Allstate Ins. Co. v. Palterovich

653 F.Supp.2d 1306

ALLSTATE INSURANCE CO., et al., Plaintiff, v. Mikhail PALTEROVICH, et al., Defendants.

Case No. 04-21402-CIV.

United States District Court, S.D. Florida.

August 26, 2009.

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Robin Kaplan Pass, Robert A. Stern, Stern & Montana LLP, Boca Raton, FL, Sandra Patricia Burgos, Stern & Montana, New York, NY, for Plaintiff.

Mikhail Palterovich, pro se.

Dmitry Shteyman, Staten Island, NY, pro se.

Mario LaPlume, Miami Beach, FL, pro se.

Russell Jay Williams, Fort Lauderdale, FL, Michael M. Tobin, Coral Gables, FL for Defendants.

ORDER GRANTING PLAINTIFFS' MOTION FOR FINAL DEFAULT JUDGMENT

ANDREA M. SIMONTON, United States Magistrate Judge.

Presently pending before the Court is Plaintiffs' Motion for Default Judgment (DE # 571). The deadline to file a timely response expired on October 20, 2008 and none has been filed to date. This matter is referred to the undersigned Magistrate Judge for final disposition based upon the parties' consent (DE # 278).¹ Based upon a careful review of the record as a whole and for the reasons stated herein, Plaintiffs' motion is GRANTED. It is hereby ORDERED that a Final Judgment shall issue in favor of Plaintiffs and against Defendants Mikhail Palterovich ("Palterovich"), Dmitry Shteyman ("Shteyman"), Sun State Diagnostic, Inc. ("Sun State"), Continental Consulting, Inc. ("Continental") and Mario LaPlume ("LaPlume"), jointly and severally, for the sum of $1,522,231.11, plus attorneys' fees and costs, additional prejudgment interest as set forth in detail below, as well as postjudgment interest at the statutory rate; and, the Court shall retain jurisdiction to enter an Order regarding the amount of attorneys' fees and costs.

I. BACKGROUND

In a complaint filed on June 10, 2004, Plaintiffs alleged that 22 defendants participated in a four-year long conspiracy to defraud them, and other insurance companies like them, by staging automobile accidents and operating sham medical clinics that submitted insurance claims for testing and treatment that were never rendered or were medically unnecessary. Thus, Plaintiffs sued the defendants under the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, 1962 and 1964 (Counts I-VI); common law unjust enrichment based on the Florida Professional Service Corporations and Limited Liability Companies Act, Fla. Stat. §§ 621, et seq. (Count VII); common law fraud (Count VIII); as well as the Florida Civil Remedies for Criminal Practices Act, Fla. Stat. §§ 772.104 and 772.11 (Counts IX-X); and, Plaintiffs sought injunctive relief (Count XI) and declaratory judgments (Counts XII-XIV) in addition to monetary damages (DE # 1).

This Court entered default judgments as to liability against Palterovich, Shteyman, Sun State, Continental and LaPlume as a sanction for their willful disregard for the Court's Orders and their failure to participate in discovery as required (DE ## 269, 512, 566).²

In the presently pending motion, Plaintiffs request that this Court enter a final default judgment against the defaulted defendants as to Counts I-VI and VIII-X of the Complaint; assess damages against them in the amount of $2,618,617.41,³ plus additional prejudgment and postjudgment interest, as well as attorneys' fees and costs; and, find them jointly and severally liable for the entire sum (DE # 571).

II. ANALYSIS

Based upon the allegations of the Complaint which are deemed admitted pursuant to the entry of a default as to liability, as well as the analysis set forth herein, the undersigned concludes that it is appropriate to enter a final default judgment in favor of Plaintiffs and against Defendants Palterovich, Shteyman, Sun State, Continental and LaPlume, jointly and severally, for the sum of $1,522,231.11, plus additional prejudgment interest as set forth in detail below, as well as postjudgment interest at the statutory rate, based upon their violations of the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. §§ 1961, 1962 and 1964 (Counts I-VI); common-law fraud (Count VIII); and the Florida Civil Remedies for Criminal Practices Act, Fla. Stat. §§ 772.104 and 772.11 (Counts IX-X) (DE # 1).

A. The RICO Act (Counts I-V)

By virtue of Defendants' default—which renders all well-pled allegations in the Complaint to be admitted as true—the undersigned finds that Plaintiffs have stated a cause of action under the RICO statute. 18 U.S.C. §§ 1962(c) and 1964.

It is well established that the elements for a civil RICO claim consist of: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (5) that caused injury to business or property." Ace Pro Sound and Recording, LLC v. Albertson, 512 F.Supp.2d 1259, 1266 (S.D.Fla.2007) (citing Langford v. Rite Aid of Ala., Inc., 231 F.3d 1308, 1311 (11th Cir.2000)); accord Special Purpose Accounts Receivable Co-op. Corp. v. Prime One Capital Co., 202 F.Supp.2d 1339 (S.D.Fla.2002). In addition, the provision of the RICO Act that forms the basis for Plaintiffs' claims expressly requires proof that the Defendants are associated with an enterprise that is "engaged in, or the activities of which affect, interstate or foreign commerce ...." 18 U.S.C. § 1962(c).

1. Enterprise

To satisfy the first element of the RICO statute, Plaintiffs must demonstrate the existence of a "RICO enterprise," which is defined as "any union or group of individuals" that is "associated together for a common purpose of engaging in a course of conduct." 18 U.S.C. § 1961; United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). Plaintiffs bear the burden of showing "evidence of an ongoing organization, formal or informal," as well as evidence "that the various associates function as a continuing unit." Turkette, 452 U.S. at 583, 101 S.Ct. 2524. In the Complaint, Plaintiffs satisfactorily allege that Defendants Palterovich, Shteyman, Sun State, Continental and LaPlume, among others, participated in a RICO enterprise.

a. Existence of an Enterprise

The overarching RICO enterprise is described in the Complaint as an association-in-fact enterprise known as the "Medical Network Enterprise." The Medical Network Enterprise consists of the Defendant Clinics (including Sun State) and the Defendant Management Companies (including Continental), each of which was controlled by the Defendant Ringleaders (including Palterovich and Shteyman) to effectuate the fraudulent scheme through the assistance of the Defendant Providers (including LaPlume).

The Defendants, individually and collectively, each fulfilled a role in the Medical Network Enterprise. For example, the Defendant Ringleaders operated the Defendant Clinics; the Defendant Management Companies generated and processed the fraudulent medical bills and passed the insurance payments onto the individual Defendants; and, the Defendant Providers were licensed medical professionals who allowed their names to be used in order to support the fraudulent insurance claims that were based on bills for testing and treatments that were either unnecessary or never performed (DE # 1 at 74-76) (Count I).

In addition to the overarching "Medical Network Enterprise," Counts II-V of the Complaint allege that each of the Defendant Clinics—including Sun State (Count III)—constituted individual RICO enterprises as well, and that the Defendants participated in the operation of these individual enterprises in a similar fashion (DE # 1 at 80).

The Medical Network Enterprise and each of the Defendant Clinics is a RICO enterprise because each consisted of a group of individuals that associated together for the purpose of engaging in a course of conduct that included "defrauding Plaintiffs into paying bills for medical services that were not necessary and, in many cases, not supplied" (DE # 1 at 76, ¶ 252). Thus, the individuals and entities named as Defendants in this lawsuit, who worked together to operate sham medical clinics and billing agencies over a four-year period, comprised an "enterprise," as that term is used in the RICO Act, which is to be "liberally construed to effectuate its remedial purposes," and defines "enterprise" expansively. See Boyle v. United States, ___ U.S. ___, 129 S.Ct. 2237, 2243, 173 L.Ed.2d 1265 (2009) (internal citation omitted).

b. Distinctness

The RICO Act provides that it is "unlawful for any person ... associated with any enterprise" to participate in racketeering activity. 18 U.S.C. § 1962 (emphasis added).⁴ The statute thus "imposes a `distinctness' requirement whereby the `person' and the `enterprise' identified must be separate and distinct entities." Boca Raton Cmty. Hosp., Inc. v. Tenet Healthcare, 502 F.Supp.2d 1237, 1253 (S.D.Fla.2007). This limitation applies, however, "only when the singular person or entity is defined as both the person and the only entity comprising the enterprise." United States v. Goldin Indus., Inc., 219 F.3d 1271, 1275 (11th Cir.2000). Thus, the fact that the Complaint names Defendant Sun State to be a RICO enterprise in its own right does not preclude a finding that it is simultaneously a RICO person and a component of a distinct RICO enterprise. The RICO enterprises at issue in this case, whether identified as the underlying "Medical Network Enterprise"—as in Count I— or as the individual Defendant Clinics—as in Counts II through V—are made up of other individuals and groups, such as the Defendant Ringleaders and the Defendant Providers, each of which were "free to act independently of each other and to advance their own separate interests," meaning that Sun State is not only a RICO enterprise, but a RICO person as well, thus satisfying the "distinctness" requirement.⁵ See Boca Raton Cmty. Hosp., Inc. v. Tenet Healthcare, 502 F.Supp.2d 1237, 1253 (S.D.F...