DISMISSAL DUE TO DISSOLUTION OF PLAINTIFF CORPORATION

All Care Med. Svcs. of NR, PC a/a/o Chela Charles v. MTA LI Bus, Index #: 1079/06 (N.Y. Civ. Ct., Queens 6/20/2012)

Our office has successfully obtained dismissal of lawsuits that had been maintained by medical providers whose professional corporations (PC’s) had long since been dissolved.

In a lawsuit, when an individual plaintiff dies, there is no longer a plaintiff in existence, and CPLR § 1015 thus requires that “substitution” be made (e.g. that the plaintiff’s estate be brought into the action as a substitute).  Similarly, CPLR § 1017 provides that “substitution” must also be made if “a corporate party is dissolved.”  Corporations enjoy a separate and distinct legal identity from their shareholders, which continues to exist even in the event of a sole-shareholder’s death.  It is as if the corporation were itself its own individual.  Accordingly, the CPLR treats dissolution of corporations similar to the death of individuals.  Under CPLR § 1021, if “substitution is not made within a reasonable time, the action may be dismissed” as against the individual deceased, or the dissolved corporation. No-Fault plaintiffs’ attorneys have insisted that Business Corporation Law § 1006 (which allows a dissolved corporation to “wind up its affairs” by, among other things, retaining the power to sue in the corporate name) renders CPLR § 1017 dead letter law and permits them to proceed in litigation, as long as the services at issue were provided prior to dissolution.  This appears to be a commonly accepted rule.

Upon our reading of these statutes, however, not only are CPLR § 1017 and § 1021 still good law in full force and effect, but “winding up” under BCL § 1006, like substitution under the CPLR, is required to take place within a reasonable time.  But, surprisingly, there is no controlling no-fault case law on this subject.

Appellate Division authority limits the “reasonable time” within which an individual may be substituted to at least two (2) years.  We therefore moved to dismiss a suit by All Care Medical Services of NR, PC, a medical provider whose professional corporation had been dissolved for more than two years.  After oral arguments, Civil Court, Queens County (Schwartz, J.) issued an Order on June 20, 2012 that the Complaint would be dismissed, as “Plaintiff’s failure to substitute or otherwise wind up its affairs in this matter since the Plaintiff’s Professional Corporation was dissolved warrants dismissal as six (6) years exceeds the “reasonable time” within which such was required to be effectuated.”  In an Order issued June 15, 2012, Suffolk County District Court (Hackeling, J.) granted our motion to dismiss the Complaint of WM Medical Services PC, et. al. v. NYC Trans. Auth., Index #: 1223/04 (Dist. Ct., 3rd Dist, Suffolk, 6/15/12) based on failure to effect timely substitution under CPLR § 1021, where the plaintiff was dissolved four (4) years prior.

These recent decisions serve as proof not only that thinking outside the box and going against commonly accepted (but false) interpretations of the law may pay off, but also that the Courts are willing to dismiss claims of dissolved corporations, in order to prevent those parties from (in the words of a Civil Court judge in a non-no-fault case) becoming “a mere puppet, whose strings are pulled by lawyers looking for fees.”

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