New Era Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 51396(U))

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, First District (Andrew M. Engel, J.), dated May 16, 2008. The order, insofar as appealed from as limited by the brief, denied the branches of defendant’s motion which sought to dismiss the complaint due to plaintiff’s failure to comply with defendant’s discovery demands, or, in the alternative, to compel plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial and to compel plaintiff to respond to defendant’s combined discovery demands.

Order, insofar as appealed from, modified by providing that the branch of defendant’s motion seeking to compel plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial and to compel plaintiff to respond to defendant’s combined discovery demands is granted to the extent of compelling plaintiff to produce the documents and information demanded in items 5, 6, 7 and 9 of defendant’s notice for discovery and inspection and to serve answers providing the information sought in questions 31, 32, 37, 38, 45 and 46 of defendant’s demand for verified written interrogatories, within 60 days of the order entered hereon, and by further compelling plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial within 30 days thereafter, or on such other date to which the parties shall agree, but in no event later than 60 days thereafter; as so modified, affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved to dismiss the complaint, pursuant to CPLR 3126, based upon plaintiff’s failure to comply with discovery, or, in the alternative, pursuant to CPLR 3124, to compel plaintiff to respond to its demand for written interrogatories, to produce the documents requested in its demand for discovery and inspection, and to compel plaintiff to produce its owner, Valentina Anikeyeva, to appear for an examination before trial (EBT). Defendant acknowledged receipt of plaintiff’s [*2]responses to its discovery demands, which plaintiff had served more than 18 months after service of defendant’s discovery demands, but claimed that plaintiff’s answers were either insufficient or unresponsive. Defendant specifically alleged that plaintiff had failed to give meaningful responses to questions 31, 32, 36, 37, 38, 45 and 46 of its demand for verified written interrogatories, and to items 5, 6, 7, 8 and 9 of its demand for discovery and inspection. Defendant also asserted that it was entitled to an EBT of plaintiff’s owner, Valentina Anikeyeva. Plaintiff opposed the motion, arguing that its responses were proper, and that defendant had failed to demonstrate that plaintiff’s owner’s EBT would lead to any relevant information that could not be adequately addressed in plaintiff’s responses to the interrogatories. The District Court denied so much of defendant’s motion as sought to dismiss the complaint based on plaintiff’s failure to comply with defendant’s discovery demands, and, to the extent that defendant raised specific objections to plaintiff’s responses to its discovery demands, the District Court denied the branch of defendant’s motion which sought, in the alternative, to compel such responses. The District Court also denied the branch of defendant’s motion seeking to compel Ms. Anikeyeva to appear for an EBT on the ground that defendant failed to demonstrate any genuine need for same. The instant appeal by defendant ensued.

Plaintiff was required, but failed, to challenge the propriety of defendant’s notice for discovery and inspection pursuant to CPLR 3120 within the time prescribed by CPLR 3122. Likewise, plaintiff failed to timely object to defendant’s demand for verified written interrogatories. As a result, plaintiff is obligated to produce the information sought except as to matters which are palpably improper or privileged (see Fausto v City of New York, 17 AD3d 520 [2005]; Marino v County of Nassau, 16 AD3d 628 [2005]; Garcia v Jomber Realty, 264 AD2d 809 [1999]; Midwood Acupuncture, P.C. v State Farm Fire and Cas. Co, 21 Misc 3d 144[A], 2008 NY Slip Op 52468[U] [App Term, 2d & 11th Jud Dists 2008]; Midborough Acupuncture, P.C. v State Farm Ins. Co., 21 Misc 3d 10 [App Term, 2d & 11th Jud Dists 2008]; Great Wall Acupuncture v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 136[A], 2008 NY Slip Op 51529[U] [App Term, 2d & 11th Jud Dists 2008]; A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71 [App Term, 2d & 11th Jud Dists 2006]).

To the extent defendant’s discovery demands concern matters relating to defenses which defendant is precluded from raising, they are palpably improper notwithstanding the fact that plaintiff did not timely object thereto (see A.B. Med. Servs. PLLC, 11 Misc 3d 71). However, defendant seeks discovery, inter alia, to support its defense that plaintiff is ineligible to recover no-fault benefits as a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]), a defense which is not precluded. As a result, discovery of, among other things, the contract between plaintiff and its management company, if any, and the agreement pursuant to which plaintiff occupied its premises, is not palpably improper, and plaintiff did not demonstrate that such information was privileged. Consequently, defendant is entitled to production of the documents and information demanded in items 5, 6 and 7 of its notice for discovery and inspection and to answers providing the information sought in questions 31, 32, 38, 45 and 46 of its demand for verified written interrogatories (see CPLR 3101 [a]; One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d 738 [2008]; Midwood Acupuncture, P.C., 21 Misc 3d 144[A], 2008 NY Slip Op 52468[U]; Great Wall Acupuncture, 20 Misc 3d 136[A], 2008 NY Slip Op 51529[U]). [*3]

In addition, we find that special circumstances exist which warrant the disclosure of plaintiff’s corporate income tax returns (see CPLR 3101 [a]; Midwood Acupuncture, P.C., 21 Misc 3d 144[A], 2008 NY Slip Op 52468[U]; Midborough Acupuncture, P.C., 21 Misc 3d 10; Great Wall Acupuncture, 20 Misc 3d 136[A], 2008 NY Slip Op 51529[U]; Statewide Med. Servs., P.C. v Travelers Ins. Co., 13 Misc 3d 134[A], 2006 NY Slip Op 52014[U] [App Term, 1st Dept 2006], revg 9 Misc 3d 1124[A], 2005 NY Slip Op 51773[U] [Civ Ct, Bronx County 2005]; see also One Beacon Ins. Group, LLC, 54 AD3d 738; Dore v Allstate Indem. Co., 264 AD2d 804 [1999]; cf. Benfeld v Fleming Props., LLC, 44 AD3d 599, 600 [2007]; Altidor v State-Wide Ins. Co., 22 AD3d 435 [2005]). Accordingly, defendant is also entitled to the documents demanded in item number 9 of its notice for discovery and inspection and to the answer sought in question 37 of its demand for verified written interrogatories.

Contrary to the District Court’s conclusion, defendant was not required to show, as a prerequisite to an EBT of Ms. Anikeyeva, that plaintiff’s responses to its demand for written interrogatories were inadequate. “The CPLR does not set forth any order of priority as to the use of the various disclosure devices. A party is generally free to choose both the discovery devices it wishes to use and the order in which to use them” (Edwards-Pitt v Doe, 294 AD2d 395, 396 [2002]). Accordingly, defendant was entitled to conduct such EBT notwithstanding the fact that it had also served plaintiff with other discovery demands (see CPLR 3102; Woods v Alexander, 267 AD2d 1060, 1061 [1999]; Iseman v Delmar Med.-Dental Bldg., 113 AD2d 276 [1985]; JMJ Contract Mgt. v Ingersoll-Rand Co., 100 AD2d 291, 293 [1984]; Great Wall Acupuncture, P.C. v General Ass. Co., 21 Misc 3d 45 [App Term, 2d & 11th Jud Dists 2008]). Moreover, since defendant is asserting a Mallela defense, it was entitled to such an EBT (see Corona Heights Med. P.C. v State Farm Mut. Auto. Ins. Co., 21 Misc 3d 134[A], 2008 NY Slip Op 52185[U] [App Term, 2d & 11th Jud Dists 2008]; see also Vladimir Zlatnick, M.D., P.C. v Government Empls. Ins. Co, 2 Misc 3d 347, 353 [Civ Ct, Queens County 2003] [“Depositions in certain cases under the no-fault laws, for example, may be helpful in detecting instances of fraud”]).

To the extent that defendant also sought to compel production of the personal federal and state income tax returns of Ms. Anikeyeva, defendant failed to establish its entitlement to such documents since “[i]t is well settled that tax returns are generally not discoverable in the absence of a strong showing that the information is indispensable to the claim and cannot be obtained from other sources” (Altidor, 22 AD3d at 435-436 [citations and internal quotation marks omitted]; see also Benfeld, 44 AD3d at 600). As a result, at this juncture, defendant failed to meet its burden of establishing that Valentina Anikeyeva’s personal income tax returns were properly discoverable, particularly where, as here, defendant is entitled to disclosure of plaintiff’s income tax returns and the requested financial information with respect to said corporation (see Midwood Acupuncture, P.C., 21 Misc 3d 144[A], 2008 NY Slip Op 52468[U]; Midborough Acupuncture, P.C., 21 Misc 3d 10; Great Wall Acupuncture, 20 Misc 3d 136[A], 2008 NY Slip Op 51529[U]).

Accordingly, we modify the order of the District Court to the extent indicated above.

The decision and order of this court entered herein on June 2, 2009 are hereby recalled and vacated (see motion decided simultaneously herewith).
Rudolph, P.J., and Molia, J., concur.

Scheinkman, J., taking no part.
Decision Date: June 29, 2009