SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
109
CA 14-00923
PRESENT: SMITH, J.P., CARNI, LINDLEY, AND VALENTINO, JJ.
IN THE MATTER OF COUNTY OF CHAUTAUQUA,
PETITIONER-PLAINTIFF-RESPONDENT-APPELLANT,
V MEMORANDUM AND ORDER
NIRAV R. SHAH, M.D., M.P.H., AS COMMISSIONER
OF NEW YORK STATE DEPARTMENT OF HEALTH AND
NEW YORK STATE DEPARTMENT OF HEALTH,
RESPONDENTS-DEFENDANTS-APPELLANTS-RESPONDENTS.
(APPEAL NO. 1.)
ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, ALBANY (VICTOR PALADINO OF
COUNSEL), FOR RESPONDENTS-DEFENDANTS-APPELLANTS-RESPONDENTS.
WHITEMAN, OSTERMAN & HANNA LLP, ALBANY (CHRISTOPHER E. BUCKEY OF
COUNSEL), AND NANCY ROSE STORMER, P.C., UTICA, FOR
PETITIONER-PLAINTIFF-RESPONDENT-APPELLANT.
Appeal and cross appeal from a judgment (denominated order and
judgment) of the Supreme Court, Chautauqua County (Deborah A. Chimes,
J.), entered January 27, 2014 in a CPLR article 78 proceeding and
declaratory judgment action. The judgment, among other things,
annulled the determination of respondents-defendants and directed
respondents-defendants to allow petitioner-plaintiff’s claims for
reimbursement.
It is hereby ORDERED that the judgment so appealed from is
unanimously modified on the law by denying the petition-complaint in
its entirety and granting judgment in favor of respondents-defendants
as follows:
It is ADJUDGED and DECLARED that section 61 of part D
of section 1 of chapter 56 of the Laws of 2012 has not been
shown to be unconstitutional,
and as modified the judgment is affirmed without costs.
Memorandum: The petitioner-plaintiff in appeal No. 1 (hereafter,
Chautauqua County) commenced a hybrid CPLR article 78 proceeding and
declaratory judgment action seeking, inter alia, to compel
respondents-defendants (respondents) to reimburse it for certain
Medicaid expenditures known as overburden expenditures (see Matter of
County of Herkimer v Daines, 60 AD3d 1456, 1456-1457, lv denied 13
NY3d 707 [County of Herkimer I]). The petitioner-plaintiff in appeal
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CA 14-00923
No. 2 (hereafter, Jefferson County; collectively with Chautauqua
County, petitioners) commenced a nearly identical proceeding-action
seeking reimbursement for its overburden expenditures. The
petitions/complaints allege that respondent-defendant New York State
Department of Health (DOH) improperly billed petitioners for those
expenditures prior to 2006, and that respondents have a continuing
duty to reimburse petitioners for them.
The history of the legislation and prior litigation regarding
these expenditures is fully set forth in our recent decision in Matter
of County of Niagara v Shah (122 AD3d 1240, 1240-1242 [Niagara III]).
In brief, several counties throughout the State have submitted
numerous claims to the DOH over the last several years, seeking
reimbursement for overburden expenditures that the counties made prior
to 2006. When the DOH refused to pay those claims, the counties
commenced litigation similar to the cases on appeal, asking the courts
to direct respondents to pay those claims (see e.g. Matter of County
of Herkimer v Daines, 83 AD3d 1510; Matter of County of Niagara v
Daines, 79 AD3d 1702, lv denied 17 NY3d 703 [Niagara I]). First, in
County of Herkimer I (60 AD3d at 1457), we rejected respondents’
contentions that the claims were extinguished by the enactment of the
Medicaid Cap Statute ([Cap Statute] L 2005, ch 58, § 1, part C, § 9,
as amended by L 2006, ch 57, § 1, part A, § 60). We later rejected
respondents’ contention that the claims “were time-barred pursuant to
18 NYCRR 601.3 (c)” (Niagara I, 79 AD3d at 1705), and, in Matter of
County of Niagara v Daines (91 AD3d 1288, 1289 [Niagara II]), we
rejected respondents’ further contention that the Legislature intended
to extinguish those claims by enacting a 2010 amendment to the Cap
Statute (see L 2010, ch 109, § 1, part B, § 24). In making these
determinations, we relied on, among other things, the lack of any
indication in the statutes or the applicable legislative history that
the Legislature intended to extinguish the counties’ right to
reimbursement for overburden expenditures made prior to the enactment
of the Cap Statute.
The situation changed, however, when the Legislature inserted a
provision in the 2012-2013 State budget stating that,
“[n]otwithstanding the provisions of section 368-a of the social
services law or any other contrary provision of law, no reimbursement
shall be made for [counties’] claims submitted on and after the
effective date of this paragraph, for district expenditures incurred
prior to January 1, 2006, including, but not limited to,” overburden
expenditures (L 2012, ch 56, § 1, part D, § 61 [hereafter, section
61]). In addition, the memorandum in support of the 2012-2013
executive budget stated that section 61 had been proposed “to clarify
that [counties] cannot claim for overburden expenses incurred prior to
January 1, 2006, when the [Cap Statute] took effect. This is
necessary to address adverse court decisions that have resulted in
State costs paid to [counties] for pre-cap periods, which conflict
with the original intent of the” Cap Statute. Consequently, we
concluded in Niagara III (122 AD3d at 1242) that “[s]ection 61 clearly
states that no further claims for reimbursement of overburden
expenditures will be paid, notwithstanding Social Services Law §
368-a. Thus, the unequivocal wording of section 61 retroactively
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CA 14-00923
extinguishes [a county’s] right to submit claims for reimbursement of
overburden expenditures made prior to 2006.”
After the effective date of section 61, petitioners submitted the
claims at issue in these appeals, which the DOH denied on the ground
that they were barred by section 61. In appeal No. 1, Supreme Court,
Chautauqua County, issued a judgment in which it, inter alia, declared
section 61 unconstitutional, annulled respondents’ determination to
deny those claims, and directed respondents to pay the claims. The
court also denied Chautauqua County’s request for relief in the nature
of mandamus, directing the DOH to search its records for all other
payments made by Chautauqua County for overburden expenses, and to
reimburse that County for those expenses. In appeal No. 2, Supreme
Court, Jefferson County, issued a judgment in which it annulled the
DOH’s denial of that County’s claims for reimbursement, directed
respondents to pay the claims at issue, and declared section 61
unconstitutional. The court, unlike the judgment in appeal No. 1,
granted relief in the nature of mandamus, directing the DOH to search
its records and reimburse Jefferson County for all unpaid overburden
expenditures that had been made by Jefferson County. These appeals by
respondents and cross appeals by petitioners ensued.
Respondents contend in both appeals that the court erred in
declaring section 61 unconstitutional under the federal and state
constitutions because petitioners have no due process rights against
the State. Specifically, respondents contend that petitioners are not
persons within the meaning of the due process guarantees of the state
and federal constitutions, and thus petitioners have no ability to
raise claims for violation of those provisions. Petitioners contend
that respondents are actually attempting to raise a capacity defense,
which they waived by failing to assert it as an affirmative defense in
their answer or by motion. We agree with respondents that petitioners
are not persons within the meaning of the state and federal
constitutions and thus may not raise a due process argument against
the State.
We note at the outset the well-settled principle that
“municipalities and other local governmental corporate entities and
their officers lack capacity to mount constitutional challenges to
acts of the State and State legislation. This general incapacity to
sue flows from judicial recognition of the juridical as well as
political relationship between those entities and the State” (City of
New York v State of New York, 86 NY2d 286, 289). We agree with
petitioners, however, that “[t]he issue of lack of capacity to sue
does not go to the jurisdiction of the court, as is the case when the
[petitioners] lack standing. Rather, lack of capacity to sue is a
ground for dismissal which must be raised by motion and is otherwise
waived” (id. at 292; see Niagara III, 122 AD3d at 1244). Here, it is
clear that respondents did not raise the defense of capacity in their
answer or a pre-answer motion, and thus it is waived. Nevertheless,
respondents’ waiver of their capacity defense does not afford
petitioners the right to the relief sought. In other words, the issue
of “ ‘capacity concerns [petitioners’] power to appear and bring
[their] grievance before the court’ ” (Matter of Graziano v County of
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CA 14-00923
Albany, 3 NY3d 475, 478-479), but petitioners must then establish
their constitutional claim.
Here, petitioners contend that respondents’ enactment of section
61 impermissibly deprived them of vested rights to repayment under
Social Services Law § 368-a, in violation of their rights under the
due process clauses of the federal and state constitutions. The
Fourteenth Amendment of the United States Constitution provides in
relevant part that “[n]o State shall make or enforce any law which
shall abridge the privileges or immunities of citizens of the United
States; nor shall any State deprive any person of life, liberty, or
property, without due process of law.” Similarly, article I, § 6 of
the New York State Constitution provides in relevant part that “[n]o
person shall be deprived of life, liberty or property without due
process of law.” Thus, the constitutional provisions share a common
link, i.e., they protect a “person” (id.; see US Const, 14th Amend, §
1).
Contrary to petitioners’ contentions, we conclude that they are
not persons within the meaning of the constitutional due process
provisions. This principle was stated clearly by the United States
Court of Appeals for the Seventh Circuit, which concluded that
“[m]unicipalities cannot challenge state action on federal
constitutional grounds because they are not ‘persons’ within the
meaning of the Due Process Clause” (City of East St. Louis v Circuit
Court for Twentieth Judicial Circuit, St. Clair County, Ill., 986 F2d
1142, 1144). Other decisions, without using the term “person,” also
support the conclusion that a municipal body may not use the due
process clause to challenge legislation of the municipality’s creating
state. Thus, “[i]t has long been the case that a municipality may not
invoke the protections of the Fourteenth Amendment against its own
state . . . A municipality is thus prevented from attacking state
legislation on the grounds that the law violates the municipality’s
own rights . . . Moreover, while municipalities or other state
political subdivisions may challenge the constitutionality of state
legislation on certain grounds and in certain circumstances, these do
not include challenges brought under the Due Process . . . Clause[] of
the Fourteenth Amendment . . . This is because ‘a municipal
corporation, in its own right, receives no protection from the . . .
Due Process Clause[] vis-a-vis its creating state’ ” (City of New
Rochelle v Town of Mamaroneck, 111 F Supp 2d 353, 364 [citations
omitted] [SD NY]; see City of S. Lake Tahoe v California Tahoe
Regional Planning Agency, 625 F2d 231, 233-234, cert denied 449 US
1039; cf. Township of River Vale v Town of Orangetown, 403 F2d 684,
686 [2d Cir] [a municipality may raise a constitutional due process
challenge to the actions of a different state]). Indeed, the Supreme
Court wrote in 1933 that a “municipal corporation, created by a state
for the better ordering of government, has no privileges or immunities
under the Federal Constitution which it may invoke in opposition to
the will of its creator” (Williams v Mayor & City Council of
Baltimore, 289 US 36, 40). The Court of Appeals has concluded that
the same principle applies equally under the due process clause of the
New York State Constitution, stating that, although “under the due
process . . . clauses of our State and Federal Constitutions . . .[,
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CA 14-00923
petitioners] have procedural standing to participate in the present
litigation (and thus to be heard, for instance, on questions of
statutory interpretation), they do not have the substantive right to
raise these constitutional challenges” (Matter of Jeter v Ellenville
Cent. Sch. Dist., 41 NY2d 283, 287). Inasmuch as petitioners are not
persons who may raise a due process challenge to state legislation,
they are not entitled to the relief they seek, including a declaration
that the legislation is unconstitutional. We therefore modify the
judgments in both appeals by denying in its entirety the relief sought
in the petitions/complaints and by granting judgment in favor of
respondents declaring that section 61 has not been shown to be
unconstitutional.
Petitioners’ contentions that they are entitled to relief in the
nature of mandamus, directing respondents to search their records,
locate all unreimbursed claims for overburden expenditures made by
petitioners, and reimburse petitioners for those expenditures, are
without merit (see Niagara III, 122 AD3d at 1243-1244). Finally, for
reasons stated in the decision at Supreme Court, Jefferson County,
that County’s contentions on its cross appeal with respect to its tort
claims are without merit.
Frances E. Cafarell
Entered: March 20, 2015
Clerk of the Court