Preferred Med. Imaging, P.C. v Liberty Mut. Ins. Co. (2006 NY Slip Op 50437(U))

Suffolk Dist Ct

HUC 2181-05

Appearances:

Fazio, Rynsky & Associate

Attorneys for Plaintiff

175 Eileen Way

Syossett, New Yor 11791

Stern & Montana, LLP

Attorneys for Defendant

Trinity Centre

115 Broadway

New York, New York 10006

C. Stephen Hackeling, J.

The plaintiff, Preferred Medical Imaging, P.C. (via Court documents No.1 & 4) moves this Court for a two pronged Order, directing the Court Clerk to seal its records and enjoining, for privacy reasons, the defendant and its counsel from disclosing any documents or information it may obtain via disclosure directives arising out of this action. The defendant, Liberty Mutual Insurance Co. (via Court documents 2 and 3) vigorously opposes the requested relief, asserting amongst other reasons, the First and Sixth Amendments of the United States Constitution, requiring public and press access to Court proceedings. For the following reasons the movant is granted a modified temporary sealing order and is denied any further relief.

Application for File Sealing and Gag Order

The Undisputed Relevant Facts

The plaintiff brought this action as a medical service provider, seeking to recover the assigned “No Fault” automobile insurance benefits assigned to it by Bevolin Lewis and Edwin Lewis. Plaintiff is an authorized medical service provider who allegedly [*2]rendered approximately $5,000.00 of MRI image services to Mr. Lewis,

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and his son between October 7 and October 11, 2004, pursuant to a physician’s referral. The plaintiff timely took assignments of claims and billed for the services. The defendant timely denied plaintiff’s claim, precipitating the instant action. On or about January 5, 2005 the Court signed an order compelling the plaintiff to disclose assorted documentary business management agreements and tax returns of the plaintiff and its alleged principal Dr. Robert Schepp for the years 2002-2003. Many of the documents sought had previously been disclosed in an affidavit or Dr. Schepp, filed in a pending unrelated Nassau County Supreme Court action.

Disputed Issues

The defendant has interposed a myriad of defenses in its answer. Its counsel has argued that its strongest position is that the plaintiff’s business practices constitute a systematic and persistent violation of the New York State No-Fault Laws as codified in Sec. §5101. It is alleged that the claims generated are the result of an illegal financial relationship in violation of Sec. 238 of the Public Health Law and Article 15 of the Business Corporation Law. It is the defendant’s position that plaintiff is in fact not an authorized medical service provider as it is not constituted by, or supervised by, a physician. It is asserted that the plaintiff is one of many providers who seek to abuse the “no fault” insurance system by simply purchasing a physician’s letterhead for the purpose of allowing non physician laymen to set up and run corporate medical service provider corporations. In this instance the crux of this discovery dispute involves the production of tax returns for Dr.Robert Schepp and for affiliated corporations which also employ Dr. Schepp. The defendant asserts that these returns will establish that Dr.Schepp receives “frontman only” compensation which bears no relationship to his alleged corporate ownership interest. The plaintiff denies this contention and asserts that without the requested relief Dr. Schepp’s privacy rights will be violated and that these documents will be circulated to other insurance carriers and their attorneys.

Discussion

The Court is not naive to the import of the underlying discovery struggle concerning this application. This Court administers approximately 10,000 no-fault actions annually which often contain multiple unrelated plaintiff providers and unrelated defendant insurers in the same complaint. At the call of each no-fault calendar, dozens of insurance companies and their counsel discuss joint legal strategies amongst themselves. During proceedings they have often argued to the Court the insurance industry’s assertion that the no-fault system is plagued with systematic fraud and abuse. On several [*3]occasions the Court has observed insurance company expert testimony which evidences the collective efforts of the insurance industry to mutually share fraudulent “No Fault” claim information in a common data base.

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Sealing the Record

The Court notes that much of the material plaintiff wishes to seal is already publicly available in that it evidently has been produced in a pending Nassau County Supreme Court action titled AIU Inc. Co.v. Deajess Medical Imaging, PC. At least one decision has been published to date concerning this action. (see, 2/10/2006 NYLJ p. 22, col. 1, et seq.).

The legal standard and/or predicate statute for the requested relief is not stated in the plaintiff’s papers. However the law is clear that “Except where otherwise provided by statute or rule, a Court shall not enter an order in any action or proceeding sealing the Court records, whether in whole or in part, except upon a finding

of good cause, which shall specify the grounds thereof”. 22 NYCRR §216.1 (a). As stated by the Appellate Court in Danco Laboratories, Ltd., v. Chemical Works of Gedeon Richter, Ltd. 274 AD2d 1 (1st Dept. 2000);

We start by taking note of the broad constitutional proposition, arising from the First and Sixth Amendments, as applied to the States by the Fourteenth Amendment, that the public, as well as the press, is generally entitled to have access to Court proceedings. Since the right is of constitutional dimension, any order denying access must be narrowly tailored to serve compelling objectives… However, the right of access is not absolute. Moreover, access may still be respected in keeping with constitutional requirements while sensitive information is restricted in keeping with “the State’s legitimate concern for the well-being” of an individual (Globe Newspaper corp. v. Superior Court, [457 US 596], at 609.)

Clearly, the function of this Court is to apply a balancing test and fashion an Order which serves to protect both Dr. Schepp’s privacy interests and to faciliate the public’s right to observe the Court’s proceedings. Absent compelling evidence of fully articulated immediate prejudice, an unconditional sealing order is unwarranted. No prejudice is indicated for the bulk of the information disclosed to date as many of the documents are already in the public domain, i.e. the Nassau Supreme Court. In the present matter, the Court finds that good cause to seal exists only as to the possibility of identity theft and perhaps patient information. It has been the practice of this Court to redact this type of information from its decisions which are to be published on-line. Therefore, to this limited extent, the plaintiff’s [*4]motion is granted. It is Ordered that the file will be sealed for a 14

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day period during which time the movant shall review the Court file and submit ( on 5 days notice ) a copy of a proposed redacted file which is consistent with this decision to redact only identification numbers and patient infromation. The Clerk shall be permitted to exhibit the movant’s redacted file for public viewing after the 14 days sealing period.

Enjoining Defendant from Information Disclosure

The real objective of the plaintiff’s application is to obtain an Order of this Court which prohibits the defendant and its attorneys from disclosing any documents or the information obtained in

this action to any other party. While not expressly labeled; this clearly is a request for a permanent injunction. The Suffolk County District Court, as constituted by the Uniform District Court Act, has limited equitable powers. Sec.§209 of the UDCA expressly provides “(b) Injunction or Restraining Order. No injunction or restraining order shall issue out of or by this Court unless…” The statute provides for only four allowable injunction instances which involve criminal zoning, waste, chattel recovery, and money judgment enforcement proceedings. No predicate basis has been plead or otherwise articulated which allows the Court to consider an Article 63 New York CPLR injunction application. Accordingly, the injunction component of this application is denied.

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J.D.C.

Decision to be published____yes____no.

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