TZ Manor, LLC v. Daines

• Decision Date: 27 September 2011
• Docket Number: Case No. 08–CV–3293 (KMK).
• Citation: 815 F.Supp.2d 726
• Parties: TZ MANOR, LLC, Pondview Corp., and Parkfield Properties (as assignee of Exchange Authority LLP, Trustee of the Almeida Parkfield Exchange Trust), as Tenants in Common, Plaintiffs, v. Richard F. DAINES, M.D., Commissioner of the New York State Department of Health, Robert P. Dougherty, Director of the New York State Department of Health, Division of Home and Community Based Care, Judith R. Mooney, Co–Director of the New York State Department of Health, Division of Home and Community Based Care, Marybeth Fader, Director, ACF CON Certification Unit of the New York State Department of Health, Division of Home and Community Based Care, Alan J. Lawitz, Esq., Associate Attorney, Bureau of House Counsel, New York State Department of Health, and the Long Hill Alliance Company, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

815 F.Supp.2d 726

TZ MANOR, LLC, Pondview Corp., and Parkfield Properties (as assignee of Exchange Authority LLP, Trustee of the Almeida Parkfield Exchange Trust), as Tenants in Common, Plaintiffs,

v.Richard F. DAINES, M.D., Commissioner of the New York State Department of Health, Robert P. Dougherty, Director of the New York State Department of Health, Division of Home and Community Based Care, Judith R. Mooney, Co–Director of the New York State Department of Health, Division of Home and Community Based Care, Marybeth Fader, Director, ACF CON Certification Unit of the New York State Department of Health, Division of Home and Community Based Care, Alan J. Lawitz, Esq., Associate Attorney, Bureau of House Counsel, New York State Department of Health, and the Long Hill Alliance Company, Inc., Defendants.

Case No. 08–CV–3293 (KMK).

United States District Court, S.D. New York.

Sept. 27, 2011.

Sanford F. Young, Esq., New York, NY, for Plaintiffs.

Scott Joseph Spiegelman, Esq., Office of the Attorney General of the State of New York, New York, NY, for Defendants Richard F. Daines, M.D., Robert P. Dougherty, Judith R. Mooney, Marybeth Fader, Alan J. Lawitz, Esq.

David Eugene Nardolillo, Esq., O'Connell & Aronowitz Attorneys at Law, Albany, NY, for Defendant The Long Hill Alliance Co.

OPINION AND ORDER

KENNETH M. KARAS, District Judge:

Plaintiffs TZ Manor, LLC (“TZ Manor”), Pondview Corp. (“Pondview”), and Parkfield Properties (“Parkfield”) (collectively “Plaintiffs”) have filed an amended complaint in this action after this Court dismissed their initial complaint over two years ago. See TZ Manor, LLC v. Daines, No. 08–CV–3293, 2009 WL 2242436 (S.D.N.Y. July 28, 2009) (“ TZ Manor I ” ). Plaintiffs again allege that officials of the New York State Department of Health (collectively the “State Defendants” or “DOH”) engaged in various acts relating to the operation of an Adult Home in Nyack, New York, located on property owned by Pondview and Parkfield. These acts, taken together, allegedly constituted a deprivation of Plaintiffs' property without just compensation and without due process of law, in violation of the Fifth Amendment's Takings Clause and the Fourteenth Amendment's Due Process Clause. Plaintiffs' Amended Complaint also includes a claim under 42 U.S.C. § 1983 for violation of the Equal Protection Clause and several state common law claims. The State Defendants and Defendant Long Hill Alliance Co., Inc. (“Long Hill”) have separately moved to dismiss Plaintiffs' Amended Complaint. For the reasons stated herein, both motions are granted with respect to the federal claims, supplemental jurisdiction over the state law claims is declined, and the Amended Complaint is dismissed in its entirety.

I. Background

A. Facts

The factual allegations in the Amended Complaint (Dkt. No. 45) are substantially the same as those in Plaintiffs' initial Complaint (Dkt. No. 1), which are discussed in TZ Manor I, 2009 WL 2242436, at *1–3. Familiarity with that opinion is assumed. The following are the essential facts as alleged in the Amended Complaint, which the Court accepts as true for purposes of these Motions.

In October 2002, Pondview and Exchange Authority LLP acquired 51 Mountainview Ave., Nyack, New York (“the Property”) as tenants-in-common via a foreclosure sale by the United States Department of Housing and Urban Development (“HUD”). See Pondview Corp. v. Russand Inc., No. 0822/03, slip op. at 2–5 (N.Y.Sup.Ct. Mar. 24, 2004) (“ Mar. 24, 2004 Pondview Decision & Order” ) (describing history of the Property's prior ownership and Plaintiffs' acquisition).¹ (Am. Compl. ¶¶ 23–24, 28.) At some point thereafter, Exchange Authority LLP assigned its rights to Parkfield. ( Id. ¶¶ 26–27.) The Tappan Zee Manor, a 100–bed Adult Home (the “Adult Home”), sits on the Property, and was, at the time of the Property's acquisition, operated by Andrew Blatt (“Blatt”). Blatt's predecessor in interest Eleanor Blatt had held a series of leases on the Property beginning in 1996 and was issued a license by the State of New York Department of Health (“DOH”) to operate the Adult Home in June 1998. ( Id. ¶¶ 24, 32, 37–39, 41, 43, 45–46.) DOH had issued Blatt a temporary operating license on or about June 25, 2002. ( Id. ¶ 47.)

TZ Manor applied for a temporary operating license for the Adult Home from DOH on October 4, 2002. ( Id. ¶ 30.) DOH denied the application on February 10, 2003, because there was “an alternate claimant asserting leasehold rights in the Adult Home.” ( Id.) (This “alternate claimant” was presumably Blatt, though the Amended Complaint does not make this crystal clear.) At about the same time, Plaintiffs commenced litigation in New York state court against the previous owners and tenants at the Adult Home, seeking their eviction. As relevant here, this litigation resulted in a Justice of the Supreme Court granting Plaintiffs injunctive relief including, among other things, appointment of a “temporary operator and receiver” for the Adult Home pursuant to N.Y. C.P.L.R. § 6401(a). Mar. 24, 2004 Pondview Decision & Order, slip op. at 11. On April 20, 2004, the court substituted Defendant Long Hill as the Adult Home's “Temporary Receiver and Interim Operator” (Am. Compl. ¶ 50), and the DOH notified Long Hill on July 6, 2004 that it would “authorize [ ] the temporary operation of Tappan Zee Manor Adult Home by Long Hill” pursuant to the Supreme Court's receivership order, ( id. ¶ 51). The Supreme Court terminated Long Hill's status as receiver on March 3, 2006. ( Id. ¶ 52.)

Following this order, Long Hill “provided the State Court with a closing statement for the period ending on July 2, 2006.” ( Id. ¶ 53.) Plaintiffs allege, however, that Long Hill did not cease operating the Adult Home even after the receivership was terminated; instead, through a series of letters between Plaintiffs' representatives and DOH officials, it became clear that DOH had “authorized [Long Hill] to act as temporary operator [of the Adult Home] pending approval of an application for change of operator.” ( Id. ¶ 63.) (These communications are discussed in greater detail in TZ Manor I. See 2009 WL 2242436, at *2–3.) A DOH attorney, Defendant Alan J. Lawitz (“Lawitz”), acknowledged in a June 27, 2007 letter to Plaintiffs' general counsel that DOH was aware that Long Hill had retained a “portion of operational revenue [derived from the Adult Home] to pay for its services,” but Lawitz stated that DOH had “no objection” to this “[i]n the absence of other arrangements between the parties for payment of [Long Hill's] services.” (Am. Compl. ¶ 64.) Plaintiffs responded that they had not “authorized [ ]or approved any payments to Long Hill post-receivership and, in fact, have never been advised upon what basis these funds [that Long Hill had retained] have been taken from the facility.” ( Id. ¶ 66.) When Plaintiffs asked for an explanation of DOH's actions, Lawitz wrote in a July 24, 2007 email:

Following the termination of the court-appointed receivership of Long Hill Alliance Company, Inc., there was a clear need for [DOH] to authorize Long Hill to continue to act as interim operator of Tappan Zee Manor, as there was no other individual or entity that had received [DOH] approval to operate the facility, and [DOH] did not wish to take action to require the closure of the facility and transfer of its residents....

[DOH] has authority to issue operating certificates under Social Services Law (SSL) section 460–d for the operation of adult homes serving dependent residents.... Under SSL section 461–c, the operator and the residents enter into admission agreements under which the operator agrees to provide the services required by law, in consideration of the resident's payment for such services. No individual or entity other than the approved operator is legally authorized to participate in the operating revenue of an adult home.... In most cases, when the operator does not own the real property, the operator is making rental payments under a lease to the landlord. Because of the unique and litigious circumstances in this case, there is no current lease between the real property owner and the interim operator [Long Hill].... As you know, [DOH] is currently reviewing an application for change of operator of this adult home.... [DOH] will try to continue to expedite this review.

( Id. ¶ 68.)

New York State regulations define an “adult home” as an “adult-care facility established and operated for the purpose of providing long-term residential care, room, board, housekeeping, personal care and supervision to five or more adults unrelated to the operator.” N.Y. Comp.Codes R. & Regs. tit. 18, § 485.2(b). Under the New York Social Services Law, no adult home (or other adult-care facility regulated by DOH) “shall be operated unless it shall possess a valid operating certificate issued [by DOH] specify[ing] [inter alia] who the operator of the facility shall be....” N.Y. Soc. Serv. Law § 460–b(1). Except in the case of receivership, discussed later, no entity that does not possess an operating license issued by the DOH may run an Adult Home. See id. § 461–b(2)(c) (making “[t]he knowing operation of an adult care facility without the prior written approval of [DOH]” a class A misdemeanor); N.Y. Comp.Codes R. & Regs. tit. 18, § 485.5(i). DOH may issue operating licenses if the proposed facility meets certain standards set forth in the Social Services Law and regulations promulgated thereunder. N.Y. Soc. Serv. Law § 460–b(2).

The application process to become an operator of an Adult Home proceeds in two parts. The regulations generally require a putative operator to satisfy DOH that (among other things) the applicant possesses the “character and competence” to operate the facility, N.Y. Comp.Codes R. & Regs. tit. 18, § 485.6(b), that it possesses “sufficient financial resources” to do so, id. § 485.6(a)(iv), and that it “has developed a ... program of operation”...