City of Ny v. State of Ny

• Decision Date: 01 September 2005
• Docket Number: 6074.
• Citation: City of Ny v. State of Ny, 27 A.D.3d 1, 801 N.Y.S.2d 8, 2005 NY Slip Op 6572 (N.Y. App. Div. 2005)
• Parties: CITY OF NEW YORK et al., Respondents, v. STATE OF NEW YORK, Appellant.
• Court: New York Supreme Court — Appellate Division

27 A.D.3d 1

801 N.Y.S.2d 8

2005 NY Slip Op 06572

CITY OF NEW YORK et al., Respondents, v. STATE OF NEW YORK, Appellant.

6074.

Appellate Division of the Supreme Court of the State of New York, First Department.

September 1, 2005

APPEAL from a judgment of the Court of Claims (Alan C. Marin, J.), entered March 19, 2004. The judgment, after a non-jury trial, awarded the City of New York damages.

Eliot Spitzer, Attorney General, Albany (Victor Paladino and Andrea Oser of counsel), for appellant.

Michael A. Cardozo, Corporation Counsel, New York City (Cheryl Payer, Stephen J. McGrath, Alan H. Kleinman and Joshua Rubin of counsel), for respondents.

OPINION OF THE COURT

CATTERSON, J.

In 1985, New York City and the New York City Health and Hospitals Corporation (hereinafter referred to as HHC or claimants) commenced an action in Supreme Court, New York County, seeking to compel the New York State Office of Mental Retardation and Developmental Disabilities (hereinafter referred to as OMRDD) under section 13.07 of the Mental Hygiene Law to place, care for or treat numerous developmentally disabled children in foster care referred to it by the Child Welfare Administration (hereinafter referred to as CWA) and developmentally disabled hospital patients referred by HHC.

Under the law, OMRDD "shall assure" the development of comprehensive plans, programs and services with the cooperation of local governments, and provide appropriate facilities and encourage their provision by local governments. (§ 13.07 [a].) Additionally, OMRDD is responsible for seeing that the developmentally disabled are provided care and treatment.

On May 1, 1991, OMRDD, the City and HHC settled their case, City of New York v Webb, by entering into a stipulation (hereinafter referred to as the Webb Stipulation) whereby CWA and HHC would provide a list of priority placements in each of the three fiscal years of 1991-1992, 1992-1993 and 1993-1994 of 250 persons suitable for OMRDD services. The parties' expectation was that OMRDD would place at least 200 individuals from each year's list into its system. The number of placements to be made in the 1994-1995 fiscal year was left for later determination and in February 1994, 200 placements were mutually agreed upon for that year as well.

Inasmuch as 250 names were submitted each year and only 200 placements were required, the City was given discretion to include on a subsequent year's list any of the 50 persons who had not been placed the year before.

In April 1994, claimants brought a contempt proceeding in Supreme Court, New York County, for the State's failure to make the required 200 annual placements. The court denied the contempt based on testimony that noncompliance was unintended and beyond OMRDD's control. The court did however find that OMRDD's failure caused CWA and HHC to incur losses. The court then attempted to fashion its own remedy by treating the stipulation as a contract and awarding the City over $9 million in damages.

On the State's appeal, this Court vacated the award of damages against the State as not within Supreme Court's jurisdiction as only the Court of Claims can award damages for breach of contract by a state agency. (City of New York v Maul, 239 AD2d 225 [1997].) Although the City did not cross-appeal from the denial of contempt, and thus did not place the issue before this Court, we nonetheless noted that Supreme Court had "inexplicably declined to find that [the State's] failure to fully comply with a so-ordered stipulation . . . was contemptuous" and that "the record clearly mandates a finding to the contrary." (Id.)

The City and HHC then filed a claim against the State alleging that the stipulation is a binding contract on all parties which the State breached by failing to make the required number of placements in a timely fashion. The claimants sought restitution damages for over $9 million for fiscal years 1992, 1993 and 1994 and additional damages for fiscal year 1995, based on the City's provision of care to mentally retarded children and adults that the State was responsible for under the stipulation.

The State maintained that the Supreme Court had sole jurisdiction over the stipulation, negating the Court of Claims' ability to grant a remedy under it, and that the stipulation is not enforceable as a contract with the State because it had not been approved by the Comptroller as required by statute.

The Court of Claims denied the parties' cross motions for summary judgment.

This Court affirmed, holding that the action was properly before the Court of Claims and that Comptroller approval was not required for this type of restitution claim. (City of New York v State of New York, 284 AD2d 255 [2001].)

In this action to recover damages for the City's monetary loss during the fiscal years covered by the Webb Stipulation, the Court of Claims awarded the City the principal amount of $15,257,147 with $8,182,634.88 in interest for a total award of $23,439,781.88.

It is axiomatic that the party "complaining of injury has the burden of proving the extent of the harm suffered." (Berley Indus. v City of New York, 45 NY2d 683, 686 [1978]; accord J. R. Loftus, Inc. v White, 85 NY2d 874 [1995].) However, while "recovery will not necessarily be denied a plaintiff when it is apparent that the quantum of damage is unavoidably uncertain, beset by complexity or difficult to ascertain." (Berley Indus. v City of New York, 45 NY2d at 687.) This rule, born of both necessity and practicality for complex litigation, does not obviate the need for proof based upon matters properly admitted in evidence at trial. The law simply does not permit damages to be based on general assumptions.

The claimants had the burden of proving damages at trial with a reasonable certainty. (Manshul Constr. Corp. v Dormitory Auth. of State of N.Y., 79 AD2d 383, 387 [1981].) To accomplish this task the City relied on the computations of Judy Shernicoff, who conducted budget oversight for the City's Child Welfare Administration during the period covered by the Webb Stipulation and, based on her testimony, claimed damages of approximately $18 million.

Shernicoff estimated the costs of the unplaced referrals based upon the average cost of housing groups of that size. For the first three years under the stipulation, a representative sample of 56 individuals who had been referred early, but who had not been placed as of April 1, 1994, was used to determine the CWA's annual cost of care. Shernicoff calculated the City's average cost per individual for four categories: those under 21 and placed with a CWA voluntary contract agency, those over 21 similarly placed, those under 21 and placed at an outside specialized facility, and those over 21 similarly placed. A weighted annual rate for each fiscal year for each category was computed and multiplied by the cumulative shortfall in placements by the State to arrive at an estimate of what it cost the City each year to care for the individuals that should have been cared for by the State under the stipulation.

As for the individuals still not placed at the end of the 1995 fiscal year, each was eventually placed by the State by October 1995. Shernicoff used the average number of days those individuals in each category remained in the City's care between April and October of 1995, multiplied it by the weighted annual cost of caring for someone in their category based on a "representative" sample of persons placed between April 1, 1994 and October 1995, divided by 365, and then multiplied by the number of individuals in each category that were not placed as of March 31, 1995. Shernicoff labeled the four resulting numbers as the gross cost of caring for the average individual in each category during the April October 1995 time span. These numbers were then multiplied by the percentage of the gross cost the City was responsible for to determine how much it cost the City to support each of the four groups of individuals for the additional seven months.^*

Taking Shernicoff's calculations at face value, the court below found as follows:

                      Required        Placed        Cumulative Shortfall
                   FY 91-92             200            102                98
                   FY 92-93             200            156               142
                   FY 93-94             200            173               169
                   FY 94-95             200            222               147
                

In the first fiscal year, the court correctly found that there were no damages, "since the State was permitted, at the latest, to make the placements on the final day of the fiscal year." When the State placed only 102 individuals in the first year, leaving a shortfall of 98 placements, "the City began to incur the cost for those 98 from the first day of the second fiscal year (April 1, 1992)." The court reasoned that, because the State had not made up the shortfall in the second year (1992-1993), "the City had to bear the cost of the 98 for the entire second year." Accordingly, the...