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June 28, 2005.


The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge



Pending before the Court is the motion of defendants Michael Aziz, M.D. ("Aziz") and Anne Brutus, M.D. ("Brutus") (collectively, "defendants") to dismiss the third, fourth and fifth causes of action in the complaint pursuant to Fed.R. Civ. 12(b)(6). Those causes of action are brought under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"), and common law claims for fraud and unjust enrichment. Defendants argue that the complaint does not allege the essential elements of a claim for relief under RICO and for unjust enrichment, that plaintiff's fraud claim should be dismissed for lack of particularity, and that the Court lacks subject matter jurisdiction over this case. Plaintiff State Farm Mutual Automobile Insurance Company ("State Farm" or "plaintiff") opposes the motion and asserts that the complaint states the elements of all claims alleged against defendants, and therefore the Court properly exercises subject matter jurisdiction over this action.

  In addition, Aziz and Brutus have filed objections to Magistrate Judge Matusmoto's May 26, 2005 order (the "Order") requiring them to produce certain records and information in response to document demands and interrogatories served on them by State Farm. They argue that the document demands and interrogatories at issue are overbroad, unduly burdensome and also compel them to violate regulations promulgated under the Health Insurance Portability and Accountability Act of 1996 ("HIPPA"). In response, State Farm argues that Magistrate Judge Matsumoto's ruling was neither clearly erroneous nor contrary to law, and thus defendants' objections should be overruled.

  Also pending before the Court are the objections of defendants CPT Medical Services, P.C., Hoss Medical Services, P.C., Huseyin Tuncel, M.D. ("Tuncel"), Victor Mariani, M.D. and Mark Slamowitz, D.C. (collectively, the "Tuncel Defendants") to the Order denying their application to stay discovery pursuant to Fed.R.Civ.P. 26(c). The Tuncel Defendants argue that the Magistrate Judge improvidently denied their application for a stay because the facts reveal that there is a pending state criminal case against Tuncel involving the same subject matter, and plaintiff would not be prejudiced by the issuance of a stay. Plaintiff asserts that Magistrate Judge Matsumoto correctly decided not to stay discovery because defendants failed to meet the prerequisites for doing so.

  For the reasons set forth below, defendants' motion to dismiss the complaint is denied, the objections of Aziz and Brutus to the Order are sustained in part and overruled in part, and the objections of the Tuncel Defendants to the Order are overruled.


  The facts as set forth below are drawn from the complaint, the allegations of which the Court accepts as true solely for purposes of this motion to dismiss. State Farm filed suit against, among others, Aziz, Brutus and the Tuncel Defendants, to recover millions of dollars which it paid as a result of defendants prescribing medically unnecessary current perception threshold tests ("CPT Tests") to plaintiff's insureds who were injured in automobile accidents.*fn1 Aziz and Brutus are physicians who treat insureds at several clinics in New York City for soft tissue injuries and have allegedly ordered unnecessary CPT Tests. (Compl. ¶ 2(a)). Tuncel is a medical doctor who performs the CPT Tests on the insureds and interprets the results for, among others, Aziz and Brutus. (Id. ¶ 2(b)). Defendants CPT Medical Services, P.C. and Hoss Medical Services, P.C. are professional medical corporations owned and controlled by Tuncel, through which he renders, interprets and charges for the CPT Tests.*fn2 (Id. ¶ 2(c)).

  According to the complaint, defendants know that the tests have no diagnostic value or other benefit to the insureds, the billing codes submitted to State Farm for the CPT Tests materially misrepresent the nature of the tests, and the documents submitted by defendants in support of the charges for the CPT Tests are false and materially misleading. (Compl. ¶ 3). State Farm contends that the sole purpose of the tests was to generate fees and revenue for defendants and their co-conspirators. (Id.) Under New York's Comprehensive Motor Vehicle Insurance Reparations Act, N.Y. Ins. Law § 5101 et seq. and regulations issued thereunder, automobile insurers, like State Farm, are required to provide personal injury protection benefits for basic economic loss ("No-Fault Benefits") up to $50,000 per insured for necessary health care goods and services, including medically necessary diagnostic tests. (Compl. ¶¶ 5, 6). Insureds may assign their right to No-Fault Benefits directly to providers of medically necessary diagnostic tests. (Id. ¶ 7). Pursuant to such assignments, providers may submit claims directly to insurance companies and receive payment for these tests. (Id.).

  The purpose of the CPT Tests is ostensibly to diagnose the existence of abnormal conditions in the peripheral nerves and nerve roots of the insureds caused by the automobile accidents. (Compl. ¶ 20). However, the CPT Tests are non-invasive, purport to diagnose abnormalities only in the sensory nerves and sensory nerve roots, and cannot provide any diagnostic information about the motor nerves and motor nerve roots. (Id. ¶ 21). In the cases of many, if not all, of the insureds who were ordered to undergo CPT Tests by Aziz and Brutus (and the other Prescribing Doctors), these patients were also administered three tests by other medical providers at or around the same time which result in the most accurate diagnosis concerning the existence, nature, extent and specific location of abnormalities (i.e., neuropathies) in the peripheral nerves and nerve roots. (Id. ¶¶ 13, 19). These three diagnostic tests are called nerve conduction velocity tests ("NCVs"), electomyography tests ("EMGs") and magnetic resonance imaging tests ("MRIs"). (Id. ¶ 13). According to State Farm, "[e]ven if the CPT Tests had diagnostic value for these [i]nsureds, which they do not, there is absolutely no legitimate medical reason why CPT Tests would have been necessary under these circumstances." (Id. ¶ 19).

  Plaintiff contends that the validity of CPT Tests to diagnose the existence, nature, severity or specific location of any abnormalities in the sensory nerves or any of the nerve fibers of which they are comprised is medically unproven. (Compl. ¶¶ 31-35). Moreover, the two manufacturers of equipment used to perform CPT Tests allege that their competitor's product is, among other things, unreliable, irrelevant to its purpose and a fraud. (Id. ¶¶ 25-30). Further, plaintiff charges that even if the CPT Tests could produce valid diagnostic information, defendants do not follow the necessary protocols established by the manufacturers, for example, ordering the tests to be conducted within 14-21 days of the insured's automobile accident. (Id. ¶¶ 36-38).

  In support of its claims, plaintiff avers that defendants submitted false and materially misleading statements set forth in "boilerplate letters" of medical necessity which they have signed or which bear their signature stamp. (Compl. ¶¶ 39-40). These letters are false and misleading because they erroneously assert that the insureds were prescribed to undergo CPT Tests "to detect and quantify the presence of any neuropathies [i.e., abnormal conditions in the nerves] or radiculopathies [i.e., pinched nerve roots] . . . and will allow for early targeted intervention before morbidity can jeopardize outcome." (Id. ¶ 41). Not only do the CPT Tests fail to provide such information, but the tests were performed on the insureds well after NCVs, EMGs and MRIs were or easily could have been performed to allow for superior intervention. (Id.). The necessity letters also falsely represent that insureds have not received NCVs, EMGs and/or MRIs prior to undergoing the CPT Tests, and make other assertions which are unsupported medically, including that the CPT Tests quantify "the functional integrity of both the large and small afferent (sensory) nerve fibers."*fn3 (Id. ¶¶ 42-45).

  Plaintiff asserts that they have justifiably relied on the forms signed by, among others, Aziz and Brutus. (Compl. ¶ 69). It alleges that it is statutorily and contractually obligated to promptly and fairly process claims within thirty days. (Id. ¶ 70). State Farm contends that the facially valid documents signed by defendants and ultimately submitted to it, along with the false statements contained within, caused plaintiff to rely on them. (Id.).

  Plaintiff states that Aziz ordered CPT Tests for at least fifty-three insureds, and Brutus ordered CPT Tests for at least 30 insureds, both of them knowing that the tests were medically unnecessary and of no diagnostic value. (Compl. ¶¶ 79, 80). State Farm seeks damages in excess of $2,500,000 as a result of the alleged conspiracy. (Id. ¶ 100).

  During discovery, State Farm served on Aziz and Brutus certain interrogatories and document requests. Defendants objected to several of these demands as being overbroad, unduly burdensome, requiring them to violate HIPPA and therefore clearly erroneous and contrary to law. For example, document request number 4 asks for "all documents relating to any transactions which generated cash or currency to be used in any way by or for your business" and document request number 33 asks for "all documents reflecting . . . any income you have received in any entity that has provided health care services." (Brutus ...

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