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Allstate Insurance Co. v. St. Anthony's Spine & Joint Institute

March 9, 2010

ALLSTATE INSURANCE COMPANY, ET AL., PLAINTIFFS,
v.
ST. ANTHONY'S SPINE & JOINT INSTITUTE, P.C., MELVIN D'SOUZA, D.C., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve United States District Court Judge

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge

BACKGROUND

Before the Court is Plaintiffs Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Company's (collectively "Allstate") Motion for Summary Judgment on Defendants Melvin D'Souza, D.C. ("Dr. D'Souza") and St. Anthony's Spine and Joint Institute, P.C.'s ("St. Anthony's") (collectively "Defendants") Counterclaim. Allstate's suit against Defendants includes a claim pursuant to 720 ILCS § 5/46-5(a) based on Defendants' submission of allegedly false and misleading medical reports, records, and billing statements for chiropractic and diagnostic services to Allstate. Defendants filed a counterclaim against Allstate alleging that Allstate brought its suit against Defendants in bad faith in contravention of 720 ILCS § 5/46-5(b) and seeking statutory damages and attorneys' fees. For the following reasons, the Court grants Plaintiffs' Motion for Summary Judgment.

I. Northern District of Illinois Local Rule 56.1

When determining summary judgment motions, the Court derives the background facts from the parties' Local Rule 56.1 statements. Specifically, Local Rule 56.1 assists the Court by "organizing the evidence, identifying undisputed facts, and demonstrating precisely how each side propose[s] to prove a disputed fact with admissible evidence." Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 527 (7th Cir. 2000). Local Rule 56.1(a)(3) requires the moving party to provide "a statement of material facts as to which the moving party contends there is no genuine issue." Cracco v. Vitran Exp., Inc., 559 F.3d 625, 632 (7th Cir. 2009). "The opposing party is required to file 'a response to each numbered paragraph in the moving party's statement, including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon.'" Id. (citing N.D. Ill. R. 56.1(b)(3)(B)). In addition, Local Rule 56.1(b)(3)(C) requires the nonmoving party to present a separate statement of additional facts that require the denial of summary judgment. See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008). Pursuant to the Local Rules, the Court will not consider any additional facts proposed in the nonmoving party's Local Rule 56.1(b)(3)(B) Response, but instead must rely on the non-movant's Local Rule 56.1(b)(3)(C) Statement of Additional Facts when making factual determinations. See id. at 643; Cichon v. Exelon Generation Co., L.L.C., 401 F.3d 803, 809 (7th Cir. 2005) ("Local Rule 56.1 requires specifically that a litigant seeking to oppose a motion for summary judgment file a response that contains a separate 'statement . of any additional facts that require the denial of summary judgment.'") (emphasis in original).

Moreover, the purpose of Rule 56.1 statements is to identify the relevant evidence supporting the material facts, not to make factual or legal arguments, see Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir. 2006), and thus the Court will not address the parties' arguments made in their Rule 56.1 statements and responses. Also, the requirements for responses under Local Rule 56.1 are "not satisfied by evasive denials that do not fairly meet the substance of the material facts asserted." Bordelon, 233 F.3d at 528. Further, the Court may disregard statements and responses that do not properly cite to the record. See Cichon, 401 F.3d at 809-10. Finally, "hearsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial." Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir. 1997). With these standards in mind, the Court turns to the relevant facts of the case.

II. Dr. D'Souza's Affidavit

Prior to addressing the facts, the Court must address Dr. D'Souza's affidavit which contains numerous unsubstantiated statements and legal conclusions that are outside of his personal knowledge. Rule 56(e)(1) of the Federal Rules of Civil Procedure sets forth requirements for affidavits submitted at the summary judgment stage:

A supporting or opposing affidavit must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on the matters stated. If a paper or part of a paper is referred to in an affidavit, a sworn or certified copy must be attached to or served with the affidavit. The court may permit an affidavit to be supplemented or opposed by depositions, answers to interrogatories, or additional affidavits.

Fed.R.Civ.P. 56(e)(1). "While personal knowledge may include inferences and opinions, those inferences must be substantiated by specific facts." Vakharia v. Little Co. of Mary Hosp. & Health Care Ctrs., 62 Fed. Appx. 122, 125 (7th Cir. 2003); Drake v. 3M, 134 F.3d 878, 887 (7th Cir. 1998) ("Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter, rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.")

The Court recognizes that 720 ILCS § 5/46-5(b) on which Defendants premise their counterclaim provides that, "[i]n determining whether an insurance company . . . acted in bad faith, the court shall relax the rules of evidence to allow for the introduction of any facts or other information on which the insurance company . . . may have relied in bringing an action under subsection (a) of this Section." 720 ILCS § 5/46-5(b). Defendants contend that § 5/46-5(b) renders certain otherwise inadmissible evidence admissible as to the issue of Allstate's reliance. The evidentiary portion of § 5/46-5(b), however, is a state rule of evidence and thus inapplicable here. Indeed, the "Federal Rules of Evidence, not provisions of state law, govern the admissibility of evidence in federal court." Park v. City of Chicago, 297 F.3d 606, 611 (7th Cir. 2002); see also Barron v. Ford Motor Co. of Canada Ltd., 965 F.2d 195, 198 (7th Cir. 1992) ("Even in diversity cases the rules of evidence applied in federal courts are the federal rules of evidence rather than state rules . . ."). As the Seventh Circuit noted in Barron, "[a] pure rule of evidence, like a pure rule of procedure, is concerned solely with accuracy and economy in litigation . . . while a substantive rule is concerned with the channeling of behavior outside the courtroom." Id. at 199. Because the text of § 5/46-5(b) establishes an evidentiary rule, the provision does not apply to the admissibility of evidence in federal court.

Despite the inapplicability of this evidentiary rule, the Court views the facts in the light most favorable to Defendants. The Court will consider evidence admissible in federal court, including deposition testimony from Allstate employees and Dr. D'Souza, as well as portions of Dr. D'Souza's affidavit that are based on his personal knowledge. The Court, however, will not consider the many self-serving, conclusory allegations contained in Dr. D'Souza's affidavit that assert legal conclusions regarding issues at the center of this motion for summary judgment, or that are not supported by Dr. D'Souza's personal knowledge or any other form of evidence. The Court, for example, will not assume the truth of the following statements contained in Dr. D'Souza's affidavit: Allstate's "refusal to pay for my patients' care was because [Allstate] does not credit as real and compensable musculigamentous injuries arising out of automobile accidents," Allstate's "refusal to pay for radiographic testing of my patients was because the insurance company falsely believes that x-rays can only be used to detect fractures of bone and are useless in diagnosing soft tissue injuries," "Allstate's continuing practice of declining any payment for the reasonable and necessary medical expenses of its insureds . . . who [were] treated at my clinic was in bad faith," "this is a vindictive suit" and "it has been brought against me as a means to punish me for caring for soft tissue injury patients," "[t]he suit is being used to harass, intimidate and burden me," "the suit has also been brought as a means of avenging [Allstate's] hostility toward me for my views [on] . . . injuries arising from automobile accidents," "the charges against me . . . are untrue," "I believe all of Allstate's accusations against me have been trumped up to try to mask the motive of this suit, which is to vindictively punish, harass, and intimidate me for treating and diagnosing patients whom Allstate does not want to pay its insurance out to," and "[t]his lawsuit has been brought to teach a lesson to chiropractors in this community that if they engage in caring treatment and thorough diagnostic work up of soft tissue injury cases and if they engage in public speech and actions that challenge the practices of [Allstate] . . . they can be targeted for a costly and burdensome suit as punishment." (R. 184-1, Ex. 1, D'Souza Aff, ¶¶ 122, 124-125, 184-188, 204, 227.)

III. Relevant Facts

The facts underlying Allstate's claims against Defendants are detailed in the ruling on Defendants' Motion for Summary Judgment. (R. 209-1, Memorandum Opinion and Order.) The facts pertinent to the pending motion concern whether Defendants have a counterclaim that Allstate brought its statutory insurance fraud claim against Defendants in bad faith.

A. Defendants' Relationship with Allstate

Dr. D'Souza, a chiropractic physician, conducts business through a series of chiropractic centers located in and around Chicago, Illinois. (R. 186-1, Plaintiffs' Local Rule 56.1 Statement of Undisputed Facts, ¶¶ 2-5.) As a physician who treats patients who have been injured in automobile accidents, Dr. D'Souza routinely submits claims to insurance companies. Allstate has contracted to pay all reasonable expenses actually incurred for the necessary medical treatments and services of insureds in an automobile accident. Id. at ¶ 4. At issue in this case are a series of insurance claims seeking payment of medical bills that Dr. D'Souza submitted to Allstate between 2000 and 2006. (R. 196-1, Defendants' Local Rule 56.1 Statement of Additional Facts, ¶ 1.) Most of the insurance claims Defendants submitted to Allstate involved patients who sustained soft-tissue injuries consisting of ligament and muscle sprains or strains of the cervical, thoracic, and/or lumbar spine in automobile accidents. (R. 186-1, ¶¶ 1-2.) From 2000 through the inception of this lawsuit, Allstate paid Defendants almost $80,000 in direct payments for treatments and diagnostic services, ...


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