Rye Psychiatric Hosp. Center, Inc. v. State

• Decision Date: 13 November 1989
• Docket Number: No. M-40656,M-40656
• Citation: 547 N.Y.S.2d 1017,145 Misc.2d 706
• Parties: , 28 Soc.Sec.Rep.Ser. 112 RYE PSYCHIATRIC HOSPITAL CENTER, INC., Claimant, v. The STATE of New York, Defendant. Motion
• Court: New York Court of Claims

Page 1017

547 N.Y.S.2d 1017

145 Misc.2d 706, 28 Soc.Sec.Rep.Ser. 112

RYE PSYCHIATRIC HOSPITAL CENTER, INC., Claimant, v. The STATE of New York, Defendant.

Motion No. M-40656.

Court of Claims of New York.

Nov. 13, 1989.

Bleakley, Platt & Schmidt by Michael J. Trainor, White Plains, for claimant.

Robert Abrams, Atty. Gen. of the State of N.Y. by Bruce D. Feldman, Asst. Atty. Gen., for defendant.

EDWIN MARGOLIS, Judge.

This is a motion brought pursuant to section 10(6) of the Court of Claims Act for permission to file an untimely claim. The proposed claim alleges that for the years 1985, 1986, 1987 and 1988 the Office of Mental Health (OMH) wrongfully incorporated a minimum occupancy factor into its computation of the Medicaid reimbursement rate for claimant. Claimant estimates that the adverse impact of the rate calculation over the four years in question has been in excess of $500,000.00.

Inclusion of the minimum occupancy factor ¹ into the calculation for fixing Medicaid reimbursement rates was established by a state regulation, 14 NYCRR § 577.7(g), which became effective for the first time for fiscal year 1985. This factor was included in the State Plan for Medical Assistance (State Plan), which was filed with the Secretary of the United States Department of Health and Human Services (HHS). Claimant has instituted a federal action for declaratory judgment and recovery of the moneys withheld by implementation of the minimum occupancy factor (Rye Psychiatric Hospital Center, Inc. v. Surles, 88 Civ. 5922 [GLG] [SDNY]. The basis for that action is claimant's contention that the State regulation, insofar as it authorizes inclusion of the minimum occupancy factor, violates a governing Federal statute, 42 USC § 1396a(a)(13)(A) (Title XIX of the United States Social Security Act). ²

The State officials who are named as defendants in the Federal action have raised, as an affirmative defense, the U.S. Constitution's Eleventh Amendment bar to monetary recovery against a State in Federal court. Although claimant intends to challenge this defense, the instant motion is being made to protect its right to recover money damages from the State in the event that it is successful in the overall Federal litigation but unsuccessful in challenging the affirmative defense. Thus, the action which claimant seeks to institute in this court does not raise the underlying issue of the regulation's validity but is directed merely at recovery of the sums withheld through use of the minimum occupancy factor if and when the regulation is invalidated by the Federal court.

Counsel for claimant continually and incorrectly refers to its motion as one for permission to file a late "notice of claim", making it clear that he intends merely to reserve his right to commence an action in this court if it is necessary, and possible, to do so at the conclusion of the Federal litigation. There is no document entitled "notice of claim" recognized or authorized by the Court of Claims Act. A "notice of intention to file a claim", which is authorized by the Act, would act to preserve the claimant's right to formally institute an action at a somewhat later date, however it appears that claimant's time for filing a notice of intention has passed ³. Section 10(6) authorizes only the belated filing of a "claim", the document which formally commences an action in this court.

Defendant asserts that, pursuant to section 9(2) of the Court of Claims Act, this court has jurisdiction to hear and determine only causes of action premised on tort, contract, and appropriation of realty by the State ⁴ and that this action, where the demand for money damages is premised on the alleged invalidity of a State regulation, does not fall within these categories. In fact, both counsel have assumed that the dispute about claimant's underlying right to recover (i.e. whether inclusion of the minimum occupancy factor violates the governing Federal statute) cannot be adjudicated by this court but must be decided either in a CPLR article 78 proceeding, an action for declaratory judgment in State Supreme Court, or--as claimant has chosen--an action for declaratory judgment in Federal court.

This view is not correct. The jurisdiction of this court encompasses actions based on statutory rights (see St. Paul Fire and Marine Ins. Co. v. State of New York, 99 Misc.2d 140, 148-156, 415 N.Y.S.2d 949) and other claims which do not fit into the classic concepts of "tort" or "contract". In Parsa v. State of New York, 64 N.Y.2d 143, 485 N.Y.S.2d 27, 474 N.E.2d 235, the Court of Appeals held that the Court of Claims would have jurisdiction to hear a properly-pleaded claim for reimbursement of Medicare moneys withheld by the State in alleged violation of a governing Federal statute. In Parsa, the claim had been brought by a physician who provided services to Medicare patients through the Downstate Medical Center and alleged that he had not been paid the amount to which he was entitled under the governing Federal statute, which required that reimbursement for such services be the lesser of "reasonable cost" or "customary charges" (supra, at 150, 485 N.Y.S.2d 27, 474 N.E.2d 235).

According to the Court of Appeals, the cause of action is one for money had and received, which it described as arising from "a contract implied in law".

Although the action is recognized as an action in implied contract, the name is something of a misnomer because it is not an action founded on contract at all; it is an obligation which the law creates in the absence of agreement when one party possesses money that in equity and good conscience he ought not to retain and that belongs to another (Miller v. Schloss, 218 NY 400, 406-407 .

(64 N.Y.2d 143, 148, 485 N.Y.S.2d 27, 474 N.E.2d 235.) An action for money had and received, therefore, lies within the jurisdiction of this court pursuant to that portion of section 9(2) of the Court of Claims Act authorizing the court to hear and determine claims based on "breach of contract, express or implied". (64 N.Y.2d at 149, 485 N.Y.S.2d 27, 474 N.E.2d 235).

The claim in Parsa was ultimately dismissed on the ground that, in that case, the physician claimant was not a Medicare "provider" and thus not personally entitled to payment under the Federal statute. "[W]hatever sums are paid over by the Federal Government, are payments to the hospital for services it supplied to the patients. * * * [T]he statute * * * does not set aside fees which the physician is entitled to receive as a matter of law." (64 N.Y.2d 143, 151, 485 N.Y.S.2d 27, 474 N.E.2d 235.) In contrast, Rye Psychiatric Hospital, the party bringing the instant motion, is the provider hospital, is directly entitled to receive reimbursement, and has standing to institute an action for money had and received in this court.

In a more recent Court of Claims case dealing with an action for money had and received, 405 Company v. State of New York, 118 Misc.2d 305, 460 N.Y.S.2d 455, claimants who had paid money pursuant to a taxing statute that was subsequently repealed, retroactive to its effective date, were held to be entitled to a refund of the moneys they had paid pursuant to that provision of the Tax Law.

A number of other decisions have recognized that where an individual or corporation's right to obtain money damages against the State rests directly on the legal correctness of a State statute, regulation or administrative action, this court has the power to both adjudicate the underlying right and--should the claimant prevail on that issue--award money damages. (See Travelers Indemnity Co. v. State of New York, 33 A.D.2d 127, 305 N.Y.S.2d 689, affd. 28 N.Y.2d 561, 319 N.Y.S.2d 609, 268 N.E.2d 323; China City Corp. v. State of New York, 51 Misc.2d 429, 273 N.Y.S.2d 272.)

Pursuant to Guaranty Trust Co. of New York v. State of New York, 299 N.Y. 295, 86 N.E.2d 754, rearg. denied 300 N.Y. 498, 88 N.E.2d 726, the cause of action in these cases accrues at the point that the moneys which claimant seeks to recover are either withheld by or paid to the State. In Guaranty Trust, the claimant had paid, during 1939, unemployment insurance contributions pursuant to a statute which was invalidated by the Court of Appeals in March 1944. Immediately after the Court of Appeals decision, claimant applied to the State Department of Labor for a refund and, shortly thereafter, instituted an action in the Court of Claims. ⁵ The claim was dismissed as untimely since the Court of Appeals held that the cause of action had accrued at the time of the 1939 payments and claimant had not complied with the applicable time limitation (Court of Claims Act § 10[4].

More recently, in Citibank, N.A. v. State of New York, 103 Misc.2d 348, 350-351, 425 N.Y.S.2d 932, a motion for permission to file claims seeking recovery of taxes paid pursuant to another subsequently-invalidated statute was denied, on the authority of Guaranty Trust, because the cause of action had accrued when the taxes were paid, not when the taxing statute was subsequently stricken. ⁶ The judge who decided Citibank recognized that this rule of accrual poses significant problems for litigants who possess these types of claims, and he suggested that the claimants should have either refused to pay the taxes, subsequently moving to set aside the delinquency assessment or brought simultaneous actions in Supreme Court and the Court of Claims, having the latter placed on the reserve calendar. As Parsa and the instant motion illustrate, not all situations within this category can be handled by refusing to pay money to the State. In addition, the Court of Claims no longer has a reserve calendar, although in certain unusual situations extended adjournments may be proper (see City of New York v. State of New York, 148 A.D.2d 289, 542 N.Y.S.2d 545). We respectfully differ, however, with the implicit view of the trial court in Citibank that the Court of Claims should routinely...