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Allstate Insurance Company, et al v. St. Anthony's Spine & Joint Institute

February 29, 2012

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, District Court Judge:

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiffs Allstate Insurance Company, Allstate Indemnity Company and Allstate Property & Casualty Insurance Company's (collectively, "Plaintiffs") motion for a new trial pursuant to Federal Rule of Civil Procedure ("Rule") 59(a). For the following reasons, the Court denies Plaintiffs' motion.

BACKGROUND*fn1

This case arises from what Plaintiffs have alleged is an "elaborate scheme to defraud" Plaintiffs through the creation and submission of false and misleading medical reports, records, and billing statements for chiropractic and diagnostic services. (R. 230, Am. Compl. at ¶ 1.) Specifically, Plaintiffs claimed that Defendant Melvin D'Souza, a chiropractic physician, routinely ordered "unnecessary and unwarranted diagnostic testing" such as digital motion x-rays ("DMX"), which he conducted in a mobile x-ray van shared by Defendants' multiple chiropractic clinics.*fn2 (Id. ¶¶ 96, 99.) Plaintiffs also alleged that Defendant D'Souza's multiple websites falsely represented the ability of DMX to "find injuries that could never be seen before" and provide "objective information that cannot be disputed" regarding "permanent soft tissue damage resulting from automobile accidents." (Id. ¶ 129.) According to Plaintiffs, they suffered harm by making "direct payments to Defendants on first party claims submitted by [Plaintiffs'] own insureds pursuing medical payments claims, and uninsured and under-insured motorist claims" based on Defendants' alleged fraudulent bills. (Id. at ¶ 2.) In other instances, Plaintiffs made "substantial payments based upon settlements and verdicts obtained against Plaintiffs' insureds in [their] third party personal injury claims and lawsuits" in which Defendants "submitted physicians liens through the U.S. mail to Plaintiffs purporting to assert their alleged right to attached towards any potential settlement and/or resolution reached in each particular case." (Id.)

Plaintiffs asserted the following claims 1) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964 (Defendant D'Souza only); 2) insurance fraud in violation of 720 ILCS 5/46-5;*fn3 3) common law fraud under Illinois law; 4) negligent spoliation regarding DMX and x-ray studies (Defendant D'Souza only); and 5) negligent spoliation with respect to DMX and x-ray reports (Defendant D'Souza only).*fn4 Defendants denied liability for all claims and maintained throughout trial that they neither falsified medical documents nor submitted falsified documents to Plaintiffs. Further, Defendants argued that all of the procedures they ordered for their patients were medically necessary. After a nine-day jury trial in October 2011, the jury deliberated for a day and a half and rendered a verdict for Defendants on all claims.(R. 303.) The Court entered judgment against Plaintiffs on October 31, 2011. (R. 304.)

According to Plaintiffs, all of the jury's verdicts were against the manifest weight of the evidence. Plaintiffs further contend that a new trial is warranted because Defendants' counsel's repeated leading questions tainted the evidence. Pursuant to Rule 59(a), they ask the Court to grant their motion to vacate the judgment and grant a new trial.

LEGAL STANDARD

Plaintiffs face a heavy burden under Rule 59(a). See Latino v. Kaizer, 58 F.3d 310, 315 (7th Cir. 1995) ("[N]ew trials granted because the verdict is against the weight of the evidence are proper only when the record shows that the jury's verdict resulted in a miscarriage of justice or where the verdict, on the record, cries out to be overturned or shocks [the court's] conscience.") (citation omitted). In deciding a motion for a new trial under Rule 59(a), the "district court must determine whether the verdict was against the manifest weight of the evidence, the damages are excessive, or if for other reasons the trial was not fair to the moving party." Frizzell v. Szabo, 647 F.3d 698, 702 (7th Cir. 2011); Westchester Fire Ins. Co. v. Gen. Star Indem. Co., 183 F.3d 578, 582 (7th Cir. 1999). A verdict will be set aside as contrary to the manifest weight of the evidence only if "no rational jury" could have rendered the verdict. Moore ex rel. Estate of Grady v. Tuelja, 546 F.3d 423, 427 (7th Cir. 2008) (citing King v. Harrington, 447 F.3d 531, 534 (7th Cir. 2006)); see also Westchester Fire, 183 F.3d at 582 (a court "will not overturn a jury's verdict as long as there is a reasonable basis in the record to support it").*fn5

In determining whether the jury's verdict was against the manifest weight of the evidence, a court "may consider the credibility of witnesses, the weight of the evidence, and anything else which justice requires." Bob Willow Motors, Inc. v. Gen. Motors Corp., 872 F.2d 788, 798 (7th Cir. 1989); see also Mejia v. Cook County, Ill., 650 F.3d 631, 633 (7th Cir. 2011) ("in passing on a motion for a new trial, the district court has the power to get a general sense of the weight of the evidence, assessing the credibility of the witnesses and the comparative strength of the facts put forth at trial."). In doing so, it is "bound to the same evidence the jury considered, and can strike a piece of evidence from its weighing process only if reasonable persons could not believe it because it contradicts indisputable facts or laws." Mejia, 650 F.3d at 633 (citing Latino, 58 F.3d at 315).

Seventh Circuit precedent instructs that courts are to view the evidence in the light most favorable to the non-moving party on a Rule 59(a) motion. See, e.g., Wipf v. Kowalski, 519 F.3d 380, 384 (7th Cir. 2008) (citing Kapelanski v. Johnson, 390 F.3d 525, 530 (7th Cir. 2004)); Carter v. Chicago Police Officers, 165 F.3d 1071, 1079 (7th Cir. 1998) (citing M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1407 (7th Cir. 1991)). At least one court in this District has interpreted the Seventh Circuit's recent decision in Mejia as requiring courts to view the evidence neutrally on a Rule 59(a) motion. See Galvan v. Nordberg, No. 04 C 4003, 2011 WL 1898237, at *6, n.4 (N.D. Ill. May 18, 2011) ("the evidence must be weighed neutrally, rather than in a light favorable to the non-movant") (citing Mejia, 650 F.3d at 634)). Several district courts in the Seventh Circuit, however, have continued to view the evidence in the light most favorable to the prevailing party after Mejia. See, e.g., Nelson, 2011 WL 4460492 at *7; Cook v. Illinois Dept. of Corrs., No. 09-cv-133-DRH, 2011 WL 5520436, *2 (S.D. Ill. Nov. 14, 2011). Regardless of whether the Court views the evidence in this case in a light most favorable to Defendants or neutrally, the Court's decision is the same.

District courts have wide discretion in determining whether to grant a motion for a new trial, Mejia, 650 F.3d at 634, but they must give deference to the jury's conclusions. Id. at 633, n.1. "This deference is encompassed within the manifest weight standard, which balances 'a decent respect for the collective wisdom of the jury' against a duty not to 'approve miscarriages of justice.'" Id. (citing 11 Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane, Federal Practice and Procedure § 2806, at 74 (2d ed. 1995)). "In cases involving simple issues but highly disputed facts . . . , greater deference should be afforded [to] the jury's verdict than in cases involving complex issues with facts not highly disputed." Latino,58 F.3d at 314 (citations omitted); see also Moore, 546 F.3d at 427 (citing Latino). The Seventh Circuit has cautioned that while the district court judge "has a responsibility for the result [of the trial] no less than the jury, he should not set the verdict aside as against the weight of the evidence merely because, if he had acted as trier of the fact, he would have reached a different result; and in that sense he does not act as a 13th juror in approving or disapproving the verdict." Latino, 58 F.3d at 315.

ANALYSIS

During the nine-day jury trial, Plaintiffs and Defendants presented several witnesses, both lay and expert, in support of their respective theories. Defendant D'Souza testified twice--once in Plaintiffs case-in-chief and again in Defendants' case-in-chief. Neither Plaintiffs nor Defendants called any of Defendant D'Souza's patients to testify at trial.

The facts regarding Defendants' conduct were largely undisputed. Rather, the parties disputed the reasons for that conduct and the inferences to be drawn from such conduct. See R. 342 ("Largely, the underlying facts are not in dispute . . . . What is complicated are defendant's attempted explanations of the reasons why these actions were taken."); R. 348 at 2-3; R. 355 at 12 ("In this case, a central issue before the jury was a simple one, the Defendant's intent."). Plaintiffs are correct that this case involved allegations of relatively complex healthcare fraud, but Defendants are also correct in that much of what the jury decided rested on credibility determinations of various witnesses. Accordingly, it is appropriate to give significant deference to the jury's verdicts.*fn6

I. Claims Involving Fraud

Because Plaintiffs' first three claims (RICO/mail fraud, Illinois insurance fraud and Illinois common law fraud) all centered around the same alleged fraudulent scheme, the Court addresses those claims together. Plaintiffs argue that the overwhelming evidence at trial indicated that Defendants perpetuated "a fraudulent scheme" consisting of the following components: (a) personal injury attorneys representing persons involved in minor auto accidents referred 461 clients to Defendant D'Souza; (b) those persons had personal injury or direct "medpay" claims against Plaintiffs; (c) Defendant D'Souza filed a physician's lien on these claims; (d) Defendant D'Souza mailed medical records, bills and health insurance claim forms to Allstate for treatments to these patients; (e) Defendant D'Souza's bills increased the value of the patients' insurance claims or lawsuits; (f) the cases settled or resolved; (g) Defendant D'Souza got paid and wrote off the rest; and (h) Defendant D'Souza's bills were false, misleading and/or inflated, and they exaggerated injuries and/or misrepresented unnecessary treatments or treatments not rendered. See R. 348 at 3-4.

A. Burdens of proof

1. RICO/mail fraud

To prevail on their RICO claim against Defendant D'Souza, Plaintiffs had to prove, by a a preponderance of the evidence, that: 1) an enterprise existed; 2) the enterprise engaged in, or had some effect upon, interstate or foreign commerce; 3) the defendant was employed by or associated with the alleged enterprise; 4) the defendant knowingly and willfully conducted or participated, directly or indirectly, in the conduct of the affairs of the alleged enterprise; and 5) the defendant did so knowingly and willfully through a pattern of racketeering activity. See R. 306 at 28-33; Fifth Circuit Pattern Jury Instr. 8.1 (2006); see also DeGuelle v. Camilli, 664 F.3d 192, 199 (7th Cir. 2011). Because Plaintiffs argued that Defendant D'Souza committed two or more predicate acts in violation of the mail fraud statute, Plaintiffs also had the burden of proving that Defendant D'Souza committed mail fraud. To do so, they had to prove, by a preponderance of the evidence, that he 1) willfully and knowingly devised a scheme or artifice to defraud, or a scheme for obtaining money or property by means of false pretenses, representations or promises, and 2) used the mail in furtherance of the scheme. See R. 306 at 31; 18 U.S.C. § 1341; see also Williams v. Aztar Indiana Gaming Corp., 351 F.3d 294, 298-99 (7th Cir. 2003).

2. Illinois statutory insurance fraud under 720 ILCS 5/46-5

To succeed on their Illinois statutory insurance fraud claim, Plaintiffs had to prove, by clear and convincing evidence, that either one of the Defendants 1) knowingly obtained, attempted to obtain, or caused to be obtained by deception, control over the property of an insurance company; 2) made a false claim or caused a false claim to be made on any policy of insurance issued by an insurance company; and 3) intended to deprive an insurance ...


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