Insurer Fights Back Against No-Fault Clinic Mills
Fraud Doesn’t Pay When Insurers Fight Back
Post number 5353
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ISSUE:
Whether State Farm was entitled to a preliminary injunction staying pending no-fault arbitrations and collection actions, and barring new filings, while it litigated a federal RICO and fraud action alleging a large-scale no-fault insurance scheme.
In State Farm Mutual Automobile Insurance Company and State Farm Fire And Casaulty Company v. Atlantic Medical & Diagnostic, P.C., Jonathan Landow, M.D., and Viviane Etienne, M.D., No. 26-CV-1084 (OEM) (JAM), United States District Court, E.D. New York (April 29, 2026) Plaintiffs alleged that Landow and Etienne operate Atlantic as a high-volume medical practice at more than 90 multi-disciplinary clinics that cater to individuals purportedly injured in automobile accidents.
At these No-Fault Clinic Mills, Plaintiffs contend that Atlantic conducts examinations that are not legitimately performed to determine the true nature and extent of patient injuries but rather are performed as a pretext to justify unnecessary treatment and services.
Plaintiffs further alleged that Atlantic secures patients through improper quid pro quo arrangements with the NoFault Clinic Mills where it operates.
RULE:
A preliminary injunction requires irreparable harm, either likelihood of success on the merits or sufficiently serious questions going to the merits plus a balance of hardships tipping decidedly in the movant’s favor, and consistency with the public interest.
HOLDING:
Yes. The court granted State Farm’s motion and stayed all pending no-fault arbitrations and state-court collection proceedings, while also enjoining defendants from filing new ones during the federal case.
REASONING:
The court found irreparable harm because thousands of piecemeal proceedings would obscure the alleged fraud and risk preclusive rulings. State Farm also raised serious questions on the merits through detailed allegations and documentary support showing predetermined treatment, medically unnecessary services, and kickback-based referrals. The balance of hardships and public interest favored an injunction, and the court declined to require a bond.
According to the complaint, defendants allegedly:
1. Conducted examinations as a pretext to justify unnecessary treatment;
2. Referred patients and prescribed goods/services pursuant to kickback arrangements disguised as rent or service fees;
3. Submitted claims falsely representing that treatment was medically necessary and reimbursable; and
4. Filed thousands of no-fault arbitrations and state court collection actions when claims were denied.
State Farm claimed more than 7,000 collection proceedings had been filed and sought over $30 million in damages. It moved for a preliminary injunction to stay all pending no-fault arbitrations/lawsuits and bar defendants from filing new ones while the federal action proceeds.
LEGAL ISSUES
The court applied the Second Circuit standard for a preliminary injunction. To obtain one, the movant must show:
1. Irreparable harm;
2. Either likelihood of success on the merits or serious questions going to the merits plus a balance of hardships tipping decidedly in the movant’s favor; and
3. That the injunction is in the public interest.
Precedent recognized that, in large-scale no-fault fraud schemes, piecemeal arbitrations and collection actions can obscure the alleged fraud and create a risk of inconsistent or preclusive rulings, thereby supporting irreparable harm and injunctive relief.
The court also noted that under Rule 65(c) it had discretion to require no bond, or no bond at all, where there was no demonstrated likelihood of harm from an erroneous injunction.
BOTTOM LINE
The court held that recent Second Circuit authority strongly supports injunctive relief in large-scale no-fault RICO fraud cases where fragmented arbitrations and lawsuits would obscure the alleged scheme and risk inconsistent or preclusive rulings.
The services rendered by Atlantic, as alleged by Plaintiffs, result in a predetermined course of treatment for virtually every patient, regardless of their individual needs, conditions, or diagnoses.
LEGAL STANDARD
“[A] preliminary injunction is ‘an extraordinary remedy never awarded as of right.’” Benisek v. Lamone, 585 U.S. 155, 158 (2018) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008)).
DISCUSSION
For the foregoing reasons, Plaintiffs’ Motion for a preliminary injunction was granted.
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Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
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