Opinion
80904
Decided March 18, 2005.
KAVINOKY COOK, LLP, Attorney for Petitioner.
Samuel L. Shapiro, Esq, STATE OF NEW YORK OFFICE OF THE ATTORNEY GENERAL, Ann C. Williams, Esq., Attorneys for Respondents.
This is an Article 78 proceeding wherein petitioner seeks a judgment annulling respondents' determination that petitioner is operating an adult care facility without an operating certificate. Respondents have moved to dismiss on the ground that petitioner has failed to exhaust its administrative remedies.
Petitioner leases units within certain residential apartment buildings to tenants, all of whom are age sixty-five (65) or older. Petitioner maintains these units and offers amenities to the tenants such as dining, linen service, housekeeping, recreation, security and transportation.
Pursuant to their inspection authority under Social Services Law § 460-c, respondents have determined that petitioner is operating an "adult care facility" as defined in Social Services Law § 2 (21). It is undisputed that petitioner does not possess an "operator's certificate" to operate such a facility as required by Social Services Law § 460-b.
Respondents evidenced their determination that petitioner was operating an unlicensed adult care facility by letter dated October 6, 2003 ("determination letter"). The relevant language of the determination letter is as follows:
. . . it appears that you are providing residential care and services to adults residing in your facility who are unable to live independently and that you are, therefore, operating an adult care facility as defined in Section 2 (21) of the Social Services Law.
. . . an Administrative hearing will be scheduled shortly to determine whether a fine should be imposed against you.
(Emphasis added).
The determination letter advises that fines of up to $1,000.00 per day were possible as was prosecution for a misdemeanor. Further, the determination letter provides that the civil penalty commences thirty (30) days after receipt of "this notification" and that the civil penalties will continue until an acceptable license application is submitted or the facility is closed.
The determination letter enclosed a Summary of Procedures for the hearing at which respondents would determine whether a fine should be imposed. The Summary of Procedures provides, in relevant part, as follows:
Notice of the determination that the facility is an adult care facility and the reasons for such determination and notice of the time and place of the hearing shall be served in person on the operator, owner or prime lessor, if any, or by certified mail, return receipt requested, addressed to such person and received at least twenty (20) days prior to the hearing.
(Emphasis added). This language is derived verbatim from Social Services Law § 460-d(9)(a).
The determination letter is clearly the "notice of determination" referenced in the Summary of Procedures and the statute even though it did not set forth a hearing date. The determination letter states instead that the hearing "will be scheduled shortly." The determination letter was served by certified mail, return receipt requested, as the Summary of Procedures and statute provide.
The determination letter makes clear that respondents were proceeding under Social Services Law § 460-d authorizing "enforcement powers" for non-compliance with that statute. In the case of an unlicensed adult care facility, respondents are authorized to commence an administrative hearing seeking a closure order and/or imposition of a civil penalty. Social Services Law § 460-d(9)(a).
Social Services Law § 460-d (9) provides that the enforcement powers for an unlicensed facility cannot be exercised until after there has been "notice" and an "opportunity to be heard." In addition, the hearing cannot be commenced until after the Department of Health has made a "determination" that the facility owner is operating in violation of the statute. Thus, the question before this Court is whether the department's "determination," which cannot be enforced until after the hearing, is "final and binding" under CPLR § 217.
Respondents assert that a determination is not final and binding within the meaning of CPLR § 217 until the aggrieved party is able to ascertain the consequences of the challenged determination. New York State Ass'n of Counties v. Axelrod, 78 NY2d 158, 165-66 (1991). Further, respondents assert that administrative actions are not final "unless and until they impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process." Matter of Essex County v. Zagata, 91 NY2d 447, 453 (1998), quoting Chicago Southern Airlines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 113 (1948).
Respondents argue that the language of the determination letter clearly indicates that it is not final and binding. Respondents also claim that the Summary of Procedures demonstrates that petitioner will have ample opportunity to be heard with respect to the alleged violation of the Social Services Law, i.e., whether petitioner is operating an adult care facility without a license. Moreover, at oral argument, respondents' counsel stated that petitioner would be permitted to argue at the administrative hearing that it is not an adult care facility requiring licensure, as opposed to merely the imposition of a fine.
Petitioner counters by emphasizing the language of the statute, the determination letter and the Summary of Procedures which make clear that respondents have arrived upon a "determination." Petitioner also relies heavily on the Third Department's decision in Alterra Healthcare Corp. v. Novello, 306 AD2d 787 (3rd Dept. 2003) wherein the court affirmed dismissal of a petition which was found to be untimely under CPLR § 217 in a very similar context. According to petitioner, Alterra squarely holds that a determination such as the one arrived at here by the respondents is "final and binding" under the CPLR.
In reviewing the statute and accompanying regulations, it is clear that the respondents have arrived upon a "determination." Still, the question is whether under the statute and regulations this "determination" is "final and binding" upon the petitioner. To answer this question, this Court must make a pragmatic evaluation of whether the decision-maker has arrived at a definitive position on the issue that inflicts an actual and concrete injury that may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party. Am. Transit Ins. Co. v. NY State DMV, 305 AD2d 840 (3rd Dept. 2003), quoting Matter of Essex County, 91 NY2d at 453.
This Court's pragmatic evaluation of the statutes and regulations which govern this situation is that the determination letter is not "final and binding" because respondents can take no further action with respect to the alleged violation of the statute until an administrative hearing has been conducted. Social Services Law § 460-d(9)(a); 18 NYCRR 486.5(b) (3). The statute and regulations also do not preclude petitioner from contesting the substance and merits of the alleged violation during the administrative hearing. Moreover, the regulations specifically provide that, at a hearing regarding an uncertified operator:
This proceeding does not involve an application for an injunction as authorized by Social Services Law § 460-d (5). Even if such an application were to be made, it would involve a hearing before the court as opposed to the administrative hearing respondents claim must next be conducted here.
. . . the department must establish that the operator is providing or arranging for the provision of personal care or supervision to one or more unrelated, dependent adults or has held himself or herself out as providing such services and is providing at least room and board to one or more unrelated, dependent adults.
Based on the language of this regulation, it is clear that the respondents must prove at the administrative hearing, and petitioners may contest, that petitioner is operating an adult care facility providing the services described in the regulation. At such a hearing, the parties will be in a position to make a complete record so that the administrative department with the responsibility to enforce the statute has all of the facts before it prior to making a final and binding determination. As of now, there is no substantive record before the Court. The Court of Appeals has recognized that "an administrative determination is not final for judicial review purposes if it rests upon an empty record." Yarbough v. Franco, 95 NY2d 342, 346 (2000).
Simply put, respondents are unable to enforce their determination until a hearing is conducted. They cannot issue any closure order and/or impose fines. Moreover, in light of an empty record before the Court, it would appear more appropriate to allow the administrative process to conclude before a court intervenes.
Nevertheless, this Court believes it is bound by the decision in Alterra because there is no contrary decision from the Fourth Department. Mountain View Coach Lines, Inc. v. Storms, 102 AD2d 663, 664 (2nd Dept. 1984). Under virtually identical circumstances, the Alterra court found that a determination letter such as the one present in this case is "final and binding" for purposes of CPLR § 217.
Significantly, the respondents here were the respondents in Alterra. In that case, respondents took the position that their determination as authorized under the Social Services Law was "final and binding" and, upon this argument, respondents prevailed on their motion to dismiss which was affirmed by the Third Department.
This Court has reviewed the Record on Appeal in Alterra and notes the multitude of arguments by the respondents that their issuance of a virtually identical determination letter in Alterra was final and binding. In support of their position, respondents argued in Alterra:
The determination letter in Alterra was more direct in its language but the letter's function in that case was exactly the same as the letter here, i.e. to serve as a basis upon which to initiate the administrative hearing process. ( Alterra, Record on Appeal, p. 218).
Where the agency has committed itself and the impact of its commitment is known, its determination becomes final and binding upon the aggrieved parties, even if additional steps must be taken before the impact is felt.
( Alterra, Record on Appeal, Respondents' Brief p. 13) (Citations omitted) (Emphasis added).
Respondents also argued in Alterra:
In its brief, petitioner contends that it was not finally aggrieved by the department's May 25 letter because it suffered no immediate impact from the Department's determination requiring licensure (Br. at pp. 18, 25-27). Specifically, petitioner argues that because the Department only threatened enforcement action "contingent" upon petitioner's failure to submit the proper licensure applications, no "concrete injury" arose from the Department's determination requiring licensure and would not unless and until the Department commenced an enforcement action (Br. at p. 18). Petitioner's arguments are specious.
In its May 25 letter, the Department issued a determination clearly committing itself to a course of action for future decisions, namely, that petitioner was operating unlicensed EHPs (257-258). That additional action had to be taken before petitioner's operations could be closed or fines imposed does not alter the finality of the Department's determination. See Matter of Queensborough, 41 NY2d at 926; Matter of Fishman, 294 AD2d at 765-766; Matter of Wing, 129 AD2d at 217-218. The May 25 letter advised petitioner in no uncertain terms what the Department's determination was with respect to the status of petitioner's facilities and the consequences that flowed from that decision. Put bluntly, petitioner was told to apply for the licenses or else. Petitioner's assertion that it did not know what fate lay in store for it simply because the Department, at petitioner's behest, forbore from immediate enforcement action is both legally baseless and factually incredible, and should be soundly rejected by this Court.4
4 By the same token, petitioner's claim that an article 78 proceeding based on the May 25 letter would have been" premature" because it had not yet been injured by an enforcement action (Br. at pp. 18-19) is also specious. Were enforcement action the triggering event, then petitioner would have no grounds to bring this current article 78 proceeding as no enforcement action had been initiated by the Department prior to petitioner's commencement of this proceeding.
Petitioner's argument is also flawed because it fails to recognize that the May 25 determination itself resulted in immediate concrete injury to petitioner. Because the Department had determined that petitioner was operating unlicensed EHP's petitioner was no longer free to operate its facilities without complying with the regulations and standards governing EHP facilities. The Department's determination thus immediately restricted petitioner's operation of its adult facilities.
( Alterra, Respondents' Brief, pp. 15-16) (Emphasis added).
This language from respondents' brief in Alterra is clearly in direct contradiction of the arguments advanced by respondents before this Court. In fact, the brief's language seems to be a concession by respondents that this Court ought to conclude that respondents' arguments here are "specious."
Respondents further claim that Alterra is distinguishable and point to the court's analysis in Cambridge Development LLC v. Novello, Index No. 8103/03, Supreme Court, New York County (Decided May 21, 2004), as a basis upon which to differentiate Alterra. In Cambridge Development, respondents argued that Alterra was different because, in Alterra, the petitioner submitted applications for licensing after the determination letter was issued and therefore the petitioner would no longer be entitled to a hearing, thus rendering the letter final.
This purported distinction, which respondents' claim exists here as well, is not accurate and is once again directly contradicted by the respondents arguments in Alterra. According to Social Services Law § 460-d(9)(b), the submission of an application for an operating certificate does not act as a bar to the imposition of a penalty against the facility's operator. Thus, a hearing was still available with respect to a civil penalty for past conduct and also perhaps for on-going conduct if the operating certificate was denied.
Respondents also argued in Alterra that the court should evaluate finality based solely on the language of the determination letter and not consider any events after its issuance. ( Alterra, Respondents' Brief, p. 18). While respondents convinced the court in Cambridge Development that Alterra was distinguishable on its facts, this Court finds that any such distinction makes no material difference because, as respondents argued in Alterra, finality must be based on the determination letter alone. This is the proper conclusion because alleged unlicensed operators cannot rely on future events to change the finality of the determination letter and are entitled as a matter of fundamental fairness to know when they must act.
Furthermore, in Alterra, petitioner filed its applications "under protest," thereby signifying its intention to contest the determination that it was operating an adult care facility. By taking the position that the filing of applications obviates the necessity of a hearing, respondents effectively acknowledged that the petitioner in Alterra was left without an opportunity to be heard and a remedy. It is precisely this concern about being left without a forum and a remedy that prompted the petitioner here to commence the proceeding when it did. Because of the varying positions respondents have taken in these types of cases, the Court cannot allow the petitioner here to be prejudiced by: (1) being sent to a hearing at which it may be told it cannot contest the substance and merits of the alleged violation; and (2) attempting to go to court later and being told that the proceeding is too late under Alterra.
Because the Third Department accepted the respondents' arguments in Alterra, this Court is not in a position to change the Appellate Division's decision even though it may respectfully disagree with it. It also should be noted that the burden of establishing the date a decision is final and binding is upon the agency issuing the determination. Feldman v. New York State Teachers' Ret. Sys., 2005 NY App. Div. LEXIS 76 (3rd Dept. 2005). Through their arguments in Alterra, the respondents here have set the date upon which their determination becomes final and binding and that date here must be based on the issuance and receipt of the determination letter. If respondents wish to change the precedent they procured, they need to do so with another court.
Based on the foregoing, the motion to dismiss is in all respects denied and respondents are given twenty (20) days after service of this Order with notice of entry in which to serve an Answer to the Petition. This decision shall constitute the Order of the Court once it has been granted and entered, and served with notice of entry.