Appeal from an order of the Civil Court of the City of New York, Kings County (Delores J. Thomas, J.), entered December 1, 2006. The order, insofar as appealed from, denied defendant's motion to strike the complaint or, in the alternative, to compel discovery.

Order, insofar as appealed from, modified by providing that defendant's motion is granted to the extent of compelling plaintiff to produce its certificate of incorporation for discovery and inspection and to serve answers providing the information sought in numbers 1, 15, 18, 31, 37-40, and 44-46 of defendant's demand for verified written interrogatories within 60 days of the date of the order entered hereon and that within 30 days thereafter, plaintiff shall produce its owner, Valentina Anikeyeva, for an examination before trial in the courthouse of the Civil Court of the City of New York, Kings County, or on such other date to which the parties agree, but in no event later than 60 days thereafter; 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 (EBT), to respond to defendant's demand for verified written interrogatories and to produce the documents demanded in defendant's notice for discovery and inspection. Defendant's moving papers established that after defendant sent a good faith letter requesting that plaintiff provide the requested discovery to avoid motion practice, plaintiff sent a letter rejecting defendant's discovery demands in their entirety. In addition to opposing defendant's motion, plaintiff cross-moved for a protective order. The court denied defendant's motion, finding that defendant failed [*2]to submit sufficient factual evidence to establish its entitlement to an order compelling discovery. Plaintiff's cross motion for a protective order was implicitly denied as academic. 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. 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 AD3d 520 [2005]; Marino v County of Nassau, 16 AD3d 628 [2005]; Garcia v Jomber Realty, 264 AD2d 809 [1999]; A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71 [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 [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 NY3d 313 [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 NY Slip Op 50437[U] [Suffolk Dist Ct 2006]). As a result, defendant is entitled to production of plaintiff's certificate of incorporation as
well as answers providing the information sought in interrogatories numbered 1, 15, 18, 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 NY Slip Op 52014[U] [App Term, 1st Dept 2006], revg 9 Misc 3d 1124[A], 2005 NY 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 NY Slip Op 50437[U] [2006], supra; see also Dore v Allstate Indem. Co., 264 AD2d 804 [1999]; cf. Benfeld v Fleming Props., LLC, 44 AD3d 599, 600 [2007]; Altidor v State-Wide Ins. Co., 22 AD3d 435 [2005]). Accordingly, defendant is also entitled to an answer providing the information demanded in interrogatory number 37.

Inasmuch as plaintiff's sole basis for opposing the branch of defendant's motion seeking to compel plaintiff to produce its owner, Valentina Anikeyeva, for an EBT is predicated on the fact that she appeared for an EBT in another action with respect to a different professional service corporation owned by her, such an argument lacks merit since defendant's defense to this action is based upon the alleged ineligibility of the plaintiff herein to receive reimbursement of assigned no-fault benefits (see State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005], supra). Consequently, defendant is entitled to an EBT of Anikeyeva with respect to the instant plaintiff (see CPLR 3101 [a]).

To the extent defendant's motion also sought to compel production of Anikeyeva's personal federal and state income tax returns, defendant failed to establish its entitlement to such [*3]documents since "[i]t 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 AD3d at 435-436 [citations and internal quotation marks omitted]; see also Benfeld, 44 AD3d at 600). As a result, at this juncture, defendant failed to meet its burden of establishing that Anikeyeva's personal income tax returns are properly discoverable, particularly where, as here, defendant is entitled to disclosure of plaintiff's income tax returns and the requested financial information with respect to said corporation.

Pesce, P.J., and Steinhardt, J., concur.

Golia, J., concurs in part and dissents in part in a separate memorandum.

Golia, J., concurs in part and dissents in part and votes to modify the order granting defendant's motion to the extent set forth in the majority's decision and to the further extent of compelling the production of the personal federal and state income tax returns of plaintiff's principal, Valentina Anikeyeva, in the following memorandum:

I am generally in agreement with the analysis and reasoning of the majority. My disagreement concerns the majority's determination that "defendant failed to meet its burden of establishing that [Valentina] Anikeyeva's personal income tax returns are properly discoverable, particularly where, as here, defendant is entitled to disclosure of plaintiff's [corporate] income tax returns and the requested financial information with respect to said corporation."

The difficulty for me with this determination is that it does not take into consideration the special and unique circumstances of this matter.

I agree with the statement in the majority's decision that "the record reveals . . . detailed and specific reasons for believing that plaintiff may be . . . a fraudulently incorporated professional service corporation . . . ." The fact that there are "detailed and specific reasons" to believe that Valentina Anikeyeva may be involved in a fraudulent scheme, appears to me to mandate that the insurance carrier be permitted to obtain sufficient facts to either prove the specific fraud or establish the bona fides of plaintiff.

I take this position being mindful with regard to the legal doctrine of falsus in uno, falsus in omnibus. That is, that one who has submitted false documents to create multiple professional service corporations may also be a person who is less than accurate in the keeping of corporate records and personal records, including income tax records. It is therefore conceivable that the corporate records may show substantial payments being made to Anikeyeva as the owner of the facility, but her personal taxes may not reflect such payments. Such a finding would lead to the conclusion that she is not the "actual" owner of the facility.

Indeed, defendant alleges that Anikeyeva is the sole shareholder of not less than 20 professional service corporations, which also may have been fraudulently incorporated (see e.g. Ava Acupuncture, P.C. v State Farm Ins. Co., 16 Misc 3d 138[A], 2007 NY Slip Op 51756[U] [App Term, 2d & 11th Jud Dists 2007]; Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 15 Misc 3d 110 [App Term, 2d & 11th Jud Dists 2007]; Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 14 Misc 3d 131[A], 2007 NY Slip Op 50052[U] [App Term, 2d & 11th Jud Dists 2007]; North Acupuncture, P.C. v State Farm Ins. Co., 14 Misc 3d 130[A], 2006 NY Slip Op 52523[U] [App Term, 2d & 11th Jud Dists 2006]; First Help Acupuncture P.C. v State Farm Ins. Co., 12 Misc 3d 130[A], 2006 NY Slip Op 51043[U] [App Term, 2d & 11th Jud Dists 2006]; Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90 [App Term, 2d & 11th Jud Dists 2006]). There is sworn testimony that it is Anikeyeva's husband [*4]who is the actual owner of these professional service corporations and that he personally appeared and removed large sums of money (approximately $100,000 a month) from each of the 20 corporations. There is also information that employees were told to "stonewall" any investigation and were given letters containing false statements to sign and send to the Insurance Department.

We are aware and should be mindful of the numerous other matters involving the very same individual which have been determined by this and other courts, to contain pervasive fraud. For example, Anikeyeva has failed to appear for several examinations under oath; a Dr. Aziz who operated out of several facilities in which Anikeyeva also operated her professional service corporations was indicted for insurance fraud; there were links to three other individuals who were criminally charged with insurance fraud; and a suspicious burglary occurred at one of the facilities under investigation in which business files were stolen. It is a very suspect burglary when one breaks into an office and steals only certain business files but leaves behind office equipment, computers, etc.

Under normal circumstances, I would not permit the examination of personal income tax records, but this case does not present "normal" circumstances. Indeed, if any case can stand for the proposition that special and unique circumstances require special and unique treatment, this is that case.
Decision Date: July 10, 2008