| Matter of County of Chautauqua v Shah |
| 2015 NY Slip Op 02245 [126 AD3d 1317] |
| March 20, 2015 |
| Appellate Division, Fourth Department |
[*1]
| In the Matter of County of Chautauqua,Respondent-Appellant, v Nirav R. Shah, as Commissioner of the New YorkState Department of Health, et al., Appellants-Respondents. (Appeal No.1.) |
Eric T. Schneiderman, Attorney General, Albany (Victor Paladino of counsel), forrespondents-defendants-appellants-respondents.
Whiteman, Osterman & Hanna LLP, Albany (Christopher E. Buckey ofcounsel) and Nancy Rose Stormer, P.C., Utica, forpetitioner-plaintiff-respondent-appellant.
Appeal and cross appeal from a judgment (denominated order and judgment) of theSupreme Court, Chautauqua County (Deborah A. Chimes, J.), entered January 27, 2014in a CPLR article 78 proceeding and declaratory judgment action. The judgment, amongother things, annulled the determination of respondents-defendants and directedrespondents-defendants to allow petitioner-plaintiff's claims for reimbursement.
It is hereby ordered that the judgment so appealed from is unanimously modified onthe law by denying the petition-complaint in its entirety and granting judgment in favorof respondents-defendants as follows:
It is adjudged and declared that section 61 of part D of section 1 of chapter 56 of theLaws of 2012 has not been shown to be unconstitutional, and as modified the judgmentis affirmed without costs.
Memorandum: The petitioner-plaintiff in appeal No. 1 (hereafter, ChautauquaCounty) commenced a hybrid CPLR article 78 proceeding and declaratory judgmentaction seeking, inter alia, to compel respondents-defendants (respondents) to reimburse itfor certain Medicaid expenditures known as overburden expenditures (see Matter of County of Herkimer vDaines, 60 AD3d 1456, 1456-1457 [2009], lv denied 13 NY3d 707[2009] [County of Herkimer I]). The petitioner-plaintiff in appeal No. 2(hereafter, Jefferson County; collectively with Chautauqua County, petitioners)commenced a nearly identical proceeding-action seeking reimbursement for itsoverburden expenditures. The petitions/complaints allege that respondent-defendant NewYork State Department of Health (DOH) improperly billed petitioners for thoseexpenditures prior to 2006, and that respondents have a continuing duty to reimbursepetitioners for them.
The history of the legislation and prior litigation regarding these expenditures is fullyset forth in our recent decision in Matter of County of Niagara v Shah (122 AD3d 1240,1240-1242 [2014] [Niagara III]). In brief, several counties throughout the Statehave submitted numerous claims to the DOH over the last several years, seekingreimbursement for overburden expenditures that the counties made prior to 2006. Whenthe DOH refused to pay those claims, the counties commenced litigation similar to thecases on appeal, asking the courts to direct respondents to pay those claims (see e.g. Matter of County ofHerkimer v Daines, 83 AD3d 1510 [2011]; Matter of County of Niagara v Daines, 79 AD3d 1702[2010], lv denied 17 NY3d 703 [2011] [Niagara I]). First, in [*2]County of Herkimer I (60 AD3d at 1457), we rejectedrespondents' contentions that the claims were extinguished by the enactment of theMedicaid Cap Statute ([Cap Statute] L 2005, ch 58, § 1, part C,§ 9, as amended by L 2006, ch 57, § 1, part A,§ 60). We later rejected respondents' contention that the claims "weretime-barred pursuant to 18 NYCRR 601.3 (c)" (Niagara I, 79 AD3d at 1705),and, in Matter of County ofNiagara v Daines (91 AD3d 1288, 1289 [2012] [Niagara II]), werejected respondents' further contention that the Legislature intended to extinguish thoseclaims by enacting a 2010 amendment to the Cap Statute (see L 2010, ch 109,§ 1, part B, § 24). In making these determinations, we reliedon, among other things, the lack of any indication in the statutes or the applicablelegislative history that the Legislature intended to extinguish the counties' right toreimbursement for overburden expenditures made prior to the enactment of the CapStatute.
The situation changed, however, when the Legislature inserted a provision in the2012-2013 State budget stating that, "[n]otwithstanding the provisions of section 368-aof the social services law or any other contrary provision of law, no reimbursement shallbe made for [counties'] claims submitted on and after the effective date of this paragraph,for district expenditures incurred prior to January 1, 2006, including, but not limited to,"overburden expenditures (L 2012, ch 56, § 1, part D, § 61[hereafter, section 61]). In addition, the memorandum in support of the 2012-2013executive budget stated that section 61 had been proposed "to clarify that [counties]cannot claim for overburden expenses incurred prior to January 1, 2006, when the [CapStatute] took effect. This is necessary to address adverse court decisions that haveresulted in State costs paid to [counties] for pre-cap periods, which conflict with theoriginal intent of the" Cap Statute. Consequently, we concluded in Niagara III(122 AD3d at 1242) that "[s]ection 61 clearly states that no further claims forreimbursement of overburden expenditures will be paid, notwithstanding Social ServicesLaw § 368-a. Thus, the unequivocal wording of section 61 retroactivelyextinguishes [a county's] right to submit claims for reimbursement of overburdenexpenditures made prior to 2006."
After the effective date of section 61, petitioners submitted the claims at issue inthese appeals, which the DOH denied on the ground that they were barred by section 61.In appeal No. 1, Supreme Court, Chautauqua County, issued a judgment in which it, interalia, declared section 61 unconstitutional, annulled respondents' determination to denythose claims, and directed respondents to pay the claims. The court also deniedChautauqua County's request for relief in the nature of mandamus, directing the DOH tosearch its records for all other payments made by Chautauqua County for overburdenexpenses, and to reimburse that County for those expenses. In appeal No. 2, SupremeCourt, Jefferson County, issued a judgment in which it annulled the DOH's denial of thatCounty's claims for reimbursement, directed respondents to pay the claims at issue, anddeclared section 61 unconstitutional. The court, unlike the judgment in appeal No. 1,granted relief in the nature of mandamus, directing the DOH to search its records andreimburse Jefferson County for all unpaid overburden expenditures that had been madeby Jefferson County. These appeals by respondents and cross appeals by petitionersensued.
Respondents contend in both appeals that the court erred in declaring section 61unconstitutional under the federal and state constitutions because petitioners have no dueprocess rights against the State. Specifically, respondents contend that petitioners are notpersons within the meaning of the due process guarantees of the state and federalconstitutions, and thus petitioners have no ability to raise claims for violation of thoseprovisions. Petitioners contend that respondents are actually attempting to raise acapacity defense, which they waived by failing to assert it as an affirmative defense intheir answer or by motion. We agree with respondents that petitioners are not personswithin the meaning of the state and federal constitutions and thus may not raise a dueprocess argument against the State.
We note at the outset the well-settled principle that "municipalities and other localgovernmental corporate entities and their officers lack capacity to mount constitutionalchallenges to acts of the State and State legislation. This general incapacity to sue flowsfrom judicial recognition of the juridical as well as political relationship between thoseentities and the State" (City of New York v State of New York, 86 NY2d 286,289 [1995]). We agree with petitioners, however, that "[t]he issue of lack of capacity tosue does not go to the jurisdiction of the court, as is the case when the [petitioners] lackstanding. Rather, lack of capacity to sue is a ground for dismissal which must be raisedby motion and is otherwise waived" (id. at 292; see Niagara III, 122AD3d at 1244). Here, it is clear that respondents did not raise the defense of capacity in[*3]their answer or a pre-answer motion, and thus it iswaived. Nevertheless, respondents' waiver of their capacity defense does not affordpetitioners the right to the relief sought. In other words, the issue of " 'capacityconcerns [petitioners'] power to appear and bring [their] grievance before thecourt' " (Matter ofGraziano v County of Albany, 3 NY3d 475, 478-479 [2004]), but petitionersmust then establish their constitutional claim.
Here, petitioners contend that respondents' enactment of section 61 impermissiblydeprived them of vested rights to repayment under Social Services Law§ 368-a, in violation of their rights under the due process clauses of thefederal and state constitutions. The Fourteenth Amendment of the United StatesConstitution provides in relevant part that "[n]o State shall make or enforce any lawwhich shall abridge the privileges or immunities of citizens of the United States; norshall any State deprive any person of life, liberty, or property, without due process oflaw." Similarly, article I, § 6 of the New York State Constitution providesin relevant part that "[n]o person shall be deprived of life, liberty or property without dueprocess of law." Thus, the constitutional provisions share a common link, i.e., theyprotect a "person" (id.; see US Const, 14th Amend,§ 1).
Contrary to petitioners' contentions, we conclude that they are not persons within themeaning of the constitutional due process provisions. This principle was stated clearly bythe United States Court of Appeals for the Seventh Circuit, which concluded that"[m]unicipalities cannot challenge state action on federal constitutional grounds becausethey are not 'persons' within the meaning of the Due Process Clause" (City of E. St.Louis v Circuit Ct. for Twentieth Jud. Circuit, St. Clair County, Ill., 986 F2d 1142,1144 [1993]). Other decisions, without using the term "person," also support theconclusion that a municipal body may not use the due process clause to challengelegislation of the municipality's creating state. Thus, "[i]t has long been the case that amunicipality may not invoke the protections of the Fourteenth Amendment against itsown state . . . A municipality is thus prevented from attacking statelegislation on the grounds that the law violates the municipality's own rights. . . Moreover, while municipalities or other state political subdivisions maychallenge the constitutionality of state legislation on certain grounds and in certaincircumstances, these do not include challenges brought under the Due Process. . . Clause[ ] of the Fourteenth Amendment . . . This isbecause 'a municipal corporation, in its own right, receives no protection from the. . . Due Process Clause[ ] vis-a-vis its creating state' " (City ofNew Rochelle v Town of Mamaroneck, 111 F Supp 2d 353, 364 [SD NY 2000][citations omitted]; see City of S. Lake Tahoe v California Tahoe Regional PlanningAgency, 625 F2d 231, 233-234 [1980], cert denied 449 US 1039 [1980];cf. River Vale Tp. v Town of Orangetown, 403 F2d 684, 686 [2d Cir 1968] [amunicipality may raise a constitutional due process challenge to the actions of a differentstate]). Indeed, the Supreme Court wrote in 1933 that a "municipal corporation, createdby a state for the better ordering of government, has no privileges or immunities underthe Federal Constitution which it may invoke in opposition to the will of its creator"(Williams v Mayor of Baltimore, 289 US 36, 40 [1933]). The Court of Appealshas concluded that the same principle applies equally under the due process clause of theNew York State Constitution, stating that, although "under the due process. . . clauses of our State and Federal Constitutions . . .[,][petitioners] have procedural standing to participate in the present litigation (and thus tobe heard, for instance, on questions of statutory interpretation), they do not have thesubstantive right to raise these constitutional challenges" (Matter of Jeter v EllenvilleCent. School Dist., 41 NY2d 283, 287 [1977]). Inasmuch as petitioners are notpersons who may raise a due process challenge to state legislation, they are not entitled tothe relief they seek, including a declaration that the legislation is unconstitutional. Wetherefore modify the judgments in both appeals by denying in its entirety the relief soughtin the petitions/complaints and by granting judgment in favor of respondents declaringthat section 61 has not been shown to be unconstitutional.
Petitioners' contentions that they are entitled to relief in the nature of mandamus,directing respondents to search their records, locate all unreimbursed claims foroverburden expenditures made by petitioners, and reimburse petitioners for thoseexpenditures, are without merit (see Niagara III, 122 AD3d at 1243-1244).Finally, for reasons stated in the decision at Supreme Court, Jefferson County, thatCounty's contentions on its cross appeal with respect to its tort claims are without merit.Present—Smith, J.P., Carni, Lindley and Valentino, JJ.