Petition for Writ of Certiorari — Concourse Nursing Home v. Perales

Supreme Court of the United States

OCTOBER TERM 1996

CONCOURSE NURSING HOME,

Petitioner,

Vv.

CESAR A. PERALES, individually and as Commissioner of the

New York State Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting Commissioner of the

New York State Department of Health, and PATRICK

BULGARO, individually and as Budget Director of the State of

New York,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE NEW YORK SUPREME COURT APPELLATE

DIVISION, FIRST DEPARTMENT

PETITION FOR WRIT OF CERTIORARI

MARVIN NEIMAN, ESQ.

Counsel of Record and Attorney for

Petitioner Concourse Nursing Home

39 Broadway - 25th Floor

New York, New York 10006

(212) 269-1000

| Of Counsel:

Neiman Ginsburg & Mairanz P.C.

Theodore T. Mairanz, Esq.

Bu Betsy R. Malik, Esq.

wy AW. AVACLAAN,

PRINTINGHOUSE PRESS 25 WEST 43RD STREET NEW YORK, NY 10036 (212) 719-0990

i

QUESTIONS PRESENTED

(i)

Whether a state court can dismiss a valid federal claim

arising under 42 U.S.C. § 1983 (1983 claim” or “1983

action”) commenced in state court by converting such § 1983

claim into an alternate state form of action and then applying

thereto a shorter,and in this case an expired limitations period,

for the alternate form of claim?

(ii)

Can a state court dismiss a valid federal claim having its

own applicable statute of limitations and impose on the

petitioner litigant the shorter statute of limitations of an

available state form of action when petitioner expressly

elected the federal claim with its own federally created statute

of limitations?

(iii)

Whether a state court can finally dismiss a federal claim

based upon state law rules of pleading when as a matter of

federal law, pleadings can be liberally amended in federal

cases which rules had they been applied would have entitled

petitioner to replead its claim?

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TABLE OF CONTENTS

Pages

QUESTIONS PREGENTED 6.5 os .8 Se OG 8s i

TABLE OF AUTHORITIES ..-------+:- °° 1V

REPORTS OF OPINIONS DELIVERED BELOW... 1

STATEMENT OF JURISDICTIONAL GROUNDS .. 2

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED ....------::°+°° 3

A. ConstitutionalProvisions ...----+--+-:° 3

B. Statutory Provisions ...-.--------+:+°° 4

STATEMENT OF THE CASE ...-----+:- °° 8

STATEMENT OF FACTS ...-.---- ++ 0° 10

PARTIES AND BACKGROUND ...------:--:° 10

PROCEEDINGS BELOW ....-------+:c7° 12

REASONS FOR GRANTING THE WRIT .....--- 14

THIS CASE INVOLVES WHETHER THE

STATE COURT HAS THE RIGHT TO

TRANSFORM AND THEREBY TREAT A

FEDERAL CLAIM AS A STATE LAW

CLAIM AND APPLY THE STATE CLAIM’S

STATUTE OF LIMITATIONS MERELY

BECAUSE THE ACTION IS BROUGHT

IN STATE COURI . 2 2's ee ee ewer eee 14

iil

A. Petitioner Has a Valid § 1983 Claim Against

the State for its Unlawful Refusal to

Adjust Petitioner’s Medicaid Rates to

Reflect the Invalid Recalibration Regulation . 15

B. Petitioner sufficiently pled a cause of action

EE ae Se eee a 21

PMEPONOGMON 5 4 os 5c eet tt tt 27

APPENDICES

Appendix A Opinion and Order (with Notice of Entry) of

the State of New York Supreme Court,

Appellate Division, First Department

Dated September 7, 1995 .-------> Al

Appendix B Order (with Notice of Entry) of the State of

New York Supreme Court, Appellate

Division, First Department Dated

December 21,1995 ..-----:- °° A8

Appendix C Order of the State of New York Court of

Appeals Dated April 2, 1996 Denying

Appellant’s Motion for Leave

Si ese wis ee 8s All

Appendix D Opinion and Order (with Notice of Entry) of

the Supreme Court of the State of New

York, County of New York Datez

March 1,1994...--------c°° Al2

iv

TABLE OF AUTHORITIES

Cases Pages

Branum v. Clark, 927 F.2d 698 (2d Cir. 1991) .... 25

Concourse Nursing Home v. Cesar A. Perales,

631 N.Y.S. 2d 156, __A.D.2d__ (1st Dep’t 1995). . 1

Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99,

pw oy er ene eee 25

Felder v. Casey, 487 U.S. 131, 108 S.Ct. 2302,

MG Lae 123 Gee? 3. 4 PES. passim

Foman v. Davis, 371 U.S.178, 83 S.Ct. 227,

Fe ee CD ene ve ek Keele ss pe we 25

Golden State Transit Corp. v. City of Los Angeles,

493 U.S. 103, 110 S.Ct. 444,

ST SG ERATED: icici cee ee ee 15

Harris v. James, 883 F.Supp. 1511

CRF: Fe SD 6S wn es ev cw oe 18

Howlett v. Rose, 496 U.S. 356, 110 S.Ct. 2430,

RE LAs SARA 6 oc kek ee 14, 15, 25

In the Matter of Medical Arts Sanitarium, Inc.., v.

New York State Department of Health,

184 A.D.2d 399, 585 N.Y.S.2d 355

[eee ee OE 2) a eee re a 17, 23, 24

Maine v. Thihoutot, 488 U.S.1, 100 S.Ct. 2502,

Gk Rae CE ks ene DS ee ee ks ye)

Methodist Hospital v. Ind.Family and Social Services

Administration, 860 F.Supp. 1309 (N.D.Ind.

| ea eee 18

Vv

New York City Health & Hosp. Corp. v. McBarnette,

84 N.Y.2d 194, 614 N.Y.S.2d 1, 639 N.E.2d 740

New York City Health & Hospitals Corp. v.

McBarnette, 195 A.D.2d 391, 600 N.Y.S.2d 245

(BR ee eer ee oe rarer he ee 12, 13

NYSAC v. Axelrod, 78 N.Y.2d 158, 573 N.Y.S.2d 25,

S7T Fare POA Teea) 6 6% 6 0 oe ose 2 bes 11,22

Owens v. Okure, 488 U.S. 2235, 109 S.Ct. 573,

Rls Mc POND co we ee es ees 20

Patsy v. Bd of Regents of Florida, 457 U.S. 496,

102 S.Ct. 2557, 73 L.Ed.2d 172 (1982) .. 14,17, 18

Rehabilitation Association of Virginia Inc. v. Kozlowski,

£2 P50 106 CO Ge I ko so oe Ss SES 18

Ribbiuti v. N.Y.S. Transit Authority, 941 F.2d 119

Ce. BE oi aa aoe ele te ee ee 25

Svaigsen v. City of New York,

203 A.D.2d 32, 609 N.Y.S.2d 894

4h 23 Peper ww gare ee are ee Fe

Visiting Nurse Assoc. v. Bullen, 866 F.Supp. 1444

eG Pn der aes ue ke ete or aa ee 18

Wilder v. Virginia Hospital Association, 496 U.S. 498,

110 S.Ct. 2510, 110 L.Ed.2d 455

I 66th ee a a ee i7, 19, 4

Wilson v. Garcia, 471 U.S. 260, 105 S.Ct. 1938,

OS tee 2 Cee”. Sele ieee 13, 20

Wood v. Tompkins, 33 F.3d 600 (6th Cir. 1994) .... 18

v1

Statutes

Supremacy Clause of the U.S. Constitution .......- 13

14th Amendment to the U.S. Constitution. .....-.-- 24

28 U.S.C. § 1257(a) (1988) ...--- 22 seer eee 2

Pasa Fade @ sR aNSP as array oe em A, Me ee gt 24

SI USE ST oa oe et os es 18

42 U.S.C. § 1396a(a(4A .-- 2-2 ee ee ees 18

Civil Rights Actof 1871... .--- +--+ eee ree 15

BUS £ WES ct bie Pe cA passim

Rule 13.1 of the Supreme Court Rules.....-.---- 2

New York Civil Practice Law & Rules (“CPLR”),

el ie ee en a eRe eee me ES 6

New York Civil Practice Law & Rules (“CPLR”),

GP anh TN oo aa en 8 ee 2

The Virginia Administrative Process Act ...---.-- 17

Supreme Court of the United States

OCTOBER TERM 1996

CONCOURSE NURSING HOME,

Petitioner,

We

CESAR A. PERALES, individually and as Commissioner of

the New York State Department of Social Services, LORNA

H. McBARNETITE, individually and as Acting Commissioner

of the New York State Department of Health, and PATRICK

BULGARO, individually and as Budget Director of the State

of New York,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

NEW YORK SUPREME COURT APPELLATE

DIVISION, FIRST DEPARTMENT

L.

REPORTS OF OPINIONS DELIVERED BELOW

The opinion of the New York State Supreme Court, which

is not officially reported, appears in Appendix “D” hereto at

17. The opinion of the New York State Supreme Court,

Appellate Division, First Department (“Appellate Division”),

is officially reported as Concourse Nursing Home v. Cesar A.

Perales, 631 N.Y.S.2d 156, __A.D.2d__(1st Dep’t 1995) and

appears in Appendix “A” hereto at 3. The subsequent denial

of petitioner’s motion to the Appellate Division for

reargument or for leave to appeal to the Court of Appeals is

2

not officially reported but appears in Appendix “B” hereto at

9-10. The denial of the motion to the Court of Appeals for

leave to appeal to it is not officially reported and appears in

Appendix “C” hereto at 11.

Il.

STATEMENT OF JURISDICTIONAL GROUNDS

The Decision/Order of the Appellate Division is officially

reported as Concourse Nursing Home v. Cesar A. Perales, 631

N.Y.S.2d 156, __A.D.2d__(1st Dep’t 1995) and it appears in

the Appendix “A” at A 3.! Thereafter, Concourse Nursing

Home (“Concourse”) filed a motion at the Appellate Division

for reargument or, alternatively, for leave to appeal to the

Court of Appeals from the decision of the Appellate Division.

The denial of that motion appears in Appendix “B”hereto at

A 8. Concourse then filed a motion for discretionary review

pursuant to New York Civil Practice Law & Rules(“CPLP.”’)

5602 and 5513 for leave to appeal to the Court of Appeals.

The denial of this motion was entered on April 2, 1996 and

appears in Appendix “C” hereto at A 11.

In accordance with Rule 13.1 of this Court’s Rules this

petition is filed within 90 days of the date of the denial of the

motion for leave to appeal to the New York State Court of

Appeals. The jurisdiction of this Court is invoked under 28

U.S.C.§ 1257(a) (1988) because the Decision/Order of the

Appellate Division sought to be reviewed deprives petitioner

of its rights and privileges claimed under the statutes of the

United States.

1 All references to the appendix are referred to as “A__.”

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Ii.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

A. Constitutional Provisions

The “Supremacy Clause” of the United States

Constitution, U.S. Const. art. VI, cl. 2, provides:

U.S. Const. amend. XIV Section 1 provides, in relevant part

that:

This Constitution, and the Laws of the United

States which shall be made in Pursuance thereof;

and all Treaties made, or which shall be made,

under the Authority of the United States, shall be

the supreme Law of the Land; and the Judges in

every State shall be bound thereby, any Thing in

the Constitution or Laws of any State to the

Contrary notwithstanding.

All persons born or naturalized in the United

States and subject to the jurisdiction thereof, are

citizens of the United States and of the State

wherein they reside. No State shall make or

enforce any law which shall abridge the

privileges or immunities of citizens of the United

States; nor shall any state deprive any person of

life, liberty, or property, without due process of

law; nor deny to any person within its jurisdiction

the equal protection of the laws.

B.Statutory Provisions

42 U.S.C. § 1396 Sec. 1396a. provides, in pertinent part:

(a) Contents

A State plan for medical assistance must— ...

(13) provide—

(A) for payment (except where the State agency is

subject to an order under section 1396m of this title)

of the hospital services, nursing facility services, and

services in an intermediate care facility for the

mentally retarded provided under the plan through the

use of rates (determined in accordance with methods

and standards developed by the State which, in the case

of nursing facilities, take into account the costs

(including the costs of services required to attain or

maintain the highest practicable physical, mental, and

psychosocial well-being of each resident eligible for

benefits under this subchapter) of complying with

subsections (b) (other than paragraph (3)(F) thereof),

(c), and (d) of section 1396r of this title and provide

(in the case of a nursing facility with a waiver under

section 1396r(b)(4)(C)(ii) of this title) for an

appropriate reduction to take into account the lower

costs (if any) of the facility for nursing care, ... which

the State finds, and makes assurances satisfactory to

the Secretary, are reasonable and adequate to meet the

costs which must be incurred by efficiently and

economically operated facilities in order to provide

care and services in conformity with applicable State

and Federal laws, regulations, and quality and safety

standards and to assure that individuals eligible for

medicai assistance have reasonable access (taking into

—————————————————————————

5

account geographic location and reasonable travel

time) to inpatient hospital services of adequate

quality;and such State makes further assurances,

satisfactory to the Secretary, for the filing of uniform

cost reports by each hospital, nursing facility, and

intermediate care facility for the mentally retarded

and periodic audits by the State of such reports;

(B) that the State shall provide assurances

satisfactory to the Secretary that the payment

methodology utilized by the State for payments to

hospitals can reasonably be expected not to increase

such payments, solely as a result of a change of

ownership, in excess of the increase which would

result from the application of section 1395x(v)(1)(O)

of this title; ....

42 U.S.C. §1983 provides, in pertinent part:

Every person who, under color of any statute,

ordinance, regulation, custom, or usage, of any State

or Territory or the District of Columbia, subjects, or

causes to be subjected, any citizen of the United

States or other person within the jurisdiction thereof

to the deprivation of any rights, privileges, or

immunities secured by the Constitution and laws,

shall be liable to the party injured in an action at law,

suit in equity, or other proper proceeding for redress.

For the purposes of this section, any Act of Congress

applicable exclusively to the District of Columbia

shall be considered to be a statute of the District of

Columbia.

6

CPLR 7803 of the New York Civil Practice Law and Rules

provides, in pertinent part that:

The only questions that may be raised in a proceeding under

this article are:

1. whether the body or officer failed to perform a duty

enjoined upon it by law; or

2. whether the body or officer proceeded, is proceeding

or is about to proceed without or in excess of

jurisdiction;or

3. whether a determination was made in violation of

lawful procedure, was affected by an error of law or

was arbitrary and capricious or an abuse of discretion,

including abuse of discretion as to the measure or

mode of penalty or discipline imposed;or

4. whether a determination made as a result of a

hearing held, and at which evidence was taken,

pursuant to direction by law is, on the entire record,

supported by substantial evidence.

Virginia Administrative Process Act:

§ 9-6.14:19 Court judgments.

Unless an error of law as defined in s 9-6.14:17

appears, the court shall dismiss the review action or

affirm the agency regulation or decision. Otherwise, it

may compel agency action unlawfully and arbitrarily

withheld or unreasonably delayed except that the court

shall not itself undertake to supply agency action

committed by the basic law to the agency. Where a

regulation or case decision is found by the court to be

not in accordance with law under s 9- 6.14:17, the court

7

shall suspend or set it aside and remand the matter to

the agency for such further proceedings, if any, as the

court may permit or direct in accordance with law....

RULE 2A:2. Notice of Appeal.

Any party appealing from a regulation or case

decision shall file, within 30 days after adoption of

the regulation or after service of the final order in the

case decision, with the agency secretary a notice of

appeal signed by him or his counsel. In the event that

service of a case decision upon a party is

accomplished by mail, 3 days shall be added to the

30-day period. Service under this Rule shall be

consistent with s 9-6.14:14 and, if made by mail, shall

be sufficient if sent by registered or certified mail to

the party’s last address known to the agency....

§ 9-6.14:16 Right, forms, venue.

A. Any person affected by and claiming the

unlawfulness of any regulation, or party aggrieved by

and claiming unlawfulness of a case decision, as the

same are defined in s 9-6.14:4 of this chapter and

whether or not excluded from the procedural

requirements of Article 2 (s 9-6.14:7.1 et seq.) or 3(s

9-6.14:11 et seq.)hereof, shall have a right to the

direct review thereof by an appropriate and timely

court action against the agency as such or its officers

or agents in the manner provided by the rules of the

Supreme Court of Virginia. Such actions may be

instituted in any court of competent jurisdiction as

provided in s 9-6.14:5, and the judgments of such

courts of original jurisdiction shall be subject to

appeal to or review by higher courts as in other cases

unless otherwise provided by law. In addition, when

8

any such regulation or case decision is the subject of

an enforcement action in court, the same shall also be

reviewable by the court as a defense to the action, and

the judgment or decree therein shall be appealable as

in other cases.

STATEMENT OF THE CASE

The important issue at stake in this case concerns the future

of 42 U.S.C. § 1983 actions (“§ 1983 action” or “§ 1983

claim”) in the New York State courts when there

simultaneously exists a state form of action in the state court

system. The Appellate Division decided this case in a way that

abridges the federal rights of litigants such as, Concourse

which have been already firmly established by this Court in

Felder v. Casey, 487 U.S. 131, 108 S.Ct. 2302, 101 L.Ed.2d

123 (1988).The Appellate Division dismissed Concourse’s §

1983 claim by holding that Concourse was limited by state

law to bring its claim as an Article 78 proceeding under the

CPLR (“Article 78 proceeding”) and not as a federal § 1983

claim. The Appellate Division then proceeded to hold that as

an Article 78 proceeding, this action was not commenced

timely and, therefore, dismissed it on state statute of

limitations grounds.

The Appellate Division further opined that the federal

claims alleged in the complaint, viz., the § 1983 claims, which

pled violations of the Federal Medicaid law were pled in a

conclusory manner such that they do not meet the

requirements under New York law to render such a claim valid

and, therefore, dismissed the complaint without leave to

replead. Notwithstanding petitioner’s belief that the federal §

1983 claim was sufficiently pled, petitioner believes that the

Appellate Division was required to apply federal law in the

instant federal case even though this case was brought in the

9

state court system. It, therefore, should have permitted

Concourse to replead its complaint in accordance with federal

law rather than dismissing it outright. The dismissal

effectively rendered Concourse out of court and without a

remedy.

Not only is this issue of converting “federal claims” into

“state claims” by the use of some state crafted rule or test of

“conclusoriness” of great significance to litigants of federal

claims but from a practical standpoint, New York State’s

courts should not be allowed to transform federal claims to

actions under state law because of New York State’s

significantly shorter statute of limitations for such

proceedings. This, if allowed, would, in effect, deprive many

litigants of their day in court. Also, challenges to the

application of the Federal Medicaid regulation brought as

federal claims in state courts will more and more likely be

converted to claims under state law so that that state’s shorter

statute of limitations would apply.” Because of the current

fiscal climate a state’s shorter statute of limitations will be the

vehicle used by more and more states to summarily cut off a

litigant’s claim. States experiencing severe fiscal and

budgetary crises are under pressures to reduce the Medicaid

reimbursement to providers of such services. By imposing the

shorter statute of limitations of the alternate state forms of

action rather than that of the elected federal form of action,

Concourse’s bona fide federal claim was rejected outright.

2 This has already happened to petitioner herein on other occasions in

other unrelated but as yet nonfinal matters.

10

STATEMENT OF FACTS

PARTIES AND BACKGROUND

Concourse* was a healthcare facility licensed by the State

of New York to operate a nursing home which rendered health

care services to the people of the State of New York.

Concourse participated as a provider of services in the

Medicaid program pursuant to annually renewed “provider

agreement” contracts. In excess of 90% of the income of

Concourse was received by it for services rendered to

Medicaid eligible persons.

In or about June 1987 the Department of Health (“DOH”),

an administrative agency in the State of New York with

jurisdiction to promulgate the rates of payment for Medicaid

providers of services, notified all residential health care

facilities (“facilities”) in the State of New York that it

promulgated the “recalibration” regulation which uniformly

reduced by 3.035% all facilities’Medicaid reimbursement

rates regardless of actual change experienced by a facility in

its case mix index; an index used by the agency for the

calculation of facilities’ Medicaid rates. The recalibration

regulation would be applied retroactively to January 1987. In

or about June 1987, Concourse received rate computation

notices for the first time reflecting the 3.035% recalibration

effected reduced rate. Accordingly, Concourse timely

appealed before the appropriate administrative agency, the

DOH, its rates on the basis of, inter alia, the recalibration

regulation being illegal. While Concourse’s rate appeals were

3 Concourse is now being operated by a corporation under the name of

Concourse Rehabilitation & Nursing Center, Inc.

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11

pending and being processed by the DOH, the DOH

distributed a letter dated April 30, 1991, industry-wide, which

provided that objections to the rates on “methodology

grounds” could not be appealed administratively.

Additionally, while Concourse’s administrative appeals

were pending, the New York State Court of Appeals in NYSAC

v. Axelrod, 78 N.Y.2d 158, 573 N.Y.S.2d 25, 577, N.E.2d 16

(1991) affirmed the lower courts’ invalidation and annulment

of the recalibration regulation for rate periods 1987 and 1988.

Nevertheless, DOH thereafter denied Concourse’s rate

appeals on the merits and in contravention of the aforesaid

Court of Appeals’ holding. Concourse subsequently filed a

Level Il appeal’ for an administrative hearing at DOH because

of the agency’s improper continued application of the

recalibration regulation which, as stated, the Court of Appeals

invalidated. On or about December 23, 1991 DOH denied

Concourse’s Level II administrative appeal on the grounds

that the issue was one of law which did not necessitate an

administrative hearing.

Within four months of the denial of the Level II

administrative appeal, on or about April 16, 1992 Concourse

commenced the instant action in the state court under 42

U.S.C. § 1983 alleging that the DOH’s continued application

of the invalidated recalibration regulation as part of its

Medicaid reimbursement rate violated its rights under the

Federal Medicaid Act.

4 Im the normal appeal procedure for facilities the exhaustion of

administrative remedies procedure required two appeals before the

process is considered complete and “final.”

12

PROCEEDINGS BELOW

At the state trial court, the New York Supreme Court,

Concourse moved for summary judgment based on the Court

of Appeals’ holding that the recalibration regulation was

invalid and that the State actors’ continued application of the

recalibration regulation to calculate its Medicaid rates violated

Concourse’s rights under the Federal Medicaid Act. The State

defendants cross-moved for summary judgment on the

grounds that Concourse’s claims were interposed more than

four months after the industry-wide letter; its action was,

therefore, commenced beyond the state Article 78 limitations

period. The issue litigated at the trial level concerned what was

the appropriate limitations period; the merits of the case were

acknowledged by all to be clearly on the side of petitioner.

Concourse argued that the appropriate period for a § 1983

action in New York was a three year period while the State

defendants argued that the appropriate period was that of an

Article 78 proceeding or four months. By decision dated

January 7, 1994, the trial court granted Concourse summary

judgment and denied the State defendants’ cross-motion for

summary judgment to dismiss the complaint based on the trial

court’s applying yet a different theory for arriving at a three

(3) year statute of limitations.(A 17)The court based its

decision on the fact that the Appellate Division, in the interim

rendered a decision in which it held that a plaintiff alleging

violations of the federal Medicaid Act had a three year

limitations period in accordance with state law.(New York City

Health & Hospitals Corp. v. McBarnette, 195 A.D.2d 391,

600 N.Y.S.2d 245 (ist Dep’t 1993).

The State defendants appealed the denial of their

cross-motion for summary judgment to the Appellate Division

which, reversed the Order/Judgment of the Supreme Court,

New York County by Decision dated September 7, 1995. The

Prabal re PER ea Ral STS Rltahll abe) Dai Site hes on ge NAS

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13

Appellate Division essentially held that since the Appellate

Division holding of the McBarnette case relied on by the trial

court was subsequently reversed by the Court of Appeals the

issue then became whether this action “could have been

brought in the form of an Article 78 proceeding?’ The

Appellate Division held that it could have been so brought,

and since it was not commenced within four months of the

original rates being issued as is required of such state actions,

this action was held to be untimely and was consequently,

dismissed.

Concourse moved to reargue and/or alternatively, sought

leave to appeal to the Court of Appeals because, as Concourse

argued, it intentionally and appropriately commenced its

§1983 action in state court notwithstanding that it may have

possessed an alternate remedy under state law. As a result, it

argued the statute of limitations to apply in the instant § 1983

case was that as established by this Court in Wilson v. Garcia,

471 U.S. 260, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985).The

Appellate Division acted contrary to the laws established by

this Court in Felder, supra and Wilson v. Garcia, supra by

transforming a legitimate §1983 action to a claim under state

law and then applying that state claim’s particular statute of

limitations. The Appellate Division denied Concourse’s

motion to reargue or, alternatively, for leave to appeal to the

Court of Appeals which decision appears in the appendix

herein at A 9-10.

Concourse, as required to in order to protect its interests and

to obtain finality, then urged the Court of Appeals, in a motion

for leave to appeal to the Court of Appeals to accept this case

because the decision of the Appellate Division, inter

alia,violated principles of law established by this Court and

the Supremacy Clause of the U.S. Constitution. In a decision

14

appearing in the appendix herein at A 11, the Court of Appeals

in a summary order denied the motion for discretionary review

to its court.

REASONS FOR GRANTING THE WRIT

THIS CASE INVOLVES WHETHER THE

STATE COURT HAS THE RIGHT TO

TRANSFORM AND THEREBY TREAT A

FEDERAL CLAIM AS A STATE LAW CLAIM

AND APPLY THE STATE CLAIM’S

STATUTE OF LIMITATIONS MERELY

BECAUSE THE ACTION IS BROUGHT IN

STATE COURT

The New York State Appellate Division decided this case

in contravention to well established legal principles

enunciated by this Court in Patsy v. Bd of Regents of Florida,

457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982), and in

Felder, supra. This Court already confirmed that state courts

are conferred with concurrent jurisdiction to hear claims under

§ 1983. Felder, supra at 2307; Howlett v. Rose, 496 U.S. 356,

110 S.Ct. 2430, 110 L.Ed.2d 332 (1990).Yet the Appellate

Division in this case rejected Concourse’s valid and selected

§ 1983 claim brought in the state court system. Instead that

court transformed Concourse’s claim into a state claim that

exists in the state system, and applied thereto the significantly

shorter limitations period of that state claim. The effect of

transforming petitioner’s claim into one under state law

caused the claim to be untimely because of the shorter state

law statute of limitations.

The underlying issue raised in this case is not new for this

Court and would not need the Court’s intervention but because

of the Appellate Division’s unique treatment of petitioner’s

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15

claim this Court is invited to protect Congress’ and this Court’s

intentions regarding § 1983 claims brought in state court. This

Court has ruled that federal law is to apply to § 1983 actions

including the statute of limitations specific to a § 1983 claim.

Felder, supra; Howlett, supra. This is so even though and in

spite of the fact that there simultaneously exists an alternative

state remedy with its own limitations period. A state should

not be able to circumvent Congress’ and this Court’s

intentions by means of a novel procedure not heretofore

addressed by this Court.

A. Petitioner Has a Valid § 1983 Claim Against the State

for its Unlawful Refusal to Adjust Petitioner’s

Medicaid Rates to Reflect the Invalid Recalibration

Regulation

This Court has often ruled that in enacting § 1983, Congress

granted litigants the right to seek redress for conduct

committed by individuals acting under “color of state law”

which deprived them of rights, privileges or immunities

secured by the Constitution or laws of the United States.

Congress’ principal objective in enacting the § 1983 type

action as part of the Civil Rights Act of 1871 was to insure to

individuals whose federal, constitutional or statutory rights

were abridged, that they may obtain damages or secure

injunctive relief. Felder, supra. Not only has the § 1983 form

of action been repeatedly reinforced and broadened by this

Court, but the § 1983 action is so fundamental and deeply

embedded in our jurisprudence that any encroachment of that

right by application of state law thereto has been condemned

and made void. Felder, supra, at 2307;Howlett, supra; Golden

State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 110

S.Ct. 444, 107 L.Ed.2d 420 (1989).

16

State courts cannot impose barriers or prescribe

requirements for a litigant to bring a § 1983 action in state

court which would not be required in federal court. Felder,

supra at 2314. This Court stated in Felder, supra, that § 1983

provides:

“a unique federal remedy and any limitation or

incursion by the application of state law or

procedure on a § 1983 action brought in state

court is preempted.” (Emphasis supplied)

Id. at 2307.

In Felder plaintiff commenced a § 1983 action in state court

without complying with Wisconsin’s notice of claim statute,

which required certain prerequisites to be compiled with

before commencing an action against the State in its own

courts. The Felder Court, in accord with its previous ruling in

Patsy, supra, reaffirmed that state administrative remedies do

not have to be exhausted before instituting a § 1983 action in

state court and proceeded to further hold that “state law that

immunizes government conduct otherwise subject to suit

under § 1983 is preempted.”/d. 2307. As a result, this Court

held that a state’s rule or law that in any way limits or inhibits

a litigant in state court from prosecuting a § 1983 action is

preempted. The classification of a valid federal § 1983 claim

into something different by state fiat as, was done in this.case,

by the Appellate Division is but another way of limiting or

inhibiting a litigant in state court from prosecuting its § 1983

claim.

Although the State defendants attempted to argue that

petitioner’s claim was not really a federal claim the Appellate

Division did not reach the issue of whether petitioner had a

federal claim, vel non. The Appellate Division merely ruled

that because Concourse did not plead its § 1983 claim

17

properly, Concourse, therefore was not entitled to the three

year state statute of limitations. The Appellate Division

relying on Jn the Matter of Medical Arts Sanitarium, Inc., v.

New York State Department of Health, 184 A.D.2d 399, 585

N.Y.S.2d 355 (1st Dep’t 1992) held that petitioner’s

conclusory allegation that the DOH determination violates

federal Medicaid Law does not translate its claim to a § 1983

action as a matter of state law. This holding of Medical Arts,

as applied to petitioner is invalid, as a matter of federal law,

to foreclose valid federal claims. Otherwise, if the decision

was based on deficiency of the factual pleading the court

would have had to allow Concourse to replead its federal claim

to test the veracity of its federal cause of action. This it did not

do.

The § 1983 remedy has been validated by this Court in

Wilder v. Virginia Hospital Association, 496 U.S. 498, 110

S.Ct. 2510, 110 L.Ed.2d 455 (1990) to vindicate violations

under the Medicaid Act. Similar to the situation at hand, in

Wilder, there simultaneously existed a state administrative

procedure to review the “complained of” conduct. The

Virginia Administrative Process Act provides that “any

person affected by and claiming the unlawfulness of any

regulation” can bring a direct action in court against the agency

or its officers. Nevertheless, the Wilder Court adhering to its

prior holding in Patsy, supra, expressly stated that availability

of state administrative procedures does not foreclose resort to

private remedies under § 1983 for enforcement of those rights.

Id. at 2524-2525.

5 The Virginia Administrative Process Act is similar to the New York

CPLR Article 78 proceeding.

18

While Wilder was a case that involved the Boren

Amendment, § 1983 actions in the Medicaid context are not

limited solely to Boren Amendment matters. Even after

Wilder, § 1983 has routinely been the vehicle to obtain redress

for violations under the Federal Medicaid Act for conduct that

does not come within the scope of the Boren amendment. See

e.g., Methodist Hospital v. Ind. Family and Social Services

Administration, 860 F.Supp. 1309 (N.D.Ind. Hammond Div.

1994)(medical provider had right enforceable under § 1983 to

challenge improper adoption of regulation regarding appeal

mechanism); Rehabilitation Association of Virginia Inc. v.

Kozlowski, 42 F.3d 1444 (4th Cir. 1994) (§ 1983 was the

appropriate vehicle to challenge State’s interpretation of

Medicaid Act); Wood v. Tompkins, 33 F.3d 600 (6th Cir. 1994)

(violation of § 1396(n)° et Seq. gives rise to a private right of

action under § 1983); Harris v. James, 883 F.Supp. 1511

(M.D.Ala. N.Div. 1995) (private right of action exists under

§ 1983 to require the state to provide medical transportation

pursuant to § 1396a(a)(4)(A)); Visiting Nurse Assoc. v. Bullen,

866 F.Supp. 1444 (D.Mass.1994) (§ 1983 is the proper

remedy to enforce equal access provision of the Medicaid

Act).

Petitioner’s claim in this case challenging the State’s

unlawful calculation of its Medicaid rates and refusal to

correct such rates by removing the declared invalid

recalibration component from its rate calculation, as violating

6 References to § 1396(n) ef seg. is made in connection with Wood v.

Tompkins, supra and § 1396a(a)(4)(A) referred to in the Harris v. James,

supra, Case are not being relied on by the petitioner herein in support of

its argument. It is for that reason the full text of those statutes are not set

forth in this petition.

“

@

4

bed

19

its rights under the federal Medicaid Act, fits squarely into a

§ 1983 claim. See also Wilder, supra, at 2525.

Notwithstanding that petitioner, in accord with Wilder,supra,

commenced its § 1983 action in state court, the Appellate

Division held, in relevant part that, since “petitioner’s

challenge could have been brought in the form of an Article

78 proceeding” and that this case was not commenced within

four months of the Level I administrative agency decision,’

the case should be dismissed.(Emphasis added)

The Appellate Division’s dismissal of petitioner’s valid §

1983 claim turned on the fact that petitioner a/so had an

alternative state remedy; an Article 78 proceeding under state

law. While it is true that petitioner could have brought an

Article 78 proceeding, it deliberately elected a specific federal

remedy, a § 1983 cause of action. Having elected a federal

remedy, Concourse should not be relegated to the State’s

desired form - an Article 78 proceeding. The State’s attempt

to force petitioner to relinquish the panoply of rights

encompassed in a § 1983 action for those encompassed in an

Article 78 proceeding must fail as a matter of federal law. As

stated above, this Court since Patsy has consistently rebuked

such efforts by states. The availability of an alternative state

remedy should not render petitioner’s valid and elected

format; a § 1983 cause of action, untenable. Such action on

the part of the state and the state court is but a novel attempt

at undermining this Court’s jurisdiction by the creation of a

7 In accordance with state law there is an administrative appeal process

that a provider must exhaust before resort to the courts to challenge its

Medicaid reimbursement rate.

20

new road around Felder, the renaming or conversion of

federal claims to state claims so that the federal rights

concomitant to § 1983 actions would not apply.

The only reason that the Appellate Division held that this

case “could have been brought in the form of an Article 78

proceeding” is because it found this case to be

“indistinguishable” from McBarnette (NYC Health & Hosp.

Corp. v. McBarnette), 84 N.Y.2d 194, 616 N.Y.S.2d 1, 639

N.E. 2d 740 (1994).The single most critical distinguishing

factor between McBarnette and the instant case, though, is that

McBarnette was not commenced as a § 1983 action.

Therefore, the principle of preempting state remedies as would

apply in the case of the instant § 1983 action, as embodied in

Felder, supra, and Wilder, supra, did not come into play in

McBarnette. Furthermore, to the extent McBarnette can be

read to be a basis to reject a litigant’s § 1983 claim it conflicts

with this Court’s holdings in Felder and Howlett and,

therefore, it must yield to the supremacy of federal law.

Nor should petitioner be bound by the four month statute of

limitations applicable to an Article 78 proceeding. The § 1983

claim entitles petitioner to a three year statute of limitations in

accordance with federal law. Wilson v. Garcia, supra. This

Court held in Wilson that a § 1983 action is timely as a matter

of federal law if brought within the longest tort limitation

period of a particular state. In New York the longest tort

limitation period is three years. See also Owens v. Okure, 109

S.Ct. 573, 488 U.S. 2235, 102 L.Ed.2d 594 (1989)(This Court

reaffirmed its goal enunciated in Wilson, supra of providing

“one simple, broad characterization” of all § 1983 actions and

confirmed that the statute of limitations applicable to a § 1983

action is the state’s general or residual personal injury statute

of limitations).

21

The battle of the “forms of action” between a § 1983 action

- a federal type of action -and the available state remedy - a

CPLR Article 78 proceeding against the State - both of which

could be maintained concurrently in the state courts, will

frequently arise because they are both challenges to the

sovereign’s conduct. The State, though, will always prefer the

Article 78 form since the limitations period is much shorter in

New York.® Based on the Appellate Division’s decision, the

election of a § 1983 claim in state court may be foreclosed by

the mere existence of the availability of an Article 78

proceeding in such forum. The Appellate Division’s decision

undermines the continued vitality of this Court’s

pronouncement of the law pertaining to § 1983 actions in the

New York State’s courts. It is for this Court, to clarify the state

of the law in this regard and proclaim that it will not

countenance this new and novel way around Felder. This

Court should protect Congress’ and its own interests in

protecting the panoply of federal rights of § 1983 actions. If

New York can do this end run around the Congress and this

Court why couldn’t and wouldn't every other state in the union

do likewise?

B. Petitioner sufficiently pled a cause of action under

§1983.

This Court has held that to prevail on a §1983 claim it must

be established that:

8 There are a number of other reasons why the State would prefer the

Article 78 form of action. Chief among them are the fact that there is no

discovery available in an Article 78 proceeding without leave of court

and, further, that it is a summary type of proceeding.

22

(i) The conduct complained of was committed by persons

acting under color of state law and

(ii) that conduct deprived it of rights, privileges or

immunities secured by the constitution or laws of the

United States.

Wilder, supra at 2510.

In the seminal case Maine v. Thiboutot, 488 U.S.1, 100 S.Ct.

2502, 62 L.Ed.2d 555 (1980) this Court held that the plain

language of § 1983 “undoubtedly embraces the Social

Security Act.”The Supreme Court in Wilder, supra, further

held that causes of action alleging violation of the Medicaid

Act are properly brought under § 1983.

Not only does Concourse have a valid § 1983 claim but it

was appropriately pled. The complaint adequately alleges both

of the aforementioned requirements of a § 1983 claim in

accordance with Wilder. The State defendants argued below

that the complaint “merely described” the Medicaid program.

Specifically the complaint alleges that the State, acting “under

color of state law” improperly applied and continues to apply

the original recalibration regulation in computing Concourse’s

Medicaid rates notwithstanding that the Court of Appeals

declared the recalibration regulation invalid in NYSAC v.

Axelrod, supra. Since the original recalibration regulation was

declared null and void, Concourse’s Medicaid rates for all rate

years in question, excluding 1988, should have been

9 Obviously the State defendants acknowledged their unlawful conduct in

refusing to correct Concourse’s Medicaid rates because after the

commencement of this lawsuit, the State adjusted Concourse’s Medicaid

rate for the 1988 rate year by removing the invalid recalibration

IR ST ey eee em ee ee as ae

eutea® at De as eve

sir ae at AM aber NL Net

BES ROSE Rte aE NRE IN

23

readjusted to reflect the invalidity of the recalibration

regulations in the then pending lawsuit before the Level I

decision was rendered. Such conduct by the State was

designed to, and did, in fact, deprive Concourse of its rights

under the Federal Medicaid Act.

The Appellate Division erroneously dismissed petitioner’s

§ 1983 claim by adopting the State defendants’ argument and

incorrectly citing to Medical Arts, supra, as support for its

decision. The Appellate Division held that the three year

statute of limitations applicable to a § 1983 claim did not apply

because, as in Medical Arts, supra “the petition recites a

conclusory allegation that the determination violates federal

Medicaid Law.” (Emphasis supplied)However, no such

argument can validly be made here because the complaint

alleged both of the elements of a § 1983 claim required by

Wilder. As aresult the conclusory test is not factually or legally

applicable and cannot be applied in the place of the two

elements required by Wilder.

It is, therefore, clear that the basis for the dismissal could

not be federal law since there was no basis therein for it. In

fact, the basis must have been state law, i.e., Medical Arts,

which espouses a rule of summary judgment of federal claims

if they are conclusorily pled without more. In a clear

contradiction to the holdings of this Court, as stated, a party

loses his right to the federal remedy in the New York State’s

adjustment from its Medicaid rate calculation. For rate year 1988, the

State defendants’ action in correcting Concourse’s rate is evidence that

Concourse proved its § 1983 claim in accordance with Wilder.

24

courts if such party didn’t plead such claim correctly in

accordance with state law, 10 the Claimant does not get another

opportunity to correct its pleading deficiencies.

In this case petitioner claims that there is no need to replead

since the complaint herein is replete with details of what the

State did, and did not do, in accordance with, and in violation

of, the particular applicable law. Not only does the instant

complaint expressly provide in the jurisdiction paragraph that

this action is commenced pursuant to §1983 to remedy

violations of the Medicaid Act, 42 U.S.C. § 1396 and the 14th

Amendment to the U.S. Constitution but it further provides a

detailed description of the Federal Medicaid program, 42

U.S.C. $1396 et seq., and the specific actions of the State

defendants that constitute a violation of petitioner’s rights

under federal law. Moreover, the Answer, too, referred to each

paragraph of the complaint and specifically referred to federal

law numerous times. Unlike Medical Arts, supra, and based

on all the foregoing references to federal law, there can be no

claim of only “conclusory” references to the federal Medicaid

law in this case. It was, therefore, error for the Appellate

Division to dismiss the instant § 1983 action and to rely on

Medical Arts as precedent.

But, most importantly, even assuming that the complaint

was inartfully drawn, the Appellate Division should not have

dismissed a federal § 1983 action on state law grounds. The

Appellate Division erroneously relied on Medical Arts which

!O another problem with this conclusorily pleading rule is that it is

undefined. If this is claimed to be a federal rule as stated infra, it is in

error. If it is a state rule it fails in this matter because of its conflict with

the Supremacy Clause in the U.S. Constitution.

Sahl civeab ae

ORG At Nie Lad KS EI a Sd alban

oe oe

ee a te Oe te ee Ne) ee he

25

is a State law decision guided by state law. If a valid federal

case is brought in state court, the law to be applied is federal

and not state law. See, Felder, supra; Howlett, supra; Svaigsen

v. City of New York, 203 A.D.2d 32, 609 N.Y.S.2d 894 (1st

Dep’t 1994).Thus, as set forth above, based on the pleading

requirements of a § 1983 claim, Concourse properly pled its

§ 1983 claim in this case.

Even assuming arguendo that it could be claimed that

Concourse did not sufficiently plead a § 1983 claim or that the

pleading “conclusorily” alleged a violation of federal

Medicaid law, under the liberal pleading requirements in

federal practice as repeatedly reaffirmed by this Court in

Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80

(1957) and Foman v. Davis, 371 U.S.178, 83 S.Ct. 227, 9

L.Ed.2d 222 (1962), and the rule to liberally permit

amendment of pleadings, leave to replead should have been

granted if a reading of a “federal” complaint gives even the

slightest indication that a valid claim exists. See, Ribbiuti v.

N.Y.S. Transit Authority, 941 F.2d 119 (2d Cir. 1991); Branum

v. Clark, 927 F.2d 698 (2d Cir. 1991).The federal rules do not

require a Claimant to set out in detail the facts upon which the

claim is based. All the rules require is a “short and plain

statement of the claim that will give the defendant fair notice

of what the plaintiff’s claim is and the grounds upon which it

rests.”Conley, supra at 103. The goal of pleadings in federal

practice is to facilitate a proper decision on the merits, Foman,

supra, at 230, and not to summarily reject them, particularly

in the cavalier manner that the Appellate Division treated

petitioner’s claim.

The dismissal of petitioner’s § 1983 action erodes the

continued vitality of Felder supra, and its progeny. If the

Appellate Division decision is allowed to stand its impact will

be far reaching. Guided by the New York State courts, other

26

jurisdictions, too, will carve out a similar procedure to

circumvent litigating § 1983 actions in state court. As such,

the § 1983 claimant will not benefit from the application of

federal procedures attendant to all other federal claims brought

in state courts; and this may, in fact, be the precursor of how

New York State may now treat all other federal claims brought

in its courts. It is for this Court to intervene to insure that the

Congressional intent in enacting § 1983 and this Court’s

interest in its rulings are upheld.

This Court should grant petitioner a writ of certiorari and

do what it did in Felder and Wilder and sustain petitioner’s

complaint by reversing the decision of the Appellate Division.

That would have the effect of conforming the § 1983 practice

in the New York State’s courts to the practice in federal courts.

This Court’s policy making function makes it the appropriate

forum to render such a pronouncement.

27

CONCLUSION

For these reasons, a writ of certiorari should be issued to

review the opinion and judgment of the Appellate Division.

Dated: New York, New York

June 26, 1996

Respectfully submitted,

NEIMAN GINSBURG

& MAIRANZ P.C.

Attorneys for Petitioner

Concourse Nursing Home

39 Broadway - 25th Floor

New York, New York 10006

(212) 269-1000

Of Counsel:

Marvin Neiman, Esq.

Theodore T. Mairanz, Esq.

Betsy R. Malik, Esq.

APPENDICES

Al

APPENDIX A

OPINION AND ORDER (WITH NOTICE OF ENTRY)

OF THE STATE OF NEW YORK SUPREME COURT,

APPELLATE DIVISION, FIRST DEPARTMENT

DATED SEPTEMBER 7, 1995

Supreme Court of the

State of New York County of New Bork

NOTICE OF ENTRY

Index No. 13281/92

CONCOURSE NURSING HOME,

Plaintiff-Respondent,

-against-

CESAR A. PERALES, individually and as

Commissioner of the New York State

Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting

Commissioner of the New York State

Department of Health, and PATRICK J.

BULGARO, individually and as Budget Director

of the State of New York,

Defendants-Appellants.

A2

PLEASE TAKE NOTICE, that the within is a true and

complete copy of an order duly filed and entered in the office

of the Clerk of the Court, Supreme Court of the State of New

York, Appellate Division, First Department, on September 7,

1995.

Dated: New York, New York

September 22, 1995

Yours, etc.,

DENNIS C. VACCO

Attorney General of the State of

New York

Attomey for Defendants

120 Broadway

New York, New York 10271

(212) 416-8560

TO:

NEIMAN GINSBERG & MAIRANZ, P.C.

39 Broadway, 25th Floor

New York, New York 10006

(212) 269-1000

A3

APPELLATE DIVISION, SUPREME COURT

FIRST DEPARTMENT

SEPTEMBER 7, 1995

THE COURT ANNOUNCES THE

FOLLOWING DECISIONS:

Murphy, P.J., Rubin, Kupferman, Ross, Mazzarelli, JJ.

55145, Concourse Nursing Home,

Plaintiff-Respondent,

M. Neiman

-against-

Cesar A. Perales, etc., et al.,

Defendants-Appellants,

B.K. Hathaway

Order and judgment (one paper), Supreme Court, New York

County (Harold Tompkins, J.), entered June 8, 1994, which

granted plaintiff's summary judgment motion, directing the

New York State Department of Health to recompute plaintiff's

Medicaid reimbursement rate for 1987 through and including

1991, referred that portion of the action for interest, attorneys’

fees, costs and disbursements to a special referee, and denied

defendants’ cross-motion to dismiss the complaint, except as

to Patrick J. Bulgaro, as Budget Director of the State of New

York, and defendants individually, unanimously reversed, on

the law, to the extent appealed from, the motion denied and

the cross motion granted, and the complaint dismissed,

without costs.

Plaintiff nursing home receives payments under the

Medicaid program (Title XIX of the Social Security Act, 42

USC §1396 et seq.), funded jointly by the Federal and State

A4

governments. This appeal arises out of a dispute as to the

formula used to determine plaintiff's payment rate for the

years 1987 through 1991.

Prior to 1986, the New York State Department of Health

calculated a prospective Medicaid reimbursement rate for

nursing homes (residential health care facilities) based on the

operational costs of a base year, as limited by cost ceilings

determined by comparison to peer groups, which was then

increased to account for inflation and capital costs. The rate

was expressed as a per diem amount for each patient.

In 1986, the Department of Health implemented a new

Medicaid reimbursement calculation for nursing homes, the

Long Term Care Case Mix Reimbursement System. Under

this system, the daily per-patient rate is calculated by four cost

components: direct, indirect, noncomparable and capital (10

NYCRR 86-2.10 [b] [1] [ii]). The new system resulted in

increased rate payments due, in part, to improved

documentation of patients rather than any actual increase in

costs. Therefore, the Department of Health promulgated a

“recalibration” system, to become effective July 1, 1987 and

apply retroactively to January 1, 1987. The Court of Appeals,

in New York State Assn. of Counties v Axelrod (78 NY2d 158),

annulled the recalibration system because it arbitrarily

reduced every facility’s “direct component” rate by 3.035%,

without regard to whether a facility’s costs increased due to

documentation or actual expenses.

In 1991, the Department of Health promulgated a new

recalibration regulation applicable to calculation of the

1989-1991 reimbursement rates based on the individual needs

of each nursing home. Jn Matter of Jewish Home & Infirmary

v Commissioner of New York State Dept. of Health (84 NY2d

252, 260), the Court of Appeals held that the regulation could

—— a ee ee eee eY

AS

not be applied retroactively to 1989-1991 because it would

violate Public Health Law §2807 (7) (a), requiring advanced

notification to a nursing home of its approved rate of payment.

In a notice dated April 30, 1991, the Department of Health

notified residential health care facilities that “the methodology

used by the Commissioner to promulgate the Medicaid rates

is not included as a rate appeal issue in Sections 86-2.13 and

86-2.14. Appeals objecting to the Medicaid rate methodology

are inappropriate under the regulations and will be rejected.”

Nevertheless, plaintiff Concourse Nursing Home filed a first

level administrative appeal (10 NYCRR 86-2.13) challenging

the recalibration of its 1988 to 1990 rates. This appeal was

denied by the Department by letter dated July 30, 1991.

Plaintiff also filed a first level appeal from its 1991

recalibration rates, which was rejected by letter dated May 15,

1991 on the ground that the rate calculation is not appealable.

Plaintiff subsequently filed a “second level” administrative

appeal (10 NYCRR 86-2.14 [b] [1]) on August 30, 1991,

seeking review of the 1987 to 1991 reimbursement rates (even

though it never filed a level one appeal with respect to its 1987

reimbursement rate). On December 23, 1991, the Department

of Health rejected that request on the grounds that the issues

were not appealable. Plaintiff commenced this action on April

16, 1992, seeking declaratory and injunctive relief.

Supreme Court granted plaintiff's summary judgment

motion, holding that the Department of Health’s rate

determinations for 1987 through 1991 were arbitrary and

capricious and directed the Department to recompute the rates

for those years. The Court, citing our decision in New York

City Health & Hosps. Corp. v McBarnette (195 AD2d 391),

applied a Statute of Limitations of three years. In McBarnette,

we followed the determination of the United States Court of

A6

Appeals for the Second Circuit in Hollander v Brezenoff (787

F2d 834), holding that such an action constitutes a claim to

recoup funds due under 42 USC §1396 and is subject to the

provisions of CPLR 214(2), applicable to a liability created or

imposed by statute. The Court of Appeals subsequently

modified the decision in McBarnette (84 NY2d 194), holding

that the four-month limitations period applicable to

proceedings for review of an administrative determination

pursuant to CPLR article 78 should control. The Court noted:

“The nature of plaintiff's claim requires it to convince the

court that defendants promulgated a rule affecting hospital

rates that represented an irrational construction of the

governing statutes * * * Accordingly, plaintiff’s challenge

could have been brought in the form of an article 78

proceeding” (supra, at 205).

The nature of the instant action is indistinguishable from

McBarnette (supra) and is therefore subject to a four-month

Statute of Limitations. As this Court noted in Matter of

Medical Arts Sanitarium v New York State Dept. of Health

(184 AD2d 399, 399-400), a proceeding is not “subject to the

three-year limitations period set forth in CPLR 214(5)

applicable to claims brought under 42 USC §§1983 and

1396a(a) (13) (A) (the Boren Amendment), merely because

the petition recites a conclusory allegation that the

determination violates Federal Medicaid Law.”

Plaintiff argues that its action is nevertheless timely because

it was commenced within four months of respondent

Department of Health’s denial of its second level

administrative appeal on December 23, 1991. It is well settled,

however, that “an administrative determination is final and

binding when it has an impact upon a petitioner” (Matter of

Filut v New York State Educ. Dept., 91 AD2d 722, 723).

“Neither an application for reconsideration nor a series of

A7

inquiries regarding reconsideration will extend or toll the

four-month Statute of Limitations” (id. [citations omitted]).

Plaintiff was on notice as early as April 30, 1991 that the

Department of Health would not entertain an administrative

appeal concerning the calculation of Medicaid reimbursement

rates. Plaintiff’s persistence in filing second level

administrative appeals, following rejection of its first level

appeals, does not operate to extend the time to commence a

proceeding for administrative review pursuant to CPLR article

78. If the Department of Health did not initially undertake to

review the propriety of plaintiff’s Medicaid rate, it certainly

cannot be said to have engaged in a “fresh and new

redetermination” of that rate (Matter of Corbisiero v New York

State Tax Commn., 82 AD2d 990, affd 56 NY2d 680) so as to

toll the running of the Statute of Limitations. This matter was

therefore untimely commenced and must be dismissed.

THIS CONSTITUTES THE DECISION AND ORDER OF

THE SUPREME COURT, APPELLATE DIVISION,

FIRST DEPARTMENT.

ENTERED: SEPTEMBER 7, 1995

/signature

LERK

A8

APPENDIX B

ORDER (WITH NOTICE OF ENTRY) OF THE

STATE OF NEW YORK SUPREME COURT,

APPELLATE DIVISION, FIRST DEPARTMENT

DATED DECEMBER 21, 1995

Supreme Court of Che State

of New York

Appellate Division : First Department

Concourse Nursing Home,

Plaintiff - Respondent,

-against-

CESAR A. PERALES, individually and as

Commissioner of The New York State

Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting

Commissioner of the New York State

Department of Health, and PATRICK J.

BULGARO, individually and 2° Budget Director

of the State of New York,

Defendants - Appellants.

NOTICE OF ENTRY

Index No. 13281/92

PLEASE TAKE NOTICE, that the within is a true and

complete copy of an order duly filed and entered in the office

of the Clerk of the Court, Supreme Court of the State of New

York, Appellate Division, First Department, on December 21,

1995.

A9

Dated: New York, New York

: December 29, 1995

Yours, etc.,

é Dennis C. Vacco

f Attorney General of the State of

3 New York

' 120 Broadway

: New York, New York 10271

(212) 416-8560

To:

NEIMAN, GINSBERG

& MAIRANZ, P.C.

; for Plaintiff

39 Broadway, 25th floor

New York, New York 10006

(212) 269-1000

At a term of the Appellate Division of the Supreme Court

held in and for the First Judicial Department in the County of

New York, on December 21, 1995

Present - Hon. Francis T. Murphy

Presiding Justice

Israel Rubin

Theodore R. Kupferman

David Ross

Angela M. Mazzarelli

Justices.

re PEASE SN MRO NMP GON PM RENE YD Bee ek gia Riek I 6 CELT PATE AS MRAM Se pl on om eT ee

. d are Laibar out SRs te Ke

Al0

Concourse Nursing Home,

Plaintiff - Respondent,

-against-

Cesar A. Perales, etc. , et al.,

Defendants - Appellants.

M-5856

Index #13281/92

Plaintiff - respondent having moved for reargument of the

decision and order of this Court entered on September 7, 1995

(Appeal No. 55145), or , in the alternative, for leave to appeal

to the Court of Appeals,

Now, upon reading and filling the papers with respect to the

motion, and due deliberation having been had thereon,

It is ordered that the motion be the same hereby is denied

in its entirety with $100 costs.

ENTER:

Neen eT

All

APPENDIX C

ORDER OF THE STATE OF NEW YORK COURT

OF APPEALS DATED APRIL 2, 1996 DENYING

APPELLANT’S MOTION FOR

LEAVE TO APPEAL

State of New Bork

Court of Appeals

/stamp

Donald M. Sheraw

Clerk of the Court

Clerk’s Office

Albany, New York 12207

DECISION April 2, 1996

1 - 13 Mo. No. 189

Concourse Nursing Home,

Appellant,

vs.

Cesar A. Perales, &c., et al.,

Respondents.

Motion for leave to appeal denied with one hundred dollars

costs and necessary reproduction disbursements.

Al12

APPENDIX D

OPINION AND ORDER (WITH NOTICE OF ENTRY)

OF THE SUPREME COURT OF THE STATE OF

NEW YORK, COUNTY OF NEW YORK DATED

MARCH 1, 1994

Supreme Court

of the State of New York

COUNTY OF NEW YORK

CONCOURSE NURSING HOME,

Plaintiff,

-against-

CESAR A. PERALES, individually and as

Commissioner of the New York State

Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting

Commissioner of the New York State

Department of Health, and PATRICK

BULGARO, individually and as Budget Director

of the State of New York,

Defendants.

Index No. 13281/92

NOTICE OF ENTRY

Assigned to:

Hon. Harold Tompkins

IAS Part 13

PLEASE TAKE NOTICE, that the within is a true copy of

the Order and Judgment granted on March 1, 1994, and duly

entered in the Office of the Clerk of the within named Court

on June 8, 1994.

Dated: New York, New York

June 9, 1994

NEIMAN GINSBURG

& MAIRANZ P.C.

Attorneys for Plaintiff

39 Broadway - 25th Floor

New York, New York 10006

(212) 269-1000

TO:

OLIVER KOPPELL

Attorney General of the State of New York

120 Broadway

New York, New York 10271

At IAS Part 13, of the Supreme Court of the State of New

York, held in and for the County of New York, at the

Courthouse located at 60 Centre Street, New York, New York

on the 1 of March 1994.

ORDER AND JUDGMENT

Index No. 13281/92

PRESENT:

HON. HAROLD TOMPKINS, JUSTICE

Al4

CONCOURSE NURSING HOME,

Plaintiff,

-against-

CESAR A . PERALES, individually and as

Commissioner of the New York State

Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting

Commissioner of the New York State

Department of Health, and PATRICK J.

BULGARO, individually and as Budget Director

of the State of New York,

Defendants.

UPON the Notice of Motion of plaintiff by its attorneys

Neiman Ginsburg & Mairanz P.C., dated February 17, 1993,

for an Order pursuant to CPLR 3212 granting summary

judgment to plaintiff and dismissing defendants’ affirmative

defenses, and the notice of cross-motion of defendants by

Robert Abrams, Attorney General of the State of New York

dated March 23, 1993, and said motion and cross motion

having regularly come on to be heard on June 4, 1993 and upon

reading and filing said notice of motion of plaintiff, the

affidavit of Marvin Neiman, Esq., sworn to on February 17,

1993 and the exhibits annexed thereto in support of the motion,

the aforesaid notice of cross-motion for summary judgment of

defendants, the affidavit of Carl M. Dembrovsky sworn to on

March 22, 1993 the affidavit of Joseph C. Bierman, sworn to

on March 19, 1993 and the exhibits annexed thereto in support

of defendants’ cross-motion and in opposition to plaintiff’s

motion and the reply affidavit of Marvin Neiman sworn to on

March 30, 1993 and the exhibits annexed thereto in support of

the motion and in opposition to defendants’ cross-motion and

Al5

after hearing counsel for the respective parties, and after due

deliberation having been held thereon and upon the Court’s

decision dated January 7, 1994, it is ordered that plaintiffs

motion for summary judgment is granted and it is further

ORDERED, that defendants cross motion for summary

judgment is granted; to the extent that the action is dismissed

as to the defendants in their individual capacities and against

defendant Bulgaro, the budget director in his official capacity

and is otherwise denied and it is further

ORDERED, and adjudged, that the Department of Health

rate determinations for rate periods 1987 through and

including 1991 are arbitrary and capricious and in violation of

applicable law; and it is further

ORDERED, that defendants’ are directed to recompute and

promulgate corrective rates for plaintiff for the rate periods

1987 through and including 1991 in accordance with the

applicable law; and it is further

ORDERED, that the portions of the action for interest,

reasonable attorneys fees, and costs and disbursements are

severed and referred to a special referee to hear and report

(with recommendations) pending the report and motion

thereon pursuant to CPLR 4413 that portion of the motion is

held in abeyance - Counsel is directed to serve a copy hereof

upon the clerk of the legal support office to arrange for a

hearing date before a special referee.

Al6

ENTER:

/Signature

| he oe

Norman Goodman

Clerk

FILED

JUN 8 1994

COUNTY CLERK’S OFFICE

NEW YORK

Al7

Supreme Court,

NEW YORK COUNTY

IAS PART 13

CONCOURSE NURSING HOME,

Plaintiff,

-against-

CESAR A. PERALES, individually and as

Commissioner of the New York State

Department of Social Services, LORNA H.

McBARNETTE, individually and as Acting

Commissioner of the New York State

Department of Health, and PATRICK

BULGARO, individually and as Budget Director

of the State of New York,

Defendants.

Index No. 13281/92

Motions Submitted

June 4, 1993

HAROLD TOMPKINS, JUSTICE:

Plaintiff Concourse Nursing Home’s motion for summary

judgment and defendants’ cross motion for summary

judgment dismissing the complaint are consolidated for

disposition and decided as noted below.

This action involves the Medicaid reimbursement rates for

the 1987-1991 rate years in which plaintiff has challenged the

A18

recalibration methodology used by defendant Health

Department. Plaintiff seeks a recomputation of rates for the

1987-1991 rate years without recalibration.

The Health Department’s original recalibration regulation

( former §86-2.31 of Title 10 of NYCRR), promulgated in

1986 to effect an across-the-board percentage reduction in

Medicaid reimbursement rates of New York State residential

health care facilities for rate periods commencing on or after

January 1, 1987, was declared invalid by the New York Court

of Appeals as lacking a rational basis, New York Association

of Counties v. Axelrod, 78 N.Y2d 158 (1991). Subsequently,

the Appellate Division, Third Department held in New York

State Association of Counties v. Axelrod, ___ A.D.2d :

595 N.Y.S. 258, lv denied 82 N.Y.2d 705, that the successor

recalibration regulations (present §86-2.31 of Title 10

NYCRR), promulgated in December, 1991, to govern 1989

through 1991 rate years, was based upon the same flawed

methodology as the original regulation, and that the 1991

regulation could not be retroactively applied to 1989 through

1991 rate years, due to DOH’s failure to comply with the

requirement of Public Health Law §2807 (7) (a) that facilities

be notified of their rates of payment at least 60 days prior to

the effective date.

The Third Department decision was adopted by the

Appellate Division, First Department in granting summary

judgment for the plaintiff in N.Y.C. Health & Hospitals Corp.

vMcBarnette, AD2d__,600N.Y.8.2d245 (Ist Dept.

1993). McBarnette held that the Appellate Division, Third

Department’s holding in New York State Association of

Counties v Axelrod, that the recalibration regulations were still

being used by the governmental entities; that the recalibration

regulations were invalid based upon flawed methodology, and

that the appropriate statute of limitations, was three years since

Al9

the action was an attempt to recoup funds due under the

reimbursement provisions of 42 U.S.C. §1396 was a binding

determination on these regulations. Since New York State

Association of Counties, supra and McBarnette, supra have

determined the invalidity of the Medicaid reimbursement rates

for the challenged years as a matter of law, plaintiff

Concourse Nursing Home’s motion for summary judgment

must be granted and defendants’ cross motion for summary

judgment must be denied.

Settle order accordingly.

Dated: January 7, 1994.

/Signature

pF te