A trial de novo is but a declaratory judgment action – District Court lacks jurisdiction

Liberty Mut. Ins. Co. v Bayside Pain & Rehabilitation Medicine, P.C., 2013 NY Slip Op 50906(U)(App. Term 2d Dept. 2013)

“Defendant moved to dismiss the complaint for, among other things, failure to state a cause of action, and plaintiff opposed the motion. While the motion was pending, the Supreme Court transferred the action to the District Court of Nassau County pursuant to CPLR 325 (d). By order dated July 12, 2011, the District Court granted defendant’s motion and dismissed the complaint.”

“This action seeks, in essence, a declaratory judgment and not monetary damages. While we cannot review the propriety of the order of the Supreme Court transferring this declaratory judgment action to the District Court pursuant to CPLR 325 (d) (see e.g. Priel v Linarello, 7 Misc 3d 64 [App Term, 2d & 11th Jud Dists 2005], affd 44 AD3d 835 [2007]; Green v Lakeside Manor Home for Adults, Inc., 30 Misc 3d 16 [App Term, 2d, 11th & 13th Jud Dists 2010]), it is, nevertheless, not within the subject matter jurisdiction of the District Court to adjudicate this particular type of declaratory judgment action.”

Great Wall is binding precedent on American Arbitration Association

Allstate Ins. Co. v Natural Healing Acupuncture, P.C., 2013 NY Slip Op 50645(U)(Civ. Ct. Kings Co. 2013)

“The arbitrator failed to mention, much less follow the Appellate Term’s decision in Great Wall Acupuncture v. GEICO Gen. Ins. Co., 16 Misc 3d 23 (App. Term, 2nd Dept. 2007), which addressed the issue and applied the fee schedule for licensed chiropractors to acupuncture services provided by licensed acupuncturists.  In Great Wall, the Appellate Term analogized licensed chiropractors to licensed acupuncturists based on the similar training they underwent for licensure in order to perform acupuncture services, while contrasting them to physicians, who only had to obtain certification in order to perform acupuncture. The Appellate Term further noted the Department of Insurance’s lack of “specific guidance as to which particular fee schedule should be applied to a licensed acupuncturist performing acupuncture,” and urged it to do so. Great Wall, supra at 24.

“Although acknowledging Great Wall, supra, and the fact that the proposed legislation to increase the reimbursement rates for both chiropractors and acupuncturists was still pending, the master arbitrator confirmed the award. The master arbitrator found that Allstate impermissible sought to have him conduct a de novo review, and that the lower arbitrator’s award had “a plausible basis in the evidence presented” and thus conformed to applicable law.”

“This Court does not understand the reasoning behind the master arbitrator’s award. Allstate did not seek a de novo or a factual review, as prohibited by Petrofsky, supra. Rather, petitioner argued that the decision was arbitrary and capricious and contrary to well settled law. This Court cannot countenance an award which finds that proposed or pending legislation trumps well established precedent, i.e. Great Wall, supra. Therefore, the award is vacated and the Court directs that the arbitrator calculate the fees owed to respondent in accordance with the fee schedule for licensed chiropractors who perform acupuncture.”

Rules on Trial De-Novo

Dutchess Med., P.C. v Allstate Ins. Co., 2013 NY Slip Op 23139 (City Ct. Poughkeepsie 2013)

“In a de novo hearing’, the judgment of the [trial] court is suspended and the reviewing court determines the case as though it originated in the reviewing court and gives no attention to the findings and judgment of the lower court except as they may be helpful to us in the reasoning.” Reck v. Reck, application for rehearing, 46 N.E. 2d 429, 430 (1942). A demand for trial de novo must be made “within 30 days after service upon such party of the notice of filing of the award with the appropriate court clerk, or if service is by mail, within 35 days of such service . . . ” [22 N.Y.C.R.R. §28.12], or the finding becomes final and binding.

Here, the Arbitrator’s decision was rendered on January 2, 2013. The decision was filed with this Court on February 20, 2013.  The plaintiff has provided no evidence it served upon the defendant a notice of filing of the award with the Court Clerk. Therefore, defendant’s demand for trial de novo (filed on February 6, 2013) was in fact timely – as defendant’s time had not even begun to run. See, 22 N.Y.C.R.R. §28.12.”

“Accompanied by its demand for a trial de novo, defendant filed a jury trial demand. The law provides that for the arbitration of certain claims, the rules must permit a jury trial de novo upon demand by any party following the determination of the arbitrators.C.P.L.R. §3405.  Indeed, the rules, as promulgated, specifically provide both parties that the trial de novo be accompanied by a demand for a trial with or without a juryN.Y.C.R..R. §28.12.

These particular statutes are noteworthy here because on August 14, 2012, plaintiff filed a notice of trial without a jury. And while this defendant had ten (10) days after service of plaintiff’s notice of trial to demand a jury trial [U.C.C.A. §1303(a)], defendant never made such a demand thereby waiving its right to a jury trial under U.C.C.A. §1303(b) – or seemingly waived it – as explained more fully below. Also see C.P.L.R. §4102.

However, while defendant may have waived his right to a jury trial under U.C.C.A. § 1303(b), both parties are awarded an encore with respect to their right to demand a jury trial when the matter is subject to mandatory arbitration. In particular, C.P.L.R. §3405 together with N.Y.C.R.R. §28.12 specifically address the right to demand a jury trial in arbitration cases, whereas U.C.C.A. §1303 has more of a general applicability for all actions in City Court. As such, the strict timing requirements to request a jury trial [pursuant toU.C.C.A. §1303] are rendered virtually obsolete when the matter is subject to mandatory arbitration. U.C.C.A. §1303.  In short, while the time to demand a jury trial expired under U.C.C.A. §1303 ten (10) days after this plaintiff served its notice of trial, both parties’ right to demand a jury trial was revived when the arbitrator issued its final determination. C.P.L.R. §3405; N.Y.C.R.R. §28.12.”


Arbitration and personal jurisdiction

American Ind. Ins. Co. v Art of Healing Medicine, P.C., 2013 NY Slip Op 01546 (1st Dept. 2013)

“At this pre-arbitration stage, the issue is not whether New York courts have jurisdiction over AIIC, but whether the arbitrator has authority under the terms of the insurance contract to award no-fault benefits to the appellants (see American Ind. Ins. v Gerard Ave. Med. P.C., 12 Misc 3d 1176[A], 2005 NY Slip Op 52302[U] [Sup Ct, Bronx County]). Without providing a copy of the policy of insurance, AIIC could not establish that a valid arbitration agreement is not controlling. Our recognition in other cases that New York State courts do not have personal jurisdiction over AIIC does not entitle AIIC to, in effect, a declaration that the arbitrator does not have authority and jurisdiction over AIIC. While personal jurisdiction is required for the exercise of the state’s judicial power over a party, arbitration is a form of dispute resolution almost wholly independent of the court system (see Siegel, NY Prac § 586 at 1050 [5th ed 2011]). “Except for a few basic guarantees, such as the right to be heard and to be represented by counsel at the arbitration, the procedural law of the state is also inapplicable to arbitration, including the rules of evidence” (id. at 1052). In short, personal jurisdiction is not required for arbitration that is controlled by the parties’ agreement. Therefore, the Supreme Court erred in granting the petition to permanently stay arbitration on the ground that there was no personal jurisdiction over AIIC.”

So personal jurisdiction is not a pre-requisite to filing an arbitration against somebody in the State of New York?  I suppose the execution of an arbitration agreement, whether voluntarily or through operation of law, will waive jurisdictional defenses, similar to a forum selection clause in a contract – hence all cruise ship cases must be heard in Miami-Dade Circuit Court in the Sunshine State.  I am taking it that if the policy did not contain an arbitration clause and there were no other links to New York, then a successful personal jurisdictional defense could have been forwarded?


Alev Med. Supply, Inc. v Allstate Prop. & Cas. Ins. Co., 2012 NY Slip Op 51294(U)(App. Term 2d Dept. 2012)

Since each medical provider as assignee of a purportedly injured party has its own right to chose litigation or arbitration, the decision of one medical provider cannot prejudice another medical provider or assignor.


“A prior arbitration proceeding involving one claimant provider seeking reimbursement of assigned first-party no-fault benefits does not preclude another provider from commencing its own action seeking reimbursement of assigned no-fault benefits, even where the claims have been assigned by the same individual and have arisen from the same accident”

Westchester Lincoln

“Defendant failed to demonstrate that it had timely denied the claims at issue based upon plaintiff’s assignor’s failure to appear for an EUO, and therefore that it is not precluded from asserting its proffered defense that plaintiff failed to comply with a condition precedent to coverage”

Ins Law 5105 – loss transfer regarding a livery vehilce and a standard passenger vehicle

Matter of Matter of Philadelphia Ins. Co. (Utica Natl. Ins. Group), 2012 NY Slip Op 05470 (4th Dept. 2012)

This is a coverage case with a vigorous, and I think an accurate dissent.  There is never a shortage of dissenting opinions out of this Rochester based Court, and I am starting to believe the dissents out of this Court make more sense than the majority opinions.  You will see that if you regularly read this blog.  Regarding the case, I will break it down.

(1) Two car collision – it appears the possible livery vehicle is at fault.  Philadelphia insures this vehicle;

(2) Utica is insurer for vehicle that the Injured victim was present inside, and Utica paid Assignor and/or assignee medical providers no-fault benefits;

(3) Utica files for 5105 intercompany arbitration;

(4) Philadelphia did not move for a permanent stay of arbitration;

(5) Philadelphia raised defense during arbitration: (a) Lack of Jurisdiction; (b) Claim not subject to Arbitration;

(6) Arb Forums rules in favor of Utica finding Philadelphia’s vehicle was a livery vehicle;

(7) Philadelphia files an Article 75 to vacate the award on the basis that Arb Forums was wrong on the law; and Utica cross-moves to confirm the award;

(8) Supreme Court grants the petition and vacates the award, awarding judgment in favor of Philadelphia;

(9) Utica Appeals and the Fourth Department reverses and dismisses the Petition;

(10) Fourth Department holds that Philadelphia should have moved to stay arbitration and waived its right to dispute the result of the arbitration because it raised jurisdictional defenses at Arb Forums;

(11) On the merits, the Fourth Department holds that Arb Forums’ finding that the vehicle was used as a livery vehicle has record support;

(12) Dissent dispels the jurisdictional argument; looks at this case from a less deferential viewpoint; and finds that Philadelphia’s vehicle was not being used as a livery vehicle, and would have affirmed Supreme Court’s granting of the petition.

If you read the opinion and are familiar with the wild west of arb forums, it seems that the dissents argument is more persuasive.  Using what looked to be the inartful claims representative’s use of a legal term in a less than formal setting to preclude Article 75 relief seems to be over the top.  On the merits, the dissent hit the nail on the head.

This one should go to the Court of Appeals and looks interesting.

Non-compulsory arbitration award vacated

Siegel v Landy, 2012 NY Slip Op 03625 (2d Dept. 2012)

There is a right to be able to present evidence at an arbitration…

“However, as the plaintiff correctly contends, the arbitration award, as modified, *3 should have been vacated on the ground that the arbitrator failed to follow the procedures set forth in CPLR article 75 (see CPLR 7511 [b][1][iv]). The plaintiff was effectively denied her right to notice, the opportunity to be heard, and the opportunity to present evidence (see CPLR 7506). Accordingly, the Supreme Court should have denied that branch of the defendants’ motion which was to confirm the award, as modified, and granted the plaintiff’s cross motion to vacate the award, as modified”

The Appellate Division grants an Article 75 petition and remands the matter back to AAA arbitration

Matter of Mvaic v Interboro Med. Care & Diagnostic PC, 2010 NY Slip Op 04522 (1st Dept. 2010)

“MVAIC defended the arbitration on the ground that the police accident report showed that the offending vehicle was registered out-of-state and was insured, but the arbitrator refused to consider that defense on the merits on the ground that MVAIC had failed to pay or deny the claim within 30 days of its submission, as required by the no-fault law (Insurance Law § 5106[a]; 11 NYCRR 65-3.8[a][1]; [c]). This was contrary to settled law (see generally Matter of State Farm Mut. Auto. Ins. Co. v Lumbermens Mut. Cas. Co., 18 AD3d 762, 763 [2005]) recognizing a narrow exception to the 30-day deadline for defenses based on lack of coverage (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]). New York Hosp. Med. Ctr. of Queens v MVAIC (12 AD3d 429 [2d Dept 2004], lv denied 4 NY3d 705 [2005]), relied on by the arbitrator, did not involve a lack of coverage issue.”

A few things should be observed.  First, note the special treatment the courts give MVAIC as opposed to that given the insurance carriers that my fellow brethren and I regulalry defend.  That being said, the Appellate Division correctly found the existence of a triable issue of fact as to coverage.  But note how the Appellate Division, Second Department has insulated most arbitration awards from judicial scrutiny, whereas the First Department appears willing to look at the merits of an arbitral dispute.

Good luck trying to vacate a no-fault arbitration award pursuant to Article 75

Matter of Chin v State Farm Ins. Co., 2010 NY Slip Op 04186 (2d Dept. 2010)

“Consistent with the public policy in favor of arbitration, the grounds specified in CPLR 7511 for vacating or modifying a no-fault arbitration award are few in number and narrowly applied” (Matter of Mercury Cas. Co. v Healthmakers Med. Group, P.C., 67 AD3d 1017, 1017). “An arbitration award can be vacated by a court pursuant to CPLR 7511(b) on only three narrow grounds: if it is clearly violative of a strong public policy, if it is totally or completely irrational, or if it manifestly exceeds a specific, enumerated limitation on the arbitrator’s power” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d 729, 729; see Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, 79; Matter of Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, 37; Cifuentes v Rose & Thistle, Ltd., 32 AD3d 816; Matter of Rockland County Bd. of Coop. Educ. Servs. v BOCES Staff Assn., 308 AD2d 452, 453). “An award is irrational if there is no proof whatever to justify the award'” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d at 730, quoting Matter of Peckerman v D & D Assoc., 165 AD2d 289, 296). “Even if the arbitrators misapply substantive rules of law or make an error of fact, unless one of the three narrow grounds applies in the particular case, the award will not be vacated” (Matter of Erin Constr. & Dev. Co., Inc. v Meltzer, 58 AD3d at 730; see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471; Matter of Silverman [Benmor Coats], 61 NY2d 299, 308; Matter of Sprinzen [Nomberg], 46 NY2d 623, 629; Cifuentes v Rose & Thistle, Ltd., 32 AD3d at 821). “An arbitrator is not bound by principles of substantive law or rules of evidence, and may do justice and apply his or her own sense of law and equity to the facts as he or she finds them to be.”

If you think an arbitrator is going to be unfair, it is probably best to order a stenographer and obtain a transcript of the proceeding.  A proper record never lies.

EBT in aid of arbitration? No dice.

Matter of Travelers Indem. Co. v United Diagnostic Imaging, P.C., 2010 NY Slip Op 03944 (2d Dept. 2010)

“The test for ordering disclosure to aid in arbitration is “necessity,” as opposed to “convenience” (Hendler & Murray v Lambert, 147 AD2d 442, 443 [internal quotation marks omitted]). Thus, court-ordered disclosure to aid in arbitration is justified only where that relief is “absolutely necessary for the protection of the rights of a party” to the arbitration (Hendler & Murray v Lambert, 147 AD2d at 443 [internal quotation marks omitted]). [*2]

Here, the petitioner already has evidence sufficient to establish a potential defense in the arbitration proceedings (cf. 11 NYCRR 65-1.1[d], 65-3.2[c], 65-3.5[b], [c], [e]). Furthermore, the petitioner can potentially obtain the requested disclosure in the context of those proceedings (see 11 NYCRR 65-4.5[o][2]; cf. Matter of Katz [Burkin], 3 AD2d 238, 238-239). Finally, the record provides no indication that if a disclosure directive is made during those proceedings, the requested disclosure will, at that point, be unavailable (cf. Bergen Shipping Co., Ltd. v Japan Marine Servs., Ltd., 386 F Supp 430, 435 n 8). Under the circumstances, the petitioner failed to demonstrate the existence of extraordinary circumstances justifying court-ordered disclosure to aid in those proceedings. Accordingly, the Supreme Court improvidently exercised its discretion in granting the petition.”

The Appellate Division seems to be continuing its cruisade to insulate the arbitration forum from any collateral attack.  Travelers Indem. Co. v. United Diagnostic Imaging, P.C., 70 A.D.3d 1043 (2d Dept. 2010); Mercury Cas. Co. v. Healthmakers Medical Group, P.C., 67 A.D.3d 1017 (2d Dept. 2010).

Also, look at the the regulagtory provisions that were delimited by a “c.f.” cite: 65-3.2(c) “Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.”; 65-1.1(d) “[Claimant shall] provide any other pertinent information that may assist the Company in determining the amount due and payable.”; 65-3.5 (allowing verification via EUO under the tight claims determinative time frames).

It appears that this might have been a Mallela case, and the Court was not willing to allow the same type of discovery in arbitral proceedings that it would allow in plenary actions.  Compare, One Beacon Ins. Group, LLC v. Midland Medical Care, P.C., 54 A.D.3d 738 (2d Dept. 2008).

Also, note the purported ability to obtain discovery through the arbitration proceeding itself.  We saw this doctrine enunciated in another context a few years  ago.  In re Progressive Northeastern Ins. Co. (New York State Ins. Fund),  56 A.D.3d 1111 (3d Dept. 2008).  Yet, should the arbitrator refuse to grant you the sought after discovery, you are probably out of luck.  See, Mercury Cas. Co. v. Healthmakers Medical Group, P.C..

Finally, without knowing what the proofs were in this matter, I cannot say that I necessarily agree or disagree with the outcome of the ultimate disposition of the case.  I take issue, however, with the court denying discovery on the basis that the information could have been obtained during the claims determination phase, inasmuch as broad discovery is usually allowed where true coverage issues or non-precludable standing issues arise.