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State Farm Mutual Automobile Insurance Co. v. Punjwani

United States District Court, S.D. Texas, Houston Division

December 31, 2019

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and STATE FARM COUNTY MUTUAL INSURANCE COMPANY OF TEXAS, Plaintiffs,
v.
NOORUDDIN S. PUNJWANI, M.D., PAIN ALLEVIATION & INTERVENTIONAL NEEDS, PLLC, BARKETALI M. ROOPANI, ANIL B. ROOPANI, and SOHAIL B. ROOPANI, Defendants.

          MEMORANDUM AND ORDER

          EWING WERLEIN, JR. UNITED STATES DISTRICT JUDGE.

         Pending is Defendant Nooruddin S. Punjwani's Motion to Dismiss (Document No. 14) and Defendants Pain Alleviation & Interventional Needs, PLLC, Barketali M. Roopani, Anil B. Roopani, and Sohail B. Roopani's Motion to Dismiss (Document No. 15). After carefully considering the motions, response, replies, and applicable law, the Court concludes for the reasons that follow that both motions should be denied.

         I. Background

         Plaintiffs State Farm Mutual Automobile Insurance Company and State Farm County Mutual Insurance Company of Texas (collectively "State Farm") allege that Defendants Nooruddin S. Punjwani, M.D. ("Dr. Punjwani") and Pain Alleviation & Interventional Needs, PLLC ("PAIN") engaged in a fraudulent scheme involving medically unnecessary treatment of motor accident victims. State Farm alleges it paid hundreds of allegedly fraudulent claims for medical services, including unnecessary medical evaluations, spinal injections, and related procedures, performed at PAIN locations by Dr. Punjwani on accident victims who submitted claims for insurance benefits under State Farm policies.[1] PAIN was formed as a Texas limited liability company in July 2015, and its sole members from formation through about June 2018 were Defendants Barketali Roopani and his sons, Anil B. Roopani and Sohail B. Roopani (collectively, "the Roopanis").[2] Dr. Punjwani has performed evaluations and injections at PAIN since its formation, and he is paid a fixed fee for every evaluation and injection he performs.[3]

         According to State Farm, Dr. Punjwani and PAIN prepared fraudulent examination reports, MRI interpretive reports, and operative reports that purported to show that accident victims suffered serious injuries requiring the need for invasive treatment.[4] Dr. Punjwani allegedly performed the same cursory examination on each accident victim and prescribed an allegedly medically unnecessary series of three interlaminar epidural steroid injections ("ESIs") for virtually all patients with neck and/or back pain.[5] State Farm alleges that the serial ESIs were performed to inflate the potential value of the accident victims' insurance claims.[6] Dr. Punjwani billed for fluoroscopic guidance along with the ESIs, allegedly inflating the cost of the procedures, but there are no records or films of actual fluoroscopies, which is contrary to basic medical standards.[7]

         As part of the diagnostic process, Dr. Punjwani interpreted MRI films and allegedly made an identical positive spinal injury diagnosis for each of the hundreds of accident victims.[8] He then used these findings as justification for the medically unnecessary invasive ESIs.[9] State Farm alleges that the boilerplate operative reports for the ESIs show that Dr. Punjwani made the same predetermined, non-specific diagnosis of each patient who received ESIs.[10]

         State Farm alleges that at least as early as August 2015, Dr. Punjwani and PAIN began to enrich themselves through the victims' insurance claims made to State Farm.[11] Dr. Punjwani and PAIN created the bills for the allegedly unnecessary services and sent them to personal injury attorneys who then included the bills in demand packages for claims.[12] This scheme involved both (i) bodily injury claims made by accident victims who were not substantially at fault to the insurance companies of the at-fault drivers and (ii) underinsured/uninsured motorist claims made by accident victims to their own insurance companies if they were unable fully to recover from the at-fault drivers' insurance companies.[13] State Farm alleges that Dr. Punjwani and PAIN's scheme was designed to induce State Farm to rely on the fraudulent bills and reports from Dr. Punjwani and PAIN to settle the bodily injury and underinsured/uninsured motorist claims with higher than warranted settlement offers.[14] The scheme was employed with knowledge that Texas insurance law subjects insurers to substantial liability for failing to accept reasonable settlement demands within policy limits on bodily injury claims or for not acting in good faith to provide a settlement when liability is reasonably clear.[15] As a result of the scheme, State Farm seeks damages of more than $3 million from Defendants for settlements of bodily injury claims and underinsured/uninsured motorist claims paid as a result of fraudulent treatments of the claimants by Dr. Punjwani and PAIN.[16]

         State Farm alleges against Dr. Punjwani a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et. seq., and alleges against all Defendants a claim for money had and received. Defendants move to dismiss State Farm's claims under Rule 12(b) (6) for failure to state a claim.[17]

         II. Legal Standard

         Rule 12(b) (6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b) (6) . When a district court reviews the sufficiency of a complaint before it receives any evidence either by affidavit or admission, its task is inevitably a limited one. See Scheuer v. Rhodes, 94 S.Ct. 1683, 1686 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 102 S.Ct. 2727 (1982). The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support the claims. Id.

         In considering a motion to dismiss under Rule 12(b)(6), the district court must construe the allegations in the complaint favorably to the pleader and must accept as true all well-pleaded facts in the complaint. See Lowrey v. Tex. A&M Univ. Svs., 117 F.3d 242, 247 (5th Cir. 1997). To survive dismissal, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007) . "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). While a complaint "does not need detailed factual allegations . . . [the] allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 127 S.Ct. at 1964-65.

         III. Discussion

         A. RICO

         "Claims under RICO, 18 U.S.C. § 1962, have three common elements: Ml) a person who engages in (2) a pattern of racketeering activity, (3) connected to the acquisition, establishment, conduct, or control of an enterprise.'" St. Germain v. Howard, 556 F.3d 261, 263 (5th Cir. 2009) (quoting Abraham v. Singh, 480 F.3d 351, 355 (5th Cir. 2007)). "A pattern of racketeering activity consists of two or more predicate criminal acts that are (1) related and (2) amount to or pose a threat of continued criminal activity." Snow Ingredients, Inc. v. SnoWizard, Inc., 833 F.3d 512, 524 (5th Cir. 2016) (quoting St. Germain, 556 F.3d at 263). Dr. Punjwani argues that Plaintiff failed to plead its RICO claim with particularity as required by Rule 9(b); "failed to plead any one RICO predicate act, let alone a pattern of racketeering activity"; and failed to allege any "enterprise."[18]

         1. State Farm's Complaint meets the Rule 9(b) pleading standard.

         Title 18, United States Code Section 1961(1) lists a number of predicate criminal acts, including wire fraud and mail fraud. RICO claims based on predicate acts of fraud are subject to the heightened pleading requirements of Rule 9(b). Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1138-39 (5th Cir. 1992). Under Rule 9(b), parties "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). To meet this standard, Plaintiff should "specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent." Sullivan v. Leor Energy, LLC, 600 F.3d 542, 551 (5th Cir. 2010) (quoting ABC Arbitrage v. Tchuruk, 291 F.3d 336, 350 (5th Cir. 2002)) .

         Dr. Punjwani argues that State Farm generally fails to allege any fraudulent activity because State Farm does not identify a single patient of PAIN who did not receive the treatment for which payment was sought and provides no factual basis for its contention that the services provided by Dr. Punjwani were unnecessary. However, State Farm's principal allegation is not that patients did not receive the treatment they sought from Dr. Punjwani and PAIN but rather that Dr. Punjwani and PAIN conducted illegitimate evaluations and made predetermined recommendations for medically unnecessary ESIs. State Farms's Complaint describes this scheme at length and provides detailed appendices that identify and illustrate the alleged fraudulent scheme, including initial exam reports, MRI reports, operative reports, and demand packages containing settlement information for the claims at issue.[19] State Farm's detailed allegations and appendices provide ample notice of the specifics of Dr. Punjwani's allegedly fraudulent conduct and are sufficiently particularized to satisfy Rule 9(b). See Allstate Ins. Co. v. Benhamou, 190 F.Supp.3d 631, 659-60 (S.D. Tex. 2016) (Harmon, J.) (concluding that detailed allegations of unnecessary treatment and inflated services leading to higher insurance claims "make the predicate acts alleged by Plaintiff plausible") (guoting Adhikari v. Daoud & Partners, 697 F.Supp.2d 674, 693 (S.D. Tex. 2009) (Ellison, J.)).

         2. State Farm sufficiently pleads predicate acts under RICO.

         State Farm alleges that Dr. Punjwani's actions in the fraudulent scheme led to repeated violations of the federal mail fraud statute, 18 U.S.C. § 1341, one of the predicate acts that may support a RICO violation.[20] Mail fraud requires "(1) a scheme to defraud; (2) the use of the mails to execute the scheme; and (3) the specific intent to defraud." United States v. Traxler, 764 F.3d 486, 488 (5th Cir. 2014). Dr. Punjwani allegedly submitted "fraudulent bills and supporting documentation for evaluations and injections which either were not performed, were not legitimately performed, or were not medically necessary, which in turn caused settlement checks to be deposited in the U.S. mails by [State Farm] and delivered on or about the dates reflected on Ex. 4."[21]

         Dr. Punjwani argues that State Farm's pleadings do not state predicate acts of mail fraud because State Farm makes no factual allegations that Dr. Punjwani himself fraudulently used the mail. However, to state a claim for mail fraud, "the defendant need not personally effect the mailing. It is sufficient that the defendant . . 'act with knowledge that the use of the mails will follow in the ordinary course of business.'" Traxler, 764 F.3d at 488 (quoting Pereira v. United States, 74 S.Ct. 358, 363 (1954)); see also Schmuck v. United States, 109 S.Ct. 1443, 1447 (1989) (requiring only that "the use of the mails is a part of the execution of the fraud") (citation omitted). State Farm's ...


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