McGee v. State Farm Mutual Automobile Insurance Company - Document 56
ORDER granting 22 Motion to Dismiss. For the foregoing reasons, the Court grants State Farm's motion to dismiss pursuant to Rule 12(b)(6) and hereby dismisses the amended complaint in its entirety. Because McGee has already amended his complaint once, and because any further amendment would be futile, dismissal is with prejudice. The Clerk of the Court is directed to close this case and enter judgment in favor of State Farm. Ordered by Senior Judge I. Leo Glasser on 11/8/2011.
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MEMORANDUM AND ORDER
- against -
09 Civ. 3579 (ILG) (RLM)
STATE FARM MUTUAL AUTOMOBILE
GLASSER, Senior United States District Judge:
On July 28, 2009 plaintiff John McGee (“McGee”) initiated this diversity action
against defendant State Farm Mutual Insurance Company (“State Farm”) in New York
State Supreme Court, asserting, among other things, claims for fraud and breach of
contract. State Farm on August 18, 2009 removed the action to this Court pursuant to
28 U.S.C. § 1441(a). On September 4, 2009, McGee filed an amended complaint nearly
identical to his original complaint that added additional defendants—all New York
residents—whose joinder would destroy diversity and also filed a motion to remand the
action to state court. State Farm on September 8, 2009 opposed McGee’s motion to
remand and also moved to dismiss both McGee’s original and amended complaints.
By Memorandum and Order dated November 18, 2009, the Court denied
McGee’s motion to remand and ordered that the non-diverse parties named in the
amended complaint be dropped pursuant to Fed. R. Civ. P. 21. See McGee v. State Farm
Mut. Auto. Ins. Co., 684 F. Supp. 2d 258, 265 (E.D.N.Y. 2009). Currently before the
Court is State Farm’s motion to dismiss the amended complaint pursuant to Rules
8(a)(2), 9(b), and 12(b)(6) of the Federal Rules of Civil Procedure.
For the reasons set forth below, State Farm’s motion is hereby GRANTED, and
the amended complaint is dismissed in its entirety with prejudice.
McGee is a licensed physician in the State of New York who provided medical
care to eligible insured persons covered by State Farm through automobile insurance
contracts. Amended Complaint dated August 31, 2009 ¶ 1 (“Am. Compl.”) (Dkt. No. 20).
Asserting theories of fraud, breach of contract, breach of the duty of good faith and fair
dealing, unjust enrichment, and equitable subordination, McGee alleges that he has
sustained more than four million dollars in damages as a result of a scheme by State
Farm to deny him payment for his treatment of its insureds. Am. Compl. ¶ 55.1 McGee
previously brought a similar action against State Farm that was before Judge Block and
another against All State Insurance Company that was before Judge Vitaliano; both of
those cases involved allegations nearly identical to those here, and both were dismissed.
See McGee v. Allstate Ins. Co., No. 08–CV–0842 (ENV) (MDG), 2011 WL 3497527
(E.D.N.Y. Aug. 3, 2011) (dismissing fraud, breach of contract, unjust enrichment, breach
of the duty of good faith and fair dealing, and equitable subordination claims); McGee v.
State Farm Mut. Auto. Ins. Co., No. 08-CV-392 (FB) (CLP), 2009 WL 2132439
(E.D.N.Y. July 10, 2009) (“McGee I”) (dismissing civil RICO claim). This action, like
McGee’s previous actions in this district, involves certain aspects of New York’s no-fault
insurance law. A brief review of that regime is thus in order.
Elsewhere in the amended complaint, McGee alleges that he sustained damages
in the amount of only three million dollars. Am. Compl. ¶ 224.
A. New York’s No-Fault Insurance Law
Under the Comprehensive Motor Vehicle Insurance Reparation Act, New York’s
no-fault insurance law, State Farm is required to indemnify all covered persons for the
treatment of “personal injury arising out of the use or operation of a [covered] motor
vehicle.” N.Y. Ins. Law § 5102(b) (McKinney 2005). Treatment must be “necessary for
the treatment of injuries sustained,” 11 N.Y.C.R.R. § 65.3.16(a)(6), and claimants
seeking reimbursement thus must substantiate their claims by “submit[ing] to a medical
examination by a physician selected by, or acceptable to, the [insurer] when, and as
often as, the [insurer] may reasonably require,” 11 N.Y.C.R.R. § 65-1. These
examinations are referred to as “independent medical examinations” (“IMEs”).
“Patients covered by no-fault insurance often assign their claims to their health
care providers rather than seek reimbursement from insurance carriers directly.” State
Farm Mut. Auto Ins. Co. v. Mallela, 4 N.Y.3d 313, 319, 794 N.Y.S.2d 700, 827 N.E.2d
758 (2005) (citing 11 N.Y.C.R.R. § 65-3.11)). If a claim is approved, “[t]he insurer upon
assignment by the applicant shall pay the providers of services directly.” Universal
Acupuncture Pain Servs., P.C. v. State Farm Mut. Auto. Ins. Co., 196 F. Supp. 2d 378,
384 (S.D.N.Y. 2002) (citation and internal quotation marks omitted). A claim may not
be approved where, for example, the insurer determines as a result of an IME that
treatment was not medically necessary. McGee I, 2009 WL 2132439, at *1.
B. The Complaint2
McGee provided medical care to patients with no-fault automobile insurance
policies issued by State Farm who had assigned their policies to him. Am. Compl. ¶¶ 1,
17, 209. State Farm requires claimants to submit to IMEs and uses various referral
services to perform the IMEs. Am. Compl. ¶ 13.
McGee alleges that “[i]n order to maximize [its] profits as well as to reduce its
exposure regarding claims for policy benefits, STATE FARM conspired and agreed with
the other Defendants to utilize illegal medical referral services and/or brokers to
procure forged and fraudulent [IME] reports” to deny him reimbursement. Am. Compl.
¶ 7. “STATE FARM engaged the other Defendants with the expectation that all reports
received would be favorable to the insurance carrier” and “communicated with and to
the other Defendants that if they did not provide sufficient denials within the evaluation
reports then STATE FARM would not use their illegal medical referral service.” Am.
Compl. ¶ 8. As a result of these fraudulent reports, McGee was, among other things,
wrongfully denied reimbursement for healthcare services that he had already provided.
Am. Compl. ¶ 8. McGee avers that State Farm has been operating this scheme since
December 1998 and that it has continued uninterrupted since that time. Am. Compl. ¶
55. He seeks compensatory and punitive damages.
State Farm moves to dismiss the amended complaint on several grounds,
arguing, among other things, that: (1) McGee lacks standing to assert his claims; (2) his
The following allegations are taken from McGee’s complaint and are accepted as
true for the purpose of this motion.
fraud claim is barred by collateral estoppel; (3) New York law does not recognize an
independent cause of action for breach of the duty of good faith and fair dealing; (4) his
breach of contract claim fails because he does not identify any specific contractual
provision that State Farm breached; (5) his unjust enrichment claim is duplicative of his
breach of contract claim; and (6) his equitable subrogation claim fails because McGee
cannot demonstrate that he paid under compulsion an existing debt owed by State
Farm. Memorandum of Law in Support of Motion to Dismiss the Complaint dated
September 8, 2009 (“Def.’s Mem.”) at 11-33 (Dkt. No. 22). McGee on February 16, 2010
filed his opposition to the motion to dismiss, and State Farm on April 29, 2010 filed its
reply. See Memorandum of Law in Opposition to State Farm’s Motion to Dismiss the
Complaint dated February 15, 2010 (“Pl.’s Opp’n”) (Dkt. No. 46); State Farm’s Reply in
Support of its Motion to Dismiss the Complaint dated April 29, 2010 (“Def.’s Reply”)
(Dkt. No. 47).3
A. Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to
include “a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss pursuant to Rule
12(b)(6), McGee’s pleading must contain “sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 129
S. Ct. 1937, 1940, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
McGee delayed filing his opposition until after the Court ruled on his motion for
reconsideration of the Court’s Memorandum and Order dated January 14, 2010 denying
his motion to remand the action to state court.
544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).4 A claim has facial plausibility
“when the plaintiff pleads factual content that allows the Court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at
1949. Although detailed factual allegations are not necessary, the pleading must include
more than an “unadorned, the-defendant-unlawfully-harmed-me accusation;” mere
legal conclusions, “a formulaic recitation of the elements of a cause of action,” or “naked
assertions” by the plaintiff will not suffice. Id. at 1949 (alteration in original) (internal
quotations, citations, and alterations omitted). This plausibility standard “is not akin to
a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).
B. Article III Standing
State Farm first contends that McGee lacks standing to bring this action. Def.’s
Mem. at 11-12. Standing is a threshold issue and “an essential and unchanging part of
the case-or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504
U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992) (citing Allen v. Wright, 468 U.S.
737, 751, 104 S. Ct. 3315, 82 L. Ed. 2d 556 (1984)). Article III standing “requires that an
injury be concrete, particularized, and actual or imminent; fairly traceable to the
challenged action; and redressable by a favorable ruling.” Monsanto Co. v. Geertson
Seed Farms, 130 S. Ct. 2743, 2752, 177 L. Ed. 2d 461 (2010) (citing Horne v. Flores, 557
In addition to the facts alleged in the complaint, a district court considering a
motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) may also consider “documents
attached to the complaint as exhibits, and documents incorporated by reference in the
complaint.” DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (citing
Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002)).
U.S. —, 129 S. Ct. 2579, 2591-92, 174 L. Ed. 2d 406 (2009)). “[I]n all standing inquiries,
the critical question is whether [the plaintiff] has ‘alleged such a personal stake in the
outcome of the controversy as to warrant his invocation of federal-court jurisdiction.’”
Hornes, 129 S. Ct. at 2592 (quoting Summers v. Earth Island Inst., 555 U.S. 488, 492,
129 S. Ct. 1142, 1148-49, 173 L. Ed. 2d 1 (2009)).
State Farm argues that McGee has suffered no injury and thus has no such
personal stake because his alleged standing depends on his having received assignments
of rights from his patients, various State Farm insureds—a fact that he has failed to
allege sufficiently. Def.’s Mem. at 11-13. State Farm also contends that McGee cannot
base his standing upon State Farm’s alleged infringement of his purported
“constitutional right to practice medicine.” Def.’s Reply. at 4-5.
State Farm’s latter contention is correct because, contrary to McGee’s assertions
based on a Fourteenth Amendment property deprivation theory, Pl.’s Opp’n at 3-5, no
such constitutional right exists. The Fourteenth Amendment applies only to state
actors, not private defendants such as State Farm. See, e.g., Lugar v. Edmondson Oil
Co., Inc., 457 U.S. 922, 937, 102 S. Ct. 2744, 73 L. Ed. 2d 482 (1982). In any event, even
if the Fourteenth Amendment did apply, there is no due process right to practice one’s
profession free of any restraints. See, e.g., Conn v. Gabbert, 526 U.S. 286, 291-92, 119 S.
Ct. 1292, 143 L. Ed. 2d 399 (1999).
Regarding State Farm’s former contention, though McGee’s allegations
concerning the assignment of his patients’ insurance claims to him are hardly the model
of clarity, McGee does in fact allege that he is the claims’ assignee. See Am. Compl. ¶
218 (“STATE FARM breached the contract which Dr. McGee is an assignee of [sic] those
rights under the insurance contract.”); Am. Compl. ¶ 223 (“Dr. McGee is an assignee for
the receivable which are [sic] being sought.”). Further, McGee has attached to the
complaint a single denial-of-claim form that has the “Yes” box check-marked in
response to the question whether the claim was brought “as assignee.” Compl. Ex. A.
Accepting as true McGee’s allegations and construing the complaint in favor of McGee
as the Court must, see, e.g., Connecticut v. Physicians Health Servs. of Conn., Inc., 287
F.3d 110, 114 (2d Cir. 2002) (since standing is challenged on basis of pleadings, courts
must accept all allegations as true and construe complaint in favor of complaining
party), the Court concludes that the complaint has sufficiently alleged McGee’s standing.
See McGee I, 2009 WL 2132439, at *3 (citing Am. Med. Ass’n v. United Healthcare
Corp., No. 00 Civ. 2800 (LMM) (GWG), 2002 WL 31413668, at *2 (S.D.N.Y. Oct. 23,
2002)) (even where denial of claim forms attached to complaint indicated that McGee
was not assignee of those claims, single allegation that McGee was “assignee of [his
patients’] policy benefits” was sufficient to create standing).
Having concluded that McGee has standing, the Court now turns to each of
McGee’s specific claims against State Farm below.
McGee’s first claim sounds in fraud, Am. Compl. ¶¶ 129-53, and thus it must meet
the particularity requirements of Rule 9(b) of the Federal Rules of Civil procedure.5 To
satisfy Rule 9(b), a complaint must “(1) specify the statements that the plaintiff contends
were fraudulent, (2) identify the speaker, (3) state where and when the statements were
Fed. R. Civ. P. 9(b) provides that “[i]n alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.”
made, and (4) explain why the statements were fraudulent.” Shields v. Citytrust
Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994) (internal citations and quotation marks
State Farm contends that McGee’s fraud claim fails to meet the particularity
requirements of Rule 9(b) on several grounds, Def.’s Mem. at 13-26, but as a threshold
matter contends that collateral estoppel bars McGee from asserting fraud claims against
it in this action. Def.’s Mem. at 15-19.
“The elements of fraud under New York law are: (1) a misrepresentation or a
material omission of fact which was false and known to be false by defendant, (2) made
for the purpose of inducing the other party to rely upon it, (3) justifiable reliance of the
other party on the misrepresentation or material omission, and (4) injury.” Premium
Mortg. Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009) (internal quotation
marks and citation omitted).6 State Farm contends that McGee has not alleged that he
justifiably relied upon any alleged misrepresentation by State Farm and that he is
barred from arguing otherwise under the principles of collateral estoppel. Def.’s Mem.
at 15. More specifically, State Farm maintains that Judge Block’s conclusion in McGee I
dismissing McGee’s civil RICO claims on the grounds that the allegedly fraudulent IME
reports were not calculated to deceive McGee or his patients bars McGee’s fraud claim.
Def.’s Mem. at 16-17. McGee does not respond to this argument in detail; instead, he
states that “State Farm’s argument is based on RICO which this case at bar has not made
a RICO claim [sic] and therefore is an irrelevant argument . . . .” Pl.’s Opp’n at 7. He
Because this is a diversity case, New York law applies. See, e.g., Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941).
thus appears to contend that because the prior case involved a civil RICO claim, and this
case involves a fraud claim, collateral estoppel is inapplicable. The Court disagrees.
Collateral estoppel, also known as issue preclusion, bars litigants from
relitigating any fact or issue that has already been fully and fairly litigated in a prior
proceeding that produced a final judgment on the merits. See Bank of N.Y. v. First
Millenium, Inc., 607 F.3d 905, 918 (2d Cir. 2010) (citing Purdy v. Zeldes, 337 F.3d 253,
258 (2d Cir. 2003)). The party seeking the benefit of collateral estoppel with respect to
an issue must demonstrate that the issue decided in the prior proceeding is identical to
the issue in the subsequent action while the party resisting the application of collateral
estoppel “has the burden of establishing the absence of a full and fair opportunity to
litigate the issue.” Evans v. Ottimo, 469 F.3d 278, 281-82 (2d Cir. 2006) (internal
quotation marks and citation omitted). Further, contrary to McGee’s contention,
collateral estoppel may apply to claims in a second action between the parties other than
those they previously litigated; the specific causes of action need not be the same. See,
e.g., Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S. Ct. 2794, 81 L.
Ed. 2d 718 (1984) (“A judgment in favor of either side is conclusive in a subsequent
action between them on any issue actually litigated and determined, if its determination
was essential to that judgment.”); Allen v. McCurry, 449 U.S. 90, 94, 101 S. Ct. 411, 66 L.
Ed. 2d 308 (1980) (prior “decision may preclude relitigation of the issue in a suit on a
different cause of action involving a party to the first case”).
State Farm has met its burden here. State Farm raised the identical issue—
whether McGee can show reliance on any alleged misrepresentation of State Farm in or
associated with its allegedly fraudulent IME reports—in this action and the prior action
before Judge Block in McGee I. There, Judge Block addressed, among other things,
whether McGee’s complaint sufficiently alleged a civil RICO claim against State Farm
and ultimately concluded that it did not. McGee I, 2009 WL 2132439, at *5-6. Judge
Block reasoned that McGee failed to plead the alleged predicate acts of mail or wire
fraud with the requisite particularity. Id. at *4-5. He also reasoned that the predicate
acts did not constitute mail or wire fraud as a matter of law because establishing mail or
wire fraud “requires showing a scheme or artifice to defraud or obtain money by means
of false pretenses, representations, or promises, and such a showing fundamentally
requires that someone be deceived,” Id. at *5 (internal citations and quotation marks
omitted), a showing McGee failed to make in the complaint. Judge Block stated as
In the conspiracy which McGee alleges, however, none of the defendants’
conduct is calculated to deceive anyone. The Providers’ allegedly falsified
IME reports are not calculated to deceive State Farm because State Farm
ordered the falsification in the first place. Neither are the reports
calculated to deceive McGee: he knows full well what his own patients’
true condition is, and defendants’ reports are not intended to convince
him otherwise. Nor are the reports calculated to deceive McGee’s patients,
who apparently do not even receive them, and who are aware of their own
injuries in any event. In sum, while defendants’ alleged conduct is
dishonest and unfair, no one is intended to be duped or taken in.
Id. at *6. It follows that if McGee cannot establish that anyone was deceived by an
allegedly false IME report, he also cannot establish that anyone relied upon such a
report—a point Judge Block himself recognized. Id. at *5 n.9.
Here, in order to sufficiently allege a fraud claim, McGee must allege among
other things, “justifiable reliance . . . on [State Farm’s] misrepresentation[s].” Equifax,
583 F.3d at 108, or, in other words, that he was actually deceived by them. And, as in
McGee I, the misrepresentations at issue here pertain to purportedly false IME reports.
See, e.g., Am. Compl. ¶ 130 (“Such representations were deceitful and were perpetrated
as part of a covert plan or scheme contrived by STATE FARM to procure false and
contrived reports, designed in advance to attribute losses to policy exclusions through
peer review reports.”); Am. Compl. ¶ 134 (“STATE FARM materially misrepresented
that the peer review reports were accurate and based in science and for the purpose of
treatment of the patient and not in attempt to maximize profits.”). Accordingly, because
the issue decided in McGee I—whether McGee can show reliance on any alleged
misrepresentation of State Farm in or associated with its allegedly fraudulent IME
reports—is identical to the issue here and because there is no question that McGee had a
full and fair opportunity to litigate the issue previously as he submitted briefing on this
very same point, McGee I, No. 08-CV-00392, Dkt. No. 130, at 16 (“A regular RICO claim
with assertions of mail fraud requires pleading someone relied on the
misrepresentations . . . .”), collateral estoppel bars McGee from relitigating the issue
here, and McGee’s fraud claim is therefore dismissed.
Even if the Court were to conclude that the fraud claim is not barred by collateral
estoppel, it would still dismiss the claim on the grounds that its generalized and
conclusory allegations are insufficient to satisfy the pleading requirements of Fed. R.
Civ. P. 9(b). Indeed, Judge Vitaliano recently dismissed McGee’s fraud claim against All
State Insurance Company on this ground, and the allegations regarding fraud in that
case were nearly identical to those here. See All State Ins., 2011 WL 3497527, at *3 &
n.1. There, “the crux of McGee’s fraud claim [was] that Allstate created a system of peer
reviews and IMEs with the purpose of denying coverage to [State Farm insureds],
regardless of the medical necessity of treatment. Specifically, he claim[ed] that Allstate
demanded a finding denying payment and a finding that the treatment rendered by Dr.
McGee to be medically unnecessary.” Id. (quotations omitted). The same is true here.
McGee alleges that State Farm “dictated . . . that the evaluations and reports must deny
the medical necessity for future treatment as well as lack of medical necessity for prior
treatment.” Am. Compl. ¶ 7. Moreover, there, as here, McGee purported to provide
specificity to his claim by providing claim numbers along with corresponding dollar
amount that the insurance company allegedly failed to pay him. See Allstate Ins., 2011
WL 3497527, at *3; Am. Compl. ¶¶ 68-119. But “[t]he only thing that these details
establish is that plaintiff sought payment for services that [State Farm] refused. . . .
[T]hey are not false statements or misrepresentations on their face and McGee says
nothing that explains why they are fraudulent.” Allstate Ins., 2011 WL 3497527, at *3.
D. Breach of Contract & Breach of Implied Duty of Good Faith & Fair
McGee also asserts claims for breach of contract and breach of the implied duty
of good faith and fair dealing. Am. Compl. ¶¶ 212-201 at 47-49, 202-18 at 49-52.7 Like
the allegations underlying McGee’s other claims, the allegations relevant to these claims
are almost entirely conclusory.
To make out a breach of contract claim under New York law a plaintiff must show
“(1) the existence of a contract between itself and that defendant; (2) performance of the
plaintiff’s obligations under the contract; (3) breach of the contract by that defendant;
and (4) damages to the plaintiff caused by that defendant’s breach.” Diesel Props S.r.l.
Since the amended complaint contains inconsistent numbering of the
paragraphs in these sections, the Court notes the pages numbers associated with the
relevant allegations as well.
v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011) (citations omitted). “‘In
pleading these elements, a plaintiff must identify what provisions of the contract were
breached as a result of the acts at issue,’” CreditSights, Inc. v. Ciasullo, No. 05 Civ. 9345
(DAB), 2008 WL 4185737, at *10 (S.D.N.Y. Sept. 5, 2008) (quoting Wolff v. Rare
Medium, Inc., 171 F. Supp. 2d 354, 358 (S.D.N.Y. 2001)); accord Owens v. Gaffken &
Barriger Fund, LLC, No. 08 Civ. 8414 (PKC), 2009 WL 3073338, at *14 (S.D.N.Y. Sept.
21, 2009) (citations omitted).
All contracts also carry an implicit covenant of good faith and fair dealing. This
means that each party to a contract “embraces a pledge that ‘neither party shall do
anything which will have the effect of destroying or injuring the right of the other party
to receive the fruits of the contract.’” Dalton v. Educ. Testing Serv., Inc., 87 N.Y.2d 384,
639 N.Y.S.2d 977, 663 N.E.2d 289, 291 (1995) (quoting Kirke La Shelle Co. v. Armstrong
Co., 263 N.Y. 79, 79, 188 N.E. 163 (1933)).
State Farm argues that the breach of contract claim should be dismissed because
the complaint fails to identify a single contract or contractual provision that State Farm
has breached. Def.’s Mem. at 28. It further contends that the claim for breach of the
implied duty of good faith and fair dealing should be dismissed because the claim is
based upon the same allegations that give rise to the plaintiff’s breach of contract claim,
and it is therefore redundant. Def.’s Mem. at 27. McGee responds that his complaint
does, in fact, identify the contract provisions at issue, Pl.’s Opp’n at 12, and maintains
that New York does “recognize good faith and fair dealings claims,” Pl.’s Opp’n at 8.
McGee’s complaint contains vague references to several agreements that purport
to provide the basis of his breach of contract claim: “POLICY FORM 9332P.6” and a
NEW YORK STATE PRIVATE PASSENGER AUTO INSURANCE POLICY
endorsement.” Am. Compl. ¶ 205 at 49. These agreements, McGee avers, provide
“mandatory personal injury protection along with other additional coverage such as
bodily injury liability and property damage.” Am. Compl. ¶ 205 at 50. Though McGee
alleges that “STATE FARM breached . . . duties owed to [him] as an assignee of the
policyholders, . . .” by “repeatedly denying [his] claims for coverage benefits after
multiple and timely requests for reimbursement,” Am. Compl. ¶ 209, he fails to identify
any specific provision of these agreements that State Farm has breached and does not
attach the agreements to the complaint. Further, the only provision in each of these
agreements that he does identify does not relate to the duties owed by State Farm to its
policyholders. Am. Compl. ¶ 208. Instead, the provision applies to the obligations of
State Farm’s injured policy holders to, upon request of State Farm, submit to an IME:
“[t]he eligible injured person shall submit to medical examination by physicians selected
by or acceptable to, the Company, when, and as often as the Company may reasonably
require.” Am. Compl. ¶ 208.
Further, in the portion of the amended complaint containing McGee’s allegations
as to fraud, McGee references another agreement—Medical Payments Coverage-Symbol
C (“Med Pay”), a “private insurance contract which is optional and fall [sic] outside the
New York No-Fault statutes,” Am. Compl. ¶ 148, and cites the “Coverage” portion of the
policy, Am. Compl. 149. It provides that that “[w]e will pay, subject to the limits of the
liability, for reasonable expenses incurred for medical and funeral services that are
necessary due to bodily injury to an insured caused by an accident.” Am. Compl. ¶ 149.
To the extent that McGee contends that State Farm breached a Med Pay agreement, the
amended complaint contains no such allegations. Nor does it contain allegations that
any of his patients had such coverage, or if they did, that they also met any of the
preconditions for obtaining it, thus bringing the agreement into force.8
In a scattershot approach, McGee alleges the nature of State Farm’s purported
breach in generalities, fraught with legal conclusions not entitled to the assumption of
truth.9 See Iqbal, 129 S. Ct. at 1950. He avers, for example, that “[u]pon information
and belief, STATE FARM breached non-delegable and express and implied duties owed
to the Plaintiff,” by, among other things, failing to conduct an “honest peer review of
treatment rendered by Dr. McGee” and failing to “single loss adjust and voluntarily
reimburse Dr. McGee.” Am. Compl. ¶ 210 at 50-51. But McGee fails to tie any of the
allegations to a specific provision of any agreement between State Farm and an insured
who has assigned his or her policy to McGee. For this reason, McGee’s allegations are
insufficient to state a claim for breach of contract, and the claim is therefore dismissed.10
See, e.g., Eaves v. Designs for Fin., Inc., 785 F. Supp. 2d 229, 259 (S.D.N.Y. 2011) (citing
Owens, 2009 WL 3073338, at *14) (breach of contract claim dismissed where plaintiffs
McGee acknowledges that “[w]hen payment or coverage is not available for
whatever reason under the No Fault Endorsement or No Fault law than [sic] State Farm
is required under [Med Pay] to pay for the medical treatment,” Pl.’s Opp’n at 12, but the
amended complaint nevertheless contains no allegations as to whether Med Pay was
even available to any of the patients he treated and, if it was, how specifically State Farm
breached the agreement.
same is true of a vast majority of the pleadings in McGee’s amended
complaint. Though at 55 pages, the complaint is hardly “a short and plain statement of
the claim,” Fed. R. Civ. P. 8(a), it nevertheless contains very few well-pleaded factual
Because the Court resolves the breach of contract claim on this ground, it will
not reach the issue of whether the claim passes muster under Rule 8(a)(2).
failed to identify “which documents and which provisions of those documents
[defendant] allegedly breached”); CreditSights, 2008 WL 4185737, at *11 (breach of
contract counterclaim dismissed because “New York law is eminently clear that a proper
breach of contract claim must identify specifically breached contract terms [and] [n]one
are so alleged in the counterclaims”); Lewis Tree Serv., Inc., et al. v. Lucent Techs., Inc.,
et al., No. 99 Civ. 8556 (JGK), 2000 WL 1277303, *5 (S.D.N.Y. Sept. 8, 2000) (breach of
contract claim dismissed because plaintiffs failed to identify contractual provisions that
defendant had breached); Shah v. Wilco Systems, Inc., 126 F. Supp. 2d 641, 653
(S.D.N.Y. 2000) (same).
McGee’s claim for breach of the implied duty of good faith and fair dealing is also
fatally flawed. New York law does not recognize a separate claim for breach of the
implied duty of good faith and fair dealing based on the same facts as a claim for breach
of contract. See, e.g., L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 433 n.17 (2d Cir.
2011) (“‘[B]reach of [the duty of good faith and fair dealing] is merely a breach of the
underlying contract.’” (quoting Fasolino Foods Co. v. Banca Nazionale del Lavoro, 961
F.2d 1052, 1056 (2d Cir. 1992))). And there is no question that McGee’s breach of
contract and breach of the implied duty of good faith and fair dealing claims are based
on the same facts. Compare Am. Compl. ¶ 214 at 47 (“Under New York law, an insurer’s
duty to an insured for automobile policies imposes a non-delegable obligation to make a
prompt, thorough, and reasonable investigation of the merits of claims submitted.”) and
Am. Compl. ¶ 219 at 48 (“STATE FARM breached and willfully violated the duty of good
faith and fair dealing owed to Dr. McGee which among other things required that
STATE FARM be honest in dealing with Dr. McGee’s claims.”), with Am. Compl. ¶ 209
at 50 (“STATE FARM breached non-delegable, express and implied duties owed to the
Plaintiff as an assignee of policyholders, . . . by repeatedly denying Plaintiff’s claims for
coverage benefits after multiple and timely requests for reimbursement.”). Accordingly,
because McGee’s breach of the duty of good faith and fair dealing claim is redundant of
his breach of contract claim, it is dismissed. See, e.g., FlightSafety Int’l, Inc. v. Flight
Options, LLC, 418 F. Supp. 2d 103, 111 (E.D.N.Y. 2005), vacated in part on other
grounds, 194 F. App’x 53 (2d Cir. 2006) (per curiam) (breach of covenant of good faith
and fair dealing claim dismissed as redundant of breach of contract claim);
Tevdorachvili v. Chase Manhattan Bank, 103 F. Supp. 2d 632, 642 (E.D.N.Y. 2000)
(citations omitted) (same).
E. Unjustment Enrichment
McGee also asserts a claim of unjust enrichment, alleging, among other things,
that “STATE FARM has been paid for the insurance contracts which it entered with Dr.
McGee’s patient. [sic] STATE FARM has failed to pay over 3 million dollars of services
rendered to [sic] Dr. McGee.” Am. Compl. ¶ 225.
As State Farm correctly notes, Def.’s Mem. at 31, in order to state a claim for
unjust enrichment under New York law, a plaintiff must allege, “(1) that the defendant
benefitted; (2) at the plaintiff’s expense; and (3) that equity and good conscience require
restitution.” Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue Shield of N.J. Inc., 448
F.3d 573, 586 (2d Cir. 2006) (citing Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir.
2000)); accord Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d 173, 182, 944 N.E.2d
1104, 919, N.Y.S.2d 465 (2011).
An unjust enrichment claim is duplicative of a breach of contract claim where the
cause of action stems from the contractual relationship. See, e.g., Clark-Fitzpatrick, Inc.
v. Long Island R.R. Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987)
(“The existence of a valid and enforceable written contract governing a particular
subject matter ordinarily precludes recovery in quasi contract for events arising out of
the same subject matter.”); Leibowitz v. Cornell Univ., 584 F.3d 487, 507 (2d Cir. 2009)
(“[I]t is an elementary principle of contract law that, where there exists an express
contract for compensation, an action outside that contract will not lie.” (citation and
quotation marks omitted)).
Here, McGee’s unjust enrichment claim stems from the alleged contractual
relationship between State Farm and McGee as an assignee of his patients. It is thus
duplicative of McGee’s breach of contract claim and is dismissed. See, e.g., Allstate,
2011 WL 3497527, at *5 n.3 (dismissing McGee’s unjust enrichment claim against
Allstate based on nearly identical allegations because it was duplicative of breach of
F. Equitable Subrogation
McGee also invokes the doctrine of equitable subrogation, again alleging that he
rendered services to State Farm insureds and has not received payment from State
Farm. Am. Compl. ¶¶ 227-50. This claim fails as well. “Rooted in equity, the purpose of
Even if the unjust enrichment claim was not duplicative of the breach of
contract claim, it would still fail as McGee has not alleged that any medical services he
rendered to his patients bestowed a benefit upon State Farm or that the benefit was
“bestowed [by him] at the defendant’s behest.” Barbagallo v. Marcum LLP, — F. Supp.
2d —, No. 11 Civ. 1358 (JBW), 2011 WL 5068086, at *13 (E.D.N.Y. Oct. 25, 2011)
the subrogation doctrine is to afford a person who pays a debt that is owed primarily by
someone else every opportunity to be reimbursed in full.” Chem. Bank v. Meltzer, 93
N.Y.2d 296, 304, 712 N.E.2d 656, 690 N.Y.S.2d 489 (1999). The doctrine is
broad enough to include every instance in which one party pays a debt for
which another is primarily answerable and which in equity and good
conscience should have been discharged by the latter, so long as the
payment was made either under compulsion or for the protection of some
interest of the party making the payment, and in discharge of an existing
Travelers Cas. & Sur. Co. v. Dormitory Auth., State of N.Y., 735 F. Supp. 2d 42, 90
(S.D.N.Y. 2010) (citation and quotation marks omitted). The doctrine has “allow[ed]
insurers to stand in the shoes of their insured to seek indemnification by pursuing any
claims that the insured may have had against third parties legally responsible for the
loss.” All State Ins. Co. v. Mazzola, 175 F.3d 255, 258 (2d Cir. 1999) (citation omitted).
Courts have also applied the doctrine in the mortgagee or lienholder context where the
mortgagee makes a payment to satisfy an existing debt or lien on property. See, e.g.,
United States v. Baran, 996 F.2d 25, 28-29 (2d Cir. 1993) (“New York courts have
routinely applied subrogation ‘where the funds of a mortgagee are used to satisfy the
lien of an existing, known incumbrance when, unbeknown to the mortgagee, another
lien on the property exists which is senior to his but junior to the one satisfied with his
funds.’” (quoting King v. Pelkofski, 20 N.Y.2d 326, 333-34, 282 N.Y.S.2d 753, 758, 229
N.E.2d 435, 439 (1967))). But “New York courts have never applied the doctrine of
equitable subrogation on behalf of a medical professional seeking third party payment,”
AllState, 2011 WL 3497527, at *4, exactly what McGee contends the Court should do
McGee argues that the doctrine applies because “State Farm owes a debt to Dr.
McGee” in light of the medical services he provided to State Farm’s insureds. Pl.’s
Opp’n at 14. Yet he provides the Court with no authority to support this assertion—
reason enough to dismiss this claim. See AllState, 2011 WL 3497527, at *4.
There are other problems with this claim as well. McGee does not allege that he
treated his patients under compulsion or for the protection of his own interest; he avers
merely that “[u]pon information and belief, STATE FARM [insureds] requested and
sought treatment by Dr. McGee.” Am. Compl. ¶ 230. This allegation is insufficient to
show compulsion. See, e.g., Underpinning & Foundation Skanska, Inc. v. Travelers Cas.
& Sur. Co. of Am., 726 F. Supp. 2d 339, 353 (S.D.N.Y. 2010) (“A payment is not
involuntary simply because it was demanded by the person paid.” (citation and
quotation marks omitted)). Finally, the Court rejects McGee’s contention that he was
compelled to treat his patients because he was under an ethical obligation to do so. Pl.’s
Opp’n at 14. The complaint contains no such allegation, and “[a] party may not amend
its complaint . . . through statements made in its motion papers.” Siti-Sites.com, Inc. v.
Verizon Commc’ns, Inc., No. 10 Civ. 3751 (DLC), 2010 WL 5392927, at *5 (S.D.N.Y.
Dec.29, 2010) (citing Wright v. Ernst & Young LLP, 152 F.3d 169, 178 (2d Cir. 1998)). In
any event, “[a] physician has no duty to render services to every person seeking them. . .
. [A] physician’s decision of whether to treat a person amounts to a decision of whether
to enter into a contractual relationship.” Williams v. United States, 242 F.3d 169, 176
(4th Cir. 2001) (internal quotation marks and citation omitted). For all of these reasons,
McGee has failed to sufficiently plead his equitable subordination claim, and it is
For the foregoing reasons, the Court grants State Farm’s motion to dismiss
pursuant to Rule 12(b)(6) and hereby dismisses the amended complaint in its entirety.
Because McGee has already amended his complaint once, and because any further
amendment would be futile, dismissal is with prejudice. The Clerk of the Court is
directed to close this case and enter judgment in favor of State Farm.
Brooklyn, New York
November 8, 2011
I. Leo Glasser
Senior United States District Judge