New York State Court of Claims

New York State Court of Claims

CONCOURSE NURSING HOME V. New York, #2000-015-011, Claim No. 101181, Motion Nos. M-60960, CM-61037


The Court will sua sponte dismiss a claim when it lacks subject matter jurisdiction. A claim to overturn a Medicaid recoupment must be pursued in Supreme Court.

Case Information

Claimant short name:

Footnote (claimant name) :

Footnote (defendant name) :
The caption of this claim was amended by an order of this Court filed on January 19, 2000 to reflect the State of New York as the only properly named defendant.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):
Claimant's attorney:
Neiman Ginsburg & Mairanz, P.C.By: Betsy R. Malik, Esquire
Defendant's attorney:
Honorable Eliot Spitzer, Attorney GeneralBy: Arthur Patane, Esquire, Assistant Attorney General
Third-party defendant's attorney:

Signature date:
March 21, 2000
Saratoga Springs

Official citation:

Appellate results:

See also (multicaptioned case)


The cross-motion of the claimant for an order pursuant to CPLR 3025 permitting it to serve and file an amended claim is granted and the motion of the defendant to dismiss the amended claim pursuant to CPLR 3211 for lack of subject matter jurisdiction is granted.

Claimant is the operator of a 240 bed nursing home in the Bronx, New York and participated in the Medicaid Program (see 42 USC § 1396 et seq.; Public Health Law § § 2807, 2803; and 10 NYCRR Part 86) through which government funds reimburse healthcare providers for services rendered to Medicaid eligible patients. According to claimant, in excess of 90% of its income for the period beginning on January 1, 1974 and terminating on December 31, 1991 was received as Medicaid reimbursement. The claim alleges that claimant commenced timely administrative appeals of its Medicaid rates for the years 1974 through 1991.

Pursuant to a 1980 labor relations matter, claimant was required to pay increased labor expenses which were reimbursed through the Medicaid Program in the sum of $8,200,000. Thereafter, it was determined that the $8,200,000 had not been paid to the employees and the Department of Health (DOH) used that failure to compute lower Medicaid reimbursement rates for claimant. Claimant protested and pursued an administrative appeal from that determination, amongst others. It is alleged that on October 6, 1989, claimant and the DOH entered into a letter agreement whereby the DOH agreed to act upon all of the appeals, including the labor rate dispute. Claimant asserts that one of the purposes of the October 6, 1989 letter agreement was to facilitate a settlement between Concourse and the union representing its employees, Local 144 of the Hotel, Hospital, Nursing Home and Allied Services Union. Local 144 had instituted litigation against claimant for failure to pay certain wage and benefit increases. That litigation was settled pursuant to a stipulation and order executed by representatives of Local 144 and claimant on May 23, 1991. The settlement hinged upon claimant receiving additional Medicaid funds from the State with a provision that if claimant received less than $7.1 million the settlement would be set aside.

Early in 1991, DOH notified claimant that it was due Medicaid reimbursement in the sum of $9,400,000 pursuant to the administrative appeals. In May of 1991, the DOH advised claimant that as a result of a recalculation claimant would be receiving an additional $3.3 million dollars in retroactive Medicaid reimbursement payments. On August 14, 1991, $9.4 million was paid by DOH as Medicaid reimbursement directly to the agent of Local 144 and $3.3 million dollars was withheld upon the basis of information given by representatives of Local 144 to the DOH contending that there may have been significant overpayments of Medicaid funds to claimant. DOH directed the New York State Department of Social Services to conduct an audit and a determination was made in 1994 that $10,230,947.00 in Medicaid overpayments had been made to claimant as of the end of 1993.

During 1991, claimant commenced an action against the Commissioners of the DOH and the Department of Social Services in the Supreme Court of New York County asserting five causes of action and seeking to recover the $3.3 million dollars upon the ground that the Commissioners had breached the October 6, 1989 letter agreement. In a decision and order dated July 15, 1994, Supreme Court Justice Beverly Cohen granted the defendant's CPLR 3211 motion to dismiss the third, fourth and fifth causes of action. All parties then moved for summary judgment upon the two remaining causes of action. The first cause of action sought specific performance of the 1989 letter agreement and the second cause of action sought $3.3 million in monetary damages by reason of the alleged breach of the letter agreement. In a decision and order entered on November 13, 1997, Supreme Court Justice Lorraine Miller sua sponte dismissed the complaint upon the ground that Supreme Court was without subject matter jurisdiction as the sole exclusive forum for a breach of contract cause of action against the State for money damages is the Court of Claims. In a decision issued on March 9, 1999, the First Department in the case of Concourse Nursing Home v Chasin, 259 AD2d 302, affirmed Justice Miller and held:
The IAS court correctly held that since plaintiff's only remaining causes of action primarily seek recovery of money under an agreement with the State Department of Health, the action may only be entertained in the Court of Claims.
This claim was filed on October 1, 1999. Prior to serving an answer, the State made this motion for an order pursuant to CPLR 3211 dismissing the claim for lack of subject matter jurisdiction as the claim allegedly sought relief beyond the subject matter jurisdiction of this Court as follows:
a. directing defendants to specifically perform under the October 6, 1989 agreement;

b. directing and ordering the defendants to recompute plaintiff's Medicaid reimbursement rate, in accordance with the October 6, 1989 agreement, taking into account the full amounts of the correct appeal rates;

c. declaring and adjudging that the July 30, 1991 determination is arbitrary and capricious, and in violation of applicable law and regulations;

d. directing defendants to promulgate the correct appeal rates for plaintiff for the respective rate periods in accordance with law;

e. declaring the draft audit report issued by DSS as being in breach of the October 6, 1989 agreement and in violation of law and of no legal or further effect and enjoining defendants from taking any further action relating to such audit report;

f. awarding plaintiff interest in this action;

g. awarding plaintiff its reasonable attorneys fees in this action;

h. awarding plaintiff the costs and disbursements of this action; ...
Claimant opposes the motion and cross-moves for permission to serve and file the proposed amended claim annexed to the notice of cross-motion upon the argument that while some of the requested relief may be improper it has alleged a traditional breach of contract cause of action against the State and that cause of action should not be dismissed. The sole change set forth in the proposed amended claim is the addition of a request in the Wherefore clause for a judgment "in the amount of $3.3 million for breach of the October 6, 1989 agreement and interest". Both the original claim and the proposed amended claim point out that the DOH paid the $3.3 million to claimant in June of 1997 and then recouped $2.2 million from claimant during July of 1997.

Arguably, the relief requested in the cross-motion may not be necessary as pursuant to 22 NYCRR 206.7 (b) a party in the Court of Claims may amend a pleading once without court permission "within forty days after service of a pleading responding to it". Since the answer has not yet been served and filed it appears that claimant may still of right serve and file an amended claim. Be that as it may, it is well settled that absent a demonstration of prejudice a motion to amend a claim to set forth the amount of damages sought will be granted (Barski v State of New York, 43 AD2d 767; cf Grande v State of New York, 160 Misc 2d 383). The Barski holding will be followed here as the State has failed to allege or establish prejudice and the proposed amended claim will be considered the operative pleading for the purpose of determining the defendant's motion to dismiss the claim for lack of subject matter jurisdiction.

In the Court's view, the claim must be dismissed for lack of subject matter jurisdiction albeit not for the reasons argued by the defendant. It is settled law that a Court should sua sponte dismiss litigation when it discovers facts establishing a lack of subject matter jurisdiction (Fry v Village of Tarrytown, 89 NY2d 714, 718). The proposed amended claim seeks to recover for an alleged breach of contract that occurred at the very latest some time during 1991 as established by claimant's Supreme Court action for breach of the contract commenced during that year. The version of Court of Claims Act § 10 (4) in effect during 1991[1] provided as follows:
4. A claim for breach of contract, express or implied, and any other claim not otherwise provided for by this section, over which jurisdiction has been conferred upon the court of claims, shall be filed within six months after the accrual of such claim, unless the claimant shall within such time file a written notice of intention to file a claim therefor in which event the claim shall be filed within two years after such accrual.
At the time that the breach of contract cause of action accrued in 1991 it was settled law that the failure to timely file a notice of intention or claim deprived this Court of subject matter jurisdiction over the claim (Sandoval v State of New York, 147 Misc 2d 1072). Consequently, the 1995 amendment to Court of Claims Act § 10 (4) deleting the requirement that a notice of intention be filed may not be applied retroactively to this claim (Chapman v State of New York, 261 AD2d 814). While that point may well be moot in view of Justice Carpinello's recent statement in the case of State of New York v Dewey, 260 AD2d 924, that "we have previously held that failure to timely and properly comply with the notice provisions of Court of Claims Act § § 10 and 11 deprives the Court of Claims of subject matter jurisdiction", it is clear that in order for this Court to have subject matter jurisdiction of the breach of contract cause of action set forth in the claim either a notice of intention to file a claim or a claim had to be filed with the Clerk of the Court within six months of the time that the cause of action accrued in 1991. The Clerk of the Court advises that neither document was timely filed. Claimant's failure to timely file a notice of intention or claim requires dismissal for lack of subject matter jurisdiction. Furthermore, the six year Statute of Limitations set forth in CPLR § 213 for breach of contract causes of action has long since expired, depriving claimant of any late claim relief pursuant to Court of Claims Act § 10 (6). Finally, CPLR § 205 is not available to make the claim timely (Yonkers Contracting Co., Inc. v Port Authority Trans-Hudson Corp., 93 NY2d 375).

To the extent that the amended claim can be read as attempting to assert a cause of action premised upon the recoupment of $2.2 million of Medicaid funds in July of 1997, the court in which subject matter jurisdiction concerning such litigation rests is Supreme Court (Matter of Mayf lower Nursing Home v Office of Health Systems Mgt. of Dept. of Health of the State of N.Y., 59 NY2d 935; Matter of Faxton Sunset-St. Luke's Skilled Nursing Facility v Dowling, 233 AD2d 865; Matter of Medicon Diagnostic Labs.v Perales, 182 AD2d 1033; Matter of County of Monroe v Axelrod, 125 AD2d 981). The subject matter jurisdiction of Supreme Court over such claims is established by a review of the decisions in Matter of Westledge Nursing Home v Axelrod, 68 NY2d 862 and Tioga Nursing Home v Axelrod, 90 AD2d 570, affd 60 NY2d 717. In the Westledge Nursing Home case the Commissioner of Health decided to recoup Medicaid overpayments arising from certain labor costs. The nursing home operator commenced litigation in Supreme Court to enjoin the State from recouping the alleged overpayment upon the argument that it had a binding agreement with the Department of Health to use certain annualized labor costs in setting the Medicaid reimbursement rates. The litigation, brought in the form of an article 78 proceeding, was immediately transferred to the Appellate Division pursuant to CPLR § 7804 (g), and was decided by the Appellate Division under traditional article 78 standards. Certainly, if the Supreme Court lacked subject matter jurisdiction of such litigation the Court of Appeals would have so stated. It did not. In the Tioga Nursing Home case, the Commissioner of Health determined that there had been Medicaid overpayments to the nursing home and he retroactively adjusted the nursing home's Medicaid rates by seizing Medicaid payments that had already been made to the nursing home operator. The nursing home operator commenced litigation in Supreme Court seeking an injunction directing the Commissioner to stop withholding current payments and to repay the amounts previously withheld. The Supreme Court decided in favor of the nursing home operator and the Appellate Division reversed deciding that the Commissioner of Health was authorized to retroactively adjust Medicaid rates and recoup overpayments. The Court of Appeals affirmed the Appellate Division. Certainly there would have been no such rulings if Supreme Court lacked subject matter jurisdiction in the first instance. A review of the foregoing case law leads this Court to conclude that the remedy for an alleged improper recoupment of Medicaid payments is an article 78 proceeding in Supreme Court, relief beyond the subject matter jurisdiction of this Court (Harvard Financial Services v State of New York, _____ AD2d ____ 698 NYS2d 84; Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670).

March 21, 2000
Saratoga Springs, New York

Judge of the Court of Claims

The Court considered the following papers:

  1. Notice of motion dated December 6, 1999;
  2. Affidavit of Arthur Patane sworn to December 6, 1999;
  3. Notice of cross-motion dated January 11, 2000;
  4. Undated affirmation of Betsy R. Malik, with exhibit;
  5. Claim filed on October 1, 1999;
  6. Decision and order of Supreme Court Justice Lorraine S. Miller in the case of Concourse Nursing Home v Chasin, dated October 31, 1997 and entered on November 13, 1997.

[1]Pursuant to chapter 466 of the Laws of 1995, section 10 (4) was amended to delete the requirement that a notice of intention to file a claim be filed with the Clerk of the Court and replaced it with the requirement that the notice of intention be served upon the Attorney General.