UPTODATE MEDICAL SERVICES v. STATE FARM MUTUAL AUTOMOBILE INS CO (2009)

Appeal from an order of the Civil Court of the City of New York, Queens County (Diane A. Lebedeff, J.), entered October 22, 2007.   The order, insofar as appealed from, denied defendant's cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint.

Order, insofar as appealed from, reversed without costs, defendant's cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint granted, and complaint dismissed.

In this action by a provider to recover assigned first-party no-fault benefits for services rendered, plaintiff moved for summary judgment.   Defendant cross-moved for leave to amend its answer to assert the affirmative defense of collateral estoppel, and, upon such amendment, for summary judgment dismissing the complaint.   The Civil Court denied plaintiff's motion and defendant's cross motion.   Defendant appeals from so much of the order as denied its cross motion.

 Generally, leave to amend a pleading pursuant to CPLR 3025(b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the cause of action or defense to be asserted in the amendment may have merit (see Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 959, 471 N.Y.S.2d 55, 459 N.E.2d 164 [1983];  Ingrami v. Rovner, 45 A.D.3d 806, 808, 847 N.Y.S.2d 132 [2007] ).   The court must examine the merits of the cause of action or defense to be asserted in the proposed amendment since leave to amend should not be granted where the cause of action or defense to be asserted is totally without merit or is palpably insufficient as a matter of law (see Ingrami, 45 A.D.3d at 808, 847 N.Y.S.2d 132;  Hill v.2016 Realty Assoc., 42 A.D.3d 432, 433, 839 N.Y.S.2d 801 [2007] ).

 Defendant sought leave to amend its answer in order to interpose the affirmative defense of collateral estoppel because there was a prior arbitration proceeding between the parties in which plaintiff had sought to recover assigned first-party no-fault benefits for services rendered to a different assignor.   In said proceeding, the arbitrator determined that plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 322, 794 N.Y.S.2d 700, 827 N.E.2d 758 [2005] ).   Inasmuch as plaintiff failed to demonstrate that prejudice or surprise would result from allowing the proposed amendment (see McCaskey, Davies & Assocs. v. New York City Health & Hosps. Corp., 59 N.Y.2d 755, 463 N.Y.S.2d 434, 450 N.E.2d 240 [1983] ), and the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law (see Ingrami, 45 A.D.3d at 808, 847 N.Y.S.2d 132;  Hill, 42 A.D.3d at 433, 839 N.Y.S.2d 801), defendant should have been granted leave to amend its answer (see Ingrami, 45 A.D.3d at 808, 847 N.Y.S.2d 132 [a defendant who has failed to assert a defense set forth in CPLR 3211(a)(5) both in a motion to dismiss and an answer (see CPLR 3211[e] ) may nonetheless be granted leave to amend the answer to assert such defense under appropriate circumstances] ).

 “The two elements that must be satisfied to invoke the doctrine of [collateral] estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue (see Kaufman v. Lilly Co., 65 N.Y.2d 449, 455, 492 N.Y.S.2d 584, 482 N.E.2d 63 [1985] )” (Luscher v. Arrua, 21 A.D.3d 1005, 1007, 801 N.Y.S.2d 379 [2005];  see D'Arata v. New York Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659, 563 N.Y.S.2d 24, 564 N.E.2d 634 [1990] ).  “The burden is on the party attempting to defeat the application of collateral estoppel to establish the absence of a full and fair opportunity to litigate” (D'Arata, 76 N.Y.2d at 664, 563 N.Y.S.2d 24, 564 N.E.2d 634;  see also Kaufman, 65 N.Y.2d at 456, 492 N.Y.S.2d 584, 482 N.E.2d 63).

 Collateral estoppel effect can, under appropriate circumstances, be given to arbitration awards (see Matter of American Ins. Co. [Messinger Aetna Cas. & Sur. Co.], 43 N.Y.2d 184, 401 N.Y.S.2d 36, 371 N.E.2d 798 [1977] ).   Where a plaintiff has freely elected to proceed to arbitration with the assistance of counsel despite the availability of an alternate judicial forum and has had the opportunity to employ procedures substantially similar to those utilized in a court of law, it may be found that the plaintiff has had a full and fair opportunity to litigate the issue determined in the arbitration proceeding (Clemens v. Apple, 65 N.Y.2d 746, 492 N.Y.S.2d 20, 481 N.E.2d 560 [1985] ).

 In the instant matter, defendant established that the issue of whether plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d at 322, 794 N.Y.S.2d 700, 827 N.E.2d 758) was identical to the issue previously decided by the arbitrator.   In opposition to defendant's cross motion, plaintiff failed to address the branch of the cross motion which sought summary judgment dismissing the complaint on the ground of collateral estoppel.   Therefore, plaintiff failed to establish that it did not receive a full and fair opportunity to litigate in the arbitration proceeding.   Thus, the branch of defendant's cross motion seeking summary judgment should have been granted (see Uptodate Med. Serv., P.C. v. State Farm Mut. Auto. Ins. Co., 22 Misc.3d 128(A), 2009 N.Y. Slip Op. 50046[U], 2009 WL 78376 [App Term, 2d, 11th & 13th Jud. Dists. 2009] ).

Accordingly, the order, insofar as appealed from, is reversed, defendant's cross motion for leave to amend its answer, and, upon such amendment, for summary judgment dismissing the complaint is granted, and the complaint is dismissed.