## Facts

- Allstate entities issued New York no-fault auto policies and paid, or were asked to pay, PIP benefits on claims submitted by several medical professional corporations.
- Allstate alleged a scheme in which claimants were subjected to unnecessary tests and treatments, with test results allegedly misrepresented or fabricated to justify additional services.
- Defendants allegedly submitted invoices seeking payment for services that were not medically necessary or were never rendered.
- The alleged billing and supporting documentation were sent through the mails, forming the asserted predicate acts of mail fraud.
- Allstate alleged that although a physician (Alexander Rozenberg) was the nominal owner of the clinics, the clinics were actually controlled by management-company defendants and their individual principals.

## Issues

1. Whether the complaint adequately alleged an association-in-fact RICO enterprise (PC clinics plus management companies) and satisfied § 1962(c)’s person–enterprise distinctness requirement.
2. Whether Allstate could plead itself as an “unwitting” RICO enterprise under § 1962(c), with defendants as the RICO persons.
3. Whether the complaint sufficiently alleged racketeering activity, a pattern of racketeering, and enterprise structure and continuity at the Rule 12(b)(6) stage.

## Decision

- The motion to dismiss was denied as to the RICO claim premised on an enterprise consisting of the clinic PCs and the management companies (Count I).
- The motion to dismiss was granted as to the RICO claim treating Allstate as the “unwitting” enterprise (Count II).
- The court held the complaint sufficiently pleaded mail-fraud predicates and an association-in-fact enterprise for Count I, including under Rule 9(b) and plausibility standards.

## Legal Principles

- Section 1962(c) requires distinctness between the RICO “person” (defendant) and the RICO “enterprise”; an entity generally cannot be both.
- Distinctness can be satisfied where the alleged enterprise is a corporation (or association of corporations) and the alleged RICO persons are the officers, employees, or individuals operating through those entities.
- An association-in-fact enterprise may be pleaded by alleging a common fraudulent purpose, relationships among participants, and sufficient longevity and coordination to pursue the scheme.
- A plaintiff-victim generally may not reframe itself as an “unwitting” § 1962(c) enterprise based solely on outsiders inducing it to pay fraudulent claims, where the theory does not fit how defendants “conduct” the enterprise’s affairs under governing precedent.
- At the pleading stage, detailed allegations of systematic billing for unnecessary or nonexistent services, coupled with use of the mails, can satisfy Rule 9(b) for mail-fraud predicates and support a pleaded pattern.

## Conclusion

The court allowed Allstate to proceed on a RICO theory alleging an association-in-fact enterprise composed of the defendant clinics and management companies operated by individual defendants, but dismissed the alternative theory that Allstate itself was the § 1962(c) enterprise, concluding that the latter conflicted with distinctness and the statute’s enterprise-conduct requirement.


Allstate Ins. Co. v. Rozenberg, 590 F. Supp. 2d 384 (E.D.N.Y. 2008)