City of New York v State of New York

[*1] City of New York v State of New York 2009 NY Slip Op 52763(U) [27 Misc 3d 1207(A)] Decided on December 23, 2009 Ct Cl Scuccimarra, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 23, 2009
Ct Cl

The City of New York, Claimant

against

The State of New York, Defendant(s).



112579



Claimant's attorney:

Corporation Counsel for the City of New York

By: Michael A. Cardozo, Esq. and John R. Low-Beer, Esq., Senior Counsel

Defendant's Attorney:

Hon. Andrew M. Cuomo, New York State Attorney General

By: Glenn C. King, Assistant Attorney General

Thomas H. Scuccimarra, J.

Cross-motions for summary judgment granted in part and denied in part. Claim asserts three causes of action arising from allegedly negligent State failure to properly program welfare management system computers to recognize ineligibility determination codes transmitted by federal government for Medicaid recipients entitled to Medicaid by virtue of eligibility for Supplemental Security Income.

In the filed claim the City of New York seeks damages arising from the State's allegedly negligent failure to properly program its welfare management system computers to recognize ineligibility determination codes transmitted by the federal government for Medicaid recipients [*2]entitled to Medicaid by virtue of eligibility for federal Supplemental Security Income [SSI].[FN1]

By way of background, the SSI program provides cash assistance to indigent aged and disabled individuals. SSI recipients are automatically eligible for Medicaid. 42 U.S.C. § 1396a(a)(10)(A)(i)(II); Social Services Law § 366(1)(a)(2). The federal government reimburses states for a portion of the cost of Medicaid benefits, 42 U.S.C. §§ 1396b(a)(l), 1396d(b). In the State of New York, remaining expenses are generally shared equally by the State and local municipalities. Social Services Law § 368-a(l)(d). Thus for Medicaid recipients in New York City, the federal government pays 50% of the program costs, the City pays 25% and the State pays 25%.[FN2] The mechanics are that the State pays the medical providers and then bills the City of New York for its share. Social Services Law §367-b.

It is alleged in the claim that when new codes were relayed to the State computers by the federal government signaling that an individual was not eligible for SSI (and thus not entitled to Medicaid on that basis) the State computers failed to recognize such codes, and ineligible individuals continued to be viewed as eligible, with the State, Federal and City governments paying accordingly. The State paid the medical benefits directly to the providers, and continued its weekly billing of Medicaid charges to the City at the noted rate of 25%.

Three different types of errors in code recognition are alleged in the claim. First, there were persons who had been receiving SSI who were no longer eligible, but who were nonetheless erroneously continued as Medicaid-eligible cases. [Verified Claim, ¶17]. Second, there were instances where a person had merely applied for SSI, but was interpreted as being Medicaid-eligible by the State's computer system. [Ibid. ¶18]. Third, additional codes added by the federal government signaling ineligibility were not recognized and new Medicaid cases were opened by the State. [Ibid. ¶19].

It is alleged that these "glitch[es]" were first noted and reported to the State by the City

" [b]y letter dated April 23, 1999." [Ibid. ¶21, see Affirmation of John R. Low-Beer, Exhibit 10]. It is further alleged that the State "did nothing" to remove the ineligible names from the Medicaid rolls, nor did it provide the City with data it could use to "resolve the problem on its own." [Ibid. ¶2]. "[I]n or about August 2000 the City began to withhold unrelated funds it otherwise would have paid over to the State." [Ibid. ¶3]. "The total withheld was $8.4 million." [Ibid. ¶27]. Claimant alleges that "[e]xpenditures for glitch cases continued to be charged to the City through the end of 2002." [Ibid. ¶28].

The claim filed herein was served and filed pursuant to the Decision and Order granting [*3]late claim relief [see Court of Claims Act §10(6)], and allowing such service and filing within thirty (30) days of July 5, 2006 or by August 4, 2006. [See City of New York v State of New York, Motion No. M-70556 (unreported decision) (Hard, J., June 13, 2006)]. The motion was filed by claimant on July 15, 2005. The motion court determined that the proposed claim had the "appearance of merit" for late claim purposes, namely that it was not patently groundless, frivolous or legally defective, [see Matter of Santana v New York State Thruway Auth., 92 Misc 2d 1 (Ct Cl 1977)] a lesser standard than that required to establish defendant's liability. Review for late claim purposes concerning the causes of action asserted in a proposed claim is very limited. It bears repeating that allowing a claimant to serve and file a late claim is not a finding that a cause of action is established prima facie, it is only finding that a cause of action has the appearance of merit. In determining such motion, it is presumed that all the facts asserted by a claimant are true. Additionally, the statutes of limitation provided in the Civil Practice Law and Rules are generally discussed in a decision determining such motion because the Court needs to ascertain whether the motion is timely brought in order to assure that a late claim is filed ". . . at any time before an action asserting a like claim against a citizen of the state would be barred under the provisions of article two of the civil practice law and rules . . ." Court of Claims Act § 10(6).

Three causes of action are asserted in the filed claim. First, a cause of action premised upon a violation of Social Services Law §368-a, wherein it is provided that the State charge the City one-half of what the State paid for eligible persons. By paying for and then charging the City for ineligible persons, the statute was violated, and allegedly a private right of action attaches to the City for such violation.

Second, a negligence cause of action is asserted. The duty alleged is that the State bill the City correctly. By negligently failing to update its computer program to recognize the federal codes, by negligently maintaining ineligible persons on the Medicaid rolls, by negligently paying Medicaid benefits on behalf of such ineligible persons, and by charging the City any share of these erroneously paid amounts, such duty was breached.

Third, a cause of action for money had and received is also alleged. A cause of action for money had and received "is an obligation which the law creates in the absence of agreement when one party possesses money that in equity and good conscience he ought not to retain and that belongs to another." Parsa v State of New York , 64 NY2d 143, 148 (1984). "As to pleading requirements, the essential elements for this cause of action are that (1) the defendant received money belonging to [the] plaintiff, (2) the defendant benefited from receipt of the money, and (3) under principles of equity and good conscience, the defendant should not be permitted to keep the money'. . . " Matter of Witbeck, 245 AD2d 848, 850 (3d Dept 1997).

Civil Practice Law and Rules §3212(b) provides in pertinent part:

. . . A motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action or defense has no merit. The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party . . . the motion shall be denied if any party shall show [*4]facts sufficient to require a trial of any issue of fact. If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion.

Assuming a movant has made a prima facie showing of entitlement to judgment as a matter of law by proffering sufficient evidence to eliminate any genuine, material, issues of fact, the party in opposition to the motion for summary judgment must tender evidentiary proof in admissible form to establish the existence of material issues which require a trial. Winegrad v New York Univ. Medical Center, 64 NY2d 851 (1985); Zuckerman v City of New York, 49 NY2d 557 (1980). Failure to make a showing of entitlement to judgment as a matter of law by appropriate evidence requires denial of the motion regardless of the sufficiency of the opposing papers. Winegrad v New York Univ. Medical Center, supra , at 853. Moreover, it bears repeating that issue finding - not issue resolution - is the Court's role on an application for summary judgment. This is a "drastic remedy," the procedural equivalent of trial, and should not be granted where there is any doubt as to the existence of triable issues of fact. S.J. Capelin Assoc. v Globe Mfg. Corp., 34 NY2d 338, 341 (1974). In reviewing the papers submitted on a motion for summary judgment, the court must examine the proof in a light most favorable to the party opposing the motion. Robinson v Strong Memorial Hospital, 98 AD2d 976 (4th Dept 1983).

For reasons that follow, both motions are granted in part, and denied in part.

VIOLATION OF STATUTE - PRIVATE RIGHT OF ACTION

When no private right of action is expressly conferred upon aggrieved parties in a statutory scheme, a breach of a statutory duty - here an alleged breach of the State's obligations under Social Services Law §368-a- does not imply such private right of action unless "(1) the . . . [claimant] is one of the class for whose particular benefit the statute was enacted; (2) recognition of a private right of action would promote the legislative purpose of the governing statute; and (3) to do so would be consistent with the legislative scheme . . . If one of these prerequisites is lacking, the claim will fail." Palaez v Seide, 2 NY3d 186, 200 (2004); McLean v City of New York, 12 NY3d 194, 201 (2009);[FN3] see also Uhr v East Greenbush Cent. School Dist, 94 NY2d 32, 38 (1999);[FN4] Mark G. v Sabol, 93 NY2d 710, 720-722 (1999);[FN5] Sheehy v Big Flats [*5]Community Day, Inc., 73 NY2d 629, 633 (1989).[FN6] Here, claimant is arguably one of the class for whose particular benefit the particular statute within a statutory scheme was enacted - in that Social Services Law §368-a apportions the respective financial obligations between the federal, state and municipal governments - and the purpose of this individual section could conceivably be promoted by recognizing a private right of enforcement attaching to the localities, but implying a private right of action would not be consistent with the general legislative scheme broadly directed at providing needed services to citizens, and might embroil governmental entities in bottomless litigation.

When initially enacted in 1966, the purpose was specifically ". . . to implement the recently enacted Federal Medicare legislation, assuring that its benefits are available to all of our citizens with a uniformly high standard of care." [Governor's Message to the Legislature, New York State Legislative Annual, 1966]. In this sense, it is ultimately the citizenry who benefit from the proportionate sharing of the costs of the entitlement programs by the governmental entities. Social Services Law §368-a has been amended continually since its enactment, to include new programs, for example, or in anticipation of adjustments to other interrelated statutes. At any point the Legislature might have chosen to include mechanisms for enforcement between the governmental entities, beyond administrative applications subject to judicial review, but did not do so.

What is provided for, and was mentioned in passing by the Court in the decision granting permission to late file the present claim[FN7], was an administrative reimbursement mechanism [Social Services Law §368-a(3)(a)], purportedly constructively denied by the State, and then never pursued further via an Article 78 proceeding. Although claimant argues that an implied cause of action is consistent with the legislative scheme because an enforcement mechanism is otherwise denied to localities, the Court simply does not agree, and finds that it is the Legislature that must determine more explicitly if more is necessary to bring this cumbersome scheme to heel.

Indeed, when presented with other Social Services Law provisions concerning the registration, and renewal of registration in the absence of complaints in a two (2) year period, for family day care homes [see Social Services Law §390] the Court of Appeals would not recognize [*6]a private right of action based only the final prong of the articulated test. McLean v City of New York, supra at 200-201. In making such finding, the Court noted that the particular provision is highly detailed, contains many subsections, distinguishes between providers who may be licensed versus registered, provides for inspections, authorizes the Office of Children and Family Services to prevent noncompliant providers from caring for children, charges the agency with creating regulations, and elsewhere provides for criminal liability. [Ibid.]. The Court noted that no provision for governmental tort liability is stated, and that "[i]t is fair to infer that the Legislature considered carefully the best means for enforcing the provisions of Social Services Law §390, and would have created a private right of action against erring government agencies if it found it wise to do so." [Ibid.].

As noted, Social Services Law §368-a is a voluminous section setting forth a multitude of scenarios for State reimbursement under varying formulas and for various programs. What the localities have done according to the bulk of the case law citations presented by claimant, is pursue administrative remedies, or an audit process, followed by judicial review [see e.g. Matter of Gross v Perales, 72 NY2d 231 (1988); Matter of City of New York v New York State Dept. of Correctional Servs., 237 AD2d 160 (1st Dept 1997)].

Thus while it is arguable that the situation satisfies the first two prongs of the test, in order to satisfy the third prong to imply such a right of action, there must be "clear evidence" of the Legislature's willingness to expose the governmental entity to liability that it might otherwise not incur (see Uhr v East Greenbush Central School Dist., supra at 42). The Court has reviewed Social Services Law Title 11, and the not very illuminating histories thereunder, and discerns no evidence supportive of the Legislature's willingness to expose the State of New York to additional liability for violation of this provision within the general statutory scheme. Under these circumstances, the Court finds that a private right of action to enforce Social Services Law §368-a is inconsistent with the overall legislative scheme of Title 11 and therefore cannot be fairly implied. This is a policy matter.

Accordingly, no private, separate cause of action in money damages for a purported violation of Social Services Law §368-a is implied herein, and that portion of the claim asserting such a cause of action is dismissed.

NEGLIGENCE

Claimant has not established the elements of any claim of negligence in the first instance, because it has not shown how the conduct of the State's agents constituted a failure to use that degree of care that a reasonably prudent person would have used under the same circumstances, through the affidavit of an expert in computer programming or otherwise. What the claimant's submissions show is that there was a lot of discussion back and forth within the various alphabet agencies of the State and of the City of New York once the errors were apparently noted in 1999. The salient feature of these communications, however, is that problems with the interaction between the federal and state computer systems had to be identified, weeded out, determinations on how to fix what errors were isolated had to be made, with various interests - from the policy end and the technical end - weighing in with varying results and varying efficiency. These were all judgment calls: what was wrong, how it might be fixed, when and how to test alterations made, how to preserve the rights of those receiving the benefits of the entitlement programs, etc. Over the course of the attempts to fix the glitch, one or all of these considerations was called into [*7]play not just by State personnel, but by the City personnel as well. Prioritizing was part of the process. There were concerns over the transition to calendar year 2000, implementing the so-called "newborn cases,"[FN8] and assuring that those Medicaid recipients who were actually eligible remained eligible, among other things.

More significantly however, the acts or omissions of the State's employees were clearly discretionary, and involved the exercise of judgment upon which reasonable minds might differ, and different results might obtain, and thus entitled to absolute immunity. Arteaga v State of New York, 72 NY2d 212 (1988). A government agency is not liable for the negligent performance of a governmental function in the absence of a special duty to the injured party, in contrast to a general duty owed to the public. ". . . [D]iscretionary or quasi-judicial acts involve the exercise of reasoned judgment which could typically produce different acceptable results. . . [A] ministerial act envisions direct adherence to a governing rule or standard with a compulsory result." Tango v Tulevech, 61 NY2d 34, 41(1983).

If it was not clear before, it has been clarified now that "[g]overnment action, if discretionary, may not be a basis for liability, while ministerial[FN9] actions may be, but only if they violate a special duty owed to the plaintiff, apart from any duty to the public in general." McClean v City of New York, supra , at 203; see also Dinardo City of New York, ___NY3d___, 2009 WL 4250125.

Quoting Pelaez v Seide, supra , the McLean Court said

" [a] special relationship can be formed in three[FN10] ways: (1) when the municipality [*8]violates a statutory duty enacted for the benefit of a particular class of persons; (2) when it voluntarily assumes a duty that generates justifiable reliance by the person who benefits from the duty; or (3) when the municipality assumes positive direction and control in the face of a known, blatant and dangerous safety violation'. . . To form a special relationship through breach of a statutory duty the governing statute must authorize a private right of action . . .' McLean v City of New York, supra at 199-200."

As noted above, the Social Services Law does not expressly confer governmental tort liability, nor is one implied. Since it is also apparent that no special relationship is created by virtue of an explicitly conferred private right of action, or an implied private right of action, then there is no basis for a cause of action in negligence here. In saying this, the Court is mindful of the decision in Matter of City of New York v Wing, supra , wherein the First Department affirmed the trial court dismissal of claimant's Article 78 proceeding wherein it was concluded that the nature of the claim before it [see Matter of Gross v Perales, supra ] was one for money damages stemming from the State's alleged negligence in programming its computers, appropriately brought in the Court of Claims. That determination did not at all address any immunity concerns, and is thus limited in its utility.

Claimant's submissions show that problems with the computer program were not either readily ascertainable or quickly fixed. Any "fix", too, based upon the City's submissions here, also implicated policy concerns as to notification of affected individuals, potential lawsuits by same as vocalized by legal representatives who pointed out problems with other bases for medicaid eligibility. At best, there are triable issues of fact as to this cause of action, because claimant has not established that the acts of the State employees were negligent, that is, claimant has not established entitlement to judgment as a matter of law for summary judgment purposes.

Additionally, the Court is concerned with the fluidity of interpretation of what constitutes conduct granted absolute immunity and conduct that is ministerial that may subject the State to liability for negligent acts. Because of the mixture of these concepts in the acts alleged, there are triable issues of fact as to whether defendant is entitled to dismissal of this cause of action based on Arteaga v State of New York, supra and McLean v City of New York, supra .

Accordingly, claimant's motion for summary judgment on this cause of action and defendant's cross-motion for summary judgment on this cause of action are both denied.

MONEY HAD AND RECEIVED

As noted above, a cause of action for money had and received is a quasi-contract cause of action. The claimant must show that the defendant received money to which the claimant is entitled, and, although it should return it, has not done so. This cause of action is clearly tenable, given that there is no factual dispute that the State of New York erroneously billed the City of New York for expenditures that should not have been billed. The State's argument to the effect [*9]that it has not benefitted from overcharging the City for its share of medicaid expenditures, because the State itself paid money to providers, is rejected. Rejected, too, is the claimant's urging that its resort to self-help by withholding monies it would otherwise have paid to the State of New York in recovered Medicaid liens should not offset any damages owed by the State.

Notably, only claims for moneys paid within six years of the filing of the application for late claim relief are timely (as opposed to claimant's indication that it paid money for ineligible medicaid recipients from January 1990 through November 2002). The application for late claim relief was filed July 15, 2005. Claimant has established that the State is liable for excess amounts billed to the City from July 19, 1999 through November 30, 2002. According to the submissions herein, the glitch cases were closed by November 30, 2002.[FN11]

Accordingly, the City alleges it overpaid some 16.8 million dollars during the period from July 19, 1999 through November 30, 2002, based upon the accounting affidavits presented on its motion for summary judgment as it relates to this cause of action. [See Affidavit of Ellen Walker and Affirmation of Gordon Kraus-Friedberg, and attached Exhibits]. By the same token, however, the City withheld monies as acknowledged self-help it otherwise should have paid to the State from the proceeds of recovered Medicaid liens - an entirely different process - but monies they indicate were withheld strictly because of the glitch problem. While initially it appears that the amount of 8.4 million dollars was the amount withheld (and thus an appropriate offset against any monies the State is holding that it is not entitled to), the actual dollar figures are blurred because the City mentions in legal memorandum that the City "filed for reimbursement for the amounts that it was wrongfully billed for the Glitch cases."[See Sur-Reply Memorandum of Law in Further Support of Claimant's Motion for Summary Judgment and in Opposition to Defendant's Cross-Motion for Summary Judgment, Page 4].

With regard to this cause of action, the Court finds that there are also triable issues of fact preventing summary determination.

Accordingly, while claimant's motion for summary judgment with regard to its third cause of action for money had and received is granted to the extent that it has established the State's incorrect billing of the claimant's share of Medicaid costs for the period from July 19, 1999 through November 30, 2002, trial on the actual damages for said period is necessary.

The Clerk of the Court is directed to enter interlocutory judgment accordingly. Footnotes

Footnote 1: The determination whether individuals are eligible for SSI (and thus for Medicaid on that basis) is made by the federal Social Security Administration. SSI provides assistance to people who are disabled or who are indigent and over 65 but, who, as a result of their work histories, are entitled to little or no Social Security Survivor and Disability Insurance benefits.

Footnote 2: Social Services Law §368-a sets forth the reimbursement rate scheme. Most Medicaid claims are paid in the percentages noted, with some adjustments made for different categories of recipients, or different categories of services, such as long-term care, which are reimbursed in different proportions. See also Social Services Law §367-b(6); 42 U.S.C. §§ 1396b(a) (1), 1396d(b).

Footnote 3: No private right of action implied for the benefit of infant who suffered abuse while being tended at family day care home registered by City agency as contracted with State agency, from Social Services Law provision governing the licensing and registration of day care providers. Social Services Law §390. No "special duty" found.

Footnote 4: No private cause of action against school district for failing to conduct scoliosis screening of infant plaintiff as required by Education Law §905.

Footnote 5: No private right of action against City welfare agency implied under two titles of Social Services Law for children abused while in foster care. Two of the three prongs arguably satisfied, yet court found it inappropriate.

Footnote 6: No private right of action from penal law provision prohibiting sale of alcoholic beverages to minors where minor injured as a result of voluntary consumption of beverages.

Footnote 7: Judge Hard noted the State's "constructive denial" in July 2003 of the claimant's reimbursement application, as well as the apparent failure to seek judicial review via an Article 78 proceeding. The Court found, however, that such review would likely yield the same result as the proceeding brought by the City of New York concerning the State's determination to recoup the monies retained by the City as self-help, whereby the First Department concluded that what was at issue was a claim for money damages stemming from the State's purportedly negligent failure to program its computers properly, best brought in the Court of Claims. Matter of City of New York v Wing, 12 AD3d 180 (1st Dept 2004), lv denied 4 NY3d 705 (2005). Neither the claimant nor the defendant here has addressed at any length a seeming failure to pursue an administrative remedy.

Footnote 8: Whereby children born to medicaid eligible women were to be automatically enrolled themselves. [See Affirmation in Opposition to Claimant's Motion for Summary Judgment and in Support of Defendant's Cross-Motion for Summary Judgment by Glenn C. King, Assistant Attorney General, Exhibit E].

Footnote 9: A ministerial act is typically described as being "clerical or routine" in nature. Mon v City of New York, 78 NY2d 309, 313 (1991).

Footnote 10:The second and third means of forming a special relationship would not seem at all applicable here, in that they are used in the police and safety inspection context primarily, as derived from Cuffy v City of New York, 69 NY2d 255 (1987). The McLean Court, quoting Cuffy v City of New York, said that to form a special relationship by voluntarily assuming a duty "to an injured person . . .[claimant must demonstrate] (1) an assumption by the municipality through promises or actions, of an affirmative duty to act on behalf of the party who was injured; (2) knowledge on the part of the municipality's agents that inaction could lead to harm; (3) some form of direct contact between the municipality's agents and the injured party; and (4) that party's justifiable reliance on the municipality's affirmative undertaking.'" McLean v City of New York, supra at 201; see Dinardo v City of New York, supra . As to safety, Pelaez v Seide, supra at 203, recites that "Smullen v City of New York (28 NY2d 66 [1971]) is the prototypical case for this exception . . . we found a special relationship between the municipality and a worker who was killed when a trench collapsed. Before entering the trench, a city inspector, who was in control of the site and had the power to stop work, assured the worker the trench was solid.'. . . the trial court instructed the jury that there could be no recovery against the City in the absence of a finding that the inspector assumed control and direction of the work and that such a conclusion could only be arrived at if it could be found that he gave decedent "an order or affirmative instruction to enter the excavation."

Footnote 11: Although it is noted that the claimant makes argument to the effect that new glitch cases have appeared, they are not part of any timely served and filed claim pending before this Court, nor are they part of the subject claim served and filed only by permission. Additionally, claimant concedes that due to the enactment of a dollar cap on the City's Medicaid costs in 2005, the City has not suffered any financial losses as a result of the glitch since.