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Allstate Insurance Company v. Kumar

United States District Court, Second Circuit

June 3, 2013

ALLSTATE INSURANCE COMPANY, Plaintiff,
v.
PUNEET KUMAR, M.D., et al., Defendants.

REPORT AND RECOMMENDATION

RONALD L. ELLIS, Magistrate Judge.

I. INTRODUCTION

On October 28, 2010, Allstate Insurance Company ("Allstate") commenced this action against Puneet Kumar, M.D., John Cosby, M.D. ("Nominal Owner Defendants"); ABL Medical P.C., Cosby Medical, P.C., Magenta Medical, P.C. (collectively, "P.C. Defendants"); Leonard Gerchick; Alexander "Doe"; Christopher Montana, D.C.; David Slidovker a/k/a Dmitry Slidovker; Anatta Lcvinsky; Hamlet Balbuena; Yvette Williams; Inwood Management, Inc.; Solid Management & Billing, Inc.; Soma Health Care Billing and Management Inc.; and EV Health Care Management, Inc. (collectively, "Management Defendants") seeking declaratory judgment pursuant to 28 U.S.C. § 2201 and § 2202 and alleging violations of 18 U.S.C. §§ 1962(c) and (d), state fraud, and unjust enrichment. (Compl.¶¶ 91-175.) Allstate moved for entry of default against all defendants and the Clerk of the Court entered the defaults. Allstate is seeking trebled damages pursuant to 18 U.S.C. § 1964(c) and prejudgment interest pursuant to New York C.P.L.R. § 5001 and § 5004. Mem. of Law in Support of Pl. Mot. for Default Against Def. Leonard Gerchick ("Mot.") 14; Supp. Mem. of Law on Damages 2-7 ("Supp. Mem.").

This inquest on damages was referred on October 26, 2011. For the reasons set forth below, I respectfully recommend that: (1) Defendants ABL and Inwood be jointly and severally liable for $362, 283.30, reflecting $221, 269.53 in damages under common law fraud and unjust enrichment, plus $151, 013.77 for prejudgment interest; (2) Defendant Inwood be liable for $653, 808.59, reflecting $663, 808.59 in treble damages, minus the $10, 000 settlement payment by Defendant Kumar; (3) Defendants Balbuena, Solid, and Cosby be jointly and severally liable for $89, 083.40, reflecting $90, 484.30 in damages under common law fraud and unjust enrichment, plus $53, 599.10 in prejudgment interest, ; (4) Defendant Balbuena and Solid be jointly and severally liable for $271, 452.90 in treble damages, minus the $55, 000 settlement payment by Defendants Montana, Slidovker, Levinski and Soma; (5) Defendant Magenta be liable for $278, 026.93, reflecting $171, 046.77 in damages under common law fraud and unjust enrichment, plus $106, 980.16 in prejudgment interest, minus the $45, 000 settlement payment by Defendants Williams and EV.

II. BACKGROUND

New York permits health care providers such as medical professional corporations to submit claims to a medical insurer for no-fault benefit medical services rendered and to receive payments in return. 11 NYCRR § 65-3.11. A fraudulently incorporated medical professional corporation may not be reimbursed for false billing practices. 11 NYCRR § 3.16(a)(12). Under New York law, medical professional corporations must be owned and operated by licensed physicians. N.Y. Bus. Corp. § 1507. Allstate claims that Management Defendants are not, and never have been, licensed physicians, and that they unlawfully incorporated, owned, and controlled a series of medical professional corporations, including P.C. Defendants. (Compl. ¶¶ 1-3.) It asserts that Management Defendants illegally purchased the use of Nominal Owners Defendants' medical licenses for the purpose of submitting false claims for payment under New York's no-fault insurance laws. ( Id. ¶ 32.)

Allstate alleges that the Management Defendants entered into contracts with the fraudulently incorporated medical professional corporations, P.C. Defendants, for billing and other management services. ( Id. ¶ 37-39.) The Management Defendants billed the P.C. Defendants to maintain the latter in constant debt to the former. (Id.) Management Defendants funneled insurance payments from the fraudulently incorporated medical professional corporations to themselves. ( Id. 39.)

Allstate filed its Complaint, which invokes this court's diversity jurisdiction, on October 28, 2010. It asserted claims of common law fraud and unjust enrichment against all Defendants, and Racketeer Influenced and Corrupt Organizations ("RICO") Act violations against all Defendants, save the P.C. Defendants, which Allstate regards as the enterprises used as tools in the racketeering conspiracy or activity. (Compl. ¶¶ 95-175.)

Allstate seeks a judgment in the amount of the payments it made to the P.C. Defendants, plus prejudgment interest, minus the settlement payments already received from other Defendants who have previously agreed to settle this matter, and treble damages under RICO against all defaulting Defendants, plus prejudgment interest minus the settlement payments. Allstate requests that all related defaulting Defendants be held jointly and severally liable for damages.

The Defendants were organized as follows:

P.C. Defendants ABL Medical Cosby Medical Magenta Medical Management Leonard Gerchick, Christopher Yvette Williams, and Defendants Alexander "Doe, " Montana, David EV Health Care and Inwood Slidovker (a.k.a. Management, Inc. Management Dmitry Slidovker), Anatta Levinsky, Hamlet Balbuena, Solid Management & Billing, Inc., and Soma Health Care Billing & Management, Inc. Nominal Owner John Cosby, M.D. or John Cosby, M.D. or John Cosby, M.D. or Defendants Peneet Kumar, M.D. Peneet Kumar, M.D. Peneet Kumar, M.D.

III. DISCUSSION

A. Default Judgment and Reasonable Certainty

Upon entry of a default judgment, the defaulting defendants are regarded as having admitted the truth of the allegations in the complaint. Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997). The court may not, however, "just accept [plaintiff s] statement of the damages." Id. at 111. After entry of a default judgment, the court must determine the amount of damages to a reasonable certainty. Id. Under Rule 55(b)(2) of the Federal Rules of Civil Procedure, a reasonable certainty means that there is "a basis for the damages specified in the default judgment." Id. (quotations omitted).

Cynthia Wilcox, Special Investigator for Allstate, submitted copies of the tax identification number payment runs ("TIN Runs") to show the amount of payments made by Allstate to Defendants ABL, Cosby and Magenta, noting:

The TIN Runs draw payment information from Allstate's earnings reporting system, from which IRS Forms 1099-MISC are generated for payees and to report to the Internal Revenue Service. When a payment to a healthcare provider is authorized by Allstate, the designated information is inputted into Allstate's systems, which in turn generates a check that is issued and catalogued according to the tax identification number of the payee. The TIN Runs reflect every individual payment that Allstate makes to a provider with the pertinent tax identification number. The information in Allstate's earnings reporting system from which the TIN Runs are generated is compiled and maintained in the ordinary course of Allstate's business.

(Cynthia Wilcox Decl. ¶ 4.)

B. Entitlement to RICO Damages

The purpose of The Racketeer Influenced and Corrupt Organizations Act ("RICO") is to "[protect] legitimate business from the infiltration of organized crime." 18 U.S.C. §§ 1961-64; United States v. Porcelli, 865 F.2d 1352, 1362 (2d Cir. 1989). Section 1964(c) of the Act provides that the plaintiff "shall recover threefold the damages he sustains." Under § 1964(c), the plaintiff may seek trebled damages only if he alleges that: (1) the defendant committed the predicate RICO violation under § 1962, (2) the plaintiff was harmed in his business, and (3) the defendant caused injury to plaintiff's business by reason of his violation. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); Lerner v. Fleet Bank, NA., 318 F.3d 113, 120 (2d Cir. 2003); Reed Const. Data Inc. v. McGraw-Hill Companies, 745 F.Supp.2d 343 (S.D.N.Y. 2010).

A plaintiff may have a cause of action only if the alleged RICO violation was the proximate cause of his injury. Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268-69 (1992). There must be "some direct relation between the injury asserted and the injurious conduct alleged." Id. at 268; see also Lerner, 318 F.3d at 123; Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 459-60 (2006) (upholding Holmes and reasoning that, without proximate causation, an alleged injury may have been caused by some unknown party and a calculation of damages would be speculative). Here, ...


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