Agencies for Children's Therapy Servs., Inc. v New York State Dept. of Health

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Agencies for Children's Therapy Servs., Inc. v New York State Dept. of Health 2013 NY Slip Op 30610(U) February 4, 2013 Surpeme Court, Nassau County Docket Number: 15763/12 Judge: Thomas Feinman Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] sG4'^i SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK COUNTY OF NASSAU Present: Hon. Thomas Feinm,an . JUSllCe AGENCIES FOR CHILDREN'S THERAPY SERVICES, INC., TzuAL/IAS PART 9 NASSAU COLINTY TNDEXNO. 15763112 Plaintiff, G - agalnst - NEW YORK STATE DEPARTMENT OF HEALTH and ANDREW M. CUOMO, in his official capacity as Governor of the State ofNew York, MOTION SUBMISSION DATE:1/10/13 MOTION SEQUENCE NO. l,2 Defendants. The following papers read on this motion: X Order to Show Cause...... Affidavits.......... X Notice of Cross-Motion and X Memorandum of Law............... Opposition.... Reply Affirmation........................ Affirmation in N/A X Plainlifi, Agencies for Children's Therapy Services, Inc., moves by Order to Show cause, pursuant to cPLR 6311, to preliminarily enjoin the application and enforcement of regulations adopted by the defendant, New York state Department of Health and published in the State Register in a Notice of Adoption on November 28 ,2012. The motion is granted. Defendants, New York State Department of Health and Andrew M. Cuomo, in his official capacity as the Governor o1 the State of New York, cross Inove, pursuant to CPLR 510(3) for an Order changing the venue of this action and to dismiss this action for lack of standins. The cross motion is denied. [* 2] Piaintiff, Agencies for Children's Therapy Services, Inc. (hereinafter referred to as *ACTS'), is a New York not-for-profit corporation whose member agencies, pursuant to "New York's Eatly Intervention Program for Infanls and Toddlers with Disabilities and Their Families"r, contract with and employ individuals who provide evaluations, services and service coordination for children with developmental delays due to physical or mental conditions such as Down syndrome or other chromosomal abnormalities, sensory impairments, inborn errors of metabolism, or fetal alcohol syndrome. The Early Intervention Program is designed to provide services to such developmentally disabled children at an early age - typically between birth and two years old - through the coordination and cooperation of parents, professional service providers, and municipalities. The New York State Department of Flealth C'DOH') and the Governor of the State of New York promulgated regulations and an Executive Order on November 28,2012 and January 18,2012, rispectively, to address the "conflicts of interest" by evaluators, service providers and sewice coordinators. (The DOH's regulations will hereinafter be refened to as the "conflict of interest regulations.") Notably, on September 5, 2010, prior to the DOFI's publication of the proposed conflict of interest regulations, the Governor submitted a similar set of rules to the Legislature for its approval as part of the 2012-2013 state Budget. The Legislature did not, however, enact those rules into law. ACTS brings this action seeking a declaratory judgment that, inter alia, the DOH and the Govemor have exceeded the scope of their authority by issuing rules and an Executive Order that purport to make policy decisions which, it claims, are the Legislature's alone to make. Specifically, in bringing this suit, ACTS claims, inter alia, that the regulations and Executive Order at issue will make sweeping changes to the operation of New York's Early Intervention Law including, among other things, prohibiting a person who conducts an evaluation of a child for eligibility for Early Intervention services, and also an agency who contracts with or employs the evaluator, from providing Early Intervention services to the same child; and, forbidding a person from serving as both an evaluator and a "service coordinator" for a child (i.e., a professional who, among other things, assists eligible children and their families in accessing Early Intervention selices and coordinates the provision of Early [ntervention services to eligible children). ACTS submits that the Early Intervention Law does not authorize the DOH to declare policy with respect to whether, and in what circumstances, an evaluator may also provide Early Intervention services to a child. It also claims that, as with the conflict ofinterest regulation, the Governor, pursuant to the doctrine of separation of powers, does not have the authority to issue an Executive Order reflecting policy choices that are left to the Legislature to make. 'Codified in Title II-A ofthe Public Heallh Law $$ 2540-2559-b and refened to herein as "Early Intervention Program" or "Early Intervention Law." [* 3] Upon the instant motion, brought by Order to Show Cause, ACTS seeks a preliminary injunction preventing the implementation of the conflict of interest regulations that in effect prohibits the evaluators for children under New York's Early Intervention Law from also acting as service providers for the children that they evaluate, szpra. Notably, plaintilfs claim that the Govemor lacked the authority to issue Executive Order No. 38 is not the subject of ACTS' preliminary inj uncLion rrotiorr. Defendants oppose the plaintiff s motion and cross move, in tum, for an Order changing tl.re venue ofthis action, or alternatively, dismissing the action for lack ofstanding. Addressing first the issue oflack of starding, this Court notes the following: plaintiff is a not-Ibr-profit corporation with member agencies who contract with and employ individuals to provide evaluations, services and service coordination for children pursuant to the Early Intervention Program (Complaint, flfl2, 15). It is true that the plaintiff does not have standing to maintain this action in its own right because it has failed to demonstrate that l/ has suffered any injury in fact as a result of defendants' actions (Matter of Dental Socy. v Carey,61 NY2d 330, 334 [1984]). However, in bringing this declaratory judgment action, the plaintiff has consistently identified itself as a membership organization. It claims that its "members" will sustain injury if the conflict of interest regulations and the Execulive Order are not set aside. The law governing organizational standing is clear. In order to have standing to sue on behalf of its members, some or all of the members of the organization must have such standing; the interests which the organization seeks to protect must be germane to its purpose; the organization must be an appropriate representative of the group; and, participation of the individual members in the relief sought or claims asserted must not be required (1d). Llere, ACTS' complaint satisfies these criteria for standing. Specifically, ACTS' members have standing because they are directly injured by the regulations in the form of lost opportunities for business and the inability to service children as both evaluators and service providers. For the purposes of establishing standing, "[i]t is enough to allege the adverse effect of the decision sought to be reviewed on the individuals represented by the organization; the complaint need not specif) individual injured parties" (1d. at 334). Indeed, this Courl notes that no where on this record do the defendants dispute that the regulations are applicable to the entities that employ or contract with qualified personnel including members of ACTS. Next, ACTS' Certificate of Incorporation states that ACTS was "formed for the following pupose or purposes: For mutual advancement of the interests of its members engaged in the business ofproviding evaluation and therapy seryices...; to [* 4] promote and represent thc common business interests of and improve business conditions among, persons engaged in such business..." (Sanders' Reply Aff., Ex. A) Accordingly, it is plain that advancing its members' interests as providers of Early Intervention services and evaluations is clearly germane to ACTS' purposes. Finaliy, the participation of ACTS' members is not required in this declaralory judgment action which seeks simply to determine the validity of the conflict of interest regu.lations (Matter of Aeneas McDonald Police Benevolent Assn. v City of Genew, 92 NY2d 326, 331 |9981; Mulgrew v Board of Educ. of the City School Dist. of the City of New York,75 AD3d 412 [1' Dept.2010l). In light of the lbregoing, this Court finds that the plaintiff can proceed to advance its clam as a representative of its members. Defendants' argument that this action is not proper in Nassau and should be changed to Albany is equally meritless. Defendants assefi two bases for their application to change the venue ofthis action. First, citing to CPLR 6311, defendants argue that the venue for a motion for a preliminary injunction seeking to prevent a govemmental entity from performing a statutory duty "maybe granted only by the supreme court at a term in the department in which the officer or board is located or in which the duty is required to be performed." Second, defendants contend that since this is an Article 78 proceeding masquerading as a declaratory judgment action, ACTS' Nassau County "residence" is irrelevant and is not a basis for venue for the Article 78 proceeding (Def'endants' Memo of Law, pp. 4-8). Dealing first with the defendants' contention that this action should have been brought as an Article 78 proceeding, this Court notes that pursuant to the Slate Administrative Procedure Act $205, "[u]nless an exclusive procedure or remedy is provided by law, judicial review of rules may be had upon petition presented under article seventy-eight of the civil practice law and rules, or in dn action for a declaratory judgment where applicable and proper" (Emphasis Added). This (declaratory judgment) action challenges the validity of the conflict of interest regulations and the DOH's authority to issue said regulations. l'he Court ofAppeals has made clear that where, as here, the plainrifls scek both a review ofa quasi-legislative act and a declaration that a promulgated regulation is invalid, an action for a declaratory judgment is more appropriate than an Article 78 proceeding (Boreali v. Axelrod, Tl NY2d 1 119871; Erie County v t(halen,57 AD2d281 [3'd Dept. 1977] alf'd 44 NY2d 817 [978]). Accordingly, there is no basis herein for converling this action (seeking, inter alia, review of a legislative action) into an Article 78 proceeding. [* 5] Del'endants argue that plaintiffs claims assert that the DOH "proceeded or is about to proceed wilhout or in excess ofjurisdiction" in issuing the conflict ofinterest regulation which. they submit, is a ground for commencing an Article 78 proceeding. This argument is unavailing. The statutory ground of proceeding "without or in excess ofjurisdiction" is a codification ofthe writ of prohibition, which, in turn, is limited to challenges to official action in a 'Judicial or quasi-jLrdicial capacity," as distinguished from legislative, executive or ministerial action (Town af Huntington y. Neyv York State Division of Human Rights, 82 Ny2d 783 11993); B.T. Productions, Inc. t Barr,44 NY2d 226 [1978]). Here, ACTS is not challenging any judicial or quasi-judicial action; rather, ACTS seeks a declaratory judgment determining the validity of the conflict of interest regulations. A declaratory judgment action is appropriate to determine the validity of a statute, ordinance, or other enactment of a legislative nattre (Hudson l/alley Oil Heat Council, Inc. v. Town oJ'Warwick, 7 AD3d 572 [2"d Dept. 2004); see also Jones v. Town of Catoll,32 AD3d 1216 [4'h Dept. 2006]). As to defendants' application to change the venue of this action to Albany County, it is noted that pursuant to CPLR 631 1(1): "A preliminary injurclion to restrain a public olJicer, board or municipal corporation of lhe state from performing a statutory duty may be granted only by the supreme court at a term in the department in which the officer or board is located or in which the duty is required to be performed" (Emphasis Added). Here, the plaintifT seeks to enjoin the New York State Depatment of Health, not a "public officer, board or municipal corporation" (State Administrative Procedure Act $102[]). Moreover, ACTS is not seeking to enjoin the DOH from "performing a statutory duty;" rather, it is seeking to preliminarily enjoin the DOH from enforcing its own conflict of interest regulations. Accordingly, this Court finds no basis in CPLR 6311 to change the venue of this action to Albany County (see also CPLR 503 [a] [c]). Finally, defendants' claim that the convenience of the parties and putative parly witnesses compel a change of venue to Albany County, is also unavailing (CPLR 510[3]; D'Argenio v. Monroe Radiological lssocs., 124 AD2d 541 l2'd Dept. 19861). Hcre, the defendants have failed to satisly their burden to demonstrate that the convenience of the nonpdl,J,- witnesses warrants a transfer of venue (CPLR 510[3]; McAdoo v. Letinson, 1 43 AD2d 8 I 9 [2"d Dept. 1988]). Accordingly, this Coul finds that it is no more convenient to decide this action in Albany County than it is in Nassau County, where ACTS has otherwise properly established venue (see e.g, Bretetti y. Roth, 114 AD2d 877 [2"d Dept. 1985f; Margolis v. fJnited Parcel Service, Inc., 57 AD3d 371 [1't Dept. 2008]). Therefore, defendants' application to ttansfer venue is herewith denied. Turning to the plaintiffs motion for a preliminary injunction, this Court begins by noting that although the proccdural device is designed to maintain the status quo pending determination [* 6] of an action (City of Long Beach v. Sterling Am. Capital, LLC, 40 AD3d 902,903 [2"d Dept. 2007 j; Ingenuit, Ltd. v. Harrffi 33 AD3d 589 [2"d Dept. 2006]), it is a drastic remedy which is used sparingly, and only when required in urgent situations or grave necessity and then upon the clearest evidence (Wm. Rosen Monuments, Inc. v. Phil Madonick Monuments, Inc., 62 AD2d 1053 [2"d Dept. 1978]). Ultimately, the decision whether to grant or deny such relief rests in the sound discretion of this Court (Ruiz v. Meloney, 26 AD3d 485, 486 [2"d Dept. 2006]). In order to obtain a preliminary injunction the movant must demonstrate (1) a likelihood of success on the merits; (2) irreparable injury absent the granting of the requested reliel and (3) a balancing of the equities in the movant's favor (Aetna Ins. Co. v. Capasso, 75 NY2d 860, 862 11990] Wiener v. Life Style Futon Inc.,48 AD3d 458 [2"" Dept. 2008]). It must be reiterated that the ACTS' application for a preliminary injunction is aimed at preventing the implementation of the conflict of interest regulations issued by the DOH. ACTS' claim that the Governor lacked the authority to issue Executive Order No. 3 8 is not the subject of this motion. Here, ACTS has demonstrated it's likelihood of success on the merits - i.e., that the DOH did not have the authority to promulgate regulations prohibiting parents from choosing a service provider that also evaluated their child. The DOH is a New York State executive agency which administcrs the Early Intervention Program. As .an arm of the executive branch of govemment, an administrative agency may not, in the exercise of rule-rnaking authority, engage in broad-based public policy determinations (Boreali v. Axelrod, supra at 9). In Boreali, the Court of Appeals identified four "coalescing circumstances" indicating that the agency, in enacting the regulations, had usurped the role of the legislature in making public policy assessments. Similarly, in this case, ACTS has established that all of the Boreali factors weigh in favor of frnding that the DOH, just as the State's Public Health Comrnission in Boreali, acted outside its proper role and that the regulations are therefore unlawful: L The [agency] consfucted a regulatory scheme laden with exceptions based solely upon economic and social concemsl 2. The [agency] did not merely f,rll in the details of broad legislation describing the overall policies to be implemented, but instead, writing on a clean slate, created its own comprehensive set ofrules without benefit of legislative guidance; 3 . The [agency] acted in an area in which the legislature had repeatedly tried-and failed-to reach agreement in the face of substantial public debate and vigorous lobbying by a variety of interested factions; and 4. The [agency] had no special expertise or technical competence. |d. at l2-14. [* 7] As to the first factor, here, according to the DOH, its conflict ofinterests regulations will "ensure that the relationship between evaluator and provider does not encourage the inappropriate provision of services, fostering the objectivity of evaluations and decreasing costs fbr taxpayers" (Sanders Aff., Ex. A [Early Inte ention Final Regulations] at 10). Thus, not only is it plain that the DOH is balancing policy matters that have nothing to do with health or costs, but, as in the case of Boreali, there is no distinction herein that "[tjo the extent that the agency has built a regulatory scheme on its own conclusions about the appropliate balance of trade-offs between health and cost...it [is] 'acting solely on [its] own ideas of sound public policy' and [is] therefore operating outside of its proper sphere of authority" (Boreali r. Axelrod, supra at 12 [citations omitted]; see also Under 21, Catholic Home Bur. For Dependent Children v. City of New York,65 NY2d 344,359 [1985]). Moreover, pursuant to a plain and simple reading of the Early Interwention Law - Public Health Law $2544[5] - the evaluation of a child from including a reference to any specific provider of Early Intervention services is expressly prohibited. Thus, clearly, the Legislature not only considered the conflict of interest in connection with the provision of Early Intervention scrvices, but it also addressed and resolved the issue within the statute itself. Therefore, absent any statutory authority, this Court cannot permit the DOH to expand upon or modifu the Legislature's policy. Indeed, there is no provision of the Early Intervention statute that delegates any authority to the DOH to fui1her regulate purported conflicts of interest between evaluators and seruice providers. Accordingly, in light of the detailed legislative scheme outlined in the Early Intervention statute, to wit, Public Health Law $$2540-2559, there is no basis for the DOH to usurp the right to regulate the choice ofa provider under the generalized concern for avoiding a "con flict of interest." With respect to the second Boreali faclor, since, as stated above, the legislature has made clear how service providers are chosen and how conflicts of interest are best avoided, leaving no provision for the DOH to have any regulatory role in this area, this Coud finds that the DOH's conflict of interest regulations do not fill any statutory gap; rather, the DOFI has "creatfed] its oum comprehensive set of rules without benefit of legislative guidance," allowing it the discretion to determine whether an evaluator may also act as a service provider (Boreali v. Axelrod, supra at l3). The conflict of interest regulations give the DOH the power to decide how to make the policy tradeofls in determining under what circumstances al evaluator may also be a service provider tbr a child. This is clear$ outside the function of the DOH (Under 21, Catholic Home Bur. For Dependent Children v. City of New York, sryraat356). As to the third factor, the facts here are undisputed that as pad of his 2012-13 State Budget, the Governor submitted a proposed conflict of interest rule to the Legislature lor its approval, which the Legislature ultimately chose to reject. Refusal by the Legislature, the arm of the government charged with the task of enacting laws, to adopt the Governor's proposed rule is enough evidence that this choice, in fact, belongs to the legislature, not to an executive agency 'l [* 8] (Boreali v. Axelrod, supra at 13; see also Ellicott Group, LLC v State of N.Y. Exec. Dept OJf. of Gen. Servs..85 ADld 48. 54 l4'h Dcpt. 20 | I l). Finally, based upon the papers presented for this Court's consideration, and despite the fact that the Early Interuention Law is a public health statute, there is no evidence that the DOH used any special experlise in the field ofhealth in creating the regulations at issue here. With the exception of a single statistic about the incidence of agency evaluators and service providers serving the same child in New York City (a consideration having nothing to do with heallh), the DOH does not cite to any evidence in support of its regulations. Thus, having shown the existence of all four Boreali factors, this Court finds that the DOH lacked the authority to promulgate regulations prohibiting parents from choosing a.service provider that also evaluated their child. The DOH's actions violate the separation of powers doctrine and establish ACTS' likelihood of success on the merits of its claim for a declaratory judgment that the conflict ofinterest regulations are invalid. In fact. by demonstrating the DOH also failed to comply with the procedures mandated by the statute in promulgating the regulations (see e.g., PHL $$ 2553[4], 2559-b) and that the regulations are based upon speculation and erroneous assumptions and are therefore arbitrary and capricious, ACTS has advanced additional basis of it's success on the merits of its claim for a preliminary injunction. For example, there is no record evidence here of instances where a conflict of interest taintbd the process of evaluations, service coordination and services. Nor is there any evidence of any benefit beyond an undefined level of savings to the program (,Id; see also, Matter of Aronslry v. Bd. of Educ.,75 NY2d 997, 1000-01 [990]). "Absent a predicate in the proof to be found in the record, an unsupported determination must be set aside as without any rational basis and wholly arbitrary" (Metro. Taxicab Bd. Of Trade v. New York City Taxi & Limousine Commission,20Og WL 8411814 [Sup. Ct. New York 2009]). ACTS has also established an irreparable harm in the absence of a preliminary injunction. There is support for ACTS' claim that by expressly preventing an approved agency from evaluating a child for eligibility for Early Intervention services and also providing Early Intervention services to the same child, the DOH's conflict of interest regulations will cause a substantial disruption in the Early Intervention Program, by causing a likely shortage in the availability of willing evaluators and impinging on the rights of parents. Indeed, the affidavits from several of ACTS' Board rnembers, each of which is a principal in an approved agency providing Early Intervention evaluations ard services, demonstrate that, in the absence of the conflict of interest regulation, each of these ACTS' member agencies anticipate providing Early Intervention services in 2013 to a similar percentage of children whom it will evaluate in 2013 approximately 35% to 600/o of the children whom they also evaluated in 2012. Lost business opportunities are irreparable (see e.g., Gundermann & Gundermann Ins. v. Brassill,46 AD3d 615.617 l2"d Dept. 20071). ln any event, damages arc unavailable in this suit involving an unlawful administrative regulation (State Administrative Procedure Act $ 205). Notably, the DOII does not take issue with ACTS' argument that the lost business opportunities that ACTS' [* 9] members rvill suffcr are not compensable with damages and are thus ineparable (McLaughlin, Piven, Vogel, Inc v. IF.J. Nolan & Co., lnc.,114 AD2d 165, 174 [2'd Depr. 1986] app. den. 67 NY2d 606 [1986]). The DOH's argument that ACTS has failed to show that "ir will be harmed" because "ACTS does not engage in any activity that is subject to the...regulationfs]" (Defendants' Memo ci'Lar,v, p. i3) is meriiless. .1\s statecl above, urrier the iaiv of associational sranding, szryra, injury to ACTS' member agencies by the conflict of interest regulation may be asser-ted by ACTS. Finally, the test lbr determining whether the balance of equities weighs in favor of granting preliminary injunctive relief is whether "the irreparable injury to be sustained is more burdensome to the plaintiff than the harm caused to the defendant through the imposition of the injunction" (Klein, ll/agner & Motis v. Latprence A. Klein, P.C.,186 AD2d 631,633 [2"r Dept. 1992]). Here, the harm to ACTS has been established, sz;pra; however, there is no evidence or suggestion of any demonstrable harm to the DOH from maintaining the status quo until this Court decides the merits of this case. Further, inasmuch as this Court is required to "weigh the interests of the general public as well as the interests of the parties to the litigation" in determining this motion for a preliminary injunction (De Pina v. Educational Testing Serr.,3l AD2d 744, 745 lz"d Dept. I 9691), there is evidence on this record that the regulations will harm the parents ofthe children who need Early Intervention services in that the regulations will have the eflect of a causing a shortage of evaluators because of the disincentive they create to qualified individuals working as evalualors (Sanders Aff., 1110). Moreover, the regulations will interfere with the right of parents to choose their evaluator to act as their child's service provider (lck. Given that the harm to the DOH from a provisional injunction is minimal, this Coufi flnds that the balance of equilies favors maintaining the status quo until this Court decides the merits of this case. Accordingly, this Court is persuaded that the injury to be sustained by plaintiff is more burdensome to plaintiff than the harm which would be caused to defendants through tlre imposition of the injunction (McLaughlin, Piven, Vogel, Inc. v. I;l/.J. Nolan & Co,, Inc . , stpra aI 17 4) . For these reasons, plaintiffs motion for a preliminary injunction enjoining the application and enforcement ofthe conflict of interest regulations promulgated by the New York State Department of Flealth and published in the New York State Register on November 28, 2012, is granted pending final disposition of this action. The parties' remaining contentions have been considered and do not rvarrant discussion. The parties are hereby directed to appear for a Prelirninary Conference which shall be held at the Preliminary Conference part located at the Nassau County Supreme Court on lhe 21th day of March, 2013, at 9:30 A.M. This clirective, with respect to the date of the [* 10] Conference, is subject to the right of the Clerk to fix an altemate date should scheduling require. T'he attorneys for the plaintilf shall serve a copy of this order on the Preliminary Conl'erence Clerk and thc attomevs for the defendants. This shall constitute the decision and order ofthis Court. Dated: February 4,2013 cc: Jones Day Eric T. Schneiderman, Attorney General ofthe State ofNew York ENTERED FEB 13 20t3 corfifr*d&t";i'.dlacc l0

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