County of St. Lawrence v. Daines

• Decision Date: 27 January 2011
• Citation: 81 A.D.3d 212,917 N.Y.S.2d 330
• Parties: In the Matter of COUNTY OF ST. LAWRENCE, Respondent, v. Richard DAINES, as Commissioner of Health, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

917 N.Y.S.2d 330

81 A.D.3d 212

In the Matter of COUNTY OF ST. LAWRENCE, Respondent,

v.Richard DAINES, as Commissioner of Health, et al., Appellants.

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

Jan. 27, 2011.

Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), for appellants.

Whiteman, Osterman & Hanna, L.L.P., Albany (Christopher E. Buckey of counsel), for respondent.

Before: PETERS, J.P., MALONE JR., STEIN, McCARTHY and EGAN JR., JJ.

PETERS, J.P.

Appeal from a judgment of the Supreme Court (Demarest, J.), entered May 20, 2010 in St. Lawrence County, which granted petitioner's application, in a proceeding pursuant to CPLR article 78, to annul three determinations of respondents disallowing petitioner's claims for Medicaid reimbursements.

Petitioner submitted five sets of claims to respondent Department of Health (hereinafter DOH) for reimbursement of certain Medicaid expenditures, known as overburden expenses, made by petitioner prior to January 2006. At the time the expenditures were made, DOH was obligated to reimburse petitioner for those expenses ( see Social Services Law § 368-a [1][h] ). After the expenditures were made by petitioner, but before it submitted claims for reimbursement, a new statute was enacted that caps Medicaid expenditures made by counties at the amount paid in the year 2005, with certain exceptions and a yearly percentage-based increase ( see L 2005, ch 58, part C, as amended by L 2006, ch 57, part A, § 60 [hereinafterMedicaid Cap Statute] ). Respondents ultimately denied petitioner's claims on the ground that the newly enacted Medicaid Cap Statute bars reimbursement for overburden expenditures and that such claims were untimely. Petitioner thereafter commenced this CPLR article 78 proceeding seeking, among other things, to compel respondents to reimburse it for the claimed overburden expenditures and the imposition of sanctions for respondents' alleged frivolous defenses and bad faith. Supreme Court granted the petition in its entirety, finding that respondents' denial of petitioner's claims resulted from an improper retroactive application of the Medicaid Cap Statute and, further, that the time requirements set forth in 18 NYCRR 601.3 were inapplicable to petitioner's claims. The court also imposed sanctions upon respondents in the form of counsel fees. Respondents appeal.

Recently, the Fourth Department, addressing the same issue presented here, determined that respondents improperly applied the Medicaid Cap Statute retroactively to reimbursement claims for overburden expenditures incurred prior to 2006 ( see Matter of County of Niagara v. Daines, 60 A.D.3d 1460, 874 N.Y.S.2d 924 [2009], lv. denied 13 N.Y.3d 708, 890 N.Y.S.2d 445, 918 N.E.2d 960 [2009]; Matter of County of Herkimer v. Daines, 60 A.D.3d 1456, 876 N.Y.S.2d 303 [2009], lv. denied 13 N.Y.3d 707, 2009 WL 3296528 [2009] ). While we are not bound by those decisions, we agree with the Fourth Department's reasoning that respondents' application of the Medicaid Cap Statute to petitioner's claims constituted an impermissible retroactive application of the statute.

Under New York law, "retroactive operation is not favored by courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it" ( Majewski v. Broadalbin-Perth Cent. School Dist., 91 N.Y.2d 577, 584, 673 N.Y.S.2d 966, 696 N.E.2d 978 [1998]; see Matter of St. Clair Nation v. City of New York, 14 N.Y.3d 452, 457-458, 902 N.Y.S.2d 22, 928 N.E.2d 404 [2010]; Dorfman v. Leidner, 76 N.Y.2d 956, 959, 563 N.Y.S.2d 723, 565 N.E.2d 472 [1990] ). It is also a fundamental rule of statutory interpretation "that statutes affecting substantive rights and liabilities are presumed to have only prospective effect" ( Morales v. Gross, 230 A.D.2d 7, 10, 657 N.Y.S.2d 711 [1997] [internal quotation marks and citation omitted]; see Majewski v. Broadalbin-Perth Cent. School Dist., 231 A.D.2d 102, 105, 661 N.Y.S.2d 293 [1997], affd. 91 N.Y.2d 577, 673 N.Y.S.2d 966, 696 N.E.2d 978 [1998] ), while those that merely effect a procedural change are presumed to have retroactive effect ( see Matter of Regenbogen v. New York State Willard Psychiatric Ctr., 254 A.D.2d 593, 595, 679 N.Y.S.2d 430 [1998]; Majewski v. Broadalbin-Perth Cent. School Dist., 231 A.D.2d at 105-106, 661 N.Y.S.2d 293). "The principle requiring a clear expression that retroactive application was intended is important because 'such a statement constitutes evidence that the Legislature has affirmatively assessed the potential for unfairness created by retroactivity and concluded that it is an acceptable price to pay for the anticipated benefits' " ( Majewski v. Broadalbin-Perth Cent. School Dist., 231 A.D.2d at 106, 661 N.Y.S.2d 293, quoting Morales v. Gross, 230 A.D.2d at 10, 657 N.Y.S.2d 711).

Here, the Legislature did not explicitly provide for retroactivity. Furthermore, upon our review of the language of the Medicaid Cap Statute and the legislative history, we find no clear indication that it is to be applied retroactively. To the contrary, the statute expressly states that the calculation of medical assistanceexpenditure amounts for social services districts "shall be" governed by its provisions "[c]ommencing with the calendar year beginning January 1, 2006" (L. 2005, ch. 58, part C, § 1 [c] ). The fact that the statute speaks only of the present and future militates against retroactive application ( see Bolarinwa v. Albany Med. Ctr. Hosp., 261 A.D.2d 21, 23, 701 N.Y.S.2d 451 [2000], lv. dismissed 95 N.Y.2d 825, 712 N.Y.S.2d 450, 734 N.E.2d 762 [2000]; Matter of Gramott Corp. v. Graves, 255 App.Div. 255, 256, 7 N.Y.S.2d 457 [1938], affd. 280 N.Y. 588, 20 N.E.2d 27 [1939] ). Moreover, the Medicaid Cap Statute created a substantive change in the law regarding the availability of Medicaid overburden reimbursements ( see Matter of Deutsch v. Catherwood, 31 N.Y.2d 487, 490, 341 N.Y.S.2d 600, 294 N.E.2d 193 [1973]; Matter of Moynihan v. New York State Employees' Retirement Sys., 192 A.D.2d 913, 914-915, 596 N.Y.S.2d 570 [1993] ). Thus, we conclude that the Medicaid Cap Statute is to be accorded only a prospective application.

Additionally, to the extent that respondents argue that the Medicaid Cap Statute was not applied retroactively here because the claims for reimbursement were submitted, and the requestedreimbursement would be paid, after the statute's effective date, we are unpersuaded. It is true that "[a] statute is not retroactive ... when made to apply to future transactions merely because such transactions relate to and are founded upon antecedent events" ( Forti v. New York State Ethics Commn., 75 N.Y.2d 596, 609, 555 N.Y.S.2d 235, 554 N.E.2d 876 [1990] [internal quotation marks and citation omitted]; accord Matter of St. Clair Nation v. City of New York, 14 N.Y.3d at 457, 902 N.Y.S.2d 22, 928 N.E.2d 404). However, where, as here, application of a statute serves to "impair vested rights or alter past transactions or considerations," it is retroactive in the true sense ( Matter of Allied Grocers Coop. v. Tax Appeals Trib., 162 A.D.2d 791, 792, 557 N.Y.S.2d 707 [1990]; see McKinney's Cons Laws of NY, Book 1, Statutes § 51[a] ). In this regard, Social Services Law § 368-a-the statute under which petitioner sought reimbursement-provides that "[t]here shall be paid to each [social services] district [100%] of the amount expended for medical assistance for those individuals who are eligible ... as a result of a mental disability" (Social Services Law § 368-a [1][h] ). Thus, prior to 2006, upon payment to DOH for services provided to overburden patients for which no local share was owing, petitioner's right to reimbursement for such expenditures accrued ( see Matter of County of Herkimer v. Daines, 60 A.D.3d at 1457, 876 N.Y.S.2d 303; cf. County of Rensselaer v. City of Troy, 120 A.D.2d 796, 797, 501 N.Y.S.2d 534 [1986]; Matter of Tripp, 275 App.Div. 36, 37, 87 N.Y.S.2d 137 [1949] ). Inasmuch as the transactions were complete and reimbursement was owed prior to the January 2006 effective date of the Medicaid Cap Statute, which "altered the substantive law governing petitioner's conduct" ( Matter of Miller v. DeBuono, 90 N.Y.2d 783, 791, 666 N.Y.S.2d 548, 689 N.E.2d 518 [1997]; accord Matter of County of Herkimer v. Daines, 60 A.D.3d at 1457, 876 N.Y.S.2d 303), application of that statute to petitioner's claims would render it "retroactive" in the true sense of that term.

Respondents alternatively assert that petitioner's claims for overburden reimbursement are untimely under 18 NYCRR 601.3(c). Respondents initially denied four of the five sets of claims on the sole ground that the Medicaid Cap Statute barred reimbursement for such claims. Then, within days of the Fourth Department's decisions rejecting that argument ( see Matter of County of Niagara v. Daines, 60 A.D.3d 1460, 874 N.Y.S.2d 924 [2009], supra; Matter of County of Herkimer v. Daines, 60 A.D.3d 1456, 876 N.Y.S.2d 303 [2009], supra ), respondents purported to "supplement" their denial of petitioner's reimbursement claims by asserting 18 NYCRR 601.3(c) as an additional ground for its determination. Even assuming that respondents had the authority to issue a "supplemental" determination,¹ we find that the time requirements set forth in 18 NYCRR 601.3(c) are not applicable to petitioner's claims for reimbursement.

Pursuant to 18 NYCRR 601.3(c), "[e]xcept as otherwise provided within the requirements for any particular activity, expenditures made by a social services district may not be reimbursed if such costs are related to expenditures, services, supplies or other costs incurred on behalf of a recipient or an individual more than 12 months prior to the month in which the claim for reimbursement is made, unless such costs are specifically approved by [DOH]" (18 NYCRR 601.3[c] ). There is no dispute that the time limitations set forth therein apply to situations,...