Decided February 17, 2009.
Baker, Sanders, Barshay, Grossman, Fass, Muhlstock Neuwirth, By: Douglas H. Sanders, Esq., Claimant's attorney.
Hon. Andrew M. Cuomo, NYS Attorney General, By: Michael C. Rizzo, Assistant Attorney General, Of Counsel, Defendant's attorney.
Claimant Signature Health Center LLC moves for an order striking defendant State of New York's answer pursuant to CPLR 3126 (M-75867) and for an order granting summary judgment on the issue of liability pursuant to CPLR 3212 (M-75868). Defendant, State of New York, opposes the aforementioned motions and cross-moves for summary judgment (CM-75983).
The background facts underlying this claim have been previously recited in a prior action that was dismissed for procedural reasons as set forth below:
In December 1999 claimant was approved as a new medical diagnostic and treatment center by the New York State Department of Health (DOH) and was assigned a budgeted rate of $132.84 per threshold patient visit for Medicaid billing purposes in accord with 10 NYCRR § 86-4.19(a). The budgeted rate was subject to adjustment based upon actual costs incurred for the first full fiscal year of operation pursuant to 10 NYCRR § 86-4.19 (b). Claimant sought such an adjustment in October, 2001 based upon an independently audited cost report for the year 2000, its first full year of operation. The cost report was reviewed, endorsed and approved by DOH and a new threshold rate was calculated. The newly calculated rate was in turn certified by the New York State Division of the Budget (DOB) in an amount roughly equal to an increase of $35.00 per threshold visit over the original budgeted rate. In May, 2002 claimant submitted a further revision of its cost report for the year 2000. That revision was reviewed and approved by the DOH Bureau of Primary and Acute Care Reimbursement. A new rate was calculated, certified and submitted to the DOB which certified the second revised threshold rate in December, 2002 in an amount approximately $12.00 per threshold visit higher than the rate certified in claimant's initial rate adjustment.
Despite the review, approval and certification processes related above DOH failed or refused to publish the claimant's revised rates when certified and failed to pay the claimant in conformity with the revisions. Informal efforts by claimant to obtain reimbursement at the revised rates proved fruitless prompting both the instant action and an article 78 proceeding in Supreme Court.
The article 78 proceeding resulted in a Decision, Order and Judgment dated June 19, 2003 in which Acting Supreme Court Justice Edward A. Sheridan found that DOH had indeed acted illegally in failing to implement the revised reimbursement rates approved in 2001 and 2002. Acting Justice Sheridan ordered DOH to make all payments due the petitioner in accordance with the revised reimbursement rates and denied petitioner's requested relief in all other respects.
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Claimant subsequently moved in Supreme Court for an order granting attorney fees, costs and pre and post-judgment interest on its recovery in the article 78 proceeding. That motion was denied by Decision and Order dated September 16, 2003. . . . In relevant part, that decision found claimant to be ineligible to seek attorneys fees and expenses against the State pursuant to CPLR article 86 since it failed to qualify as a "party" as that term is defined in § 8602 (d). Moreover, Justice Sheridan held that his ordered reimbursement pursuant to the revised rate constituted relief incidental to the article 78 proceeding and was neither a "sum awarded" nor a "money judgment" upon which interest could be recovered pursuant to CPLR §§ 5001, 5002 or 5003. In addition, he noted several appellate decisions which held that there is no statutory authority permitting an award of interest on retroactive Medicaid reimbursement.
As directed by Acting Justice Sheridan in the June 19, 2003 Decision, Order and Judgment the revised rates were published and claimant received approximately $3,000,000 in retroactive reimbursement. Claimant maintains, however, that it has not been adequately compensated for losses which were foreseeable and which are directly attributable to DOH's failure and/or refusal to publish the adjusted rates and make timely payments in accord therewith ( Signature Health v State of New York, Claim No. 107802, Motion No. M-69848, CM-69921, UID #2005-015-014, Collins, J.).
The present claim, as the claim before it, seeks damages resulting from the delayed publishing of the rates and payment in accordance therewith, including "among other things, the substantial loss of value Signature's business caused by the illegal acts or failure to act of the DOH, the legal fees and expenses of Signature's Chapter 11 proceeding, the loss of business which resulted form a lack of funds, additional expenses incurred by Signature because of its poor credit standing and inability to pay its obligations as they became due, the interest expenses borne by Signature for borrowing necessitated by DOH's wrongful withholding of approval, and interest on the money wrongfully withheld by DOH" (Claim, at ¶ 14, filed June 22, 2005).
The basis of the claimant's motion to strike defendant's Answer is the alleged failure of the State to produce relevant discovery material, to wit "all documents, memorandums, correspondence and any other records concerning any and all Medicaid rate appeals for the claimant Signature Health Center, LLC, operating certificate 7000054R, Medicaid provider number 01998778" (Affirmation in Support of Douglas H. Sanders, Esq, filed November 17, 2008, at ¶ 12). Claimant contends that defendant has purposely withheld and/or destroyed discovery material relevant to its claim for damages associated with the wrongful delay of the State in publishing and paying claimant in accordance with the correct Medicaid billing rates.
Claimant's prior motion for the same relief (M-75121) was withdrawn after a conference with the Court. The present motions and cross motion were filed thereafter.
The initial position of defendant, as reflected in its response to the withdrawn motion (M-75121) was that liability may be determined based upon the June 19, 2003 Decision, Order and Judgment of Acting Justice Sheridan in claimant's CPLR article 78 proceeding, rendering the sought after documents that pertained to information underlying that proceeding superfluous. Defendant now explains that it has complied with claimant's demands with voluminous responses as well as an in-camera submission to the Court that it contends is protected from disclosure by attorney-client privilege (Affidavit in Opposition of Michael C. Rizzo, Esq, AAG filed December 10, 2008).
Claimant's motion for summary judgment, as well as defendant's cross motion, subsume the motion to strike the Answer, as a grant to claimant for summary judgment would result in a finding of liability. This would render any documents underlying the State's failure to adjust the rates irrelevant and only claimant's purported damages caused thereby at issue. This is acknowledged by claimant (Reply Affirmation in Further Support of Claimant's Motion to Strike of Douglas H. Sanders, filed December 18, 2008, at ¶ 2). A grant of summary judgment to defendant dismissing the claim would also render discovery irrelevant. Thus, the Court first addresses the cross motions for summary judgment.
The gravamen of defendant's argument in support of summary judgment is that the claim essentially seeks relief that is incidental to the prior article 78 hearing, and that this Court lacks subject matter jurisdiction over the claim because it would, as a condition precedent, require the Court to review the decision of the Department of Health not to post the revised rates (Affidavit in Support of Cross Motion for Summary Judgment of Michael C. Rizzo, Esq, AAG filed December 10, 2008; Reply Affidavit of Michael C. Rizzo, Esq, AAG filed December 23, 2008).
Claimant's position is that the claim is for consequential, economic damages resulting from the Department of Health's failure to post the approved medicaid rate adjustments; that this is not incidental relief; and such damages would not have been recoverable in the article 78 proceeding. In fact, the basis of its motion for summary judgment is that the Order of Supreme Court in the article 78 proceeding, rather than precluding the action in this Court, entitles it to a grant of summary judgment on the issue of liability under the doctrine of collateral estoppel (Affirmation in Support of Motion of Douglas H. Sanders, Esq., [Motion No. M-75868], filed November 21, 2008; Reply Affirmation of Douglas H. Sanders, Esq., filed December 18, 2008).
As a general matter, Court of Claims jurisdiction is limited to awarding money damages against the State. It does not possess the jurisdiction to grant equitable relief ( see Madura v State of New York , 12 AD3d 759 [3d Dept 2004], lv denied 4 NY3d 704) or, relatedly, to affect any determinations made by State agencies or award damages which would be incidental to a successful administrative challenge ( see Matter of Miller v State of New York, 283 AD2d 830 [3d Dept 2001]). A proceeding pursuant to CPLR article 78 commenced in Supreme Court is the aggrieved party's exclusive vehicle for review of an agency's determination ( see City of New York v State of New York , 46 AD3d 1168 [3d Dept 2007]). Neither party here questions the aforementioned principles, only their application in the present case.
The analysis to determine whether the Court of Claims has jurisdiction over a claim or whether it is in the province of a CPLR article 78 proceeding has been distilled into two inquiries ( see e.g. City of New York v State of New York, supra). The first is "[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim'" ( Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670, 671[3d Dept 1997], quoting Matter of Gross v Perales, 72 NY2d 231, 236; see CPLR 7806). "Incidental [relief] means that the same facts which justify equitable relief justify money damages" ( White v State of New York, 161 Misc 2d 938, 941) automatically in the form of "restitution or payment of the sums in question, without the necessity of a separate judicial order or direction" ( Safety Group No. 194-New York State Sheet Metal Roofing Air Conditioning Contractors Association, Inc. v State of New York, 2001 WL 939747, 2001 NY Slip Op. 40099 [Ct Cl April 11, 2001], affd 298 AD2d 785 [3d Dept 2002]).
As the recitation of the facts reveal, claimant has already been awarded "incidental" damages of approximately $3,000,000.00 in retroactive reimbursement after its successful article 78 action to compel DOH to publish the revised reimbursement rates. It now seeks alleged economic damages as a result of a wrongful failure to publish the rates and the resulting loss of income. That is, it seeks consequential damages which would not flow automatically from the article 78 ruling but would require separate and adequate proof as well as a judgment of a court to impose such damages. The Court of Claims is the proper venue for seeking money damages against the State. Accordingly, the claim survives this first prong of the analysis.
The second inquiry is a related process and asks "what this court would have to do to award a money judgment" ( Ouziel v State of New York, 174 Misc 2d 900, 905). If an award of damages would require this court to first review an administrative agency's determination, a power beyond this court's jurisdiction, the proper remedy would lie in Supreme Court by way of a proceeding under CPLR article 78 and require this Court to dismiss the claim ( see City of New York v State of New York, supra; Bertoldi v State of New York, 164 Misc 2d 581, affd 275 AD2d 227 [1st Dept 2000], lv denied 96 NY2d 706).
In the present case, unlike others where a claimant is essentially seeking the functional equivalent of a collateral review of an agency action under the guise of a claim for money damages ( see e.g. Lantry v State of New York, UID # 2001-001-027, Claim Nos. 102258; 102455, Read, P.J., ; Phillips v State of New York, UID # 2008-041-048, Claim No. 115519, Milano, J., ), there is no need for this Court to examine the agency action as it has already been judicially reviewed and ruled upon in the preceding article 78 proceeding. In other words, this Court is not, and as discussed below could not, be called upon to examine the agency action in order to entertain claimant's request for damages. Consequently, under either prong of the two part inquiry, this claim survives the State's motion to dismiss.
Turning to claimant's motion for partial summary judgment on the issue of liability, the application of collateral estoppel against a particular party requires proof: (1) that the identical issue was necessarily decided in the prior action; (2) that the party was also a party to the prior proceeding; and (3) that the party to be precluded from relitigating the issue had a full and fair opportunity to litigate the matter in the earlier action or proceeding ( see Matter of Juan C. v Cortines, 89 NY2d 659, 667; D'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664). The burden of establishing that the issue raised was identical to that of a prior action, lies with the party seeking to avail itself of the doctrine, while the burden of demonstrating that there was no full and fair opportunity to litigate the issue in question rests with party opposing its application ( D'Arata v New York Cent. Mut. Fire Ins. Co., supra; Ryan v New York Telephone Co., 62 NY2d 494).
Here, it cannot be disputed that the question of whether the State was justified in withholding payment at the approved adjusted rates was the central issue in the prior proceeding, that both parties litigated this precise question, and that Supreme Court's answer was that the State had not been justified in its actions. The decision and judgment in the article 78 proceeding in this case unequivocally determined that the State's act of failing to publish and pay claimant according to the revised payment rates was not supported by the law. There had been no authority for the DOH to withhold the posting of the revised rates in the first instance and no legal basis upon which it could have withheld future or retroactive payments associated with the revised rates. As noted by claimant, other than cross-moving for summary judgment on the aforementioned basis, defendant does not dispute, and nor could it, that the issue decided in the article 78 proceeding is central to the determination of liability in the instant case or that it did not have a full and fair opportunity to litigate the matter in that proceeding. A review of that decision leaves little doubt that this precise issue was vigorously defended by the State and was the central issue in Supreme Court. Accordingly, claimant's motion for partial summary judgment as to the issue of liability is granted. The remaining motion to strike the Answer for the alleged failure of the State to turn over certain discovery material is denied as moot. In this Court's view, and as acknowledged by claimant, any discovery documents pertaining to the underlying article 78 proceeding would be superfluous at this juncture. The materials relevant to the remaining issue in this claim, that is, the alleged damages suffered by claimant as a result of the delay in receiving proper payment, would appear to be uniquely in its hands.
Supreme Court stated "[i]n sum, and in the context of petitioner's request for an order of mandamus directing payment of retroactive reimbursement, respondent has not established that its withholding of such payments is legal, and inasmuch as those rates have been finally approved, payment of the retroactive reimbursement is a ministerial act to which petitioner has established its clear entitlement" ( Matter of Signature Health v Department of Health, Sup Ct, Albany County, June 19, 2003, Sheridan, J., at 9 [Annexed to Claim]).
In summary, claimant's motion for summary judgment (M-75868) is hereby granted. Defendant's cross motion (CM-75983) is denied, as is claimant's motion to strike the Answer (M-75867).
Therefore, it is
ORDERED, that the Clerk of the Court is directed to enter an interlocutory judgment on the issue of liability in favor of claimant in accordance with this Decision and Order.