Supreme Court, Greene County, July 17, 2019

Freeman Howard, P.C., Hudson (Paul M. Freeman of counsel), for defendant.

FitzGerald Morris Baker Firth, P.C., Glens Falls (John D. Aspland, Jr., of counsel), for plaintiff.

In July 2014, defendant, currently a Florida resident, sold his New York-based medical practice, and certain assets associated therewith, to plaintiff. Defendant continued to work with the practice during the transition and then worked remotely from Florida as an independent contractor. During the time defendant was an independent contractor, plaintiff paid defendant's malpractice premiums. Due to the demutualization of defendant's malpractice insurance provider, Medical Liability Mutual Insurance Company (hereinafter MLMIC), defendant [*2]received a payment of nearly double the amount of three years' worth of premium payments in exchange for his ownership interest in that company. Plaintiff is suing defendant, alleging that defendant has become unjustly enriched through receipt of these proceeds. Plaintiff paid the premiums during part of the relevant period and believes it has an equitable claim to the distribution. Before the court is defendant's motion to dismiss for lack of personal jurisdiction and plaintiff's cross motion for summary judgment based on an alleged agreement between the parties regarding distribution of the funds.

Defendant brings a motion to dismiss pursuant to CPLR 3211 (a) (8). Defendant asserts that he lives in Florida, has a Florida driver's license and is registered to vote in Florida. Further, he has owned no real property in New York since July 2014, the time of the sale of his practice to plaintiff. Therefore, defendant asserts this court has no personal jurisdiction over him as he is a nonresident and there is an insufficient nexus between his former contacts and the current claim. Plaintiff asserts that defendant negotiated the sale of his practice while in New York and, even after leaving the state, functioned as a New York licensed physician providing care to New York patients; therefore, defendant purposefully availed himself of the New York market and protections of its laws and is thus rightfully within the jurisdiction of this court.

CPLR 3211 (a) (8) permits the court to dismiss an action for lack of personal jurisdiction (see Uzan v Telsim Mobil Telekomunikasyon Hizmetleri A.S., 51 AD3d 476, 478 [1st Dept 2008]; Amodeo v Star Mfg. Co., 88 AD2d 1081, 1082 [3d Dept 1982]). "A plaintiff bears the ultimate burden of proof as the party seeking to assert personal jurisdiction" (Gottlieb v Merrigan, {**65 Misc 3d at 257} 170 AD3d 1316, 1317 [3d Dept 2019] [citations omitted], lv denied 33 NY3d 908 [2019]). "Such burden, however, does not entail making a prima facie showing of personal jurisdiction; rather, plaintiff need only demonstrate that it made a sufficient start to warrant further discovery" (Bunkoff Gen. Contrs. v State Auto. Mut. Ins. Co., 296 AD2d 699, 700 [3d Dept 2002] [internal quotation marks and citations omitted]; see Urfirer v SB Bldrs., LLC, 95 AD3d 1616, 1618 [3d Dept 2012]).

"[A] court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent . . . transacts any business within the state" (CPLR 302 [a] [1]). CPLR 302 (a) (1) jurisdiction is proper "even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Deutsche Bank Sec., Inc. v Montana Bd. of Invs., 7 NY3d 65, 71 [2006], quoting Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 [1988]).

"In determining whether jurisdiction exists, the court must conduct a twofold inquiry. First, the defendant must have purposefully availed itself of the privilege of conducting activities within the forum state by either transacting business in New York or contracting to supply services in New York and second, the claim must arise from that business transaction or from the contract to supply services" (Gottlieb v Merrigan, 170 AD3d at 1317 [internal quotation marks, ellipses, brackets and citations omitted]; see Andrew Greenberg, Inc. v Sirtech Can., Ltd., 79 AD3d 1419, 1420 [3d Dept 2010]).

"As a broad generalization, a nondomiciliary who enters New York's service economy pursuant to a contract is more likely to be deemed to be transacting business in New York than is one who performs services out of State for New York residents on a random basis" (McLenithan v Bennington Community Health Plan, 223 AD2d 777, 778 [3d Dept 1996], lv dismissed 88 NY2d 1017 [1996]).

Education Law § 6542 requires that physician assistants perform medical services under [*3]the management of a supervising physician (see also 10 NYCRR 94.1 [d] [requiring the supervising physician to be New York licensed]). 10 NYCRR 94.2 (f) imposes upon a physician medical responsibility for medical services performed by a licensed physician assistant{**65 Misc 3d at 258} whom such physician supervises. Similarly, Education Law § 6902 requires nurse practitioners to work with a collaborating physician, though they are independently responsible for the care of their patients. 8 NYCRR 64.5 (g) (1) (i) states that

"[c]ollaborative relationships shall mean that a nurse practitioner communicates, in person, by telephone, or through written means including electronically, with a physician who is qualified to collaborate in the specialty involved, or in the case of a hospital, the nurse practitioner communicates with a physician qualified to collaborate in the specialty involved and who has privileges at such hospital, for the purposes of exchanging information, as needed, in order to provide comprehensive patient care and to make referrals, as necessary" (see also 8 NYCRR 64.5 [g] [1] [ii] ["Physician shall mean a New York State licensed and registered physician"]).

As further relevant here, supervision of physician assistants and collaborating with nurse practitioners gives rise to potential liability (see Ruggiero v Miles, 125 AD3d 1216, 1217 [3d Dept 2015]; Vaccaro v St. Vincent's Med. Ctr., 71 AD3d 1000, 1002 [2d Dept 2010]; Gaspari v Sadeh, 61 AD3d 405, 406 [1st Dept 2009]; see also Conrad v Child's Hosp., 174 AD2d 952, 953 [3d Dept 1991]).

Both Insurance Law § 3435 and Regulation No. 135 (11 NYCRR part 153) permit the issuance of group property/casualty insurance only with respect to public and not-for-profit insureds. Thus, under New York law, with the limited exception of a risk retention group authorized under federal law, group property/casualty insurance for physician groups may not be written in New York (see Ops Gen Counsel NY Ins Dept No. 08-06-02 [June 4, 2008], available at https://www.dfs.ny.gov/insurance/ogco2008/rg080602.htm). Therefore, as a matter of course, medical malpractice insurance must generally be acquired for each provider rather than for a group.

Neither party asserts that plaintiff and defendant, from the beginning, had a contract regarding the ownership interest in the mutual insurance policy. It is uncontested that plaintiff and defendant contracted with each other for defendant to provide supervisory/collaborative services in support of physician assistants/nurse practitioners who provided care for patients in New York. It is further uncontested that defendant was aware that plaintiff was making payments from New York to MLMIC, a New York malpractice insurance provider.{**65 Misc 3d at 259}

Defendant admits that "[a]s a consulting physician, I reviewed physician assistants' records in patient charts" (defendant's aff ¶ 9). Defendant further acknowledges that plaintiff's payments of his MLMIC premiums were due to this arrangement (defendant's aff ¶ 13).

In opposition to the motion to dismiss, plaintiff submits the affidavit of Dr. Robert Schneider, president of plaintiff. Schneider asserts that defendant was covered under a New York insurance policy for the services he was performing for plaintiff, sent invoices to New York every two weeks, and was in daily contact with plaintiff's nurse practitioner regarding care being provided to New York patients.

Plaintiff's claim arises in equity based upon its payment of defendant's malpractice insurance premiums—insurance that provided coverage for defendant as he provided supervisory and collaborative medical care to New York patients during his time as an independent contractor (see Matter of Schaffer, Schonholz & Drossman, LLP v Title, 171 AD3d 465, 465[*4][1st Dept 2019]). Notably, an unjust enrichment claim cannot be a contract claim, so the claim is not based on the negotiated contract between plaintiff and defendant, but rather the relationship between them and the payments made due to that relationship (see Corsello v Verizon N.Y., Inc., 18 NY3d 777, 790 [2012] [Unjust enrichment "is available only in unusual situations when, though the defendant has not breached a contract nor committed a recognized tort, circumstances create an equitable obligation running from the defendant to the plaintiff"]).

[1] Defendant cited Etra v Matta (61 NY2d 455 [1984]) for the proposition that a medical provider providing consultation from another state is insufficient to invoke personal jurisdiction under New York's long-arm statute. Defendant misreads the holding of Etra v Matta. Here, unlike in Etra v Matta, defendant is a New York licensed physician that was conducting regular contact in support of care for multiple New York patients. There is no allegation these patients sought out the services of an out-of-state provider. To the contrary, defendant purposefully and regularly reached into the New York marketplace and acted with a New York license under the protection of New York insurance (see Fischbarg v Doucet, 9 NY3d 375, 380 [2007]; Robins v Procure Treatment Ctrs., Inc., 157 AD3d 606, 607 [1st Dept 2018]; Reyes v Sanchez-Pena, 191 Misc 2d 600, 616 [Sup Ct, Bronx County 2002, Victor, J.]; compare Paterno v Laser Spine Inst., 24 NY3d 370, 379 [2014] [differentiating responsive contacts]).{**65 Misc 3d at 260}

Plaintiff made the payments for defendant's malpractice insurance premiums due to his contacts; therefore, a sufficient nexus exists as the claim arose from defendant's relationship with plaintiff and New York patients (see McLenithan v Bennington Community Health Plan, 223 AD2d at 778).

Equally unpersuasive is defendant's contention that this court asserting jurisdiction would violate federal due process rights. A state may exercise personal jurisdiction over a nondomiciliary defendant if he or she has certain "minimum contacts" with the forum "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice" (International Shoe Co. v Washington, 326 US 310, 316 [1945] [internal quotation marks omitted]). The test for "minimum contacts" is whether a defendant's " 'conduct and connection with the forum State' are such that [he or she] 'should reasonably anticipate being haled into court there' " (LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 216 [2000], quoting World-Wide Volkswagen Corp. v Woodson, 444 US 286, 297 [1980]). Due process is not violated when "defendant has purposefully directed its activities toward the forum, and has created continuing obligations between itself and forum residents" (Opticare Acquisition Corp. v Castillo, 25 AD3d 238, 247 [2d Dept 2005]). In such a case, the defendant has availed itself of the "privilege of conducting business there, and because his [or her] activities are shielded by 'the benefits and protections' of the forum's laws it is presumptively not unreasonable to require him [or her] to submit to the burdens of litigation in that forum as well" (Burger King Corp. v Rudzewicz, 471 US 462, 476 [1985]). Here, defendant was able to access the New York market due to his New York medical license and was protected by New York malpractice insurance. Defendant cannot claim surprise at having to answer in the courts of New York for a claim arising from this connection. The very fact that defendant needed malpractice insurance to cover him regarding his interactions should have alerted him to the reasonable possibility he could be haled to a New York court to account for his action relating to this contact. "Requiring him to defend himself in New York will not offend due process because, by actively seeking New York residents as patients, he should have reasonably expected that he would be required to defend his actions here" (McLenithan v Bennington Community Health Plan, 223 AD2d at 778-779).{**65 Misc 3d at 261}

Likewise, this court's assertion of personal jurisdiction over defendant comports with traditional notions of fair play and substantial justice.

"The factors to be considered in making that assessment are: (1) the burden on the defendant, (2) the forum state's interest in adjudicating the dispute, (3) the plaintiff's interest in obtaining convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies" (Opticare Acquisition Corp. v Castillo, 25 AD3d 238, 248 [2d Dept 2005], citing Asahi Metal Industry Co. v Superior Court of Cal., Solano Cty., 480 US 102, 113-114 [1987]; Rushaid v Pictet & Cie, 28 NY3d 316, 331 [2016]).

Here, the complaint implicates an unjust enrichment arising out of a relationship involving the health and safety of New York residents, an issue of great importance to the state. The question to be litigated involves a question of New York law and New York courts provide plaintiff a greater possibility of relief. On balance, and considering all the remaining factors, the maintenance of suit here does not "offend traditional notions of fair play and substantial justice."

Plaintiff cross-moves for summary judgment, contending that state law entitles it to the demutualization proceeds as well as both parties had allegedly entered into an agreement regarding plan distribution. Defendant opposes the motion, arguing that there are questions of fact regarding the agreement and whether each party understood who was entitled to the proceeds from demutualization.

Although "unjust enrichment is not a catchall cause of action to be used when others fail" (Corsello v Verizon N.Y., Inc., 18 NY3d 777, 790 [2012]), the Court of Appeals has noted the broad equity jurisdiction of the courts and our power to correct unjust enrichment, going so far as to cite Aristotle in this context, stating "[l]aw without principle is not law; law without justice is of limited value. Since adherence to principles of 'law' does not invariably produce justice, equity is necessary" (Simonds v Simonds, 45 NY2d 233, 239 [1978]). To recover under a theory of unjust enrichment, "[a] plaintiff must show that (1) {**65 Misc 3d at 262}the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (New York State Workers' Compensation Bd. v Program Risk Mgt., Inc., 150 AD3d 1589, 1594 [3d Dept 2017] [internal quotation marks and citation omitted]; see Georgia Malone & Co., Inc. v Rieder, 19 NY3d 511, 516 [2012]).

"The essence of such a cause of action is that one party is in possession of money or property that rightly belongs to another" (Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 988 [3d Dept 2006]). This requirement of ownership is in the context of an equitable claim, not legal ownership rights; therefore, a party may be legally entitled to a benefit through a contract but still equitably owe those funds to another (see Simonds v Simonds, 45 NY2d at 239; see also Restatement [Third] Restitution and Unjust Enrichment § 26, Comment b, Illustration 11). " 'The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered' " (Goel v Ramachandran, 111 AD3d 783, 791 [2013], quoting Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415, 421 [1972], cert denied 414 US 829 [1973]).

"[I]t is not a prerequisite of an unjust enrichment claim that one enriched commit a wrongful or unlawful act" (Mayer v Bishop, 158 AD2d 878, 880 [3d Dept 1990], lv denied 76 NY2d 704 [1990]). A claim for unjust enrichment "is undoubtedly equitable and depends upon broad [*6]considerations of equity and justice" (Paramount Film Distrib. Corp. v State of New York, 30 NY2d at 421).

"In determining whether this equitable remedy is warranted, a court should look to see if a benefit has been conferred on the defendant under mistake of fact or law, if the benefit still remains with the defendant, if there has been otherwise a change of position by the defendant, and whether the defendant's conduct was tortious or fraudulent" (Betz v Blatt, 160 AD3d 696, 701 [2d Dept 2018] [internal quotation marks and citations omitted]).

Ultimately, "to determine whether there has indeed been unjust enrichment the inquiry must focus on the 'human setting involved,' not merely upon the transaction in isolation" (Mayer v Bishop, 158 AD2d at 880 [citation omitted], quoting McGrath v Hilding, 41 NY2d 625, 629 [1977]).{**65 Misc 3d at 263}

Summary judgment is a drastic remedy which will be granted only when the party seeking summary judgment has established prima facie entitlement to judgment as a matter of law by presenting competent evidence that there is no doubt as to the absence of a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; McDay v State of New York, 138 AD3d 1359, 1359 [3d Dept 2016]). It is well established that "[t]he court's function on a motion for summary judgment is issue finding not issue determination" (Gadani v Dormitory Auth. of State of N.Y., 43 AD3d 1218, 1219 [3d Dept 2007]; see Lacasse v Sorbello, 121 AD3d 1241, 1242 [3d Dept 2014]), and this court "must view the evidence in the light most favorable to the nonmoving party and accord such party the benefit of every reasonable inference that can be drawn therefrom" (Aretakis v Cole's Collision, 165 AD3d 1458, 1459 [3d Dept 2018]; see Healthcare Professionals Ins. Co. v Parentis, 165 AD3d 1558, 1565 [3d Dept 2018]).

The burden then shifts to the nonmoving party to establish by admissible proof the existence of genuine issues of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Davis v EAB-TAB Enters., 166 AD3d 1449, 1450 [3d Dept 2018]). However, in opposing a motion for summary judgment, the nonmoving party "must produce evidentiary proof in admissible form . . . or must demonstrate acceptable excuse for his [or her] failure to meet the requirement of tender in admissible form; mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" (Zuckerman v City of New York, 49 NY2d at 562; accord Miller v Lu-Whitney, 61 AD3d 1043, 1047 [3d Dept 2009]; see Banco Popular N. Am. v Victory Taxi Mgt., 1 NY3d 381, 383 [2004] ["(A)verments merely stating conclusions, of fact or of law, are insufficient" to "defeat summary judgment"]). While it is incumbent upon the nonmoving party to "lay bare" his or her proof in order to defeat summary judgment (O'Hara v Tonner, 288 AD2d 513, 514 [3d Dept 2001]), "[a] summary judgment motion is properly denied as premature when the nonmoving party has not been given reasonable time and opportunity to conduct disclosure relative to pertinent evidence that is within the exclusive knowledge of the movant" (Greener v Town of Hurley, 140 AD3d 1285, 1286 [3d Dept 2016], quoting Metichecchia v Palmeri, 23 AD3d 894, 895 [3d Dept 2005]).

[2] First, plaintiff asserts that Insurance Law § 7307 (e) (3) establishes its entitlement to the proceeds. This argument is{**65 Misc 3d at 264} without merit. Plaintiff relies on the statute's wording—"such policyholder has properly and timely paid to the insurer" (Insurance Law § 7307 [e] [3]). This does not clearly mean that who pays the policy premium is the equitable owner. In fact, the provider, as explained above, was the policyholder.

To the extent that this statute is ambiguous,

"courts regularly defer to the governmental agency charged with the responsibility for administration of a statute in those cases where [*7]interpretation or application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom, and the agency's interpretation is not irrational or unreasonable" (Matter of County of Albany v Hudson Riv.-Black Riv. Regulating Dist., 97 AD3d 61, 66-67 [3d Dept 2012] [internal quotation marks, brackets and citation omitted], lv denied 19 NY3d 816 [2012]).

Here, the New York Superintendent of Financial Services expressly rejected plaintiff's interpretation of the statute:

"Payment of Consideration to Eligible Policyholders. One interested party testified and submitted a written comment asserting that the group of policyholders eligible to be paid shares of the purchase price should be changed or that the purchase price should be allocated differently. However, Insurance Law § 7307(e)(3) explicitly defines those policyholders who are eligible to receive the purchase price consideration based on the three-year period of eligible policies preceding the MLMIC Board resolution (which was adopted on July 15, 2016), and dictates that the transaction consideration shall be allocated to each Eligible Policyholder based on the amount of net premiums timely paid on that Eligible Policyholder's eligible policy or policies as a fraction of the total of such net premiums paid on eligible policies in the three years preceding July 15, 2016 . . .

"One commenter referred to the provision in Insurance Law § 7307(e) stating that in calculating each such person's equitable share one must factor in the amount 'such policyholder has properly and timely paid to the insurer on insurance policies in effect during the three years immediately preceding . . .' (emphasis added). The commenter suggested {**65 Misc 3d at 265}that this means that the person that paid the premium is automatically entitled to the proceeds of the sale. The Superintendent finds that this is not determinative because the same provision refers to the 'policyholder,' which might or might not be the person who paid the premiums.

"Insurance Law § 7307(e)(3) defines the policyholders eligible to be paid their proportional shares of the purchase price, but also recognizes that such policyholders may have assigned such legal right to other persons. Therefore, the Plan appropriately includes an objection and escrow procedure for the resolution of disputes for those persons who dispute whether the policyholder is entitled to the payment in a given case." (Plaintiff's exhibit B at 22-23.)

Second, plaintiff asserts that the parties entered into an agreement regarding distribution of the demutualization proceeds. Notably, plaintiff pleaded an unjust enrichment claim, not a breach of contract claim. "To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound" (Kolchins v Evolution Mkts., Inc., 128 AD3d 47, 59 [1st Dept 2015], affd 31 NY3d 100 [2018]). "There can be no contract absent a mutual intent to be bound" (Keis Distrib. v Northern Distrib. Co., 226 AD2d 967, 968 [3d Dept 1996] [internal quotation marks and citation omitted]). Further, " '[u]nless both parties to a contract are bound, so that either can sue the other for a breach, neither is bound' " (Reddy v Mihos, 160 AD3d 510, 514 [1st Dept 2018], lv denied 32 NY3d 902 [2018], quoting Schlegel Mfg. Co. v Cooper's Glue Factory, 231 NY 459, 462 [1921]).

Here, on July 24, 2017, defendant emailed plaintiff's president seeking assurance that if plaintiff received the entire demutualization check, plaintiff would forward the part of the [*8]proceeds to defendant equivalent to the portion of time defendant had paid the premium. Defendant made no promises to plaintiff. Plaintiff's president replied by email, on the same day, stating that "[y]our email is received. If we get the check, we will make sure it or the accurate reimbursement to you is made. We will will [sic] monitor this closely as we need to be sure that we are reimbursed for our expenses and that the providers are aware" (plaintiff's exhibit G). Defendant responded, "Thank you Rob" (plaintiff's exhibit G). In none of the emails did defendant make or agree to any promise that could{**65 Misc 3d at 266} constitute consideration for an agreement. Therefore, as "the record discloses no consideration for any such agreement . . . it [is] unenforceable" (Maxam v Kucharczyk, 138 AD3d 1268, 1269 [3d Dept 2016]).

Even assuming the agreement was enforceable, defendant has raised a question of fact regarding the voidability of the alleged agreement. "A contract may be rescinded when it is shown by clear and convincing proof that a mutual mistake existed when the contract was executed that was so substantial that there was no true meeting of the parties' minds" (Lakshmi Grocery & Gas, Inc. v GRJH, Inc., 138 AD3d 1290, 1292 [3d Dept 2016] [internal quotation marks and citations omitted]; see generally Restatement [Second] of Contracts §§ 152-154). In opposition to plaintiff's cross motion, defendant submits an affidavit swearing that the parties not only did not have a meeting of the minds regarding an alleged agreement to divide the proceeds, but that both parties were communicating based on inaccurate information from MLMIC regarding who was eligible for the payment. Defendant corroborates this by presenting copies of communications from MLMIC before and after the alleged agreement demonstrating the lack of clarity.

"A court may take judicial notice of matters of public record, such as an incontrovertible official document or other reliable documents, the existence and accuracy of which are not disputed, and information culled from public records" (8 Carmody-Wait 2d § 56:33; see Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205, 208 n [3d Dept 1990], affd 76 NY2d 993 [1990]; Matter of Sunhill Water Corp. v Water Resources Commn., 32 AD2d 1006, 1008 [3d Dept 1969]). As both parties rely significantly on the demutualization process approved by the New York Superintendent of Financial Services, this court finds it appropriate to take judicial notice of the entire record of the process as provided through the New York Superintendent of Financial Services (see Department of Financial Services, Public Hearings and Decisions, Medical Liability Mutual Insurance Company [MLMIC] Demutualization Plan of Conversion from Property and Casualty Mutual Insurance Company to Property and Casualty Stock Insurance Company, available at https://www.dfs.ny.gov/reports_and_publications/public_hearings [last accessed July 12, 2019]). There records show that there was significant confusion regarding who was the eligible policyholder or equitable owner entitled to demutualization proceeds up to and including the date of the public hearing on the MLMIC demutualization.{**65 Misc 3d at 267}

As summary judgment is a drastic remedy and all inferences must be construed in favor of the nonmoving party, even if the agreement was otherwise enforceable, a clear question of fact exists as to whether the agreement was voidable by mutual mistake.

According, it is ordered, defendant's motion to dismiss the complaint is denied; and it is further ordered, plaintiff's motion for summary judgment is denied.