Bayside Wellness Physical Therapy, P.C. v. Double Why Design, Inc.
2:23-cv-03842
E.D.N.YFeb 11, 2025Background
- Plaintiffs Bayside Wellness Physical Therapy, P.C. and Naon Physical Therapy P.C., owned by Jessie Kim, alleged that the defendants fraudulently diverted insurance payments owed to them via forged documents and fraudulently opened bank accounts.
- Defendants included Double Why Design, Inc., Young Jun Youn, Barbara Mangibin, Gabriel & Moroff, P.C. (G&M), and unknown individuals and corporations.
- Plaintiffs claimed the defendants prepared fraudulent transfer documents, submitted false filings with regulators, opened unauthorized bank accounts, and directed insurance payments to themselves.
- The court considered a motion to dismiss under Rules 12(b)(1) and 12(b)(6), focusing primarily on whether plaintiffs established a valid civil RICO (Racketeer Influenced and Corrupt Organizations Act) claim.
- After plaintiffs’ demand letter in October 2022, the alleged misconduct stopped: fraudulent accounts were closed, plaintiffs no longer shared office space with defendants, and disputed funds remained escrowed and unreleased.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO: Pattern of Racketeering | Scheme showed both closed and open-ended continuity via multiple acts to divert funds | No closed/open-ended continuity; alleged acts occurred over short period, ceased | No sufficient pattern of racketeering; period too short, no ongoing threat |
| RICO: Ongoing Threat | Defendants remain able to defraud plaintiffs; acts still ongoing | Activities ceased after October 2022; no present risk of continued misconduct | No facts showing ongoing threat; scheme "inherently terminable" and ended |
| Supplemental Jurisdiction (State Law) | Federal RICO claim gives jurisdiction over state law claims | With RICO dismissed, court should not retain jurisdiction over state claims | Declined jurisdiction over state claims; dismissed state claims without prejudice |
| Scope of Scheme (Number of Victims) | Scheme broad and affected plaintiffs | Only two victims; single scheme with limited scope | Scheme too narrow; RICO requires more breadth in victims and duration |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (establishing the plausibility standard for pleading under Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (requiring more than conclusory statements to state a claim)
- Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999) (RICO requires related and continuous predicate acts)
- H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (explaining the continuity requirement under RICO)
- Spool v. World Child Int’l Adoption Agency, 520 F.3d 178 (2d Cir. 2008) (timeframe for continuity is predicate act period, not underlying dispute)
- GICC Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463 (2d Cir. 1995) (RICO continuity is primarily a temporal concept)
- First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159 (2d Cir. 2004) (state claims should be dismissed if federal claims are dismissed early in litigation)