the Matter of County of Chemung, St. Lawrence, Chautauqua, Jefferson, Oneida, Genesee, Cayuga, Monroe v. Nirav R. Shah , 28 N.Y.3d 244 ( 2016 )

This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 136
In the Matter of County of
Chemung,
Respondent,
v.
Nirav R. Shah, &c., et al.,
Appellants.
---------------------------
No. 137
In the Matter of County of
St. Lawrence,
Respondent,
v.
Nirav R. Shah, &c., et al.,
Appellants.
(And Two Other Related
Proceedings.)
---------------------------
No. 138
In the Matter of County of
Chautauqua,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
---------------------------
No. 139
In the Matter of County of
Jefferson,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
---------------------------
No. 140
In the Matter of County of
Oneida,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
---------------------------
No. 141
In the Matter of County of
Genesee,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
---------------------------
No. 142
In the Matter of County of
Cayuga,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
---------------------------
No. 143
In the Matter of County of
Monroe,
Appellant,
v.
Nirav R. Shah, &c., et al.,
Respondents.
Case Nos. 136 and 137:
Victor Paladino, for appellants.
Christopher E. Buckey, for respondent.
City of New York; New York State Association of
Counties, amici curiae.
Case Nos. 138, 139, 140, 141, 142 and 143:
Christopher E. Buckey, for appellant.
Victor Paladino, for respondents.
City of New York; New York State Association of
Counties, amici curiae.
RIVERA, J.:
In these appeals, several counties challenge the
constitutionality of Section 61 of the 2012 amendment (L 2012, ch
56 § 1, part D, § 61) to the Medicaid Cap Statute (L 2005, ch 58,
§ 1, part C, § 1), which closes the door on reimbursement claims
for a category of Medicaid disability expenses paid by the
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counties to the State prior to 2006. The current appeals are the
latest round in a decade-long struggle between the counties and
the State, during which the counties demanded payment after the
State Legislature restructured the Medicaid local-share payment
system, and enacted a flat cap on total county Medicaid expenses.
We are now faced with divergent departmental approaches to the
resolution of the singular question underlying these proceedings:
whether the State must consider and pay claims submitted after
the effective date of the legislative deadline for pre-2006
reimbursement claims set forth in Section 61. We conclude
Section 61 is constitutional, and that the State is under no
further obligation to address outstanding county reimbursement
claims filed after April 1, 2012, nor must the State initiate an
administrative review of its records to identify and pay for any
pre-2006 claims.
I.
Medicaid is a federal program that provides medical
services to low-income individuals with limited resources (see
generally Visiting Nurse Serv. of NY Home Care v NY State Dept.
of Health, 5 NY3d 499, 503 [2005]; 42 USC § 1395 et seq.). The
program is jointly funded by the federal government and the
states (42 USC §§ 1396a, 1396b). In New York, the program is
administered through the State Department of Health (DOH), and
the State pays for covered medical services and, in turn, is
partially reimbursed a specified percentage for these expenses by
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the federal government (id.). Unreimbursed expenses are shared
between the State and fifty-eight local social services
districts, which are coterminous with the State's counties
(Social Services Law § 368-a [1] [d]).1
From 1984 until 2006 the State directly billed the
counties for their respective local shares, which included costs
for a category of medical services for certain Medicaid
recipients for which the counties bore no financial
responsibility, and for which they were entitled to repayment,
known as "overburden reimbursements" (Social Services Law § 368-a
[1] [h]). The State deposited the local share in a special
escrow Medicaid fund maintained by the State Comptroller (Social
Services Law § 367-b [14]). As required by Social Services Law §
368-a (1) (h) (i), upon review by DOH of the local share, the
State was obligated to pay the county 100 percent of Medicaid
services provided to recipients who were eligible for overburden
reimbursement.2
1
The exception is New York City, whose five counties are
constituted as a single social service district (Social Services
Law § 61).
2
The Department of Health (DOH): "shall review the
expenditures made by social services districts for medical
assistance for needy persons, and the administration thereof,
before making reimbursement . . . . If approved by the [DOH],
such expenditures . . . shall be subject to reimbursement by the
state in accordance with this section and the regulations of the
[DOH] as follows: (h)(i) Beginning January first, 1984, one
hundred per centum of the amount expended for medical assistance
for those individuals who are eligible . . . as a result of a
mental disability as determined by [state officials] after first
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From 1984 to 2005, the State met its obligation to pay
overburden reimbursements in two ways. First, DOH identified
overburden reimbursement-eligible patients and paid the counties
quarterly. Second, DOH instituted a process whereby counties
could submit reimbursement claims for eligible patients
overlooked by DOH (18 NYCRR 601.4 & part 635). To assist with
the claims process, DOH would send each county several reports
that included the client identification number of each patient
for which the county was entitled to reimbursement, the amount
the county had originally paid for that patient's Medicaid
expenditures, and the reimbursement amount. The State also made
the adjudicated claims history file available to the counties,
and it included details from 1984 onward regarding all Medicaid
claims that DOH's fiscal agent paid for services provided to
Medicaid recipients. Any county that believed it was owed a
reimbursement based on its review of these reports could notify
DOH in writing by letter or upon submission of a claim in
accordance with DOH regulations.
In response to rising Medicaid costs and the fiscal
burdens they imposed on the counties, in 2006 the Legislature
enacted the Medicaid Cap Statute (Cap Statute) to limit the
counties' financial responsibility for Medicaid expenditures.
The Cap Statute replaced the counties' fixed percentage of
deducting therefrom any federal funds properly received or to be
received on account thereof" (Social Services Law § 368-a [1] [h]
[i]).
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Medicaid expenses (for example, roughly 25%), with a maximum
individualized county cap, based on the Medicaid expenditures
made by or on behalf of each county during the 2005 base year,
after deducting any overburden reimbursement payments made to the
county.
Thereafter, DOH interpreted the Cap Statute as imposing
a specific annual contribution amount on the counties that they
could not reduce by seeking payment for outstanding overburden
reimbursements, and DOH denied overburden reimbursement claims
submitted after the enactment of the Cap Statute. Niagara,
Herkimer, and St. Lawrence Counties each brought article 78
proceedings challenging the denials. Supreme Court granted the
Counties partial relief and, when DOH appealed, the Appellate
Division held that DOH's application of the Medicaid Cap Statute
to the Counties' claims "constituted an impermissible retroactive
application of the statute" (County of St. Lawrence v Daines, 81
AD3d 212, 214 [3d Dept 2011], lv denied 17 NY3d 703 [2009]; see
also County of Herkimer v Daines, 60 AD3d 1456, 1457 [4th Dept
2009], lv denied 13 NY3d 707 [2009]; County of Niagara v Daines,
60 AD3d 1460, 1461 [4th Dept 2009], lv denied 13 NY3d 708
[2009]).
On the heels of the Counties' success in the courts,
the Legislature enacted an amendment in 2010 that DOH interpreted
as barring the Counties from seeking past overburden
reimbursements. Another round of litigation ensued, and the
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Appellate Division ultimately rejected the State's statutory
construction and annulled DOH's denials of overburden claims,
concluding that the 2010 amendment did not clearly and
unambiguously extinguish the State's obligation to pay the pre-
2006 claims (see County of St. Lawrence v Shah, 95 AD3d 1548,
1548 [3d Dept 2012]; County of Niagara v Daines, 91 AD3d 1288,
1290 [4th Dept 2012], lv denied 94 AD3d 1481 [2009]).
While these appeals were pending, the Legislature
enacted Section 61 of the 2012 Executive Budget Law (Section 61),
which expressly provides that "[n]otwithstanding the provisions
of section 368-a of the social services law or any other contrary
provision of law, no reimbursement shall be made for social
services districts' claims submitted on and after the effective
date of this paragraph, for district expenditures incurred prior
to January 1, 2006" (L 2012, ch 56, § 1, part D, § 61). Section
61, which was proposed on January 17, 2012 and passed on March
30, 2012, had an effective date of April 1, 2012. According to
the State Executive Budget Memorandum, Section 61 was intended:
"to clarify that local governments cannot claim for
overburden expenses incurred prior to January 1, 2006
when the 'local cap' statute that limited local
contributions to Medicaid expenditures took effect.
This is necessary to address adverse court decisions
that have resulted in State costs paid to local
districts for pre-cap periods, which conflict with the
original intent of the local cap statute."
(Mem in Support of 2012-13 NY Executive Budget, Health and Mental
Hygiene art VII Legis, at 18 [2012]). When the 2012 Amendment
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was passed, overburden claims could be up to twenty-eight years
old.
Shortly before the April 1st effective date, St.
Lawrence and Chemung Counties submitted claims for millions of
dollars of pre-2006 overburden reimbursements. DOH paid these
claims in 2012 but rejected claims from several upstate Counties,
including additional claims from St. Lawrence and Chemung
Counties submitted after April 1, 2012.
St. Lawrence County commenced three combined CPLR
article 78 proceedings and actions for declaratory judgment (for
each claim rejected by DOH). The County sought to annul DOH's
decision to deny reimbursement for claims submitted after April
1, 2012 as arbitrary and capricious and to compel DOH to approve
and pay the claims. It further requested that the court declare
Section 61 unconstitutional for depriving the County of its
vested property rights, and impose a constructive trust over the
funds that DOH was allegedly obligated to reimburse. DOH moved
and the County cross-moved for summary judgment on the
declaratory judgment and state law claim. Supreme Court
concluded that the County had a vested right to reimbursement for
the overburden expenditures which could not be extinguished. It
declared Section 61 unconstitutional, annulled DOH's denials of
the County's claims, and directed DOH to pay the claims submitted
by the County (Matter of St. Lawrence v Shah, Sup Ct, St Lawrence
County, July 31, 2013, Demarest, J., index No 140712). Supreme
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Court also granted the County's request for mandamus relief and
held that DOH has a unilateral obligation to calculate and
reimburse the County for the pre-2006 overburden expenditures.
The Third Department modified Supreme Court's order,
and held Section 61 constitutional, construing it as a statute of
limitations that did not extinguish the Counties' substantive
rights but merely ended the time for submission of their claims.
As a matter of procedural due process, the Court imposed a six-
month grace period from the date of its decision for submission
of the Counties' pre-2006 claims (County of St. Lawrence v Shah,
124 AD3d 88, 92-93 [3d Dept 2014]). The court also upheld the
grant of mandamus relief, which required DOH to identify, verify
and pay all overburden expenditures incurred by the County before
2006 (id. at 94).
In the summer of 2013, Chemung County commenced a
combined CPLR article 78 proceeding and action for declaratory
judgment seeking similar relief to that sought in the St.
Lawrence litigation. Supreme Court held in Chemung County's
favor on the reasoning of the decision in the St. Lawrence
proceedings. On appeal, the Third Department applied its St.
Lawrence decision and reached the same conclusion (County of
Chemung v Shah, 124 AD3d 963 [3d Dept 2015]).
Shortly before the decision in St. Lawrence, the Fourth
Department held in an article 78 proceeding and declaratory
judgment action commenced by Niagara County, that Section 61
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applies retroactively to extinguish the pre-2006 overburden
claims. However, the court remitted for consideration of any
properly alleged State challenges to the County's argument that
Section 61 violated due process by extinguishing its vested
rights in the claims (County of Niagara v Shah, 122 AD3d 1240
[4th Dept 2014]).
Before a decision was rendered on that issue in the
Niagara County litigation, and in nearly identical actions
commenced by Chautauqua County and Jefferson County, the Fourth
Department held that the State waived its defense that the
Counties' lacked capacity to assert constitutional challenges
against the State and State legislation. However, the court
determined that the Counties were not persons within the meaning
of the due process clauses of the federal and state
constitutions, and therefore failed to establish the
unconstitutionality of Section 61 (County of Chautauqua v Shah,
126 AD3d 1317 [4th Dept 2015]; County of Jefferson v Shah, 126
AD3d 1322 [4th Dept 2015]; County of Oneida v Shah, 128 AD3d 1381
[4th Dept 2015]; County of Genesee v Shah 128 AD3d 1380 [4th Dept
2015]; County of Cayuga v Shah, 129 AD3d 1503 [4th Dept 2015];
County of Monroe v Shah, 129 AD3d 1505 [4th Dept 2015]). Those
Counties appealed to this Court.
We granted the State leave to appeal in County of
Chemung v Shah (124 AD3d 963 [3d Dept 2015]) and County of St.
Lawrence (124 AD3d 88 [93d Dept 2014]) to resolve the divergence
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and apparent conflict in the Appellate Division (County of
Chemung v Shah, 25 NY3d 903 [2015]; County of St. Lawrence v
Shah, 25 NY3d 903 [2015]).
II.
On appeal to us, the Counties assert that they possess
constitutionally protected vested rights in the unpaid funds
which cannot be extinguished by retroactive application of
Section 61 without violating their due process rights. Under
this interpretation of the statutory scheme, the Counties have no
burden to demand payment and the State must pay any overburden
reimbursements due under Social Services Law § 368-a (1) (h) (i),
regardless of whether the Counties submitted claims before April
1, 2012, or at any time thereafter. This would mean that the
State has an ongoing obligation, terminated only by payment of
outstanding reimbursements, irrespective of the age of the claim.
Alternatively, the Counties argue Section 61 may be
interpreted to avoid any constitutional deficiencies as a statute
of limitations that sets a deadline for the submission of claims
without extinguishing the Counties' substantive rights, but that
the deadline set forth in Section 61 must be extended to provide
an adequate period in which to submit their remaining claims.
Lastly, the Counties argue that mandamus relief is not only
appropriate but necessary to compel the State's compliance with
its statutory duty under Social Services Law § 368-a.
The State responds that the Counties fail to present a
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viable due process challenge to the constitutionality of Section
61. The State argues the Counties are neither "persons"
guaranteed due process in the constitutional sense, nor are they
holders of any rights in a particular form of medicaid
allocation. Regardless, according to the State, the Counties
have not been unfairly harmed by its decision to replace one
Medicaid expense repayment system with another because the Cap
Statute provides greater financial benefits to the counties. The
State maintains that the legislature responded to the rapidly
increasing Medicaid costs with a ceiling on the counties'
financial exposure, essentially providing them with a fixed
dollar amount rather than a fixed percentage of overall costs.
Under the Cap Statute, the total amount the counties could pay
was limited, but part of this legislative "deal" was that the
counties would be required to pay their full cap amount each
year, without any credit for reimbursements owed. The State also
claims that the Counties lack a clear legal right to the mandamus
relief granted here, specifically a massive, retrospective review
by the State of twenty-two years of Medicaid expenditures.
The litigation posture of these appeals presents
insurmountable obstacles to our consideration of some of the
State's objections to the Counties' ability to pursue its
challenge to Section 61. As the State concedes, it waived any
argument that the Counties are without capacity to sue the State
under the general rule that municipalities are "creatures or
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agents of the State," without authority to "contest the actions
of their principal or creator affecting them in their
governmental capacity or as representatives of their inhabitants"
(City of NY v State of NY, 86 NY2d 286, 290 [1995]; see also
Williams v Mayor, 289 U.S. 36, 40 [1933]). The State's waiver
encompasses any challenge to the Counties' argument that they
hold a proprietary interest in the overburden reimbursements (see
City of NY, 86 NY2d at 291-292). The State also failed to
preserve its argument that the Counties lack a substantive due
process right to the monies they now claim because the
municipalities are not persons within the meaning of the federal
and state due process clauses.
We now turn to the merits of the Counties' challenge to
the State's interpretation of Section 61. Five principles guide
our analysis. First, "[i]t is well settled that acts of the
Legislature are entitled to a strong presumption of
constitutionality" (Cohen v Cuomo, 19 NY3d 196, 201 [2012]).
This presumption can only be overcome when it can be shown beyond
a reasonable doubt that it conflicts with a fundamental law, and
"until every reasonable mode of reconciliation of the statute
with the constitution has been resorted to, and reconciliation
has been found impossible" (In re Fay, 291 NY 198, 207 [1943]).
Second, "statutes relating to the same subject matter . . . must
be read together and applied harmoniously and consistently"
(Alweis v Evans, 69 NY2d 199, 204 [1987]). Third, we aim to
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effectuate the intent of the Legislature, and the clearest
indicator of legislative intent is the plain meaning of the
statutory language (Majewski v Broadalbin-Perth Cent. Sch. Dist.,
91 NY2d 577, 583 [1998]). Fourth, any claim can be time barred,
including constitutional claims (Block v North Dakota ex. rel Bd.
of Univ. & Sch. Lands, 461 U.S. 273, 292 [1983]). Fifth, extensive
arguments about a cost allocation scheme's economic and political
wisdom is outside the scope of judicial review (Jeter v
Ellenville Cent. Sch. Dist., 41 NY2d 283, 287 [1977]). As the
Supreme Court has held,
"[w]hether the enactment is wise or unwise, whether it
is based on sound economic theory, whether it is the
best means to achieve the desired result, whether, in
short, the legislative discretion within its prescribed
limits should be exercised in a particular manner, are
matters for the judgment of the legislature, and the
earnest conflict of serious opinion does not suffice to
bring them within the range of judicial cognizance."
(Chicago, B & QR Co. v McGuire, 219 U.S. 549, 569 [1911]).
In other words, the counties cannot challenge the State's
decision to prospectively reallocate Medicaid payments.
With these principles in mind, we are able to resolve
these appeals without deciding between the parties' competing
positions as to whether Section 61 extinguishes substantive
claims, or merely sets forth the outer temporal limit during
which counties may challenge the State's initial overburden
payment determination to seek additional reimbursement. If we
assume, arguendo, that the counties have a vested right to any
reimbursements that accrued before 2006, then under any possible
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theory presented in these appeals, Section 61 is constitutional.
By its express language that "no reimbursement shall be
made for social services districts' claims submitted on and after
the effective date of this paragraph, for district expenditures
incurred prior to January 1, 2006," Section 61 terminates the
submission of pre-2006 claims past its effective date. This
legislatively-mandated cutoff date was a response to judicial
misinterpretations of prior statutory efforts to end the claims
process which was administratively instituted by DOH under the
State's former Medicaid allocation regime (Mem in Support of
2012-13 NY Executive Budget, Health and Mental Hygiene art VII
Legis, at 18 [2012][Section 61 necessary to address adverse court
decisions that conflict with statute's original intent]). Once
the State complied with its statutory obligation under Social
Services Law § 368-a (1) (h) (i) to pay the counties for
overburden reimbursements, it was fully consistent with the prior
mandatory reimbursement scheme for the Legislature to impose a
deadline on claims for unpaid funds. That deadline was neither
in conflict with a fundamental law nor our constitutional
principles. Just as the Counties cannot be heard to complain
that the Legislature replaced one Medicaid allocation scheme with
another, thus redefining the counties' expense burden, so too are
the counties without recourse when the Legislature imposes a
deadline on the counties' submission of claims for overburden
reimbursements, thereby closing the door on pre-2006 claims.
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- 15 - Nos. 136-143
There is also no merit to the Counties' claim that
procedural due process mandates that Section 61 be extended
beyond its effective date in order to protect their vested rights
in any unpaid funds. It is well established that procedural due
process guarantees notice and an opportunity to be heard before a
claimant is deprived of liberty or a recognized property interest
(Matter of Quinton A., 49 NY2d 328, 334 [1980]). "[N]o one rule
as to the length of time which will be deemed reasonable can be
laid down for the government of all cases alike. Different
circumstances will often require a different rule. What would be
reasonable in one class of cases would be entirely unreasonable
in another" (McGahey v Commonwealth of Virginia, 135 U.S. 662, 707
[1890]). The question distills to what is reasonable under the
circumstances (Terry v Anderson, 95 U.S. 628, 633 [1877]). In
deciding the Counties' argument for additional time to submit
claims, our analysis focuses on the overburden reimbursement
claims process, the litigation following the enactment of the Cap
Statute, and the question of whether the counties have been
denied the opportunity to pursue claims before enactment of the
statutory prohibition on submissions.
As the record establishes, as far back as 1988 the
counties were on notice under Social Services Law § 368-a (1) (h)
(i) and the State's regulations that the State was obliged to pay
overburden reimbursements, and that the counties could pursue
claims for any amounts they believed they were still owed after
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payment. The counties had information available to pursue those
claims in the decades leading up to the passage of Section 61.
For years, the counties knew on a weekly basis the amount the
State was taking to satisfy the counties' local share of Medicaid
expenses, and the State provided the counties with quarterly
reports and other documents by which the counties could determine
if they had a potential claim. Only after the enactment of the
Cap Statute, and in reliance of its interpretation that the
legislature thereby set for the counties a fixed, non-reducible
maximum payment, did the State categorically reject claims
submitted after 2006. The dispute over these claims spawned
close to a decade of litigation in the Appellate Division,
involved numerous counties, and resulted in the eventual payment
of all outstanding claims. Armed with the success of this
litigation, while still aware of the State's continued efforts to
close the door on pre-2006 claims, the counties continued to
submit more claims as the effective date of Section 61
approached. Given this history, we cannot say that the counties
did not have notice of the claims process or an opportunity to
seek reimbursement for claims, including those going back over
twenty years.
Moreover, as the Counties recognize, they have no claim
to the continuation of the former overburden reimbursement system
in perpetuity because the State acted well within its authority
to reallocate Medicaid spending under a new legislative
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framework, as it did with the passage of the Cap Statute (L 2005,
ch 58, § 1, part C, § 9, as amended by L 2006, ch 57, § 1, part
A, § 60). Notably, the Cap Statute provides significant
financial benefit to the counties, and does not place them in a
demonstrably worse position than under the overburden
reimbursement claims process. As the State contends, and the
Counties do not dispute, the counties saved billions of dollars
in the years following the enactment of the Cap Statute.
Our analysis must also give weight to the judgment of
the Legislature that claims should be extinguished with the
enactment of the budget on April 1, 2012 (Terry, 95 U.S. at 633).
As the State argues, this deadline furthers the State's
significant interest in the stability of its finances and the
budgeting process.
Under the unique circumstances of this case we do not
consider the deadline set by the Legislature repugnant to due
process. Therefore, there is no basis to extend the time for
submission of pre-2006 claims beyond the years previously
available to the counties and the date set forth in Section 61.3
3
The Counties' reliance on Brothers v Florence (95 NY2d 290
[2000]), in support of their request for a "grace period" beyond
the legislative deadline is misplaced. Even treating Section 61
as a statute of limitations, the appeals before us require that
we consider the history and relationship between the Counties and
the State. Unlike the potential claimants in Brothers, the
Counties have twice avoided legislative attempts to end the
submissions process, and by the State's undisputed estimate, the
counties have already been paid approximately 98% of their
claims. Therefore, the Counties' demand for more time is not
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III.
We also conclude that mandamus relief is unwarranted.
This Court has repeatedly stated that mandamus is an
"extraordinary remedy" that is "available only in limited
circumstances" (Klostermann v Cuomo, 61 NY2d 525, 537 [1984]).
"Mandamus is used to enforce an administrative act positively
required to be done by a provision of law" (Walsh v La Guardia,
269 NY 437, 441 [1936]). It is considered extraordinary because
the judiciary is loathe to interfere with the Executive
Department's exercise of its official duties, unless the
Department has failed to perform a specific act (id.) Here, DOH
made its initial determinations and reimbursed counties
quarterly, and then paid out all claims submitted prior to the
April 1, 2012 deadline. The Social Services Law requires no more
and the Counties are not entitled to this relief. Moreover,
ordering mandamus is inconsistent with our conclusion that
Section 61 is constitutional.
IV.
Accordingly, in Matter of County of Chemung and Matter
of County of St. Lawrence, the orders insofar as appealed from
should be reversed, without costs, the petitions dismissed in
their entirety and a declaration made in favor of respondents
Nirav R. Shah, &c., et al. that section 61 of part D of Chapter
supported here.
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56 of the Laws of 2012 has not been shown to be unconstitutional;
in Matter of County of Chautauqua, Matter of County of Jefferson,
Matter of County of Oneida, Matter of County of Genesee, Matter
of County of Cayuga, and Matter of County of Monroe, the orders
insofar as appealed from should be affirmed, without costs.
- 19 -
M/O County of Chemung v Shah
No. 136-143
GARCIA, J.(concurring):
While I am in general agreement with the result arrived
at by the majority, I reach that conclusion by a somewhat
different analysis that I believe is more in line with the unique
facts and procedural issues we confront here.
These cases present the conflicting interpretations of
Section 61 by the Third and Fourth Departments. The Third
Department held that Section 61 did not retroactively extinguish
the counties' right to reimbursement for certain Medicaid
overpayments -- or "overburden expenses" -- under Social Services
Law § 368-a (1) (h) and instead that court treated Section 61 as
a statute of limitations on the payment of claims for pre-2006
reimbursement (see County of St. Lawrence v Shah, 124 AD3d 88 [3d
Dept 2014]). In light of this interpretation, the Third
Department imposed a six-month grace period for the submission of
reimbursement claims and granted mandamus relief requiring the
Department to identify, calculate, and pay outstanding overburden
expenses. Conversely, the Fourth Department held that Section 61
unequivocally extinguished the counties' right to pre-2006
reimbursement but later held that the counties could not
challenge this action on due process grounds, despite the New
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York State Department of Health's (DOH) waiver of the capacity
defense, because they lack the "personhood" necessary to do so
(see County of Niagara v Shah, 122 AD3d 1240 [4th Dept 2014];
County of Chautaqua v Shah, 126 AD3d 1317 [4th Dept 2015]). I
would reject the Third Department's interpretation of Section 61
as a statute of limitations, adopt the Fourth Department's
interpretation of the statute but reject its personhood analysis,
and hold that the statute is constitutional under a vested due
process rights analysis.
With respect to the Fourth Department's determination
that Section 61 extinguishes the counties' right to
reimbursement, I agree that Section 61 evinces a clear intent to
foreclose any pre-2006 reimbursement claim. The language
explicitly states that the statute is being enacted
"notwithstanding" Social Services Law § 368-a (1) (h). As a
result, "no reimbursement shall be made for social services
districts' claims submitted on or after [the amendment's
effective date] for district expenditures incurred prior to
January 1, 2006 [including overburden expenditures]" (L 2012, ch
56, § 1, part D, § 61).
This interpretation of the plain language of the
statute is likewise supported by the tortured litigation history
that led to its enactment. The Legislature first enacted the
Medicaid Cap Statute (Cap Statute) in 2006, and litigation ensued
following its passage. After courts determined that the Cap
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Statute did not extinguish the counties' right to
reimbursements,1 the Legislature passed an amendment in 2010
stating that "the state/local social services district relative
percentages of the non-federal share of medical assistance
expenditures incurred prior to January 1, 2006 shall not be
subject to adjustment on or after July 1, 2006" (L 2010, ch 109,
pt B, § 204). DOH's interpretation of this amendment as barring
the counties' right to pre-2006 overburden reimbursements led to
a new round of litigation, again resulting in opinions holding
that the amendment did not extinguish DOH's obligation to pay
these reimbursement claims. This litigation history prompted the
passage of Section 61. Clearly, the Legislature was not imposing
a new time limit for filing claims: the intent was to extinguish
those claims and end this process.
Where the language of a statute directs us to ignore a
specific prior statute in addition to "any other contrary
provision of law," it is unnecessary to "harmonize" the two
statutes. Accordingly, the Third Department's interpretation of
Section 61 as a statute of limitations was error. Nor is such a
reading warranted to make the statute constitutional because, for
1
It is unclear what the majority means in casting these
decisions as "judicial misinterpretations" (majority op. at 14);
none of the relevant lower court decisions were reviewed by this
Court (see e.g. County of Herkimer v Daines, 60 AD3d 1456 [4th
Dept], lv denied, 13 NY3d 708 [2009]; County of St. Lawrence v
Daines, 81 AD3d 212, 214-216 [3d Dept], lv denied, 17 NY3d 703
[2011]).
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- 4 - Nos. 136-143
the reasons discussed below, Section 61 is constitutional under a
vested due process rights analysis.
Turning to the issue of whether in extinguishing the
claims the Legislature violated due process, it is necessary to
address the threshold issue of capacity of the counties to bring
this suit. New York strictly adheres to the rule that
"municipalities lack the capacity to bring suit to invalidate
State legislation" (City of New York v State of New York, 86
NY2d 286, 290 [1995]). Nor is it at all clear that plaintiffs
here would have fit their claims within one of the narrow
exceptions to that general rule, such as proprietary interest in
a specific fund of moneys (id. at 291-292). Nevertheless,
capacity, a waivable defense, was concededly waived here2 (see
City of New York, 86 NY2d at 292). I would reject the Fourth
Department's interpretation of our case law as requiring the
demonstration of an additional, undefined "personhood"
requirement as a prerequisite to sue on due process grounds. The
only support given for this interpretation is the reference to a
"substantive right" to raise constitutional matters in Jeter v
2
The majority's conclusion that the State waived any
challenge to the counties' argument that they fit within an
exception to the capacity defense misses the point (majority op.
at 12). The State has forfeited the right to assert that the
counties lack the capacity to sue the State. The counties still
need to demonstrate some form of due process interest requiring
constitutional protection; however, it need not be the narrow
"proprietary interest" necessary to overcome a properly asserted
capacity defense.
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- 5 - Nos. 136-143
Ellenville Central School District (41 NY2d 283, 287 [1977]), but
a fair reading of that case demonstrates that the concern was
capacity, not "personhood." As a result, we can assume under the
unique facts of this case that the counties had a vested property
right in the refund of money spent to cover costs properly
allocated to the State (see Alliance of Am. Insurers v Chu, 77
NY2d 573, 585-86 [1991]).
The waiver of the capacity defense and the
determination that there is no additional personhood requirement,
and an assumption that a vested property right exists in refunds
owed, makes necessary a vested due process rights analysis to
determine whether Section 61 is constitutional. This
straightforward analysis examines "fairness to the parties,
reliance on pre-existing law, the extent of retroactivity, and
the nature of the public interest to be served by the law"
(Alliance of Am. Insurers, 77 NY2d at 586).
I would uphold the statute's constitutionality on the
basis of such an analysis. The new payment system of Section 61
provides some financial benefit to the counties in exchange for
extinguishing the prior claims and in this way treats the
counties fairly. The fact that those counties might disagree
with the financial calculation is immaterial. Moreover, the
economic or political wisdom of that calculation is beyond our
review (see Jeter, 41 NY2d at 287). The counties had no right to
rely on the pre-existing payment system. Since the Cap Statute
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- 6 - Nos. 136-143
was enacted in 2005, the counties were on notice of changes in
the reimbursement regime, and years of litigation and failed
statutory amendments demonstrated DOH's plain intent to
extinguish pre-2006 reimbursement claims. The statute is
minimally retroactive, applying only to those pre-2006 claims
that were not brought by 2012. Moreover, Section 61 serves the
public interest in overhauling a system fraught with error and
inefficiencies that still saw uncertainty with respect to the
amount of outstanding claims -- some potentially going back
decades.
Enactment of Section 61 extinguishing the counties'
pre-2006 claims was not unconstitutional. Because there is no
need to read in any "statute of limitations," there is also no
need to provide a grace period or grant mandamus relief.
Accordingly, I agree with the Fourth Department's interpretation
of Section 61 as extinguishing the counties' right to pre-2006
reimbursement, and hold that there was no due process violation
in that legislative action.
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* * * * * * * * * * * * * * * * *
For Case No. 136: Order, insofar as appealed from, reversed,
without costs, petition dismissed in its entirety and a
declaration made in favor of respondents Nirav R. Shah, &c., et
al. that section 61 of part D of Chapter 56 of the Laws of 2012
has not been shown to be unconstitutional. Opinion by Judge
Rivera. Chief Judge DiFiore and Judges Pigott and Abdus-Salaam
concur. Judge Garcia concurs in result in a separate concurring
opinion. Judges Stein and Fahey took no part.
For Case No. 137: Order, insofar as appealed from, reversed,
without costs, petitions dismissed in their entirety and a
declaration made in favor of respondents Nirav R. Shah, &c., et
al. that section 61 of part D of Chapter 56 of the Laws of 2012
has not been shown to be unconstitutional. Opinion by Judge
Rivera. Chief Judge DiFiore and Judges Pigott and Abdus-Salaam
concur. Judge Garcia concurs in result in a separate concurring
opinion. Judges Stein and Fahey took no part.
For Case Nos. 138, 139, 140, 141, 142 and 143: Order, insofar as
appealed from, affirmed, without costs. Opinion by Judge Rivera.
Chief Judge DiFiore and Judges Pigott and Abdus-Salaam concur.
Judge Garcia concurs in result in a separate concurring opinion.
Judges Stein and Fahey took no part.
Decided October 27, 2016
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