UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF MICHIGAN 

State Farm Mutual Automobile Insurance 

Company, 

) 

) 

 ) 

 Plaintiff, ) 

 ) 

 v. ) Case No. 2:15-cv-10993 

 ) 

Universal Rehab Services, Inc., 

PhysioFlex, PLLC, 

Ahmad T. Abulabon, P.T., 

Summit Medical Group, PLLC, and 

David Jankowski, D.O., 

) 

) 

) 

) 

) 

Hon. Judge 

Victoria A. Roberts 

Magistrate Judge 

Anthony P. Patti 

 Defendants. ) 

STATE FARM MUTUAL’S MOTION 

TO DISMISS DEFENDANTS’ COUNTERCLAIMS [Dkt. 116] 

 Plaintiff/Counter-Defendant State Farm Mutual Automobile Insurance 

Company (“SFMAIC”), pursuant to Federal Rules of Civil Procedure 12(b)(6) and 

9(b) and the Court’s Order dated September 21, 2016 [Dkt. 121], moves to dismiss 

the Counterclaims [Dkt. 116] filed by defendants Universal Rehab Services, Inc., 

PhysioFlex, PLLC, and Ahmed T. Abulabon, P.T. (collectively “Defendants”) for 

the reasons set forth in the attached Brief. 

 Counsel for SFMAIC contacted opposing counsel and sought, but did not 

obtain, concurrence in the relief sought. 

 WHEREFORE, Counter-Defendant SFMAIC respectfully requests that this 

Court dismiss Defendants’ Counterclaims [Dkt. 116]. 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 1 of 38 Pg ID 5131
2 

Dated: October 10, 2016 Respectfully submitted, 

 

 By: /s/ Kathy P. Josephson 

Ross O. Silverman 

Kathy P. Josephson 

Andrew D. Welker 

Katten Muchin Rosenman LLP 

525 West Monroe Street 

Chicago, IL 60661-3693 

(312) 902-5200 

ross.silverman@kattenlaw.com 

kathy.josephson@kattenlaw.com 

andrew.welker@kattenlaw.com 

Thomas W. Cranmer (P25252) 

Miller, Canfield, Paddock and Stone, 

PLC 

840 W. Long Lake Road, Suite 200 

Troy, Michigan 48098 

(248) 267-3381 

cranmer@millercanfield.com 

Attorneys for Plaintiff SFMAIC 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 2 of 38 Pg ID 5132
UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF MICHIGAN 

State Farm Mutual Automobile Insurance 

Company, 

)

)

 ) 

Plaintiff, ) 

 ) 

v. ) Case No. 2:15-cv-10993 

 ) 

Universal Rehab Services, Inc., 

PhysioFlex, PLLC, 

Ahmad T. Abulabon, P.T., 

Summit Medical Group, PLLC, and 

David Jankowski, D.O., 

) 

) 

) 

) 

) 

Hon. Judge 

Victoria A. Roberts 

Magistrate Judge 

Anthony P. Patti 

Defendants. ) 

STATE FARM MUTUAL’S BRIEF IN SUPPORT OF THE 

MOTION TO DISMISS DEFENDANTS’ COUNTERCLAIMS [Dkt. 116] 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 3 of 38 Pg ID 5133
ii 

STATEMENT OF ISSUES PRESENTED 

1. Should Defendants’ Counterclaims should be dismissed because 

Defendants did not obtain leave from the Court to file their counterclaims? 

2. Should Defendants’ Counterclaim for abuse of process be dismissed 

because it fails to allege elements required under Michigan law, including the 

following: (a) an improper act; (b) an ulterior purpose for the improper act that is 

more than simply retaliatory; and (c) damages? 

3. Should Defendants’ Counterclaim for tortious interference with 

contractual relations be dismissed because it fails to allege elements required under 

Michigan law, including the following: (a) the existence of any contract; (2) the 

breach of any contract; and (3) unjustifiable interference by SFMAIC with any 

such contract? 

4. Should Defendants’ Counterclaim for breach of settlement agreements 

based on SFMAIC’s filing of this lawsuit be dismissed because, based on the 

express terms of the settlement agreements, no such breach occurred? 

5. Should Defendants’ Counterclaim for fraudulent misrepresentation be 

dismissed because it fails to allege: (a) a breach of duty separate and distinct from 

SFMAIC’s contractual obligation to pay no-fault benefits; (b) fraud with sufficient 

particularity to satisfy Fed. R. Civ. P. 9(b)? 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 4 of 38 Pg ID 5134
iii 

STATEMENT OF MOST CONTROLLING AUTHORITIES 

Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, Inc., 2011 WL 2261298 (D. 

Minn. Mar. 21, 2011) 

Elite Entm’t, Inc. v. Khela Bros. Entm’t, 227 F.R.D. 444 (E.D. Va. 2005)

Prof’l Real Estate Inv’r, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56–57 

(1993)

Early Detection Ctr., PC v. N.Y. Life Ins. Co., 157 Mich. App. 618 (1986) 

Thill v. Ocwen Loan Servicing, LLC, 8 F. Supp. 3d 950 (E.D. Mich. 2014)

State Farm Mut. Auto. Ins. Co. v. Physiomatrix, Inc., 2013 WL 509284 (E.D. 

Mich. Jan. 12, 2013) 

Forbes v. Ilitch, 1997 WL 33353844 (Mich. Ct. App. Jan. 31, 1997) 

L&W Servs., Inc. v. Campbell Aviation, Inc., 2001 WL 716933 (Mich. Ct. App. 

Mar. 13, 2001) (per curiam) 

Brock v. Consol. Biomed. Labs., 817 F.2d 24 (6th Cir. 1987)

State Farm Mut. Auto. Ins. Co. v. Radden, 2016 WL 695598 (E.D. Mich. Feb. 22, 

2016) 

MCL § 500.3145(1) 

Fed. R. Civ. P. 15(a) 

Fed. R. Civ. P. 12(b)(6) 

Fed. R. Civ. P. 9(b) 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 5 of 38 Pg ID 5135
iv 

TABLE OF CONTENTS 

Page 

I. INTRODUCTION ........................................................................................... 1

II. RELEVANT BACKGROUND ....................................................................... 2

A. Defendants Ignore Federal Rules And Judge Roberts’s 

Scheduling Order, Filing Untimely Counterclaims Without 

Leave Of Court. ..................................................................................... 2

B. Defendants’ Allegations Regarding SFMAIC’s Purportedly 

Abusive Discovery Conduct Have Been Rejected By The 

Court. ..................................................................................................... 6

III. LEGAL ANALYSIS ....................................................................................... 7

A. The Untimely Counterclaims Should Be Struck For Failure To 

Obtain Leave Of Court And Because Delay Is Unduly 

Prejudicial. ............................................................................................. 7

B. Defendants’ Counterclaims Fail To State A Claim For Relief. ............ 9

C. Defendants Fail To Allege An Actionable Abuse Of Process. ........... 10

D. Claim For Tortious Interference With Contract Is Fatally 

Flawed. ................................................................................................ 15

E. Claim For Breach Of Settlement Agreements Must Be 

Dismissed. ........................................................................................... 18

F. Defendants Cannot State A Claim For Fraud. .................................... 20

G. Claim For Unpaid PIP Benefits Should Be Dismissed Or 

Limited. ............................................................................................... 23

IV. CONCLUSION .............................................................................................. 25

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 6 of 38 Pg ID 5136
v 

TABLE OF AUTHORITIES 

 Page(s) 

Cases 

Allied Mech. Servs., Inc. v. Local 337 of United Ass’n of Journeymen 

& Apprentices of Plumbing & Pipefitting Indus., 

2000 WL 924594 (6th Cir. June 26, 2000) ......................................................... 20 

Ashcroft v. Iqbal, 

129 S. Ct. 1937 (2008) .......................................................................................... 9 

Battah v. Resmae Mortg. Corp., 

746 F. Supp. 2d 869 (E.D. Mich. 2010) ............................................................. 24 

Bern Unlimited, Inc. v. Burton Corp., 

25 F. Supp. 3d 170 (D. Mass. 2014) ................................................................. 7, 8 

Bowlers’ Alley, Inc. v. Cincinnati Ins. Co., 

32 F. Supp. 3d 824 (E.D. Mich. 2014) ............................................................... 22 

Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, Inc., 

2011 WL 2261298 (D. Minn. Mar. 21, 2011) .................................................. 7, 8 

Bundy v. Fed. Nat’l Mortg. Ass’n, 

2011 WL 977531 (E.D. Mich. Feb. 25, 2011) .............................................. 24, 25 

Cal. Motor Transp. Co. v. Trucking Unlimited, 

404 U.S. 508 (1972) ............................................................................................ 17 

Casey v. Auto Owners Ins. Co., 

273 Mich. App. 388 (2007) ................................................................................ 25 

Collins v. CitiMortgage, Inc., 

974 F. Supp. 2d 1034 (E.D. Mich. 2013) ........................................................... 18 

Cooper v. Auto Club Ins. Ass’n, 

481 Mich. 399 (2008) ......................................................................................... 22 

Cruz v. State Farm Mut. Auto. Ins. Co., 

241 Mich. App. 159 (2000) ................................................................................ 25 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 7 of 38 Pg ID 5137
vi 

Ctr. for Dermatology & Skin Cancer, Ltd. v. Humana Ins. Co., 

2012 WL 473133 (N.D. Ill. Feb. 8, 2012) .......................................................... 16 

Curran v. City of Dearborn, 

957 F. Supp. 2d 877 (E.D. Mich. 2013) ............................................................. 10 

Dalley v. Dykema Gossett, 

287 Mich. App. 296 (2010) .......................................................................... 11, 18 

Digital Ally, Inc. v. DragonEye Tech., LLC, 

2014 WL 2865592 (D. Kan. June 24, 2014) .................................................... 7, 8 

Early Detection Ctr., PC v. N.Y. Life Ins. Co., 

157 Mich. App. 618 (1987) ................................................................................ 14 

Eid v. Saint-Gobain Abrasives, Inc., 

377 F. App’x 438 (6th Cir. 2010) ....................................................................... 19 

Ellison v. JP Morgan Chase Bank, 

2013 WL 5913432 (E.D. Mich. Oct. 31, 2013) .................................................. 10 

Estella v. Bristol Hosp., 

2015 WL 5134798 (Conn. Super. Ct. Jul. 31, 2015) .......................................... 16 

Farm Bureau Mut. Ins. Co. v. Knipple, 

2000 WL 33421298 (Mich. Ct. App. May 12, 2000) ......................................... 25 

Feldman v. Green, 

138 Mich. App. 360 (1984) ................................................................................ 17 

Flores v. Emerich & Fike, 

2008 WL 2489900 (E.D. Cal. June 18, 2008) .................................................... 12 

Forbes v. Ilitch, 

1997 WL 33353844 (Mich. Ct. App. Jan. 31, 1997) .......................................... 16 

Foremost Promotions, Inc. v. Pabst Brewing Co., 

15 F.R.D. 128 (N.D. Ill. 1953) ............................................................................ 11 

Friedman v. Dozorc, 

412 Mich. 1 (1981) ............................................................................................. 10 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 8 of 38 Pg ID 5138
vii 

Glass v. Van Lokeren, 

2014 WL 1233704 (Mich. Ct. App. Mar. 25, 2014)........................................... 17 

GMA Cover Corp. v. Saab Barracuda, LLC, 

2012 WL 642739 (E.D. Mich. Feb. 8, 2012) ...................................................... 17 

Hensley Mfg. v. ProPride, Inc., 

579 F.3d 603 (6th Cir. 2009) ................................................................................ 9 

Horacek v. Neph, 

466 F. App’x 508 (6th Cir. 2012) ....................................................................... 14 

Ioppolo v. Rumana, 

2011 WL 3568863 (M.D. La. Aug. 15, 2011) .................................................... 13 

Keys v. Cent. Mortg. Co., 

2014 WL 5511510 (E.D. Mich. Oct. 31, 2014) .................................................. 14 

L&W Servs., Inc. v. Campbell Aviation, Inc., 

2001 WL 716933 (Mich. Ct. App. Mar. 13, 2001) ............................................. 18 

Larobina v. McDonald, 

274 Conn. 394 (2005) ......................................................................................... 13 

Lonchar v. Thomas, 

517 U.S. 314 (1996) ............................................................................................ 11 

Mahrle v. Danke, 

216 Mich. App. 343 (1996) ................................................................................ 15 

McKinney v. Misico Inv., LLC, 

2011 WL 5244956 (E.D. Mich. Nov. 3, 2011) ............................................. 23, 24 

Morris v. Ambassador Nursing Home, Inc., 

845 F. Supp. 1164 (E.D. Mich. 1994) ................................................................ 16 

PPG Indus., Inc. v. Payne, 

2012 WL 1836314 (E.D. Tenn. May 21, 2012) ................................................. 12 

Patrick v. Wal-Mart, Inc. - Store No. 155, 

2012 WL 1739143 (5th Cir. May 17, 2012) ....................................................... 24 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 9 of 38 Pg ID 5139
viii 

Pennwalt Corp. v. Zenith Labs., Inc., 

472 F. Supp. 413 (E.D. Mich. 1979) .................................................................. 11 

Prof’l Real Estate Inv’r, Inc. v. Columbia Pictures Indus., Inc., 

508 U.S. 49 (1993) .............................................................................................. 11 

Romero v. Buhimschi, 

2010 WL 3724595 (6th Cir. 2010) ................................................................. 9, 10 

State Farm Mut. Auto. Ins. Co. v. Physiomatrix, Inc., 

2013 WL 509284 (E.D. Mich. Jan. 12, 2013) .................................................... 16 

State Farm Mut. Auto. Ins. Co. v. Radden, 

2016 WL 695598 (E.D. Mich. Feb. 22, 2016) ........................................ 21, 22, 23 

Sutor v. Intex Recreation Corp., 

2014 WL 5439302 (M.D. Fla. Oct. 24, 2014) ...................................................... 9 

Thill v. Ocwen Loan Servicing, LLC, 

8 F. Supp. 3d 950, 955 (E.D. Mich. 2014) ................................................... 15, 16 

Thompson v. Bank of Am., NA, 

773 F.3d 741 (6th Cir. 2014) .............................................................................. 15 

Three Lakes Ass’n v. Whiting, 

75 Mich. App. 564 (1977) ............................................................................ 10, 14 

U.S. ex rel. Marlar v. BWXT Y-12, LLC, 

525 F.3d 439 (6th Cir. 2008) .............................................................................. 22 

Van Emon v. State Farm Mut. Auto. Ins. Co., 

2008 WL 3539480 (E.D. Mich. Aug. 11, 2008) ................................................. 21 

Weiner v. Klais & Co., Inc., 

108 F.3d 86 (6th Cir. 1997), overruled on other grounds by 

Swierkiwica v. Sorema, NA, 534 U.S. 506 (2002) .............................................. 20 

Westfield Ins. Co. v. Mitchell, 

2013 WL 4742832 (S.D. W. Va. Sept. 3, 2013) ................................................. 12 

Westmac, Inc. v. Smith, 

797 F.2d 313 (6th Cir. 1986) .............................................................................. 11 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 10 of 38 Pg ID 5140
ix 

Statutes 

18 U.S.C. § 1962 ........................................................................................................ 2 

MCL § 500.3101, et seq. .......................................................................................... 25 

MCL § 500.3145 ...................................................................................................... 21 

Rules 

Fed. R. Civ. P. 8(a) ............................................................................................. 23, 24 

Fed. R. Civ. P. 9(b) .................................................................................................. 22 

Fed. R. Civ. P. 11(b) .................................................................................................. 3 

Fed. R. Civ. P. 12(b)(6) .............................................................................................. 9 

Fed. R. Civ. P. 15 ................................................................................................... 7, 8 

Fed. R. Civ. P. 26 ..................................................................................................... 12 

Fed. R. Civ. P. 34 ..................................................................................................... 12 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 11 of 38 Pg ID 5141
I. INTRODUCTION 

Over two months after the deadline to amend pleadings expired and without 

leave of Court, Defendants filed baseless and retaliatory Counterclaims 

(“Counterclaims” or “CC”) for: (1) abuse of process; (2) tortious interference with 

contractual relations; (3) breach of settlement agreements; (4) fraudulent 

misrepresentation; and (5) unpaid personal-injury-protection (“PIP”) benefits. The 

Counterclaims are untimely and should be stricken for this reason alone. 

Moreover, each count fails to state a claim. The abuse-of-process and tortiousinterference claims are improperly based on the filing of this lawsuit and theories 

that were expressly rejected by the Court in the September 26, 2016 Order denying 

Defendants’ Motion to Compel [Dkt. 122], namely that SFMAIC produced 

disorganized documents, and violated HIPAA by producing personal health 

information (“PHI”). With respect to the tortious-interference claim, Defendants 

fail to allege a contract, a breach, or tortious conduct by SMAIC that caused the 

breach. Defendants’ claim that SFMAIC breached settlement agreements by filing 

this lawsuit is belied by the express language of the settlement agreements 

themselves. Their untimely fraud claim lacks the requisite specificity. Finally, 

Defendants’ claim for unpaid PIP benefits should be dismissed because it fails to 

identify the bills SFMAIC allegedly refused to pay, and is barred by the one-year2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 12 of 38 Pg ID 5142
2 

back rule. Requests for exemplary damages in their contract claims should also be 

stricken. 

II. RELEVANT BACKGROUND 

A. Defendants Ignore Federal Rules And Judge Roberts’s 

Scheduling Order, Filing Untimely Counterclaims Without Leave 

Of Court. 

 On March 16, 2015, SFMAIC filed its Complaint, alleging claims under 18 

U.S.C. § 1962(c) and (d), as well as claims for fraud and unjust enrichment. Dkt. 1 

On October 15, 2015, the Court denied the motions to dismiss the Complaint. Dkt. 

38. Five days later, on October 20, 2015, the Court entered a Scheduling Order 

which, in relevant part, set a May 11, 2016 deadline to amend pleadings. Dkt. 39. 

On May 6, 2016, Defendants filed a Motion for Leave to File Counterclaim, 

attaching as Exhibit 2 a proposed Counterclaim that purported to allege claims for: 

(1) unpaid PIP benefits; (2) breach of settlement agreements; (3) fraudulent 

misrepresentation; (4) abuse of process; and (5) tortious interference with 

contractual relations. Dkt. 78. On May 11, 2011, SFMAIC filed a Motion for 

Leave to File Amended Complaint, explaining that the proposed Amended 

Complaint was substantially the same as the Complaint, except that it: (1) added 

nine new patients; (2) removed eight patients whose bills were resolved through 

state-court cases and two duplicates; (3) moved 13 patients from the PT Enterprise 

to the Summit/PT Enterprise; (4) described the relationship between the Summit 

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3 

and Summit Physicians Group (“SPG”); and (5) revised the damages allegations. 

Dkt. 85. 

 On June 16, 2016, SFMAIC sent Defendants a letter, attached as Exhibit 1, 

notifying them that their Counterclaim falsely accused SFMAIC and its attorneys 

of fraudulently manufacturing a release intended to resolve a state-court case that 

Physioflex filed against SFMAIC, forging Abulabon’s signature and producing the 

purportedly forged document in this case to defraud Defendants. SFMAIC 

explained that even a minimal amount of due diligence would have revealed that 

Defendants had no good-faith basis to make these false, defamatory and 

sanctionable allegations against SFMAIC and its attorneys. Id. (citing Fed. R. Civ. 

P. 11(b)). SFMAIC demanded that Defendants immediately remove the false 

allegations from the docket. Id. In response, on June 22, 2016, Defendants 

withdrew their Motion for Leave to File Counterclaim. Dkt. 105. 

 On June 28, 2016, the parties appeared in Court for a discovery conference 

and motion hearing on pending motions, including SFMAIC’s Motion for Leave. 

The Court confirmed on the record that Defendants had withdrawn their Motion 

for Leave to File Counterclaim. See Ex. 2. The next day, the Court entered an 

Order withdrawing Defendants’ Motion and granting SFMAIC leave to file the 

Amended Complaint. Dkt. 106. On July 8, 2016, SFMAIC filed its Amended 

Complaint. Dkt. 107. On July 22, 2016, Defendants responded to the Amended 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 14 of 38 Pg ID 5144
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Complaint with an Answer, Affirmative Defenses, and Counterclaim. Dkt. 116. 

The Counterclaim is almost identical to the pleading Defendants initially asked to 

file, except they removed the false and defamatory allegations about SFMAIC and 

its counsel. Although it was filed in response to SFMAIC’s Amended Complaint, 

it does not address the specific, minimal amendments that SFMAIC made. 

 Rather, Defendants purport to allege the same causes of action, based on 

virtually identical allegations, as their May 6, 2016 version, filed before SFMAIC 

filed its proposed Amended Complaint. Specifically, Defendants allege that “[t]his 

lawsuit has no basis in actual fact,” “fails to pass muster under FRCP 11[],” and is 

“presented . . . to harass . . . [or] needlessly increase the cost of litigation.” Dkt. 

116 at 34, 39. According to Defendants, SFMAIC filed this lawsuit to “retaliat[e] 

against Abulabon for his refusal to assist [SFMAIC] in the identification and 

prosecution of insurance fraud.” Id. at 35; id. at 52 (“unlawful motive behind 

[SFMAIC’s] frivolous lawsuit and its desire to bankrupt the . . . Defendants is 

Abulabon’s refusal, in 2012, to assist [SFMAIC] in investigating and identifying 

insurance fraud”). They further allege that “[SFMAIC’s] filing and maintenance 

of the instant litigation constitutes a breach of [state court settlement agreements], 

which were executed prior to or during the pendency of this action” and “is the 

result of [SFMAIC’s] abuse of the power entrusted to it by [this Court] and is 

additional evidence that [SFMAIC] brought this litigation for an improper 

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5 

purpose.” Id. at 42–43. Defendants also claim that “to induce providers . . . to 

continue to treat [SFMAIC’s] insureds and wait to file a lawsuit for nonpayment 

until the limitations period has expired, [SFMAIC] issues fraudulent letters 

misrepresenting that [SFMAIC] is investigating the claim . . . .” Id. at 44. 

 Defendants then accuse SFMAIC of abusing discovery procedures in this 

case by “us[ing] its document production . . . in a manner that is not proper.” Id. at 

48. Defendants make the same arguments that the Court rejected in denying their 

Motion to Compel, that: (1) “[SFMAIC’s] documents are a mess of thousands of 

irrelevant documents,” and (2) “[SFMAIC] failed to review its production to 

ensure that its production of PHI was limited to ‘the minimum necessary to 

accomplish the intended purpose’” in violation of HIPAA “to cause . . . Defendants 

needlessly to expend substantial resources.” Id. at 49–51; id. at 51 (SFMAIC’s 

“document dump . . . is an abuse of an actual litigation procedure during the course 

of this lawsuit”). Defendants also assert that SFMAIC abused the processes of this 

Court by inadvertently contacting their current employee, despite that she was not 

identified in Defendants’ sworn interrogatory answers.1

 

1

 Moreover, as set forth in the email exchange attached as Exhibit 3, no substantive discussion 

took place between counsel for SFMAIC and Inayeh Bazzi, and when Defendants advised 

SFMAIC that Ms. Bazzi is a current employee, SFMAIC described the limited conversation that 

took place, confirmed that it would have no further contact with Ms. Bazzi, and requested that 

Defendants immediately amend their sworn interrogatory answers to identify all current and past 

employees, along with their status. 

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6 

 Defendants’ request for compensatory and exemplary damages is based on 

SFMAIC’s alleged: (1) “reckless disregard for the obligations it has as a custodian 

of vast amounts of [PHI] and other sensitive and confidential information,” (2) 

“initial and continued pursuit of the instant and frivolous litigation,” and (3) 

“wanton and willful abuse of the processes of this Court.” Id. at 35, 62. 

B. Defendants’ Allegations Regarding SFMAIC’s Purportedly 

Abusive Discovery Conduct Have Been Rejected By The Court. 

On May 17, 2016, shortly after seeking leave to file their original proposed 

Counterclaims, Defendants filed a Motion to Compel Answers to Interrogatories 

and Production/Identification of Responsive Documents, advancing the same 

arguments about SFMAIC’s discovery practices that they alleged in both versions 

of their Counterclaims. Dkt. 89. On September 26, 2016, the Court denied 

Defendants’ Motion in its entirety. Dkt. 122. In doing so, the Court denied their 

request to compel SFMAIC to identify responsive documents more specifically 

and to exclude allegedly nonresponsive or irrelevant documents, holding that “[t]he 

Court agrees with State Farm that it has no further duty to sort or organize the 

documents.” Id. at 3–4. Additionally, the Court held that “State Farm’s document 

production has not unlawfully violated HIPAA.” Id. at 7. Specifically, “[t]here is 

an exception for judicial proceedings, the parties have a stipulated protective order 

in place, and these documents have been labeled ‘confidential’ pursuant to the 

protective order which specifically references these types of documents.” Id. In 

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7 

light of the Court’s Order, Defendants’ allegations regarding SFMAIC’s discovery 

conduct cannot support their Counterclaims. 

III. LEGAL ANALYSIS 

A. The Untimely Counterclaims Should Be Struck For Failure To 

Obtain Leave Of Court And Because Delay Is Unduly Prejudicial. 

A counterclaim filed after an amended complaint is a “pleading” governed 

by Rule 15(a)(2), which requires “the court’s leave,” or the opponent’s consent, 

before filing. See Bern Unlimited, Inc. v. Burton Corp., 25 F. Supp. 3d 170, 179 

(D. Mass. 2014) (applying “Rule 15 standard equally to amended complaints and 

amended (or new) counterclaims,” and striking counterclaims); see also Digital 

Ally, Inc. v. DragonEye Tech., LLC, 2014 WL 2865592, at *3–4 (D. Kan. June 24, 

2014); Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, Inc., 2011 WL 

2261298, at *6 (D. Minn. Mar. 21, 2011) (improper to assert new counterclaim 

without leave of court). Allowing defendant “to assert entirely new counterclaims, 

at its option, whenever the complaint has been amended would mean that claims 

that would otherwise be barred or precluded could be revived without cause.” 

Bern, 25 F. Supp. 3d at 179. It would “create an imbalanced, if not inequitable, 

situation where the plaintiff would be required to obtain leave to make 

amendments to its pleadings, but the defendant-counterclaimant would not.” Id. 

The Counterclaims should be dismissed with prejudice because Defendants 

filed them late, after the Court-ordered May 11, 2016 deadline to amend pleadings, 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 18 of 38 Pg ID 5148
8 

and intentionally failed to seek leave from the Court. As set forth above, 

Defendants intended to seek leave to file Counterclaims for the first time before the 

deadline [Dkt. 78] but withdrew their motion, see Ex. 2, because the proposed 

Counterclaims contained false and defamatory allegations against SFMAIC [Dkt. 

105]. Instead of disclosing their sanctionable conduct and intent to refile to the 

Court at the June 28, 2016 hearing, Defendants attempted an end-run around the 

Court’s Scheduling Order and Rule 15(a), filing Counterclaims without consent or 

leave of Court on July 22, 2016, three weeks after the hearing and more than two 

months after the deadline to amend. Dkt. 116 at 33–63. Defendants’ pleading 

approach is not permissible. See Bern, 25 F. Supp. 3d at 179; Digital Ally, 2014 

WL 2865592, at *3–4; Buffalo Wild Wings, 2011 WL 2261298, at *6.2

Defendants’ delay also prejudices SFMAIC. This case was filed in March 

2015. As the Court knows, in August 2016, just weeks after the Counterclaims 

were filed, the parties agreed to stay discovery pending facilitation scheduled for 

September 12, 2016, which was unsuccessful. On September 19, 2016, the Court 

 

2

 Nor can Defendants argue that their Counterclaims were responsive to SFMAIC’s amendments. 

Indeed, although Defendants’ Counterclaims were not filed until after SFMAIC filed its 

Amended Complaint, Defendants filed their now-withdrawn Motion for Leave to File 

Counterclaims, attaching virtually identical Counterclaims to those that they have now filed, 

before SFMAIC filed its own Motion for Leave to File Amended Complaint, which attached the 

proposed Amended Complaint. Moreover, SFMAIC’s Amended Complaint is substantially the 

same as the original Complaint. SFMAIC did not add parties or causes of action, nor did 

SFMAIC add or change any theory of liability or damages. Indeed, the only changes the 

Amended Complaint makes is to update the Complaint’s appendices, revise SFMAIC’s actual 

damages, and add certain factual allegations describing the relationship between the Summit

Defendants and a related entity, none of which expands the scope or theory of SFMAIC’s case. 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 19 of 38 Pg ID 5149
9 

agreed to extend fact discovery until December 16, 2016, which would leave 

SFMAIC with insufficient time—less than three months—to conduct discovery on 

the Counterclaim’s five new causes of action. See Sutor v. Intex Recreation Corp., 

2014 WL 5439302, at *2–3 (M.D. Fla. Oct. 24, 2014) (denying motion for leave to 

amend complaint where “discovery deadline [was] less than three months away,” 

“addition of punitive damages claim would widen the scope of litigation” and 

plaintiff “failed to establish the requisite good cause”). Defendants could have 

sought leave to file Counterclaims before the Court-ordered deadline but failed to 

do so. Because Defendants’ tactics and delay are both procedurally improper and 

prejudicial to SFMAIC, their Counterclaims should be dismissed with prejudice. 

B. Defendants’ Counterclaims Fail To State A Claim For Relief. 

To survive a Rule 12(b)(6) motion, a counter-claimant must plead more than 

labels and conclusions or a formulaic recitation of the elements of a claim. 

Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (quoting Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Rather, the claim must allege 

facts that, if accepted as true, raise a right to relief above the speculative level, and 

state a claim that is plausible on its face. See Romero v. Buhimschi, 2010 WL 

3724595, at *4 (6th Cir. 2010); Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949–50 

(2008)). “A claim has facial plausibility only when the plaintiff pleads factual 

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content that allows the court to draw the reasonable inference that the defendant is 

liable for the misconduct alleged.” Romero, 2010 WL 3724595, at *4. 

C. Defendants Fail To Allege An Actionable Abuse Of Process. 

Defendants’ abuse-of-process claim, based on SFMAIC’s allegedly 

improper initiation of this lawsuit, “wrongful use of its document production,” and 

inadvertent de minimis contact with a current Physioflex employee, is fatally 

flawed and must be dismissed. Dkt. 116 at 60 ¶¶ 120–22. “The tort of abuse of 

process is not favored in Michigan.” Ellison v. JP Morgan Chase Bank, 2013 WL 

5913432, at *11 (E.D. Mich. Oct. 31, 2013). To state a claim, a plaintiff must 

allege: (1) an act in the use of process that is improper in the regular prosecution of 

the proceeding; (2) an ulterior purpose; and (3) actual damages. See Curran v. City 

of Dearborn, 957 F. Supp. 2d 877, 887 (E.D. Mich. 2013) (citing Friedman v. 

Dozorc, 412 Mich. 1, 30 (1981); Three Lakes Ass’n v. Whiting, 75 Mich. App. 564, 

575 (1977)). The Counterclaim fails to satisfy these three requirements. 

First, Defendants do not allege an act in the use of process that is improper 

in the regular prosecution of the proceeding. The three predicate acts for 

Defendants’ abuse-of-process claim are that SFMAIC: (1) “brought this lawsuit 

for the ulterior and covert purpose of bankrupting the . . . Defendants and of 

carrying out the final step in its retaliatory scheme against Abulabon”; (2) 

wrongfully produced documents to cause Defendants “to waste substantial 

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resources” reviewing documents and which improperly contain PHI in violation of 

federal law; and (3) “unlawfully attempted to obtain discovery from . . . 

Defendants’ Alternative Administrator.” Dkt. 116 at 60 ¶¶ 120–22. None of the 

alleged acts can support an abuse-of-process claim. 

As to their allegation that SFMAIC filed the lawsuit for an improper 

purpose, filing a complaint, even with malice, cannot support their claim. See 

Dalley v. Dykema Gossett, 287 Mich. App. 296, 322 (2010).3

 An abuse-of-process 

claim “must allege more than the mere issuance of process,” since “an action for 

abuse of process lies for the improper use of process after it has been issued, not 

for maliciously causing it to issue.” Id. Moreover, such a claim is barred by the 

Noerr-Pennington doctrine, which recognizes that filing a lawsuit is 

constitutionally protected activity under the First Amendment. See Prof’l Real 

Estate Inv’r, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56-57 (1993); 

Westmac, Inc. v. Smith, 797 F.2d 313, 315 (6th Cir. 1986).4

 

 

3

 As the Supreme Court has explained, “courts will not look behind an action that states a valid 

legal claim on its face in order to try to determine the comparative weight a litigant places on 

various subjective reasons for bringing the claim.” Lonchar v. Thomas, 517 U.S. 314, 332 

(1996). “A valid . . . action . . . does not suddenly become invalid simply because the litigant is 

subjectively indifferent about receiving the requested . . . relief, but instead primarily wants to . . 

. obtain revenge.” Id. This is because “it is difficult to see how an inquiry into the circumstances 

surrounding the instigation of the action could affect the substance of the claim.” Foremost 

Promotions, Inc. v. Pabst Brewing Co., 15 F.R.D. 128, 130 (N.D. Ill. 1953). 

4 See also Pennwalt Corp. v. Zenith Labs., Inc., 472 F. Supp. 413, 424 (E.D. Mich. 1979) (abuseof-process claim based on complaint filing was barred under Noerr-Pennington). 

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Defendants also allege that SFMAIC’s document production was an abuse 

of process. As a preliminary matter, the Court has already rejected Defendants’ 

arguments, holding that SFMAIC’s document production was proper and did not 

violate HIPAA. Dkt. 122. In any event, SFMAIC’s document production pursuant 

to Rules 34 and 26 is not conduct that can support an abuse-of-process claim. See

PPG Indus., Inc. v. Payne, 2012 WL 1836314, at *11 (E.D. Tenn. May 21, 2012) 

(concluding that a “document dump[,]” among other issues attendant to 

“contentious litigation[,]” did not constitute an abuse of process). Rather, disputes 

regarding document productions are properly resolved through discovery motions. 

See Westfield Ins. Co. v. Mitchell, 2013 WL 4742832, at *5 (S.D. W. Va. Sept. 3, 

2013) (alleged intentional failure to produce documents under Rule 26(a)(1) would 

“not be sufficient to support an abuse of process claim . . . . because at most” it 

would “suggest a violation of civil discovery rules”); Flores v. Emerich & Fike, 

2008 WL 2489900, at *13 (E.D. Cal. June 18, 2008) (attempt to use documents at 

trial that were not produced in discovery and alleged destruction of evidence were 

not an abuse of process because they were “matters [that] are inherently part of the 

discovery process and were redressible under discovery rules”). 

Nor can the inadvertent and de minimis5

 telephone contact by SFMAIC’s 

counsel with one of Defendants’ current employees support their abuse-of-process 

 

5 See Ex. 3 (describing brief conversation between Ms. Bazzi and counsel for SFMAIC). 

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claim. Specifically, a telephone call does not constitute the use of process and 

cannot support an abuse-of-process claim. See, e.g., Larobina v. McDonald, 274 

Conn. 394, 408 (2005) (acts that do “not involve a judicial procedure . . . as a 

matter of law, do not support an abuse of process claim”); Ioppolo v. Rumana, 

2011 WL 3568863, at *5–6 (M.D. La. Aug. 15, 2011) (dismissing abuse-ofprocess claim because conduct was not “legal process or court process”).

Moreover, Defendants admit that this conduct was a direct result of their own 

failure to fulfill discovery obligations by omitting Ms. Bazzi as a current employee 

in their sworn interrogatory answers. Dkt. 116 ¶¶ 71–72. Once informed that Ms. 

Bazzi was a current employee, SFMAIC’s counsel immediately agreed to “have no 

further contact” with her, explaining that “[w]e did not know that [the employee] is 

a current employee of PhysioFlex. She is not identified in your clients’ sworn 

interrogatory answers, and it was our understanding that she no longer worked for 

your clients.” Ex. 3. Thus, none of the alleged conduct supports their claim. 

Second, Defendants have not alleged, as they must, the existence of an 

actionable “ulterior purpose.” Indeed, they allege no ulterior purpose at all for 

contacting Ms. Bazzi. They do allege that SFMAIC purportedly initiated this 

lawsuit and produced documents to retaliate against Abulabon by forcing 

Defendants to incur litigation expenses and become bankrupt. Dkt. 116 ¶¶ 120–21. 

However, the desire to put a party out of business, even with a retaliatory motive, 

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or to expose a party to “excessive litigation costs” is not an “improper purpose” 

that supports the claim. See Early Detection Ctr., PC v. N.Y. Life Ins. Co., 157 

Mich. App. 618, 629-30 (1987) (“ulterior purpose alleged must be more than 

harassment, defamation, exposure to excessive litigation costs, or even coercion to 

discontinue business”); cf. Horacek v. Neph, 466 F. App’x 508, 511 (6th Cir. 2012) 

(retaliatory motive for false testimony was insufficient to support abuse-of-process 

claim). Failure to allege an ulterior purpose is fatal to their claim. See Keys v. 

Cent. Mortg. Co., 2014 WL 5511510, at *3 (E.D. Mich. Oct. 31, 2014). 

Third, Defendants do not allege that they sustained any damages as a result 

of SFMAIC’s conduct. Although Defendants allege that they incurred expenses to 

review SFMAIC’s document production, the Court held that SFMAIC’s document 

production was proper when it: (1) “agree[d] with [SFMAIC] that it has no further 

duty to sort or organize the documents” SFMAIC produced; and (2) rejected 

Defendants’ contention that they, improperly, were “forc[ed] . . . to take on 

additional liability as the involuntary custodian of [SFMAIC’s] PHI” holding that 

SFMAIC’s “document production has not unlawfully violated” HIPAA. Dkt. 122 

at 3–4, 7. Defendants have not alleged that SFMAIC counsel’s telephone call to 

Ms. Bazzi caused them any damages. See Three Lakes Ass’n, 75 Mich. App. at 

575 (actual damages is an element of an abuse-of-process claim). 

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Defendants’ abuse-of-process claim not only fails to state a claim, it defies 

common sense, and should be dismissed with prejudice.

D. Claim For Tortious Interference With Contract Is Fatally Flawed. 

To state a claim for tortious interference with contractual relations, 

Defendants must plead: (1) the existence of a contract; (2) a breach of that 

contract; and (3) an unjustified instigation of the breach by defendant. See Thill v. 

Ocwen Loan Servicing, LLC, 8 F. Supp. 3d 950, 955 (E.D. Mich. 2014) (citing 

Mahrle v. Danke, 216 Mich. App. 343, 350 (1996)). Defendants conclusorily 

allege that they had contracts with their patients and that SFMAIC intentionally 

interfered with them by making false allegations about Defendants (filing the 

Complaint) and abusing the processes of the Court (producing documents and 

inadvertently contacting Ms. Bazzi). Dkt. 116 ¶ 130. This claim is fatally flawed 

for at least three reasons. 

First, Defendants do not and cannot allege the existence of actual contracts

with patients. To the contrary, they allege nothing more than a summary 

conclusion that Defendants had “contractual relationships with [SFMAIC’s] 

insureds.” Dkt. 116 ¶ 129. These allegations cannot support their tortiousinterference claim because they “merely assert that . . . contract[s] exist[ed]” but do 

“not identify the contract[s]” that are the basis for their claim. Thompson v. Bank 

of Am., NA, 773 F.3d 741, 754 (6th Cir. 2014) (tortious-interference claim failed 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 26 of 38 Pg ID 5156
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because no specific allegations regarding the existence of a contract). State Farm 

Mut. Auto. Ins. Co. v. Physiomatrix, Inc., 2013 WL 509284, at *8 (E.D. Mich. Jan. 

12, 2013) is instructive. In that case, clinics filed a counterclaim against SFMAIC 

for tortious interference, alleging that SFMAIC damaged their patient relationships 

by denying claims. This Court dismissed the counterclaim because the clinics did 

not identify “any specific relationship adversely affected.” Similarly here, 

Defendants’ “allegations do not have the requisite factual support to satisfy Iqbal.” 

Id. 

Second, because Defendants do not allege that patients breached any of the 

unidentified contracts, the Counterclaim must be dismissed. See Morris v. 

Ambassador Nursing Home, Inc., 845 F. Supp. 1164, 1167 (E.D. Mich. 1994) 

(“breach of contract is an essential element of a tortious interference claim”); 

Forbes v. Ilitch, 1997 WL 33353844, at * 2 (Mich. Ct. App. Jan. 31, 1997) 

(tortious-interference claim failed because “no factual allegations identifying the 

alleged breach”); Thill, 8 F. Supp. 3d at 955 (dismissing tortious-interference claim 

that did “not identify the specific terms of the contract allegedly breached”).6

 

6

 Defendants’ allegations are even more deficient than those in Forbes and Thill because they do 

not allege any breach of contract by any of their patients. Instead, Defendants allege only that 

they lost “a substantial portion of their patient base” as a result of SFMAIC’s conduct. Dkt. 116 

¶ 131. However, patient-physician relationships are terminable at will and the loss of patients 

does not equate to a breach of contract by the patients. See, e.g., Estella v. Bristol Hosp., 2015 

WL 5134798 (Conn. Super. Ct. Jul. 31, 2015) (citing Ctr. for Dermatology & Skin Cancer, Ltd. 

v. Humana Ins. Co., 2012 WL 473133 (N.D. Ill. Feb. 8, 2012) (doctor failed to state claim for 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 27 of 38 Pg ID 5157
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Third, Defendants have not alleged conduct by SFMAIC that supports a 

claim for tortious interference. To sufficiently plead tortious interference, 

Defendants must allege that SFMAIC “did something illegal, unethical or 

fraudulent.” Glass v. Van Lokeren, 2014 WL 1233704, at *7 (Mich. Ct. App. Mar. 

25, 2014); see also Feldman v. Green, 138 Mich. App. 360, 370 (1984) (tortiousinterference claim “must allege the intentional doing of a per se wrongful act or the 

intentional doing of a lawful act with malice and unjustified in law for the purpose 

of invading [the other party’s] contractual rights or business relationship”). 

Defendants’ tortious-interference claim is based on SFMAIC’s filing and is pursuit 

of this lawsuit. Dkt. 116 ¶¶ 130–31 (SFMAIC “us[ed] false allegations [i.e., the 

allegations contained in the Complaint] to disparage the . . . Defendants and 

[abused] the processes of this Court for the purpose of retaliation and forcing the 

. . . Defendants into bankruptcy,” resulting in loss of “a substantial portion of their 

patient base and corresponding contracts with such patients”). Filing a lawsuit and 

producing documents are not tortious acts. Filing a complaint is protected by the 

First Amendment. See Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 

508, 510–11 (1972) (filing complaint is protected by the First Amendment under 

Noerr-Pennington); GMA Cover Corp. v. Saab Barracuda, LLC, 2012 WL 

642739, at *11 (E.D. Mich. Feb. 8, 2012) (Noerr-Pennington barred tortious-

 

tortious interference with contract because he did not and could not allege enforceable contract 

with patient)). 

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interference claim based on filing complaint). Moreover, the fact that SFMAIC 

filed and is pursuing this lawsuit, including responding to document requests and 

inadvertently contacting a current employee because of Defendants’ false sworn 

interrogatory answer is not actionable as tortious interference. Cf. Dalley, 287 

Mich. App. at 324 (pursuit of TRO and “vindictive, groundless lawsuit” are not 

“illegal, unethical, or fraudulent conduct” and cannot support claim for tortious 

interference). Indeed, in L&W Servs., Inc. v. Campbell Aviation, Inc., 2001 WL 

716933, at *1–2 (Mich. Ct. App. Mar. 13, 2001), the Michigan Court of Appeals 

held that filing and maintaining a lawsuit, even in bad faith, cannot support a 

tortious-interference claim. The court explained that if plaintiff “wished to charge 

[defendant] with litigating in bad faith, various remedies were available that would 

properly have addressed the issue directly without having to bend the tort of 

tortious interference . . . to those contours.” Id. at *2. Because the conduct that 

forms the basis of Defendants’ tortious-interference claim is not actionable, their 

tortious-interference claim should be dismissed with prejudice. 

E. Claim For Breach Of Settlement Agreements Must Be Dismissed. 

Defendants’ claim for breach of settlement agreements/releases is a claim 

for breach of contract, which requires: “(1) a contract between the parties, (2) the 

terms of which require performance of a certain action, (3) a breach, and (4) the 

breach caused injury to the other party.” Collins v. CitiMortgage, Inc., 974 F. 

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Supp. 2d 1034, 1041 (E.D. Mich. 2013). Defendants cannot state a claim against 

SFMAIC because the settlement agreements at issue neither require action by 

SFMAIC nor release Defendants from liability.7

 Nevertheless, Defendants allege 

that: (1) they “filed over 35 separate state court lawsuits (the “State Court 

Actions”) against [SFMAIC] in order to secure payment . . . for the [PT] services 

they provided to [SFMAIC’s] insureds,” CC ¶ 25; (2) some “State Court Actions 

resulted in . . . settlement agreements,” identified in ¶ 29 of the CC, id. ¶¶ 26, 29; 

(3) the parties “agreed that part of the consideration for each such settlement 

agreement was that the agreement would have the effect of a final resolution of the 

claims at issue,” id. ¶ 30; and (4) SFMAIC “breached each of the agreements 

identified in ¶ 29 when it filed and/or maintained the instant lawsuit,” id. ¶ 96. 

Tellingly, Defendants do not and cannot identify even one term of one contract that 

SFMAIC allegedly breached. This omission is fatal to their claim.8

 

 

7

 As SFMAIC has told Defendants and the Court, it is not seeking to recover as damages any 

amounts paid to Defendants pursuant to these settlement agreements. Defendants allege that 

“while [SFMAIC] has been seeking damages in this Court based on its . . . theory that every 

treatment/modality identified in its [Amended Complaint] is part of an unlawful scheme to 

defraud [SFMAIC], [SFMAIC] has meanwhile executed and made settlement payments to . . . 

Defendants for the exact same ‘fraudulent’ treatments/modalities.’” Dkt. 116 ¶ 37. Settlement 

of some State Court Actions is not a concession by SFMAIC that Defendants’ services are 

proper. As the Court knows, “disputes are often settled for reasons having nothing to do with the 

merits of a claim.” Eid v. Saint-Gobain Abrasives, Inc., 377 F. App’x 438, 444 (6th Cir. 2010). 

8

 Five agreements that Defendants allege SFMAIC breached are between patients and SFMAIC. 

See Exs. 5–7, 13 17. Defendants are not parties and lack standing to sue for breach of these 

agreements. See Police & Fire Retirement Sys. of City of Detroit v. Watkins, 2009 WL 3210922, 

at *8 (E.D. Mich. Sept. 30, 2009) (dismissing breach-of-contract claim for lack of standing). In 

addition, Exs. 19–22 relate to patients whose claims are no longer at issue in this case. Dkt. 85, 

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The language of the agreements identified in the Counterclaims must be 

considered on a motion to dismiss.9

 See Weiner v. Klais & Co., Inc., 108 F.3d 86, 

89 (6th Cir. 1997) (overruled on other grounds by Swierkiwica v. Sorema, NA, 534 

U.S. 506 (2002)). Accordingly, the highlighted agreements are Exhibits 4–22. 

The plain, unequivocal language of these agreements makes clear that Defendants 

released SFMAIC from liability on unpaid bills at issue in those State Court Cases, 

but SFMAIC neither released Defendants from liability nor agreed to perform any 

action. See id. Some agreements even state that they do not resolve the matters at 

issue in this case. See Exs. 17–22. SFMAIC did not make promises in these 

agreements that it could have breached. The Counterclaim for breach of settlement 

agreements should be dismissed.10

F. Defendants Cannot State A Claim For Fraud. 

In support of their fraud claim, Defendants allege that (1) SFMAIC worked 

with “IME doctors” and “clinics” to deny payment of claims, CC ¶ 44; 

(2) SFMAIC decided to deny claims before sending Defendants letters advising 

that it was investigating the claims, id. ¶¶ 46, 106, 110; and (3) these letters were 

 

106, 107. Defendants’ claim as to these agreements must be dismissed. Because Exhibits 17–22 

contain confidentiality provisions, SFMAIC is requesting leave to file them under seal. 

9

 The agreement referenced in Defendants’ Counterclaims as “RE# 9 (D.B., 9/24/2015)” actually 

refers to an agreement involving RE# 79 (D.B., 10/15/2015). The agreement referenced as “RE# 

1/31 (S.W. and N.D.) refers to an agreement involving RE# 1/31 (S.W. and M.D.). The 

agreement referenced as “RE# 106 (M.H., 12/5/2015) actually was executed on 12/21/15. 

10 Defendants’ request for exemplary damages should be struck from this claim for the reasons 

set forth below in section III.G. 

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sent because SFMAIC decided to deny payment to induce Defendants to continue 

treating insureds and to prevent Defendants from filing suit until after the one-year 

limitations period set forth in MCL § 500.3145(1) had expired, CC ¶¶ 45, 113–14. 

As a preliminary matter, Defendants’ claim fails because they do not allege a 

breach of duty separate and distinct from a breach of contract. Brock v. Consol. 

Biomedical Labs., 817 F.2d 24, 25 (6th Cir. 1987) (It “is well-settled that an action 

in tort requires a breach of duty separate and distinct from a breach of contract.”). 

Specifically, “the gravamen of their counterclaim is that SFMAIC breached its 

insurance contracts by not paying the No-Fault benefits they believe they were 

owed for services purportedly provided to State Farm’s insureds.” State Farm 

Mut. Auto. Ins. Co. v. Radden, 2016 WL 695598, at *2 (E.D. Mich. Feb. 22, 2016). 

Defendants’ allegations are strikingly similar to those alleged in Radden, where the 

counterclaimants alleged that “State Farm engaged in a fraudulent scheme with 

doctors who perform [IMEs] and other (unidentified) co-conspirators to deny, 

delay, and diminish payment on claims.” Id. at *1. Counterclaimants in Radden

also alleged they received “letters indicating that claims were still under 

investigation by State Farm.” Id. The court dismissed the counterclaim because 

the “main thrust of [their] fraud claim [was] that State Farm did not pay enough 

under the contract[, and, therefore,] the claim [was] not fraud, but a breach of 

contract.” Id. at *2 (quoting Van Emon v. State Farm Mut. Auto. Ins. Co., 2008 

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WL 3539480, at *4 (E.D. Mich. Aug. 11, 2008)). While Defendants recite the 

elements of fraud, they do not and cannot allege a duty separate from SFMAIC’s 

duty to pay No-Fault benefits. See Cooper v. Auto Club Ins. Ass’n, 481 Mich. 399, 

409 (2008).11 Thus, Defendants’ fraud counterclaim should be dismissed.

In addition, Defendants do not satisfy Rule 9(b)’s heightened pleading 

requirements. See Bowlers’ Alley, Inc. v. Cincinnati Ins. Co., 32 F. Supp. 3d 824, 

832 (E.D. Mich. 2014). “The threshold test is whether the complaint places the 

defendant on sufficient notice of the misrepresentation allowing the defendants to 

answer, addressing in an informed way . . . plaintiff’s claim of fraud.” Id. To 

plead fraud, Defendants “at a minimum, must allege the time, place, and content of 

the alleged misrepresentation on which [Defendants] relied; the fraudulent scheme; 

the fraudulent intent of [SFMAIC]; and the injury resulting from the fraud.” U.S. 

ex rel. Marlar v. BWXT Y-12, LLC, 525 F.3d 439, 444 (6th Cir. 2008). 

In Radden, defendants’ virtually identical fraud counterclaim lacked the 

requisite specificity because defendants did not “identify a specific claim that State 

Farm fraudulently denied, delayed or diminished that involved a named 

accomplice, co-conspirator, doctor or vendor.” 2016 WL 695598, at *2. Here too, 

Defendants allege that SFMAIC works “with a system of IME doctors and clinics” 

 

11 The Court in Radden relied on Cooper, explaining that “unlike a no-fault claim, a fraud claim 

does not arise from an insurer’s mere omission to perform a contractual or statutory obligation, 

such as its failure to pay all the [No-fault] benefits to which its insureds are entitled.” Radden, 

2016 WL 695598, at *2 (quoting Cooper, 481 Mich. at 409). 

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to defraud Defendants, CC ¶ 44, but fail to name even one of those “IME doctors” 

or “clinics,” nor do they identify one specific claim that SFMAIC purportedly 

fraudulently denied.12 As in Radden, the fraud Counterclaim should be dismissed. 

G. Claim For Unpaid PIP Benefits Should Be Dismissed Or Limited. 

Defendants’ breach-of-contract claim for unpaid PIP benefits fails to meet 

the pleading requirements of Rule 8(a). To state a claim for breach of contract, 

Defendants must plead: (1) a contract; (2) the terms of the contract; (3) a breach by 

the defendant; and (4) that the breach caused plaintiff’s injury. McKinney v. 

Misico Inv., LLC, 2011 WL 5244956, at *4 (E.D. Mich. Nov. 3, 2011). 

Defendants fail to put SFMAIC on notice of the alleged breaches, namely the 

specific bills at issue. Also, to the extent Defendants seek payment for services 

rendered before July 22, 2015, such claims are barred by the “one-year-back rule.” 

Finally, Defendants’ request for exemplary damages should be stricken. 

 

12 Defendants’ Counterclaim diverges from Radden’s fraud counterclaims in one significant 

respect. Specifically, Defendants attach a single document from SFMAIC’s production that they 

claim is proof SFMAIC applied “unlawful processes and procedures [i.e., the use of a “Project,” 

“TIN Diversion,” or “TIN Stop”] to all claims submitted by” Defendants since 2012. CC ¶¶ 49, 

108, 111. The lone document is a 10/4/12 SFMAIC draft memo that supports none of 

Defendants’ arguments. CC Ex. 4. Indeed, the only connection the draft memo has to any of 

Defendants’ allegations is that it includes the term “TIN Diversion.” However, the document 

does not in any way support that a “TIN Diversion” was used “to justify a denial of [a] claim[,]” 

CC ¶ 47(a), or that its use is somehow unlawful. There is nothing in the draft memo that 

indicates that any claims have been or will be denied, much less as a result of a fraudulent or 

improper practice. To that end, this document underscores the baselessness of Defendants’ fraud 

Counterclaim. Indeed, Defendants purportedly received a “massive” production from SFMAIC, 

yet the only evidence Defendants cite (and apparently could find) in support of their fraud claim 

is a draft memo that provides absolutely no support for their sweeping accusations. Defendants 

have not pleaded fraud with specificity. 

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 First, Defendants must allege “some facts as to [the] breach.” McKinney, 

2011 WL 5244956, at *4. In Patrick v. Wal-Mart, Inc. - Store No. 155, 2012 WL 

1739143, at *2 (5th Cir. May 17, 2012), plaintiff sued his worker’s compensation 

carrier for alleged bad-faith denial of worker’s compensation benefits. The court 

dismissed plaintiff’s claims with prejudice for failure to satisfy Rule 8(a) because 

plaintiff did not “identify by date or amount or type of service, any of the alleged 

bad-faith denials and delays” at issue. Id. at *8; see also Battah v. Resmae Mortg. 

Corp., 746 F. Supp. 2d 869, 876 (E.D. Mich. 2010) (dismissing breach of contract 

claim where plaintiff “lazily” referred to documents that supposedly provided facts 

to support the breach “without any supporting factual allegations”). As in Patrick, 

Defendants’ breach-of-contract claim fails to “identify by date or amount or type 

of service, any of the alleged . . . denials and delays” that are allegedly at issue. 

Patrick, 2012 WL 1739143, at *8. Thus, the Counterclaims plead “no factual 

content allow[ing] [this] court to draw the reasonable inference” that SFMAIC 

wrongly denied claims for benefits. Id. In short, Defendants must allege which 

bills are the subject of this lawsuit with greater specificity. Because their “breach 

of contract count consists of nothing more than ‘unadorned, the-defendantunlawfully-harmed-me accusation[s],’ it fails to state a claim.” Bundy v. Fed. 

Nat’l Mortg. Ass’n, 2011 WL 977531, at * 8 (E.D. Mich. Feb. 25, 2011).

 Second, this claim should be dismissed to the extent it seeks to recover PIP 

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benefits for services rendered before July 22, 2015. A “claimant may not recover 

benefits for any portion of the loss incurred more than 1 year before the date on 

which the action was commenced.” MCL § 500.3145. Therefore, Defendants may 

not recover for any allegedly unpaid claims where the services were rendered one 

year prior to the date they filed their Counterclaims. Accordingly, the Court 

should limit Defendants’ damages in this case to only those services that were 

rendered after July 22, 2015. 

 Third, Defendants’ request for exemplary damages should be struck. Dkt. 

116 ¶ 92. The No-Fault Act, MCL § 500.3101, et seq., provides the exclusive 

remedy for breach of a No-Fault insurance contract. Cruz v. State Farm Mut. Auto. 

Ins. Co., 241 Mich. App. 159, 164 (2000). The No-Fault Act does not contain a 

provision entitling a claimant to collect exemplary damages. See Casey v. Auto 

Owners Ins. Co., 273 Mich. App. 388, 400 (2007) (“Punitive damages . . . are 

generally not recoverable in Michigan [unless] . . . expressly authorized by 

statute.”).13 The request for exemplary damages should be struck. 

IV. CONCLUSION 

For all the foregoing reasons, the Counterclaims should be dismissed with 

prejudice. 

 

13 Moreover, “[t]he claim of ‘bad-faith refusal to pay an insurance claim [is] an action that is not 

recognized by the courts of this state.’” Farm Bureau Mut. Ins. Co. v. Knipple, 2000 WL 

33421298, at *5 (Mich. Ct. App. May 12, 2000). 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 36 of 38 Pg ID 5166
26 

Dated: October 10, 2016 Respectfully submitted, 

 

 By: /s/ Kathy P. Josephson 

Ross O. Silverman 

Kathy P. Josephson 

Andrew D. Welker 

Katten Muchin Rosenman LLP 

525 West Monroe Street 

Chicago, IL 60661-3693 

(312) 902-5200 

ross.silverman@kattenlaw.com 

kathy.josephson@kattenlaw.com 

andrew.welker@kattenlaw.com 

Thomas W. Cranmer (P25252) 

Miller, Canfield, Paddock and Stone, 

PLC 

840 W. Long Lake Road, Suite 200 

Troy, Michigan 48098 

(248) 267-3381 

cranmer@millercanfield.com 

Attorneys for Plaintiff SFMAIC 

 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 37 of 38 Pg ID 5167
CERTIFICATE OF SERVICE 

I hereby certify that on October 10, 2016, I electronically filed the foregoing 

document with the Clerk of Court using the CM/ECF system, which will send 

notification to all counsel of record. 

By: /s/ Kathy P. Josephson 

Attorney for Plaintiff 

2:15-cv-10993-VAR-APP Doc # 123 Filed 10/10/16 Pg 38 of 38 Pg ID 5168