Long Island Minimally Invasive Surgery, P.C. v. Orslini (In re Orslini)
| Decision Date | 30 January 2023 |
| Docket Number | 21-71374-reg,Adv. Pro. 21-8146-reg |
| Parties | In re: LISA ORSLINI, Debtor. v. LISA ORSLINI, Defendant. LONG ISLAND MINIMALLY INVASIVE SURGERY, P.C. d/b/a NEW YORK BARIATRIC GROUP, Plaintiff, |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
DECISION AFTER TRIAL
Before the Court is an adversary proceeding commenced by Long Island Minimally Invasive Surgery P.C. d/b/a New York Bariatric Group (the "Plaintiff") seeking a determination that the Plaintiff's $54,128.60 claim against the Debtor/Defendant, Lisa Orslini (the "Debtor" or "Defendant") is non-dischargeable under 11 U.S.C §§ 523(a)(2), (4), and (6).
The Plaintiff provided a variety of elective surgical procedures to the Debtor pre-petition. The Plaintiff did not require advance payment from the Debtor based on the Debtor's agreement to remit to the Plaintiff the value of all reimbursements she received from her insurance i.e., the Debtor agreed to either turn over the insurance checks or pay the Plaintiff the value of the checks. However, the Debtor failed to turn over the insurance checks or their value as per her agreement. Despite attempts by the Plaintiff to get paid, the Debtor failed to pay for the services she requested and received. Simply put, the Debtor sought services from the Plaintiff, the Plaintiff provided those services, the Debtor received insurance benefits to pay for those services and the Debtor then failed to pay despite her agreement to do so. Having failed to turn over the insurance proceeds to the Plaintiff, the Debtor ended up profiting from this scheme and offered no explanation for her actions.
The Plaintiff's claim in this case is based on a state court default judgment against the Debtor in the amount of $54,128.60 for breach of contract and conversion. The Plaintiff relies in part on the collateral estoppel effect of the default judgment and that court's decision finding that the Plaintiff had proven its asserted claims, including the claim for conversion. The Plaintiff also argues that the facts established in the trial of this § 523 case show that the Debtor fraudulently induced the Plaintiff to perform elective medical procedures for her based on the Debtor's agreement that she would turn over to the Plaintiff all insurance reimbursement checks, or their value.
The Debtor, who was present for the trial, did not avail herself of the opportunity to testify or offer any evidence refuting the Plaintiff's allegations, leaving the record barren of any credible defense to the allegations set forth in the complaint which were supported by testimony of the Plaintiff's witness. The Debtor argues in her post-trial memorandum that Plaintiff failed to establish it was the Debtor's intent to harm the Plaintiff in any way that would give rise to non-dischargeability under §§ 523(a)(2), (4), or (6). And, even if the Debtor did receive and convert the insurance proceeds with the requisite intent she argues that the checks only account for $2,830.70 of the total judgment and non-dischargeability should be limited to that amount.
For the reasons that follow, the Court finds that the Plaintiff's claim is non-dischargeable pursuant to 11 U.S.C. §§ 523(a)(2), (4), and (6).
The Plaintiff is a surgical center that performed a series of elective procedures on the Debtor between January 2006 and March 2018. Def's Aff. in Opp. to Mot. for Default J., ECF No. 13, ¶5[1]. The doctor(s) at the Plaintiff's practice who performed these services did not accept the Debtor's insurance plan and as such the Plaintiff was an "out-of-network" provider. Transcript of Oct. 11, 2022 Trial ("Tr."), at 48-49. As an out-of-network provider, it was the Plaintiff's practice not to require up-front payment from patients, including the Debtor. Id. at 69. The Plaintiff, as per its agreement with the Debtor, submitted invoices for the costs of the procedure to the Debtor's insurance company. Id. at 15. The Plaintiff had no contractual relationship with the insurance company, and so all payments by the insurance company for procedures performed on the Debtor were sent directly to the Debtor. Id. at 14. Although the amount reimbursed by the insurance company was significantly less than the full amount invoiced by the Plaintiff for any given procedure, the Plaintiff agreed to accept the amount of the insurance reimbursement as payment in full for its services as long as the Debtor as per her agreement forwarded all insurance checks or their value to the Plaintiff, along with any out-of-pocket costs such as co-payments and/or deductibles pursuant to the terms of the Debtor's insurance policy. Id. at 26. Under this agreement the Debtor would not be liable for the difference between the insurance reimbursement and the invoiced amount. Id. at 26. However, if the Debtor breached the agreement by failing to turn over an insurance reimbursement or its value, then she would be liable for the full invoiced amount. Id. at 26-27.
From January 2006 to June 2013, the Debtor honored her obligations to the Plaintiff regarding payment and turnover of insurance checks. Aff. in Supp. of Mot. to Strike Def.'s Answer and for Entry of a Default J., ECF No. 11, at 3, ¶ 4; Def's Aff. in Opp. to Mot. for Default J., ECF No. 13, ¶5. In August of 2014, following a brief hiatus in treatments, the Debtor signed two documents: an Assignment of Insurance Benefits and Right of Recovery Form ("Assignment of Benefits") (Pl.'s Ex 1), and an Out-of-Network Payment Agreement ("Payment Agreement") (Pl.'s Ex. 2). Pursuant to the Assignment of Benefits, the Debtor assigned to the Plaintiff "all rights, title and interest" in benefits payable for services rendered by the Plaintiff.[2]Pl.'s Ex. 1. The Debtor also agreed to pay the Plaintiff "for all charges incurred or alternatively, for all charges excess of the sums actually paid pursuant to said policies or plans". Id. The Payment Agreement provided that the Debtor's failure to forward insurance checks to the Plaintiff would result in the Debtor becoming liable for the "full amount charged for [her] surgery, plus the cost of legal fees, legal costs, and disbursements, with no courtesy discount." Pl.'s Ex. 2.
On August 22, 2014, the Plaintiff performed medical services for the Debtor. Pl.'s Ex. 3. On September 4, 5 and 6, 2014, the Plaintiff performed a three-day sleep study on the Debtor. Id. From August 3 through November 9, 2015, the Plaintiff performed various other medical services for the Debtor. Id. Finally, the Plaintiff treated the Debtor on March 16, 2018. Id. The Plaintiff alleged in state court, and alleges here, that it billed the Debtor's insurance company for services provided to the Debtor; the insurance company issued several checks to the Debtor totaling $2,838.70 as payment for said services; the Debtor failed to forward the checks to the Plaintiff; and the Plaintiff did not receive payment for its services. Def.'s Ex. C.[3] Upon her failure to turn over the insurance checks or their value to the Plaintiff, invoices were issued to the Debtor for the full amount of these services, $36,975.69, which the Debtor did not pay.[4] Pl.'s Ex. 3.
On August 24, 2018, the Plaintiff filed a Verified Complaint in New York State Supreme Court Nassau County asserting causes of action against the Debtor for breach of contract, account stated, and conversion, and alleging damages of $36,150.30 from unpaid invoices ("State Court Complaint"). Def.'s Ex. C. The State Court Complaint alleged the Debtor's insurance company "delivered, in total $2,838.70[5] via multiple checks, to the Debtor to cover a portion of the Plaintiff's charges." State Court Compl. ¶ 20. It also alleges:
State Court Compl. ¶¶ 21-23.
Although the Debtor did appear and file an answer in the state court case, she failed to appear for preliminary conferences which prompted a motion for default judgment by the Plaintiff. On October 25, 2019, the state court issued a written opinion granting the Plaintiff's motion for default judgment (Def.'s Ex. E, Short Form Order, dated October 25, 2019), and on November 18, 2019, default judgment was entered against the Debtor in the amount of $54,128.60, which included damages of $36,966.53, plus costs of $454.50, interest of $10,482.57, and fees of $6,225 ("Judgment"). Pl.'s Ex. 4. The state court found that "the Plaintiff prove[d] its claims in the affidavit of Jacqueline Spina, Billing Manager for the Plaintiff, and the supporting exhibits." Def.'s Ex. E, Short Form Order at 4.
On July 29, 2021, the Debtor filed a petition for relief under chapter 7 of the Bankruptcy Code. The Debtor scheduled an unsecured obligation to the Plaintiff in the amount of $36,966.53. Case No. 21-71374, ECF No. 1, Sch. E/F.
On September 27, 2021, the Plaintiff commenced this adversary proceeding alleging that the full amount of the Judgment debt is non-dischargeable under 11 U.S.C.§§ 523(a)(2) (4), and (6). ECF No. 1. On October 26, 2021, the Debtor filed an Answer. ECF No. 4. The parties filed separate...
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