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April 20, 2009

Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 29164)

https://www.beynensonlaw.com/case-law/uptodate-med-servs-p-c-v-state-farm-mut-auto-ins-co-2009-ny-slip-op-29164/

Court
Appellate Term, Second Department
Decided
April 20, 2009
Citation
2009 NY Slip Op 29164 · 23 Misc 3d 42
Posture
Summary judgment
Outcome
Insurer prevailed
Later treatment
Followed in 1 later decision (see Cited by)
Issues
Declaratory judgment, res judicata Fraudulent incorporation (Mallela) Discovery and procedure
Legal questions
Fraudulent incorporation (Mallela) · Mallela defense: preclusion and discovery (see the maps)
Cite as
Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co., 23 Misc 3d 42 (App Term, 2d Dept 2009)

Posture, outcome, issues and treatment by other decisions are Beynenson Law’s classification. Treatment labels are assigned by a language model reading the citing decision; negative and appeal-history labels are checked by a second reader.

Summary

Editorial summary by Beynenson Law, not part of the court’s decision.

The provider was collaterally estopped by a prior arbitration finding of fraudulent incorporation and ineligibility for reimbursement. The earlier arbitration between the same parties concerned a different assignor and resolved the identical eligibility issue under Mallela. The Appellate Term, Second Department, reversed the order, insofar as appealed from, granted the insurer leave to amend its answer under CPLR 3025 (b), and granted summary judgment dismissing the complaint. The provider showed no prejudice or surprise from amendment, and the defense was not palpably insufficient. Arbitration awards can have collateral estoppel effect when the party had a full and fair opportunity to litigate. By failing to address the summary judgment branch, the provider failed to establish the absence of that opportunity.

Reported in New York Official Reports at Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 29164)

Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co.
2009 NY Slip Op 29164 [23 Misc 3d 42]
Accepted for Miscellaneous Reports Publication
AT2
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, June 17, 2009

[*1]

Uptodate Medical Services, P.C., as Assignee of Jean Baptiste, Respondent,
v
State Farm Mutual Automobile Ins. Co., Appellant.

Supreme Court, Appellate Term, Second Department, April 20, 2009

APPEARANCES OF COUNSEL

Rivkin Radler LLP, Uniondale (Evan H. Krinick, Cheryl F. Korman, Stuart M. Bodoff and Melissa M. Murphy of counsel), for appellant.

{**23 Misc 3d at 43} OPINION OF THE COURT

Memorandum.

Order, insofar as appealed from, reversed without costs, defendant’s cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint granted, and complaint dismissed.

In this action by a provider to recover assigned first-party no-fault benefits for services rendered, plaintiff moved for summary judgment. Defendant cross-moved for leave to amend its answer to assert the affirmative defense of collateral estoppel, and, upon such amendment, for summary judgment dismissing the complaint. The Civil Court denied plaintiff’s motion and defendant’s cross motion. Defendant appeals from so much of the order as denied its cross motion.

Generally, leave to amend a pleading pursuant to CPLR 3025 (b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the cause of action or defense to be{**23 Misc 3d at 44} asserted in the amendment may have merit (see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959 [1983]; Ingrami v Rovner, 45 AD3d 806, 808 [2007]). The court must examine the merits of the cause of action or defense to be asserted in the proposed amendment since leave to amend should not be granted where the cause of action or defense to be asserted is totally without merit or is palpably insufficient as a matter of law (see Ingrami, 45 AD3d at 808; Hill v 2016 Realty Assoc., 42 AD3d 432, 433 [2007]). [*2]

Defendant sought leave to amend its answer in order to interpose the affirmative defense of collateral estoppel because there was a prior arbitration proceeding between the parties in which plaintiff had sought to recover assigned first-party no-fault benefits for services rendered to a different assignor. In said proceeding, the arbitrator determined that plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 322 [2005]). Inasmuch as plaintiff failed to demonstrate that prejudice or surprise would result from allowing the proposed amendment (see McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755 [1983]), and the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law (see Ingrami, 45 AD3d at 808; Hill, 42 AD3d at 433), defendant should have been granted leave to amend its answer (see Ingrami, 45 AD3d at 808 [a defendant who has failed to assert a defense set forth in CPLR 3211 (a) (5) both in a motion to dismiss and an answer (see CPLR 3211 [e]) may nonetheless be granted leave to amend the answer to assert such defense under appropriate circumstances]).

“The two elements that must be satisfied to invoke the doctrine of collateral estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue (see Kaufman v Lilly & Co. [65 NY2d 449,] at 455)” (Luscher v Arrua, 21 AD3d 1005, 1007 [2005]; see D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659 [1990]).

“The burden is on the party attempting to defeat the application of collateral estoppel to establish the absence of a full and fair opportunity to litigate” (D’Arata, 76 NY2d at 664; see also Kaufman, 65 NY2d at 456).

Collateral estoppel effect can, under appropriate circumstances, be given to arbitration awards (see Matter of American Ins. Co. [Messinger—Aetna Cas. & Sur. Co.], 43 NY2d 184 [1977]). Where a plaintiff has freely elected to proceed to arbitration with the assistance of counsel despite the availability{**23 Misc 3d at 45} of an alternate judicial forum and has had the opportunity to employ procedures substantially similar to those utilized in a court of law, it may be found that the plaintiff has had a full and fair opportunity to litigate the issue determined in the arbitration proceeding (Clemens v Apple, 65 NY2d 746 [1985]).

In the instant matter, defendant established that the issue of whether plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 322) was identical to the issue previously decided by the arbitrator. In opposition to defendant’s cross motion, plaintiff failed to address the branch of the cross motion which sought summary judgment dismissing the complaint on the ground of collateral estoppel. Therefore, plaintiff failed to establish that it did not receive a full and fair opportunity to litigate in the arbitration proceeding. Thus, the branch of defendant’s cross motion seeking summary judgment should have been granted (see Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co., 22 Misc 3d 128[A], 2009 NY Slip Op 50046[U] [App Term, 2d, 11th & 13th Jud Dists 2009]).

Accordingly, the order, insofar as appealed from, is reversed, defendant’s cross motion for leave to amend its answer, and, upon such amendment, for summary judgment dismissing the complaint is granted, and the complaint is dismissed.

Pesce, P.J., Weston Patterson and Golia, JJ., concur.

Legal questions (2)

Questions of no-fault law this decision rules on, from our Legal Questions pages. Bars count the decisions on the question by year and court, coloured by category; circles are this decision and the decisions on the question it cites or that cite it. Point at a bar or circle for details. The categories and summaries are Beynenson Law’s classification, made by a language model and checked by a second reading.

Fraudulent incorporation (Mallela)

Open the full map

On the merits, when may a no-fault insurer withhold payment because unlicensed persons own or control the provider (Mallela)?

This decision: Provider held ineligible: unlicensed ownership/control or improper formation proved (rules on the question, but another ground decided the case)

Dismissed the complaint because an arbitrator's earlier finding, in a claim for a different assignor, that the provider was fraudulently incorporated and ineligible precluded relitigation; the provider did not show it lacked a full and fair opportunity to litigate.

  • Court of AppealsCt App 3
  • Appellate DivisionApp Div 8
  • Appellate TermApp Term 26
  • Trial courtsTrial 24
2019, Court of Appeals: 1 decision (1 Defense established)2005, Court of Appeals: 1 decision (1 Defense established)2025, Court of Appeals: 1 decision (1 Not a Mallela ground)2019, Appellate Division: 4 decisions (2 Defense established, 2 Defense not established)2017, Appellate Division: 2 decisions (1 Defense established, 1 Defense not established)2016, Appellate Division: 1 decision (1 Triable issue)2008, Appellate Division: 1 decision (1 Triable issue)2020, Appellate Term: 1 decision (1 Not a Mallela ground)2019, Appellate Term: 1 decision (1 Defense established)2013, Appellate Term: 1 decision (1 Defense established)2012, Appellate Term: 1 decision (1 Not a Mallela ground)2010, Appellate Term: 6 decisions (2 Defense established, 1 Triable issue, 2 Defense not established, 1 Not a Mallela ground)2009, Appellate Term: 4 decisions (2 Defense established, 1 Triable issue, 1 Not a Mallela ground)2008, Appellate Term: 4 decisions (1 Defense established, 1 Triable issue, 2 Defense not established)2007, Appellate Term: 5 decisions (1 Defense established, 4 Triable issue)2006, Appellate Term: 2 decisions (1 Triable issue, 1 Defense not established)2015, Appellate Term: 1 decision (1 Defense not established)2019, Trial courts: 1 decision (1 Triable issue)2017, Trial courts: 2 decisions (1 Defense not established, 1 Not a Mallela ground)2015, Trial courts: 2 decisions (1 Defense established, 1 Not a Mallela ground)2013, Trial courts: 1 decision (1 Defense not established)2010, Trial courts: 1 decision (1 Not a Mallela ground)2009, Trial courts: 3 decisions (1 Defense established, 2 Triable issue)2008, Trial courts: 4 decisions (1 Defense established, 2 Triable issue, 1 Defense not established)2007, Trial courts: 2 decisions (1 Defense established, 1 Triable issue)2006, Trial courts: 3 decisions (3 Triable issue)2005, Trial courts: 4 decisions (3 Defense established, 1 Defense not established)2004, Trial courts: 1 decision (1 Not a Mallela ground)This decision
20052010201520202025
Defense establishedTriable issueDefense not establishedNot a Mallela groundThis decisionCites it or cited by itCited or followed

Of the 61 decisions on this question in the Second Department courts and the Court of Appeals, 20 (this one included) are in the same category.

Mallela defense: preclusion and discovery

Open the full map

May the insurer raise and investigate a Mallela (fraudulent incorporation) defense, or is it precluded, waived or denied discovery?

This decision: Insurer may raise or investigate the Mallela defense here (rules on the question, but another ground decided the case)

Held the insurer should have been granted leave to amend its answer to plead collateral estoppel based on a prior arbitration finding of fraudulent incorporation, because the provider showed no prejudice or surprise and the defense had merit.

  • Court of AppealsCt App 1
  • Appellate DivisionApp Div 7
  • Appellate TermApp Term 71
  • Trial courtsTrial 55
2005, Court of Appeals: 1 decision (1 Defense may be pursued)2021, Appellate Division: 1 decision (1 Defense may be pursued)2019, Appellate Division: 2 decisions (1 Defense may be pursued, 1 Defense barred)2017, Appellate Division: 1 decision (1 Defense may be pursued)2016, Appellate Division: 1 decision (1 Defense may be pursued)2011, Appellate Division: 1 decision (1 Defense may be pursued)2008, Appellate Division: 1 decision (1 Defense may be pursued)2019, Appellate Term: 1 decision (1 Defense may be pursued)2018, Appellate Term: 2 decisions (2 Defense may be pursued)2017, Appellate Term: 2 decisions (2 Defense may be pursued)2014, Appellate Term: 2 decisions (2 Defense may be pursued)2013, Appellate Term: 5 decisions (5 Defense may be pursued)2012, Appellate Term: 8 decisions (8 Defense may be pursued)2011, Appellate Term: 7 decisions (7 Defense may be pursued)2010, Appellate Term: 9 decisions (7 Defense may be pursued, 2 Defense barred)2009, Appellate Term: 7 decisions (7 Defense may be pursued)2008, Appellate Term: 8 decisions (7 Defense may be pursued, 1 Defense barred)2007, Appellate Term: 7 decisions (7 Defense may be pursued)2006, Appellate Term: 6 decisions (6 Defense may be pursued)2025, Appellate Term: 7 decisions (7 Defense may be pursued)2023, Trial courts: 2 decisions (2 Defense may be pursued)2021, Trial courts: 4 decisions (3 Defense may be pursued, 1 Defense barred)2019, Trial courts: 1 decision (1 Defense may be pursued)2017, Trial courts: 4 decisions (2 Defense may be pursued, 2 Defense barred)2015, Trial courts: 3 decisions (3 Defense may be pursued)2013, Trial courts: 2 decisions (1 Defense may be pursued, 1 Defense barred)2012, Trial courts: 6 decisions (1 Defense may be pursued, 5 Defense barred)2011, Trial courts: 1 decision (1 Defense barred)2010, Trial courts: 3 decisions (3 Defense barred)2009, Trial courts: 4 decisions (3 Defense may be pursued, 1 Defense barred)2008, Trial courts: 6 decisions (5 Defense may be pursued, 1 Defense barred)2007, Trial courts: 2 decisions (2 Defense may be pursued)2006, Trial courts: 5 decisions (5 Defense may be pursued)2005, Trial courts: 9 decisions (5 Defense may be pursued, 4 Defense barred)2025, Trial courts: 2 decisions (2 Defense may be pursued)2026, Trial courts: 1 decision (1 Defense may be pursued)This decision
20052010201520202025
Defense may be pursuedDefense barredThis decisionCites it or cited by itCited or followed

Of the 134 decisions on this question in the Second Department courts and the Court of Appeals, 111 (this one included) are in the same category.

Cited in this decision

A label shows how this decision treated the case it cites.

  • State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416)Fraudulently incorporated medical providers are ineligible for no-fault reimbursement under 11 NYCRR 65-3.16 (a) (12).
  • Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 50046(U)) FollowedThe provider's reimbursement claim was barred by a prior arbitration determination that it was fraudulently incorporated.

Cited by

A label shows how the later decision treated this one.

  • Laga v Unitrin Auto & Home Ins. Co. (2022 NY Slip Op 50906(U)) FollowedThe provider's benefits action was barred by collateral estoppel because a declaratory judgment had decided its entitlement to coverage.
  • Triboro Quality Med. Supply, Inc. v State Farm Mut. Auto. Ins. Co. (2012 NY Slip Op 51289(U))The provider's claim was barred by collateral estoppel because a prior jury verdict resolved whether the injuries arose from an insured incident.
  • Parisien v Kemper Ins. Co. (2022 NY Slip Op 22260)Collateral estoppel does not require privity between the insurer invoking it and a party to the prior declaratory judgment action.
  • American Tr. Ins. Co. v U.S. Med Supply Corp. (2023 NY Slip Op 50560(U))A provider invoking collateral estoppel from a prior no-fault award need not prove master arbitrator affirmance or judicial confirmation.
  • Andrew Carothers, M.D., P.C. v MTA Bus Co. (2009 NY Slip Op 51216(U))The bus company could not invoke collateral estoppel without establishing that a final judgment followed the fraudulent-incorporation verdict.
  • Quality Psychological Servs., P.C. v GEICO Ins. Co. (2010 NY Slip Op 51423(U))An insurer may not amend its answer to assert fraud and unjust-enrichment counterclaims based on a precluded fraudulent-billing defense.
  • Downtown Acupuncture PC v State Wide Ins. Co. (2015 NY Slip Op25371)The insurer's collateral estoppel request could not be entertained until it formally sought to plead fraudulent incorporation.

Similar decisions

  • Bath Med. Supply, Inc. v Allstate Indem. Co. (2010 NY Slip Op 20059)The insurer failed to justify discovery or preserve fraudulent-billing and EUO nonappearance defenses through proof of timely denials.
  • Pain Mgt. Ctr. of N.J., P.C. v Travelers Prop. & Cas. Ins. Co. (2019 NY Slip Op 50607(U))The provider identified no ambiguity or factual distinction defeating collateral estoppel from a prior arbitration award.
  • WJ Acupuncture, P.C. v Nationwide Mut. Ins. (2012 NY Slip Op 51648(U))The insurer failed to establish that the providers were parties to, or in privity with a party to, an earlier arbitration.
  • Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 27135)The insurer raised issues concerning the provider's actual operation and control that required discovery before summary judgment.
  • Midborough Acupuncture P.C. v State Farm Ins. Co. (2006 NY Slip Op 26360)An insurer's fraudulent-incorporation defense survives an untimely denial, and discovery into provider ownership and licensing is material.
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