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November 18, 1991


The opinion of the court was delivered by: Robert J. Ward, District Judge.


Plaintiffs Louis O. Acevedo, III and Karen Nunnery have moved, pursuant to Rule 56, Fed.R.Civ.P., for summary judgment in the above-captioned action. Defendant Richard C. Surles, Ph.D., has cross-moved for summary judgment. For the reasons that follow, plaintiffs' motion is granted and defendant's motion is denied.


The instant cross-motions for summary judgment are made upon a set of stipulated facts. Those facts which are relevant to the legal questions involved are as follows:

Plaintiff Acevedo

Acevedo is an indigent individual who resides at Middletown Psychiatric Center, a psychiatric facility operated by the New York State Office of Mental Health (OMH). On January 3, 1986, Acevedo suffered a broken leg during an assault by another patient on the ward where both patients lived. In March, 1987, as a result of this incident, Acevedo filed a negligence claim against the State of New York ("the State") in the New York State Court of Claims. In December, 1987, the State served upon Acevedo a verified claim for $265,647.66, as a lien against any recovery which might be obtained by Acevedo in the state court proceeding. This amount represented the full cost of charges assessed against Acevedo for his hospitalization and treatment. New York State Assistant Attorney General Kenneth Keutman told Acevedo's counsel that "he should be aware that the verified claim would serve as a lien against any recovery before he spent a great deal of time in processing the claim." Joint Stipulation of Facts at ¶ 4.

In the Court of Claims, Acevedo moved to challenge the validity of the claim assessed against him by the State. The State opposed this motion, arguing that state law imposed a duty upon Acevedo to pay for services provided to him and the Court of Claims lacked jurisdiction to determine the validity of the charges. The Court of Claims denied Acevedo's motion, whereupon Acevedo's attorney recommended to Acevedo that he withdraw his lawsuit, because of the unlikelihood of obtaining any recovery. Acevedo subsequently withdrew his negligence lawsuit against New York. Since then, New York has not attempted to collect the charges-in-full assessed against Acevedo.

Plaintiff Nunnery

From September, 1987 until May, 1988, Nunnery resided at the Buffalo Psychiatric Center, a psychiatric facility operated by OMH. In December, 1988, Nunnery filed a lawsuit in the New York State Court of Claims seeking to recover $2,796.00, which she alleged OMH had wrongfully appropriated. In February, 1989, the State served upon Nunnery a verified claim for $128,835.86. This amount represented charges for care and treatment provided to Nunnery during a number of previous hospitalizations.

Prior to the filing of her lawsuit, the State did not bill Nunnery for the full cost of her hospitalization, because she did not have the ability to pay such costs. If Nunnery had had the ability to pay, New York would have attempted to collect for her costs. OMH told Nunnery that if she withdrew her action in the Court of Claims, then OMH would not attempt to collect the $128,835.86. OMH did not tell her that it would collect only the amount of any recovery obtained by her against the State.

The serving of a verified claim against Nunnery resulted in her facing a debt far greater than any potential recovery and, for this reason, "she considered withdrawing her lawsuit." Joint Stipulation of Facts at ¶ 25.

Overview of the OMH Billing Procedure

While OMH is authorized to assess charges for care and treatment provided to patients,*fn1 the agency will, with the exceptions noted herein, only assess charges against those patients that OMH believes have the ability to pay such charges or the potential ability to pay. Potential ability means that a patient has known resources, but the extent of the resources are unknown (e.g., when a patient owns a piece of real property but the value of the property is unknown).

In order to determine whether a patient has the ability to pay OMH charges, the agency conducts a financial investigation of each patient upon his or her admission to an OMH facility. Once this investigation is complete, OMH assesses charges commensurate with that patient's ability to pay.*fn2

If an OMH patient is entitled to an inheritance, OMH may assess full charges before the patient receives the inheritance.*fn3 The reason for assessing full charges is to "notify the administrator of the estate that the State has an interest in the proceeding as to ensure that the patient receives his share of the estate and no one attempts to divert funds that belong to the patient." Joint Stipulation of Facts at ¶ 37. Prior to the probate of the estate, other than drafting a verified claim, which may or may not be served on the patient, OMH does not provide a patient with notice that it intends to collect a portion of the inheritance.

In addition, if OMH learns that a patient or fiduciary acting on the patient's behalf has received funds that can satisfy charges, a bill may be generated commensurate with that patient's ability to pay.

OMH's Practice Concerning Lawsuits Against the State

Shortly after a patient files a claim against the State in the New York Court of Claims, OMH will serve a verified claim against the patient in which the patient is assessed full charges for the hospitalization and treatment received in OMH facilities. OMH will not attempt to collect an amount greater than any recovery against the State, unless it learns that the patient has additional assets. However OMH does not tell the patient or patient's attorney that it will collect charges only in the amount of the recovery against the State.

The reason for the OMH policy is, "[b]y notifying the patient and his counsel of the State's ability to set-off, such action saves the time and resources of State staff in defending a lawsuit which would serve no good purpose since the State has the ability to defeat almost any recovery. . . . In addition, the set-off policy . . . avoids the necessity of pursuing claims against parties whom the State Comptroller has already paid and such action was patterned after the practice of general hospitals in personal injury actions." Joint Stipulation of Facts at ¶¶ 51, 53.

OMH exempts from its offset, and will pay out on the patient's behalf, allowable costs (including witness fees), attorney's fees*fn4 and "an amount equal to the maximum Medicaid or SSI reserve as such an amount would be exempt from [OMH] charges under normal circumstances." Joint Stipulation of Facts at Appendix.

A patient cannot challenge a verified claim by OMH in the State Court of Claims because the State does not assert the charges as a counterclaim and thus the Court of Claims lacks jurisdiction to rule on the validity of the set-off. However a patient could challenge the verified claim in New York State Supreme Court by means of an action for declaratory or injunctive relief against the New York State Comptroller. Furthermore, a patient could also challenge a verified claim pursuant to Article 78, New York State Civil Practice Law and Rules. In either case, the burden of proof is on the patient to establish that the charges were incorrect. The State does not provide the patient with notice of the opportunity to challenge the verified claim.

The Instant Action

Plaintiffs have filed a motion for summary judgement, asserting that: (1) the State's practice of assessing full charges against plaintiffs in response to their decision to file lawsuits against the State violates the plaintiffs' First Amendment rights of access to the courts and to petition for redress of grievances, as well as 42 U.S.C. § 1983; (2) the State violates the equal protection clause of the Fourteenth Amendment, as well as 42 U.S.C. § 1983, because OMH selectively assesses charges against plaintiffs in response to plaintiffs exercising their First Amendment rights to sue OMH; and (3) the ability of the State to set-off against any judgment obtained by plaintiffs the full care and treatment charges violates plaintiffs' right to due process of law under the Fourteenth Amendment, as well as 42 U.S.C. § 1983.

Defendant has filed a cross-motion for summary judgment, claiming that: (1) plaintiffs' rights have not been violated by the State's action of billing them in response to their filing of lawsuits against the State; and (2) plaintiffs' rights have not been violated by the State's ability to set-off its charges against any judgments obtained by plaintiffs. Defendant seeks dismissal of the complaint.


Plaintiffs' complaint challenges two logically distinct OMH policies: (1) when a patient or ex-patient sues the State, OMH files a verified claim against that individual which is based upon the full charges for hospitalization and treatment of the patient or ex-patient, rather than the patient's or ex-patient's ability or potential ability to pay and (2) the State uses a set-off by the State Comptroller, rather than a pre-deprivation hearing, as the means for collecting any verified claim against patients or ex-patients who sue the State. The complaint alleges that the first OMH policy violates the First Amendment and the equal protection clause of the Fourteenth ...

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