Allstate Insurance Company et al v. A & F Medical P.C. et al
MEMORANDUM AND ORDER denying (331) Motion to Disqualify Counsel. See attached for discussion. Ordered by Chief Mag. Judge Roanne L. Mann on 5/30/2017. Associated Cases: 1:14-cv-06756-JBW-RLM, 1:15-cv-03639-JBW-RLM (Proujansky, Josh)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
ALLSTATE INSURANCE COMPANY,
MEMORANDUM AND ORDER
A & F MEDICAL P.C., et al.,
ALLSTATE INSURANCE COMPANY,
-againstART OF HEALING MEDICINE, P.C., et al.,
ROANNE L. MANN, CHIEF UNITED STATES MAGISTRATE JUDGE:
Currently pending before the Court, in these actions 1 brought pursuant to the Racketeer
Influenced and Corrupt Organizations Act (ARICO@), 18 U.S.C. ' 1961 et seq., is a motion
Allstate Insurance Company v. Art of Healing Medicine, P.C., 15-cv-3639 (JBW), is one of five
member cases opened by the Clerk of Court at the direction of the Honorable Jack B. Weinstein in
response to motions to sever filed by various defendants named in the lead action, Allstate Insurance
Company v. A & F Medical, P.C., 14-cv-6756 (JBW). See Order (June 23, 2015), Electronic Case
Filing (AECF@) Docket Entry (ADE@) #171. Despite the two docket numbers, the remainder of this
opinion will refer to the litigation initiated by the Allstate plaintiffs as a single Aaction.@ All citations
to docket entries pertain to the docket in the 14-cv-6756 case unless otherwise noted.
filed by defendants Art of Healing Medicine, P.C., Alexander Pinkusovich M.D. and Svetlana
Pinkusovich M.D. (collectively, the AAOH defendants@) to disqualify counsel for plaintiffs
Allstate Insurance Company, Allstate Indemnity Company, Allstate Property & Casualty
Insurance Company and Allstate Fire & Casualty Insurance Company (collectively, Aplaintiffs@
or AAllstate@). See Motion to Disqualify Counsel Stern & Montana, LLP and for a Protective
Order and Temporary Stay (Nov. 14, 2016) (AMot. to Disqualify@), DE #331. The motion to
disqualify, which is opposed by plaintiffs, see Response in Opposition (Nov. 15, 2016)
(AAllstate=s Opp.@), DE #332, has been referred to the undersigned magistrate judge by the
Honorable Jack B. Weinstein. See Order referring motion to Magistrate Judge (Mar. 17,
2017), DE #395. By Electronic Order dated May 25, 2017, this Court denied the motion to
disqualify, with an opinion to follow. This opinion sets forth the Court’s reasons for denying
the AOH defendants= motion.
On November 18, 2014, Allstate commenced this action against the above-named
defendants, among many other entity and individual medical providers, alleging that they had
engaged in a scheme to defraud Allstate through their involvement in the submission of false
and/or fraudulent insurance claims on behalf of injured persons allegedly covered by New
York's Comprehensive Motor Vehicle Insurance Reparations Act, N.Y. Ins. Law ' 5101 et
seq. See Complaint (Nov. 18, 2014) (ACompl.@), DE #1.
The Complaint alleges that the
AOH defendants purportedly performed Voltage Actuated Sensory Nerve Conduction
Threshold Testing (AVsNCT Testing@) on patients, to diagnose peripheral neuropathies. See
id. && 93, 95, 119, 191. Utilizing VsNCT Testing, the service provider purports to
selectively deliver an electrical current to the patient=s sensory nerves through an electrode
placed on the surface of the skin, thereby measuring the electrical response of a specific nerve
fiber known as the AA-Delta.@ See id. && 6-10, 200. According to plaintiffs, it is
impossible for the VsNCT Testing purportedly performed by the AOH defendants to
selectively stimulate and measure the A-Delta fiber. See id. && 11, 13, 209. In addition,
plaintiffs allege that the AOH defendants fraudulently billed Allstate for VsNCT Testing using
Current Procedural Terminology (ACPT@) Code 95904, when in fact such testing is not
reimbursable pursuant to CPT Code 95904, and was medically unnecessary and of no
diagnostic value. See id. && 17-18, 36-40, 93, 193, 194.
On July 28, 2016, the AOH defendants filed a separate action (the AAOH Action@)
against Allstate, alleging violations of RICO. See Complaint (July 28, 2016) (the AAOH
Compl.@), DE #1 in 16-cv-4208 (E.D.N.Y.). In that complaint, the AOH defendants
(proceeding as plaintiffs) allege that Allstate engaged in a scheme to avoid paying no-fault
insurance claims submitted by the AOH defendants. See id. & 7. According to the AOH
defendants, Allstate fraudulently paid each no-fault claim for VsNCT Testing within 30 days of
their submission, thereby lulling the AOH defendants into believing that such claims were
proper. See id. && 15, 20. Then, once the claims reached a significant amount in the
aggregate, Allstate sued the AOH defendants under RICO, in order to recover the payments
made to the AOH defendants, obtain treble damages, and prevent the AOH defendants from
submitting new no-fault claims. See id. && 23, 24, 31. The AOH defendants further allege
that they believed, inter alia, that VsNCT Testing is objective and that billing for VsNCT
Testing using CPT Code 95904 was proper. See AOH Compl. & 13 & n.3.
By order dated February 21, 2017, Judge Weinstein denied without prejudice Allstate=s
motion to dismiss the AOH Action and stayed all discovery therein pending the resolution of
the instant action against the AOH defendants. See Order (Feb. 21, 2017), DE #46 in 16-cv4208.
In the pending motion, the AOH defendants cite four grounds for disqualification of
plaintiffs’ counsel. First, they contend that attorney Robin Pass of the law firm of Stern &
Montana, LLP (“Stern & Montana”), which represented plaintiffs until it ceased operations as
of December 28, 2016, see Motion for Extension of Time (Dec. 27, 2016) at 1, DE #352, 2
endeavored to alter the deposition transcript of defendant Alexander Pinkusovich (“Dr.
Pinkusovich”) by directing the stenographer to change a word in the transcript outside the
presence of the AOH defendants’ then-counsel. Second, the AOH defendants argue that Stern
& Montana has a conflict of interest because the firm represented Allstate at the Acollectionsdefense level,@ and Allstate may invoke the advice-of-counsel defense in the AOH Action.
Third, the AOH defendants contend that Stern & Montana served as originators of and
advisors with respect to Allstate=s fraud prevention plan, and the AOH defendants therefore
intend to call Stern & Montana attorneys as witnesses regarding Allstate=s alleged scheme to
A number of Stern & Montana attorneys working on this case joined the law firm of Morrison
Mahoney, LLP, which, along with Cadwalader, Wickersham & Taft, currently represents plaintiffs.
manufacture RICO claims by fraudulently inducing the AOH defendants and other medical
providers to bill under CPT Code 95904. Finally, the AOH defendants argue that plaintiffs’
counsel has created the appearance of impropriety due to their false responses to inquiries as to
when plaintiffs first discovered the fraud claimed to have been committed by the AOH
defendants. See generally Mot. to Disqualify.
I. Alteration of Transcript
The AOH defendants argue that Stern & Montana=s attorneys are material witnesses
because defendant Alexander Pinkusovich was informed by his former counsel, Galina
Feldsherova, that she had inadvertently obtained a tape-recorded conversation between
plaintiffs’ counsel, Robin Pass, and the stenographer at Dr. Pinkusovich=s deposition,
concerning altering one word in the transcript from ATrump@ to Atramp.@ See Mot. to
Disqualify at 1-2. Ms. Feldsherova had reportedly been recording the deposition on a tape
recorder and mistakenly left the recorder on after the deposition ended. During the
examination of Dr. Pinkusovich, he had made a comment to Ms. Pass that she is like
“Trump,” “who wants to get involved in everything and objects to everything.” Id. at 2 &
Ex. B (DE #331-2) at 172. According to the AOH defendants, Ms. Pass attempted to have the
stenographer change the word ATrump@ to Atramp@ Ato negatively affect both the Court=s
perception of Dr. Pinkusovich and his credibility, and that of any jury.@ Mot. to Disqualify at
2. When Dr. Pinkusovich first raised this issue with the Court, see Letter to Court from
Alexander Pinkusovich dated August 12, 2016 (Aug. 17, 2016), DE #304, Allstate responded
that it would consent to change the transcript to Dr. Pinkusovich=s preferred wording, see
Letter in Response to Art of Healing/Pinkusovich Correspondence (Aug. 21, 2016) at 1, DE
#306. Not content with the proffered remedy, the AOH defendants seek to disqualify all of
plaintiffs’ attorneys of record from representing Allstate in this litigation.
Although not cited in the AOH defendants’ motion to disqualify, their charge that
plaintiffs’ counsel are “material witnesses” is predicated on the witness-advocate rule
embodied in Rule 3.7 of the New York Rules of Professional Conduct. Subsection (a) of the
Rule provides that "[a] lawyer shall not act as advocate before a tribunal in a matter in which
the lawyer is likely to be a witness on a significant issue of fact . . . ."
N.Y. R. Prof'l
Conduct ' 3.7(a). Subsection (b), which addresses imputation, has somewhat broader
application: “A lawyer may not act as an advocate before a tribunal in a matter if . . .
another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue
other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the
client.” Id. ' 3.7(b).
Recognizing that Rule 3.7 "lends itself to opportunistic abuse[,]" Murray v.
Metropolitan Life Ins. Co., 583 F.3d 173, 179 (2d Cir. 2009), the Second Circuit has held that
motions to disqualify under the witness-advocate rule should be subject to Afairly strict
Id. The movant "'bears the burden of demonstrating specifically how and as to
what issues in the case the prejudice may occur and that the likelihood of prejudice occurring
to the witness-advocate's client is substantial.'"
Id. (quoting Lamborn v. Dittmer, 873 F.2d
522, 531 (2d Cir. 1989)). "Prejudice" refers to testimony "that is 'sufficiently adverse to the
factual assertions or account of events offered on behalf of the client, such that the bar or the
client might have an interest in the lawyer's independence in discrediting that testimony.'"
Id. (quoting Lamborn, 873 F.2d at 531). Disqualification is Arequired only when it is likely
that the testimony to be given by [counsel] is necessary.@ Purgess v. Sharrock, 33 F.3d 134,
144 (2d Cir. 1994) (internal quotation marks and citation omitted; alteration by court in
Disqualification under subsection (a) applies only when the attorney-witness actually
serves as trial counsel.
See Murray, 583 F.3d at 179; Finkel v. Frattarelli Bros., Inc., 740
F.Supp.2d 368, 373 (E.D.N.Y. 2010). Based on her infrequent participation in the court
proceedings in this case, it is unlikely that, to the extent that Ms. Pass will even serve as a
member of the trial team, she will act as an advocate before the jury. See Murray, 583 F.3d
at 179 (reversing order disqualifying law firm, even though four of its attorneys were likely to
be called to testify at trial: “Three of them are transactional lawyers who are not and will not
be trial advocates; the fourth, a litigator, is a member of the trial team, but will not act as an
advocate before the jury.”). Accordingly, the witness-advocate rule embodied in Rule 3.7(a)
does not apply here.
Nor is disqualification warranted under Rule 3.7(b) based on imputation.
Disqualification under subsection (b) "should be ordered sparingly . . . and only when the
concerns motivating the rule are at their most acute." Murray, 583 F. 3d at 178 (citation
Consequently, "a law firm can be disqualified by imputation only if the movant
proves by clear and convincing evidence that [A] the witness will provide testimony prejudicial
to the client, and [B] the integrity of the judicial system will suffer as a result."
Id. at 178-79.
In contrast to the situation addressed under subsection (a), in imputation cases, the potential for
harm to the integrity of the judicial process -- and thus the concerns underlying Rule 3.7(a) -are "'absent or, at least, greatly reduced.'"
Id. at 178 (quoting Ramey v. Dist. 141, Int'l
Ass'n of Machinists & Aerospace Workers, 378 F.3d 269, 283 (2d Cir. 2004)).
In this case, the AOH defendants have fallen far short of meeting these standards.
an initial matter, even assuming arguendo that Ms. Pass had been directed by her clients to
seek to modify a particular word in the transcript, the AOH defendants have not demonstrated
that counsel’s testimony is necessary. In fact, it is hard to imagine that the trial court would
allow extrinsic evidence into whether, in speaking disparagingly of Ms. Pass, Dr. Pinkusovich
used the word “tramp” versus “Trump.” Even if this issue were conceivably relevant, the
AOH defendants do not need Ms. Pass’ testimony; they could seek to subpoena the alleged
tape recording of the conversation or call the stenographer as a witness.
In any event, the AOH defendants have failed to identify any testimony that Ms. Pass is
likely to offer that would be prejudicial to the plaintiffs. See Finkel, 740 F.Supp.2d at 377;
Ross v. Blitzer, No. 09 Civ. 8666 (HB), 2009 WL 4907062, at *3 (S.D.N.Y. Dec. 21, 2009);
Occidental Hotels Mgmt. B.V. v. Westbrook Allegro L.L.C., 440 F.Supp.2d 303, 315
(S.D.N.Y. 2006). Contrary to the premise of the AOH defendants’ argument, the key inquiry
is the potential prejudice to the client arising from the involvement of the "attorney-witness,"
not the alleged prejudice to the opposing party. Disqualification by imputation is an "extreme
remedy" that requires the AOH defendants to establish by clear and convincing evidence that
plaintiffs would be so prejudiced by Ms. Pass' potential testimony that it would harm the
integrity of the judicial system. The AOH defendants have failed to satisfy their heavy
burden to warrant depriving plaintiffs of their choice of counsel. See Evans v. Artek Sys.
Corp., 715 F.2d 788, 791 (2d Cir. 1983) (noting that disqualification motions are disfavored
because they impinge on a "client's right freely to choose his counsel").
In support of their motion to disqualify all of plaintiffs’ attorneys, the AOH defendants
rely on a hearsay affidavit from Dr. Pinkusovich, in which he states that his former counsel
“informed” him of the contents of the tape recording. See Affidavit of Alexander
Pinkusovich (attached as Ex. G to Mot. to Disqualify) ¶ 2, DE #331-7. Dr. Pinkusovich was
not present during the challenged conversation with the stenographer, nor has he listened to the
referenced recording. His proffer thus is a slender reed on which to rest the drastic remedy
of disqualification of the entire team of lawyers representing plaintiffs.
plaintiffs have consented to the AOH defendants’ preferred wording in the transcript,
defendants have not been prejudiced by the supposed misconduct.
The AOH defendants conclude this aspect of their motion to disqualify by arguing that
A[t]he appearance of impropriety and egregious conduct here constitutes an independent ground
Mot. to Disqualify at 2.
While misconduct may, in an appropriate
case, provide grounds for disqualifying counsel, see Ceramco, Inc. v. Lee Pharms., 510 F.2d
268, 271 (2d Cir. 1975), courts have recognized that Athe tactical use of attorney-misconduct
disqualification motions is a deeply disturbing phenomenon in modern civil litigation[,]@ see
Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 441 (1985) (Brennan, J., concurring).
Disqualification generally is reserved for situations where counsel’s conflict of interest
undermines the court’s confidence in the representation of the client or where counsel is
potentially in a position to use privileged information concerning the other party through a
prior representation. See Bobal v. Rensselaer Polytechnic Institute, 916 F.2d 759, 764-65 (2d
Cir. 1990) (citing Bd. of Educ. of City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d
Cir. 1979)). Where, as here, the “threat of tainting the trial does not exist, . . . the litigation
should proceed, the remedy for unethical conduct lying in the disciplinary machinery of the
state and federal bar.”
Bottaro v. Hatton Assocs., 680 F.2d 895, 896-97 (2d Cir. 1982).
Stern & Montana’s Collections Representation of Allstate
The AOH defendants further argue that the law firm of Stern & Montana has a potential
conflict of interest in the AOH Action because that firm represented Allstate in no-fault
litigation at the collections level.
According to the AOH defendants, Allstate may raise an
advice-of-counsel defense in the AOH Action, thereby putting Allstate in a position adverse to
See Mot. to Disqualify at 2-3. However, the AOH Action has been stayed and,
since no counterclaims have been asserted in the instant action, Allstate has no need to
interpose defenses, let alone an advice-of-counsel defense.
In addition, Stern & Montana
ceased operations at the end of last year, and Allstate is now represented by two other firms,
thereby further undermining the AOH defendants’ allegation of a conflict of interest.
Therefore, Stern & Montana’s representation of Allstate in collections proceedings does not
result in a conflict in this case.
III. Stern & Montana as Material Witness to Fraud Prevention Plans
The AOH defendants further argue that Stern & Montana’s advertising touting their
attorneys’ experience in fraud prevention plans proves that the firm acted as “originators and
advisors of such fraud prevention plans” with respect to Allstate. See Mot. to Disqualify at 3.
The AOH defendants therefore claim that they will seek testimony from Stern & Montana
attorneys regarding the AOH defendants’ theory that Allstate fraudulently induced them to bill
for VsNCT Testing under CPT Code 95904. See id.
The AOH defendants offer no concrete evidence that Stern & Montana acted as an
“originator and advisor” of Allstate’s fraud prevention plans. In fact, counsel for plaintiffs
states unequivocally that the firm “did not represent or provide services to Allstate in
connection with its fraud prevention plan.” Allstate’s Opp. at 6. Even if it had, the AOH
defendants make no showing that the attorney or attorneys who provided such advice will
represent Allstate as advocates at trial. As noted above, Stern & Montana is no longer
operating or representing plaintiffs.
Thus, the need for testimony from Allstate’s trial
attorney is purely speculative. See Goodwine v. Lee, No. 10CV6019 (VB)(LMS), 2014 WL
4377855, at *4 (S.D.N.Y. Sept. 3, 2014) (denying motion to disqualify where attorney may
not be required to give testimony).
IV. Appearance of Impropriety
Lastly, the AOH defendants argue that plaintiffs’ counsel’s conduct in this action
creates an appearance of impropriety. See Mot. to Disqualify at 3. Citing statements made
on plaintiffs’ behalf that plaintiffs first became aware of AOH’s allegedly fraudulent conduct in
2011, 3 the AOH defendants contend that these representations, made through counsel, were
3 Specifically, at a conference before Judge Weinstein, counsel for Allstate responded to a question
necessarily false, because AOH closed its no-fault department in September 2010. See Mot.
to Disqualify at 4. However, the AOH defendants fail to establish even the appearance of
impropriety with respect to plaintiffs’ counsel’s statements, neither of which is inconsistent
with the closing of AOH’s no-fault department in September 2010: Counsel’s statement to
Judge Weinstein and plaintiffs’ interrogatory response represented only that plaintiffs learned
of AOH’s fraudulent scheme in March 2011, not that AOH’s scheme continued into March
2011. Moreover, even if the AOH defendants could demonstrate the appearance of
impropriety, “[t]he Second Circuit has repeatedly warned . . . that [the appearance of
impropriety], standing alone, does not warrant attorney disqualification in this Circuit.” Bass
Pub. Ltd. Co. v. Promus Cos. Inc., No. 92 CIV. 0969, 1994 WL 9680 (SWK), at *9
(S.D.N.Y. Jan. 10, 1994) (citing Int’l Elecs. Corp. v. Flanzer, 527 F.2d 1288, 1295 (2d Cir.
from the Court regarding when plaintiffs discovered AOH’s fraudulent conduct: “In 2011, there were
allegations brought to our client that [AOH] was engaged in fraud.” Transcript of Hearing held on
July 25, 2016 (Sept. 12, 2016) at 15, DE #324. And in an interrogatory response, plaintiffs asserted:
“Plaintiffs became aware of the acts/omissions giving rise to the allegations contained in the Complaint
in or about March 2011 after learning that a claimant was referred to Art of Healing . . . . Plaintiffs
discovered the acts/omissions relating to VsNCT testing which gave rise to the allegations of the
Complaint . . . .” Plaintiffs’ Response to Interrogatory No. 1 (attached as Ex. D to Mot. to
Disqualify) at 4, DE #331-4.
For the foregoing reasons, the AOH defendants’ motion to disqualify is denied.
Brooklyn, New York
May 30, 2017
Roanne L. Mann
ROANNE L. MANN
CHIEF UNITED STATES MAGISTRATE JUDGE
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