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State Farm Mutual Automobile Insurance Co. v. CPT Medical Services

July 22, 2008


The opinion of the court was delivered by: I. Leo Glasser, United States Senior District Judge



On October 22, 2007, Plaintiff State Farm Mutual Automobile Insurance Company ("State Farm" or "Plaintiff"), a nationwide automobile insurer, filed its amended complaint against forty-seven defendants, alleging that it was defrauded when defendants CPT Medical Services, P.C., Hoss Medical Services, P.C., Channel Diagnostics, P.C., and East-Way Chiropractic, P.C. (the "Defendant Medical Corporations") performed medically unnecessary diagnostic current perception threshold tests ("CPT tests") on patients covered by State Farm insurance, and then submitted bills to State Farm for those tests with fraudulent documentation purporting to support the medical necessity of those tests. Plaintiff claims that the defendants who performed the CPT tests, Drs. Huseyin Tuncel and Andrew Susi, owned and operated the Defendant Medical Corporations in name only, when in fact they were secretly owned and operated by layperson Richard Weinstein through defendant management companies Richard's Medical Management Corp. and Weinstein Healthcare Management, Inc. (the "Weinstein Entities") in violation of New York law requiring medical corporations to be owned by licensed physicians. To carry out their fraudulent scheme, Weinstein and the Weinstein Entities paid kickbacks to either the treating physicians or other lay persons who controlled the medical corporations in order to obtain patient referrals and letters of medical necessity that they submitted to State Farm to bolster their claims. State Farm was required to pay these claims within thirty days pursuant to New York's No-Fault laws, N.Y. Ins. Law § 5101 et seq.,and the regulations promulgated pursuant to those laws, 11 N.Y.C.R.R. § 65 et seq.

Discovery has been ongoing in the action. This Memorandum & Order concerns two different discovery disputes.

A. Deposition of Dr. John McGee

State Farm subpoenaed Dr. John McGee, a non-party, to appear for a deposition on April 1, 2008. It claims that Dr. McGee was one of the treating physicians that ordered CPT tests from the Defendant Medical Corporations. He was also the principal of two non-party medical corporations, Ostia Medical and Wexford Medical, that billed State Farm for medically unnecessary CPT tests and submitted fraudulent supporting documentation almost identical to that submitted by the Defendant Medical Corporations. Pl. Br. at 2-3. State Farm asserts that Dr. McGee's deposition is necessary to provide direct testimony about why CPT Tests billed by the CPT Medical Defendants were performed, the basis for certain statements about CPT Testing that State Farm alleges were fraudulent, and the conduct of named defendants in the case, including the CPT Medical Defendants, the Weinstein Entities, Richard Weinstein, Huseyin Tuncel, Andre Susi, Yan Moshe and Dr. Riaz Ahmad.


On March 27, 2008, Dr. McGee moved the Court for a protective order pursuant to Federal Rule of Civil Procedure 26(c) to "define the parameters of the testimony" that he would be required to provide. Letter to Judge Matsumoto, dated March 27, 2008, at 1. Dr. McGee believes that at his deposition State Farm will question the propriety of his medical practice and whether he violated any rules of professional conduct. Id. This belief is based on Dr. McGee's assertion that State Farm has in the past used depositions of other physicians to "intentionally seek[] out information of professional misconduct in order to report the doctors to state authorities," thereby gaining the added benefit of "being able to deny all pending and future insurance claims from those doctors." Id. at 3. Dr. McGee contends that he should be afforded a qualified privilege not to answer questions regarding his medical practice because if he were subjected to similar questioning from a professional disciplinary committee he would be given notice of the claims against him, given time to prepare a defense, and granted a hearing.

On April 7, 2008, Judge Kiyo A. Matsumoto, the magistrate to whom this action was referred to oversee discovery, denied Dr. McGee's request as follows:

The court declines to stay Dr. McGee's deposition and directs Dr. McGee to answer all questions that are relevant to the claims and defenses of the parties to this action or that are likely to lead to the discovery of admissible evidence. Dr. McGee has not demonstrated the existence of any privilege that would allow him to avoid answering relevant questions that might put his medical license at risk. Dr. McGee's assertion that disciplinary proceedings may be commenced against him as a result of his deposition testimony are speculative at this time, nor has he shown that he would not be afforded due process in any disciplinary proceedings against him.

Docket Minute Entry dated April 7, 2008. Dr. McGee now objects to Judge Matsumoto's ruling.

B. Bank Subpoenas

State Farm also served subpoenas on the Bank of America and Morgan Stanley (the "Banks") for financial documents related to Weinstein and the Weinstein Entities (the "Weinstein defendants") to determine how the alleged kickback payments were made. The subpoenas sought:

Any and all documents or records, in either paper or electronic form, relating to Richard Weinstein or [certain account numbers], including but not limited to account statements, cancelled checks, deposit slips, withdrawal slips, records of wire transfers, signature cards, loans and/or loan applications, corporate resolutions, documents related to the opening and/or closing of any account, documents related to any reporting or filing with any governmental agency ...

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