AETNA HEALTH, INC. et al. v. CARABASI CHIROPRACTIC CENTER, INC., CHARLES A. CARABASI, D.C.

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NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3185-04T13185-04T1

AETNA HEALTH, INC. and AETNA

LIFE INSURANCE COMPANY,

Plaintiffs-Appellants,

v.

CARABASI CHIROPRACTIC CENTER, INC.,

CHARLES A. CARABASI, D.C.,

Defendants-Respondents.

________________________________________________________________

 

Submitted December 20, 2006 - Decided January 13, 2006

Before Judges Coburn, Collester and Lisa.

On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-3345-03.

Kelley, Wardell & Craig, attorneys for appellants (Edward S. Wardell, on the brief).

Cofsky & Zeidman and Charles I. Artz, attorneys for respondents (Donald C. Cofsky and Charles I. Artz, on the brief).

PER CURIAM

Plaintiffs Aetna Health, Inc. and Aetna Life Insurance Company (collectively "Aetna") appeal from an order dismissing their complaint with prejudice for failure to state a claim upon which relief could be granted. We reverse in part and affirm in part.

I

Because of the early stage of these proceedings, our statement of the facts will focus mainly on the procedural aspects and the allegations asserted in the amended complaint.

Defendants Carabasi Chiropractic Center, Inc. and Charles A. Carabasi, D.C. (collectively "Carabasi") are non-participating providers who offered chiropractic services to patients who received health care benefits or insurance from Aetna. Since Carabasi does not participate in Aetna's plan, there exists no contract between Carabasi and Aetna, nor any structured reimbursement arrangement. After treating patients, Carabasi submits insurance claims to Aetna requesting payment for the services rendered. Aetna reviews each claim and either approves or denies reimbursement.

On November 21, 2003, Aetna filed a complaint against Carabasi, alleging insurance fraud, common-law fraud and unjust enrichment, and seeking reimbursement and treble damages for the payments Carabasi received, which exceeded $600,000. On August 6, 2004, the court denied Carabasi's motions under Rule 4:6-2(e) to dismiss the complaint for failure to state a claim and under Rule 4:5-8 for failure to plead fraud with particularity and directed Aetna to file an amended complaint within thirty days. The court also ordered Aetna to submit for in camera review the medical records supporting its amended complaint.

On September 7, 2004, Aetna filed an amended complaint alleging insurance fraud, common-law fraud, negligent misrepresentation, unjust enrichment and tortious interference with Aetna's contracts with its subscribers. On December 13, 2004, Carabasi again moved under Rule 4:6-2(e) to dismiss the amended complaint for failure to state a claim and on substantive grounds. After two days of oral arguments, during which the court considered, in addition to the complaint, medical records and patient surveys, the court granted Carabasi's motion and dismissed Aetna's complaint with prejudice.

Motions to dismiss under Rule 4:6-2(e) "should be granted only in the rarest of instances" and generally without prejudice. Printing Mart-Morristown v. Sharp Electronics, 116 N.J. 739, 772 (1989). A judge must read the complaint liberally and afford the plaintiff every reasonable inference of fact to determine if the facts alleged "suggest[]" a cause of action. Id. at 746. A judge may convert a R. 4:6-2(e) motion to dismiss into a R. 4:46 motion for summary judgment and consult "matters outside the pleadings," if "all parties [have been] given reasonable opportunity to present all material pertinent to such a motion." R. 4:6-2. Without such a conversion, the judge must limit his inquiry to the face of the complaint and not concern himself with the plaintiff's ability to prove the allegations asserted. Printing Mart-Morristown, supra, 116 N.J. at 746.

The August 6, 2004, order directing Aetna to file an amended complaint improperly required Aetna to submit additional materials for in camera review. That is not the stage at which this ought to have been. Rather the court should have looked only to the face of the complaint to determine whether Aetna had alleged sufficient facts to state a claim upon which relief could be granted. Aetna's ability to prove those allegations was of no concern since a Rule 4:6-2(e) motion to dismiss requires the court to accept all the pleadings as true. Heavner v. Uniroyal, Inc., 63 N.J. 130, 133 (1973).

Even when a plaintiff alleges fraud, which pursuant to Rule 4:5-8(a), requires particular pleadings, the court cannot require the plaintiff to offer proofs to establish the allegations contained in its complaint. Rule 4:5-8(a) requires a plaintiff alleging fraud to plead its claim with particularity, but that is the extent of the requirement. And the court cannot place on the plaintiff a heavier burden than that imposed by the rule.

II

The Insurance Fraud Prevention Act enables "[a]ny insurance company damaged as the result of a violation of any provision of this act" to file a claim "in any court of competent jurisdiction to recover compensatory damages." N.J.S.A. 17:33A-7. "[I]f the court determines that the defendant has engaged in a pattern of violating this act," the insurance company can recover treble damages. Ibid. The relevant provisions of the Act read as follows:

a. A person or a practitioner violates this act if he:

(1) Presents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy . . . knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or

(2) Prepares or makes any written or oral statement that is intended to be presented to any insurance company . . . in connection with, or in support of or opposition to any claim for payment or other benefit pursuant to an insurance policy . . . knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or

(3) Conceals or knowingly fails to disclose the occurrence of an event which affects any person's initial or continued right or entitlement to (a) any insurance benefit or payment or (b) the amount of any benefit or payment to which the person is entitled[.]

[N.J.S.A. 17:33A-4.]

Thus, to state a claim for statutory fraud, Aetna must allege facts to show that Carabasi knowingly misrepresented or failed to disclose facts material to the claims submitted to Aetna for reimbursement.

For a claim of common-law fraud, Aetna must allege facts tending to show that Carabasi knowingly misrepresented a material fact with the intent to induce Aetna's reliance thereon and that Aetna did in fact rely upon Carabasi's misrepresentation and suffered damages as a consequence. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (citation omitted). Additionally, R. 4:5-8(a) requires that in an allegation of fraud, "particulars of the wrong, with dates and items if necessary, shall be stated insofar as practicable."

"Because negligent misrepresentation does not require scienter as an element, it is easier to prove than fraud." To plead such a claim, Aetna need only allege "[a]n incorrect statement, negligently made and justifiably relied upon [which resulted in] economic loss or injury sustained as a consequence of that reliance." H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 334 (1983).

Aetna's amended complaint makes detailed allegations, with specific references to eighty-one patients, twenty of which were based upon Aetna's review of medical records supplied by Carabasi. It alleges that "[b]eginning in 1998, [Carabasi] entered into a scheme to defraud [Aetna] through a pattern of false and misleading billing and claims." It asserts that Carabasi submitted bills and received payment for services which the laws governing chiropractic prohibited or made ineligible for payment, Carabasi never actually performed or knew "were not medically necessary, were not justified by the needs of the patient, and would not further the diagnosis or treatment of the patient" or that were "rendered without any diagnosis, documentation or medical support." It alleges that Carabasi submitted bills and received payment for multiple charges for the same services, misrepresented the amounts actually charged and received double payment for services rendered. Specifically, it asserts that Carabasi waived patients' co-insurance but failed to disclose that to Aetna on the claims forms, which resulted in Carabasi overstating the total charge for the services provided. Finally, the complaint alleges that Aetna relied upon Carabasi's misrepresentations and as a result, paid Carabasi additional money to which he was not entitled.

At the motion hearings, the judge looked beyond the complaint and considered outside materials submitted by the parties. He looked at the claims forms and noted that Carabasi routinely left the "AMOUNT PAID" and "BALANCE DUE" boxes blank. He found that by doing so, Carabasi never made any representation to Aetna, let alone a false one, regarding the collection or waiver of patients' co-insurance payments and because Aetna could have requested additional information from Carabasi, Aetna could not claim that it had relied on the blank forms. Such a determination was premature and will not be ripe for consideration until after further discovery has been made. If Aetna's allegations prove true, Carabasi failed to disclose a fact material to his right to receive reimbursement and if done knowingly, could certainly give rise to a claim of fraud under both the statute and common-law. Certainly, Aetna will have to prove reliance, but such proof is not required at this early stage.

The judge also considered the patient surveys, which reported that Carabasi had performed the services listed and that the patients' conditions improved as a result of those treatments, which Carabasi argued indicated medical necessity. But discovery does not end because the patient said in response to a questionnaire that Carabasi performed the service or collected the payment. Indeed, Aetna alleges in its amended complaint that Carabasi "advised and instructed the patients on how to respond to the inquiries." Aetna has a right to depose and further question each patient.

The judge repeatedly inquired as to how Aetna planned to prove its allegations. He seemed particularly concerned that Aetna had reviewed the numerous claims submitted by Carabasi over the years and engaged in a statistical analysis to determine that Carabasi had committed fraud. Such concern is misplaced since it matters not whether Aetna bases its allegations on a data comparison or specific factual observations. If the statistical analysis indicates fraud and Aetna can specify the acts Carabasi committed to perpetrate the fraud, then it is sufficient to state a claim of fraud. Accordingly, because the court improperly considered materials outside the complaint, which by itself sufficiently pleaded claims of insurance fraud, common-law fraud and negligent misrepresentation, we reverse that part of the order dismissing those claims.

Aetna also alleges that Carabasi tortiously interfered with the contracts between Aetna and its subscribers. To establish such a claim Aetna must show: (1) actual interference with a contract; (2) that the interference was inflicted intentionally by [Carabasi,] who is not a party to the contract; (3) that the interference was without justification; and (4) that the interference caused damage." Dello Russo v. Nagel, 358 N.J. Super. 254, 268 (App. Div. 2003) (citations omitted). "[T]he complaint must allege facts claiming that the interference was done intentionally and with malice," which does not mean that it must assert Carabasi harbored ill will toward Aetna, but that Carabasi inflicted the harm "intentionally and without justification or excuse." Printing Mart-Morristown, supra, 116 N.J. at 751, 756-57 (citations omitted).

Aetna's amended complaint alleges that Carabasi knew of the contract provisions requiring Aetna to pay only a fixed percentage of the cost of services, with the balance being paid by the individual members and that those provisions were material to the contracts. The complaint contends that Carabasi "intentionally, in bad faith and without justification" waived such payments "in order to access insurance information, to encourage overutilization of services by the insureds and to bill [Aetna] for amounts in excess of those actually charged to the patient." It claims that Aetna suffered damage as a result of Carabasi's interference since the provisions were designed to deter patients from using non-participating providers and from receiving unnecessary or excessive treatment, and Carabasi's waiver of these payments caused patients to overutilize his services. These allegations clearly set forth a claim for tortious interference, and we reverse that part of the order dismissing it.

 
Finally, Aetna asserts a claim of unjust enrichment, which has no merit and was properly dismissed. The essence of an unjust enrichment claim is that the law implies a contract where it would be inequitable for a defendant to retain a benefit without payment of value. Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 108-09 (1965) (citation omitted). To show inequity, Aetna must allege facts that it "expected remuneration from [Carabasi] at the time it performed or conferred a benefit on [Carabasi] and that the failure of remuneration enriched [Carabasi] beyond its . . . rights" VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994) (citations omitted). Aetna has alleged no facts which would indicate that it expected to derive some benefit from Carabasi upon payment of the claims. Nor has Aetna alleged any contractual relationship between itself and Carabasi. Aetna's unjust enrichment claim merely reasserts its claim for fraud, and we affirm that part of the order dismissing it.

Reversed in part, affirmed in part.

(continued)

(continued)

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A-3185-04T1

January 13, 2006