Ignoring an Administrative Order is Expensive
1011 Fake Claims Results in more than $500,000 Penalty
When a chiropractor is caught billing insurers for services not performed he should never fail to appear to defend himself at an administrative hearing. Of course, if he or she has no defense delay is possible but dangerous.
In The Matter Of Proceedings By The Commissioner Of Banking And Insurance, State Of New Jersey To Fine Charles Boas Pursuant To The New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, Docket No. A-2223-17T2, Superior Court of New Jersey Appellate Division (February 22, 2019) Charles Boas appealed from New Jersey Department of Banking and Insurance (Department) orders directing that he pay $500,000 in civil and administrative penalties for his submission of 1011 fraudulent insurance claims, a $1000 statutory insurance fraud surcharge, $53,384.52 in restitution and $3459 in attorneys’ fees, and denying his motion for reconsideration.
Boas is a licensed chiropractor in the State of New Jersey. In April 2014, Boas pleaded guilty to third-degree health care claims fraud and was sentenced in July 2014 to a two-year term of probation.
The Order To Show Cause
The order to show cause alleged that from 2003 to 2007 Boas submitted claims for insurance payments to Horizon for chiropractic services he did not provide.
The Department served, and Boas received, the order to show cause in September 2014. The Department again served Boas with the order to show cause in December 2014, and at that time informed Boas that if he did not respond within seven days, his right to a hearing would be deemed waived and the Commissioner would dispose of the matter.
Boas failed to respond to the order to show cause.
Boas’s Motion to Vacate
the Final Order
Four months later, in March 2016, Boas filed a motion to vacate the final order. In support of the motion, Boas submitted a certification asserting that upon his receipt of the order to show cause on September 26, 2014, he called the attorney who represented him in the criminal proceeding, forwarded the order to show cause to the attorney by telefax, and was assured by the attorney that he “would handle the matter.” Boas also certified that he received the December 2014 “second notice” concerning the order to show cause and forwarded it by telefax to the attorney.
Boas’s certification offered the conclusory assertion that he “had a clear defense to this case.” He did not identify the putative defense or provide any facts supporting a defense to the allegations contained in the order to show cause.
In a detailed and comprehensive November 7, 2016 written order, the Commissioner denied Boas’s motion to vacate the final order.
The Commissioner determined that a default judgment will not be disturbed unless the failure to answer or otherwise appear and defend was excusable under the circumstances and unless the defendant has a meritorious defense, either to the cause of action itself, or to the quantum of damages. The Commissioner noted that in his motion to vacate the final order, Boas did not challenge the penalties imposed and failed to present any evidence establishing a meritorious defense to the charges in the order to show cause. The Commissioner further determined Boas did not establish excusable neglect for his failure to timely respond to the order to show cause because he did not indicate when his purported conversations with the attorney occurred or what “assurances” the attorney provided, the $2000 check to the attorney is dated eight months after Boas received the December 2014 second notice concerning the order to show cause.
Analysis
An appellate court may not upset an agency’s final quasi-judicial decision absent a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record.
The appellate court will only review discipline to determine whether the punishment is so disproportionate to the offense, in the light of all of the circumstances, as to be shocking to one’s sense of fairness. Courts are required to take care not to substitute their own views of whether a particular penalty is correct for those of the body charged with making that decision.
Boas did not provide any facts supporting a meritorious defense to the allegations in the order to show cause other than a conclusory assertion that he had a “clear defense.”
Boas argued the Commissioner’s denial of his motion to vacate the final judgment was arbitrary, capricious and unreasonable and lacks support in the record.
Generally, a defendant seeking to reopen a default judgment must show that the neglect to answer was excusable under the circumstances and that he has a meritorious defense. There is an abuse of discretion when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.
To prevail on a motion to vacate a judgment a party is compelled to prove the existence of a meritorious defense because it would create a rather anomalous situation if a judgment were to be vacated on the ground of excusable neglect, only to discover later that the defendant had no meritorious defense. A court is required to examine defendant’s proposed defense to determine its merit.
The record presented to the Commissioner on Boas’s motion to vacate the final order was bereft of any evidence supporting a meritorious defense to the allegations in the order to show cause.
Indeed, Boas’s certification demonstrates his putative attorney’s alleged assurances could not be reasonably relied upon to ensure that a response to the order to show cause was, or would be, filed. Boas certified that he sent the September 2014 order to show cause to the attorney and received assurances the attorney would “handle” the matter, but in December 2014 Boas was served with the order to show cause again with a notice that if he did not respond in seven days, the Commissioner would dispose of the matter. Thus, Boas knew in December 2014 that his putative attorney’s alleged assurances were not true, but his certification offered no explanation why he thereafter assumed the same attorney would actually file a response to the order to show cause or why he took no steps to ensure the attorney did so.
The Commissioner’s findings support his determination that Boas failed to demonstrate excusable neglect for his failure to respond to the order to show cause. Mere carelessness or lack of proper diligence on the part on an attorney is ordinarily not sufficient to entitle his clients to relief from an adverse judgment in a civil action.
Here, Boas’s supporting certification did not demonstrate any meritorious defenses to the order to show cause and, as the Commissioner found, Boas failed to provide sufficient details concerning his actions, and those of his putative attorney, to demonstrate a mistake compatible with due diligence.
Boas failed to demonstrate the Commissioner’s findings and decision denying the motion to vacate were made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.
Given the substantial deference the court must afford an agency’s choice of remedy or sanction and all of the circumstances found by the Commissioner in the final order. The penalty imposed for Boas’s 1011 violations of the Act occurring over a four-year period, was not so disproportionate to the offense as to be shocking to one’s sense of fairness. The order was affirmed.
ZALMA OPINION
Boas, a convicted felon, who pleaded guilty to having billed insurers for 1011 services never performed only to be given probation failed to deal with the administrative proceeding. As a result of his sloth, perhaps encouraged by a charitable sentence after his conviction, finds himself obligated to pay the state more than $500,000, an almost adequate punishment for such a major fraud, who should have spent time in prison.
