Correct Note of issue asserting discovery is outstanding not basis for striking Note April 13, 2017

Suarez v Shapiro Family Realty Assoc., LLC, 2017 NY Slip Op 02914

(1) “Under the circumstances, where plaintiff’s certificate of readiness contained no incorrect material representations, the court properly refused to vacate the note of issue (cf. 22 NYCRR 202.21[e]). However, as plaintiff acknowledged in the note of issue and certificate of readiness, discovery was still outstanding.”

(2) “It is noted that granting Shapiro’s discovery request as to Duane Reade will not prejudice plaintiff, since the matter remains on the trial calendar”

This is how they do business in Supreme Queens.  I am not a fan since a Note of Issue should not be filed until discovery is completed.  OCA should step up to the plate on this one and not give Courts the power to force note of issues to be filed when discovery is outstanding.

Defaults 3215(f) – what does it mean? April 11, 2017

Geico Ins. v Sullivan, 2017 NY Slip Op 27108 (App. Term 2d Dept. 2017)

This case highlights how disparate the uniform court system is.  Here, Plaintiff clearly did not have sufficient facts to establish a default as to liability.  I get that clearly, i.e., there was no affidavit or verification from the operator of the Subrogor’s vehicle.  But I discuss this case because of what it does not say.  Assume I filed the same subrogation case in Civil Queens and the defendant defaults.  What do I do?

I file a Notice of Inquest with appropriate fees, put on the inquest calendar, bring whatever evidence of damages the assigned judge requires and knock out judgments and license suspensions.  I sense that the District Court Clerk will require a motion for a default, refuses to engage in Civil Court practice and hence this case.  That is why counsel here moved for leave to enter a default in the first instance.

Now it looks like the statute has run and Geico will never recover the $12,069.59.  Brian Sullivan will keep his license and, yet, never knew how close he came to being in a lifetime payment plan or running to Central Islip to file a chapter 7

Discretion was not abused April 10, 2017

Middle Vil. Chiropractic v Geico Gen. Ins. Co., 2017 NY Slip Op 50431(U)(App. Term 2d Dept. 2017)

(1) “Plaintiff filed a notice of trial on February 25, 2015, and the matter appeared on the trial calendar on April 6, 2015. On April 6, 2015, defense counsel made an oral application to adjourn the trial, stating that “[s]ix weeks is not a reasonable amount of time . . . for our offices to book a witness for all these trials.” The Civil Court denied the application. As defendant was unable to proceed to trial in the absence of its expert witnesses, the court ordered that judgment be entered in plaintiff’s favor. A judgment in favor of plaintiff in the principal sum of $1,549.41 was entered on July 27, 2015.”

(2) “”An application for a continuance or adjournment is addressed to the sound discretion of the trial court, and the grant or denial thereof will be upheld on appellate review if the trial court providently exercised its discretion”

(3) “Here, although expert witness testimony was critical, defense counsel made no showing that due diligence had been exercised in attempting to secure the attendance of its witnesses during the six-week period between the filing of the notice of trial and the action’s appearance on the trial calendar. In view of the foregoing, and the fact that this case had been commenced almost five years before it was reached for trial, we find that it was not an improvident exercise of discretion for the trial court to have denied defendant’s request for an adjournment.”

I must disagree with this decision. Whenever the Civil Courts are given carte blanche to exercise their discretion, problems arise.  I generally agree that some type of diligence is necessary in order to adjourn a final trial.  E.g.:

(a) “I tried to get a doctor and two subs and they were booked”

(b) “My witness is in Kings, where all no-fault trials are heard”

Yet, a case that is first time on –  6 weeks after a notice of trial is filed – should never be presumptive final.  The fact that Civil Court, Queens County under various administrative judges made a promise to the Queens County bar that all PIP cases would banish in the doldrums of hell should not inure to the benefit to the plaintiffs who still file there.  That is what I learn from this case.

And again, I know the First Department would have probably reversed had it been presented with the same set of facts.  Shame on the Appellate Term for perpetuating a broken system.

I believe the court rules need to be amended to require a pre-trial conference and mandate that no-final trial (unless on consent) be scheduled less than 6 weeks following the conclusion of any pre-trial conference.  OCA – do not let me down.

Post note of issue discovery granted April 6, 2017

Cuprill v Citywide Towing & Auto Repair Servs., 2017 NY Slip Op 02729 (1st Dept. 2017)

It is such a murky area – when is post note of issue discovery appropriate?

“Contrary to plaintiff’s argument, defendants did not seek, and the motion court did not order, vacatur of the note of issue. Trial courts are authorized, as a matter of discretion, to permit post-note of issue discovery without vacating the note of issue, so long as neither party will be prejudiced.”

Carothers April 6, 2017

Carothers v Progressive Ins. Co., 2017 NY Slip Op 02614 (2d Dept. 2017)

Discussion of BLC

(1)  “To incorporate, the licensed individual must obtain a “certificate . . . issued by the [New York State Department of Education (DOE)] certifying that each of the proposed shareholders, [*4]directors and officers is authorized by law to practice a profession which the corporation is being organized to practice” (Business Corporation Law § 1503[b]). The DOE may not issue a certificate of authority to a professional service corporation that does not meet these qualifications (see Education Law § 6507[4][c][i]). Once the professional corporation is formed, shareholders may not transfer their voting power to any person who is not a licensed professional in the field (see Business Corporation Law § 1507[a])” Any agreement by a shareholder transferring the voting power of his/her share to individuals who are not authorized by law to practice the profession is void (see Business Corporation Law § 1507[a]).


“insurers may look at the actual ownership and operation of the practice, to wit, whether the practice was actually controlled or owned by an unlicensed individual in violation of state and local law (see id. at 321; United States v Gabinskaya, 829 F3d 127, 133 [2d Cir]). In this context, however, the Court of Appeals cautioned that insurance carriers could not delay payments of reimbursement claims to pursue investigations unless they had “good cause” (State Farm Mut. Auto. Ins. Con v Mallela, 4 NY3d at 322; see 11 NYCRR 65-3.2[c]; Dynamic Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 29 Misc 3d 278, 285 [Nassau Dist Ct]) and that, in the licensing context, “carriers will be unable to show good cause’ unless they can demonstrate behavior tantamount to fraud”

Jury Charge

Factors to determine whether there was fraudulent incorporation:

(1) “As the Appellate Term correctly determined, the charge properly focused the jury on the question of whether Carothers was a mere nominal owner of the plaintiff, and if, in actuality, nonphysicians Sher and Vayman owned or controlled the plaintiff such that the profits were funneled to them. The Civil Court properly instructed the jury to consider whether Sher and/or Vayman shared in the profits of the plaintiff, and that the jury could consider whether the leases entered into between the plaintiff and Sher’s companies were arms’ length or meant to funnel profits to Sher. The Civil Court charged the jury that, in order to succeed on its defense, the defendant was required to establish, by clear and convincing evidence, that Sher and/or Vayman, two nonphysicians, were “de facto owners” of the plaintiff or exercised “substantial control” over the plaintiff; and that to find de facto ownership, the jury must find that either Sher and/or Vayman exercised “dominion and control over” the plaintiff and its assets and that they “shared the risks, expenses, and interest in the profits and losses” of the plaintiff. To find control, the jury was instructed that they must find that Sher and/or Vayman had a “significant role in the guidance, management, and direction of the business.”

(1a) ” Likewise, although Malella instructed that “[t]echnical violations” such as a failure to hold an annual meeting, pay corporate filing fees, or submit paperwork on time would not establish the defense of fraudulent incorporation (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 322), a failure to follow corporate formalities is a relevant factor for the jury to consider, in conjunction with other factors, in determining the ultimate issue of ownership and control and whether the plaintiff was a proper professional corporation or merely a vehicle operated by nonphysicians to funnel profits to themselves”

(2) “Although the plaintiff is correct that certain of the factors enumerated in the non-exhaustive list of factors with which the jury was charged that it might wish to consider, could not, standing alone, support a finding of fraudulent incorporation, these factors were relevant for the jury to consider in determining the ultimate issues of de facto ownership and substantial control, and the jury was properly instructed to consider the totality of the circumstances”

(3) “Good faith compliance with the requirements of a professional corporation at the time of incorporation does not end when the certificate of incorporation is filed and does not defeat a claim of fraudulent incorporation if the evidence demonstrates that at some point after the initial incorporation, the nominal physician owner turned over control of the business to nonphysicians in contravention of state regulations”

(4) “In light of the jury’s determination that the evidence at trial met this more stringent standard of proof than required by the preponderance of the evidence standard, we do not reach the issue of which is the appropriate standard of proof in establishing the defense of fraudulent incorporation

The Court discussed harmless error, and found the 5th Amendment issue insufficient to overturn the jury verdict.


What did I take out of the case?   First, the Court punted on clear and convincing versus preponderance.    Second, individual violations of the BCL and Education law are not separately actionable to deny a provider his/her no-fault benefits.  We learned this in Allstate v. New Way Massage Therapy, P.C.  Third, we have a non-exhaustive list of factors that could be cited to discern whether a cause of action or triable issue of fact exists as to a Mallela defense.

On a side note, you have to wonder how any of this can be used to shape or reshape Rico actions.  The predicate acts are usually mail/wire fraud and based upon Mallela issues.  Can the smart provider attorney reshape the central inquiry?  Contrariwise, can an insurance carrier attorney reformulate the Mallela factors to fit a pattern act from Federal criminal law?  There is a lot to digest here – the intuitive practitioner can play with this case and draft a crafty memorandum of law.

Of course, most cases are just not this egregious.