American Transit Insurance Company v. Bilyk

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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AMERICAN TRANSIT INSURANCE :

COMPANY, : MEMORANDUM DECISION

: AND ORDER

ATIC, :

: 19-cv-5171 (BMC)

- against - :

:

YULIA BILYK, et al., :

:

:

Defendants. :

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COGAN, District Judge.

This RICO action is before me on the motion of defendants Russell Ionin and his wholly-

owned company, Active Care Medical Supply Corporation, Inc., to vacate the default judgment

against them pursuant to Federal Rules of Civil Procedure 55(c) and 60(b). I find that the Ionin

defendants’ default was willful; that they have failed to demonstrate a meritorious defense; and

that that have failed to show that ATIC would not be prejudiced by granting the motion to

vacate. The motion is therefore denied.

BACKGROUND

I. Procedural Background

Plaintiff American Transit Insurance Company (“ATIC”) originally commenced this

action against 29 different individuals and corporations and 40 John Doe defendants for

fraudulent submission of insurance claims concerning the sale of medical devices. ATIC settled

with most of the defendants and sought a default judgment against the five individual defendants

and five of their wholly owned companies who had not appeared.1 The Clerk entered the default

against these defendants pursuant to Rule 55(a) of the Federal Rules of Civil Procedure between

the end of December 2019 and the beginning of January 2020, and ATIC moved for entry of

default judgment against them on February 10, 2020. The Ionin defendants were among those

who had failed to appear and thus were the subject of the default judgment motion.

On February 21, 2020, while the motion for a default judgment was pending, Attorney

Martin Wolf filed a notice of appearance on behalf of the Ionin defendants. He took no action in

the case until, by sealed letter filed three weeks later, on March 6, 2020, Attorney Wolf requested

a “telephone conference with the Court to discuss the withdrawal of [ATIC’s motion for a

default judgment] with leave to file an answer or if the same is not successful, to obtain a

briefing schedule for the opposition and reply to the aforesaid motion for default.” By Order that

same day, I directed the unsealing of the letter (as there had been no grounds to file it under seal)

and rejected the request for a telephone conference. However, I also noted that the proper

procedure was for the Ionin defendants to move to vacate their default under Rule 55(c) of the

Federal Rules of Civil Procedure upon a showing of good cause, and that the Ionin defendants

were free to make that motion.

I heard nothing further from Attorney Wolf or the Ionin defendants. Nine months later, I

proceeded to rule on the motion for a default judgment. Initially, I denied it. ATIC had not

explained how the 186-page complaint and 300 pages of exhibits tied all of the defendants

together in a common RICO enterprise. I therefore concluded that ATIC had failed to state a

plausible claim. See Gunawan v. Sake Sushi Rest., 897 F. Supp. 2d 76, 83 (E.D.N.Y. 2012)

(“The fact that a complaint stands unanswered does not . . . suffice to establish liability on its

1 ATIC also sought a default judgment against an additional company but not its owner, who ATIC had been unable

to serve with the motion.

claims: a default does not establish conclusory allegations, nor does it excuse any defects in the

plaintiff’s pleading.”).

However, by Order entered January 21, 2021, I granted ATIC’s motion for

reconsideration. ATIC’s motion explained that the complaint actually alleged fourteen separate

RICO schemes against groups of defendants and non-parties, and the reconsideration motion tied

each of the defaulting defendants into their respective RICO schemes. The defaulting defendants

were members of five of the fourteen separate RICO enterprises. ATIC made this showing, as to

the defaulting defendants, by walking me through each fraudulent transaction described in the

exhibits and matching it to the particular allegations as to each RICO enterprise, which it had not

done in its motion for a default judgment. Recognizing that the pleading problem was one of

improper joinder, not failure to state a claim, and that improper joinder is a waivable defense that

need not be considered on a motion for a default judgment, I granted the motion for

reconsideration, and, upon reconsideration, granted ATIC’s motion for a default judgment.2

As against the Ionin defendants, the complaint alleges the following scheme. Many

prescriptions for medical devices are generic in nature, allowing the provider discretion as to the

particular type of device to provide. ATIC alleged that the Ionin defendants would bill ATIC for

expensive items, using insurance codes reserved for such items, when the items actually

provided were not the same expensive items and were in fact worth much less. Instead of

charging for a regulatorily-allowed profit on the top of the wholesale cost of the item for which

they billed ATIC, the Ionin defendants would receive a super-premium by buying a lower-cost

item at wholesale and then billing for a higher-cost item which they did not provide.

2 The default judgment was conditioned on ATIC’s paying an additional five filing fees for the groups of defendants

involved in the default judgment motion, as they should have been sued separately. ATIC has made those payments.

The complaint provided details of multiple transactions in which the Ionin defendants

engaged in this practice. One of them, for example, was that the Ionin defendants charged for

special customized knee braces that require a custom fitting, but only supplied a cheap one-fits-

all brace. Another example is that the Ionin defendants would bill for “egg crate mattresses” that

cost over $95, when the item provided was a cheap, thin mattress pad.

Having heard nothing more from Attorney Wolf or the Ionin defendants, the Clerk

entered default judgment against them on January 27, 2021. Their liability was by far the largest

against any of the defaulting defendants: $227,871.09 against Ionin, of which Active Care

Medical was jointly and severally liable for $88,937.61.

Several weeks later, on February 11, 2021, a new attorney for the Ionin defendants,

Raymond Zuppa, filed a letter motion requesting leave to file a motion to vacate the default

judgment against those defendants. The request was purportedly made pursuant to my Individual

Practice Rules. It made no mention of Attorney Wolf’s submissions a year earlier. I denied the

motion as unnecessary because: (1) my Individual Practice Rules do not require a premotion

conference for a motion to vacate a default judgment; and (2) I had already informed Attorney

Wolf nearly a year earlier that the Ionin defendants were free to make whatever motion they

deemed appropriate.

The Ionin defendants filed their motion to vacate the default judgment on March 2, 2021.

DISCUSSION

Federal Rule of Civil Procedure 55(c) provides that a “court may set aside an entry of

default for good cause, and it may set aside a final default judgment under Rule 60(b).” Rule

60(b)(1), in turn, provides that a default judgment may be set aside due to “mistake,

inadvertence, surprise, or excusable neglect.” The Second Circuit has held that three factors

govern a district court’s decision to set aside a default judgment under either Rule 55(c) or 60(b):

“(1) whether the default was willful; (2) whether setting aside the default would prejudice the

adversary; and (3) whether a meritorious defense is presented.” Enron Oil Corp. v. Diakuhara,

10 F.3d 90, 96 (2d Cir. 1993); see also State St. Bank and Tr. Co. v. Inversiones Errazuriz

Limitada, 374 F.3d 158, 166-67 (2d Cir. 2004) (“When a district court decides a motion to vacate

a default judgment pursuant to the provisions of Rule 60(b), the court’s determination must be

guided by [the] three principal factors [mentioned above].”). These factors are applied more

rigorously against a defendant after a default judgment has been entered. Meehan v. Snow, 652

F.2d 274, 276 (2d Cir. 1981); Wright & Miller, 10A Fed. Prac. & Proc. Civ. § 2692 (West 2021).

Moreover, the preference for resolving disputes on the merits does not go so far as to relieve the

defendant from the burden of proving the applicable factors. See Sony Corp. v. Elm State Elecs.,

800 F.2d 317, 320 (2d Cir. 1985).

As the text of the Rules suggests and the applicable case law provides, “[t]he dispositions

of motions for entries of defaults and default judgments and relief from the same . . . are left to

the sound discretion of a district court because it is in the best position to assess the individual

circumstances of a given case and to evaluate the credibility and good faith of the parties.”

Enron Oil, 10 F.3d at 95. The scope of this discretion, however, is limited by the Second

Circuit’s “oft-stated preference for resolving disputes on the merits.” Id. “[B]ecause defaults are

generally disfavored and are reserved for rare occasions, when doubt exists as to whether a

default should be granted or vacated, the doubt should be resolved in favor of the defaulting

party.” Id. at 96. Nevertheless, the Second Circuit has recognized that default procedures

“provide a useful remedy when a litigant is confronted by an obstructionist adversary. Under

such circumstances those procedural rules play a constructive role in maintaining the orderly and

efficient administration of justice.” Id.

I. Willfulness

The Ionin defendants offer a number of reasons why their failure to timely respond was a

“mistake” or “inadvertent.” The undisputed facts do not support that characterization for a

greater number of reasons.

First, defendants assert that they had no knowledge of this action until they were served

with ATIC’s motion for a default judgment on February 10, 2020. I will assume that it is true.

But the reason they did not receive it earlier was because of repeated failures on their part,

despite the full portfolio of litigation in which the Ionin defendants have engaged (as described

below), to comply with the legal requirements for receiving process. Defendants admit that

Active Care changed its address in 2013. They further admit that they never advised the New

York Department of State of their new address. That is the address at which ATIC effected

service on Active Care, and thus defendants cannot and do not suggest that service was invalid.

Instead, they characterize the outdated service address as a “mistake.”

A major purpose of listing an address with the Department of State is to facilitate service

of process. The Department of State was defendants’ designated agent for service of process.

By not changing their address, defendants all but ensured that any plaintiff would not provide

them with notice.

Defendants argue that because their “mistake” happened in 2013, it was not their intent to

evade process from this particular plaintiff. Again, that may be true, but it is not very important.

This “mistake” was only the first of several identical mistakes. In fact, I do not see how

defendants were able to pull this off while running a substantial business. Under New York

Business Corporation Law § 408, business corporations are required to file a Biennial Statement

every two years with the New York Department of State. The Biennial Statement must set forth:

(i) the name and business address of its chief executive officer, (ii) the street address of its

principal executive office, (iii) the address to which the New York Secretary of State shall

forward copies of process accepted on behalf of the corporation and (iv) the number of directors

constituting the board and how many directors of such board are women. N.Y. Bus. Corp. § 408

(emphasis added); see also FAQs: Corporations & Business Entities, NYS Dep’t of State,

https://dos.ny.gov/faqs-corporations-business-entities (last visited June 23, 2021). As to the

address to which the NYS Secretary of State shall mail a copy of process, “[s]uch address shall

supersede any previous address on file with the department of state for this purpose.” N.Y. Bus.

Corp. § 408(c). This means there were at least three “mistakes,” each occurring biennially,

before ATIC attempted to serve Active Care through its authorized address. I therefore see the

length of time without providing a current address to the Department of State as an aggravating

rather than a mitigating factor.

Maintaining non-compliance with this statute for so long a period is not consistent with

“inadvertence” any more than crossing the street with one’s eyes closed and then being hit by a

car is inadvertent. That is why the courts have consistently held that the failure to maintain a

current address with the Department of State is evidence of willfulness. See e.g. Trs. of Local

531 Pension Fund v. Am. Indus. Gases, Inc., 708 F. Supp. 2d 272 (E.D.N.Y. 2010) (failure of

corporation to update address with Secretary of State for 30 years constituted “wilfulness or

gross negligence in failing to comply with the law and update its address”) (citing Estrella v.

P.R. Painting Corp., 06-cv-717, 2006 WL 3359485, at *2 (E.D.N.Y. Nov. 20, 2006) (“it seems

that the fault lies with the Defendant, since it is the one responsible for ensuring that its

registered address with the state for purpose of process is correct”); Swift Spinning Mills v. B &

H Apparel, No. 00-cv-652, 2003 WL 942610, at *1-2 (S.D.N.Y. Mar. 5, 2003) (“[D]efaults

caused by negligence may in some cases be excusable, but . . . [h]ere, [defendant’s] failure to

notify the Secretary of State of its change of address constitutes willful conduct, and is not

excusable.”), aff’d, 96 F. App’x 761 (2d Cir. 2004)).

This principle is especially applicable in this case because the Ionin defendants are no

strangers to litigation. Defendants do not dispute that Active Care has appeared as a plaintiff in

3100 civil actions (presumably mostly collection actions) in the New York State courts, 700 of

which were still pending during this action. Moreover, defendants have been sued by another

insurance company in federal court based on RICO allegations similar to those here. See Gov’t

Emps. Ins. Co. v. Active Care Med. Supply Corp., 12-cv-5632 (E.D.N.Y. Nov. 15, 2012) (“The

GEICO action”).

Finally (as to this point), I reject Ionin’s argument that ATIC should have looked up

Active Care’s address in the “white pages” because that would have shown its current address.

Public directory listings are neither legally required nor generally reliable – compliance with

Business Corporation Law § 408 is both.

Second, ATIC’s attempt to personally serve Ionin shows that he has made himself, at

least, a hard-to-get defendant. When ATIC attempted to serve him at what it believed was

Ionin’s address in New Jersey, the building’s doorman told ATIC’s process server that although

Ionin owned the apartment, he did not reside there, and the apartment was vacant. ATIC

therefore moved, and I granted, alternative service through Active Care at its listed address with

the Department of State. (ATIC had no reason to know, nor did I, that Ionin had failed to update

Active Care’s service address with the Department of State for the last seven years.)

Since the service was made pursuant to my alternative service order, the Ionin defendants

cannot and do not dispute that Ionin was validly served. Instead, they suggest that the affidavit

of attempted service was “boilerplate,” implying that the process server’s conversation with the

doorman may not have happened, and that ATIC’s process server should have tried more than

once to serve him in New Jersey before ATIC applied for alternative service. They point out that

“Ionin has a demonstrated history of appearing and litigating suits against him” (although they

deny that he is a “sophisticated litigant”).

The affidavit of attempted service is not boilerplate. It is a customized description of

what happened when the process server attempted service at Ionin’s New Jersey address. And

because the doorman told the process server that the apartment was unoccupied, it would have

made no sense to keep returning to that apartment to attempt service. Moreover, despite Ionin’s

contention that he has a “demonstrated history of appearing and litigating,” ATIC has shown that

Ionin also has a history of “missing” service of process for various reasons at that address, and

that the doorman gives different excuses to process servers why service cannot be made there.

See Wells Fargo Bank, N.A. v. Ionin, et al., SWC-F-011309-19 (N.J. Super. Ct. Ch. Div. Dec. 2,

2019); The Watermark Condo. Residences Assoc., Inc. v. Ionin, HUD-L-004809-19 (N.J. Super.

Ct. Law Div. July 30, 2020). Ionin does not contest that plaintiffs found him difficult to serve in

at least two cases, but instead states only that the process servers should have mailed the

summonses to him at that address despite what the doorman said; that he does “not have to sit

around waiting to be served with process”; and that he eventually appeared and answered the

complaint in both cases. This history contributes to my conclusion that Ionin appears in actions

and litigates only when he wants to or believes he has to.

But the most obvious indicator of willfulness is Ionin’s attempt to exculpate himself for

not responding to the motion for a default judgment by shifting the blame to Attorney Wolf. It is

undisputed that although Attorney Wolf knew of and advised Ionin of the pending motion for a

default judgment (and thus the existence of the lawsuit) in February 2020; that I authorized them

to seek appropriate relief at that time; and that they took no action until the filing of the instant

motion nearly a year later, after the default judgment had been entered.

The excuses that the Ionin defendants offer for this are transparent. First, Ionin avers that

Attorney Wolf advised him on December 17, 2020 that I had initially denied ATIC’s motion for

a default judgment (as noted above), and that advice caused Ionin to stand down. That may be,

but it does not account for the total lack of attention to this case from February through

December. And it does not explain, since the Ionin defendants were also served with ATIC’s

motion for reconsideration, why they did not appear at that point in opposition to the motion for

reconsideration.

Second, it is undisputed that Ionin made no effort to check with Attorney Wolf to see

what was going on between February 2020 and the entry of default judgment. The reason,

according to Ionin, was that the pandemic in New York kicked in a month later and he took his

family to his home in Florida to escape it. But they have telephones in Florida. It would have

taken no more effort to dial Attorney Wolf’s phone number in New York City from Florida than

it would have taken to dial it from New Jersey.

The failure of Ionin to make any inquiry about what was happening to the pending

default judgment motion against him for nine months is itself sufficient grounds to find

willfulness. Even without that, however, I would reject the Ionin defendants’ attempt to separate

themselves from Attorney Wolf. He was their lawyer, after all. His failure to act is their failure

to act. Where a party’s attorney willfully defaults, that willfulness is imputed to the client for

purposes of a Rule 60(b)(1) analysis. See Church & Dwight Co. v. Kaloti Enters. of Mich.,

L.L.C., No. 07 CIV. 0612, 2011 WL 4529605, at *3 (E.D.N.Y. Sept. 28, 2011) (“The Second

Circuit has held that an attorney’s willfulness may be imputed to the client ‘where [the party]

makes no showing that [s]he has made any attempt to monitor counsel’s handling of the lawsuit,’

or where the record is ‘bereft of any indication of client diligence.’”). Moreover, it is notable

that although the Ionin defendants remain in contact with Attorney Wolf (as the docket sheet

indicates), they have not submitted an affidavit from him explaining why he took no action to

follow up on his initial letter for month after month.

In sum, the circumstances surrounding the default judgment show such conscious and

reckless disregard of the Ionin defendants’ legal obligations that the default can only be

characterized as willful.

II. Meritorious defense

Consistent with the broad discretion vested in the district courts on motions to vacate a

default judgment, there is no single standard defining how robust a showing of a meritorious

defense the movant must put forward. Wright & Miller § 2697. Most courts decline to accept

conclusory statements, but beyond that, the degree of proof required varies depending on the

facts of the case. Id.

Here, there are good grounds to require more than the mere possibility that defendants

have a meritorious defense. First, the grounds of the defense are exclusively within their

knowledge. ATIC’s complaint alleges a fraudulent billing scheme in which defendants

participated, but that complaint is, as it must be, based on inferences that ATIC can draw from

the final form of claims that it has received. In contrast, defendants know exactly how their

billing and procurement practices worked and have or should have all the documents to show

that they acted legitimately. But aside from affidavits from Ionin averring generally that

everything was on the up-and-up, they have not responded to the specific identification of

fraudulent transactions in ATIC’s complaint.

As noted above, ATIC has pled a substantial number of specific fraudulent transactions.

It should have been straightforward for defendants to demonstrate by documentary evidence and

affidavits of the persons involved in providing and receiving the services that ATIC has

misconstrued the claims and that at least a meaningful number of those transactions were not

fraudulent. In addition, it is not as if defendants were pressed for time to make the necessary

showing. As noted in the preceding section of this decision, they have had over a year to

develop their meritorious defense and present it, and I would have given them even longer had

they shown the need. The Ionin defendants did not have to prove the invalidity of ATIC’s claims

regarding each and every allegedly fraudulent transaction, but a solid sampling would have made

the point. There is no such evidence in the affidavits.

Instead of doing that, the Ionin defendants have taken two tacks. First, they seek to

relitigate whether the complaint states a claim against them, relying on my original decision

denying entry of default judgment. I have again considered these arguments (now for the third

time), but that ship has sailed. It was indeed difficult for me to see the single RICO scheme that

I thought ATIC was trying to assert and I therefore initially denied default judgment. But that

was because ATIC wasn’t trying to state a single scheme. When ATIC pointed out in its motion

for reconsideration that there were separate RICO schemes in the complaint, I found the claims

against the defaulting defendants plausible. The Ionin defendants cannot simply repeat to me

arguments that I have already rejected. Moreover, if they wanted to oppose default judgment on

that ground, they should have done it when they were timely served with the motion, instead of

doing nothing for nearly nine months.

The Ionin defendants’ second attempt to show a meritorious defense is to rely on moving

and reply affidavits from Ionin himself. However, these affidavits are not convincing. For one

thing, they contain a substantial amount of invective, criticism of ATIC’s allegations, argument,

opinion, hearsay, and conclusions that make it difficult to separate that which is admissible from

that which is inadmissible under the Federal Rules of Evidence. For example, Ionin avers under

oath that “[t]he medical allegations in the complaint contravene the very purpose of the no fault

automobile insurance statute . . . .” Similarly, Ionin complains that “American Transit rails in

the Complaint about the identity of treatment under a so-called ‘Predetermined Treatment

Protocol’ theory, but its description is inconsistent and filled with contradictions,” and that

ATIC’s allegations are “fabricated.” Ionin’s opinion on how ATIC has contradicted itself or his

opinion that ATIC’s allegations are not truthful is not something to which he could testify on the

witness stand, and he is no more able to give that “testimony” in an affidavit. And Ionin asserts

that “[o]ne cannot assert fraud because you say tomato and I say Tow-mato,” which is a cute turn

of phrase but also an argument which I would not permit a witness to use in testimony before a

jury.

This kind of inadmissible, argumentative rhetoric pervades the affidavits despite the

caution in my individual practice rules that “[w]itness or party affidavits will not be accepted if

they violate the Federal Rules of Evidence, including those pertaining to hearsay, conclusions,

and foundation.” I am not going to strike the affidavits, but after having to wade through the

rhetoric, there is not much left that establishes legitimate billing, coding, and provision of

conforming medical equipment.

There are exceptions. One of the areas where Ionin’s affidavits are sufficient is in

describing how the business could operate in a legitimate manner. However, the affidavits say

little to specifically engage the allegations in the complaint. They mostly duck the issue.

The case ATIC has pled as to the Ionin defendants is not complicated: the Ionin

defendants bought low-end equipment wholesale that is nominally covered by generally phrased

prescriptions and then billed ATIC for high-end equipment. Numerous, specific transactions in

the complaint detail this practice. All Ionin’s affidavits had to do to demonstrate a meritorious

defense was to describe the piece of equipment actually delivered to some of these patients,

produce the wholesale invoice for that equipment, and submit an affidavit from the salesman or

the patient for the piece of equipment reflected in the wholesale invoice. None of that appears.

Indeed, Ionin’s affidavit argues that as to each of ATIC’s allegations about specific transactions,

“I do not understand how this allegation can even be made since Active Care did not submit

wholesale invoices” to ATIC. Exactly. So where are the records describing the equipment

purchased and that patients actually received? Not in Ionin’s affidavits.

Ionin attempts to explain this by arguing that because he charges regulated prices, and

because wholesale prices vary, he does not match up any particular piece of equipment provided

to a patient with a particular wholesale purchase. If he is telling the truth, then, frankly, no

business should run that way; it is rife with the opportunity for fraud if there is no documentation

connecting the purchase of an item, the bill to the insurance company for that item, and the cost

of the item sold to that customer. If a patient receives a device that was bought by Active Care

in Wholesale Purchase A for $10, Active Care should maintain records showing that the

wholesale price was $10, and not part of a separate, Wholesale Purchase B for $12.

In a regulated industry like medical devices, the scheduled allowable price is derived in

part from the wholesale cost. Ionin’s declaration that he can’t match up the wholesale cost of

any particular item to any particular patient would allow him to charge the highest scheduled

price he paid the wholesaler even if that price was not the basis of the sale to the patient – exactly

what ATIC alleges.

To take a specific example, the complaint alleges – and submits documentation – of two

examples of paid, and several examples of unpaid, claims for a heat lamp using insurance code

EO205, and billing ATIC $160 each, when, in fact, the heat lamp provided was a cheap, hand

held heat lamp, reimbursable as a Non-Fee Schedule item, for, at most, $20. It should have been

easy, armed with the complaint’s documentation, for the Ionin defendants to back out these

transactions and demonstrate that, in fact, the heat lamp they supplied in at least a substantial

number of these transactions was the scheduled $160 item, not an unscheduled $20 item. But

they do not; they offer merely the general conclusion that they provided appropriate items and

only billed for those items.

The closest the Ionin defendants get to confronting ATIC’s specific allegations is to

mention egg crates and bed boards. Ionin accuses ATIC of mislabeling those items, but he offers

no documentation showing what any patient actually was provided, its cost, and his markup.

Instead, he offers general conclusions, like referring to a provided piece of medical equipment as

“of high quality that met all the specifications” of the insurance schedule.

Having ignored the case for so long, and being in possession of all the documentation

necessary to rebut ATIC’s allegations (if it exists), it is not too much to have expected the Ionin

defendants to specifically refute at least part of ATIC’s detailed list of fraudulent transactions.

They have not, and have therefore failed to demonstrate a meritorious defense on the merits.

Nor have the Ionin defendants demonstrated a meritorious defense based on the statute of

limitations. Defendants’ arguments are conclusory and fail to identify which fraudulent acts

alleged in the complaint fall outside the applicable limitations period. Defendants do not provide

any evidence countering the application of equitable tolling or the discovery rule to plaintiff’s

allegations that it could not earlier discover the fraud because of defendants’ efforts to conceal it.

See State Farm Mut. Auto. Ins. Co. v. Cohan, No. 09-CV-2990, 2010 WL 890975, at *4

(E.D.N.Y. Mar. 8, 2010), aff’d, 409 F. App’x 453 (2d Cir. 2011) (defendants did not establish a

meritorious defense based on the statute of limitations because the supporting “affidavit does not

explain what claims the limitations period would preclude, nor does it consider whether equitable

tolling or the discovery rule would negate a statute of limitations defense”). The four-year civil

RICO limitations period begins to run when the plaintiff discovers or should have discovered the

RICO injury, see Gov’t Emps. Ins. Co. v. Mayard, No. 15-CV-4077, 2019 WL 3716069, at *5

n.1 (E.D.N.Y. May 9, 2019), report and recommendation adopted, 2019 WL 4141030 (E.D.N.Y.

Aug. 30, 2019). Plaintiff alleged that it could not have earlier discovered the fraud due to

defendants’ concealment, and defendants have made no attempt to refute that.

III. Prejudice

The Ionin affidavits also fail to persuade me that ATIC would not be prejudiced if I

vacated the default. Strangely, there is no representation that the Ionin defendants have

preserved the necessary documents to defend this action, and Ionin’s testimony that he does not

match up wholesale documents with invoices to ATIC gives me no comfort that documents have

not already been destroyed. Moreover, ATIC has pointed out that in two other actions in which

the Ionin defendants were sued on similar claims, documents were in fact destroyed. See ECF

140-1, The GEICO Action (Mar. 10, 2014) (defendants claiming a flood destroyed all invoices

from wholesalers); ECF 361, Allstate Ins. Co. v. Yadgarov, No. 11-cv-6187 (E.D.N.Y. Aug. 28,

2014) (“The Allstate Action’) (citing same flood). In those two actions, Ionin stated that if

called upon to testify in connection with these documents, he would invoke his privilege against

self-incrimination.> ECF 152, The GEICO Action (Apr. 10, 2014) (conceding spoliation and

stating that Ionin would assert Fifth Amendment right at hearing on issue); ECF 431, The

Allstate Action (Apr. 16, 2015) (same).

Nor has Ionin proffered the identity, location, or number of witnesses who could support

his general denials. There is not the name of a single device-fitter, patient, salesperson, or

bookkeeper who could corroborate his story.* It is the Ionin defendants’ burden to show the

absence of prejudice to ATIC, see State St. Bank & Tr. Co. v. Inversiones Errazuriz, Limitada,

230 F. Supp. 2d 313, 316 (S.D.N.Y. 2002), and their submissions and prior litigation history

compel the contrary conclusion — getting discovery out of them would be like pulling teeth.

They have not met their burden.

CONCLUSION

The Ionin defendants’ motion to vacate the default judgment is denied.

SO ORDERED.

US DI

Dated: Brooklyn, New York

June 29, 2021

In his reply affidavit for the instant motion, Ionin asserts that he “did not assert any Fifth Amendment right in the

GEICO action.” That is plainly false. See ECF 152, The GEICO Action (Apr. 10, 2014) (“The Ionin Defendants

wish to inform Your Honor that Defendant Russell Ionin will assert his Fifth Amendment right not to be compelled

as a witness against himself at today’s hearing” on plaintiff's motion for sanctions).

+ Although patient identities are protected by HIPAA, had Ionin disclosed that he was willing to produce such

information, I could have ordered it to be filed under seal.

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