On March 29, 2016, in the matter of Liberty Mutual Fire Insurance Company, et al. v Isaac Shapson, et al. (13-cv-05046-ENV-PK), Judge Eric N. Vitaliano of the United States District Court for the Eastern District of New York rejected medical professional corporations’ attempt to invoke the doctrine of Primary Jurisdiction to stay Liberty Mutual’s fraud-based affirmative recovery action pending an investigation by the New York State Department of Financial Services (“DFS”). Defendants argued that under section 5109 of the Insurance Law, which authorizes the DFS to investigate and de-authorize health providers from submitting claims through the No-fault system, Liberty Mutual’s action should be stayed pending an investigation and determination by DFS as to whether the professional corporations at issue were fraudulently incorporated. In general, the doctrine of primary jurisdiction applies in instances where, although a claim may be brought in court, an administrative agency is imbued with special competence to determine an issue that is the subject of the court claim and, therefore, should decide that issue before proceeding in court.
In summarily rejecting the application of Primary Jurisdiction, the Court noted that no technical expertise is required to determine that a corporation is fraudulently incorporated, observing that the federal courts are “extensively familiar with the exact type of fraudulent misrepresentations and RICO violations alleged [in Liberty’s action].” The Court further stated that “[g]iven the volume of similar litigation that has wended its way through the district courts before every, or nearly every, federal district judge in New York, it would be a startling conclusion to find that such cases were, all this time, beyond the competence of these courts.” After concluding that none of the factors that apply to the doctrine of Primary Jurisdiction were present in the Liberty case, the Court denied defendants’ motion to stay.
