New York State Court of Claims

New York State Court of Claims

TRANSITIONAL SERVICES v. THE STATE OF NEW YORK, #2005-015-035, Claim No. 108720, Motion Nos. M-70047, CM-70117


Claimant's motion to compel discovery denied as academic following dismissal of claim seeking equitable relief and money damages incidental to overturning decisions of OMH regarding number of beds eligible for reimbursement under State operated program.

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):
Claimant’s attorney:
Alan Polsky, Esquire
Defendant’s attorney:
Honorable Eliot Spitzer, Attorney General
By: Michael W. Friedman, EsquireAssistant Attorney General
Third-party defendant’s attorney:

Signature date:

Saratoga Springs

Official citation:

Appellate results:

See also (multicaptioned case)


The defendant's cross-motion for summary judgment dismissing the claim is granted. Claimant's motion to compel discovery is denied as academic upon dismissal of the claim. The claim filed on January 5, 2004 alleges that the claimant operates or administers several programs in Suffolk County, New York providing services for the mentally ill. One such program, the Summit program, provides permanent housing to mentally ill individuals pursuant to funding provided by the federal Department of Housing and Urban Development (HUD) and the New York State Office of Mental Health (OMH). The claim asserts that OMH has funded the Summit program for the past 15 years pursuant to contractual agreements in which the amount of funds received by the claimant is based upon the number of beds provided.

The first cause of action for breach of contract is described in paragraphs 4 - 6 of the claim which state:
4. In 2003 the Summit program maintained 14 beds: 12 of which were occupied by mentally ill individuals with the remaining 2 beds occupied by children of mentally ill adults in the Summit program.

5. Effective October 1, 2003, OMH unilaterally altered the contract (Contract No. C005527) between Claimant and OMH for the Summit program to provide funding for 12 beds instead of 14, resulting in a reduction of funding for the Summit program.

6. Claimant has never agreed to or accepted this reduction in funding but has objected to this unilateral action to various OMH officials. Despite these objections, OMH has refused to restore the funding.

The claim contains a second cause of action alleging the defendant failed to offset a $48,274 underpayment due the claimant for the period 1997- 2000 against a $97,916 overpayment assessed for the period 1997-2002. Paragraph 14 of the claim states:
14. As a result of OMH's failure to account for underpayments due to Claimant, OMH wrongfully withheld the sum of $48,274.00 from Claimant.

The defendant cross-moved to dismiss claimant's first cause of action on the grounds that the reduction of beds from 14 to 12 was not accomplished by way of a unilateral modification of the parties' agreement but instead occurred pursuant to a written and approved amendment to claimant's contract with OMH.

The defendant submitted proof that an amendment to the contract between the claimant and OMH (Exhibit A attached to affidavit of James Leggiero) which reduced the number of beds funded under the agreement from 14 to 12 was signed by claimant's Director of Operations and notarized by Bruno LaSpina, claimant's CEO, on October 8, 2003. In his reply affidavit Mr. LaSpina acknowledged that an amendment reducing the number of beds to be funded was executed but claims that the amendment is "of no particular importance" (paragraph 5 of LaSpina's reply affidavit) due to the parties' unequal bargaining position which, he asserts, rendered the amendment a contract of adhesion.

" 'Adhesion is found where the party seeking to enforce the contract use[s] high pressure tactics or deceptive language in the contract and where there is inequality of bargaining power between the parties . . . In addition, it must be shown that the contract inflicts substantive unfairness on the weaker party' (Matter of Ball [SFX Broadcasting], 236 AD2d 158, 161)" (Precision Mech. v Dormitory Auth. of State of N.Y., 5 AD3d 653, 654). Claimant's conclusory allegations of the parties' unequal bargaining position, without more, are insufficient to establish a contract of adhesion. Equally without merit is claimant's assertion that the amendment was without consideration. Claimant's continued participation in the program and its continued receipt of compensation for the remaining 12 beds appears to the Court to be adequate consideration to support the amendment. Claimant's first cause of action for breach of contract is, therefore, dismissed.

With regard to claimant's second cause of action James Leggiero (OMH's current supervisor of contracts and claims) asserts in his affidavit that OMH did not commence its policy of offsetting overpayments on contracts with residential providers by the amount of any underpayments on such contracts until 2002. Mr. Leggiero alleges that, as a result, claimant's cause of action to obtain credit for underpayments made between 1997 and 2000 is without merit.

Court of Claims Act § 9(2) grants this Court jurisdiction to hear and determine claims for "breach of contract, express or implied." Notwithstanding the Court's ability to determine issues of contract, the Court's subject matter jurisdiction is limited to instances where the essential nature of the claim is to recover money damages (Matter of Gross v Perales, 72 NY2d 231). This Court has 'no jurisdiction to grant strictly equitable relief . . . with the return of the money to follow as a consequence of the equitable relief, if granted" (Psaty v Duryea, 306 NY 413, 416-417). Where a party "seeks to annul an agency's determination because it was arbitrary and capricious, then a CPLR article 78 proceeding is appropriate" (Safety Group No. 194 - New York State Sheet Metal Roofing & A.C. Contrs. Assn. v State of New York, 298 AD2d 785, 786).

In the instant case claimant can recover money damages only by challenging the appropriateness of the Office of Mental Health's decision to withhold $97,916 as an overpayment on the contract without deducting therefrom as an offset a total of $48,274 in underpayments. The primary relief sought by the claimant is annulment of the discretionary decision by OMH to disallow an offset against overpayments on the contract or, alternatively, to compel application of an offset and thereby recover monies allegedly "wrongfully withheld" by the defendant. In essence the claimant seeks to establish that the failure to permit an offset for underpayments against the amount withheld by OMH was irrational and/or arbitrary and capricious. Such relief "is a quintessential example of a dispute governed under CPLR article 78 [citations omitted]" (Madura v State of New York, 12 AD3d 759, 761; see also Harvard Fin. Servs. v State of New York, 266 AD2d 685; Matter of Ferncliff Manor for Retarded v Ambach, 116 AD2d 841).

"It is well settled that a court cannot ignore the fact that subject matter jurisdiction over an action brought before it is lacking. Such a jurisdictional defect can be raised at any time, or even sua sponte (CPLR 3211 (e); Eckert v Eckert, 34 AD2d 684; Williams v State of New York, Ct Cl, Collins, J., August 17, 2001, [Claim No. 102081; Motion Nos. M-63063, M-63531], UID No. 2001-015-171; see also Fry v Village of Tarrytown, 89 NY2d 714, 718)" Jackson v State of New York, Ct Cl, February 4, 2003, [Claim No. 100626, Motion No. M-65924, UID # 2003-031-003] Minarik J., unreported).

The defendant's cross-motion to dismiss the claim is granted rendering academic claimant's discovery-related motion which is denied.

Saratoga Springs, New York

Judge of the Court of Claims

The Court considered the following papers:
  1. Notice of motion dated April 20, 2005;
  2. Affidavit of Bruno J. LaSpina sworn to April 20, 2005 with exhibits;
  3. Notice of cross-motion dated May 9, 2005;
  4. Affirmation of Michael W. Friedman dated May 9, 2005 with exhibits;
  5. Reply affidavit of Bruno J. LaSpina sworn to June 10, 2005.