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Government Employees Insurance Co. v. He

United States District Court, D. New Jersey

October 29, 2019



          KEVIN MCNULTY, U.S.D.J.

         Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company and GEICO Casualty Co. (collectively, "GEICO"), are automotive insurers that allege that defendants submitted or caused to be submitted hundreds of fraudulent claims for reimbursement of medical expenses. GEICO seeks to recover $5, 298, 000.00 that it paid to defendants. GEICO asserts eleven counts, including unjust enrichment, common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, and violations of the New Jersey Insurance Fraud Prevention Act. Defendants John Li, M.D., Anthony Surace, M.D., and Timothy Finley, M.D., now move to dismiss the complaint under Rule 12(b)(6). (DE 20, 47). Dr. Surace separately moves to dismiss for lack of proper service under Rule 12(b)(4) and 12(b)(5). (DE 20) (Herein, "defendants" refers to the movants, unless otherwise stated.)

         I. BACKGROUND[1]

         Plaintiffs are automotive insurers who have sued a number of defendants to recover funds reimbursed to defendants for allegedly fraudulent medical services. The movants, defendants John Li, M.D., Anthony Surace, M.D., and Timothy Finley, M.D., are all anesthesiologists licensed to practice medicine in New Jersey. (Compl. ¶¶ 17, 18, 25). They are alleged to have performed the relevant medical services while working at co-defendant Apex Anesthesia Associates, L.C.C. ("Apex"). Apex is a New Jersey medical professional limited liability company through which defendants allegedly provided medical services and then requested and received reimbursement from GEICO. (Id. ¶ 4(v)). Defendant Advanced Pain Care is another New Jersey medical professional limited liability company through which many of the fraudulent services were provided and billed to insurance companies, including GEICO. (Id. ¶ 4(ii))

         Under New Jersey law, automobile insurance policies provide benefits for personal injuries sustained in an accident involving the covered automobile, regardless of whether the driver was at fault for the accident. (Id. ¶¶ 36-37). This coverage is called "personal injury protection," or "PIP." (Id.). When Insureds receive treatment, they can assign their right to PIP benefits to their medical providers, who can then seek direct reimbursement from the insurance companies. (Id. ¶ 37). Defendants are such medical providers, i.e., assignees of their patients' PIP benefits.

         GEICO alleges that defendant Doctors Li, Surace, and Finley submitted, and caused to be submitted, hundreds of fraudulent no-fault insurance charges for services that were unjustified, medically unnecessary, and designed only to enrich defendants. (Id. ¶ 5). These services were claimed to have been provided to Insureds involved in automobile accidents who were eligible for coverage under no-fault insurance policies issued by GEICO. (Id. ¶ 2).

         GEICO alleges that its payments to defendants were fraudulently obtained for several reasons. Defendants allegedly billed for medically unnecessary treatments, or for treatments that did not occur at all. (Id. ¶ 3). Treatments were allegedly provided to Insureds who had only minor accidents. (Id. ¶¶ 3, 85-94). In those cases, defendants followed predetermined protocols that invented diagnoses and billed for medically unnecessary treatments. (Id.; see also ¶¶ 308-18). In many cases the billing codes for services misrepresented and exaggerated the level of service provided. (Id. ¶¶ 349-55).

         GEICO seeks to recover more than $5, 298, 000.00 that it paid in reliance on defendants' allegedly fraudulent billing. (Id. ¶ 7). GEICO's complaint asserts eleven causes of action. Of these, seven are relevant to these defendants and these motions to dismiss:

• Count 2 alleges violations of the New Jersey Insurance Fraud Prevention Act ("NJIFPA"), N.J. Stat. § 17:33A-1, et seq. (Id. ¶¶ 415-18);
• Counts 4 and 9 allege violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) [Id. ¶¶ 426-34, 463-71);
• Count 5 alleges aiding and abetting common law fraud (Id. ¶¶ 442-49);
• Count 10 alleges common law fraud (Id. ¶¶ 472-78); and
• Counts 7 and 11 allege unjust enrichment (Id. ¶¶ 450-55, 479-84).

         In response to GEICO's allegations, defendants have moved to dismiss the complaint pursuant to Rule 12(b)(6). (DE 20, 47). Surace also moves for dismissal under Rule 12(b)(4) and (5), alleging improper service. Plaintiffs oppose the motions to dismiss. (DE 35, 52).


         A. Rule 12(b)(6)

         Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Sci. Prods., Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trs. Thereof v. Tishman Constr. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

         Federal Rule of Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the complaint's factual allegations must be sufficient to raise a plaintiffs right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also West Run Student Hous. Assocs., LLC v. Huntington Nat'l Bank, 712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement'... it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.

         B. Rule 9(b)

         For claims of fraud, Federal Rule of Civil Procedure 9(b) imposes a heightened pleading requirement, over and above that of Rule 8(a). Specifically, it requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "Malice, intent, knowledge, and other conditions of a person's mind," however, "may be alleged generally." Id. That heightened pleading standard requires the plaintiff to "state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the precise misconduct with which it is charged." Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (internal quotation and citation omitted).

         In general, "[t]o satisfy this heightened standard, the plaintiff must plead or allege the date, time, and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation." Id. "Plaintiff must also allege who made the misrepresentation to whom and the general content of the misrepresentation." hum v. Bank of Am., 361 F.3d 217, 224 (3d Cir. 2004) (internal citation omitted); see also In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 276-77 (3d Cir. 2006) ("Rule 9(b) requires, at a minimum, that plaintiffs support their allegations of fraud with all of the essential factual background that would accompany the first paragraph of any newspaper story-that is, the who, what, when, where and how of the events at issue." (internal quotation and citation omitted)).

[Plaintiffs] need not, however, plead the "date, place or time" of the fraud, so long as they use an "alternative means of injecting precision and some measure of substantiation into their allegations of fraud." The purpose of Rule 9(b) is to provide notice of the "precise misconduct" with which defendants are charged and to prevent false or unsubstantiated charges. Courts should, however, apply the rule with some flexibility and should not require plaintiffs to plead issues that may have been concealed by the defendants.

Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644, 658 (3d Cir. 1998) (quoting Seville Indus. Mach. v. Southmost Mach.,742 F.2d 786, 791 (3d Cir. 1984) and citing Christidis v. First Pa. Mortg. ...

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