One Beacon Ins. Group, LLC v Halima (2008 NY Slip Op 52715(U))

Supreme Court, Suffolk County

06505-07

PLTF’S/PET’S ATTORNEY:

Brody, O’Connor & O’Connor

111 John Street, Suite 900

New York, New York 10038

Bruce S. Rosenberg, Esq.

2631 Merrick Road, Suite 401

Bellmore, New York 11710

Einsnberg & Carton

2631 Merrick Road, Suite 201

Bellmore, New York 11710

Meiselman, Denlea, Packman, Et Al.

1311 Mamaroneck Avenue

White Plains, New York 10605

Neil L. Fuhrer & Associates, LLP

750 Third Avenue

New York, New York 10017

Kenneth B. Schwartz, Esq.

555 Westbury Avenue

Carle Place, New York 11514

Conroy & Associates

350 Old Country Road, Suite 106

Garden City, NY 11530

Wylie M. Stecklow

10 Spring Street, Suite 1

New York, New York 10012

DEFT’S/RESP ATTORNEY:

Bruno, Gerbino & Soriano, LLP

James K. Hogan, Esq.

445 Broad Hollow Road, suite 220

Melville, New York 11714

Peter Fox Cohalan, J.

It is, ORDERED that these motions by plaintiff for injunctive relief (seq. #

001), and by defendants for dismissal (seq. #

002 & 004), and a change of venue (seq.#

003) are hereby decided as follows.

The plaintiff instituted this action against the various named defendants listed as the Halima et al. defendants, the Minick defendants and the Glassman defendants [*2]alleging that all the various defendants and entities have engaged in a systematic scheme to defraud the plaintiff insurance company by submitting bills for reimbursement of no-fault related services allegedly rendered to individuals involved in automobile accidents. The plaintiff contends that the named individual defendants who are physicians sold their names and allowed the use of their medical licenses to form the related professional corporations also named as defendants for the sole basis of obtaining benefits from the plaintiff, among others. The plaintiff contends that the professional medical corporations were actually created and owned by laypersons, chiropractors and a now disbarred attorney. The plaintiff claims that it is currently litigating claims by these defendants in excess of $456,682.11 and points to a New York Court of Appeals decision in State Farm Insurance v. Mallela, 4 NY3d 313, 794 NYS2d 700 (2005) for the proposition that a fraudulently incorporated professional corporation is not entitled to recover benefits under the New York no-fault law where the corporation is not actually owned by the required medically licensed physician. This lawsuit thereafter ensued. The Halima et al., defendants have defaulted except for defendant Mark Slamowitz who has interposed an answer and filed opposition to the plaintiff’s requested relief and has sought by way of motion a change of venue from Suffolk County, New York to Kings County, New York pursuant to CPLR §510.

The plaintiff now moves for injunctive relief (seq. #

001) seeking to stay all current and future no-fault proceedings against the defendants as well as payments pending resolution of the instant litigation and the answering defendants oppose the requested relief. The Minick defendants, Michele Minick and her designated companies, ANN Management Company Inc., ANM Transport Co., CJ Transport Co., and Scott Funding Company, Inc., (seq. #

002) [hereinafter Michelle Minick et al.] and Michael Scott Minick and his designated companies, Montgomery Medical P.C. and Metro Chiro and Rehab, PLLC., (seq. #

004) [hereinafter Michael Minick et al.] move to dismiss the 1st, 2nd, 3rd, 4th, 5th and 6th causes of action (Michael Scott Minick et al., seq. #

004) and the 3rd, 4th and 5th causes of action (Michele Minick et al., seq. #

002) for failure to state a cause of action. The plaintiff opposes this requested relief. The defendant, Mark Slamowitz, also moves for a change of venue of this action from Suffolk County, New York to Kings County, New York pursuant to CPLR 510(1), 511(b) or 510(3) on the grounds that the plaintiff’s choice of forum is improper which relief the plaintiff opposes.

The purpose of a preliminary injunction is to preserve the status quo pending trial. McLaughlin, Piven, Vogel Inc. v. W. J. Nolan & Co., Inc., 114 AD2d 165, 498 NYS2d 146 (2nd Dept. 1987), appeal denied 67 NYS2d 606, 501 NYS2d 1024. In order to prevail on a motion for a preliminary injunction, the moving party has the burden of establishing, (1) a likelihood of ultimate success on the merits, (2) irreparable injury absent a granting of the requested relief and (3) the equities weigh in its favor. Related Properties, Inc., v. Town Bd of Harrison, 22 AD3d 587, 802 NYS2d 221 (2nd Dept. 2005); Upgrade Education Services, Inc. v. Rappaport, 136 AD2d 628, [*3]523 NYS2d 872 (2nd Dept. 1988); Benjamin Kurzban and Son, Inc. v. Board of Education, City of New York, 129 AD2d 756, 514 NYS2d 749 (2nd Dept. 1987). Preliminary Injunctive relief lies with the sound discretion of the Court [Geres v Koch, 62 NY2d 84, 476 NYS2d 73 (1984)] and it is predicated on a clear showing of the afore-mentioned three prong test. Ginsberg v. Ock-A-Bock Community Ass’n, Inc., 34 AD3d 637, 825 NYS2d 119 (2nd Dept. 2006); W. T. Grant Co., v Srogi, 52 NY2d 496, 438 NYS2d 761 (1981); cf. Albini v. Solork Associates, 37 AD2d 835, 326 NYS2d 150 (2nd Dept. 1971).

As a provisional remedy, the chief function of a preliminary injunction is to prevent any conduct before judgment which would impair the ability of the Court to render the appropriate final judgment. Mucchi v. Eli Haddad Corp., 101 AD2d 724, 475 NYS2d 35 (1st Dept. 1984). However, it is also well settled that, absent extraordinary circumstances, a preliminary injunction will not be granted if it provides the ultimate relief that the movant would gain via a final judgment. SHS Baisley, LLC. v Res Land, Inc., 18 AD3d 727, 795 NYS2d 690 (2nd Dept. 2005). Here, in the case at bar, the plaintiff provides an affidavit from a cooperating named defendant, Ahmed Erfan Halima, M.D. (hereinafter “Halima”), setting forth the very fraudulent acts discussed in the complaint wherein physicians were lending their names for a fee to laypersons, chiropractors and an attorney so as to fraudulently incorporate no-fault clinics actually owned and controlled by these non-licensed non medical professionals. The plaintiff has established a likelihood of success, irreparable injury and equities which favor its case. The defendants suggest that the plaintiff is not entitled to injunctive relief because money damages would compensate the plaintiff for any wrongdoing; however, if the fraudulent corporation owned or controlled by a non-licensed medical professional goes out of business or disappears, the plaintiff is indeed irreparably harmed as is the public because monies would have been diverted to those in control of the fraudulent corporation without any recourse by the plaintiff.

The plaintiff has established irreparable harm, likelihood of ultimate success on the merits and that the balancing of the equities lies in their favor. Trimboli v. Irwin, 18 AD3d 866, 796 NYS2d 659 (2nd Dept. 2005). However, because preliminary injunctive relief is an equitable remedy, the award of such relief is not only discretionary with this Court, but may be tailored to protect the interests of all the parties. See, Paddock Construction LTD. v. Automated Swim Pools, Inc., 130 AD2d 894, 515 NYS2d 662 (3rd Dept. 1987); Antinelli v. Toner, 74 AD2d 996, 427 NYS2d 99 (4th Dept. 1980) appeal after remand, 78 AD2d 576, 432 NYS2d 421. Therefore, as to the defaulting defendants named, injunctive relief is granted without opposition; as to those defendants appearing in this action, the injunctive relief sought is granted unless these defendants present and file with the plaintiff, the corporate documents establishing a licensed medical professional is the owner, operator and in principal control of the corporation seeking reimbursement of no-fault benefits provided. A failure to so provide the corporate documents, resolutions and identity of the officers of the corporation seeking benefit payments will continue the injunction as to all defendants failing to [*4]provide such proof. The defendants are directed to provide to the Court copies of all documents identifying the principals in control of the various entities seeking payment for benefits provided under the no-fault provisions. The defendants are granted leave to renew their objections to injunctive relief if they have been unfairly denied reimbursement after having provided the documentation and proof required by this order. See, CPLR §6314. The plaintiff is directed to file an undertaking in the amount of $100,000.00 pursuant to CPLR §6312 (b).

The Minick defendants also move pursuant to CPLR §3211 (a) (7) for dismissal of the causes of action contained within the plaintiff’s complaint ( seq. #

002 & #

004) on the grounds that the causes of action identified in the movant’s papers fail to state a cause of action.

Upon a motion to dismiss a complaint for legal insufficiency, the test to be applied is whether the complaint gives sufficient notice of the transactions, occurrences or series of transactions or occurrences intended to be proven and whether the requisite elements of any cause of action know to our law can be discerned from its averments. Frank v. DaimlerChrysler Corp., 292 AD2d 118, 741 NYS2d 9 (1st Dept. 2002); Gruen v. County of Suffolk, 187 AD2d 560, 590 NYS2d 217 (2nd Dept. 1992); Moore v. Johnson, 147 AD2d 621, 538 NYS2d 28 (2nd Dept. 1989); Conroy v. Cadillac Fairview Shopping Center Properties, 143 AD2d 726, 533 NYS2d 446 (2nd Dept. 1988). Furthermore, the complaint should be liberally construed in plaintiff’s favor and the facts alleged in the complaint should be assumed to be true. P.T. Bank Central Asai v. ABN Amro Bank N.V., 301 AD2d 373, 754 NYS2d 245 (1st Dept. 2003); Palazzolo v. Herrick, Feinstein, LLP, 298 AD2d 372, 751 NYS2d 401 (2nd Dept. 2002); Holly v. Pennysaver Corp., 98 AD2d 570, 471 NYS2d 611 (2nd Dept. 1984). The nature of the inquiry is whether a cause of action exists and not whether it has been properly stated. McGill v. Parker, 179 AD2d 98, 582 NYS2d 91 (1st Dept. 1992); Marini v. D’Atolito, 162 AD2d 391, 557 NYS2d 45 (1st Dept. 1990).

As noted by the Court in Pace v. Perk, 81 AD2d 444, 440 NYS2d 710 (2nd Dept. 1981) with regard to a motion to dismiss pursuant to CPLR 3211

” Upon such a motion to dismiss a complaint for legal insufficiency, the court must assume that the allegations are true (Denihan Enterprises v. O’Dwyer, 302 NY 451, 458, 99 NE2d 235), and must deem the complaint to allege whatever can be imputed from its statements by fair and reasonable intendment, however imperfectly, informally or illogically facts may be stated therein (Condon v. Associated Hosp. Service of New York, 287 NY 411, 40 NE2d 230). In making its analysis, the court is not bound by the constructions and theories of the parties (see, Siegel, Practice Commentaries, McKinney’s Cons. Laws of NY, Book 7B, CPLR 3211:24). The test of the sufficiency of a complaint is whether it gives sufficient notice of the transactions, occurrences, or series of transactions or occurrences intended to be proved and [*5]whether the requisite elements of any cause of action know to our law can be discerned from its averments (CPLR 3013; Foley v. D’Agostino, 21 AD2d 60, 62-65, 248 NYS2d 121; Guggenheimer v. Ginzberg, 43 NY2d 268, 274-275, 401 NYS2d 182, 372 NE2d 17). Where the motion to dismiss for failure to state a cause of action is made under CPLR 3211, the plaintiff may rest upon the matter asserted within the four corners of the complaint and need not make an evidentiary showing by submitting affidavits in support of his complaint (Rovello v. Orofino Realty Co., 40 NY2d 633, 389 NYS2d 314, 357 NE2d 970).”

The rules governing the Court’s review of a motion to dismiss pursuant to CPLR 3211 (a)(7) are both simple and straight forward. The Court must afford the complaint a liberal construction, accept as true the allegations contained therein, afford plaintiff the benefit of every favorable inference and determine only whether the facts alleged fit within any cognizable legal theory. Guggenheimer v. Ginzburg, 43 NY2d 268, 401 NYS2d 182 (1978); One Acre Inc. V. Town of Hempstead, 215 AD2d 359, 626 NYS2d 226 (2nd Dept. 1995). Although, as the Court noted, the plaintiff need not make an evidentiary showing by submitting affidavits or other documentation in support of the complaint, nevertheless, if submitted by the plaintiff, they “may be used freely to preserve inartfully pleaded, but potentially meritorious claims” (Rovello v. Orofino Realty Co., supra , 635, 389 NYS2d 314, 316).

With these general principles in mind, the Court, upon review of the plaintiff’s complaint, submissions, affidavits and the allegations contained in it, finds that for the reasons stated herein the motions by the Minick defendants for dismissal of the plaintiff’s complaint pursuant to CPLR §3211 (a)(7) for failure to state a cause of action (seq. #

002-Michelle Minick and #

004-Michael Scott Minick) are in all respects denied.

The Court when assessing the motion pursuant to CPLR §3211 (a)(7) may freely consider the plaintiff’s affidavit to remedy any defects which may be apparent in the complaint. The criterion is not whether the proponent has pleaded a cause of action but whether, in fact, the proponent has one and affidavits and other evidence may be considered. Fay Estates v. Toys “r” Us, Inc., 22 AD3d 712 (2nd Dept. 2005); Pechko v. Gendelman, 20 AD3d 404 (2nd Dept. 2005).

As the Court in Scott v. Cooper, 215 AD2d 368, 625 NYS2d 661 (2nd Dept. 1995) app. Dis. 86 NY2d 812, 632 NYS2d 497, aptly noted:

” The criterion is whether the plaintiff has a cause of action and not whether he may ultimately be successful on the merits (see, Stukuls v. State of New York, 42 NY2d 272, 275; Detmer v. Acampora, 207 AD2d 475; Greenview Trading Co. V. Hershman & Leicher, 108 AD2d 468, 470).” [*6]

The motions by the defendants for dismissal of the plaintiff’s complaint pursuant to CPLR §3211 (a)(7) is set forth in each of the two (2) individual motions by the defendants.

The motion by defendant, Michelle Minick, et al. (Seq. #

002), seeks to dismiss the third (3rd) cause of action sounding in fraud, the fourth (4th) cause of action seeking punitive damages and the fifth (5th) cause of action sounding in unjust enrichment/restitution. The defendant Michelle Minick et al’s motion is denied as to cause of action three (3rd) sounding in fraud and five (5th) sounding in unjust enrichment. CPLR §3016 requires an action sounding in fraud to be pled with particularity and to set forth sufficient detail to clearly inform the defendant with respect to the incidents complained of. The plaintiff has set forth in detail that the named defendants and the corporations controlled by them are but shell corporations in the name of licensed medical physicians but are actually owned and controlled by non- licensed non-medical individuals, such as Michael Scott Minick, a chiropractor, using the “dummy” corporations to bill the no-fault carrier for services allegedly not performed or performed contrary to law. The plaintiff provides an affidavit from Halima, a defaulting defendant and a cooperating one, as well as an affidavit from Nichole Matthews, an investigator for Autoone Insurance Company, that Halima, among others, sold his name to non-licensed non-medical professionals to incorporate “dummy or shell” corporations owned and controlled by others but carrying a licensed physician’s name to provide no-fault services which were billed to the named plaintiff seeking reimbursement for these no-fault services. While there may be some missing details, the New York Court of Appeals has held that the misconduct of the defendants complained of must be shown in some detail but particularity and/or specific conduct may await further discovery where it is impossible at this stage of the proceedings to detail the fraud. See, Lanzi v. Brooks, 43 NY2d 778, 402 NYS2d 384 (1977); Oxford Health Plans (NY) Inc. V. Bettercare Health Care Pain Management & Rehab P.C., 305 AD2d 223, 762 NYS2d 344 (1st Dept 2003).

Here, the plaintiff presents, through affidavits, and the substance of its allegations in its complaint, that the named defendants, Michael Scott Minick and Michelle Minick, hold and own controlling interests in fraudulent medical service corporations named as defendants which carry a licensed physician as the owner in name only for the sole purpose of seeking reimbursement under no-fault notwithstanding the proscription that only a medical corporation owned and controlled by a licensed physician may seek no fault insurance reimbursement. State Farm Mutual Insurance Co. V. Mallela et al., 4 NY3d 313, 794 NYS2d 700 (2005). In State Farm v. Mallela, supra , the Court also noted that no claims for fraud or unjust enrichment would lie for payments made prior to April 2002, necessarily providing the imprimatur that such claims would lie for such payments under fraud and unjust enrichment causes of action for payments after that date. Oxford Health Plans (NY) Inc. V. Bettercare Health Care Pain Management & Rehab P.C., supra . The plaintiff alleges that Michelle Minick acted in concert with Michael Scott Minick who is [*7]the true owner of the underlying medical corporations which are not owned or controlled by a licensed physician as required by law or by the rules and regulations promulgated by the New York Superintendent of Insurance. See, 11 NYCRR 65-3.16 (a). The motions by both defendants, Michelle Minick et al., and Michael Scott Minick et al., as to the 3rd cause of action sounding in fraud and the 5th cause of action sounding in unjust enrichment, are denied as the causes of action have been pled by the plaintiff with sufficient detail and particularity at this stage of the proceedings to inform the defendants of the nature of their alleged conduct and the claims being made against them.

As to the 4th cause of action sounding in punitive damages, the courts have long recognized that punitive damages are warranted where the conduct of the party being held liable evidences a high degree of moral culpability, where the conduct is so flagrant as to transcend mere recklessness or where the conduct constitutes wilful or wanton negligence or recklessness. Hale v. Odd Fellow & Rebekah Health Care Facility, Inc., 302 AD2d 948, 755 NYS2d 164 (4th Dept.. 2003); see also, Gellman v. Seawane Golf & Country Club, Inc., 24 AD3d 415, 805 NYS2d 411 (2nd Dept. 2005). An award of punitive damages can be premised on conduct particularly egregious in nature directed at both the plaintiff and the general public. National Broadcasting Co. Inc., v Fire Craft Services, Inc., 287 AD2d 408, 731 NYS2d 722 (1st Dept. 2001). It may also lie where the allegations in the complaint have a fraudulent or evil motive. U.S. Trust Corp. v. Newbridge Partners, LLC., 278 AD2d 172, 718 NYS2d 63 (1st Dept. 2000). Since the plaintiff alleges in its complaint the commission of a tort in the nature of a fraud, independent of any contractual claim, the cause of action alleging punitive damages is proper. See, Probst v. Cacoulidis, 295 AD2d 331, 743 NYS2d 509 (2nd Dept. 2002). The motions by both defendants, Michelle Minick et al.(seq.#

002), and Michael Scott Minick et al.(seq. #

004), as to the 4th cause of action seeking punitive damages is denied.

Finally, the defendant, Michael Scott Minick et al., seeks dismissal of the 1st and 2nd causes of action seeking declaratory judgment relief based upon the fraud in the ownership and licensing of the defendant medical professional corporations and the defendants’ failure to cooperate and that aspect of the motion is denied. As previously noted, the rules governing the Court’s review of a motion to dismiss pursuant to CPLR 3211 (a)(7) are both simple and straight forward. The Court must afford the complaint a liberal construction, accept as true the allegations contained therein, afford plaintiff the benefit of every favorable inference and determine only whether the facts alleged fit within any cognizable legal theory. A review of the plaintiff’s complaints and submissions demonstrates sufficient claims and principles well recognized in the New York Court of Appeals’ decision in State Farm v. Mallela, supra , that there is no entitlement to no-fault reimbursement for a fraudulently incorporated medical corporation and the failure of the defendants to cooperate into a full airing of the underlying ownership and control of the various corporate entities by the individual defendants named is subject to the relief requested if established. For those reasons, [*8]the motion to dismiss the 1st and 2nd causes of action seeking declaratory judgment relief is denied.

Finally, the defendant, Mark Slamowitz, moves to change venue (seq. #

003) of this action from Suffolk County, New York to Kings County, New York pursuant to CPLR §503(c) and CPLR §509 for an improper forum or alternatively under CPLR §510 (3) on the grounds that the majority of the defendants reside and do business in Kings County. This motion to change venue is denied. Suffolk County is a proper forum and venue, in that the plaintiff maintains a principal office within it. Furthermore, it has been held that a demand to change venue based on the designation of an improper county must be served with the answer or before the answer is served. When a defendant fails to serve a timely demand to change venue and fails to make the motion for such relief within the statutory 15 day period provided, the motion becomes one addressed to the Court’s exercise of its sound discretion. See, Obas v. Grappell, 43 AD3d 431, 841 NYS2d 595 (2nd Dept. 2007).

On a motion to change venue pursuant to CPLR §510 (3) based upon the convenience of witnesses, the movant must establish the identity of the witnesses of the witnesses who allegedly will be inconvenienced, their willingness to testify and the nature of their anticipated testimony. Walsh v. Mystic Tank Lines Corp., 51 AD3d 908, 859 NYS2d 233 (2nd Dept. 2008); O’Brien v. Vassar Brothers Hospital, 207 AD2d 169, 622 NYS2d 284 (2nd Dept. 1995); Simeti v. Smithtown Fairfield Condominium, Inc., 172 AD2d 513, 567 NYS2d 860 (2nd Dept. 1991). In the absence of such a showing such a change of venue which is addressed to the sound discretion of the Court, should be denied. Countrywide Insurance Company v. Quinn, 268 AD2d 381, 703 NYS2d 2 (1st Dept. 2000). The defendant has failed to make a proper showing and therefore the motion is denied.

The foregoing constitutes the decision of the Court.

Dated: July 15, 2008_______________________________________

J.S.C.