In the Matter of County of Jefferson, Appellant,v.Nirav R. Shah,, et al., Respondents.BriefN.Y.September 7, 2016To be argued by: Christopher E. Buckey, Esq. 10 minutes requested New York Supreme Court APPELLATE DIVISION .... FOURTH DEPARTMENT Docket No. CA 14-00926 IN THE MATIER OF THE APPLICATION OF COUNTY OF JEFFERSON, Petitioner/Plaintiff Respondent/ Appellant, -against- NIRA V R. SHAH, AS COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF HEALTH AND THE NEW YORK STATE DEPARTMENT OF HEALTH, Respondents/Defendants-Appellants/Respondents. SURREPLY BRIEF FOR RESPONDENT/ APPELLANT COUNTY OF JEFFERSON WHITEMAN OSTERMAN & HANNA LLP Christopher E. Buckey, Esq., Of Counsel Robert S. Rosborough IV, Esq., Of Counsel Monica R. Skanes, Esq., Of Counsel Nicholas J. Faso, Esq., Of Counsel Jon E. Crain, Esq., Of Counsel One Commerce Plaza Albany, New York 12260 (518) 487-7600 NANCY ROSE STORMER, P.C. Nancy Rose Stormer, Esq., Of Counsel Michael Bagge, Esq., Of Counsel 1325 Belle Avenue Utica, New York 13501 (315) 797-0110 Attorneys for Petitioner/Plaintiff Respondent/ Appellant County of Jefferson Jefferson County Index No. CV-2013-1956 TABLE OF CONTENTS TABLE OF AUTHORITIES ....................................................................................................... ii PRELIMINARY STATEMENT ................................................................................................. 1 ARGUMENT ........................................................................................ .' ........................................ 2 SUPRElVIE COURT ERRONEOUSLY DENIED PETITIONER'S CLAIMS FOR UNJUST ENRICHMENT, CONVERSION, AND CONSTRUCTIVE TRUST ................ 2 CONCLUSION ............................................................................................................................. 8 TABLE OF AUTHORITIES State Cases Brothers v Florence, 95 NY2d 290 (2000) ..................................................................................... 7 Cass v State of New York, 58 NY2d 460 (1983) ............................................................................. 5 City of New York v State of New York, 46 AD3d 1168 (3d Dept 2007), Iv denied 10 NY3d 705 (2008) ........................................................................................................... 3, 4, 5 Feuer v State ofNew York, 101AD3d1550 (3d Dept 2012) ......................................................... 3 Hoffman v State of New York, 42 AD3d 641 (3d Dept 2007) ......................................................... 4 James Sq. Assoc. LP v Mullen, 21NY3d233 (2013) ..................................................................... 7 Kagen v Kagen, 21NY2d532 (1968) ............................................................................................ 6 Klostermann v Cuomo, 61NY2d525 (1984) ................................................................................. 8 Madura v _State of New York, 12 AD3d 759 (3d Dept 2004), lv denied 4 NY3d 704 (2005) ......... 3 Matter of Gross v Perales, 72 NY2d 231 (1988) ................................................................ 3~ 4, 6, 7 Matter of Markham v Comstock, 272 AD2d 971 (4th Dept 2000), appeal dismissed 95 NY2d 886 (2000), cert denied 531US1079 (2001) ............................................................. 6 ~Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753 (1991) ....... 4 New York State Sheet Metal Roofing & A.C. Contractors Assn. v State of New York, 298 AD2d 785 (3d Dept 2002) ................................................................................................... 3 O'Neil v State ofNew York, 223 NY 40 (1918) .............................................................................. 7 Ozanam Hall of Queens Nursing Home v State ofNew York, 241AD2d670 (3d Dept 1997) ...... 3 Ring v Jones, 13 AD3d 1078 (4th Dept 2004) ................................................................................ 3 Safety Group No. 194 v State of New York, Claim No. 101826, 2001WL939747 (Ct Cl Apr. 11, 2001 ), qffd sub nom. Safety Group No. 194--New York State Sheet Metal Roofing & A. C. Contractors Assn. v State of New York, 298 AD2d 785 (3d Dept 2002) ...... 3, 6 Simonds v Simonds, 45 NY2d 233 (1978) ...................................................................................... 5 Stiver v Good & Fair Carting & Moving, Inc., 32 AD3d 1209 (4th Dept 2006), afjd 9 NY3d 253 (2007) ..................................................................................................................... 3 Thrasher v United States Liab. Ins. Co., 19 NY2d 159 (1967) ...................................................... 6 Federal Cases Rhem v Malcolm, 507 F2d 333 (2d Cir 1974) ................................................................................ 8 Statutes, Constitutional Provisions & Regulations NY Const, art VI, § 7(a) .................................................................................................................. 6 Social Services Law§ 368-a(l)(h)(i) .............................................................................................. 7 ill PRELIMINARY STATEMENT Petitioner County of Jefferson ("Petitioner") respectfully submits this surreply brief in further support of its cross appeal from the Order and Judgment of Supreme Court, Jefferson County (Gilbert, J.), dated February 14, 2014 and entered February 27, 2014, declaring Section 61 of the 2012 Executive Budget unconstitutional, annulling the determination of Respondents to deny Petitioner's claims for overburden reimbursement, directing Respondents to pay Petitioner's claims in the total amount of $114,501.50, and compelling Respondents to calculate and pay Petitioner for the total remaining overburden reimbursements owed. Respondents Nirav R. Shah, as Commissioner of the New York State Department of Health, and the New York State Department of Health (collectively, "Respondents") assert that Supreme Court lacked jurisdiction over, and thus properly dismissed, Petitioner's claims for conversion, unjust enrichment, and constructive trust because those claims may be maintained only in the Court of Claims. Respondents are mistaken. Because Petitioner's tort claims against Respondents are merely incidental to the primary relief sought in this proceeding-an order and judgment pursuant to CPLR Article 78 annulling Respondents' arbitrary denial of Petitioner's claims for overburden reimbursement, compelling Respondents to satisfy their unambiguous statutory duty to reimburse Petitioner for 100% of the overburden local share payments made to Respondents prior to January 1, 2006, and declaring Section 61 an unconstitutional retroactive attempt to extinguish Petitioner's vested rights-the Court of Claims lacks jurisdiction over this proceeding. It cannot be disputed, in contrast, that Supreme Court, as a court of general original jurisdiction, has jurisdiction over Petitioner's claims, and may award the incidental monetary relief against Respondents that Petitioner seeks. Respondents attempt to avoid liability for conversion and unjust enrichment, and imposition of a constructive trust, by characterizing the Legislature's retroactive extinguishment of Petitioner's vested rights to overburden reimbursement as a mere policy decision that this Court should not question. The New Yorlc Constitution, however, does not sanction unabridged legislative authority to eradicate the State's vested debts whenever the State no longer desires to pay. Indeed, as demonstrated in Petitioner's opposition brief, it is manifestly unfair to extinguish Petitioner's vested right to 100% overburden reimbursement, especially where, as here, the Legislature purports to do so without a constitutionally required grace period for submission of all reimbursement claims. It is this Court's duty to enforce this clear constitutional limitation on the Legislature's authority. Supreme Court therefore erred in dismissing Petitioner's claims for conversion, unjust enrichment, and constructive trust. ARGUMENT SUPREME COURT ERRONEOUSLY DENIED PETITIONER'S CLAIMS FOR UNJUST ENRICHMENT, CONVERSION, AND CONSTRUCTIVE TRUST Respondents argue, for the first time on appeal, that the Court of Claims has exclusive jurisdiction over Petitioner's claims for conversion, unjust enrichment, and constructive trust because the claims seek damages incidental to the equitable relief sought by Petitioner in this proceeding. Respondents' surface analysis of Supreme Court's jurisdiction over Petitioner's claims is unpreserved and cannot withstand scrutiny in any event. Respondents have never before in this proceeding argued that the Court of Claims has exclusive jurisdiction over Petitioner's conversion, unjust enrichment, and constructive trust claims. Respondents' argument, therefore, is unpreserved for appellate review and should not be considered (see Stiver v Good & Fair Carting & Moving, Inc., 32 AD3d 1209, 1211 [4th Dept 2 2006], ajfd 9 NY3d 253 [2007]; Ring v Jones, 13 AD3d 1078, 1079 [4th Dept 2004]). Respondents' argument fails nonetheless. Although the Court of Claims generally has exclusive jurisdiction over actions for money damages against the State (see .A1atter of Gross v Perales, 72 NY2d 231, 235-236 [1988]), an analysis of Court of Claims jurisdiction is not as simple as Respondents would make it seem. Indeed, because the Court of Claims has "no jurisdiction to grant strictly equitable relief," and may only grant incidental equitable relief so long as the primary claim seeks to recover money damages in appropriation, contract, or tort cases (City of New Yorkv State of New York, 46 AD3d 1168, 1169 [3d Dept 2007], lv denied 10 NY3d 705 [2008]; see Feuer v State of New York, 101 AD3d 1550, 1551 [Jd Dept 2012]; Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671 [3d Dept 1997]), the threshold question to detem1ine Court of Claims jurisdiction 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 [3d Dept 2004], lv denied 4 NY3d 704 [2005], quoting Gross, 72 NY2d at 236). As the Court of Claims has held, (1) A money claim is incidental to relief sought in an Article 78 proceeding if a natural or automatic result of a favorable determination on the issues would be reimbursement, restitution or payment of the sums in question, without the necessity of a separate judicial order or direction, and (2) a money damage claim is incidental to relief sought in an Article 78 proceeding when, in order to award the money judgment, the court must engage in the type of inquiry and analysis that is appropriate to such a proceeding and inappropriate to an action at law (Safety Group No. 194 v State of New York, Claim No. 101826, 2001 WL 9397 4 7 [Ct Cl Apr. 11, 2001], affd sub nom. Safety Group No. 194--New York State Sheet Jt.1etal Roofing & A.C. Contractors Assn. v State of New York, 298 AD2d 785 [3d Dept 2002]). Court of Claims 3 jurisdiction, thus, is "dependent upon the facts and issues presented in a particular case" (Gross, 72 NY2d at 236). The second inqufry to determine jurisdiction, regardless of how a claimant categorizes a claim, is whether the claim would require review of an administrative agency's determination (see id.). The Court of Claims lacks subject matter jurisdiction to entertain such claims, which are properly brought only in Supreme Court in a CPLR Article 78 proceeding (see A1atter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 757 [1991]; see e.g. Hoffman v State of New York, 42 AD3d 641, 642 [3d Dept 2007] ["although claimant contends that her claim is for breach of contract, our review of the record indicates that she primarily is seeking to annul the Comptroller's administrative decision to issue a check that deducted the amount of unemployment insurance benefits from her back pay. Plainly, any monetary recovery would be incidental to that determination. Inasmuch as [t]his is a quintessential example of a dispute governed under CPLR article 78 and the Court of Claims has no subject matter jurisdiction over this type of dispute, we find that the claim was properly dismissed" [internal quotation marks and citations omitted]). For example, in City of New York, the Third Department held that the Court of Claims did not have jurisdiction to hear the City of New York's statutory damages, implied contract, and unjust enrichment claims, seeking state reimbursements for expenses incurred by school districts hosting disabled students residing in the state from the Office of Mental Retardation and Developmental Disabilities (see City of New York, 46 AD3d at 1168-1169). The Court held that, although the claims were "couched only in terms that [sought] recovery of monetary damages, the real challenge [was] to the [Department of Education's] administrative determinations that these claims were not timely filed and that claimants' request for a waiver of the time limitations 4 was also untimely" (id at 1169). Accordingly, the Court held that "the statutory cause of action, the implied contract cause of action and the unjust enrichment cause of action were all properly dismissed by the Court of Claims for lack of subject matter jurisdiction as they [were] directly dependent upon the Department's determination that the claims [were] not timely and that the waiver request was also untimely" (id. [emphasis added]). As in City of New York, Petitioner's claims for conversion and unjust enrichment are merely incidental to Petitioner's requests to annul Respondents' administrative determinations denying Petitioner's claims for overburden reimbursement, for mandamus relief compelling Respondents to satisfy their unambiguous statutory duty to calculate and pay Petitioner all reimbursement outstanding, and a declaration that Section 61 unconstitutionally deprives Petitioner of its vested rights to reimbursement for the overburden expenses incurred on Respondents' behalf prior to January 1, 2006 (R 107-120). Indeed, the natural and necessary consequence of Supreme Court's declaration that Section 61 cannot retroactively impair Petitioner's vested right to overburden reimbursement, and is thus invalid, is payment of the overburden reimbursement sought, alternatively, under Petitioner's conversion and unjust emiclunent claims. Moreover, Petitioner's claim seeking to impose a constructive trust over the reimbursements that remain unpaid is, by definition, a claim for equitable relief over which the Court of Claims cannot assert jurisdiction (see Simonds v Simonds, 45 NY2d 233, 241-242 [1978]). Simply stated, Respondents cannot dispute that the Court of Claims lacks jurisdiction over Petitioner's primary CPLR Article 78 and declaratory judgment claims (see Cass v State of New York, 58 NY2d 460, 463 [1983] ["Claims against the State primarily seeking money damages should, of course, be brought in the Court of Claims. It is settled, however, that a 5 declaratory judgment action in the Supreme Court is an appropriate vehicle for challenging the constitutionality of a statute ... Thus the motion to dismiss the complaint against the State for lack of jurisdiction should have been denied." (citations omitted)]; Matter of Markham v Comstock, 272 AD2d 971, 972 [4th Dept 2000] ["the Court of Claims is not the appropriate forum for litigating a constitutional challenge to the ST AR exemption"], appeal dismissed 95 NY2d 886 [2000], cert denied 531 US 1079 [2001]; Safety Group No. 194, 2001 WL 939747 ["The Court of Claims does not have jurisdiction over challenges to the constitutionality of statutes, even if such determination is necessary to resolve a claim for money damages against the State. Such challenges should be brought by an action for declaratory judgment, which must be brought in Supreme Court." (citations omitted)]). Thus, contrary to Respondents' argument, the Court of Claims similarly lacks jurisdiction over Petitioner's incidental claims for conversion, unjust emichment, and constructive trust. Nor can it be seriously disputed that Supreme Court, in contrast, as a court of general original jurisdiction, has jurisdiction over Petitioner's conversion, unjust enrichment, and constructive trust claims, notwithstanding that they are maintained against Respondents as an agency of the State and its commissioner (see NY Const, art VI, § 7[a]; Kagen v Kagen, 21 NY2d 532, 537 [1968]; Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 166 [1967]; see e.g. Gross, 72 NY2d at 236). Indeed, the Court of Appeals, in Gross, faced the precise issue that Respondents seek to raise in defense of Supreme Court's dismissal of Petitioner~s conversion, unjust enrichment, and constructive trust claims-"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" 6 (Gross, 72 NY2d at 233-234). In soundly rejecting Respondents' argument for exclusive Court of Claims jurisdiction, the Court of Appeals held: Only if it was found that the NYSDSS acted arbitrarily and capriciously could its determination, and the concomitant administrative penalty, be annulled. This accomplished, the City was then entitled to the withheld reimbursements under the Social Services Law. This is true whether or not the court directed payment, since upon nullification of the underlying administrative action, the State had a statutory duty to reimburse the City. Consequently, in ordering payment to the City, the court merely directed the State to fulfill its statutory duty. Had the City only petitioned for judicial review of the audit procedures employed and annulment of the penalty, without additionally requesting the court to direct payment, the State would still have been obligated to reimburse the City. Thus, the demand for monetary relief was unquestionably incidental to the facts and issues presented. (id. at 236 [citations omitted]). The Court of Appeals' decision in Gross controls here. Therefore, Supreme Court enoneously held that Petitioner could not maintain its conversion, unjust enrichment, and constructive trust claims against Respondents. Furthermore, as Supreme Court indicated (R 70-71, 74-79, 83), and Petitioner demonstrated in its opposition brief, Petitioner has established that it was fundamentally unjust for the Legislature to attempt to extinguish the States vested debts to Petitioner by legislative fiat, without even as much as providing the grace period required by due process (see Social Services Law § 368-a[l][h][i] [entitling Petitioner to 100% reimbursement for pre-January I, 2006 overburden expenses]; see also Brothers v Florence, 95 NY2d 290, 301 [2000]). To hold otherwise is to give the Legislature unabridged authority to sin1ply abrogate its own debts whenever it determines it no longer desires to pay them, regardless of whether Petitioner or any other creditor of the State has constitutionally vested rights (see e.g. James Sq. Assoc. LP v Mullen, 21 NY3d 233, 249-250 [2013] [holding that the State's budgetary concern is not a "valid public purpose" for retroactive application of a statute]; O'Neil v State of New York, 223 NY 40, 7 43-44 [1918]; Rhem v Malcolm, 507 F2d 333, 341 n 20 [2d Cir 1974]). The New York Constitution does not confer, much less sanction, such unchecked power. Contrary to Respondents' suggestion, it is precisely this Court's role to enforce constitutional limitations on the Legislature's authority, especially where, as here, Petitioner's vested rights in statutorily guaranteed overburden reimbursement are at stake (see e.g. Klostermann v Cuomo, 61 NY2d 525, 536 [1984] ["Plaintiffs are individuals who claim that they hold certain rights under the pertinent statutes and are seeking to enforce those rights. In effect, they assert that the Legislature has mandated certain programs and that the executive branch has failed to deliver the services. The appropriate forum to determine the respective rights and obligations of the parties is in the judicial branch." [footnote omitted]). Thus, because Petitioner demonstrated its entitlement to recovery for conversion and unjust enrichment and imposition of a constructive trust over the total overburden reimbursement liability owed, Supreme Court erroneously dismissed Petitioner's claims. CONCLUSION For the foregoing reasons, Petitioner respectfully requests that this Court modify the Order and Judgment of Supreme Court, Jefferson County as stated above and, as so modified, affirm the judgment in its entirety, and award Petitioner such other and further relief as this Court deems just and proper. Dated: September 26, 2014 Albany, New York By: WHITEMAN OSTERMAN & HANNA LLP Christopher E. Buckey, Esq. Robert S. Rosborough IV, Esq. Monica R. Skanes, Esq. One Commerce Plaza Albany, New York 12260 (518) 487-7600 8 NANCY ROSE STORMER, P.C. Nancy Rose Stormer, Esq. Michael Bagge, Esq. 1325 Belle A venue Utica, New York 13501 (315) 797-0110 Attorneys.for Respondent/Appellant 9