One of Central Florida's best-known law firms and a prominent Brevard County surgeon may have had an "across-the-board agreement" in recent years to inflate by millions of dollars the charges for spinal surgeries in auto-accident claims, according to insurance-company allegations that have sprung unexpectedly from a pair of routine personal-injury lawsuits.
Central to the allegations: Orlando-based Morgan & Morgan, which considers itself the nation's largest personal-injury law firm; Dan Newlin, a 10-year Morgan & Morgan lawyer who left the firm late last year to open his own office; Dr. Ara Deukmedjian, president of the Brevard County Medical Society and a volunteer assistant professor of neurosurgery at the University of Central Florida School of Medicine; and State Farm Mutual Automobile Insurance Co., the nation's largest auto insurer.
The two lawsuits, filed by Morgan & Morgan against State Farm auto policies, are each in evidence-gathering phases and months away from possible trials. But they became superheated last fall when a former paralegal at the law firm turned whistle-blower, providing State Farm with ammunition to probe Deukmedjian's billing practices with Morgan & Morgan from 2007 to 2011.
As a result, the insurance company is building a case — "quite aggressively," a federal judge has observed — that Deukmedjian was charging "exorbitant amounts" for surgeries performed on auto-accident clients. It alleges that Deukmedjian's bills were then incorporated into lawsuits filed by Morgan & Morgan lawyers as they sought to win payouts from State Farm, but that Deukmedjian then accepted, under a prearranged agreement, significantly less than his original charge, as long as Morgan & Morgan sent more clients to his Deuk Spine Institute.
In a recent court document, State Farm alleges that "Deuk Spine had an enormously profitable financial arrangement with Morgan & Morgan" in which the doctor submitted bills totaling $8.14 million from 2009 to 2011, then received roughly half of what he had charged. According to the insurer, an analysis it conducted of Morgan & Morgan spreadsheets concluded that the "amount actually paid" to Deukmedjian was $4.84 million.
A Morgan & Morgan managing partner denied the "brazen assertions" of State Farm that his law firm had a "cozy" relationship with Deukmedjian.
"It's the complete opposite of what State Farm has said," said Scott Weinstein, the firm's spokesman.
Weinstein said there was no prearranged agreement with Deukmedjian; the surgeon was uncooperative, he said, when the law firm asked him to lower his fees during the customary negotiations to reach settlements on behalf of his patients — the firm's clients.
Weinstein also said that Newlin, a former deputy sheriff who had generated a high volume of cases for the firm, was the lawyer most involved with the surgeon.
Earlier this month, Newlin denied State Farm's allegation that Morgan & Morgan sent clients to Deukmedjian in exchange for the surgeon agreeing in advance to accept less than the fees incorporated in the firm's lawsuits. He clarified last week that he had little knowledge of how lawsuits played out because his job had been to attract new clients, who were then assigned to other Morgan & Morgan lawyers.
"I didn't review bills, and I didn't handle files," he said.
Deukmedjian's lawyer, Crystal Eiffert of Orlando, also denied that there was a prearranged agreement and said Deuk Spine charges the same for every patient and every procedure.
"There's not selective billing, as some of the portions of State Farm's allegations seem to indicate," Eiffert said. "There was never an agreement to accept a reduced amount of money, unless it was done on a case-by-case basis. If a patient requests a reduced amount because they don't have enough money, then they [Deuk Spine] might take a reduction."
Doctors routinely agree to reduce their medical fees during negotiations to settle cases, based on the circumstances of each lawsuit. But lawyers are not allowed to intentionally overstate medical costs in lawsuits, said Amy Mashburn, a University of Florida legal-ethics professor who is not familiar with the Morgan & Morgan lawsuits. "That's fraud on the court, and it's a breach of the lawyer's professional ethics," Mashburn said.
There have been no allegations of criminal wrongdoing on the part of Deukmedjian, Newlin or Morgan & Morgan, whose founder, John Morgan, is not included as an active figure in the litigation. The two civil suits are focused on the "necessity and reasonableness" of Deukmedjian's charges for treating two car-accident patients, and State Farm has opted to fight those charges by hiring lawyers from three firms.
Neither State Farm nor its lead lawyer would comment.
The two lawsuits began in 2010 as ordinary legal actions by accident victims. (According to state figures, nearly 40 percent of all motor-vehicle crashes last year resulted in litigation.)
One of the suits was filed in state Circuit Court in Orlando. The second case began in state court in Lake County but was moved at State Farm's request to U.S. District Court in Ocala.
They became linked when the former Morgan & Morgan paralegal, Margaret Zukoski, testified last year about her experiences at the firm, where she had worked for four years until quitting in July.
The Orlando woman's Oct. 28 deposition was for the state lawsuit. But three days later, State Farm took a transcript of her testimony to the judge in the federal case in an effort to obtain additional information from the law firm and the doctor. And two weeks after that, on Nov. 14, U.S. Magistrate Judge Thomas B. Smith issued an order that required Morgan & Morgan to reveal its financial transactions with Deukmedjian and required the surgeon to turn over emails that had passed between his medical practice and the law firm.
In his order, the judge paraphrased several of Zukoski's sworn assertions:
"Dan Newlin, operating from Morgan & Morgan, would send patients to Deuk Spine. ... Dr. Deukmedjian would perform surgery and submit a bill."
"Morgan & Morgan would then handle the case. There was an arrangement between Deuk Spine and Morgan & Morgan that Deuk Spine would accept half the amount billed for surgery."
"The full amount of the Deuk Spine bill, not the amount Deuk Spine had agreed to accept was used at mediation and trial."
Smith explained further that Morgan & Morgan, according to its records, had referred 176 clients to Deuk Spine within the past four years, while State Farm asserted in court that as many as 90 percent of the law firm's clients who became patients of Deukmedjian ended up having surgery.
Morgan & Morgan no longer represents the accident victim in the federal case. Still, "[t]he fulcrum point for the litigation to date has centered on the relationship between [the victim's] initial counsel, Morgan & Morgan law firm, and her treating physician Dr. Deukmedjian," the judge stated in a ruling a month ago.
As the result of Smith's Nov. 14 order, State Farm received more than 2,000 pages of Deukmedjian and Morgan & Morgan emails. Even though the insurer protested that the messages were heavily censored, it asserted in a January court filing: "The correspondence between Deuk Spine and Morgan & Morgan appears on its face to confirm Ms. Zukoski's testimony that there was an across-the-board agreement to reduce Deuk Spine's fees for Morgan & Morgan clients in exchange for large amounts of patient referrals."
Asked about that assertion, Weinstein said State Farm, in an attempt to obtain more records from the law firm and doctor, is making unfounded accusations in court, which the federal judge has allowed, he said, as part of the wide latitude typically given lawyers in the early phases of lawsuits. "There's nothing there. It's a dead end," he said.
2,000 pages of emails
Morgan & Morgan lawyers have referred to Zukoski in court documents as a disgruntled ex-employee whose deposition was based on speculation and hearsay. To emphasize that characterization, Weinstein cited a Kissimmee lawyer's unsuccessful appeal of a 2008 disciplining by the state Supreme Court for having missed court hearings and trials.
The Kissimmee lawyer, who was reprimanded and placed on 18 months' probation, gave many excuses for her actions in her appeal, including illness, a sister's death, uncooperative judges, a traffic jam and racial inequalities. She also cited Zukoski, describing her as a former, "disgruntled employee" who had told former clients to lodge complaints against the lawyer.
Zukoski recently told the Sentinel that during her last two years at Morgan & Morgan, she became dismayed by cuts in employee benefits but also distressed by aspects of the firm's practices involving Deuk Spine Institute.
Morgan & Morgan "can call me anything they like," Zukoski said. "I was open, honest and straightforward." She added: "It's not about me — it's about the documents."
The more than 2,000 pages of emails that State Farm has obtained in the federal lawsuit are being withheld by lawyers from the public case file, while the emails Zukoski provided with her deposition in the state suit remain under seal and unavailable even to the lawyers until a judge rules on Morgan & Morgan's assertion that they are confidential and illegally obtained.
But Zukoski showed the Sentinel many of the emails she took with her when she resigned. In a January 2009 email, Newlin responded to a refusal by Deukmedjian to reduce his charge in a particular lawsuit. "Normally we ask doctors to take 25 cents on the dollar[, and] if Morgan ever is notified of something like this [refusal], you will be blacklisted for us to work with," said Newlin, who concluded by asking, "What happened to the honeymoon?"
Newlin wrote to the surgeon two months later: "Doc, hopefully you are beginning to see the surgery checks coming in, we are working hard on several more presently."
In her deposition, Zukoski testified that Deukmedjian's fees, as much as $66,000 for a laser procedure, were "ridiculous. … And then, come to find out, he had agreed that he would take half of that amount," she stated. "But the entire $66,000 was what was being presented to insurance carriers."
Weinstein showed the Sentinel several internal Morgan & Morgan emails that suggested an ongoing struggle by the firm's lawyers to get Deukmedjian to agree to a reduction in his fees during the customary negotiations used to settle cases.
"This firm was constantly battling Dr. Deuk, asking him to reduce his bills," he said. "… Whatever emails that we have found that she [Zukoski] possibly could be talking about do not say what she says they say."
Zukoski said that, about a year ago, she concluded that the lawsuits involving her employer, Deukmedjian and State Farm's primary lawyer, Dale Gobel of Orlando, were "heating up."
In a June 2011 email that Zukoski showed the Sentinel, a Morgan & Morgan lawyer gave colleagues instructions to forward Gobel's lawsuit actions to "our Deuk response team" leader and concluded with: "P.S. can you do us all a favor and knock gobel's … [initials for a profanity] ass out."
Zukoski, 61, said she had already been preparing to retire after 33 years of legal work when she called The Florida Bar's ethics hotline July 27 to discuss her situation. Hours later, she sent a resignation email to Morgan & Morgan, warning that she planned turn over to authorities information about the firm's dealings with Deukmedjian.
"There are many, many emails in which Dan has made that relationship crystal clear," the paralegal wrote.
Zukoski said she considered not taking the emails with her and simply telling authorities about them, but "who would have believed me?" Also, she was worried, she said, that Morgan & Morgan would somehow blame the firm's staff for any allegations raised by State Farm. She said she eventually reached out to Gobel, the State Farm lawyer, phoning him and saying, "You're on the right track."
Exhausting legal battles
Neither of the personal-injury lawsuits has gone smoothly.
The federal judge, dissatisfied with Deukmedjian's responses during depositions, said the doctor was showing "a lack of respect for the authority of the court." As a result, in an extremely rare move, the judge has ordered that the next deposition be held in the courthouse, where he can preside if needed.
In the state case, Circuit Judge John M. Kest disqualified himself after Morgan & Morgan accused him of bias against the firm's client; the judge who replaced him, Robert J. Egan, recused himself without explanation.
Zukoski said she has been interviewed by the Florida Division of Insurance Fraud. A spokesman, Capt. Steve Smith, would not comment on whether an investigation is under way. He did say that excessive cooperation between doctors and lawyers generally has been a concern of the agency's.
"Some of the problems we've had are doctors and lawyers probably working too closely together," Smith said. "They have a plan in place to go after the bowl of money ... where the priority is enriching themselves rather than taking care of the patient, who is secondary — or a means to the end."