (App. Div. 2004); Allstate Ins. Co. v. Schick, 328 N.J. Super. 611, 627-29 (Law Div. 1999). HIS does not challenge that proposition.

HIS contends that its violations were not established. On plaintiffs' motions for summary judgment, Judge Villanueva*fn4 found that HIS violated the IFPA because claims for diagnostic tests billed to Liberty Mutual were performed by entities that HIS owned and operated in violation of N.J.A.C. 13:35-2.5 and N.J.A.C. 13:35-2.6. The complex business relationships between HIS and the facilities and medical professionals involved in delivering the services billed, as well as the undisputed facts that led the judge to conclude that HIS was aware of and acted to circumvent regulations prohibiting these arrangements, are fully detailed in Judge Villanueva's written opinion of March 18, 2005. The amount of damages assessed was based on a summary of services billed and paid. HIS did not submit evidence disputing the information contained in the summary.

On May 10, 2005, Judge Villanueva awarded Liberty Mutual treble damages, including reasonable counsel fees and costs. That order was based on the pattern of illegal activity set forth in his March 18 opinion.

On June 27, 2005, the judge granted the State's motion to strike HIS's affirmative defenses; his reasons for that order are set forth in a written opinion issued on the same day. On June 28, 2005, Judge Villanueva awarded partial summary judgment to the State for reasons stated in the March 18 opinion. In accordance with N.J.S.A. 17:33A-5, he imposed civil penalties based on the number of violations.

With respect to HIS's appeals, we affirm the orders substantially for the reasons stated in Judge Villanueva's opinions of March 18 and June 27, 2005. The claims of error raised by HIS on appeal lack sufficient merit to warrant discussion in a written ...


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