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Illinois Farmers Insurance Co. v. Guthman

United States District Court, D. Minnesota

September 7, 2017

Illinois Farmers Insurance Company, 21st Century Insurance Company, Bristol West Casualty Insurance Company, and Mid-Century Insurance Company, Plaintiffs,
v.
Timothy W. Guthman, D.C., Inver Family Chiropractic, P.A., Team Chiropractic, P.A., a/k/a Team Chiropractic, Inc., Team Chiropractic Service Corporation, Alianza Chiropractic Clinic, Rehabilitations Professionals, Inc., Gregory Peter Steiner, D.C., Chiropractic Wellness Center, Inc., Apple Valley Wellness Center, Centro Hispano de Ayuda, Silvia Ross, a/k/a Silvia Pena, Zulema Calderon, a/k/a Sulema Calderon, Zulema Levya, and Zulema Manjarrez, Laura Pimental, a/k/a Analaura Pimental Duqueiro Cano, a/k/a “El Duque, ” Defendants.

          Richard S. Stempel, Bradley L. Doty, [1] Gregory Maus, Stempel & Doty, PLC, Hopkins, Minnesota, for Plaintiffs.

          Kevin M. Magnuson, Kelley, Wolter & Scott, P.A., Minneapolis, Minnesota, for Defendants Timothy W. Guthman, D.C., Inver Family Chiropractic, P.A., Team Chiropractic, P.A., Alianza Chiropractic Clinic, Centro Hispano de Ayuda, Silvia Pena Ross, Laura Pimentel, and Duqueiro Cano.

          David W. Asp, Kristen G. Marttila, Lockridge Grindal Nauen P.L.L.P., Minneapolis, Minnesota, for Defendants Gregory Peter Steiner, D.C., Chiropractic Wellness Center, Inc., and Rehabilitation Professionals, Inc.

          ORDER

          David S. Doty, Judge

         This matter is before the court upon the motion to dismiss by defendants Gregory Peter Steiner, D.C. and Chiropractic Wellness Center, Inc. (Steiner Defendants) and the motion to dismiss by defendants Timothy W. Guthman, D.C., Inver Family Chiropractic, P.A., Team Chiropractic, P.A., Alianza Chiropractic Clinic, Centro Hispano de Ayuda, Silvia Pena Ross, Laura Pimentel and Duqueiro Cano (Guthman Defendants). Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the Steiner Defendants' motion and grants in part the Guthman Defendants' motion.

         BACKGROUND

         This fraud action arises out of defendants' alleged scheme to defraud automobile insurers. Plaintiffs Illinois Farmers Insurance Company, 21st Century Insurance Company, Bristol West Casualty Insurance Company, and Mid-Century Insurance Company issue automobile-insurance policies in Minnesota. Am. Compl. ¶¶ 6-10. Under the Minnesota No-Fault Automobile Insurance Act, Minn. Stat. § 65B.41 et seq., insurers are required to provide “basic economic loss benefits” - a minimum of $20, 000 for necessary medical expenses - in each automobile policy sold in Minnesota. The Act is designed to expedite payments to those injured in accidents without regard to fault in order to “relieve the severe economic distress of uncompensated victims” and “encourage appropriate medical and rehabilitation treatment.” Minn. Stat. § 65B.42. Insurers must make these payments within 30 days of being billed by a medical provider. Id. § 65B.54.

         Guthman and Steiner are Minnesota chiropractors. Am. Compl. ¶¶ 12, 16-17. Plaintiffs allege that they took advantage of the no-fault insurance system by billing for (1) medically unnecessary treatments at their clinics[2] or (2) services that were not actually provided. To accomplish this, they paid people, referred to as “runners, ” to solicit prospective patients. Id. ¶ 26.[3] The runners, in turn, would provide cash to accident victims to entice them to go to the clinics, which then “billed [plaintiffs] for services not rendered, ” “provided excessive treatment which was not necessary, treated [the individuals] at a frequency that was unreasonable[, ] and generally developed a pattern and practice of excessive treatment modalities and therapy to maximize the charges [they] could submit for no-fault medical benefits.” Id. ¶¶ 25, 40. The amended complaint alleges that Guthman specifically instructed runners to target plaintiffs' insureds, because plaintiffs ostensibly “paid claims faster than other no-fault insurers.” Id. ¶ 39. Ultimately, plaintiffs paid more than $750, 000 for services billed by Guthman, Steiner, and their clinics. Id. ¶ 38.[4]

         Plaintiffs commenced this matter in early 2017, alleging numerous claims. Defendants moved to dismiss, and plaintiffs then filed the amended complaint, asserting seven claims: violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c) (Count 1) and § 1962(d) (Count 2); violation of the Minnesota consumer-fraud statute, Minn. Stat. § 325F.69 (Count 3); civil conspiracy (Count 4); common-law fraud (Count 5); no-fault fraud (Count 6); and unjust enrichment (Count 7). The Guthman Defendants and the Steiner Defendants now move to dismiss all of these claims.

         DISCUSSION

         I. Standard of Review

         To survive a motion to dismiss for failure to state a claim, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff [has pleaded] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Although a complaint need not contain detailed factual allegations, it must raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. “[L]abels and conclusions or a formulaic recitation of the elements of a cause of action” are not sufficient to state a claim. Iqbal, 556 U.S. at 678 (citation and internal quotation marks omitted).

         II. The RICO Claims

         Congress enacted RICO in 1970 as part of the Organized Crime Control Act, Public Law No. 91-452, in an effort to combat mob-related activities and organized crime. The statute makes it unlawful for “any person employed by or associated with any enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). “Racketeering activity” includes a host of enumerated crimes such as murder, kidnapping, robbery, and, relevant here, mail fraud. Id. § 1961(1). In addition to possible criminal penalties, RICO provides a civil remedy for persons injured by a violation of its substantive provisions. See id. § 1964(c). To show a civil RICO violation, a plaintiff must demonstrate “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Crest Constr. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011).

         Here, plaintiffs allege that Guthman, Steiner, their clinics, and the runners violated RICO by associating with each other to achieve the purpose of billing and receiving improper no-fault benefit payments. Defendants argue that this claim fails as a matter of law because, among other things, plaintiffs have not alleged the existence of an “enterprise” distinct from the alleged racketeering activity itself. The court agrees.

         A RICO 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). An “association in fact, ” requires a discrete structure and existence uniting its members as a cognizable group. Nelson v. Nelson, 833 F.3d 965, 968 (8th Cir. 2016). Although such association need not have regular meetings or a chain of command, it must comprise something more than a pattern of racketeering activity. Id.; see also United States v. Turkette, 452 U.S. 576, 583 (1981) (“The ‘enterprise' is not the ‘pattern of racketeering activity'; it is an entity separate and apart from the pattern of activity in which it engages.”). A plaintiff, therefore, must demonstrate that the alleged enterprise would exist in the absence of the alleged racketeering activity. Crest Constr., 660 F.3d at 354-55. In other words, “[t]he focus of the inquiry is whether the enterprise encompasses more than what is necessary to commit the predicate RICO offense.” Diamonds Plus, Inc. ...


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