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March 8, 2019

Queens-Roosevelt Med. Rehabilitation, P.C. v Response Ins. Co. (2019 NY Slip Op 50608(U))

https://www.beynensonlaw.com/case-law/queens-roosevelt-med-rehabilitation-p-c-v-response-ins-co-2019-ny-slip-op50608u/

Court
Appellate Term, Second Department
Decided
March 8, 2019
Citation
2019 NY Slip Op 50608(U)
Posture
Other motion
Outcome
Insurer prevailed
Issues
Discovery and procedure Fraudulent incorporation (Mallela)
Legal questions
Mallela defense: preclusion and discovery (see the maps)
Cite as
Queens-Roosevelt Med. Rehabilitation, P.C. v Response Ins. Co., 2019 NY Slip Op 50608(U) (App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2019)

Posture, outcome, issues and treatment by other decisions are Beynenson Law’s classification. Treatment labels are assigned by a language model reading the citing decision; negative and appeal-history labels are checked by a second reader.

Summary

Editorial summary by Beynenson Law, not part of the court’s decision.

The provider's refusal to answer deposition questions about ownership warranted striking its complaint after years of discovery noncompliance. The owner's involvement, hours, and duties at other medical corporations were material to whether the owner genuinely owned and operated the provider, an issue relevant to the insurer's Mallela defense. Counsel's directions not to answer were unauthorized under 22 NYCRR 221.2. The Appellate Term, Second Department, held that the refusal could be presumed willful and contumacious in light of the provider's prolonged failure to comply fully with discovery. Because some claims had already been struck for noncompliance and the owner had been deposed twice, it reversed the order and granted the insurer's motion to strike the complaint and dismiss the action under CPLR 3126.

Reported in New York Official Reports at Queens-Roosevelt Med. Rehabilitation, P.C. v Response Ins. Co. (2019 NY Slip Op 50608(U))

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 2d, 11th and 13th JUDICIAL DISTRICTS

Queens-Roosevelt Medical Rehabilitation, P.C., as Assignee of Maria Rodriguez, Respondent,

against

Response Insurance Company, Appellant.

Rubin, Fiorella & Friedman, LLP (Harlan R. Schreiber of counsel), for appellant. Law Firm of Natalia Skvortsova, PLLC (Natalia Skvortsova and Pryanka Arora of counsel), for respondent.

Appeal from an order of the Civil Court of the City of New York, Queens County (Sally E. Unger, J.), entered March 1, 2016. The order denied defendant’s motion to strike the complaint and dismiss the action pursuant to CPLR 3126.

ORDERED that the order is reversed, with $30 costs, and defendant’s motion to strike the complaint and dismiss the action pursuant to CPLR 3126 is granted.

In this action by a provider to recover assigned first-party no-fault benefits, defendant appeals from an order of the Civil Court denying defendant’s motion to strike the complaint and dismiss the action pursuant to CPLR 3126.

This action, commenced in 2010, involved numerous discovery disputes, during which, among other things, plaintiff’s owner, Dr. John McGee, was ordered to appear for a deposition. After that deposition and further discovery, certain of plaintiff’s claims were dismissed based on plaintiff’s “failure to comply in good faith with defendant’s discovery demands.” In 2014, Dr. McGee was ordered to appear for a second deposition, this time on the issue of whether plaintiff was in violation of state licensing requirements prohibiting nonphysicians from owning or controlling medical service corporations, “i.e. [whether] Dr. John McGee is plaintiff’s bona fide owner & operator” (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]; Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 42 Misc 3d 30, 38 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2013], affd 150 AD3d 192 [2017], lv granted 2017 NY Slip Op 90794[U] [2017]). At that deposition, Dr. McGee testified that he was plaintiff’s owner and sole physician, and that he performed medical and managerial tasks for plaintiff. Over defendant’s objection, and on the advice of plaintiff’s counsel—based upon her claim that, in essence, the questions [*2]were irrelevant—Dr. McGee refused to answer several questions, including those pertaining to other medical service corporations which Dr. McGee either admittedly or allegedly owned or operated during the time plaintiff was in operation, and Dr. McGee’s involvement with those corporations, including his hours and duties at those corporations.

Defendant subsequently moved to strike the complaint and dismiss the action, based on Dr. McGee’s refusal to answer questions and on plaintiff’s alleged spoliation of evidence. The Civil Court denied defendant’s motion, stating, among other things, that the questions at issue were “outside the scope of the deposition due to the fact that they had nothing to do with the plaintiff corporation.”

Contrary to the finding of the Civil Court, the questions at issue were “designed to elicit information which was material and necessary to the appellant’s defense of this action” (Parker v Ollivierre, 60 AD3d 1023, 1024 [2009]), as Dr. McGee’s involvement in other medical service corporations, including how much time he spent at those entities, could necessarily affect his involvement in the daily activities and management of plaintiff, and were relevant to whether Dr. McGee was plaintiff’s “bona fide owner [and] operator.” Moreover, counsel’s “directions not to answer [the questions at issue] were not otherwise authorized by [Uniform Rules for the Conduct of Depositions] 22 NYCRR [§] 221.2” (id. at 1024). In light of plaintiff’s failure to fully comply with discovery over many years, plaintiff’s refusal to answer the questions at issue may be presumed to be willful and contumacious (see e.g. Honghui Kuang v MetLife, 159 AD3d 878 [2018]); therefore, a sanction is warranted. Given that certain of plaintiff’s claims have already been struck based upon its noncompliance with discovery and that Dr. McGee has already been deposed twice, we find that striking plaintiff’s complaint is the appropriate sanction (see id.).

Accordingly, the order is reversed and defendant’s motion to strike the complaint and dismiss the action pursuant to CPLR 3126 is granted.

PESCE, P.J., WESTON and ALIOTTA, JJ., concur.


ENTER:
Paul Kenny
Chief Clerk
Decision Date: March 08, 2019

Legal questions

A question of no-fault law this decision rules on, from our Legal Questions pages. Bars count the decisions on the question by year and court, coloured by category; circles are this decision and the decisions on the question it cites or that cite it. Point at a bar or circle for details. The categories and summaries are Beynenson Law’s classification, made by a language model and checked by a second reading.

Mallela defense: preclusion and discovery

Open the full map

May the insurer raise and investigate a Mallela (fraudulent incorporation) defense, or is it precluded, waived or denied discovery?

This decision: Insurer may raise or investigate the Mallela defense here (rules on the question, but another ground decided the case)

Held that deposition questions about the owner's involvement and time at other medical corporations were material to whether he was the provider's bona fide owner and operator, so refusing to answer them warranted striking the complaint.

  • Court of AppealsCt App 1
  • Appellate DivisionApp Div 7
  • Appellate TermApp Term 72
  • Trial courtsTrial 56
2005, Court of Appeals: 1 decision (1 Defense may be pursued)2021, Appellate Division: 1 decision (1 Defense may be pursued)2019, Appellate Division: 2 decisions (1 Defense may be pursued, 1 Defense barred)2017, Appellate Division: 1 decision (1 Defense may be pursued)2016, Appellate Division: 1 decision (1 Defense may be pursued)2011, Appellate Division: 1 decision (1 Defense may be pursued)2008, Appellate Division: 1 decision (1 Defense may be pursued)2019, Appellate Term: 1 decision (1 Defense may be pursued)2018, Appellate Term: 2 decisions (2 Defense may be pursued)2017, Appellate Term: 2 decisions (2 Defense may be pursued)2014, Appellate Term: 2 decisions (2 Defense may be pursued)2013, Appellate Term: 5 decisions (5 Defense may be pursued)2012, Appellate Term: 8 decisions (8 Defense may be pursued)2011, Appellate Term: 8 decisions (7 Defense may be pursued, 1 Defense barred)2010, Appellate Term: 9 decisions (7 Defense may be pursued, 2 Defense barred)2009, Appellate Term: 7 decisions (7 Defense may be pursued)2008, Appellate Term: 8 decisions (7 Defense may be pursued, 1 Defense barred)2007, Appellate Term: 7 decisions (7 Defense may be pursued)2006, Appellate Term: 6 decisions (6 Defense may be pursued)2025, Appellate Term: 7 decisions (7 Defense may be pursued)2023, Trial courts: 2 decisions (2 Defense may be pursued)2021, Trial courts: 4 decisions (3 Defense may be pursued, 1 Defense barred)2019, Trial courts: 1 decision (1 Defense may be pursued)2017, Trial courts: 4 decisions (2 Defense may be pursued, 2 Defense barred)2015, Trial courts: 3 decisions (3 Defense may be pursued)2013, Trial courts: 2 decisions (1 Defense may be pursued, 1 Defense barred)2012, Trial courts: 6 decisions (1 Defense may be pursued, 5 Defense barred)2011, Trial courts: 1 decision (1 Defense barred)2010, Trial courts: 3 decisions (3 Defense barred)2009, Trial courts: 4 decisions (3 Defense may be pursued, 1 Defense barred)2008, Trial courts: 6 decisions (5 Defense may be pursued, 1 Defense barred)2007, Trial courts: 2 decisions (2 Defense may be pursued)2006, Trial courts: 5 decisions (5 Defense may be pursued)2005, Trial courts: 9 decisions (5 Defense may be pursued, 4 Defense barred)2025, Trial courts: 2 decisions (2 Defense may be pursued)2026, Trial courts: 2 decisions (2 Defense may be pursued)This decision
20052010201520202025
Defense may be pursuedDefense barredThis decisionCites it or cited by itCited or followed

Of the 136 decisions on this question in the Second Department courts and the Court of Appeals, 112 (this one included) are in the same category.

Cited in this decision

  • State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416)Fraudulently incorporated medical providers are ineligible for no-fault reimbursement under 11 NYCRR 65-3.16 (a) (12).
  • Andrew Carothers, M.D., P.C. v Progressive Ins. Co. (2013 NY Slip Op 23232)A Mallela defense does not require proof of common-law fraud or fraudulent intent at incorporation.
  • Carothers v Progressive Ins. Co. (2017 NY Slip Op 02614)A fraudulent-incorporation defense does not require proof of common-law fraud or fraudulent intent when the provider was incorporated.

Similar decisions

  • Queens-Roosevelt Med. Rehabilitation P.C. v Response Ins. Co. (2019 NY Slip Op 50612(U))The insurer's motion to strike the complaint and dismiss the assigned no-fault action under CPLR 3126 was granted on appeal.
  • RLC Med., P.C. v Allstate Ins. Co. (2010 NY Slip Op 50642(U))The insurer established a need for discovery of facts in the provider's possession concerning alleged fraudulent incorporation.
  • Jj & R Chiropractic, P.C. v Interboro Mut. Indem. Ins. (2017 NY Slip Op 51201(U))The provider's deposition noncompliance warranted testimony preclusion rather than dismissal within the motion court's discretion.
  • American Tr. Ins. Co. v MZY Acupuncture, P.C. (2026 NY Slip Op 02236)The provider failed to show that the insurer's noncompliance with discovery was willful or contumacious.
  • Clinton Place Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51012(U))A provider that fails to object timely to discovery demands must respond except as to privileged or palpably improper matters.
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