Thursday, November 20, 2008

Motion to Vacate Stipulations of Settlement Denied, Carothers Trial Result Notwithstanding

Deajess Med. Imaging, P.C. v. Country-Wide Ins. Co.

(NYC Civil Ct., Kings Co., decided 10/7/2008)

Through defense counsel, Country-Wide entered into two stipulations of settlement with plaintiff medical provider, the first in this action in July 2006 to vacate an $18,694.39 November 2005 judgment, and the second so-ordered stipulation in March 2007 in a Nassau County action. The first stipulation provided that ""[p]laintiff agrees to vacate the judgment for assignor Trinece Summer [and] defendant agrees to pay the remaining claims as per the Court's Order of November 4, 2005 within 30 days inclusive of interest up until the day of payment." In the second stipulation, Contry-Wide agreed that plaintiff's right "to enforce voluntary settlements that have been entered into with any of the Insurers," including Country-Wide, would not be impaired.

Country-Wide moved to vacate the November 2005 judgment and stipulation of settlement in this action on the ground that newly discovered evidence existed which "if introduced at trial would probably have produced a different result and which could not have been discovered in time to move for a new trial under section 4404" (CPLR § 5015 [a] [2]). The newly discovered evidence Country-Wide cited included a federal case involving Robert Scott Schepp, M.D., New York State appellate case law involving the plaintiff, a news article from, as well as the Andrew Carothers, M.D., P.C. trial in the New York City Civil Court, Richmond County, all of which Country-Wide argued established that plaintiff was fraudulently incorporated. Country-Wide also argued that the judgment was the product of "fraud, misrepresentation, or other conduct of an adverse party" (CPLR § 5015 [a] [3]) and that there was no meeting of the minds when the parties entered into the written stipulation of settlement.

Noting that settlement stipulations are judicially favored and should not be lightly set aside, New York City Civil Court Judge George Silver rejected Country-Wide's arguments and denied its motion to vacate, holding:
The only evidence offered by defendant in support of its claim that the settlement was procured through fraud or collusion are the conclusory allegations contained in the affirmations of defendant's attorney. Bare, unsubstantiated allegations such as "[t]he purported judgment premised upon plaintiff's misrepresentations" and "[p]laintiff obtained its judgment under false pretenses" and "[t]he judgment was obtained under collusion by the plaintiff and its attorney since plaintiff's attorney was well aware of several litigations pending against their client based on their client's corporate structure" are insufficient to vacate the stipulation as a product of collusion or fraud. Such speculation also fails to make the requisite showing to reform the stipulation on the ground that it was executed under a mutual or unilateral mistake (see M.S.B Dev. Co., Inc. v Lopes, 38 AD3d 723 [2d Dept 2007] [A party seeking reformation must show clearly that there has been a mistake] [emphasis added]). Moreover, defendant, a sophisticated insurer well-versed in no-fault litigation and represented by able and competent counsel at the time the stipulation was entered into, does not claim that the settlement was a product of duress or that its counsel lacked the authority to enter into the settlement.

Defendant's claim that the stipulation of settlement should be vacated based upon newly discovered evidence of plaintiff's allegedly fraudulent incorporation is also without merit.

Plaintiff and defendant entered into a second stipulation, so-ordered on March 26, 2007, in the Nassau County action in which defendant agreed that plaintiff's right "to enforce voluntary settlements that have been entered into with any of the Insurers," including defendant, would not be impaired. As a party to the Nassau County action defendant was certainly aware on March 26, 2007 that the plaintiff professional corporation may be fraudulently incorporated. Despite that awareness, defendant nevertheless agreed that plaintiff could freely enforce any and all voluntary settlements which plaintiff had previously entered into. This concession by defendant to plaintiff belies defendant's argument that had it been aware of plaintiff's allegedly fraudulent incorporation on July 10, 2006 it would not have entered into the stipulation at issue here. "Courts will not set aside a stipulation . . . simply because, in hindsight, a party decides that the agreement was improvident" (Town of Clarkstown v. M.R.O. Pump & Tank, Inc., 287 AD2d 497, 498, 731 NYS2d 231 [2d Dept 2001]). Therefore, because defendant has failed to meet any of the criteria necessary for the court to vacate the parties' voluntary stipulation of settlement, defendant's Order to Show Cause is denied in its entirety.

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