Allstate Insurance. v. Lyons
2012 U.S. Dist. LEXIS 19866
| E.D.N.Y | 2012Background
- In recent Ellis No-fault scheme, PCs purportedly provided medical services to auto-accident victims and billed Allstate for no‑fault benefits.
- Lyons served as radiologist for each PC, produced MRI reports that were allegedly fabricated.
- PCs were allegedly owned on paper by doctors but controlled by non‑physician actual owners.
- Allegations cluster defendants include Right Aid, Atlantic Imaging, Atlantic Radiology, A Plus, Omega, Shore, Oracle, Aurora, Alma, and others; paper owners and Lyons allegedly conducted affairs of the PCs.
- No-fault reform: plaintiffs seek RICO, common law fraud, NY GBL § 349, and unjust enrichment; defendants move to dismiss and to compel arbitration.
- Court denies motions to dismiss in full; grants arbitration for claims Allstate has not yet paid; arbitration limited to those unpaid claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PCs constitute RICO enterprises | Allstate alleges PCs are RICO enterprises. | Defendants contend lack of distinct enterprise and improper association-in-fact. | Enterprises pled as PCs satisfy RICO distinctness and association requirements. |
| Whether pattern of racketeering shows continuity | Open-ended continuity shown by ongoing fraud and regular inflated billings. | Defendants contest continuity as to certain entities. | Open-ended continuity adequately pled; continued threat inferred despite some entities being defunct. |
| Whether mail fraud adequately plead as predicate acts and scienter | Fraudulent incorporation and false MRI reports satisfy mail fraud with requisite scienter. | Arguments about particularity under Rule 9(b) and lack of scienter. | Sufficient specificity under Rule 9(b); strong inference of fraudulent intent established. |
| Scope of arbitration under NY Insurance Law § 5106(b) | No arbitration required for fraud claims; statute does not compel arbitration of affirmative fraud actions. | Section 5106(b) requires arbitration for disputes arising under subsection (a). | Arbitration not required for claims Allstate has paid or claims based on fraud; limited arbitration applies to unpaid claims. |
Key Cases Cited
- Turkette v. United States, 452 U.S. 576 (U.S. 1981) (establishes enterprise and pattern elements in RICO)
- H.J. Inc. v. Northwest Bell Telephone Co., 492 U.S. 229 (U.S. 1989) (defines pattern of racketeering and continuity concepts)
- State Street Bank & Trust Co. v. Salovaara, 326 F.3d 130 (2d Cir. 2003) (interprets arbitration scope in FAA contexts)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (U.S. 2001) (distinctness rule in RICO when corporate actors conduct affairs)
- First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159 (2d Cir. 2004) (RICO enterprise and affiliation principles; association-in-fact constructs)
- State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 794 N.Y.S.2d 700 (N.Y. 2005) (licensing and eligibility for no-fault reimbursement; mail fraud implications)
- Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (N.Y. 1995) (consumer-oriented conduct standard under § 349)
- Moore v. PaineWebber, Inc., 189 F.3d 165 (2d Cir. 1999) (Rule 9(b) specificity requirements in fraud claims)