Baker v. Comprehensive Mental Assessment & Med. Care

• Decision Date: 08 January 2010
• Parties: BAKER, SANDERS, BARSHAY, GROSSMAN, FASS, MUHLSTOCK & NEUWIRTH, LLC, Plaintiff,v.COMPREHENSIVE MENTAL ASSESSMENT & MEDICAL CARE, P.C., All Mental Care Medicine, P.C., Points of Health Acupuncture, P.C., Horizon Psychological Services, P.C., Art of Healing Medicine, P.C. and Lubarsky & Tarnovsky, P.C., Defendants.
• Court: New York Supreme Court

26 Misc.3d 1109
896 N.Y.S.2d 805
2010 N.Y. Slip Op. 20007

BAKER, SANDERS, BARSHAY, GROSSMAN, FASS, MUHLSTOCK & NEUWIRTH, LLC, Plaintiff,
v.
COMPREHENSIVE MENTAL ASSESSMENT & MEDICAL CARE, P.C., All Mental Care Medicine, P.C., Points of Health Acupuncture, P.C., Horizon Psychological Services, P.C., Art of Healing Medicine, P.C. and Lubarsky & Tarnovsky, P.C., Defendants.

Supreme Court, Nassau County, New York.

Jan. 8, 2010.

[896 N.Y.S.2d 806]

Matthew J. Conroy & Associates, P.C. by Matthew J. Conroy, Esq., Garden City, for Plaintiffs.Law Office of Roman V. Popik, P.C. by Roman V. Popik, Esq., New York, for Defendants Comprehensive mental Assessments et al.Lubarsky & Tarnovsky, P.C., Brooklyn, for Lubarsky and Tarnovsky.IRA B. WARSHAWSKY, J.

[26 Misc.3d 1110] On or about October 1, 2007, Comprehensive Mental Assessment & Medical Care, P.C., (“Comp. Mental”) commenced an action against Baker, Sanders, Barshay, Grossman Fass, Muhlstock & [26 Misc.3d 1111] Neuwirth, LLC (“Baker Sanders”) in the Supreme Court of the State of New York, County of Kings, for conversion, breach of contract, and ancillary damages (“Kings County Action”). In or about November 20, 2007, Baker Sanders commenced an action in the Supreme Court of the State of New York, County of Nassau, against Comp Mental, All Mental Care Medicine, P.C. (“All Mental”), Points of Health Acupuncture, P.C. (“Points of Health”), Horizon Psychological Services, P.C. (“Horizon”), Art of Healing Medicine, P.C. (“Art of Healing”), and Lubarsky & Tarnovsky, P.C. (“Lubarsky”) for, among other things, a declaratory judgment, breach of contract, quantum merit, retaining lien and tortuous interference with contract (“Nassau County Action”) (collectively, Comp Mental, All Mental, Points of Health, Horizon and Art of Healing are known as the “Pincusovich Defendants”).

In or about March 12, 2008, Baker Sanders filed an Amended Verified Complaint against the Pincusovich Defendants and Lubarsky. In an Order dated February 29, 2008, the Honorable Stephen A. Bucaria in the Nassau County Action issued a Short Form Order which decided a motion by Baker Sanders pursuant to CPLR 602(a) and (b) to consolidate the Nassau County Action with the Kings County Action. Justice Bucaria further decided that the causes of action set forth in the Kings County Action shall be deemed counterclaims in the Nassau County Action which shall be captioned Baker, Sanders, Barshay, Grossman Fass, Muhlstock & Neuwirth, LLC v. Comprehensive Mental Assessment & Medical Care, P.C., All Mental Care Medicine, P.C., Points Of Health Acupuncture, P.C., Horizon Psychological Services, P.C., Art Of Healing Medicine, P.C., and Lubarsky & Tarnovsky, P.C. Sometime thereafter, the Nassau County Action was transferred to this Court.

As a result of numerous and ongoing discovery disputes between Plaintiff and

[896 N.Y.S.2d 807]

Defendants, on July 23, 2009, Michael Cardello, Esq. was appointed Discovery Referee to oversee all discovery in the Nassau County Action. On or about September 18, 2009, a discovery-related conference was held during which counsel for the parties and the Discovery Referee addressed numerous outstanding discovery issues. While a resolution to numerous discovery-related issues was reached, there was one particular issue that required briefs to be submitted to the Discovery Referee for a determination. That issue involves Baker Sanders' Supplemental Notice of Discovery and Inspection dated September 5, 2008, which requested numerous documents related to the corporate structure of the Pincusovich Defendants [26 Misc.3d 1112] (the “Supplemental Demands”). Specifically, the Supplemental Demands sought the following: (1) for the period January 2001 through the present, originals, if available, and if not, copies of any and all general ledgers maintained for each defendant; (2) for the period of January 2001 through the present, copies of any and all corporate, federal and state tax returns for each defendant; (3) for the period of January 2001 through the present originals, or if no originals are available, copies of all bank statements used in connection with the operation of the defendants' businesses; (4) for the period of January 2001 through the present, copies of all 1099s or W–2s issued to all employees of, or persons or entities providing services to the defendants; (5) for the period of January 2001 through the present, copies of all lease agreements between the defendants and any other person or entities relating to space utilized by the defendants in the operation of their businesses; and (6) for the period of January 2001 through the present, copies of all management agreements between the defendants and any other person or entities relating to the operation of their business.

Counsel for the Pincusovich Defendants has indicated that the documentation sought in the Supplemental Demands are a tactic to divert the focus of the litigation away from the real issues and bury the Pincusovich Defendants in meaningless, irrelevant and protracted discovery. Because counsel for Baker Sanders and the Pincusovich Defendants could not reach a resolution on this issue, the Discovery Referee directed counsel to submit briefs on the issue.

Thereafter, counsel for Baker Sanders and the Pincusovich Defendants entered into a briefing schedule. As such, Baker Sanders served and filed a memorandum of law in support with the Discovery Referee which was followed by the Pincusovich Defendants filing and serving their memorandum of law in opposition and which was then followed by the Plaintiff's Reply. During a Court conference held on November 19, 2009, counsel for the Pincusovich Defendants sought leave of the Court to file a Sur–Reply with regard to the outstanding discovery issue. The application was granted by the Court. However, counsel for Baker Sanders was permitted to file and serve a Supplemental Reply in response to the Sur–Reply.

Although Michael Cardello, Esq. has been appointed to mediate discovery issues in this case, the Court has determined that a formal decision of the Court is warranted. Having considered all the submissions of the Parties and have reviewed the Supplemental Demands, the Court decides the issue as set forth below.

[26 Misc.3d 1113] DISCUSSION BAKER SANDERS' ARGUMENTS

Baker Sanders contends that it is entitled to disclosure of the requested documentation in the Supplemental Demand because it, as a legal malpractice defendant,

[896 N.Y.S.2d 808]

is entitled to defend the claim by challenging the merits of the underlying action. Baker Sanders argues that in an action to recover damages for legal malpractice, a legal malpractice plaintiff must demonstrate that an attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney's breach of this duty proximately caused the legal malpractice plaintiff to sustain actual and ascertainable damages. Baker Sanders goes on to state that to establish causation, a legal malpractice plaintiff must show that he or she would have prevailed in the underlying action or would have not incurred any damages, but for the lawyer's negligence. Therefore, Baker Sanders argues that it is well settled that a legal malpractice defendant can raise the merits of the legal malpractice plaintiff's underlying action.

Mallela Defense ¹

Baker Sanders contends that the Mallela Defense is a complete defense to the Pincusovich Defendants' counterclaim for legal malpractice. See State Farm Mutual Automobile Insurance Co. v. Mallela, 4 N.Y.3d 313, 794 N.Y.S.2d 700, 827 N.E.2d 758 (2005). According to Baker Sanders, the holding in Mallela allows an insurance carrier to look beyond the facially valid professional corporations' structure to determine whether a corporation is owned or controlled by a non-licensed person.

In the instant matter, the Pincusovich Defendants are New York professional corporations which engaged Baker Sanders to bring no-fault claims against various insurance companies for unpaid no-fault insurance claims pursuant to the New York Comprehensive Motor Vehicle Insurance Reparation Act (the “No Fault Law”).

According to Baker Sanders, No Fault Law specifies that “a provider of healthcare services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York.” Baker Sanders also states that in a notice published prior to the effective date of the regulations, the Department of [26 Misc.3d 1114] Insurance stated that the above-stated language has been added to clarify that a healthcare provider must be properly licensed to be eligible for reimbursement under the No Fault Law. Furthermore, New York's Business Corporations Law requires professional healthcare service corporations to be owned and controlled only by individuals who are licensed to practice medicine.

Therefore, it is Baker Sanders' contention that it should be entitled to review documentation that goes to the issue of whether there is a fraudulent corporate structure for the Pincusovich Defendants. Baker Sanders argues that if it could show that the Pincusovich Defendants were never entitled to no-fault recovery of monies because of their fraudulent corporate structure then there can be no basis for a legal malpractice claim against Baker Sanders. Therefore, the documentation requested in the Supplemental Demand is material and necessary to the defense of the legal malpractice claim.

The Independent Contractor Defense

Baker Sanders also sets forth in its moving papers an independent contractor defense to the claim of legal malpractice. According to Baker Sanders, 11 N.Y.C.R.R. § 65–3.11(a) provides that “an insurer shall pay benefits for any elements of loss directly to the applicant or, upon assignment by the applicant, shall pay benefits

[896...