The opinion of the court was delivered by: TRAGER
This case concerns the care and treatment of about fifty profoundly disabled and medically fragile individuals whose rights under the federal Constitution have been gravely imperiled as the result of an unfortunate funding dispute between the City and the State of New York.
The present action has been brought by eighteen of these individuals and eight others who seek to intervene. Shafran-Torres v. Pataki, 95-CV-3803. Plaintiffs and intervenors are severely disabled individuals with multiple handicaps. By way of example, one is a twenty-six year old woman who has epilepsy and an IQ of about 70-72 as well as other disabilities. Tr. at 151. Another is a twenty-five year old, profoundly retarded, non-verbal woman. Pltf. Mot., Bavaro Aff. Seven of the eight proposed intervenors are profoundly autistic and pose potential danger, certainly, to themselves and, possibly, to others. Shafran-Torres, Compl. P 57. All of the plaintiffs were originally placed in out-of-state residential care as children by New York City school and social service agencies, with the approval of the State Education Department, because no adequate programs or placements were available in New York. Educ. L. § 4401 & see McKinney's Commentary to Educ. L. § 4402, note 102. They remained in those placements even after they reached twenty-one, when the State's obligations to them under federal law expired. Their expenses were then paid under a formula in which localities were reimbursed by the State for fifty percent of the costs of continued placement. They now range in age from twenty-three to thirty-four.
This dispute arose out of the City of New York's (the City) frustration with the State's failure to assume full funding of this service, the residential placement of severely disabled adults, that is ordinarily solely a State responsibility and that will be a State responsibility once the plaintiffs are placed appropriately in New York. This frustration plus budgetary pressure led the City to withdraw from the program under which it paid fifty percent of the costs of these individuals' care.
In addition to this litigation, two suits litigated in state court relate to this matter. In New York Council for Exceptional People v. Pataki, ("NYCEP"), No. 102684/95 (Sup. Ct. N.Y. County), the parties are essentially the same as in this litigation.
There plaintiffs sought a declaratory judgment forbidding the City from withdrawing from the program under which it provided partial funding. In City of New York v. Webb, No. 40313/86 (Sup. Ct. N.Y. County), the City sued the State to recover the costs it incurred due to the State's failure to provide residential placements for City-referred individuals. Although plaintiffs in the present action were not parties to Webb, they were among those referred and, presumably, the amount assessed against the State in that action included the City's costs for their care over the period covered by the suit. NYCEP Appellants' Record on Appeal, 5/17/95 Rosenbaum Affirm. P5 at 135.
A. Statutory History of Transitional Care Funding (TCF)
Transitional Care Funding for residential placement of disabled individuals who have "aged out" of educational placements was first included in the State budget in 1982, as a part of the Aid to Localities Budget. From April 1982 to July 1995, the State budget provided fifty percent reimbursement of local expenses for care of mentally and developmentally disabled adults who as children had been placed in residential schools and institutions by local school districts. The Legislative History for the TCF statute noted: "New York assumed continued responsibility for [the] care [of children in residential care who had become twenty-one years old] until alternative programs could be identified, through enactment of appropriation authority to reimburse local social services district payments for transitional care." 1994 N.Y. Laws Ch. 600, Legislative History: Assembly Mem., City Mot. Ex. D at 000011. There was, however, no corresponding authority for transitional care in substantive law until the Transitional Care Statute was enacted in 1994. Id. at 000010. Costs increased from "$ 350,000 [in 1982] to a projected $ 26 million in the 1993-94 State fiscal year." Id. at 000011.
In 1994, legislation was adopted increasing the State's share of transitional care costs to sixty percent, as of July 1, 1995, and establishing a timetable for the phase out of transitional care to eliminate intake to TCF in 1996 and provide for full state funding as of 1999. 1994 N.Y. Laws, Ch. 600. The Legislative History of the TCF Statute stated the justification for removing persons from out-of-state adult (non-child care) placements as: 1.) lack of "systemic procedures for monitoring the care and services provided by out-of-State facilities so as to protect the health and safety of these young adults;" 2.) reduced opportunities for maintaining family and community ties; and 3.) "out-of-state facilities may or may not have the authority or capacity to care for young adults properly." 1994 N.Y. Laws, Ch. 600, Legislative History: Assembly Mem., City Mot. Ex. D at 000012. The statute permitted discontinuation of transitional funding only after "an appropriate, available adult placement or adult services" was offered and, if not accepted, had been upheld as appropriate by an administrative hearing or the period in which to request administrative review had expired. Id. § 466-5(a).
In 1985, the City filed suit against the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD) for its "alleged failure . . . to plan for, develop and provide beds to mentally retarded and/or developmentally disabled persons referred by the [City]." City of New York v. Webb, No. 40313/86 (Sup. Ct. N.Y. County).
In 1991, Webb was settled under a court-ordered stipulation of the parties in which OMRDD undertook to place a minimum of 200 individuals annually from a list of 250 City priority placements, to provide written explanations of any failure to place within twenty-four months of referral, and to place all referrals within thirty months of referral. City Mot., Ex. E.
All plaintiffs in the present action for whom OMRDD is responsible were "priority referrals by the City to be placed under the Webb stipulation and who either have not been offered a placement by OMRDD or are challenging their offer of placement through the State's appeal procedure." NYCEP Appellants' Record on Appeal, 5/17/95 Rosenbaum Affirm. P5 at 135.
In May 1994, the City filed a contempt motion against the State for its failure to comply with the Webb stipulation and order. In October 1995, Judge Collazo, while declining to hold the State in contempt for reasons of policy, directed OMRDD to reimburse New York City's Child Welfare Administration (CWA) $ 8,500,000 and New York City Health & Hospitals Corporation (HHC) $ 572,500 for costs incurred through OMRDD's failure to place priority referrals within thirty months. N.Y.L.J. 10/27/95, p. 31, col. 2.
Notwithstanding the increase in the State's share of the costs from fifty to sixty percent, and its commitment to full funding by 1999, the City, in October 1994, notified the State that it would stop funding TCF after December 31, 1994. City Mem. at 6. On December 7, 1994, New York City's Human Resources Administration (HRA) wrote care-giving institutions and parents/guardians advising them of the City's withdrawal from the TCF program. The letter told the parents/guardians that: "CWA will assist [OMRDD] in facilitating the transfer of all young adults out of Transitional Funding. . . . Please be assured that New York City looks forward to working with you in planning for a smooth transition for your family member." Compl. P69 (quoting Kathryn Croft, Exec. Dep. Comm., NYC HRA, 12/7/94 Letter) (emphasis added). Despite this assurance, at the same time, Commissioner Croft also notified the care givers that the City's withdrawal from funding TCF would occur in only three and one-half weeks, as of December 31, 1994. On December 30, 1994, one day prior to the expiration of its initial cut-off date, the City agreed to provide funds for TCF ". . . until June 30, 1995 or until the City's budgetary allocation of $ 1.116 million ran out, whichever occurred first." City Mem. at 6. The City sent mailgrams to parents/guardians on December 30, 1994, notifying them of continued funding for a limited period. Croft Mem., dated 5/30/95.
On January 31, 1995, the City and OMRDD entered into a Memorandum of Understanding (MOU) in which the City agreed, as it had promised on December 30, 1994, to allocate up to $ 1.116 million to permit the program to continue until the sooner of funds exhaustion or June 30, 1995.
D. State Transition Process
On or about January 11, 1995, OMRDD wrote the parents/guardians, offering an alternate placement to each OMRDD beneficiary and informing them that the City had agreed to fund TCF for a limited period. It offered, in addition to details about a proposed placement, an opportunity for administrative review of the recommended alternative placement. Am. Compl. P72-73.
The Office of Mental Health (OMH) entered the placement process, however, only on February 27, 1995, when it sent a letter to parents/guardians informing them that the City would provide continued payments for a limited period. This letter
also stated that "the state legislature enacted a law (Chapter 600, Laws of 1994) which requires the Transitional Funding Program be phased-out entirely."
Pltf. Ex. 7G.
The OMH letter outlined a four step process for placement in OMH operated or licensed programs:
1. OMH staff or its case management agency would interview and evaluate each individual prior to identification of an appropriate residential program.
2. The client and client advocate were to visit the proposed program, with refusal to visit constituting rejection of placement.
3. Following the visit(s), OMH was to send a "Placement Determination Letter" specifying the placement determined to be appropriate, including a description of the program, services, program contact, and proposed transfer date. This letter was to trigger administrative review procedures.
4. Upon expiration of thirty days without a request for an administrative review or upon affirmation of the placement as the result of administrative review, TCF funding was to end upon the transfer date.
In conformance with their announced procedures, the City and State arranged transition for many OMRDD TCF clients prior to the cessation of funding by the City. For approximately fifty-eight of the 108 OMRDD clients this resulted in transfer from TCF to in-state placements prior to June 1, 1995.
It is not clear how many, if any, of the unknown number of OMH TCF clients have been transferred. The Amended Complaint alleges that: "[from February 27 through May 31, 1995] OMH showed proposed facilities but did not proceed to nomination or hearing." Am. Compl. P78 (c).
E. City's Termination of Funding on June 1, 1995
On May 30, 1995, New York City notified the TCF parents/guardians that the TCF funding would cease, effective two days later, on June 1, 1995. Pltf. Mot. Ex. 5. Judge Freedman's order denying plaintiffs' request for a preliminary injunction was issued on June 13, 1995. The Appellate Division, First Department, declined to consider an expedited appeal on June 30, 1995.
F. Plaintiffs' State Court Challenge to the City's and State's Right to Discontinue TCF under State Law
Plaintiffs in the present proceeding filed an action in state court in early 1995, apparently originally as an Article 78 appeal from adverse results in the administrative hearings held by OMRDD following its placement proposals. NYCEP, No. 102684/95 (Sup. Ct. N.Y. County 6/13/95). At the end of February, these litigants requested a declaratory judgment that, under the TCF statute, the City and State could not withdraw from funding TCF.
This arm of the litigation was decided against the plaintiffs by Justice Helen Freedman on June 13, 1995. Id. In October, her decision was affirmed by the Appellate Division, First Department, 1995 WL 592885.
G. The State's Notices to Plaintiffs Following Announcement of the City's Planned Cessation of TCF Funding
The City and State provided what can be fairly described as abrupt and ambiguous notifications to parents/guardians concerning the City's planned cessation of funding. At the end of 1994, the City's letter announcing the end of TCF funding was provided on short notice
and was followed by an eleventh hour notice that funds were in fact still available. The period for which the City extended funding was defined in an indeterminate manner -- the exhaustion of a sum of money or June 30, 1995, whichever was earlier. It thus provided little warning that funds would actually run out on May 31. This history of the City-State dispute over funding, followed by temporary resolutions, seems to have lulled not only care givers and parents, but also OMRDD and OMH, into the belief that the City's intention to end TCF funding was an idle threat, comparable to budget delays from 1982-1993.
As noted, OMH's first notification to parents/guardians of transition plans occurred four months after the City informed the State of its intended withdrawal from TCF. OMH, moreover, provided parents/guardians with a misleading description of the TCF statute.
Pltf. Mot. Ex. 7G. OMH then proceeded very slowly to identify potential placements and indicated that its consultants, not plaintiffs, were to arrange visits. The testimony of the parents/guardians described OMH's total ...