New York State Court of Claims

New York State Court of Claims

SIGNATURE HEALTH v. THE STATE OF NEW YORK, #2005-015-014, Claim No. 107802, Motion Nos. M-69848, CM-69921


Court sua sponte dismissed claim seeking legal fees and bankruptcy expenses incurred by claimant in dispute with DOH over Medicaid reimbursement rates where such items of damage were not set forth in claim as required by CCA § 11 (b) as interpreted by Court of Appeals in Lepkowski v State of New York.

Case Information

SIGNATURE HEALTH CENTER, LLC The Court, sua sponte, amends the caption to name the only proper defendant.
Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :
The Court, sua sponte, amends the caption to name the only proper defendant.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):
Claimant's attorney:
Errol Blank, Esquire
Defendant's attorney:
Honorable Eliot Spitzer, Attorney General
By: Michael W. Friedman, EsquireAssistant Attorney General
Third-party defendant's attorney:

Signature date:
May 16, 2005
Saratoga Springs

Official citation:

Appellate results:

See also (multicaptioned case)


Defendant's motion for summary judgment seeking dismissal of the claim for lack of jurisdiction is denied. Claimant's cross-motion for partial summary judgment establishing the defendant's liability is also denied. The claim is, however, dismissed sua sponte for failure to meet the substantive pleading requirements contained in Court of Claims Act § 11 (b). In December 1999 claimant was approved as a new medical diagnostic and treatment center by the New York State Department of Health (DOH) and was assigned a budgeted rate of $132.84 per threshold patient visit for Medicaid billing purposes in accord with 10 NYCRR § 86-4.19(a). The budgeted rate was subject to adjustment based upon actual costs incurred for the first full fiscal year of operation pursuant to 10 NYCRR § 86-4.19 (b). Claimant sought such an adjustment in October, 2001 based upon an independently audited cost report for the year 2000, its first full year of operation. The cost report was reviewed, endorsed and approved by DOH and a new threshold rate was calculated. The newly calculated rate was in turn certified by the New York State Division of the Budget (DOB) in an amount roughly equal to an increase of $35.00 per threshold visit over the original budgeted rate. In May, 2002 claimant submitted a further revision of its cost report for the year 2000. That revision was reviewed and approved by the DOH Bureau of Primary and Acute Care Reimbursement. A new rate was calculated, certified and submitted to the DOB which certified the second revised threshold rate in December, 2002 in an amount approximately $12.00 per threshold visit higher than the rate certified in claimant's initial rate adjustment.

Despite the review, approval and certification processes related above DOH failed or refused to publish the claimant's revised rates when certified and failed to pay the claimant in conformity with the revisions. Informal efforts by claimant to obtain reimbursement at the revised rates proved fruitless prompting both the instant action and an article 78 proceeding in Supreme Court.

The article 78 proceeding resulted in a Decision, Order and Judgment dated June 19, 2003 in which Acting Supreme Court Justice Edward A. Sheridan found that DOH had indeed acted illegally in failing to implement the revised reimbursement rates approved in 2001 and 2002. Acting Justice Sheridan ordered DOH to make all payments due the petitioner in accordance with the revised reimbursement rates and denied petitioner's requested relief in all other respects (see defendant's motion papers, Exhibit C).

Claimant subsequently moved in Supreme Court for an order granting attorney fees, costs and pre and post-judgment interest on its recovery in the article 78 proceeding. That motion was denied by Decision and Order dated September 16, 2003 (claimant's cross-motion papers, Exhibit C). In relevant part, that decision found claimant to be ineligible to seek attorneys fees and expenses against the State pursuant to CPLR article 86 since it failed to qualify as a "party" as that term is defined in § 8602 (d). Moreover, Justice Sheridan held that his ordered reimbursement pursuant to the revised rate constituted relief incidental to the article 78 proceeding and was neither a "sum awarded" nor a "money judgment" upon which interest could be recovered pursuant to CPLR § § 5001, 5002 or 5003. In addition, he noted several appellate decisions which held that there is no statutory authority permitting an award of interest on retroactive Medicaid reimbursement.

As directed by Acting Justice Sheridan in the June 19, 2003 Decision, Order and Judgment the revised rates were published and claimant received approximately $3,000,000 in retroactive reimbursement. Claimant maintains, however, that it has not been adequately compensated for losses which were foreseeable and which are directly attributable to DOH's failure and/or refusal to publish the adjusted rates and make timely payments in accord therewith.

In paragraph "17" of his affidavit opposing the defendant's motion and in support of the cross-motion, Craig B. Sanders (Signature's president) alluded to the $3,000,000 payment received from the defendant and averred that "Defendant made no other payment to Signature on account of the significant damages Signature suffered as a result of Defendant's illegal failure to discharge its obligation to Signature. This action was brought to recover those damages." At paragraph "38" he further averred:
The damages sustained by Signature as a result of Defendant's wrongful acts are significant. They are the natural and foreseeable consequences of Defendant's actions. Those damages include, among other things, the legal fees and expenses of Signature's Chapter 11 proceeding, the loss of business which resulted from a lack of funds, the additional expenses incurred by Signature because of its poor credit standing and inability to pay its obligations as they became due, and the substantial loss of value of Signature's business caused by the illegal actions of the DOH. Those damages aggregate a sum in excess of $2 million . . .

In paragraph "4" of his affirmation in reply and in opposition to the claimant's cross-motion, defense counsel charges that the damages referred to in the preceding paragraph were "mentioned for the first time in the Sanders [sic] affidavit and have nowhere been pled or otherwise made a part of the claim."[1] He proposes that Sander's newly made allegations regarding damages sustained by Signature are, in essence, new claims outside the scope of the pleadings which cannot be considered by the Court on the claimant's motion for summary judgment and require dismissal of the claim.

Claimant's counsel argues in his reply affirmation that damages were properly pleaded in the claim yet cites no specific portion of the claim to support this contention other than paragraph "14" which states:
14. Further, in that the DOH has and continues to refuse to correct its wrongful conduct, damages to Signature continue to occur and accrue each day and as such this claim is clearly being served within 90 days of the accrual.
Alternatively, counsel argues that the defendant had actual knowledge of the damages incurred by Signature and, if such be required, requests "leave to replead to provide any information this Court determines is missing".

It is well established that the pleading requirements set forth in Court of Claims Act § 11 (b) are jurisdictional in nature and are to be strictly construed (see Lepkowski v State of New York, 1 NY3d 201; Lichtenstein v State of New York, 93 NY2d 911, 913, quoting Dreger v New York State Thruway Auth., 81 NY2d 721, 724). It is equally settled that unlike pleadings in Supreme Court a jurisdictionally defective claim cannot be cured by amendment if the defect is deemed to be jurisdictional (Manshul Constr. Corp. v State Ins. Fund, 118 AD2d 983; Ferrer v State of New York, 172 Misc 2d 1; Cannon v State of New York, 163 Misc 2d 623; Grande v State of New York, 160 Misc 2d 383). In fact, a jurisdictional defect may even be raised by the Court sua sponte (Matter of Fry v Village of Tarrytown, 89 NY2d 714; Chapman v State of New York, 261 AD2d 814).

The defendant's motion asserted that summary judgment is appropriate because the claim seeks equitable relief beyond this Court's jurisdiction and res judicata precludes the relitigation of issues previously addressed in the prior article 78 proceeding in Supreme Court. The cross-motion seeks a determination of the defendant's liability stating: "This is a claim for damages sustained as a result of Defendant's violation of claimant's rights by its failure to perform a ministerial act required by law" (Notice of Motion dated March 23, 2005).

In its "Affirmation in Reply and in Opposition" the defendant asserts as an additional ground that the claim fails to identify the items of damage claimed to have been sustained as required by Court of Claims Act § 11 (b). These arguments are addressed in a "Reply Affirmation" in which the claimant argues that damages are adequately stated and, alternatively, that the defendant had actual notice of the damages incurred as a result of the State's actions.

Grounds raised for the first time in a reply are not properly considered on a motion for summary judgment (Canter v East Nassau Med. Group, 270 AD2d 381; Doe v Metropolitan Life Ins. Co., 234 AD2d 74; Scherrer v Time Equities, 218 AD2d 116). In the instant matter, however, the defendant's motion raised the issue of the Court's jurisdiction and the nature of the damages sought in the claim. Although the issue of itemization of damages was raised for the first time in defendant's papers in reply and opposition, the issue was fully addressed in the claimant's reply affirmation. Given this circumstance, and it being apparent that the claim fails to state the items of damage sustained as required by Court of Claims Act § 11 (b), the Court dismisses the claim sua sponte for lack of jurisdiction (Fry v Village of Tarrytown, 89 NY2d 714; Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670; Lublin v State of New York, 135 Misc 2d 419, affd 135 AD2d 1155).

First, claimant's counsel asserts that the claim does not seek recovery of amounts due by way of Medicaid reimbursement. In fact, such a claim is not cognizable in this Court (see Chase Manhattan Bank v State of New York, 13 AD3d 873; Rye Psychiatric Hosp. v State of New York, 177 AD2d 834). Instead, claimant contends that it is proceeding here on a negligence cause of action seeking damages unrelated to the reimbursement of Medicaid monies which arose upon the failure of DOH employees to perform a ministerial duty.

In Lepkowski v State of New York, 1 NY3d 201, the Court of Appeals stated:
The State's waiver of immunity from suits for money damages is not absolute, but rather is contingent upon a claimant's compliance with specific conditions placed on the waiver by the Legislature (see Court of Claims Act § 8 [specifying that the Sate waives its immunity from liability and action 'provided the claimant complies with the limitations' of article II of the Court of Claims Act, which includes section 11]; see also Alston v State of New York, 97 NY2d at 163). Further, '[b]ecause suits against the State are allowed only by the State's waiver of sovereign immunity and in derogation of the common law, statutory requirements conditioning suit must be strictly construed' (Lichtenstein v State of New York, 93 NY2d 911, 913 [1999], quoting Dreger v New York State Thruway Auth., 81 NY2d 721, 724 [1992]). As relevant here, section 11 (b) places five specific substantive conditions upon the State's waiver of sovereign immunity by requiring the claim to specify (1) 'the nature of [the claim]'; (2) 'the time when' it arose; (3) the 'place where' it arose; (4) 'the items of damage or injuries claimed to have been sustained'; and (5) 'the total sum claimed.'

Lepkowski involved public employees seeking unpaid overtime compensation allegedly due pursuant to the federal Fair Labor Standards Act (FLSA). As relevant here, the Court found that the claims in Lepkowski, which sought "all unpaid overtime compensation for all hours worked over 40 hours in a work week and not compensated at one and one-half times the regular rate", were insufficient to fulfill the pleading imperative in Court of Claims Act § 11(b) which requires that a claim state "the items of damage or injuries claimed to have been sustained and the total sum claimed". The Court of Appeals affirmed the dismissal of the claims by the Appellate Division, Third Department, holding that the claims were "jurisdictionally defective for nonconformity with section 11 (b)'s substantive pleading requirements" (id at p. 209).

A thorough review of the claim served and filed in this matter reveals the complete absence of any reference to the items of damage related in paragraph 38 of the Sanders' affidavit. The claim does not specifically refer to either negligence or a failure to perform a ministerial duty. It does not reference claimant's bankruptcy or attorneys fees incurred therein. Nor does the claim mention business losses, additional expenses incurred by Signature as a result of problems with its credit rating or a decline in the value of business. The only specific reference to damages in the claim is contained in the concluding paragraph which states: "By reason of the foregoing, the claimant, Signature, was and continues to be damaged in the amount of $10,000,000, and demands judgment against the Defendant in and for said amount". It is thus clear that although the claim sets forth the "total sum claimed" it fails to state "the items of damage or injuries claimed to have been sustained". Since each of the five elements required of a claim pursuant to section 11 (b) constitute "specific, substantive conditions" to suit in this Court under Lepkowski, the failure to identify the items of damage sustained renders the claim herein jurisdictionally defective in that it fails to comply with the pleading requirements of Court of Claims Act § 11 (b). This jurisdictional defect may not be remedied by either amendment or leave to replead (Roberts v State of New York, 4 Misc 3d 768). Nor does any alleged notice to the State concerning the sort of damages cited by Mr. Sanders in his affidavit compensate for the deficiencies in the claim as "[t]he Court of Claims Act does not require the State to ferret out or assemble information that section 11 (b) obligates the claimant to allege" (Lepkowski, supra at p. 208).

The motion and cross-motion are denied and the claim is dismissed for lack of jurisdiction.

May 16, 2005
Saratoga Springs, New York

Judge of the Court of Claims

The Court considered the following papers:
  1. Notice of motion dated March 7, 2005;
  2. Affirmation of Michael W. Friedman dated March 7, 2005 with exhibits;
  3. Notice of [cross] motion dated March 23, 2005;
  4. Affidavit of Craig B. Sanders sworn to March 23, 2005 with exhibits;
  5. Affirmation of Michael W. Friedman dated April 1, 2005 with exhibits;
  6. Affirmation of Errol Blank dated April 5, 2005 with exhibits.

[1]See also paragraph "8" of the Friedman affirmation.