In the Matter of County of Genesee, Appellant,v.Nirav R. Shah,, et al., Respondents.BriefN.Y.September 7, 2016CA 14-01041 To be argued by: VICTOR PALADINO 10 minutes requested Supreme Court, Genesee County - Index No. 63493 ~upreme QCourt of tbe ~tate of ~ew ~ork ~ppellate 7!\tbi%ion - jf outtb JJBepartment IN THE MATTER OF THE APPLICATION OF COUNTY OF GENESEE, Respondent, -against- NIRA V R. SHAH, AS COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF HEALTH AND THE NEW YORK STATE DEPARTMENT OF HEALTH, Appellants. REPLY BRIEF FOR APPELLANTS PETER H. SCHIFF Senior Counsel VICTOR PALADINO Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Appellants The Capitol Albany, New York 12224-0341 (518) 776-2012 OAG No. 14-170337 Dated: December 17, 2014 Reproduced on Recycled Paper Table of Contents Page Table of Authorities ............................................................................................ iii Preliminary Statement ...................................................... : ................................. 1 Argument POINTI The 2012 Amendment Is Constitutional.. ....................................... 1 A. The County's due process claim fails for lack of merit, not for lack of capacity, because the County is not a "person" entitled to due process protection ......................................... 1 B. The Third Department's strained interpretation of the 2012 amendment is flawed and should not be followed by this Court ................................................................................ 4 POINT II The County Lacks A Clear Legal Right To Mandamus Relief Directing the Department of Heal th To Calculate And Determine All Outstanding Overburden Liabilities ..................................................................... 8 Conclusion ........................................................................................................... 9 Table of Authorities Cases Page City of New York v. State of New York, 86 N.Y.2d 286 (1995) .................................................................................. 3 County of Cayuga, Matter of v. McHugh, 4 N.Y.2d 609 (1958) .............................................................. , .................. 3-4 County of Niagara, Matter of v. Shah, 2014 N.Y. App. Div. LEXIS 7738 (4th Dep't Nov. 14, 2014) .......... passim County of St. Lawrence, Matter of v. Shah, 2014 N.Y. App. Div. LEXIS 8230 (3d Dep't Nov. 26, 2014), motion for lv. to appeal pending ...................................................... passim Jeter, Matter of v. Ellenville Central School District, 41N.Y.2d283 (1977) .................................................................................. 3 Kraukopf v. Perales, 139 A.D.2d 147 (3d Dep't 1988); aff'd, 7 4 N.Y.2d 730 (1989) ................................................................ : ................. 2 Robertson v. Zimmerman, 268 N.Y. 52 (1935) ...................................................................................... 4 Silver v. Pataki, 96 N.Y.2d 532 (2001) ...................................... : ........................................... 2 · United States Constitution Fourteenth Amendment ........................................... : .......................................... 4 State Statutes . Social Services Law § 368-a(l)(h) ................................................................................................ 5 L. 2012, ch. 56, Part D § 61 ................................................................................................. passim 2 PRELIMINARY STATEMENT Appellants Nirav R. Shah, Commissioner of Health, and the New York State Department of Health submit this reply brief in further support of their appeal from Supreme Court's judgment that nullified section 61 of part D of chapter 56 of the laws of2012 (the 2012 amendment or Section 61). The 2012 amendment unambiguously ended state reimbursement for pre-2006 overburden claims. In this reply brief, we address the impact on this appeal of this Court's recent decision in Matter of County of Niagara v. Shah, 2014 N.Y. App. Div. LEXIS 7738 (4th Dep't Nov. 14, 2014), and the Third Department's conflicting decision in Matter of County of St. Lawrence v. Shah, 2014 N.Y. App. Div. LEXIS 8230 (3d Dep't Nov. 26, 2014), motion for lv. to appeal pending. ARGUMENT· POINT I THE 2012 AMENDMENT IS CONSTITUTIONAL A. The County's due process claim fails for lack of merit, not for lack of capacity, because the County.is not a "person" entitled to due process protection. Supreme Court erred in declaring the 2012 amendment unconstitutional. The due process clause does not limit the Legislature's authority to allocate Medicaid expenses between the State and its political subdivisions as it sees fit, and to change that allocation even after the relevant expenses have been incurred. As demonstrated in the Department's main brief (pp. 15-19), the County's due process challenge to the 2012 amendment fails because a county is not a "person" entitled to due process protection against the legislative actions of the State, its creator. On this issue, this Court should decline to follow Matter of County of St. Lawrence v. Shah, 2014 N.Y. App. Div. LEXIS 8230 (3d Dep't Nov. 26, 2014), motion for lv. to appeal pending. There, the Third Department concluded that the Department's argument that the County was not a person for purposes of mounting a due process challenge to a State law was essentially an argument that the County lacked capacity. 2014 N.Y. App. Div. LEXIS 8230 at *3,*4. Any argument that the County lacked capacity, the Third Department held, had been waived because it was not raised in Supreme Court. The Third Department's conclusion is erroneous. The argument that a County is not a person within the meaning of New York's due process clause is separate and distinct from the affirmative defense that the County lacks capacity. Capacity is a threshold issue, and concerns a litigant's power to appear and bring its grievance before the court. Silver-v. Pataki, 96 N.Y.2d 532, 537 (2001). Even ifthe County has capacity here because it claims a proprietary interest in a specific fund of money, see Krauskopf v. Perales, 139 A.D.2d 147, 153 (3d Dep't 1988), aff'd, 74 N.Y.2d 730 (1989) (which did not involve a due process claim), the County's due process vested rights claim 2 fails on the merits because a political subdivision is not a person entitled to due process protection and, thus, lacks the substantive right to challenge a State law on due process grounds. In other words, the Third Department failed to distinguish between the county's authority to sue (capacity) and its entitlement to protection under the due process clause (the merits). The only authority the Third Department cited for its conclusion, City of New York v. State of New York, 86 N.Y.2d 286 (1995), did not involve a challenge by a political subdivision to a statute on due process grounds. That case addressed only the doctrine of capacity and did not suggest - let alone hold - that capacity and personhood for purposes of a due process claim are the same. The cases that have squarely addressed · the question of whether a political subdivision is a person (see Department's opening brief at pp. 17-18) have held that political subdivisions are not persons entitled to due process protection. The County has failed to cite or distinguish these cases in its brief. In this regard, the County's brief (pp. 14-15, 17) misstates the holding in Matter of Jeter v. Ellenville Centtal School District, 41 N.Y.2d 283, 287 (1977). Jeter holds that the municipalities' challenge to a state law failed not for lack of standing (a concept closely aligned with capacity) but for lack of a "substantive right" under the due process and equal protection clauses. Id. at 287. Similarly, Matter of County of Cayuga v. McHugh, 4 N.Y.2d 609, 616 3 (1958), cited by the Comity (Br. at 14), rejected on the merits Cayuga County's due process challenge to a state determination closing its jail, because a "determination to close [the county jail] does not deprive the county of any property rights" and "no question of due process or substantial evidence arises in this case." The COl:irt quoted Robertson v. Zimmerman, 268 N.Y. 52, 64 (1935), where the Court state that "[t]he power of the State unrestrained by the Fourteenth Amendment to the Federal Constitution over the rights and property of cities is not open to question.'; Thus, ·a. political subdivision's lack ofpersonhood is, under the case law, a separate and distinct matter from its general lack of capacity. Because a County cannot assert a due process claim against a state law, Supreme Court's judgment should be reversed. B. The Third Department's strained interpretation of the 2012 amendment is flawed and should not be followed by this Court. Even if the County could mount a due process claim against the 2012 amendment, the statute is constitutional under a due process vested rights analysis, for the reasons discussed at pages 30 through 32 of the Department's opening brief. Although the Third Department recently addressed the constitutionality of the 2012 amendment, its analysis is flawed and should not be followed. See Matter of County of St. Lawrence v. Shah, 2014 N.Y. App. Div. LEXIS 8230. There, the Third Department held that the 4 2012 amendment was constitutional. But it reached this conclusion by · interpreting the amendment in such a way as to render it meaningless and in direct conflict this Court's interpretation of the 2012 amendment in Matter of County of Niagara v. Shah, 2014 N.Y. App. Div. LEXIS 7738 (4th Dep't Nov. 14, 2014). While the Third Department concluded that the 2012 amendment did not retroactively extinguish counties' right to reimbursement under SSL § 368-a(l)(h), this Court in County of Niagara v. Shah held that the 2012 amendment "has retroactively changed the law" by extinguishing the State's obligation to pay counties for pre-2006 overburden reimbursements. 2014 N.Y. App. Div. LEXIS 7738 at *6. The Third Department construed the 2012 amendment as merely imposing a statute of limitations on the counties' submission of overburden claims, and imputed a six-month grace period from the date of the court's decision for the continued submission of such claims. In addition, the court reasoned that the 2012 amendment did not repeal SSL § 368-a(l)(h) or extinguish the State's obligation to identify, calculate, and pay overburden reimbursements to counties, even apart from any overburden claims the counties might submit. Based on this reading of the 2012 amendment, the Third Department affirmed Supreme Court's directive that the Department identify, verify, and pay the total unpaid 5 overburden expenditures that the County incurred before 2006. 2014 NY Slip Op 08278 at *8-*9. In County of Niagara v. Shah, this Court reached precisely the opposite conclusion on this issue. It rejected the County's contention that the 2012 amendment was "inapplicable because respondents have an ongoing duty to reimburse petitioner for all prior overburden expenditures without regard to whether petition~r submits a claim." 2014 N.Y. App. Div. LEXIS 7738 at *8. As this Court explained, if it were to "accept petitioner's contention that respondents must forthwith search out all prior possible instances of unreimbursed overburden expenditures and submit payment for them to petitioner notwithstanding [the 2012 amendment], then there is no situation in which a claim for such payment will be submitted. Thus, there will be no situation in which [the 2012 amendment] will apply, rendering it a nullity." Id. at *8-*9. Accordingly, this Court reversed the judgment in County of Niagara v. Shah, which had directed DOH to unilaterally identify, calculate, and pay all outstanding overburden reimbursement owed to the County - the very mandamus relief the Third Department affirmed in County of St. Lawrence II. In other words, the Third Department's interpretation-that the 2012 amendment is merely a statute of limitations and does not extinguish the State's duty to reimburse counties for overburden expenditures without 6 regard to whether the counties have submitted claims - is precisely the interpretation that this Court in County of Niagara v. Shah held would render the 2012 amendment a nullity. The legislative history of the 2012 amendment makes abundantly clear that its purpose was to end overburden reimbursement and overturn adverse court decisions that continued such reimbursement (R. 373). Even ifthe 2012 amendment were treated like a statute of limitations, . the Third Department erred in imputing a 6-month grace period. What grace period, if any, to provide is for the Legislature, not the courts, to decide. The Legislature could reasonably have determined counties had already had sufficient time to submit overburden claims: when the 2012 amendment was enacted, overburden claims were between seven and twenty-eight years old. Moreover, after the amendment was included in the Governor's budget bills in mid-January 2012, counties submitted a flurry of overburden claims before April 2012, all of which were paid (R. 343, '1[ 52 & n.23). Since counties already had more than sufficient time to submit overburden claims; there was no need to engraft a grace period onto the statute to preserve its constitutionality. By imputing an additional six-month grace period onto the statute, the Third Department improperly second-guessed the Legislature's judgment that overburden reimbursement should end as of April 1, 2012. For these reasons, this Court, in deciding the constitutionality of the 2012 7 amendment, should decline to follow the Third Department's decision in County of St. Lawrence II. Instead, if the Court reaches the issue, it should uphold as constitutional the 2012 amendment, as enacted by the Legislature. POINT II THE COUNTY LACKS A CLEAR LEGAL RIGHT To MANDAMUS RELIEF DIRECTING THE DEPARTMENT OF HEALTH TO CALCULATE AND DETERMINE ALL OUTSTANDING OVERBURDEN LIABILITIES The provision in Supreme Court's judgment directing the Department to identify, calculate, and pay all outstanding overburden liabilities owed the County must 'be reversed in.light of Matter of County of Niagara v. Shah, 2014 N.Y. App. Div. LEXIS 7738 (4th Dep't Nov. 14, 2014). As mentioned, this Court rejected the County's argument that respondents have an ongoing duty to reimburse petitioner for all prior overburden expenditures without regard to whether petitioner submits a claim. 2014 N.Y. App. Div. LEXIS 7738 at *8. Although the Third Department affirmed the grant of mandamus relief in County of St. Lawrence v. Shah II, that decision conflicts with this Court's decision in Matter of County of Niagara v. Shah and therefore should not be followed. 8 CONCLUSION This Court should reverse the judgment, declare that section 61 of Part D of chapter 56 of the laws of 2012 is constitutional, and dismiss the petition/complaint. Alternatively, the Court should reverse the parts of the judgment that direct the Department to calculate and pay all outstanding overburden liabilities owed the County. Dated: Albany, New York December 17, 2014 PETER H. SCHIFF Sen;ior ·Counsel VICTOR PALADINO Assistant Solicitor General of Counsel Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Appellants By: ___J,~~-=.......,.~2?-"L!;;Z...L,,:.==-· - VICTOR PALADINO . Assistant Solicitor General Office of the Attorney General The Capitol Albany, New York 12224 Telephone: (518) 776-2012 Reproduced on Recycled Paper 9