Discovery penalty: dismissal

Queens-Roosevelt Med. Rehabilitation, P.C. v Response Ins. Co., 2019 NY Slip Op 50608(U)(App. Term 2d Dept. 2019)

“Contrary to the finding of the Civil Court, the questions at issue were “designed to elicit information which was material and necessary to the appellant’s defense of this action” (Parker v Ollivierre, 60 AD3d 1023, 1024 ), as Dr. McGee’s involvement in other medical service corporations, including how much time he spent at those entities, could necessarily affect his involvement in the daily activities and management of plaintiff, and were relevant to whether Dr. McGee was plaintiff’s “bona fide owner operator.” Moreover, counsel’s “directions not to answer were not otherwise authorized by 22 NYCRR [§] 221.2” (id. at 1024). In light of plaintiff’s failure to fully comply with discovery over many years, plaintiff’s refusal to answer the questions at issue may be presumed to be willful and contumacious (see e.g. Honghui Kuang v MetLife, 159 AD3d 878 ); therefore, a sanction is warranted. Given that certain of plaintiff’s claims have already been struck based upon its noncompliance with discovery and that Dr. McGee has already been deposed twice, we find that striking plaintiff’s complaint is the appropriate sanction (see id.).”

This case is interesting for a bunch of reasons. First, Dr. McGee should have had shells on his payroll to administer the tests and treatments at his facility, so he could account for his large practice. Second, the direction not to answer a question is just dangerous unless the question is palpably improper. Example: “What’s her motivation for saying that you lied”. Clearly palpably improper. Better question: “Are you aware of why she said you lied?” But, I suppose McGee asked for this outcome.

Yet, don’t you think in light of Dr. McGee appearing twice – a remedy short of dismissal with prejudice (SOL makes it with prejudice) – perhaps a third deposition or preclusion might be a proper remedy?

Mallela Discovery Rights

Under Mallela v Westchester Med. Ctr., 58 AD3d 564 (2d Dept 2009), insurance carriers possess broad discovery rights to examine whether a medical provider qualifies as a bona fide owner operator. The Court of Appeals affirmed this principle, recognizing that carriers may explore the business structure, ownership interests, and management involvement of medical professionals to determine if the provider has standing to maintain the action.

Discovery extends beyond mere corporate formalities. Insurers may examine the doctor’s involvement in daily operations, time spent at multiple facilities, financial interests in related entities, and the actual provision of medical services. The carrier’s ability to investigate these matters is not limited to documents; depositions exploring these issues are material and necessary to the defense.

Bona Fide Owner Operator Requirements

The bona fide owner operator requirement stems from 11 NYCRR 65-3.16(a)(12), which mandates that medical corporations providing no-fault services must be owned and operated by licensed physicians. This regulation serves to prevent sham arrangements where physicians lend their names to entities controlled by non-physicians.

Courts examine whether the physician exercises actual control over the medical practice, participates in patient care decisions, and maintains meaningful involvement in the entity’s operations. A physician who serves as nominal owner while devoting substantial time to other medical practices raises legitimate questions about whether the entity satisfies regulatory requirements. The carrier is entitled to explore these issues through discovery.

Improper Directions Not to Answer

Counsel’s authority to direct a witness not to answer deposition questions is narrowly circumscribed by 22 NYCRR 221.2. Permissible objections include privilege, trial preparation materials, and questions manifestly exceeding the scope of disclosure permitted by Article 31 of the CPLR. Directions not to answer based on relevance, materiality, or general objections to the line of questioning are improper.

In this case, questions concerning Dr. McGee’s involvement in other medical service corporations directly bore on his capacity to serve as plaintiff’s bona fide owner operator. These inquiries fell squarely within the scope of permissible discovery under Mallela. Counsel’s directions not to answer lacked any legitimate basis under the uniform rules and constituted obstruction of the discovery process.

Discovery Sanctions Standards

CPLR 3126 authorizes courts to impose sanctions for willful failure to disclose information. The statute grants courts discretion to issue orders: (1) resolving issues against the noncompliant party; (2) prohibiting introduction of evidence; (3) striking pleadings; or (4) dismissing the action. The severity of the sanction should correspond to the egregiousness of the conduct and the prejudice to the opposing party.

Willfulness may be inferred from a pattern of noncompliance over time, particularly where the party has been afforded multiple opportunities to comply. Courts need not find malicious intent; deliberate or contumacious refusal to comply with disclosure obligations suffices. The record of plaintiff’s failure to fully comply with discovery over many years, coupled with the improper directions not to answer at two depositions, supported the inference of willful conduct.

Consequences of Willful Noncompliance

The ultimate sanction of dismissal is warranted where the noncompliant party’s conduct demonstrates a clear pattern of disregard for court orders and discovery obligations. The Appellate Term noted that certain claims had already been struck based on prior noncompliance, and Dr. McGee had appeared for deposition twice without providing complete answers to material questions. These circumstances justified dismissal as the only effective remedy.

The statute of limitations had expired, rendering the dismissal effectively with prejudice. Lesser sanctions such as a third deposition or preclusion would not adequately address the prolonged pattern of obstruction. When a party repeatedly refuses to comply with discovery obligations despite court intervention, dismissal serves both punitive and deterrent purposes.

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