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Farm’s counterclaim and certain affirmative defenses for failure to state a cause of action upon

which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). For the

reasons that follow, I will grant in part and deny in part counterclaim-defendants’ motion.


Factual and Procedural Background

State Farm’s counterclaim asserts three counts against Allied, Kirstein and Ehrlich: (I)

fraud; (II) statutory insurance fraud under 18 Pa. Con. Stat. § 4117; and (III) unjust enrichment.

To support these counts, State Farm makes the following allegations, which the court must

accept as true for purposes of a motion to dismiss. State Farm, an insurer, provides its customers

insurance coverage for medical expenses that arise out of automobile accidents. (Countercl. ¶ 1.)

Allied operates a business that provides “chiropractic, medical, diagnostic, and/or physical

therapy treatment, testing, services and/or goods . . . .” (Id. ¶ 2.) David Kirstein, D.C. and Bryan

Ehrlich, D.C. serve as “proprietor[s], owner[s], officer[s], agent[s] and/or shareholder[s] of

Allied.” (Id. ¶¶ 3-4.)

State Farm contends that counterclaim-defendants are engaged in a form of insurance

fraud that began in 2003 (if not earlier). (Id. ¶ 30.) Specifically, counterclaim-defendants are

“active participants in a conspiracy and scheme to defraud [State Farm] by doing acts including,

but not limited to, producing and submitting false, misleading, inaccurate and/or fraudulent

medical records, reports, bills, and/or other documents . . . .” (Id. ¶ 11.) The scheme is aimed at

inducing State Farm to reimburse counterclaim-defendants for, inter alia, unnecessary medical

services allegedly provided by counterclaim-defendants. (Id. ¶ 12.) To further their scheme,

counterclaim-defendants instituted an incentive system, which offered incentives to “employees

and/or agents” who would “provide unnecessary, inappropriate and/or unreasonable treatment.”


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