| Matter of County of Niagara v Shah |
| 2014 NY Slip Op 07781 [122 AD3d 1240] |
| November 14, 2014 |
| Appellate Division, Fourth Department |
[*1]
| In the Matter of County of Niagara, Respondent, vNirav R. Shah, as Commissioner of the New York State Department of Health, et al.,Appellants. |
Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), forrespondents-defendants-appellants.
Whiteman Osterman & Hanna LLP, Albany (Christopher E. Buckey of counsel)and Nancy Rose Stormer, P.C., Utica, for petitioner-plaintiff-respondent.
Appeal from a judgment (denominated order and judgment) of the Supreme Court,Niagara County (Catherine R. Nugent Panepinto, J.), entered July 1, 2013 in a CPLRarticle 78 proceeding and declaratory judgment action. The judgment, inter alia, directedrespondents-defendants to pay petitioner-plaintiff's claims for reimbursement ofoverburden expenditures.
It is hereby ordered that the judgment so appealed from is unanimously reversed onthe law without costs and the matter is remitted to Supreme Court, Niagara County, forfurther proceedings in accordance with the following memorandum: Petitioner-plaintiffCounty of Niagara (petitioner) commenced this hybrid CPLR article 78 proceeding anddeclaratory judgment action seeking, inter alia, to compel respondents-defendants(respondents) to pay petitioner's claims for reimbursement for certain expendituresknown as overburden expenditures (see generally Matter of Krauskopf v Perales,139 AD2d 147 [1988], affd 74 NY2d 730 [1989]). The petition/complaint allegesthat respondent-defendant New York State Department of Health (DOH) improperlybilled petitioner for those expenditures prior to 2006, and that respondents have acontinuing duty to reimburse petitioner for them.
Determination of this appeal requires some discussion of the legislation and priorlitigation concerning these expenditures. With respect to most Medicaid costs, the initialstatutory scheme provided that the federal government would reimburse the State for halfof all Medicaid expenditures that were made, and in most cases the DOH would thensplit the other half with the social services district in which the payment was made,including petitioner (see Social Services Law § 368-a [1] [d]). Withrespect to Medicaid payments made to treat the mentally ill individuals at issue in theoverburden 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 wholebegan to grow exponentially, the Legislature changed the statutory scheme by enactingthe Medicaid Cap Statute ([Cap Statute] L 2005, ch 58, § 1, part C,§ 9, as amended by L 2006, ch 57, § 1, part A,§ 60). Although the Cap Statute used a complex set of provisions to affixeach social services district's liability for Medicaid expenses, it essentially provided thateach social services district, including petitioner, would send the State a fixed amount ofmoney per year, based on the amount spent by that social services district during thefiscal year beginning April 1, 2005, minus payments received by the social servicesdistrict for those expenses (seegenerally Matter of County of St. Lawrence v Shah, 95 AD3d 1548, 1549-1550[2012]). The amounts are to be adjusted for inflation in subsequent years (seeid.).
Petitioner contends that respondents failed to reimburse it for numerous overburdenexpenditures that it made prior to 2006, and it began submitting claims forreimbursement. Upon enactment of the Cap Statute, respondents began to deny thoseclaims on the ground that the Cap Statute extinguished petitioner's right to seekreimbursement for those claims. On appeal from a judgment rejecting that ground fordenial, this Court concluded that, "in light of the lack of legislative history or statutorylanguage indicating that the Legislature intended that the statute . . . shouldbe applied retroactively" (Matterof County of Herkimer v Daines, 60 AD3d 1456, 1457 [2009], lv denied13 NY3d 707 [2009]), respondents' duty to reimburse social services districts foroverburden expenditures incurred prior to January 1, 2006 was not extinguished by theCap Statute (id.). In addition, we also rejected respondents' contention thatpetitioner's claims "were time-barred pursuant to 18 NYCRR 601.3 (c)" (Matter of County of Niagara vDaines, 79 AD3d 1702, 1705 [2010], lv denied 17 NY3d 703 [2011]).Respondents thereafter took the position that petitioner's right to seek reimbursement foroverburden expenditures was extinguished by a 2010 amendment to the Cap Statute (L2010, ch 109, § 1, part B, § 24), and we likewise rejected thatcontention. We concluded that, "inasmuch as the plain language of the 2010 amendmentdoes not mention overburden expenditures or respondents' preexisting duty to reimbursepetitioner for such expenses incurred prior to 2006, that duty is not extinguished by theamendment" (Matter of Countyof Niagara v Daines, 91 AD3d 1288, 1289 [2012]). We further stated that"[t]here is nothing in the legislative history indicating that the Legislature acted inresponse to the prior judicial decisions concerning the Medicaid Cap Statute" in enactingthe 2010 amendment (id.).
Subsequent to our determination in that case, however, the Legislature inserted aprovision in the executive budget for 2012-2013, stating that, "[n]otwithstanding theprovisions of section 368-a of the social services law or any other contrary provision oflaw, no reimbursement shall be made for social services districts' claims submitted onand after the effective date of this paragraph, for district expenditures incurred prior toJanuary 1, 2006, including, but not limited to," overburden expenditures (L 2012, ch 56,§ 1, part D, § 61 [hereafter, section 61]). Furthermore, thememorandum in support of the executive budget indicated that section 61 was proposed"to clarify that local governments cannot claim for overburden expenses incurred prior toJanuary 1, 2006, when the [Cap Statute] took effect. This is necessary to address adversecourt 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 thisappeal. 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-movedfor summary judgment on the petition/complaint. Respondents appeal from a judgmentthat, inter alia, granted petitioner's cross motion and directed respondents to pay theclaims. We agree with respondents that section 61 has retroactively changed the law withrespect to this issue, and we therefore reverse.
Section 61 clearly states that no further claims for reimbursement of overburdenexpenditures will be paid, notwithstanding Social Services Law § 368-h.Thus, the unequivocal wording of section 61 retroactively extinguishes petitioner's rightto submit claims for reimbursement of overburden expenditures made prior to 2006."The retroactivity of a statute which is expressly retroactive, as here, will generally bedefeated only if such retroactivity would violate due process or some other specificconstitutional precept" (Matter of City of New York v Lawton, 128 AD2d 202,206 [1987]).
Here, however, in granting the cross motion, Supreme Court ordered that petitioner'sclaims be "treated under Social Services Law § 368-a as [they] existed atthe time that Petitioner incurred the Overburden expenses on Respondents' behalf,pursuant to the special facts exception." We agree with respondents that the special factsexception does not apply in this situation. Insofar as relevant here, that exceptionprovides that "a court may deny an agency the benefit of a change in the law when it hasintentionally or even negligently delayed action on [a claim] until after the law had beenamended to authorize denial of the" claim (Matter of Faymor Dev. Co. v Board ofStds. & Appeals of City of N.Y., 45 NY2d 560, 565 [1978]). There is noindication 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, basedon section 61. Although respondents unquestionably denied other, earlier claims basedon 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 toflag these payments as overburden expenditures, and all subsequent denials or delays inpaying claims submitted by petitioner and other social services districts, should beclassified as the requisite intentional or negligent failure to act. Any intentional ornegligent computer coding error occurred, if at all, when a computer coding process wasallegedly changed at some unknown date prior to 2006, and section 61 was not enacteduntil six years later. It therefore cannot be said that the changes in the computer codingwere made in anticipation of the imminent enactment of section 61, which was notcontemplated at that time. Similarly, respondents' prior denial of claims and litigationoccurred years before section 61 was first contemplated, and we therefore reject thecontention that the delay was for the purpose of awaiting that legislative action. Thus, thecourt erred in determining that the special facts exception applies.
Petitioner further contends that section 61 is inapplicable because respondents havean ongoing duty to reimburse petitioner for all prior overburden expenditures withoutregard to whether petitioner submits a claim. Thus, according to petitioner, no claim forreimbursement is necessary, and section 61 therefore does not apply to this situationbecause it merely bars payment of claims. We reject that contention.
It is well settled that, in interpreting a statute, a court " 'must assume that theLegislature did not deliberately place a phrase in the statute that was intended to serve nopurpose' " (Matter of Rodriguez v Perales, 86 NY2d 361, 366 [1995],quoting Matter of Smathers, 309 NY 487, 495 [1956]), and must avoid aninterpretation that " 'result[s] in the nullification of one part of [a] [statute] byanother' " (Rangolan v County of Nassau, 96 NY2d 42, 48 [2001]). Thus,"[a] construction that would render a provision superfluous is to be avoided"(Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 587 [1998];see Matter of Branford House v Michetti, 81 NY2d 681, 688 [1993]). If weaccept petitioner's contention that respondents must forthwith search out all priorpossible instances of unreimbursed overburden expenditures and submit payment forthem to petitioner notwithstanding section 61, then there is no situation in which a claimfor such payment will be submitted. Thus, there will be no situation in which section 61will apply, rendering it a nullity. Similarly, to accept petitioner's "proffered interpretationwould be to return to the prior version of the statute, rendering the amendment a nullity"(People v Thompson, 99 NY2d 38, 42 [2002]). We therefore reject petitioner'sinterpretation of the statutory scheme.
In its cross motion for summary judgment, petitioner sought, inter alia, judgmentdeclaring that section 61 is unconstitutional because the statute deprived petitioner of dueprocess by removing its vested rights. "[T]he traditional principle throughout the UnitedStates has been that municipalities and other local governmental corporate entities andtheir officers lack capacity to mount constitutional challenges to acts of the State andState legislation. This general incapacity to sue flows from judicial recognition of thejuridical as well as political relationship between those entities and the State.Constitutionally as well as a matter of historical fact, municipal corporatebodies—counties, towns and school districts—are merely subdivisions ofthe State, created by the State for the convenient carrying out of the State's governmentalpowers and responsibilities as its agents. Viewed, therefore, by the courts as purelycreatures or agents of the State, it followed that municipal corporate bodies cannot havethe right to contest the actions of their principal or creator affecting them in theirgovernmental capacity or as representatives of their inhabitants" (City of New York vState of New York, 86 NY2d 286, 289-290 [1995]).
It is equally well settled, however, that "[t]he issue of lack of capacity to sue does notgo to the jurisdiction of the court, as is the case when the plaintiffs lack standing. Rather,lack of capacity to sue is a ground for dismissal which must be raised by motion and isotherwise waived" (id. at 292). Here, petitioner cross-moved for summaryjudgment on several grounds, including the unconstitutionality of the statute, and itappears that the Attorney General was invited to participate based upon the challenge tothe constitutionality of section 61. The record does not reflect whether respondentscontested that part of the cross motion, or whether the Attorney General appeared withrespect to that issue. Because the court decided the cross motion solely on the ground thatthe special facts exception barred the application of section 61, the court did not reachthe issue. We therefore remit the matter to Supreme Court for consideration of the issue,after any further briefing and motion argument that the court deems proper.Present—Scudder, P.J., Smith, Centra, Fahey and Peradotto, JJ.