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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1120%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1996
- **Citation:** 519 U.S. 863

## Text

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?

ata a aaaaaaaarcan ii iad)

il

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__.”

lee alt LS a Oe an Ma Ske ee om we

a ee eee

a

Ne ee ee ee ae .

3

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.

Ln i end hl 0A Ain Sle PLE TANASE Bhat

Miiictehistiieicirnns. >

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

eee hi es

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

ee ee ae es ee eee =

.' lenient Ene Io PPG DANAE EA AAS dee Hey eh een ci Win eo hele >)

Ne ee Coe Se a ee ioe

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1120%3A1. Public record. Not legal advice.