A federal district court in Florida has denied a motion by a nail salon owner to quash two nonparty subpoenas served on her by an insurer that filed a lawsuit in New York alleging insurance fraud.

The Case

State Farm Mutual Automobile Insurance Company filed a civil case in the U.S. District Court for the Eastern District of New York, captioned State Farm Mutual Automobile Ins. Co. v. Parisien, No. 1:18-cv-00289-ILG (E.D.N.Y.) (the “Underlying Action”), that included allegations of a fraud-derived racketeering enterprise in Brooklyn, New York, that allegedly occurred in a clinic where physicians, chiropractors, acupuncture therapists and medical sources providers submitted bills to State Farm for treatments to automobile accident claimants. State Farm alleged that these treatments were medically unnecessary, ineligible for reimbursement, and/or never occurred. One of the issues in the Underlying Action was whether nonphysicians owned and controlled the Brooklyn clinic, directed patient treatment and siphoned the proceeds of the treatment to themselves.

State Farm asserted that if laypersons owned and controlled the health care corporations, those corporations would be ineligible under New York law for the reimbursement of health care services and their claims for payment would be deemed fraudulent. State Farm sought evidence that laypersons obtained the proceeds of the professional corporations, constituting proof of lay ownership and control.

Discovery revealed that, during the alleged conspiracy period, many of the defendants in the Underlying Action made large payments to businesses and individuals connected to a nonphysician layperson named Tatiana Rybak. One of Ms. Rybak’s associates allegedly was Vasila Queen, the owner of a nail and hair salon at the Trump International Hotel in Miami.

State Farm claimed that bank records showed that 15 different health care providers who worked at the clinic wrote at least 70 checks either payable to Ms. Queen directly or payable as cash into Ms. Queen’s bank account. These deposits allegedly occurred over a six-year period between February 2012 and February 2018, totaling $100,000. According to State Farm, none of the checks was for more than $10,000 and, in some instances, large cash withdrawals were made from Ms. Queen’s bank account shortly after the deposit.

After reviewing bank records, State Farm deposed several former employees. Those employees invoked the Fifth Amendment and refused to answer questions related to specific payments.

State Farm then served Rule 34 requests to defendants in the Underlying Action and requested that they produce any documents related to the payments to Ms. Queen.

State Farm also issued to and served subpoenas on Ms. Queen to discover the purpose of these alleged payments and determine the relationship that she had with the clinic, if any.

Ms. Queen moved to quash the nonparty subpoenas, arguing that:

• State Farm had no right to investigate her transactional history with the defendants in the Underlying Action;
• Her history of prior transactions was irrelevant and her receipt of funds had nothing to do with State Farm’s allegations of fraud;
• She never provided health care services in the medical industry and did not have any involvement in an insurance scam based on billing insurance companies for unnecessary medical treatments;
• State Farm relied on nothing than a hunch that criminal activity was afoot and that, without more, State Farm was not entitled to intrude on her personal life; and
• The nonparty subpoenas lacked any relevance and imposed an undue burden.

The District Court’s Decision

The district court denied the motion.

In its decision, the district court ruled that the discovery sought by State Farm was “relevant as to whether the defendants in the Underlying Action used Ms. Queen as part of a conspiracy to siphon money from a healthcare clinic in violation of state and federal law.”

The district court said that Ms. Queen’s argument that she had never provided health care services in the medical industry and could not have any involvement in an insurance scam “misse[d] the whole point of the discovery sought.” State Farm did not allege that Ms. Queen provided medical services, the court observed. Rather, it said, State Farm had evidence that Ms. Queen had been in receipt of more than $100,000 from individuals who were believed to have submitted fraudulent medical bills to State Farm for treatments that were unnecessary, ineligible for reimbursement, and/or never occurred.

The court reasoned that Ms. Queen’s attempts to distance herself as an irrelevant nonparty witness did “more harm than good.” It said that if Ms. Queen was “so distant from the medical profession,” it raised the question as to why a Miami nail salon owner was in receipt of substantial sums of money from medical providers.

The court stated that although it was “certainly possible” that there was “a legitimate explanation for Ms. Queen’s involvement,” it was within the scope of discovery to explore these payments given the allegations and evidence presented. In other words, the court ruled, the discovery sought was “relevant because it may establish who owns and controls the defendants in the Underlying Action and the scope of the alleged conspiracy.”

The court ruled that Ms. Queen’s contention that the subpoenas subjected her to an undue burden was “equally unavailing” because it was “entirely conclusory.”

Accordingly, the court concluded that the discovery sought by State Farm was “relevant” and that Ms. Queen’s motion to quash has to be denied.

The case is Queen v. State Farm Mutual Ins. Co., No. 19-21931-Civ-WILLIAMS/TORRES (S.D. Fla. Aug. 7, 2019).

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. Contact him at smeyerowitz@ meyerowitzcommunications.com.