Metropolitan Property and Casualty Ins. Co., v. Savin Hill, ___ F. Supp.3d ___, 2017 WL 3120273 (D. Mass., 2017)
The court concluded that the claims for violations of RICO and RICO conspiracy asserted in Counts II and IV of the Second Amended Complaint survived the motions to dismiss.
1. Existence of a RICO Enterprise
First, the court did reject claims based on the “victim-enterprise” theory, i.e.,
“by alleging a legitimate enterprise that was victimized by a racketeering scheme” finding the Reves “conduct or participate” criterion not adequately alleged.
Editor Note: There is no such legal theory as “victim-enterprise,” as an enterprise is either a legal entity or an association in fact. Not relevant to status as an enterprise, the Court has stated that an enterprise can be a victim or a vehicle. See Cedric Kushner, so this could be the genesis of this so-called theory. The Reves test, discussed by the court as applying to “victim-enterprises” applies to any kind of enterprise as defined in RICO, but is relaxed in RICO conspiracy cases. Perhaps the court is thinking of legal entity enterprises as “victim-enterprises.” If so, all of the elements of RICO apply, including the Reves test, except the rules and conduct involving “association in fact” enterprises. See below.
Second, the court accepted as adequately pleaded the existence of an association-in-fact enterprise. See Count II and Count IV of their Second Amended Complaint. Here, the Plaintiffs allege that the defendants were a group of persons associated together for the common purpose of wrongfully obtaining insurance benefits through the Massachusetts statutory framework governing personal injury claims arising out of motor vehicle accidents, and thereby constitute an “association-in-fact enterprise,” as that term is defined in section 1961(4).
The defendants contend that these claims must be dismissed because the Plaintiffs have failed to allege the existence of a RICO enterprise having a distinct and ascertainable structure apart from the predicate acts of racketeering activity. This court disagreed for many reasons, chief of which was the Supreme Court has clarified that “an ‘association-in-fact enterprise need not have any structural features beyond ‘a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.’ ” Id. (quoting Boyle v. United States, 556 U.S. 938, 946, 129 S.Ct. 2237, 2244, 173 L.Ed. 2d 1265 (2009)).
The court found that each of the three criteria of Boyle are satisfied, finding that the Plaintiffs have alleged that the defendants acted for the common purpose of fraudulently obtaining “monetary payments, through insurance claims, from Metropolitan and Commerce by submitting or facilitating the submission of fraudulent chiropractic records and bills, and submitting and prosecuting fraudulent claims for insurance benefits based on such records and bills.” They have also delineated the specific roles of the defendants in the allegedly fraudulent scheme, and the nature of the relationships among the various groups of defendants. In addition, the Plaintiffs have alleged extensive and detailed facts regarding the nature of the defendants’ relationships, as “family members and business associates,” which they allegedly used “to create, develop and implement a cohesive and comprehensive network of improper and illegal relationships in order to fraudulently obtain unwarranted insurance benefits” from the Carriers.
The court specifically rejected that Plaintiffs must allege “a distinct structure amongst all of the defendants separate and apart from each of their individual endeavors,” and Plaintiffs sufficiently alleged that the defendants engaged in a coordinated effort to carry out the alleged fraudulent billing scheme. The court also ruled that the final feature of an association-in-fact enterprise, longevity, is easily met by the Plaintiffs’ allegations as well.
2. Alleged Participation in the Conduct of the RICO Enterprise
The court also found the Plaintiffs adequately alleged that the defendant[s] conducted or participated, ‘directly or indirectly, in the conduct of the RICO enterprise’s affairs’ as the Plaintiffs alleged facts showing how each of the defendants was integral to carrying out the activities of the alleged enterprise. Id., at *12-13 citing to Warren Chiropractic & Rehab Clinic P.C., 2015 WL 4724829, at *7.
The court rejected the Defendants’ argument that found Second Amended Complaint alleges related predicate acts that amount to continued criminal activity. The court found sufficient that the Plaintiffs contended that throughout the time period from January 2008 to August 4, 2016, the defendants “submitted false and/or fraudulent chiropractic records, bills, letters, PIP Applications and/or fraudulent insurance claims for payment to [the Carriers] through the use of and/or knowledge of the use of United States mails and wires[,]” or aided and abetted their co-defendants in submitting such materials. The court concluded that “[A] plaintiff who alleges a high number of related predicate acts committed over a substantial period of time establishes that those acts amount to continued criminal activity[.]” Fleet Credit Corp., 893 F.2d at 446.
4. Conspiracy to Violate RICO
The court found the Plaintiffs claim that the Defendants’ acted in a conspiracy to violate civil RICO adequately pleaded.
Ed Note: This case is a good blueprint for drafting a civil RICO complaint which will in any jurisdiction pass muster. Cases with multiple plaintiffs, long-running and diverse complex mail and wire fraud schemes, with sufficient particularity and direct injury, are almost always successful civil RICO cases.