“Certainly, if the federal claims are dismissed before 16 trial, even though not insubstantial in a jurisdictional sense, the state claims should be 17 dismissed as well.”
How later courts described this case
- “Certainly, if the federal claims are dismissed before 16 trial, even though not insubstantial in a jurisdictional sense, the state claims should be 17 dismissed as well.”
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 BORREGO COMMUNITY HEALTH Case No.: 3:22-cv-01056-RBM-SBC
FOUNDATION, a California Nonprofit
12
Public Benefit Corporation, ORDER GRANTING THE DENTIST
13 DEFENDANTS’ MOTIONS TO
Plaintiff, DISMISS
14
v.
15 KAREN HEBETS, et. al., [Docs. 223, 225, 227–28, 232, 234, 236–
38, 245–46]
16
Defendants.
17
18
19 Plaintiff Borrego Community Health Foundation (“Plaintiff”) filed a Second
20 Amended Complaint (“SAC”) asserting 73 causes of actions against 39 defendants. (Doc.
21 217 [“SAC”].) In the SAC, Plaintiff alleges that it “was a California nonprofit public
22 benefit corporation operating a Federally Qualified Health Center [‘FQHC’]” that provided
23 “healthcare services to historically underserved areas of San Diego, Riverside, and San
24 Bernadino counties.” (SAC ¶ 1.)1 Plaintiff then alleges that “individuals and entities both
25 inside and outside of [Plaintiff] siphoned off money from [Plaintiff.]” (Id. ¶ 2.) These
26
27
1 The Court cites the paragraph numbers of the SAC and the CM/ECF electronic pagination
28
1 individuals and entities are the named defendants in this action.
2 Pending before the Court are seven motions to dismiss the SAC made by various
3 Defendants or groups thereof. This Order addresses two motions to dismiss brought by
4 two dentist defendants and their entities, as well as numerous joinders filed by additional
5 dentist defendants, (collectively, the “Dentist Defendants”) seeking to join the arguments
6 presented in the two noticed motions (the “Dentist Defendants’ MTDs”).2 (See Docs. 223,
7 225, 227–28, 232, 234, 237–38, 245–46.) As each of the Dentist Defendants played a
8 comparable role in the fraudulent schemes alleged by Plaintiff, the Court addresses the
9 Dentist Defendant MTDs together.
10 The Court finds this matter suitable for determination without oral argument
11 pursuant to Civil Local Rule 7.1(d)(1). For the reasons discussed below, the Dentist
12 Defendants’ MTDs are GRANTED, and the Dentist Defendants are DISMISSED from
13 this action with leave to amend.
14 I. FACTUAL BACKGROUND
15 A. The Contract Dental Schemes3
16 As the Court thoroughly explains in its Order (1) Granting Defendants Premier,
17 Daryl Priest, Nicholas Priest, Travis Lyon’s Motion to Dismiss [Doc. 231]; (2) Granting
18 Defendant Karen Hebets’ Motion to Dismiss and Denying as Moot Her Alternative
19 Motions for a More Definite Statement and to Strike Allegations [Doc. 239]; (3) Granting
20
21
2 The Dentist Defendants and their entities are Husam E. Aldairi, D.D.S.; Aldairi D.D.S.,
22
Inc.; Ayed Hawatmeh, D.D.S.; Hawatmeh Dental Group, P.C.; Alborz Mehdizadeh,
23 D.D.S.; Alborz Mehdizadeh, Inc.; Jilbert Bakramian, D.D.S.; Mohammed Al Tekreeti,
D.D.S.; Magaly Velasquez, D.D.S.; Magaly M. Velasquez D.D.S. Professional Dental
24
Corp.; Aram Arakelyan, D.D.S.; New Millennium Dental Group Of Aram Arakelyan, Inc.;
25 Michael Hoang, D.M.D.; Waleed Stephan, D.D.S.; W.A. Stephan, A Dental Corporation;
Santiago Rojo, D.D.S.; Santiago A. Rojo, D.D.S., Inc.; Marcelo Toledo, D.D.S.; Marcelo
26
Toledo, D.D.S., Inc.; Marlene Thompson, D.D.S.; Marlene Thompson, D.D.S., Inc.;
27 Douglas Ness, D.D.S.; and Ness Dental Corporation.
3 The factual summary in this section reflects Plaintiff’s allegations, not conclusions of fact
28
1 Defendant Mikia Wallis’ Motion to Dismiss [Doc. 230]; and (4) Granting Defendants
2 Harry Ilsley, Dennis Nourse, Mike Hickok, And Chuck Kimball’s Motion To Dismiss
3 [Doc. 226] (“Prior Order”) (Doc. 299), Plaintiff alleges various fraudulent schemes
4 perpetrated by the named Defendants.4 Several of these schemes involve Plaintiff’s
5 contract dental program, in which Plaintiff entered “into contracts with individual dentists
6 and/or their practices” and, “[u]nder those contracts, the contracted dentists agreed to
7 provide certain dental services to eligible patients of [Plaintiff]” (the “Contract Dental
8 Schemes”). (SAC ¶ 103.) “Those services would then be billed to Medi-Cal by
9 [Plaintiff],” and “[Plaintiff], in turn, [paid] the dentist a fee for the dental services
10 rendered.” (Id.) The Court summarizes the allegations pertinent to the Dentists Defendants
11 here.
12 1. The Premier Scheme
13 On March 1, 2016, Bruce Hebets and Defendant Premier executed a Management
14 Services Agreement for Plaintiff’s contract dental program (the “Dental MSA”). (Id.
15 ¶ 121.) “Pursuant to the terms of the Dental MSA, [Plaintiff] was to pay [Defendant]
16 Premier $5 per participating patient visit to any contract dentist for the first 8,000 visits,
17 then $25 per participating patient visit thereafter. In return, [Defendant] Premier, by and
18 through [Defendants] Daryl Priest, Nick Priest, and Travis Lyon, agreed to provide the
19 services to [Plaintiff], including … claims management and processing … .” (Id. ¶ 130.)
20 Claims management and processing included “‘scrubbing’ the contract dental claims for
21 documentation errors or inconsistencies … .” (Id.)5
22
23
4 The Court incorporates the detailed summary set forth in its prior order here. (Doc. 299
24
at 3–17.)
25 5 The Dental MSA underwent two amendments on or about December 22, 2016 and July
1, 2017, respectively. (SAC ¶ 131.) The first amendment extended the term of the Dental
26
MSA for five years beginning on January 1, 2017, subject to an automatic renewal of five
27 years. (Id. ¶ 132.) The first amendment also removed the provision allowing Plaintiff to
terminate the agreement without cause. (Id.) The second amendment “obligated [Plaintiff]
28
1 2. The Fraudulent Dental Billing Scheme
2 As part of the Dental MSA, Defendant Premier, by and through Defendants Daryl
3 Priest, Nick Priest, and Travis Lyon, engaged and reached out to new dental providers for
4 the contract dental program. (Id. ¶ 171.) They were also responsible for training the
5 dentists on how to properly submit their claims to Defendant Premier for payment. (Id.
6 ¶ 172.) Plaintiff alleges that Defendants Premier, Daryl Priest, Nick Priest, and Travis
7 Lyon coached the contract dentists on how to fraudulently bill Plaintiff. (Id. ¶ 178.)
8 B. The Dentist Defendants
9 Plaintiff alleges that the Dentist Defendants participated in Plaintiff’s contract dental
10 program either as a provider or sub-provider and were “involved in [Plaintiff’s] operations
11 by providing dental services to [Plaintiff’s] patients.” (Id. ¶¶ 187, 209, 230, 242, 251, 263,
12 271, 278, 285, 291, 300, 314, 321 (emphasis added).)
13 1. Defendants Husam Aldairi and Mohammed Al Tekreeti
14 On or about May 27, 2016 and May 29, 2018, Defendant Husam Aldairi, both
15 individually and through his company, Aldairi D.D.S., Inc., entered into written dental
16 services agreements with Plaintiff, in which Defendant Aldairi agreed to provide dental
17 services to Plaintiff’s patients, and Plaintiff agreed to pay Defendant Aldairi for those
18 services. (Id. ¶ 185.) By executing the dental services agreements, Defendant Aldairi
19 promised to practice dentistry in accordance with all federal, state, and local laws; all
20 regulations; and all generally accepted principles in the practice of dentistry. (Id. ¶ 188.)
21 Defendant Aldairi also agreed to prepare, establish, and maintain administrative, financial,
22 and patient records.6 (Id.)
23 Notwithstanding the dental services agreements, Defendant Aldairi submitted false
24
25
26
per visit for the first 8,000 visits.” (Id.¶ 133.) Plaintiff alleges that “[t]wenty-five dollars
27 per claim was an unreasonably high price.” (Id. ¶ 141; see also id. ¶ 158.)
6 Each of the dental services agreements has the same terms and conditions. The Court
28
1 and fraudulent bills. (Id. ¶ 189.) In September 2020, after Defendant Aldairi had failed his
2 prior audit, Plaintiff re-audited him. (Id. ¶ 195.) The results of the re-audit indicated that
3 he “had … (1) bill[ed] excessive patient visits, including falsifying appointment schedules;
4 (2) fail[ed] to maintain adequate documentation to support billing; (3) falsif[ied] medical
5 records; (4) perform[ed] services that lacked medical necessity; (5) provid[ed] services that
6 fell below the standard of care; (6) provid[ed] excessive services; and (7) generat[ed]
7 inaccurate billing records, including billing for services not rendered, upcoding, …
8 splitting services, and billing for services rendered by another provider [or] providers not
9 enrolled in Medi-Cal.” (Id. ¶ 196.) For example, Defendant Aldairi’s patient charts
10 demonstrated instances of patients coming to his office several days in a row when patient
11 scheduling records did not support that such frequent visits took place. (Id. ¶ 197.)
12 Defendant Aldairi even billed procedures when his office was closed for Thanksgiving.
13 (Id.; see also id. ¶¶ 198–204 (providing additional examples of fraudulent billing).)
14 On or about August 7, 2017, Defendant Aldairi hired Defendant Mohammed Al
15 Tekreeti to provide dental services to Plaintiff’s patients. (Id. ¶ 284.) Defendant Al
16 Tekreeti submitted false or fraudulent bills. (Id. ¶ 286.) “For example, on or about May
17 2019, [Defendant] Al Tekreeti billed [Plaintiff] for a partial denture for teeth which
18 supporting documentation indicated were never prepared for dentures.” (Id.)
19 2. Defendant Ayed Hawatmeh
20 On or about October 18, 2017, Defendant Ayed Hawatmeh, both individually and
21 through his company, Hawatmeh Dental Group, P.C., entered into a written dental services
22 agreement with Plaintiff, in which Defendant Hawatmeh agreed to provide dental services
23 to Plaintiff’s patients, and Plaintiff agreed to pay Defendant Hawatmeh for those services.
24 (Id. ¶ 207.) Notwithstanding the dental services agreement, Defendant Hawatmeh
25 submitted false and fraudulent bills. (Id. ¶ 211.) For example, Defendant Hawatmeh
26 routinely billed for several crowns instead of a single, non-covered bridge. (Id. ¶ 212.)
27 “[O]n both May 29, 2018 and June 2, 2018, Hawatmeh billed [Plaintiff] for services
28 performed on a tooth the patient no longer had at the time of service.” (Id. ¶ 213.) “[O]n
1 March 12, 2018, Hawatmeh submitted claims for payment indicating one patient received
2 treatment from him” “54 times within an 86-day period.” (Id. ¶ 214; see id. ¶¶ 214–16
3 (identifying additional examples).)
4 3. Defendant Alborz Mehdizadeh
5 On September 28, 2016 and December 11, 2018, Defendant Alborz Mehdizadeh,
6 both individually and through his company Alborz Mehdizadeh, Inc., entered into written
7 dental services agreements with Plaintiff, in which Defendant Mehdizadeh agreed to
8 provide dental services to Plaintiff’s patients, and Plaintiff agreed to pay Defendant
9 Mehdizadeh for those services. (Id. ¶ 228.) Notwithstanding the dental services
10 agreement, Defendant Mehdizadeh submitted false and fraudulent bills. (Id. ¶ 232.) For
11 example, Defendant Mehdizadeh billed for patients visits that either never occurred or were
12 conducted by providers that were not disclosed to Plaintiff. (Id. ¶ 233.) He billed for 146
13 patients he claimed to have seen on Saturday, November 16, 2019. (Id.) Defendant
14 Mehdizadeh also billed for 29 surgical extractions for one patient over a sixth-month
15 period. (Id. ¶ 234.) Defendant Mehdizadeh also submitted bills for the same service
16 multiple times on at least three occasions. (Id. ¶ 236.)
17 4. Defendant Magaly M. Velasquez
18 On or about November 5, 2014, Defendant Magaly M. Velasquez, both individually
19 and through her company Magaly M. Velasquez D.D.S., Professional Dental Corp., entered
20 into a written dental services agreement with Plaintiff, in which Defendant Velasquez
21 agreed to provide dental services to Plaintiff’s patients, and Plaintiff agreed to pay
22 Defendant Velasquez for those services. (Id. ¶ 240.) Notwithstanding the dental services
23 agreement, Defendant Velasquez submitted false and fraudulent bills. (Id. ¶ 244.) For
24 example, Plaintiff alleges that Defendant Velasquez submitted 150 duplicative claims. (Id.
25 ¶ 245 (including bullet point list of duplicative claims).) Plaintiff also alleges that
26 Defendant Velasquez billed for excessive visits, including “4,552 instances where
27 [Defendant] Velasquez billed for more than five visits for the same patient in a seven-day
28 period.” (Id. ¶ 246.)
1 5. Defendants Aram Arakelyan and Jilbert Bakramian
2 On November 17, 2016, November 18, 2018, and November 29, 2018, Defendant
3 Aram Arakelyan, both individually and through his company New Millennium Dental
4 Group of Aram Arakelyan, Inc., entered into written dental services agreements with
5 Plaintiff, in which Defendant Arakelyan agreed to provide dental services to Plaintiff’s
6 patients, and Plaintiff agreed to pay Defendant Arakelyan for those services. (Id. ¶ 245.)
7 Notwithstanding the dental services agreements, Defendant Arakelyan submitted false and
8 fraudulent bills. (Id. ¶ 253.) For example, in 2019, Defendant Arakelyan billed for services
9 on teeth that the patients did not have. (Id.)
10 Defendant Arakelyan hired Defendant Jilbert Bakramian to provide dental services
11 to Plaintiff’s patients. (Id. ¶ 290.) Defendant Bakramian also submitted false or fraudulent
12 bills. (Id. ¶ 292.) “For example, … on or about January 2019, [Defendant] Bakramian
13 billed [Plaintiff] for a filling on a tooth which x-rays noted that the patient did not have at
14 the time of service[.]” (Id.; see also id. ¶¶ 292—96 (identifying additional examples of
15 fraudulent billing).)
16 6. Defendant Michael Hoang
17 On or about November 28, 2018, Defendant Michael Hoang entered into a written
18 dental services agreement with Plaintiff, in which Defendant Hoang agreed to provide
19 dental services to Plaintiff’s patients, and Plaintiff agreed to pay Defendant Hoang for those
20 services. (Id. ¶ 261.) Notwithstanding the dental services agreement, Defendant Hoang
21 submitted false and fraudulent bills. (Id. ¶ 265.) For example, Defendant “Hoang
22 represented he saw one patient 10 times in a 30 day period[,]” which Plaintiff alleges is not
23 supported by the patient record or schedules. (Id. ¶ 267.)
24 7. Defendant Waleed Stephan
25 On October 1, 2016, Defendant Waleed Stephan, both individually and on behalf of
26 his company W.A. Stephan, A Dental Corporation, entered into a written dental services
27 agreement with Plaintiff, in which Defendant Stephan agreed to provide primary dental
28 services to Plaintiff’s patients, and Plaintiff agreed to pay Defendant Stephan for those
1 services. (Id. ¶ 269.) Notwithstanding the dental services agreement, Defendant Stephan
2 submitted false and fraudulent bills. (Id. ¶ 265.) For example, “on August 13, 2019,
3 [Defendant] Stephan billed [Plaintiff] for crowns on teeth numbers 12, 13 and 14” when
4 “the patient care plan documents that a singular bridge was put in place during … one
5 appointment.” (Id. ¶ 273.)
6 8. Defendant Santiago Rojo
7 On March 29, 2017, Defendant Santiago Rojo, both individually and through his
8 company Santiago A. Rojo, D.D.S., Inc., entered into a written dental services agreement
9 with Plaintiff, in which Defendant Rojo agreed to provide dental services to Plaintiff’s
10 patients, and Plaintiff agreed to pay Defendant Rojo for those services. (Id. ¶ 276.)
11 Notwithstanding the dental services agreement, Defendant Rojo submitted false and
12 fraudulent bills. (Id. ¶ 265.) For example, throughout 2020, “[Defendant] Rojo billed for
13 visits in California even though he was living in Florida[.]” (Id. ¶ 281.) “[Defendant] Rojo
14 also engaged in excessive billing and ‘claim splitting.’” (Id. ¶ 283.) “[Defendant] Rojo
15 represented he saw one patient for 12 days in a 23-day period.” (Id.)
16 9. Defendant Marcelo Toledo
17 On June 16, 2015, Defendant Marcelo Toledo, both individually and through his
18 company Marcelo Toledo, D.D.S., Inc., entered into a written dental services agreement
19 with Plaintiff, in which Defendant Toledo agreed to provide dental services to Plaintiff’s
20 patients, and Plaintiff agreed to pay Defendant Toledo for those services. (Id. ¶ 298.)
21 Notwithstanding the dental services agreement, Defendant Toledo submitted false and
22 fraudulent bills. (Id. ¶ 302.) For example, “on or about July 2018, [Defendant] Toledo
23 billed for services rendered to a patient during one scheduled visit as though they occurred
24 over the cour[se] of four visits[.]” (Id. ¶ 303; see also id. ¶¶ 303–10 (identifying additional
25 examples of fraud).)
26 10. Defendant Marlene Thompson
27 On or about April 18, 2013, Defendant Marlene Thompson, both individually and
28 through her company Marlene M. Thompson, D.D.S., Inc., entered into a written dental
1 services agreement with Plaintiff, in which Defendant Thompson agreed to provide dental
2 services to Plaintiff’s patients, and Plaintiff agreed to pay Defendant Thompson for those
3 services. (Id. ¶ 312.) Notwithstanding the dental services agreement, Defendant
4 Thompson submitted false and fraudulent bills. (Id.) Specifically, Defendant Thompson
5 billed for services performed by Maura Tuso, who was suspended from participating in
6 Medi-Cal. (Id. ¶¶ 315–16.)
7 11. Defendant Douglas Ness
8 On or about May 2, 2016, Defendant Douglas Ness, both individually and through
9 his company Ness Dental Corporation, entered into a written dental services agreement
10 with Plaintiff, in which Defendant Ness agreed to provide dental services to Plaintiff’s
11 patients, and Plaintiff agreed to pay Defendant Ness for those services. (Id. ¶ 319.)
12 Notwithstanding the dental services agreement, Defendant Ness submitted false and
13 fraudulent bills. (Id.) For example, “[r]ather than submit one bill for the cleaning,
14 [Defendant] Ness submitted two claims, the first asserting he provided a dental cleaning to
15 the left side of the patient’s mouth, then a month later provided a dental cleaning to the
16 right side of the patient’s mouth.” (Id. ¶ 323.) Defendant Ness also submitted bills for
17 Maura Tuso and other suspended dentists in his own name. (Id. ¶¶ 324–27.)
18 C. The Dentist Defendants’ Motions to Dismiss
19 On April 29, 2024, Defendants Ayed Hawatmeh and Hawatmeh Dental Group, P.C.
20 (the “Hawatmeh Defendants”) filed a Motion to Dismiss Pursuant to Rules 12(b)(1) and
21 12(b)(6) (the “Hawatmeh MTD”). (Doc. 223.) In the Hawatmeh MTD, the Hawatmeh
22 Defendants argue that Plaintiff lacks Article III standing, that Plaintiff’s claims are time-
23 barred, that Plaintiff has failed to plead viable Racketeer Influenced and Corrupt
24 Organization Act (“RICO”) claims against the Hawatmeh Defendants, and that the Court
25 should decline to exercise supplemental jurisdiction over Plaintiff’s state law claims. (Doc.
26 223-1 at 5–21.) Defendant Ayed Hawatmeh also argues that he should be dismissed in his
27 individual capacity because Plaintiff failed to plead an alter ego theory of liability, agency,
28 or aiding/abetting. (Id. at 21–24.) Lastly, the Hawatmeh Defendants argue that Plaintiff’s
1 SAC should be dismissed with prejudice. (Id. at 25.)
2 On April 29, 2024, Defendants Husam E. Aldairi and Aldairi D.D.S., Inc. (Doc.
3 227); Defendants Douglas Ness and Ness Dental Corporation (Doc. 228); and Defendant
4 Michael Hoang (Doc. 232) joined the Hawatmeh MTD.
5 On April 30, 2024, Defendants Waleed Stephan, W.A. Stephan, A Dental
6 Corporation, Marcelo Toledo, and Marcelo Toledo, D.D.S., Inc. (Doc. 234); Defendants
7 Santiago Rojo and Santiago A. Rojo, D.D.S. Inc. (Doc. 237); and Defendants Magaly
8 Velasquez and Magaly M. Velasquez D.D.S. Professional Dental Corp. (Doc. 238) joined
9 the Hawatmeh MTD.
10 On May 15, 2024, Defendants Aram Arakelyan, New Millennium Dental Group of
11 Aram Arakelyan, Inc., Alborz Mehdizadeh, Alborz Mehdizadeh, Inc., and Jilbert
12 Bakramian joined the Hawatmeh MTD. (Doc. 245.)
13 On May 23, 2024, Defendants Marlene Thompson and Marlene Thompson, D.D.S.,
14 Inc. joined the Hawatmeh MTD despite having already answered Plaintiff’s SAC on April
15 29, 2024.7 (Doc. 246; see Doc. 224.)
16 On April 29, 2024, before she joined the Hawatmeh MTD, Defendant Magaly
17 Velasquez and Magaly M. Velasquez D.D.S. Professional Dental Corp. also filed a Motion
18 to Dismiss Pursuant to Rules 12(b)(1) and 12(b)(6) (the “Velasquez MTD”).8 (Docs. 225,
19 236.) In the Velasquez MTD, Defendant Velasquez argues that Plaintiff failed to plead a
20 viable RICO claim against Defendant Velasquez, that Defendant Velasquez should be
21 dismissed in her individual capacity, and that the SAC should be dismissed with prejudice.
22 (Doc. 225-1 at 5–10.)
23 On April 29, 2025, Defendant Mohammed Al Tekreeti answered Plaintiff’s SAC.
24 (Doc. 233.) Defendant Al Tekreeti did not join the Hawatmeh MTD or the Velasquez
25
26
27 7 Despite this delay, the Court will consider the arguments set forth in the Hawatmeh MTD
as they pertain to Defendant Marlene Thompson and Marlene Thompson, D.D.S., Inc.
28
8
1 MTD.
2 Because the arguments in the Hawatmeh MTD and the Velasquez MTD overlap in
3 many respects, the Court will address them concurrently.
4 II. LEGAL STANDARD
5 A. Federal Rule of Civil Procedure 12(b)(1)
6 Rule 12(b)(1) allows a defendant to move to dismiss a complaint based on a lack of
7 subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). “When subject matter jurisdiction is
8 challenged under Federal Rule of Procedure 12(b)(1), the plaintiff has the burden of
9 proving jurisdiction in order to survive the motion.” Tosco Corp. v. Cmtys. for a Better
10 Env’t, 236 F.3d 495, 499 (9th Cir. 2001), overruled on other grounds by Hertz Corp. v.
11 Friend, 559 U.S. 77 (2010). “A Rule 12(b)(1) jurisdictional attack may be facial or factual.
12 White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000) (citation omitted). In a facial attack, the
13 challenger asserts that the allegations contained in a complaint are insufficient on their face
14 to invoke federal jurisdiction. By contrast, in a factual attack, the challenger disputes the
15 truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.”
16 Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).
17 “Though lack of statutory standing requires dismissal for failure to state a claim,
18 lack of Article III standing requires dismissal for lack of subject matter jurisdiction under
19 Federal Rule of Civil Procedure 12(b)(1).” Maya v. Centex Corp., 658 F.3d 1060, 1067
20 (9th Cir. 2011) (emphasis in original) (citations omitted). “[W]hen a court is faced with a
21 factual attack on standing pursuant to Rule 12(b)(1), the court ‘must leave the resolution
22 of material factual disputes to the trier of fact when the issue of [standing] is intertwined
23 with an element of the merits of the plaintiff’s claim.’” Bowen v. Energizer Holdings, Inc.,
24 118 F.4th 1134, 1144 (9th Cir. 2024) (quoting Leite v. Crane Co., 749 F.3d 1117, 1122 n.3
25 (9th Cir. 2014)).
26 B. Federal Rule of Civil Procedure 12(b)(6)
27 Pursuant to Rule 12(b)(6), an action may be dismissed for failure to allege “enough
28 facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
1 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual
2 content that allows the court to draw the reasonable inference that the defendant is liable
3 for the misconduct alleged. The plausibility standard is not akin to a probability
4 requirement, but it asks for more than a sheer possibility that a defendant acted unlawfully.”
5 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations
6 omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual
7 allegations in the complaint as true and construe[s] the pleadings in the light most favorable
8 to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025,
9 1031 (9th Cir. 2008).
10 However, the Court is “not bound to accept as true a legal conclusion couched as a
11 factual allegation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). Nor is the
12 Court “required to accept as true allegations that contradict exhibits attached to the
13 Complaint or matters properly subject to judicial notice, or allegations that are merely
14 conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels-Hall v.
15 Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010). “In sum, for a complaint to survive
16 a motion to dismiss, the non-conclusory factual content, and reasonable inferences from
17 that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss
18 v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotation marks omitted).
19 When a Rule 12(b)(6) motion is granted, “a district court should grant leave to amend
20 even if no request to amend the pleading was made, unless it determines that the pleading
21 could not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe v. N.
22 Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990) (citations omitted).
23 C. Federal Rule of Civil Procedure 9
24 As set forth in the Court’s Order Granting Motions to Dismiss Plaintiff’s First
25 Amended Complaint (“FAC Order”), Federal Rule of Civil Procedure Rule 9(b) applies to
26 claims based on fraud. (Doc. 215 [FAC Order] at 9.) A plaintiff must plead the elements
27 of fraud with the particularity demanded by Rule 9(b), outlining the who, what, when, and
28 where of the alleged fraudulent acts. Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066
1 (9th Cir. 2004). “In some cases, the plaintiff may allege a unified course of fraudulent
2 conduct and rely entirely on that course of conduct as the basis of a claim. In that event,
3 the claim is said to be grounded in fraud or to sound in fraud, and the pleading of that claim
4 … must satisfy the particularity requirement of Rule 9(b).” Vess v. Ciba-Geigy Corp. USA,
5 317 F.3d 1097, 1103–04 (9th Cir. 2003). “Given the factual basis for all of Plaintiff’s
6 claims are the twelve fraudulent schemes, all must meet Rule 9(b)’s particularity
7 requirement.” (Doc. 215 [FAC Order] at 9.)
8 III. DISCUSSION
9 A. Article III Standing
10 Plaintiff must demonstrate it has constitutional standing under Article III of the U.S.
11 Constitution. Lujan v. Def. of Wildlife, 504 U.S. 555, 560 (1992). To do so, Plaintiff must
12 plead: “(i) injury-in-fact—plaintiffs must allege concrete and particularized and actual or
13 imminent harm to a legally protected interest; (ii) causal connection—the injury must be
14 fairly traceable to the conduct complained of; and (iii) redressability—a favorable decision
15 must be likely to redress the injury-in-fact.” Barnum Timber v. U.S. E.P.A., 633 F.3d 894,
16 897 (9th Cir. 2011) (internal quotation marks and citations omitted).
17 In the Hawatmeh MTD, joined by the other Dentist Defendants, Defendant
18 Hawatmeh argues that Plaintiff cannot establish injury-in-fact, and therefore lacks Article
19 III standing, because it has been fully compensated for its injury. (Doc. 223-1 at 12–15.)
20 Specifically, Defendant Hawatmeh asserts that Medi-Cal reimbursed Plaintiff for the
21 Dentist Defendants’ allegedly fraudulent claims and that Plaintiff retained a handsome
22 profit. (Id. at 13–14.)
23 Plaintiff responds that “a third-party’s partial reimbursement or payment to a
24 plaintiff” does not “defeat Article III standing” and that “such a result would unjustly
25 reward wrongdoers when an injured party receives reimbursement through an insurance or
26 indemnification agreement.” (Doc. 248 at 16.) Plaintiff also responds that “[Plaintiff] paid
27 the Dentist Defendants before it received any payment from Medi-Cal, if it received any
28 payment from Medi-Cal at all” and “that [Defendant] Premier failed to obtain recoupment
1 from the Dentist Defendants when Medi-Cal did not pay [Plaintiff] for these claims[.]”
2 (Id.) Plaintiff explains that “[Plaintiff] improperly paid [Defendant] Premier $25[;]” that
3 “Medi-Cal ultimately issued a payment suspension, forcing [Plaintiff] to offer medical and
4 dental services for no payment[;]” that Plaintiff was forced to hire a compliance monitor
5 for $2.7 million; and that Plaintiff had “to close two of its clinics and subsequently file for
6 bankruptcy.” (Id.)
7 As a preliminary matter, the Court is not persuaded by Plaintiff’s arguments that rely
8 upon Defendant Premier’s alleged misconduct when it is the Dentist Defendants’ alleged
9 misconduct that is at issue here. However, the Court agrees with Plaintiff that, at this stage,
10 it has adequately alleged additional injury-in-fact beyond the subsequently reimbursed
11 payments made to the Dentist Defendants, e.g., that Plaintiff was forced to hire a
12 compliance monitor for $2.7 million. See Bowen, 118 F.4th at 1144. Thus, the Court finds
13 that Plaintiff has adequately alleged Article III standing at this time. However, as set forth
14 below (see Section III.B), Plaintiff must also establish statutory standing.
15 B. Civil RICO Standing
16 In addition to Article III standing, Plaintiff must also establish statutory standing to
17 assert a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
18 U.S.C. §§ 1961–1968. In response to Defendant Hawatmeh’s Article III standing
19 argument, the Court issued an Order Requesting Supplemental Briefing Regarding Civil
20 RICO Statutory Standing (“Supp. Briefing Order”) from all the parties to this action. (Doc.
21 282.) The parties then filed supplemental briefing on February 20, 2025, February 21,
22 2025, and February 24, 2025. (See Docs. 284, 286–95.)
23 “Under RICO’s civil enforcement mechanism, ‘[a]ny person injured in his business
24 or property by reason of a violation of [18 U.S.C. § 1962] may sue therefor in any
25 appropriate United States district court and shall recover threefold the damages he sustains
26 and the cost of the suit, including a reasonable attorney’s fees ... .’” Canyon Cnty. v.
27 Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008) (alterations in original) (quoting
28 18 U.S.C. § 1964(c)). Therefore, “[t]o have standing under § 1964(c), a civil RICO
1 plaintiff must show: (1) that his alleged harm qualifies as injury to his business or property;
2 and (2) that his harm was ‘by reason of’ the RICO violation, which requires the plaintiff to
3 establish proximate causation.” Id. (quoting 18 U.S.C. § 1964(c)) (citing Holmes v. Sec.
4 Investor Prot. Corp., 503 U.S. 258, 268 (1992) and Sedima, S.P.R.L. v. Imrex Co., 473 U.S.
5 479, 496 (1985)).
6 1. Injury to Business or Property
7 “To determine whether a plaintiff has sufficiently alleged that he has been ‘injured
8 in his business or property,’ we must examine carefully the nature of the asserted harm.”
9 Canyon Cnty., 519 F.3d at 975. “[The Ninth Circuit] requires that a plaintiff asserting
10 injury to property allege ‘concrete financial loss.’” Id. (quoting Oscar v. Univ. Students
11 Coop. Ass’n, 965 F.2d 783, 785 (9th Cir. 1992) (en banc)). “Financial loss alone, however,
12 is insufficient. ‘Without a harm to a specific business or property interest—a categorical
13 inquiry typically determined by reference to state law—there is no injury to business or
14 property within the meaning of RICO.’” Id. (quoting Diaz v. Gates, 420 F.3d 897, 900
15 (9th Cir. 2005) (en banc)).
16 In its supplemental briefing, Plaintiff broadly asserts that it has alleged injury to its
17 business or property. (Doc. 294 at 9–16.) Plaintiff first argues that it has alleged numerous
18 schemes that do not “touch on healthcare billing.” (Id. at 11–12.) However, these schemes
19 do not concern the Dentist Defendants, and the Court will not address them here.
20 Plaintiff then argues that Defendants’ healthcare billing schemes directly and
21 concretely injure Plaintiff in multiple ways. (Id. at 13–16.) First, Plaintiff asserts that
22 Plaintiff paid the Dentist Defendants based on a fee schedule listing different prices for
23 different dental services. (Id. at 13 (citing SAC, Ex. G, Add. B).) But Medi-Cal paid
24 Plaintiff an inclusive, per encounter rate regardless of the number or value of services. (Id.
25 (citing SAC ¶ 105).) Plaintiff concludes that the Dentist Defendants were therefore able to
26 steal from Plaintiff without causing corresponding harm to Medi-Cal. (Id. at 13–14.)
27 Plaintiff provides the following examples:
28 In the situation where a dentist … falsely billed … a deep cleaning of two
1 quadrants of the mouth in one visit ($140 for both quadrants) instead of a
regular cleaning for the whole mouth, [Plaintiff] paid the Dentist $140 instead
2
of $100. … When dentists billed [Plaintiff] for unnecessary (or fake)
3 complex extractions rather than simple extractions, [Plaintiff] paid the dentists
$165, rather than $100, for the service. [Plaintiff] is harmed by these
4
overpayments of $40 and $65 per service, respectively. However, Medi-Cal
5 is not harmed by these overpayments: it pays [Plaintiff] the same flat
encounter rate regardless of the excessive service by the dentist.
6
7 (Id. at 22 (citations omitted).) Second, Plaintiff asserts that it lost money on non-dental
8 services when Medi-Cal suspended Plaintiff because of the Dentist Defendants’ fraudulent
9 conduct. (Id. at 14.) Third, Plaintiff asserts that it lost money on dental services not
10 reimbursed by Medi-Cal after Plaintiff’s suspension.9 (Id.)
11 Although the allegations in Plaintiff’s SAC are unclear, with this additional
12 explanation, the Court is persuaded that, at this stage, Plaintiff has adequately alleged
13 injury to business or property not subsequently reimbursed by Medi-Cal. See Canyon
14 Cnty., 519 F.3d at 975.
15 2. “By Reason Of” the RICO Violation—Proximate Causation
16 “The Supreme Court has interpreted the phrase ‘by reason of’ in 18 U.S.C. § 1964(c)
17 to require, as elements for a civil RICO recovery, both proximate and but-for causation.”
18 Painters & Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharms. Co., 943
19 F.3d 1243, 1248 (9th Cir. 2019) (footnote omitted) (citing Holmes, 503 U.S. at 268). Here,
20 the Parties do not seem to dispute that the alleged fraudulent billing by the Dentist
21 Defendants is a “but-for” cause of Plaintiff’s alleged injuries. (See e.g., Doc. 294 at 16–
22 17; Doc. 290 at 4–5 (discussing proximate causation only).) The more significant question
23
24
25 9 Plaintiff also identifies three additional injuries (see Doc. 294 at 14–15), but these alleged
injuries do not alleviate the Court’s concerns regarding civil RICO standing. For example,
26
Plaintiff asserts that the Dentist Defendants billed multiple encounters to collect multiple
27 times when the services could have been, or were performed, all at once. (Id. at 15.)
However, Plaintiff also benefited from the Dentist Defendants billing for multiple
28
1 is whether Plaintiff has alleged proximate causation sufficiently to establish civil RICO
2 standing.
3 “The requirement of proximate cause seeks to ‘limit a person’s responsibility for the
4 consequences of that person’s own acts.’” Id. (quoting same). “Put another way, ‘the
5 proximate-cause requirement generally bars suits for alleged harm that is ‘too remote’ from
6 the defendant’s unlawful conduct.’” Id. (quoting Lexmark Int’l, Inc. v. Static Control
7 Components, Inc., 572 U.S. 118, 133 (2014)). “Thus, it ‘demand[s] ... some direct relation
8 between the injury asserted and the injurious conduct alleged.’” Id. (quoting Holmes, 503
9 U.S. at 268). The Supreme Court in Holmes explained that the “direct relation”
10 requirement is based upon three practical factors:
11 First, the less direct an injury is, the more difficult it becomes to ascertain the
amount of a plaintiff’s damages attributable to the violation, as distinct from
12
other, independent, factors. Second, quite apart from problems of proving
13 factual causation, recognizing claims of the indirectly injured would force
courts to adopt complicated rules apportioning damages among plaintiffs
14
removed at different levels of injury from the violative acts, to obviate the risk
15 of multiple recoveries. And, finally, the need to grapple with these problems
is simply unjustified by the general interest in deterring injurious conduct,
16
since directly injured victims can generally be counted on to vindicate the law
17 as private attorneys general, without any of the problems attendant upon suits
by plaintiffs injured more remotely.
18
19 Holmes, 503 U.S. at 269–70 (footnote and internal citations omitted).
20 Plaintiff argues that its injuries are “by reason of” the Defendants’ RICO violations.
21 (Doc. 294 at 16–27.) First, Plaintiff argues that the schemes unrelated to healthcare billing
22 (and therefore unrelated to the Dentist Defendants) directly defrauded Plaintiff. (Id. at 18–
23 20.) As before (see Section III.B.I), the Court finds that these schemes do not concern the
24 Dentist Defendants and will not address them here.
25 Second, Plaintiff argues that the “direct target and intention” of the healthcare billing
26 schemes was to steal money from Plaintiff, not Medi-Cal. (Doc. 294 at 21.) Plaintiff
27 emphasizes that the Dentist Defendants were able to steal from Plaintiff without causing
28 corresponding harm to Medi-Cal. (Id. at 13–14, 22.) Plaintiff distinguishes this case from
1 the cases cited by the Court in its Supp. Briefing Order, where the Medicare/Medicaid
2 programs were the direct target of the fraud, and where the plaintiffs consistently benefitted
3 from the fraudulent schemes alleged. (Id. at 22–24.) Plaintiff also argues that this case
4 presents no apportioning concerns, as Plaintiff is the only plaintiff, and asserts that Plaintiff
5 is the proper Plaintiff to bring this challenge. (Id. at 24–27.10)
6 While the Court remains concerned that proximate cause is clouded by the
7 intervening, independent conduct of the non-dentist Defendants, with this additional
8 explanation, the Court is persuaded that, at the pleading stage, Plaintiff has adequately
9 alleged injury to business or property “by reason of” the Dentist Defendants’ alleged RICO
10 violations. See Holmes, 503 U.S. at 269–70.
11 C. Plaintiff’s Civil RICO Claims
12 Plaintiff alleges the Dentist Defendants have violated two provisions of RICO. First,
13 it alleges violations of 18 U.S.C. § 1962(c), which provides that “[i]t shall be unlawful for
14 any person employed by or associated with any enterprise engaged in, or the activities of
15 which affect, interstate or foreign commerce, to conduct or participate, directly or
16 indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering
17 activity or collection of unlawful debt.” Second, Plaintiff alleges violations of 18 U.S.C.
18 § 1962(d), which provides that “[i]t shall be unlawful for any person to conspire to violate
19 any of the provisions of subsection (a), (b), or (c) of this section.”
20 “[T]he survival of [Plaintiff’s] claim under § 1962(c) [ensures] the survival of [its]
21 claim under § 1962(d).” Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007)
22 (citing Howard v. Am. Online Inc., 208 F.3d 741, 751 (9th Cir.2000)). As such, the Court
23 addresses 18 U.S.C. § 1962(c) first.
24
25
26
10 Plaintiff also notes that the California Department of Health Care Services (“DHCS” or
27 “Medi-Cal”) will be a primary beneficiary of its bankruptcy plan, further alleviating the
Court’s concern than Plaintiff is not the proper plaintiff to bring suit. (Doc. 294 at 7–8,
28
1 1. 18 U.S.C. § 1962(c)—Conducting the Affairs of a RICO Enterprise
2 “To state a claim under § 1962(c), a plaintiff must allege ‘(1) conduct (2) of an
3 enterprise (3) through a pattern (4) of racketeering activity.’” Odom, 486 F.3d 547 (quoting
4 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). In the Hawatmeh MTD,
5 Defendant Hawatmeh argues that Plaintiff “has not alleged that [he] participated in the
6 operation or management of the alleged RICO enterprise” and that Plaintiff “has failed to
7 plead a pattern of racketeering because the alleged enterprise only targeted one victim,
8 [Plaintiff].” (Doc. 223-1 at 20–25.)
9 a) Conduct—Element 1
10 The Supreme Court has held that “‘to conduct or participate, directly or indirectly,
11 in the conduct of such enterprise’s affairs,’ … one must participate in the operation or
12 management of the enterprise itself.” Reves v. Ernst & Young, 507 U.S. 170, 185 (1993)
13 (quoting 18 U.S.C. § 1962(c)). In other words, “one must have some part in directing those
14 affairs.” Id. at 179. “Simply performing services for the enterprise does not rise to the
15 level of direction … .” Walter v. Drayson, 538 F.3d 1244, 1249 (9th Cir. 2008). “Whether
16 [a defendant] rendered his services well or poorly, properly or improperly, is irrelevant to
17 the Reves test.” Baumer v. Pachl, 8 F.3d 1341, 1344 (9th Cir. 1993). Likewise, “[i]t is not
18 enough that [a defendant] failed to stop illegal activity, for Reves requires ‘some degree of
19 direction.’” Walter, 538 F.3d at 1248 (quoting Reves, 507 U.S. at 179).
20 In the Hawatmeh MTD, Defendant Hawatmeh argues that, as alleged, Plaintiff is the
21 enterprise and, therefore, Plaintiff must plead that Defendant Hawatmeh participated in the
22 operation or management of Plaintiff. (Doc. 223-1 at 20.) He concludes that Plaintiff has
23 not, and cannot, plead such facts as he did not do anything other than perform and bill for
24 his own dental services. (Id. at 20–21.) Defendant Hawatmeh notes that Plaintiff regularly
25 audited him and terminated his contract, undermining any claim that he cooperated with
26
27
28
1 the enterprise in any way. (Id. at 21.)
2 Plaintiff responds that “the SAC clearly demonstrates how the Hawatmeh
3 Defendants were notified of the scheme by [the] Premier Defendants, and that after
4 discussing how fraudulent bills could be submitted, the Hawatmeh Defendants adopted
5 those practices.” (Doc. 248 at 20–21.) Plaintiff also asserts that “[t]he SAC makes clear
6 that the Premier Defendants infiltrated [Plaintiff’s] upper management, taking over the
7 contract dental program and working alongside [Plaintiff’s] CEO, CFO and VP of Business
8 Affairs to submit fraudulent claims for payment.” (Id. at 21.)
9 As a preliminary matter, the Court finds that the arguments set forth in the Hawatmeh
10 MTD apply with equal force to each of the Dentist Defendants, as the allegations against
11 each of the Dentist Defendants are repetitious (see Section I.B (summarizing the allegations
12 against each Dentist Defendant)). For each of the Dentist Defendants, Plaintiff merely
13 alleges that they were “involved in [Plaintiff’s] operations by providing dental services to
14 [Plaintiff’s] patients.” (SAC ¶¶ 187, 209, 230, 242, 251, 263, 271, 278, 285, 291, 300, 314,
15 321 (emphasis added).) This allegation is conclusory and not sufficient to establish that
16 the Dentist Defendants took part in managing or conducting the affairs of the enterprise—
17 Plaintiff.
18 Further, Plaintiff’s allegations that the Dentist Defendants were “coached” or
19 “trained” to fraudulently bill by the other Defendants undermine any assertion that the
20 Dentist Defendants participated in the operation or management of Plaintiff. At most,
21 Plaintiff alleges that the Dentist Defendants provided dental services to Plaintiff’s patients
22 under the terms of a dental services agreement. As set forth above, “[s]imply performing
23 services for the enterprise does not rise to the level of direction … .” Walter, 538 F.3d at
24 1249. Whether the Dentist Defendants rendered their services “improperly” is irrelevant.
25 Baumer, 8 F.3d at 1344.
26
27
11 In the Velasquez MTD, Defendant Velasquez makes the same arguments. The argument
28
1 Finally, Plaintiff’s argument that “the Premier Defendants infiltrated [Plaintiff’s]
2 upper management, taking over the contract dental program and working alongside
3 [Plaintiff’s] CEO, CFO and VP of Business Affairs to submit fraudulent claims for
4 payment” (Doc. 248 at 21 (emphasis added)) does not persuade the Court that the Dentist
5 Defendants, as opposed to the Premier-related Defendants, also “infiltrated” Plaintiff’s
6 upper management and had a role in managing or conducting Plaintiff’s affairs.
7 b) Pattern of Racketeering—Elements 3 and 4
8 As set forth above, to be liable under § 1962(c), the enterprise must have engaged in
9 “a pattern of racketeering activity.” 18 U.S.C. § 1962(c). “Racketeering activity” is
10 defined to be any crime listed within 18 U.S.C. § 1961(1), including mail fraud, 18 U.S.C.
11 § 1341, and wire fraud, 18 U.S.C. § 1343, as predicate acts under RICO. “[T]o constitute
12 a ‘pattern,’ there must be at least two acts of racketeering activity within ten years of one
13 another.” Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004) (citing 18 U.S.C. §
14 1961(5)). “However, while two predicate acts are required under the Act, they are not
15 necessarily sufficient.” Id. (citing H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 237–38
16 (1989)).
17 “A ‘pattern’ of racketeering activity also requires proof that the racketeering
18 predicates are related and ‘that they amount to or pose a threat of continued criminal
19 activity.’” Id. (citing H.J. Inc., 492 U.S. at 239). “‘Continuity’ is both a closed- and open-
20 ended concept, referring either to a closed period of repeated conduct, or to past conduct
21 that by its nature projects into the future with a threat of repetition.” H.J. Inc., 492 U.S. at
22 241 (citation omitted). “A party alleging a RICO violation may demonstrate continuity
23 over a closed period by proving a series of related predicates extending over a substantial
24 period of time. Predicate acts extending over a few weeks or months and threatening no
25 future criminal conduct do not satisfy this requirement: Congress was concerned in RICO
26 with long-term criminal conduct.” Id. at 242.
27 Additionally, the Ninth Circuit has “recognized that RICO’s continuity requirement
28 is not satisfied if plaintiffs have merely alleged ‘a single fraud perpetrated on a single
1 victim.’” United Energy Owners Comm., Inc. v. U.S. Energy Mgmt. Sys., Inc., 837 F.2d
2 356, 360 (9th Cir. 1988) (quoting California Architectural Bldg. Prods., Inc. v. Franciscan
3 Ceramics, Inc., 818 F.2d 1466, 1469 (9th Cir. 1987)). In other words, “when a plaintiff
4 alleges only a single scheme with a single victim[,] it cuts against a finding of both closed-
5 ended as well as open-ended continuity.” Metaxas v. Lee, 503 F. Supp. 3d 923, 941 (N.D.
6 Cal. 2020) (citing Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364, 365–67 (9th Cir.
7 1992)).
8 In the Hawatmeh MTD, Defendant Hawatmeh argues that Plaintiff’s § 1962(c)
9 claims should be dismissed because, as alleged, Plaintiff is the sole victim of the RICO
10 enterprise. (Doc. 223-1 at 24.) Defendant Hawatmeh asserts that numerous district courts
11 have dismissed civil RICO claims when there is only one victim. (Id. (citing cases).)
12 Plaintiff responds that “the SAC alleges 11 different schemes, each delineating multiple
13 acts taken by each defendant.” (Doc. 248 at 23.) Regarding Defendant Hawatmeh,
14 specifically, Plaintiff responds that he and his entity “engaged in several acts of
15 misconduct, from ‘split-billing’ to submitting claims for services not rendered” and that he
16 “submitted over 2,952 fraudulent claims for payment.” (Id. (citing SAC ¶¶ 207–217, 219).)
17 Here, Plaintiff alleges that the Dentist Defendants engaged in false and fraudulent
18 healthcare billing over a period of several years. Plaintiff identifies this conduct as a single
19 scheme—the Fraudulent Dental Billing Scheme. Additionally, Plaintiff alleges, and
20 adamantly argues in its supplemental briefing, that Plaintiff is the primary victim of the
21 Fraudulent Dental Billing scheme. (SAC ¶ 555 (alleging that Plaintiff is both the enterprise
22 and the victim); Doc. 294 at 7 (“With regard to many of the alleged harms, Medi-Cal
23 experienced no corresponding harm, and Borrego Health was the sole victim. And, even
24 in instances in which Medi-Cal, too, was overbilled, any impact on Medi-Cal was indirect
25 and unintended by the Defendants.”); but see SAC ¶ 585 (alleging that Plaintiff, the United
26 States, and the State of California are victims of the schemes).) As pled, the United States
27 and the State of California are merely “incidental victims of the scheme.” Metaxas, 503 F.
28 Supp. 3d at 944. Thus, Plaintiff has alleged a single scheme perpetrated by the Dentist
1 Defendants—the Fraudulent Dental Billing Scheme—against a single victim—Plaintiff—
2 which cuts against a finding of continuity.12 Id. at 941 (citing Religious Tech. Ctr., 971
3 F.2d at 365–67 (9th Cir. 1992)).13
4 2. 18 U.S.C. § 1962(d)—Conspiracy
5 Because Plaintiff has failed to plead a violation of 18 U.S.C. § 1962(c) against the
6 Dentist Defendants, Plaintiff has also failed to plead a violation of 18 U.S.C. § 1962(d)
7 against the Dentist Defendants. See Odom, 486 F.3d at 547 (citing Howard, 208 F.3d at
8 751).
9 D. Plaintiff’s State Law Claims
10 Because Plaintiff failed to state civil RICO claims against the Dentist Defendants,
11 the Court declines to exercise supplemental jurisdiction over Plaintiff’s state law claims
12 against the Dentist Defendants. See 28 U.S.C. § 1367(c)(3) (“The district courts may
13 decline to exercise supplemental jurisdiction over [a state law claim] if . . . the district court
14 has dismissed all claims over which it has original jurisdiction.”); United Mine Workers v.
15 Gibbs, 383 U.S. 715, 726 (1966) (“Certainly, if the federal claims are dismissed before
16 trial, even though not insubstantial in a jurisdictional sense, the state claims should be
17 dismissed as well.”).
18 Even if the Court were to exercise supplemental jurisdiction over Plaintiff’s state
19 law claims against the Dentist Defendants, Plaintiff has failed to allege alter ego liability
20 against the individual Dentist Defendants. The Court finds that Plaintiff’s alter ego
21 allegations are conclusory, repetitive, and insufficient to state a claim against the individual
22 Dentist Defendants. (See SAC ¶¶ 55–84 (repeating the same conclusory alter ego
23 allegations for each of the individual Dentist Defendants and their entities).) See also
24
25
12 As set forth in this Court’s Prior Order, Plaintiff also failed to plead the existence of an
26
enterprise—element 2—and predicate acts supporting a pattern of racketeering—elements
27 3 and 4. (See Doc. 299 at 40–42, 45–48, 50–53.)
13 Because Plaintiff has failed to state civil RICO claims against the Dentist Defendants,
28
1 Gerritsen v. Warner Bros. Ent. Inc., 116 F. Supp. 3d 1104, 1136 (C.D. Cal. 2015)
2 (“Conclusory allegations of ‘alter ego’ status are insufficient to state a claim. Rather, a
3 plaintiff must allege specific facts supporting both of the necessary elements.”); Katzir’s
4 Floor & Home Design, Inc. v. M-MLS.com, 394 F.3d 1143, 1149 (9th Cir. 2004) (“The
5 mere fact of sole ownership and control does not eviscerate the separate corporate identity
6 that is the foundation of corporate law.”) (citing Dole Food Co. v. Patrickson, 538 U.S.
7 468, 475 (2003)).
8 IV. CONCLUSION
9 Based on the foregoing, the Hawatmeh MTD (Doc. 223) and the Velasquez MTD
10 (Docs. 225, 236) are GRANTED, and Plaintiff’s claims against the moving Dentist
11 Defendants— Husam E. Aldairi, D.D.S.; Aldairi D.D.S., Inc.; Ayed Hawatmeh, D.D.S.;
12 Hawatmeh Dental Group, P.C.; Alborz Mehdizadeh, D.D.S.; Alborz Mehdizadeh, Inc.;
13 Jilbert Bakramian, D.D.S.; Magaly Velasquez, D.D.S.; Magaly M. Velasquez D.D.S
14 Professional Dental Corp.; Aram Arakelyan, D.D.S.; New Millennium Dental Group Of
15 Aram Arakelyan, Inc.; Michael Hoang, D.D.S.; Waleed Stephan, D.D.S.; W.A. Stephan,
16 A Dental Corporation; Santiago Rojo, D.D.S.; Santiago A. Rojo, D.D.S., Inc.; Marcelo
17 Toledo, D.D.S.; Marcelo Toledo, D.D.S., Inc.; Marlene Thompson, D.D.S.; Marlene
18 Thompson, D.D.S., Inc.; Douglas Ness, D.D.S.; and Ness Dental Corporation—are
19 DISMISSED.14
20 While the Court doubts Plaintiff’s ability to state a civil RICO claim against the
21 Dentist Defendants, the Court grants Plaintiff leave to amend their claims against the
22 Dentist Defendants. Any amended complaint must be filed on or before April 11, 2025.
23 Responses to any amended complaint must be filed on or before April 25, 2025.
24
25
14 Defendant Al Tekreeti did not join the Hawatmeh MTD or the Velasquez MTD (see Doc.
26
233) and, therefore, is not dismissed from this action. The Court notes, however, that the
27 arguments set forth in the Hawatmeh MTD and the Velasquez MTD, as well as the
reasoning set forth in this Order, apply with equal force to Plaintiff’s claims against
28
1 IT IS SO ORDERED.
2 || DATE: March 27, 2025
3
4 Gath mio, Moitirggs □□
5 HON. RUTH BERMUDEZ'’ MONTENEGRO
UNITED STATES DISTRICT JUDGE
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