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Statutory Prohibition of Court Review of Civil Service Commission’s Determination (Where the Employee Elects to Appeal to the Commission Before Seeking Judicial Review) Does Not Apply When Constitutional Rights Are Implicated or Where the Agency Has Acted Illegally or In Excess of Its Jurisdiction

The Third Department determined, despite a statutory provision prohibiting judicial review when the employee elects to appeal to the Civil Service Commission before seeking judicial review, the courts have the power to review the agency’s determination when the agency has acted in excess of its jurisdiction. Here the petitioner asserted her employment was terminated based on charges brought after the statute of limitations on those charges had passed. The Third Department agreed.  Although there is an exception to the application of the one-year statute of limitations when the charges constitute crimes, here the allegations of misconduct did not include the requisite mens rea for the crime of official misconduct (intent to gain a benefit and knowledge the conduct was unauthorized).  Therefore the one-year statute of limitations applied. With respect to the power to review the agency’s determination, the Third Department wrote:

Civil Service Law § 76 (3) provides that where, as here, an employee has elected to appeal to respondent before seeking judicial review, “[t]he decision of [respondent] shall be final and conclusive, and not subject to further review in any court” (see also Civil Service Law § 76 [1]). Such explicit statutory language ordinarily bars further appellate review … . However, statutory preclusion of all judicial review of the decisions rendered by an administrative agency in every circumstance would constitute a grant of unlimited and potentially arbitrary power too great for the law to countenance … . Thus, even when proscribed by statute, judicial review is mandated when constitutional rights are implicated by an administrative decision or “when the agency has acted illegally, unconstitutionally, or in excess of its jurisdiction”… . Matter of De Guzman v State of New York Civ. Serv. Commn., 2015 NY Slip Op 04712, 3rd Dept 6-4-15

 

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New York City Taxi and Limousine Commission (TLC) Did Not Have the Authority to Promulgate “Health Care Rules” and Mandate Deductions from Taxi Fares to Pay for Healthcare Services and Disability Coverage for “Medallion” Taxi Cab Drivers

The First Department determined the New York City Taxi and Limousine Commission (TLC) exceeded its authority and acted arbitrarily and capriciously when it promulgated “Health Care Rules” and determined six cents per taxi-fare could be deducted for the purpose of providing healthcare services and disability coverage for “medallion” taxi cab drivers.

TLC’s “expansive mandate to develop and improve taxi and limousine service” notwithstanding …, we find that TLC exceeded its authority in promulgating the Health Care Rules … .

First, the record demonstrates that, in its attempt to establish a cost-effective structure for promoting driver health, TLC, motivated by broad “economic and social concerns,” was making policy, and therefore was “operating outside of its proper sphere of authority” … . Second, TLC manufactured a “comprehensive set of rules without benefit of legislative guidance” … . TLC has certain delineated powers to ensure that drivers are capable of driving safely (see New York City Charter § 2300; Administrative Code of City of NY §§ 19-505[b][3], [d], [h], [l]; 19-512.1[a]). However, nothing in the Charter or the enabling Code provisions contemplates the establishment and outsourcing of a miniature health insurance navigation and disability insurance department. Third, no expertise in the field of health care services or disability insurance was involved in the development of the rule (indeed, this is not TLC’s area of expertise), a fact highlighted by the lack of technical discussion at the hearings on the proposed rule amendments … . Matter of Ahmed v City of New York, 2015 NY Slip Op 04733, 1st Dept, 6-4-15

 

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Courts Do Not Defer to an Agency’s Construction of a Statute—Workers’ Compensation Board’s Determination, Based Upon the Construction of Workers’ Compensation Law 25, Reversed

In the context of a “conciliation process” pursuant to Workers’ Compensation Law 25, the Third Department explained the court’s role in reviewing the determination of an agency when statutory construction is the sole issue. Unlike the factual determinations of an agency, to which courts must defer, no such deference is afforded an agency’s construction of a statute. Reversing the Workers’ Compensation Board, the Third Department held that the statute unambiguously entitled claimant to a penalty imposed upon the employer for failure to timely make compensation payments:

Where, as here, the issue is one of pure statutory construction, no deference need be accorded to the Board’s interpretation of the statutory framework … . As to our construction of Workers’ Compensation Law § 25, “the text of a statute is the best evidence of legislative intent and, where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used” … . Further, the provisions within that statute must be “construed together unless a contrary legislative intent is expressed, and courts must harmonize the related provisions in a way that renders them compatible” … .

Turning to the relevant statutory provisions, Workers’ Compensation Law § 25 has two mechanisms for penalizing employers or workers’ compensation carriers who fail to make timely payment of compensation following a decision. The first provides that, “[i]f the employer or its insurance carrier shall fail to make payments of compensation according to the terms of the award within [10] days . . ., there shall be imposed a penalty equal to [20%] of the unpaid compensation which shall be paid to the injured worker or his or her dependents” (Workers’ Compensation Law § 25 [3] [f]). The second provides that, if payment is not made within 10 days of a proposed conciliation decision becoming final, “the chair [of the Board] shall impose . . . a fine of [$500] for failure to live up to the terms of the decision upon verification that payment has not been timely made” (Workers’ Compensation Law § 25 [2-b] [h]; see 12 NYCRR 312.5 [i]).

The statutory scheme unambiguously entitles claimant to the penalty described in Workers’ Compensation Law § 25 (3) (f). Matter of Liberius v New York City Health & Hosps. Corp., 2015 NY Slip Op 04706, 3rd Dept 6-4-15

 

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Agency’s Failure to Follows Its Own Regulations Rendered Determination Arbitrary and Capricious

The Third Department determined that the NYS Education Department did not follow its own regulations in calculating the amounts due petitioner for special education services for preschool children with disabilities.  Failure to follow the regulations rendered the calculation “arbitrary and capricious:”

Petitioner contends that respondent failed to follow its own regulations and otherwise acted arbitrarily primarily by relying upon unaudited information from the municipalities, disregarding petitioner’s audited CFR [Consolidated Fiscal Report] and financial data, and refusing to consider petitioner’s explanation for the discrepancies between its audited information and the municipalities’ data. Our review of an administrative agency’s determination is limited to “ascertain[ing] whether there is a rational basis for the action in question or whether it is arbitrary and capricious” …, and we have previously recognized that respondent has “broad discretion in setting the reconciliation rate” … . However, an agency determination arrived at in a manner inconsistent with its own regulations is not supported by a rational basis … . Although “an agency’s interpretation of its own regulation is entitled to deference” … , “courts are not required to embrace a regulatory construction that conflicts with the plain meaning of the promulgated language” … . * * *

The intent of the regulations, consistent with common sense and good government, is to gather and use correct data; hence, the repeated directives that service providers submit information — CFRs and financial statements — that has been independently audited and certified by an appropriate professional (see 8 NYCRR 200.9 [e] [1] [i] [a] [1]; [ii] [a]). The regulations provide no authority for relying solely on unaudited information from municipalities. This does not lead to the conclusion that such information from a municipality has no role. It can be considered to require clarification or explanation from a service provider and, if adequately verified, even incorporated in the calculus. However, at a minimum, a service provider that has adhered to the regulations and provided a CFR and financial statement, both audited, should be afforded a reasonable opportunity to explain and/or reconcile its information with the unaudited information of a municipality. Consistent with its own regulations, respondent cannot simply reject audited information by reason of the existence of less reliable information without some articulable rational basis. Matter of Mid Is. Therapy Assoc., LLC v New York State Educ. Dept., 2015 NY Slip Op 04707, 3rd Dept 6-4-15

 

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Application for Area Variances Properly Denied—Court’s Review Criteria Explained—General City Law and Town Law Criteria for Area Variance Explained

The Second Department determined the city zoning board properly denied the application for area variances.  The court explained its role in reviewing the board’s determination and the criteria applied to applications for area variances under the General City Law and the Town Law:

” Local zoning boards have broad discretion in considering applications for variances, and judicial review is limited to determining whether the action taken by the board was illegal, arbitrary, or an abuse of discretion'” … . “Therefore, a zoning board’s determination should be sustained if it is not illegal, has a rational basis, and is not arbitrary and capricious” … .

In determining whether to grant an application for an area variance, a zoning board must engage in a balancing test weighing “the benefit to the applicant if the variance is granted . . . against the detriment to the health, safety and welfare of the neighborhood or community by such grant” (General City Law § 81-b[4][b];… see also Town Law § 267-b[3]). The zoning board must also consider: “(i) whether an undesirable change will be produced in the character of the neighborhood or a detriment to nearby properties will be created by the granting of the area variance; (ii) whether the benefit sought by the applicant can be achieved by some method feasible for the applicant to pursue, other than an area variance; (iii) whether the requested area variance is substantial; (iv) whether the proposed variance will have an adverse effect or impact on the physical or environmental conditions in the neighborhood or district; and (v) whether the alleged difficulty was self-created, which consideration shall be relevant to the decision of the board of appeals, but shall not necessarily preclude the granting of the area variance” (General City Law § 81-b[4][b]…). Matter of Goodman v City of Long Beach, 2015 NY Slip Op 04484, 2nd Dept 5-27-15

 

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The Agency’s Determination Was Based Upon Its Own Precedents and Related Jurisprudence and Was Therefore “Rationally Based”—The Determination Should Not, Therefore, Be Disturbed by a Court—A Court May Not Substitute Its Own Judgment for that of the Agency

The First Department, in a full-fledged opinion by Justice Acosta, reversed Supreme Court’s denial of a motion to dismiss a petition to annul an agency-determination. The underlying proceedings involved two nurses accused of submitting false time sheets. In seeking a hearing allowed by the collective bargaining agreement, the union, on behalf of the nurses, requested certain documents relevant to the allegations from the New York City Human Resources Administration (HRA). HRA refused to turn over the documents, arguing that such “discovery” is not allowed in disciplinary actions (by the relevant regulations). The Board (of Collective Bargaining) ultimately ruled that some, but not all, of the requested documents (those kept in the regular course of business) should be turned over. HRA filed an Article 78 petition seeking to annul the Board’s determination. Supreme Court denied the union’s motion to dismiss the petition.  The 1st Department held the petition should have been dismissed. In reviewing an agency determination, the court looks only at whether the determination is rationally based. Here the Board’s determination was based upon its own precedents and related jurisprudence. Therefore, the determination must stand.  A court cannot substitute its own judgment for that of the agency:

“In reviewing an administrative agency determination, courts must ascertain whether there is a rational basis for the action in question or whether it is arbitrary and capricious” … . “A court cannot simply substitute its judgment for that of an administrative agency when the agency’s determination is reasonable” … . Moreover, “[i]t is well settled that the construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld” … . “Broad deference must therefore be accorded determinations of the Board, which … is the body charged with interpreting and implementing the [regulations] and determining the rights and duties of labor and management in New York City” … .

Given this deferential standard of review, we are compelled to hold that the petition should have been dismissed. The Board’s decision had a rational basis and was not arbitrary and capricious. To be sure, the Board engaged in a relatively expansive interpretation of the duty to furnish information embodied in [the regulations], when it determined that the duty applies in the context of these disciplinary proceedings instituted pursuant to the Agreement. But its interpretation was based on the holdings of some nine prior decisions and was not irrational … . The Board based its decision on its own precedents and related jurisprudence, and its interpretation of the [regulations], a statutory provision within its purview and expertise, was sufficiently reasonable to preclude our “substitut[ing] another interpretation” … . Matter of City of New York v New York State Nurses Assn., 2015 NY Slip Op 04437, 1st Dept 5-26-15

 

 

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Town Planning Board’s Approval of the Installation of Wind Turbines Should Not Have Been Reversed—Board Properly Considered All the Factors Mandated by the Land Use Ordinance and Supreme Court Did Not Have the Authority to Substitute Its Judgment for the Board’s

The Third Department, reversing Supreme Court, determined that the town planning board had properly issued a special use permit for the installation of wind turbines. The court noted that the burden of proof on the owner for seeking a special exception (special use permit) is lower than the burden for seeking a variance.  The court held that all of the analytical factors mandated by the land use ordinance had been properly considered by the board and Supreme Court did not have the authority to substitute its own judgment for the board’s:

The Land Use Ordinance permits specified uses in the area where the project is to be built and allows “[a]ll other uses” for which a special use permit is obtained. Contrary to petitioners’ assertion, while the project is not allowed as of right in the district, the fact that it is “permitted . . . is ‘tantamount to a legislative finding that [it] is in harmony with the general zoning plan and will not adversely affect the neighborhood'” … . As such, “the burden of proof on an owner seeking a special exception is lighter than that on an owner seeking a variance, [with] the former only being required to show compliance with any legislatively imposed conditions on an otherwise permitted use” … . The determination of the Board that those conditions had been met here will be upheld if it “has a rational basis and is supported by substantial evidence in the record” … .

The parties do not dispute upon this appeal, and we agree with Supreme Court, that the Board’s findings with regard to six of the eight conditions enumerated in the Land Use Ordinance are supported by substantial evidence. The first of the remaining two conditions requires that the “[l]ocation, use and size of structure, nature and intensity of operations involved, size of site in relation to it, and location of site with respect to existing or future streets giving access, are such that it will be in harmony with orderly development of the district.” The second requires that the “[l]ocation, nature and height of buildings, walls, fences and signs will not discourage the appropriate development and use of adjacent land and buildings or impair their value.”

With regard to those two conditions, the wind turbines are almost 500 feet tall when the rotor blades are fully vertical [FN2]. Notwithstanding their size, the Board pointed out that the turbines are located in an area where high-voltage electric transmission lines have already altered the landscape, and noted that other factors minimized the impact of the project upon the viewshed. The project will have minimal impact upon traffic after construction is completed and, given the economic benefits that will accrue to participating landowners, the Board found that it would help to preserve existing uses of the surrounding properties. Moreover, the Board cited a study in the record finding that property values would not be impacted by the project. The Board also pointed to proof that the applicant had entered into setback agreements with nonparticipating landowners who resided within 2,000 feet of the turbines, further ensuring that the project would not impair the use of nearby parcels or development in the zoning district. Supreme Court pointed to conflicting evidence submitted by petitioners with regard to both conditions but, even if that evidence was properly considered, “a court may not substitute its own judgment” where substantial evidence supports the determination of the Board … . Matter of Frigault v Town of Richfield Planning Bd., 2015 NY Slip Op 04355, 3rd Dept 5-21-15

 

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Revocation of Empire-Zone-Business Certifications Upheld in 9 of 11 Instances

The Third Department, in a full-fledged opinion by Justice Lynch, considered the Empire Zone Designation Board’s revocation of petitioners’ certifications as empire zone businesses. The Department of Economic Development (DED) was directed, in 2009, to conduct a review of all certified businesses to determine whether decertification was warranted on one of two grounds: “First, DED could decertify a business enterprise if it was a “shirt-changer,” that is, if the enterprise was certified prior to August 1, 2002, and it “caused individuals to transfer from existing employment with another business enterprise with similar ownership . . . to similar employment with [the enterprise] or if the enterprise acquired, purchased, leased, or had transferred to it real property previously owned by an entity with similar ownership, regardless of form of incorporation or ownership” (General Municipal § 959 [a] [v] [5]; see 5 NYCRR 11.9…). Second, DED could decertify a business enterprise if it failed to meet the 1:1 benefit-cost test … . The latter test required decertification where it was determined that the enterprise “has submitted at least three years of business annual reports [and it] has failed to provide economic returns to the [s]tate in the form of total remuneration to its employees (i.e., wages and benefits) and investments in its facility that add to a greater value than the tax benefits the business enterprise used and had refunded to it” … . Applying the standard criteria for review of administrative determinations, the Third Department upheld all but two of the 11 decertifications, but also determined retroactive decertifications were improper. Matter of Lyell Mt. Read Bus. Ctr. LLC v Empire Zone Designation Bd., 2015 NY Slip Op 03906, 3rd Dept 5-7-15

 

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Comptroller Has Authority to Audit Private Health Care Providers Who Are Paid through an Insurance Company Under Contract with the State for Health Care Provided to State Employees

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined the state comptroller had constitutional and statutory authority to audit the billing records of private health care providers (Handler and South) who receive state funds for care provided to state employees through an insurance company under contract with the state. The underlying audit concerned the health care providers' waiver of patients' co-payments which effectively reduced the cost of the care provided by 20%.  Because the state was obligated to pay only 80% of the cost of the care, the comptroller determined the health care providers who waived the copayment were effectively overpaid by the state.  The health care providers argued the comptroller did not have the power to audit them because they were paid by the insurance company, not the state:

Handler and South Island receive State insurance funds in exchange for services rendered to State insurance beneficiaries. The fact that the State relies on a third-party conduit, United [the insurance company], does not change the character of the funds. They remain State dollars directed to pay health care costs incurred by State beneficiaries and charged by Handler and South Island.  Matter of Martin H Handler MD PC v DiNapoli, 2014 NY Slip Op 03191, CtApp 5-6-14

 

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Denial of Special Use Permit Reversed As Arbitrary and Capricious/Difference Between Special Use Permit and Use Variance Explained

The Second Department determined that the denial of 7-Eleven’s petition for a special exception (also referred to as a special use permit) for operation of a convenience store was arbitrary and capricious.  The court explained the difference between a special use permit and a use variance. A special use permit gives a property owner permission to use property in a way that is consistent with the zoning ordinance but not necessarily allowed as of right. A use variance gives the owner permission to use the property in a manner inconsistent with the zoning ordinance.  The proof burden is much lighter for a special use permit, as opposed to a use variance.  The proponent of a special use permit need only show compliance with legislatively imposed conditions, while the proponent of a use variance must show undue hardship in complying with the ordinance. Here no evidence was presented to support the denial of the special use permit:

A special exception, commonly known as a special use permit, “gives [a property owner] permission to use property in a way that is consistent with the zoning ordinance, although not necessarily allowed as of right” … . By contrast, a use variance gives a property owner permission to use the property in a manner inconsistent with a local zoning ordinance. “The significance of this distinction is that the inclusion of the permitted use in the ordinance is tantamount to a legislative finding that the permitted use is in harmony with the general zoning plan and will not adversely affect the neighborhood” … . Accordingly, “the burden of proof on an owner seeking a special exception is lighter than that on an owner seeking a [use] variance, the former only being required to show compliance with any legislatively imposed conditions on an otherwise permitted use, while the latter must show an undue hardship in complying with the ordinance” … . Matter of 7-Eleven, Inc. v Incorporated Vil. of Mineola, 2015 NY Slip Op 03544, 2nd Dept 4-29-15

 

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