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Lexington Acupuncture, P.C. v. General Assurance Co.

Supreme Court of New York, Second Department

February 21, 2012

Lexington Acupuncture, P.C. as Assignee of WALTMAN NUNEZ, AUSTIN-RENDY BELLINGER, HORACE GORDON and SHELDON GOODRIDGE, Appellant,
v.
General Assurance Co., Respondent.

PRESENT:: RIOS, J.P., WESTON and GOLIA, JJ

Appeal from an order of the Civil Court of the City of New York, Kings County (Alice Fisher Rubin, J.), entered August 13, 2009. The order granted defendant's motion to strike the notice of trial and compel disclosure to the extent of striking the notice of trial unless plaintiff provided discovery of certain financial documents and thereafter produced its owner, Valentina Anikeyeva, for an examination before trial, and denied plaintiff's cross motion for a protective order and the imposition of sanctions.

ORDERED that the order is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order which granted defendant's motion to strike the notice of trial and compel disclosure to the extent of striking the notice of trial unless plaintiff provided discovery of certain financial documents and thereafter produce its owner, Valentina Anikeyeva, for an examination before trial, and denied plaintiff's cross motion for a protective order and the imposition of sanctions. At issue on this appeal is whether defendant's failure to assert a defense pursuant to State Farm Mut. Auto. Ins. Co. v Mallela (4 N.Y.3d 313');">4 N.Y.3d 313 [2005]) precludes it from seeking discovery related to that defense. We conclude that, based on the record before us, defendant made sufficient allegations of fraudulent incorporation to warrant disclosure.

It is well settled that a party is entitled to full disclosure of all matter that is "material and necessary in the prosecution or defense of an action" (CPLR 3101 [a]). What is "material and necessary" is left to the sound discretion of the court and includes "any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason" (Allen v Crowell-Collier Publ. Co., 21 N.Y.2d 403, 406 [1968]; Young v Tierney, 271 A.D.2d 603 [2000]). Where, as here, an insurer requests discovery concerning a Mallela defense, the request should be granted as long as there are sufficient allegations supporting such a defense (see e.g. Kipor Medicine, P.C. v GEICO, 28 Misc.3d 129 [A], 2010 NY Slip Op 51247[U] [App Term, 2d, 11th & 13th Jud Dists 2010]; Midborough Acupuncture P.C. v State Farm Ins. Co., 13 Misc.3d 58 [App Term, 2d & 11th Jud Dists 2006]; Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc.3d 90 [App Term, 2d & 11th Jud Dists 2006]). A Mallela defense is nonwaivable and may be asserted at any time notwithstanding the absence of a timely denial (see Midwood Acupuncture, P.C. v State Farm Auto. Ins. Co., 14 Misc.3d 131 [A], 2007 NY Slip Op 50052[U] [App Term, 2d & 11th Jud Dists 2007]).

Here, although defendant never moved to amend its answer to assert a defense based on fraudulent incorporation, it asserted sufficient allegations of fraudulent incorporation. Defendant cited to several cases against a different insurer involving corporations purportedly owned by Ms. Anikeyeva. In some of those cases, the defendant insurer had submitted an affidavit from its investigator which was sufficient to entitle the insurer to discovery on the issue of fraudulent incorporation (see e.g. Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc.3d 90). Defendant included, as part of its motion papers, copies of the investigator affidavits from those cases, which set forth Ms. Anikeyeva's close connection with individuals and corporations charged with insurance fraud. Since defendant presented adequate allegations of fraudulent incorporation, the Civil Court did not abuse its discretion in granting those branches of defendant's motion seeking to compel disclosure on that issue and in denying plaintiff's cross motion for a protective order and the imposition of sanctions (see Kipor Medicine, P.C. v GEICO, 28 Misc.3d 129 [A], 2010 NY Slip Op 51247[U]).

Accordingly, the order is affirmed.

Rios, J.P., and Weston, J., concur.

Golia, J., concurs in a separate memorandum.

While I concur in the result and vote to affirm the order, insofar as appealed from, I find it necessary to address additional issues raised herein.

Plaintiff corporation initiated this action seeking to recover first-party no-fault benefits assigned to it by several assignors who allegedly had received acupuncture treatments from plaintiff. While the action initially involved claims stemming from several assignors, the majority of those claims have in some manner been disposed of and the matter now only involves claims seeking benefits from a single assignor, Waltman Nunez.

In response to a notice of trial filed by plaintiff, as assignee of Nunez, defendant moved to strike the notice, alleging that there remained outstanding discovery to which defendant was entitled. Defendant requested that the court compel plaintiff to supply this discovery, which consisted of responses to interrogatories and the production of Valentina Anikeyeva for an examination before trial. Ms. Anikeyeva is the alleged owner of many health care corporations, of which plaintiff is one.

The Civil Court granted defendant's motion to strike the notice of trial and ordered plaintiff to supply the outstanding discovery. Plaintiff contends on appeal that defendant is not entitled to the requested discovery as the information sought is not material or necessary to any of the affirmative defenses pleaded in defendant's answer. I disagree.

The type of information sought by defendant includes copies of plaintiff's corporate tax returns and bank records, rental and billing agreements, and information concerning the corporate form of plaintiff's business and plaintiff's employees and independent contractors. This information is sought because defendant intends to present a defense in this matter based on State Farm Mut. Auto. Ins. Co. v Mallela (4 N.Y.3d 313');">4 N.Y.3d 313 [2005]), alleging that ...


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