Weiss Zarett Defeats Motion To Dismiss Fraudulent-Conveyance Complaint

By Michael J. Spithogiannis, Esq.
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Fundamentally, a judgment is a decree determining a lawsuit. If the plaintiff is awarded damages, the judgment will direct the defendant to pay. If the defendant refuses, it’s up to the plaintiff to find assets to seize. But what if the defendant hid or transferred assets to avoid paying? 

New York’s Debtor and Creditor Law allows creditors to void certain asset transfers deemed fraudulent. Also, while a judgment against a corporate entity with no assets is usually worthless, a judgment creditor may, under circumstances where corporate formalities have not been followed, pierce the corporate veil and look to the assets of the company’s individual owners. So too, under the de facto-merger doctrine, if the debtor tries to avoid paying by closing up shop and opening under a new name, the creditor may, if certain factors are present, enforce the judgment against the successorentity. 

Years ago, a dispute arose almost immediately after the parties signed a 15-year, commercial lease for ground-floor premises in a six-story building owned by Weiss Zarett’s client in the Washington Heights section of Manhattan. 

The tenant, a corporation in the business of selling building material, hardware, and plumbing supplies, entered the then-vacant premises and caused severe structural damage. The landlord sued, and after years of hard-fought litigation and a seven-day bench trial, the landlord was awarded a judgment for its damages. 

In subsequent proceedings to enforce the judgment, evidence was uncovered indicating that the tenant systematically transferred assets to render itself judgment proof.  Weiss Zarett sued on the landlord’s behalf to set aside these transfers as fraudulent. The tenant’s principals were also sued, as was a newly formed entity believed to have been created to take over the tenant’s assets and business operations.  The defendants filed a pre-answer motion to dismiss the case. On December 21, 2021, the Supreme Court, New York County, denied the defendants’ motion, sustaining all causes of action.


Weiss Zarett’s tenacious representation may yet result in the judgment’s satisfaction, despite efforts to frustrate enforcement.

If you require legal representation in connection with a business or real-estate dispute, please feel free to contact Michael J. Spithogiannis, Esq. at mspithogiannis@weisszarett.com or call our office at 1-516-637-7000 and ask to speak with one of the attorneys in our Litigation Department.

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NYC MANDATES VACCINATION FOR PRIVATE EMPLOYEES

By Jessica Woodrow, Esq.
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On December 13, 2021, the Commissioner of the New York City Department of Health and Mental Hygiene issued an emergency Order mandating Covid-19 vaccination for private employees pursuant to Section 3.01(d) of the Health Code and Sections 556 and 558 of the New York City Charter. The emergency Order requires covered businesses to generally exclude their unvaccinated workers in New York City starting December 27, 2021. Whereas previous mandates applied primarily to city employees and individuals working with children and other vulnerable populations (including physicians and other health care workers), the new Order now applies to any “non-governmental entity that employs more than one worker in New York City or maintains a workplace in New York City.” The mandate also applies to solo practitioners who work in shared workspaces or interface with the public. The Order, which permits “reasonable accommodations for medical or religious reasons,” will remain in effect until rescinded, amended, or modified by the Board of Health.

Beginning December 27, 2021, workers must provide proof of vaccination against Covid-19 to their employer before entering the workplace. The covered employer must exclude from the workplace any worker who has not provided such proof, except for individuals working from home who do not interact with co-workers or the public, individuals entering the workplace “for a quick and limited purpose,” and non-city residents who are performing artists or college or professional athletes as defined under the “Key to NYC” program rules. Under the Order, a “worker” is defined as a “full- or part-time staff member, employer, employee, intern, volunteer or contractor of a covered entity, as well as a self-employed individual or a sole practitioner.” The order does not apply to employers or individuals who are already subject to another Order of the Department, the Board of Health, the Mayor, or any State or federal entity that is currently in effect and requires the entity to maintain or provide proof of full vaccination, or to individuals who have been granted a reasonable accommodation pursuant to another Order.

Covered employers are required to verify all workers’ proof of vaccination and/or record of reasonable accommodation, maintaining a record of each worker’s name, whether the worker is fully vaccinated, and the basis for any reasonable accommodation with supporting documentation. For contractors and other non-employee workers, the covered entity may instead request that the worker’s employer confirm the proof of vaccination, but must maintain a record of the request and confirmation. Upon request by any City agency, the covered employer must produce these records for inspection. Records created or maintained pursuant to the Order must be treated as confidential by the covered employer. No later than December 27, 2021, covered employers must affirm compliance using a form to be provided by the Department and must post the affirmation conspicuously.

The stated purpose of the new vaccine mandate is to take action to reduce the transmission of Covid-19 as necessary “for the health and safety of the City and its residents… to protect the public health against an existing threat.” The decision to issue the Order was based in part on a study by Yale University, which “demonstrated that the City’s vaccination campaign was estimated to have prevented approximately 250,000 Covid-19 cases, 44,000 hospitalizations, and 8,300 deaths from Covid-19 infection since the start of vaccination through July 1, 2021.” The Department found that “between January 1, 2021, and June 15, 2021, over 98% of hospitalizations and deaths from Covid-19 infection involved those who were not fully vaccinated.”


Jessica Woodrow is an Associate Attorney in the litigation and administrative proceedings practice group, handling matters involving all aspects of civil litigation with a primary practice focus on healthcare law. She can be reached at jwoodrow@weisszarett.com or 516-627-7000.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a New York law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, employment counseling and controversies, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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HEALTHCARE FRAUD: SELF-DISCLOSURE PROTOCOL UPDATE

By Mathew J. Levy, Esq. & Seth A. Nadel, Esq.
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What is healthcare fraud? There are the obvious cases of greed, such as physicians billing for fictitious patients, services never performed, and the rendering of unnecessary medical procedures.  However, there is more to healthcare fraud than the obvious. This includes widely practiced rule-bending to assist patients, such as exaggerating either the severity of a patient’s condition, changing a patient’s billing diagnosis, or reporting signs or symptoms that a patient did not have to help the patient secure coverage for needed care.  Recent events make clear that these infractions can result in serious legal issues. The truth is that even well-meaning practitioners who bend the rules are placing their careers, and indeed their very freedom, at risk. 

On November 8, 2021, for the first time since 2013, the United States Department of Health & Human Services Office of the Inspector General (OIG) made substantive revisions to its Self-Disclosure Protocol (SDP).

The SDP – now officially known as the “Health Care Fraud Self-Disclosure Protocol,” pursuant to the recent updates – is intended to allow providers to voluntarily disclose evidence of fraud or improper billing practices to avoid the costs and business disruptions associated with government investigations and possible litigation. In other words, if a provider discovers that it has been previously reimbursed for claims which it knows or should have known to be legally improper (such as claims involving upcoding, overbilling, violations if the Anti-Kickback Statute, and others), it can choose to voluntarily disclose the impropriety in the interest of a more expedient and favorable resolution rather than wait for the government to discover, investigate and possibly sanction the provider.

list of recent enforcement actions on OIG’s website illustrates just some of the types of claims which are commonly the subject of disclosures. In several cases, providers paid penalties  based on having disclosed that they employed individuals they knew or should have known were excluded from the Medicare or Medicaid programs. Other settlements came about as a result of disclosing instances of upcoding, billing for services provided by unlicensed individuals, or submitting claims for incident-to services not covered by Medicare. In one instance, a durable medical equipment company was required to pay $7.1 million for dispensing equipment from unenrolled locations while representing the services were being performed at a different enrolled location.

Other than alleviating the anxiety inherent in knowing that a possible government enforcement action could strike at any time, the self-disclosure process has several notable benefits for providers which avail themselves of it. One key benefit is that penalty calculations in SDP cases tend to be lower than in other government enforcement actions. Although there is no firm standard, the government’s general practice is to require damages in a minimum amount of 1.5 times the actual damage rate (i.e. the amount of the improper claims), whereas the False Claims Act and Civil Monetary Penalties Law can authorize up to triple damages in other cases. Providers who self-disclose also enjoy a presumption by OIG that they will not be required to enter into a Corporate Integrity Agreement, and a suspension of the provider’s requirement to report and return overpayments under CMS regulations until a settlement of the disclosed matter is reached.

For 2021, there are several notable updates to the SDP. First, as mentioned, is the name, which has been amended to “Health Care Fraud Self-Disclosure Protocol” (previously the “Provider Self Disclosure Protocol”), presumably to clarify that the protocol applies to any “person,” rather than merely providers. OIG also published updated statistics, showing that between 1998 and 2020, OIG resolved over 2,200 disclosures, resulting in over $870 million in recoveries to the federal healthcare programs.

To focus its enforcement efforts and more efficiently allocate OIG’s resources, the 2021 updates also provide for higher minimum settlement amounts required to resolve matters which come about as a result of SDP disclosures. Previously, resolutions under the SPD required minimum settlements of $50,000 for disclosed violations of the Anti-Kickback Statute, and $10,000 for all other violations. Under the 2021 updates, the minimum settlements for both have been doubled, to $100,000 and $20,000, respectively.

The 2021 updates also brought several logistical changes to the SDP process. Whereas previously the self-disclosing party could submit an SDP either by mail or through OIG’s online portal, all disclosures must now be sent through the portal. There is also a new requirement that the self-disclosing party must identify the estimated damages to each federal healthcare program as well as the sum of all estimated damages. The updates further clarify additional requirements for use of the SDP for entities subject to existing Corporate Integrity Agreements, and require the disclosing party to state that it is subject to a CIA, and send a copy to the party’s assigned OIG monitor.

Finally, the 2021 updates also contain minor changes to the provision regarding OIG’s coordination with the United States Department of Justice (DOJ) in civil and criminal matters. Unfortunately, although the SDP can be a useful mechanism for more favorably resolving civil matters involving false claims, and while OIG may advocate for leniency from DOJ based on a party’s self-disclosure, use of the SDP does not preclude a related civil investigation by DOJ unless DOJ chooses to participate in any resulting settlement. This has not changed with the 2021 update. However, the language of the SDP with respect to criminal matters has been amended to reflect that OIG no longer “encourages” parties to disclose potential criminal conduct, but that OIG will no longer advocate for a benefit in any prospective criminal matter based on the disclosing party’s use of the SDP. In other words, OIG seems committed to leaving criminal matters to the DOJ, and a provider cannot rely on its use of the SDP to mitigate the consequences of any potential criminal conduct.

A full copy of the updated SDP may be found on OIG’s website here.

The healthcare attorneys at Weiss Zarett routinely assists physicians in connection with OIG self-disclosure protocols, audits and investigations by governmental agencies and third-party payors, as well as investigations by state and federal law enforcement agencies such as DOJ and New York Medicaid Fraud Control Unit. If you have any questions or require assistance with such a matter, please feel free to reach out to Mathew J. Levy, Esq., at 516-929-3320 or email: mlevy@weisszarett.com or Seth A. Nadel, Esq. at 516-926-3308 or email: snadel@weisszarett.com .

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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Business Entity Formation: Choosing the Right Business Structure for Your Needs

By Mathew Levy, Esq. & Mauro Viskovic, Esq.
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Are you looking to start a business and getting ready to decide on the business entity? Choosing your business’s legal structure is one of the most critical steps you must take in forming your business.  Often professionals spend too little time considering what business structure would maximize their profit and minimize their exposure to liability.  Sole proprietorships, partnerships, limited liability companies, and corporations are among the most common types of business entities and each poses different advantages and disadvantages. 

Anyone contemplating a new venture would be well advised to assess the needs of the venture and choose the structure that best suits its likely needs.  In doing so, consider how many investors will have an ownership interest in the business and the extent of their respective ownership, control, and liability.  Also, consider the time and cost associated with setting up a business entity, tax consequences, the transferability of ownership and management interest, and the intended lifespan of the entity.

Here’s a quick look at the most common types of business structures you can select from and their characteristics.  

The Sole Proprietorship

A sole proprietorship is the simplest type of business entity and requires minimal paperwork.  It is an unincorporated business that’s owned by the individual running it. A sole proprietorship is the default choice for anyone who runs a business but hasn’t set up another formal business structure like an LLC. As a sole proprietor, there’s no liability separation between your personal and business assets and expenses. You are personally responsible for all your business’s debts and obligations.

Individuals that do a lot of contractual work, such as freelancers, consultants and personal trainers often choose to file their taxes as sole proprietors. This is the easiest way to go if you’re just starting out or you’re not yet making enough profit to justify the costs of an LLC or corporation. However, even if you’ve been in business for decades, a sole proprietorship may still be the best option, depending on the type of business you run. It’s all going to depend on your income, business type, and your personal management preferences.

A sole proprietorship can only have one owner. If you take on a business partner, your unincorporated business will become a general partnership.

The Partnership

A partnership is an organization composed of two or more persons or entities that join forces for the purpose of running a business for profit.  Its owners or “partners” share the ownership and management interest of the partnership.  While a partner can freely assign her profits (ownership interest) to another, she may not assign her control (management interest) without the consent of all of the partners, unless agreed upon in writing.  Partnerships enjoy limited life and dissolve upon the death, bankruptcy, or withdrawal of any partner.  

While a partnership may be formed without a written agreement, the failure to do so is a recipe for disaster.  Written partnership agreements should spell out the financial and managerial responsibilities of each partner, including the requisite capital contributions of each and how profits and losses will be apportioned.  The partnership agreement may also provide guidelines for the transfer of ownership interest and the dissolution of the business.  Despite any such agreement, New York law holds each partner liable for acts performed on behalf of the partnership by any partner or employee.  Partnership liability is unlimited and can place personal assets at risk. 

Significantly, partnership income is not subject to taxation.  Rather, each partner is taxed individually for his own income.  However, by filing certain forms, a partnership can elect to be taxed like a corporation if this arrangement will create tax savings.  

The Corporation

A corporation is a legal entity owned by one or more persons (or other business entities).  Owners are issued stock (i.e. shares of corporate ownership).  Shareholders elect directors who set corporate policy and appoint officers responsible for the actual operation of the business.  Through its officers or directors, a corporation may enter into contracts, own property, sue or be sued, pay taxes and conduct business.  Shareholders enjoy limited liability and a shareholder’s risk is generally limited to the value of his or her stock.  

Corporations have many rules associated with formation and maintenance.  A corporation must file a certificate of incorporation setting forth its name and corporate purpose.  In order to assure limited shareholder liability, corporations are required to obey a strict set of rules and maintain particular business records.  The filing of a certificate of incorporation in this state designates the secretary of state as the corporation’s agent for the receipt of legal processes, such as a summons or a subpoena.  

Unlike partnerships, corporations are separate and distinct legal entities from their shareholders.  Consequentially, corporations can enjoy perpetual life and their stock may be freely transferred.  Also, corporate income is taxed twice.  A corporation is taxed on its income and its shareholders are taxed on the dividends they receive.  However, shareholders that also work for the corporation may enjoy tax-free fringe benefits such as health and life insurance.  Entities known as “S” corporations are taxed like partnerships but enjoy the limited liability and other advantages of incorporation.  With some exceptions, “S” corporations cannot have more than 100 shareholders, all of which must be U.S. residents, qualifying trusts, or certain tax-exempt individuals.   

The LLC

A limited liability company or LLC is an entity owned by one or more natural persons or entities, known as “members” or “managers.”  It is formed by filing an article of organization with the state in conformance with the requirements of New York’s Limited Liability Company Law.  Significantly, members are not personally liable for the business debts of the company, unless specified by the articles of incorporation.  The entity may elect whether it will be treated like a corporation or a partnership for tax purposes, without being subject to the liability of a partnership or the restrictions imposed on an “S” corporation.  An LLC must adopt a written operation agreement setting forth how and by whom the company is to be managed, how ownership interests may be transferred, the obligations of the members with respect to each other, and the circumstances under which it may be dissolved.  

Formation of an LLC may be expensive and technical.  New York law provides minimum requirements for a business to receive limited liability company treatment.  Like a partnership, an LLC has limited life.  The operating agreement must specify an outside date for the dissolution of the company.  Absent a contrary provision in the operating agreement, an LLC will dissolve upon the death, withdrawal, or bankruptcy of a member.  Like a partnership, unless otherwise provided in the operating agreement, a member’s financial interest in the LLC is freely transferable, but her management interest is not, absent the consent of the other members.

Should you have any questions regarding the implications of choosing your business entity type, please contact Mathew Levy, Esq at 516-926-3320 or email mlevy@weisszarett.com or Mauro Viskovic, Esq at 516-751-6537 or mviskovic@weisszarett.com

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy, and creditors’ rights, and commercial real estate transactions.

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WEISS ZARETT WINS REVERSAL ON APPEAL AND DISMISSAL OF TORTIOUS-INTERFERENCE CLAIMS

By Michael D. Brofman, Esq. & Michael J. Spithogiannis, Esq.
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Imagine winning litigation after being a defendant in a contract dispute and then having the plaintiff start another suit arising out of the same contract but on a different theory.  That is essentially the issue that Weiss Zarett faced recently in its appeal to the Appellate Division Second Department.  The matter in question arose from two cases in the Supreme Court Nassau County.  In the first case, the plaintiff sought to foreclose on a mortgage arising out of a joint- venture agreement.  Weiss Zarett represented the new owner of the commercial real property in question, which it purchased after the foreclosure litigation had commenced.  Weiss Zarett successfully intervened for the new owner in  the pending foreclosure action and asserted a counterclaim to quiet title.  Ultimately, on appeal, the underlying foreclosure action was dismissed, and a judgment was entered in favor of the new owner cancelling and discharging  the mortgage of record.  Immediately thereafter, plaintiff again sued the same joint-venture parties under the same joint- venture agreement and added the new owner as a defendant, asserting  that it tortiously interfered with the joint venture agreement. The new case was assigned to a different Supreme Court Justice.  Weiss Zarett moved to dismiss the case as to the new owner, on the grounds (among others) that the plaintiff could not split its causes of action and was barred from asserting claims it could have asserted in the first action. The Supreme Court  denied the motion to dismiss. On appeal, the Appellate Division, Second Department, reversed and dismissed the case as to Weiss Zarett’s client, effectively reminding parties that they can’t have two bites at the apple!

Should you need the assistance of skilled and experienced counsel to assist you in litigation arising from commercial real estate transactions, do not hesitate to contact Michael D. Brofman, Esq. at mbrofman@weisszarett.com and Michael J. Spithogiannis at mspithogiannis@weisszarett.com.