MEMORANDUM OF DECISION AND ORDER
On Fеbruary 12, 2008, the Plaintiffs (or “Allstate”), a group of nine insurers, commenced this action alleging that the numerous Defendants conspired to abuse New York’s No-Fault Insurance regime, N.Y. Ins. Law § 5101 et seq., in order to obtain payment for medical services and diagnostic tests that were not medically necessary, or in some cases, never performed at all. The Plaintiffs assert common law claims for fraud and unjust enrichment, and seek damages for violations of N.Y. Gen. Bus. L. § 349, and violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 еt seq. (“RICO”).
On April 30, 2008, Defendants Inna Po-lack, Alexander Polack, Natalya Shvarts-man (“the Management Defendants”), and Mighty Management Group, Inc., Mighty Management LLC, and Blue Wave Management, Inc. (“the Management Companies”) moved to dismiss Counts I, II, III, IV, V, and VIII of the Plaintiffs’ complaint. On June 5, 2008, Defendants Dr. Alexander Rozenberg (“Rozenberg”), A.R. Medical Rehabilitation, P.C., A.R. Medical Art, P.C., and Yonkers Medical Art, P.C. (“the PC Defendants”) moved to dismiss Counts I-V. For the sake of judicial economy, and because these separate motions raise the same arguments, the Court will address both motions together.
/. BACKGROUND
A. The Alleged Scheme
Pursuant to New York’s No-Fault insurance regime, the Plaintiffs are required to provide benefits to eligible insured persons for medically necessary diagnostic tests. The insureds in turn may assign their rights to such benefits to their medical providers in order to reimburse them for services rendered. The Plaintiffs allege that Rozenberg, a licensed neurologist, is the straw owner of the PC Defendants. The PC Defendants are medical professional corporations that billed the Plaintiffs for consultations, neurological exams, and range of motion testing performed upon patients insured by Allstate. According to the Plaintiffs, Rozenberg played no role in the actual operation or management of the PC Defendants.
The Plaintiffs assert that the PC Defendants were in fact operated by the Management Companies; New York corporations that are owned and controlled by Inna Polack, Alexander Polack, and Yuliy Goldman. The Plaintiffs allege that the sole purpose of establishing the relationship between the PC Defendants and the Management Companies was to facilitate a scheme to defraud Allstate by creating and submitting, through the mail, fraudulent medical reports and invoices for medical services in support of hundreds of No-Fault insurance claims. In particular, the Plaintiffs aver that the Defendants submitted bills for services not rendered; charged excessive fees for unnecessary *388 medical treatment; and induced Allstate and the other insurers to pay No-Fault insurance claims to professional medical corporations that were owned by non-licensed individuals.
The Plaintiffs allege that Inna Polack, Alexander Polack, and Rozenberg created the PC Defendants with different names, addresses, and taxpayer identification numbers to reduce the likelihood that insurers would uncover their scheme. The Plaintiffs further allege that, through the Management Companies, Inna Polack, Alexander Polack, and Goldman instructed non-medical personnel, including the Defendant Natalya Shvartsman, to implement pre-established treatment regimens that would maximize the PC Defendants’ billing invoices.
The Plaintiffs contend that Rozenberg subjected their claimants to a battery of unnecessary tests and that the results of these examinations were often deliberately misrepresented or fabricated in order to justify further costly but unneeded treatments. The Plaintiff avers that, based upon these fabricated testing results, the Defendants submitted invoices to the Plaintiffs demanding payments for services that were not medically necessary or, in some cases, never rendered at all.
B. The Indictment
On or about July 31, 2006, Rozenberg, Inna Polack, Natalya Shvartsman, Emmanuel Kucherоvsky, Shaun Robinson, A.R. Medical, P.C., Mighty Management, LLC, and Mighty Management Group, Inc. (“the criminal Defendants”) were indicted in Supreme Court, Kings County, in connection with a scheme to defraud No-Fault insurance carriers. According to the Indictment, the criminal Defendants controlled A.R. Medical. The Indictment alleges that the criminal Defendants paid a network of “steerers,” such as Shaun Robinson, to stage automobile accidents and refer the victims to AR Medical for treatment. The Indictment alleges that AR Medical then defrauded insurance cаrriers by submitting fraudulent claims for health services.
The Indictment further alleges that although Rozenberg was the straw owner of AR Medical, it was in fact owned by Inna Polack. The Indictment alleges that Inna Polack established and enforced rules governing the solicitation of patients and the administration of patient treatment. According to the Indictment, the criminal Defendants fraudulently diagnosed patients with extensive injuries and submitted claims to insurance carriers for unnecessary treatment or, in some cases, treatment that was never provided at all. The Indictment also alleges that Inna Po-lack used the clime’s manager, Natalya Shvartsman, to carry out Polaek’s alleged scheme.
According to the Indictment, checks were drawn from the accounts of the Management Companies and made payable to corporations owned or controlled by Ku-cherovsky who, for a transaction fee, transferred these monies to Inna Polack. The Indictment alleges that during the period from January of 2005 until March of 2006, more than $2.3 million was depositеd into the accounts of the Management Companies. According to the Plaintiffs, to date, Inna Polack, Shvartsman, Kucherov-sky, and Robinson have all pled guilty to Insurance Fraud, Money Laundering, and Larceny.
C. The Plaintiffs’ Complaint
On February 12, 2008, the Plaintiffs commenced this lawsuit alleging that: (i) the Defendants violated RICO, 18 U.S.C. § 1962(c); (ii) the Defendants engaged in a RICO conspiracy in violation of 18 U.S.C. § 1962(d); (iii) the Defendants committed common law fraud and unjust enrichment; *389 and (iv) the Defendants are liable under N.Y. Gen. Bus. L. § 349 for deceptive business practices.
II. DISCUSSION
A. 12(b)(6) Standard
In considering a 12(b)(6) motion to dismiss, “ ‘[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.’ ”
Todd v. Exxon Corp.,
A complaint should be dismissed only if it does not contain enough allegations of fact to state a claim for relief that is “plausible on its face.”
Bell Atl. Corp. v. Twombly,
B. The Defendants’ Motions to Dismiss
The Defendants have filed separate motions to dismiss the complaint asserting that: (i) the Plaintiffs have failed to adequately set forth each Defendant’s role in the alleged scheme; (ii) the Plaintiffs have failed to adequately plead that the Defendants carried on an “enterprise” within the meaning of RICO; (iii) the Plaintiffs cannot show that there was a RICO conspiracy because they have failed to allege an underlying RICO violation; (iv) the Plaintiffs failed to plead common law fraud with the requisite particularity; (v) the Plaintiffs cannot state a claim under N.Y. Gen. Bus. L. § 349 because they complain of practices that were not directed at consumers; and (vii) the Plaintiffs have failed to allege any “direct dealing,” with the Defendants as required in order to assert a valid unjust enriсhment claim under New York law. The Court will review each of these arguments in turn.
1. The Plaintiffs’ Civil RICO Counts
The substantive RICO statute, 18 U.S.C. § 1962(c), makes it “unlawful for any person employed by or associated with any enterprise engaged in ... interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity ...” To establish a RICO violation under 18 U.S.C. § 1962(c), a plaintiff must show: “(1) that the defendant (2) through the commission of two or more acts (3) constituting a ‘pattern’ (4) of ‘racketeering activity’ (5) directly or indirectly invests in, or participates in (6) an ‘enterprise’ (7) the activities of which affect interstate or foreign commerce.” Moss
v. Morgan Stanley Inc.,
RICO defines “racketeering activity” to include certain predicate criminal acts including mail fraud.
S.Q.K.F.C., Inc. v. Bell Atlantic TriCon Leasing Corp.,
Rule 9(b) provides that “in all aver-ments of fraud or mistake, the circumstances constituting fraud or mistake [must] be stated with particularity.” Fed. R.Civ.P. 9(b). In order to satisfy this requirement, the complaint must: “ ‘(1) specify the statements that the plaintiff contends were fraudulent; (2) identify the speaker; (3) state where and when the statements were made; and (4) explain why the statements were fraudulent.’”
Lerner,
The Plaintiffs have described the allegedly fraudulent scheme, and each Defendant’s role in the scheme, in detail. In fact, the complaint includes exhibits detailing the dates and specific instances of fraudulent submissions mailed by the Defendants. The complaint also alleges that each of the Defendants are connected to the scheme such that each defendant could have reasonably foreseen that use of the mail was an essential element of the alleged fraud.
See United States v. Bortnovsky,
Having determined that the Defendants engaged in racketeering activity, the Court’s analysis must turn to whether the Plaintiffs have shown that the Defendants participated in an “enterprise” that is cognizable under RICO. Here, the Plaintiffs assert two theories of enterprise liability under 18 U.S.C. § 1962(с).
a. Count I
The Defendants contend that the Plaintiffs have failed to allege the existence of an “enterprise” within the meaning of RICO. The statute provides that an “enterprise” includes “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). However, under Section 1962(c), it is well-established that the alleged “enterprise” through which a pattern of racketeering-activity is conducted must be distinct from those persons or entities who stand accused of conducting that racketeering activity.
See Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A.,
In Count I, the Plaintiffs have identified the PC Defendants and the Management Companies as the RICO enterprise, and Inna Polack, Alexander Polack, Rozen-berg, Goldman, Shvartsman, Kucherovsky, and Robinson as the so-called RICO persons. The Defendants argue that the distinctiveness requirement is not met where a рlaintiff alleges a conspiracy between a corporation and its own employees carrying on the affairs of the corporation. However, the Supreme Court has explicitly rejected such an exacting construction of the distinctiveness requirement.
In
Cedric Kushner Promotions, Ltd. v. King,
The Supreme Court reversed the lower courts, holding that, in such circumstances, the distinctiveness requirement is met because a “corporate owner/employee ... is distinct from the corporation itself, а legally different entity with different rights and responsibilities due to its different legal status.”
Id.
at 163,
In Riverwoods, the plaintiffs alleged that the defendant bank had fraudulently coerced them into restructuring loan agreements in violation of RICO. Id. at 341. In their complaint, the plaintiffs alleged that the bank was the RICO person and the RICO enterprise was the bank along with its employees and agents. Id. The Second Circuit found that the distinctiveness requirement could not be circumvented “by alleging a RICO enterprise that consists merely of a corporate defendant associated with its оwn employees or agents carrying on the regular affairs of the defendant ...” Id. at 344.
However, here, as in
Kushner,
the Plaintiffs claim that the corporate officers and employees are the RICO persons while the corporations are the RICO enterprise. The legal distinction between the RICO enterprise (the PC and Management Company Defendants) and the RICO persons (the officers and employees of those corporations) is sufficient to satisfy the distinctiveness requirement.
See Kushner,
Having determined that the Plaintiffs have alleged a valid RICO enterprise, the Court must analyze whether each of the Defendants conducted or participated, directly or indirectly, in the conduct of the enterprise’s affairs. 18 U.S.C. § 1962(c). The Supreme Court has held that “to conduct or participate, directly or indirectly, in the conduct” of an enterprisе’s affairs “one must participate in the operation or management of the enterprise itself.”
Reves v. Ernst & Young,
At the pleading stage, the Plaintiffs have offered allegations sufficient to show that all of the individual Defendants participated in the alleged enterprise. Here, Inna Polack, Alexander Polack, and Yuliy Goldman are alleged to have been the true owners of the enterprise. The Plaintiffs allege that Rozenberg conducted the en *392 terprise’s affairs by misdiagnosing patients and performing the unnecessary treatments that drove the fraud. The Plaintiffs further allege that Shvartsman directed the enterprise’s affairs by implementing the treatment regimens established by Inna Polack. The Plaintiffs also aver that Kucherovsky participated in the enterprise by laundering the fraudulent proceeds of the allеged scheme. Finally, although the allegations that Robinson participated in the conduct of the enterprise are more tenuous, they are sufficient to state a RICO claim against him because he managed a crucial part of the alleged scheme-steering patients to the PC Defendants.
The Plaintiffs having established all of the requisite elements of a civil RICO claim, the Defendants’ motions to dismiss Count I of the complaint are denied.
b. Count II — The “Innocent Victim Enterprise” Theory
In Count II, the Plaintiffs argue that Allstate — the alleged victim of the racketeering activity — is actually the RICO enterprise. The Supreme Court has observed that “the enterprise in subsection (c) [of § 1962] connotes generally the vehicle through which the unlawful pattern of racketeering activity is committed, rather than the victim of that activity.”
Schei-dler,
To analyze this theory of RICO liability, the Court must again turn to the operation and management test. The Plaintiffs appear to claim that the Defendants conducted or participated in the Plaintiffs’ affairs by submitting allegedly fictitious insurance claims that affected the insurance companies’ claim-paying process. In the absence of any Second Circuit authority supporting the proposition that such conduct is sufficient to satisfy the “operation and management test,” the Plaintiffs lean heavily on the First Circuit’s decision in
Aetna Cas. Sur. Co. v. P & B Autobody,
One of the issues on appeal was whether Aetna, the victim of the fraud, was an enterprise for RICO purposes. The appellants argued that Aetna could not properly be regarded as a RICO enterprise because, among other things, the appellants did not participate in Aetna’s operation or management. The First Circuit disagreed finding that “[b]y acting with purpose to cause Aetna to make payments on false claims, appellants were participating in the ‘operation’ of Aetna.”
Id.
at 1559. Crucial to the First Circuit’s decision was the fact that several of the named defendants were Aetna claims adjusters who were bribed by their co-defendants into submitting false claims.
Id.
at 1559-60. The First Circuit’s reasoning in
Aetna
has not been well received by courts within the Second Circuit.
See Allstate Ins. Co. v. Seigel,
*393
In
Seigel,
the plaintiff alleged that a doctor and a medical corporation owned by that doctor created fraudulent invoices and medical reports for the purpose of inducing the plaintiff to pay for medical treatments that were never performed. The plaintiff alleged a variety of RICO violations, and contended that it met the distinctiveness requirement because Allstate, and not the named defendant medical corporation, was the relevant RICO enterprise for the purposes of the plaintiffs 1962(c) claim. Although the Court declined to dismiss the plaintiffs RICO claim at the pleading stage, the Court observed that the First Circuit’s construction would effectively undermine the operation and management test because “any time a company is defrauded by the conduct of a defendant, one could say that the defendant ‘controlled’ the company’s operations, since absent the fraud, the compаny would not have done what it did or acted in the manner in which it did.”
Seigel,
In
SmithKline,
healthcare insurers and other parties brought suit against a chain of medical laboratories alleging, among other things, that the defendant violated 1962(c) by engaging in a fraudulent billing scheme.
With due respect, the Court finds the First Circuit’s construction of the “operation and management,” test to be unpersuasive. However, even if the Court did apply this less stringent version of the test, Aetna is clearly distinguishable from the instant case. Significantly, unlike in Aetna, here the Plaintiffs do not allege that any of their employees conspired with the Defendants in the alleged scheme. As noted above, the fact thаt Aetna’s claims adjusters were named as defendants for accepting bribes was the linchpin of the First Circuit’s finding that the defendants conducted Aetna’s affairs in such a way as to make Aetna an enterprise within the meaning of the statute.
Nevertheless, the Plaintiffs contend that Rozenberg and the PC Defendants occupied a unique position of trust as medical providers that gave them an operational or management role in Plaintiffs’ decisions regarding the payment of claims. However, it is difficult to see how this position of trust goes to the salient question of whether the Defendants
directed
the Plaintiffs’ affairs. See
Reves,
c. Count III — RICO Conspiracy Under § 1962(d)
The Plaintiffs also allege that the Defendants violated the RICO conspiracy provision. 18 U.S.C. § 1962(d) provides that “[i]t shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” To establish the existence of a RICO conspiracy, a plaintiff must prove “the existence of an аgreement to violate RICO’s substantive provisions.”
Cofacredit, S.A. v. Windsor Plumbing Supply Co., Inc.,
2. Count IV — Common Law Fraud
“Under New York law, for a plaintiff to prevail on a claim of fraud, he must prove five elements by clear and convincing evidence: (1) a material misrepresentation or omission of fact, (2) made with knowledge of its falsity, (3) with an intent to defraud, and (4) reasonable reliance on the part of the plaintiff, (5) that causes damage to the plaintiff.”
Lerner v. Fleet Bank, N.A.,
Here, the complaint is replete with well-pleaded allegations that “give rise to a strong inference of fraudulent intent,” on the part of the Defendants.
First Capital Asset Mgmt., Inc. v. Satinwood, Inc.,
3. Count V — Deceptive Business Practices Under N.Y. Gen. Bus. L. § 349
Section 349 prohibits “[deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service ...”
Davis v. Blige,
“The consumer oriented prong of the Section 349 claim requires a plaintiff to show that the practices complained of have a ‘broad impact on consumers at large
...”’ Id.
(quoting
Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank,
Here, the Defendants argue that the alleged deceptive practices were not consumer-oriented within the meaning of the statute. However, this is a close question and the Court declines to find, as a matter of law, that the Plaintiffs are unable to state a claim under Section 349. The fact that the Defendants’ alleged scheme would almost certainly result in higher premiums for insurance consumers is sufficient, at this stage, to show that the alleged fraud had “ramifications for the public at large”. Accordingly, the Defendants’ motions to dismiss Count V are denied.
4. Count VIII — Unjust Enrichment
“To prevail on a claim for unjust enrichment in New York, a plаintiff must establish (1) that the defendant bene-fitted; (2) at the plaintiffs expense; and (3) that equity and good conscience require restitution.”
Beth Israel Med. Ctr. v. Horizon Blue Cross and Blue Shield of New Jersey,
III. CONCLUSION
Based on the foregoing, it is hereby
ORDERED, that the Defendants’ motions to dismiss Count II are GRANTED, and it is further
ORDERED, that the Defendants’ motions to dismiss Counts I, III, IV, V, and VIII are DENIED.
SO ORDERED.