IA PART 29
Justice Sklar
Abrams v. Handler — Motion Sequence Nos. 002 and 003 are consolidated and disposed of in accordance with the following decision.
Defendants Hitzig-Schwinning Medical Group, LLC ("LLC") and individual defendants Gary Hitzig, M.D., and John Schwinning, M.D., move for summary judgment dismissing the complaint against them in its entirety. Defendant Seymour Handler, M.D. cross-moves for summary judgment dismissing the third through the sixth causes of action. Plaintiff Robert Abrams moves for leave to amend his complaint .
In this essentially medical malpractice action arising out of hair transplantation treatment , plaintiff seeks damages from Hitzig, Handler & Schwinning, P.C. (the "PC"), also known as Long Island Medical Associates, from the three physicians who practiced through the PC, as well as from an allegedly successor corporation to the PC, LLC. The complaint asserts a claim for medical malpractice based on alleged departures from standards of accepted medical treatment, a claim for lack of informed consent , and claims for breach of contract, negligent misrepresentation, violation of General Business Law ("GBL") §§349 and 350, and punitive damages.
In these motions, LLC seeks dismissal on the ground that plaintiff's treatment took place before LLC was in existence, and that it is not a successor corporation of PC. Defendants Hitzig and Schwinning contend that they never rendered any care to plaintiff, nor did they supervise any such care, and that they are not vicariously liable for any purported misfeasance by other shareholders , directors or officers of the PC, e.g., defendant Handler. All of the defendants join in making arguments regarding why the third through sixth causes of action should be dismissed as a matter of law. Plaintiff seeks to amend to add allegations that the individual defendants are jointly and severally liable as partners, and are individually liable for punitive damages.
In November 1978, defendants Hitzig and Handler formed Gary Hitzig and Seymour Handler, P.C. , a professional corporation for the practice of medicine. Exhibit A to Affidavit of Gary Hitzig, dated March 30, 2000. Hitzig and Handler were the only shareholders. On September 18, 1996, defendant Schwinning became a shareholder and member, and the name was changed to Hitzig, Handler & Schwinning, M.D., P.C. (the "PC"). Exhibit B to Hitzig Aff. The PC did business under the name Long Island Medical Associates ("LIMA"). Exhibit C to Hitzig Aff. The defendant doctors were engaged in the practice of medicine, particularly through hair transplantation in the treatment of male baldness.
On September 29, 1995, plaintiff consulted with the PC, specifically with Dr. Handler and a LIMA staff member named Walter, seeking treatment for his baldness. He asserts that he first learned of LIMA through an infomercial called "Hair Today, " in which Dr. Hitzig appears, and Dr. Handler is mentioned, and through newspaper and radio advertisements . Exhibit B to Affidavit of Robert Abrams, dated June 28, 2000, in Opposition. Abrams asserts that, at this initial consultation, he was shown a video about the procedure, and the results which LIMA would achieve. Abrams Aff. in Opposition, ¶21. He claims that Dr. Handler promised him a natural-looking, full head of permanent hair, and that he would never go bald again. Id.
On October 27, 1995, prior to submitting to his first treatment, Abrams asked Dr. Handler to sign an agreement on Abrams' own letterhead , which provided, in part, that the transplant procedure to be performed that date was to "fill a widow 's peak and strip in the front middle section with approximately 1200 hairs, 10 percent single graphs [sic] in front for hairline, then linear graphs [sic] of only 2 and 3 hairs, for $2,000." Exhibit G to Abrams Aff. in Opposition. The agreement went on to provide that "[a]s a promotional tie in of a hair transplant with [Abrams'] feature film, ... Dr. Handler has graciously agreed to perform a free hair transplant to be filmed last week in May of 1996." Id. Dr. Handler signed the agreement, "Dr. Seymour L. Handler, L.I. Medical Associates." Id.
Abrams alleges that he underwent the transplant procedures on October 27, 1995, and on February 2, 1996. He returned for follow-up visits on March 1, 1996, December 6, 1996, January 17, 1997 and March 18, 1997. He claims that the transplants were performed under local anesthetic, and that during the procedures, Dr. Handler performed only some of the work, leaving the room for the majority of the time. Abrams Aff. in Opposition, ¶¶37-38. He claims that the harvesting of donor hair, the preparation of the grafts, the cutting of at least half the holes in the front of his head, and the placing of the donor hair into the recipient sites, was all performed by technicians , without Dr. Handler being present. Id. He also asserts that none of the defendant physicians were present when the bandages were placed on his head, when they were removed or when the stitches were removed. Id., ¶39.
On July 7, 1997, Schwinning and Hitzig formed a limited liability corporation, pursuant to New Jersey law, named Hitzig-Schwinning Medical Group, LLC ("LLC"). Exhibit D to Hitzig Aff. Hitzig and Schwinning are the only shareholders of LLC. Hitzig Aff., ¶7. LLC conducted no business until May 8, 1998, the date on which the PC filed under Chapter 7 of the Bankruptcy Code for liquidation. After May 8, 1998, LLC was run by Hitzig, as president, and Schwinning, as vice president, both former officers of the PC, and it retained many of the same employees. Plaintiff's Opposition, Exhibit O, Deposition of Louis Amico, at 1-15.
On July 22, 1998, pursuant to a Bankruptcy Court order, LLC purchased the PC's leases for its premises at: (1) 165 N. Village Avenue, Suite 128, Rockville Center, New York ; (2) 4 Progress Street, Suite 3B, Edison, New Jersey; and (3) 44 East 67th Street, Suite 1A, New York , New York. LLC also purchased some specifically listed personal property of the PC (listed on an attached inventory). LLC paid $35,000 for the leases and personal property. See, Exhibit E to Hitzig Aff. The Bankruptcy Court order excluded "any and all tangible personal property, such as accounts receivable, rent deposits, patient or customer lists, rights in any bank accounts, releases, licences, rights, causes of action, contingent or unliquidated claims of any nature, and intellectual property of any type whatsoever ," and any tangible personal property not explicitly listed on the attached inventory. Id.; see also, Plaintiff's Exhibit Y.
On July 30, 1997, Abrams, and other named plaintiffs, brought this action seeking damages for medical malpractice (the first two causes of action), and fraud. Upon a prior motion to dismiss, by decision dated June 17, 1999, this Court dismissed the other plaintiffs' claims without prejudice, and dismissed the fraud claim on the ground that it alleged the identical damages as the medical malpractice claims, and therefore merely duplicated them. Exhibit H to Defendants' Notice of Motion.
Upon amendment of the complaint, Abrams asserted several new causes of action: breach of contract (the third cause of action), negligent misrepresentation (the fourth cause of action), violation of GBL §§349 and 350 (the fifth cause of action), and punitive damages (the sixth cause of action). The breach of contract claim alleges that plaintiff had a written contract with Handler and the PC in which plaintiff was promised a hair transplant to fill in a widow's peak and strip in the front middle section of his scalp with "approximately 1200 hairs, 10 percent single graphs [sic] in front for hairline, then linear graphs [sic] of 2 and 3 hairs ," and for Handler and the PC to receive $2,000. Exhibit G to Abrams Aff. in Opposition. Plaintiff alleges that Handler and the PC breached by failing to fill in the widow's peak and strip as specified in the contract. Plaintiff also alleges an "implied individual contract" with all the defendants created through representations made to the public in the marketing of their services in the media, including in the infomercial "Hair Today," in a brochure entitled "The Hair Transplant Process," and in statements and representations made during consultations and conversations with plaintiff. He claims that defendants breached this contract in a number of ways, including, inter alia, by failing to produce a full head of hair, or a natural-looking appearance, with no visible scarring and minimal pain, and the completion of the procedures within a certain time period, with a particular number of procedures, for a specified cost. Amended Complaint, ¶¶79-88.
In his fourth cause of action for negligent misrepresentation , plaintiff alleges that because defendants, as his physicians and medical providers, were in a fiduciary relationship with him, they had a duty to accurately represent the results that could be reasonably expected , the number of treatments needed to obtain the desired results, and the techniques to be used. He alleges that they negligently provided misinformation to him, through the marketing materials and in consultations , regarding the results, the number of treatments and the techniques, and that they knew he would rely , and he did so rely, to his detriment. Amended Complaint, ¶¶89-100.
In the fifth cause of action , plaintiff alleges claims under GBL §§349 and 350 for deceptive business practices and false advertising. He alleges that defendants provided a medical service to consumers. He asserts that defendants employed extensive marketing, which had displayed one or more of defendants' names upon it, and the name LIMA, to promote their services to the general public. These marketing and advertising materials, the infomercial and the brochure, as well as radio and print ads, included testimonials from other alleged "patients." Plaintiff alleges that in these materials, defendants asserted that they would be able to alleviate plaintiff's baldness with a full, natural head of hair, that the results would be natural-looking, undetectable and permanent, and that only one transplant procedure would be needed, because recipients "would never go bald again ." The brochure stated that the transplanted hair will grow and "will cover your entire scalp with permanent hair within a short period of time ... you will need no further maintenance ... [and] you will be unlimited in both hair styling ... and activities." Plaintiff's Amended Notice of Motion, Exhibit F. Plaintiff asserts that the majority of the advertising put forth "before" and "after" photographs of persons who claimed to have been the recipients of a transplant procedure, without indicating the number of procedures required to obtain that "after" result. The advertising promised permanent, undetectable results in a single, simple procedure next to pictures showing men with heads of full, dense hair. The false statements included, inter alia: a full head of hair; a virtually painless technique; a once in a lifetime expense ; natural results; never go bald again; frontal hairline will be natural and not pluggy; linear grafting for a more dense, natural appearance without the tufted or cornfield appearance; end baldness; you can have your own growing hair again; thick head of your own growing hair; the hair transplant is a permanent , maintenance-free way to end baldness; and hair transplants are performed once in a lifetime and grow for the remainder of it. Amended Complaint, ¶¶101-113; see also, Exhibits C through F annexed to Plaintiff 's Amended Notice of Motion.
Plaintiff alleges that these representations were false and misleading . Specifically, he claims that multiple procedures would be required to even approximate the advertised results, and that the results would not be permanent, since there would be a need for a never-ending cycle of ongoing procedures. He alleges that defendants failed to explain that as the top of his hair continued to bald between the plugs and receded towards the crown, and the crown continued to bald, he would need additional hair transplants for the remainder of his life. Id., ¶¶117-118. He alleges that because of these misrepresentations, he was lured into consultations at which the same representations were made, and he was ultimately lured into undergoing the procedures. His injuries include being physically injured, disfigured and disabled, being required to undergo additional medical treatment, and suffering pain and discomfort and economic loss. Id., ¶125.
Finally, the sixth cause of action seeks punitive damages on the ground that defendants tortious and fraudulent conduct was willful, wanton, constituted gross negligence, and was aimed at the general public. Amended Complaint, ¶¶129-140.
In the proposed Second Amended Complaint, at issue on plaintiff's motion for leave to amend, plaintiff seeks to add allegations that defendants Handler, Hitzig and Schwinning are jointly and severally liable as partners under Partnership Law §§24, 26 and 27, because they failed to respect the corporate entity, if any, of the PC, and that a partnership by estoppel was created under Partnership Law § 27. Proposed Second Amended Complaint, ¶¶37-43. Plaintiff also seeks to add allegations that during the course of the transplant procedures, each of the physician defendants knowingly abdicated their roles as physicians to unqualified, unlicenced and unsupervised employees, and that, therefore, they are liable to plaintiff for punitive damages. Id ., ¶¶66-67, 71.
In moving for summary judgment, defendants Hitzig, Schwinning and the LLC assert several arguments for the dismissal of the complaint against them. First, these moving defendants contend that plaintiff's consultation and the transplants performed by Handler all took place before the LLC was in existence. They assert that no treatment was rendered by LLC, or by any of its employees, officers , shareholders or agents. Hitzig and Schwinning both submit affidavits in which they attest that they never treated or consulted with plaintiff, and that they never had any discussions about him or his medical care with anyone at the PC during the time that he was a patient of the PC. Hitzig Aff., ¶13; Affidavit of John Schwinning, MD, dated March 30, 2000. They urge that LLC is not a successor entity of the PC, pointing to the facts that LLC did not expressly or impliedly assume PC's tort liability, plaintiff is free to pursue any judgment against the PC against the PC's insurance, and there was no de facto merger or continuation of the PC. Hitzig and Schwinning also argue that they are not vicariously liable for the acts of Handler or of any other shareholder, officer or employee of the PC. They maintain that as members of a professional corporation, they are only liable for negligent acts which they committed, or which were committed by persons under their direct supervision. They contend that the undisputed facts show that plaintiff consulted with, and was treated by, Handler and technicians assisting Handler, and that neither of them had any involvement in such treatment.
Defendants Handler, Hitzig and Schwinning all seek dismissal of the third through sixth causes of action. With respect to the breach of contract claim, they urge that the contract was between plaintiff and the PC, not them individually. On the alleged " 'implied individual contract' ... created through the representations and promises made to the general public," they contend that the terms of this "contract" are too vague to be enforceable. They further argue that plaintiff basically concedes that no express promise was made to him to effect a cure or to accomplish a definite result. The negligent misrepresentation claim, they contend, should be dismissed because it is based on the identical facts and injury as the medical malpractice claims and, therefore , merely duplicates them. They further urge that this Court has already dismissed these allegations, previously labeled as a common-law fraud claim in a prior dismissal motion, and that that dismissal should be law of the case. The GBL claims in the fifth cause of action should be dismissed, according to defendants, for failing to state a claim. They argue that plaintiff's claims are not, as a matter of law, deceptive acts or practices. They assert that the allegations amount to an assertion that plaintiff was misled by statements in defendants ' advertisements and promotional materials that his hair loss could be addressed in a single transplant procedure, and that he was misled by defendants' failure to explain to him that he would continue to lose non-transplanted hair and would need continuing procedures. They claim that the advertisements were not misleading — they contained either straightforward descriptions of the services provided, and opinions about what some patients received, and what the doctors might be able to accomplish with other patients . Defendants claim that the advertisements promise nothing more than a free consultation. They assert that the ads do not state that a single transplant is all that would be needed, and they specifically state that it is the transplanted hair that is permanent, and will grow for the patient's lifetime, not , as plaintiff appeared to understand, the rest of his hair. They further argue that plaintiff fails to connect any actual injury to the alleged deceptive act or practice.
In opposition, plaintiff attests in his affidavit that he was deceptively lured and induced into submitting to hair transplant procedures through misrepresentations made by defendants and their staff in media advertising, brochures and videotapes and in direct statements to him, which caused physical and financial injury. Abrams Aff . in Opposition, ¶3. He states that he was falsely promised a "permanent, natural looking dense head of hair in a cost effective manner," and that his baldness would be cured. Id., ¶¶4-5. Plaintiff asserts that his injuries include the need for additional procedures to obtain a result approaching the pictures that he was shown, and to correct the scarring which he suffered from the first procedure, and the need for even more surgeries to maintain the hair density promised by defendants as he ages and loses more hair. Id. In the infomercial, plaintiff attests that defendants promised results that would be natural , permanent, that the frontal hairline would not be pluggy, and that after the procedure one would never go bald again. Id. ¶13. The "patients" presented in the infomercial claimed that they were cured of their baldness, that they were given back their own growing hair which could be styled in any fashion, that this was permanent, and that they would not have to worry about going bald again. Id., ¶14. Plaintiff states that each of the individual defendants appear on the infomercial, representing that a hair transplant was the best "cure" for baldness, since it would provide a full natural head of hair that would be permanent . Id., ¶16. Plaintiff also asserts that it was also misrepresented on the infomercial that all of the doctors were expert cosmetic surgeons, and that actually Hitzig was trained as a urologist, Handler was trained as a pediatrician, and Schwinning was trained as a vascular surgeon. Id., ¶17; see also, Plaintiff 's Opposition Exhibit N, at 50-60.
Plaintiff asserts that these promises were false and deceptive because: the transplanted hair did not cover his entire scalp, not with the density depicted in the photographs ; the hair did require further maintenance, since he will need continuous additional transplants as his other hair falls out, to maintain the look which defendants claimed would be permanent; and he had to undergo additional transplants and corrective work due to large gaps in between the plugs, scarring and an artificial and unnatural appearance. Abrams Aff. in Opposition, ¶27. He affirms that neither his widow 's peak nor the strip in the front of his head was filled, and instead that he has scarring, fibrosis , lumps and indents. Id., ¶¶41-42.
Plaintiff further states in his affidavit that defendants never represented themselves as a corporation, but that it appeared that the entity was "some form of joint partnership or simply a group of doctors acting under the name of Long Island Medical Associates or LIMA." Abrams Aff. in Opposition, ¶20. He affirms that he never saw any posting which conspicuously displayed the name of any professional corporation at defendants' 44 East 67th Street, New York, New York location. Id., ¶31. In his affidavit in support of the motion for leave to amend, he states that , in the infomercial and in other advertising, defendants only represented themselves as members of an entity known as Long Island Medical Associates, which he was left with the impression was a partnership . Abrams Affidavit in Support of Motion for Leave to Amend, ¶¶10-15. He claims that the letterhead of a cover letter sent to him accompanying a brochure does not indicate a corporation, but states only LIMA or Long Island Medical Associates. Id., ¶18, and Exhibit E annexed thereto. He claims that he further relied on a brochure, which listed the three doctors as owners of the facility, and LIMA as a "physician owned and operated facility." Id., ¶19. Plaintiff claims that he believed that Handler executed the contract as a partner in LIMA, and that there was no representation made that he was acting on behalf of a corporation . Id., ¶¶26-28.
With respect to the actual transplants which he underwent, plaintiff states that Handler was in and out of the room during the harvesting of the donor hair, and that he was not in the room at all during the preparation of the grafts, which were all performed by technicians. Abrams Aff . in Opposition, ¶37. He affirms that the technicians cut at least half of the holes in the front of his head without Handler's presence. Id. He further attests that Handler was not present for, nor did he supervise, the placing of the donor hair in the recipient sites. Id., ¶38. He asserts that because of all of the individual defendants' failure to supervise their personnel, he was left in the hands of unqualified, unlicenced employees, and that he thereby suffered excessive scarring and injury. Abrams Aff. in Support of Motion for Leave to Amend, ¶33. Plaintiff contends, in opposing defendants' summary judgment motion, that the technicians were allegedly trained on the job, but were neither nurses nor licenced to perform medical procedures. See, Plaintiff's Opposition Exhibit M, Deposition of Seymour Handler in Mitchell v. Handler, Index No. 7031/99 (Sup Ct, Nassau County), at 20-22.
Plaintiff also submits an affidavit from a physician who practices plastic surgery and hair transplantation and who reviewed the infomercial, various advertisements, the brochure "The Hair Transplant Process," and the cover letter that was sent to plaintiff with the brochure. Plaintiff's Opposition Exhibit I. This doctor stated that in his or her opinion, the advertising contained material misrepresentations and omissions with regard to: (1) the patient testimonials about the quality of care at LIMA; (2) the procedure being a permanent way to end baldness without explaining the need for additional surgeries to maintain the appearance; (3) the cost of maintenance over the person's lifetime; and (4) the number of procedures required to achieve a dense head of hair as depicted in the ads. Id., ¶¶4-10. The doctor states that the infomercial reasonably implies that a person will permanently receive the full head of hair shown in the photos in the short period of time discussed in the video. Id., ¶11. The doctor further attests that it is misleading to omit the fact that to "never go bald again" requires most persons to continue to receive additional transplant procedures. Id. The doctor also states that to promise a "cure" for baldness was deceptive, since, again, it implies a permanence without additional transplants. Id., ¶1 2. The "before" and "after" photos are deceptive, in this doctor's opinion, because they fail to disclose how many procedures were required, and over what length of time, to achieve those results. Id., ¶¶13- 16.
The motion for summary judgment is granted only to the extent of dismissing the third cause of action as against defendants Hitzig and Schwinning, the fourth cause of action for negligent misrepresentation, and the sixth cause of action for punitive damages . The motion for leave to amend the complaint is granted only to the extent of permitting the allegations in paragraphs 66, 67 and 71 of the Proposed Amended Complaint, seeking punitive damages as to plaintiff 's medical malpractice claim, and alleging that defendants Handler, Hitzig and Schwinning "are liable for punitive damages for abdicating their roles as physicians during the course of surgical procedures to unqualified and un-licenced [sic] employees and for failing to supervise the procedures in question ." Plaintiff's Amended Notice of Motion, at (b).
The proponent of a summary judgment motion " must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." Ayotte v. Gervasio, 81 NY2d 1062, 1063 (1 993); Estate of Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 259 AD2d 282 (1st Dept 1999). Failure to make such a prima facie showing requires denial of the motion. Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 (1985). To defeat a motion for summary judgment, the opposing party has the burden of presenting evidentiary facts sufficient to raise triable issues of fact. Rinaldi v. Holt, Rinehart & Winston, Inc ., 42 NY2d 369, cert denied 434 US 969 (1977); Indig v. Finkelstein, 23 NY2d 728 (1968). Such facts must be in admissible form, and "mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient." Zuckerman v. City of New York, 49 NY2d 557, 562 (1980).
While defendant LLC has made a prima facie showing, plaintiff has raised a triable issue of fact, with respect to the allegations of successor liability against LLC. Plaintiff has submitted some evidence demonstrating that there may have been a de facto merger of the PC and LLC.
Generally, a corporation which acquires the assets of another is not liable for the torts of its predecessor. Schumacher v. Richards Shear Co., 59 NY2d 239, 244-45 (1983). There are exceptions to this rule if (1) the purchaser expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, (3 ) the purchaser was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations. Id. at 245. These exceptions have primarily been applied in tort liability cases, to insure that someone pays for a victim's injuries. See, Grant-Howard Assocs . v. General Housewares Corp, 63 NY2d 291(1984); Nardi v. Hirsh, 245 AD2d 205 (1st Dept 1997) (applied to successor liability of physician's professional corporation).
With regard to the first exception , there must be something in the purchase documents indicating the acquiring company's intent to assume the tort liability of its predecessor. See, Wensing by Wensing v. Paris Indus.- New York, 158 AD2d 16 4, 167 (3d Dept 1990). Here, there is nothing in the papers to suggest that LLC expressly or impliedly assumed the PC's tort liability.
The exceptions for consolidation or merger and mere continuation "are based on the concept that a successor that effectively takes over a company in its entirety should carry the predecessor's liabilities as a concomitant to the benefits it derives from the good will purchased ." Grant-Howard Assocs. v. General Housewares Corp, supra at 296. It refers to a corporate reorganization in which "only one corporation survives; the predecessor corporation must be extinguished." Schumacher v. Richards Shear Co., supra, at 245. Here, the record indicates that the PC, the predecessor, survived the asset transfer as a distinct corporation, albeit in bankruptcy. The PC still retains the assets excluded under the Bankruptcy Court order. Under these circumstances, LLC cannot be cast as the PC's mere continuation . Schumacher v. Richards Shear Co., supra (predecessor survived even though it discontinued its business of selling, manufacturing and servicing shears, and it had few assets, no liability insurance, employees or business volume); Sweatland v. Park Corp., 181 AD2d 243, 245 (4th Dept 1992) (predecessor survived , even though in bankruptcy); Wensing by Wensing v. Paris Indus.- New York, supra, at 167; cf., Burgos v. Pulse Combustion, Inc., 227 AD2d 295 (1st Dept 1996) (sale of all assets and intangibles, including name, and predecessor ceased to exist); see, Mitchell v. Handler, Index No. 7031/99 (Sup Ct, Nassau County ) (June 29, 2000), adhered to upon rearg (December 8, 2000), (in action by a hair transplant patient against these same defendants, while finding issues of fact on de facto merger, court found that LLC was not a mere continuation of the PC, because the PC survived LLC's purchase of the leases and the office equipment).
Plaintiff, however, has raised an issue of material fact as to whether LLC's purchase of the PC's assets constituted a de facto merger. In considering the de facto merger exception, courts have considered several factors including: "(1) continuity of ownership; (2)cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and (4) a continuity of management, personnel, physical location, assets, and general business operation." Sweatland V Park Corp., supra at 245-46 (citations omitted). Not all of these factors must be present to demonstrate a de facto merger. Id. at 246. The determination must be made on a case -by-case basis. Id. The rationale for this de facto merger doctrine in the context of a tort action is the protection of tort claimants against attempts by ongoing businesses to avoid liability through the transfer of operations to another entity. Id.
Here, plaintiff submits evidence that the PC ceased operations when it filed for bankruptcy, and immediately thereafter LLC began to operate as a professional practice, though its formation occurred almost a year before. Plaintiff also asserts, and defendants do not dispute, that LLC is using the PC's phone number 1-800-4HAIR. The parties dispute whether LLC is using the PC's customer lists, and plaintiff submits letters by LLC that were sent to all patients and parties seeking information of the PC, advertising the opening of LLC. LLC also acquired most of the PC's officers, except Handler, and many of its employees. Further, while the PC had malpractice insurance , that insurance may not cover plaintiff's GBL §§349 and 350 claims, thus, triggering the rationale for the application of this doctrine in tort cases. See Sweatland v. Park Corp., supra; cf., City of New York v. Charles Pfizer & Co., 260 AD2d 174 (1st Dept 1999) (court finds source remained to pay for victim's injuries). Thus, plaintiff has raised an issue of fact as to whether a de facto merger between the PC and LLC occurred. See, Mitchell v. Handler, supra (December 8, 2000); see also, Nardi v. Hirsh, supra (court finds fact issue as to whether physician's professional corporation assumed his prior tort liabilities). To the extent LLC urges that the Bankruptcy Court's order approving the agreement between the PC and LLC excluding "causes of action " from LLC's purchase demonstrates there can be no successor liability, this is rejected. Liability based on a finding of a de facto merger may still lie to protect third parties such as plaintiff, who are strangers to such agreement. Grant-Howard Assocs. v. General Housewares Corp., supra, 63 NY2d, at 297; see, Burgos v. Pulse Combustion, Inc., supra at 296 (purchase agreement provisions that assets were sold free of adverse charges of any nature, and that predecessor was responsible for all claims, do not require finding no merger as a matter of law); Wensing by Wensing v. Paris Indus.- New York, supra, at 168; Mitchell v. Handler, supra (December 8, 2000). Accordingly, summary judgment dismissing the claims against LLC on the theory of successor liability is denied.
Summary judgment is also denied to defendants Hitzig and Schwinning. While defendants are correct that plaintiff fails to raise any issue regarding piercing the corporate veil or partnership by estoppel, they have failed to address plaintiff's allegations that they failed to control and supervise the nonmedical employees of the PC. First, as to piercing the PC's corporate veil, "[c]orporations ... are legal entities distinct from their managers and shareholders and have an independent legal existence." Port Chester Elec. Constr. Co. v. Atlas, 40 NY2d 652, 656 ( 1976). The court will pierce the corporate veil to prevent fraud where "the corporation is a 'dummy' for its individual stockholders who are in reality carrying on the business in their personal capacities for purely personal rather than corporate ends." Walkovszky v. Carlton, 18 NY2d 414, 418 (1966). The party seeking to pierce the veil must show that "the owners through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene." Morris v. New York State Dept. of Taxation and Finance, 82 NY2d 13 5, 142 (1993). Mere allegations that the corporation conducted business informally are insufficient to pierce the corporate veil. Bowles v. Errico, 163 AD2d 771 (3d Dept 1990). Here, Handler's testimony that the PC did not have any formal corporate or shareholders meetings (Plaintiff's Amended Notice of Motion , Exhibit H, at 95-101) and that things were done informally, does not warrant piercing the corporate veil. Further, plaintiff's apparent argument that because Hitzig appeared in the infomercial and the defendants all controlled the advertisements, the veil should be pierced, does not make any sense. Plaintiff presents no evidence that the PC was a "dummy" for the individual defendants to carry on their personal business.
Second, as to the partnership by estoppel theory, pursuant to Partnership Law § 27, which is also the subject of plaintiff's motion to amend, defendants demonstrate that they conducted business as a professional corporation using the assumed name LIMA, and plaintiff fails to raise an issue that they were actually a partnership. "In essence, Partnership Law § 27 provides that a person is estopped from denying the existence of a partnership when he, by words spoken or written or by conduct, represents himself, or consents that another represent him, as a partner of an existing partnership." Ranieri v. Leavy, 180 AD2d 723, 725 (2d Dept 1992). A corporation can be held to be acting as a partner by estoppel . See, John's, Inc. v. Island Garden Ctr. of Nassau, Inc., 49 Misc 2d 1086 (Dist Ct, Nassau County 19 66), affd without opn 53 Misc 2d 1021 (App Term, 2d Dept 1967). Partnership by estoppel should not be lightly invoked. Royal Bank and Trust Co. v. Weintraub, Gold & Alper, 68 NY2d 124 (1986). There are two elements to this theory. First, there must be sufficient indicia of partnership presented to plaintiff to constitute a representation that a partnership exists. Id. (defendant estopped from denying partnership where law firm space, stationery, phone number and listing continued to indicate partnership two years after partnership dissolved); Ranieri v. Levy, supra (no partnership by estoppel where only partnership indicia was use of company name without "Inc." and check made out by plaintiff in that name); Fleet Bank NH v. Royall, 218 AD2d 727 (2d Dept 1995) (defendant estopped to deny he is partner of established partnership , where he signed a modification agreement and a note for a loan to that partnership); John's, Inc. v . Island Garden Ctr. of Nassau, Inc., supra (defendants estopped where held selves out as a partnership in brochure, some corporations described as branches of single venture, one person presented as president of joint venture, one corporation promised to pay creditor from insurance proceeds due a different corporation , bookkeeping of corporations centralized). The mere use of the business name without the use of the term "incorporated" or "Inc.," is in itself insufficient indicia of partnership. Ranieri v. Levy, supra . Second, the party seeking to impose liability under this section must have relied upon those representations . See, White by White v. East Nassau Med. Group, 253 AD2d 812 (2d Dept 1998); Propoco, Inc. v. Ostreicher , 119 AD2d 740 (2d Dept 1986).
Here, the plaintiff himself, in his affidavits on these motions , never states that any of the defendants represented themselves, in words, as a partner. He fails to present any evidence that in the advertisements, in any of his consultations or treatment sessions, or in anything told to him by any employee, it was represented that defendants were partners and not a professional corporation. Rather, he states that they implied it was a partnership, and he assumed it was a partnership , based on the name Long Island Medical Associates. See, Abrams Opposition Aff., ¶¶20, 31; Abrams Aff . in Support of Motion for Leave to Amend, ¶¶10-15, 18-19, 26-28. This is not sufficient indicia of partnership to constitute a representation to plaintiff that a partnership exists. The fact that the PC used an assumed or trade name, which was duly registered in September 1996, but after defendants had already been using the name for some time, is simply not enough to indicate that the business was a partnership, and that Hitzig and Schwinning were partners. See, Ranieri v. Levy, supra. Thus, plaintiff fails to satisfy his burden in opposing summary judgment and in moving to amend to add these allegations.
However, plaintiff has raised a triable issue as to the vicarious liability of Hitzig and Schwinning under Business Corporation Law ("BCL")§ 1505(a). A doctor who practices in a professional corporation is generally not vicariously liable for the malpractice of another doctor who is an officer, shareholder, director or employee of the corporation. Hill v. St. Clare's Hosp., 67 NY2d 72, 79 (1986); Connell v. Hayden, 83 AD2d 30, 49-59 (2d Dept 1981); BCL § 1505(a). Vicarious liability may, however, be imposed when there is an agency relationship or control in fact. Hill v. St. Clare's Hosp., supra. BCL § 1505(a) provides :
Each shareholder, employee or agent of a professional service corporation shall be personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or by any person under his direct supervision and control while rendering professional services on behalf of such corporation.
(Emphasis added). It has been noted that this statute "reflects the common-law rule ... that a supervisor is liable if he directs or permits tortious conduct by those under his supervision or fails to exercise proper control over them." Connell v. Hayden, supra, at 59 (citation omitted) (emphasis added).
Plaintiff's complaint includes allegations of failing to properly train, instruct, supervise and control various non-medical employees who were actively involved in plaintiff's hair transplant procedures. Complaint, ¶58. The Proposed Second Amended Complaint asserts additional allegations that Hitzig and Schwinning abdicated their roles as physicians during the course of the surgical procedures to unqualified and unlicenced employees, and failed to supervise them. Proposed Second Amended Complaint, ¶¶66-67, 71. Defendants have a burden in moving for summary judgment seeking dismissal of the claims against them to present evidence to show that they did not, or could not have, controlled or supervised the employees of the PC. They really have failed to address this aspect of plaintiff's allegations, except to the extent of pointing to a letter from the Department of Veterans Affairs, indicating that the PC's training program was approved under the Service Members Occupational Conversion Training Act. Hitzig Reply Exhibit Q. While this indicates that there may have been some training, it fails to establish, prima facie, that Hitzig and Schwinning lacked control over , and did not supervise, the PC's employees involved in plaintiff's care. See, Indelicato v. Wyckoff Heights Hosp., 205 AD2d 664 (2d Dept 1994); Wise v. Greenwald, 208 AD2d 1141 (3d Dept 1994) (question of fact as to degree of control and supervision doctor exerted, or could have exerted, over other employee ); Mitchell v. Handler, supra. It also fails to establish as a matter of law that this training was sufficient , and absolved them of any potential liability. Accordingly, summary judgment is denied to defendants Hitzig and Schwinning as to their vicarious liability.
With respect to the third cause of action for breach of contract, defendants seek dismissal as to the assertion of breach of an "implied individual contract." This branch of their motion is denied. To support a claim for breach of contract against a doctor, there must be an express special promise to effect a cure or accomplish some definite result. Robins v. Finestone, 308 NY 543 (1955); Romatowski v. Hitzig, 227 AD2d 870 (3d Dept), leave dismissed in part, denied in part 89 NY2d 915 (1996). Plaintiff asserts in his affidavit, and the brochures and advertisements support, that he was promised that his baldness would be cured, that he would never go bald again, that he would have a natural and not a cornfield-look hairline, that the transplanted hair would cover his entire scalp with permanent hair within a short period of time, and that the transplant would be undetectable. These are express special promises that are actionable as a breach of contract claim. See, Robins v. Finestone , supra; Romatowski v. Hitzig, supra; see also, Bobrick v. Bravstein, 116 AD2d 682 (2d Dept 1986). Plaintiff has also appropriately asserted damages other than pain and suffering, including damages for the money expended to undergo corrective procedures. See, Mitchell v. Spataro, 89 AD2d 599 (2d Dept 1982). These assertions are sufficient to survive a summary judgment motion. See, Romatowski v. Hitzig, supra, at 872. Defendants' assertions that they never guaranteed a particular result or promised a cure, and that the promises plaintiff is relying on are mere puffery, just create a question of fact. While defendants do not appear to seek summary judgment as to the written breach of contract claim, the Court finds that plaintiff's affidavit, stating that his widow's peak and the adjoining strip in the middle front section of his head were not filled as promised, sufficiently raises issues of fact for trial. Abrams Aff. in Opposition, ¶41.
These breach of contract claims, however, are only maintainable against Handler and the PC. As already determined above, there is no basis to pierce the corporate veil, and there are insufficient indicia of partnership to hold Hitzig and Schwinning liable as partners by estoppel. As shareholders of a professional service corporation, they cannot be held personally liable for business debts of the corporation. We're Assocs. Co. v. Cohen, Stracher & Bloom, P.C., 65 NY2d 148 (1985). As corporate shareholders who did not even sign the contract, which contained no provision for their personal liability, Hitzig and Schwinning cannot be held liable on this breach of contract cause of action. See , id.; Prudential-Bache Metal Co. v. Binder, 121 AD2d 923, 925 (1st Dept 1986).
Handler, on the other hand, is a proper defendant on the contract claims. It is unclear whether Handler signed the written agreement in his individual capacity. Although the name LIMA appears below the line he signed, there is no statement that he was signing as an officer of the entity. Moreover, the agreement provides, in relevant part, that "Dr. Handler has graciously agreed to perform a free transplant." Plaintiff's Amended Notice of Motion, Exhibit G. This language demonstrates that there is a triable issue of fact as to whether Handler's signature was only in his corporate capacity, or whether it was also intended as Handler's personal obligation toward plaintiff. See, McDonagh Real Estate and Dev. Ltd. v. Kwilecki, 158 AD2d 3 72, 373 (1st Dept 1990).
The fourth cause of action for negligent misrepresentation is dismissed . Like plaintiff's previously dismissed fraud claim, this claim is duplicative of the medical malpractice claims and asserts the identical damages. Therefore, it cannot stand. See, McClurg v. State of New York , 204 AD2d 999 (4th Dept), leave denied 84 NY2d 806 (1994); see also, Karlin v. IVF America, Inc., 23 9 AD2d 560, 561 (2d Dept 1997), affd as modified on other grounds 93 NY2d 282 (1999) (fraud and medical malpractice).
The branch of defendants' motion and cross motion seeking dismissal of the GBL §§349 and 350 claims is denied . Defendants have oversimplified and selectively focused on two of plaintiff's allegations to the exclusion of the others. The advertisements submitted, as well as plaintiff's affidavits and the affidavit from a physician, who practices hair transplant surgery and who reviewed the materials, demonstrate that there are triable issues of fact. To state a claim under GBL §§349 and 350, the complaint must allege consumer-oriented conduct that is deceptive or misleading in a material way. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A. , 85 NY2d 20, 24-25 (1995). The plaintiff must also assert that he suffered actual injury as a result of the deceptive act or false advertising. See, Stutman v. Chemical Bank, 95 NY2d 24 (2000). Section 349 is aimed at deceptive acts or practices, and section 350 addresses false advertising. Where the practices or advertising involve an extensive marketing scheme that has a broad impact on consumers at large, such as in the instant case, they will be subject to scrutiny under GBL §§349 and 350. See, e.g., Karlin v. IVF America, Inc., supra at 293; Gaidon v. Guardian Life Ins. Co. of Am., 94 NY2d 330 (1999); Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., supra at 25. A "deceptive act or practice" has been defined as a representation or omission " 'likely to misled a reasonable consumer acting reasonably under the circumstances.' " Karlin v. IVF America, Inc., supra, at 294, quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., supra, at 26.
In Karlin v. IVF America, Inc., supra, the Court of Appeals held that doctors can be held liable under GBL §§349 and 350, notwithstanding medical malpractice claims based on lack of informed consent, reasoning that:
the interests at stake in an action under the General Business Law are distinctly different from the interests involved in a suit for professional malpractice. Thus, while physicians providing information to their patients in the course of medical treatment may be afforded the benefits of Public Health Law § 2805-d, when they choose to reach out to the consuming public at large in order to promote business— like clothing retailers, automobile dealers and wedding singers who engage in such conduct— they subject themselves to the standards of an honest marketplace secured by General Business Law §§349 and 350.
Karlin v. IVF America, Inc., supra, at 294. The plaintiffs in Karlin, who were patients of the defendant doctors, claimed that defendants' promotional materials, advertisements , slide presentations and seminars, contained misrepresentations that deceived and misled consumers about the success rates and health risks associated with defendant IVF America, Inc.'s in vitro fertilization treatment program. The claims included exaggerated success rates, and concealing and misrepresenting significant health risks, including high miscarriage rates, excessive neonatal deaths and abnormalities of infants. Karlin v. IVF America, Inc., 93 NY2d 289, supra. The Court of Appeals held that the plaintiffs properly stated causes of action under the consumer protection statutes, and were not precluded from pursuing them because the deception related to the provision of medical services.
Here, as in Karlin, the defendants', the PC, Hitzig, Handler and Schwinning's, multi-media dissemination of information to the public "is precisely the sort of consumer-oriented conduct that is targeted by General Business Law §§349 and 350." Karlin v. IVF America, Inc., supra, at 293 (citation omitted). Contrary to defendant Handler's argument in his cross motion, the promotional and advertising materials, including brochures provided at plaintiff's consultation, are properly the subject of claims under the General Business Law . Id.
Defendants challenge plaintiff's claim on the ground that the advertisements and materials were not deceptive as a matter of law, because they were promoting nothing more than a free consultation , and because the claims, they urge, amount to two assertions — that plaintiff was misled that he could be treated in one procedure, and that defendants failed to explain that he would continue to lose non -transplanted hair. This characterization of plaintiff's claim, however, overlooks several of plaintiff 's assertions. As clearly alleged in the Amended Complaint and in the Proposed Second Amended Complaint , plaintiff alleges that he was misled that a single transplant would be needed, that the results of the procedure would be permanent, natural and undetectable, that he would be able to style his hair in a natural manner, and that no further treatments would be necessary, because he would never go bald again . Amended Complaint, ¶¶108, 113; Proposed Second Amended Complaint, ¶¶118, 122. Plaintiff, in his affidavits , states that he was misled that his baldness would be cured, that he would have a natural, not a pluggy or doll-looking hairline, and that he would not have to undergo a never-ending cycle of hair transplants to even approximate the results shown in the "before" and "after" photos showcased in the ads. He further states that these misrepresentations were continued in his consultation with Handler. These assertions must be viewed as a whole in deciding the motion.
Moreover, the issue before this Court, as the Court of Appeals framed it on a summary judgment motion in Gaidon v. Guardian Life Ins. Co. of Am. (supra , 94 NY2d, at 345), is "not whether, as a matter of law, reasonable consumers would be misled in a material way, but whether that prospect is enough to create a question of fact." There is clearly a prospect that reasonable consumers would be materially misled based on the submissions here. As plaintiff correctly points out, consumers of medical procedures, such as hair transplants, vary in their level of sophistication about the procedures and their expected results. A review of the advertising materials confirms that, indeed, defendants made the representations of which plaintiff complains, and had apparently omitted pertinent information regarding the results which plaintiff could expect. Plaintiff's statements, borne out by the ads, that he thought he would have a full, natural head of hair, that the results would be undetectable, and that he was not told that he would need multiple procedures to even approximate what was shown in the photos, or that he would need them for the rest of his life, certainly create a prospect that a reasonable consumer could be, and was, in fact, misled. The facts that the "before" and "after " photos fail to reveal how many procedures, over how many years, or how many transplanted hairs were required by the individuals to achieve the results, and that the defendant doctors, in depositions in the Mitchell action, could not even opine, in looking at the photos, as to how many procedures were necessary to obtain the results, further supports that conclusion. Hitzig 2/01/00 Deposition, Plaintiff's Opposition Exhibit L, at 154-171; Handler 2/29/00 Deposition, Plaintiff's Opposition Exhibit N, at 23-29; Schwinning 3/08/00 Deposition, Plaintiff's Opposition Exhibit N, at 98-107. The physician affidavit submitted by plaintiff also supports the prospect that a reasonable consumer would be misled. This physician found misrepresentations in the failure to reveal the need for additional procedures to maintain the appearance , in the cost of maintenance over the person's lifetime, and in the failure to reveal the number of procedures required to achieve the dense heads of hair depicted in the various ads. The physician stated that it would be misleading to promise a cure for baldness, without revealing that most persons would have to continue to undergo additional transplants. Defendants' submission, in reply, of an affidavit from another patient stating that he was not misled, does not resolve this issue.
Defendants also challenge this claim on the ground that plaintiff failed to show that any deceptive act caused him actual injury . This challenge is also rejected. As stated above, GBL §§349 and 350 require that a plaintiff show that the deceptive act or practice "caused actual, although not necessarily pecuniary harm." Oswego Laborer's Local 214 Pension Fund v. Marine Midland Bank, N.A., supra, at 26. The deception itself cannot constitute the injury. Small v. Lorillard Tobacco Co., 252 AD2d 1 (1st Dept 1998), affd 94 NY2d 43 (1999).
Here, plaintiff alleges that he was forced to undergo and pay for additional procedures that he was led to believe would be unnecessary by defendants' assertions that they would permanently cure his baldness, and that his hair would be as dense as in the photos shown in the ads. He also asserts injury in that he had to undergo surgery to correct the scarring and unnatural and pluggy look of his hair caused by defendants' transplants. These alleged injuries are separate and apart from the deception, and thus withstand dismissal. Cf., Small v. Lorillard Tobacco Co., supra (the withdrawal of tobacco addiction as the injury in smokers' GBL § 349 claim against tobacco company is fatal, since deception alone cannot be injury). With respect to the issue of whether there was any break in the causal connection based on plaintiff's consultation with Handler, defendants, having submitted no affidavit or other admissible evidence, have failed to meet their burden as the movants for summary judgment. Therefore, summary judgment on the fifth cause of action is denied.
Finally, summary judgment is granted, dismissing the sixth cause of action. A claim for punitive damages cannot stand as a separate cause of action. Weir Metro Ambu-Serv., Inc. v. Turner, 57 NY2d 911 (1982). Plaintiff has appropriately pleaded his request for punitive damages in his medical malpractice causes of action, and for limited punitive damages in his GBL claim, neither of which pleadings are being challenged in defendants' motion or cross motion .
Accordingly, the motion and cross motion for summary judgment are granted, in part, to the extent that: (1) the third cause of action is dismissed only as against defendants Hitzig and Schwinning ; and (2) the fourth and sixth causes of action are dismissed as against all defendants, and the remainder of the action shall continue. The plaintiff's motion for leave to amend the complaint is granted, in part, to the extent that leave shall be granted to amend to add the allegations set forth in paragraphs 66, 67, and 71 of the Proposed Second Amended Complaint annexed to the moving papers and to this extent , the amended complaint in the form proposed as annexed to the moving papers shall be deemed served upon service of a copy of the order to be settled hereon with notice of entry. Leave to amend is denied with respect to the proposed paragraphs 37, 38, 39, 40, 41, 42 and 43 in the Proposed Second Amended Complaint , and those allegations are stricken. The defendants shall answer the Second Amended Complaint within 20 days from the date of said service.
Settle order.