MIDBOROUGH ACUPUNCTURE v. STATE FARM INS CO (2008)

Appeal from an order of the Civil Court of the City of New York, Kings County (Robin D. Garson, J.), entered June 7, 2006.   The order, insofar as appealed from, denied the branch of defendant's motion seeking to compel plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial, and granted the branches defendant's motion seeking to compel plaintiff to respond to the demand for discovery and inspection, the demand for verified written interrogatories and the supplemental demand for verified written interrogatories only to the extent of requiring plaintiff to produce documentation pertaining to its “corporate structure” and Valentina Anikeyeva's license, and granted plaintiff's cross motion for a protective order to the extent of providing that Valentina Anikeyeva did not have to produce “personal documents.”

Order, insofar as appealed from, modified by providing that the branches of defendant's motion seeking to compel plaintiff to respond to the demand for discovery and inspection, the demand for verified written interrogatories and the supplemental demand for verified written interrogatories are granted to the extent of compelling plaintiff to produce its certificate of incorporation for discovery and inspection, and serve responses to numbers 1, 15 and 16 of defendant's demand for verified written interrogatories and numbers 1, 15, 31, 37-40, and 44-46 of defendant's supplemental demand for verified written interrogatories within 60 days of the date of the order entered hereon;  as so modified, affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved to strike plaintiff's complaint pursuant to CPLR 3126 or, in the alternative, to compel plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial and to produce the discovery demanded in defendant's demand for discovery and inspection, demand for verified written interrogatories and supplemental demand for verified written interrogatories.   Plaintiff opposed the motion and cross-moved for a protective order.   The court granted defendant's motion to the extent of requiring plaintiff to provide documentation pertaining to the license of plaintiff's owner, Anikeyeva, and to plaintiff's corporate structure, and granted plaintiff's cross motion to the extent of providing that Anikeyeva did not have to produce personal documents.   This appeal by defendant ensued.

 Plaintiff was required, but failed, to challenge the propriety of defendant's notice for discovery and inspection pursuant to CPLR 3120 within the time prescribed by CPLR 3122.   Likewise, plaintiff failed to object to defendant's demand for verified written interrogatories and to defendant's supplemental demand for verified written interrogatories.   As a result, plaintiff is obligated to produce the information sought except as to matters which are palpably improper or privileged (see Fausto v. City of New York, 17 A.D.3d 520, 793 N.Y.S.2d 165 [2005];  Marino v. County of Nassau, 16 A.D.3d 628, 791 N.Y.S.2d 438 [2005];  Garcia v. Jomber Realty, 264 A.D.2d 809, 695 N.Y.S.2d 607 [1999];  A.B. Med. Servs. PLLC v. Utica Mut. Ins. Co., 11 Misc.3d 71, 813 N.Y.S.2d 845 [App. Term, 2d & 11th Jud. Dists. 2006] ).

 To the extent the discovery demands concern matters relating to defenses which defendant is precluded from raising, they are palpably improper notwithstanding the fact that plaintiff did not specifically object thereto (see A.B. Med. Servs. PLLC v. Utica Mut. Ins. Co., 11 Misc.3d 71, 813 N.Y.S.2d 845 [2006], supra ).   However, the record reveals that defendant set forth detailed and specific reasons for believing that plaintiff may be ineligible to recover no-fault benefits as a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 794 N.Y.S.2d 700, 827 N.E.2d 758 [2005] ), a defense which is not precluded.   By obtaining discovery of, among other things, plaintiff's certificate of incorporation, management agreements, and the names of plaintiff's shareholders, defendant will be able to ascertain whether plaintiff is ineligible for reimbursement of no-fault benefits (see e.g. Preferred Med. Imaging, P.C. v. Liberty Mut. Ins. Co., 11 Misc.3d 1069(A), 2006 WL 756082, 2006 N.Y. Slip Op. 50437(U) [Suffolk Dist. Ct. 2006] ).   As a result, in addition to the discovery previously ordered by the Civil Court, which portion of the order we do not review since it is not the subject of this appeal, defendant is also entitled to production of plaintiff's certificate of incorporation as well as responses to interrogatories numbered 1, 15, and 16 and responses to the supplemental interrogatories numbered 1, 15, 31, 38-40 and 44-46 since said items were not palpably improper or privileged.

 We further note that special circumstances exist which warrant the disclosure of plaintiff's corporate income tax returns (see CPLR 3101[a];  Statewide Med. Servs., P.C. v. Travelers Ins. Co., 13 Misc.3d 134(A), 2006 WL 3007599, 2006 N.Y. Slip Op. 52014(U) [App. Term, 1st Dept. 2006], revg. 9 Misc.3d 1124(A), 2005 WL 2866916, 2005 N.Y. Slip Op. 51773 (U) [Civ. Ct., Bronx County 2005];  Preferred Med. Imaging, P.C. v. Liberty Mut. Ins. Co., 11 Misc.3d 1069(A), 2006 WL 756082, 2006 N.Y. Slip Op. 50437(U) [2006],supra;  see also Dore v. Allstate Indem. Co., 264 A.D.2d 804, 695 N.Y.S.2d 422 [1999];  cf. Benfeld v. Fleming Props., LLC, 44 A.D.3d 599, 600, 843 N.Y.S.2d 351 [2007];  Altidor v. State-Wide Ins. Co., 22 A.D.3d 435, 801 N.Y.S.2d 545 [2005] ).   Accordingly, defendant is also entitled to the information demanded in defendant's supplemental interrogatory number 37.

 Defendant's contention that the court erred in denying the branch of its motion which sought to compel plaintiff to produce its owner, Valentina Anikeyeva, for an examination before trial is without merit.   The notice of examination before trial served by defendant sought to require Anikeyeva to appear for an examination before trial at defendant's counsel's office in “Lake Success, New York 11042.”   However, as noted by plaintiff, since Anikeyeva is “an officer, director, member or employee” of plaintiff, defendant improperly noticed the deposition for a location outside New York City (see CPLR 3110).   Consequently, the court did not err insofar as it declined to compel plaintiff to produce Anikeyeva for an examination before trial at the location sought (see e.g. Mamunes v. Szczepanski, 70 A.D.2d 684, 416 N.Y.S.2d 406 [1979] ).

 Defendant's argument that the court should have denied the branch of plaintiff's cross motion which resulted in a protective order as to Anikeyeva's “personal documents” lacks merit.  “It is well settled that tax returns are generally not discoverable in the absence of a strong showing that the information is indispensable to the claim and cannot be obtained from other sources” (Altidor, 22 A.D.3d at 435-436, 801 N.Y.S.2d 545 [citations and internal quotation marks omitted];  see also Benfeld, 44 A.D.3d at 600, 843 N.Y.S.2d 351).   At this juncture, defendant failed to meet its burden of establishing that Anikeyeva's personal tax returns and personal bank account records are needed, particularly where, as here, defendant is entitled to disclosure of plaintiff's tax returns and the requested financial information with respect to said corporation.   Thus, based upon the record before it, the court did not improvidently exercise its discretion in issuing its protective order.