Katz v. Zuckermann

126 Misc. 2d 135, 481 N.Y.S.2d 271, 1984 N.Y. Misc. LEXIS 3564
CourtNew York Supreme Court
DecidedOctober 23, 1984
StatusPublished
Cited by4 cases

This text of 126 Misc. 2d 135 (Katz v. Zuckermann) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Katz v. Zuckermann, 126 Misc. 2d 135, 481 N.Y.S.2d 271, 1984 N.Y. Misc. LEXIS 3564 (N.Y. Super. Ct. 1984).

Opinion

OPINION OF THE COURT

Leon A. Beerman, J.

Defendant moves for an order granting summary judgment and dismissing the plaintiffs’ complaint upon the grounds that it fails to state a cause of action as the agreements asserted by plaintiffs in the complaint are void, illegal and contrary to public policy.

Plaintiffs oppose the application contending that the agreements between plaintiffs and defendant are valid and legal, and alternatively, even if the agreements are illegal and void, that plaintiffs are entitled to damages for unjust enrichment.

Plaintiffs’ first cause of action alleges that in or about January, 1973, plaintiffs, technicians in EEG and ECHO testing, and [136]*136defendant, a licensed physician, entered into an oral agreement whereby the parties were to contribute jointly to the purchase of EEG and ECHO testing machines. That plaintiffs were to administer the tests and that the parties would divide, on a 50-50 basis, money received for all tests given by plaintiffs as well as expenses for maintenance of the machines and office facilities. The complaint further alleges that on January 20, 1976, the agreement was modified, reduced to writing, and executed by the parties. Said written agreement is alleged to provide as follows:

“agreement between: Dr. emil c. zuckermann, m.d. (the first party), and Mr. & Mrs. Joseph katz, (the second party):

“This agreement originated with the purchase of medical equipment in the form of EEG and ECHO machines with equal (50%-50%) contribution from both parties mentioned above.

“It is the responsibility of the second party to perform all requested tests for EEG and ECHO in:

“1) Dr. Zuckermann offices daily office hours.

“2) Hospitals and Health-Related facilities (when is required).

“It is the responsibility of the first party to submit monthly statements with all payments received for EEG and ECHO tests to the second party.

“All payments for the above tests will be shared each month equally (50%-50%) between the first party and the second party.

“It is the responsibility of the second party to pay each month to the first party: $1100.00 as contribution to general office expenses, plus half (50%) of all charges for supplies, repairs of accessories for the use of EEG and ECHO machines.

“This agreement is to be in effect for five years beginning with January 1, 1978.

“Termination, or any changes to this agreement must be by written notification and signed by both parties two months in advance.”

Plaintiffs allege that defendant breached the agreement in that no monthly accounting statements were provided and that defendant failed to pay plaintiffs their proportionate share of the net profits thereunder.

The second and third causes of action also allege a breach of contract based upon the agreement between the parties and request money damages and an accounting. The fourth cause of action proposes an unjust enrichment.

[137]*137Defendant, in his moving papers, unequivocally denies ever entering into a written agreement, although he does concede that the parties entered into the oral agreement alleged by plaintiffs. In that regard, defendant contends that plaintiffs were provided monthly accounting statements and paid their proportionate share of the profits. Notwithstanding this contention, defendant posits that the complaint must be dismissed due to the fact that plaintiffs are unlicensed technicians and therefore the agreement constituted an illegal fee-splitting arrangement which is void and unenforceable as a matter of law.

Section 6509-a of the Education Law which is entitled “Additional definition of professional misconduct; limited application”, and applicable to doctors, describes as professional misconduct “directly or indirectly * * * participating] in the division [or] * * * splitting * * * of a fee for * * * the furnishing of professional care, or service”.

Additionally, the Board of Regents of the State of New York has established certain rules which define unprofessional conduct in the practice of any profession licensed or certified pursuant to title VIII of the Education Law.

With respect to the instant case unprofessional conduct includes: “(4) permitting any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, or a legally authorized trainee practicing under the supervision of a licensed practitioner. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice” (8 NYCRR 29.1 [a] [4]).

Obviously, these prohibitions are pointedly directed against the professional. It defines the conduct of the individual licensed in a specific profession and the manner in which the individual is to administer his skill with its concomitant emoluments. The guidance and restrictions set out by these regulations establish the professional standards applicable to its members.

The defendant contends that these precepts have the same force and effect upon the general public with equal significant consequences to both professional as well as nonprofessional.

As discussed by Justice Pino, in the recently decided case of Baliotti v Walkes (NYLJ, April 27, 1984, p 15, col 3), the fact that [138]*138the above-mentioned provisions were enacted in 1977, after the date of the agreement, does not make the provisions inapplicable.

“As the Court of Appeals specifically stated in Matter of Bell v. Board of Regents [295 NY 101], at 111:

“ ‘It seems to us that there is one course of conduct which in each and every profession is known as a matter of common knowledge to be improper and unprofessional. That is conduct by which, after a professional man has been licensed by the State, he enters into a partnership in his professional work with a layman, by the terms of which he divides with the latter, on a percentage basis, payment made by client or patient for professional services rendered.’ ” (Baliotti v Walkes, supra.)

It must be noted that the situation at bar is somewhat different than the facts presented in Baliotti (supra). Therein, plaintiffs, who were not physicians, contributed their building to a corporation, BLW, formed by plaintiffs and the defendant doctors. In exchange for their respective contributions, plaintiffs received a 50% and each doctor a 25% ownership interest in BLW. The newly formed corporation, BLW, then leased the premises to a partnership, known as OBGYN, which was formed by the defendant doctors. BLW entered into a management agreement whereby BLW agreed to provide certain nonmedical services to OBGYN in exchange for a percentage of OBGYN’s gross receipts. Said agreement, which in effect, provided that a business corporation was to share on a percentage basis in the professional fees earned by doctors, was found to be fee splitting and the cause of actions based upon the agreement dismissed.

At bar, plaintiffs did not share in the entire proceeds of the doctor’s professional practice.

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Bluebook (online)
126 Misc. 2d 135, 481 N.Y.S.2d 271, 1984 N.Y. Misc. LEXIS 3564, Counsel Stack Legal Research, https://law.counselstack.com/opinion/katz-v-zuckermann-nysupct-1984.