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John E. Andrus Memorial, Inc. v. Daines

March 3, 2009


The opinion of the court was delivered by: Cathy Seibel, J.


Before the Court are the Objections of Defendant Richard F. Daines, Commissioner of the New York State Department of Health ("DOH"), to a Report and Recommendation of the Honorable Mark D. Fox, United States Magistrate Judge, issued on July 17, 2008 (the "R&R"). (Doc. 51.) Judge Fox recommended that the Motion for Preliminary Injunction (Doc. 25) filed by Plaintiff John E. Andrus Memorial, Inc., a nursing home in the Village of Hastings-on-Hudson, New York, doing business as Andrus-on-Hudson (the "Andrus"), be granted, thereby prohibiting Defendant from implementing the recommendation of the New York State Commission on Healthcare Facilities in the 21st Century (the "Commission"), which would require the Andrus to cease operating as a nursing home or to operate as an assisted living facility.

A preliminary injunction hearing was held before Judge Fox on June 25 and 26, 2008. He heard testimony from six witnesses: (1) Dr. Jeffrey Nichols, a geriatrician and Plaintiff's medical expert on dementia and transfer trauma among nursing home residents; (2) Sharon Carlo, a consultant to nursing homes in New York State and former DOH employee and nursing home administrator; (3) Mark Kissinger, a member of the Commission; (4) Neil Benjamin, New York State DOH Director of the Division of Health Facility Planning; (5) Betsy Biddle, Executive Director of the Andrus; and (6) David Sandman, the Executive Director of the Commission. At the hearing, portions of the depositions of Mr. Kissinger, Mr. Benjamin and Mr. Sandman were admitted into evidence pursuant to Rule 32 of the Federal Rules of Civil Procedure. (Hr'g Tr. 282:4-20, June 25-26, 2008.) Defendants submitted additional portions of these depositions to the Court on June 30, 2008. Judge Fox issued the R&R on July 17, 2008, recommending that Plaintiff's Motion for a Preliminary Injunction be granted. Defendant filed timely Objections to the R&R on July 29, 2008 ("Def's Objs.") (Doc. 54), and Plaintiff filed a Response to Defendant's Objections on August 12, 2008 ("Pl.'s Resp.") (Doc. 56).

After carefully reviewing Defendant's Objections, the Response thereto, the affidavits submitted by the parties, the transcripts of the preliminary injunction hearing, the deposition excerpts, and the memoranda of law filed by the parties both before and after the preliminary injunction hearing,*fn1 the Court adopts the R&R to the extent that is consistent with this Order and grants Plaintiff's Motion for a Preliminary Injunction. Familiarity with the procedural history and facts as set forth in detail in the R&R is presumed. To the extent that Defendant objects to Judge Fox's findings of fact and conclusions of law stated therein, this Opinion sets forth the Court's independent findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.


In April 2005, the New York State Legislature passed, and then-Governor George E. Pataki signed, legislation creating the Commission. See Part K of Chapter 58 of the Laws of 2003, as added by Section 31 of Part E of Chapter 63 of the Laws of 2005, 2005 N.Y. Sess. Laws Ch.63, § 31 (McKinney) (the "Enabling Legislation").*fn2 The Commission was created for the purpose of conducting:

[A] rational, independent review of health care capacity and resources in the state to ensure that the regional and local supply of general hospital and nursing home facilities is best configured to appropriately respond to community needs for quality, affordable and accessible care, with meaningful efficiencies in delivery and financing that promote infrastructure stability.

Enabling Legislation § 1. The Commission itself consisted of eighteen statewide members and regional members from six regions in New York State, id. § 7(a), one of which was the Hudson Valley region in which the Andrus is located, id. § (7)(b)(iii).

The Enabling Legislation required the Commission to "develop recommendations for reconfiguring the state's general hospital and nursing home bed supply to align bed supply to regional needs," and specifically to "make recommendations relating to facilities to be closed and facilities to be resized, consolidated, converted or restructured" and to transmit such recommendations to the Governor and Legislature by December 1, 2006. Id. § 8(a)-(b), (e). In making these recommendations, the Commission was required to consider a detailed set of factors, id. § (5)(a), and to analyze these factors in light of information provided to the Commission by the DOH, id. § 5(b). In order to further the Commission's information-gathering capabilities and access to regional input, the Enabling Legislation also established regional advisory committees ("RACs") for each of the six regions. Id. § (7)(c). The RACs were charged with the task of "develop[ing] recommendations for reconfiguring its region's general hospital and nursing home bed supply to align bed supply with regional and local needs." Id. § (7)(d). In carrying out this task, the Enabling Legislation provided that the RACs "shall foster discussions among, and conduct formal public hearings with requisite public notice to solicit input from, local stakeholder interests, including but not limited to community-based organizations, health care providers, labor unions, payers, businesses and consumers." Id. The Commission was directed to "collaborate with the [RACs] insofar as practicable to foster discussions among, and conduct formal public hearings with requisite public notice to solicit input from, statewide and regional stakeholder interests, including but not limited to community-based organizations, health care providers, labor unions, payers, businesses and consumers." Id. § 8(a).

The Commission and RACs conducted nineteen public hearings statewide, including three in the Hudson Valley Region on February 15, 2006, February 22, 2006, and March 1, 2006, respectively (the "Public Hearings"). (Hr'g Tr. 293:1-294:17.) Prior to each of these public hearings, the Hudson Valley RAC circulated a document entitled "Opportunity to Comment -Notice of Public Hearings" to various interested stakeholders, including healthcare facilities within the Hudson Valley Region (the "Public Notices"). (Hr'g Tr. 294:7-296:14; Def.'s Exs. F, G.) The Public Notices provided general information regarding the Commission's purpose and structure and invited oral testimony regarding (1) "[t]he misalignment between the supply of services and the needs of the community"; (2) "[s]pecific local changes regarding regional nursing home and hospital bed supply in order to better align the supply of services with local needs"; (3) "[n]eccessary investments to carry out such alignments"; and (4) "[t]imeline in which the aforementioned steps should be taken." (Def.'s Exs. F, G.) The Public Notices provided a list of speakers who had registered in advance, but they did not identify the specific subject matter of the speakers' testimony or whether any particular facilities would be discussed. (Hr'g Tr. 302:3-9.) As was the general practice across all regions (Hr'g Tr. 319:1-5), the Hudson Valley RAC explicitly provided in the Public Notices that only one representative per organization would be permitted to testify for a maximum of ten minutes at the Public Hearings. (Def.'s Exs. F, G.)

Betsy Biddle, the Executive Director of the Andrus, did not recall ever receiving the Public Notices (Hr'g Tr. 256:11-258:22), and no specific notice was given to the Andrus in advance of the Public Hearings that the Andrus would be discussed or that the Andrus was being considered for closure. (Id. 201:2-8, 209:19-210:6.) Such notice may not have been possible because neither the Hudson Valley RAC nor the Commission was necessarily aware, at the time of the Public Hearings, of which facilities were preliminarily targeted for closure. (Hr'g Tr. 303:18-304:1.) The Andrus did not participate in any of the Public Hearings. (Sandman Aff. ¶ 18.)

Ms. Biddle had her first interaction with the Commission in May 2006, when she received a phone call from Mark Ustin, the Deputy Director and General Counsel of the Commission. (Hr'g Tr. 201:2-11, 255:6-8; Sandman Dep. 85:8.) During their telephone conversation, Mr. Ustin asked Ms. Biddle "about how Andrus was doing," and Ms. Biddle informed him that the resident census at the Andrus "had gone from 72 to . . . 160 something people" and that the facility "had been financially viable for the first time [in 2005] and [was] continuing to have good results [in 2006]." (Hr'g Tr. 201:12-20.) Mr. Ustin then asked Ms. Biddle "to come to the [Hudson Valley] RAC . . . and tell [her] good story." (Id. 201:21-22, 203:11-13.) Mr. Ustin told Ms. Biddle that she had "such a good story to tell about [the Andrus's] occupancy and about [its] financial situation, that [she] should come and tell the [Hudson Valley] RAC about what's going on." (Id. 249:17-24.)

Members of the Hudson Valley RAC and Commission staff met with Ms. Biddle on June 19, 2006. (Id. 202:1-3.) None of the staff of the Hudson Valley RAC or the Commission participating in the meeting told the Andrus that it was being considered for closure. (Id. 202:24-203:10.) Instead, Ms. Biddle and the members of the Hudson Valley RAC discussed the "whole history" of the Andrus, including (1) a failed joint venture with Beth Abraham Health Services ("Beth Abraham") -- dashed at the "eleventh hour" by the Village of Hastings-onHudson's denial of zoning rights in November 2001 -- which, with the construction of additional facilities on Andrus's campus, would have converted the 247 nursing home beds the Andrus was then certified to operate into a continuing care retirement community with 72 nursing home beds and 201 beds total (Id. 193:13-195:10, 203:2-6); (2) the Andrus's positive resident census and financial trends since resuming admissions that were temporarily suspended in 2002 in anticipation of the Beth Abraham joint venture (Id. 180:20-22, 203:2-6; Biddle Aff. ¶ 32-33.); and (3) the Andrus's sale of 50 licensed beds to Beth Abraham by a sales agreement dated July 3, 2002 (the "Beth Abraham Sales Agreement") (Pl.'s Ex. 4) (Hr'g Tr. 180:20-22, 203:2-6; Biddle Aff. ¶ 32-33).

At the request of the Hudson Valley RAC and Commission staff attending the June 2006 meeting, Ms. Biddle sent the Meeting Chairperson, Robert W. Amler, M.D, a letter dated June 23, 2006 (Pl.'s Ex. 5), enclosing the Beth Abraham Sales Agreement and the Andrus's certified financial statements for 2005 (Pl's Ex. 6). (Hr'g Tr. 203:16-24.) Ms. Biddle believed that the Hudson Valley RAC asked for these materials in order to "verify" her "good story." (Id. 265:13-266:22.) This June 2006 meeting and the follow-up information sent by Ms. Biddle were the only substantive communications between the Commission or Hudson Valley RAC and representatives of the Andrus. (Id. 209:24-210:6.)

On November 15, 2006, the Hudson Valley RAC issued its Final Report to the Commission (the "RAC Report") (Biddle Aff. Ex. A.), which contained specific recommendations for facilities to be closed, resized, consolidated, converted or restructured; the dates by which such actions should occur; information regarding investments necessary to implement its recommendations; and justifications for the recommendations. In listing the steps taken in the review process prior to issuing the RAC Report, the Hudson Valley RAC noted that it "[h]eld individual meetings with providers from facilities of interest" and "provider representatives who wanted to discuss their facilities in more detail than their public testimony allowed." (RAC Report 3.) The RAC Report identified the Andrus as a facility of interest and recommended that the "facility be considered for conversion to ALP beds."*fn3 (RAC Report 10.) The Hudson Valley RAC based this recommendation on the Andrus's purported "low occupancy and case mix index (in 2003, 39.2% and .90, respectively)" and resulting "obvious financial problems." (RAC Report 10.) Referencing the June 2006 meeting with Ms. Biddle, the RAC Report noted that "the [Hudson Valley RAC] is less concerned about financial stability (since there is a large foundation underwriting [the Andrus's] capital expenditures) than about the low acuity of [the Andrus's] patients." (RAC Report 10.) The RAC Report was provided only to the Commission and was not public or otherwise available to the Andrus. (Biddle Aff. ¶ 43.)

On November 28, 2006, the Commission transmitted its final recommendations, entitled A Plan to Stabilize and Strengthen New York's Health Care System (the "Final Report") to the Governor and Legislature. (Def.'s Ex. A.)*fn4 In the Final Report, the Commission recommended that the Andrus downsize all "247 residential health care facility beds" that it was certified to operate and replace them with 140 assisted living program beds. (Final Report 122.) The Commission based its decision on the following findings: (1) that 176 of the 247 beds at the Andrus were occupied, amounting to "71% of its certified beds, or 89% of 'available beds,' pending a 50-bed sale to another provider"; (2) that although the Andrus "claims that it is now operating in the black" it "had been operating at a significant loss until 2006"; (3) that the Andrus "has one of the lowest case mix indexes in the State (0.91)" and that "about half have low-acuity conditions," which "could be better served in an [assisted living program], if that were available"; (4) that "the physical plant is old and in need of capital improvements"; (5) that the conversion of the Andrus to an [assisted living program] facility "would be economical"; and (6) that the Andrus "has a history of a high number of deficiencies (26 in its 2005 survey), many of which are attributable to the building's deteriorating condition." (Id. 123.) Given these findings, the Commission concluded that the closure of the Andrus presented "opportunities to shift resources from institutions to other settings in Westchester County" where there are both "too many nursing home beds" and "an unmet need for approximately 1,100 non-institutional slots." (Id.) The Governor transmitted the Final Report and his approval thereof to the Legislature on November 30, 2006, and the New York State Legislature did not pass a concurrent resolution rejecting the Commission's recommendations prior to the end of 2006, thereby giving the recommendations the force of law as of January 1, 2007. Enabling Legislation § 9(b).

Perceiving the facility description in the Final Report to be inaccurate, representatives of the Andrus met with the DOH in December 2006, and expressed their distress with the Commission's final recommendation. (Hr'g Tr. 216:20-23, 217:3-7.) The DOH instructed that the Andrus "wait a while," as "there [would] be further information coming out." (Id. 216:21-25.) But on January 31, 2007, the DOH sent a letter to the Andrus including an implementation outline for the Commission's closure recommendation. (Id. 216:2-9; Benjamin Aff. ¶ 4, Exh. B.) The Andrus requested another meeting with the DOH, which took place in February 2007. (Id. 217:1-2.) At that meeting, the DOH requested certain information from the Andrus, presumably to assess the validity of the Andrus's claims that the Final Report contained certain material errors. (Id. 217:8-11.) Accordingly, the Andrus engaged in "fact-finding" and eventually provided the DOH with additional information, including a letter dated February 28, 2008 (Pl.'s Ex. 8), explaining the risk of "transfer trauma" to the residents of the Andrus, and an email sent on April 8, 2008 (Pl.'s Ex. 7), attaching a spreadsheet containing the following information about every resident in the Andrus: (1) age; (2) length of time at the Andrus; (3) residence before moving to the Andrus; (4) proximity of family members to the facility; and (5) and whether the resident had been diagnosed as suffering from dementia. (Hr'g Tr. 219:13-220:18.) In total, the Andrus had five meetings with DOH officials concerning the Final Report and provided the DOH with all of the information and documents it requested. (Id. 217:25-218:7.)

The DOH never followed up with the Andrus about any of the information it provided following the release of the Final Report. (Id.217:16-19.) In April 2008, the DOH sought permission to issue the Andrus -- which currently operates under the authority of an open-ended operating certificate (id. 191:8-21.) -- an amended operating certificate with a fixed expiration date. (Id. 228:13-16, 271:12-20; Def.'s PH Mem. 14.)

The instant lawsuit was filed on April 30, 2007, and Defendant moved for Summary Judgment on July 18, 2007 (Doc. 12). Defendant's Summary Judgment Motion was held in abeyance by the late United Stated District Judge Charles L. Brieant (to whom this action was previously assigned)*fn5 pending a decision by the New York Court of Appeals in a similar case, captioned St. Joseph Hospital of Cheektowaga v. Novello, No. 1247 SSD 60. On November 27, 2007, the New York Court of Appeals dismissed the appeal as of right in St. Joseph Hospital of Cheektowaga "sua sponte, upon the ground that no substantial constitutional question is directly involved," 9 N.Y.3d 988 (2007), and on February 12, 2008, the Court of Appeals denied a motion for leave to appeal, 10 N.Y.3d 702 (2008). Judge Brieant denied Defendant's Motion for Summary Judgment on March 10, 2008. John E. Andrus Mem'l, Inc. v. Daines, No. 07-CV-3432, 2008 U.S. Dist. LEXIS 18189, at *10 (S.D.N.Y. Mar. 10, 2008). Following the DOH's expression of its intention to go forward with the issuance of an amended operating certificate, Plaintiff sought a preliminary injunction preventing any steps to effectuate the closure of the Andrus.



A district court reviewing a magistrate judge's report and recommendation "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). Where a party submits timely objections to a report and recommendation, as Defendant has here, the district court reviews the parts of the report and recommendation to which the party objected under a de novo standard of review. Id.; Fed. R. Civ. P. 72(b)(3); see id.("The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.").

"[I]n providing for a 'de novo determination' [in Section § 636(b)(1)] rather than de novo hearing, Congress intended to permit whatever reliance a district judge, in the exercise of sound judicial discretion, chose to place on a magistrate's proposed findings and recommendations." United States v. Raddatz, 447 U.S. 667, 676 (1980). Accordingly, a district court's review of the record and the magistrate's recommendation on a motion for a preliminary injunction constitutes adequate de novo review under Section § 636(b)(1). Pan Am. World Airways, Inc. v. Int'l Bhd of Teamsters, 894 F.2d 36, 40, n.3 (2d Cir. 1990) (citing Raddatz, 447 U.S. at 676); see RxUSA Wholesale, Inc. v. Dep't of Health and Human Servs., 467 F. Supp. 2d 285, 287 (E.D.N.Y. 2006) ("Such de novo review does not entirely replace the Magistrate's efforts."); M&G Elecs. Sales Corp. v. Sony Kabushiki Kaisha, 250 F. Supp. 2d 91, 97-98 (E.D.N.Y. 2003) ("[A] court may in its sound discretion afford a degree of deference to the magistrate's report and recommendation." (citing Raddatz, 447 U.S. at 676)). In light of these principles, the Court makes a de novo determination with regard to the specific objections raised by Defendant.


For this Court to issue a preliminary injunction against "government action taken in the public interest pursuant to a statutory or regulatory scheme," the Plaintiff must show "(i) irreparable harm absent the injunction and (ii) a likelihood of success on the merits." Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d Cir. 2005) (internal quotation marks omitted); see Plaza Health Labs., Inc. v. Perales, 878 F.2d 577, 580 (2d Cir. 1989) ("the district court should not apply the less rigorous fair-ground-for-litigation standard" in such circumstances).


"Irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction." Rodriguez v. DeBuono, 175 F.3d 227, 233-34 (2d Cir. 1999) (internal quotation marks omitted). Accordingly, the Court must first determine whether Plaintiff has demonstrated that such injury is likely before addressing the other requirements for the issuance of an injunction. Id. at 234. In the R&R, Judge Fox concluded that the Andrus established irreparable harm because (1) family members and physicians would be reluctant to place new residents in the Andrus after being informed, as required by relevant state and federal regulations, that the Andrus's operating certificate was to expire; and (2) the closure of the Andrus ...

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