Brightonian Nursing Home v. Daines
Brightonian Nursing Home v. Daines
Opinion of the Court
OPINION OF THE COURT
Before us on this appeal as of right pursuant to CPLR 5601 (d) is a challenge to the facial constitutionality of Public Health Law § 2808 (5) (c). That provision, in its present form enacted in 2010 as this case was being litigated in Supreme Court (L 2010, ch 109, part B, § 36), prohibits the withdrawal or transfer of residential health care facility equity or assets in an aggregate amount exceeding three percent of the facility’s most recently reported annual revenue from patient care services, without the prior approval of the State Commissioner of Health:
*574 “The commissioner shall make a determination to approve or disapprove a request for withdrawal of equity or assets under this subdivision within sixty days of the date of the receipt of a written request from the facility ... In reviewing such requests the commissioner shall consider the facility’s overall financial condition, any indications of financial distress, whether the facility is delinquent in any payment owed to the department, whether the facility has been cited for immediate jeopardy or substandard quality of care, and such other factors as the commissioner deems appropriate.”
Nursing homes serve a particularly needy and vulnerable clientele and are largely compensated with public funds. Preserving their financial viability and capacity to provide care and treatment at mandated levels is thus a proper and uncontroversial subject of legislative concern. The particular concern addressed by the presently challenged enactment—that precipitous withdrawals of substantial facility equity or assets for non-facility purposes may impair facility operations and thus occasion detriment to the welfare of an utterly reliant resident population—is not new. Public Health Law § 2808 (5) (c) is only the most recent of several restrictions on the alienation of facility equity and assets contained in Public Health Law § 2808. Subdivision (5) (a), enacted in 1977 (L 1977, ch 521, § 1), requires an operator to obtain permission for the withdrawal of facility assets or equity when the facility is in a negative net worth position or when the withdrawal would give rise to such a position, and, as amended in 1984 to address widespread noncompliance with the pre-approval requirement, contains a clawback provision (L 1984, ch 969, § 6). Subdivision (5) (b), enacted in 2008 (L 2008, ch 58, part C, § 72, as amended by L 2008, ch 57, part OO, § 12) extended the Commissioner’s oversight of facility asset/equity withdrawals to facilities in positive equity positions, by requiring across-the-board prior written notification of any withdrawal or transfer of facility equity or assets exceeding in the aggregate three percent of the facility’s most recently reported annual revenue from patient care services. The presently challenged provision, subdivision
In granting plaintiffs summary judgment, declaring section 2808 (5) (c) facially unconstitutional, Supreme Court reasoned that the statute’s use of the catch-all phrase “and such other factors as the commissioner deems appropriate” afforded the Commissioner unbridled discretion to deny withdrawal/transfer applications, and in so doing impermissibly ceded legislative policy-making power to a regulatory agency situated in the executive branch (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 864 [2003]). The court also faulted the statute for infringing the substantive due process property interests of facility owners; subdivision (5) (c), it said, was not rationally related to any end that might be achieved through the State’s police power.
The Appellate Division agreed that the statute’s catch-all provision impermissibly surrendered legislative policy-making power (93 AD3d 1355, 1358 [2012]). And, while noting defendants’ contention that the catch-all, if deemed constitutionally offensive, could be severed without compromising the essential legislative design, the court was of the view that severance was incapable of saving the statute because the enactment as a whole violated substantive due process (93 AD3d at 1359). The court did not question the governmental purpose for the statute—namely, ensuring the financial viability of nursing homes and protecting the welfare of their vulnerable residents—but was unable to discern a reasonable relationship between that purpose and the means prescribed, which it said “swe[pt] so broadly as to be irrational and arbitrary in view of the objective to be accomplished” (id. at 1360). In the court’s view, protecting the financial viability of nursing homes and the welfare of their residents was sufficiently assured by Public Health Law § 2808 (5) (a) and (b).
The lower courts, we believe, erred in concluding that the subject statute was offensive to substantive due process. Economic regulation will violate an individual’s substantive due process property interest only in those situations, vanishingly
Plaintiffs do not suggest that the purposes advanced by the State for the challenged enactment are illegitimate. Their contention is rather that the enactment does not reasonably advance those purposes because it targets facilities that are not financially distressed—facilities with positive net worth positions—and imposes an across-the-board “freeze” on assets, using as a touchstone an arbitrary percentage of annual revenue. Plaintiffs urge that annual revenue is not itself a reliable indicator of a facility’s financial health and that there is no reason why the extent of an operator’s unconditioned access to facility assets and equity should depend solely on the facility’s most recent annual revenue stream.
Defendants respond that facilities enjoying positive net worth positions—i.e., where total assets exceed total liabilities (see 10 NYCRR 400.19 [a] [1])—are not immune from instability precipitated by the withdrawal of substantial facility assets; that the liquidity of even those facilities may be rendered insufficient to meet their day-to-day operating expenses thus impairing the satisfaction of institutional care and treatment obligations. While acknowledging that annual revenue is not itself an infallible index of a facility’s financial condition, defendants assert that it is rationally indicative of a facility’s scope of operation and ability to sustain services to its residents at mandated levels and that it may therefore be reasonably used as a basis for determining how much may be withdrawn from a facility without prior approval. As to the three percent threshold, defendants explain that the point at which scrutiny should commence will inevitably be fairly arbitrary since it is only after
We think it apparent that we do not deal here with an outrageously baseless regulatory exercise and it is, in any event, certain that plaintiffs have not met their extraordinary burden in this species of litigation of proving beyond a reasonable doubt that the challenged provision “suffers wholesale constitutional impairment” (Matter of Moran Towing Corp. v Urbach, 99 NY2d 443, 448 [2003]; and see Overstock.com, Inc. v New York State Dept. of Taxation & Fin., 20 NY3d 586, 593-594 [2013]).
Possibly, Public Health Law § 2808 (5) (c) is not as narrowly focused as it might be, or as the Appellate Division thought that regulation equal to the State’s legitimate purpose should be; but it does not follow that the statute is violative of substantive due process. The legislature’s prescription of means, particularly in the arena of economic regulation, is entitled to judicial deference so long as those means are in a very broad sense reasonably related to the achievement of a permissible regulatory end (see Rochester Gas & Elec., 71 NY2d at 320; and see Concrete Pipe & Products of Cal., Inc. v Construction Laborers Pension Trust for Southern Cal., 508 US 602, 639 [1993] [“under the deferential standard of review applied in substantive due process challenges to economic legislation there is no need for mathematical precision in the fit between justification and means”]). We see no ground to doubt the constitutional adequacy of that relation here.
In employing the three percent threshold based on annual facility revenue, the legislature, exercising the discretion that is ordinarily its prerogative in matters of economic regulation (see Montgomery v Daniels, 38 NY2d 41, 64 [1975]), put in place a mechanism that would at once identify contemplated withdrawals sufficiently substantial to be of legitimate regulatory concern, and afford owners of facilities with positive net worth a measure of unregulated access to facility assets and equity. We note that the reasonableness of the same threshold employed for the same identifying purpose in Public Health Law § 2808
Plaintiffs’ alternative theory for deeming section 2808 (5) (c) unconstitutional—that the provision’s catch-all phrase effects an improper delegation of legislative policy-making power—is not, in our view, more viable than their substantive due process claim. Although the principle of ejusdem generis may not be strictly applicable to require a limitation of the catch-all’s reference, since the statute’s enumeration is of general criteria and not particular things within a single category of which the catch-all would be naturally comprehended as a circumscribed extension (see McKinney’s Cons Laws of NY, Book 1, Statutes § 239 [b]), it does not follow that the catch-all effects an unconstitutional delegation. Indeed that is a construction to be avoided, if at all possible (LaValle v Hayden, 98 NY2d 155,
We have reviewed plaintiffs’ remaining arguments and find them to be without merit.
Accordingly, the appealed judgment and the order of the Appellate Division brought up for review should be reversed, with costs, and judgment granted to defendants declaring that Public Health Law § 2808 (5) (c) is constitutional to the extent challenged.
Judges Graffeo, Read, Smith, Pigott, Rivera and AbdusSalaam concur.
Judgment appealed from and order of the Appellate Division brought up for review reversed, with costs, and judgment granted to defendants declaring that Public Health Law § 2808 (5) (c) is constitutional to the extent challenged.
. An earlier version of the statute (L 2009, ch 58, part D, § 11) required pre-approval of asset/equity withdrawal when the amount involved equaled or exceeded three percent of the facility’s total annual Medicaid revenue. The statute’s amendment was evidently responsive to the facility owners’ contention that Medicaid revenue is not a reliable index of a facility’s financial
. Any withdrawal from a facility in a negative net worth position would, under subdivision (5) (a) of the statute, trigger the pre-approval requirement.
. Withdrawals for facility purposes, including the payment of salaries and taxes, are not counted toward the three percent threshold (see 10 NYCRR 400.19 [a] [3]).
. The record discloses that the vast majority of subdivision (5) (c) withdrawal applications have been timely approved.
Reference
- Full Case Name
- Brightonian Nursing Home v. Richard F. Daines, M.D., Commissioner of Health, State of New York
- Cited By
- 20 cases
- Status
- Published