United States District Court, Eastern District of New York
October 10, 1990
BOSTON DRUGS, INC., PLAINTIFF,
CESAR A. PERALES, COMMISSIONER OF THE DEPARTMENT OF SOCIAL SERVICES OF THE STATE OF NEW YORK, DEFENDANT. TRC DRUGS, INC., PLAINTIFF, V. CESAR A. PERALES, COMMISSIONER OF THE DEPARTMENT OF SOCIAL SERVICES OF THE STATE OF NEW YORK, DEFENDANT. RIZCO PHARMACY, INC., PLAINTIFF, V. CESAR A. PERALES, COMMISSIONER OF THE DEPARTMENT OF SOCIAL SERVICES OF THE STATE OF NEW YORK, DEFENDANT.
The opinion of the court was delivered by: Glasser, District Judge:
Plaintiffs, pharmacies located in the Southern District of
New York, bring these actions pursuant to the equal protection
and due process clauses of the United States Constitution, and
Article I, § 11 of the New York State Constitution, which
prohibits the denial of equal protection of the laws of the
State. Preliminarily, plaintiffs seek an order directing
defendant to show cause why this Court should not enjoin
defendant from terminating plaintiffs' participation in the
The only issue now before the Court, however, is whether
venue in this District is proper, pursuant to 28 U.S.C. § 1391(b).
More specifically, the question presented is whether
the defendant's office in Queens, New York, which is located
within the Eastern District, may be deemed an "official
residence" of defendant Perales for the purpose of establishing
venue here. For the reasons set forth below, the Queens office
is found to be sufficient and venue is found to be proper.
The specific venue provision implicated in this proceeding is
28 U.S.C. § 1391(b), which provides:
A civil action wherein jurisdiction is not founded
solely on diversity of citizenship may be brought
only in the judicial district where all defendants
reside, or in which the claim arose, except as
otherwise provided by law.
It is settled law that under § 1391(b) the "residence" of
public officers means the "official" and not the actual
residence. Canaday v. Koch, 598 F. Supp. 1139, 1143 (E.D.N Y
1984). It is also well established that a state official, as
distinguished from a federal official, may have more than one
residence for the purpose of establishing venue. Id.; Cheeseman
v. Carey, 485 F. Supp. 203, 207 (S.D.N.Y. 1980).
To determine whether a state defendant maintains an official
residence in a particular district, a court should consider
(1) the defendant's presence in the district in
which the plaintiff has sued; (2) the extent of
defendant's official activities in the district;
and (3) the relationship of the defendant's
activities within the district to the cause of
Cheeseman v. Carey, 485 F. Supp. 203, 207 (S.D.N.Y. 1980).
Pursuant to the three-pronged inquiry, the court in Cheeseman
held that venue was not proper under § 1391(b). In that case,
two defendants, the State Office of Employee Relations and its
Director, did not have their own office in the Southern
District of New York, but claimed that they had an official
residence there by virtue of an Executive Branch office located
in the district. Id. at 208. Another defendant, the State
Comptroller, alleged that venue was proper because it
maintained an office in the district. Id. However, the court
found that venue was not proper because the activities pursued
in the Southern District by both the Executive Branch and the
Comptroller were not significantly related to the facts
underlying the cause of action. Id.
In Canaday v. Koch, 598 F. Supp. 1139 (E.D.N.Y. 1984), this
Court held that the Queens office of Cesar Perales,
Commissioner of the New York State Department of Social
Services and a named defendant, could not be considered an
official residence for the purpose of establishing venue. 598
F. Supp. at 1145. There, Perales was sued based on his agency's
denial of emergency shelter to homeless families. This Court
held that Perales' office had, at best, only a supervisory role
over the local agencies responsible for making decisions
concerning the allocation of emergency housing. Id. The
defendants did not make any of the relevant decisions within
the Eastern District. Id. Consequently, venue here was found to
be improper. Id. Cf. South Ogden CVS Store, Inc. v. Ambach,
493 F. Supp. 374, 378 (S.D.N.Y. 1980) (venue proper because
defendants maintained offices in the district and failed to
show that "they do not conduct at least a significant part of
their pharmacy-related business" there).
In the instant cases, unlike the situation in
Canaday, Perales' Queens office apparently plays an active role
in the relevant decision-making processes. The office houses
hundreds of auditors who investigate and determine pharmacies'
compliance with Medicaid regulations. The Queens office's
findings serve as a basis for pharmacies' ultimate terminations
from participating in the Medicaid program. Moreover, the
terminations in the present cases were based on investigations
conducted by the Queens office.
Because Perales maintains a significant official presence in
this district, and because his office's activities are highly
related to the present actions, venue is proper in these cases.
See also Florida Nursing Home Ass'n v. Page, 616 F.2d 1355 (5th
Cir.) (venue proper where the state maintained a large office
and from which the Medicaid payments sought by plaintiff were
due), cert. denied, 449 U.S. 872, 101 S.Ct. 211, 66 L.Ed.2d 92
(1980), rev'd on other grounds sub nom. Florida Dept. of Health
and Rehabilitative Services v. Florida Nursing Home Ass'n,
450 U.S. 147, 101 S.Ct. 1032, 67 L.Ed.2d 132 (1981). Defendant is
hereby ordered to show cause why it should not be enjoined from
terminating plaintiffs' Medicaid participation. Arguments shall
be made before this Court in Courtroom 5 of the United States
Courthouse located at 225 Cadman Plaza East, Brooklyn, New York
on October 26, 1990 at 9:30 a.m. Defendant must file its
responsive papers on or before October 19, 1990.
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