ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE NEW JERSEY INSURANCE COMPANY, Plaintiffs-Appellants,
NORTHFIELD MEDICAL CENTER, P.C.; ROBBAN ARIEL SICA, M.D.; SCOTT DAVID, D.O.; J. SCOTT NEUNER, D.C.; JSM MANAGEMENT COMPANY, INC.; TILTON CHIROPRACTIC CENTER, P.C.; TILTON CHIROPRACTIC CENTERS, SOUTH DIVISION, P.C.; ARNOLD BACARRO, M.D.; PANKAJ ANAND AGRAWAL, M.D. a/k/a "PANKAJ ANAND"; ALAN CARR, D.O.; VORRIE MACOM, M.D.; ALONSO V. CORREA, M.D.; ALONSO V. CORREA, M.D., P.C.; CORREA MEDICAL DIAGNOSTICS, P.C.; MEDICAL INNOVATIONS, INC., Defendants, and DANIEL H. DAHAN, D.C.; PRACTICE PERFECT; MEDICAL NEUROLOGICAL DIAGNOSTICS, INC., Defendants-Respondents, and ROBERT P. BORSODY, ESQ., Defendant-Respondent, and AMERICAN ARBITRATION ASSOCIATION, Defendant in Interest.
syllabus is not part of the opinion of the Court. It has been
prepared by the Office of the Clerk for the convenience of
the reader. It has been neither reviewed nor approved by the
Supreme Court. Please note that, in the interest of brevity,
portions of any opinion may not have been summarized.
January 4, 2017
certification to the Superior Court, Appellate Division.
J. Hall argued the cause for appellants (McGill & Hall
and Pashman Stein, attorneys; Mr. Hall and Michael S. Stein,
on the briefs).
Lawrence S. Lustberg argued the cause for respondent Robert
P. Borsody, Esq. (Gibbons, attorneys; Mr. Lustberg and Amanda
B. Profess, on the briefs).
Christopher B. Turcotte argued the cause for respondents
Daniel H. Dahan, D.C., Practice Perfect and Medical
Neurological Diagnostics, Inc.
Zen Jackson argued the cause for amici curiae Medical Society
of New Jersey and the American Medical Association (McElroy,
Deutsch, Mulvaney & Carpenter, attorneys).
Meisel submitted a brief on behalf of amicus curiae New
Jersey Dental Association.
J., writing for a unanimous Court.
appeal, the Court reviews the Appellate Division's
determination that the trial court erred in finding a knowing
violation of the Insurance Fraud Prevention Act (IFPA),
N.J.S.A. 17:33A-1 to -30. After a bench trial, Robert P.
Borsody, Esq., a New York attorney, and Daniel H. Dahan, a
California chiropractor, were found to have violated the IFPA
to the extent they promoted and assisted in the creation of a
practice structure designed to circumvent regulatory
requirements with respect to the control, ownership, and
direction of a medical practice.
13:35-6.16(f), codified in 1992, explicitly provides that a
medical doctor with a plenary scope of practice may not be
employed by a licensee with a more limited scope of practice,
such as a chiropractor. In 1995, the Executive Director of
the State Board of Medical Examiners (Board), issued a
letter-opinion in response to a hypothetical scenario in
which a professional association was divided between a
chiropractor holding a seventy-percent interest and a doctor
holding a thirty-percent interest. The director wrote that
"[The Board] would find it inappropriate for a physician
with a plenary scope of practice (M.D./D.O.) to be in a
position where the practitioner with a limited scope of
practice (here, a [chiropractor]) can compel-by the simple
fact of majority voting rights- the medical doctor to accept
contracts for the provision of all manner of services."
1990s, Dahan began organizing a series of lectures throughout
the country through his company, "Practice
Perfect." Practice Perfect lectures were marketed toward
chiropractors and focused on the creation of
multi-disciplinary practices in which chiropractors work with
physicians and other medical professionals. Borsody made
presentations at Practice Perfect lectures on the legal
issues arising from such multi-disciplinary practices.
1996, New Jersey-licensed chiropractor John Scott Neuner
attended a two-day Practice Perfect seminar at which both
Dahan and Borsody presented. The practice model, developed by
Borsody and pitched at Dahan's programs, included a
number of safeguards to prevent the nominal doctor-owner of
the medical corporation from seizing control of the practice
from the real investor-the chiropractor. Prior to the seminar
attended by Neuner, Borsody wrote at least one trade article
that correctly stated that New Jersey requires a majority of
the ownership interest in a medical corporation to be owned
by medical doctors.
March 1997, after attending the Practice Perfect seminar
described above, Neuner signed a contract with Dahan to
become a client of Practice Perfect. Neuner hired Dr. Robban
A. Sica, M.D., as the initial doctor-owner of Northfield.
Neuner also hired several doctors to work at Northfield who
held no ownership interest in the practice.
1998, Allstate, which had been receiving insurance claims for
treatment provided at Northfield, began investigating the
legality of Northfield's practice structure. Neuner
retained Borsody to represent him and, in January 1999,
Borsody wrote that because the doctors hired to work at
Northfield did not own stock in the medical practice,
Neuner's employment of those doctors likely violated
existing guidance from the Board. As a result of its
investigation, Allstate refused payment on approximately
$330, 000 in claims of patients treated by Northfield.
filed the instant action on October 19, 1999, against Neuner,
Northfield, Dahan, Borsody, and a number of additional
defendants. Neuner settled with Allstate early in the
proceedings, in part in exchange for his agreement to testify
against his co-defendants. For present purposes, the salient
charges of the complaint allege that Borsody and Dahan
(collectively, defendants) violated the IFPA by knowingly
assisting Neuner in the creation and operation of a
multi-disciplinary practice whose insurance claims were
fraudulent under the IFPA. Allstate's theory of the case
relies on the practice's failure to comply with governing
standards on the corporate practice of medicine, a necessary
precondition to a valid insurance claim.
trial court found that Borsody and Dahan violated the IFPA
when they "knowingly assisted, conspired with and urged
Neuner to operate in a fashion that violated the law."
In an unpublished opinion, the Appellate Division reversed,
concluding that the evidence did not support a finding that
defendants knowingly violated the IFPA. The Court granted
Allstate's petition for certification. 223 KI 555 (2015).
Defendants extensively promoted a professional practice
structure that a fact-finder could reasonably conclude was
little more than a sham intended to evade well-established
prohibitions and restrictions governing ownership and control
of a medical practice by a non-doctor. In light of the broad
anti-fraud liability imposed under the IFPA, holding
defendants responsible for promoting and assisting in the
formation of an ineligible medical practice was not a novel
or unanticipated application of the statute. The trial court
correctly applied a plain-language understanding of
"knowing, " and its finding of a knowing violation
of the IFPA is amply supported in this record.
N.J.S.A. l7:33A-4(b) instructs that "[a] person or
practitioner violates [the IFPA] if he knowingly assists,
conspires with, or urges any person or practitioner to
violate any of the provisions of this act." Defendants
were found to have knowingly assisted or conspired with
Neuner in violating the IFPA by promoting and helping Neuner
with the construction of an impermissible professional
practice structure that enabled the chiropractor to benefit
from proceeds derived from his submission of medical claims
for reimbursement, in violation of N.J.S.A. 17:33 A-4(a),
(c). Proof of such violation need only be found to exist
based on a preponderance of the evidence, (pp. 24-26)
is not a criminal case. The trial court rightly did not
import aspects of a "knowing" mens rea from the
Criminal Code into the civil liability section of the IFPA at
issue. Rather, the court correctly applied a plain-language
understanding of "knowing, " which is well
understood to be an awareness or knowledge of the illegality
of one's act. That knowledge need not come from a prior
decision holding that the precise conduct at issue gives rise
to a violation of a legal requirement. There is ample
precedent supporting the proposition that a party's
knowledge as to the falsity or illegality of his conduct may
be inferred from the surrounding factual circumstances, (pp.
Defendants claim that they could not have knowingly violated
the IFPA because it was not clear that compliance with
practice-structure regulations was "material" to
insurance submissions. The Court does not accept that a
reasonable actor would not have known that compliance with
the regulatory provisions governing the organization,
supervision, and control of a medical practice was material
to an insurance submission by that medical practice. Health
care services are highly regulated. One cannot claim, or
feign, ignorance of those regulatory requirements and
restrictions until there is an express command applicable to
a precise set of facts, (pp. 35-38)
Court reviews the regulatory requirements in place governing
the lawful structures for medical practices when Borsody and
Dahan promoted their practice model and notes that the 1995
letter makes plain that the Board would allow no subterfuge
to shield the existence of a real or potential corrupting
influence that could be exercised by a management company or
by a professional association where a licensee with a lesser
scope of practice, like a chiropractor, could actually wield
control over the practice of medicine by a plenary licensee,
Based on the regulations in effect at the time and the
testimony at trial, the trial court here could reasonably
conclude that Borsody, as well as Dahan, knew of the
regulatory requirements at issue, promoted a practice scheme
specifically designed to circumvent those requirements while
appearing compliant, and therefore knowingly assisted in the
provision of services, the foreseeable result of which was
the submission of invalid and misleading claims under the
IFPA. The documents and structure promoted and designed by
defendants accomplished what the regulations sought to avoid.
They placed control over the medical practice in the hands of
a chiropractor, subjecting plenary licensees to his effective
control. The lengths that defendants went to in shielding the
true controller of this practice from view undermine any
basis for interfering with the trial court's assessment
of the mixed question of fact and law that was presented to
the court, (pp. 40-44)
judgment of the Appellate Division is REVERSED. The case is
REMANDED to the Appellate Division for proceedings consistent
with this opinion.
JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-VINA,
SOLOMON, and TIMPONE join in JUSTICE LaVECCHIA's opinion.
JUSTICE ALBIN did not participate.
Allstate Insurance Company (Allstate) filed a complaint
alleging statutory claims of insurance fraud against
defendants Robert P. Borsody, Esq., a New York attorney, and
Daniel H. Dahan, a California chiropractor (collectively,
defendants). After a bench trial, defendants were found to
have violated the Insurance Fraud Prevention Act (IFPA),
N.J.S.A. 17:33A-1 to -30, by assisting a New Jersey
chiropractor in the late 1990s in the creation of an unlawful
multi-disciplinary practice, which submitted medical
insurance claims to Allstate. The trial court determined that
Borsody and Dahan violated the IFPA to the extent they
promoted and assisted in the creation of a practice structure
that was designed to circumvent regulatory requirements with
respect to the control, ownership, and direction of a medical
Appellate Division reversed that judgment. In doing so, the
panel relied on defendants' arguments that Allstate had
not established that defendants actually knew that their
practice model violated regulatory requirements governing the
lawful ownership and control of a medical practice, and that,
even if evidence of such knowledge could be found in this
record, Allstate had not established that defendants knew
that a violation of those regulatory requirements could
constitute insurance fraud under the provision of the IFPA
that creates liability for one who "knowingly assists,
conspires with, or urges any person or practitioner to
violate any of the provisions of [the IFPA]." N.J.S.A.
l7:33A-4(b). The Appellate Division concluded that the trial
court erred in finding a knowing IFPA violation on the facts
sought our review of that determination, and we now reverse.
extensively promoted a professional practice structure that a
fact-finder could reasonably conclude was little more than a
sham intended to evade well-established prohibitions and
restrictions governing ownership and control of a medical
practice by a non-doctor. Further, in light of the broad
anti-fraud liability imposed under the IFPA, holding
defendants responsible for promoting and assisting in the
formation of an ineligible medical practice -- created for
the obvious purpose of seeking reimbursement for medical care
delivered by that practice -- was not a novel or
unanticipated application of the statute. We conclude that
the trial court's finding of a knowing violation of the
IFPA is amply supported in this record, which contains
compelling evidence demonstrating how the structure shielded
from view its effective circumvention of regulatory rules.
reasons that follow, we reverse on the sole issue found to be
determinative by the Appellate Division. Because there were
other issues not reached by the panel, we remand to the
Appellate Division to allow for their evaluation.
consideration of this matter necessitates, first and
foremost, an understanding of the rules and requirements for
ownership, control, and direction of a physician's
practice. Accordingly, before addressing the facts, we
identify the requirements in place at the time relevant to
State Board of Medical Examiners (Board) -- the entity
responsible for establishing standards for professional
practice by licensed physicians -- has addressed the
permissible types of professional practice forms. A
regulation, adopted by the Board in 1992 and codified at
N.J.A.C. 13:35-6.16, figures prominently in this
the codification of N.J.A.C. 13:35-6.16, the Board
established limits on the corporate practice of medicine.
Section 6.16(f) lists the appropriate types of private
practices -- for example, solo practice, partnership, and
medical corporation -- and explicitly provides that a medical
doctor with a plenary scope of practice may not be employed
by a licensee with a more limited scope of practice, such as
a chiropractor. In directing the proper structure of a
medical practice, the regulation provides that
[a] practitioner may practice solo and/or may employ or
otherwise remunerate other licensed practitioners to render
professional services within the scope of practice of each
employee's license, but which scope shall not exceed that
of the employer's license. The practitioner may employ
ancillary non-licensed staff in accordance with Board rules,
if any, and accepted standards of practice.
[N.J.A.C. 13:35-6.16(f) (1) .]
(f)(2) directs that
[a] practitioner may practice in a partnership, professional
association, or limited liability company, but such entity
shall be composed solely of health care professionals, each
of whom is duly licensed or otherwise authorized to render
the same or closely allied professional service within this
subsection (f)(3) defines employment as "an ongoing
associational relationship between a licensee and
professional practitioner(s) or entity on the professional
practice premises for the provision of professional services,
whether the licensee is denominated as an employee or
independent contractor, for any form of remuneration."
N.J.A.C. 13:35-6.16(f)(3). Thereafter, subsection
f(3)(i) provides that
[a] practitioner may be employed, as so defined, within the
scope of the practitioner's licensed practice and in
circumstances where quality control of the employee's
professional practice can be and is lawfully supervised and
evaluated by the employing practitioner. Thus, a practitioner
with a plenary license shall not be employed by a
practitioner with a limited scope of license, nor shall a
practitioner with a limited license be employed by a
practitioner with a more limited form of limited license. By
way of example, a physician with a plenary license may be
employed by another plenary licensed physician, but an M.D.
or D.O. may not be employed by a podiatrist (D.P.M.) or
chiropractor (D.C.) or midwife or certified nurse midwife
(R.M., C.N.M.). A podiatrist may not employ a chiropractor.
This section shall not preclude any licensee from employing
licensed personnel such as nurses, x-ray technologists,
physical therapists, ophthalmic dispensers and ophthalmic
technicians, etc., as appropriate to the primary practice of
[N.J.A.C. 13:35-6.16(f) (3) (i) .]
addition to the above-mentioned parts of section 6.16,
N.J.A.C. 13:35-6.17 bears noting, specifically
subsections (h) and (i), which permit administrative
contracts between a management company and a professional
practice. The permissibility of a medical practice's use
of a ...