New York State Court of Claims

New York State Court of Claims

CITY OF NEW YORK v. THE STATE OF NEW YORK, #2004-016-005, Claim No. 99160


Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):

Cross-motion number(s):

Alan C. Marin
Claimant's attorney:
Michael A. Cardozo, Corporation Counsel of the City of New YorkBy: Alan H. Kleinman, Esq. and Joshua P. Rubin , Esq.
Defendant's attorney:
Eliot Spitzer, Attorney GeneralBy: Arthur Patane, Esq., AAG and Patricia Pawlowski, Esq. of OMRDD
Third-party defendant's attorney:

Signature date:
February 18, 2004
New York

Official citation:

Appellate results:

See also (multicaptioned case)


The First Department has twice upheld findings that the State of New York violated a Stipulation it had entered into in 1991 with the City of New York and the New York City Health and Hospitals Corporation. City of New York v Maul, 239 AD2d 225, 657 NYS2d 644 (1997); and City of New York v State of New York, 284 AD2d 255, 726 NYS2d 560 (2001). The agreement, known as the Webb Stipulation after the former Commissioner of the State Office of Mental Retardation and Developmental Disabilities (OMRDD), obligated the State to make at least 200 residential placements of individuals under the claimants' care for each of four years beginning with the 1991-1992 State Fiscal Year.[1]

What remained to be tried and decided is "the measure of the damages therefrom . . . which will include the number of placements below the stipulated minimums and the corresponding monetary damage . . ." City of New York and The New York City Health and Hospitals Corporation v State of New York , Ct Cl dated September 28, 1999 (claim no. 99160, motion no. M-59228, cross-motion no. CM-59546, unreported, p 3, Marin, J) affd supra. The Webb Stipulation provided that the Child Welfare Agency (CWA)[2] of the City of New York and the Health and Hospitals Corporation (HHC) were to supply 250 priority referrals from which OMRDD would draw the 200 placements (cl exh 1, pp 2-3). Unplaced referrals could be carried over from year-to-year, meaning that the claimants were not required to produce 250 new referrals each year; for example, only 450 individual names had to be referred in the first two years, or 850 over the four-year life of the agreement.[3] This excess of referrals over minimum placements afforded OMRDD some leeway, but effectively only with regard to the CWA referrals; the placement of HHC referrals, which came from acute care hospital beds, had to be made within five months.[4]

Defendant's Contention of Insufficient Priority Referrals

The parties are not far apart as to the number of placements made through the first four years: defendant contends it made 661 placements over the period and claimants, 644.[5] It is undisputed that the required total minimum of 800 placements was attained a half year following the close of the Stipulation's fourth and final year, in early October of 1995.

Disagreement arises from the number of priority referrals. The defendant contends that it was the referrals that fell short, and that its placements were proportional to the claimants' referrals. For example, for the first three years, defendant argues that it placed 439 of the 554 individuals referred, or just over 79%, virtually at the 80% proportion that 200 placements is of 250 referrals.[6]

Defendant presented a substantial amount of case-by-case information demonstrating the unique and difficult nature of each client's situation. See the client files submitted by defendant through its witness, Deborah Van Exel, then and now deputy director of OMRDD based in New York City, (exhs W1-W6; X1 and X2; Y1-Y7; and Z3 and Z5). Client C.P. was a profoundly retarded adult with the mental capacity of a child under two years of age who was subject to seizures (exh W3). The placement of P.P. was delayed because the upstate developmental center "had to coordinate his school placement and the BOCES was taking their time" (exh X2). Client B.P. was normally functional until a car accident left him with traumatic brain injury (exh Y5). For D.O., who had ambulatory problems, obtaining the necessary background information was difficult because her family was located at a considerable distance (exh Z3).

Christine Oberle, an operations specialist for OMRDD, also testified about the problems of placement. Ms. Oberle pointed out that even in cases of parental objections, children could be placed, but OMRDD needed the City to clarify who had the authority to sign. In some cases, a child was in a CWA foster home and the State was going to convert it to an OMRDD family care home, but was unable to do so in a timely fashion. According to Ms. Oberle, one client needed a facility that was wheelchair accessible; in three other cases, children were taken by their families to live with them out-of-state, to Virginia, Pennsylvania and Georgia. The situation referred to in defendant's exhibit L was described by Oberle as follows: "We had offered several placements . . . for this child, and the mother kept refusing our offers."

Defendant's exhibits M and O are internal OMRDD memos described or entitled "some issues that have impeded timely placements" and "Obstacles Impeding Priority Placements," respectively. But both are dated April 21, 1994, already into the fourth year of the Stipulation.[7] In the memorandum from OMRDD staffer Joseph Prezio to Commissioner Walsh, very little is arguably in violation of the Stipulation, and even that portion entitled "outdated referral packets" is likely subject to Appendix ¶C, "Eligibility Determination," which requires that an objection be interposed (see below). There were a number of occasions in which defendant conceded that, in general, there simply were not enough beds on line for the referrals; specifically, for example, one individual (D.E.), who had been accepted by a provider for a project it was developing, was waiting for the facility to open.

OMRDD's own records do show a sufficient number of referrals. For example, Commissioner Walsh wrote to his superior, Commissioner Elin Howe, following the Stipulation's first year (April 27, 1992) that "the Child Welfare Administration (CWA) and the Health and Hospitals Corporation (HHC) actually submitted a total of 297 referrals . . ." (cl exh 18, p 1). OMRDD's monthly report prepared just before the close of the second year shows 544 priority referrals; the document has an entry which reads that 291 of the priority referrals are "Pending: Accepted, Awaiting Services"(cl ex 19, p 2, the report is dated March 6, 1993).

Ms. Oberle testified to 795 priority referrals during the four years of the Webb Stipulation, 623 from CWA and 172 from HHC. But referrals on OMRDD printouts that were not covered by Oberle added an additional 146 by CWA (cl exh 22) and 15 by HHC (cl exh 20) for a total of 956 referrals.

The clients were persons who had been diagnosed with mental retardation or developmental disability, or both, as such terms are defined in the Mental Hygiene Law §§1.03(21) & (22). These are individuals with cerebral palsy, diagnosed as neurologically impaired, and persons who may have a "Full scale IQ score below 50." Moreover, under the Webb Stipulation, an individual who is a substance abuser is not disqualified from being accepted into the OMRDD system (id., pp 33 and 42).

The Stipulation included separate appendices for CWA and HHC, which detail eligibility criteria, the referral process and the method for resolving disputes between the agencies.[8] An individual who is referred to OMRDD is accompanied by a packet which "must include": results of a recent physical and a psychological examination (plus a psychiatric examination for certain dual-diagnosis individuals); a social history; custodial and guardianship information including names, phone numbers and level of involvement; placement history; recommendation for location of placement; information on all current financial entitlements and limitations; and school, vocational and hospital records where appropriate and available, and if not available, copies of correspondence requesting same.[9]

Furthermore, ¶C of the CWA appendix required OMRDD to notify CWA within 10 working days by fax and by mail of its determination on eligibility, which CWA could contest via the procedure set forth in ¶D. There is no record that defendant objected to referrals on the grounds that they were not in compliance with the terms of the Webb Stipulation such as incomplete referral packets.

Where some leeway was permitted, the Stipulation so provides. For example, under ¶C.2, a birth certificate may be submitted with the packet, but in no case less than 30 days prior to placement. "CWA will use its best efforts to obtain proof of birth. Failure to obtain an original or certified copy of proof of birth shall not be grounds for denial of a placement with OMRDD." (cl exh 1, p 35).

The so-ordered Webb Stipulation constituted an arms-length agreement between two sides familiar with what they had agreed to and the kind of care that the affected individual clients required. OMRDD had the flexibility of not placing 50 of 250 referrals. That was the agreement; it was not, for example, 300 referrals, or fewer placements, perhaps 175, from the same number of referrals. There is no question that defendant handled these clients with professionalism and sensitivity; that they were treated as individuals, not as numbers, and that strong efforts were made to match each referral to the best placement environment. But defendant's explanation as to the difficulty in securing timely placements does not in any event bring it outside the terms of the Stipulation and the agreed-to schedule. See Restatement of Contracts (Second), §261 (1981); see, e.g., Kel Kim Corp. v Central Markets, Inc., 70 NY2d 900, 524 NYS2d 384 (1987).

On the procedural front, it might also be noted that claimants argue that: (i) the State of New York was late in coming to this position, not raising the issue until well into the fourth year of the Stipulation;[10] and (ii) such was not part of defendant's case in the motion practice that led to this Court's September 28, 1999 Order.

The Health and Hospitals Corporation

To calculate damages, both sides treated the HHC referrals the same way - - that each had to be made within five months; and thereafter, the cost would be at a particular per diem rate which was not in dispute.[11]

The defendant states in its Brief (page 17) that it "has no disagreement with the rates used or how the calculations were made," referring to claimants' exhibit 17 which was introduced through its witness, Kenneth Feifer. Mr. Feifer had been employed by the Health and Hospitals Corporation from 1986 through 1995, and for most of that time, held the title of Senior Director of Operations with responsibilities that included involvement with the Webb Stipulation.

Claimants' Exhibit 17 lists 24 priority referrals from acute care psychiatric beds in City hospitals who were not placed within 5 months. Next to each name are the number of days beyond five months, varying from a week or less over the limit by M.S. at Harlem Hospital; M.M. at Lincoln Hospital; C.I. at Metropolitan Hospital and L.R. at Woodhull Hospital to four patients who remained in HHC care for 150 or more days beyond the agreed to five-month period.

According to the claimants at trial, the damages incurred by HHC aggregate to $501,731. But after reviewing defendant's exhibit Q, claimants added four patients, E.H., C.A., V.B. and G.O., which increased their damages to $544, 226 (App A to its Brief). Defendant maintains that exhibit 17 lists a B.B. of Kings County who does not appear on either the master list of all referrals (Cl exh 21) or the master list of HHC referrals (def exh Q). The credible view of evidence is to add the four names the claimants propose and delete patient B.B.

The State contends that the claimants have made 21 errors in calculating the five-month overages, 16 of them in its favor (def Brief, pp 19-20). Defendant's exhibit Q is a computer printout and is a more basic, less derivative document than is claimants' exhibit 17 and is therefore the more credible source for the 5-month overages.[12]

I will determine the damages by individual client, working from claimants' Appendix A to its Brief, but modifying the overage days per defendant's list on pp 19-20 of its Brief.[13] Using the same net loss per diem (the "Net Loss" column in Appendix A) yields a new total of $428,465, which breaks down as follows:

1992 $36,958

1993 $162,879
1994 $159,594

1995 $69,034

The Child Welfare Agency

The calculation of the City's loss - - i.e. what it spent as a consequence of keeping persons in CWA care, which under the Stipulation should have been placed by OMRDD - - is a less precise undertaking than that for HHC. This is a consequence of having more referrals than placements. There can be no specific list of the 98-person shortfall from the first year, because the total referrals were at a minimum 250 (there was credible evidence of 297). By placing only 102 of the priority referrals, the City was left with, not 98 individuals ready to be placed, but upwards of 148, if not 195. Claimants presume, without challenge from defendant, that all the shortfalls are CWA referrals.[14]

Thus, the City of New York advanced, in my view credibly, a calculation based on the average weighted cost for the component groups of the CWA referrals: 1) individuals younger than age 21 and placed with a CWA voluntary contract agency; 2) those 21 years and older and similarly placed; 3) individuals below age 21 who were placed at an outside specialized facility (often out-of-state); and 4) the comparable category for clients 21 and older. The latter two categories are known as "NCIB/Under 21 Years" and "NCIB"/Over 21 Years" (see cl exh 12).

The parties are only 17 placements apart for the entire four-year period, and inasmuch as it is not readily apparent which set of figures is better grounded, the midpoint of the two will be used. For that matter, claimants describe the two sets of numbers as representing "nearly-identical positions" (cl brief page 8). The result is as follows:

Required Placed Cumulative Shortfall
FY 91-92 200 102 98
FY 92-93 200 156 142
FY 93-94 200 173 169

FY 94-95 200 222 147

In the first fiscal year, there are no damages, since the State was permitted, at the latest, to make the placements on the final day of the fiscal year. When the State placed only 102 individuals in that first year - - failing to place 98 - - then the City began to incur the cost for those 98 from the first day of the second fiscal year (April 1, 1992). As the table shows, the State did not make up the shortfall in the second year (1992-1993) and so the City had to bear the cost of the 98 for the entire second year. That result is 98 times the weighted average net cost, with interest from April 1, 1993.

At the end of the Stipulation's second year, the shortfall had increased to 142, which the City had to bear for the entire third year since the shortfall was not made up during such year (the cumulative shortfall increased from 142 to 169). That result is 142 times the weighted average net cost, with interest from April 1, 1994.

The shortfall was 169 at the beginning of the final year of the Webb Agreement, 1994-1995. Defendant did reduce the shortfall to 147 by making 222 placements, so that the 169 cannot be calculated as being carried the entire fiscal year, but it is quite close since the evidence shows that over 100 placements were made in March of 1995.[15] Utilizing the analogous methodology - - namely, that an increase in shortfalls means that for such period, the City is bearing the cost for the prior year's shortfall - - the City incurred the costs of caring for the 169 individuals through the end of February of 1995 (the interest should still date from April 1, 1995).

To this trier of fact, the City's methodology, with some modifications, offered through Judy Shernicoff, who at all relevant times had budget oversight responsibility for CWA, is a credible and appropriate way to handle the first three years of the Webb Stipulation. Using lists of individuals waiting to be placed (see cl exhs 7 and 11), Ms. Shernicoff looked at the four groups and calculated an average cost within each group for each of the fiscal years FY 92-93, 93-94 and 94-95. Shernicoff also calculated the proportion that each of the groups constituted of the total and the City's share of the cost.[16] The method of calculation for the fourth year is covered, infra.

The underlying figures from claimants' exhibit 12 shall be used, but with these modifications:

- While not challenged, the $47,154 in 1992-93 for the "CWA/Over 21 years" is 15% higher than the rate for this group for the following fiscal year. Such seems to be in error; it is inconsistent with Shernicoff's testimony about annually increasing costs. I shall assume that the amount was intended to be $40,154;

- The distribution among the four groups is the same for the last two of the three years of the Stipulation. It is not inappropriate to use that distribution for the first year as well;[17] and

- The City's share of the cost of care for persons in the two over-21 groups dropped from 50% to 40% beginning January 1, 1995, the last quarter of FY 1994-95, according to Ms. Van Exel's unchallenged testimony.[18]

Applying this methodology to the shortfall carryovers into FY 92-93, 93-94 and 94-95 results in the following damages to the claimant City of New York:

FY 1992-93 (98 shortfalls) : $2,932,793

FY 1993-94 (142 shortfalls): $5,019,720

FY 1994-95 (169 shortfalls): $5,312,372

When the final year of the Webb Stipulation closed on March 31, 1995, the State still had not made 147 placements. For such year, the calculation necessarily differed from that of the earlier years. Since everyone was placed by October 6, 1995, rather than using individuals who were not placed, Ms. Shernicoff looked at individuals who were placed; and computed an average number of days after April 1, 1995 that it took for each of the four groups to be placed (cl exh 14, p.1).

The table that is the first page of claimants' exhibit 14 is analogous to claimants' exhibit 12; it will be used with two modifications. First, as previously decided, the number of holdovers is 147, not 156. [19] Secondly, a good deal of time was spent on how the City's share for those 21 years and older dropped from 50% to 40%, and the statutory basis therefor. The change to 40% is not reflected in this table. But the table doubles the City's share of the cost for the two groups of under 21's without explanation; it would be more appropriate to remain with the earlier shares of 28.15% for CWA/Under 21 and 50% for NCIB/Under 21.

The damages to claimant City of New York arising from the placement shortfall from the fourth year amount to $1,959,952.

Claimant sought case management costs of $275,926 for the first three years (cl exh 12) and $73,148 for the fourth year (cl exh 14, pp 1, 3 and 4). The task here is to measure the costs incurred by a contract breach; such is not cost accounting, even though claimants argue they are not seeking costs for overhead, but only salaries for caseworkers and attendant supervisory and support personnel. Ms. Shernicoff relied on a cost model that may not represent actual damages; conceding on the stand that these "numbers are always going to be fluid." Claimants have not met their burden that as a consequence of the contract breach, CWA, for example, hired employees or required overtime and if so, what those dollar costs were.
* * *
In view of the foregoing, the Clerk of the Court is ordered to enter judgment in favor of the claimants:

I. For the New York City Health and Hospitals Corporation, an award in the amount of

$428,465, with interest to be calculated on the award's four components as follows:

$ 36,958 from April 1, 1992;

$162,879 from April 1, 1993;

$159,594 from April 1, 1994; and

$ 69,034 from April 1, 1995.

II. For the City of New York, an award in the amount of $15,257,147 with interest to be calculated on the award's four components as follows:

$2,932,793 from April 1, 1993;

$5,019,720 from April 1, 1994;

$5,344,682 from April 1, 1995; and

$1,959,952 from October 6, 1995.

February 18, 2004
New York, New York

Judge of the Court of Claims

[1] Claimants' exhibit 1. The Stipulation contained the minimum placement figure of 200 for each of the first three years. It authorized the parties to reach agreement for the fourth year, and they did so on the same terms as earlier obtained.
[2] In 1996, CWA, which had been part of the City's Human Resources Administration, became a separate entity, the Administration for Children's Services.
[3] James Walsh, Associate Commissioner of OMRDD, conceded such formulation. See his letter of October 5, 1994 (the fourth year of the Stipulation), in which he requests additional referrals to bring the total thereof to 1,000 (def exh P).

[4] The 5-month time limit for HHC referrals contained an exception for "extraordinary circumstances"; none of the HHC referrals were argued to fall within the exception (cl exh 1, pp 46-47). In fact, the Webb Stipulation provided that the State was to use its "best efforts" to place HHC referrals within 30 days (id., p 46). Note that the Stipulation does not contain an extraordinary-circumstances exception for the CWA referrals.

[5] Claimants' exhibit 13, an OMRDD document totals 659, because it lists the first year placements at an even 100 (see page 8 of defendant's Brief), not the 102 that was agreed to in the submissions filed in connection with this Court's Sept 28, 1999 Order (see page 5). See also page 8 of the claimants' Brief.
[6] Defendant's Brief, page 8. The Brief has it at 437 of 554 (78.9%), which uses 100 placements, instead of 102 for the first year of the Stipulation.

[7] See the June 20, 1992 letter from OMRDD's executive deputy commissioner, Thomas Maul, to his counterpart at CWA, Robert Little (def exh F). Commissioner Maul writes that since the lawsuit was settled, "[w]e have learned a lot through the process." Maul proposes a meeting so that the parties could meet and discuss certain issues. Commissioner Maul does not state that the City or HHC was in violation of the Stipulation, and does not ask for more priority referrals until his letter of over two years later (def exh P, letter of October 5, 1994).

[8] Both are entitled "Appendix A"; the appendix covering CWA is pages 32 - 40 of claimants' exhibit 1; pages 41-49 of the exhibit covers HHC.

[9] Claimants' exhibit 1 at pp 33-35; see pp 42- 44 for a comparable, nearly identical, list for the HHC referral packet.

[10] Defendant's exhibit P described in footnote 3; see also claimants' Brief at page 16.

[11] The per diem facility prevailing rate less the alternate level of care reimbursement ("ALC Rate" in the fourth column heading on page 2 of cl exh 17).

[12] The "PRI Date" and "Outcome Date" columns of exhibit Q measure the total period between HHC referral and OMRDD placement, including the five months. Note, for example, that exhibit Q properly reflects the time for S.A. and L.J., two patients defendant says have incorrect waiting periods in claimants' exhibit 17, the former in claimants' favor, the latter for defendant. S.A., from Kings County Hospital, is entry #5 on page 1 of exhibit Q's 4/28/95 computer run; L.J., a Bellevue Hospital referral, is entry #137 on page 6.

[13] The adjustments from claimants' Appendix A is based upon defendant's Brief as follows: L.J. (from 224 to 165 days over); C.P. (from 243 to 98 days); M.S. (5 to 1 day); P.P. (72 to 56 days); D.O. (76 to 60 days); S.A. (150 to 201 days); D.H. (115 to 110 days); C. I. (5 to 2 days); B.V. (26 to 22 days); A.R. (63 to 54 days); R.T. (26 to 18 days); G.O. (23 to 15 days) and the following individuals drop to zero, off the list: H.E. from Kings (not on App A); M.M. at Lincoln Hospital; M.R. at Harlem Hospital; and L.R. at Woodhull.

[14] This is so because the State has until the end of the fiscal year to make the placements and, generally speaking, a shortfall does not arise until it is clear from the following fiscal year that the State is falling below the 200- placement minium in that year as well; i.e., that the cumulative shortfall is growing (cl Brief pp 8, 25 and 45). For HHC, the damages calculation was made from the number of days over 5 months that a patient remained with HHC. The slowest HHC referral was J.T. from Woodhull Hospital, whose referral to placement took from June 4, 1991 to June 9, 1992 (entry #284, page 11 of def exh Q).

[15] Shernicoff so testified, and see claimants' exhibit 14.
[16] Shernicoff accounted for the overlap between the State fiscal year and New York City's fiscal year July 1 to June 30; see the notes to claimants' exhibit 12. All references in this Decision to fiscal year refer to the State's fiscal year of April 1 to March 31.
[17] The result is that the distribution for the first three years is 19.51&17.07% (CWA under and over 21 years of age); and 12.20 & 51.22% (NCIB under and over 21).
[18] Social Services Law §466, as added by chapter 600 of the Laws of 1994, which is defendant's exhibit S.
[19] The figure of 156 is proportionately reduced: 84 becomes 79; 18 to 17; 12 to 11; and 42 to 40.