Opinion
905895-19
05-15-2020
In the Matter of the Application of NORTH SHORE AMBULANCE AND OXYGEN SERVICES, INC., Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules, v. NEW YORK STATE EMERGENCY MEDICAL SERVICES COUNCIL, Respondent.
Nixon Peabody LLP, By: Daniel J. Hurteau, Esq. and Peter J. Millock, Esq., 677 Broadway, 10th Floor, Albany, New York 12207, Attorneys for Petitioner Letitia A. James, Esq., Attorney for Respondent, By: C. Harris Dague, Assistant Attorney General, The Capitol, Albany, New York 12224-0341, Attorney General of the State of New York
Nixon Peabody LLP, By: Daniel J. Hurteau, Esq. and Peter J. Millock, Esq., 677 Broadway, 10th Floor, Albany, New York 12207, Attorneys for Petitioner
Letitia A. James, Esq., Attorney for Respondent, By: C. Harris Dague, Assistant Attorney General, The Capitol, Albany, New York 12224-0341, Attorney General of the State of New York
David A. Weinstein, J.
In this Article 78 proceeding, filed on September 9, 2019, petitioner North Shore Ambulance and Oxygen Services, Inc. ("North Shore") seeks a judgment reversing and vacating the May 8, 2019 determination of respondent New York State Emergency Medical Services Council ("SEMSCO") that upheld the decision of the Nassau County Regional Emergency Medical Services Council ("REMSCO") to deny North Shore's application to operate ambulance services in Nassau County.
By Decision & Order dated November 14, 2019, I denied a motion by respondent to dismiss the petition on grounds of improper service, and granted petitioner's motion to extend the time to serve the petition on the New York State Department of Health ("DOH") and the Office of the Attorney General. Petitioner has now served its petition. Respondent has submitted a Verified Answer denying it has acted contrary to law, and seeking transfer of the case to the Appellate Division. In a supporting affirmation of counsel, REMSCO argues that since the petition challenges the outcome of a hearing, and raises a question of substantial evidence, it must be transferred pursuant to CPLR 7804(g). It further asks that if transfer is denied, that it be given additional time to address the petition on the merits.
In addition, third party Downstate New York Ambulance Association ("DNYAA") moves to dismiss the petition on the ground that petitioner failed to join it or its members as necessary parties pursuant to CPLR 1001. In the alternative, it seeks to intervene as a matter of right under CPLR 1012(a)(2), or in the Court's discretion under CPLR 7802(d) (see Attorney Affirmation in Support of Motion to Dismiss or Intervene ["Aff in Supp"] ¶¶ 65-66). DNYAA does not oppose the transfer application (id. ¶ 44).
A parallel petition has been filed by North Shore to challenge the denial of its application for a certificate to permit its operation of ambulance services in Suffolk County (North Shore Ambulance and Oxygen Services, Inc. v. New York State Emergency Medical Services Council , et al. , No. 907733-19). Motions seeking identical relief are before the Court in that case, which are addressed in a separate Decision & Order issued today.
Before addressing these matters, it is necessary to recount the administrative proceedings in the case, the results of which are now at issue. The description provided below is that set forth in the petition.
Background
The present dispute arises out of petitioner's application to provide emergency medical services in Nassau County submitted by North Shore on December 22, 2017 to the Nassau County REMSCO (Petition ["Pet"] ¶ 36). North Shore currently provides such services in Kings and Queens County (id. ¶ 19). The REMSCO, and its State counterpart SEMSCO, are charged by statute with determining whether there is a demonstrated public need for a provider's services before it may grant such an application (see Public Health Law ["PHL"] § 3008 ).
After being told the application was incomplete, North Shore submitted a revised application on February 26, 2018 (Pet ¶ 38).
After a review by DOH found there was no bar to the application on the grounds of North Shore's fitness and competency, a public hearing on the REMSCO application was conducted on April 24, 2018 before an administrative law judge ("ALJ") (Pet ¶ 41-42).
The Hearing Officer recommended approval (Pet ¶¶ 43-44). Nevertheless, on May 2, 2018, the REMSCO Emergency Medical Services Committee voted for denial, and the full REMSCO also voted to deny the application the same day (id. ¶ 45-46).
North Shore appealed to SEMSCO, which referred the matter to another ALJ (id. ¶¶ 47-48). The ALJ issued a report recommending that the application be granted (id. ¶¶ 49-50). After a series of procedural steps which are relevant to the merits of the case, but not to the motions before me, SEMSCO ultimately voted to affirm the REMSCO denial on May 8, 2019 (id. ¶ 75). According to the petition, the SEMSCO proceeding was not a "de novo" hearing; the only participants were SEMSCO members, and the only record was that already before SEMSCO (id. ¶¶ 68-69).
Petitioner contends that this process was fatally flawed, alleging in particular that one SEMSCO member, Alan Lewis, had an undisclosed conflict of interest in that he represented a trade association opposed to the application, and introduced material outside the appropriate record into the decision-making process (id. ¶¶ 53-64, 71-73, 94, 105). On the basis of the above, petitioner challenges the SEMSCO decision on four grounds: (1) it was "arbitrary and capricious" in that it did not adequately take into account the public need for an additional ambulance service provider (Pet ¶¶ 89-95); (2) it was based on the financial interests of other providers, and arose out of an erroneous ruling allowing Lewis to make a statement on behalf of such providers in the record (id. ¶ 96-99); (3) it was not supported by "substantial evidence," as North Shore had presented "extensive and comprehensive" evidence of public need at the hearing (id. ¶¶ 100-103); and (4) petitioner is entitled to declaratory relief because SEMSCO members including Lewis failed to disclose their conflicts of interest and considered evidence outside the record (id. ¶¶ 104-107).
The Motion to Dismiss/Intervene
DNYAA is an organization of proprietary ambulance service providers, whose members opposed North Shore's application before the REMSCO and SEMSCO (Attorney Affirmation in Support of Motion to Dismiss or Intervene ["Reisner Aff"] ¶¶ 6, 12). It now moves to dismiss the petition for failure to join it and its members as necessary parties, or in the alternative to intervene. The motion is supported by the affirmation of counsel, and factual affidavits by (1) Daniel Leibowitz, the president of various ambulance services companies active in Nassau and Suffolk Counties, and DNYAA Chair; (2) Randy Wolmert, Chief Operating Officer of Emergency Ambulance Service, Inc. ("EAS"); and (3) Lewis, who makes various arguments in regard to the merits of the petition that are not relevant to this motion.
In his affidavit, Leibowitz states that the DNYAA member companies have standing in this action "based on their direct economic interests which will be inequitably effected [sic] if the court grants the relief sought in the petition, as well as through their explicit statutory and policy based inclusion as interested parties throughout the administrative process" (Leibowitz Aff ¶ 4.a). He also argues that DOH's "overriding interest" in the case is to reduce its Medicaid expenditures, and that any other interests it has do not "align" with those of DNYAA or its member companies (id. ¶¶ 15, 17). Leibowitz contends that the process for receiving a Certificate of Need ("CON")—the document authorizing an entity to provide ambulance services in a particular area—"is designed to ensure that the RIGHT amount of competition is present within each geographic area of the state" (id. ¶ 27 [emphasis in original] ). He argues that too many CONs will destroy the competitive balance, and prevent ambulance companies from operating profitably and force them out of business (id. ¶ 28). Finally, Leibowitz asserts that the DNYAA member companies have a "property interest" in their CONs, and the value of such and the companies' "financial interests" in their Certificates would be adversely affected if petitioner is granted one (id. ¶ 31). As a result, not allowing movant to intervene would deny these companies due process (id. ).
DNYAA goes into a fairly intricate argument as to the precise role played by DOH in the administrative process, and why its interests are at odds with those of existing ambulance providers. For reasons made clear in the discussion below, the details are not material to the outcome of the motions before me.
For his part, Wolmert asserts that EAS has "made a significant expenditure to acquire a property right" in its license to operate an ambulance service, which the present petition "seeks to upset" (Wolmert Affidavit ¶ 6). He argues as well that "the insertion of another CON into an already crowded market will dilute the number of calls available to the existing CON holders" (id. ¶ 8).
Discussion
I. Motion to Dismiss
Respondent SEMSCO has made application to transfer this proceeding to the Appellate Division. Before I can address that motion, however, I must "first dispose of such other objections as could terminate the proceeding ... without reaching the substantial evidence issue"(CPLR 7804[g] ). Such is the case with DNYAA's assertion that (1) the organization and its members are necessary parties under CPLR 1001(a) and 1003, and (2) the limitations period to name it as a defendant has lapsed, and therefore dismissal is the appropriate remedy (see Windy Ridge Farm v. Assessor of Town of Shandaken , 11 NY3d 725 [2008] ).
Movant argues that it is a necessary party due to its "presence and active involvement throughout the administrative process"; and its "significant economic interest" in the outcome of this proceeding and "distinct differences in positions" with SEMSCO (DNYAA Memorandum of Law 16). Further, it maintains that a ruling for North Shore would effect an "an unconstitutional deprivation of their property rights in their CONs without an opportunity to be heard by the Court" (id. at 17).
A party may be deemed necessary to a matter if "its rights could be inequitably affected by a judgment" therein (see Brancato v. New York State Bd. of Real Property Services , 7 AD3d 865, 867 [3d Dept 2004] ). Thus, the "possibility that a judgment rendered without [the omitted party] could have an adverse practical effect [on that party] is enough to indicate joinder" ( Hitchcock v. Boyack , 256 AD2d 842, 844 [3d Dept 1998] [citation omitted] ). Such will be the case where granting a petition results in direct harm to another party, such as depriving it of its property or rights. Thus, necessary parties have been found to include a successful bidder in an Article 78 proceeding challenging the grant of the contract to that party (see Matter of Boston Culinary Group, Inc. v. New York State Olympic Regional Dev. Auth., 18 AD3d 1103, 1105 [3d Dept 2005] ; an individual whose direct cash award in a horse race would be diminished by petitioner's challenge thereto (see Matter of Freed v. New York State Racing and Wagering Bd. , 9 AD3d 808, 809 [3d Dept 2004], a school district that would lose tax revenue if a challenge to the tax assessment rolls were upheld (Matter of Haddad v. City of Hudson , 6 AD3d 1018, 1019 [3d Dept 2004] ; a person whose license would be annulled if petitioner prevailed (see Matter of Baker v. Town of Roxbury , 220 AD2d 961, 963 [3d Dept 1995], lv denied 87 NY2d 807 [1996] ); and an individual whose civil service status would be adversely altered in the event the Court ruled in petitioner's favor (see Matter of McGuinn v. City of New York , 219 AD2d 489, 490 [1st Dept 1995], lv dismissed in part and denied in part 87 NY2d 966 [1996] ).
A party may be necessary as well if complete relief cannot be granted in its absence (see CPLR 1001[a] ). There is no argument that this test applies in the case before me.
But not every hypothetical interest which may be impacted renders a party necessary (see Matter of Hearst Corp. v. City of Albany , 88 AD3d 1130, 1133 n* [3d Dept 2011] [fact that granting relief would lead to release of information embarrassing about party does not make that party necessary to a proceeding] ). Nor would any indirect impact be sufficient for this purpose (see Mylod v. Pataki , 171 Misc 2d 556, 560-561 [Sup Ct, Albany Cty 1996] [action that would require state to seek reimbursement from federal government, but that does not directly seek money from United States, does not require joinder of federal agency as necessary party] ). Further, even an adverse impact on a party does not require its joinder under CPLR 1001 unless such consequence is "inequitable" (see Country Vil. Towers Corp. v. Preston Communications , 289 AD2d 363, 363-364 [2d Dept 2001] ; Cohen v. Brown, Harris, Stevens , 99 AD2d 732, 733 [1st Dept 1984], affd 64 NY2d 728 [1984] ). As one trial court in this county put it: "the language of the CPLR clearly does not allow joinder of all persons who might feel some effect or impact from a judicial order or judgment; rather, the Legislature limited participation in lawsuits to those who might be affected ‘inequitably’ " (Awwad v. Capital Region Otolaryngology Head & Neck Group, LLP , 18 Misc 3d 1111[A], *11 [Sup Ct, Albany Cty 2007] ).
In this case, I cannot find that the proffered impact in the event petitioner prevails—the presumed diminution of value in the CONs held by members of the proposed intervenor in the event of a new competitor—would be "inequitable." Despite their contentions in this regard, the other service providers have only such rights as they individually possess to provide services via a CON; these do not include an interest in preventing other parties from getting such a certificate. That conclusion clearly flows from two Third Department decisions made in the standing context: Matter of LaSalle Ambulance Inc. v. New York State Dept. of Health (245 AD2d 724 [3d Dept 1997], lv denied 91 NY2d 910 [1998]) ("LaSalle Ambulance ") and Matter of Troy Ambulance Service Inc. v. New York State Dept. of Health (260 AD2d 715, 716 [3d Dept 1999] ) ("Troy Ambulance "). In those cases, rival ambulance providers challenged certain determinations granting competitors CONs on the ground that the determinations would cause the providers competitive injury. In each instance, the Court found such injury insufficient to confer standing, because "the explicit purpose of Public Health Law article 30 [the provision governing the CON process] is to protect the public health, safety and welfare and ‘not to shield ambulance services from competition’ " ( Troy Ambulance , 260 AD2d at 716, citing Lasalle Ambulance , 245 AD2d at 725 ; see also PHL § 3000 ["It is the purpose of this article to promote the public health, safety and welfare by providing for certification of all advanced life support first response services and ambulance service ..."] ).
Movant relies heavily on Matter of Red Hook/Gowanus Chamber of Commerce v. New York City Bd. of Stds. & Appeals (5 NY3d 452 [2005] ) (see DYNAA Memorandum of Law in Reply ["Reply Mem"] 4-5). But that case found petitioner a necessary party when it faced the "potential loss of millions of dollars" if the variance at issue, which formed the basis for its investment, was overturned (id. at 456-462 ). The problems with movant's interest in this proceeding — that it is a competitive interest not constitutionally protected, and does not fall within the zone of interests to be protected by the governing statute — were not present in that case.
Troy Ambulance involved the transfer of a certificate, while LaSalle Ambulance involved its issuance. The upshot of both, though, is that the statute is not intended to shield a competitor from competitive injury.
While these cases address standing, not whether an entity is a necessary party, the implications for the present case are clear: given that the interests raised by movant's members are not those which the proceedings at issue were intended to protect, it is in no way inequitable to proceed to a determination without their presence in the suit. Put simply, they are not necessary parties, because their rights are not at issue in this case (see Country Vil. Towers Corp. , 289 AD2d at 364 [sublicensees who might be adversely affected by licensee's suit in regard to equipment kept on licensee's property were not necessary party; any affect on them was not "inequitable," since "they possessed no rights independent of their contract with the licensee"]; Cohen , 99 AD2d at 733 [maids for whose benefit space was rented were not parties to dispute over that space between tenants and co-op board; while they are "certainly to be affected," that was not inequitable since "they possess no rights independent from their contract with plaintiffs," and were not parties to the agreement at the heart of the dispute] ).
Movant argues that Troy Ambulance and LaSalle Ambulance are inapposite, because they involved a challenge to the grant of a CON, not to a failure to grant it (DNYAA Memorandum of Law in Support of Motion to Intervene ["Pet Mem"] 18). Moreover, it contends that the Third Department did not address an alternative basis for an ambulance service provider's standing in a case where a competitor seeks a CON: that its constitutional interests are implicated (id. ). That interest is supplied, movant maintains, by the property interest its members "have in the value of the CON's and their right to derive revenue therefrom" (id. at 19).
DNYAA's argument notwithstanding, the competitive service provider in LaSalle Ambulance did argue that its interest was of constitutional dimension—and that argument was explicitly rejected by the Third Department (see 245 AD2d at 725 ["Petitioner cannot claim that its injury falls within the "zone of interest" protected by a constitutional guarantee as it has not established that any such guarantee was violated by the actions of the Department of Health"] ). Besides, viewed on its own terms, movant's argument is without merit.
Movant correctly points out that a holder of a license may derive a property interest therefrom, which can give rise to due process protections (see id. , citing Matter of Daxor Corp. v. State of NY Dept. of Health, 90 NY2d 89 [1997] ). But as Matter of Daxor recognized, such interests are not creatures of the Constitution, but "are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits" ( id. at 98, citing Board of Regents v. Roth, 408 US 564, 577 [1972] ). Thus, "the focus of respondents' claimed property interest must be on the laws from which the licenses derive" ( id. at 98 ). When a statute is fully discretionary, no property right attaches, while such a right can exist when a statute creates an entitlement to the license at issue ( id. at 98-100 ).
Here, the authorization to operate services held by DNYAA's members is not being challenged. Rather, movant alleges that these companies hold some kind of due process interest in keeping out or limiting competitive services, since allowing such services to operate will diminish the value of their own certificates. The Court of Appeals has explicitly rejected the suggestion that a competitor can assert a Due Process claim on this basis (see Dairylea Cooperative v. Wakley (38 NY2d 6, 10 [1975] ). And given the holdings of Troy and LaSalle Ambulance that Article 30 was not intended to protect competitors, the same conclusion must be reached in this case.
While the Court in Dairylea recognized that the competitor had no constitutional interest, it granted standing in the case before it—one involving licensing of milk wholesalers — on the ground that "where a statute reflects an overriding legislative purpose to prevent destructive competition, an injured competitor has standing to require compliance with that statute" (38 NY2d at 11 ). That is, it found standing based on the statutory purpose—the very basis on which the Third Department has found no standing under Article 30 of the PHL. None of this indicates that there is some constitutional basis for a competitor to bring suit, as that argument was rejected in Dairlylea and other controlling law (see Blue Cross of Western New York, Inc. v. Cooper , 164 AD2d 578, 581 [3d Dept 1991] ["the court gave standing to the competitor in Dairylea only because the relevant statute reflected ‘an overriding legislative purpose to prevent destructive competition’ "; declining to find standing where Court had previously found "no such overriding purpose" in statute before it] ).
In addition, joinder is not necessary when a party's interests "stand or fall" with that of a named respondent (see Matter of Doner v. Comptroller of State of NY , 262 AD2d 750, 751 [3d Dept 1999] ; see also Long Island Contractors' Ass'n v. Town of Riverhead , 17 AD3d 590, 594 [2d Dept 2005] ["dismissal is not warranted where, as here, the interests of the named party and the nonjoined party are so intertwined that there is virtually no prejudice to the nonjoined party"] ). While petitioner makes various arguments that DOH was actually supportive of North Shore, I see no reason why the Attorney General cannot appropriately defend SEMSCO's decision in this Court. And to the extent the interests of competitive providers may diverge from the state regulatory bodies, it is SEMSCO that is tasked with advancing the interests appropriately at issue in this litigation, i.e., those underlying Article 30. But even if I were to conclude that such a divergence existed, this is merely an alternative ground for finding a party to be necessary; since DNYAA has no legally protected interest in these proceedings, it is not a necessary party in any case.
Lastly, the fact that movants objected and participated in the administrative proceeding does not render them "necessary" for purposes of CPLR 1001 (see Matter of Venne v. Sanford , 25 AD3d 1007 [3d Dept 2006], lv denied 6 NY3d 806 [2006] ). In Venne , the Court found that the individuals who objected to a petition for incorporation were not necessary parties to a suit challenging its denial. Among other reasons, it noted that the essence of their claim — that the proposed village would bisect their property — was "irrelevant to the issue of the validity of the petition" ( id. at 1009 ). The same is true here.
For all these reasons, neither DNYAA nor its members are necessary parties to this suit, and its motion to dismiss on this ground is therefore denied.
II. Motion to Intervene
In the alternative to dismissal, movants seek to intervene in this case. They contend that if they are not allowed to participate, their interests will not be adequately represented in this proceeding, although they will be adversely affected by a judgment in petitioner's favor (see DNYAA Mem 2).
In an article 78 proceeding, intervention may be granted as of right under CPLR 1012, or in the Court's discretion under CPLR 7802(d).
Discretionary intervention is also provided for under CPLR 1013. Movant does not rely on this statute, and as described below, the intervention standard specifically applicable to Article 78 proceedings is broader.
DNYAA contends it may intervene as of right under CPLR 1012(a)(2), which provides that intervention may be made as right when "the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment" Specifically, movant argues that a ruling without its participation will essentially be res judicata because if it "is denied intervenor status and a judgment issues without them having an opportunity to be heard, they [i.e. its members] will be prohibited from reviving the case and controversy" (Reply Mem 9). The fact that a final judgment may resolve an issue in a way that could impact an a person that is not participating in the suit is true of every litigation; it does not create a right to intervene. And for reasons stated at length above, the rights of DNYAA and its members are not being determined in this proceeding. Even if the value of their certificates may diminish if petitioner prevails, that does not equate to their being "bound" by the judgment.
Discretionary intervention presents a closer question. CPLR 7802(d) provides simply that the Court may "allow other interested persons to intervene." Under this provision, the Court has "broader authority" to allow intervention in an Article 78 proceeding than is generally the case pursuant to its discretionary authority under CPLR 1013 (see Matter of Greater NY Health Care Facilities Ass'n v. DeBuono , 91 NY2d 716, 720 [1998] ). And while petitioner's primary contention is that DNYAA lacks standing to challenge a determination of SEMSCO on the basis of the grounds it now alleges — a contention that movant does not dispute (see Petitioner's Memorandum of Law 2-7; Reply Mem 8-9) — that is not dispositive. Under CPLR 7802(d), "[t]he bases for permissive intervention are broader than they are for standing to originate the proceeding" (Matter of Ball v. Town of Ballston , 173 AD3d 1304, 1306 [3d Dept 2019], lv denied 34 NY3d 903 [2019] ). That is, a party that lacks standing to sue may be found sufficiently interested in the subject matter to intervene in an Article 78 proceeding (see id. [developer allowed to intervene although "Petitioner may well be correct that the developers do not have standing to bring suit to challenge his determination"] ). In Matter of Ball itself, the Court found that developers were appropriate intervenors under CPLR 7802(d), because the decision would impact their ability to connect to a water main that was at issue in the case.
There is little law explaining under what circumstances a party without standing may nonetheless have sufficient interest to intervene. I thus look for guidance to the considerations generally at issue in regard to a permissive intervention motion: whether the intervention will "unduly delay the determination of the action or prejudice the substantial rights of any party" [ CPLR 1013 ], and whether the movant has a sufficiently "direct and substantial interest in the outcome" (see Borst v. International Paper Co. , 121 AD3d 1343, 1346 [3d Dept 2014] [citation omitted] ), albeit one not sufficiently direct for standing purposes.
Ball relied for this principle on a trial court decision from over forty years earlier: (O'Brien v Barnes Bldg. Co. , 85 Misc 2d 424, 439 [Sup Ct, Suffolk County 1974], affd without op 48 AD2d 1018 [2d Dept 1975] ). The earlier decision did not rule on a party's intervention motion, but discussed the issue in the course of distinguishing an earlier trial court decision.
Adding DNYAA as a party need not delay the proceedings, as I may set the same date for responsive papers for the proposed intervenor and present respondent. As to prejudice, the addition of a new party which—as its papers before me make apparent—may raise a host of issues which petitioner will need to address, whether or not the Court ultimately finds them relevant. More importantly, while the outcome of the proceeding would undoubtedly impact movant's members, for reasons stated above such competitive impact is the sort the courts have found is unconnected to the purpose of the statute at issue, and which does not give rise to any other kind of legally protected interest. Moreover, that impact is far more indirect than the direct limitation on the use of intervenor's property at issue in Matter of Ball. And while standing may not be essential in every case to intervention under 7802(d), to allow it in these circumstances would seem to offer an easy end run for competitors to escape the black letter principle that "[u]nless the relevant statute at issue reflects an overriding purpose to prevent destructive competition, competitive injury, by itself, will not confer standing" ( New York Hearing Aid Soc., Inc. v. Children's Hosp. and Rehabilitation Center of Utica , 91 AD2d 333, 334 [2d Dept 1983] [citations omitted]; see also Oil Heat Institute of Long Island, Inc. v. Public Service Commission , 72 AD2d 828, 829 [3d Dept 1979], lv denied 49 NY2d 707 [1980] ).
For all these reasons, I deny the motion for intervention in the exercise of my discretion.
III. Transfer
CPLR 7804(g) provides:
"Where the substantial evidence issue specified in question four of section 7803 is not raised, the court in which the proceeding is commenced shall itself dispose of the issues in the proceeding. Where such an issue is raised, the court shall first dispose of such other objections as could terminate the proceeding ... without reaching the substantial evidence issue. If the determination of the other objections does not terminate the proceeding, the court shall make an order directing that it be transferred for disposition to a term of the appellate division ...."
CPLR 7803(4), referenced in the above provision, encompasses those cases in which the Court must decide "whether a determination made as a result of a hearing held, and at which evidence was taken , pursuant to direction by law is, on the entire record, supported by substantial evidence" (emphasis added).
In this case, petitioner's third cause of action challenges whether "[t]he SEMSCO Decision to deny the [North Shore] application was ... supported by substantial evidence in the record" (Pet ¶ 102). The "mere fact that [a] petition alleges the lack of substantial evidence supporting the determination," however, "is not dispositive" of the question of transfer (see Matter of Bonded Concrete, Inc. v. Town Bd. of Town of Rotterdam , 176 AD2d 1137, 1137 [3d Dept 1991] [citation omitted]; see also Matter of Save the Pine Bush v. Planning Bd. of City of Albany , 83 AD2d 741, 741 [3d Dept 1981] ).
The test for determining whether a proceeding involves "substantial evidence,"—in which case transfer would be required—was set forth in the Third Department's decision in Matter of Department of Envtl. Protection of City of NY v. Department of Envtl. Conservation of State of NY (120 AD2d 166 [3d Dept 1986], lv denied 69 NY2d 921 [1987] ) as follows:
"If the agency's findings of fact are challenged, the standard of review is the familiar substantial evidence test, and, where that issue is raised, the proceeding must be transferred to this court ( CPLR 7804[g] ). However, where agency action is taken without a hearing, or where the hearing is discretionary or informational as opposed to adjudicatory and evidentiary, judicial review is sought by way of a CPLR article 78 proceeding in the nature of mandamus to review ( CPLR 7803[3] ). In such case, the standard of review is whether the agency's action had a rational basis and, thus, was not arbitrary or capricious. As a result, the substantial evidence test is not at issue and transfer to this court is not authorized" ( id. at 169 ).
Thus, when an agency takes action without an evidentiary hearing, the substantial evidence standard does not apply (see Ball v. New York State Dept. of Environmental Conservation , 35 AD3d 732, 733 [3d Dept 2006] ). On the other hand, when factual findings made by an agency after an adjudicatory hearing are challenged, then the substantial evidence standard applies, and the proceeding must be transferred (see Margolin , 130 AD2d at 315 ; see also Secreto v. County of Ulster , 228 AD2d 932 [3d Dept 1996] [case should have been transferred, because "petitioner raised the question of substantial evidence by challenging the Hearing Officer's factual assessment of misconduct"] ).
In fleshing out this distinction, the caselaw holds that a matter involves substantial evidence only when there was a "a quasi-judicial evidentiary hearing" ( Halperin v. City of New Rochelle , 24 AD3d 768, 769 [2d Dept 2005] ; see also Fildon, LLC v. Planning Board of Incorporated Village of Hempstead , 164 AD3d 501, 502 [2d Dept 2018] [citations omitted][substantial evidence requires "trial-type hearing"] ). In contrast, proceedings involving public hearings where parties "have a right to be heard ... and to present facts in support of their position" are not subject to substantial evidence review ( id. at 770 ; accord Francello v. Mendoza , 165 AD3d 1555, 1556-1557 [3d Dept 2018] ). Thus, in Wal-Mart Stores Inc. v. Planning Bd. of Town of North Elba (238 AD2d 93 [3d Dept 1998] ), the Court found that the public hearing at issue was not a "true adjudicatory hearing as contemplated by CPLR 7803[4]" when "[t]he public hearing conducted by respondent, although required by statute ..., was informational in nature and did not involve the receipt of sworn testimony or taking of "evidence" within the meaning of CPLR 7803(4)" ( id. at 96 ; see also Halperin , 24 AD3d at 770 [mere fact that a petitioner has the "right to be heard and present facts" does not transform a hearing into an adjudicatory proceeding] ). Similarly, the Second Department found a hearing was not adjudicatory in nature when it "did not involve cross-examination of witnesses and the making of record" (see Seaview Assn. of Fire Is. v. Department of Envtl. Conservation of State of NY , 123 AD2d 619, 619 [2d Dept 1986] ).
The process for obtaining a CON for ambulance services is addressed by statute only in very broad strokes: An application for a CON is made in the first instance to the appropriate REMSCO (see PHL § 3008[1] ). The Notice is sent to local hospitals, ambulance service providers and municipalities, who are given the opportunity to comment (PHL § 3008[2] ). The REMSCO must make a determination within sixty days by a majority vote (PHL § 3003[5], 3008[4] ) which may then be appealed to the SEMSCO (PHL § 3008[5] ). The statute indicates that the SEMSCO may affirm, reverse or modify the decision by majority vote, and that such determination is subject to review via Article 78 (see PHL § 3002[3] ). Nothing is said in the statute, or in the regulations enacted thereunder, about the procedure by which this is to take place, and nothing is said about a hearing or ALJ (see 10 NYCRR, Part 800). Those procedures are instead set forth in DOH Policy Statement 06-06, which provides that a REMSCO "shall establish a date, time and location for a public hearing(s) to review the application and receive all comments" (Reisner Aff, Ex L at 10). The REMSCO "must use a hearing officer designated by the REMSCO and charged with finding fact and preparing a report for the REMSCO" (id. at 11). The REMSCO then votes on whether to accept or reject the recommendation of the ALJ (id. at 12-13). In the event of an appeal an ALJ is again assigned "to hear the appeal and make a finding of fact and recommendation to the State EMS Council" (id. at 14). Consideration of the application is "not de novo," and thus "discussion will be limited to State EMS Council members and the record" (id. at 14). The SEMSCO's Systems Committee then reviews the record and the ALJ recommendation. If there is "significant opposition," it holds a public hearing; if not (as in this case), it makes its determination (id. ).
A hearing may be reviewed under the substantial evidence standard — and thus is subject to transfer — only when it is conducted "pursuant to direction by law" (CPLR 7803[4] ; see also Colton v. Berman , 21 NY3d 322, 329 [1967] [when hearing not mandated by Administrative Code, substantial evidence standard did not apply]; Matter of Christopher v Phillips , 160 AD2d 1165, 1167 [3d Dept 1990], lv denied 76 NY2d 706 [1990] ["If a hearing is not required by law, the substantial evidence standard of review does not apply" and review is by arbitrary and capricious standard]; Nassau Roofing & Sheet Metal Co., Inc. v. Facilities Development Corp. , 131 AD2d 171, 174 [3d Dept 1987] [where hearing not "mandated by law" but held pursuant to contract, transfer was improper] ). The hearing in this case was held pursuant to a DOH policy statement and was not required by statute or regulation. This would appear to be another reason why application of the substantial evidence standard does not apply here (compare Matter of Margolin v. Newman , 130 AD2d 312, 314-315 [3d Dept 1987], appeal dismissed 71 NY2d 844 [1988] [evidentiary hearing conducted pursuant to regulation subject to substantial evidence review] with Matter of Mehdi v. Board of Mgrs. of Jones Mem. Hosp. , 116 AD2d 1024, 1025 [4th Dept 1986] [Article 78 proceeding transferred in error, when hearing was conducted pursuant to hospital by-laws, and thus was not "pursuant to direction by law"] ). Nevertheless, given the above conclusion that this was not an adjudicatory hearing, I need not determine whether transfer would also be inappropriate for this reason.
The transcript of the actual REMSCO hearing held in this case reveals that it involved proponents and opponents of the proposal presenting unsworn statements of their positions (see Affirmation of Peter J. Millcock in Support of Petition, Ex C). The speakers were on occasion asked a few clarifying or informational questions, but were not subject to what can be called "cross-examination" (id. ). The proceeding thus clearly falls under the rubric of an informational hearing, not a quasi-adjudicatory proceeding with sworn testimony and cross examination.
In light of the foregoing, the merits of this proceeding is subject to "arbitrary and capricious" review, and not the substantial evidence standard (see Matter of Sutherland v. Glennon , 221 AD2d 893, 894 [3d Dept 1995] ["The arbitrary and capricious standard governs where agency action is taken without a hearing or where the hearing is discretionary or informational in nature"] ).
Accordingly, it is hereby ORDERED that the motion by proposed intervenor Downstate New York Ambulance Association to dismiss the petition, or in the alternative to intervene, is denied in its entirety; and it is further
ORDERED that the application of respondent New York State Emergency Medical Services Council to transfer the proceeding to the Appellate Division is hereby denied; and it is further
ORDERED that respondent may serve an amended answer and return within thirty days of the date of this Decision & Order addressing the petition on the merits, and the return date of the petition is extended to July 26, 2020.
This constitutes the Decision and Order of the Court, which shall be electronically filed, with copies to counsel for the parties. The signing and transmittal of this Decision and Order shall not constitute notice of entry under CPLR 5513, and the parties are not relieved from the applicable provisions of that Rule respecting to filing and service of Notice of Entry, except to the extent superceded by Administrative Order addressing the COVID-19 pandemic.
Papers Considered:
1. Notice of Petition and Petition, filed on September 9, 2019, with supporting affidavits and exhibits annexed thereto.
2. Verified Answer of Respondents New York State Emergency Medical Services Council, New York State Bureau of Emergency Medical Services, and New York State Department of Health, with proposed Order of Transfer and Affirmations of C. Harris Dague, Esq. and Michael J. Phillips, Esq.
3. Notice of Motion to Dismiss or Intervene of Downstate New York Ambulance Association dated January 31, 2020, with appended Affirmation of Jeffrey P. Reisner, Esq., and supporting affidavits and exhibits annexed thereto, along with Memorandum of Law.
4. Petitioner's Memorandum of Law in Opposition to Motion to Dismiss or Intervene dated February 7, 2020.
5. Memorandum of Law in Reply to Petitioner's Response to DNYAA's Motion to Dismiss or Intervene dated February 13, 2020.