Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, LLC v. Comprehensive Mental Assessment & Med. Care, P.C.
(Sup. Ct., Nassau Co., decided 1/8/2010)
Wasn't it William Shakespeare who wrote in The Tempest, "Mallela acquaints a man with strange bedfellows"? Or was that misery?
In a lengthy decision regarding whether turnabout is indeed fair play, Nassau County Supreme Court Justice Ira Warshawsky ordered the provider PC defendants, former clients of Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, LLC, now embroiled in cross litigation for fees and alleged legal malpractice damages, to respond to BSBGFM&N's supplemental notice for discovery and inspection of:
In October, 2007, the defendant PCs commenced an action against BSBGFM&N in Kings County Supreme Court for conversion, breach of contract, and ancillary damages. In November, 2007, BSBGFM&N commenced an action in Nassau County Supreme Court against the defendant PCs for, among other things, a declaratory judgment, and damages from defendants' alleged breach of contract, quantum merit, retaining lien and tortuous interference with contract. The actions were consolidated into BSBGFM&N's Nassau County action, with the provider PCs' claims becoming counterclaims. The court appointed a special referee to supervise the many discovery disputes that arose in the action, and the referee was able to resolve all but the parties' dispute over BSBGFM&N's supplemental demand for discovery and inspection of records relating to the provider PCs' corporate formation and structure.(1) for the period January 2001 through the present, originals, if available, and if not, copies of any and all general ledgers maintained for each defendant;
(2) for the period of January 2001 through the present, copies of any and all corporate, federal and state tax returns for each defendant;
(3) for the period of January 2001 through the present originals, or if no originals are available, copies of all bank statements used in connection with the operation of the defendants' businesses;
(4) for the period of January 2001 through the present, copies of all 1099s or W-2s issued to all employees of, or persons or entities providing services to the defendants;
(5) for the period of January 2001 through the present, copies of all lease agreements between the defendants and any other person or entities relating to space utilized by the defendants in the operation of their businesses; and
(6) for the period of January 2001 through the present, copies of all management agreements between the defendants and any other person or entities relating to the operation of their business.
BSBGFM&N contended that the Mallela defense represented a complete defense to the provider PCs' counterclaims for legal malpractice. BSBGFM&N asserted that it should be entitled to review documentation that goes to the issue of whether there was a fraudulent corporate structure for the defendant provider PCs, arguing that if it could show that the provider PC defendants were never entitled to no-fault recovery of monies because of their fraudulent corporate structure, then there can be no basis for a legal malpractice claim against BSBGFM&N. BSBGFM&N also alleged that the defendant provider PCs provided health care services through independent contractors, and therefore, were not entitled to no-fault benefits. According to BSBGFM&N, there could be no legal malpractice claim set forth against it on this basis, as well.
Accusing BSBGFM&N of attempting to "play for another side", the provider PC defendants argued that the "Mallela defense" is available only to insurance carriers as a statutory defense arising out of a claimant's failure to comply with applicable sections of Business Corporation Law, Limited Liability Law and Educational Laws and that there are no reported cases where such a defense against a claim for legal malpractice was deemed valid by a court. The provider PC defendants further contended that BSBGFM&N's supplemental demands were nothing short of a fishing expedition and that, if permitted, would open a floodgate of baseless inquiries into every expense and disbursement. Counsel for the provider PC defendants asserted that after "making loud statements of the Defendants' integrity and having made a small fortune off the Defendants' claims for a number of years and signing off on release documents, it is disingenuous and, even improper, for Plaintiff to pursue this frivolous and dilatory demand for voluminous documents to examine Pincusovich Defendants' corporate and financial affairs from 2001 up to date".
After taking briefs from the parties on the discovery dispute, which are outlined in his decision, Justice Warshawsky reviewed the Mallela and independent contractor defenses, found that the records BSBGFM&N sought in its supplemental notice for discovery and inspection were material and necessary to its defense against the provider PCs' legal malpractice claims, and directed the provider PCs to respond to BSBGFM&N's supplemental demand within 35 days of the court's decision. Justice Warshawsky concluded:
A tempest, indeed.Nothwithstanding the Pincusovich Defendants' argument to the contrary, it is the view of the Court that Baker Sanders has not waived its right to assert the Mallela defense. This Court is in agreement with counsel for the Plaintiff in that the inquiry is not whether certain defenses are available today, i.e., after the execution of the release, but rather whether the defenses were available during the underlying litigation. As discussed, supra, Baker Sanders should be permitted to defend the case within a case scenario, and thus, the requested documentation is material and necessary.
The Court is troubled by the possibility that plaintiff law firm knew or believed that its client was unlawfully collecting benefits under the no-fault laws when it assisted in said collection efforts. However, the impact of that "fact" on the malpractice case, or even the main action, will be determined at a later time.