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

Notice of Motion1

Reply Affirmation and Opposition to Cross Motion2

Notice of Motion3

Reply Affirmation and Opposition to Cross Motion4

Notice of Motion5

Memorandum of Law in Support6

Reply Memorandum of Law7

Notice of Cross Motion8

Memorandum of Law in Support of Cross Motion

and in Opposition to Defendants' Motions9

Affirmation in Opposition to Cross Motion10

Introduction

Motion [Seq. 002] by defendant, Kevin J. Curley, Jr., M.D., for an Order, inter alia, pursuant to CPLR 3211(a)(7), dismissing the plaintiff's verified complaint insofar as asserted against him, is granted.

Motion [Seq. 003] by defendant, Damion A. Martins, M.D., for an Order, inter alia, pursuant to CPLR 3211(a)(7), dismissing the plaintiff's verified complaint insofar as asserted [*2]against him, is granted.

Motion [Seq. 005] by defendants, Andrew N. Bazos, M.D., Dante Brittis, M.D., Joseph C. Cole, M.D., Vinay B. Das, M.D., Isandr Dumesh, M.D., Dominick Garofalo, D.C., Terence McAlarney, M.D., Michael Russ, M.D., Tatiana Sharahy, M.D., Robert A. Sohn, D.C., Renat Sukhov, M.D., Edward Weiland, M.D., and Alan P. Wolf, M.D. (collectively referred to herein as the "Bazos Defendants"), for an Order, inter alia, pursuant to CPLR 3211(a)(7), dismissing the plaintiff's complaint insofar as asserted against them, and pursuant to 22 NYCRR §130.1-1, for an Order awarding them monetary sanctions, and attorneys' fees and costs, is granted in part and denied in part.

Cross motion by plaintiff, Andrew N. Carothers, M.D., P.C., for an Order, pursuant to CPLR 2201, granting a stay of the action pending a decision by the Appellate Term, Second Judicial Department, on the appeal of the jury verdict in In re Andrew N. Carothers, M.D., P.C. v. Insurance Cos. Represented by Bruno Gerbino & Soriano, LLP, 26 Misc 3d 448 [Civil Ct. Richmond County, October 14, 2009], is denied as academic.

Factual and Procedural Background

This action arises out of plaintiff's claim that the defendants improperly prepared peer review reports that were relied upon by insurance carriers in wrongly denying the Plaintiff reimbursement of no-fault benefits which had been assigned to it.

Inasmuch as a motion made pursuant to CPLR 3211 requires this Court to accept as true the allegations in the complaint (Guggenheimer v. Ginzburg, 43 NY2d 268, 275 [1977]), the underlying facts are as follows:

Plaintiff, Andrew Carothers, M.D., P.C. ("Carothers PC"), a professional corporation, owned by Andrew Carothers, M.D.^[FN1] formerly incorporated, infra, in the State of New York, provided radiology or magnetic resource imaging (MRI) services to motor vehicle accident victims under the No-Fault Law of this State (Verified Complaint, ¶44). The injured insureds, as assignors, duly assigned their rights to receive No-Fault benefits under New York's No-Fault law to the plaintiff. Such assignment provided the plaintiff, as the assignee, the right to seek reimbursement for No-Fault claims directly from the insurance companies. The plaintiff performed and provided MRIs to injured insureds who had been referred to it by physicians and other medical professionals who it believed had duly evaluated the medical history and physical condition of those individuals prior to referring them to the plaintiff (Verified Complaint, ¶60).

The plaintiff submitted No-Fault claims to various insurance companies for reimbursement. Plaintiff alleges that with respect to the vast majority of claims it submitted to [*3]the insurance companies, the insurance companies invoked their right to verify the claims by either hiring the defendants directly or by retaining service companies that employed or contracted with the defendants in order to provide peer reviews (Verified Complaint, ¶50).

The defendants herein prepared peer review reports consisting of an evaluation in which practicing physicians or healthcare professionals assessed the appropriateness of the medical services and/or treatment provided to an injured insured by another physician or healthcare professional (Verified Complaint, ¶40). Plaintiff claims that peer reviews are based upon the review of records of an injured insured's medical history and are not based upon any actual physical examination of the injured insured (Id. at ¶41). In any event, the various insurance companies used said reports as the basis to deny claims for reimbursements of No-Fault benefits to the plaintiff.

In addition to not conducting physical examinations, the plaintiff alleges that the defendants also failed to conduct truly independent and honest assessments of the conditions and medical needs of the injured insureds. Consequently, the plaintiff claims that the peer review reports that the defendants prepared are patently defective, reached invalid medical conclusions and lacked any legitimate use (Verified Complaint, ¶62).

Additionally, plaintiff claims that the insurance companies employed and/or paid the defendants to perform the peer reviews and that the defendants, in order to aid the insurance companies, provided a fraudulent basis for the refusal to pay millions of dollars worth of claims for No-Fault reimbursement to the plaintiff. According to the plaintiff, the defendants were fully aware that if they wished to continue to receive and get paid for peer review work, they were obliged to furnish the insurance companies with peer reviews that provided a basis to deny claims for No-Fault reimbursement (Verified Complaint, ¶52). Plaintiff alleges that the defendants were aware that a peer review finding of lack of medical necessity would cause an insurance company to deny plaintiff's claim for No-Fault reimbursement (Verified Complaint, ¶56).

Plaintiff claims that it relied on the defendants to conduct fair, accurate and unbiased evaluations of its claims for no-fault reimbursement throughout the verification process in accordance with their best medical judgment, ethical obligations as physicians, and with proper consideration of the medical needs of the injured insureds (Verified Complaint, ¶54). According to the plaintiff, the defendants knowingly prepared peer review reports that misrepresented the medical necessity of treatment provided to the injured insureds and that the defendants prepared such false reports strictly for their own pecuniary interests (Verified Complaint, ¶57).

Plaintiff's complaint rests upon allegations that the defendants' conduct was improper, unlawful and fraudulent and directly contradicted their ethical duties and obligations as licensed physicians in the State of New York. Further, as a result of their allegedly improper, unlawful and fraudulent conduct, the No-Fault system, which is designed to encourage physicians and other healthcare providers to promptly provide necessary medical services to injured insureds by [*4]ensuring timely payment for the losses incurred without regard to fault or negligence, has been chilled. Plaintiff's complaint seeks: (1) a declaratory judgment; (2) damages for breach of contract; (3) damages for fraudulent misrepresentation; and (4) damages for unjust enrichment.

The court notes a prior action commenced by the plaintiff at bar in the Civil Court of the State of New York, County of Richmond, entitled In re Andrew N. Carothers, M.D., P.C. v. Insurance Cos. Represented by Bruno Gerbino & Soriano, LLP, 26 Misc 3d 448 [Civil Ct. Richmond County, October 14, 2009] (hereinafter referred to as the "Richmond County Action"). Said action was based upon claims that Dr. Carothers, through the plaintiff, Carothers PC, which owned and operated MRI clinics, had a substantial practice dealing with no-fault patients and providing them with MRIs. As required, when an insurer would deny payment for MRIs done at Carothers PC, Carothers PC would, through counsel, commence litigation in order to collect on the outstanding claims. Insurers began to routinely deny plaintiff's claims for no-fault reimbursement alleging that it was fraudulently incorporated. Eventually, the individual claims/suits were consolidated for trial in the Richmond County Action on the issue of whether the insurance carriers could withhold no-fault reimbursement payments for medical services provided by allegedly fraudulently incorporated enterprises to which insureds had assigned their claims. Notably, this precise issue was dealt by the Court of Appeals in State Farm Mutual Automobile Insurance Company v. Mallela, 4 NY3d 313 [2005].^[FN2]

In the Richmond County Action, the jury found that the plaintiff herein, Carothers PC, and Dr. Carothers were in violation of Mallela and that Dr. Carothers was not engaged in the practice of medicine through Carothers PC as required by New York State law.

Subsequently, a Notice of Appeal was filed and the jury determination in the Richmond County Action was appealed to the Appellate Term, Second Department.

The documentary evidence submitted herein confirms that by proclamation of the New York State Department of State dated January 26, 2011, the plaintiff, Carothers PC, has been dissolved. Further, by Order of the New York State Department of Health on February 1, 2010, Andrew Carothers, M.D.'s medical license was suspended after being found guilty of professional misconduct.

Defendants, Kevin J. Curley, Jr., M.D. and Damion A. Martins, M.D. ("Martins"), together with the Bazos Defendants, seek to dismiss the plaintiff's complaint in its entirety on the [*5]following grounds: plaintiff fails to state a cause of action; plaintiff has failed to join necessary parties; and, under the doctrines of res judicata and collateral estoppel, plaintiff is precluded from re-litigating the issues clearly raised in the prior action or proceeding. In addition, defendant Martins argues that the action should be dismissed because of plaintiff's lack of standing pursuant to NYCRR §65-3.16(a)(12); and, plaintiff lacks the capacity to bring a declaratory cause of action. The Bazos Defendants additionally seek monetary sanctions including attorneys' fees and costs.

Plaintiff opposes the separate motions and cross-moves for an Order staying this action pending a decision by the Appellate Term, Second Judicial Department on the appeal of the jury verdict in the Richmond County Action. It is noted, however, that during the pendency of this motion, the Appellate Term affirmed the judgment in the Richmond County Action in a decision dated July 5, 2013.^[FN3]

The Court's Determination

The foregoing factual and procedural recitation establishes that the plaintiff, in bringing the within action, is attempting, without legal basis, to improperly enlarge the potential "pool" of defendants in connection with unpaid no-fault benefits and to circumvent the rule set forth in Mallela. In this regard, none of the causes of action set forth in the complaint state a cause of action: there is simply no contractual, common law or statutory duty owed by the defendants to the plaintiff, and, therefore, there is no breach upon which liability can be predicated in favor of the plaintiff and against the defendants. Moreover, the complaint does not set forth a valid causal connection between the alleged wrongdoing by the defendants and any damages Plaintiff suffered by virtue of the allegedly improper denial of no-fault benefits. Significantly, even assuming that the court could disregard the deficiencies in the complaint, the finding by the jury in the Richmond County Action, and as affirmed by the Appellate Term, that the plaintiff was fraudulently incorporated, negates the existence of any causal connection between the alleged wrongdoing by the defendants herein and the damages suffered by the plaintiff (see Gilberg v. Barbieri, 53 NY2d 285 [1981]). Indeed, the Plaintiff was denied reimbursement of no-fault benefits not because of any wrongdoing by the defendants but because it was fraudulently incorporated.

Plaintiff's arguments to the contrary, and otherwise in opposition to the motion, have been considered and are completely devoid of merit (see Kaufman v. Eli Lilly & Co, supra; Breslin Realty Dev. Corp. v. Shaw, 72 AD3d 258, 263 [2d Dept. 2010] Smith v. AJ Contracting Co., Inc., 277 AD2d 305, 307 [2d Dept. 2000] Golding v. Dowling, 242 AD2d 601, 602 [2d Dept. 1997] Anonymous v. Dobbs Ferry Union Free School District, 19 AD3d 522 [2d Dept. 2005]).

Accordingly, it is ordered that the complaint is dismissed pursuant to CPLR 3211(a)(7). [*6]

To the extent that the Bazos Defendants seek sanctions, etc. pursuant to 22 NYCRR §130-1.1, it is ordered that that branch of the motion is denied, as a matter of discretion (Wagner v. Goldberg, 293 AD2d 527 [2d Dept. 2002]).

It is further ordered that plaintiff's cross motion, pursuant to CPLR 2201, seeking a stay of the action pending a decision by the Second Department on the appeal of the Richmond County Action is denied as academic.

In view of the foregoing, the parties' remaining contentions have been considered and do not warrant additional discussion.

The court granted defendants' motion to dismiss on the basis that the complaint failed to state a cause of action in that there was no contractual, common law or statutory duty owed by the defendants to the plaintiff. Moreover, a jury verdict in a Richmond County Civil Court action between plaintiff and the insurance carriers finding that the plaintiff was not engaged in the practice of medicine in violation of Mallela, severed any causal connection that might exist between defendants' alleged wrongdoing and the damages suffered by plaintiff by virtue of the allegedly improper denial of no-fault benefits.

This constitutes the decision and order of this Court.

DATE: January 7, 2014

____________________________________

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