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State Farm Mutual Automobile Insurance Co. v. American Rehab and Physical Therapy

July 14, 2009

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., ET AL.
v.
AMERICAN REHAB AND PHYSICAL THERAPY, INC., ET AL.



The opinion of the court was delivered by: Baylson, J.

SUPPLEMENTAL MEMORANDUM RE: PRELIMINARY INJUNCTION and MOTION TO STAY

On June 22, 2009, this Court issued a Memorandum and Order (Doc. No. 150) granting a preliminary injunction against Defendant Richard Privitera ("Privitera") because of his purposeful evasion of his legal obligation to satisfy a default judgment entered against him almost four years ago. Although the Court's Order gave the parties fourteen days to submit exceptions to the ruling, Privitera has elected to file an appeal to the Court of Appeals for the Third Circuit rather than filing exceptions with this Court.

In light of Privitera's appeal, this Court writes further to elaborate on the extensive history of Plaintiffs State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Insurance Company (collectively "Plaintiffs" or "State Farm")'s obtainment of a default judgment against Privitera and Plaintiffs' numerous post-judgment collection efforts, which have been stymied by constant obstructive conduct by Privitera. In addition, the Court responds to Privitera's Motion to Stay Pending Appeal and new legal arguments raised in his accompanying Memorandum of Law.

The Court's June 22, 2009 Order did not deal with the issue of the Plaintiffs posting a bond as a condition of obtaining a preliminary objection. Upon taking the appeal, Privitera has also requested that a supersedeas bond be allowed for a nominal amount, asserting that he does not have sufficient funds for any substantial amount of bond. This Memorandum and the Order following will rule on both of these issues.

I. Complaint and Pre-Judgment Proceedings

This case began October 7, 2003, when Plaintiffs filed a civil action against Defendants American Rehab and Physical Therapy Inc. ("American Rehab"), Richard Privitera, Dean Parker, and Steve Moldover (Doc. No. 1). Defendants Privitera, Parker, and Moldover were shareholders, directors, officers, and employees of American Rehab at all times relevant to this action. (Compl. ¶¶ 3-5; Ans. ¶¶ 3-5.) Plaintiffs alleged violations of the corporate practice of medicine doctrine, Pennsylvania Insurance Fraud Statute, and various common law causes of action based on Defendants' scheme to defraud Plaintiffs by performing unnecessary testing and consults and producing fraudulent reports and billing in order to obtain payment from Plaintiffs. (Compl. ¶¶ 10, 11.) In addition, Plaintiffs alleged that the individual Defendants were practicing medicine without a license. (Compl. ¶ 17.) Defendants answered the Complaint (Doc. No. 9) and subsequently filed a Motion for Judgment on the Pleadings (Doc. No. 15).

On April 30, 2004, the case was placed in suspense due to the bankruptcy filing of Defendant American Rehab (Doc. No. 20). On May 25, 2005, following Plaintiffs' filing of an unopposed Motion to Sever Defendant American Rehab, the Court granted Plaintiffs' Motion, severed Defendant American Rehab, and transferred the case back to the Court's current docket to proceed against the individual Defendants (Doc. No. 22). On July 8, 2005, Plaintiffs filed a Motion for Partial Summary Judgment (Doc. No. 29), arguing collateral estoppel based on a jury verdict against American Rehab and the individual Defendants in a suit by another insurance company, Allstate Insurance Co., et al. v. American Rehab and Physical Therapy, Inc., et al., 2001-cv-5076. This Court denied the Motion for Partial Summary Judgment without prejudice on August 24, 2005 (Doc. No. 58).

Plaintiffs filed numerous discovery requests and motions after the case was taken out of suspense, and subsequently, Plaintiffs filed Motions for Sanctions against the individual Defendants for failing to participate in any discovery in this case (Doc. Nos. 66, 67, 68, 70). On October 19, 2005, following a hearing on the Motions for Sanctions, this Court entered Default Judgments against all remaining Defendants-Privitera, Parker, and Moldover-under counts of fraud, statutory insurance fraud, unjust enrichment, and restitution (Doc. No. 75). Each Defendant was assessed a judgment of $500,000. Defendants Parker and Moldover attended the hearing, but Defendant Privitera did not attend. Counsel for Defendants Parker and Moldover, who were present, did not object to the entry of the default judgments, and no appeal was taken.

II. Post-Judgment Proceedings

Since the entry of the default judgments, Plaintiffs have engaged in extensive discovery in aid of the execution of the default judgment pursuant to Federal Rule of Civil Procedure 69(a)(2). On December 3, 2007, Plaintiffs filed a Motion to Compel Privitera's Deposition (Doc. No. 78), which this Court granted (Doc. No. 80). Plaintiffs deposed Privitera on January 15, 2008. On July 2, 2008, Plaintiffs filed a Motion to Compel against Privitera for an order requiring him to identify the holding company to whom he pays rent (Doc. No. 84), which this Court granted on July 17, 2008 (Doc. No. 86). Privitera refused to comply with the Court's Order to identify the holding company to whom he pays rent, and on that basis, Plaintiffs filed a Motion to Compel a Bench Warrant for the Arrest of Privitera on September 8, 2008 (Doc. No. 87). In addition, throughout 2008 and 2009, Plaintiffs filed various writs of execution against Defendant Privitera and garnishee banks and other companies (Doc. Nos. 82, 90, 91, 105, 108, 122, 128, 134, 144, 153).

The Court held a hearing on November 24, 2008 on Plaintiffs's Motion to Compel Subpoenaed Documents from Comcast (Doc. No. 85) and the Motion to Compel a Bench Warrant, which Privitera was required to attend. Following the hearing, on November 26, 2008, the Court ordered Privitera to provide Plaintiffs' counsel with a true and correct personal financial statement subject to penalties against perjury and to appear at a deposition to answer any and all questions relating to his financial status, transactions, etc (Doc. No. 99). On December 11, 2008, following a telephone status conference on December 8, 2008 and in view of its November 26 Order, this Court denied without prejudice Plaintiffs's Motion to Compel a Bench Warrant for the Arrest of Privitera and denied as moot Plaintiffs's Motion to Compel Documents from Comcast (Doc. No. 102).

On January 12, 2009, Privitera filed for Chapter 7 bankruptcy (Doc. No. 115), following which Privitera's attorney cancelled the deposition scheduled pursuant to the Court's November 26, 2008 Order. (See Pl.'s Mot. Inj. Ex. C.) However, the bankruptcy court dismissed Privitera's bankruptcy case on February 17, 2009, due to Privitera's failure to file the necessary documents. (See Pl.'s Mot. Inj. Ex. D.) This set of circumstances raised a strong inference that Privitera had filed for bankruptcy as a strategic ploy to delay or evade Plaintiffs' post-judgment execution efforts. The evidence subsequently introduced (summarized in the Court's June 22, 2009 Memorandum) shows that Privitera was not bankrupt, in any sense of the word, but rather enjoyed a comfortable lifestyle.

Plaintiffs then deposed Privitera on May 7, 2009. (See Pl.'s Mot. Inj. Ex. E.) Despite the prior Court Orders requiring Privitera to respond to Plaintiffs' post-execution discovery, Privitera was repeatedly non-responsive during the deposition, even in the absence of any objection of privilege or otherwise by his attorney. (Pl.'s Mot. Inj. ¶¶ 16-32.) As a result, the Court ordered a resumption of the deposition in open court, which took place on June 16, 2009.

Plaintiffs filed additional motions in aid of execution against Privitera. On April 27, 2009, Plaintiffs filed a Motion to Compel Subpeonaed Documents from Privitera's attorney, Stephen Usdin, regarding Privitera's payments to Usdin (Doc. No. 124). On June 2, 2009, Plaintiffs filed a Motion for an Injunction against Privitera to enjoin him from transferring, conveying, assigning, spending, disposing, and/or concealing any money or property valued at $200.00 or more and to order him to appear for another deposition (Doc. No. 132). Although Privitera had testified at his deposition to earning approximately $168,000 per year, he had not made a single payment to satisfy the default judgment. (Pl.'s Mot. Inj. ΒΆΒΆ 3, 19.) Further, Plaintiffs asserted that Privitera has purposefully structured his financial affairs to frustrate Plaintiffs' collection efforts by not maintaining any bank accounts ...


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