United States District Court, E.D. New York
GOVERNMENT EMPLOYEES INSURANCE CO., GEICO INDEMNITY CO., GEICO GENERAL INSURANCE COMPANY, and GEICO CASUALTY COMPANY, Plaintiffs,
LEICA SUPPLY, INC. and GRIGORY BRANFENBRENER, et al. 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 (collectively, "GEICO" or "plaintiffs"), seeking a declaration that plaintiffs are not legally obligated to pay outstanding fraudulent claims submitted by defendant Leica Supply, Inc. ("Leica" or "defendant"). On May 17, 2013, defendant was properly served with plaintiffs' renewed motion for declaratory judgment at Leica's last known address. (Certificate of Service, ECF No. 133-8.) To date, Leica has not responded to the renewed motion. In addition, Leica's default in this action was previously noted by the Clerk of Court on November 1, 2011. (ECF No. 38.) 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 August 4, 2011, plaintiffs filed the instant action against thirty-two defendants,  including Leica, asserting claims pursuant to the federal Racketeer Influenced and Corrupt Organizations statute ("RICO"), and under New York common law for fraud and unjust enrichment, seeking recovery of funds that defendants fraudulently obtained from plaintiffs by submitting false claims for payment for durable medical equipment and orthotic devices. ( See generally Compl., ECF No. 1.) In addition, plaintiffs sought a declaratory judgment that they are not legally obligated to pay outstanding fraudulent claims submitted by Leica and other defendants. (Compl. ¶ 2.)
Leica failed to answer timely or otherwise respond to this action and, as previously discussed, the Clerk of Court noted Leica's default on November 1, 2011. (ECF No. 38.) On April 4, 2012, plaintiffs filed a motion for default judgment against Leica (ECF No. 109), and, on July 30, 2012, the court referred the motion, as well as a motion for default judgment against Leica's owner, Grigory Branfenbrener, to the Honorable Viktor V. Pohorelsky for a Report and Recommendation. On March 6, 2013, Judge Pohorelsky issued his Report and Recommendation. ("R&R, " ECF No. 122.) In the R&R, Judge Pohorelsky recommended that the court grant plaintiffs' motion for default judgment and award plaintiffs a total of $146, 720.20, for which Leica and Branfenbrener would be jointly and severally liable in the amount of $48, 906.76, and for which Branfenbrener would be individually liable in the amount of $97, 813.52. (R&R at 1, 15.) Judge Pohorelsky further recommended that the court enter a declaratory judgment "stating that plaintiffs are not obligated to pay any of the outstanding claims in the amount of $392, 065.84 submitted by Leica" to GEICO for payment, some of which were also the subject of lawsuits in state court brought by Leica against plaintiffs. (R&R at 15; see also Pls. Mot. for Default J. against Leica, Ex C, ECF No. 109-3 (list of outstanding claims and state court lawsuits by Leica against GEICO).) Plaintiffs properly served the R&R on Leica and Branfenbrener, and no objections were filed to the R&R. ( See Certificates of Service, ECF Nos. 123-24.)
On March 30, 2013, the court adopted Judge Pohorelsky's R&R in all respects except for the recommendation that plaintiffs' request for declaratory relief against Leica be granted. ("Order Adopting R&R" at 5, ECF No. 125.) In addition, the court made a minor arithmetic correction to the R&R, finding that the total damages for which defendants Leica and Branfenbrener were liable was $146, 720.28 but that Judge Pohorelsky's calculations of the amounts for which each defendant was liable were correct. (Order Adopting R&R at 5 n.2.) In denying plaintiffs' motion for declaratory judgment without prejudice to renew, the court concurred with Judge Pohorelsky's analysis regarding the fraudulent nature of Leica'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 6 (quoting Chevron Corp. v. Camacho Naranjo, 667 F.3d 232, 245 (2d Cir. 2012)).) The court also noted that there was not sufficient information before it about the nature of the pending state court lawsuits, which related to some but not all of the claims for payment Leica had submitted to GEICO, to determine whether a declaratory judgment should issue. (Order Adopting R&R at 8-9.)
On April 1, 2013, monetary judgment was entered against Leica and Branfenbrener in the amount of $146, 720.28, $48, 906.76 of which Leica was liable for, jointly and severally with Branfenbrener. (ECF No. 126). On May 20, 2013, plaintiffs renewed their motion for declaratory judgment. (Pls. Mot., ECF No. 133.)
II. Criminal Case Against Defendant Branfenbrener
Prior to the filing of the instant case, on June 8, 2010, Branfenbrener was indicted on charges of health care fraud conspiracy and money laundering conspiracy in connection with the scheme to defraud insurance companies. See United States v. Branfenbrener, et al., No. 10-CR-459 (SJ) (E.D.N.Y. filed June 8, 2010). The United States Attorney's Office also filed a Superseding Information charging Branfenbrener with tax evasion, a charge for which Branfenbrener waived indictment. (No. 10-CR-459, ECF Nos. 205, 207.) As plaintiffs note, the sentencing memorandum filed on Branfenbrener's behalf identifies Leica as one of the shell companies through which Branfenbrener perpetrated insurance fraud. (No. 10-CR-459, ECF No. 246, at 4.) On November 3, 2011, Branfenbrener pled guilty to Count One of the Superseding Information, tax evasion, and Count Two of the Indictment, money laundering conspiracy. (No. 10-CR-459, ECF Nos. 206, 208.)
III. The New York State Court Actions
As part of their supplemental submission to the court, plaintiffs have provided an affidavit dated May 16, 2013 from plaintiffs' counsel, P. Stephanie Estevez ("Estevez Aff., " ECF No. 133) and a declaration dated May 16, 2013 from Jennifer Fogarty, an employee of GEICO ("Fogarty Decl., " ECF No. 133-1). Fogarty states that, after a review of GEICO's records, she has identified unpaid claims asserted by Leica against GEICO totaling $245, 662.22 as of May 16, 2013, the date of her declaration. (Fogarty Decl. ¶ 5.) Of this amount, $160, 703.66 in unpaid claims are the subject of sixty-three separate lawsuits brought by Leica against GEICO in the Civil Court in the County of Queens. (Fogarty Decl. ¶ 5, Ex. A-1.) Counsel for GEICO reports that, as a result of Branfenbrener's guilty plea, all of Leica's state lawsuits against GEICO were voluntarily dismissed, except for the remaining sixty-three. (Estevez Aff. ¶ 19; Fogarty Decl. Ex. D (copies of stipulations of discontinuance).) Fogarty avers that the remaining sixtythree suits were all brought on Leica's behalf by an attorney no longer licensed to practice law in New York State and that it is unclear whether these suits will proceed. (Fogarty Decl. ¶ 7.)
I. Declaratory ...