The opinion of the court was delivered by: Hurley, Senior District Judge
Presently before the Court is a motion brought by defendants Valley Physical Medicine & Rehabilitation, P.C. ("Valley"), Elite Physical Medicine & Rehabilitation, P.C. ("Elite"), Universal Express, Inc. ("Universal"), Dr. Joseph Mills ("Mills") and Dr. Pavani Tipirneni ("Tipirneni") (collectively "Defendants") to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the first through seventh causes of action asserted in the amended complaint.*fn1 For the reasons set forth below, the motion to dismiss is denied.
Plaintiffs Allstate Insurance Company, Allstate Indemnity Company and Deerbrook Insurance Company (collectively "Allstate"or "Plaintiffs") commenced this action on December 20, 2005 asserting causes of action for fraud (first claim for relief), for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") (second through seventh claims for relief), unjust enrichment/restitution (eighth claim for relief) and a declaratory judgment (ninth claim for relief). As asserted in the original complaint, Allstate's claims arise out of payments it made from 1996 to 2002 totaling in excess of one million dollars to Valley and Elite for services allegedly rendered to Allstate's insureds under New York State's no-fault insurance system. (Compl. ¶¶ 58 & 66.) Defendants moved to dismiss the complaint and the Court partially granted the motion to dismiss and directed the filing of an amended complaint. More particularly, theCourt(1) dismissed the causes of action for fraud and unjust enrichment seeking to recover for no-fault payments made to Defendants prior to April 4, 2002 to the extent they were premised upon fraudulent billing in the nature of excessive or unnecessary services or for services by unlicensed individuals that were not timely denied in accordance with N.Y. Insurance Law § 5106(a); and (2) dismissed the RICO claims as barred by the statute of limitations to the extent they sought to recover for payments made to Valley prior to December 20, 2001. See Memorandum & Order, dated February 21, 2007. Thereafter, the Court granted Allstate's motion for reconsideration and vacated its prior decision to the extent it dismissed the fraud and unjust enrichment claims based on fraudulent billing. See Memorandum & Order, dated March 31, 2008. Familiarity with these prior decisions is presumed.
The Allegations of the Amended Complaint
The following facts are taken from the Amended Complaint ("AC").
In New York, only doctors of medicine and of osteopathy are physicians and are authorized to practice medicine. See N.Y. Educ. Law §§ 6522, 6524. New York law also prohibits non-physicians from sharing ownership in medical service corporations. See N.Y. Bus. Corp. Law §§ 1507, 1508, and N.Y. Educ. Law § 6507(4)(c). (AC ¶¶ 1, 26-27.) The Defendants allegedly engaged in a scheme to evade the State's prohibition on non-physicians from sharing ownership in medical service corporations in order to facilitate fraudulent no-fault billing. (AC ¶¶ 3- 10.) In 1996 Mills, a chiropractor, closed his chiropractice office and formed Universal for the purpose of managing a professional medical corporation through which he could bill for medical services. Mills paid Drs. Tipirneni, Quereshy, and Lahiri to use their names on paperwork filed with the State to establish medical service corporations, to wit: Valley and then Elite.*fn2 (AC ¶¶ 11-12; 30-31.) Once Valley and Elite were established under the facially valid cover of the nominal physician owners, Mills actually operated the companies. (AC ¶¶ 12) Enabled by the doctor defendants, Valley, Elite, Universal, and Mills proceeded to bill Allstate for medical services that were either nonexistent, or were not provided by medical doctors, or medically unnecessary and/or medically useless, and engaged in other fraudulent billing practices. (AC ¶¶ 13-14; 32-35.)*fn3 The amended complaint provides further specificity as to the allegedly fraudulent billing practices. (See AC ¶¶ 36-45; id. at Exs. B &C.) Mills then drained all the profits from Valley and Elite though management agreements and leases to Universal, which is wholly owned by him.
The instant action is neither the first nor the only action between these parties. In 1999, Valley commenced an action against Allstate, which was removed to this Court, seeking payment for services allegedly rendered under no-fault policies from 1997-99. During discovery, Allstate obtained evidentiary support for its defense that Mills was the true owner of Valley. Although a trial of the action began, during its direct case Valley voluntarily withdrew the action with prejudice. (AC ¶ 15.)
Based on these allegations and as relevant to the instant motion, Allstate alleges a cause of action for common law fraud (first claim for relief) and six RICO causes of action (second through seventh claims for relief).
I. Motion to Dismiss Standard
Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6).
First, in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 550 U.S. at 562. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Id. at 570.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's 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. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Id. at 555 (citations and internal quotation marks omitted).
More recently, in Ashcroft v. Iqbal, -- U.S. --, 129 S.Ct. 1937 (2009), the Supreme Court provided further guidance, setting a two-pronged approach for courts considering a motion to dismiss. First, a court should "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." 129 S.Ct. at 1950. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949 (citing Twombly, 550 U.S. at 555)).
Second, "[w]hen there are well-pleaded factual allegations a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. "Determining whether a complaint states a plausible claim for relief [is]... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. The Court defined plausibility as follows:
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"
Id. at 1949 (quoting and citing Twombly, 550 U.S. at 556-57) (internal citations omitted). In other words, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[n]' - that the pleader is entitled to relief." Id. at 1950.
II. The RICO Causes of ...