Opinion
# 2019-015-125 Claim No. 132129 Motion No. M-93415
03-12-2019
FIELDSTON OPERATING LLC v. THE STATE OF NEW YORK
No Appearance Honorable Letitia James, Attorney General By: Richard C. Maider, Esq., Assistant Attorney General
Synopsis
In a breach of contract claim by the owner and operator of a nursing home arising from a Universal Settlement Agreement, the Court granted defendant's dismissal motion, finding that although the Court had jurisdiction over the claim, the claim was untimely and, in any event, documentary evidence refuted its essential allegations. Specifically, nothing in the Universal Settlement Agreement submitted by the defendant in support of its motion precluded the application of base-year costs, determined after the audit became final, to subsequent years.
Case information
| UID: | 2019-015-125 |
| Claimant(s): | FIELDSTON OPERATING LLC |
| Claimant short name: | FIELDSTON |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | 132129 |
| Motion number(s): | M-93415 |
| Cross-motion number(s): | |
| Judge: | FRANCIS T. COLLINS |
| Claimant's attorney: | No Appearance |
| Defendant's attorney: | Honorable Letitia James, Attorney General By: Richard C. Maider, Esq., Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | March 12, 2019 |
| City: | Saratoga Springs |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
Defendant moves to dismiss the instant breach of contract claim pursuant to CPLR 3211 (a) (1), (2), (7) and (8).
The following facts were alleged in the claim: Claimant owns and operates a 200-bed skilled nursing facility in the Bronx and is a New York State Medicaid provider (Claim, ¶ 1). Claimant, together with 600 other providers, entered into a Universal Settlement Agreement with the State to resolve industry-wide issues which had arisen regarding Medicaid payments, appeals, and lawsuits seeking increased payments for services rendered (id. at ¶¶ 3-5). Claimant and the other providers "wanted to enter into a settlement agreement to limit the areas of audit . . . relating to the State's payment appeals" and the State desired "to resolve and discontinue the [providers'] pending rate appeals and litigation" (id. at ¶¶ 6-7). The providers "also had to give up any current or future rights they might have had to bring most categories of rate appeal claims or litigation" (id. at ¶ 7). Specific types of rate appeals that were excluded from the Universal Settlement Agreement were listed in the agreement, which permitted the Office of the Medicaid Inspector General (OMIG) to undertake audits of certain categories of expenses (id. at ¶ 11). According to the claim:
"A 'roll-forward adjustment' results from a review by OMIG of the impact of a prior audit on the rates previously paid to nursing homes adjusted for the rates of payment for subsequent periods ('Roll-Forward Adjustment'). Roll-Forward Adjustments were not preserved as claims that can be asserted by OMIG" (id. at ¶ 11).
Claimant alleges that OMIG agreed in the Universal Settlement Agreement "that it would not 'commence any review, investigation or audit of any matter that is being withdrawn, discontinued and released with prejudice under this Settlement Agreement' . . . and would discontinue any current review or audit of any matter" (id. at ¶ 12, quoting Universal Settlement Agreement attached to claim, ¶ 12.1; see also Foster Exhibit B). Claimant alleges the defendant breached the Universal Settlement Agreement in the following manner:
"13. [Defendant's] 2018 Notice of Rate Changes letter (Exhibit B) asserts that Fieldston was overpaid by Medicaid in the amount of $726,985, relying on a Roll-Forward Adjustment for the period April 1, 2009 through December 31, 2011, based on a September 1, 2003 through August 31, 2004 base year audit. This adjustment to the rates paid to Fieldston during the period April 1, 2009 through December 31, 2011 and OMIG seeking to recover monies due from such audit are a breach of the Universal Settlement signed between Claimant and the State, for which Claimant gave up valuable rights.
14. On information and belief, as of the end of June 2018, the State has withheld payments otherwise due to Fieldston in the amount of $726,985.
15. The demand for payment due to the OMIG based on the Notice of Rate Changes Letter and the subsequent withholding by the State of these funds otherwise due for services rendered, breached the terms of the Universal Settlement" (Claim, ¶¶ 13-15).
On January 19, 2018, OMIG issued a letter advising claimant of an overpayment in the amount of $726,985.00 for the period April 1, 2009 through December 31, 2011 based on the September 1, 2003 through August 31, 2004 base-year audit (Parry Exhibit 3). A notice of intention to file a claim was served by certified mail, return receipt requested, on August 15, 2018 (Maider Exhibit A) and the claim was filed on October 15, 2018.
In support of its dismissal motion, defendant argues that this Court lacks jurisdiction over the claim, that the claim is untimely, and that the Universal Settlement Agreement did not release the claimant from liability for overpayments arising from roll-forward adjustments that are based on completed audits.
Addressing first the defendant's threshold contention that this Court lacks jurisdiction over the claim, the law is settled that the Court of Claims lacks subject matter jurisdiction where a claim necessarily " 'require[s] review of an administrative agency's determination,' "(Feuer v State of New York, 101 AD3d 1550, 1551 [3d Dept 2012], quoting City of New York v State of New York, 46 AD3d 1168, lv denied 10 NY3d 705 [2008]; Chevron U.S.A. Inc. v State of New York, 86 AD3d 820, 820 [3d Dept 2011]). This is because challenges to administrative action must be brought in the Supreme Court pursuant to CPLR article 78 (Pratow Corporation v State of New York, 148 AD3d 1065 [2d Dept 2017]; Davis v State of New York, 129 AD3d 1353, 1354 [3d Dept 2015] appeal dismissed 26 NY3d 969 [2015]). Here, however, review of an administrative determination is unnecessary to the resolution of the claimant's breach of contract claim. The breach of contract claim is premised on the contention that OMIG's issuance of the January 19, 2018 overpayment letter constituted a breach of the Universal Settlement Agreement (cf. Chase Manhattan Bank v State of New York, 13 AD3d 873 [3d Dept 2004]; Matter of Rye Psychiatric Hosp. Ctr. v State of New York, 177 AD2d 834 [3d Dept 1991], lv denied 80 NY2d 751 [1992]). While resolution of the claim requires review of the Universal Settlement Agreement to determine whether OMIG's rate change and recoupment efforts violated the terms of the agreement, review of the administrative determination itself is unnecessary. In fact, as discussed below, claimant administratively appealed the final audit that gave rise to the overpayment, and partially prevailed. Thus, aside from the remaining procedural argument, the only issue for this Court's determination is whether the defendant's rate adjustments and recoupment efforts constituted a breach of the Universal Settlement Agreement. Such matters lie clearly within the jurisdiction of the Court of Claims (Court of Claims Act § 9 [2]).
Turning to that branch of defendant's motion contending the claim is untimely, Court of Claims Act § 10 (4) requires that a breach of contract claim:
"shall be filed and served upon the attorney general within six months after the accrual of such claim, unless the claimant shall within such time serve upon the attorney general a written notice of intention to file a claim therefor, in which event the claim shall be filed and served upon the attorney general within two years after such accrual" (Court of Claims Act § 10 [4]).
A claim alleging breach of contract accrues when damages become reasonably ascertainable (Waters of Saratoga Springs v State of New York, 116 AD2d 875, 877 [3d Dept 1986] affd 68 NY2d 777 [1986]; Jeda Capital-Lenox, LLC v State of New York, 149 AD3d 1390, 1391 [3d Dept 2017], lv denied 30 NY3d 903 [2017]). Claimant alleges that the roll-forward rate adjustment for the period April 1, 2009 through December 31, 2011, which was based upon an audit performed for the period September 1, 2003 through August 31, 2004, gave rise to the alleged overpayment in the sum of $726,985 (Claim, ¶ 13). Claimant was first notified of this overpayment when it received the January 19, 2018 notice of rate change on January 23, 2018 (Claim, ¶ 13; Exhibit B, annexed to claim; Parry affidavit, ¶ 27; Parry Exhibits 3 and 4). Consequently, damages became reasonably ascertainable when claimant received the January 2018 notification of the overpayment. That being the case, the notice of intention served on August 15, 2018 was untimely.
Moreover, even if the claim was timely filed and served the defendant established, through the submission of the Universal Settlement Agreement, that nothing in the agreement precludes the application of base year costs, determined after an audit becomes final, to subsequent years.
Claimant alleges that "[r]oll-[f]orward [a]djustments were not preserved as claims that can be asserted by OMIG" (Claim, ¶ 11) and that "OMIG contractually bound itself via the Universal Settlement that it would not 'commence any review, investigation or audit of any matter that is being withdrawn, discontinued and released with prejudice under this Settlement Agreement' " (Claim, ¶ 12). However, the audit that resulted in the overpayment was not new or pending or a matter that was released with prejudice under the agreement. The audit, which was initiated in 2009, resulted in the issuance of a draft audit report in 2011 and a final audit report in 2012 (Parry affirmation, Exhibits 1 and 2). Claimant had the right to object to the draft audit report (see 18 NYCRR 517.5 ) and also the right to administratively appeal the final audit findings (18 NYCRR §§ 517.6, 517.17, 519.4), which it pursued. Claimant's administrative appeal of the final audit resulted in the execution of a Stipulation of Settlement, dated June 2013, in which the final audit report was revised and it was agreed that "[t]he Medicaid overpayment to be repaid by the Provider will be determined after the new audited rates are calculated . . . and the Provider will be notified of the new audited rates and the total amount of Medicaid overpayment" (Parry Exhibit 2, ¶ 8). Nothing in the 2015 Universal Settlement Agreement released claimant from its obligation to repay an overpayment that was based upon a finalized audit and previously compromised by the stipulation of the parties in 2013.
The contract clause claimant contends was breached states in full: "OMIG will not commence any review, investigation or audit of any matter that is being withdrawn, discontinued and released with prejudice under this Settlement Agreement" (Foster Exhibit B, ¶ 12.1).
The regulations make clear that rates are provisional until audited or the six-year period to conduct an audit has expired (10 NYCRR 86-2.7; 18 NYCRR 517.3 [a] [1]; Matter of Martin Luther Nursing Home, Inc. v Dowling, 78 AD3d 1623 [4th Dept 2010], rearg denied 81 AD3d 1388 [4th Dept 2011], lv denied 17 NY3d 701 [2011]; Matter of DMN Mgt. Servs., LLC v Daines, 79 AD3d 37 [3d Dept 2010]). The audit that resulted in rate revisions was a finalized audit and the regulations clearly require application of audit adjustments "to all rate periods which are affected by the audited costs" (18 NYCRR 517.14; see also Matter of Northern Metro. Residential Healthcare Facility, Inc. v Novello, 72 AD3d 1383, 1385 [3d Dept 2010]; German Masonic Home Corp. v DeBuono, 295 AD2d 312, 314 [2d Dept 2002], lv denied 99 NY2d 507 [2003]). Consequently, the defendant conclusively refuted claimant's breach of contract claim through the submission of documentary evidence (CPLR 3211 [a] [1]).
Accordingly, the defendant's motion is granted and the claim is dismissed, without opposition.
March 12, 2019
Saratoga Springs, New York
FRANCIS T. COLLINS
Judge of the Court of Claims Papers Considered:
1. Notice of Motion dated January 18, 2019;
2. Affirmation of Richard C. Maider, Esq. dated January 17, 2019 with Exhibit A;
3. Affirmation of Peter M. Parry, Esq. dated January 16, 2019, with Exhibits 1-4;
4. Affidavit of Ann Foster sworn to January 17, 2019, with Exhibits A and B;
5. Defendant's memorandum of law dated January 18, 2019.