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State Farm Mutual Automobile Insurance Co. v. Family Practice and Rehab, Inc.

United States District Court, M.D. Florida, Orlando Division

September 16, 2019




         State Farm Mutual Automobile Insurance Company ("State Farm Mutual") and State Farm Fire and Casualty Company ("State Farm Fire") (collectively "State Farm") bring the instant action for fraud, unjust enrichment, and declaratory judgment against Family Practice and Rehab, Inc. ("Family Practice") and Gilson Mortimer.[1] State Farm now moves for summary judgment against Gilson Mortimer. (Doc. 36).[2] As set forth below, State Farm's motion is granted in part and denied in part.

         I. Background

         Health care clinics operating in Florida are required to be licensed by the Agency for Health Care Administration ("AHCA") unless they qualify for an exemption. Fla. Stat. § 400.991 (2012). A clinic does not lawfully provide services if it does so without obtaining required licenses or meeting the standards for an exemption. Section 400.9905(4)(g), Florida Statutes, provides an exemption for clinics that are "wholly owned by one or more licensed health care practitioners ... if one of the owners who is a licensed health care practitioner is supervising the business activities and is legally responsible for the entity's compliance with all federal and state laws." A Florida statute pertaining to personal injury protection ("PIP") benefits also provides exemptions to licensing requirements for entities "wholly owned" by a physician licensed under chapters 458 or 459, or by a chiropractic physician licensed under chapter 60. ]d § 627.736(5)(h). "An insurer or insured is not required to pay a claim or charges ... for any service or treatment that was not lawful at the time rendered [or] [t]o any person who knowingly submits a false or misleading statement relating to the claim or charges." Id, § 627.736(b)(1).

         Family Practice was incorporated in Florida in March 2012 with Dr. Charles Richard-a doctor of osteopathic medicine-as the corporation's president and Mortimer- a non-physician-as its vice president.[3] (Mortimer Dep. Ex. 2).[4] Family Practice operated as a chiropractic clinic in Orlando, Florida, until 2015, when it was dissolved. (Mortimer Dep. at 20, 116; Richard Decl. at 3). Family Practice was not licensed by AHCA, instead asserting entitlement to an exemption based on Dr. Richard's purported whole ownership of the clinic.

         State Farm Mutual and State Farm Fire are insurers who routinely pay medical providers for services rendered to their insureds under PIP policies. While Family Practice was in operation, State Farm Mutual paid $377, 846.72 and State Farm Fire paid $6, 549.52 to Family Practice for such services. (Mortimer Dep. at 125). In this lawsuit, State Farm claims that Mortimer was an owner of Family Practice and that therefore Family Practice was not exempt from AHCA licensure under Florida law. State Farm thus contends that it had-and has-no obligation to pay Family Practice, and State Farm seeks to recover the sums that it did pay. State Farm further asserts that because Mortimer admitted to retaining the benefits from State Farm's payments to Family Practice, State Farm may recover all payments from Mortimer directly.[5]

         II. Summary Judgment Standards

         "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The Court must construe the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Reeves v. Sanderson Plumbing Prods.. Inc.. 530 U.S. 133, 150 (2000). However, when faced with a "properly supported motion for summary judgment, [the nonmoving party] must come forward with specific factual evidence, presenting more than mere allegations." Gargiulo v. G.M. Sales. Inc.. 131 F.3d 995, 999 (11th Cir. 1997). "[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         '"[J]udges [are not] required to submit a question to a jury merely because some evidence has been introduced by the party having the burden of proof, unless the evidence be of such a character that it would warrant the jury in finding a verdict in favor of that party .... [I]n every case, before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed.'" Id. at 251 (quoting Improvement Co. v. Munson. 14 Wall. 442, 448 (1872)). The inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52. Summary judgment may be granted if no "reasonable jury could return a verdict for the nonmoving party." Id. at 248.

         III. Discussion

         A. "Wholly Owned"

         State Farm argues that it is entitled to summary judgment on the question of ownership of the clinic because there is no genuine issue of material fact as to whether Family Practice was "wholly owned" by one or more licensed health care practitioners. The record evidence establishes that State Farm is correct. Mortimer-who claims to have been the Family Practice office manager-admits that there are no texts, emails, documents, or other forms of records to substantiate any of his assertions of non-ownership. Mortimer's evidence against ownership is his own deposition testimony, which is riddled with contradictory statements and evasive answers. Further, Mortimer's deposition directly contradicts his answers to interrogatories on many issues. Even viewing Mortimer's statements and their discrepancies in the light most favorable to him, as the Court must, there is not evidence of a "sufficient disagreement to require submission to the jury" on the issue of ownership. Anderson, 477 U.S. at 251-52.

         State Farm does not need to show that Mortimer was the sole owner of Family Practice in order to prove that the clinic was providing services unlawfully. State Farm only needs to show that Mortimer-or another non-physician-was, in reality, a partial owner of Family Practice such that Dr. Richard-a physician-was not the sole owner. State Farm has done so.

         Section 627.732(17), Florida Statutes, defines "entity wholly owned" to mean an entity "in which licensed health care practitioners are the business owners of all aspects of the business entity, including, but not limited to, being reflected as the business owners on the title or lease of the physical facility, filing taxes as the business owners, being account holders on the entity's bank account, being listed as the principals on all incorporation documents required by this state, and having ultimate authority over all personnel and compensation decisions relating to the entity." Courts have provided additional factors to aid in determining whether an entity is "wholly owned" by licensed health care practitioners, including financial factors such as whether a non-physician signed company checks, used company checks and debit cards for personal expenses, wrote company checks to themselves and family members, withdrew cash from business accounts for personal use, directed payments to other businesses that the individual owned or their businesses' vendors, or had the company pay for a personal vehicle. See State Farm Mut. Auto. Ins. Co. v. First Care Sol., Inc., 232 F.Supp.3d 1257, 1263-67 (S.D. Fla. 2017); State Farm Mut. Auto Ins. Co. v. Med. Serv. Ctr. of Fla., 103 F.Supp.3d 1343, 1351-53 (S.D. Fla. 2015).

         Other factors that courts have considered relate to incorporation and corporate control, such as whether a non-physician: made capital investments in the entity, received profits or suffered losses, had the ability to sell or dissolve the business, had authority to retain and direct the activities of attorneys, hired the company's accountants, participated in the preparation and filing of tax returns, owned equipment in the facility, handled the winding up of the business and storage of equipment and patient records, or actively participated in management and control of the business. See State Farm Fire & Cas. Co. v. Silver Star Health & Rehab, 739 F.3d 579, 585 (11th Cir. 2013); First Care, 232 F.Supp.3d at 1263-67; Med. Serv. Ctr.. 103 F.Supp.3d at 1351-53. Additionally, courts have listed factors more related to the management of daily clinic activities, such as whether a non-physician: possessed keys and alarm codes for the facility, was responsible for vendor bills, was involved in day-to-day operational activities, determined amounts billed to insurers, controlled payroll, maintained patient records, or dictated office policies and decisions pertaining to pricing, advertising, and personnel. See Silver Star, 739 F.3d at 585; Med. Serv. Ctr., 103 F.Supp.3d at 1351-53; First Care, 232 F.Supp.3d at 1263-67.

         1. Financial Control

         Perhaps most indicative of Mortimer's ownership of Family Practice is his use and control of the finances of the business. As described in more detail below, Mortimer (1) was a signer on the clinic's bank account, (2) used company checks and debit cards for personal expenses, (3) wrote company checks to himself and family members, (4) withdrew cash for personal use, (5) directed payments to other businesses that he owned and those businesses' vendors, and (6) had the company pay for his personal vehicle.

         Mortimer claims Family Practice had no bookkeeping system and that he kept no payroll or other financial records relating to Family Practice's obligations to him, his wife, [6]or his other personal businesses. (Mortimer Dep. at 54, 72-79, 92-93). Yet he paid himself, his wife, and at least four of his other personal businesses large sums of money that he states were for backpay, repayment of his loans to the business, and services rendered by his other businesses. He does not dispute that he used Family Practice's bank account to withdraw $62, 139.50, spend $113, 661.26 in debit card transactions, write $37, 500 in checks to himself and his personal entities, and pay $64, 538.48 to his wife. (Id at 126-29). He even directly paid vendors to whom his personal businesses-unrelated to Family Practice-owed money. Id, at 96-99). On the other hand, Dr. Richard avers he never signed any checks on behalf of the clinic, [7] (Richard Decl. at 2), and Dr. Richard's total withdrawals from the clinic's bank account were $15, 788.15; total debit card transactions were $23, 912.12; and total check payments were $12, 000, including all payment for services he rendered as a chiropractor at the clinic. (Mortimer Dep. Ex. 39).

         There are also $1, 235, 156.53 in unspecified withdrawals that Mortimer does not have accountings for; he claims he gave money to Dr. Richard because Dr. Richard was going through a divorce and did not want the funds tracked back to him. (Mortimer Dep. at 127). Oddly, this account of events is first introduced by Mortimer at the very end of his deposition. (Id.)

         Mortimer repeatedly used Family Practice's bank account to pay for personal expenses, including the down payment on his Land Rover. (Id. at 94). He used his Family Practice debit card to make personal purchases at places like Red Lobster, Advance Auto Parts, Victoria's Secret, Guess, Publix, Burlington, Armani Exchange, and several hotels. (Id, at 105-10). After reviewing bank records showing charges at Publix and other entities, Mortimer was asked:

Q: And then towards the bottom of the page, there's a charge on your account for Victoria's Secret; correct?
A: Correct.
Q: And those are all for personal or household transactions; ...

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