B.Y., M.D., P.C. v Lancer Ins. Co., 2010 NY Slip Op 50493(U)(App. Term 2d Dept. 2010)
“However, defendant seeks discovery, inter alia, to support its defense that B.Y. is ineligible to recover no-fault benefits as a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]), a defense which is not precluded (see New Era Acupuncture, P.C., 24 Misc 3d 134[A], 2009 NY Slip Op 51396[U]). As a result, discovery of certain items requested by defendant is not palpably improper, and B.Y. did not demonstrate that such information was privileged. Consequently, defendant is entitled to production of the documents and information demanded in items 1 through 7, 9, 10, 12 through 16, 19, 41, and 42 of its notice for discovery and inspection, and to responses to questions 1, 6 through 9, and 23 through 25 of its “demand for verified written interrogatories” insofar as the information sought relates to B.Y. (see CPLR 3101 [a]; One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d 738 [2008]; Midwood Acupuncture, P.C. v State Farm Fire & Cas. Co., 21 Misc 3d 144[A], 2008
NY Slip Op 52468[U] [App Term, 2d & 11th Jud Dists 2008]; Great Wall Acupuncture v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 136[A], 2008 NY Slip Op 51529[U] [App Term, 2d & 11th Jud Dists 2008]).”
The “good cause” standard does not regulate Mallela based discovery matters. As we all know, no-fault matters brought in court are subject to the full scope of CPLR 3101. But here is the unresolved question: what factual presentation is necessary to allow this type of broad based corporate structure discovery? Since One Beacon, it is rare that one sees a Mallela discovery-based case, where the application for discovery based sanctions is denied.
I do not think the good cause standard was proper. I also do not think baseless allegations, without a sufficient evidentiary presentation, should allow this type of discovery. Some articulated threshold standard is necessary, so the bar can have some clarity on this issue. And so we wait.
