Antitrust Law Daily Wrap Up, RICO—D. Nev.: RICO claims against doctor for alleged insurance scheme survive dismissal, (Sep 10, 2013)

By Peter Reap, J.D., LL.M.

The RICO claims brought by various Allstate Insurance Company entities against a group of doctors, lawyers, and their corresponding entities survived a motion to dismiss brought by one of the individual defendants, Sebastian P. Balle, M.D., because each of his four purported deficiencies was without merit, the federal district court in Las Vegas, has decided (Allstate Insurance Company v. Balle, September 9, 2013, Gordon, A.).

Background. Allstate alleged that the defendants colluded to submit false and inflated medical reports on behalf of claimants injured primarily in automobile accidents. Falsified documents, including medical reports and billing statements, were allegedly submitted to claimants’ attorneys or to Allstate itself to inflate the ultimate insurance settlement and corresponding payments to the defendants.

Balle filed the instant motion, seeking to dismiss only Allstate’s RICO claims.

RICO

Balle identified four purported deficiencies that rendered the allegations insufficient to state a RICO claim against him. He complained that: (1) Allstate lacked standing; (2) the complaint did not adequately allege an “enterprise” distinct from “persons”; (3) the complaint failed to sufficiently allege a claim against him personally; and (4) the complaint failed to plead the necessary “predicate acts.” All of these arguments were without merit, the court held.

Standing. Balle’s argument that Allstate lacked standing because it did not plead an actual, concrete financial loss was based on a misapplication of the standard. Although each plaintiff must eventually prove its specific damages, the complaint only had to allege that each plaintiff paid more on insurance claims and settlements than it otherwise would have to, due to the defendants’ fraudulent scheme. The complaint did this, the court ruled.

Although the complaint only referred to the plaintiffs collectively and did not break out individualized harms, it was plausible that each plaintiff paid some portion of the alleged 89 false claims. Thus, Allstate had standing to bring suit.

Enterprise. This was not a case where Balle and the alleged “enterprise” were the same person, simply going by two names, according to the court. Nor was it a case where the complaint merely alleged illegal activity on the part of several defendants.

Rather, the complaint alleged that Balle worked in concert with the other medical corporations, marketing professionals, and personal injury lawyers to conduct the scheme and defraud Allstate. In doing so, the complaint sufficiently alleged that Balle—a “person” —was distinct from the collaborative association of all of the defendants—the “enterprise.” Thus, the complaint sufficiently alleged that Balle was distinct from the “enterprise” and colluded with others in the “enterprise” to conduct the alleged illegal activity.

Personal allegations. Balle briefly argued that because his name was only specifically mentioned twice in the complaint, the allegations were insufficient to state a claim against him individually. Balle again mischaracterized the allegation in the complaint, the court explained.

The complaint alleged that Balle was the co-founder of one of the corporations playing a central role in the scheme. Further, Balle allegedly gave his approval for the solicitation of personal injury referrals, and occasionally treated patients and generated false medical reports. These allegations were sufficient to state a plausible claim against Balle.

Predicate acts. Balle’s argument that the complaint failed to plead the requisite “predicate acts” with specificity because it never identified the “where, when, what and from and to whom” was rejected. The complaint identified that between 2004 and 2010, each of the defendants sent falsified written medical reports, billing records, tests, x-rays, or scans, and fraudulent settlement demands to attorneys retained by claimants or to Allstate itself. Further, Allstate attached to its Second Amended Complaint the false documentation that was transmitted. These allegations sufficiently, and with the requisite particularity, established the predicate acts element of the RICO claim, the court held.

The case is No. 2:10-cv-02205-APG-NJK.

Attorneys: Bret Wayne Weatherford (Kassabian, Doyle & Weatherford, PC) for Allstate Insurance Company. C. Stanley Hunterton (Hunterton & Associates) for Sebastian P Balle, M.D.

Companies: Allstate Insurance Company

Cases: RICO NevadaNews