Opinion
002217/06.
Decided April 27, 2009.
Subin Associates, LLP, Jeremy Greenstein, Esq.-Of Counsel on SJ Motion, New York, NY, Plaintiff's Counsel of Record.
Smith Valliere, PLLC, Mark W. Smith, Esq., New York, New York, Plaintiff's Trial Counsel.
John E. McCormack, P.C., John E. McCormack, Esq., Hempstead, NY, Joined Defendants' Lead Counsel.
Bruno, Gerbino Soriano, LLP, Vincent F. Gerbino, Esq., Melville, NY.
Rivkin Radler, LLP, Barry I. Levy, Esq., Uniondale, NY.
Freiberg Peck, LLP, Craig L. Freiberg, Esq., New York, NY.
The limited issue in all the cases that have been joined for trial is whether plaintiff Andrew Carothers, M.D., P.C. was fraudulently incorporated within the meaning of State Farm Mut. Auto. Ins. Co. v. Mallela , 4 NY3d 313 . Both plaintiff and defendants now move for summary judgment.
The parties' submissions demonstrate the existence of a triable issues of fact necessitating a plenary trial ( see Boston Post Road Medical Imaging, P.C. v. Progressive Ins. Co. , 15 Misc 3d 145[A], 2007 NY Slip Op. 51173[U] [App Term, 2nd 11th Jud Dists]; First Help Acupuncture P.C. v. State Farm Ins. Co., 12 Misc 3d 130 [A], 2006 NY Slip Op. 51043[U] [App Term, 2nd 11th Jud Dists]; Zuckerman v. City of New York, 49 NY2d 557). Accordingly, the motion and cross-motion are both DENIED.
The court rejects plaintiff's contention that the doctrine of res judicata, or claim preclusion, bars some defendants from asserting fraudulent incorporation as a defense. Plaintiff submitted admissible proof establishing that it prevailed against some of the defendants in prior actions to recover assigned first-party no-fault benefits and secured judgments in its favor. Plaintiff offered no proof, however, that the issue of whether it had been fraudulently incorporated was actually litigated and determined in those actions. Nevertheless, plaintiff maintains that, since the issue of fraudulent incorporation could have been raised and litigated in those actions, the doctrine of res judicata bars the defendants from asserting the defense in these actions. Plaintiff cites Chisholm-Ryder Co. v. Sommer Sommer, 78 AD2d 143 [2nd Dep't 1980] in supports of its position. In Chisholm-Ryder Co., the court stated that "[i]t is familiar law that the doctrine of res judicata or claim preclusion forecloses a party from relitigating a cause of action which was the subject matter of a former lawsuit or from raising issues or defenses that might have been litigated in the first suit" ( id. at 144).
Plaintiff's argument is without merit. Simply because a defense of fraudulent incorporation could have been litigated in the prior actions is not determinative. In the seminal case of Schuylkill Fuel Corp. v. B. C. Nieberg Realty Corp., 250 NY 304, 306-307, 165 N.E. 456, the Court held that a judgment in a prior action will be conclusive in a later one as to matters that "might have been so litigated" only "when the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first. . . .[i]t is not conclusive, however, to the same extent when the two causes of action are different, not in form only . . . but in the rights and interests affected ( citations omitted)." In Smith v. Kirkpatrick, 305 NY 66, 70, the applicable principle of law was stated as follows: "[i]t is familiar law that where a cause of action has been prosecuted to a final adjudication on the merits, the same cause of action may not be again litigated. It is said that the prior adjudication is conclusive as to all things which might have been litigated as well as those actually litigated but that where a subsequent proceeding is had upon a different cause of action between the same parties or their privies only such things as were actually and necessarily determined in the prior proceeding are held to be concluded . . . . ( citations omitted)" [emphasis added].
Perhaps this rule of law was best stated in Cromwell v. County of Sac, 94 U.S. 351, 352-353, 24 L.Ed. 195. There, the Supreme Court of the United States stated that "where [a] second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered. In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and determined in the original action, not what might have been thus litigated and determined. Only upon such matters is the judgment conclusive in another action" ( 94 U.S. at 352-353).
Here, the claims for first-party no-fault benefits at issue in the joint trial are different from the claims for first-party no-fault benefits that were litigated in the prior actions, not only in form, but "in the rights and interests affected" ( Schuylkill Fuel Corp., 250 NY at 307). There is no proof before the court that the issue of whether plaintiff had been fraudulently incorporated was "actually and necessarily" determined in the prior actions ( Smith, 305 NY at 70). Plaintiff's contention that a finding for defendants in the within actions would destroy or impair rights or interests established in the earlier actions is without merit. The doctrine of res judicata, or claim preclusion, therefore, does not bar any of the defendants from asserting the defense of fraudulent incorporation in any of the cases now joined for trial herein.
The court has considered the other arguments raised by plaintiff and defendants in support of their motion and cross-motion and find them to be unavailing.
Accordingly, it is hereby
ORDERED that the motion and cross-motion are DENIED.
This constitutes the decision and order of the court.