v. Heights Med. Care, P.C.

• Decision Date: 02 August 2016
• Docket Number: 450499/2016
• Citation: 2016 NY Slip Op 51153 (U)
• Parties: In the Matter of the Application of New York City Transit Authority, Petitioner, v. Heights Medical Care, P.C., Respondent.
• Court: New York Supreme Court

2016 NY Slip Op 51153(U)

In the Matter of the Application of New York City Transit Authority, Petitioner, v. Heights Medical Care, P.C., Respondent.

450499/2016

Supreme Court, New York County

Decided on August 2, 2016

Carol R. Edmead, J.

Petitioner, New York City Transit Authority ("NYCTA"), brings this action pursuant to Insurance Law 5106(c) for a judgment, upon de novo review, declaring that Petitioner is not liable for first party no-fault benefits to Jose Vargas ("Vargas") arising from an incident of March 12, 2014, and thereby vacating a no-fault arbitration award exceeding $5,000 in favor of Respondent Heights Medical Care P.C. ("Heights Medical"), to whom benefits were assigned by Vargas. Heights Medical cross-moves for attorneys' fees.

For the reasons below, the Petition is granted and the arbitration award is vacated, and Heights Medical's cross-motion for attorneys' fees is denied.

BACKGROUND FACTS

Vargas was allegedly a passenger on an M116 bus owned by NYCTA on March 12, 2014, when he was injured by an explosion at Park Avenue and 116th Street in New York, New York. Vargas sought medical treatment at the office of Heights Medical. In addition to submitting a notice of no-fault claim to the New York City Comptroller on March 18, 2014, Vargas first sought reimbursement of his claims directly from NYCTA on April 4, 2014 (Pet'r Exh D). NYCTA responded with a "Verification of Facts" for Vargas to complete, including a boilerplate request to provide a copy of the back of the metrocard used on the date of the accident, if any (id. at p. 2). NYCTA sent a second request on May 30, 2014, unaware that Vargas had already mailed a completed Verification of Facts on May 29, 2014 (id.). Vargas's response indicated that he had used a metrocard but, despite the instructions listed on the Verification of Facts, did not include a copy (id.). NYCTA's next communication was on October 24, 2014 and affirmatively requested a copy of the metrocard from Vargas (id. at p. 5). On April 28, 2015, having not received any response, NYCTA issued a general denial of claim, citing Vargas's failure to provide verification (the metro card) within 120 days (Exh 3 at 16).

Sometime thereafter, Vargas assigned his rights to recover the expenses for his medical treatment to Heights Medical (Resp Affirm ¶ 4), which subsequently sought arbitration pursuant to Insurance Law § 5106(b) on October 21, 2014. After a hearing, Arbitrator Charles Sloane (the "Lower Arbitrator") issued a decision on October 31, 2015 (Exh A/Exh 2; the "Lower Award"), finding that Vargas complied with his responsibilities by sending a completed Verification of Facts to NYCTA and that NYCTA did not timely request additional documentation, and awarding Heights Medical $8,729.48 in reimbursement, plus fees and costs.

NYCTA appealed to Master Arbitrator Hon. Alfred J. Weiner (ret.) (the "Master Arbitrator"), who affirmed the Lower Award on January 21, 2016 (Exh 5/Exh B; the "Master Award"). Applying Article 75 standards, the Master Arbitrator found that the lower award was not arbitrary, capricious, or contrary to the law, and awarded additional fees and costs (id.).

In support of its Petition, NYCTA argues that the Court should review the Master Award de novo and enter a judgment declaring that NYCTA is not liable to Heights Medical (or Vargas) for no-fault benefits because Vargas's injuries did not arise from the "use or operation of a motor vehicle" as contemplated by the no-fault law. The Petition is supported by the affidavit of Joan Jones ("Jones"), an NYCTA Claims Examiner assigned to Vargas's claim, which sets forth NYCTA's claims procedure and the basis for the denial of Vargas's claim.

In opposition, and in support of its cross-motion for attorneys' fees, Heights Medical argues: first, that because this Petition constituted a new proceeding, service upon counsel only (without also serving Heights Medical) was improper; second, since NYCTA has conflated the standards for review in this proceeding, this proceeding is limited to CPLR 7511's deferential "arbitrary and capricious" standard and declaratory relief is unavailable to NYCTA; third, that NYCTA's "use or operation" argument cannot be considered by the Court because it is a fact-sensitive argument that was not raised before the Lower Arbitrator, and therefore could not be considered for the first time by the Master Arbitrator or this Court; fourth, that if the Court finds that this matter is one for de novo review, the Court should convert this action pursuant to CPLR 103 and permit respondent to file an answer; fifth, that the application should be dismissed because it excludes Vargas, a necessary party, and because it relies on unreliable evidence and hearsay, including the Jones affidavit; and sixth, that the no-fault regulations pertaining to an appeal of a master arbitrator's decision entitles Heights Medical to recover attorneys' fees.

In reply, NYCTA argues: first, that the Court can properly consider the issues de novo under the applicable regulations, which require the use of the Article 75 special proceeding mechanism, and issue declaratory relief; second, that any procedural defects such as the failure to implead an indispensable party can be remedied without dismissal; third, that NYCTA's "use or operation" argument was raised below and, in any event, is non-precludable; third, that NYCTA properly served Heights Medical via counsel and the Secretary of State and that Heights Medical waived any defects in service by opposing the Petition on its merits; fourth, that NYCTA's use of newspaper articles as evidence is permissible, but Heights Medical's use of hearsay evidence is not; and fifth, that Heights Medical is not entitled to legal fees because its arguments will not prevail or, alternatively, that such an award should be capped at $650.

DISCUSSION

I. Procedural Arguments

a. Service upon counsel

For our courts to obtain jurisdiction, a special proceeding must be commenced through proper filing and service (Vento v All. Holding Companies, Ltd, 139 AD3d 530, 530 [1st Dept 2016], citing Matter of Star Boxing, Inc. v DaimlerChrysler Motors Corp., 17 AD3d 372, 792 NYS2d 564 [2nd Dept 2005] (failure to properly serve notice of petition required dismissal for lack of jurisdiction over respondent)). Notably, CPLR 2001, which allows for correction of technical, non-prejudicial error, does not encompass service errors (Professor Alexander, Practice Commentaries, citing Achtziger v Fuji Copian Corp., 209 AD2d 946, 750 NYS2d 413 [4th Dept 2002] (plaintiff's failure to serve process on defendant precluded court from permitting correction of defendant's name in caption)).

Heights Medical does not, contrary to NYCTA's argument, waive its jurisdictional objections merely by opposing NYCTA's motion or substantive allegations, or by cross-moving for attorneys' fees (Calloway v National Services Industries, Inc., 93 AD2d 734, 735461 NYS2d 280 [1st Dept 1980] (participation in the defense of an action does not waive a defense of lack of personal jurisdiction contained in the answer, the determination of which may be delayed "until the trial itself"); Turkish v Turkish, 126 AD2d 436, 439, 510 NYS2d 582 [1st Dept 1987] (defendant did not waive his objection based on the lack of personal jurisdiction by actively defending on the merits and cross-moving for affirmative relief)).

Additionally, contrary to NYCTA's argument, service of the Petition upon counsel for NYCTA did not confer jurisdiction. While CPLR 2103 allows papers to be served upon a party via that party's attorney, it allows such service only in a "pending action." However, because review of an arbitration award is a "first application arising out of an arbitrable controversy," it must be commenced via the filing of initiating pleadings—in the case of this special proceeding, a petition (CPLR 304; Eagle Ins. Co. v Republic W. Ins. Co., 21 Misc 3d 1121(A) [Sup Ct, Nassau County 2008], citing Star Boxing, Inc. v DaimlerChrysler Motors Corp., 17 AD3d 372 [2d Dept 2005]; accord Vento v All. Holding Companies, Ltd, 139 AD3d 530, 530 [1st Dept 2016]). Pursuant to CPLR 403[c], a notice of petition must be served in the same manner as a summons—service upon a party's attorney alone is not sufficient.

Nevertheless, jurisdiction over Heights Medical was plainly conferred via service upon the Secretary of State—Heights Medical has not disputed that service, or its status as a New York corporation (NYCTA Reply ¶ 22; NYSCEF 26; CPLR 311 [a] [1], citing Business Corporation Law ["BCL"] 306).

b. Indispensable Parties

CPLR 1001(a) provides that "persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants." If a party is not necessary, analysis goes no further; that is, consideration of CPLR 1001(b), whether an action can proceed in that party's absence, is not required (Alexander, Practice Commentaries, CPLR 1001:1). Dismissal should be a last resort (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d 801, 821 [2003]).

An assignor of an insurance policy is not a necessary party to an action to recover under the policy (Bergman v Liverpool & London & Globe Ins. Co., 269 AD 103, 104 [1st Dept 1945]). In situations where a defendant is concerned by another party's rights, that defendant may protect itself by impleading that other party (id.). Moreover, where the valid assignment of a claim is absolute on its face and the assignor is divested of all control and right to the cause of action, the assignee is the proper party in interest and has the right to commence and prosecute an action in its own name without joining the assignor as a necessary party (Cardtronics, LP v St. Nicholas Beverage Discount Ctr., Inc., 8 AD3d 419, 420 [2d Dept 2004]). To the extent that the assignment is unchallenged,...