State Farm Mut. Auto. Ins. Co. v. Slade Healthcare, Inc., 381 F. Supp. 3d 536

Background

State Farm sued six medical clinics, twelve providers, four clinic owners, and Slade Healthcare alleging a multi‑year fraudulent billing "predetermined treatment protocol" that maximized Maryland PIP (no‑fault) payments and avoided outside referrals and diagnostics.
Plaintiff seeks compensatory damages, disgorgement (unjust enrichment), and declaratory relief that it need not pay outstanding or future claims tied to the alleged protocol; complaint included extensive exhibits and claim lists.
Defendants (Clinics/Owners/Slade and Providers) filed motions to dismiss challenging limitations, ripeness, and pleading particularity; defendants also brought amended counterclaims for defamation, tortious interference with prospective business advantage, and civil conspiracy.
The Clinics/Providers moved to dismiss portions of State Farm’s claims (statute of limitations and declaratory counts); State Farm moved to dismiss the counterclaims, asserting absolute litigation privilege and failure to plead essential elements.
The court denied the Clinics’ and Providers’ motions to dismiss State Farm’s complaint, finding State Farm adequately pleaded fraud and unjust enrichment (and that accrual/limitations could not be resolved on the pleadings), and held declaratory counts sufficiently ripe and particularized for now.
The court granted State Farm’s motion to dismiss the counterclaims (defamation, tortious interference, conspiracy), finding the letters protected by the absolute litigation privilege and the remaining counterclaims insufficiently pleaded, with leave to amend.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Accrual / Statute of limitations	State Farm: discovery rule; fraud not reasonably discoverable until analysis after Fall 2016 across thousands of claims	Defendants: State Farm knew or was on inquiry notice earlier (e.g., 2012 Kozachuk deposition) so claims pre‑Dec 14, 2014 are time‑barred	Denied defendants' 12(b)(6) limitations defense — factual dispute over inquiry notice; cannot resolve on pleadings
Unjust enrichment (against Providers)	State Farm: paid claims conferred benefits; defendants participated in scheme so equity requires disgorgement	Providers: were independent contractors paid fixed rates and thus did not receive unjust benefit	Denied dismissal — complaint plausibly alleges concerted scheme and that retention of payments would be inequitable
Declaratory relief / ripeness and pleading particularity	State Farm: seeks declaration it need not pay unpaid/future claims tied to the alleged fraud; claims are concrete and immediate	Defendants: seeks relief as to hypothetical future claims and pleads fraud too generally (fail Rule 9(b))	Declaratory counts survive — court finds controversy ripe and fraud pleaded with sufficient particularity here (distinguishing Carefree)
Counterclaims: defamation, tortious interference, civil conspiracy; privilege	Counter‑plaintiffs: State Farm orally and in letters accused them of fraud and denied claims, harming business and reputation	State Farm: letters and communications are privileged (absolute litigation privilege); counterclaims fail to plead falsity, malice, identity, and causation	Granted State Farm’s motion: claim denial letters privileged; oral statement allegations are too vague; tortious interference and conspiracy fail; leave to amend granted

Key Cases Cited

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible)
Ashcroft v. Iqbal, 556 U.S. 662 (separating legal conclusions from factual allegations)
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (actual controversy requirement for declaratory judgment)
Norman v. Borison, 418 Md. 630 (Md. law on defamation and absolute privilege)
Gersh v. Ambrose, 291 Md. 188 (test for applying absolute privilege to extrinsic statements)
Mixter v. Farmer, 215 Md. App. 536 (absolute litigation privilege extends beyond defamation to related torts)