[*1]
Teplitsky v Karian
2012 NY Slip Op 52103(U) [37 Misc 3d 1220(A)]
Decided on October 5, 2012
Supreme Court, Nassau County
DeStefano, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected in part through November 16, 2012; it will not be published in the printed Official Reports.


Decided on October 5, 2012
Supreme Court, Nassau County


Ida Teplitsky, both individually and on behalf of the shareholders of PHYSICIAN'S CHOICE, INC., Plaintiff,

against

Stephan Karian and LORI KARIAN, Defendants.



Matter of the Application of IDA TEPLITSKY, Petitioner, For the Judicial Dissolution of PHYSICIAN'S CHOICE, INC.

STEPHAN KARIAN and LORI KARIAN, individually and on behalf of the shareholders of PHYSICIAN'S CHOICE INC., Plaintiffs,

against

IDA TEPLITSKY, Defendant.





014840-10



Attorney for Plaintiff:

PRYOR & MANDELUP, LLP

675 Old Country Road

Westbury, NY 11590

(516) 997-0999

By: Marc A. Stein, Esq.

Attorney for Defendant:

MANGAN GINSBERG, LLP

160 Pearl Stree, Suite 610

New York, NY 10005

(212) 248-2171

By: Michael P. Mangan, Esq.

Vito M. DeStefano, J.



The following papers and the attachments and exhibits thereto have been read on this motion:

Notice of Motion (No.04)1

Affirmation in Support (#04)2

Affirmation in Opposition (#04) and Affirmation in Support (#07)3

Affirmation in Opposition (#04) and Affirmation in Support (#07 & #08)4

Reply Affirmation (#04) and Affirmation in Opposition (#07 & #08)5

Notice of Motion (#06)6

Memorandum of Law in Support (#06)7

Affirmation in Support (#06)8

Sur-Reply Affirmation in Opposition (#06)9

Affirmation in Support (#08)10

Amended Notice of Cross Motion (#07)11

Memorandum of Law in Support (#07 & #08)12

Reply Affirmation in Support (#07 & #08)13

Notice of Cross Motion (#08)14

Reply Affirmation (#08)15

By amended notice of cross motion, Stephan Karian and his wife Lori Karian (the "Karians") move for an order: pursuant to CPLR 2221(d) and (e) renewing and rearguing the court's several orders and directives concerning two motions to quash certain non-party subpoenas and imposing sanctions upon counsel for Ida Tepletsky ("Tepletsky") (Amended Notice of Cross Motion). In another motion, the Karians move for an order pursuant to CPLR 3126 and 22 NYCRR 130-1.1 striking the amended complaint in the derivative action; imposing monetary sanctions for failing to participate in discovery; or compelling Ida and Michael Teplitsky to attend depositions. Teplitsky cross-moves for an order pursuant to 22 NYCRR 130-1.1 imposing sanctions on the Karians for their "patently frivolous" motion to strike and moves, by order to show cause, for an order adjudicating counsel for the Karians (Michael Mangan and Jonathan Ginsberg) in contempt for failing to comply with subpoenas duces tecum served upon them.

Background

The instant three actions, which have been joined for discovery purposes, concern the corporate dissolution and alleged mismanagement of Physician's Choice Inc. ("PC").

In 1996, Stephan Karian and Ida Teplitsky formed PC. Each party invested $5,000 and became a 50% shareholder of PC.[FN1] In May 2010, there was a dispute with respect to PC's management. On June 30, 2010, the Karians commenced a hybrid derivative and dissolution action against Teplitsky in New York County. On August 4, 2010, Teplitsky commenced a dissolution proceeding in Nassau County and a companion derivative action against the Karians for misappropriation of PC funds.

Following the commencement of the actions, a preliminary conference was held, demands for discovery were made, depositions were scheduled, and subpoenas were served.

Teplitsky's Non-Party Subpoena Served upon Counsel for the Karians

Specifically, on March 25, 2011, Teplitsky issued subpoenas duces tecum to opposing counsel Michael Mangan, Jonathan Ginsberg, and Joel Schonfeld. On April 7, 2011, the Karians moved to quash the subpoenas and for a protective order on the grounds that they sought opposing counsel's privileged documents and work product and because Teplitsky did not exhaust her requests to obtain the same material from the parties to the litigation. In opposition to the motion to quash, Teplitsky argued that the Karians did not sustain their burden that the material sought was privileged and, in any event, the privilege, if any, has been waived when opposing counsel (Mangan, Schonfeld and Ginsberg) purportedly represented PC as well.

On July 15, 2011, during oral argument, Judge Warshawsky stated that he was going to "deny the motion to quash the subpoenas" but "not going to allow the subpoenas to go forward in the form" they were in because they were "overly broad" (Ex. "I" to Cross Motion at pp 20, 59-60). Justice Warshawsky concluded the oral argument with a ruling that Karians' motion to quash was denied in part and granted in part insofar as "Mr. Stein [counsel for Teplitsky] is to submit to the Court modified subpoenas pursuant to our subpoena today which would require a narrowing of the scope of the subpoenas, and in different forms, I believe, for the different attorneys" (Ex. "I" to Cross Motion at pp 69-70).

On August 22, 2011, Teplitsky provided new subpoenas duces tecum to the court and [*2][*3]opposing counsel.[FN2] After a lengthy oral argument, the court authorized the new subpoenas to be [*4]served and to be responded to "accordingly" (Ex. "C" to Motion at p 12). Specifically, the court stated to Mr. Mangan, counsel for the Karians:

So, you'll answer these eight points as best you can. I know what your spin is on some of them because of the role you say you did not play and we'll take it from there . . . . If there are any documents you do come across which you believe are privileged, then you have already mentioned you know the appropriate route is a privilege log. And we're not looking for immense problems here. But the privilege log may be a situation which the Court will have to address once it is in receipt of said log (Ex. "C" to Motion at pp 19-20).

Although Judge Warshawsky discussed the use of a privilege log for objections to the documents sought, his direct instructions to counsel were to "send in your stuff or respond in any other way you want to the subpoenas that are being served upon you and Mr. Ginsberg".

On September 12, 2012, Mangan and Ginsberg (counsel for the Karians) separately responded to the subpoenas by letter including specific objections to the subpoena requests (Ex "D" and "E" Order to Show Cause).[FN3]

Karians' Non-Party Subpoenas on Michael Teplitsky

On April 18, 2011, the Karians served four subpoenas duces tecum and a subpoena ad testificandum on Michael Teplitsky and three corporations that are under the Teplitskys' control.[FN4] [*5]On June 11, 2011, Teplitsky moved to quash the April 18 subpoena on the ground, inter alia, that it sought irrelevant material to the litigation and required the production of privileged information.

At oral argument on July 22, 2011, Judge Warshawsky quashed most of the subpoena requests.[FN5]

The Court's Determination


Karians' Cross Motion to Renew and Reargue

and Sanctions against Mr. Mangan (Motion Seq. No. 7)

By amended notice of cross motion, the Karians move for an order pursuant to CPLR [*6]2221(d) and (e) "renewing and rearguing the Court's several orders and directives concerning Karians' motion to quash the Teplitsky non-party subpoenas on opposing counsel in this litigation, including the orders and directives of July 15, July 22, August 18 and August 22, 2011 by quashing the subpoenas and issuing a protective order"; renewing and rearguing the Court's July 22, 2011 order "concerning the Teplitsky motion to quash Karians' non-party subpoenas on Michael Teplitsky and several entities controlled by Michael Teplitsky": and imposing sanctions for "serving frivolous, harassing and abusive subpoenas and for commencing and maintaining a frivolous order to show cause for contempt" (Amended Notice of Cross Motion).

a. Renewal and Reargument of Karians' Motion to Quash

That branch of the Karians' cross motion seeking leave to renew and reargue their prior motion to quash, which was resolved, on the record, in an order dated August 22, 2011 (Warshawsky, J.), is granted and, upon renewal and reargument, the motion to quash is set down for a hearing to aid in the determination thereof. The hearing and the matter are referred to Special Referee Thomas Dana for the purpose of determining the motion and supervising any and all discovery issues arising in this matter (CPLR 3104 [a]).

b. Renewal and Reargument of Teplitsky Motion to Quash

That branch of the Karians' cross motion seeking leave to reargue Teplitsky's prior motion to quash the subpoenas served upon Michael Teplitsky (and three companies purportedly controlled by him), which was resolved, on the record, in an order dated July 22, 2001 (Warshawsky, J.), is denied.

With respect to renewal of Teplitsky's prior motion to quash the subpoena served upon Michael Teplitsky, the court grants leave to renew and, upon renewal, denies that branch of Teplitsky's prior motion to quash concerning any and all documents related to Teplitsky's criminal, civil and disciplinary actions.

At oral argument on the Teplitsky motion to quash, Judge Warshawsky quashed the production of documents relating to any criminal, civil or disciplinary action against Michael Teplitsky stating:

There's no relevancy to anything outstanding in this case. Everything is by speculation. It just doesn't fit anything you have claimed here. Remember, this is a subpoena duces tecum that's to a non-party - although he is as much a part of this as you can possibly know — prior to the completion of the discovery demands and the responses to the discovery demands, pursuant to those responses there, as you pointed out when the issue is joined.

There now arises an issue that would make item three relevant to either the prosecution of a defense or to the prosecution of a claim within the dissolution process. [*7]

You are authorized to renew you application, but as of now, no (Ex. "K" to Cross Motion at p 45).

On October 17, 2011, after oral argument on Teplitsky's motion to quash, the Karians interposed an answer which contained numerous affirmative defenses including one affirmative defense which stated that the damages sustained by Teplitsky were caused by Michael Teplitsky having been convicted of a misdemeanor, disciplined as a doctor, and having his license suspended on two separate occasions (Ex. "O" to Cross Motion).

Given the assertion of this affirmative defense, Karians' motion to renew is granted to the extent Number 3 in the subpoena duces tecum served upon Michael Teplitsky is not quashed and Michael Teplitsky is directed to provide copies of all documents sought in Number 3 of the subpoena.

Teplitsky's Motion for Contempt (Motion Seq. No. 4)

By Order to Show Cause, Teplitsky seeks an order adjudicating opposing counsel (Mangan and Ginsberg) in contempt for failing to comply with subpoenas duces tecum served upon them on August 22, 2011. The motion for contempt is denied in light of all the circumstances of this case and considering that the court has granted renewal and reargument of the Karians' motion to quash the subpoenas served upon opposing counsel.

Karians' Motion to Strike and for Sanctions (Motion Seq No. 6)

and Teplitsky's Cross Motion for Sanctions (Motion Seq No. 8)

On February 24, 2012, Karians moved for an order pursuant to CPLR 3126 and 22 NYCRR 130-1.1: to strike Teplitsky's amended complaint in the derivative action because the Teplitskys failed to proceed with depositions; impose monetary sanctions for failing to participate in discovery; or compel Ida and Michael Teplitsky to attend depositions. On April 25, 2012, Teplitsky cross-moved for an order pursuant to 22 NYCRR 130-1.1 imposing sanctions on the Karians for their "patently frivolous" motion to strike.

The motion to strike and cross motion for sanctions are denied.

Pursuant to CPLR 3126, "if any party . . . refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed pursuant to this article, the court may make such orders with regard to the failure or refusal as are just, among them . . . an order striking out pleadings . . . ."

A review of the record before the court indicates a history of repeated attempts to schedule the depositions of Ida and Michael Teplitsky. The court notes that the conduct of both parties contributed to the difficulty in scheduling and conducting the Teplitskys' depositions. The court further notes that since the instant motion was served, the depositions of the Teplitskys (the failure of which is the subject of the motion to strike), have been completed. Accordingly, [*8]as a matter of discretion, the Karians' motion to strike the amended complaint is hereby denied.

With respect to the branches of the motion and cross motion seeking the imposition of sanctions, the court determines that sanctions are not warranted under the circumstances.



Conclusion

Based on the foregoing, it is hereby

Ordered that the motion for an order adjudicating Michael Mangan and Jonathan Ginsberg in contempt (motion sequence # 4) is denied; and it is further

Ordered that the branch of the cross motion to renew and reargue (motion sequence # 7) Karians' prior motion to quash the non-party subpoenas served upon opposing counsel is granted and, upon renewal and reargument, the motion is set down for a hearing to aid in determination thereof; the hearing and the matter are referred to Special Referee Thomas Dana (Lower Level) for the purpose of determining the motion and supervising any and all discovery issues in this matter (CPLR 3104 [a]). Counsel for the parties are directed to contact Special Referee Dana within three days of the date hereof for the purpose of selecting a date to conference with him; upon selection of the date, counsel shall immediately notify the Court of the scheduled conference date; and it is further

Ordered that the branch of the cross motion to reargue (motion sequence # 7) Teplitsky's prior motion to quash the subpoena duces tecum served upon Michael Teplitsky, is denied; and it is further

Ordered that the branch of the cross motion to renew (motion sequence # 7) Teplitsky's prior motion to quash the subpoena duces tecum served upon Michael Teplitsky, is granted and, upon renewal, is denied to the extent the subpoena sought the production of documents set forth in demand # 3 of the subpoena; and it is further

Ordered that the branch of the motion to strike (motion sequence # 6) is denied; and it is further

Ordered that the branches of the motion (motion sequence # 6) and cross motions (motion sequences # 7, # 8) seeking the imposition of sanctions pursuant to 22 NYCRR 130-1.1 are denied.

This constitutes the decision and order of the court.

Dated: October 5, 2012 [*9]

_____________________________

Hon. Vito M. DeStefano, J.S.C..

Footnotes


Footnote 1: Stephan Karian and his wife, Lori, are 50% owners as tenants by the entirety.

Footnote 2: The amended subpoenas sought the following:

1. Any and all documents in your possession, custody, or control, including but not limited to, correspondence, e-mails, and memoranda, that were shared with Kevin Helmich, Esq. by any person, concerning, referring, or related to the May 2010 meetings of the shareholders and the Board of Directors of Physicians Choice, Inc. ("PCI");

2. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to any subject matter contained in any document that was shared with Kevin Helmich, Esq., including, but not limited to:

(a) Documents concerning, referring, or related to the May 2010 meetings of the shareholders and the Board of Directors of Physician's Choice, Inc.;

(b) Documents concerning, referring, or related to a dispute amongst the shareholders of PCI prior to the May 2010 meetings of the shareholders and the Board of Directors of PCI;

(c) Documents concerning, referring, or related to salaries for or salary payment to the officers and directors of PCI, including, but not limited to, Stephan Karian;

(d) Documents concerning, referring, or related to the minutes for any and all shareholders meetings or meetings of the Board of Directors of PCI;

(e) Documents concerning, referring, or related to distributions paid by PCI, including, but not limited to, documents referencing distributions that were not made equally amongst PCI's ownership, and documents referencing the propriety of such distributions, or referencing any advice given by Kevin Helmich, Esq., regarding the propriety of such distributions;

(f) Documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to the authority of the President of PCI; and

3. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to the Summons with Notice, dated June 30, 2010, and the amended Summons With Notice, dated July 9, 2010, filed in the action entitled Karian and Physician's Choice, Inc. v Teplitsky et al., New York County Index No. 150144/2010, including, but not limited to discussions regarding potential claims against Ida Teplitsky or Dr. Michael Teplitsky, or any potential liability to Ida Teplitsky or Dr. Michael Teplitsky;

4. Any and all documents, including but not limited to correspondence and e-mails, concerning, referring, or related to the transfer of any asset or property from Physician's Choice, Inc., to Stephan Karian, Lori Karian, Dr Marketing, Inc., Great American Products, Inc., Customer Care, Inc. or any person or entity owning property at which Physician's Choice, Inc. rented space;

5. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to the sharing of information with Ida Teplitsky or Dr. Michael Teplitsky, including, but not limited to, documents referencing PCI's response to corporate books and records requests made by Ida Teplitsky;

6. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to responses to requests made to PCI by Marc A. Stein, Esq.;

7. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to analysis of decisions rendered by Hon. Ira B. Warshawsky in the above captioned matters, that were shared with or received from Kevin Helmich, Esq., or any other person other than Stephan Karian or Lori Karian; and

8. Any and all documents, including but not limited to correspondence, e-mails, and memoranda, concerning, referring, or related to communications with Stephan Karian as President of PCI.

Footnote 3: The numerous reasons set forth in the letters were, for the most part, previously discussed at oral argument.

Footnote 4: The subpoenas served on Michael Teplitsky were for the following documents:

1. Copies of all documents in your possession, custody or control regarding the operation, management, revenues, and relationship to Physician's choice of the following entities: (I) Choice Physician P.C., (ii) MT Consulting Group Inc., and (iii) D & J Medical Management & Billing Inc.;

2 Copies of all documents, correspondences (including correspondences with counsel, co-defendants, or any other person), emails, notes, invoices, contracts, calendars or any other document or recording in your possession, custody or control regarding the action venued in the Northern District of Florida, captioned Federal Trade Commission v Great American Products, Inc. et al., Index No. 05 CV 0170;

3. Copies of all documents in your possession, custody or control regarding any criminal, disciplinary or civil action against you, Dr. Michael J. Teplitsky (a/k/a Michael Teplitsky, M.D.) based on allegations of professional misconduct, criminal misconduct, initiated by a patient, former patient, People of New York (through any district attorney's office) or the NY State Board for Professional Medical Conduct, and any determination, finding, plea, conviction, or verdict determining that you have violated of New York State Public Health Law, Professional Medical Misconduct, generally accepted standards of medical practice, medical malpractice, medical negligence, medical misconduct, or New York State Penal Law;

4. Copies of all documents in your possession, custody or control, regarding any audit, investigation, inquiry or legal action taken by the Internal Residence Service, the New York State Department of Taxation and Finance, and/or any local tax authority, into regarding an amount paid to you, to any entity owned or controlled by you, including, Physician P.C., MT Consulting Group Inc., D & J Medical Management & Billing Inc., by Physician's Choice Inc. Between 2003 and 2010;

5. Copies of all correspondences and other documents in your possession custody or control, including all correspondence between you, Ida Teplitsky, Marc Stein, Esq., Pryor & Mandelup LLP, and any other lawyer, accountant or professional organization between August 30, 2004 and July 20, 2010, regarding Ida Teplitsky's ownership of, duties to, receipt of payment from, correspondence with, and/or claims against, Physician Choice Inc., Stephan Karian and Lori Karian.

Footnote 5: Tepletsky's motion to quash the subpoena served upon Michael Teplitsky was granted as to paragraphs 1, 3 and 4, denied as to paragraph 2, and granted in part and denied in part as to paragraph 5.Tepletsky's motion to quash the subpoenas served upon MT Consulting Group, Inc., D & J Medical Management and Billing, Inc., and Choice Physician, P.C., was granted.