Cnty. of Niagara v. Shah, 858 CA 13-02010

• Decision Date: 14 November 2014
• Docket Number: 858 CA 13-02010
• Citation: 2014 N.Y. Slip Op. 07781,122 A.D.3d 1240,997 N.Y.S.2d 546
• Court: New York Supreme Court — Appellate Division
• Parties: In the Matter of COUNTY OF NIAGARA, Petitioner–Plaintiff–Respondent, v. Nirav R. SHAH, M.D., M.P.H., Commissioner, New York State Department of Health and New York State Department of Health, Respondents–Defendants–Appellants.

122 A.D.3d 1240

997 N.Y.S.2d 546

2014 N.Y. Slip Op. 07781

In the Matter of COUNTY OF NIAGARA, Petitioner–Plaintiff–Respondent

v.Nirav R. SHAH, M.D., M.P.H., Commissioner, New York State Department of Health and New York State Department of Health, Respondents–Defendants–Appellants.

858 CA 13-02010

Supreme Court, Appellate Division, Fourth Department, New York.

Nov. 14, 2014.

Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of Counsel), for Respondents–Defendants–Appellants.

Whiteman Osterman & Hanna LLP, Albany (Christopher E. Buckey of Counsel), and Nancy Rose Stormer, P.C., Utica, for Petitioner–Plaintiff–Respondent.

PRESENT: SCUDDER, P.J., SMITH, CENTRA, FAHEY, and PERADOTTO, JJ.

OpinionMEMORANDUM:

Petitioner-plaintiff County of Niagara (petitioner) commenced this hybrid CPLR article 78 proceeding and declaratory judgment action seeking, inter alia, to compel respondents-defendants (respondents) to pay petitioner's claims for reimbursement for certain expenditures known as overburden expenditures (see generally Matter of Krauskopf v. Perales, 139 A.D.2d 147, 530 N.Y.S.2d 667, affd. 74 N.Y.2d 730, 544 N.Y.S.2d 814, 543 N.E.2d 79 ). The petition/complaint alleges that respondent-defendant New York State Department of Health (DOH) improperly billed petitioner for those expenditures prior to 2006, and that respondents have a continuing duty to reimburse petitioner for them.

Determination of this appeal requires some discussion of the legislation and prior litigation concerning these expenditures. With respect to most Medicaid costs, the initial statutory scheme provided that the federal government would reimburse the State for half of all Medicaid expenditures that were made, and in most cases the DOH would then split the other half with the social services district in which the payment was made, including petitioner (see Social Services Law § 368–a [1 ][d] ). With respect to Medicaid payments made to treat the mentally ill individuals at issue in the overburden expenditures, however, it was mandated that, commencing January 1, 1984, the DOH would pay the entire non-federal share of the treatment (see § 368–a [1 ][h] ). As the costs arising from the Medicaid program as a whole began to grow exponentially, the Legislature changed the statutory scheme by enacting the Medicaid Cap Statute ( [Cap Statute] L. 2005, ch. 58, part C, as amended by L. 2006, ch. 57, part A, § 60). Although the Cap Statute used a complex set of provisions to affix each social services district's liability for Medicaid expenses, it essentially provided that each social services district, including petitioner, would send the State a fixed amount of money per year, based on the amount spent by that social services district during the fiscal year beginning April 1, 2005, minus payments received by the social services district for those expenses (see generally Matter of County of St. Lawrence v. Shah, 95 A.D.3d 1548, 1549–1550, 945 N.Y.S.2d 443 ). The amounts are to be adjusted for inflation in subsequent years (see id. ).

Petitioner contends that respondents failed to reimburse it for numerous overburden expenditures that it made prior to 2006, and it began submitting claims for reimbursement. Upon enactment of the Cap Statute, respondents began to deny those claims on the ground that the Cap Statute extinguished petitioner's right to seek reimbursement for those claims. On appeal from a judgment rejecting that ground for denial, this Court concluded that, “in light of the lack of legislative history or statutory language indicating that the Legislature intended that the statute ... should be applied retroactively” (Matter of County of Herkimer v. Daines, 60 A.D.3d 1456, 1457, 876 N.Y.S.2d 303, lv. denied 13 N.Y.3d 707, 2009 WL 3296528 ), respondents' duty to reimburse social services districts for overburden expenditures incurred prior to January 1, 2006 was not extinguished by the Cap Statute (id. ). In addition, we also rejected respondents' contention that petitioner's claims “were time-barred pursuant to 18 NYCRR 601.3(c) ” (Matter of County of Niagara v. Daines, 79 A.D.3d 1702, 1705, 917 N.Y.S.2d 779, lv. denied 17 N.Y.3d 703, 2011 WL 2473241 ). Respondents thereafter took the position that petitioner's right to seek reimbursement for overburden expenditures was extinguished by a 2010 amendment to the Cap Statute (L. 2010, ch. 109, part B, § 24), and we likewise rejected that contention. We concluded that, “inasmuch as the plain language of the 2010 amendment does not mention overburden expenditures or respondents' preexisting duty to reimburse petitioner for such expenses incurred prior to 2006, that duty is not extinguished by the amendment” (Matter of County of Niagara v. Daines, 91 A.D.3d 1288, 1289, 937 N.Y.S.2d 776 ). We further stated that “[t]here is nothing in the legislative history indicating that the Legislature acted in response to the prior judicial decisions concerning the Medicaid Cap Statute” in enacting the 2010 amendment (id. ).

Subsequent to our determination in that case, however, the Legislature inserted a provision in the executive budget for 2012–2013, stating that, “[n]otwithstanding the provisions of section 368–a of the social services law or any other contrary provision of law, no reimbursement shall be made for social services districts' claims submitted on and after the effective date of this paragraph, for district expenditures incurred prior to January 1, 2006, including, but not limited to,” overburden expenditures (L. 2012, ch. 56, part D, § 61 [hereafter, section 61] ). Furthermore, the memorandum in support of the executive budget indicated that section 61 was proposed “to clarify that local governments cannot claim for overburden expenses incurred prior to January 1, 2006, when the [Cap Statute] took effect. This is necessary to address adverse court decisions that have resulted in State costs paid to local districts for pre-cap periods, which conflict with the original intent of the” Cap Statute.

After the effective date of section 61, petitioner submitted the claims at issue in this appeal. The DOH denied those claims on the ground that they were barred by section 61, and petitioner commenced this action. Respondents moved and petitioner cross-moved for summary judgment on the petition/complaint. Respondents appeal from a judgment that, inter alia, granted petitioner's cross motion and directed respondents to pay the claims. We agree with respondents that section 61 has retroactively changed the law with respect to this issue, and we therefore reverse.

Section 61 clearly states that no further claims for reimbursement of overburden expenditures will be paid, notwithstanding Social Services Law § 368–h. Thus, the unequivocal wording of section 61 retroactively extinguishes petitioner's right to submit claims for reimbursement of overburden expenditures made prior to 2006. “The retroactivity of a statute which is expressly retroactive, as here, will generally be defeated only if such retroactivity would violate due process or some other specific constitutional precept” (Matter of City of New York v. Lawton, 128 A.D.2d 202, 206, 515 N.Y.S.2d 903 ).

Here, however, in granting the cross motion, Supreme Court ordered that petitioner's claims be “treated under Social Services Law § 368–a as [they] existed at the time that Petitioner incurred the Overburden expenses on Respondents' behalf, pursuant to the special facts exception.” We agree with respondents that the special facts exception does not apply in this situation. Insofar as relevant here, that exception provides that “a court may deny an agency the benefit of a change in the law when it has intentionally or even negligently delayed action on [a claim] until after the law had been amended to authorize denial of the” claim (Matter of Faymor Dev. Co. v. Board of Stds. & Appeals of City of N.Y., 45 N.Y.2d 560, 565, 410 N.Y.S.2d 798, 383 N.E.2d 100 ). There is no indication that resolution of the claims at issue was delayed until section 61 was enacted. To the contrary, respondents denied the claims immediately upon their submission, based on section 61. Although respondents unquestionably denied other, earlier claims based on other rationales, those claims have since been paid and are not at issue in this appeal. We reject petitioner's contention that the initial alleged failure of the State's computer to flag these payments as overburden expenditures, and all subsequent denials or delays in paying claims submitted by petiti...