Litigation of counsel Martin Flumenbaum and partner Brad Karp’s latest Second Circuit Review column, “Staying Parallel State Proceedings in RICO Litigation: 'GEICO v. Patel',” appeared in the February 25 issue of the New York Law Journal. The authors discuss a recent decision in which the court affirmed the lower court’s stay of hundreds of parallel state court and arbitration proceedings via a federal RICO action.
In the underlying action, GEICO and three of its subsidiaries sued Dr. Bhargav Patel and associated entities in the U.S. District Court for the Eastern District of New York, alleging a RICO scheme whereby defendants systematically tried to exploit New York’s no-fault automobile insurance laws. Following GEICO’s federal action, the defendants filed approximately 605 individual collection actions against GEICO in arbitration tribunals and New York state courts. GEICO sought a preliminary injunction from the district court to stay the collection proceedings and stop the defendants from filing any new actions until the district court ruled on the pending RICO action. In her majority opinion, Senior Circuit Judge Susan L. Carney found no error in the district court’s assessment that GEICO had made a sufficient showing of irreparable harm, the “single most important prerequisite for the issuance of a preliminary injunction.” The decision confirms that when an insurer alleges a complex fraudulent scheme that can only be understood by viewing claims in the aggregate, the risks created by disaggregating the scheme into individual actions can amount to irreparable harm justifying a preliminary injunction.
Litigation associate Michael Pisem assisted in the preparation of this column.
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