312 F.Supp.2d 260 (2004) | Cited 9 times | D. Connecticut | March 30, 2004


In this action, Plaintiffs Allstate Insurance Company and AllstateIndemnity Company (collectively, "Allstate") have sued Dr. Arthur Seigel("Seigel"), his medical practice, Arthur M. Seigel, P.C. ("Seigel P.C."),and his wife, Ellen Seigel, an employee and shareholder of Seigel P.C.,for various alleged violations of the Racketeering Influenced and CorruptOrganizations Act ("RICO"), 18 U.S.C. § 1961, et seq., theConnecticut Unfair and Deceptive Trade Practices Act, Conn. Gen. Stat.("CUTPA"), § 42-110a, et seq., the Connecticut HealthInsurance Fraud Act ("CHIFA"), Conn. Gen. Stat. § 53-442, and commonlaw fraud. Briefly stated, Allstate alleges, among other things, thatSeigel and Seigel P.C. created false and fraudulent invoices and medicalreports on patients who had been involved in automobile accidents for thepurpose of causing insurers such as Allstate to pay for medicaltreatments that were either never performed or were incompletelyperformed and/or to pay inflated amounts for the personal injury claimsofPage 2those patients. This lawsuit follows Seigel's plea of guilty to,and conviction on, a single count of mail fraud in violation of18 U.S.C. § 1341.

Presently before the Court is Defendants' Motion to Dismiss [doc. #31].Defendants assert that Allstate's 98-page, 452 paragraph, seven-countAmended Complaint is defective in a number of respects. Specifically,Defendants contend that: (1) Allstate lacks standing to pursue certain ofits RICO claims because Defendants' predicate acts were not the proximatecause of certain of Allstate's alleged injuries; (2) certain ofAllstate's claims for damages are too speculative as a matter of law; (3)Allstate's claim against Seigel under 18 U.S.C. § 1962(a) failsbecause Allstate has not alleged an "investment injury" as required by§ 1962(a); (4) Allstate's claim against Seigel under18 U.S.C. § 1962(b) fails because Allstate has not alleged an "acquisitioninjury" as required by that section; (5) Allstate's RICO claim againstSeigel P.C. is defective because, under 18 U.S.C. § 1962(c), an entity suchas Seigel P.C. cannot be both a RICO "person" and the RICO "enterprise"; (5)Allstate's common law fraud claim does not sufficiently allege causation;and (6) Allstate's CUPTA claim does not allege a sufficient nexus betweenAllstate and the defendants. Alternatively, Defendants move for a moredefinite statement.

For reasons set forth below, the Court GRANTS IN PART and DENIES INPART Defendants' Motion to Dismiss [doc. #31] and DENIES Defendants'Motion for a More Definite Statement [doc.# 31].


On a motion to dismiss, this Court must accept the factual allegationscontained in thePage 3Amended Complaint [doc. #59] ("Amended Compl.") and exhibitsattached thereto,1 and Amended RICO Statement [doc. #9] as true anddraw all reasonable inferences in favor of Allstate. See Conley v.Gibson, 355 U.S. 41, 45-46 (1957); see also Taylor v. VermontDep't Of Educ., 313 F.3d 768, 776 (2d Cir. 2002) (stating that, on amotion to dismiss, the Court is "generally limited to the facts presentedwithin the four corners of the complaint, to documents attached to thecomplaint, or documents incorporated within the complaint byreference").2 Although the legal issues in this case are complex thefacts are relatively straightforward.

At all relevant times, Seigel was a medical doctor, board certified inneurology and licensed to practice in Connecticut. Amended Compl. ¶2. Seigel is the principal of Seigel P.C., and he and Ellen Seigel,Seigel's wife, are the shareholders of Seigel P.C. Id. If 4. TheAmended Complaint alleges, and Seigel has stipulated in a plea agreementwith the U.S. Attorney,3 that from in or about December 1996 throughin or about August 2000, Seigel knowingly and willfully, and with intentto defraud, devised a scheme to defraud certain entities, includingAllstate, by obtaining money from these entities through false andfraudulent pretenses and representations. Amended Compl. ¶¶ 57;see Stipulation of Offense Conduct ("Stip.") [doc. #1],Page 4Ex. at 8.

As part of his practice, Seigel treated a large number of patients whohad been involved in automobile accidents and had been referred byattorneys or chiropractors. See Stip. at 8. He examined thesepatients for any neurological deficits, performed (or claimed to perform)certain tests and evaluated (or claimed to evaluate) the patients'conditions. Id. Seigel had training in performing a test calledneedle electromyography (EMG), a test which requires a physician toinsert a needle into the patient's relaxed muscle in the injured area,moving the needle to record muscle activity. Reading the results from amachine connected to the needle, the physician gains informationregarding the health of the muscle. Id. During the relevantperiod, Seigel submitted bills to various insurance providers, includingAllstate, for over 7000 EMG procedures, intending that Allstate and theother insurers pay him for performing said procedures. Stip. at 8.However, many of these billings were fraudulent, as Seigel did notperform the EMG test on a significant number of his patients, but stillknowingly billed the insurance providers for the tests. Id.Seigel is also trained to administer Nerve Conduction Study ("NCS")testing.4 Amended Compl. ¶ 43. NCS testing requires the clinicianto measure nerve impulses during stimulation and to obtain informationregarding the speed and time of nerve impulses. Id. ¶ 45.Since January 1, 1996, to bill for NCS testing in compliance with theAmerican Medical Association's CPT protocols, the clinician is requiredto measure and record amplitude information in the completion of alegitimate NCS test. Id. ¶ 48. Allstate alleges that all NCStests for whichPage 5

Seigel submitted bills under certain current procedural terminologycodes were incomplete. Id. ¶ 50. Furthermore, Allstatealleges that Defendants intentionally authored medical reports thatcontained conclusions and recommendations that were false and misleadingin light of actual test results. Id. ¶¶ 96(3), 97. Allstateasserts that Seigel's fraudulent billing scheme artificially inflated theperceived value of tort claims and the costs associated with such claims,contributing to Allstate's payment of over $3,400,000 injury andsettlement awards. Id. ¶ 8.

Allstate claims that it suffered substantial financial losses resultingfrom the pattern of criminally fraudulent conduct by Seigel. The injuriesfor which compensatory damages are sought include, but are not limitedto: (1) Allstate's loss of its ability to conduct its insurance businesson the basis of true, accurate, and complete assessments of legitimate,compensable claims; (2) Allstate's loss of funds paid for false andfraudulent (whether wholly fictitious or grossly inflated) bills forservices, which funds, in part, enabled Seigel to perpetuate his patternof racketeering activities and enhance his ability to further Seigel'sbusiness by and through the operation of the fraudulent enterprise; (3)Allstate's payments on fraudulently inflated settlement claims inthird-party, bodily-injury claims where such payments were based uponDefendants' fraudulent medical documentation and billing; (4) Allstate'spayments on judgments or to settle civil litigation cases where Allstatewas obligated to pay bodily-injury tort awards that were artificially andfalsely inflated (based upon Defendants' fraudulent medical documentationand billing); (5) Allstate's expenses incurred to review, adjust,investigate, litigate and pay the false and fraudulent claims created bySeigel and supported by and through Seigel's pattern of racketeeringactivity; and (6) Allstate's past and continuing financial burden toestablish and carry out systems and policies to detect false, fraudulent,and inflated claims. Id. If 11.Page 6

The Amended Complaint contains the following counts: Count I againstSeigel only for violation of 18 U.S.C. § 1962(b) and § 1962(c);Count II against Seigel and Seigel P.C. for violation of18 U.S.C. § 1962(c); Count III against Seigel only for violation of18 U.S.C. § 1962(a); Count IV against Seigel and Seigel P.C. for common lawfraud; Count V against all Defendants for violation of CUTPA, Conn. Gen.Stat. § 42-110(b); Count VI against Seigel and Seigel P.C. for violation ofCHIFA, Conn. Gen. Stat. § 52-442; and Count VII against allDefendants for injunctive relief. Amended Compl. at 86-97.


The RICO statute creates civil (and criminal) liability against anyperson who: (a) invests or otherwise uses, directly or indirectly, incomederived from a pattern of racketeering activity to acquire an interest inor to establish or operate an enterprise engaged in interstate commerce;(b) acquires or maintains, directly or indirectly, an interest in orcontrol of such an enterprise through a pattern of racketeering activity;(c) is employed by or associated with such an enterprise and conducts orparticipates, directly or indirectly, in the conduct of its affairsthrough a pattern of racketeering activity; or (d) conspires to do any ofthe foregoing. 18 U.S.C. § 1962(a)-(d). Any person "injured in hisbusiness of property by reason of a violation of section 1962" may suefor damages and injunctive or other relief. Id. § 1964(c).To demonstrate standing to sue under RICO, a plaintiff must plead, at aminimum, "(1) the defendant's violation of § 1962, (2) an injury tothe plaintiff's business or property, and (3) causation of the injury bythe defendant's violation. This third requirement is satisfied if thedefendant's injurious conduct is both the factual and proximate cause ofthe injury alleged." Lerner v. Fleet Bank, N.A., 318 F.3d 113,120 (2d Cir. 2003) (internal quotations and citations omitted); seeBaisch v. Gallina, 346 F.3d 366,Page 7372 (2d Cir. 2003).


Defendants first argue that Allstate lacks standing to pursue certainof its RICO claims because Defendants' predicate acts were not theproximate cause of certain of Allstate's alleged injuries. SeeMemorandum of Law in Support to Motion to Dismiss [doc. #32] at 5 (" Supp. of Mot. to Dismiss"). Allstate's Amended Complaint seeksrecovery under RICO for injuries sustained in two basic types ofsituations. One relates to payments that Allstate made to or on behalf ofits insureds who were injured in automobile accidents and who weretreated as patients by Seigel. Amended Compl. ¶ 7. These claims arereferred to in this decision as the "insured patient" claims. Allstatecontends that on behalf of its insureds, Allstate paid for tests thatSeigel either did not perform or inadequately performed.5Id.

A second situation alleged in the Amended Complaint, and the focalpoint of Defendants' present motion, involves payments that Allstate madeon behalf of its insureds who were involved in automobile accidents andwho were alleged to have tortiously injured other individuals (the "tortvictims") who, in turn, were treated as patients by Seigel. AmendedCompl. ¶¶ 6-8. These tort victims were not insured by Allstate butthey received either a money judgment or a settlement from Allstate,which paid the judgment or settlement on behalf of its insureds.Id. ¶¶ 6, 11(2), (3). These claims are referred to in thisdecision as the "insured tortfeasor" claims. Allstate alleges that Seigelfraudulently submitted bills for tests that werePage 8either not performed or were inadequately performed on the tortvictims and that Seigel submitted medical reports that falsely claimedthat the tort victims sustained injuries that they did not, in fact,sustain. Id. ¶¶ 6, 7. In the insured tortfeasor situation,Seigel typically rendered the bills for his treatment of the tort victimsdirectly to the tort victim's attorney, and the attorney then held thebill during the pendency of the action or claim and ultimately paidSeigel directly from the proceeds of any judgment or settlement paid byAllstate. Allstate's claims involving insured tortfeasors dwarf inmagnitude its claims involving insured patients.

Defendants do not contest Allstate's standing to sue under RICO forinjuries Allstate sustained in the insured patient situation. Transcriptat 9. However, in their Motion to Dismiss, Defendants challengeAllstate's standing to sue under RICO for claims involving insuredtortfeasors. Specifically, Defendants argue that Allstate's injuriesarising from the insured tortfeasor claims are too remote, indirect andspeculative to satisfy the proximate cause requirements of RICO. Mem. inSupp. of Mot. to Dismiss at 2. The Court disagrees.

In a trilogy of cases decided within the last year, the Second Circuithas elaborated on its proximate cause analysis in RICO cases. See,e.g., Baisch v. Gallina, 346 F.3d 366 (2d Cir. 2003); Desiano v.Warner-Lambert Co., 326 F.3d 339 (2d Cir. 2003);6 Lerner v.Fleet Bank, N.A., 318 F.3d 113 (2d Cir. 2003). The court hasspecified a two-step inquiry. "First, the plaintiff's injury must havebeen `proximately caused by a pattern of racketeering activity violating[18 U.S.C.] § 1962 or by individual RICO predicate acts.'"Lerner, 318 F.3d at 122-23Page 9(quoting Hecht v. Commerce Clearing House, Inc.,897 F.2d 21, 23 (2d Cir. 1990)). This is the so-called "direct injury" test.The "critical question posed by the direct injury test is whether thedamages a plaintiff sustains are derivative of an injury to a third party.If so, then the injury is indirect; if not, it is direct." Laborer's Local17 Health and Benefit Fund v. Philip Morris, Inc., 191 F.3d 229,238-39 (2d Cir. 1999); see Baisch, 346 F.3d at 373. As theSupreme Court held in its seminal decision on RICO standing, "a plaintiffwho complained of harm flowing merely from the misfortunes visited upon athird person by the defendant's acts was generally said to stand at tooremote a distance to recover." Holmes v. Secs. Investor Prot.Corp., 503 U.S. 258, 268-69 (1992); see Baisch, 318 F.3d at374. The second part of the test asks whether the plaintiff "suffered adirect injury that was foreseeable." Id. "The reasonablyforeseeable victims of a RICO violation are the targets, competitors andintended victims." Lerner, 318 F.3d at 123; seeDesiano, 326 F.3d at 346.

Turning first to the second requirement — foreseeability —there can be no serious question that Allstate was the "reasonablyforeseeable or anticipated" victim of Seigel's alleged fraudulentscheme, even in the insured tortfeasor situation. See FirstNationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 769(2d Cir. 1994). Indeed, it is difficult to identify anyother target or victim of Seigel's fraudulent scheme thanthe insurers that paid damages or settlements based on his fraudulentmedical reports and billings. In fact, in his guilty plea, Seigelacknowledged that he had "knowingly, willfully and with the intent todefraud, participated in a scheme with knowledge of its fraudulent natureand with the intent to defraud insurance providers of money and property,through the submission of fraudulent medical invoices." Stip. at 8.Furthermore, even if there were other targets or victims of Seigel'salleged frauds, the Second Circuit hasPage 10recently cautioned that "[n]o precedent suggests that aracketeering enterprise may have only one `target' or that only a primarytarget has standing." Baisch, 346 F.3d at 375; see, e.g.,Commercial Cleaning Servs., LLC v. Colin Serv. Sys., Inc.,271 F.3d 374, 380 (2d Cir. 2001). Assuming, as it must, the truth of theallegations set forth in the Amended Complaint, the Court concludes thatSeigel's alleged acts involving insured tortfeasors were "a substantialfactor in the sequence of responsible causation" and that the injuriesAllstate alleges arising from the insured tortfeasor claims were"reasonably foreseeable or anticipated as a natural consequence" ofSeigel's false bills and medical reports. See, e.g., Baisch, 346F.3d at 374; Lerner, 318 F.3d at 123.

The real issue in this case is not foreseeability, but ratherdirectness — the first requirement for proximate cause under RICO.For "an allegation of specific intent does not overcome the requirementthat there must be a direct injury to maintain this action." LaborersLocal 17, 191 F.3d at 242. Courts have offered a variety of verbalformulations in an attempt to provide clarity to the directness inquiry,though the Supreme Court has cautioned, "the infinite variety of claimsthat may arise make it virtually impossible to announce a black-letterrule that will dictate the result in every case." Holmes, 503U.S. at 274 n.20 (quoting Assoc. Gen. Contractors of Cal., Inc. v.Cal. State Council of Carpenters, 459 U.S. 519, 536 (1983)). Severaldecisions in the Second Circuit have asked whether the RICO plaintiff'sinjuries are "derivative" or "wholly derivative" of harm that thedefendant's conduct caused to others. See, e.g., Desiano, 326F.3d at 350; Laborers Local 17, 191 F.3d 239. Thus, inLaborers Local 17, the court concluded that the harm to theunion insurance plans was derivative of the harm that cigarettemanufacturers caused to insured smokers themselves. Id. at 244.By contrast, in Desiano, thePage 11court found that the economic harm to insurers from the defendant'smisrepresentations regarding Rezulin was direct and not derivative of theharm sustained by any given patient who became ill from ingestingRezulin. Desiano, 326 F.3d at 349. As the Second Circuitexplained, the defendants' "fraud directly caused economic loss to themas purchasers, since they would not have bought Defendants' product,rather than available cheaper alternatives, had they not been misled byDefendants' misrepresentations." Id.

While this case is not precisely either Desiano orLaborers Local 17, the Court believes that this case is closerto Desiano than to Laborers Local 17. Here, Allstatewas directly injured by Seigel's fraudulent conduct, since Allstate paidsettlements and judgments that were based, at least in part, on phonymedical bills, tests that were never performed and/or medical reportsthat purportedly documented injuries that had never been sustained by thetort victims. Allstate's injury in the insured tortfeasorsituation — the excess money it alleges that it paid for judgmentsand settlements as a result of Seigel's fraud — is not derivativeof harm to any third party. See Desiano, 326 F.3d at 349;see also Baisch, 346 F.3d at 373.

Relying on Blue Cross & Blue Shield United of Wis. v.Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995), Defendants contendthat because Allstate did not make settlement and judgment payments inthe insured tortfeasor situation directly to Seigel, Allstate's injuriesfrom Seigel's fraud are too indirect to satisfy RICO's causationrequirements. In Marshfield, Blue Cross sued Marshfield Clinicunder the antitrust laws to recover overcharges.7 The Seventh Circuitheld thatPage 12Blue Cross had standing to pursue the overcharges because BlueCross paid the Clinic directly on behalf of Blue Cross's patient-insuredsfor the "lion's share" of the alleged overcharges to thepatient-insureds. In the insured tortfeasor context, Defendants correctlypoint out, Allstate paid the tort victim's lawyer, who then paid Seigelfor his services from the settlements or judgments on behalf the tortvictim.

Admittedly, the route by which Allstate's funds got into Seigel'spocket was less direct than in Marshfield Clinic. But it was notso circuitous or contingent as to deny Allstate standing to seek torecover those funds from Seigel. In this case, the tort victims (andtheir lawyers) were mere conduits through which Seigel fraudulentlyextracted funds from Allstate and other insurers to which he was notentitled. Defendants contend that the "direct" victims of Seigel's fraudare the tort victim patients of Seigel who were charged for tests notperformed or inadequately performed by virtue of the amounts that theirattorneys deducted from the Allstate settlements or judgments andremitted to Seigel. But it is fanciful to speak of the tort victimpatients of Seigel as his "victims," for as a result of Seigel'sfraudulent billings and medical reports, his patients receivedsettlements and judgments to which (at least in part) they were notentitled. While no one claims that the tort victims themselves were awareof, or complicit in, Seigel's fraud, they are more properly seen as"beneficiaries," not "victims." That Seigel knowingly used theseindividuals as the vehicles by which he fraudulently obtained money fromAllstate to which he was not entitled does not make Allstate's injuriesany less direct.Page 13

The Court is fortified in its view that Allstate's injuries satisfy thedirectness test by consideration of the three policy concerns that theSupreme Court in Holmes identified as informing RICO's proximatecause analysis: 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 other, independent factors. Second, quite apart from problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely.Holmes, 503 U.S. at 269-70.

Defendants argue that Allstate's judgments and settlements in theinsured tortfeasor setting are attributable to the negligent conduct ofAllstate's insureds and, therefore, it will be too difficult to ascertainthe amounts properly attributable to the tortious conduct of Allstate'sinsureds versus Seigel's fraud. The Court disagrees. While the tortiousconduct of Allstate's insureds may well have been the reason why Allstatepaid a settlement or judgment in the first place, if the allegations ofthe Amended Complaint are believed (as they must), at least some portionof those settlements or judgments is directly attributable to Seigel'sfraud. Moreover, Allstate alleges that it would not have settled claimsor paid judgments in lawsuits had it known of Seigel's fraud and insteadAllstate would have defended those claims or actions on the ground thatthe tort victim's alleged medical treatment and diagnosis was false andfraudulent. See Amended Compl. ¶ 390. And at this stage ofthe litigation, this Court must accept Allstate's assertions as true.Page 14

To be sure, some categories of damages that Allstate seeks pose moredifficult ascertainment problems than others. At one end of the spectrumare judgments that Allstate paid that expressly include as one item ofeconomic damage, the bills for tests that Seigel either never performedor inadequately performed or amounts for injuries that Seigel falselyrepresented the tort victim had sustained. At the other end of thespectrum are lump-sum settlements that Allstate paid where Seigel'sdiagnosis or bills were but a very small portion of the amounts sought bythe tort victim and the nature of the settlement does not readily lenditself to segregation. However, the Court believes that thoseascertainment problems, which are not necessarily insurmountable, arebetter addressed in the context of the traditional standards for recoveryof damages rather than in the context of standing to pursue the claims atall.

Defendants also argue that the Court will be required to allocatedamages among Seigel's tort victim patients and Allstate and that thoseallocation problems counsel against granting RICO standing for thetortfeasor insured claims. However, as previously stated, the Court doesnot understand how Seigel's tort victim patients would be entitled torecover from Seigel for payments made by Allstate for medical tests thatwere never performed or improperly performed or for injuries that thetort victims never sustained. Any recovery of these sums by the tortvictim patients from Seigel would be subject to reimbursement toAllstate — which, after all, is the party that is actuallyout-of-pocket as a result of Seigel's fraud — or, if there were noreimbursement, any such recovery by the tort victim patients would be awindfall for them. As a consequence, the second Holmes factorargues for granting standing to Allstate, not denying it.

For the same reason, the third Holmes factor — whichcounts on the most directly injured party to vindicate the interestsprotected by RICO — favors Allstate, not Defendants.Holmes,Page 15503 U.S. at 269-70. Defendants assert that Seigel's tort victimpatients will vindicate the law by suing Seigel for the fraudulent billsand medical diagnoses he made on their behalf. But for reasons statedpreviously, it is difficult to understand how those who actuallybenefitted (albeit unwittingly) from Seigel's fraud could sue him torecover amounts paid by Allstate that the tort victim patients were neverentitled to receive in the first place. That is, wouldn't Seigel claim insuch actions that the tort victim patients lacked standing to sue himbecause they were not injured by his conduct but actually benefitted fromit? More to the point, however, it is difficult to understandwhy those tort victim patients would bother bringing such anaction even if they could do so. The tort victims who recovered more thanthey were entitled to because of Seigel's fraudulent bills and medicalreports are unlikely to band together to sue Seigel to recover amounts towhich they are never entitled and which they would likely be required topass along to Allstate by way of reimbursement. See MarshfieldClinic, 65 F.3d at 1415 ("It would be cumbersome, to say the least,for patients of Marshfield Clinic to organize in a class action torecover money that the patients never paid and that if they received in ajudgment or settlement they would have to share with Blue Cross; for BlueCross could seek and probably obtain restitution of moneys paid bymistake to the insureds because [it] paid for expenses that the insuredshad not in the end incurred.").

Accordingly, based on the allegations of the Amended Complaint, theCourt concludes that Allstate has alleged sufficient facts, which ifproved, would entitle it to recovery under RICO in the insured tortfeasorsituation.


In a related, though independent, vein, Defendants next argue thatcertain of thePage 16categories of damages that Allstate seeks are too speculative as amatter of law. In particular, Defendants target what the parties havecalled Allstate's "Seigel effect" damages. The Seigel effect damages arealleged to consist of the additional costs to Allstate resulting from:(1) treatments that the tort-victim claimant sought from neurologists;(2) medical expenses attributable to false testing; (3) referrals totreating chiropractors (thus escalating overall medical expenses); (4)fraudulent medical conclusions documenting non-existent injuries; and (5)patient "impairment" ratings based upon testing that was not performed ornot performed completely. Amended Compl. ¶ 386. In addition to theexpenses resulting from these alleged activities, the Seigel effectdamages include the amounts Allstate paid in third-party settlements andawards in reliance upon Defendants' false medical documentation. Allstateasserts that it can demonstrate statistically (and it has retained astatistician to do so) that it paid an average of 31% more to settlecases in which tort victims were treated or seen by Seigel than in othercases involving similarly situated victims who were not treated or seenby Seigel. Id. ¶ 387. In addition, Allstate seeks recoveryof all expenses incurred to review, adjust, investigate and litigatefalse and fraudulent claims submitted by Seigel, as well as the costsborne by Allstate to establish and carry out systems and policies todetect false, fraudulent, and inflated claims. Amended Compl. ¶ 11.

As Defendants note, certain of Allstate's claims for damages appear ontheir face to be speculative and in some cases, exaggerated. However, theCourt is mindful that its task "in ruling on a Rule 12(b)(6) motion ismerely to assess the legal feasibility of the complaint, not to assay theweight of the evidence which might be offered in support thereof."Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers& Lybrand, LLP, 322 F.3d 147, 158 (2d Cir.Page 172003) (citation and quotation marks omitted). Hence, dismissal of acomplaint pursuant to Fed.R.Civ.P. 12(b)(6) is improper "unless itappears beyond doubt that the plaintiff can prove no set of facts insupport of his claim which would entitle him to relief." Id.This case is still at its inception and the Court believes it ispremature to decide ex ante that Allstate will not under anycircumstances be able to present proof of its damages with the precisionrequired by relevant case law.

The Court emphasizes that at this stage it has made no determinationthat Allstate will be able to prove its damages with the precisionrequired by case law or that the statistical evidence Allstate hasproffered is valid or will satisfy either the requirements of the FederalRules of Evidence or substantive law. Those are all issues for anotherday, once discovery is complete and the Court has the full record beforeit.


Count III of the Amended Complaint against Seigel alleges that heviolated § 1962(a) on the grounds that he "fraudulently obtainedpayment from Allstate through a pattern of racketeering activity and hasused and/or invested directly or indirectly said income or the proceedsof said income in the operation of Seigel P.C." Amended Compl. ¶ 425.Seigel moves to dismiss this count because Allstate has failed to allege"investment injury" as required by § 1962(a).

Section 1962(a) provides as follows:

It shall be unlawful for any person who has received any income derived, directly or in directly, from a pattern of racketeering activity . . . to invest, directly or indirectly, any part of such income, or the proceeds of such income, in the acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreignPage 18 commerce.

The Second Circuit has made clear that "a civil RICO claim under §1962(a) must be premised on injury by means of defendants' investmentof racketeering income." Ouaknine v. MacFarlane, 897 F.2d 75, 77 (2dCir. 1990) (emphasis added). "[U]nder the plain terms of the statute, tostate a civil claim . . . for a violation of § 1962(a), aplaintiff must allege injury `by reason of defendants' investment ofracketeering income in an enterprise." Id. at 82-83; seeDiscon, Inc. v. Nynex Corp., 93 F.3d 1055, 1063 (2d Cir. 1996),vacated in part on other grounds, 525 U.S. 128 (1998). Thus,§ 1962(a) requires a plaintiff to allege and prove that theplaintiff's injury was caused by the defendant's investment ofracketeering proceeds. See Ouaknine, 897 F.2d at 83 ("[B]ecausethe conduct constituting a violation of § 1962(a) is investment ofracketeering income, a plaintiff must allege injury from the defendant'sinvestment of the racketeering income to recover under § 1962(a)").

While "investment" might appear to contemplate a channeling offraud-derived profits back to a RICO violator, case law squarely rejectssuch an interpretation. For when racketeering proceeds are merelyreinvested back into the same RICO enterprise, the plaintiff's injuriesderive proximately not from the investment but rather from the predicateacts themselves, and "§ 1962(a) aims at punishing not the predicateoffenses but the investment of the ill-gotten gains of the predicateoffenses." Alien v. New World Coffee, No.OO-CV-2610, 2002 WL432685, at *2 (S.D.N.Y. Mar. 19, 2002); see, e.g., Brittingham v.Mobil Corp., 943 F.2d 297, 305 (3rd Cir. 1991) ("The direct cause ofplaintiffs' alleged injuries was the fraudulent conduct. Plaintiffs haveneither alleged nor demonstrated a connection with the use or investmentof racketeering incomePage 19other than the normal reinvestment of corporate profits.");8see also USA Certified Merchants, LLC v. Koebel, 262 F. Supp.2d 319,331 (S.D.N.Y. 2003) ("Where investment of racketeering proceeds backinto the same RICO enterprise is alleged, the injuries stem proximatelynot from the investment, but from the predicate acts that make up theracketeering activity."); see Falise v. American Tobacco. Co.,94 F. Supp.2d 316, 349-50 (E.D.N.Y. 2000) ("Where reinvestment ofracketeering proceeds back into the same RICO enterprise is alleged, theinjuries stem proximately not from the investment, but from the predicateacts that make up the racketeering activity"); see Vista Co. v.Columbia Pictures Indus., Inc., 725 F. Supp. 1286, 1299-1300(S.D.N.Y. 1989) (court rejected plaintiffs' argument that they stated aclaim under § 1962(a) by alleging that defendant invested or used theincome resulting from defendant's pattern of racketeering activity tofacilitate its own operations and that the continuing operation injuredthe plaintiffs, stating that "plaintiffs must allege that they wereinjured specifically by the use or the investment of income derived fromracketeering activity").

The Amended Complaint alleges in conclusory fashion, without any detailwhatsoever,9Page 20that Seigel invested his alleged racketeering profits in SeigelP.C., and thus did not, strictly speaking, reinvest the fraudulentlyobtained funds in his own activities. Amended Compl. ¶ 425. However,while it may be the case that Seigel did not actually place the money inhis own pocket but into his own P.C., that should not matter in thecircumstances of this case, where Seigel P.C. was wholly owned by Seigeland his wife and was the vehicle through which Seigel is alleged to haveperpetrated the predicate acts. See Ouaknine, 897 F.2d at 83("The essence of a violation of § 1962(a) is not commission ofpredicate acts but investment of racketeering income."). Indeed, theAmended Complaint repeatedly alleges that "Seigel, through Seigel, P.C."engaged in the various predicate acts that form the basis of Allstate'sRICO claims. Thus, Allstate only alleges injury stemming from thepredicate acts of racketeering activity and no distinct injury flowingfrom the investment of the ill-gotten gains. See United States FireIns. Co., 2004 WL 324477, at *10 ("Here, Plaintiff's alleged injuryconsists of providing insurance at rates less than the rates it couldhave charged if it had known the truth . . . This injury did notresult from the investment of the racketeering proceeds . . . butrather flowed directly from the predicate fraudulent acts."); Alien,2002 WL 432685, at *2 ("The purpose of 18 U.S.C. § 1962(a) is`to prevent racketeers from using their ill gotten gains to operate, orpurchase a controlling interest in, legitimate businesses.'") (citationomitted).

Moreover, the Supreme Court has characterized the "enterprise"described in § 1962(a) as "the victim of unlawful activity."Nat'l Org.for Women, Inc. v. Scheidler, 510 U.S. 249, 259(1994). In essence, this RICO provision (as well as § 1962(b)discussed infra) is aimed atPage 21preventing racketeers from using the proceeds from theirracketeering scheme to invest in, or acquire interests in, legitimateenterprises. See USA Certified Merchants, 262 F. Supp.2d at330-31. Based upon the allegations of the Amended Complaint, Seigel P.C.would hardly qualify as a innocent victim of Seigel's fraud.

Because Allstate has not alleged "investment injury" distinct from theinjuries it sustained as a result of the predicate acts, the Court willgrant Defendants' motion to dismiss Allstate's § 1962(a) claimagainst Seigel, Count III of the Amended Complaint.


Count I of the Amended Complaint seeks recovery from Seigel under §§1962(b) and (c). Defendants, however, only move to dismiss the §1962(b) claim in Count I. With regard to § 1962(b), that provisionmakes it "unlawful for any person through a pattern of racketeeringactivity . . . to acquire or maintain, directly orindirectly, any interest in or control of any enterprise which is engagedin, or the activities of which affect, interstate or foreign commerce."(emphasis added). It was enacted for purposes similar to those for which§ 1962(a) was designed. See United States Fire Ins. Co.,2004 WL 324477, at *13 ("The purpose of § 1962(b) is to prohibit thetakeover of a legitimate business through racketeering, typicallyextortion or loansharking.") (internal quotations omitted). In anargument that is similar to that which they have advanced regarding §1962(a), Defendants contend that Allstate has failed to allege the"acquisition or maintenance" injury required by RICO.

Like § 1962(a), § 1962(b) requires a plaintiff to allege an"acquisition injury" separate and distinct from the injuries sustained asa result of the defendant's commission of predicate acts. SeeDiscon, 93 F.3d at 1063; see also Danielsen v. Burnside-OttAviation Training Ctr.,Page 22Inc., 941 F.2d 1220, 1231 (D.C. Cir. 1991); UnitedStates Fire Ins. Co., 2004 WL 324477, at *13; Redtail Leasing,Inc. v. Bellezza, No. 95 CV 5191, 1997 WL 603496, at *3 (S.D.N.Y.Sept. 30, 1997). Here, Allstate alleges injuries stemming from Seigel'sacquisition or maintenance of an interest in Seigel P.C. However, theAmended Complaint does not explain how the maintenance of such aninterest injured Allstate separate and apart from the injuries Allstatesustained as a result of Seigel's fraudulent activities. LightningLube v. Witco. Corp., 4 F.3d 1153, 1191 (1st Cir. 1993);seeDiscon, Inc., 93 F.3d at 1063 (plaintiff failed to state acause of action under § 1962(b) on the ground that plaintiff onlyalleged injuries stemming from the predicate acts and did not describethe injuries that resulted from the acquisition or maintenance of anenterprise); Alien, 2002 WL 432685 at *5 ("A plaintiff cannotrecover under § 1962(b) unless he alleges a distinct injurycaused not by predicate acts but by the defendant's acquisition ormaintenance of an interest in or control of an enterprise.") (emphasisadded).

Allstate's claim under § 1962(b) is thus deficient for the samereason that its § 1962(a) claim is deficient — Allstate hasfailed to specify an injury that resulted from the acquisition ormaintenance of a RICO enterprise that is distinct from the injuriesincurred as a consequence of the predicate acts themselves. See,e.g., United States Fire Ins. Co., 2004 WL 324477, at *13(dismissing § 1962(b) claim for failure to allege "acquisitioninjury" separate from injury caused by the predicate acts themselves).Simply put, Allstate's contention that Seigel maintained an interest inSeigel P.C. with the assistance of proceeds from Seigel's fraudulentactivities, thereby enabling Seigel to continue his fraudulent conduct,does not describe an independent harm that is distinct from the predicateacts of fraud. Therefore, the Court will grant Defendants' motion todismiss Allstate's § 1962(b) claim against Seigel, Count I of theAmended Complaint.Page 23


In Defendants' final argument under RICO, they urge this Court todismiss Count II of the Amended Complaint, which asserts claims againstboth Seigel and Seigel P.C. for violating § 1962(c). Section 1962(c)provides that: It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."Under this section, the RICO `person' must conduct the affairs ofthe RICO `enterprise' through a pattern of racketeering activity."Discon, 93 F.3d at 1063 (quoting Riverwoods Chappaqua Corp.v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir. 1994)). TheSecond Circuit has made it clear "that the person and the enterprisereferred to must be distinct" and that only the RICO person but not theenterprise is subject to RICO liability. Discon, 93 F.3d at1063; see Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158,161 (2001) (stating that § 1962(c) requires some distinctness betweenthe RICO defendant and the RICO enterprise); see also De Falco. v.Bernas, 244 F.3d 286, 307 (2d Cir. 2001) ("[I]t is well establishedin this Circuit that, under § 1962(c), the alleged RICO `person' andRICO `enterprise' must be distinct.").

Defendants argue that Count II should be dismissed against Seigel P.C.because the P.C. cannot simultaneously be a RICO person and a RICOenterprise.10 Mem. in Supp. of Mot. to Dismiss at 17-18. Allstateagrees with Defendants that Seigel P.C. cannot be both the RICO personand the RICO enterprise. Mem. in Opp. to Mot. to Dismiss at 53. However,AllstatePage 24argues that its § 1962(c) claim against Seigel P.C. is notdefective because the enterprise in Count II is not Seigel P.C. butrather Allstate itself.

In Reves v. Ernst & Young, 507 U.S. 170 (1993), theSupreme Court considered the meaning of § 1962(c)'s requirement thata person employed by or associated with any enterprise "conduct orparticipate, directly or indirectly, in the conduct of such enterprise'saffairs through a pattern of racketeering activity." The Court held that"one is not liable under [§ 1962(c)] unless one has participatedin the operation or management of the enterprise itself." Id. at 185(emphasis added). Under the "operation and management" test, a defendantmust have "some part in directing the enterprise's affairs." 178. As the Supreme Court explained in Reves: Once we understand the word "conduct" to require some degree of direction and the word "participate" to require some part in that direction, the meaning of § 1962(c) comes into focus. In order to "participate, directly or indirectly, in the conduct of such enterprise's affairs," one must have some part in directing those affairs. Of course, the word "participate" makes clear that RICO liability is not limited to those with primary responsibility for the enterprise's affairs, just as the phrase "directly or indirectly" makes clear that RICO liability is not limited to those with a formal position in the enterprise, but some part in directing the enterprise's affairs is required. The "operation or management" test expresses this requirement in a formulation that is easy to apply. Id.

As one court within the Second Circuit has observed, "the `operationand management' test . . . is a very difficult test tosatisfy . . . There is a `substantial difference between actual controlover an enterprise and association with an enterprise in ways that do notinvolve control; only the former is sufficient under Reves." RedtailLeasing, Inc., 2001 WL 863556, at *4; see Dubai Islamic Bank v.Citibank, N.A., 256 F. Supp.2d 158, 164 (S.D.N.Y. 2003). Courtshave held that it is not sufficient "to merely take directions andperform tasks that are necessary orPage 25helpful to the enterprise." Schmidt v. Fleet Bank,16 F. Supp.2d 340, 346 (S.D.N.Y. 1998); accord United State Fire Ins.Co., 2004 WL 324477, at *13. While a defendant need not be involvedin the day-to-day operation of the enterprise, and indeed can be anoutsider to the enterprise, a defendant will not be found to participatein the management or operation of the enterprise unless he is "associatedwith [the] enterprise and participate[s] in the conduct of itsaffairs — that is, participate[s] in the operation or management ofthe enterprise itself." Id. at 185; see United States v.Masotto, 73 F.3d 1233, 1239 (2d Cir. 1996). As a consequence of therigor of this requirement, courts have regularly dismissed claims againstprofessional service providers, such as law firms, that failed to meetthe requirements of the "operation and management" test. See, e.g.,Azrielli v. Cohen Law Offices, 21 F.3d 512, 521-22 (2d Cir. 1994)(RICO claim against attorneys dismissed); Hoyden v. Paul, Weiss,Rifkind, Wharton & Garrison, 955 F. Supp. 248, 254 (S.D.N.Y.1997) (same).

Relying on the First Circuit's decision in Aetna Cas. Sur. Co. v. P& B Autobody, 43 F.3d 1546 (1st Cir. 1994), Allstate argues thatSeigel P.C. did exercise control over All state's claims settlementoperations by submitting false medical billings and medical reports. InP&B Autobody, the First Circuit upheld a jury verdict for aninsurer under § 1962(c) against certain insureds, claimants and bodyshops who had associated together to submit false claims to the insurer.The Court held that the evidence viewed in the light most favorable tothe insurer permitted the jury to conclude that "[b]y acting with purposeto cause Aetna to make payments on false claims, appellants wereparticipating in the `operation' of Aetna." Id. at 1560.

P&B Autobody reached its conclusion by extrapolating fromReves1 recognition that an enterprise might be operated orcontrolled by bribery to find that the defendant exerted a degreePage 26of control over Aetna that gave rise to a § 1962(c) claim. 42F.3d at 1560. However, other courts that have considered the briberycontext examined in Reves have noted that the effect of bribery"is qualitatively different from mere influence or assistance because theoutsider paying the bribes buys actual control over the actions of aperson within the enterprise. Giving a bribe can be tantamount to gaininga management position within the enterprise, because the insider takingthe bribes acts under the direction of the outsider giving them inconducting the affairs of the RICO enterprise." Dept. of Econ.Dev. v. Arthur Andersen & Co., 924 F. Supp. 449, 466-67 (S.D.N.Y.1996). If a defendant bribes a company official to engage in certainconduct, the defendant can rightly be seen as "participating " in theoperation and management of the company through the conduct of the bribedofficial. It is considerably less clear whether that characterizationproperly applies when an outside has merely defrauded a company.

Moreover, the Court is concerned that the First Circuit's constructionof the operation and management test might well read that test out of theact. For under Allstate's reading of P&B Autobody, 11any time a company is defrauded by the conduct of a defendant, one couldsay that the defendant "controlled" the company's operations, sinceabsent the fraud, the company would not have done what it did or acted inthe manner in which it did. Such a free-wheeling interpretation of theoperation and management test would appear to be inconsistent withReves, and as Allstate's counsel essentially conceded at oralargument, with the more rigorous approachPage 27to the operation and management requirement that district courts inthe Second Circuit have adopted. Transcript at 101; see RedtailLeasing, 2001 WL 863556, at *4 ("the `operation and management'test . . . is a very difficult test to satisfy") (citation omitted);see also Vickers Stock Research Corp. v. Quotron Syst., Inc.,No. 96 Civ. 2269, 1997 WL 420265, at *4 (S.D.N.Y. July 25, 1997) ("[A]defendant will not be found to participate in the management or operationof the enterprise simply because he enjoys substantial persuasive powerto induce the alleged enterprise to take certain actions.") (citation andquotation marks omitted).

The Court's considerable skepticism about Allstate's theory aside, theCourt is fully cognizant that it considers this issue on a motion todismiss, before discovery and before all of the facts regardingDefendant's conduct and its effect on Allstate are fully known. In thesecircumstances, the Court is unwilling at this preliminary stage of theproceeding to decide definitively that Allstate will be unable to adduceany evidence to buttress its allegations that Seigel P.C. did in fact"participate in [Allstate's] affairs, directly or indirectly, through apattern of racketeering activity." Amended Compl. ¶ 421; see,e.g., United States Fire Ins. Co., 2004 WL 324477, at *15 (denyingmotion to dismiss); RD Mgmt. Corp. v. Samuels, 203 WL 21254076,*8 (S.D.N.Y. 2003) (denying motion to dismiss); cf. United States v.Alien, 155 F.3d 35, 42 (2d Cir. 1998) (reversing summary judgment onthe issue of participation in the operation and management of anenterprise's affairs). Therefore, the Court will not dismiss Count IIagainst Seigel P.C.


Defendants' motions to dismiss Allstate's common law fraud and CUTPAclaims do not require substantial discussion. Defendants' motion todismiss the common law fraud claims isPage 28founded on its proximate cause arguments, which this Court hasalready rejected. Since the Second Circuit has observed that "inpractice, our cases have held RICO plaintiffs to a more stringent showingof proximate cause than would be required at common law,"Desiano, 326 F.3d at 348 (internal quotation and citationomitted), it necessarily follows that at least at this stage of the case,Allstate has pleaded sufficient facts to withstand a motion to dismissthe common law claims as a matter of law. Even if, as Defendants haveargued, Connecticut has adopted the "Holmes factors indetermining standing for state statutory and common law claims," for thereasons stated previously, the Court concludes that at this stageAllstate has satisfied Holmes' pleading requirements, and,therefore, Connecticut's as well.

As for Allstate's CUTPA claims, relying on Connecticut Pipe TradesHealth Fund v. Philip Morris, Inc., 153 F. Supp.2d 101, 113 n.13(D. Conn. 2001), Defendants argue that Allstate has not alleged any"connection or nexus — business, consumer, competitor, commercialor otherwise — between" Allstate and Seigel with respect to theinsured tortfeasor claims. However, the court's concern inConnecticut Pipe was the apparent absence of anyallegation of a commercial or trade relationship between the plaintiffsand the defendants. Id. As Allstate was the recipient ofDefendants' fraudulent invoices whose payment obligations and litigationdecisions depended upon Defendants' invoices and medical reports, and asSeigel well understood that Allstate (and other insurers) would be theultimate payer of his bills in both the insured patient and insuredtortfeasor situations, the Court is not prepared at this stage toconclude that there was no "connection or nexus" between Allstate and theDefendants sufficient to satisfy CUTPA. Furthermore, ConnecticutPipe makes it clear that directly injured parties have standingunder CUTPA. Id. at 113 ("By limiting standing under CUTPA tothose who werePage 29directly injured by a defendant's unfair trade practices, theintended beneficiaries of CUTPA are afforded full relief"). Since, asdiscussed above, the Court is persuaded at this stage that Allstate wasdirectly injured by Defendants' fraudulent acts, the Court will notdismiss Allstate's CUTPA claim.


As an alternative prayer for relief, Defendants ask the Court torequire a more definite statement from Allstate. A motion for a moredefinite statement is not intended as a substitute for the normaldiscovery process. Rule 12(e) of the Federal Rules of Civil Procedureallows a party to make a motion for more definite statement when thepleading "is so vague or ambiguous that a party cannot reasonably berequired to frame a responsive pleading." Fed.R.Civ.P. 12(e). Here,Allstate's 98-page, 452 paragraph Amended Complaint provides Defendantswith sufficient detail to give them adequate notice of the claims againstthem, and, thus meets the requirement of Rule 8, which prescribes only a"short and plain statement of the claim showing the pleader is entitledto relief." Fed.R.Civ.P. 8. Defendants will undoubtedly requirefurther details regarding Allstate's claims, but they will have to obtainthose details through the normal discovery processes.


Accordingly, Defendants' Motion to Dismiss [doc. # 31] is GRANTED INPART and DENIED IN PART. Defendants' Motion to Dismiss the § 1962(b)claim against Seigel in Count I of the Amended Complaint and the §1962(a) claim against Seigel in Count HI is GRANTED and those claims arehereby dismissed. In all other respects, the Motion to Dismiss is DENIED.The parties should proceed to complete discovery as promptly as possible.All stays of discoveryPage 30heretofore granted are dissolved. The parties are directed toconfer regarding a schedule for completing discovery and submit a jointproposed schedule to the Court no later than April 23, 2004.


1. The exhibits attached to the original Complaint, which were notattached to the Amended Complaint, are incorporated by reference.Citations to the exhibits are to be understood to refer to theattachments to the original Complaint.

2. Allstate asked the Court to convert the Motion to Dismiss into asummary judgment motion under Fed.R.Civ.P. 12(b)(6). Defendants opposeconversion. The Court declines to convert the Motion to Dismiss.Therefore, the Court has limited its review to the Amended Complaint, theAmended RICO Statement and the exhibits attached to the Complaint.

3. Seigel entered a plea agreement with the United States for asingle count of mail fraud in the criminal proceedings against Seigel. Indoing so, Seigel conceded to the conduct described in the Stipulation,which is attached to the Complaint, and therefore Seigel's Stipulationwill be deemed true for the present motion to dismiss.

4. In his plea agreement with the United States, Seigel only pleadedguilty to generating bills for EMG testing that was either not performedor insufficiently performed. Stip. at 8. The parties agreed that the"fraud loss" attributable to Seigel's conduct amounted to $450,000.Id. at 9.

5. In his plea agreement with the United States, Seigel stipulatesto committing mail fraud insofar as: "On or about April 17,2000 . . . for the purposes of executing a scheme to defraud and toobtain monies and properties by false and fraudulent pretenses andrepresentations, or attempting to do so, and with the intent to defraud,Seigel caused to be delivered by U.S. mail [a] bill [for an EMG test thatwas not performed], addressed to the insurance provider. Stip. at 8.

6. While Desiano involved New Jersey's law of proximatecause, the defendants claimed that New Jersey's common law of causationmirrored RICO's proximate cause analysis and therefore the Court analyzedthe claims under RICO's causation analysis. Desiano, 326 F.3d at348-49.

7. Courts frequently look to standing cases under the antitrust lawsas informing the standing analysis under RICO. See, e.g.,Lerner, 318 F.3d at 129 ("In evaluating whether a plaintiff hasstanding under RICO, the court must, as in an antitrust case, `evaluatethe plaintiff's harm, the alleged wrongdoing by the defendants, and therelationship between them.'") (quoting Associated Gen. Contractorsof Cal., 459 U.S. at 535 (1983)); see also Allegheny Gen. Hosp.v. Philip Morris, Inc., 228 F.3d 429, 443 (3rd Cir. 2000)("The principles underlying proximate cause in RICO are analogous tothose in antitrust . . ."); see also Holmes, 503 U.S. at 267(observing that Congress modeled § 1964(c) on the civil-actionprovision of the federal antitrust laws, § 4 of the ClaytonAct).

8. The Third Circuit offered a sound explanation for why merereinvestment would be improper grounds to state a § 1962(a) claim:"Over the long term, corporations generally reinvest their profits,regardless of the source. Consequently, almost every racketeering act bya corporation will have some connection to the proceeds of a previousact. Section 1962(c) is the proper avenue to redress injuries caused bythe racketeering acts themselves. If plaintiff's reinvestment injuryconcept were accepted, almost every pattern of racketeering activity by acorporation would be actionable under § 1962(a), and the distinctionbetween § 1962(a) and § 1962(c) would be meaningless."Brittingham, 943 F.2d at 305.

9. Allstate argues that on a motion to dismiss it is sufficient thatits Amended Complaint alleges that Seigel "invested" the proceeds inSeigel P.C. and that Allstate was injured. Pl.'s Mem. in Opp. to Mot. toDimiss at 55. Allstate is wrong. Courts have repeatedly made it clearthat "[c]onclusory allegations that the defendant `used or invested' theincome derived from racketeering in its operations are insufficient."United States Fire Ins. Co. v. United Limousine Serv., Inc., No.01-CV-10821, 2004 WL 324477, *10 (S.D.N.Y. Feb.6, 2004); see Katzmanv. Victoria's Secret Catalogue, 167 F.R.D. 649, 657(S.D.N.Y. 1996), aff'd, 113 F.3d 1229 (2d Cir. 1997)("Plaintiff's conclusory allegations that Defendants `used or invested'income received . . . is insufficient because it fails to allege howthat use or investment injured them.").

10. Defendants do not argue that the § 1962(c) claim againstSeigel in Count I of the § 1962(c) claim against Seigel in Count IIshould be dismissed.

11. The Court notes that there are factual differences betweenP&B Autobody and the present case that bear on the operationand management issue. While there were no allegations of actual briberyin P&B Autobody, at least two of the named defendants wereAetna appraisers who participated in the widespread fraudulent scheme bysubmitting false appraisals to assist at least one of the auto shopdefendants defraud Aetna, thus arguably making P&B Autobodycloser to a bribed official situation than is alleged in the presentcase. Thus, on its facts, P&B Autobody may be a considerablymore limited holding than Allstate asserts.

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