899 F. Supp. 2d 227
E.D.N.Y2012Background
- This removal case involves Cambridge Medical, P.C. seeking payment and declaratory relief from Allstate under New York No-Fault Law.
- Allstate filed a large third-party complaint naming Cambridge, Pine Hollow Medical, P.C., multiple physicians and chiropractors, and five professional corporations as third-party defendants.
- The third-party claims allege widespread fraud and RICO-related conduct in the No-Fault system, including disputed referrals and financial arrangements.
- Two Rule 12(b)(6) motions are before the court: one by chiropractors to dismiss Section 238-a claims, and one by Cambridge and others seeking broader dismissal of the third-party complaint.
- The court addresses No-Fault payment requirements, Section 238-a defenses, and various preclusion, timeliness, and limitations arguments, ultimately denying both motions.
- Discovery is ordered to continue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 238-a claims against chiropractors survive. | Chiropractors violate 238-a due to compensation/referral schemes. | Safe harbors apply to arrangements, warranting dismissal. | Claims survive; factual questions preclude dismissal at this stage. |
| Whether licensing/medical necessity challenges against Cambridge Parties are viable at this stage. | Cambridge properly licensed; services medically necessary. | Improriety and discovery should reveal deficiencies. | Insufficient to decide on a motion to dismiss; discovery to continue. |
| Whether Allstate's fraud/RICO claims are time-barred under statute of limitations. | Fraud claims timely under discovery rule; not time-barred. | Some claims pre-date limitations; should be dismissed. | RICO claims not time-barred at this stage; denial of dismissal. |
| Whether Rooker-Feldman or ordinary preclusion principles bar the third-party claims. | State court judgments bar federal action. | Rooker-Feldman/preclusion apply. | Rooker-Feldman and preclusion do not bar the action at this stage. |
| Whether the No-Fault 30-day payment/denial rule bars fraud claims against No-Fault services. | 30-day rule should apply to objections; not to insurer-initiated fraud suit. | 30-day rule governs all challenges to claims. | thirty-day rule does not bar affirmative fraud claims by insurer. |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313 (New York 2005) (No-Fault payment/necessity framework; licensing requirements)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (Plaintiff must plead plausible claims, not mere conclusory statements)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (Plausibility standard for pleading survives Twombly framework)
- Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (U.S. 2005) (Rooker-Feldman doctrine scope limited; avoid overbroad application)
- Hoblock v. Albany Cty. Bd. of Elections, 422 F.3d 77 (2d Cir. 2005) (Four-part test for Rooker-Feldman applicability)
- State Farm Mut. Auto. Ins. Co. v. Grafman, 655 F. Supp. 2d 212 (E.D.N.Y. 2009) (Insurer fraud claims; timeliness considerations under discovery rule)