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Sim Hoffman, et al v. Zenith Insurance Company

February 10, 2011


The opinion of the court was delivered by: David O. Carter United States District Judge


Before the Court is Defendants Zenith Insurance Company and Znat Insurance Company (collectively "Zenith")'s Motion for Summary Judgment as to Plaintiffs' RICO Claims (the "Motion") (Docket 22). After considering the parties' moving, opposing, and replying papers, as well as oral arguments from both sides, the Court GRANTS the Motion.

I. Background

This lawsuit is related to a consolidated lawsuit that is in the process of settling before this Court. Plaintiffs argue that Defendants conducted the affairs of several enterprises through a pattern of mail fraud, in violation of 18 U.S.C. § 1962(c). Plaintiffs further allege that Defendants conspired to commit a substantive violation of the Racketeering Influenced and Corrupt Organizations ("RICO") Act in violation of 18 U.S.C. § 1962(d).

Plaintiffs include Sim Hoffman, M.D. ("Dr. Hoffman"), an Orange County based physician and radiologist, and a number of business entities that Dr. Hoffman owns or operates. Dr. Hoffman is the medical director of Plaintiff Advanced Professional Imaging Medical Group ("API"), which performs radiological diagnostic services in Buena Park, California. Declaration of Sim Hoffman, M.D. ("Hoffman Decl."), ¶ 4. Dr. Hoffman also owns and operates Plaintiff Better Sleeping Medical Center, Inc., which provides "sleep testing" services in Buena Park, California. Id.. Dr. Hoffman is an owner, officer, and/or shareholder of Plaintiff Advanced Medical Support, Inc., which provides interpreter and translation services in support of medical providers in Buena Park, California. Dr. Hoffman is also the owner, officer, and/or shareholder of Plaintiff Pacific Medical Supplies & Services, Inc., which provides transportation services to medical providers in Buena Park, California. Dr. Hoffman owns and operates Plaintiff California Psychologist Care, Inc., which provides psychological services in an unspecified region in the state of California. Dr. Hoffman also owns and operates Plaintiffs Access Plus, Inc., Pacific Neuro Diagnostic Medical Group, Inc., Pacific Care Medical Group, Inc., and Diagnostic Imaging Network Medical Group, Inc., all of which submits bills for reimbursement to insurers on behalf of medical providers in the state of California.

Dr. Hoffman, along with the other Plaintiffs, service injured workers covered under workers' compensation insurance policies. Hoffman Decl. ¶ 3; Complaint, ¶¶ 12-20. After an injured worker is provided with radiological services by Advanced Professional, sleep tested by Better Sleeping, receives assistance with the English language from Advanced Medical, obtains help with transportation needs from Pacific Medical, or receives psychological care from California Psychologist, the entities bill the injured worker's workers' compensation insurer for services rendered. The bills are submitted through and by the four entity plaintiffs owned and operated by Dr. Hoffman. In the event an insurer objects to a bill or otherwise fails to remit timely payment, the medical provider (or the entity that submits the bill on its behalf) files a lien with the Workers Compensation Appeals Board of California (WCAB).

Plaintiffs' suit challenges the manner in which Zenith, which sells workers' compensation insurance in California and other states, objected to bills for services purportedly rendered by Dr. Hoffman's entities. Under California law, an insurance provider who objects to a bill must "file a written objection within 60 days from receipt of the bill stating the reasons for the objection. Hoffman Decl. ¶ 20. Plaintiffs aver that Zenith committed numerous predicate acts of mail fraud by sending Explanation of Payment ("EOP") letters to Plaintiffs after receiving bills from Plaintiffs. Motion, at 7. Plaintiffs allege that Zenith's refusals to pay its bills were not made in good faith; they argue that Zenith's EOP objections and subsequent refusals to make payments were "inadequate" and often "boilerplate." Plaintiffs' Opposition to Motion for Summary Judgment ("Opposition"), at 7-8.

Plaintiffs allege that Zenith's conduct through its EOPs and before the WCAB constitutes a substantive violation of RICO as well as an unlawful conspiracy to violate RICO and that Plaintiffs have been injured in their business or property by reason of Zenith's violations of the RICO statute. According to Plaintiffs, Zenith has "lull[ed] Plaintiffs into believing" that it intended to resolve its objections to their claims in good faith before the WCAB, only to "abus[e] the process of the WCAB to delay payments and to destroy Plaintiffs' business." Complaint, ¶ 34. Plaintiffs claim that Zenith has instructed its adjustors to systematically deny Plaintiffs' requests for reimbursement, make disingenuous offers to settle the claims for payment, and exploit the "slow moving" workers' compensation appeals system to essentially litigate Plaintiffs to death. See id., ¶¶ 35-37. Plaintiffs also challenge the good faith of Defendants' objections before the WCAB. They argue that Defendants were "abusing the process" in order to destroy Plaintiffs financially; they point to Zenith's consolidation of all outstanding cases before the WCAB and the subsequent stay imposed on all liens as proof of Zenith's ill will. Opposition, at 9.

Prior to the filing of the instant lawsuit, Zenith filed its own claim for insurance fraud and unfair business practices against many of the Plaintiffs, including Dr. Hoffman, in Orange County Superior Court under California Insurance Code section 1871.7. Declaration of Dennis Kass ("Kass Decl."), ¶ 2, Exh. A.. Zenith's state court complaint alleges that Dr. Hoffman and his entities have fraudulently sought reimbursement for medical services that were never actually provided and, indeed, could not have been provided since Dr. Hoffman and his entities lacked the technological capability to provide some of the services for which they sought to bill insurers. Defendants assert that Plaintiffs filed the present case in retaliation for the state court case filed by Zenith.

II. Legal Standard

Summary judgment is proper if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c).

The Court must view the facts and draw inferences in the manner most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993 (1962); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1161 (9th Cir. 1992). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial, but it need not disprove the other party's case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S. Ct. 2548 (1986). When the non-moving party bears the burden of proving the claim or defense, the moving party can meet its burden by pointing out that the non-moving party has failed to present any genuine issue of material fact. Musick v. Burke, 913 F.2d 1390, 1394 (9th Cir. 1990).

Once the moving party meets its burden, "an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must--by affidavits or as otherwise provided in this rule--set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party." FED. R. CIV. P. 56(e)(2); see also Anderson, 477 U.S. at 248-49. Furthermore, a party cannot create a genuine issue of material fact simply by making assertions in its legal papers. There must be specific, admissible evidence identifying the basis for the dispute. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., Inc., 690 F.2d 1235, 1238 (9th Cir. 1980). The Supreme Court has held ...

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