CITY OF NEW YORK v. THE STATE OF NEW YORK, #2004-016-005, Claim No. 99160
THE CITY OF NEW YORK and THE NEW YORK CITY HEALTH AND HOSPITALS CORPORATION
CITY OF NEW YORK
Footnote (claimant name)
THE STATE OF NEW YORK
Footnote (defendant name)
Alan C. Marin
Michael A. Cardozo, Corporation Counsel of the City of New YorkBy: Alan H. Kleinman, Esq. and Joshua P. Rubin , Esq.
Eliot Spitzer, Attorney GeneralBy: Arthur Patane, Esq., AAG and Patricia Pawlowski, Esq. of OMRDD
February 18, 2004
See also (multicaptioned
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
, 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
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
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.
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
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.
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
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.
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,
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.
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
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
and (ii) such was not part of
defendant's case in the motion practice that led to this Court's September 28,
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
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
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.
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:
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
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
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 93-94 200 173
FY 94-95 200 222
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.
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
The method of calculation for the
fourth year is covered, infra
The underlying figures from claimants' exhibit 12 shall be used, but with these
- 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
- 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;
- 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
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.
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
$428,465, with interest to be calculated on the award's four components as
$ 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
York, New York
HON. ALAN C. MARIN
Judge of the Court of Claims
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.
In 1996, CWA, which had been part of the
City's Human Resources Administration, became a separate entity, the
Administration for Children's Services.
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).
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
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.
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.
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).
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.
Claimants' exhibit 1 at pp 33-35; see pp 42-
44 for a comparable, nearly identical, list for the HHC referral packet.
Defendant's exhibit P described in
footnote 3; see also claimants' Brief at page 16.
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).
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
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
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;
, 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).
Shernicoff so testified, and see
claimants' exhibit 14.
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.
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).
Social Services Law §466, as added by
chapter 600 of the Laws of 1994, which is defendant's exhibit S.
The figure of 156 is proportionately
reduced: 84 becomes 79; 18 to 17; 12 to 11; and 42 to 40.