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Allstate Insurance Co. v. Williams

United States District Court, Eastern District of New York

November 3, 2014



For Plaintiffs: Barry I. Levy, Max Saulter Gershenoff, Michael Stanton, Rivkin Radler LLP, Uniondale, NY.



On May 16, 2013, plaintiff Allstate Insurance Company (" Allstate") filed suit against the above named defendants, amongst others, alleging that defendants engaged in a series of interrelated fraudulent schemes through which they submitted to Allstate thousands of fraudulent charges relating to medical services for individuals involved in automobile accidents who were covered under Allstate's no-fault policies (" Insured"). Based on the foregoing, Allstate has alleged: (1) violations of the Racketeering Influenced and Corrupt Organizations Act (" RICO"), 18 U.S.C. § 1962(c); (2) violations of the RICO conspiracy statute, 18 U.S.C. § 1962(d); (3) common law fraud; and (4) unjust enrichment. Allstate also seeks declaratory judgment that the defaulting defendants have no right to receive payments for any pending bills submitted to Allstate that were the result of defendants' fraudulent treatment and billing protocol. (Compl. ¶ ¶ 226-31, ECF No. 1.)

Defendants Conrad Robert WILLIAMS (" Williams"); Williams's medical practice, Targee Medical Services, P.C. (" Targee"); Michael George Alleyne (" Alleyne"); and Alleyne's medical practice, Michael Alleyne Medical Doctor, P.C. (" MAMD") (collectively, the " defaulting defendants") failed to appear or otherwise defend against Allstate's allegations.[1] Allstate then moved for default judgment. (Mot. for Def. J. Williams & Targee (" W& T Mot."), ECF No. 47; Mot. for Def. J. Alleyne & MAMD (" A& M Mot."), ECF No. 50.) On March 10, 2014, the Honorable Raymond J. Dearie granted Allstate's motion for default judgment against Alleyne and MAMD, and referred the motion to me for a report and recommendation on the calculation of damages. (Mar. 10, 2014 Order, ECF No. 58.) On March 13, 2014, Judge Dearie referred Allstate's motion for default judgment against Williams and Targee to me for report and recommendation. (Mar. 13, 2014 Order, ECF No. 60.) On October 31, 2014, Judge Dearie issued an order granting a declaratory judgment against MAMD in favor of Allstate. (Oct. 31, 2014 Order, ECF No. 67).

For reasons that I discuss below, I respectfully recommend that Allstate's motion for default judgment against Williams and Targee be granted; Allstate receive the damages set forth below as to each defendant; and Allstate receive declaratory judgment against Targee.


To understand the facts alleged in Allstate's complaint, it is necessary to provide a brief overview of New York's no-fault insurance scheme. See generally State Farm Mutual Automobile Ins. Co. v. Mallela, 372 F.3d 500, 502-503 (2d Cir. 2004) (providing a detailed overview of New York's no-fault scheme). Under New York's No-Fault Insurance Law, automobile insurers provide mandatory coverage for certain no-fault benefits, including necessary expenses for medical treatment up to $50, 000. N.Y. Ins. Law § § 5102(a)(1), 5102(b), 5103. " The regulations permit covered parties to assign their benefits to health care providers, who in turn submit claims to insurers for treatment and services given to the injured individual." Mallela, 372 F.3d at 503; N.Y. Ins. Law § 5102; 11 N.Y.C.R.R. 65-3.11. However, medical service corporations may not " bill for services provided by physicians who are not employees of the corporation, such as independent contractors." Liberty Mut. Ins. Co. v. Excel Imaging, P.C., 879 F.Supp.2d 243, 257 (E.D.N.Y. 2012) (citing 11 N.Y.C.R.R. § 65-3.11(a); N.Y. Ins. Gen. Counsel Op. No. 05-03-21 (2005); N.Y. Ins. Gen. Counsel Op. No. 01-02-13 (2001)).

" New York's No-Fault Insurance Laws require an pay or deny a verified claim for benefits within thirty calendar days of its submission." State Farm Mut. Auto. Ins. Co. v. Grafman, No. 04-CV-2609, 2007 WL 7704666, at *8 (E.D.N.Y. May 22, 2007) (citing N.Y. Ins. Law § 5106(a); 11 N.Y.C.R.R. § 65-3.8(c)). If an insurer fails to act on a claim within thirty days, any defenses to payment, including lack of medical necessity, are waived. Grafman, 2007 WL 7704666, at *8.

Allstate uses current procedural terminology (" CPT") codes for billing. (Compl. ¶ 5(iii).) Each CPT code corresponds to specific medical services that are billed in accordance with the applicable fee schedule. (See, e.g., id. ¶ ¶ 47-59.) For example, billing under CPT code 99205 indicates that the physician had " (i) taken a 'comprehensive' patient history; (ii) conducted a 'comprehensive' physical examination; and (iii) engaged in medical decision-making of high complexity." (Id.¶ 50.)


The facts set out below are drawn from the allegations in the complaint and the exhibits attached thereto. (See id.)

As early as 2007 and continuing through the filing of the instant action, the defaulting defendants organized and participated in several schemes to defraud Allstate under New York's No-Fault Insurance Laws. Specifically, the defaulting defendants fraudulently submitted no-fault bills relating to initial and follow-up examinations (" the Examinations"); digital range of motion and muscle tests (the " ROM/Muscle Tests"); spirometry tests; functional capacity evaluation tests (the " FCE Tests"); transcutaneous electrical nerve stimulation sessions (the " TENS Sessions"); neurological consultations (the " Consultations"); and electrodiagnostic tests (the " EDX Tests") (collectively, the " Fraudulent Services"). Allstate seeks damages from the defaulting defendants for claims that Allstate paid where the services were either never conducted, improperly billed by independent contractors, medically unnecessary, or exaggerated. (Id. ¶ ¶ 1-6.)

A. Allegations Common to All Defaulting Defendants

1. Independent Contractor Services

Allstate alleges that the technicians who performed Fraudulent Services, to the extent that they were performed at all, were, in fact, independent contractors. (See id. ¶ ¶ 35-38.) Thus, their services are not reimbursable. Williams and Alleyne (collectively, the " Individual Defendants") were the only physicians in their respective medical offices and outsourced their testing to independent contractors--specifically Targee outsourced to Marat Tsilrin, M.D. (" Tsilrin") and MAMD outsourced to Choon Kwon Kim, M.D. (" Kim"). (Id.¶ 38.) The technicians, Tsilrin and Kim, qualify as independent contractors because of their tax treatment, lack of employee benefits, their non-exclusive relationships with Targee and MAMD (collectively, the " PC Defendants"), and the fact that they performed contemporaneous services for their own practices and on behalf of other medical practices that were in direct competition with one another. (Id. ¶ ¶ 35-38.) When the Individual Defendants billed for the Fraudulent Services performed by independent contractors, the billing submitted for those services falsely stated that the independent contractors were employees of the PC Defendants, or omitted that information in order to lead Allstate to believe that the services were performed by someone whose services were reimbursable. (Id. ¶ ¶ 40-41.)

2. Initial Examinations

When an Insured visits a PC Defendant's facility, the Insured receives an initial examination, which is charged to Allstate. (Id.¶ 44.) The charges, however, were fraudulent because the defaulting defendants: (1) used CPT billing codes that misrepresented the nature and extent of the initial examinations; (2) often exaggerated the Insureds' injuries in order to inflate the charges; (3) misrepresented the time, depth, and complexity of the initial examinations; and (4) used predetermined " diagnosis" for every Insured and prescribed virtually identical course of treatments for every Insured. (Id. ¶ ¶ 45-64.) Allstate further alleges that the Insured " did not report any medical problems that legitimately could be traced to an underlying automobile accident." (Id.¶ 63.)

3. Follow-Up Examinations

After the initial examination, the Individual Defendants " typically purported to subject Insured to two or more fraudulent follow-up Examinations." (Id.¶ 65.) As with the initial examinations, the defaulting defendants misrepresented the nature and extent of the follow-up examinations by exaggerating the time, complexity, and depth of the examination. (Id. ¶ ¶ 65-78.) The Individual Defendants used boilerplate language to support the continuation of their predetermined, non-tailored treatment and billing protocol. (Id.¶ 78.) The Individual Defendants would instruct each Insured to return for " medically useless ROM/Muscle Tests." (Id.¶ 86.) The bills submitted for ROM/Muscle Tests were duplicative, medically unnecessary, and the charges would be unbundled in order to maximize the fraudulent billing through double-billing. (See id. ¶ ¶ 93, 99-108.) In addition, the results of those tests were medically implausible--showing that the Insured were either too weak to support their own body weight or that they possessed superhuman strength. (Id. ¶ ¶ 109-15.) The Individual Defendants also submitted claims under CPT billing codes that represented that a written report interpreting the test data was prepared; however, written reports were " almost never" prepared. (Id. ¶ ¶ 116-20.)

4. EDX Testing

Based upon the fraudulent, predetermined diagnoses and treatment regiments, Insureds were referred to independent contractors for EDX Testing consultations.[2] (Id.¶ 177.) As with the initial examinations, the consultations were fraudulent because they: (1) misrepresented the nature and extent of the Insureds' injuries; (2) exaggerated the depth and time of the examination; and (3) resulted in predetermined diagnoses requiring EDX testing. (Id. ¶ ¶ 178-80.) The Individual Defendants " required that Tsirlin, Kim, and other physicians who purposed to provide the Consultations arrive at these pre-determined conclusions in order to fraudulently maximize the charges that could be submitted for each individual Insured." (Id.¶ 181.) The independent contractors were " part of and amenable to this scheme because of the financial remuneration provided by the [Individual] Defendants." (Id.)

The subsequent EDX tests were fraudulent as well because: (1) they were not tailored to the unique circumstances of the Insured; (2) the Individual Defendants frequently unbundled the charges so as to double bill Allstate; (3) data submitted in testing reports was duplicated across patients who purportedly received treatment months apart; and (4) some tests conducted by the independent contractors resulted in statistically impossible findings. (Id. at 50-60.)

B. Claims Specific to Williams and Targee

Against billing protocol, Williams and Targee billed for outcome assessment tests and examinations separately, thereby double billing for duplicative work that both assessed the patient's history and physical condition. (Id. ¶ ¶ 80-83.) Williams further instructed each Insured to return for one or more rounds of ROM/Muscle Tests, which were medically useless and duplicative of tests conducted during prior examinations. (Id.¶ 77.)

Williams and Targee inappropriately used FCE Tests on Insureds who did not meet the FCE eligibility requirements and knowing that such testing was medically useless and duplicative of the manual ROM/Muscle tests. (Id. ¶ ¶ 131, 138.) Moreover, although the applicable fee schedule required that FCE Testing be performed only by a certain licensed providers, the technicians who performed the tests at Targee were unlicensed and not supervised by Williams or any other licensed provider associated with Targee. (Id. ¶ ¶ 139-40.) Additionally, Williams and Targee, on numerous occasions, purported to provide two FCE Tests to a single Insured following a single accident, with the first and second FCE Tests inappropriately performed less than three months following the respective Insureds' accidents, in violation of the usual protocol for FCE tests. (Id. ¶ ¶ 149-50.) To conceal that the FCE Tests were inappropriately administered and therefore not reimburseable, Williams and Targee routinely omitted any information regarding the Insureds' recovery status from the FCE Test reports that Williams and Targee submitted or caused to be submitted. (Id.¶ 152.) Williams and Targee used catch-all CPT codes in an effort to conceal un-reimbursable FCE testing. (Id. ¶ ¶ 157-60.)

Finally, Williams and Targee exaggerated the time spent with each Insured and falsified the existence of test-interpreting written reports. (Id. ¶ ¶ 162-66.)

C. Claims Specific to Alleyne and MAMD

Alleyne and MAMD purported to provide spirometry tests, which are used to diagnose conditions that affect breathing. (Id.¶ 123.) Even though Alleyne and MAMD routinely purported to provide these tests to Insureds, almost none of the Insureds had any pulmonary or respiratory complaints. (Id.¶ 125.)

Further, to avoid billing constraints that were associated with certain electrical simulation treatments, Alleyne and MAMD simply purported to provide TENS Sessions to Insured, which were not subject to those same constraints. (Id. ¶ ¶ 173-75.) The TENS Sessions that Alleyne and MAMD purported to have administered, to the extent they were actually provided, were medically unnecessary, and were provided solely to financially enrich Alleyne and MAMD, not benefit the Insureds. (Id.¶ 176.)

D. Allstate's Reliance on the Fraudulent Documentation

The defaulting defendants would often take advantage of the thirty-day statutory deadline for claim payments, by submitting facially-valid documentation intended to mislead Allstate and conceal the fraud. (Id. ¶ ¶ 218-20.) Allstate has to promptly and fairly process claims within thirty days; therefore, Allstate reasonably relied on the facially-valid documents submitted to them by the defendants in support of the fraudulent charges. (Id.¶ 222.) The defaulting defendants hired law firms that would involve Allstate in expensive and time consuming litigation if the charges were not paid promptly, and in full. (Id.¶ 221.)


A. Standard for Default Judgment

Rule 55 states that " [w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend . . . the clerk must enter the party's default." Fed.R.Civ.P. 55. Essentially, Rule 55 provides a " two-step process for obtaining a default judgment." New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). First, the moving party must " obtain a default" by " bring[ing] that fact to the court's attention [thereby] empower[ing] the clerk of the court to enter a default against a party that has not appeared or defended." Id. Second, the moving part must " seek a judgment by default under Rule 55(b)." Id.

Once a default is entered, the court must accept as true all well-pleaded allegations in the complaint, except those pertaining to the amount of damages. Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981); Gov't Employees Ins. Co. v. AMD Chiropractic, P.C., No. 12-CV-4295, 2013 WL 5131057, at *3 (E.D.N.Y. Sept. 21, 2013) (Gershon, J., adopting report and recommendation of Orenstein, M.J.). The allegations in the complaint must establish, as a matter of law, the non-moving party's liability. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (citing Au Bon Pain Corp, 653 F.2d at 65). Once liability is established, the court must ascertain the amount of damages within reasonable certainty. Credit Lyonnais Sec., Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)). The Second Circuit has approved the holding of an inquest by affidavit, without a hearing, as long as the court has " ensured that there was a basis for the damages specified in the default judgment." Transatlantic Marine, 109 F.3d at 111 (citation omitted); Fustok v. ContiCommodity Servs. Inc., 873 F.2d 38, 40 (2d Cir. 1989) (holding that a court " may, but need not" hold a hearing as to damages and " may rely on detailed affidavits or documentary evidence" to establish the appropriate damages to award).

B. Liability

Here, the Clerk of the Court has entered a default against each of the defaulting defendants. (See ECF Nos. 19, 37, 40, 42.)

1. Liability as to Alleyne and MAMD

Allstate contends it is entitled to default judgment against: (1) Alleyne, individually, for violation of 18 U.S.C. § 1962(c); (2) MAMD and Alleyne for common law fraud; and (3) MAMD and Alleyne for unjust enrichment.

Judge Dearie previously granted default judgment against Alleyne and MAMD. (Mar. 10, 2014 Order, ECF No. 58.) Accordingly, only the calculation of damages which was referred to me, remains. (Id.)

2. Liability as to Williams and Targee

Allstate contends it is entitled to default judgment against: (1) Williams, individually, for violations of 18 U.S.C. § 1962(c) and 18 U.S.C. § 1962(d); (2) Targee and Williams for common law fraud; and (3) Targee and Williams for unjust enrichment.

a. Williams's Appearance

After the Clerk of the Court entered default against Williams and Targee, Allstate moved for default judgment against Williams. (See Entry of Default, ECF Nos. 40, 42; Notice of Motion for Default J., ECF No. 47.) Williams, acting pro se, filed a letter with the Court requesting leave to answer the complaint and contesting the motion for default. (Williams's Mar. 7, 2014 Ltr., ECF No. 57.) Thereafter, I held a conference with Allstate and Williams, and set a limited discovery schedule. (Mar. 14, 2014 Minute Entry, ECF No. 61.) After Williams failed to comply with the discovery schedule, Allstate renewed its request for a default judgment against Williams and Targee. (Mar. 24, 2014 Allstate Reply, ECF No. 62.) Since March 14, 2014, Williams has not contacted the Court or filed any additional letters. Therefore, his request, which I construe as a motion to vacate the entry of default, is deemed abandoned.

Even assuming that the motion to vacate is not abandoned, Williams's March 7, 2014 letter shows no basis to vacate the entry of default against him. Rule 55(c) allows a court to " set aside an entry of default for good cause." Fed.R.Civ.P. 55(c). Although Rule 55 does not define " good cause, " the Second Circuit has developed three criteria that courts must assess when deciding whether to vacate an entry of default: " (1) whether the default was willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3) whether, and to what extent, vacating the default will cause the nondefaulting party prejudice." S.E.C. v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998) (citing Am. Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 59 (2d Cir. 1996)). The court may also consider other equitable factors such as " whether the failure to follow a rule of procedure was a mistake made in good faith and whether the entry of default would bring about a harsh or unfair result." Enron Oil Corp v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). When doubts exist as to whether a default should be vacated, the court should resolve those doubts in favor of the defaulting party. Id.

Here, Williams's letter makes four points. One, he states that he was in the process of reaching a settlement with Allstate and therefore he did not file an answer earlier. (Williams's Mar. 7, 2014 Ltr. at 1.) Two, Williams contends that he received notice of the default in February 2014 and due to his " busy schedule" he responded at his " earliest opportunity." (Id. at 2.) Three, Williams claims he was not formally notified of Allstate's refusal to settle and was not aware of it until he received the motion for default. (Id. at 2.) Four, he asserts, in a conclusory fashion and without any supporting evidence, that all the billings were for medically necessary procedures and in accordance with billing protocol. (Id. at 2-3.) Further, Williams asserts that he remains open to the possibility of settlement; however, Williams's failure to appear or otherwise contact the Court after the March 14, 2014 conference indicates otherwise. (Id. at 3.)

Williams's default is willful, his letter fails to demonstrate any meritorious defenses, and Allstate would be prejudiced if the default were vacated this late in the litigation. Therefore, I respectfully recommend that the motion to vacate the entry of default be denied.

b. Liability

In light of the fact Judge Dearie has already granted default judgment against Alleyne and MAMD based on similar facts and the same claims--the violation of 18 U.S.C. § 1962(c), common law fraud, and unjust enrichment--I recommend granting Allstate's motion for default judgment against Williams and Targee on those claims as well.[3] (See Compl. ¶ ¶ 232-238, 246-252, 260-265, 320-339.) Notably, other courts have also found liability in similar cases. See, e.g., Gov't Employees Ins. Co. v. Scheer, No. 13-CV-4039, 2014 WL 4966150 (E.D.N.Y. Aug. 18, 2014) (granting default judgment where plaintiff alleged, inter alia, that defendants submitted claims for services that were either not rendered at all or not medically necessary); see also AMD Chiropractic, 2013 WL 5131057 (granting default judgment against the defendants, on RICO, common law fraud, and unjust enrichment claims, where defendants allegedly engaged in a fraudulent scheme to submit no-fault insurance claims to GEICO for claims that were a product of unlawful kick-backs for patient referrals, medically unnecessary services, and misrepresentations about provider eligibility).

The only difference in claims between the motions is that Allstate also alleges Williams violated 18 U.S.C. § 1962(d), which I address below.

18 U.S.C. § 1962(d) provides: " It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c)" of 18 U.S.C. § 1962, the RICO statute. Section 1962(c) states that it shall be:

unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

The core of a civil RICO conspiracy claim is " an agreement to commit predicate acts." Morin v. Trupin, 835 F.Supp. 126, 135 (S.D.N.Y. 1993) (citing Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990)). Consequently, a complaint must " specifically allege such an agreement" to establish liability. Id. This requirement can, however, be met by showing that each defendant " possessed knowledge of only the general contours of the conspiracy." Gov't Emples. Ins. Co. v. Hollis Med. Care, P.C., No. 10-CV-4341, 2011 WL 5507426, at *10 (E.D.N.Y. Nov. 9, 2011) (quoting U.S. v. Applins, 637 F.3d 59, 75 (2d Cir. 2011)).

Allstate alleges that Williams agreed with Tsirlin " to conduct and/or participate, directly or indirectly, in the conduct of Targee enterprise's affairs, through a pattern of racketeering activity consisting of repeated violations of the federal mail fraud statute, 19 U.S.C. § 1341 . . . ." (Compl. ¶ 242.) Allstate asserts that Williams and Tsirlin submitted or caused to be submitted hundreds of fraudulent bills on a continuous basis for more than three years, seeking payments that Targee was not entitled to receive under the No-Fault Laws. (Id.) Williams and Targee were not eligible for reimbursement on those bills because the bills misrepresented and exaggerated the level and nature of the Fraudulent Services, the services were not medically necessary, the services were performed and billed pursuant to predetermined billing protocol designed to enrich the defendants, and/or certain services were performed by independent contractors whose work is not reimbursable under the CPT codes. (Id. ¶ ¶ 239-45.) Specifically, Tsirlin purported to provide consultations and then arrive at a predetermined conclusion that the Insured required EDX testing to rule out cervical and/or lumbar radiculopathy, thereby allowing for billing on both the consultation and subsequent EDX Testing. (Id. ¶ ¶ 180-82.) This scheme was designed in order to maximize the profits that Williams could reap from each Insured and, in Tsirlin's case, to " ensure that [Targee] continued to use his services as independent contractor." (Id.¶ 209.)

These allegations, in combination with the detailed layout of the scheme in the complaint, are, as a whole, sufficient to show that Williams knew the general contours of the ongoing scheme: he had knowledge that the scheme would ultimately result in the mailing of fraudulent bills, and agreed with Tsirlin to bill based on a predetermined fraudulent protocol that would cause the submission of fraudulent billing to Allstate. See Hollis Med. Care, P.C., 2011 WL 5507426, at *10 (finding that the plaintiffs' allegations regarding a scheme involving the submission of fraudulent billing to GEICO met the " relatively low [civil RICO conspiracy allegation] standard") (quoting State Farm Mut. Auto. Ins. Co. v. CPT Med. Servs., P.C., No. 04-CV-5045, 2008 WL 4146190, at *14 (E.D.N.Y. Sept. 5, 2008)); see also Allstate Ins. Co. v. Valley Phys. Med., No. 05-CV-5932, 2009 WL 3245388, at *7 (E.D.N.Y. Sept. 30, 2009) (explaining that coconspirators in a RICO conspiracy need not be fully informed about each other's specific criminal acts).

Therefore, I respectfully recommend that default judgment be entered against Williams on Allstate's claim under § 1962(d).

C. Damages

In support of its motions for default judgment, Allstate submitted declarations from Michael Bruno (" Bruno"), an Analyst in the Special Investigations Unit at Allstate. (See W& T Mot., Exh. B, Decl. of Michael Bruno (" Bruno W& T Decl."), ECF No. 49; A& M Mot., Exh. B, Decl. of Michael Bruno (" Bruno A& M Decl."), ECF No. 52.) Bruno's declarations include a spreadsheet compilation of claim payment reports for each PC Defendant. (Bruno W& T, Decl. Exh. 1; Bruno A& M Decl., Exh. 1.) In addition, Max Gershenoff, an attorney at Rivkin Radler LLP, submitted a declaration on behalf of Allstate for each default judgment. (See W& T Mot., Ex. A, Decl. of Max Gershenoff (" Gershenoff W& T Decl."), ECF No. 49; A& M Mot., Ex. A, Decl. of Max Gershenoff (" Gershenoff A& M Decl."), ECF No. 52.)

Allstate calculated its damages by compiling all claim payment reports for Targee and MAMD since 2008. (Bruno W& T Decl. ¶ 4; Bruno W& T Decl. Exh. 1; Bruno A& M Decl. ¶ 4; Bruno A& M Decl. Exh. 1.) In each case, Bruno compiled claim payment reports into spreadsheets that list all bills submitted to Allstate within the time period Allstate alleges the fraud occurred. (Id.) The spreadsheets include bills submitted to Allstate by each PC Defendant, regardless if the claim was paid or not. (Id.) Specifically, the spreadsheets identify each claim submitted by the defaulting defendants, the billing code used, the amount billed to Allstate, the amount paid by Allstate, and the entity to which the payment was made. (Id.) In each case, the " claim payment reports 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." (Id.) When a payment to a healthcare provider is authorized by Allstate, the designated information is put into Allstate's systems, which in turn " generates a check that is issued and catalogued according to the tax identification number of the payee." (Id.) Allstate maintains these records in the ordinary course of business. (Id.)

I find Allstate's affidavits and exhibits establish a sufficient basis to determine damages to a reasonable certainty. Courts have held similar types of documentary evidence sufficient to award damages in comparable RICO default cases.[4] See Allstate Ins. Co. v. Howell, No. 09-CV-4660, 2013 WL 5447152, at *7 (E.D.N.Y. Sept. 30, 2013) (Dearie, J., adopting report and recommendation of Pohorelsky, M.J.); see also Allstate Ins. Co. v. Smirnov et al., No. 12-CV-1246, 2013 WL 5407224, at *15 (E.D.N.Y. Aug. 21, 2013).

According to Allstate's claim payment reports as interpreted and compiled by Bruno, Allstate paid Targee $829, 830.63 in reliance on the fraudulent billing[5] and paid MAMD $170, 248.45 in reliance on the fraudulent billing.[6] (See Bruno W& T Decl. ¶ 6; Bruno A& M Decl. ¶ 6.)

1. RICO Damages

Allstate requests that the individual defendants, Williams and Alleyne, be held liable for treble damages under the RICO Act.[7] (See W& T Mot. at 19; A& M Mot. at 18.) A person who is injured by a RICO violation may sue for " threefold the damages he sustains." 18 U.S.C. § 1964(c). Treble damages are appropriate even on default. See Howell, 2013 WL 5447152, at *7. Having established that both Williams and Alleyne are liable their respective RICO claims, Allstate is entitled to an award of treble damages for each defendant. Trebling the $829, 830.03 in damages for Williams results in an award of $2, 489.491.89. Trebling the $170, 248.45 in damages for Alleyne results in an award of $510, 745.35.

Therefore, I respectfully recommend that Williams and Alleyne be held liable for the damages summarized in Table 1 below, which are inclusive of the compensatory damages for which the Individual Defendants are liable.




Damages after Trebling

Conrad Robert Williams


$2, 489, 491.89

Michael Alleyne


$510, 745.35

2. Common Law Fraud and Unjust Enrichment

Allstate seeks a total of $829, 830.63 against Targee and Williams and a total of $170, 248.45 against MAMD and Alleyne. (Bruno W& T Decl. ¶ 6; Bruno A& M Decl. ¶ 6.) Based on the Court's review of Bruno's spreadsheets and the declarations, I conclude that Allstate has established, to a reasonable certainty, that Allstate paid $829, 830.63 to Targee and Williams and $170, 248.45 to MAMD and Alleyne as a result of fraudulent billing.

Allstate requests that the Individual Defendants and their respective medical professional corporations be held jointly and severally liable for Allstate's damages. (W& T Mot. at 20; A& M Mot. at 19.) " In a scheme where there are repeated fraudulent acts by multiple defendants, plaintiffs are entitled to recover once for every fraudulent act, and each defendant who participated in the fraudulent act is jointly and severally liable for the amount of damage caused." Gov't Employees Ins. Co. v. Damien, No. 10-CV-5409, 2011 WL 5976071, at *7 (E.D.N.Y. Nov. 3, 2011) (report and recommendation), adopted, 2011 WL 6000571 (E.D.N.Y. Nov. 29, 2011); see also Chubb & Son, Inc. v. Kelleher, No. 92-CV-4484, 2006 WL 1789118, at *5 (E.D.N.Y. April 28, 2006) (explaining that defendants who participated in a scheme to submit fraudulent claims to an insurer were jointly and severally liable for all of those claims). The Individual Defendants and PC Defendants participated in and caused the submission of fraudulent bills to Allstate, and attempted to conceal the fraud, thus all contributing to a single indivisible injury to Allstate. Therefore, the Individual Defendants and their respective medical professional corporations should be held jointly and severally liable for the state law claims.

To the extent Allstate seeks additional damages from the Individual Defendants on their state law claims, I recommend that their application be denied; the same damages--payments made by Allstate to the PC Defendants for providing Fraudulent Services--are sought in each cause of action, and separate awards under RICO and state law would be duplicative. See generally Smirnov, 2013 WL 5407224 (finding that awarding the plaintiff damages under RICO and state law claims for the same defendant on the same underlying fraud would be duplicative); Gov't Employees Ins. Co. v. Esses, No. 12-CV-4424, 2013 WL 5972481, at *10 n. 3 (E.D.N.Y. 18 Nov. 5, 2013) (" Since the award of damages under RICO wholly compensates the plaintiffs and the award having been trebled, the plaintiffs are not entitled to separate awards of damages on the claims for common law fraud and unjust enrichment."). Thus, although the Individual Defendants are liable on RICO and state law claims, Allstate cannot recover duplicative damages on the state law claims.

Therefore, I respectfully recommend that Targee and Williams be held jointly and severally liable for $829, 830.63 in damages and MAMD and Alleyne be held jointly and severally liable for $170, 248.45 in damages.

3. Prejudgment Interest on Fraud Claims

Allstate seeks prejudgment interest on its compensatory damages stemming from the fraud claims.[8] New York law provides that a party may obtain prejudgment interest on damages computed from " the earliest ascertainable date the cause of action existed or upon all of the damages from a single reasonable intermediate date" at the noncompoundable rate of nine percent per annum. N.Y. C.P.L.R. § § 5001(a), 5004. Allstate proposes calculating interest on each fraudulent claim beginning January 1st of the year following the year in which Allstate received that claim. (Gershenoff W& T Decl. ¶ 12; Gershenoff A& M Decl. ¶ 11.) In light of the inconsistencies in Allstate's calculations, see footnotes 5-6 supra, I find that an alternative approach to calculating interest is warranted. I recommend that all of the interest for these defendants be calculated using the " reasonable intermediate date."

Allstate is entitled to $829, 830.63 in compensatory damages from Williams and Targee, beginning from December 2, 2008 to January 28, 2013. The intermediate date is December 31, 2010.

Allstate is entitled to $170, 248.45 in compensatory damages from Alleyne and MAMD, beginning from April 21, 2008 to December 28, 2011. The intermediate date is February 23, 2010.

Therefore, I respectfully recommend that Allstate be awarded prejudgment interest as summarized in Table 2 below.




End Date







Targee &




$829, 830.63


$287, 286.48





$170, 248.45


$71, 953.72




of Interest

Targee &


$1, 117, 117.11



$242, 202.17

D. Declaratory Judgment Against Targee

Allstate is seeking a declaratory judgment that Targee has no right to receive payments for any pending bills submitted to Allstate that were the result of Targee's fraudulent treatment and billing protocol.[9] (Compl. ¶ ¶ 226-31.)

A court may exercise its discretion to issue a declaratory judgment, but only in cases where the party seeking the declaratory judgment can demonstrate the existence of an actual case or controversy. 28 U.S.C. § 2201(a); Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 95, 113 S.Ct. 1967, 124 L.Ed.2d 1 (1993). Such a controversy must be " real and substantial . . . admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Olin Corp. v. Consol. Aluminum Corp., 5 F.3d 10, 17 (2d Cir. 1993) (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 81 L.Ed. 617 (1937)). Declaratory relief is appropriate where the judgment will serve a useful purpose in clarifying and settling the legal relations at issue, or when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceedings. E.R. Squibb & Sons, Inc. v. Lloyd's & Co., 241 F.3d 154, 175 (2d Cir. 2001). Courts within this district have, on numerous occasions, found these requirements met in actions by insurers seeking declaratory judgments regarding obligations relating to allegedly fraudulent claims. See, e.g., State Farm Mut. Auto. Ins. Co. v. Cohan, No. 09-CV-2990, at *11-12 (E.D.N.Y. Dec. 30, 2009) (collecting cases).

The complaint and affidavits submitted in support of Allstate's motion for default judgment against Targee state that there are outstanding fraudulent bills that Williams and Targee submitted to Allstate. (Compl. ¶ 221.) Allstate alleges that all the defaulting defendants hired law firms to pursue collection of the fraudulent charges from Allstate. (Id.) The estimated amount in dispute on their pending claims is over $400, 000.[10] (Bruno T& W Decl. ¶ 7.) Allstate's complaint alleges, with particularity, that these pending claims are fraudulent because they are part of Targee's ongoing scheme to submit claims for fraudulent services within New York's statutory no-fault insurance scheme. (Id. ¶ ¶ 28-106, 109-120, 127-166, 177-225, 232-252, 260-265) (alleging how Targee and Williams carried out the scheme to submit fraudulent claims).) Thus, Allstate has established that this is an actual controversy where a declaratory judgment would afford specific relief.

Therefore, I respectfully recommend that the Court enter a default judgment in favor of Allstate and against Targee for a declaratory judgment that Targee has no right to receive payment for any pending bills submitted to Allstate because the billed-for services were provided as part of a predetermined fraudulent treatment and billing protocol.


For the reasons stated above, I respectfully recommend judgment be entered:

1) against Targee and Williams, jointly and severally, for a total of $1, 117, 117.11, consisting of $829, 830.63 in damages and $287, 286.48 in pre-judgment interest, and per diem interest of $204.62 per day from November 3, 2014 through the date of judgment;
2) against Williams, individually, in the amount of $1, 659, 661.86, which is two-thirds of the treble damages;
3) against MAMD and Alleyne, jointly and severally, for a total of 242, 202.17, consisting of $170, 248.45 in damages and $71, 953.72 in pre-judgment interest, and per diem interest of $41.98 from November 3, 2014 through the date of judgment;
4) against Alleyne, individually, in the amount of $340, 496.90, which is two-thirds of the treble damages;

I also recommend that a default judgment be entered in favor of Allstate and against Targee for a declaratory judgment that Targee has no right to receive payment for any pending bills submitted to Allstate because the billed-for services were provided as part of a predetermined fraudulent treatment and billing protocol.

Plaintiffs are directed to serve a copy of this report and recommendation on each of the defaulting defendants and to promptly file proof of service by ECF. Any objections to this report and recommendation must be filed with the Clerk of the Court, with a copy to the undersigned, within fourteen (14) days of receipt of this report. Failure to file objections within the specified time waives the right to appeal the District Court's order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 72.


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