Opinion
# 2011-039-258 Claim No. 109323
09-30-2011
BROOKLYN MANOR v. STATE OF NEW YORK
Synopsis
Following a trial on liability, the Court finds that the owner and operator of an adult care facility in Brooklyn, New York did not prove causes of action sounding in tortious interference with prospective business relations, defamation and negligence. The claim arose from a series of administrative inspections and enforcement actions undertaken by the New York State Department of Health against the adult care facility between December 2003 and June 2005. Case information
UID: 2011-039-258 Claimant(s): BENITO FERNANDEZ d/b/a BROOKLYN MANOR HOME FOR ADULTS Claimant short name: BROOKLYN MANOR Footnote (claimant name) : Defendant(s): STATE OF NEW YORK Footnote (defendant name) : Third-party claimant(s): Third-party defendant(s): Claim number(s): 109323 Motion number(s): Cross-motion number(s): Judge: James H. Ferreira O'Connell & Aronowitz, P.C. Claimant's attorney: By: Kurt E. Bratten, Esq. Jeffrey J. Sherrin, Esq. Hon. Eric T. Schneiderman Attorney General of the State of New York Defendant's attorney: By: Thomas R. Monjeau Assistant Attorney General Third-party defendant's attorney: Signature date: September 30, 2011 City: Albany Comments: Official citation: Appellate results: See also (multicaptioned case) Decision
This Decision follows a trial on liability and a series of decisions arising from a claim originally filed in May 2004, an amended claim filed in October 2006 and a second amended claim filed in January 2008.Claimant Benito Fernandez owned and operated Brooklyn Manor Home for Adults (hereinafter "Brooklyn Manor"), an adult care facility located in Brooklyn, New York, that provided long-term care to adult residents. Defendant, through the New York State Department of Health (hereinafter "DOH"), regulates adult homes. The second amended claim alleges causes of action sounding in tortious interference with claimant's prospective business relations, defamation and negligence. The claim emanates, in large part, from enforcement actions undertaken by DOH against Brooklyn Manor between December 2003 and June 2005. Briefly stated, claimant avers that facility inspection reports prepared by defendant violated DOH regulations and that these reports formed the basis of allegedly improper enforcement proceedings including, inter alia, the denial of the facility's operating certificate, the attempt to remove the facility's administrator, the suspension of claimant's operating certificate, the appointment of a temporary operator and an attempt to appoint a permanent receiver. Claimant further alleges that the enforcement proceedings were used to divert admissions, deny the facility funding under New York's Quality Incentive Payment Program (hereinafter "QUIP") and financially ruin claimant and his business.
(see Fernandez v State of New York, UID No. 2008-039-090, Claim No. 109323, Motion No. M-73305, August 21, 2008 [Ferreira, J.] [motion to compel disclosure]; Fernandez v State of New York, 18 Misc 3d 1123(A) [2007] [motion to compel disclosure and cross-motion to dismiss]; Fernandez v State of New York, Claim No. 109323, Motion Nos. M-70234 and CM-70687, September 27, 2006 [Hard, J.] [motion to dismiss and cross-motion to amend claim]).
A bifurcated trial on liability was held between March 17 and March 25, 2010. Claimant called two witnesses, including himself. Defendant called one witness. More than 80 exhibits were received into evidence. An additional day of trial was held on August 11, 2010 to consider the admissibility of over 5,000 pages of transcripts and exhibits from two prior DOH administrative hearings. Requests for additional time to submit post trial memoranda were received and granted. Upon considering the relevant legal principles and their application to the facts underlying this claim, and after weighing the evidence, including the exhibits received into evidence and the testimony and demeanor of the witnesses, the Court finds, for the reasons stated below, that claimant has failed to prove by a preponderance of the credible evidence his claim against defendant.
Motion to Admit and Cross Motion to Admit
A threshold issue for the Court concerned the admissibility of excerpts from two administrative hearings conducted before DOH, identified at trial as claimant's exhibits 62 and 63. Those hearings are the Matter of Antonia Novello, M.D., M.P.H., Ph. D., as Commissioner of New York State Department of Health to determine the action with respect to Diane Walker, respondent, as Administrator of Brooklyn Manor Home for Adults, (hereinafter "Walker Hearing") before ALJ John Wiley, and Matter of Antonia Novello, M.D., M.P.H., Ph. D., as Commissioner of New York State Department of Health to determine the action with respect to Benito Fernandez, Respondent, as Operator of Brooklyn Manor Home for Adults (hereinafter "Revocation Hearing") before ALJ James Horan. At trial, the parties stipulated to the admissibility of the transcripts and exhibits from both of these administrative hearings contained in exhibits 62 and 63. Given the sheer volume of those hearing materials (thousands of transcript pages and hundreds of hearing exhibits), the parties subsequently filed motions seeking to admit excerpts from those two administrative hearings supporting their respective positions.On August 11, 2010, the trial resumed and the Court identified claimant's excerpts as claimant's exhibit 78 and defendant's excerpts as defendant's exhibit F. Claimant made specific objections to portions of defendant's excerpts (see claimant's exhibit 79), and defendant objected to certain parts of claimant's submission (see defendant's exhibit G). Upon consideration of these submissions and the objections related thereto, and the parties having already stipulated to the admissibility of exhibits 62 and 63, the Court overrules the objections raised by both parties and receives into evidence the administrative hearing excerpts contained in claimant's exhibit 78 and defendant's exhibit F, and the related affirmations from both parties (see claimant's exhibit 79 and defendant's exhibit G).
The motions are identified as Motion M-78411 and Cross Motion CM-78453.
Statutory and Regulatory Framework for Adult Care Facilities
Social Services Law § 460 sets forth the State's policy and purpose with respect to residential care programs:
"Residential care programs for adults and children of the highest quality, efficiently produced and properly utilized at a reasonable cost, are a matter of vital concern to the people of this state. In order to more effectively protect and assure the life, health, safety and comfort of adults and children who must be cared for away from their own homes, the department of social services acting directly or through social services districts, and with the cooperation of other state agencies, shall have the comprehensive responsibility for the development and administration of programs, standards and methods of operation, and all other matters of state policy, with respect to residential care programs for children and adults and all facilities and agencies, whether public or private, which are subject to the provisions of this article."
Article 7 of the Social Services Law (SSL § 460 et seq), when first enacted, gave the New York State Department of Social Services the authority to establish regulatory standards for all adult care facilities. In 1997, responsibility for the regulation of adult care facilities was transferred to DOH (L. 1997, ch 436, § 122 [e]).
An adult care facility is
"a residence for adults, . . . or an adult home, which provides . . . residential care and services to adults, who, though not requiring continual medical or nursing care . . . are by reason of . . . physical . . . or mental disabilities or other factors, unable or substantially unable to live independently"(SSL § 2[21]). An adult care facility is required to obtain an operating certificate from DOH (see SSL § 460-b; 18 NYCRR §§ 485.1[d], 485.5 and 485.6). DOH is responsible for setting "fiscal, administrative, architectural, safety, nutritional and program standards" for adult care facilities (SSL § 461 [1]; see 18 NYCRR §§ 485-491). To ensure compliance with such standards, DOH retains the responsibility "for the inspection and supervision of all adult care facilities" (SSL § 461-a [1]; see 18 NYCRR § 486.1 [b]), and is given broad authority to work with other state agencies to ensure compliance with regulations and standards of care at such facilities (see 18 NYCRR § 485.3). Inspections may include a review of the physical premises and facility records, private interviews with residents and the collection of written or photographic evidence (see 18 NYCRR §§ 486.2 [a] and [h]). The inspections can take different forms, including, inter alia, complete inspections, partial inspections and complaint inspections (see 18 NYCRR § 486.2 [e]). DOH may also inspect facilities on an unannounced basis (see SSL § 461-a [2]) and may "conduct more than one inspection of an adult care facility, for whatever purpose, as is deemed necessary for ensuring compliance with applicable provisions of law and regulations" (SSL § 461-a [2] [e]).
After an inspection, DOH must issue an inspection report identifying the area of operation in which the adult home has failed to comply with the applicable regulation or requirement (see SSL § 461-a [2] [c]; 18 NYCRR § 486.2 [i] [2]). The inspection report must be sent to the operator and include directions "as may be appropriate" for achieving compliance (18 NYCRR § 486.2 [i] [3]). Within 30 days of issuance of the inspection report, the operator must correct the violation or submit a plan for correction (see 18 NYCRR § 486.2 [j]). The operator is also required to post the most recent inspection report "conspicuously in a public area of the facility which is accessible to residents and visitors," (18 NYCRR § 486.2 [l]), and with the exception of confidential information, make available for review upon request, inspection reports for the most recent two-year period (see 18 NYCRR § 486.2 [m]).
Based upon violations identified during an inspection, DOH "may undertake enforcement action against any operator of an adult care facility who fails to operate the facility in compliance with applicable provisions of law and regulation" (18 NYCRR § 486.1 [d]). The enforcement mechanisms available to DOH are vast and include, inter alia, conducting hearings; imposing civil penalties after hearing; revoking or suspending an operating certificate after hearing; issuance of a commissioner's order requiring an operator to immediately remedy conditions dangerous to residents; temporarily suspending or limiting an operating certificate upon a finding of imminent danger to residents; and requesting the Attorney General to seek injunctions, civil penalties or criminal prosecution (see SSL § 460-d; 18 NYCRR § 486.4 [b]; see also 18 NYCRR §§ 486.4 [c]-[h]). DOH may also place on a "do not refer list"adult homes that have received written notice of enforcement action or where there is pending enforcement action against the adult home's operating certificate (see SSL § 460-d [15]). Referrals for admissions to facilities on such lists are prohibited (see SSL § 460-d [12]). In addition, where a facility's operating certificate is revoked or suspended, in order to protect the health, safety and welfare of residents, the DOH Commissioner has the authority to "apply to the supreme court in the county where the facility is situated" for the appointment of a receiver (SSL § 461-f [4] [a]).
Facts
This claim arises from a series of administrative enforcement actions taken by DOH against Brooklyn Manor. Fernandez owned and operated Brooklyn Manor for over 25 years (Tr. 514, 528).While the regulatory relationship between the parties was lengthy, it is the actions taken by DOH between December 5, 2003 and mid-2005 that comprise the crux of the allegations in the second amended claim. The parties differ considerably as to the conditions or events at Brooklyn Manor that prompted DOH to seek enforcement measures against the facility. There are, however, several uncontroverted facts that provide a relevant chronological background for the instant claim:
References to the trial transcript are delineated herein as (Tr. __).
February 5, 2004 - DOH issues an inspection report for Brooklyn Manor alleging numerous violations relating to, inter alia, admission standards, residents' rights, residents' funds and valuables, resident supervision and personnel (claimant's exhibit 10);
February 12, 2004 - DOH issues a referral for enforcement action arising from three inspection reports issued prior to December 5, 2003 and the February 5, 2004 inspection report (claimant's exhibit 15);
May 27, 2004 - DOH issues another inspection report alleging violations relating to, inter alia, resident protections and environmental standards (claimant's exhibit 21);
July 28, 2004 - DOH issues a 251 page inspection report alleging a multitude of violations in areas relating to admission standards, resident rights, case management, record keeping, care and supervision of residents, medication, food service and environment; report also includes that, as part of the corrective actions to be undertaken by the facility, a directive that Diane Walker be removed as the facility administrator (claimant's exhibit 23);
July 29, 2004 - DOH notifies claimant that it is denying renewal of the facility's operating certificate based upon inspection reports dated February 5, 2004, May 27, 2004 and July 28, 2004, and that claimant has the right to an administrative hearing to challenge this denial (claimant's exhibit 24);
September 1, 2004 - Claimant requests an administrative hearing regarding denial of the facility's operating certificate (claimant's exhibit 26);
December 6, 2004 - DOH Administrative Law Judge (ALJ) Marc P. Zylberberg issues a Decision finding that "[t]he Three Inspection Reports issued to Benito Fernandez operator of Brooklyn [Manor], are legally defective and cannot be used as the sole basis for determining that the operator does not have the requisite character and competence to obtain a renewal of his operating certificate," and that DOH's denial of the application to renew the facility's operating certificate "is not sustained" (claimant's exhibit 32, p. 14);
December 23, 2004 - DOH issues a Notice of Hearing and Statement of Charges against Diane Walker, as administrator of Brooklyn Manor, seeking her removal as administrator for allegedly failing to administer the facility as it relates to staff supervision, resident care and resident admissions and terminations (claimant's exhibit 33);
January 20, 2005 - Petitioners Diane Walker and Brooklyn Manor enter into a court ordered Stipulation in Supreme Court, Albany County [Ceresia, J.], wherein petitioners and DOH agree to withdraw, without prejudice, the Article 78 proceeding commenced by petitioners on or about October 5, 2004, challenging DOH's decision to remove Walker as administrator based on mootness (claimant's exhibit 34);
January 19, 2005 - On or about January 19, 2005, Brooklyn Manor commences an Article 78 proceeding in Supreme Court, Albany County, seeking an order directing the DOH Commissioner to remove Brooklyn Manor from the Adult Home Referral Suspension "do not refer list"and to keep DOH from reinstating petitioner to such list until an administrative hearing is granted; Brooklyn Manor subsequently obtains a temporary restraining order barring DOH from impeding referrals to Brooklyn Manor prior to an administrative hearing and directing DOH to remove Brooklyn Manor from the adult home "do not refer list" until the Article 78 proceeding is resolved (see claimant's exhibit 37);
February 18, 2005 - Parties enter into a court-approved Stipulation in Supreme Court, Albany County, [Stein, J.], wherein DOH agrees not to reinstate Brooklyn Manor to the "do not refer list" based on any existing inspection report issued prior to February 18, 2005 and the parties agree that Brooklyn Manor's Article 78 proceeding against DOH regarding placement on the list will be withdrawn and discontinued without prejudice (claimant's exhibit 37);
May 8, 2005 - A 51 year old male resident of Brooklyn Manor dies in a fire in his bedroom caused by a cigarette (Tr. 454; claimant's exhibit 39);
May 23, 2005 - DOH issues a Notice of Hearing and Statement of Charges against Fernandez as operator of Brooklyn Manor alleging several regulatory violations arising from the May 8, 2005 fire and violations relating to the placement and medical evaluations of residents (claimant's exhibit 43);
May 23, 2005 - DOH issues a Commissioner's Order finding that the alleged statutory and regulatory violations "constitute an imminent danger to the health, safety and welfare" of facility residents, temporarily suspends the operating certificate, and notifies Fernandez that DOH intends to seek the revocation of the operating certificate; the Order further, inter alia, appoints the New York Hospital Medical Center of Queens as temporary operator of the facility, bars Fernandez access to the facility during the term of the suspension and transfers control of the facility to the temporary operator (claimant's exhibit 44);
May 23, 2005 - DOH issues an inspection report arising from inspections conducted between May 9, 2005 and May 20, 2005; said report forms the basis of the May 23, 2005 Statement of Charges (claimant's exhibit 45);
June 6, 2005 - Claimant, Diane Walker, and Resident Council of Brooklyn Manor file an Article 78 proceeding in Supreme Court, Albany County, seeking, inter alia, to vacate the May 23, 2005 Commissioner's Order suspending the operating certificate and restoring Fernandez as operator and Walker as administrator (claimant's exhibit 47);
June 14, 2005 - DOH files a petition in Supreme Court, Kings County, seeking an order appointing New York Hospital Medical Center of Queens, the DOH Commissioner's designee, as receiver to take charge of Brooklyn Manor on the grounds that appointment of a receiver is necessary to protect the health, safety and welfare of the facility residents (claimant's exhibit 48);
June 16, 2005 - DOH issues a Supplemental Statement of Charges against Fernandez as operator of Brooklyn Manor alleging two additional charges (claimant's exhibit 51);
June 24, 2005 - Office of Chief Medical Examiner for the City of New York issues autopsy report listing "acute and chronic alcoholism" as cause of death for resident who died in fire at facility (claimant's exhibit 52);
October 18, 2005 - Judge Canfield issues a Decision and Order dismissing the Article 78 proceeding commenced by claimant, Walker and the Resident Council of Brooklyn Manor in June 2005; the court concludes, inter alia, that the temporary suspension of the operating certificate was lawful, stating that petitioners failed to establish that DOH's determination of imminent danger was without a rational basis or that DOH's charges were baseless (claimant's exhibit 54 [Resident Council of Brooklyn Manor Home for Adults et al v Novello, Sup Ct, Albany County, October 18, 2005, Canfield, J., Index No. 3402-05]);
January 23, 2006 - Following a 13 day administrative hearing during December 2005 and January 2006, DOH ALJ James F. Horan issues a Report and Decision, concerning the May 23, 2005 Statement of Charges, the June 16, 2005 Supplemental Statement of Charges, and the May 23, 2005 Commissioner's Order suspending the operating certificate and appointing a temporary receiver; ALJ Horan sustains the charges in part and dismisses other charges, and holds that the charges the Department did prove, fail to justify revoking the operating certificate; ALJ Horan imposes no further penalty as Fernandez has been suspended from operating the facility for the prior eight months due to the Commissioner's Order and the temporary receivership (claimant's exhibit 56);
January 27, 2006 - A court-approved Stipulation and Order of Discontinuance is executed, wherein DOH withdraws the Article 78 proceeding filed in Supreme Court, Kings County, and the parties agree to a process for the transfer of operation of Brooklyn Manor from the temporary operator back to Fernandez (claimant's exhibit 57);
January 30, 2006 - Fernandez resumes control of Brooklyn Manor (Tr. 680-681);
July 1, 2006 - Fernandez ceases to operate Brooklyn Manor and a new adult home business operates the facility (Tr. 737);
July 24, 2006 - DOH ALJ John Wiley dismisses as moot the administrative proceeding seeking to remove Walker as administrator (claimant's exhibit 59).
The Court notes that claimant was a petitioner in other civil proceedings against DOH (see Wavecrest Home for Adults et al., v Novello, Sup Ct, Albany County, September 15, 2004, Kavanagh, J., Index No. 2469-03 [court finds that provisions of Social Services Law governing inspection report procedures do not satisfy due process requirements and directs DOH to create an alternate process to address the court's concerns]; Bayview Manor Home for Adults et al., v Novello, Sup Ct, Albany County, August 20, 2003, Kavanagh, J., Index No.7662-20 [court dismisses in part, denies in part and grants in part petitioners' application for declaratory relief, including directing that DOH follow its governing statute and regulations when preparing inspection reports]; Fernandez v DeBuono, Sup Ct, Albany County, September 15, 1998, Canfield, J., Index No. 2078-98 [court denies defendant's application to have Fernandez removed as operator and to not renew his operating certificate]).
Additional Facts
At trial, claimant testified on his own behalf and called Mary Hart as a witness. Hart serves as the Director of DOH's Bureau of Adult Care Facility Quality and Surveillance, and held that position between December 2003 and June 2006 (Tr. 39-40). Her bureau oversees the facility inspection process and develops the enforcement packages following referrals from the regional offices (Tr. 40). Defendant called one witness, David Wollner, who served as Director of DOH's Office of Health Systems Management between January and May 2005 (Tr. 918). In that role, Wollner oversaw the Adult Home Program, including the areas of enforcement and surveillance (Tr. 918-919).
Brooklyn Manor was an adult care facility, located at 2830 Pitkin Avenue in Brooklyn, and certified to accommodate 216 residents (Tr. 537-538, 555, 607). Admission agreements were executed between the residents and the facility (Tr. 74). The majority of residents at the adult care facility faced mental health or psychiatric challenges and were referred to Brooklyn Manor from State psychiatric hospitals (Tr. 66-68, 529-530). The residents were diverse with respect to age and race (Tr. 529). Claimant spent "a great deal" of time at Brooklyn Manor and had constructed a personal office and private living quarters at the facility (Tr. 541, 573; claimant's exhibits 64-B, 64-C, 64-F). A bulletin board posting announcements, employment opportunities and inspection reports was located near the main entrance to the facility (Tr. 556-557, 873-874; claimant's exhibit 64-B [red markings]). Claimant disputed that a fire occurred at the facility on May 8, 2005 (Tr. 543-544, 627-629, 877). The Fire Department, however, responded and addressed the smoke damage to the resident's room (Tr. 628-629). Photographs of the room show, inter alia, a charred bed frame and mattress as well as burn marks on a wall (defendant's exhibit A - E). The resident who died had been smoking a cigarette in his bed when he passed away from "acute and chronic alcoholism" (claimant's exhibit 52). The fire apparently started from the cigarette at the time of, or shortly after, his death.
Tortious Interference With Prospective Business Relations
Claimant alleges in its first cause of action that defendant "tortiously interfered with Claimant's prospective business relations" by "intentionally repeatedly plac[ing] Claimant on a 'Do Not Refer' list and tak[ing] other action[s] to block referrals of new residents to Brooklyn Manor, without any legal authority or justification to do so" (Second Amended Claim, ¶¶ 89 - 90). The allegations include assertions that DOH created false and unlawful inspection reports, published false and defamatory statements, and commenced unlawful enforcement proceedings. Claimant avers that such actions interfered with claimant's admission of prospective residents and his ability to consummate business deals.
In order to recover damages for tortious interference with prospective business relations, claimant "must demonstrate that the defendant's interference with its prospective business relations was accomplished by 'wrongful means' or that defendant acted for the sole purpose of harming the plaintiff" (Snyder v Sony Music Entertainment, 252 AD2d 294, 299-300 [1999]), and " 'that the wrongful acts were the proximate cause of the rejection of the plaintiff's proposed contractual relations' " (Pacheco v United Med. Assoc., 305 AD2d 711, 712 [2003] quoting Jabbour v Albany Med. Ctr., 237 AD2d 787, 790 [1997]; see also Franbilt v The New York State Thruway Auth., UID No. 2000-015-089, Claim No. 101208, October 2, 2000 [Collins, J.]). The party asserting such a claim "must allege a particular business relationship or contract with a third party that was affected by the offending party's actions" (White v Ivy, 63 AD3d 1236, 1238 [2009]).
The success of this cause of action turns on proof of wrongful means or culpable conduct by the defendant. " 'Wrongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure" (Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 191 [1980]). "[A]s a general rule, the defendant's conduct must amount to a crime or an independent tort. Conduct that is not criminal or tortious will generally be 'lawful', and thus insufficiently 'culpable' to create liability for interference with prospective contracts" (Carvel Corp. v Noonan, 3 NY3d 182, 190 [2004]; see also Cooper v Hodge, 28 AD3d 1149 [2006]). The exception to this rule is "where a defendant engages in conduct 'for the sole purpose of inflicting intentional harm on [claimant]' " (Carvel Corp. v Noonan, supra at 190, quoting NBT Bancorp v Fleet/Norstar Fin. Group, 215 AD2d 990, 990 [1995], affd 87 NY2d 614 [1996]).
Notably, this tort requires proof of "more culpable conduct on the part of the defendant" than a claim of interference with an existing contract (NBT Bancorp v Fleet/Norstar Fin. Group, supra at 621). As succinctly stated by the Court of Appeals: "[w]hile New York law recognizes the tort of interference with both prospective and existing contract rights, 'greater protection is accorded an interest in an existing contract (as to which respect for individual contract rights outweighs the public benefit to be derived from unfettered competition) than to the less substantive, more speculative interest in a prospective relationship (as to which liability will be imposed only on proof of more culpable conduct on the part of the interferer)' " (White Plains Coat & Apron Co., Inc. v Cintas Corp., 8 NY3d 422, 425-426 [2007] [emphasis in original] quoting Guard-Life Corp. v Parker Hardware Mfg. Corp., supra at 191).
Finally, the proof must show that the plaintiff would have entered into a contractual relationship but for the interference or wrongful acts of the defendant (see Vigoda v DCA Prods. Plus, 293 AD2d 265, 266-267 [2002]; Chemfab Corp. v Integrated Liner Tech., 263 AD2d 788, 790-791 [1999]; American Preferred Prescription v Health Mgt., 252 AD2d 414, 418-419 [1998]; Maas v Cornell Univ., 245 AD2d 728, 731 [1997]; Newsday Inc. v Fantastic Mind, 237 AD2d 497 [1997]; Brown v Bethlehem Terrace Assoc., 136 AD2d 222, 225 [1988]).
Upon applying these principles, the Court finds that DOH's actions toward Brooklyn Manor and Fernandez neither constituted 'wrongful means' nor were conducted with the sole purpose of inflicting harm on Brooklyn Manor. Further, even assuming the acts were wrongful or undertaken with the sole purpose of harming claimant, the record does not establish that, but for DOH's actions, claimant would have executed business transactions with other persons or entities.
As detailed earlier, DOH has a clear statutory charge to protect the health and safety of adult residents who reside at adult care facilities, and considerable statutory and regulatory authority to implement that responsibility. The record reflects that DOH was operating with a valid governmental purpose and acting within its lawful authority (see SSL § 461-a [2] [b] ["The purpose of any inspection shall be to determine compliance with requirements of applicable provisions of law and regulations of the department"]). While claimant may adamantly disagree with the findings contained in DOH's inspection reports, and DOH's subsequent commencement of administrative actions against Brooklyn Manor based on those reports, such actions are lawful (see e.g. Matter of Lakeside Manor Home for Adults, Inc., v Novello, 43 AD3d 1057 [2007] [lower court properly determined that DOH Commissioner's denial of QUIP payments to petitioner was rationally based on inspection reports finding that petitioner violated applicable regulatory standards]). DOH's conduct must be viewed against this comprehensive statutory and regulatory backdrop, which charges DOH with the responsibility to ensure that adult care facilities are operating in compliance with the applicable rules and regulations (see SSL §§ 460, 460-b, 460-d [enforcement], 461-a [inspection and supervision],
461-f [receivership]; 18 NYCRR §§ 486.1, 486.2 [inspection], 486.4 [enforcement], 486.5 [civil penalties]). Taking action to ensure the health and safety of adult care facility residents who may have disabilities or who are otherwise incapable of living on their own is a legitimate and lawful purpose well within the ambit of DOH's legal obligations.
In light of this lawful and valid purpose for acting, claimant's argument that DOH's actions constituted "wrongful means" or were conducted for the sole purpose of harming claimant is not persuasive. Claimant contends that the placement of Brooklyn Manor on the "do not refer list" was improper, and that Brooklyn Manor lost income from less resident admissions while on the list (Tr. 697-698). Documents and testimony from Hart indicate that Brooklyn Manor was placed on the list between May 6, 2004 and November 12, 2004, and between May 23, 2005 and November 17, 2005 (claimant's exhibit 71; Tr. 278-283). Hart also testified that she believed Brooklyn Manor was on the list between May 23, 2005 and January 2006, the time period during which New York Hospital Medical Center of Queens, the temporary operator, was managing the facility (Tr. 284).
Social Services Law §§ 460-d [12] and [15] grants DOH the authority to place facilities with pending enforcement or facility certificate revocation proceedings on the "do not refer list". DOH issued three inspection reports on February 5, 2004, May 27, 2004 and July 28, 2004 (claimant's exhibits 10, 21 and 23). On February 12, 2004, DOH issued a referral for administrative enforcement based on findings from prior inspection reports, including the February 5, 2004 inspection report (claimant's exhibit 15).DOH notified claimant by letter dated July 29, 2004 that claimant's pending application for renewal of its operating certificate was denied based on the inspection reports issued in February, May and July 2004, and that claimant had the right to challenge this denial via an administrative hearing (claimant's exhibit 24). Hart also testified that a facility could be placed on the "do not refer list" based on the results of inspection reports (Tr. 169-171), and that the agency did not have the discretion to not place a facility on the list if actions were underway against the operating certificate (Tr. 410).
The February 12, 2004 referral for administrative enforcement was based on findings in inspection reports dated January 4, 2003, February 21, 2003, September 19, 2003 and February 5, 2004 (claimant's exhibit 15).
Hart further stated that a facility's placement on the list did not prevent any individual from being admitted to that facility (Tr. 405).
Contrary to claimant's argument, the fact that the three 2004 inspection reports, relied on by DOH at the time Brooklyn Manor was placed on the list, were ultimately found by ALJ Zylberberg in his December 6, 2004 Decision to have violated applicable procedures related to their preparation, is not sufficient to establish wrongful means or evidence that DOH was acting solely with malice (see claimant's exhibit 32). Moreover, ALJ Zylberberg stated that while those three inspection reports were invalid for enforcement and operating certificate denial purposes, "there is nothing I have found, which would prevent [DOH] from taking action against [claimant] based on the inspections themselves and the findings of the surveyors" (claimant's exhibit 32, p 13). ALJ Zylberberg then listed various regulatory provisions that claimant could be charged with for non-compliance (id. at 14).
As for Brooklyn Manor being on the list during the time periods mentioned in 2005, the record plainly indicates that beginning May 23, 2005, a number of administrative proceedings were underway based, in large part, on the May 8, 2005 fire at the facility. Those proceedings included, inter alia, temporarily suspending the operating certificate and appointing a temporary operator (claimant's exhibit 44).
In addition, claimant's reliance on exhibit 40 to support this cause of action is misplaced. At the outset, three of the e-mail messages pre-date December 5, 2003, the date this Court identified in prior decisions as the beginning point for allegations set forth in the second amended claim.In any event, a review of these messages, and the remaining messages within exhibit 40, including those transmitted in June 2004, and between August and November 2004, reveal communications between DOH officials and other state entities either discussing the prospect of Brooklyn Manor receiving resident admissions during periods of time when the facility was the subject of some type of agency regulatory or enforcement action, including the issuance of inspection reports. As for the May 11, 2005 e-mails, those exchanges reflect intra or inter agency staff discussions about referrals between adult care facilities or referrals from shelters following the May 8, 2005 fire. The Court does not construe the fact that Hart could not remember whether any other adult home had ever been the focus of such an effort to bar resident referrals to mean that the placement of Brooklyn Manor on such a list was improper (Tr. 293). In fact, the record shows that DOH had not singled out Brooklyn Manor and had taken administrative actions, including seeking closure of the facility, against other adult care facilities (Tr. 212-213, 798).
(see Fernandez v State of New York, 18 Misc 3d 1123(A) [2007] [motion to compel disclosure and cross-motion to dismiss]; Fernandez v State of New York, Claim No. 109323, Motion Nos. M-70234 and CM-70687, September 27, 2006 [Hard, J.] [motion to dismiss and cross-motion to amend claim]).
Under these circumstances, the Court finds that the placement of Brooklyn Manor on the "do not refer list" was within DOH's lawful ambit of authority and does not constitute evidence of wrongful means or malice against claimant. Brooklyn Manor was the subject of a variety of enforcement actions during the time periods at issue. Moreover, the Court finds the proof offered in support of claimant's position that, but for the placement of Brooklyn Manor on the list, prospective resident admissions would have continued undeterred, to be speculative and unsubstantiated.
Claimant further contends that prospective contracts with two banks, Capital One and Commerce Bank, were improperly interfered with as a result of DOH's actions. Fernandez testified that negotiations with Capital One to name the Washington Avenue Armory, which Fernandez had purchased, "fell through . . . because of the issues with [DOH], they [Capital One] wanted all that to be clarified before they entered into a contract for naming the Washington Street Armory" (Tr. 694-695). Fernandez stated that the naming rights negotiations with principals at Capital One began around 2001 or 2002, the same time he had begun negotiations to purchase the Armory (Tr. 731, 733). He stated that Capital One offered to pay him $10,000,000 over ten years for the naming rights (Tr. 735). No documentary proof of any such negotiations was proffered, and during cross-examination, Fernandez stated that the Capital One negotiations were ongoing and that they were "never discontinued and we're looking at it today as we speak. I have high hopes that they're going to come into the facility" (Tr. 736, 738).
Fernandez also stated that in late 2004 or early 2005, "we were establishing a bank relationship with Commerce Bank where they were going to lend us and give us credit lines and lend us certain funds for certain of my businesses, which fell through because of the publicity and the problems of the [DOH]" (Tr. 695). Fernandez continued that the loss of financing from Commerce Bank affected other business ventures "[n]egatively. It restricted the funds, it restricted my expansion. I had to borrow from other sources. It was a costly issue of not being able to have availability of funds" (Tr. 696). Claimant, however, later acknowledged that while he was seeking both a loan and a line of credit, he had "a very good cash flow from my other businesses . . . I really didn't need the money" (Tr. 740), and, as for the line of credit, the record indicates that the discussions were preliminary in nature and that he never submitted a formal loan application (Tr. 741, 742). He stated further that, at the time of the trial,"we have turned [the Armory] to be a very successful facility" (Tr. 737), noting that the Armory was booking "a tremendous amount of shows . . [and] had some extremely successful sellouts" (Tr. 738). He later obtained a line of credit from Capital One between $1.5 and $2 million (Tr. 747).
Under these circumstances, the Court finds no credible evidence that a prospective business relationship was terminated with either of these banks because of DOH's actions. There is no documentary proof, such as letters, proposals, applications or e-mails, to establish that a tangible and real business agreement ever existed, or was about to be completed, between Fernandez and these two banks. No documentary evidence was proffered showing that offers and counteroffers concerning the naming rights to the Armory were exchanged. Moreover, to the extent that Fernandez contends DOH's actions terminated any prospective business relationship, Fernandez testified at trial, nearly four years after he ceased operating Brooklyn Manor, that naming rights discussions with Capital One were ongoing. As for the interaction with Commerce Bank, no documentary evidence, such as a loan application, was provided to support the allegations that a viable business relationship existed, or was about to be formed, between Fernandez and Commerce Bank. Finally, even assuming that an actual business relationship or contract between Fernandez and these banks existed or was on the verge of materializing, other than testimony from Fernandez on this point, which the Court finds largely self-serving and speculative, there is no proof that, but for DOH's issuance of inspection reports or commencement of enforcement and regulatory actions against Brooklyn Manor, agreements for naming rights or for loans or lines of credit would have been consummated.
In sum, when viewed against the lawful purpose underlying DOH's actions, the proof does not establish "that defendant's sole motive for the interference was malice nor that its actions were the 'but for' reason why more [residents were admitted or business deals were made]" (Northeast Wine Dev., LLC v Service-Universal Distribs., Inc., 23 AD3d 890, 893 [2005] [citations omitted], lv granted in part 6 NY3d 842 [2006], affd 7 NY3d 871 [2006]). Accordingly, the cause of action alleging tortious interference with prospective business relations is dismissed.
Defamation
Claimant alleges in his second cause of action that defendant published false allegations about claimant in various inspection reports, causing claimant to suffer defamation. Claimant's allegations appear to focus primarily on the charges contained in the July 28, 2004 and May 23, 2005 inspection reports, as well as the February 5, 2004 report (Second Amended Claim, ¶¶ 59 - 62; claimant's exhibits 10, 23, 45).
Defamation is "the making of a false statement which tends to 'expose the plaintiff to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him in the minds of right-thinking persons, and to deprive him of their friendly intercourse in society' " (Foster v Churchill, 87 NY2d 744, 751 [1996], quoting Rinaldi v Holt, Rinehart & Winston, 42 NY2d 369, 379 [1977] [internal quotations omitted], rearg denied 42 NY2d 1015 [1977], cert denied 434 US 969 [1977]). "To constitute defamation, [claimant] must prove that defendants made a false statement, published that statement to a third party, without privilege, with fault measured by at least a negligence standard, and the statement caused special damages or constituted defamation per se" (Roche v Claverack Coop., Ins. Co., 59 AD3d 914, 916 [2009]; see also Salvatore v Kumar, 45 AD3d 560, 563 [2007], lv denied 10 NY3d 703 [2008]; Dillon v City of New York, 261 AD2d 34, 38 [1999]).
At the same time, "[i]t is well settled that 'public policy mandates that certain communications, although defamatory, cannot serve as the basis for the imposition of liability in a defamation action' . . . 'When compelling public policy requires that the speaker be immune from suit, the law affords an absolute privilege, while statements fostering a lesser public interest are only [qualifiedly]
privileged' "(Rosenberg v MetLife, Inc., 8 NY3d 359, 365 [2007] [internal citations omitted]). "The difference between the two [privileges] rests in the role of malice. A qualified privilege is one that is available only in the absence of malice, while an absolute privilege, a veritable immunity, is impervious to proof, and therefore to a charge, of malice" (Stukuls v State of New York, 42 NY2d 272, 275 [1977]).
"As a matter of public policy, an absolute privilege protects 'communications made by individuals participating in a public function, such as executive, legislative, judicial or quasi-judicial proceedings' " (Van Donsel v Schrader, 84 AD3d 1467, 1468 [2011], quoting Rosenberg v MetLife, Inc., supra at 365), and is "based upon 'consideration of public policy and to secure the unembarrassed and efficient administration of justice and public affairs' " (Cheatum v Wehle, 5 NY2d 585, 592-593 [1959], quoting Hemmens v Nelson, 138 NY 517, 523 [1893]). Notably, the privilege extends only to comments "made in the context of official communications by 'a principal executive of State or local government [or] those entrusted by law with considerable administrative or executive policy-making responsibilities' " (Van Donsel v Schrader, supra at 1468, quoting Mahoney v Temporary Commn. of Investigation of State of N.Y., 165 AD2d 233, 238 [1991]; see also Stukuls v State of New York, supra at 278), and only "to those of subordinate rank who exercise delegated powers" (Ward Telecom. & Computer Servs. v State of New York, 42 NY2d 289, 292 [1977]). "[T]he privilege is not to be extended liberally, and instead must be carefully confined to that type of situation in which the protection provided by the privilege will serve a necessary societal function" (Clark v McGee, 49 NY2d 613, 618 [1980]; see also Ward Telecom. & Computer Servs. v State of New York, supra at 292 ["the protection of an absolute privilege should be accorded but sparingly"]).
"Generally, a statement is subject to a qualified privilege when 'it is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned' " (Rosenberg v MetLife, Inc., supra at 365, quoting Toker v Pollak, 44 NY2d 211, 219 [1978]; see also Liberman v Gelstein, 80 NY2d 429, 437 [1992]). Thus, a qualified privilege may attach to a statement made in the course of discharging a duty, in which the person has an interest to persons with a corresponding interest, and the statement is made in a reasonable manner and for a proper purpose (see Liere v Scully, 79 AD3d 821, 822 [2010]; Blackman v Stagno, 35 AD3d 776, 778 [2006], lv dismissed 8 NY3d 938 [2007]; Feldschuh v State of New York, 240 AD2d 914, 915 [1997]; Jung Hee Lee Han v State of New York, 186 AD2d 536 [1992]). "This privilege serves to negate any presumption of implied malice and places the burden on plaintiffs to demonstrate that [defendant was] motivated by actual malice or ill will" (Schwartzberg v Mongiardo, 113 AD2d 172, 175 [1985]). "Malice in this context has been interpreted to mean spite or a knowing disregard of a statement's falsity" (Rosenberg v MetLife, Inc., supra at 365; see also Liberman v Gelstein, supra at 437-438). "Falsity is not sufficient for an inference of malice" (Stukuls v State of New York, supra at 279). Moreover, mere conclusory allegations of malice, or allegations resting on mere suspicion, conjecture or surmise are insufficient to defeat a claim of qualified privilege (see Cooper v Hodge, supra at 1150-1151; Hanlin v Sternlicht, 6 AD3d 334 [2004]; Ptasznik v Schultz, 223 AD2d 695, 696 [1996]).
As a preliminary matter, whether the content of the three inspection reports are afforded an absolute privilege from a claim for defamation has not been established. The inspectors who conducted the inspections at issue and prepared the inspection reports are neither "principal executive[s] of State or local government" nor among those entrusted with "policy-making responsibilities of considerable dimension" (Stukuls v State of New York, supra at 278). Further, while "[i]t has been held that the absolute privilege of the executive head of [the] department extends to those of subordinate rank who exercise delegated powers" (Ward Telecom. & Computer Servs. v State of New York, supra), there is no evidence that such delegation of authority occurred here (compare Firth v State of New York, 12 AD3d 907, 908 [2004], lv denied 4 NY3d 709 [2005]).Specifically, defendant has offered no proof that the power or authority to conduct inspections and prepare inspection reports was ever delegated or assigned by the DOH Commissioner to DOH employees or those of a subordinate rank, like DOH inspectors. Absent such proof, defendant cannot rely on the doctrine of absolute privilege to cloak it from liability for a defamation claim.
In Firth, the Court held that statements in an investigation report prepared by the Office of the State Inspector General (OSIG) were entitled to absolute immunity from a defamation claim. The Court pointed to an executive order, which created OSIG in order to fulfill the governor's statutory duty to investigate agencies, and thereby "render[ed] OSIG a delegatee of the governor" (id. at 908).
The Court finds, however, that the content of the February 5, 2004, July 28, 2004 and May 23, 2005 inspection reports are subject to a qualified privilege, pled by defendant in its "Fifth Defense." The record demonstrates that DOH personnel acted in accord with a public legal duty where their interest was concerned and communicated to persons with a corresponding duty and interest (see Liberman v Gelstein, supra at 437). Specifically, the DOH inspectors conducted the facility inspections, and prepared and issued the inspection reports, in the course of performing their statutory and regulatory duties to inspect adult homes, and communicated those findings in accordance with those duties. Given the legal requirements imposed on DOH, (see SSL § 461 [1]; SSL § 461-a [1]; 18 NYCRR § 486.1 [b]; 18 NYCRR §§ 486.2 [a] and [h]; SSL §§ 461-a [2] [c] and [e]; 18 NYCRR § 486.2 [i] [2]; 18 NYCRR § 486.1 [d]; SSL § 460-d; 18 NYCRR § 486.4 [b]), it follows that DOH inspectors, as well as other compliance, enforcement and regulatory personnel, charged by statute and regulation with carrying out those responsibilities, would receive the protection of a qualified privilege when discharging those duties (see Liere v Scully, supra at 822; Schwartzberg v Mongiardo, supra at 175).
Further, based on its review of the record, the Court does not find that defendant acted with malice. Even accepting that certain charges contained in the May 23, 2005 inspection report relating to the May 8, 2005 fire were dismissed by ALJ Horan in his 52 page January 2006 Report and Decision (claimant's exhibit 56, p. 2), it is axiomatic that DOH had the authority and responsibility to inspect the adult home, prepare inspection reports and take enforcement action, as necessary. Indeed, ALJ Horan found that DOH had proven violations of applicable regulations (see id. at 48-49). Moreover, the fact that certain charges were not sustained does not equate to falsity, but even if one were to draw that conclusion, "[f]alsity is not sufficient for an inference of malice" (Stukuls v State of New York, supra at 279).
Notably, Judge Canfield in his October 2005 Decision and Order upheld the May 23, 2005 temporary suspension of claimant's operating certificate, finding that petitioners, which included Fernandez, had failed to prove that DOH's actions were arbitrary and capricious or without a rational basis (claimant's exhibit 54, p. 6).
As for the charges stated in the July 28, 2004 inspection report, the merit, or lack thereof, of those charges was never decided (Tr. 398). ALJ Zylberberg's December 2004 Decision, which considered the grounds for DOH's decision not to renew claimant's operating certificate based on three inspection reports, including the February 5 and July 28, 2004 inspection reports, overturned DOH's decision based on the agency's failure to comply with its own procedural requirements, not on the substantive nature of the charges. In fact, ALJ Zylberberg pointed out several regulatory provisions that could form the basis of charges against the facility (claimant's exhibit 32, pp. 14 - 15).
While DOH inspector Susan Tafrate's personal comments regarding Walker were wholly inappropriate (claimant's exhibit 11), they do not establish malice. The record indicates that numerous DOH personnel participated in the inspection report process related to Brooklyn Manor. Tafrate was not involved in the preparation of the May 23, 2005 inspection report, which was compiled by four other inspectors (claimant's exhibit 45), and was one of nine inspectors involved in the July 28, 2004 inspection report (claimant's exhibit 23) and one of five inspectors involved in the May 27, 2004 inspection report (claimant's exhibit 21).
Finally, the Court notes that merely because a state agency takes enforcement against a regulated entity, such action does not connote malice. The record here shows a regulatory agency acting within its lawful authority for a proper purpose and using the statutory and regulatory tools available to it against a facility the agency deems was non-compliant with applicable rules and regulations. The record also evinces a claimant who vigorously defended himself and his facility from charges that the facility was non-compliant. The fact that some charges against claimant were not proven, that the agency was aggressive and persistent in its enforcement role, that the agency expended substantial resources and staff on this task, and that the relationship between claimant and defendant turned adversarial, does prove spite or malice.
Insofar as the element of publication is concerned, the Court finds that publication of the inspection reports was subject to a qualified privilege. The facility operator is required to post the most recent inspection report "conspicuously in a public area of the facility which is accessible to residents and visitors" (18 NYCRR § 486.2 [l]), and with the exception of confidential information, make available for review upon request, inspection reports for the most recent two-year period (18 NYCRR § 486.2 [m]). Here, the reports were placed on bulletin boards in the lobby of the facility near the administrative offices (Tr. 556, 608-610, 873-874; claimant's exhibit 64-B). Such posting of the inspection reports in a conspicuous location at Brooklyn Manor fulfilled a legal requirement, and was thus undertaken for a lawful purpose, and in the absence of credible proof that " 'malice was the one and only cause for the publication' " (Lerwick v Krna, 29 AD3d 1206, 1209 [2006] lv denied 7 NY3d 712 [2006] quoting Liberman v Gelstein, supra at 439), the publication was privileged.
The Court notes further that with respect to proving special damages or establishing defamation per se, claimant has established neither. Claimant neither pled nor proved special damages. As for defamation per se, the Court finds that claimant did not prove an injury to reputation. Each cover letter to the three inspection reports is addressed to Fernandez but the actual reports refer to "Brooklyn Manor" and the "operator" (see claimant's exhibits 10, 23, 45). Moreover, while claimant testified during direct examination about "the terrible nightmare of going through this, the embarrassment, the belittling, the loss of persona, the press articles, the harassment" (Tr. 697), during cross-examination, he stated that his friends and business colleagues did not disappear, avoid, or shun him based on DOH's actions (Tr. 748).
He stated further that while his ability to negotiate with potential successor operators of his facility was impacted, "I did not lose their respect" (Tr. 855), and that he received "a lot of calls" from business associates and friends after the May 2005 fire offering their help or sympathy (Tr. 875-876). The record also suggests that his ability to work and succeed as a businessman was not impaired after his decision to leave his position as the owner and operator of Brooklyn Manor (Tr. 737-738, 743-744, 747).
Thus, the Court finds that the issuance and publication of the inspection reports is afforded a qualified privilege, and that claimant has not proven that defendant acted with malice. Additionally, claimant has not established special damages or injury to reputation. Accordingly, for the above-stated reasons, the cause of action sounding in defamation is dismissed.
Negligence
In claimant's third cause of action, he alleges that defendant negligently prepared and issued inspection reports concerning Brooklyn Manor and improperly commenced administrative proceedings against Brooklyn Manor. Defendant contends, in large part, that DOH's actions constituted discretionary governmental conduct entitled to absolute immunity under the principles articulated in McLean v City of New York (12 NY3d 194 [2009]).
The threshold question in any analysis of governmental immunity is whether the actions in question were proprietary or governmental in nature (Kochanski v City of New York, 76 AD3d 1050, 1051 [2010]). As a general proposition, public entities are ordinarily immune from tort claims arising out of the performance of their governmental functions or from actions undertaken in a governmental capacity (Balsam v Delma Eng'g Corp., 90 NY2d 966, 967 [1997]; Miller v State of New York, 62 NY2d 506, 513 [1984]; Doe v City of New York, 67 AD3d 854 [2009]). Classic governmental functions are those "undertaken for the protection and safety of the public pursuant to the general police powers" (Balsam v Delma Eng'g Corp., 90 NY2d 966, 968 [1997]), such as police and fire protection (Bass v City of New York, 38 AD2d 407, 411 [1972], affd 32 NY2d 894 [1973]; Kircher v City of Jamestown, 74 NY2d 251 [1989]), traffic regulation (Balsam v Delma Eng'g Corp., supra; Eckert v State of New York, 3 AD3d 470 [2004]; Di Florio v Worden, 303 AD2d 924 [2003]), the investigation of a crime (Coyne v State of New York, 120 AD2d 769 [1986]), and the enforcement of statutes and regulations (Santangelo v State of New York, 103 Misc 2d 578, 583 [1980]).
Where, however, a governmental agency acts in a proprietary, as opposed to a governmental capacity, it is "generally subject . . . 'to the same duty of care as private individuals and institutions engaging in the same activit[ies]' " (Sebastian v State of New York, 93 NY2d 790, 793 [1999], quoting Schrempf v State of New York, 66 NY2d 289, 294 [1985]). Thus, where the public entity conducts itself in a manner that displaces or supplements a traditionally private enterprise, and engages in activities that ordinarily are undertaken by private enterprises, it is deemed to be performing a private corporate function and acting in a proprietary capacity (see Matter of Karedes v Colella, 100 NY2d 45, 50 [2003]; Riss v City of New York, 22 NY2d 579, 581 [1968]; Bass v City of New York, 38 AD2d 407, 411 [1972], affd 32 NY2d 894 [1973]; 15 NY Prac., NY Law of Torts § 17:45).
"The relevant inquiry in determining whether a governmental agency is acting within a governmental or proprietary capacity is to examine 'the specific act or omission out of which the injury is claimed to have arisen and the capacity in which that act or failure to act occurred' " (In Matter of World Trade Ctr. Bombing Litig., 17 NY3d 428, 447 [2011], quoting Weiner v Metropolitan Transp. Auth., 55 NY2d 175, 182 [1982]).
The general rule that the State is immune from liability for governmental actions has been modified by the waiver of sovereign immunity found in Court of Claims Act § 8, whereby "the State assumed liability for its conduct and consented to have such liability determined in accordance with the same rules of laws applicable to individuals and corporations" (Florence v Goldberg, 44 NY2d 189, 194-195 [1978]). The State, however, has retained its immunity for those governmental acts "requiring expert judgment or the exercise of discretion" (Arteaga v State of New York, 72 NY2d 212, 216 [1988]). The immunity can be absolute, where "the action involves the conscious exercise of discretion of a judicial or quasi-judicial nature" (Arteaga v State of New York, supra at 216; see also Tarter v State of New York, 68 NY2d 511 [1986]; Tango v Tulevech, 61 NY2d 34, 40 [1983]), or qualified, meaning that the act is shielded from liability except where there is evidence of bad faith by the public official or the action is taken without any reasonable basis (see Arteaga v State of New York, supra at 216). "While the line separating discretionary and ministerial action may sometime blur, it is clear that 'discretionary or quasi-judicial acts involve the exercise of reasoned judgment which could typically produce different acceptable results whereas a ministerial act envisions direct adherence to a governing rule or standard with a compulsory result' " (Haddock v City of New York, 75 NY2d 478, 484 [1990] quoting Tango v Tulevech, 61 NY2d 34, 41 [1983]; accord Lewis v State of New York, 68 AD3d 1513, 1514 [2009]).
The consequences of finding an act to be discretionary or ministerial are significant as "[g]overnment action, if discretionary, may not be a basis for liability, while ministerial actions may be, but only if they violate a special duty owed to the plaintiff apart from any duty to the public in general" (McLean v City of New York, supra at 203; see also Donald v State of New York, 17 NY3d 389, 395 [2011]; ["State is immune from liability for the discretionary acts of its officials"]). Moreover, "when official action involves the exercise of discretion or expert judgment in policy matters, and is not exclusively ministerial, a [governmental] defendant generally is not answerable in damages for the injurious consequences of that action" (Haddock v City of New York, supra at 484), " 'even if resulting from negligence or malice' " (Donald v State of New York, supra at 395, quoting Tango v Tulevech, supra at 40). The underlying policy behind the general immunity for discretionary acts is to ensure that government is not dissuaded from acting to protect the health and safety of its citizens because of the threat of liability:
"Whether absolute or qualified, this immunity reflects a value judgment that--despite injury to a member of the public--the broader interest in having government officers and employees free to exercise judgment and discretion in their official functions, unhampered by fear of second-guessing and retaliatory lawsuits, outweighs the benefits to be had from imposing liability for that injury."(Haddock v City of New York, supra at 484; see also Laratro v City of New York, 8 NY3d 79, 81-82 [2006]).
Here, the Court finds that DOH's regulatory and enforcement actions taken against Brooklyn Manor between December 2003 and 2005 constitute governmental discretionary actions subject to immunity. The investigation of regulatory violations in an adult care facility that DOH is charged by law to regulate is a classic governmental function, premised on fulfilling a cogent public interest, namely protecting the health and safety of persons unable to care for themselves. The DOH inspectors who performed inspections at Brooklyn Manor were fulfilling that legal duty. Further, the decision-making by DOH personnel related to conducting the inspections, preparing the inspection reports, and selecting what, if any, administrative enforcement mechanism to use, are discretionary acts that involve the exercise of reasoned judgment.
The record reflects that the DOH personnel involved in the regulation of Brooklyn Manor were located in the Metropolitan Area Regional Office and in DOH offices in the Albany region (Tr. 46-54, 323-325). Several DOH inspectors were involved in the inspections at Brooklyn Manor between December 2003 and mid-2005 (Tr. 44, 326). Inspectors were not limited in the number of complaint or follow up inspections that could occur at a facility (Tr. 78; 18 NYCRR §§ 486.1, 486.2). During inspections, inspectors review checklists and facility records, interview residents and staff, take physical tours of the facility, and prepare their findings, including violations, if any (Tr. 78-79). Inspectors make judgments as to whether a condition or complaint rises to the level of a violation or a systemic problem (Tr. 85-89, 343). In instances where a resident's complaint is disputed by facility staff, inspectors have to make judgments as to the credibility of the resident's complaint (Tr. 335). Hart acknowledged that the discretion or judgment of inspectors influenced whether something an inspector observes could be construed as a violation (Tr. 330-332). She stated further that inspectors would discuss their findings with their regional supervisors, and where questions of interpretation arose, the matters would be raised with her Bureau, and in some instances, with DOH's legal staff (Tr. 327, 332-333). More than one inspector prepares the inspection report and the final decision to list a condition as a violation is not the inspector's alone (Tr. 332-333, 344-345). Hart reviewed the more serious or extensive inspection reports, edited and modified the reports when necessary and, "[f]rom time to time," overruled a decision to include an item in an inspection report (Tr. 347-349).
A decision by DOH to pursue enforcement is based upon the inspection reports (Tr. 98- 99).Enforcement measures may include civil fines and penalties, suspension or revocation of an operating certificate and appointment of a temporary operator or receiver (Tr. 99-101, 116-117, 351). Hart stated that the regional office would make the initial decision to seek enforcement (Tr. 350). The regional office would then prepare an enforcement referral package consisting of the inspection reports and responses from the facility, and forward it to Hart's Bureau for review (Tr. 350, 352). Hart stated that "[w]e look at what - the - the Regional Office will send to us the actual Inspection Reports that they're referring to. Then, we balance, we go back and forth and look at them" (Tr. 117, 350). She stated further that the decision to refer a matter for enforcement is "not mandated. It's a discretionary ability by the Department to go forward" (Tr. 419). Once her review is complete, the referral is sent to her supervisor and then the referral, along with her Bureaus's enforcement recommendation, is sent to the legal affairs division for its review (Tr. 352-355). At any stage along the referral process, Hart, her supervisor, or the legal affairs office could, and sometimes did, disagree with or overrule the referral package (Tr. 357, 420). Hart agreed that the decision to deny Brooklyn Manor its operating certificate renewal (Tr. 445) and to take actions after the facility fire in May 2005 were discretionary determinations made by DOH personnel including her Bureau, her supervisor and legal counsel (Tr. 445, 454-456).
The decisions to deny the facility QUIP funds also turned on a review of the facility's enforcement history and the existence of enforcement proceedings (Tr. 293-298).
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In sum, the record is replete with proof that the regulatory actions undertaken by DOH against Brooklyn Manor to ensure compliance with applicable laws and regulations resulted from the exercise of reasoned judgment by numerous persons with different positions at various levels within DOH. The Court finds that the acts in question, including the preparation and issuance of the inspection reports, involved "the exercise of reasoned judgment," (Lauer v City of New York, supra at 99), and thus were governmental discretionary acts immune from liability. Further, the Court finds that claimant failed to prove that defendant acted without a rational basis or in bad faith. Accordingly, claimant's cause of action sounding in negligence is dismissed.
To the extent that claimant alleges separate theories of negligent supervision and/or negligent training, the Court finds such claims to be without merit. A claim for negligent supervision can only proceed against an employer where the employee is acting outside the scope of his or her employment (see Gray v Schenectady City School Dist., 86 AD3d 771, 773-774 [2011]; Perriello v State of New York, UID No. 2008-029-044, Claim No. 114495, Motion No. M-75110, CM-75348, November 3, 2008 [Mignano, J.]). Here, it is not disputed that the alleged improper conduct by DOH officials and employees occurred within the scope of their employment. In any event, "[t]o establish a cause of action based on negligent hiring, negligent retention or negligent supervision, it must be shown that the employer knew or should have known of the employee's propensity for the conduct which caused the injury" (Shor v Touch-N-Go Farms, Inc., 83 AD3d 927, 928 [2011]). Having found that DOH acted for a lawful and valid purpose - the regulation of adult care facilities - and acted without malice, there is no unlawful conduct by DOH employees to warrant charging DOH with such knowledge.
As for negligent training, claimant contends that the inspectors received "little training or were deprived of it completely" (Second Amended Claim, ¶ 97). Such a claim "requires a showing of some type of specific deficiency in training that led [DOH officials and employees] to engage in misconduct" (Shantelle S. v State of New York, 11 Misc 3d 1088 (A); see also Vippolis v Village of Haverstraw, 768 F 2d 40, 44-45 [2d Cir 1985], cert denied 480 US 916 [1987]), and no such evidence was offered at trial. In fact, the record indicates that facility inspectors received training (Tr. 107-109, 114-115, 330, 335-338).
Accordingly, for the aforementioned reasons, the claim is dismissed in its entirety. Any motions upon which the Court had previously reserved or which remain undecided are hereby denied.
The Clerk of the Court is directed to enter judgment accordingly.
September 30, 2011
Albany, New York
James H. Ferreira
Judge of the Court of Claims