Matter of New Century Acupuncture P.C. v Country Wide Ins. Co. (2015 NY Slip Op 50919(U))

CV-9502-14/HU
C. Stephen Hackeling, J.

Petitioner moves, “pursuant to CPLR §7511 (b)(1)”, to vacate the award of Master Arbitrator Godson (petitioner’s Exhibit A), which upheld the arbitration award of arbitrator Thomas (petitioner’s Exhibit B).

Specifically, petitioner argues that the arbitrator “exceeded its power or so imperfectly executed it that a final and definite award on the subject matter submitted was not made”. Petitioner also requests a rehearing, [pursuant to CPLR §7511(d)] in the event the award is vacated, while respondent requests the award be confirmed. Upon denial of an application to vacate or modify an [*2]award, the Court is required automatically to confirm the award, eliminating the need for the party opposing such application to cross-move for confirmation. See, e.g., Blumenkopf v. Proskauer Rose, LLP, 2012, 95 AD3d 647 (N.Y.A.D. 1st Dept.); CPLR § 7511.

Subjection of this no-fault action to the arbitral process was semi-consensual, not compulsory. Under this process, the arbitrator’s award “is reviewed by the Master Arbitrator, under internal procedures promulgated or approved by the Superintendent of Insurance and such review is not restricted to the grounds of CPLR § 7511. The (subsequent) decision of the Master Arbitrator was then reviewed. Under Article 75 of the CPLR, the limited review grounds of CPLR §7511 do apply. “The rationale of the no-fault award . . . while a matter of primary concern to a Master Arbitrator, is of no moment to the Court and cannot be reviewed by it.” Seigel, NY Prac. § 601.

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CPLR § 7511 (b)(1) sets forth the exclusive grounds for vacating an arbitration award. Grounds to vacate under CPLR § 7511 (b)(1) are few and are narrowly applied. (See CPLR § 7511, Commentary C 7511:2). The specific list of grounds includes “corruption, fraud or misconduct . . . partiality of an arbitrator appointed as neutral, an arbitrator’s excess of power or imperfect execution such that a final an definite award. . . was not made (and) . . . failure to follow procedure [CPLR § 7511 (b)(1)]. Outside of the narrowly circumscribed exceptions . . . the Court lacks authority to review arbitration decisions, even where an arbitrator has made an error of law or has misapplied substantive law. Matter of Kowaleski v. New York State Dept. of Correctional Services, 16 NY3d 85 (NY 2010).

Errors of law and misapplication of substantive law generally do not suffice to permit the Court to disturb the arbitrator’s decision , Matter of Falzone v. New York Central Mutual Fire Ins. Co., 15 NY3d, 530 (NY 2010). Unless the parties’ agreement provides otherwise, an arbitrator need not apply the rules of evidence and is not bound by principles of substantive law . . . he may do justice as he sees it, applying his own sense of law and equity . . . to the facts as he finds them to be. Matter of Falzone v. New York Central Mutual Fire Ins. Co., supra. Even if an arbitrator “has made an error of law, Court’s generally may not disturb the arbitrator’s decision . . . Court’s are obligated to give deference to the decision of the arbitrator. . .” Matter of Falzone, supra. Accordingly, judicial review of arbitration awards is extremely limited. “An arbitrator’s award should not be vacated for errors of law and fact committed by the arbitrator and the Court’s should not assume the role of overseers to mold the award to conform to their sense of justice” (Matter of MBNA Am. Bank v. Karathanos, 65 AD3d 688, 883 NYS 2d 917, 918 (N.Y.A.D. 2nd Dept., 2009). “A Court may not usurp the arbitrator’s role by imposing its concept of a just and equitable result”. Matter of Local 345 of Retail Store Empls. Union v. Heinrich Motors, Inc.,

81 AD2d 1021 (N.Y.A.D., 4th Dept. 1981).

Manifest disregard of the law is not a basis [under CPLR § 7511 (b)] to vacate an arbitration award. Banc. of America Securities v. Knight, 4 Misc 3d 756 (Sup. Ct. NY County, 2004). “While irrationality’ is not explicitly set forth in CPLR § 7511(b) as a ground for vacating an award, the Court of Appeals recognizes it as a kind of adjunct of the excess of power provision”. Siegel, NY Prac. §602. An award that is contrary to settled law may be vacated, however same “will be upheld if there is any reasonable hypothesis to support it, such as where the issue is unsettled is subject to conflicting Court decisions”. RDK MEd., P.C. v. General Assur. Co., 8 Misc 3d 1025 (NY City Civ. Ct., 2005). A non mandatory arbitration award will be upheld unless it violates a strong public policy, is totally irrational, or exceeds a specifically enumerated limitation of the arbitrator’s powers . . . the arbitrator’s determination on issues of law, such as application of the statute of limitations as well as on issues of fact is conclusive, in absence of proof of fraud, corruption or other misconduct”. State Farm Auto Ins. Co. V. Harco Nat. Ins. Co., 29 Misc 3d 1229 (NY City Civ. Ct. 2010).

Upon review of the papers submitted including the arbitration transcript (provided by respondent), the Court finds no basis for disturbing the award. There was sufficient evidence in the record to support the award and a rational hypothesis to support the award, which found that the respondent established its defense [that provider, New Century Acupuncture, P.C. was not entitled to obtain payment for services by reason of violation of statutes regarding ownership and control of medical provider’s offices]. Petitioner has not established, as it contends, the grounds alleged in its Notice of Petition that “the arbitrator exceeded his power or so imperfectly executed it (such that) . . . a final and definite award . . . was not made”, nor has it shown entitlement for vacatur of the award for any of the specific grounds contained in CPLR § 7511.

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The Court specifically rejects petitioner’s argument that the arbitrator improperly applied the “preponderance” standard of proof to the respondent’s defense of improper licensing/control. Petitioner argues that the higher “clear and convincing” standard of proof should have been applied. “The essence of this defense (is that ) petitioner is ineligible to recover no-fault benefits due to petitioner’s failure to comply with New York State’s licensing requirements) . . . based on (petitioner’s) failure as a professional corporation to be owned and controlled only by licensed professionals . . .” Carothers v. Progressive Ins. Co., 42 Misc 3d 30 (App. Term, 2d, 11th & 13th Jud. Dists., 2013). The fact finder focuses on factors which determine whether the provider’s company is actually owned, co-owned or controlled by unlicensed individuals. 11 NYCRR 65 3.16(a)(12) provides that a health care provider is not eligible for reimbursement under section 1507 of the BCL if it fails to meet any applicable licensing requirement, whether at the time of its incorporation or thereafter. Although this defense is called “fraudulent incorporation”, it “truly poses [*3]an issue of the provider’s “ineligibility” to receive reimbursement, rather than fraud”. Tahir v. Progressive Cas. Ins. Co., 12 Misc 3d 657, 663, (NY City Civ. Ct. 2006). “While the word fraud is commonly used todescribe a Mallela defense, Mallela has nothing to do with common law fraud . . . In reality Mallela is akin to piercing the corporate veil”. Concourse Chiropractic, PLLC v. Sate Farm Ins. Co., 35 Misc 3d 1213 (Dist. Ct., Nassau, 2012).

In V.S. Medical Services, P.C., 11 Misc 3d 334 (NY City Civ. Ct. 2006), Judge Bluth rejected the application of the clear and convincing evidence standard to the respondent’s defense of lack of coverage/staged accident, stating that the respondent “need only come forward with evidence that rebuts (the) presumption of coverage . . . that is once the petitioner has made out its prima facie case, the burden of production ( also called the burden of going forward) on the issue of coverage falls upon the respondent and the respondent must demonstrate that it has a founded basis for believing that the alleged collision was intentionally caused. The burden of persuasion, however, remains on the petitioner who must prove its case by a fair preponderance of credible evidence . . . How much evidence must respondent produce to satisfy its burden of production? There is no magic formula, but it clearly must be enough to rebut the presumption that the injuries were caused by a covered accident, that is, a true accident . . . After all the evidence has been presented, the Court must decide whether the evidence of coverage preponderates in favor of the petitioner, the party who bears the burden of persuasion. V.S. Medical Services, P.C., supra. In Universal Open MRI of the Bronx, P.C. v. State Farm Mut. Auto Ins., 12 Misc 3d 1151 (A), (NY City Civ. Ct., 2006), Judge Velasquez also applied the preponderance of the evidence standard of proof to respondent’s evidence of a staged accident, and stated that although “our Appellate Courts commonly invoke the term “fraud” when discussing the defense of “staged accident” (which is actually a defense of lack of coverage), they are not necessarily discussing fraud.

The petitioner also argues that M.A. Godson “made his own factual determination regarding respondent’s EUO no show defense ” and “that M.A. Godson decided the EUO issue de novo”, as this issue was “never decided in the first instance” by arbitrator Thomas. Arbitrator Thomas’ report made factual findings that “respondent . . . sent the applicant two requests to appear for an EUO. . . and that respondent failed to appear thereat”. The arbitrator also discussed the timeliness of respondent’s EUO requests. The arbitration report failed to explicitly state that her award was based on respondent’s failure to appear at the EUO’s. Rather, her determination explicitly stated that respondent sufficiently established petitioner’s ineligibility to receive reimbursement by reason of petitioner’s fraudulent incorporation. Said report denied plaintiff’s claim in its entirety. The arbitrator, found that the respondent proved its complete defense justifying her award which denied petitioner’s claim entirely on said ground alone. It may have been clearer had the arbitrator explicitly stated that failure to attend the EUO’s was the second ground on which her report was based, however, it was unnecessary. The Court is of the opinion that this conclusion on the part of the arbitrator is implicit in her report and that the Master Arbitrator properly reviewed thethis issue but did not determine it factually, de novo.

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The Master Arbitrator’s award states one of the two issues it was reviewing was whether the no-fault arbitrator’s findings justified a conclusion that respondent properly denied applicant’s claims on the basis of failure to attend two EUO’s. The Master Arbitrator clearly found that the failure to attend the EUO’s was an appropriate reason for the no-fault arbitrator to have sustained the respondent’s denials. The Master Arbitrator also affirmed the arbitrator’s report in its entirety; finding that the arbitrator did not act in a arbitrary, capricious or irrational manner or contrary to law in denying the claim on the grounds of petitioners’ fraudulent incorporation.

In any event, even had the arbitrator held that respondent appeared at the EUO’s, and had it stated this in its report, and had the Master Arbitrator upheld such a finding, the ultimate result is unchanged, as the respondent prevailed entirely its fraudulent incorporation defense.

Petitioner’s final argument, regarding collateral estoppel was withdrawn by petitioner, at a conference with both counsel and the jurist present. Petitioner’s motion, based on this and other grounds, is denied.

Accordingly, the petition is denied. (CPLR §7511 (e)). The award is confirmed. The respondent may enter judgment pursuant to CPLR § 7514. Submit judgment.

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J.D.C.

Dated: June 18, 2015

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