State Farm Mut. Auto. Ins. Co. v. Parisien

352 F.Supp.3d 215

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and State Farm Fire and Casualty Company, Plaintiffs,

v.Jules PARISIEN, M.D., Luqman Dabiri, M.D., Ksenia Pavlova, D.O., Noel Blackman, M.D., Frances Lacina, D.O., Allay Medical Services, P.C., FJL Medical Services P.C., JFL Medical Care P.C., JPF Medical Services, P.C., KP Medical Care P.C., PFJ Medical Care P.C., RA Medical Services P.C., Darren Mollo, D.C., Darren Mollo D.C., P.C., ACH Chiropractic, P.C., Energy Chiropractic, P.C., Island Life Chiropractic Pain Care, PLLC, Charles Deng, L.A.c., Charles Deng Acupuncture, P.C., David Mariano, P.T., MSB Physical Therapy P.C., Maiga Products Corporation, Madison Products of USA, Inc., Quality Custom Medical Supply, Inc., Quality Health Supply Corp., Personal Home Care Products Corp., and AB Quality Health Supply Corp., Defendants.

18-CV-289

United States District Court, E.D. New York.

Signed November 26, 2018

Anne Raven, Pro Hac Vice, Patrick C. Harrigan, Pro Hac Vice, Jonathan L. Marks, Pro Hac Vice, Silke G. Watson, Pro Hac Vice, Katten Muchin Rosenman LLP, Chicago, IL, Christopher Thomas Cook, Michael Max Rosensaft, Katten Muchin Rosenman LLP, New York, NY, Steven Lloyd Brounstein, Steve L. Brounstein, PLLC, Brooklyn, NY, for Plaintiffs.

Mark L. Furman, Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Wolf, LLP, Nicholas Paul Bowers, Gary Tsirelman, P.C., Brooklyn, NY, Nigel Edwin Blackman, Blackman & Melville, PC, New York, NY, Andrew S. Fisher, Fisher & Fisher, Staten Island, NY, for Defendants.

MEMORANDUM AND ORDER

I. Leo Glasser, Senior United States District Judge

Plaintiffs State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (together, "Plaintiffs" or "State Farm") bring this action seeking damages for benefits paid under no-fault automobile insurance policies for services rendered or purportedly rendered by Defendants. (ECF No. 5 ("Am. Compl.") ). State Farm also seeks a declaratory judgment that Defendants are not entitled to collect any future no-fault benefits for services rendered to date and through the pendency of the litigation. (Am. Compl. ¶¶ 261-269). Defendants are various individual providers and affiliated corporations who purportedly rendered services or provided medical supplies to State Farm's insureds at 1786 Flatbush Avenue in Brooklyn, New York ("1786 Flatbush"). (Am. Compl. ¶¶ 12-43).¹ This action is one of many that have been commenced, and will surely continue to be commenced, by insurance carriers in this district against medical providers who have allegedly abused New York's no-fault statute, N.Y. Ins. L. §§ 5101, et seq. , to carry out fraud or collect benefits to which they are not entitled under applicable regulations. See Allstate Insurance Company v. Tvildiani , 2015 WL 13048729, at *1 (E.D.N.Y. Apr. 14, 2015) (observing that "[a]llegations of fraud on our health care system generally ... have become too common. There have been dozens of cases brought in this district alleging the same misuse of New York's No Fault Insurance law").

Presently before the Court is State Farm's motion for a preliminary injunction of proceedings that have been commenced, and which may be commenced in the future, by Defendants to collect no-fault benefits from State Farm. (ECF No. 6). See Fed. R. Civ. P. 65. The temporary relief that State Farm requests may be divided into three branches:

1. an order staying lawsuits brought by Defendants against Plaintiffs to collect no-fault benefits and which are currently pending in New York state court;

2. an order staying pending American Arbitration Association ("AAA") proceedings brought by Defendants against Plaintiffs to collect no-fault benefits; and

3. an order enjoining Defendants from commencing any future lawsuits or arbitration proceedings in order to collect no-fault benefits.

(ECF No. 6).

It is the first branch that raises the most significant legal and policy questions, not only for New York's no-fault scheme, but for our ever-evolving jurisprudence on the scope of the Anti-Injunction Act ("AIA"), 28 U.S.C. § 2283. "It is always embarrassing for a lower court to say whether the time has come to disregard decisions of a higher court, not yet explicitly overruled, because they parallel others in which the higher court has expressed a contrary view." Spector Motor Service v. Walsh , 139 F.2d 809, 823 (1943) (Hand, J., dissenting). Although there are precedents suggesting that a court's authority to enjoin state proceedings in aid of its jurisdiction does not apply to actions in personam, see Toucey v. New York Life Ins. Co. , 314 U.S. 118, 139, 62 S.Ct. 139, 86 L.Ed. 100 (1941) ; Kline v. Burke Const. Co. , 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226 (1922), "one should not wait for formal retraction in the face of changes plainly foreshadowed."

Spector Motor Service , 139 F.2d at 823 ; see also Cohens v. State of Virginia , 19 U.S. 264, 404, 6 Wheat. 264, 5 L.Ed. 257 (1821) ("Questions may occur which we would gladly avoid, but we cannot avoid them"; "[w]ith whatever doubts, with whatever difficulties, a case may be attended, we must decide it, if it be brought before us") (Marshall, C.J.). Based on its review of the relevant case law and statutory authority, and under the specific facts presented in this case, the Court grants State Farm's motion in its entirety.

BACKGROUND

I. New York's No-Fault Statute

The Comprehensive Motor Vehicle Insurance Reparations Act, see N.Y. Ins. L. §§ 5101 et seq. (formerly N.Y. Ins. Law §§ 670 et seq. ) sets forth New York's no-fault scheme and "supplant[s] the state's common law tort remedies for most injuries associated with automobile accidents with a no-fault insurance scheme." State Farm Mut. Auto. Ins. Co. v. Mallela , 372 F.3d 500, 502 (2d Cir. 2004). Under the statute, automobile insurers must provide coverage for "basic economic loss," including medical expenses, arising out of the use or operation of a covered motor vehicle, without regard to fault. See N.Y. Ins. L. §§ 5102, 5103 ; Mallela , 372 F.3d at 502. The insured's claim may be assigned to his or her provider, who bills the insurer directly. See 11 N.Y.C.R.R. § 65-3.11. The purpose of the no-fault system is threefold: "to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists." Medical Society of State v. Serio , 100 N.Y.2d 854, 860, 768 N.Y.S.2d 423, 800 N.E.2d 728 (N.Y. 2003) ; see Montgomery v. Daniels , 38 N.Y.2d 41, 50-51, 378 N.Y.S.2d 1, 340 N.E.2d 444 (N.Y. 1975) (discussing reasons for the no-fault statute's enactment).

Section 5106 create a "[f]air claims settlement" procedure for all no-fault claims. Nofault benefits are deemed overdue if they are not paid or denied within 30 calendar days after proof of claim is submitted. See N.Y. Ins. L. § 5106(a) ; 11 N.Y.C.R.R. § 65-3.8(c). If an insurer fails to comply with this timeframe, it will be precluded from asserting many (but not all) defenses to coverage, including most fraud-based defenses. See Fair Price Medical Supply Corp. v. Travelers Indem. Co. , 10 N.Y.3d 556, 860 N.Y.S.2d 471, 890 N.E.2d 233 (2008) ; Central Gen. Hosp. v. Chubb Group of Ins. Companies , 90 N.Y.2d 195, 199, 659 N.Y.S.2d 246, 681 N.E.2d 413 (1997). A claimant may bring an action in state court to recover overdue no-fault benefits, and in any such action the claimant need only show that the prescribed statutory billing forms were mailed and received and that the benefits are overdue. See Viviane Etienne Medical Care, P.C. v. Country-Wide Ins. Co. , 25 N.Y.3d 498, 506, 14 N.Y.S.3d 283, 35 N.E.3d 451 (N.Y. 2015). In addition, insurers are required to include a clause in their policies allowing the claimant to seek arbitration of their claims for no-fault benefits. See N.Y. Ins. L. § 5106(b) ; 11 N.Y.C.R.R. § 65-1.1(a), (d).

An insurer who pays no-fault benefits and subsequently discovers fraud may bring an action for damages. See State Farm Mut. Auto. Ins. Co. v. James M. Liguori, M.D., P.C. , 589 F.Supp.2d 221, 229-235 (E.D.N.Y. 2008) ; State Farm Mut. Automobile Ins. Co. v. CPT Medical Services, P.C. , 2008 WL 4146190, at *6-*7 (E.D.N.Y. Sept. 5, 2008). The insurer may also bring an action for a declaratory judgment that it is not liable for any unpaid claims where the provider has committed fraud or breached applicable no-fault regulations. See 28 U.S.C. § 2201 ; Government Employees Ins. Co. v. Jacques , 2017 WL 9487191, at *9-*11 (E.D.N.Y. Feb. 13, 2017), report and recommendation adopted , 2017 WL 1214460 (E.D.N.Y. Mar. 31, 2017) ; State Farm Mut. Auto. Ins. Co. v. Cohan , 2009 WL 10449036, at *4 (E.D.N.Y. Dec. 30, 2009), report and recommendation adopted , 2010 WL 890975 (E.D.N.Y. Mar. 8, 2010). However, if an insurer is precluded from asserting a defense to coverage (such as provider fraud) due to its noncompliance with the 30-day rule, it will also be precluded from obtaining a declaratory judgment on those same grounds. See Allstate Ins. Co. v. Williams, 2015 WL 5560543, at *7 (E.D.N.Y. Aug. 28, 2015) ; Government Employees Ins. Co. v. AMD Chiropractic, P.C. , 2013 WL 5131057, at *8 (E.D.N.Y. Sept. 12, 2013).

II. Factual Background

Since August 2013, and "continu[ing] uninterrupted since that time," Defendants have allegedly subjected State Farm's insureds to a suite of medically unnecessary interventions, referred to in the complaint as the "Predetermined Treatment Protocol," to defraud State Farm and exploit those insureds' no-fault benefits. (Am. Compl. ¶¶ 2-3, 6). According to the complaint:

"[T]he Predetermined Treatment Protocol involves:

"(a) initial examinations that are not legitimately performed to determine the true nature and extent of patient injuries, but rather are performed, if at all, as a pretext to report substantially similar and in some instances nearly identical examination findings to justify a

...