Opinion
09-26-2017
In the Matter of the Application of Peter YOUNG; 820 River Street, Inc., The Altamont Program, Inc., and Vesta Community Housing Development Board, Inc., all doing business as Peter Young Housing Industries and Treatment, Petitioners, v. The NEW YORK STATE OFFICE OF ALCOHOLISM AND SUBSTANCE ABUSE SERVICES ("OASAS"); Robert Kent, as counsel to OASAS; and the Division of the Budget of the State of New York, Respondents.
O'Connell and Aronowitz, Cornelius D. Murray, of Counsel, Attorneys for Petitioners, 54 State Street, Albany, New York 12207-2501 Eric T. Schneiderman, Attorney General of the State of New York, Maria Lisi-Murray, of Counsel, Attorney for Respondents, The Capitol, Albany, New York 12224-0341
O'Connell and Aronowitz, Cornelius D. Murray, of Counsel, Attorneys for Petitioners, 54 State Street, Albany, New York 12207-2501
Eric T. Schneiderman, Attorney General of the State of New York, Maria Lisi-Murray, of Counsel, Attorney for Respondents, The Capitol, Albany, New York 12224-0341
Denise A. Hartman, J.
Petitioners Peter Young, 820 River Street, Inc., The Altamont Program, Inc., and Vesta Community Housing Development Board, Inc., all doing business as Peter Young Housing Industries and Treatment (PYHIT), commenced this CPLR article 78 proceeding against respondents New York State Office of Alcoholism and Substance Abuse Services (OASAS), OASAS's counsel Robert Kent, and the Division of the Budget of the State of New York. Petitioners seek a judgment (1) rescinding their suspension from, and restoring them to, their status as pre-qualified vendors under the State of New York's Grants Gateway program, and (2) annulling respondents' determination to recoup monies that 820 River Street owes to OASAS on a capital construction loan by withholding payments to petitioners for services provided under prior contracts with counties.
Petitioners concede that two other causes of action asserted in their petition are moot.
Respondents oppose the petition, arguing that the mandamus relief petitioners request does not lie given the discretionary nature of respondents' decision-making authority, and that any challenge to the 2014 suspension of their prequalification status under the Grants Gateway program is barred both by their failure to exhaust administrative remedies and by the statute of limitations. In the alternative, respondents request a remand for redetermination of petitioners' prequalification status and further administrative proceedings. Respondents also argue that it is not arbitrary and capricious for them to recoup monies owed on the Altamont capital construction loan from payments for services petitioners rendered under prior-year contracts with the counties.
As to petitioners' first cause of action, the Court has been provided with no evidence of compliance with the procedures set forth in the Grants Gateway Manual before final revocation of petitioners' prequalification status. Thus, while the Court denies petitioners' request for mandamus to compel restoration to their former prequalification status, it remits this matter to the agencies for redetermination and further proceedings. As to petitioners' second cause of action, the Court denies petitioners' request to annul respondents' decision to recoup monies that 820 River Street owes to OASAS on a capital construction loan by withholding payments to petitioners for services provided under past contracts with counties.
Factual Background
Father Peter Young is the founder of petitioners 820 River Street, Inc. (820 River Street), the Altamont Program, and Vesta Community Housing Development Board, Inc. (Vesta), all of which operate under Peter Young Housing Industries and Treatment. 820 River Street, the Altamont Program, and Vesta are not-for-profit corporations that run various programs that offer drug and alcohol treatment, housing, job training, and jobs to recovering individuals. Respondent OASAS certifies and funds community-based chemical dependence treatment programs and inspects and monitors them for quality of care and compliance with State and national standards. 820 River Street is currently licensed by OASAS. In 2015 and 2016, OASAS renewed the operating certificates of nine 820 River Street chemical dependence programs, most of them for two years.
OASAS has no current contracts with 820 River Street and does not directly fund its operational programs. In the fiscal year ending December 31, 2016, however, OASAS provided State funds to 820 River Street through contracts for services with Rensselaer, Warren, and Washington Counties. OASAS has also provided funding to 820 River Street for capital projects and facilities maintenance. In 2013, OASAS gave 820 River Street a $ 650,000 capital construction loan for improvements to its Altamont House property. The project was not completed and, according to respondents, 820 River Street has not entered into any arrangement to repay the loan. In 2016, to recoup monies owed on that loan, OASAS began to withhold funds that were to go to 820 River Street through its contracts with Warren and Washington Counties. OASAS claims that, even after this recoupment, 820 River Street owes $ 520,000 on the initial $ 650,000 loan.
In 2011, OASAS received information that high-level staff at petitioners' programs were misappropriating State funds. OASAS referred the matter to the Office of the Medicaid Inspector, the Office of the Attorney General, the Commission on Quality of Care, the Office of Temporary and Disability Assistance, and the Department of Corrections and Community Supervision, prompting a multi-agency investigation. In 2012, 820 River Street's former chief operating officer and its former executive director pleaded guilty to second degree grand larceny for stealing over $ 200,000 in State funds. In 2014, the former operations director of the Altamont Program pleaded guilty to second degree grand larceny. Also in 2014, the chief financial officer of the 820 River Street and Altamont Programs pleaded guilty to first degree offering a false instrument for filing and second degree falsifying business records. And in 2015, the chief operating officer of the Altamont Program pleaded guilty to two counts of misdemeanor second degree offering a false instrument for filing.
The parties disagree on how and when OASAS first received the information. Whether PYHIT first disclosed or did so only after the impropriety was discovered by OASAS through other means is irrelevant to this decision.
New York's Grants Gateway Program
New York has implemented a Grants Gateway program — an on-line portal through which not-for-profits must register and be pre-qualified in order to win competitive grants or contracts with State agencies. The Grants Gateway program and procedures are described in a manual entitled, "New York State Prequalification System for Grants Contract Vendors, A Resource Manual and User's Guide for Not-for-Profit Vendors" (Petition, Exhibit N, hereinafter Manual or Grants Gateway Manual). The Manual provides that "all vendors doing business with the State of New York must be prequalified in order to submit a competitive bid in response to a Request for Proposal issued by a State agency, or to be considered for contract renewal or contract amendment." Prequalification is effective for State grant contracts issued by numerous State agencies, including OASAS. The application process requires the vendor to answer an extensive set of questions regarding its organization, capacity, management, and finances. Once a vendor submits a prequalification application, it is assigned to the appropriate agency for review. The review agency is generally the agency with whom the vendor has had the most contracts or the agency most likely to provide funding. The Grants Gateway Manual provides a chain of review, with initial review by a prequalification specialist and further review by the agency's deputy director. The process is assisted by a prequalification officer who coordinates with relevant agencies.
The Grants Gateway Manual is available at https://grantsreform.ny.gov/sites/default/files/docs/VENDOR_POLICY_MANUAL_V.2_10.10.13.pdf (last visited September 22, 2017).
The Grants Gateway Manual also establishes specific procedures for subsequent review of a vendor's prequalification status. Section 4.7 of the Grants Gateway Manual states that, "[a]t any time, the reviewing State agency or any other partner State agency may review the vendor's prequalification status." Reasons for review include acts representing "an unacceptable risk in allowing the vendor to remain prequalified." Section 4.8 of the Grants Gateway Manual governs "Revocation of Prequalification Status." It states that "[i]n rare instances, the reviewing or other State agency may cancel a not-for-profit vendor's prequalification status barring it from competing for State contracts when the State agency finds," among other things, that a vendor has failed to "resolve any outstanding deficiencies" of where there have been "[a]ny convictions for fraud or matters reflecting the integrity of the vendor." Section 4.8 prescribes specific procedures to be followed "[b]efore any vendor's prequalification status is suspended." The "reviewing State agency will contact the vendor in writing noting all matters that may have prompted the decision to suspend." The vendor must be given "an opportunity to state a case for why its prequalification status should not be suspended." The vendor has "30 days from the date of the notice letter within which to submit a statement, in writing, presenting the reasons why suspension should not occur or requesting an extension of time to remedy the defects" identified by the agency. "The vendor's statement and any other relevant information shall be assembled and referred to the agency Executive Deputy for review and final determination."
And section 4.9 of the Grants Gateway Manual provides for "Appeals." If the State agency suspends a vendor's prequalification, the vendor is entitled to a "formal appeal, in writing, to the Prequalification Officer to review the" agency's decision. The appeal must be filed "within 20 business days of the date of the notice letter from the Agency advising the vendor of the original adverse decision." The vendor must give "full details of the reasons for the [appeal] and offer any additional information upon which [it] wishes to rely." The Prequalification Officer may review the agency's file and notes, "interview the vendor, and/or conduct independent research, and then must inform the vendor in writing of the outcome of the review within 30 business days of the request" for review. Where "matters of integrity" are in issue, the Prequalification Officer may "conduct a more in-depth interview" following a scripted list of questions. "Upon completion of his/her investigation, the Prequalification Officer will convene an expert review panel to render an opinion." No person involved in the inquiry that led to the suspension may participate on the expert review panel. The panel must convene within 14 business days of receipt of the appeal. Within 10 days of reaching a majority decision, the panel must inform the vendor and reviewing State agency of the decision and provide the reasons for the panel's decision. "The decision of the panel will be final."
Petitioners' Prequalification History
820 River Street and the Altamont Program were previously prequalified under the Grants Gateway program to compete for State contracts and funds. Their prequalification status also allowed them to receive State funding through aid the State provides to counties, referred to as "deficit funding," where petitioners have contracts with counties to render services not covered by other sources of funding. Nothing in the record before the Court indicates which State agency reviewed and approved petitioners' prequalification application.
In October 2014, the status of the PYHIT entities as prequalified vendors in the New York State Grants Gateway program was apparently changed. Again, nothing in the record before the Court indicates which agency changed petitioners' prequalification status. But a State Division of Budget employee's email on October 9, 2014, in response to a query from a PYHIT employee asking why petitioners could not access the Grants Gateway, explained: "Pre-qualification status has been changed as a result of the ongoing AG investigation into programs and staff. This is a standard practice." Since that time, the PYHIT organizations have not been treated as prequalified in the Grants Gateway and, therefore, have been unable to bid or enter into new contracts for State grants.
Petitioners and OASAS subsequently engaged in a series of discussions about efforts to strengthen petitioners' management and administrative controls to prevent further instances of misappropriation of State funds. On January 5, 2016, OASAS's General Counsel Robert A. Kent sent a letter to Kevin Luibrand, President of 820 River Street's Board of Directors, acknowledging that, to strengthen such controls, petitioners had entered into a management agreement with a third party and were working toward a merger or consolidation of their programs. Mr. Kent represented that "as long as the parties continue to work towards a solution to address both 820's and Altamont's administrative issues, OASAS is willing to certify and fund the 820 programs." He added the caveat that "[it] is important to understand that if the [management] Agreement is terminated without sufficient cause, or if ... a viable plan to permanently solve 820's and Altamont's administrative deficiencies is not reached, OASAS will proceed to discontinue both certification and funding of the 820 programs." Mr. Kent further advised that 820 River Street was required to either reimburse the State for $ 649,103 in capital construction funds provided by OASAS for a project that was not completed, or enter into a contract of sale of the subject property to another OASAS-certified provider by January 31, 2016.
Subsequently, petitioners made at least two inquiries to OASAS asking when the Grants Gateway block would be lifted. They also requested a meeting to further discuss OASAS's concerns about petitioners' operations and plans going forward. At a well-publicized meeting held on July 14, 2016, Mr. Kent expressed frustration with petitioners' decision not to follow through with his recommendations to continue their management contract and merge with the third party. Asserting that he was speaking on behalf of the State, Mr. Kent declared that he was "done" trying to work with petitioners. By letter dated January 18, 2017, Mr. Kent informed petitioners that "[c]onsistent with my January 5, 2016 letter and the multiple conversations which occurred throughout the year, please be advised that effective April 30, 2017, OASAS will terminate all OASAS contracts and funding with 820 River St., Inc." The letter also advised that OASAS would "begin the recoupment of the $ 649,103.00 that 820 River Street owes OASAS ... through offsets of 820 River Street's OASAS contract advances" to counties unless 820 River Street paid the balance of that amount in full.
Following news reports about the July 14, 2016 meeting, some State senators and assemblypersons expressed concern to the OASAS commissioner, Arlene González-Sánchez. On March 17, 2017, Commissioner González-Sánchez, responding to a letter from Assemblyperson Patricia Fahy, explained:
"OASAS and other state agencies, along with the Office of the Attorney General, have been unsuccessful in their efforts to persuade PYHIT to take the steps necessary to correct their administrative, operational and fiscal deficiencies. PYHIT's unwillingness to undertake these measures is what led the State to reluctantly conclude that PYHIT would
not be permitted to submit applications for future state contracts."
Commissioner González-Sánchez's letter went on to detail the criminal activities that had occurred, as well as alleged failures by PYHIT to comply with recommended changes.
In a February 16, 2017 letter to Mr. Kent, petitioners' counsel asked respondents for written notification of their intentions to remove the Grants Gateway block and reasons for any suspension or revocation of petitioners' access to the Grants Gateway portal.
Proceedings in This Court
On March 22, 2017, petitioners commenced this proceeding by order to show cause and petition filed on March 22, 2017. Two causes of action remain before the Court. The first cause of action alleges that petitioners' suspension from the Grants Gateway was arbitrary, capricious, and illegal because OASAS did not follow its own protocols requiring it to provide written notice of a suspension and the reasons therefore, and because OASAS had issued operating certificates to the 820 River Street programs, which demonstrates the fitness of the programs. The third cause of action alleges that respondents' withholding of funds owed by counties to PYHIT is arbitrary, capricious, and illegal. On June 19, 2017, this Court denied petitioners' request for a preliminary injunction restoring their prequalification status and access to the Grants Gateway portal.
Subsequently, respondents answered, asserting among other things that mandamus does not lie for restoration of petitioners' prequalification status, and that any challenge to the October 2014 determination to block petitioners' access to the Grants Gateway is barred by the statute of limitations or laches, as well as failure to exhaust administrative remedies. Respondents also contend that it is not arbitrary and capricious for them to recoup monies owed on the Altamont capital construction loan from payments otherwise due petitioners for services rendered under prior contracts.
Mandamus relief to restore petitioners' prequalification status does not lie, but mandamus relief is granted to compel respondents to issue, or cause to be issued, a formal determination of petitioners' prequalification status in accordance with procedures set forth in the Grants Gateway Manual.
The relief petitioners request sounds in the nature of mandamus to compel respondents to restore them to their former prequalification status. The Court declines petitioners' request for mandamus to compel respondents to restore petitioners to their prequalification status because now, three years after it was blocked, the question of whether petitioners currently meet the criteria for prequalification in the Grants Gateway program is a matter of discretion conferred upon the agencies doing business with petitioners. However, respondents have provided no evidence, nor have they argued, that any decision to revoke or suspend petitioners' prequalification status complied with the procedures set forth in the Grants Gateway Manual. Nor do they deny that the Grants Gateway Manual's procedures govern the revocation or suspension of prequalification status. The Court therefore grants relief in the form of mandamus to compel respondents to issue a determination, or cause such a determination to be issued, in compliance with the Grants Gateway procedures, so that petitioners have a meaningful opportunity for appropriate administrative and judicial review.
The Court of Appeals recently reaffirmed the longstanding principle that "mandamus is an ‘extraordinary remedy’ that is ‘available only in limited circumstances’ " ( Matter of County of Chemung v. Shah , 28 N.Y.3d 244, 266, 44 N.Y.S.3d 326, 66 N.E.3d 1044 [2016], quoting Klostermann v. Cuomo , 61 N.Y.2d 525, 537, 475 N.Y.S.2d 247, 463 N.E.2d 588 [1984] ). "Mandamus is used to enforce an administrative act positively required to be done by a provision of law" ( Matter of County of Chemung , 28 N.Y.3d at 266, 44 N.Y.S.3d 326, 66 N.E.3d 1044 [internal quotation marks omitted] ). "It is considered extraordinary because the judiciary is loathe to interfere with the executive department's exercise of its official duties, unless the department has failed to perform a specific act" ( id. ). Where petitioners cannot demonstrate "a clear legal right to the relief sought and seek[ ] to compel performance of discretionary acts, mandamus does not lie" ( Matter of Green v. Annucci , 153 A.D.3d 1099, 1100–1101, 61 N.Y.S.3d 375 [3d Dept. 2017], citing New York Civ. Liberties Union v. State of N.Y. , 4 N.Y.3d 175, 184, 791 N.Y.S.2d 507, 824 N.E.2d 947 [2005] ; see Matter of EZ Props., LLC v. City of Plattsburgh , 128 A.D.3d 1212, 1215, 9 N.Y.S.3d 440 [3d Dept. 2015] ).
Decisions whether to grant, revoke, or suspend a not-for-profit's prequalification status under the Grants Gateway program are plainly discretionary. The Grants Gateway Manual prescribes various documentation that must be provided and identifies criteria for the reviewing agency to assess whether the not-for-profit has the organizational capacity and integrity to ensure proper and effective use of public funds provided pursuant to State contracts. The reviewing or other State agency "may" "cancel," "revoke," or "suspend"—the Manual seems to use these terms interchangeably—a not-for-profit vendor's prequalification status, thereby barring it from competing for State contracts, when the State agency finds any of the following: a "[f]ailure to meet any of the legal or regulatory requirements"; a "[f]ailure to comply with relevant legislation or state regulation, policies or codes"; "a report of substantial unsatisfactory performance from other state agencies"; "an adverse change in capacity or capability of the organization's management systems"; a "[f]ailure by the vendor to adequately and promptly resolve any outstanding deficiencies"; or "any convictions for fraud or matters reflecting on the integrity of the vendor" (§ 4.8). Any decision to cancel, revoke or suspend necessarily involves discretionary consideration of the facts and circumstances giving rise to concerns about the organization's capacity and integrity to effectuate State contracts. Because any such decision involves discretion, mandamus to compel restoration to prequalification status does not lie.
But there is nothing discretionary about compliance with the procedures set forth in the Grants Gateway Manual. Section 4.8 of the Manual further provides that "[b]efore any vendor's prequalification status is suspended, the reviewing State agency will contact the vendor in writing noting all matters that may have prompted the decision to suspend, and will give the vendor an opportunity to state a case for why its prequalification should not be suspended." Here, the record before the Court contains no formal agency determination finally revoking or suspending petitioners' prequalification status in accordance with the procedures set forth in the Grants Gateway Manual's procedures. The parties' submissions identify three communications that arguably provided petitioners with notice and/or the reasons for the suspension. But none of the three communications was a formal notice to petitioners of the final revocation of their prequalification status and reasons therefor by a person or entity authorized to make such determination under the Grants Gateway Manual.
First, the record contains the October 9, 2014 email from a Division of the Budget employee in response to an inquiry from a PYHIT employee about why he was unable to access the Grants Gateway web portal. The Division of Budget employee merely stated: "Pre-qualification status has been changed as a result of the ongoing AG investigation into programs and staff. This is a standard practice." The email is patently insufficient to meet the notice requirements specified in the Grants Gateway Manual. There is no indication that the change in status was put into place at the behest of the review agency or other State agency pursuant to the Grants Gateway Manual, nor whether the change in status was temporary or would become a final revocation unless petitioners took steps to invoke the procedures for reviewing a pre-qualification revocation determination. Nor did the email "not[e] all matters that may have prompted the decision" to change PYHIT's status. Thus, the Court finds that the October 9, 2017 email does not constitute a notice of a final determination to suspend, cancel, or revoke petitioners' prequalification status within the meaning of section 4.8 of the Grants Gateway Manual.
Respondents' counsel states in footnote 2 of respondents' memorandum of law that "prequalification review was not initiated by OASAS, as OASAS was not the State agency designated to review or determine PYHIT's prequalification status." The Division of the Budget is not on the list of State agencies subject to the Grants Gateway procedures.
Second, the record contains the letter dated January 18, 2017, from OASAS's counsel, Mr. Kent, informing petitioners that "[c]onsistent with my January 5, 2016 letter and the multiple conversations which occurred throughout the year, please be advised that effective April 30, 2017, OASAS will terminate all OASAS contracts and funding with 820 River St., Inc." The January 18, 2017 letter contains no mention of petitioners' prequalification status. In fact, the referenced January 5, 2016 letter stating that OASAS would continue to fund 2016 contracts as long as petitioners' worked toward the administrative enhancements proposed by Mr. Kent suggests that the letter was issued outside the Grants Gateway procedures. OASAS appears to take the position that it did not initiate the prequalification review in 2014 or make a final determination to revoke or suspend petitioners' prequalification status. And that letter, while pointing to petitioners' refusal to go forward with his proposal, did not fully set forth reasons that would substantiate final revocation of petitioners' prequalification status.
Third, petitioners produced Commissioner González-Sánchez's letter dated March 17, 2017, responding to an Assemblyperson's concerns. There, Commissioner González-Sánchez explained that "OASAS and other state agencies, along with the Office of the Attorney General, have been unsuccessful in their efforts to persuade PYHIT to take the steps necessary to correct their administrative, operational and fiscal deficiencies" and that "PYHIT's unwillingness to undertake these measures is what led the State to reluctantly conclude that PYHIT would not be permitted to submit applications for future state contracts." But that letter was not sent to petitioners; rather it responded to a another's request for an explanation. Even if OASAS were the revoking agency, which respondents deny, the commissioner's letter cannot be considered the notice and statement of reasons required by the Grants Gateway Manual. Consequently, notwithstanding the fact that petitioners' access to the Grants Gateway Program has been blocked since 2014, there apparently has been no formal notice of and statement of reasons for final revocation, cancellation, or suspension of the prequalification status of 820 River Street and the Altamont Program. The Court will grant mandamus relief to the extent of compelling respondents to issue, or to cause to be issued, a final determination and statement of reasons for revoking petitioners' prequalification status, pursuant to the procedures set forth in the Grants Gateway Manual. In this way the Court can refrain from intruding on the agency's discretionary decision-making, allow petitioners to pursue administrative remedies set forth in the Grants Gateway Manual, and, if necessary, allow them to pursue meaningful judicial review (see Matter of Chevron U.S.A. Inc. v. Commr. of Envtl. Conservation , 86 A.D.3d 838, 839, 927 N.Y.S.2d 452 [3d Dept. 2011] [reversing dismissal of petition seeking mandamus to compel agency to issue official determination on petitioner's requests for refund of overpayments] ).
Section 4.8 of the Grants Gateway Manual provides that "the reviewing or other State agency may cancel a not-for-profit vendor's prequalification status barring it from competing for State contracts" (emphasis added). While OASAS denies that it was the agency that placed petitioners' prequalification status under review, it has acted in a way that suggests that it has substantial involvement in determining petitioners' eligibility to participate in State contracts and funding and has not moved to join any other agency as a necessary party.
Such mandamus relief is not barred by the statute of limitations, laches, or failure to exhaust administrative remedies. At no time have petitioners been given a final and binding notice of revocation of their prequalification status. The October 14, 2014 email stating that their prequalification status had changed as a result of the investigation was unclear whether the status "change" was a temporary "block" or whether it was a "final and binding" revocation of petitioners' prequalification status in the Grants Gateway Program; thus the statute of limitations did not begin to run at that time (see Matter of FMC Corp. v. N.Y. State Dept. of Envtl. Conservation , 143 A.D.3d 1128, 1130–1131, 40 N.Y.S.3d 220 [3d Dept. 2016] ; Matter of Selective Ins. Co. of Am. v. State of N.Y. Workers' Compensation Bd. , 102 A.D.3d 72, 76, 953 N.Y.S.2d 368 [3d Dept. 2012] ). Perforce, petitioners had no obligation to exhaust the administrative remedies set forth in the Gateway Grants Manual at that time.
And the statute of limitations began to run on any request for mandamus to compel issuance of a formal final determination on petitioners' prequalification no earlier than February 16, 2017, when petitioners' counsel pointedly asked respondents for written notification of their intentions to remove or continue the Grants Gateway block and the reasons for any suspension or revocation of petitioners' access to that program (see Matter of Chevron U.S.A. Inc. , 86 A.D.3d at 840, 927 N.Y.S.2d 452 ). Petitioners commenced this article 78 proceeding one month later on March 24, 2017, well within the statute of limitations for mandamus to compel issuance of a determination and reasons therefore.
Moreover, under the circumstances here, mandamus to compel issuance of an official determination is not barred by the equitable doctrine of laches. A claim for mandamus relief can be barred by the doctrine of laches where a petitioner fails to make his or her demand within a reasonable time (see id. at 840, 927 N.Y.S.2d 452 ). "In the context of an article 78 proceeding in the nature of mandamus, proof of unexcused delay without more may be enough to invoke laches" ( id. [internal quotation marks omitted] ). Here, as the Attorney General's investigation resulted in a series of criminal convictions, petitioners attempted to work with OASAS to put into place administrative and operational controls to prevent further misappropriation of public funds. These efforts culminated in management contract with a third party in accordance with Mr. Kent's proposal. In January 2016, Mr. Kent advised that "as long as the parties continue to work towards a solution to address both 820's and Altamont's administrative issues, OASAS is willing to certify and fund the 820 programs." He repeatedly represented that he had authority to decide whether petitioners would continue to receive OASAS contracts and funding, although he never directly responded to Mr. Luibrand's questions about when the block on petitioners' access to the Grants Gateway program would be lifted. In January 2017, after petitioners declined to accede to the conditions of the merger with the third party as he had urged, Mr. Kent definitively notified them that all contracts and funding with petitioners would be terminated. Petitioners requested an official determination and statement of reasons the very next month. Given this sequence of events, the Court finds no occasion to invoke the equitable doctrine of laches (see id. at 841, 927 N.Y.S.2d 452 [rejecting laches as a defense to petition for mandamus to compel agency to issue determination on refund requests]; Matter of Speis v. Penfield Cent. Schs. , 114 A.D.3d 1181, 1182–1183, 980 N.Y.S.2d 642 [4th Dept. 2014] [rejecting laches as a defense to petition for mandamus to compel respondent to perform ministerial act]; Matter of Selective Ins. Co. of Am. v. State of N.Y. Workers' Compensation Bd. , 102 A.D.3d at 76–77, 953 N.Y.S.2d 368 [same].
OASAS's recoupment of monies due on the loan it gave petitioners to build the Altamont facility is not arbitrary and capricious.
The petition also challenges as arbitrary and capricious OASAS's decision to withhold monies due 820 River Street for services rendered pursuant to contracts with counties to offset amounts owed on the unpaid capital facilities loan OASAS gave 820 River Street for a project that was never completed. Petitioners have not demonstrated that such recoupment is arbitrary and capricious.
In June 2013, OASAS provided a $ 650,000 capital construction loan for 820 River Street's Altamont House property. The project was not completed and, within months, 820 River Street shut down the facility and program. According to respondents, 820 River Street has not repaid the loan and has not entered into any arrangement to repay it. While negotiating managerial arrangements with a third party, OASAS had urged petitioners to sell the Altamont facility to another OASAS provider. Apparently, no such sale occurred. Consequently, in his letter dated January 18, 2017 terminating OASAS's contracts and funding, Mr. Kent also advised petitioners that OASAS would "begin the recoupment of the $ 649,103 that 820 River Street owes OASAS ... through offsets of 820 River Street's OASAS contract advances" to counties unless 820 River Street paid the balance of that amount in full.
Respondents assert that they have withheld funds from 820 River Street for the period August 1, 2016 through December 31, 2016 in the amount of $277,692, $147,800 of which was paid to Warren and Washington Counties to reimburse advance payments the counties made to 820 River Street. As a result, respondents claim 820 River Street still owes $ 520,000 on the original $ 650,000 loan. Respondents claim that their authority to withhold payment pursuant to these prior contracts stems from their positions as "responsible stewards of taxpayers' dollars."
Petitioners do not dispute that they received the capital facilities loan, that they closed the facility that the loan was intended to fund, or that they have not agreed to any specific repayment plan. They argue, however, that respondents lack authority to recoup monies owed on the capital facilities loan from payments due on unrelated contracts. But petitioners cite no statute or case law to support their argument. Thus they have not met their burden of demonstrating that the withholding of payments on unrelated contracts is arbitrary or capricious or contrary to law. Nor does petitioners' reference to an email from an OASAS official providing an "unofficial accounting" of amounts to be withheld create a question of fact as to the amount owed. In any event, the petition does not allege a factual claim regarding the amount owed on the capital facilities loan.
Based on the foregoing, it is
Ordered that petitioners' request for mandamus to compel respondents to restore them to their pre-2014 prequalification status is denied; and it is
Ordered that mandamus relief is granted to the extent that respondents are directed to issue, or to cause to be issued, a determination regarding the prequalification status of 820 River Street and the Altamont Program in the Grants Gateway Program, and if pre-qualification is revoked, a statement of reasons for revocation, in accordance with the procedures set forth in the Grants Gateway Manual; and it is
Ordered that petitioners' request for an order nullifying as arbitrary and capricious respondents' determination to recoup monies owed on the 2013 capital facilities loan by withholding payments to 820 River Street for services provided under unrelated contracts is denied.
This constitutes the decision and judgment of the Court. The original decision and judgment is being transmitted to petitioners' counsel. All other papers are being transmitted to the County Clerk for filing. The signing of this decision and judgment does not constitute entry or filing under CPLR 2220 or 5016 and counsel is not relieved from the applicable provisions of those rules respecting filing and service.