6th Cir. NPO Decision of Grange Mut. Cas. Co. v. Mack (8/26/2008) re private cause of action under RICO claiming ongoing conspiracy to fraudulently bill insurance company for medical expenditures under the Kentucy No Fault Act

Grange Mutual Casualty Company v. Joni Mack
    Eastern District of Kentucky at London
8/26/2008 – 08a0523n.06

JULIA SMITH GIBBONS, Circuit Judge. Plaintiffs Grange Mutual Casualty Co., Grange Indemnity Insurance Co., and Trustgard Insurance Co. appeal the district court’s Rule 12(b)(6) dismissal of their civil action under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) against defendant Joni L. Mack. Plaintiffs argue that the district court erred in concluding that plaintiffs could not establish a private cause of action under 18 U.S.C. § 1964(c) against Mack. In light of the Supreme Court’s decision in Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct. court’s dismissal and remand for further proceedings.

Plaintiffs allege that Mack joined an ongoing conspiracy that involved fraudulently billing plaintiffs for medical expenditures. Although Mack is the only defendant in this case, plaintiffs initiated a separate civil RICO action on December 4, 2002, against Mack’s husband, Greg S. Mack, and other members of a conspiracy allegedly involving a number of medical rehabilitation centers.1 In this case, plaintiffs allege that Mack joined the same conspiracy, alluding to the suit filed against Greg Mack.

The schemes were designed to take advantage of Kentucky’s statutory automobile insurance coverage system—which encourages insurers to promptly pay providers for medical costs associated with automobile accidents—in two ways. First, the conspirators coordinated testing services for physicians, which encouraged the physicians to refer patients for unnecessary testing. Second, the conspirators operated clinics—including the Injury & Rehab Centers of Kentucky, PLLC (“IRC”)—to cater to automobile victims. At IRC clinics, physicians and other employees were creat[ed] and implement[ed][ ] multiple fraudulent schemes to bill Plaintiffs for medical treatments or supplies that were never rendered or supplied, were medically unnecessary or were billed unlawfully. [In addition, these individuals] caused these fraudulent bills to be submitted to Plaintiffs via the United States mail or interstate wire communications.

In this case, the district court treated plaintiffs’ complaint as alleging that Mack violated both § 1962(c)’s substantive provision and the § 1962(d) conspiracy provision. It then determined that because the complaint failed “to plead facts demonstrating that [p]laintiffs’ injuries were suffered in reliance on the fraudulent conduct of Mack or any conspiratorial acts after her joinder in the conspiracy” it could not conclude “that Mack’s conduct was the proximate cause of [p]laintiffs’ injuries.” Given that plaintiffs are no longer required to allege reliance following Bridge, we remand to the district court for consideration of whether plaintiffs have alleged facts establishing proximate cause for either a § 1962(c) or § 1962(d) violation. To establish proximate cause for a § 1962(c) violation, plaintiffs must allege that Mack’s own violations of § 1962(c) led directly to plaintiffs’ injuries. See Anza, 547 U.S. at 461. To establish proximate cause for a § 1962(d) violation, plaintiffs must allege that they were injured by reason of a conspiracy to violate § 1962(c)’s substantive provision. See Beck v. Prupis, 529 U.S. 494, 500, 507 (2000) (holding that to maintain a § 1964(c) claim predicated on a violation of § 1962(d), a plaintiff must be injured by an act of “racketeering or otherwise unlawful under the statute”). If plaintiffs can make this showing, the district court will need to further consider whether Mack can be held civilly liable for injuries caused by the conspiracy but occurring prior to Mack’s joinder in the conspiracy.

For the foregoing reasons, we vacate and remand to the district court for further consideration consistent with this opinion.

By Michael Stevens

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