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District Court of Suffolk County, Third District, November 27, 2017

APPEARANCES OF COUNSEL

Law Offices of Buratti, Rothenberg & Burns, East Meadow, for defendant.

Baker Sanders, LLC, Garden City, for plaintiff.

After due deliberation, it is hereby ordered that defendant’s motion for summary judgment is granted solely to the extent that the amount in dispute is reduced to $9,160.08 based upon the uncontested merits of its fee schedule defense. In all other respects, defendant’s motion is denied. Based upon the submissions of the parties, the court finds that plaintiff has established its prima facie case and defendant has established its timely denial of the assigned no-fault benefits at issue. There exist material facts in dispute as to the medical necessity of the treatment provided to plaintiff’s assignor, which must be decided at a trial.

This is an action to recover assigned no-fault benefits for treatment rendered to plaintiff’s assignor for injuries claimed to have been sustained in a motor vehicle accident which occurred on December 30, 2012. Defendant’s motion for summary judgment seeks dismissal of the [*2]complaint on three separate grounds: (1) lack of medical necessity for the treatment; (2) billing in excess of the applicable fee schedule; and (3) lack of authority to do business in the State of New Jersey where the treatment was rendered, by reason of the failure of plaintiff corporation to obtain a certificate of authority to transact business, prior to the time the treatment was rendered.

As to the issue of medical necessity, both sides submitted detailed affidavits of qualified professionals regarding the reasons why the treatment rendered was or was not medically necessary. Based upon a careful review of these affidavits, the court is constrained to rule that relevant and material factual issues exist regarding the medical necessity of the subject services.

Regarding the fee schedule defense, defendant submits proof in the form of an affidavit by Timothy Schultz, a certified coder, to establish that the amount allowable by the applicable New Jersey fee schedule for the services rendered is $9,160.08.{**58 Misc 3d at 405} Plaintiff did not submit any evidence to rebut this proof. Accordingly, the court grants this branch of defendant’s motion and reduces the amount in issue to $9,160.08.

Defendant also seeks dismissal of all of the claims because plaintiff, a New York professional corporation, was not authorized to transact business in the State of New Jersey as of the dates of the treatment for which payment is sought herein. That fact is not disputed. Plaintiff became authorized to transact business in the State of New Jersey on January 5, 2015. This action was commenced on December 1, 2016 when service was duly effectuated on defendant. Plaintiff claims that the failure to obtain the requisite certificate of authority was a technical violation that does not warrant granting the drastic relief of claim preclusion urged by defendant. The parties submitted conflicting arbitration awards on this issue. It appears that this is a case of first impression as the court is not aware of any other judicial determinations of this issue.

The reasoning urged by defendant and set forth in the arbitration awards relied upon is that plaintiff violated the New York no-fault regulations by not having been qualified to do business in New Jersey by reason of having failed to obtain a certificate of authority as required by New Jersey law at New Jersey Statutes Annotated § 14A:13-3. The New York regulation relied upon by defendant is found at 11 NYCRR 65-3.16 (a) (12), which provides as follows:

“(12) A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed” (emphasis added).

Defendant urges the court to interpret the pertinent part of the regulation to be that the failure of the plaintiff health care corporation to timely obtain the requisite certificate of authority for a foreign corporation to transact business means the insurer is not obligated to pay for otherwise valid billing for medical treatment. The court disagrees. There is no dispute that the health care professionals who rendered treatment for which payment is demanded met all of the licensing requirements of the State of New Jersey to perform the health care{**58 Misc 3d at 406} services rendered to plaintiff’s assignor. The court therefore concludes that no violation of the New York no-fault regulations has been established under the facts presented in this case. The court determines that the cited regulation does not apply to the corporate certificate requirement at issue in this case.

However, even if the court were to find that the aforesaid no-fault regulation applied in this case, the court would still conclude that the failure to obtain the certificate of authority to [*3]transact business in New Jersey would not in and of itself preclude recovery of payment for the no-fault health care benefits provided. New Jersey law explicitly proscribes the impact of transacting business without the certificate of authority. New Jersey Statutes Annotated § 14A:13-11 provides as follows:

“14A:13-11. Transacting business without certificate of authority

“(1) No foreign corporation transacting business in this State without a certificate of authority shall maintain any action or proceeding in any court of this State, until such corporation shall have obtained a certificate of authority. This prohibition shall apply to

“(a) any successor in interest of such foreign corporation, except any receiver, trustee in bankruptcy or other representative of creditors of such corporation; and

“(b) any assignee of the foreign corporation, except an assignee for value who accepts an assignment without knowledge that the foreign corporation should have but has not obtained a certificate of authority in this State.

“(2) The failure of a foreign corporation to obtain a certificate of authority to transact business in this State shall not impair the validity of any contract or act of such corporation, and shall not prevent such corporation from defending any action or proceeding in any court of this State.

“(3) In addition to any other liabilities imposed by law, a foreign corporation which transacts business in this State without a certificate of authority shall forfeit to the State a penalty of not less than $200.00, nor more than $1,000.00 for each calendar year, not more than 5 years prior thereto, in which{**58 Misc 3d at 407} it shall have transacted business in this State without a certificate of authority. Such penalty shall be recovered with costs in an action prosecuted by the Attorney General. The court may proceed in such action in a summary manner or otherwise.”

This statute provides that the non-authorized foreign corporation may not maintain an action in New Jersey until such corporation has obtained a certificate of authority to transact business. Even if this were to apply to a New York action, the plaintiff was in fact authorized to transact business in New Jersey at the time the action was commenced. The statute also expressly provides that the failure to obtain the certificate “shall not impair the validity of any contract or act of such corporation” (NJ Stat Ann § 14A:13-11 [2]). This clearly includes the validity of the assignment of an insured’s contractual right to no-fault benefits, as well as the “acts” of the duly licensed health care professional rendering the treatment for which payment is sought. Finally, the statute imposes monetary penalties for failure to obtain the requisite certificate of authority to transact business.

Thus, the State of New Jersey has in place the means by which foreign corporations who fail to obtain a certificate of authority are penalized. None of the statutory penalties includes the relief requested by defendant in its motion. The harsh penalty of claim preclusion requested by defendant is not required by New Jersey law and would thwart the purpose and intent of the New York No-Fault Law and regulations. It would amount to a windfall for insurers who would otherwise be obligated to pay for medically necessary services rendered to victims of motor vehicle accidents.

The court also notes that failure to obtain the certificate of authority in this case does not [*4]amount to fraud that would be “good cause” for denial of payment as set forth in State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313, 322 [2005]). Without proof of fraudulent intent, the court finds the failure to obtain a certificate of authority to transact business in this case was a technical violation for which alternate penalties are provided by New Jersey law. Therefore, such conduct cannot be solely relied upon by insurers to delay or withhold payment of otherwise valid no-fault billing.

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Gary Tsirelman, P.C., Brooklyn, NY (Stefan Belinfanti and David M. Gottlieb of counsel), for appellants.

McCormack & Mattei, P.C., Garden City, NY (John E. McCormack, Kevin A. Mattei, and Nicole Holler of counsel), for respondents.

In an action, inter alia, for a judgment declaring that the plaintiffs are not obligated to pay any past, pending, or future claims for no-fault benefits submitted to them by the defendants, the defendants appeal from an order of the Supreme Court, Nassau County (Bruno, J.), entered January 28, 2016, which granted the plaintiffs’ motion for summary judgment on the complaint.

Ordered that the order is reversed, on the law, with costs, and the plaintiffs’ motion for summary judgment on the complaint is denied.

The plaintiffs, which issue automobile insurance policies that include coverage under the No-Fault Automobile Insurance Law (see Insurance Law § 5101 et seq.), commenced this action against the defendants, five professional medical service corporations. The complaint sought, inter alia, a judgment declaring that the plaintiffs are not obligated to pay any past, pending, or future claims for no-fault benefits submitted to them by the defendants on the basis that the defendants were fraudulently incorporated in the names of licensed medical professionals, while in fact they were owned, operated, and controlled by Andrey Anikeyev, a nonphysician. The plaintiffs moved for summary judgment on the complaint. The Supreme Court granted the motion, and the defendants appeal.

“Insurance Law § 5102 et seq. requires no-fault carriers to reimburse patients (or, as in this case, their medical provider assignees) for ‘basic economic loss’ ” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320 [2005]). However, “[a] provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York” (11 NYCRR 65-3.16 [a] [12]). “State law mandates that professional service corporations be owned and controlled only by licensed professionals” (One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d 738, 740 [2008]; see Business Corporation Law §§ 1503 [a]; 1507, 1508). Thus, an insurance carrier may withhold payment for medical services provided by a professional corporation which has been “fraudulently incorporated” to allow nonphysicians to share in its ownership and control (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 319, 321; see Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 150 AD3d 192, 194 [2017]; Liberty Mut. Ins. Co. v Raia Med. Health, P.C., 140 AD3d 1029, 1030-1032 [2016]; One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 [*2]AD3d at 739-740).

Here, the plaintiffs failed to meet their prima facie burden of demonstrating that the defendants were fraudulently incorporated in this manner. In support of their motion, the plaintiffs submitted nothing more than Anikeyev’s plea of guilty to a federal court Information that charged him generally with mail and health care fraud, and charged that substantial funds held in the defendants’ accounts were subject to forfeiture. The Information does not describe the manner in which the fraud was committed or how the funds came to be held in the defendants’ accounts. Thus, this evidence did not demonstrate, prima facie, that Anikeyev exercised dominion and control over the defendants and their assets and shared the risks, expenses, and interest in their profits and losses, or that he had a significant role in the guidance, management, and direction of their business (see Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 150 AD3d at 201). Moreover, even assuming, as the plaintiffs do, that the presence of the forfeited funds in the defendants’ bank accounts demonstrated some level of control by Anikeyev over the bank accounts, such control could not, on its own, support a finding that he owned and controlled the defendants (id. at 202).

Since the plaintiffs failed to demonstrate their prima facie entitlement to judgment as a matter of law, the Supreme Court should have denied their motion for summary judgment without regard to the sufficiency of the defendants’ opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

In light of our determination, we need not reach the defendants’ remaining contentions. Dillon, J.P., Sgroi, Hinds-Radix and Iannacci, JJ., concur.

Decided on November 3, 2017
SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 2d, 11th and 13th JUDICIAL DISTRICTS
PRESENT: : MICHELLE WESTON, J.P., MICHAEL L. PESCE, MARTIN M. SOLOMON, JJ
2015-2893 Q C

The Rybak Firm, PLLC (Damin J. Toell, Esq.), for appellant. Rivkin Radler, LLP (Stuart M. Bodoff, Esq.), for respondent.

Appeal from an order of the Civil Court of the City of New York, Queens County (Terrence C. O’Connor, J.), entered October 23, 2015. The order denied plaintiff’s motion for summary judgment, granted defendant’s cross motion for summary judgment dismissing the complaint, and, sua sponte, awarded defense counsel $250 in “fees.”

ORDERED that, on the court’s own motion, the notice of appeal from so much of the order as, sua sponte, awarded defense counsel $250 in “fees” is deemed an application for leave to appeal from that portion of the order, and leave to appeal is granted (see CCA 1702 [c]); and it is further,

ORDERED that the order is modified by vacating so much thereof as, sua sponte, awarded defense counsel $250 in “fees”; as so modified, the order is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment, and defendant cross-moved for summary judgment dismissing the complaint on the ground that plaintiff had failed to appear for duly scheduled examinations under oath. Plaintiff appeals from an order of the Civil Court which denied its motion, granted defendant’s cross motion, and, sua sponte, awarded defense counsel $250 in “fees.”

For the reasons stated in Gentlecare Ambulatory Anesthesia Servs.; Lyonel F. Paul, M.D., as Assignee of Obunike, Norbert Ebere v Geico Ins. Co. (___ Misc 3d ___, 2017 NY Slip Op ____ [appeal No. 2015—2806 Q C], decided herewith), the order is modified by vacating so much thereof as, sua sponte, awarded defense counsel $250 in “fees.”

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

Decided on November 3, 2017
SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 2d, 11th and 13th JUDICIAL DISTRICTS
PRESENT: : MICHELLE WESTON, J.P., MICHAEL L. PESCE, MARTIN M. SOLOMON, JJ
2015-2887 Q C

The Rybak Firm, PLLC (Damin J. Toell, Esq.), for appellant. Rivkin Radler, LLP (Stuart M. Bodoff, Esq.), for respondent.

Appeal from an order of the Civil Court of the City of New York, Queens County (Terrence C. O’Connor, J.), entered October 23, 2015. The order denied plaintiff’s motion for summary judgment, granted defendant’s cross motion for summary judgment dismissing the complaint, and, sua sponte, awarded defense counsel $250 in “fees.”

ORDERED that, on the court’s own motion, the notice of appeal from so much of the order as, sua sponte, awarded defense counsel $250 in “fees” is deemed an application for leave to appeal from that portion of the order, and leave to appeal is granted (see CCA 1702 [c]); and it is further,

ORDERED that the order is modified by vacating so much thereof as, sua sponte, awarded defense counsel $250 in “fees”; as so modified, the order is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment, and defendant cross-moved for summary judgment dismissing the complaint on the ground that plaintiff had failed to appear for duly scheduled examinations under oath. Plaintiff appeals from an order of the Civil Court which denied its motion, granted defendant’s cross motion, and, sua sponte, awarded defense counsel $250 in “fees.”

For the reasons stated in Gentlecare Ambulatory Anesthesia Servs.; Lyonel F. Paul, M.D., as Assignee of Obunike, Norbert Ebere v Geico Ins. Co. (___ Misc 3d ___, 2017 NY Slip Op ____ [appeal No. 2015—2806 Q C], decided herewith), the order is modified by vacating so much thereof as, sua sponte, awarded defense counsel $250 in “fees.”

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