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HEALTHGUARD OF LANCASTER, INC. v. GARTENBERG

March 5, 2004.

HEALTHGUARD OF LANCASTER, INC., Plaintiff
v.
MARK GARTENBERG; STEVEN GARTENBERG; MARK TISCHLER; GREENFIELD SPORTS MEDICINE & REHAB, P.C.; PREMIER SPORTS MEDICINE & REHAB CENTER, P.C.; MAIN LINE MEDICAL SERVICES, INC., Defendants



The opinion of the court was delivered by: MICHAEL BAYLSON, District Judge

MEMORANDUM

I. Statement of the Case

Plaintiff is a health maintenance organization which has brought a civil RICO claim against Defendants, alleging fraudulent billing processes in providing medical and/or chiropractic services in the Lancaster, Pennsylvania area. The issues involved in this case are serious, as any fraudulent diversion of healthcare funds for fraud must, if proven, be dealt with severely. As discussed below, although the record contains evidence of fraud, the Court concludes that Plaintiff has been unable to connect the dots of fraud to the rigorous requirements of civil RICO. Thus, Defendants' Motion for Summary Judgment will be granted, and its state law claims will be dismissed without prejudice for refiling, in state court, should Plaintiff so choose.

  On December 6, 2002, the Court granted Defendants' Motion to Dismiss Plaintiffs original RICO Complaint, which also asserted various state law claims (insurance fraud, common law fraud, and breach of warranty), but granted Plaintiff leave to file an Amended Complaint along with a RICO Case Statement. Plaintiff did so and engaged in discovery for a number of months. On October 8, 2003, Defendants jointly moved for summary judgment, asserting that Plaintiff, despite completion of discovery, has not demonstrated evidence to support the elements of RICO, or any genuine issues of fact for trial as to the RICO claims.

  Defendants' Motion states that it relies on "the pleadings, answers to interrogatories, and deposition testimony of Dr. David Raab to show that Healthguard has neither alleged nor produced evidence of any scheme to defraud or any specific predicate acts constituting a pattern of racketeering activity." In opposition, Plaintiff has relied on affidavits of two chiropractors and one medical doctor, who were employed by one or more of the Defendants, and a large group of papers summarizing allegedly fraudulent bills submitted by Defendant Main Line Medical Services, Inc. ("MLM") to Plaintiff, but has not submitted any deposition excerpts or other documents.

  Prior to oral argument on December 23, 2003, the Court requested Plaintiff to be prepared at the oral argument to document its evidence and supporting case law as to several elements of RICO (Docket No. 51).

 II. Statement of Facts and Contentions

  Plaintiff is a health maintenance organization with 100,000 members, which operates in and around Lancaster, Pennsylvania. As Plaintiff describes its operations, Healthguard members receive medical services from participating healthcare providers, such as Defendants, who submit insurance claims to Healthguard seeking payment for services rendered. When a healthcare provider submits a claim for payment, the provider warrants to Healthguard that the services identified in the claim were actually provided in the manner described in the claim and were medically appropriate. Upon receipt of a claim, Healthguard forwards payment to the healthcare provider on behalf of the member.

  Plaintiff alleges that Defendants, who operate a chiropractic business and provide chiropractic services to Healthguard members, devised a scheme to make their business more profitable, but in doing so, engaged in various fraudulent practices, including submitting false claims for medical services. Plaintiff asserts that the claims submitted under the provider number for one physician, Dr. David Raab, described medical services that either were not performed by a physician, were not performed properly, were not performed at all, or were not medically necessary or appropriate. Although Plaintiff has demonstrated genuine issues of fact as to elements of the common law tort of fraud, the issue before the Court is whether there is sufficient evidence meeting the requirements of RICO.

  Plaintiff's Amended Complaint and RICO case statement asserts that the RICO scheme was implemented through one of the Defendants, MLM, a management company owned and operated by other Defendants, which conducted extensive telemarketing to solicit patients for Defendants' medical practices, and then processed the insurance claims generated by each practice. Plaintiff asserts that in conducting the affairs of MLM, Defendants caused thousands of fraudulent insurance claims to be sent through the U.S. mail to Healthguard (and other health insurers) for processing and payment.

 III. Summary Judgment Motion

  The first issue is whether the Defendants have properly supported their Motion for Summary Judgment. In its landmark decision in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), the Supreme Court rejected the holdings of some lower courts which had required the moving party to submit affidavits or other sworn materials to contradict the pleadings of the non-moving party, and held that the moving party need only "show" the court where there was one or more deficiencies in the existence of an element essential to the non-moving party's case and on which the non-moving party will bear the burden of proof at trial:
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.
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Of course, a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.
* * * * * *
In cases like the instant one, where the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the "pleadings, depositions, answers to interrogatories, and admissions on file." Such a motion, whether or not accompanied by affidavits, will be "made and supported as provided in this rule," and Rule 56(e) therefore requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the "depositions, answers to interrogatories, and admissions on file," designate "specific facts showing that there is a genuine issue for trial."
* * * * * *
Instead, as we have explained, the burden on the moving party may be discharged by "showing" — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case. 477. U.S. at 322-25.
  First, Defendants rely on Plaintiffs pleadings, including the RICO Case Statement which the Court required at the outset of the case as indicative of its claim that Plaintiff has not presented sufficient evidence to create a triable issue of fact for trial. As discussed above, this satisfies Defendant's burden, under Rule 56 procedure. However, Plaintiff cannot rely on its own unsworn pleadings to rebut a motion for summary judgment, rather Plaintiff must demonstrate to the Court that it has sufficient evidence to create a triable issue of fact as required by Celotex. See Id. at 322 (summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."); see also Fed R. Civ. P. 56(e) ("the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.").

  Second, Defendants rely on their own answers to certain interrogatories served by Plaintiff. In the interrogatories, the individual Defendants describe their professional qualifications and their relationship to the corporate entities. Defendant Mark Gartenberg does not identify himself as a chiropractor or other health professional, nor of having any role as an officer or a director of any of the Defendant corporations. (M.G. Interrog. ¶¶ 4, 7.) He was, however, an employee of MLM and the father of Defendant Steven Gartenberg. (Id. ¶ 6.) Steven Gartenberg asserts that he is the sole shareholder, owner, director and officer of MLM since December 1998, and is also an officer of a non-party entity, CMS, Inc., which he describes as doing telemarketing for Greenfield. (S.G. Interrog. ¶¶ 4, 8.) The other individual Defendant, Mark Tischler, describes himself as a chiropractor who has been an employee of Greenfield (M.T. Interrog. ¶ 4) and MLM at various times, and was also a director and officer of a non-party entity referred to as Bala Medical Management ("Bala"), from 1999-2002. (Id.)*fn1

  Although normally answers to interrogatories are used by the party propounding the interrogatories, there is no reason, under the rules and decided cases under Rule 33 of the Federal Rules of Civil Procedure, that a party may not use his or its own sworn answers to interrogatories, which are not otherwise contested to prove a point in supporting a motion for summary judgment.*fn2 See Celotex, supra at 325 (explaining that "the burden on the moving party may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case."); Santa Fe Natural Tobacco Co. v. Judge, 963 F. Supp. 437, 439 (M.D. Pa.1997) (granting a plaintiffs motion for summary judgment where the plaintiff supported its motion with defendant's answers to interrogatories).

  Third, Defendants rely on the deposition of Dr. David Raab,*fn3 a long-standing physician in the Lancaster, Pennsylvania area, who had retired from various private practices and then took a job with Defendant Greenfield Sports Medicine and Rehab, P.C. ("Greenfield") as medical director — a position in which he was not required to fully understand anything about the business side of Greenfield. Dr. Raab worked at Greenfield from approximately May 17, 1999 to sometime in November of 2000. Prior to commencing his employment, Dr. Raab signed the incorporation of Greenfield on April 22, 1999. He also signed a consent to be the sole Director of the Board of Directors of Greenfield, which indicated that he was also President and Treasurer, and that Defendant Mark Tischler would be Secretary, (see Exhibits 3-4), and he signed a Service Agreement between Greenfield and a non-party, Bala Medical Management, Inc., dated April 22, 1999, in which Dr. Raab summarized in his deposition as providing that he would make medical decisions, but not business decisions on behalf of Greenfield.

  Dr. Raab also testified to his work in reviewing different medical forms, including filling out claim sheets that MLM submitted to Plaintiff. He had the impression, but had no direct evidence to support it, that the Gartenberg Defendants controlled Greenfield and that Greenfield was a subsidiary of Bala. (Raab Dep. at 70, 75). Specifically, Raab stated that he did not know exactly what the relationship was between Greenfield, Bala and the Gartenberg defendants. (Id. at 75.) He also stated that he did not know whether or not Tischler was the president of Bala but knew that Tischler did communicate with Bala. (Id. at 70-71) However, the record contains no evidence as to the content of Tischler's communications with Bala. Finally, after working at Greenfield for approximately eighteen months, Dr. Raab left because he came to believe that a number of the tests that were being performed were unnecessary (Id. at 58-59, 64).

  In opposition to summary judgment, Plaintiff supplies three affidavits by doctors who were employed by one or more of the Defendants, and the aforementioned large volume of billing statements. Although Plaintiff submitted an expert report as part of its papers in opposition, it is unsworn and this Court cannot rely upon the expert statement. Small v. Lehman, 98 F.3d 762, 765 (3d Cir. 1996) ("Rule 56 of the Federal Rules of Civil Procedure states that motions both for and in opposition to summary judgment may be supported by affidavits; unsworn statements, such as those relied upon in the instant matter, fail to meet this requirement.") Plaintiff has not submitted any other factual materials. It does not appear from the record that any of the individual Defendants were ever deposed, or that Plaintiff invoked Federal Rule of Civil Procedure 30(b)(6) and deposed a representative of any of the corporate defendants.

 IV. RICO Requirements

  The Amended Complaint in this case (¶¶ 36-37) charged Defendants of violating two sections of RICO, 18 U.S.C. § 1962(c) and (d), which are defined as follows:
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.
  As the Supreme Court has held in Sedima SPRL v. Imrex Co., 473 U.S. 479, 496 (1985), "a plaintiff must show (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity as well as injury resulting from the conduct constituting a violation." Prior to the oral argument on December 23, 2003, the Court issued an Order requesting Plaintiff to be prepared to demonstrate the existence of a genuine issue for trial on several of these elements including conspiracy as charged in 18 U.S.C. § 1962(d), predicate acts (which are defined in ...

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