HOUSTON - Insurers whose effort to allege a racketeering scheme among Houston chiropractors was rejected by a federal judge have appealed.
Companies like Farmers Texas Mutual Insurance sued 1st Choice Accident & Injury, Houston Pain Relief & Wellness Clinic and Smart Choice Chiropractic, among others. They alleged fraudulent billing for services not needed led to more than $14 million in damages and filed a lawsuit under the Racketeer Influenced and Corrupt Organizations Act in 2022.
U.S. Magistrate Judge Andrew Edison, of Houston, recommended March 12 that the lawsuit be dismissed. District Judge George Hanks did just that two weeks later.
So the 13 insurance companies filed their notice of appeal to the U.S. Court of Appeals for the Fifth Circuit on June 14.
There, they will need to address Edison's finding that said they failed to sufficiently allege an enterprise among the defendants and the term "special purpose" will be key.
Edison said they'd failed to allege the enterprise had a purpose separate and apart from the pattern of activity in which it engages.
"In objecting to Judge Edison’s 'separate purpose' finding, Plaintiffs argue that there is no requirement that a RICO plaintiff plead a 'separate purpose,'" Hanks wrote.
"The Court observes that the first time Plaintiffs argued that there is no 'special purpose' requirement was in its recent objections to Judge Edison’s Memorandum and Recommendation. Until then, Plaintiffs actually took the position that there was a 'special purpose' requirement.
"It is unclear why Plaintiffs waited until after Judge Edison issued his Memorandum and Recommendation to completely reverse course and take the position that there is no 'special purpose' requirement. It sure would have been helpful--and appreciated--for Plaintiffs to raise this argument at an earlier date."
1st Choice Accident & Injury is a chiropractic firm that has 13 locations in the Houston area and is run by brothers Phuc Vinh “Charlie” Huynh and Phuc Kien “Andy” Huynh, the suit says. The alleged scheme involves treatment for drivers involved in car accidents.
That treatment includes fraudulent exam reports, fraudulent billing and medical reports and the supply of those reports to personal injury lawyers, the suit says.
“The Defendants’ scheme is designed to enrich Defendants by inducing Farmers to rely on their bills and supporting documentation that on their face purport to substantiate the need for medical treatment and (2) settle BI and UM Claims within policy limits, and often for all or most of the limits, to protect Farmers and their insureds from potential judgments exceeding policy limits and/or avoid potential liability for bad-faith claims,” the suit says.