Appeals Court Reverses, Remands Case Involving RICO Claims for Thompson Coe Client

Background

Thompson Coe’s insurance company client (Allstate) sued a Houston freestanding emergency care facility and related entities and individuals for RICO mail fraud and common-law fraud, alleging they engaged in a scheme to provide unnecessary emergency care to car accident victims and then forward bills for the treatment to the personal-injury attorneys with the expectation that those bills would be included in settlement demand packages sent to and paid by Allstate.

As described in the Fifth Circuit’s opinion, visits from car accident patients to the facility doubled once the scheme began. Some patients waited until well after the accidents to be treated and traveled from far away and bypassed other medical centers for care at the facility. The care typically involved expensive diagnostic tests and used medical billing codes reserved for severe and life-threatening emergencies. Between 2018 and 2022, Allstate settled with 635 claimants. After discovering the alleged scheme, Allstate sued Defendants to recover about $4.7 million.

The district court dismissed Allstate’s Complaint with prejudice for not sufficiently alleging that it relied on the fraudulent bills when settling claims or that the fraudulent bills proximately caused injury to Allstate. The court also concluded that the 635 separate claims cannot manageably be tried as a single lawsuit.

Allstate appealed, asserting that it had adequately pleaded its claims and damages.  In the alternative, Allstate argued that the district court erred by dismissing with prejudice without granting Allstate leave to amend its Complaint.

Appeals Court Analysis and Opinion

In reversing the district court’s dismissal order, the Fifth Court reasoned that (1) under the Supreme Court’s Bridge decision, a RICO mail fraud claim does not track the elements of a common-law fraud claim or incorporate its reliance requirement; (2) Allstate satisfied RICO’s proximate-cause requirement by alleging a direct relationship between its injury (payment of settlements including sums for fraudulent medical bills) and Defendants’ conduct; (3) causation was not negated merely because the bills were sent to Allstate via third party attorneys, and the settlements were not an intervening cause that broke the chain of causation; and (4) Allstate’s alleged damages were not speculative because it pled as damages the “concrete amounts” that it included in settlements for Defendants’ fraudulent medical bills.

The Fifth Circuit held that Allstate sufficiently alleged its causes of action, proximate causation, and damages and that the district court erred in dismissing Allstate’s RICO claims. The Fifth Circuit remanded the case to the district court for further proceedings consistent with the opinion.