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A Lawyer said that, plaintiff is a provider of no-fault automobile liability insurance policies


A Lawyer said that, plaintiff is a provider of no-fault automobile liability insurance policies in New York City and defendants are professional corporations (hereinafter “PCs”) which were owned and operated by medical doctors. According to the pleadings, from 1998 until mid-2001, defendants rendered treatment to persons covered under no-fault policies issued by plaintiff. The covered insured patients were treated by licensed acupuncturists who were employees of defendant medical corporations. The covered insured patients executed facially-valid assignments of their no-fault benefits to defendant corporations. Defendant corporations submitted bills for the treatment provided by these licensed acupuncturists to plaintiff. Plaintiff paid the bills submitted by defendant corporations.

A Westchester source said that, plaintiff filed this action, alleging that defendants had improperly employed acupuncturists and that, based upon this organizational flaw, were operating illegally and were not entitled to the payments that plaintiffs made during the time period cited in the Complaint. The Complaint demands that defendant corporations refund all payments made by plaintiff for services provided by the licensed acupuncturists.

Another source said that, defendants move pursuant to CPLR 3211 to dismiss the Complaint for failure to state a cause of action, while other defendants cross-move pursuant to CPLR 3212 for summary judgment dismissing the Complaint. Plaintiff opposes these motions and filed a cross-motion seeking dismissal of defendant’s counterclaim.

The issues in this case are: whether a medical corporation owned and operated by doctors who do not possess a certificate to practice acupuncture may lawfully employ an acupuncturist; and whether a medical corporation which illegally employs a licensed acupuncturist is entitled to reimbursement by insurers for medical services provided to covered persons pursuant to no-fault policies issued by the insurer.

The Court said that, analysis of these motions begins by examining the claims stated in the Complaint, which lists two causes of action against each named defendant: (1) fraud, alleging that defendants knowingly made false representations to plaintiff to induce plaintiff to pay bills for services which defendants were not authorized to provide; and (2) unjust enrichment, alleging that defendants accepted payments from plaintiff that they knew were illegal and yet still retained the proceeds of said payments.

Before analyzing the causes of action stated in the Complaint it is necessary to review the statutory basis for plaintiff’s theory of recovery. Section 1503(a) of the Business Corporation Law provides that “one or more individuals duly authorized to render the same professional service within the state may organize, or cause to be organized, a professional service corporation for pecuniary profit under this article for the purpose of rendering the same professional service.” Under this statute, only professionals licensed to render the same professional services may organize as a corporation and multi-disciplinary professional practices are disallowed.

Plaintiff contends that defendant PCs have violated this prohibition against multi-disciplinary practices by employing acupuncturists. All of the defendant PCs are organized for the practice of medicine. Acupuncture, according to plaintiff, is a separate discipline that is not subsumed within the practice of medicine. Thus, according to plaintiff, unless at least one shareholder/owner of each of the defendant PCs was certified to practice acupuncture along with being a licensed medical doctor, the defendant PCs could not properly employ an acupuncturist because acupuncture was beyond the scope of the corporation’s expertise.

In order to establish a cause of action for fraud, a plaintiff must allege (1) a misrepresentation of a material fact, (2) falsity, (3) scienter (knowledge of the falsity), (4) reliance upon the false statement and (5) injury. In addition, the Complaint must state with specificity the acts which constituted the fraud. Defendants contend that the Complaint here does not plead the fraud cause of action with sufficient specificity. The Complaint states that “defendants intentionally and knowingly made false and fraudulent statements of material facts to plaintiff, namely that each was lawfully entitled to payment from plaintiff for the acupuncture services provided to each said eligible injured person.” It goes on to allege that these “fraudulent and false statements” were made “to induce plaintiff to pay for the acupuncture services they were not entitled to claim or receive.” Finally, the Complaint states that plaintiff justifiably relied upon the misrepresentations of defendant PCs in rendering payment for the acupuncture services performed.

Such allegations contain sufficient detail to place defendants on notice of the acts which are alleged to have constituted the fraud. Even without further elaboration, defendant PCs would know from these pleadings that plaintiff is alleging that defendant PCs knowingly misled plaintiff to believe they were entitled to be paid for acupuncture services when such payments were, according to plaintiff, illegal and wrongful. Keeping in mind that the statute is not to be interpreted so strictly as to defeat what might otherwise be a valid claim where some knowledge might be peculiarly within the knowledge of the defendant PCs, the present claim is stated in sufficient detail to satisfy CPLR §3016(b)’s specificity requirement.

The theory underlying plaintiff’s fraud claim relies upon the premise that defendants were violating BCL §1503 by employing acupuncturists. Assuming without deciding that plaintiff is correct in this assertion, plaintiff’s claim further asserts that it may recover the payments made to defendant PCs based upon this violation of the Business Corporation Law. Such a right of recovery is not explicit in the statute and defendants contend that no private right of action exists for any purported violation of BCL §1503(a).

Here, plaintiff seeks to recoup payments made to the defendant PCs based solely upon a purported violation of the BCL. It is noteworthy that while the Complaint infers that defendant PCs “knew” that hiring acupuncturists without having a physician certified to practice acupuncture as a corporate shareholder constituted a violation of the Education Law and BCL, plaintiff cannot point to any controlling authority that decisively states such a rule. In fact, the only violation alleged against defendants here is a potentially open question of law that is best resolved by the regulatory agencies which govern this area but have yet to speak definitively on the issue. There are no allegations of deceptive corporate structure as set forth in nearly every other case dealing with this issue. Plaintiff further concedes that the services for which they were billed were actually performed and that they were performed by licensed acupuncturists. Plaintiff’s sole basis for relief is to use the alleged violation of BCL §1503 as a sword, which goes against settled New York decisional law. Since no private right of action exists to recover for a violation of BCL §1503(a), plaintiff’s fraud claim fails to state a cause of action upon which relief may be granted and the cause of action must be dismissed.

Plaintiff’s unjust enrichment claim is similarly unavailing. In order to recover under an unjust enrichment theory, a party must prove (1) the defendants were enriched, (2) at plaintiff’s expense, and (3) that “it is against equity and good conscience to permit defendants to retain what is sought to be recovered”. While plaintiff’s submissions likely satisfy the first two elements of the claim, it fails to establish how equity and good conscience require the return of fees paid for services rendered by defendants. Plaintiff advances its public policy concerns in support of this claim as well, but they are no more convincing in the equitable forum. The facts remain that defendants rendered services, billed for those services and were paid for the services rendered. Plaintiff does not allege that the bills submitted did not accurately reflect the services provided, they do not allege that the services provided were substandard or insufficient to meet the needs of the covered insured persons and they do not allege that the amounts sought in the bills were inappropriate for the work performed. Plaintiffs received exactly what they paid for medical services provided by licensed acupuncturists. Allowing plaintiff to disgorge the fees paid for these services would arguably unjustly enrich plaintiff and, despite plaintiff’s stated concern for the public health problems associated with the alleged improper practice of medical doctors employing acupuncturists, public policy mitigates most strongly in favor of proper compensation for services rendered. Thus, plaintiff has failed to establish the viability of its unjust enrichment cause of action and that claim must also be dismissed.

Accordingly, for the reasons set forth, both the motions of the defendants seeking dismissal of the Complaint for failure to state a claim and the motions of the defendants seeking summary judgment dismissing the Complaint are granted, and the Complaint is dismissed as against all defendants. Plaintiff’s motion for summary judgment seeking dismissal of defendant Eastern Comprehensive Medical Services is granted and the counterclaim is dismissed.

Medical malpractice can cause serious harm to the medical institution’s patients. If you have suffered injury due to an alleged medical malpractice, seek the advice of a New York Medical Malpractice Attorney and/or New York Injury Attorney in order to know the legal process of claiming damages against the party at fault. Call us at Stephen Bilkis and Associates.

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