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Ulster Home Care, Inc. v. Vacco

96 N.Y.2d 505 Court N.Y. Decision date 2001-05-10 English

Delivered by Smith, J.

Contents

Majority

p. 505
[757 NE2d 764, 731 NYS2d 910]
Ulster Home Care, Inc., et al., Respondents, v Dennis C. Vacco, as Attorney General of the State of New York, Appellant.
Argued March 22, 2001;
decided May 10, 2001
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POINTS OF COUNSEL
Eliot Spitzer, Attorney General, New York City (Elizabeth T. Bogren, Preeta D. Bansal, Daniel Smirlock, Robin A. Forshaw and Jacqueline E. Berkowitz of counsel), for appellant.
I. The court below erred in permitting plaintiffs to challenge the public charge regulation for vagueness on its face rather than requiring plaintiffs to demonstrate that they did not understand the regulation. (United States v Mazurie, 419 US 544 ; People v Nelson, 69 NY2d 302 ; Bryson v United States, 396 US 64 ; American Communications Assn. v Douds, 339 US 382 ; United States v Larm, 824 F2d 780 , 484 US 1078 ; United States v Onassis, 125 F Supp 190 ; Lurie v Wittner, 228 F3d 113 ; United States v Universal C. I. T. Credit Corp., 344 US 218 ; People v Rubin, 271 AD2d 759 ; People v Shack, 86 NY2d 529 .) II. The court below erred by declaring the public charge regulation unconstitutionally vague on the skeletal factual record before it. (People v Rubin, 271 AD2d 759 ; Matter of Ordway, 196 NY 95 ; Rossbach v Rosenblum, 260 App Div 206 , 284 NY 745 ; Schmidt v Magnetic Head Corp., 97 AD2d 151 .) III. The lower courts erred in passing on the constitutionality of an adminis
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trative regulation without joining a necessary party, the agency Commissioner charged with the regulation’s interpretation and enforcement. (State of New York v Wolowitz, 96 AD2d 47 ; Prudential Ins. Co. v Stone, 270 NY 154 ; Matter of Sandor v Nyquist, 45 AD2d 122 .)
Tobin and Dempf, L. L. P., Albany (Raul A. Tabora, Jr., of counsel), for respondents.
I. Summary judgment on the “public charge” regulation should be affirmed. (Syracuse Sav. Bank v DeWitt, 56 NY2d 671 ; Indig v Finkelstein, 23 NY2d 728 ; Williams Real Estate Co. v Douglas A. Edwards Inc., 52 NY2d 779 ; De Veau v Braisted, 5 NY2d 236 , 363 US 144 ; New York Foreign Trade Zone Operators v State Liq. Auth., 285 NY 272 ; Dun & Bradstreet v City of New York, 276 NY 198 ; People v Ohrenstein, 77 NY2d 38 ; People v Albanese, 144 AD2d 952 ; Bryson v United States, 396 US 64 ; American Communications Assn. v Douds, 339 US 382 .) II. The “public charge” regulation is unconstitutionally vague as a basis for any criminal or civil enforcement. (People v Bright, 71 NY2d 376 ; People v New York Trap Rock Corp., 57 NY2d 371 ; Citizens for Safer Community v City of Rochester, 164 Misc 2d 822 ; People v Lee, 144 Misc 2d 11 ; People v Smith, 44 NY2d 613 ; Sokolov v Incorporated Vil. of Freeport, 82 Misc 2d 1087 ; People v Scott, 26 NY2d 286 ; Trio Distrib. Corp. v City of Albany, 2 NY2d 690 ; People v First Meridian Corp., 86 NY2d 608 ; People v McDonald, 88 NY2d 281 .) III. The “necessary party” defense was never raised and is meritless in any event. (Gilroy v American Broadcasting Co., 46 NY2d 580 ; Matter of Concerned Citizens to Review Jefferson Val. Mall v Town Bd., 54 NY2d 957 ; De Veau v Braisted, 5 AD2d 603 , 5 NY2d 236 ; Rockland County Multiple Listing Sys. v State of New York, 72 AD2d 742 .)
Mark Thomas, Albany, for Healthcare Association of New York State, amicus curiae.
Civil or criminal prosecution based on the “public charge” regulation would be unconstitutional. (Matter of Levine v O’Connell, 275 App Div 217 .)
Whiteman Osterman & Hanna, Albany (Heather D. Diddel, Joel L. Hodes and Robert T. Schofield of counsel), for New York State Association of Health Care Providers, Inc., amicus curiae.
I. This Court should grant the New York State Association of Health Care Providers, Inc. leave to participate as amicus curiae in this action. (Kemp v Rubin, 187 Misc 707 .) II. The Attorney General’s unprecedented application of a “public charge” reimbursement rate is impermissible and undermines
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the purpose and intent of the statute, regulations and New York State public policy. (People v Finnegan, 85 NY2d 53 , 516 US 919 ; People v Cypress Hills Cemetery, 208 AD2d 247 ; Niesig v Team I, 76 NY2d 363 ; Matter of Cortland-Clinton, Inc. v New York State Dept. of Health, 59 AD2d 228 ; Matter of New York State Clinical Lab. Assn. v Kaladjian, 194 AD2d 189 , 85 NY2d 346 .)
Gleason, Dunn, Walsh & O’Shea, Albany (Thomas F. Gleason of counsel), for Home Care Association of New York State, Inc., amicus curiae.
18 NYCRR 505.14 (h) (7) does not provide a basis for a criminal charge against a home care provider based upon a claim that a provider had utilized a charge to the general public that is less than the Medicaid rate. (Matter of Beekman-Downtown Hosp. v Whalen, 44 NY2d 124 ; Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169 .)

OPINION OF THE COURT

Effective January 1, 1994, the New York State Department of Social Services (DSS) amended the Medicaid regulation setting reimbursement rates for providers of personal care services. The amended regulation states:

“(1) Medical assistance payments to personal care services providers for any rate year beginning on or after January 1, 1994, are made at the lower of the * following rates:
“(i) the rate the provider charges the general public for personal care services; or
“(ii) the rate determined by the department in accordance with [a cost-based methodology]” (18 NYCRR 505.14 [h] [7] [ii] [a] [1] [emphasis added]).

The primary issue here is whether “the rate the provider charges the general public for personal care services” is unconstitutionally vague. We conclude that it is not.

This case arose in 1997 during a State-wide audit and investigation by the Attorney General’s Medicaid Fraud Control Unit (MFCU) of home health care agencies providing personal care services to Medicaid recipients. MFCU concluded that plaintiff Ulster Home Care had overcharged Medicaid for personal care services by approximately $600,000. MFCU concluded that instead of billing Medicaid at the DSS-determined rate (subd [a] [1] [ii] of the regulation), Ulster

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should have billed Medicaid at the rate it charged the general public for personal care services (subd [a] [1] [i]), which was the lower of the two rates. MFCU also concluded that Ulster had attempted to conceal the overcharges by overstating the amounts it charged its private-pay patients.

The Attorney General sought to bring criminal fraud and larceny charges before a Grand Jury. In May 1998, plaintiffs[1] commenced this civil action for declaratory and injunctive relief alleging its contract with Ulster County precluded the Attorney General from replacing the reimbursement rate contained in its contract with a “public charge” rate. The action also sought to enjoin the Attorney General from enforcing the regulation, from demanding the payment of any sums based upon it and from imposing any criminal or civil liability upon the plaintiffs based upon said regulation.[2]

Supreme Court denied plaintiffs’ motion for summary judgment in its entirety. The Appellate Division reversed, determining that the regulation was facially invalid because the terms “general public” and “rate” were not defined and no standards for their application were established ( 268 AD2d 59 , 66). Following an award of attorneys’ fees at Supreme Court, the Attorney General appealed to this Court from the judgment of Supreme Court pursuant to CPLR 5601 (d). We now reverse.

Before this Court, the Attorney General contends that the Appellate Division erred by permitting a facial challenge rather than requiring plaintiffs to demonstrate that they could not understand the regulation and by granting summary judgment on the limited record before it.

A statute, or a regulation, is “unconstitutionally vague if it fails to provide a person of ordinary intelligence with a reasonable opportunity to know what is prohibited, and it is written in a manner that permits or encourages arbitrary or discriminatory enforcement” (People v Foley, 94 NY2d 668 , 681; see also, People v Nelson, 69 NY2d 302 , 307).

1 Plaintiffs James Mahoney and Diane Wiegand, executives at Ulster Home Care who also would have been implicated for overcharging Medicaid, were permitted to intervene in the action.

2 On June 9, 1998, plaintiff Ulster was granted a preliminary injunction restraining the Attorney General from prosecuting it during the pendency of the action. By order entered on July 15, 1998, the Attorney General was found in civil contempt of the June 9 order in that he had proceeded to seek an indictment against Ulster. The Appellate Division affirmed the grant of the preliminary injunction and the finding of contempt ( 255 AD2d 73 ). This prior order does not necessarily affect the judgment here and thus is not brought up for review.

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Neither the term “general public” nor “rate” as used in the regulation is so vague that it could not be understood by a person of ordinary intelligence or could be arbitrarily enforced. The challenged language has a common understanding and is used in other State Medicaid and Medicare regulations (see, e.g., 8 NYCRR 247.15 [c] [4]; 10 NYCRR 86-1.21 [d]; 18 NYCRR 415.6 [e] [2]; see also, 38 CFR 17.55 [h] [Federal regulation of medical use of hospitals by veterans]; 42 CFR 413.9 [a] [Federal regulation of cost reimbursement to providers in the Medicare program]). The limited application of this regulation to home personal care providers who elect to enroll in the Medicaid program and who expressly agree to adhere to its rules, coupled with the ample opportunity these providers had to understand the requirements of the Medicaid program, are further reasons to reject the argument that the public charge provision is impermissibly vague. Plaintiffs should have been required to show that the regulation was unconstitutional as applied to them. When a person’s conduct falls within the proscriptions of a regulation, “a vagueness challenge must be addressed to the facts before the court” (Nelson, supra, 69 NY2d, at 308 ; see also, People v Rubin, 96 NY2d 548 [decided today]).

Moreover, plaintiffs were not subject to prosecution because they allegedly violated the public charge regulation. Rather, the intended charges were grand larceny and offering false instruments for filing. The alleged violation of the regulation was only an element of proof of these crimes and violation of the regulation alone, without a knowing attempt to deceive or defraud, could not support criminal liability (see, United States v Larm, 824 F2d 780 [9th Cir] [once a trier of fact determines that a person understood a regulation when it was allegedly violated, a subsequent challenge to the regulation for ambiguity is irrelevant so long as the person is actually convicted of violating a statute that provides adequate notice of the conduct proscribed]). On this separate basis, it was error to enjoin plaintiffs’ criminal prosecutions (see also, Bryson v United States, 396 US 64 , 68 [in a proceeding to vacate defendant’s conviction based on a statute that was repealed following his conviction, the Court stated that “a claim of unconstitutionality will not be heard to excuse a voluntary, deliberate and calculated course of fraud and deceit. One who elects such a course as a means of self-help may not escape the consequences by urging that his conduct be excused because the statute which he sought to evade is unconstitutional”]).

Accordingly, the judgment appealed from and the order of the Appellate Division brought up for review should be re

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versed, with costs, and the case remitted to Supreme Court for further proceedings in accordance with this opinion.

Chief Judge Kaye and Judges Ciparick, Wesley and Altman[3] concur; Judges Levine, Rosenblatt and Graffeo taking no part.

Judgment appealed from and order of the Appellate Division brought up for review reversed, etc.

3 Designated pursuant to NY Constitution, article VI, § 2.

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