New York State Court of Claims

New York State Court of Claims
CUTIE v. THE STATE OF NEW YORK, # 2018-032-044, Claim No. 125806, Motion No. M-91615

Synopsis

The claim is dismissed in its entirety. Claimants' causes of action sounding in defamation, tortious interference with existing contracts, breach of contract, and negligence failed to comply with Court of Claims Act 11 (b). No triable issues of fact exist as to the claim for tortious interference with business relationships.

Case information

UID: 2018-032-044
Claimant(s): CUTIE PHARMA-CARE and DANIEL J. CUTIE
Claimant short name: CUTIE
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 125806
Motion number(s): M-91615
Cross-motion number(s):
Judge: JUDITH A. HARD
Claimant's attorney: Barclay Damon, LLP
By: David M. Cost, Esq.
Defendant's attorney: Hon. Barbara D. Underwood, Attorney General
By: Anthony Rotondi, Assistant Attorney General
Third-party defendant's attorney:
Signature date: August 13, 2018
City: Albany
Comments:
Official citation:
Appellate results:
See also (multicaptioned case)

Decision

Claimants Cutie Pharma-Care, Inc. ("Cutie Pharma-Care") and Daniel J. Cutie filed the instant claim on March 17, 2015, alleging causes of action against the State of New York for defamation, tortious interference with business relationships and contracts, breach of contract, and negligence (see Verified Claim). Defendant now seeks dismissal of the claim pursuant to CPLR 3211 (a) (2); (5); and (7) on the grounds that the claim: (1) is barred by the doctrines of res judicata and collateral estoppel; (2) fails to state a cause of action; (3) fails to comply with the pleading requirements of the Court of Claims Act; and (4) must be dismissed for lack of subject matter jurisdiction. Defendant also seeks summary judgment pursuant to CPLR 3212 on the ground that there exists no triable issue of fact as to defendant's liability. Claimant opposes the motion.

FACTS

Cutie Pharma-Care is a licensed pharmacy in New York State and a New York State-licensed Medicaid provider that receives monetary reimbursements from Medicaid for services provided to individuals covered by Medicaid who receive treatment at certain facilities. Cutie Pharma-Care operates as a "closed door" medication management pharmacy that services facilities under the purview of the Office for People with Developmental Disabilities ("OPWDD"); public and private adult care facilities ("ACFs"); Department of Social Services facilities; children's homes; county mental health associations; and rehabilitation centers under the purview of the Office of Alcohol and Substance Abuse Services ("OASAS"). Cutie Pharma-Care contracts with ACFs and OPWDD facilities directly--not individual Medicaid patients--to provide pharmacy services. The patients receiving care at these facilities rely almost exclusively on Medicaid. ACFs and OPWDD facilities that have Medicaid patients cannot conduct business with an "excluded" Medicaid pharmacy (Affirmation of David M. Cost, Esq. 16). Providers are excluded from Medicaid if they engage in fraudulent practices, or violate certain state or federal Medicaid regulations (Cost Aff. 28).

Cutie Pharma-Care utilizes a multi-dose system of medication distribution called "the Medicine On-Time System" (Cost Aff. 14). No other facilities in the geographic region in which Cutie Pharma-Care operates use this system. Up to and including 2007, there was some debate regarding the appropriateness of the multi-dose system due to the lack of regulations applicable to the multi-dose system. At a conference that took place in 2004 or 2005, Angelo J. Ruperto, a Pharmacy Supervisor from the Office of the Medicaid Inspector General ("OMIG") told Marilyn Goulty, a co-owner of Cutie Pharma-Care, that Cutie Pharma-Care's Medicine On-Time System could not be used, and instructed Cutie Pharma-Care to stop using the system. In June of 2006, Cutie Pharma-Care's chief competitor, Omnicare, filed a complaint with the Board of Pharmacy regarding Cutie Pharma-Care's use of the multi-dose system. Based on the complaint, SED conducted an investigation of Cutie Pharma-Care that resulted in several charges against Cutie Pharma-Care. To resolve the SED proceedings, claimants executed a Consent Order admitting to certain charges, and accepting the penalty of censure and reprimand.

During the time of Cutie Pharma-Care's investigation and subsequent settlement, James G. Sheehan was the Medicaid Inspector General. Sheehan created an OMIG policy focused on aggressively pursuing entities that engaged in fraudulent Medicaid practices or violated state or federal Medicaid regulations. This policy excluded as Medicaid providers those who engaged in fraudulent Medicaid practices or who violated state or federal Medicaid regulations. Ruperto, in his capacity as a Pharmacy Supervisor, coordinated investigations of pharmacies for OMIG's Pharmacy Investigation Unit and provided recommendations concerning exclusions of Medicaid providers.

Ruperto gathered information on Cutie Pharma-Care by obtaining a copy of the Consent Order and a copy of the investigation report, authored by Stephen E. Grogan, an SED Investigator. After receiving the Consent Order and investigation report, Ruperto recommended that Cutie Pharma-Care be immediately excluded from receiving Medicaid reimbursement payments under 18 NYCRR 515.7 (e).

In or about January 2010, Ruperto contacted Martin McMahon, a supervisor with the Department of Health ("DOH"), to advise him of Cutie Pharma-Care's pending exclusion. Thereafter, in February 2010, Cutie Pharma-Care's customers were allegedly contacted and told that Cutie Pharma-Care would soon be excluded from receiving Medicaid reimbursement payments because it committed illegal conduct and engaged in Medicaid fraud, despite the fact that neither the Consent Order nor the Notice of Exclusion stated that Cutie Pharma-Care would be excluded for those reasons. The customers were also allegedly told that they must switch pharmacies and could no longer use Cutie Pharma-Care. The contact occurred before the exclusion went into effect, and before Cutie Pharma-Care had notice of its pending exclusion.

At or about the same time that Cutie Pharma-Care's customers were contacted, Ruperto and McMahon made several allegedly false statements to multiple individuals regarding Cutie Pharma-Care. Ruperto told McMahon that claimants were taking "back medications and stockpiling them and re-dispensing some of those medications" (Cost Aff. 49). Following this exchange, McMahon published a statement to several individuals stating that Cutie Pharma-Care "was found to have accepted back previously dispensed medications and thereafter re-dispensed them to other residents/facilities" (id. 50). Cutie Pharma-Care's customers were also told that the pharmacy was re-dispensing and commingling medications.

Ultimately, Cutie Pharma-Care's exclusion never went into effect, as Cutie Pharma-Care successfully challenged the exclusion. But, as a result of the actions of DOH and OMIG, Cutie Pharma-Care allegedly lost 59% of its customers.

LAW AND ANALYSIS

"Summary judgment is a drastic remedy that 'should not be granted where there is any doubt as to the existence of [triable] issues [of fact], or where the issue is arguable'" (Hall v Queensbury Union Free Sch. Dist., 147 AD3d 1249, 1250 [3d Dept. 2017], quoting Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]; see Rotuba Extruders v Ceppos, 46 NY2d 223, 231 [1978]; Stukas v Streiter, 83 AD3d 18, 23 [2d Dept. 2011]). The proponent of the motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986] [internal citations omitted]; see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Robinson v Kingston Hosp., 55 AD3d 1121, 1123 [3d Dept. 2008]). "Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hosp., 68 NY2d at 324; see Town of Kirkwood v Ritter, 80 AD3d 944, 945-946 [3d Dept. 2011]). In considering the motion, the Court "must view the evidence in a light most favorable to the nonmoving party and accord that party the benefit of every reasonable inference from the record proof, without making any credibility determinations" (Black v Kohl's Dept. Stores, Inc., 80 AD3d 958, 959 [3d Dept. 2011]; see Winne v Town of Duanesburg, 86 AD3d 779, 780-781 [3d Dept. 2011]).

I. Court of Claims Act 11 (b)

Defendant challenges the sufficiency of the notice of intention and the claim pursuant to Court of Claims Act 11 (b). Because the failure to comply with Court of Claims Act 11 (b) deprives the Court of subject matter jurisdiction, the Court will address this argument first.(1)

"Court of Claims Act 11 (b) 'places five specific substantive conditions upon [defendant's] waiver of sovereign immunity by requiring the claim to specify: (1) the nature of the claim; (2) the time when it arose; (3) the place where it arose; (4) the items of damage or injuries claimed to have been sustained; and (5) the total sum claimed' " (Davila v State of New York, 140 AD3d 1415, 1416 [3d Dept. 2016], quoting Lepkowski v State of New York, 1 NY3d 201, 206 [2003] [internal quotation marks omitted]). "Absolute exactness is not required, but the claim must enable prompt investigation and be sufficiently specific to enable [a] defendant to reasonably infer the basis for its alleged liability" (Davila v State of New York, 140 AD3d at 1416 [internal quotation marks and citations omitted]; see Morra v State of New York, 107 AD3d 1115, 1115 [3d Dept. 2013]; Deep v State of New York, 56 AD3d 1260, 1261 [4th Dept. 2008]). It is well settled that "[t]he State's waiver of immunity from suits for money damages is not absolute, but rather is contingent upon a claimant's compliance with specific conditions placed on the waiver by the Legislature" (Lepkowski v State of New York, 1 NY3d at 206; see Court of Claims Act 8; Alston v State of New York, 97 NY2d 159, 163 [2001]). Accordingly,

"[f]ailure to strictly comply with these substantive pleading requirements is a jurisdictional defect warranting dismissal for lack of subject matter jurisdiction" (Signature Health Ctr., LLC v State of New York, 42 AD3d 678, 679 [3d Dept. 2007]; see Kolnacki v State of New York, 8 NY3d 277, 280 [2007]; Lepkowski v State of New York, 1 NY3d at 207-208; Alston v State of New York, 97 NY2d at 164).

a. Defamation

Defendant argues that the causes of action for defamation must be dismissed because they were not pleaded with particularity in the notice of intention, and are therefore untimely as asserted in the claim. The claim alleges two distinct statements which claimants allege are defamatory. First, in paragraph 25 of the claim, claimants allege that "between February 18 and February 22, 2010, Ruperto materially and falsely communicated to McMahon the statement: 'this pharmacy was found to have accepted back previously dispensed medications and thereafter re-dispensed them to other residents/facilities . . .' " (Verified Claim 25). The claim further alleges that Ruperto and McMahon communicated the statement to other DOH and OMIG State actors on February 22, 2010 (Verified Claim 27). In paragraph 28 of the claim, claimants allege that defendants contacted Cutie Pharma-Care's customers and communicated that "[c]laimants had accepted back and then re-dispensed previously dispensed drugs, or committed other activities of Medicaid fraud . . ." (Verified Claim 28). The Court interprets the claim as alleging two distinct statements that claimants allege are defamatory. The first is the statement that Cutie Pharma-Care accepted back and then re-dispensed previously dispensed drugs; and the second is the statement that Cutie Pharma-Care engaged in Medicaid fraud.

A claim or notice of intention alleging defamation must be served within 90 days of its accrual date (Court of Claims Act 10 [3-b]). The accrual dates for the defamation causes of action as asserted in the claim are February 18 through February 22, 2010. The notice of intention for the instant claim was served on May 17, 2010, within the 90-day window set forth in Court of Claims Act 10 (3-b). Because the notice of intention was timely served, claimant needed to file and serve the claim by February 18, 2011--one year from the accrual date--pursuant to Court of Claims Act 10 (3-b). However, the claim was filed on March 17, 2015, and served on March 19, 2015. Thus, the claim is only timely as to the defamation causes of action if those causes of action meet the requirements of Court of Claims Act 11 (b) as alleged in the timely notice of intention, and if the Court determines that the tolling provision set forth in CPLR 205 (a) tolls the applicable statute of limitations. For the following reasons, the Court finds that the defamation causes of action asserted in the notice of intention do not satisfy the requirements of Court of Claims Act 11 (b), and claimants cannot avail themselves of the tolling provision set forth in CPLR 205 (a).

Defamation "is defined as 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], citing Sydney v MacFadden Newspaper Publ. Corp., 242 NY 208, 211-212 [1926]). It "is the injury to one's reputation, either by written expression (libel) or oral expression (slander)" (Penn Warranty Corp. v DiGiovanni, 10 Misc 3d 998, 1002 [Sup Ct, NY County 2005], citing Morrison v National Broadcasting Co., 19 NY2d 453 [1967]). The elements of defamation are: (1) a false statement; (2) the publication of said statement without privilege or authorization to a third party; (3) fault amounting at least to negligence on the part of the publisher; and (4) the statement causes special harm or constitutes defamation per se (Dillon v City of New York, 261 AD2d 34, 38 [1st Dept. 1999]; Restatement [Second] of Torts 558). It is well settled that a cause of action for defamation must allege " 'the particular words complained of' as required by CPLR 3016 (a)" (Collins v State of New York, UID No. 2016-015-138 [Ct Cl, Collins, J., June 16, 2016], quoting Sokol v Leader, 74 AD3d 1180 [2d Dept. 2010]). In addition, a claim or notice of intention must state the date when the statements were made (id.).

Here, the only arguable defamation cause of action contained within the notice of intention states that "the State of New York through its agents suggested to [Cutie Pharma-Care's] customers that Cutie Pharma-Care had committed Medicaid fraud . . ." (Notice of Intention 9). The notice of intention later states that claimants sustained damages when the State of New York, through the authority of its agents, "accus[ed] [claimants] of Medicaid Fraud . . . directly or indirectly stating . . . that [claimants] had engaged in criminal conduct" (Notice of Intention 17 [d]).

The Court finds that the notice of intention is insufficient to sustain the Court's jurisdiction over either the statement regarding the re-dispensing of medication or the statement regarding Medicaid fraud. First, the notice of intention completely fails to mention the alleged statement made by Ruperto to McMahon regarding the alleged re-dispensing of medication, nor does it mention that McMahon and Ruperto communicated an allegedly false statement regarding the re-dispensing of medication to other State actors in the DOH or the OMIG. Accordingly, claimants' cause of action for defamation insofar as it concerns the statement regarding the alleged re-dispensing of medication, is not pleaded with sufficiently particularity in the notice of intention to satisfy the requirements of Court of Claims Act 11 (b).

The second statement regarding Medicaid fraud states that, between February 22, 2010 and March 19, 2010, defendant, through its agents, contacted Cutie Pharma-Care's customers and "suggested" that Cutie Pharma-Care had engaged in Medicaid fraud (Verified Claim 7, 9). Claimants' use of the term "suggested" indicates that claimants themselves are unsure of what defendants allegedly said to the customers. Accordingly, the Court finds that claimants' allegations are insufficient to meet the specificity requirement of Court of Claims Act 11 (b) as claimants fail to allege "the precise statements claimed to be defamatory" (Kilbourne v State of New York, 111 Misc 2d 161, 166 [Ct Cl 1980]). Moreover, the notice of intention fails to specifically identify who made the statement and to whom the statement was made (see Maloney v State of New York, UID No. 2009-044-532 [Ct Cl, Schaewe, J., June 5, 2009]). Because the Court finds that the defamation causes of action are insufficient under Court of Claims Act 11 (b) to confer subject matter jurisdiction in this Court, the defamation causes of action asserted in the claim are untimely pursuant to Court of Claims Act 10 (3-b).

Claimants assert that even if the notice of intention did not allege the defamation causes of action, the defamation causes of action asserted in the claim are timely pursuant to CPLR 205 (a). CPLR 205 (a) allows a litigant to sue again even if the statute of limitations has expired. The statute allows a litigant six months from the termination of the prior action to sue again, provided that the prior action was brought within the applicable statute of limitations period. However, "[i]t is well settled that CPLR 205 (a) does not obviate the necessity for complying with the conditions precedent to suit contained in Court of Claims Act"(Jacobsen v State of New York, UID No. 2015-045-004 [Ct Cl, Lopez-Summa, J., Feb. 18, 2015], citing Campbell v City of New York, 4 NY3d 200 [2005]; Yonkers Contr. Co. v Port Auth. Trans-Hudson Corp., 93 NY2d 375 [1999]). Where a timely served notice of intention fails to comply with Court of Claims Act 11, a claimant "cannot avail [themselves] of the provisions of CPLR 205 (a)" (Diana Q. v State of New York, UID No. 2009-045-024 [Ct Cl, Lopez-Summa, J., Sept. 30, 2009]). Thus, although claimants timely served a notice of intention within 90 days of the accrual date of the defamation claim, the notice of intention failed to comply with the specificity requirements set forth in Court of Claims Act 11 (b), as explained supra.

Claimants argue that, because the federal court action was filed within the one-year statute of limitations promulgated by CPLR Article 2, the provisions of CPLR 205 (a) apply. Claimants are incorrect, for although the federal court action was timely commenced when measured against the statute of limitations contained in CPLR Article 2, the federal court action was not filed within the 90-day limitations period contained in Court of Claims Act 10 (3-b) (see Diana Q. v State of New York, UID No. 2009-045-024 [Ct Cl, Lopez-Summa, J., Sept. 30, 2009] [dismissing claim where claimant timely filed a federal court action, but did not serve a notice of intention that complied with Court of Claims Act 11 (b)]; Siegel and Connors, New York Practice, 52 [6th ed. 2018] ["[I]n order for the second action to be timely, it must be shown that the claim [alleged in the second action] would have been timely had it been interposed in the first action]). Thus, because claimants failed to plead a defamation cause of action with sufficient specificity within the notice of intention served in the instant Court of Claims action, the federal court action was not "timely commenced" as required by CPLR 205 (a) (see Crane v State of New York, UID No. 2018-050-002 [Ct Cl, Lynch, J., Jan. 11, 2018]; see also Madison v State of New York, UID No. 2010-015-114 [Ct Cl, Collins, J., Mar. 2, 2010]; Siegel and Connors, New York Practice, 52 [6th ed. 2018]). Accordingly, the Court dismisses the defamation causes of action asserted in the claim for lack of subject matter jurisdiction. b. Breach of Contract

Defendant argues that claimants' breach of contract cause of action must be dismissed for failure to comply with Court of Claims Act 11 (b). Specifically, defendant argues that the claim does not identify the contract allegedly breached or what provisions of the contract were breached, nor does it specify the parties to the contract or the nature of the contract (Rotondi Aff. 71). Claimants argue that the claim satisfies Court of Claims Act 11 (b).

"General allegations of the existence of a contract and a breach thereof are insufficient to state a breach of contract cause of action. Rather, the pleader must specify the provisions of the contract it claims were breached" (Jeda Capital-Lenox, LLC v State of New York, UID No. 2015-015-057 [Ct Cl, Collins, J., May 27, 2015], citing Sutton v Hafner Valuation Group, Inc., 115 AD3d 1039, 1042 [3d Dept. 2014]; Trump on the Ocean, LLC v State of New York, 79 AD3d 1325 [3d Dept. 2010]).The notice of intention states that "[t]his claim is based on breach of contract" (Notice of Intention 3) but does not further specify any details regarding a contract between claimants and defendant. The claim also states that it is based, in part, on a breach of contract cause of action (Claim 13), but fails to identify the contract or any specific contractual provisions. Further, both the notice of intention and the claim fail to allege the date that the breach occurred. It is well-settled that the Court of Claims Act does not require the State "to ferret out or assemble information that section 11 (b) obligates the claimant to allege" (Lepkowski v State of New York, 1 NY3d at 208). Claimants' failure to identify the contract, the date of the alleged breach, and the nature of the breach renders this cause of action jurisdictionally defective (see Whatley v State of New York, UID No. 2017-053-527 [Ct Cl, Sampson, J., June 12, 2017]; Monolith Solar v State of New York, UID No. 2016-015-155 [Ct Cl, Collins, J., Sept. 2, 2016]). Accordingly, to the extent that the claim asserts a cause of action for breach of contract, such cause of action is dismissed. c. Tortious Interference with Existing Contracts and Business Relationships

Defendant argues that the claimants' cause of action for tortious interference with an existing contract should be dismissed for lack of subject matter jurisdiction because the allegations do not satisfy the pleading requirements of Court of Claims Act 11 (b). Specifically, defendant argues that claimants failed to allege which contracts were interfered with, the parties to those contracts, whether the contracts were written or oral, or the dates of said interference (Rotondi Aff. 84).

First, the Court notes that it appears there is a discrepancy between the tortious interference cause of action alleged by claimants and the tortious interference arguments by defendant. Defendant maintains that the cause of action is one for tortious interference with an existing contract, but claimants state that the cause of action is one for tortious interference with business relationships. Claimants also at times conflate the two causes of action and reference the cause of action as one for "tortious interference with business relationships and contracts" (see Cost Aff. p. 27). However, the two causes of action are distinct and each require proof of different elements. The elements of a cause of action for tortious interference with an existing contract are: "(1) the existence of a valid contract between [claimants] and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional procuring of the breach; and (4) damages" (Foster v Churchill, 87 NY2d 744, 749-750 [1996]). In contrast, the elements of a claim for tortious interference with business relations or prospective economic advantage, as the tort is sometimes characterized, are "(1) the defendant's knowledge of a business relationship between the plaintiff and a third party; (2) the defendant's intentional interference with the relationship; (3) that the defendant acted by the use of wrongful means or with the sole purpose of malice; and (4) resulting injury to the business relationship" (534 E. 11th St. Hous. Dev. Fund Corp. v Hendrick, 90 AD3d 541, 542 [1st Dept. 2011], citing NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614 [1996]; Thome v Alexander & Louisa Calder Found., 70 AD3d 88 [1st Dept. 2009], lv denied 15 NY3d 703 [2010]). Claimant must prove that " 'defendant's interference with its prospective business relations was accomplished by wrongful means or that defendant acted for the sole purpose of harming the [claimant]' " (Caprer v Nussbaum, 36 AD3d 176, 204 [2d Dept. 2004], quoting Snyder v Sony Music Entertainment, 252 AD2d 294, 299-300 [2d Dept. 1999] [internal quotation marks and additional citations omitted]).

Insofar as defendant argues that the cause of action for tortious interference with an existing contract must be dismissed, the Court agrees. The notice of intention fails to specify what contracts defendant allegedly interfered with, or the parties to those contracts. The notice of intention only states that defendant "interfer[ed] with Cutie Pharma-Care's contractual relationships with its customers . . ." (Notice of Intention 9). Although "[a]bsolute exactness is not required . . . the claim must enable prompt investigation and be sufficiently specific to enable defendant to reasonably infer the basis for its alleged liability" (Davila v State of New York, 140 AD3d at 1416 [internal quotation marks and citations omitted]; see Morra v State of New York, 107 AD3d at 1115; Deep v State of New York, 56 AD3d at 1261). Claimants failed to identify the specific contracts and specific customers allegedly contacted by defendant, rendering defendant unable to investigate this cause of action to ascertain its liability.

Defendant did not address the cause of action for tortious interference with business relationships in its motion, as its motion papers only argue that claimants failed to state a cause of action for tortious interference with existing contracts. However, "[t]he courts of this state have uniformly rejected tortious interference claims when the alleged interference is a discretionary act taken by a public official in performance of public duties that are 'justifiable pursuant to statutory command' " (Abramoski v State of New York, 146 AD3d 1063, 1064 [3d Dept. 2017], quoting Cristo Bros. v Troy Urban Renewal Agency, 116 AD2d 793, 794 [3d Dept. 1986], affd for reasons stated below 68 NY2d 819 [1986] [additional citations omitted]). "[D]iscretionary 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" (Tango v Tulevech, 61 NY2d 34, 41 [1983]; see Lauer v City of New York, 95 NY2d 95, 99 [2000]). Defendant argues that the oversight of the professions and exclusions from Medicaid are governmental functions that cannot be categorized as ministerial. Claimants argue that the phone calls made by State representatives were ministerial acts that did not involve the exercise of reasoned judgment.

Here, the Court finds that defendant's determinations were discretionary in nature, and thus no liability can attach for a tortious interference claim. Although claimants attempt to simplify this argument by stating that the real issue is whether the telephone calls to Cutie Pharma-Care's customers were discretionary or ministerial, the Court finds that the gravamen of the claim against the State is whether the decision to contact Cutie Pharma-Care's customers regarding the pending exclusion was discretionary or ministerial. The evidence submitted by claimants shows that State officials were concerned about a disruption in service that ACFs serviced by Cutie Pharma-Care would suffer if Cutie Pharma-Care were excluded from the Medicaid program (Cost Aff. Ex. A [Deposition of Martin McMahon], p. 147; Cost Aff. Ex. B [Deposition of Angelo Ruperto] p. 193; Cost Aff. Ex. C [Deposition of James G. Sheehan], pp. 77-78). Because of this concern, DOH officials made the determination to contact ACFs that would be affected by Cutie Pharma-Care's exclusion before the exclusion took effect so that there would be no disruption in service. Given that the DOH is mandated by law to protect the residents of ACFs (see Social Services Law 460), it made a reasoned judgment to protect them by calling the ACF's to advise them of Cutie Pharma-Care's pending exclusion (Cost Aff. Ex. A, p. 147). Thus, the Court finds that DOH's decision to contact claimants' customers was a discretionary act that is "justifiable pursuant to statutory command" (Abramoski v State of New York, 146 AD3d at 1064; see Doe v City of New York, 67 AD3d 854, 857 [2d Dept. 2009] [finding a governmental action discretionary where a municipal entity made a "policy decision" to address homelessness by establishing a social outreach program]), and any allegations of bad faith or malice are irrelevent once the Court finds that the discretionary act was justifiable (Cristo Bros. v Troy Urban Renewal Agency, 116 AD2d at 794).

d. Negligence

Defendant argues that the cause of action for negligence must be dismissed because neither the notice of intention nor the claim alleges that defendant owed a legal duty to claimants.

In order to sustain a claim for negligence against the State involving a classic governmental function, claimants must prove that the governmental action was ministerial, not discretionary (Valdez v City of New York, 18 NY3d 69, 75 [2011]; McLean v City of New York, 12 NY3d 194, 202 [2009]). The State can only be held liable for ministerial governmental action if it violates a special duty owed to the claimant (Signature Health Center, LLC v State of New York, 28 Misc 3d 543, 555 [Ct Cl 2010]). A special duty can be created in one of three ways: (1) by a statute that was enacted for the benefit of a particular class of persons; (2) by voluntary assumption of a duty toward a private party who then justifiably relies on proper performance of that duty; or (3) by assuming positive direction and control in the face of a known, blatant and dangerous safety violation (Pelaez v Seide, 2 NY3d 186, 199-200 [2004], citing Garrett v Holiday Inns, 58 NY2d 253, 261-262 [1983]). Claimants bear the burden of establishing that a special duty exists, and that the State was required to exercise reasonable care toward claimants (Peleaz v Side, 2 NY3d at 198-199). If a claim fails to allege a special duty running from the State to claimants, the claim fails to satisfy the requirements of Court of Claims Act 11 (b) (Sheroka v State of New York, UID No. 2016-041-100 [Ct Cl, Milano, J., Dec. 20, 2016]).

Here, the Court finds that the notice of intention fails to allege a special duty owed to claimants by defendant. The notice of intention states that defendant contacted claimants' customers and urged the customers to change providers while "suggest[ing]" to the customers that claimants engaged in Medicaid fraud (Notice of Intention 7-9). However, the notice of intention does not contain the word "negligent" and does not reference a special duty owed to claimants by defendant. Although claimants now argue in their papers in opposition to the present motion that a special duty arises under 15 NYCRR 515.7 (g)--which outlines the appeal rights for a provider excluded from the Medicaid program--claimants failed to allege such a statutory duty in either the notice of intention or the claim. As it is claimants burden to show that a special duty existed, the failure to allege a special duty renders the claim jurisdictionally defective for its failure to comply with Court of Claims Act 11 (b) (Sheroka v State of New York, UID No. 2016-041-100 [Ct Cl, Milano, J., Dec. 20, 2016]).

CONCLUSION

Based upon the foregoing, the Court grants defendant's motion (M-91615) and dismisses claim number 125806 in its entirety.

August 13, 2018

Albany, New York

JUDITH A. HARD

Judge of the Court of Claims

Papers Considered:

1. Notice of Motion to Dismiss and Summary Judgment, dated January 2, 2018; and Affirmation in Support of Motion to Dismiss and Summary Judgment, affirmed by Anthony Rotondi, AAG on January 2, 2018, with Exhibits A through H annexed thereto.

2. Affirmation of David M. Cost in Opposition to Defendants' Motion for Summary Judgment, affirmed by David M. Cost, Esq. on March 30, 2018, with Exhibits A through BB annexed thereto; and Claimants' Memorandum of Law in Opposition to Respondents' Motions for Summary Judgment, dated March 30, 2018.

4. Affidavit of Daniel J. Cutie, R.Ph, sworn to on March 26, 2018. with Exhibits A through B annexed thereto.

5. Affidavit of Ada Santiago, sworn to on June 7, 2017.

6. Affidavit of Karl G. Williams, sworn to on March 26, 2018, with Exhibits A through B annexed thereto.

7. Affidavit of Leonard Saltzman, sworn to on June 13, 2017.

8. Affidavit of Marilyn Goulty, sworn to on March 27, 2018, with Exhibits A through C annexed thereto.

9. Reply Affirmation in Further Support of Motion to Dismiss, affirmed by Anthony Rotondi, AAG on April 16, 2018.


1. Defendant argues that claimants are barred by the doctrines of collateral estoppel and res judicata from asserting equal protection and due process claims in this Court because those claims were already decided in Federal court. In response, claimants state that they are not seeking to relitigate the equal protection and due process claims that were dismissed in Federal court (Cost Aff. 57). The Court has reviewed the verified claim, and finds that claimants do not assert any constitutional claims sounding in due process or equal protection. Specifically, the verified claim states that the nature of the claim is for "breach of contract, negligence, defamatory conduct as well as tortious interference with contract and business relationships . . ." (Verified Claim 13). Accordingly, the Court need not reach the merits of defendant's collateral estoppel/res judicata argument.