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Administrative Review of a Rent Overcharge Petition Should Have Been Granted; Allegations of Fraud Overcame Four-Year Statute of Limitations

The First Department, over a dissent, reversed Supreme Court’s dismissal of an Article 78 petition for administrative review of the denial of petitioner’s rent overcharge complaint by the NYS Division of Housing and Community Renewal (DHCR).  Petitioner’s rent was increased from $572 to $1750 a month.  To justify that adjustment, the landlord was required to have spent $39,000 improving the apartment.  Petitioner submitted evidence that supported her position the landlord spent very little on the improvements.  The landlord, however, produced no evidence of what was actually spent and, therefore, there was no basis in the record for the DHCR’s determination that the $1750 rental amount was justified.  The First Department noted that the four-year statute of limitations did not apply because there was substantial evidence of fraud:

Under the standard set forth in Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin. (15 NY3d 358 [2010]), petitioner made a sufficient showing of fraud to require DHCR to investigate the legality of the base date rent … . Although the “look-back” for an apartment’s rental history is ordinarily limited to the four-year period preceding the date that the petitioner files the complaint …, where fraud is alleged and there is “substantial indicia of fraud on the record,” DHCR is obliged to investigate whether the base date rate was legal and “act[s] arbitrarily and capriciously in failing to meet that obligation”… .

Thus, we find that DHCR’s disparate treatment of the parties’ claims was arbitrary. While the agency made no attempt to evaluate the legitimacy of petitioner’s claims despite their consistency and degree of detail, DHCR credited the owner’s implicit claim that it spent $39,000 to renovate the apartment simply because “it would not be difficult for anyone with any experience in this industry to believe it could have taken $39,000 … to update the appearance and equipment in an apartment which had not changed hands for thirty-two years.” This justification for the agency’s determination is irrational. Finding that the owner “could have” spent $39,000 …, where the owner never submitted any evidence controverting petitioner’s claims is not equivalent to finding that the owner actually made improvements costing that much. Accordingly, this matter should be remanded to DHCR to give the parties the opportunity to present evidence in connection with the legality of the base rate rent. Matter of Boyd v NYS Division of Housing and Community Renewal…, 2013 NY Slip Op 06966, 1st Dept 10-29-13

 

 

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Physician Can Be Removed from Medicaid Program Irrespective of Action Taken by Bureau of Professional Medical Conduct

In a full-fledged opinion by Judge Read, with two concurring judges, the Court of Appeals determined that the Office of Medicaid Inspector General (OMIG) is authorized to remove a physician from New York’s Medicaid program based on a consent order between the physician and the Bureau of Professional Medical Conduct (BPMC) regardless of whether BPMC chooses to suspend the physician:

In this litigation, Supreme Court annulled OMIG’s determination to terminate petitioner-physician’s participation in the Medicaid program on the basis of a BPMC consent order, and directed his reinstatement.  In the consent order, petitioner-physician pleaded no contest to charges of professional misconduct and agreed to 36 months’ probation.  Upon OMIG’s appeal, the Appellate Division affirmed, holding that it was arbitrary and capricious for the agency to bar petitioner-physician from treating Medicaid patients when BPMC permitted him to continue to practice; and that OMIG was required to conduct an independent investigation before excluding a physician from Medicaid on the basis of a BPMC consent order … .  We subsequently granted OMIG permission to appeal (19 NY3d 813 [2012]).

We disagree with the Appellate Division’s rationale, but affirm because OMIG’s determination was arbitrary and capricious for another reason.  Specifically, OMIG did not explain why the BPMC consent order in this case caused it to exercise its discretion pursuant to 18 NYCRR 515.7 (e) to exclude petitioner-physician from the Medicaid program. * * *

When resolving charges of professional misconduct with BPMC, physicians and their attorneys should be mindful that a settlement with BPMC does not bind OMIG, as petitioner-physician discovered in this case.  Matter of Koch, DO v Sheehan…, 153, CtApp 10-22-13

 

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New Medicaid Reimbursement Procedures Did Not Violate State Administrative Procedure Act

The Third Department affirmed Supreme Court and determined that a modified Medicaid reimbursement procedure for the school supportive health services program (SSHSP) did not violate the State Administrative Procedure Act because the new administrative directives (referred to as Q & A’s) were not new rules triggering the requirements of the Act:

The documentation and reimbursement eligibility requirements reflected in the challenged Q & As were not required to be promulgated as rules under the State Administrative Procedure Act.  For purposes of rule-making notice and filing requirements (see State Administrative Procedure Act § 202), a rule is defined as “the whole or part of each agency statement, regulation or code of general applicability that implements or applies law, or prescribes . . . the procedure or practice requirements of any agency, including the amendment, suspension or repeal thereof” (State Administrative Procedure Act § 102 [2] [a]).  Expressly excluded from the definition are “rules concerning the internal management of the agency which do not directly and significantly affect the rights of or procedures or practices available to the public” (State Administrative Procedure Act § 102 [2] [b] [i]), and “forms and instructions, interpretive statements and statements of general policy which in themselves have no legal effect but are merely explanatory” (State Administrative Procedure Act § 102 [2] [b] [iv]).  The Court of Appeals has recognized “that there is no clear bright line between a ‘rule’ or ‘regulation’ and an interpretative policy” (Cubas v Martinez, 8 NY3d 611, 621 [2007]).  Courts have previously found administrative directives to be interpretive statements when they rely on and constitute reasonable interpretations of existing regulations or statutes, or merely address the type of documentation needed to establish whether a predetermined test of eligibility has been met … .  Board of Education of the Kiryas Joel Village Union Free School District, 516336, 3rd Dept 10-17-13

 

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In College Disciplinary Action, Victim Need Not Testify—Failure to Detail Factual Findings in Determination Violates Due Process

The Third Department, in a disciplinary action by SUNY Cortland, determined the alleged victim of harassment was not the complainant in the disciplinary proceeding and therefore the alleged victim need not testify in the proceeding.  The court, however, determined the school’s failure to set forth detailed factual findings in its disciplinary determination violated the student’s due process rights. The matter was sent back for those factual findings, after which the student could pursue administrative remedies:

We reject petitioner’s contention that the Hearing Panel failed to substantially adhere to its rules and regulations published in the Code … .  Although petitioner correctly notes that the Code requires the “complainant” to present his or her own case, the “complainant” is defined as “any person or persons who have filed disciplinary charges against a student.”  Here, the complainant was SUNY Cortland’s Director of Judicial Affairs.  Thus, petitioner’s contention that the Hearing Panel did not comply with the Code because the victim did not present the case is unavailing.  Furthermore, as the victim was not called as a witness by either side and nothing in the Code establishes that the victim is a party to a disciplinary proceeding, we find that the Hearing Panel substantially complied with its rule requiring it to afford petitioner the opportunity to question all parties.  …
We do agree, however, that petitioner was denied due process because the Hearing Panel failed to set forth detailed factual findings in its disciplinary determination.  In a disciplinary proceeding at a public institution of higher education, due process entitles a student accused of misconduct to “a statement detailing the factual findings and the evidence relied upon by the decision-maker in reaching the determination of guilt” … .   Recognized as one of the “‘rudimentary elements of fair play'” in this context …, “[s]uch a statement is necessary to permit the student to effectively challenge the determination in administrative appeals and in the courts and to ensure that the decision was based on evidence in the record”… . Matter of Boyd v SUNY Cortland, 514925, 3rd Dept 10-17-13

 

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Law School Properly Rescinded Student’s Application for Admission Based Upon Omissions Concerning Criminal Record

The Second Department affirmed a law school’s rescission of admission of a student based upon the student’s responses to a question about criminal charges on the school’s admission form:

When the petitioner endeavored to obtain an advance ruling on his eligibility for and the likelihood of his admission to the New York State bar in light of his conviction, the law school first learned of the original charges that had been asserted against the petitioner, including, inter alia, charges for distribution of LSD in the second degree, possession of LSD with the intent to distribute in the second degree, possession of Ecstasy in the third degree, and possession of Ecstasy with the intent to distribute. The law school then advised the petitioner that he must amend his application for admission and include a full accounting of what transpired with respect to his arrest in July 1999 and an explanation with respect to his failure to initially disclose this information. Although the petitioner advised the law school that the statement in his application concerning his criminal record was not factually incorrect and did not need to be amended, he nonetheless supplemented his application and made available all details and documents surrounding his expunged record. In his supplement, the petitioner acknowledged that he had been arrested for distribution and had knowingly distributed illegal substances, and freely admitted his guilt of that crime, although he maintained that he did not engage in distribution of illegal substances on a regular basis.

The law school’s determination was made on the grounds of the petitioner’s misrepresentations and omissions on his application regarding the extent of his prior criminal background, and was based upon the exercise of discretion after a full review. Despite the petitioner’s subsequent disclosure, under the circumstances presented here, and in light of the true nature of the petitioner’s prior criminal activity, the law school’s determination to rescind his acceptance was not arbitrary and capricious, and does not warrant judicial intervention… . Matter of Powers v St John’s Univ Sch of Law, 2013 NY Slip Op 06688, 2nd Dept 10-16-13

 

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Death Threats Not Protected Under First Amendment; Hearsay May Be Basis of Administrative Determination

In affirming the arbitrator’s recommendation a teacher should be terminated for making death threats against an arbitrator in a prior disciplinary proceeding, the First Department noted that hearsay can be the basis for an administrative determination and explained the threats were not protected by the First Amendment:

We reject petitioner’s allegations that the instant disciplinary proceeding and the ultimate discipline imposed against him violated the right to free speech under the First Amendment to the United States Constitution. Supreme Court properly deferred to the arbitrator’s finding that petitioner’s statements are exempt from First Amendment protection because they constitute “true threats.” We note that petitioner’s former attorney only disclosed the threats because he believed that petitioner’s increasingly erratic behavior rendered him genuinely dangerous. Under the circumstances, it cannot be argued that petitioner’s speech implicates matters of public concern … . Nor can it be disputed that petitioner’s death threats disrupted the initial arbitration proceeding… . Matter of Smith v New York City Dept. of Educ., 2013 NY Slip Op 05765, 1st Dept 9-3-13

 

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Teacher’s Unsatisfactory Performance Evaluation Annulled—No Supporting Documentation

In an Article 78 proceeding, the First Department reversed the Board of Education’s denial of a teacher’s petition to annul an unsatisfactory performance evaluation because there was no longer any documentation substantiating any instances of corporal punishment in the teacher’s file.  Disciplinary letters concerning allegations of corporal punishment had previously been removed from the teacher’s file by stipulation.  The First Department explained the relevant rules as follows:

It is undisputed that Part 2(I) of DOE’s Human Resources Handbook “Rating Pedagogical Staff Members” provides (1) that a teacher’s evaluation must be supported by documentation in his/her personnel file; (2) that documentation removed from a file through grievance procedures is inadmissible in performance reviews; and (3) that documentation not addressed directly to a teacher is inadmissible in performance reviews, unless it is attached to and part of another document appropriately placed in the teacher’s file. Moreover, materials placed in a teacher’s personnel file must include a signature and date line for the teacher, evidencing that she has read the material and understands that it will be placed in the file, as well as a signature and date line for a witness; unsigned documents are inadmissible in evaluation reviews.  Matter of Friedman v Board of Educ of the City Sch Dist of the City of New York, 2013 NY Slip Op 05598, 1st Dept 8-13-13

 

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No Article 78 Review Where Petitioner Defaulted

The Second Department noted that there can be no Article 78 review where the petitioner defaulted in the administrative proceeding.  Only the denial of the request to vacate the default can be reviewed:

“[A] petitioner is not aggrieved by an administrative determination made on his [or her] default and may not seek to review such a determination”… . Although the petitioner is not entitled to CPLR article 78 review of the Review Board’s determination to sustain the charges and revoke its registration, which was made upon its default, the Review Board’s determination to deny its application to vacate the default may be reviewed… .  Matter of Tony’s Towing Serv Inc v Swarts, 2013 NY Slip Op 05577, 2nd Dept 8-7-13

 

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16-Ounce “Portion Cap Rule” for Sugary Drinks Invalid

In a full-fledged opinion by Justice Renwick, the First Department determined the “portion cap rule” (limiting the volume of certain “sugary drink” products to 16 ounces) was invalid because the Board of Health “overstepped the boundaries of its lawfully delegated authority” when it promulgated the rule.  In so finding, the First Department applied the analysis used by the Court of Appeals in Boreali v Axelrod, 71 NY2d 1 (1989):

We must … examine whether the Board of Health exceeded the bounds of its legislative authority as an administrative agency when it promulgated the Sugary Drinks Portion Cap Rule. Boreali illustrates when the “difficult-to-demarcate line” between administrative rulemaking and legislative policymaking has been transgressed. In Boreali, the PHC [Public Health Council] promulgated regulations prohibiting smoking in a wide variety of public facilities following several years of failed attempts by members of the state legislature to further restrict smoking through new legislation. Boreali found the regulations invalid because, although the PHC was authorized by the Public Health Law to regulate matters affecting the public health, “the agency stretched that statute beyond its constitutionally valid reach when it used the statute as a basis for drafting a code embodying its own assessment of what public policy ought to be” (id. at 9). Boreali relied on four factors in finding that the PHC’s regulations were an invalid exercise of legislative power. First, Boreali found the PHC had engaged in the balancing of competing concerns of public health and economic costs, “acting solely on [its] own ideas of sound public policy” (id. at 12). Second, the PHC did not engage in the “interstitial” rule making typical of administrative agencies, but had instead written “on a clean slate, creating its own comprehensive set of rules without benefit of legislative guidance” (id.). Third, the PHC’s regulations concerned “an area in which the legislature had repeatedly tried — and failed — to reach agreement in the face of substantial public debate and vigorous lobbying by a variety of interested factions” (id.). Boreali [*9]found that the separation of powers principles mandate that elected legislators rather than appointed administrators “resolve difficult social problems by making choices among competing ends” (id.). Fourth, Boreali found that the agency had overstepped its bounds because the development of the regulations did not require expertise in the field of health (id. at 14).  Matter of New York Statewide Coalition … v NYC Dept of Health and Mental Hygiene, 2013 NY Slip Op 05505, 1st Dept 7-30-13

 

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Review Criteria for Municipal Disability Hearing Explained

The Second Department, in an Article 78 proceeding, explained the review criteria where there has been a disability hearing (re: a firefighter) held by a municipality pursuant to General Municipal Law 207-a:

Judicial review of an administrative determination made after a hearing required by law at which evidence is taken is limited to whether the determination is supported by substantial evidence (see CPLR 7803[4]…). Substantial evidence means more than a “mere scintilla of evidence,” and the test of whether substantial evidence exists in a record is one of rationality, taking into account all the evidence on both sides … .

When there is conflicting evidence or different inferences may be drawn, “the duty of weighing the evidence and making the choice rests solely upon the [administrative agency]. The courts may not weigh the evidence or reject the choice made by [such agency] where the evidence is conflicting and room for choice exists”… .. Moreover, where there is conflicting expert testimony, in making a General Municipal Law § 207-a determination, a municipality is “free to credit one physician’s testimony over that of another” … . Thus, even if “conflicting medical evidence can be found in the record,” the municipality’s determination, based on its own expert’s conclusions, may still be supported by substantial evidence… . Matter of Solano v City of Mount Vernon, 2013 NY Slip Op 05322, 2nd Dept 7-17-13

 

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