Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 50046(U))

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Diane A. Lebedeff, J.), dated August 1, 2007, deemed from a judgment of said court entered September 6, 2007 (see CPLR 5501 [c]). The judgment, entered pursuant to the August 1, 2007 order granting plaintiff’s motion for summary judgment and denying defendant’s cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint, awarded plaintiff the principal sum of $3,745.18.

Judgment reversed without costs, order dated August 1, 2007 vacated, plaintiff’s motion for summary judgment denied and defendant’s cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint granted.

In this action by a provider to recover assigned first-party no-fault benefits for services rendered in September and October 2003, plaintiff moved for summary judgment. Defendant cross-moved for leave to amend its answer to assert the affirmative defenses of res judicata and collateral estoppel, and, upon such amendment, for summary judgment dismissing the complaint. The court below granted plaintiff’s motion and denied defendant’s cross motion. The instant appeal by defendant ensued. A judgment was subsequently entered (see CPLR 5501 [c]).

Generally, leave to amend a pleading pursuant to CPLR 3025 (b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the amendment may have merit (see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959 [1983]; Ingrami v Rovner, 45 AD3d 806, 808 [2007]). The court must examine the merits of a proposed amendment since leave to amend should not be granted where the proposed amendment is totally without merit or is palpably insufficient as a [*2]matter of law (see Ingrami, 45 AD3d at 808; Hill v 2016 Realty Assoc., 42 AD3d 432, 433 [2007]).

Defendant sought leave to interpose the affirmative defenses of res judicata and collateral estoppel because there was a prior arbitration proceeding between the parties in which plaintiff had sought to recover assigned first-party no-fault benefits for services rendered from August 2003 through January 14, 2004, in which proceeding the arbitrator had determined that plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 322 [2005]). Inasmuch as plaintiff failed to demonstrate prejudice or surprise as a result of the proposed amendment to defendant’s answer (see McCaskey, Davies & Assocs. v New York City Health & Hosps. Corp., 59 NY2d 755 [1983]), and the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law (see Ingrami, 45 AD3d at 808; Hill, 42 AD3d at 433), defendant should have been granted leave to amend its answer.

Under the doctrine of collateral estoppel, a party is precluded from relitigating an issue which has been previously decided against it in a prior proceeding where it had a full and fair opportunity to litigate the issue (see D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659 [1990]). “The two elements that must be satisfied to invoke the doctrine of estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue (see Kaufman v Lilly Co. [65 NY2d 449, 455 (1985)])” (Luscher v Arrua, 21 AD3d 1005, 1007 [2005]). “The burden is on the party attempting to defeat the application of collateral estoppel to establish the absence of a full and fair opportunity to litigate” (D’Arata, 76 NY2d at 664; see also Kaufman, 65 NY2d at 456).

Collateral estoppel effect can, under appropriate circumstances, be given to arbitration awards (see Matter of American Ins. Co. [Messinger Aetna Cas. & Sur. Co.], 43 NY2d 184 [1977]). Where a plaintiff has freely elected to proceed to arbitration with the assistance of counsel despite the availability of an alternate judicial forum and has had the opportunity to employ procedures substantially similar to those utilized in a court of law, it may be found that the plaintiff has had a full and fair opportunity to litigate the issue determined in the arbitration proceeding (Clemens v Apple, 65 NY2d 746 [1985]).

In the instant matter, defendant established that the issue of whether plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 322) was identical to the issue previously decided by the arbitrator. In opposition to defendant’s cross motion, plaintiff failed to address the branch of the cross motion which sought summary judgment dismissing the complaint on the ground of collateral estoppel. Therefore, plaintiff failed to establish that it did not receive a full and fair opportunity to litigate in the arbitration proceeding. Thus, the branch of defendant’s cross motion seeking summary judgment should have been granted.

Accordingly, the judgment is reversed, the order dated August 1, 2007 is vacated, plaintiff’s motion for summary judgment is denied and defendant’s cross motion for leave to amend its answer, and, upon such amendment, for summary judgment dismissing the complaint [*3]is granted.

Pesce, P.J., Golia and Rios, JJ., concur.
Decision Date: January 09, 2009