Opinion
# 2020-041-003 Motion No. M-94886
01-30-2020
UNITED CEREBRAL PALSEY OF NEW YORK CITY, INC. D/B/A, ADAPT COMMUNITY NETWORK v. THE STATE OF NEW YORK
ROPES & GRAY LLP Hayden A. Miller, Esq. Lee S. Gayer, Esq. HON. LETITIA JAMES New York State Attorney General By: Thomas J. Reilly, Esq. Assistant Attorney General
Synopsis
Application to file late claim alleging that the defendant wrongfully recouped Medicaid funds from disabilities services provider is denied where proposed claim lacks appearance of merit because Court of Claims lacks subject matter jurisdiction over proposed claim which should have been brought as CPLR Article 78 proceeding in Supreme Court.
Case information
| UID: | 2020-041-003 |
| Claimant(s): | UNITED CEREBRAL PALSEY OF NEW YORK CITY, INC. D/B/A, ADAPT COMMUNITY NETWORK |
| Claimant short name: | UNITED CEREBRAL |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | The caption is amended to reflect the proper defendant. |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | NONE |
| Motion number(s): | M-94886 |
| Cross-motion number(s): | |
| Judge: | FRANK P. MILANO |
| Claimant's attorney: | ROPES & GRAY LLP Hayden A. Miller, Esq. Lee S. Gayer, Esq. |
| Defendant's attorney: | HON. LETITIA JAMES New York State Attorney General By: Thomas J. Reilly, Esq. Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | January 30, 2020 |
| City: | Albany |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
Claimant moves for permission to file a late claim pursuant to Court of Claims Act 10 (6). Defendant opposes the application.
Court of Claims Act 10 (6) provides that:
"[T]he court shall consider, among other factors, whether the delay in filing the claim was excusable; whether the state had notice of the essential facts constituting the claim; whether the state had an opportunity to investigate the circumstances underlying the claim; whether the claim appears to be meritorious; whether the failure to file or serve upon the attorney general a timely claim or to serve upon the attorney general a notice of intention resulted in substantial prejudice to the state; and whether the claimant has any other available remedy."
In reviewing a late claim application, "the Court of Claims is required to consider, among other factors, those enumerated in Court of Claims Act § 10 (6), no one factor being controlling" (Matter of Donaldson v State of New York, 167 AD2d 805, 806 [3d Dept 1990]; see Matter of Duffy v State of New York, 264 AD2d 911, 912 [3d Dept 1999]). In fact, "[n]othing in the statute makes the presence or absence of any one factor determinative" (Bay Terrace Coop. Section IV v New York State Employees' Retirement Sys. Policemen's & Firemen's Retirement Sys., 55 NY2d 979, 981 [1982]).
Further, "it is well settled that the Court of Claims' broad discretion in this area should be disturbed only in the face of clear abuse" (Calco v State of New York, 165 AD2d 117, 119 [3d Dept 1991], lv denied 78 NY2d 852 [1991]).
Claimant provides programs and services for people with disabilities, including "education, health, technology, and residential and recreational services."
The proposed claim alleges that on or about "December 2, 2016, [claimant] noticed that [defendant] had failed to pay certain Medicaid payments owed to [claimant]" and contacted defendant by email seeking an explanation. The defendant responded by email on December 7, 2016 and advised claimant that it was identifying "old outstanding Medicaid liabilities" and intended "to recoup the outstanding liabilities."
On March 3, 2017, according to the proposed claim, claimant requested from defendant "the immediate suspension of such recoupment, and [demanded] repayment to [claimant] of any improperly recouped funds." On March 6, 2017, claimant learned from defendant that defendant was seeking "to recover through Medicaid recoupment . . . for payments [to claimant] that had occurred between March 8, 1993 and August 15, 1994."
On March 20, 2017, claimant's attorney notified an attorney for defendant that defendant had "improperly recouped [claimant's] Medicaid payments" and requested that defendant "cease and desist withholding payments immediately . . . and repay to [claimant] any amounts withheld to date."
The proposed claim further alleges that between November 7, 2016 and April 14, 2017, defendant recouped "an amount exceeding $245,949.57 from claimant before defendant suspended any recoupments from [claimant] after April 19, 2017."
On June 14, 2017, claimant's attorney again requested repayment from defendant of the previously recouped funds. On that same day, June 14, 2017, claimant's attorney advised defendant's attorney that "I am also cognizant of the short limitations period for filing an Article 78."
The proposed claim alleges that claimant did not pursue an Article 78 remedy, as of June 14, 2017, because a representative of defendant was reviewing the recoupment process and told claimant that "she was hoping [that claimant] would be pleased with the result of [defendant's] process and that, during the pendency of that process, the recoupment would remain in suspension."
The proposed claim alleges that defendant never repaid to claimant the previously recouped funds and instead, in January 2018, "resumed its recoupment of Medicaid payments from [claimant], completing its recoupment on January 29, 2018."
Claimant alleges that the total amount recouped as of January 29, 2018 was $334,362.93.
Claimant further alleges that on August 10, 2017, in a telephone conversation, an attorney for defendant said that she "was hoping that [claimant] and the other affected providers would be pleased with the result of [defendant's] process" and that she "very much hoped" that claimant "would not institute a Section 78 proceeding."
Claimant's excuse for allegedly failing to timely file and serve a claim is that the defendant did not give claimant "timely notification of Defendant's intention to commence Medicaid recoupment payments." The Court finds that claimant offers no reasonable excuse as to why it failed to either commence a CPLR Article 78 proceeding, file and serve a claim in the Court of Claims, or take any other legal action, after it admittedly learned of the recoupment action on March 6, 2017, until making its late claim application on or about November 7, 2019.
Although claimant has failed to offer a reasonable excuse for its failure to timely file and serve the claim, "the tender of a reasonable excuse for delay in filing a claim is not a precondition to permission to file a late claim such as to constitute a sine qua non for the requested relief" (Bay Terrace Coop. Section IV, 55 NY2d at 981).
The defendant had notice of the essential facts constituting the claim and has had an opportunity to investigate the circumstances underlying the claim. No substantial prejudice to the defendant has been shown.
Claimant had an available alternative remedy via an administrative challenge to the defendant's agency action followed by an Article 78 proceeding in Supreme Court, as set forth below.
Section 10 (6) requires that the proposed claim not be "patently groundless, frivolous or legally defective, and [that] upon consideration of the entire record, there is cause to believe that a valid cause of action exists" (Rizzo v State of New York, 2 Misc 3d 829, 834 [Ct Cl 2003]; see Dippolito v State of New York, 192 Misc 2d 395 [Ct Cl 2002]; Remley v State of New York, 174 Misc 2d 523 [Ct Cl 1997]; Matter of Santana v New York State Thruway Auth., 92 Misc 2d 1, 11 [Ct Cl 1977]). In Witko v State of New York (212 AD2d 889, 891 [3d Dept 1995]), the court noted that a proposed claim offered in a section 10 (6) application need only have "the appearance of merit."
Recognizing that "it would be futile to permit a defective claim to be filed even if the other factors . . . supported the granting of the claimant's motion" (Savino v State of New York, 199 AD2d 254, 255 [2d Dept 1993]), claimant's application to file a late claim is denied for the following reasons.
The jurisdiction of the Court of Claims is invoked where money damages are the essential object of the claim, unlike an instance where the principal claim is equitable in nature (such as to review action or inaction by a state agency), with monetary relief being incidental to the principal claim (see Harvard Fin. Servs. v State of New York, 266 AD2d 685, 685 [3d Dept 1999]; Matter of Gross v Perales, 72 NY2d 231, 236 [1988]).
In City of New York v State of New York (46 AD3d 1168, 1169-1170 [3d Dept 2007], lv denied 10 NY3d 705 [2008]), the court explains that:
"Two inquiries must be made to determine if the Court of Claims has subject matter jurisdiction. As that court has 'no jurisdiction to grant strictly equitable relief' (Psaty v Duryea, 306 NY 413, 416 [1954]), but may grant incidental equitable relief so long as the primary claim seeks to recover money damages in appropriation, contract or tort cases (see Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671 [1997]), 'the threshold question is "[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim"' (Madura v State of New York, 12 AD3d 759, 760 [2004], lv denied 4 NY3d 704 [2005], quoting Matter of Gross v Perales, 72 NY2d 231, 236 [1988]). The second inquiry, regardless of how a claimant categorizes a claim, is whether the claim would require review of an administrative agency's determination--which the Court of Claims has no subject matter jurisdiction to entertain (see Hoffman v State of New York, 42 AD3d 641, 642 [2007]), as review of such determinations are properly brought only in Supreme Court in a CPLR article 78 proceeding (see Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 757 [1991])."
In order to award claimant damages in this action, the Court would necessarily be required to review and reverse the administrative decision of the defendant regarding its recoupment determination. The Court lacks subject matter jurisdiction to do so.
Claimant's remedy for the allegedly unlawful recoupment determination, and for return of the funds, lies in Supreme Court in the context of a CPLR Article 78 proceeding. Gross v Perales (72 NY2d at 233-34), makes claimant's remedy clear:
"The primary issue presented on this appeal is whether a municipality may challenge a determination by a State administrative agency, and at the same time recover wrongfully withheld money from the State, within the context of an article 78 proceeding in Supreme Court, or whether such a lawsuit must be commenced in whole or in part in the Court of Claims. We hold that where the thrust of the lawsuit is the review of an adverse State agency determination, with the monetary relief incidental, Supreme Court may entertain the entire case under CPLR article 78."
CPLR section 7803 offers a remedy when the following questions, among others, are raised against an agency:
"1. whether the body or officer failed to perform a duty enjoined upon it by law; or
2. whether the body or officer proceeded, is proceeding or is about to proceed without or in excess of jurisdiction; or
3. whether a determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion, including abuse of discretion as to the measure or mode of penalty or discipline imposed; or
4. whether a determination made as a result of a hearing held, and at which evidence was taken, pursuant to direction by law is, on the entire record, supported by substantial evidence."
The factual allegations of the proposed claim fit squarely into the jurisdictional parameters of CPLR section 7803 and many similar such proceedings have been litigated in Article 78 proceedings in Supreme Court, including the following recent examples.
In Matter of New York State Health Facilities Assn., Inc. v Sheehan (100 AD3d 1086, 1086-1087 [3d Dept 2012], lv denied 21 NY3d 853 [2013]), an Article 78 petition to prohibit the Office of Medicaid Inspector General (OMIG) from conducting Medicaid patient audits was litigated in Supreme Court based upon the petitioner's allegation that the OMIG was acting "in excess of its jurisdiction" without "constitutional or statutory authority" to conduct such audits.
Importantly, the court in Matter of New York State Health Facilities Assn., held, at 100 AD3d 1088-1089, that allegations that defendant "acted in excess of its jurisdiction, or violated or misapplied its enabling statute . . . amount to claims that [defendant] acted arbitrarily and capriciously in disregarding regulatory requirements, or that [defendant's] interpretation of the [applicable] Law . . . is affected by an error of law [and] such claims must be raised in a CPLR article 78 proceeding following a final agency determination." (emphasis added).
In Clearview Ctr., Inc. v New York State Office of Medicaid Inspector Gen. (172 AD3d 1582, 1584 [3d Dept 2019]), a CPLR article 78 proceeding was the proper venue to challenge a final medicaid audit report on the basis that defendant "failed to undertake the audit in a timely manner and that the audit was not conducted in accordance with applicable laws and regulations . . and that, therefore, [defendant was] time-barred from recouping overpayments based upon claims that were furnished or billed (whichever was later) more than six years prior to the issuance of the draft audit report."
Shore Winds, LLC v Zucker (179 AD3d 1208, 1209 [3d Dept 2020]), further demonstrates that CPLR Article 78 provides claimant's remedy. In Shore Winds, the owners and operators of residential health care facilities were advised by the Office of Medicaid Inspector General (OMIG) that:
"[A]n audit for the base year of March 2003 to March 2004 resulted in an adjustment of its rates. OMIG further advised Shore Winds that the audit adjustment was used to calculate the operating portion of the rate for the period between April 2009 and December 2011 and that, as a consequence, Shore Winds had been overpaid in the amount of $217,876 for such period - an amount that OMIG sought to recoup. In March 2018, petitioners commenced this combined CPLR article 78 proceeding and action for declaratory judgment. Petitioners alleged four causes of action arguing that OMIG's attempt in the December 2017 letter to recoup the alleged overpayment was unauthorized."
The Shore Winds court noted that:
"Shore Winds is essentially challenging a government agency determination and, therefore, Shore Winds' avenue for judicial relief lies in a CPLR article 78 proceeding."
In Signature Health Ctr., LLC v State of New York, 92 AD3d 11, 17 [3d Dept 2011], lv denied 19 NY3d 811 [2012], the Court reminded, citing CPLR 7806, that "there is no dispute that Medicaid providers can obtain incidental monetary damages . . . in the context of a CPLR article 78 proceeding challenging the withholding of Medicaid reimbursement payments."
Subject matter jurisdiction over claims such as those alleged in the proposed claim resides in an administrative challenge to the agency action followed by an Article 78 proceeding in Supreme Court (see e.g. Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30 [1984]; Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169 [1985], cert denied 476 US 1115 [1986]; Matter of Westledge Nursing Home v Axelrod, 68 NY2d 862 [1986]; Matter of County of Monroe v Axelrod, 125 AD2d 981 [4th Dept 1986]; Matter of Medicon Diagnostic Labs. v Perales, 182 AD2d 1033 [3d Dept 1992]; Matter of Faxton Sunset-St. Luke's Skilled Nursing Facility v Dowling, 233 AD2d 865 [4th Dept 1996]).
The Court of Claims has rejected claims similar to the instant proposed claim (Eastchester Rehab & Health Care v State of New York, UID #2012-040-024, Claim No. None, Motion No. M-80914 [McCarthy, J. April 24, 2012]; Woodmere v The State of New York, UID #2017-045-008, Claim No. 128282, Motion No. M-89215 [Lopez-Summa, J., April 13, 2017]).
Finally, claimant was aware of its Article 78 remedies no later than June 14, 2017 when claimant's attorney advised defendant's attorney that "I am also cognizant of the short limitations period for filing an Article 78." Claimant seeks to avoid its limitation to Article 78 relief, and perhaps justify Court of Claims subject matter jurisdiction, by essentially asserting that defendant should be estopped from raising timeliness issues. Claimant argues that defendant persuaded claimant not to seek Article 78 relief by stating that an attorney for defendant said that she "was hoping that [claimant] and the other affected providers would be pleased with the result of [defendant's] process" and that she "very much hoped" that claimant "would not institute a Section 78 proceeding."
Claimant's reliance upon these alleged statements is misplaced because "estoppel is not available against a governmental agency in the exercise of its governmental functions" (Daleview Nursing Home v Axelrod, 62 NY2d 30, 33 [1984]).
Additionally, even assuming for the sake of argument that subject matter jurisdiction lies in the Court of Claims, it is apparent that while the proposed claim couches its allegations in purported causes of action for conversion, money had and received and unjust enrichment, the gravaman of the proposed claim is that defendant has acted negligently in allegedly misinterpreting, and violating, its own regulations.
In McLean v The City of New York (12 NY3d 194, 203 [2009]), the Court of Appeals recited the law as to when the state may be held liable for the negligent performance of a governmental function:
"Government action, if discretionary, may not be a basis for liability, while ministerial actions may be, but only if they violate a special duty owed to the plaintiff, apart from any duty to the public in general."
Here, the proposed claim essentially alleges that the defendant acted negligently in exercising its discretion to interpret and enforce its statutory and regulatory duties, rather than having committed a ministerial act of negligence. The defendant was clearly exercising a governmental function involving the exercise of reasoned discretionary judgment in determining claimant's potential liability for recoupment of medicaid payments (see, e.g. Matter of Daleview, 62 NY2d at 33-34, [1984]; County of Nassau v State of New York, 1 AD3d 732 [3d Dept 2003]).
The claim fails to state a negligence-based cause of action.
For all of the foregoing reasons, the proposed claim lacks the appearance of merit and the claimant's application is denied.
January 30, 2020
Albany, New York
FRANK P. MILANO
Judge of the Court of Claims