| Brightonian Nursing Home v Daines |
| 2012 NY Slip Op 02245 [93 AD3d 1355] |
| March 23, 2012 |
| Appellate Division, Fourth Department |
| Brightonian Nursing Home, et al., Respondents, v Richard F.Daines M.D., Commissioner of Health, State of New York, et al.,Appellants. |
—[*1] Harter Secrest & Emery LLP, Rochester (Thomas G. Smith of counsel), forplaintiffs-petitioners-respondents.
Appeal from a judgment (denominated order and judgment) of the Supreme Court, MonroeCounty (Matthew A. Rosenbaum, J.), entered November 10, 2010 in a CPLR article 78proceeding and a declaratory judgment action. The judgment denied the cross motion ofdefendants-respondents, inter alia, to dismiss the amended complaint/petition and declaredunconstitutional Public Health Law § 2808 (5) (c).
It is hereby ordered that the judgment so appealed from is unanimously affirmed withoutcosts.
Memorandum: Plaintiffs-petitioners (plaintiffs) commenced this hybrid CPLR article 78proceeding and declaratory judgment action seeking, inter alia, a declaration that the version ofPublic Health Law § 2808 (5) (c) in effect at that time was unconstitutional on its face. Wenote at the outset that this is properly only a declaratory judgment action inasmuch as plaintiffschallenge the constitutionality of a statute, rather than the specific action of the administrativeagency (see Greece Town Mall, LP vMullen, 87 AD3d 1408, 1408 [2011]). Supreme Court denied the cross motion ofdefendants-respondents (defendants), inter alia, to dismiss the amended complaint/petitionpursuant to CPLR 3211 (a) (7) and entered judgment in favor of plaintiffs declaring that PublicHealth Law § 2808 (5) (c) is unconstitutional. We affirm.
It is well settled that "[l]egislative enactments enjoy a strong presumption ofconstitutionality" (LaValle v Hayden, 98 NY2d 155, 161 [2002]; see Schulz v Stateof New York, 84 NY2d 231, 241 [1994], rearg denied 84 NY2d 851 [1994], certdenied 513 US 1127 [1995]). Where, as here, the [*2]challenge is to a statute on its face, the challenger "bears thesubstantial burden of demonstrating that in any degree and in every conceivable application, thelaw suffers wholesale constitutional impairment" (Matter of Moran Towing Corp. vUrbach, 99 NY2d 443, 448 [2003] [internal quotation marks omitted]; see Cohen v Stateof New York, 94 NY2d 1, 8 [1999]). In this case, we conclude that plaintiffs met the heavyburden of establishing the unconstitutionality of Public Health Law § 2808 (5) (c) beyonda reasonable doubt (see generallyBordeleau v State of New York, 18 NY3d 305, 313 [2011], rearg denied 18NY3d 918 [2012]; Matter of New YorkCharter Schools Assn., Inc. v DiNapoli, 13 NY3d 120, 130 [2009]; Schulz, 84NY2d at 241).
Public Health Law § 2808 (5) (c) prohibits private residential health care facilities, i.e.,nursing homes, from withdrawing equity or transferring assets that in the aggregate exceed 3% oftheir total annual revenue for patient care services without the prior written approval of theCommissioner of Health (Commissioner). The statute affords the Commissioner 60 days todetermine whether to approve a request for withdrawal of equity or assets (see id.). Inreviewing such requests, the statute provides that the Commissioner "shall consider the facility'soverall financial condition, any indications of financial distress, whether the facility is delinquentin any payment owed to the [D]epartment [of Health], whether the facility has been cited forimmediate jeopardy or substandard quality of care, and such other factors as the [C]ommissionerdeems appropriate" (id.).
Contrary to defendants' contention, we conclude that Public Health Law § 2808 (5) (c)as written is unconstitutionally vague and improperly delegates legislative authority to theCommissioner. It is axiomatic that "the legislative branch may not constitutionally cede itsfundamental policymaking responsibility to a regulatory agency" (Matter of Medical Socy. ofState of N.Y. v Serio, 100 NY2d 854, 864 [2003]; see Boreali v Axelrod, 71 NY2d1, 9-10 [1987]; see also Matter of Citizens For An Orderly Energy Policy v Cuomo, 78NY2d 398, 410 [1991], rearg denied 79 NY2d 851 [1992]). Thus, "[t]heLegislature may constitutionally confer discretion upon an administrative agency only if it limitsthe field in which that discretion is to operate and provides standards to govern its exercise"(Matter of Levine v Whalen, 39 NY2d 510, 515 [1976]). We agree with plaintiffsand the court that the provision in Public Health Law § 2808 (5) (c) permitting theCommissioner to consider "such other factors as [he or she] deems appropriate" (hereafter,catchall provision) constitutes an unconstitutional delegation of legislative authority because itgrants the Commissioner unfettered discretion in assessing equity withdrawal requests. Thestatute provides no standards to guide the Commissioner in determining what factors are"appropriate" in reviewing such requests (§ 2808 [5] [c]; see generally Dur-Bar RealtyCo. v City of Utica, 57 AD2d 51, 55 [1977], affd 44 NY2d 1002 [1978];Levine, 39 NY2d at 515). As a result, it is left to the sole discretion of the Commissionerto determine which additional factors to consider.
Defendants contend that the catchall provision is properly construed not as conferringunlimited discretion upon the Commissioner, but rather as allowing the Commissioner toconsider other factors of the same type or kind as the first four factors listed in the statute, i.e.,factors relating to the nursing home's financial condition and quality of care. In support of thatcontention, defendants rely on the ejusdem generis rule of statutory construction, which "requiresthe court to limit general language of a statute by specific phrases which have preceded thegeneral language" (McKinney's Cons Laws of NY, Book 1, Statutes § 239 [b], at 407; see 242-44 E. 77th St., LLC v Greater N.Y.Mut. Ins. Co., 31 AD3d 100, 103-104 [2006]). The rule of ejusdem generis, however,"applies only where the specific words preceding the general expression are all of the samenature, and where they are of different genera the meaning of the general words remainsunaffected by its connection with them . . . [I]n applying the rule, care must betaken to see that the words supposed to be particular or specific, and which precede the generalterm, really are an enumeration of individual things, for if the preceding terms are general as wellas that which follows, there is no place for the application of the rule" (§ 239 [b], at 409).[*3]Here, the preceding factors are general in nature and are notall of the same kind or type (see Public Health Law § 2808 [5] [c]; McKinney'sCons Laws of NY, Book 1, Statutes § 239 [b], at 409). Thus, ejusdem generis does notapply to circumscribe the otherwise limitless discretion the statute affords to the Commissioner(cf. Miranda v Norstar Bldg. Corp.,79 AD3d 42, 47 [2010]).
We also agree with plaintiffs and the court that the catchall provision of Public Health Law§ 2808 (5) (c) is unconstitutionally vague (see Russell v Town of Pittsford, 94AD2d 410, 414 [1983]), inasmuch as it does not " 'contain[ ] sufficient standards to afford areasonable degree of certainty so that a person of ordinary intelligence is not forced to guess at itsmeaning and to safeguard against arbitrary enforcement' " (Matter of Morrissey v Apostol, 75 AD3d 993, 996 [2010]; see Matter of Kaur v New York StateUrban Dev. Corp., 15 NY3d 235, 256 [2010], cert denied sub nom., Tuck-It-Away,Inc. v New York State Urban Development Corp, 562 US —, 131 S Ct 822 [2010]).Because the Commissioner may consider "such other factors as [he or she] deems appropriate"(§ 2808 [5] [c]), the statute does not adequately apprise nursing home owners andoperators of the standards used to assess their equity withdrawal requests and precludesmeaningful judicial review (cf. Matter of Slocum v Berman, 81 AD2d 1014, 1015-1016[1981], lv denied 54 NY2d 602 [1981], appeal dismissed 54 NY2d 752 [1981]).
Although defendants contend that we may sever the catchall provision and otherwise leavethe statute intact (see generally St.Joseph Hosp. of Cheektowaga v Novello, 43 AD3d 139, 146 [2007], appealdismissed 9 NY3d 988 [2007], lv denied 10 NY3d 702 [2008]), we agree withplaintiffs and the court that Public Health Law § 2808 (5) (c), in its entirety, violatessubstantive due process. "To establish a claim for violation of substantive due process, a party'must establish a cognizable . . . vested property interest' . . . and 'thatthe governmental action was wholly without legal justification' " (Matter of Raynor v LandmarkChrysler, 18 NY3d 48, 59 [2011]; see Bower Assoc. v Town of Pleasant Val., 2 NY3d 617, 627[2004]). With respect to the first part of that test, we conclude that plaintiffs have a vestedproperty interest in the equity of their businesses and the disposition of that valuable asset(see generally Dickman v Commissioner, 465 US 330, 336 [1984], reh denied466 US 945 [1984]; Federal Home Loan Mtge. Corp. v Commissioner of InternalRevenue, 121 TC 254, 259-260 [2003]; Passailaigue v United States, 224 F Supp682, 686 [1963]). As the United States Supreme Court stated, "the use of valuable property[,including money] is itself a legally protectible property interest. Of the aggregate rightsassociated with any property interest, the right of use of property is perhaps of the highest order"(Dickman, 465 US at 336).
With respect to the second part of the test for a substantive due process claim, plaintiffs mustdemonstrate that the statutory provision at issue is "without legal justification and not supportedby a rational legislative purpose" (Raynor, 18 NY3d at 59). As plaintiffs correctlyconcede, ensuring the financial viability of nursing homes and protecting the welfare of theirvulnerable residents constitutes a legitimate governmental purpose (see generally PortJefferson Health Care Facility v Wing, 94 NY2d 284, 292 [1999], cert denied 530US 1276 [2000]; Matter of Hodes v Axelrod, 70 NY2d 364, 371-372 [1987]; Villageof Herkimer v Axelrod, 88 AD2d 704, 706 [1982], affd 58 NY2d 1069 [1983]).
The question therefore becomes whether Public Health Law § 2808 (5) (c) bears areasonable relationship to the objective of safeguarding a nursing home's finances for theprotection of its residents (see Rochester Gas & Elec. Corp. v Public Serv. Commn. of Stateof N.Y., 71 NY2d 313, 321 [1988]; Montgomery v Daniels, 38 NY2d 41, 54[1975]; Russell, 94 AD2d at 412-413). "The Federal and State Due Process Clausescondition government regulation by requiring that it not be unreasonable, arbitrary or capricious,and that the means selected have a reasonable relation to the object sought to be attained"(Rochester Gas & Elec. Corp., 71 NY2d at 321). We agree with plaintiffs and the courtthat section 2808 (5) (c) is not reasonably related to the governmental purpose and thus that itviolates due process (see generally Fred F. French Inv. Co. v City of New York, 39 NY2d587, 596 [1976], rearg denied 40 NY2d 846 [1976], appeal dismissed and [*4]cert denied 429 US 990 [1976]).
Public Health Law § 2808 (5) (c) requires all nursing homes, regardless of financialviability, to obtain the approval of the Commissioner for all expenditures that, in the aggregate ina given year, exceed 3% of their annual revenue from patient care. We conclude that it ismanifestly unfair and unreasonable to freeze the equity of all nursing homes in excess of 3% oftheir respective annual revenues in order to protect nursing home residents and the public fromthe possibility that "unscrupulous or incompetent owners [will] place their facilities in afinancially unsound position by withdrawing excessive amounts of working capital" (BudgetReport on Bills, Bill Jacket, L 1977, ch 521). We note that subdivision (5) (a) of section 2808provides that "[a]ny operator withdrawing equity or assets from a hospital operated for profit soas to create or increase a negative net worth or when the hospital is in a negative net worthposition . . . must obtain the prior approval of the [C]ommissioner . . .." Subdivision (5) (b) further provides that no nursing home facility "may withdraw equity ortransfer assets which in the aggregate exceed [3%] of such facility's total reported annual revenuefor patient care services . . . without prior written notification to the[C]ommissioner." In our view, those subdivisions sufficiently protect nursing home residents andthe public from excessive withdrawals of equity that may endanger a nursing home's financialhealth. We conclude that subdivision (5) (c) sweeps so broadly as to be irrational and arbitrary inview of the objective to be accomplished, i.e., ensuring the financial viability of nursing homesfor the protection of their residents (see generally Rochester Gas & Elec. Corp., 71 NY2dat 321; Fred F. French Inv. Co., 39 NY2d at 596). Present—Smith, J.P., Peradotto,Carni and Sconiers, JJ.