Government Employees Insurance Company v. Advanced Comprehensive Laboratory, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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GOVERNMENT EMPLOYEES INSURANCE

COMPANY, GEICO INDEMNITY COMPANY,

GEICO GENERAL INSURANCE COMPANY,

GEICO CASUALTY COMPANY,

Plaintiffs,

MEMORANDUM & ORDER

-against- 20-CV-2391 (KAM)

ADVANCED COMPREHENSIVE LABOROTAORY,

LLC D/B/A TOPLAB, MARK GLADSTEIN,

M.D., VICTORIA FRENKEL, AND JOHN

DOES NOS. “1” THROUGH “10,”

Defendants.

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KIYO A. MATSUMOTO, United States District Judge:

Plaintiffs Government Employees Insurance Company,

GEICO Indemnity Company, and GEICO Casualty Company (together,

“plaintiffs” or “GEICO”), commenced this litigation against

Advanced Comprehensive Laboratory, LLC d/b/a TopLab (“Advanced

Labs”), Mark Gladstein, M.D., and Victoria Frenkel

(collectively, “defendants”) on May 29, 2020. (ECF No. 1,

Complaint (“Compl.”).) On September 22, 2020, GEICO moved for

injunctive relief, seeking: (1) a stay of all collection

arbitrations arising under New York’s No-Fault insurance laws,

and pending before the American Arbitration Association (“AAA”),

between defendant Advanced Labs and GEICO, until resolution of

the instant federal action; and (2) an injunction prohibiting

Advanced Labs, along with its record owners, Gladstein and

Frenkel, from commencing any new No-Fault collection

arbitrations or civil collection lawsuits against GEICO on

behalf of Advanced Labs, until this action is resolved. (ECF

No. 18-2, Memorandum of Law in Support of Plaintiffs’ Motion

(“Pl. Mem.”), 1.) For the reasons set forth below, plaintiffs’

motion for injunctive relief is granted.

BACKGROUND

I. New York’s No-Fault Insurance Laws

New York enacted the Comprehensive Automobile

Insurance Reparations Act, New York Insurance Law (“N.Y. Ins.

Law”) §§ 5101–5109, for the purpose of “ensur[ing] prompt

compensation for losses incurred by accident victims without

regard to fault or negligence, to reduce the burden on the

courts[,] and to provide substantial premium savings to New York

motorists.” Med. Soc'y of State of N.Y. v. Serio, 800 N.E.2d

728, 731 (N.Y. 2003) (citing Governor’s Mem. approving L. 1973,

ch. 13, 1973 McKinney’s Session Laws of N.Y., at 2335). No-

Fault insurers, like GEICO, may reimburse patients up to $50,000

without proof of the other driver’s fault; reimbursements may

include necessary expenses incurred for medical or other

professional health services. See N.Y. Ins. Law §§ 5102(a)(1),

(b). Insurers are required to verify a claim, and then pay or

deny the claim within 30 days. See N.Y. Ins. Law § 5106(a);

N.Y. Comp. Codes R. & Regs. (“NYCRR”) tit. 11 §§ 65–3.8(a), (c).

Under New York law, an insured may assign his or her benefits

“directly to providers of health care services.” 11 NYCRR § 65-

3.11(a). The regulations specify the criteria needed for a

health care provider to receive direct payment from the insurer.

See 11 NYCRR § 65-3.11(b).

Section 5106 of the New York Insurance Law creates a

“[f]air claims settlement” procedure for all No-Fault claims.

No-Fault benefits are deemed overdue if they are not paid or

denied within 30 calendar days after proof of claim is

submitted. See N.Y. Ins. L. § 5106(a); 11 NYCRR § 65-3.8(c).

If an insurer fails to comply with this timeframe, it will be

precluded from asserting many (but not all) defenses to

coverage, including most fraud-based defenses. See Fair Price

Med. Supply Corp. v. Travelers Indem. Co., 890 N.E.2d 233, 236

(N.Y. 2008); Cent. Gen. Hosp. v. Chubb Grp. of Ins. Companies,

681 N.E.2d 413, 415 (N.Y. 1997). A claimant may bring an action

in state court to recover overdue No-Fault benefits, and in any

such action the claimant need only show that the prescribed

statutory billing forms were mailed and received and that the

benefits are overdue. See Viviane Etienne Med. Care, P.C. v.

Country-Wide Ins. Co., 35 N.E.3d 451, 457 (N.Y. 2015). In

addition, insurers are required to include a clause in their

policies allowing the claimant to seek arbitration of their

claims for No-Fault benefits. See N.Y. Ins. L. § 5106(b); 11

NYCRR § 65-1.1(a), (d).

New York’s No-Fault insurance law establishes the

procedures for arbitration of disputed claims. See 11 NYCRR §

65–4.5. By statute, the New York Department of Financial

Services Superintendent has designated AAA as the body

responsible for administration of the No-Fault arbitration

process. Id. § 65-4.2(a)(2). Insurers generally bear the costs

associated with the arbitration process in direct proportion to

the frequency with which they are named as respondents. Id. §

65-4.2(c)(1). The Second Circuit has commented that the

“arbitration process for No-Fault coverage is an expedited,

simplified affair meant to work as quickly and efficiently as

possible. Discovery is limited or non-existent. Complex fraud

and racketeering claims, maturing years after the initial

claimants were fully reimbursed, cannot be shoehorned into this

system.” Allstate Ins. Co. v. Mun, 751 F.3d 94, 99 (2d Cir.

2014) (citing 11 NYCRR § 65-4.5)).

An insurer who pays No-Fault benefits and subsequently

discovers fraud may bring an action for damages. See State Farm

Mut. Auto. Ins. Co. v. James M. Liguori, M.D., P.C., 589 F.

Supp. 2d 221, 229-235 (E.D.N.Y. 2008); State Farm Mut. Auto.

Ins. Co. v. CPT Med. Servs., P.C., 2008 WL 4146190, at *6-7

(E.D.N.Y. Sept. 5, 2008). The insurer may also bring an action

for a declaratory judgment that it is not liable for any unpaid

claims where the provider has committed fraud or breached

applicable No-Fault regulations. See 28 U.S.C. § 2201; Gov’t

Emps. Ins. Co. v. Jacques, 2017 WL 9487191, at *9-*11 (E.D.N.Y.

Feb. 13, 2017), report and recommendation adopted, 2017 WL

1214460 (E.D.N.Y. Mar. 31, 2017); State Farm Mut. Auto. Ins. Co.

v. Cohan, 2009 WL 10449036, at *4 (E.D.N.Y. Dec. 30, 2009),

report and recommendation adopted, 2010 WL 890975 (E.D.N.Y. Mar.

8, 2010). If an insurer is precluded from asserting a defense

to coverage (such as provider fraud) due to its noncompliance

with the 30-day rule, however, it will also be precluded from

obtaining a declaratory judgment on those same grounds. See

Allstate Ins. Co. v. Williams, 2015 WL 5560543, at *7 (E.D.N.Y.

Aug. 28, 2015), report and recommendation adopted, 2015 WL

5560546 (E.D.N.Y. 2015); Gov’t Emps. Ins. Co. v. AMD

Chiropractic, P.C., 2013 WL 5131057, at *8 (E.D.N.Y. Sept. 12,

2013).

II. GEICO’s Allegations

GEICO alleges that, since 2018, the defendants have

submitted more $10 million in fraudulent laboratory toxicology

billings to GEICO for medically unnecessary screening tests as

part of a scheme designed to exploit New York’s No-Fault

insurance laws. (Compl. ¶¶ 2, 51.) Defendants allegedly

perpetrated the fraudulent scheme using unlawful referral and

kickback arrangements to fraudulently bill GEICO for urine

screening tests purportedly provided to individual-insureds, who

claimed eligibility for coverage under GEICO’s no-fault

insurance policies. (Id. ¶ 2.) Through this unlawful scheme,

Gladstein, Frenkel, and John Doe defendants “1”-“10” accessed a

network of New York-based patients to fraudulently bill GEICO

without providing “genuine patient care.” (Id. ¶ 3.) In other

words, GEICO alleges that the urine drugs screens were medically

unnecessary, illusory, and intended only to exploit the patients

for financial gain. (Id. ¶¶ 1,4,6, 51.)

GEICO seeks to recover more than $945,000 that

defendants obtained from GEICO and further seeks a declaration

from the court, pursuant to 28 U.S.C. §§ 2201, 2202, that GEICO

is not legally obligated to reimburse Advanced Labs for over

$8,800,000 in pending No-Fault claims that defendants either

submitted or caused to be submitted on or behalf of Advanced

Labs. (Compl. ¶ 4.) GEICO also seeks recovery of approximately

$945,000 in fraudulent bills submitted through Advanced Labs,

and asserts causes of action under the Racketeering Influenced

and Corrupt Organizations Act (“RICO”), conspiracy to violate

RICO, common law fraud, aiding and abetting fraud, and unjust

enrichment. (Id. ¶¶ 128-62.)

III. Collection Proceedings

According to a declaration submitted by GEICO Claims

Manager Robert Weir, Advanced Labs is currently prosecuting more

than 2,430 collection arbitrations against GEICO before AAA.

(ECF No. 18-5, Declaration of Robert Weir (“Weir Decl.”), ¶ 7.)

Advanced Labs served approximately 125 arbitrations on GEICO

after the commencement of this federal suit. (Id. ¶ 8.)

On over 3,000 separate occasions, Advanced Labs submitted

charges to GEICO for quantitative urine drug screens totaling

over $8,000,000. (Id. ¶ 6.) In total, Advanced Labs submitted

more than $10,000,000 in billing charges to GEICO since 2018 for

reimbursement. (Id. ¶ 8.) GEICO seeks to stay these pending

arbitrations and enjoin defendants from filing additional

arbitrations and collection actions. (Id. ¶ 9.)

In support of plaintiffs’ requested relief, Weir

asserts the procedures and practices in No-Fault arbitration

proceedings impose critical handicaps on insurers like GEICO.

Insurers generally are not permitted to seek or obtain pre-

hearing discovery beyond the discrete bill and claim at issue,

which hinders an insurer’s ability to demonstrate a pattern of

medically unnecessary treatment or fraudulent billing practices

across multiple patients and claims. (Id. ¶ 18.) During the

pendency of this case, the defendants have continued to pursue

collection of individual bills through arbitration and state

court proceedings. (Pl. Mem. 2; Weir Decl. ¶ 7.) GEICO argues

that the statutorily expedited No-Fault arbitration procedures

and civil court proceedings cannot accommodate the time or

resources needed for GEICO to demonstrate the complex

“fraudulent scheme involving fraudulent behavior that – by

Defendants’ design – is not readily apparent from the face of

any individual bill or treatment record.” (Weir Decl. ¶ 21.)

DISCUSSION

GEICO moves to stay and enjoin defendants’ No-Fault

collection proceedings. Courts in this circuit have looked to

the preliminary injunction standard under similar circumstances.

See Gov't Emps. Ins. Co. v. Cean, No. 19-cv-2363 (PKC)(SMG),

2019 WL 6253804, at *4 (E.D.N.Y. Nov. 22, 2019) (citing Allstate

Ins. Co. v. Elzanaty, 929 F. Supp. 2d 199, 217 (E.D.N.Y. 2013));

see also Moore v. Consol. Edison Co. of N.Y., 409 F.3d 506, 510

(2d Cir. 2005). To justify a preliminary injunction, “a movant

must demonstrate (1) irreparable harm absent injunctive relief;

and (2) ‘either a likelihood of success on the merits, or a

serious question going to the merits to make them a fair ground

for trial, with a balance of hardships tipping decidedly in the

plaintiff's favor.’” Metro. Taxicab Bd. of Trade v. City of New

York, 615 F.3d 152, 156 (2d Cir. 2010) (quoting Almontaser v.

New York City Dept. of Educ., 519 F.3d 505, 508 (2d Cir.

2008)). “The showing of irreparable harm is [p]erhaps the

single most important prerequisite for the issuance of a

preliminary injunction, and the moving party must show that

injury is likely before the other requirements for an injunction

will be considered.” Elzanaty, 929 F. Supp. 2d at 221 (quoting

Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002)).

As a threshold matter, the court notes that GEICO’s

complaint and the instant federal action are substantially

similar to several ongoing actions involving analogous

allegations of widespread fraudulent medical billing under New

York’s No-Fault insurance laws. See Gov't Employees Ins. Co. v.

Moshe, No. 20-cv-1098(FB)(RER), 2020 WL 3503176, at *4 (E.D.N.Y.

June 29, 2020); Gov't Employees Ins. Co. v. Strut, No. 19-cv-728

(JLS), 2020 WL 1820500, at *3 (W.D.N.Y. Apr. 10, 2020); Gov’t

Employees Ins. Co. v. Wellmart RX, Inc., 435 F. Supp. 3d 443,

456 (E.D.N.Y. 2020), appeal dismissed (May 11, 2020); Cean, 2019

WL 6253804, at *6; State Farm Mut. Auto. Ins. Co. v. Parisien,

352 F. Supp. 3d 215, 235 (E.D.N.Y. 2018); Gov't Employees Ins.

Co. v. Mayzenberg, No. 17-cv-2802, 2018 WL 6031156, at *11

(E.D.N.Y. Nov. 16, 2018); Gov't Employees Ins. Co. v.

Strutsovskiy, No. 12-cv-330, 2017 WL 4837584, at *8 (W.D.N.Y.

Oct. 26, 2017); Elzanaty, 929 F. Supp. 2d at 223. Indeed, this

court previously granted injunctive relief in favor of GEICO in

a substantially similar action. See Wellmart, 435 F. Supp. 3d

at 456. Although defendants argue that each previous case is

factually distinguishable and thereby not persuasive authority,

this court disagrees.

Having considered the numerous district court

decisions in this Circuit addressing similar circumstances and

reviewed the factual allegations in the instant complaint, this

court concludes that GEICO has satisfied the elements for

injunctive relief. Accordingly, for the reasons set forth

below, GEICO’s motion to stay all pending No-Fault collection

arbitrations before the AAA involving Advanced Labs, and to

enjoin any future No-Fault collection arbitrations before the

AAA by Advanced Labs, pending resolution of the instant federal

action, is granted.

a. Irreparable Harm

“To establish irreparable harm, a party seeking

preliminary injunctive relief must show that ‘there is a

continuing harm which cannot be adequately redressed by final

relief on the merits’ and for which ‘money damages cannot

provide adequate compensation.’” Kamerling, 295 F.3d at 214

(quoting New York Pathological & X-Ray Labs., Inc. v. INS, 523

F.2d 79, 81 (2d Cir. 1975)). “Irreparable harm occurs where ‘an

insurer is required to waste time defending numerous no-fault

actions when those same proceedings could be resolved globally

in a single, pending declaratory judgment action.’” Moshe, 2020

WL 3503176, at *1 (quoting Parisien, 352 F. Supp. 3d at 233).

Where, as here and in Wellmart, an insurer alleges a

risk of inconsistent judgments in No-Fault arbitrations and

RICO- and fraud-based litigation in federal court, district

courts in this Circuit have found irreparable harm. See, e.g.,

Mayzenberg, 2018 WL 6031156, at *5 (“The concern is that

allowing over 180 arbitrations to be heard by a mix of

arbitrators, each of whom will likely come to their own

independent and contradictory conclusions that may be rendered

ineffective by this Court, will result in harm to GEICO from

which it cannot recover.”); Moshe, 2020 WL 3503176, at *2

(finding irreparable harm where 4,786 pending arbitrations

against GEICO presented a risk of inconsistent judgments);

Wellmart, 435 F. Supp. at 449 (finding irreparable harm where

the “crux of GEICO's argument is, absent a stay, the collection

proceedings will not merely drain GEICO of time and resources,

but will also invite inconsistent judicial outcomes”); Cean,

2019 WL 6253804, at *5 (finding irreparable harm where an

insurer spends resources “defending numerous no-fault actions”

when those actions could be resolved in a “single, pending

declaratory judgment action”); Strutsovskiy, 2017 WL 4837584, at

*6-7 (W.D.N.Y. Oct. 26, 2017) (finding irreparable harm in

similar circumstances); see also Liberty Mut. Ins. v. Excel

Imaging, 879 F. Supp. 2d 243, 264 (E.D.N.Y. 2012) (“Permitting

these individual claims to proceed to arbitration while

[insurer’s] claim for a declaratory judgment remains pending in

this court puts the plaintiffs at significant risk of multiple

judgments that may be inconsistent with the ultimate decision in

this case”). The conclusions and findings by numerous district

courts in this Circuit support this court’s conclusion that

GEICO will suffer irreparable harm without injunctive relief.

Here, GEICO alleges that defendants have perpetrated a

fraudulent medical billing scheme where defendants submitted

medically unnecessary claims for reimbursement to GEICO in

furtherance of defendants’ financial gain under New York’s No-

Fault insurance regime. (See Compl. ¶ 1.) In support of its

allegations, GEICO provides specific factual examples of

defendants’ allegedly fraudulent scheme and exploitation of the

New York No-Fault insurance system. (See Compl. at ¶¶ 81

(examples of medically unnecessary tests), 86 (examples of

Advance Labs receiving referrals and processing drug screens

after insured received anesthesia services), 89 (examples of

Advance Labs’ billing for qualitative and quantitative urine

drug screens), 96 (examples showing pattern in Advance Labs’

billing practices charging sixty-eight separate quantitative

urine drug screens).) According to GEICO, Advanced Labs is

currently prosecuting more than 2,430 collection arbitrations

against GEICO before the AAA and has served approximately 125

arbitrations on GEICO after the commencement of this federal

suit. (Weir Decl. ¶¶ 7-8.) Thus, without injunctive relief,

GEICO alleges that it will suffer irreparable harm in the form

of wasted resources and inconsistent judicial judgments. This

court agrees. Indeed, allowing the 2,430 collection

arbitrations to proceed before different arbitrators would

likely subject GEICO to “independent and contradictory

conclusions” that ultimately may “be rendered ineffective by

this Court,” pending the disposition of GEICO’s declaratory

judgment claim. Mayzenberg, 2018 WL 6031156, at *5. Moreover,

under these circumstances, the court agrees that GEICO will

suffer irreparable injury that “is neither remote nor

speculative” without injunctive relief because Advanced Labs

continues to commence arbitrations before the AAA. Grand River

Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir.

2007). Thus, for the reasons set forth above and as consistent

with courts across this Circuit, this court concludes that GEICO

has demonstrated irreparable harm.

In response to the decisions by district courts in

this Circuit, defendants argue that those cases are

“distinguishable in that the stays and injunctions were based on

well-pled complaints and solid factual support.” (ECF No. 19-4,

Defendants’ Memorandum of Law in Opposition (“Def. Mem.”), at

13.) Specifically, defendants argue that the previous cases

involving GEICO and allegations of fraud under New York’s No-

Fault laws, contained detailed instances of allegedly fraudulent

conduct and other indicia of wrongdoing. (Id. at 14.) In other

words, defendants argue that the evidence proffered by GEICO is

insufficient to satisfy the elements for injunctive relief. As

explained above, however, GEICO alleged specific factual

examples of purported medically unnecessary billing in the form

of drug urine tests ordered but not generated until after

interventional pain management and anesthesia services had

already been rendered.1 (See Compl. ¶¶ 81, 86, 89, 96.) GEICO’s

detailed allegations regarding the specific timing and frequency

of defendants’ urine screening tests, read collectively with

GEICO’s supporting exhibits and declarations, are sufficiently

detailed to satisfy the elements for injunctive relief.

With respect to irreparable harm, defendants rely on

Allstate Ins. Co. v. Harvey Family Chiropractic, a summary order

1 The court agrees that the instant action may be distinguishable from

Wellmart with respect to the allegation that Wellmart RX was undertaking

steps to render itself judgment proof against any potential monetary judgment

awarded to GEICO. See Wellmart, 435 F. Supp. 3d at 452. Further, the court

also agrees that the instant action, unlike other previous suits, may not

contain identical evidence such as examples of prior litigation against

defendants for healthcare fraud. See Strutsovskiy, 2017 WL 4837584, at *6

(granting injunctive relief after reviewing, among other facts, defendant’s

felony conviction in connection with an insurance fraud scheme).

Nonetheless, in light of the evidence provided by GEICO and the detailed

allegations in the complaint, the court concludes that GEICO satisfied the

elements for injunctive relief for the reasons explained herein. See Moshe,

2020 WL 3503176, at *2 (rejecting insufficient proof of fraud argument and

granting injunctive relief, reasoning that “a complaint alone can be

sufficient to grant an injunction”); Strut, 2020 WL 1820500, at *2 (rejecting

insufficient proof argument where complaint provided “examples to support

each of [GEICO’s] fraud theories, citing specific patients, accident dates,

and treatment dates.”); Excel Imaging, 879 F. Supp. 2d at 254-64 (staying

arbitration based on facts “primarily from the complaint”).

issued by the Second Circuit which affirmed the denial of

Allstate’s request to stay No-Fault arbitrations and civil court

collection suits. 677 F. App’x 716 (2d Cir. 2017). For the

reasons set forth in this court’s decision in Wellmart, however,

Harvey does not support the proposition that injunctive relief

cannot be granted in the light of “the risk of inconsistent

judgments, or of the risk that money damages would not be

available if plaintiff ultimately obtained a declaratory

judgment.” 435 F. Supp. 3d at 451; see also Moshe, 2020 WL

3503176, at *2 (“Harvey does not preclude granting an injunction

to avoid inconsistent judgments”). Because defendants failed to

meaningfully confront and distinguish this court’s reasoning in

Wellmart, for the reasons explained in that case, this court

similarly rejects defendants’ argument that GEICO will not

suffer irreparable harm absent injunctive relief.

If Advanced Labs is permitted to prosecute the ongoing

collection proceedings, GEICO faces imminent and non-speculative

risks of inconsistent judgments and unnecessary expenditure of

time and resources on arbitrations that may be resolved by the

instant, pending declaratory judgment action. Accordingly, the

court concludes that GEICO has demonstrated irreparable harm

absent injunctive relief.

b. Serious Questions Going to the Merits

For a preliminary injunction to issue, there must be

either “a likelihood of success on the merits,” or “sufficiently

serious questions going to the merits to make them a fair ground

for litigation and a balance of hardships tipping decidedly” in

the movant's favor. Parisien, 352 F. Supp. 3d at 234 (E.D.N.Y.

2018) (citing Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc.,

596 F.2d 70, 72 (2d Cir. 1979)). “Likelihood of success is not

the focus at the early stages of a case such as this, because

any likelihood of success inquiry would be premature. Instead,

the Court looks to whether there is a serious question going to

the merits to make them a fair ground for trial.” Id. (quoting

Elzanaty, 929 F.Supp.2d at 217); see also Citigroup Glob. Mkts.,

Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30,

35 (2d Cir. 2010) (“The ‘serious questions’ standard permits a

district court to grant a preliminary injunction in situations

where it cannot determine with certainty that the moving party

is more likely than not to prevail on the merits of the

underlying claims, but where the costs outweigh the benefits of

not granting the injunction. Because the moving party must not

only show that there are ‘serious questions’ going to the

merits, but must additionally establish that ‘the balance of

hardships tips decidedly’ in its favor, its overall burden is no

lighter than the one it bears under the ‘likelihood of success’

standard.”).

Here, as in Wellmart, GEICO meets the threshold of

showing a serious question going to the merits. 435 F. Supp. 3d

at 453. Plaintiffs seek a declaratory judgment that Advanced

Labs has no right to receive payment for over $8.8 million in

pending claims submitted to GEICO because, inter alia, the

billed-for services were “medically unnecessary and were

provided –- to the extent that they were provided at all –-

pursuant to pre-determined fraudulent protocols designed to

financially enrich the Defendants, rather than to treat or

otherwise benefit the Insureds.” (Compl. ¶ 124.) GEICO’s

complaint “detail[s] a complicated scheme of alleged fraudulent

activity,” Elzanaty, 929 F. Supp. 2d at 222, supported by

specific examples and exhibits. For example, the complaint

provides a detailed narrative of different instances, in which

the defendants performed urine drug screens that appear to be

unnecessary because they were generated after: “either (i) the

interventional pain management and anesthesia services had

already been performed; or (ii) the referring physician had

already issued a prescription for pain management medication.”

(Id. ¶¶ 80-82.) Moreover, these drug screens were provided and

billed through Advanced Labs, but allegedly “not incorporated

into the Insureds’ treatment plan, played no genuine role in the

treatment or care of the Insureds, and no one responded to the

irregularities on the urine drug tests even when illicit drugs

were reported.” (Id. ¶ 83.) Further, GEICO also alleges that

Advanced Labs billed for both “qualitative and quantitative

urine drug screens” to maximize profits from medically

unnecessary testing and provides ten patient narratives

describing the allegedly duplicative testing.2 (Id. ¶¶ 88-89.)

The complaint also appends documentation to support GEICO’s

claims of fraudulent and medically unnecessary treatment,

including “a representative sample of the fraudulent claims,”

(Id. ¶ 8), which shows 15,205 allegedly fraudulent claims

identified by GEICO as of the date the instant suit commenced.

Furthermore, in support of its motion for injunctive

relief, GEICO provided declarations and underlying treatment

records in support of its contentions that Advanced Labs

submitted claims to GEICO for medically unnecessary drug

screens. Christopher G. Gharibo, M.D., a New York-licensed

doctor specializing in the field of pain medicine and certified

by the American Board of Anesthesiology, submitted a declaration

on GEICO’s behalf. (ECF No. 18-4, Christopher G. Gharibo, M.D.

2 According to the complaint, qualitative testing “determines whether the

drug is present in a test specimen” and is performed in the first instance.

(Compl. ¶¶ 65-68.) In contrast, quantitative testing “may be used to then

determine the amount of the drug in the specimen” and “may also be used to

detect a certain subset of drugs” not detectable by an initial qualitative

test. (Id. ¶¶ 70-71.) Quantitative drug testing is a “more complex and

costly testing process” and is “ordered markedly less frequently and is not

medically necessary in the first instance.” (Id. ¶¶ 72-73.)

(“Gharibo Decl.”), ¶¶ 1-2.) Based on his review of patient

records from 109 individuals insured by GEICO, each of whom

purported to provide urine drug screening tests to Advanced

Labs, Dr. Gharibo concluded that the urine drug screening tests

billed by Advanced Labs were:

(i) ordered and performed in large volumes in

a protocol fashion designed to exploit the

patients for financial gain without regard to

genuine patient care; (ii) the results of the

urine drug screens were routinely not useful,

reported or reviewed for their purported

intended purpose and not incorporated into the

patients’ treatment plans; and (iii) were not

medically necessary and were inconsistent with

the standard of care.

(Gharibo Decl. ¶¶ 4, 11.) Dr. Gharibo further concluded that

“Advanced Labs frequently billed for both qualitative and

quantitative urine drug screens ostensibly to confirm the

results of contemporaneous in-office qualitative urine drug

screens with negative results that were performed,” which was

both “not medically necessary” and “inconsistent with the

standard of care.” (Id. ¶ 15.)

In addition to Dr. Gharibo’s declaration, GEICO also

provided the underlying treatment records supporting the patient

narratives described in the complaint. (See ECF No. 18-6, Bills

and Laboratory Reports.) GEICO also provided a letter of

“medical necessity” submitted by Advanced Labs in connection

with a drug test in preparation for a surgery. (See ECF No. 18-

11, Letter from Advanced Comprehensive Laboratory.) In the

letter, Advanced Labs represents that “Routine Drug Screening

Tests are ordered before outpatient procedures to identify

potential problems that might complicate surgery.” (Id. at 4.)

Nonetheless, as detailed by GEICO’s submissions, the results

from this particular drug screening were generated and received

two days after the purported surgical procedure and

corresponding anesthesia services had been administered, thereby

supporting GEICO’s allegations that these drug urine screenings

were medically unnecessary. (See ECF No. 18-10, Laboratory

Report at 6.)

In response to Dr. Gharibo’s detailed declaration

supporting GEICO’s allegations, defendants attempt to impeach

Dr. Gharibo’s declaration as contradicted by a 2010 medical

article authored by, among others, Dr. Gharibo. (See Def. Mem.

at 9-11 (citing ECF No. 19-2, Exhibit A, “The Role of Urine Drug

Test for Patient on Opioid Therapy,” 2010 World Institute Pain,

Volume 10 Issue 6 (the “2010 article”)).) Specifically,

defendants point to several statements in the 2010 article that

purportedly support defendants’ use of qualitative and

quantitative urine testing, and purportedly contradict Dr.

Gharibo’s declaration: (1) “physicians can not reliably assess

potential drug abuse/misuse among a broad spectrum of pain

patients without some sort of test,” and (2) “two main types of

urine testing” may be used in combination on patients during

opioid therapy. (Def. Mem. at 10-11.) As explained in Dr.

Gharibo’s supplemental declaration, however, the 2010 article

“is explicitly limited to the legitimate use of urine drug

testing in the context of patients receiving opioid therapy for

chronic pain.” (ECF No. 18-18, Supplemental Declaration of

Christopher G. Gharibo, M.D. (“Gharibo Supp. Decl.”) ¶ 1.)

Accordingly, because the patient records Dr. Gharibo reviewed in

connection with his declaration “did not include any patients

who were receiving opioid therapy for chronic pain,” the alleged

contradictions highlighted by defendants are irrelevant and

misplaced. (Id.) Defendants’ second proffered article titled,

“Rational Urine Drug Monitoring in Patients Receiving Opioids

for Chronic Pain: Consensus Recommendations,” is similarly

irrelevant due to its emphasis on opioid treatment.3 (See ECF

No. 19-3.)

Viewing the record collectively, the complaint’s

detailed allegations and exhibits, along with Dr. Gharibo’s

declarations and the underlying treatment records, may satisfy

3 The court notes that defendants, in opposition to GEICO’s motion for

injunctive relief, failed to meaningfully reference the patient records

submitted by GEICO, failed to offer any expert affidavit, and failed to

submit an affidavit from a listed member of Advanced Labs, such as named

defendants Mark Gladstein, M.D. or Victoria Frenkel. Defendants failure to

submit such evidence bears no dispositive weight on their arguments against

GEICO’s motion, but does support the court’s conclusion that, based on

GEICO’s currently unrefuted evidence and detailed allegations, GEICO has, at

a minimum, demonstrated sufficiently serious questions going to the merits.

the heightened “likelihood of success” standard, and, at a

minimum, raise a serious question going to the merits as to

whether defendants were providing medically necessary drug

screenings.4 See Parisien, 352 F. Supp. 3d at 234 (finding

serious question going to the merits where the complaint and

exhibits alleged defendants provided unnecessary medical

services); Elzanaty, 929 F. Supp. 2d at 222 (finding serious

question going to the merits where complaint alleged

“complicated scheme” of fraud); see also State Farm Auto. Ins.

Co. v. Physicians Injury Care Ctr., Inc., 2010 WL 11475709, at

*6-*7, *14 (M.D. Fla. May 24, 2010) (holding that plaintiffs

proved fraud based on evidence that 957 patients were subjected

to an identical treatment protocol with little deviation).

Defendants contend that GEICO has not demonstrated

serious questions going to the merits because GEICO’s

allegations lack evidentiary support and Advanced Labs services

were provided “pursuant to valid orders from the Insureds’

physicians.” (Def. Mem. at 19.) As explained above, however,

GEICO provided detailed allegations in its complaint and further

4 Because this Court finds irreparable harm to plaintiff, sufficiently

serious questions going to the merits, and a balance of hardships tipping

decidedly in favor of granting the stay, the court need not and does not

address the likelihood of success. See Strutsovskiy, 2017 WL 4837584, at *8

(declining to address the likelihood of success where the court found

“sufficiently serious questions going to the merits and a balance of

hardships tipping decidedly in favor of granting the stay”); Parisien, 352 F.

Supp. 3d at 234 (declining to address likelihood of success where the court

found “that there are ‘serious questions going to the merits’ in lieu of a

‘likelihood of success on the merits’”).

supported those allegations with an expert declaration and the

underlying treatment records. Thus, this court concludes that

GEICO has presented evidence raising sufficiently serious

questions going to the merits of this action. Further, New York

law provides that defendants may be held liable for medically

unnecessary services under New York’s No-Fault insurance laws.

See Long Is. Radiology v. Allstate Ins. Co., 36 A.D.3d 763, 764

(2d Dept. 2007) (holding in case involving down-stream MRI

providers that “[s]ince the defense of lack of medical necessity

may indisputably be raised by the defendants [insurers] against

the injured party, it is available as against radiologists who

accept assignments of no-fault benefits”). Accordingly, it is

irrelevant whether Advanced Labs performed the drug screening

tests pursuant to orders by physicians.5 For these reasons,

defendants’ contention that GEICO failed to raise sufficiently

serious questions going to the merits of the litigation is

unavailing.

c. Balance of Hardships

Lastly, the court must balance the hardships of GEICO

and defendants. Given the court’s finding that there are

“serious questions going to the merits,” for a preliminary

5 Although it may be true, as defendants state, that drug urine tests may

be used in “continuing treatment” of each patient, (Def. Mem. at 20), the

dispute over whether these urine tests were medically necessary for a

particular surgery or for continuing treatment presents a question of fact,

i.e., a serious question going to the merits.

injunction to issue, the court must further determine if there

is a “balance of hardships tipping decidedly” in GEICO’s favor.

Parisien, 352 F. Supp. 3d at 234. Consistent with this court’s

decision in Wellmart, if the court grants plaintiffs’ motion to

enjoin the underlying collection proceedings and GEICO fails to

prove its claims, “then, at worst, [defendants’] recovery of the

no-fault benefits to which they are entitled will be delayed;

all [defendants] can hope for in pursuing their parallel state

lawsuits and arbitrations is to accelerate their receipt of

benefits to which they are already entitled.” Parisien, 352 F.

Supp. 3d at 234–35. If defendants’ pending arbitration and

civil collection proceedings are not stayed, then, as discussed

above, GEICO will suffer irreparable harm. Accordingly, the

balance of hardships tips decidedly in favor of GEICO.

Furthermore, in balancing the hardships experienced by

defendants, this court also concludes that defendants will

suffer no prejudice if their right to collect the pending

billing is adjudicated in a single declaratory judgment action.

“Indeed, granting the stay and injunction will actually save all

parties time and resources. Rather than adjudicating hundreds of

individual claims in a piecemeal fashion, all claims can be

efficiently and effectively dealt with in a single declaratory

judgment action.” Cean, 2019 WL 6253804, at *5 (citing

Elzanaty, 929 F. Supp. 2d at 222 (finding that “all parties will

benefit from having the issue of fraudulent incorporation

determined in one action”)). Furthermore, like defendants in

other similar actions, here, defendants “will benefit from the

stay if [they] ultimately prevail[ ] in this matter because

[they] will be entitled to the collection of interest at a rate

of two percent every month that the No-Fault payments are

overdue.” Strutsovskiy, 2017 WL 4837584, at *8 (quoting

Elzanaty, 929 F. Supp. 2d at 222); see 11 NYCRR § 65-

3.9(1)(a) (“All overdue mandatory and additional personal injury

protection benefits due an applicant or assignee shall bear

interest at a rate of two percent per month, calculated on a

pro-rata basis using a 30-day month.”). For the reasons set

forth above, because GEICO has made the requisite showing for a

stay and preliminary injunction to issue, and because defendants

will not be prejudiced, GEICO’s motion is granted.

d. Undertaking

Federal Rules of Civil Procedure Rule 65(c) provides

that “[t]he court may issue a preliminary injunction or a

temporary restraining order only if the movant gives security in

an amount that the court considers proper to pay the costs and

damages sustained by any party found to have been wrongfully

enjoined or restrained.” Fed. R. Civ. P. 65(c). Though the

Rule appears mandatory, an exception to the bond requirement has

been crafted for cases involving the enforcement of “public

interests” arising out of “comprehensive federal health and

welfare statutes.” Pharm. Soc. of State of N.Y., Inc. v. N.Y.

State Dept. of Soc. Servs., 50 F.3d 1168, 1174 (2d Cir. 1995).

In determining if claims involve the enforcement of public

interest, “the nature of the rights being enforced, rather than

the nature of the entity enforcing them, is the central

consideration in determining whether the bond requirement should

be waived under this exception.” Id. at 1175. Further, a

district court has a wide discretion to dispense with the bond

requirement “where there has been no proof of likelihood of

harm.” Donohue v. Mangano, 886 F. Supp. 2d 126, 163 (E.D.N.Y.

2012).

Although there is no federal health and welfare

statute involved in this action, New York’s No-Fault insurance

statutes are laws “designed to protect accident victims

regardless of fault by enabling them to obtain necessary medical

attention without concern of the ability to pay.” Mayzenberg,

2018 WL 6031156, at *10. In Mayzenberg, the court waived the

security requirement of Rule 65(c) in light of the systemic

nature of the fraud alleged in the complaint and the lack of

prejudice to defendants resulting from a preliminary injunction.

Id. The same considerations justify waiving the bond

requirement here.

CONCLUSION

For the reasons set forth above, GEICO’s motion,

pending resolution of the instant federal action, to stay all

pending No-Fault collection arbitrations between Advanced Labs

and GEICO pending before the AAA, and to enjoin Defendants from

commencing any new No-Fault insurance collection arbitrations or

collection lawsuits against GEICO on behalf of Advanced Labs

is GRANTED.

The parties shall proceed to discovery and are hereby

referred to Magistrate Judge Vera M. Scanlon for all pre-trial

matters. Because the court is temporarily staying defendants’

rights to commence further No-Fault insurance arbitrations and

collection lawsuits against GEICO on behalf of Advanced Labs,

all procedures in this matter should proceed on an expedited

basis.

SO ORDERED.

/s/

KIYO A. MATSUMOTO

United States District Judge

Eastern District of New York

Dated: Brooklyn, New York

December 1, 2020