United States District Court, E.D. New York
GOVERNMENT EMPLOYEES INSURANCE COMPANY, GEICO INDEMNITY COMPANY, GEICO GENERAL INSURANCE COMPANY, and GEICO CASUALTY COMPANY, Plaintiffs,
LI-ELLE SERVICE, INC., JOHN DOES 1-5, Defendants.
MEMORANDUM AND ORDER
KIYO A. MATSUMOTO, District Judge.
Presently before the court is a renewed motion for default judgment filed by Government Employees Insurance Company, GEICO Indemnity Company, GEICO General Insurance Company, and GEICO Casualty Company ("plaintiffs" or "GEICO"), seeking a declaration that plaintiffs are not legally obligated to pay outstanding fraudulent claims submitted by defendant Li-Elle Service, Inc. ("Li-Elle" or "defendant"). On March 21, 2013, defendant was properly served with plaintiffs' renewed motion for declaratory judgment at the address on record with New York's Secretary of State, but the motion was returned as undeliverable. In addition, Li-Elle's default in this action was previously noted by the Clerk of Court on August 6, 2012. Therefore, the court considers the motion fully briefed and, for the reasons set forth below, plaintiffs' motion for declaratory relief is granted.
I. The Instant Action
On May 18, 2012, plaintiffs filed the instant action alleging that defendants were involved in schemes to submit fraudulent claims seeking payment for durable medical equipment ("DME") and orthotic devices purportedly provided to individuals eligible for insurance coverage under GEICO insurance policies. ( See generally Compl., ECF No. 1.) On June 21, 2012, plaintiffs filed an amended complaint against Li-Elle and five unnamed owners of Li-Elle. (Am. Compl. ¶ 1, ECF No. 4.) In the amended complaint, plaintiffs raised claims of common law fraud and unjust enrichment for which they sought damages and a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. (Am. Compl. ¶¶ 50-66.) Plaintiffs specifically sought a declaratory judgment that they are not legally obligated to pay outstanding fraudulent claims submitted by Li-Elle. (Am. Compl. ¶ 2.)
Li-Elle failed to answer timely or otherwise respond to this action, and, as previously discussed, the Clerk of Court noted Li-Elle's default on August 6, 2012. (ECF No. 7.) On August 29, 2012, the court referred plaintiffs' motion to enter a default judgment to Magistrate Judge Vera M. Scanlon for a Report and Recommendation. On February 11, 2013, Judge Scanlon issued her Report and Recommendation. ("R&R, " ECF No. 15.) In the R&R, Judge Scanlon recommended that the court enter judgment against Li-Elle on plaintiffs' fraud and unjust enrichment claims in connection with the DME scheme. Judge Scanlon further recommended that a declaratory judgment be entered providing that plaintiffs are not obligated to pay defendant's outstanding claims because plaintiffs had alleged with sufficient particularity that the outstanding claims made were fraudulent. (R&R at 14-19.) No objections to Judge Scanlon's Report and Recommendation were filed by the parties after plaintiffs served the R&R on Li-Elle at the corporation's last known address.
Upon review of the record and the Report and Recommendation, on March 6, 2013, the court adopted Judge Scanlon's R&R in all respects except for the calculation of plaintiffs' interest award, and the recommendation that plaintiffs' request for declaratory relief be granted. ("Order Adopting R&R" at 3, ECF No. 16.) Specifically, the court adopted Judge Scanlon's findings that Li-Elle was liable to plaintiffs for fraud and unjust enrichment and found that judgment should be entered against Li-Elle in the amount of $262, 213.04 in compensatory damages; $100, 347.47 in prejudgment interest, plus $64.65 per day in interest between March 6, 2013 and the date of entry of judgment. (Order Adopting R&R at 8.)
With respect to plaintiffs' request for a declaratory judgment that plaintiffs are not obligated to pay defendant's outstanding claims, the court denied the motion without prejudice to renew. (Order Adopting R&R at 8). In denying plaintiffs' motion without prejudice, the court concurred with Judge Scanlon's analysis regarding the fraudulent nature of Li-Elle's outstanding claims but noted its concern over "a danger that the issuance of a declaratory judgment by this court would encroach on the domain' of the New York state courts, and aid the federal plaintiffs in a race to res judicata.'" (Order Adopting R&R at 7 (quoting Chevron Corp. v. Camacho Naranjo, 667 F.3d 232, 245 (2d Cir. 2012)).) The court thereafter permitted plaintiffs to file supplemental materials in support of a renewed motion for entry of declaratory judgment which addressed the court's concerns about encroaching on the domain of the New York state courts. (Order of Mar. 13, 2013.)
On March 28, 2013, plaintiffs submitted a supplemental memorandum of law in support of their motion for a declaratory judgment against Li-Elle. (Pls. Supp. Mem. of Law ("Pls. Mem.") at 1, ECF No. 21.) On March 3, 2014, plaintiffs also provided the court with supplemental authority in support of its motion. (ECF No. 23.)
II. The New York State Actions
As part of their supplemental submission to the court, plaintiffs have provided the court with a declaration from Jennifer Fogarty, an employee of GEICO. ("Fogarty Supp. Decl., " ECF No. 22.) Fogarty states that, after a review of GEICO's records, she has identified unpaid claims actively in dispute between Li-Elle and GEICO totaling $130, 457.47. (Forgarty Supp. Decl. ¶ 8.) Fogarty's review also indicates that Li-Elle has initiated ninety-seven lawsuits in New York City Civil Court to recover a total of $94, 278.09. (Fogarty Supp. Decl. ¶¶ 7-8.) GEICO's records further indicate that, at the time of Fogarty's declaration, Li-Elle had not sued on the remaining $36, 179.38 in unpaid claims. (Fogarty Supp. Decl. ¶¶ 7-8.)
Of the ninety-seven current lawsuits that Li-Elle currently has pending against GEICO, twelve are not scheduled for trial until either late 2014 or 2015. (Fogarty Supp. Decl. ¶ 9(i), Ex. C.) Furthermore, eighty-two of Li-Elle's pending collection lawsuits were filed in 2008 or 2009, but had not yet been tried at the time of Fogarty's declaration. (Fogarty Supp. Decl. ¶ 9(ii).)
I. Declaratory ...