Denial of Class Certification to No-Fault DME Provider Upheld

NO-FAULT – DURABLE MEDICAL EQUIPMENT – CLASS ACTION CERTIFICATION
Globe Surgical Supply v. Allstate Ins. Co.
(2nd Dept., decided 4/21/2009)

Plaintiff no-fault DME provider brought this class action against Allstate for paying less that 150% of plaintiff's "documented costs" for durable medical equipment and supplies.  Plaintiff moved pursuant to CPLR §§ 901 and 902 for an order allowing the action to proceed as a class.

The five prerequisites for a class action under CPLR § 901(a) are:

1. the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable;
2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members;
3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;
4. the representative parties will fairly and adequately protect the interests of the class; and
5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
   

In deciding whether an action may proceed as a class in New York state court, a court must also consider the five factors of CPLR § 902:

1. the interest of members of the class in individually controlling the prosecution or defense of separate actions;
2. the impracticability or inefficiency of prosecuting or defending separate actions;
3. the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
4.   the desirability or undesirability of concentrating the litigation of the claim in the particular forum; and
5. the difficulties likely to be encountered in the management of a class action.

Nassau Supreme denied plaintiff's motion for certifcation of the class, and plaintiff appealed. 

The Second Department MODIFIED the order  by adding the words "without prejudice to renewal of the motion", holding:

This action is in all material respects identical to Globe Surgical Supply v GEICO Ins. Co. (59 AD3d 129). As in that case, and for the reasons stated therein, Globe Surgical Supply, as assignee of Charles Charlotin, met all of the class certification prerequisites in the instant matter except adequacy of representation (see CPLR 901[a][4]). Accordingly, that branch of its motion which was to certify a class action should have been denied without prejudice to renewal (see Globe Surgical Supply v GEICO Ins. Co., 59 AD3d 129). 

In Globe Surgical Supply v GEICO Ins. Co., 59 AD3d 129 (2nd Dept. 2008), the Second Department addressed "whether it is appropriate to certify a class action challenging the validity, under regulations in effect prior to October 6, 2004, of a no-fault insurer's use of the prevailing geographic rate or the reasonable and customary rate for health care services in calculating first-party benefits due to a claimant or health-care provider."  In that case, the Second Department reversed class certification of Globe Surgical Supply's action without prejudice, finding that plaintiff had not satisfied the fourth prerequisite under CPLR 910, namely, that "the representative parties will fairly and adequately protect the interests of the class[.]"

In that matter, the Second Department found that Supreme Court properly rejected Jean M. Francois, the owner of Globe, as an adequate representative for the class:

Although Globe attempts to couch Francois's problems in terms of "amorphous and generalized suppositions," it is clear that Francois was charged with insurance fraud for attempting to stage accidents and thereafter bill insurance companies. While he may have only pleaded guilty to disorderly conduct, he displayed his attempt to put his interest above others by invoking his Fifth Amendment rights at his deposition, although he later withdrew his invocation of the Fifth Amendment in a subsequently-filed reply affidavit. Moreover, there was adequate evidence that Francois was engaged in recycling invoices. In addition, Francois and the class are subject to a class action counterclaim which may or may not be meritorious.^[FN4] In any event, Francois's attempt to defend himself against any such counterclaim by GEICO would preoccupy him and detract from his representation of the class. 

Footnote 2 in the GEICO case explains Francois's insurance fraud arrest:

In his affidavit sworn to April 21, 2006, Christopher J. Jones, a "Detective with the NYPD's Fraudulent Accident Investigation Squad ... for the past 2½ years," stated that "[f]raud by DME suppliers against no-fault insurance companies is widespread. It has been a principal focus of our Squad's investigation . . . On or about June 1, 2005, Mr. Francois was arrested as the result of an undercover investigation in which I was involved. He was arrested for offering to pay an undercover agent to stage a phony automobile accident and refer the alleged 'victims' to a medical clinic. The specific charges were insurance fraud in the third degree and conspiracy in the fifth degree . . . Subsequently, Mr. Francois entered into a plea agreement, pleading guilty to disorderly conduct."

Two actions; neither certified as a class, due to the legal entanglements of plaintiff's owner. Will we see these actions re-sued by different representative plaintiffs?  Or will plaintiff divest its owner and re-move for certification?  Would that be enough to satisfy the Second Department?  Or will Globe simply proceed in these separate actions as a single plaintiff in each and seek to obtain a ruling from Nassau Supreme that it was owed 150% of its alleged documented costs, rather that what GEICO and Allstate decided were reasonable and prevailing reimbursement rates for the geographic billing areas?