916 F. Supp. 2d 273
E.D.N.Y2013Background
- Plaintiffs Allstate sue Defendants Elzanaty Uptown and related entities under RICO, and for state-law fraud, unjust enrichment, and NY Gen. Bus. Law § 349 claims related to no-fault insurance reimbursements.
- Uptown is an Article 28 health-care facility operating as East Tremont Medical Center, New York Neuro & Rehab Center, and Jerome Family Health Center, allegedly controlled by Elzanaty who is not licensed to practice medicine.
- Plaintiffs allege Uptown and Pawlowski-affiliated entities were fraudulently incorporated or operated to obtain no-fault payments from Allstate.
- NY no-fault rules require timely verification and payment, and insurers may deny or withhold reimbursement for unlicensed/fraudulently licensed providers under 11 NYCRR § 65-3.16(a)(12).
- The matter involves parallel litigation dynamics across federal action, state-court declaratory proceedings, and anticipated arbitration; multiple motions are now before the court.
- A prior Bronx Supreme Court action involving Uptown was dismissed as parallel and moot by an October 2012 order, leaving the current federal case as to Uptown and remaining Defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Colorado River abstention applies. | Allstate argues ongoing state action is not parallel; abstention inappropriate. | Uptown contends parallel state action warrants abstention to avoid conflict. | Colorado River abstention denied; no parallel-state proceedings controlling federal case. |
| Whether Burford abstention applies. | Allstate contends Burford abstention not warranted because case does not challenge state licensing scheme. | Defendants claim abstention to avoid undermining state regulatory framework. | Burford abstention denied. |
| Whether RICO and fraud claims are adequately pled. | Allstate pled fraud and predicate acts (including mail fraud) and injury to business; claims cognizable. | Defendants challenge sufficiency and suggest preemption by state licensing; claims lack plausible basis. | Rule 12(c) denial of dismissal; RICO and fraud claims deemed adequately pled at this stage. |
| Whether this action is barred by collateral estoppel, res judicata, or Rooker-Feldman. | Plaintiff argues not barred by prior state adjudications or arbitrations. | Defendants contend prior decisions foreclose current claims. | Denial of this bar to dismissal; remains to be determined with further record. |
| Whether statute of limitations bars some RICO claims. | Discovery rule and tolling may render claims timely; storm warnings argued. | Claims time-barred for many predicate acts; issue factual and unsettled. | Limitations issue not resolved; denial of dismissal without prejudice. |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500 (2d Cir. 2004) (insurer may withhold no-fault reimbursement for fraudulently incorporated providers; regulatory scheme allows behind-the-face challenge to licensing)
- State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313 (N.Y. 2005) (NY Court of Appeals held insurer may pursue fraud/illegitimate licensing to recover payments)
- State Farm Mut. Auto. Ins. Co. v. Grafman, 655 F. Supp. 2d 212 (E.D.N.Y. 2009) (federal RICO can supplement insurance regulation; no automatic preemption)
- Rotella v. Wood, 528 U.S. 549 (2000) (RICO accrues at injury; separate accrual rule applies to later injuries)
- Humana, Inc. v. Forsyth, 525 U.S. 299 (1999) (RICO can be applied in harmony with state insurance regulation)