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Tz Manor, LLC, Pondview Corp., and Parkfield Properties (As Assignee v. Richard F. Daines

September 27, 2011


The opinion of the court was delivered by: Kenneth M. Karas, District Judge:


Plaintiffs TZ Manor, LLC ("TZ Manor"), Pondview Corp. ("Pondview"), and Parkfield Properties ("Parkfield") (collectively "Plaintiffs") have filed an amended complaint in this action after this Court dismissed their initial complaint over two years ago. See TZ Manor, LLC v. Daines, No. 08-CV-3293, 2009 WL 2242436 (S.D.N.Y. July 28, 2009) ("TZ Manor I"). Plaintiffs again allege that officials of the New York State Department of Health (collectively the "State Defendants" or "DOH") engaged in various acts relating to the operation of an Adult Home in Nyack, New York, located on property owned by Pondview and Parkfield. These acts, taken together, allegedly constituted a deprivation of Plaintiffs' property without just compensation and without due process of law, in violation of the Fifth Amendment's Takings Clause and the Fourteenth Amendment's Due Process Clause. Plaintiffs' Amended Complaint also includes a claim under 42 U.S.C. § 1983 for violation of the Equal Protection Clause and several state common law claims. The State Defendants and Defendant Long Hill Allliance Co., Inc. ("Long Hill") have separately moved to dismiss Plaintiffs' Amended Complaint. For the reasons stated herein, both motions are granted with respect to the federal claims, supplemental jurisdiction over the state law claims is declined, and the Amended Complaint is dismissed in its entirety.

I. Background

A. Facts The factual allegations in the Amended Complaint (Dkt. No. 45) are substantially the same as those in Plaintiffs' initial Complaint (Dkt. No. 1), which are discussed in TZ Manor I. 2009 WL 2242436, at *1-3. Familiarity with that opinion is assumed. The following are the essential facts as alleged in the Amended Complaint, which the Court accepts as true for purposes of these Motions.

In October 2002, Pondview and Exchange Authority LLP acquired 51 Mountainview Ave., Nyack, New York ("the Property") as tenants-in-common via a foreclosure sale by the United States Department of Housing and Urban Development ("HUD"). See Pondview Corp. v. Russand Inc., No. 0822/03, slip op. at 2-5 (N.Y. Sup. Ct. Mar. 24, 2004) ("Mar. 24, 2004 Pondview Decision & Order") (describing history of the Property's prior ownership and Plaintiffs' acquisition).*fn1 (Am. Compl. ¶¶ 23-24, 28.) At some point thereafter, Exchange Authority LLP assigned its rights to Parkfield. (Id. ¶¶ 26-27.) The Tappan Zee Manor, a 100-bed Adult Home (the "Adult Home"), sits on the Property, and was, at the time of the Property's acquisition, operated by Andrew Blatt ("Blatt"). Blatt's predecessor in interest Eleanor Blatt had held a series of leases on the Property beginning in 1996 and was issued a license by the State of New York Department of Health ("DOH") to operate the Adult Home in June 1998. (Id. ¶¶ 24, 32, 37-39, 41, 43, 45-46.) DOH had issued Blatt a temporary operating license on or about June 25, 2002. (Id. ¶ 47.)

TZ Manor applied for a temporary operating license for the Adult Home from DOH on October 4, 2002. (Id. ¶ 30.) DOH denied the application on February 10, 2003, because there was "an alternate claimant asserting leasehold rights in the Adult Home." (Id.) (This "alternate claimant" was presumably Blatt, though the Amended Complaint does not make this crystal clear.) At about the same time, Plaintiffs commenced litigation in New York state court against the previous owners and tenants at the Adult Home, seeking their eviction. As relevant here, this litigation resulted in a Justice of the Supreme Court granting Plaintiffs injunctive relief including, among other things, appointment of a "temporary operator and receiver" for the Adult Home pursuant to N.Y. C.P.L.R. § 6401(a). Mar. 24, 2004 Pondview Decision & Order, slip op. at 11. On April 20, 2004, the court substituted Defendant Long Hill as the Adult Home's "Temporary Receiver and Interim Operator" (Am. Compl. ¶ 50), and the DOH notified Long Hill on July 6, 2004 that it would "authorize[] the temporary operation of Tappan Zee Manor Adult Home by Long Hill" pursuant to the Supreme Court's receivership order, (id. ¶ 51). The Supreme Court terminated Long Hill's status as receiver on March 3, 2006. (Id. ¶ 52.)

Following this order, Long Hill "provided the State Court with a closing statement for the period ending on July 2, 2006." (Id. ¶ 53.) Plaintiffs allege, however, that Long Hill did not cease operating the Adult Home even after the receivership was terminated; instead, through a series of letters between Plaintiffs' representatives and DOH officials, it became clear that DOH had "authorized [Long Hill] to act as temporary operator [of the Adult Home] pending approval of an application for change of operator." (Id. ¶ 63.) (These communications are discussed in greater detail in TZ Manor I. See 2009 WL 2242436, at *2-3.) A DOH attorney, Defendant Alan J. Lawitz ("Lawitz"), acknowledged in a June 27, 2007 letter to Plaintiffs' general counsel that DOH was aware that Long Hill had retained a "portion of operational revenue [derived from the Adult Home] to pay for its services," but Lawitz stated that DOH had "no objection" to this "[i]n the absence of other arrangements between the parties for payment of [Long Hill's] services." (Am. Compl. ¶ 64.) Plaintiffs responded that they had not "authorized []or approved any payments to Long Hill post-receivership and, in fact, have never been advised upon what basis these funds [that Long Hill had retained] have been taken from the facility." (Id. ¶ 66.) When Plaintiffs asked for an explanation of DOH's actions, Lawitz wrote in a July 24, 2007 email:

Following the termination of the court-appointed receivership of Long Hill Alliance Company, Inc., there was a clear need for [DOH] to authorize Long Hill to continue to act as interim operator of Tappan Zee Manor, as there was no other individual or entity that had received [DOH] approval to operate the facility, and [DOH] did not wish to take action to require the closure of the facility and transfer of its residents. . . .

[DOH] has authority to issue operating certificates under Social Services Law (SSL) section 460-d for the operation of adult homes serving dependent residents . . . . Under SSL section 461-c, the operator and the residents enter into admission agreements under which the operator agrees to provide the services required by law, in consideration of the resident's payment for such services. No individual or entity other than the approved operator is legally authorized to participate in the operating revenue of an adult home. . . . In most cases, when the operator does not own the real property, the operator is making rental payments under a lease to the landlord. Because of the unique and litigious circumstances in this case, there is no current lease between the real property owner and the interim operator [Long Hill]. . . . As you know, [DOH] is currently reviewing an application for change of operator of this adult home. . . . [DOH] will try to continue to expedite this review. (Id. ¶ 68.)

New York State regulations define an "adult home" as an "adult-care facility established and operated for the purpose of providing long-term residential care, room, board, housekeeping, personal care and supervision to five or more adults unrelated to the operator." N.Y. Comp. Codes R. & Regs. tit. 18, § 485.2(b). Under the New York Social Services Law, no adult home (or other adult-care facility regulated by DOH) "shall be operated unless it shall possess a valid operating certificate issued [by DOH] specify[ing] [inter alia] who the operator of the facility shall be . . . ." N.Y. Soc. Serv. Law § 460-b(1). Except in the case of receivership, discussed later, no entity that does not possess an operating license issued by the DOH may run an Adult Home. See id. § 461-b(2)(c) (making "[t]he knowing operation of an adult care facility without the prior written approval of [DOH]" a class A misdemeanor); N.Y. Comp. Codes R. & Regs. tit. 18, § 485.5(i). DOH may issue operating licenses if the proposed facility meets certain standards set forth in the Social Services Law and regulations promulgated thereunder. N.Y. Soc. Serv. Law § 460-b(2).

The application process to become an operator of an Adult Home proceeds in two parts. The regulations generally require a putative operator to satisfy DOH that (among other things) the applicant possesses the "character and competence" to operate the facility, N.Y. Comp. Codes R. & Regs. tit. 18, § 485.6(b), that it possesses "sufficient financial resources" to do so, id. § 485.6(a)(iv), and that it "has developed a . . . program of operation" that complies with applicable law, id. § 485.6(a)(iii). "[P]art I" of the application requires a putative operator to provide DOH with evidence of the public need for the facility and the applicant's ability to run it. See id. § 485.6(d). DOH has 90 days from "the receipt of all required information from the operator and all required recommendations and information from local or State agencies or other sources" to make a decision on a "request for part I approval." Id. § 485.6(e). Once it passes part I, the putative operator, within 90 days of part I approval, submits part II of the application, which involves, among other things, detailed plans for the administration and operation of various aspects of the facility and the Adult Home's proposed services and policies. See id. § 485.6(f)(1). The regulations do not appear to give DOH a deadline for making a decision on part II of an operating license application.

In this case, "after the issue of site control had been clarified" by the Supreme Court, on November 22, 2006, TZ Manor applied for a temporary operator's license for the Adult Home. (Am. Compl. ¶ 90.) DOH told TZ Manor that an application for a permanent operator's license was necessary, and TZ Manor alleges that it applied for one on March 22, 2007. (Id. ¶¶ 91-92.) DOH approved part I of TZ Manor's application on October 3, 2007, TZ Manor I, 2009 WL 2242436, at *3, and approved part II on May 9, 2008, (Am. Compl. ¶ 95).*fn2 TZ Manor assumed the operation of the Adult Home on May 16, 2009. (Id. ¶ 70.)
Plaintiffs brought the present action on April 2, 2008 against Long Hill and the various State Defendants, all DOH officials.*fn3 The Amended Complaint contains eight claims. The first five are § 1983 claims, and each of these is asserted against both the State Defendants and Long Hill except for Count 5. In Count 1, Plaintiffs allege that Long Hill's continuing to serve (with the State Defendants' approval) as temporary operator of the Adult Home from the termination of its receivership until TZ Manor's operating license application was approved in May 2008 deprived them of "substantive due process." Specifically, according to Plaintiffs, Defendants' actions deprived Plaintiffs of their "rights and indicia of ownership, possession and operation of the Adult Home" and resulted in the "confiscat[ion] and redirect[ion] [of] all rents and revenues that derived from the Adult Home to Long Hill." (Id. ¶ 72.) Count 2 is a "violation of due process" claim, alleging that the State Defendants violated state law in "extend[ing] Long Hill's tenure" as operator of the Adult Home. (Id. ¶ 77.) Count 3 alleges that the same events constituted a "deprivation of property without just compensation," which the Court will treat as a takings claim. (Id. ¶¶ 81-82.) Count 4 is an Equal Protection claim based on the same allegations. (Id. ¶ 85.) In Count 5, Plaintiffs allege that the State Defendants' "delay" in approving TZ Manor's application for an operating license was "unreasonable, especially in the context of . . . [the State Defendants'] authorizing and effectively extending Long Hill's reign as receiver and operator of the Adult Home." (Id. ¶ 94.) The State Defendants' actions, Plaintiffs assert, were "arbitrary, capricious and irrational" and violated "Plaintiff's Constitutional Guaranties of Due Process and Equal Protection, as well as not to be deprived of their property." (Id. ¶ 96.) Counts 6 through 8 are state law claims for tortious interference with contract, "rent[] and use and occupancy," and unjust enrichment. (Id. ¶¶ 98-107.) As damages, Plaintiffs seek "rent from Defendants for the time period from March 3, 2006 to May 16, 2008 . . . totaling $4,903,401.95" (id. ¶ 75), as well as an additional $300,590.24, the amount by which Long Hill was allegedly unjustly enriched when it "removed" this money "from the facility" between March 3, 2006 and December 31, 2007, (id. ¶ 107).

B. Procedural History This action was filed on April 4, 2008 (Dkt. No. 1), approximately one month before DOH approved part II of TZ Manor's operating license application. This Court granted the State Defendants' motion to dismiss without prejudice on July 28, 2009, giving Plaintiffs thirty days to file an amended complaint. See TZ Manor I, 2009 WL 2242436, at *11. Plaintiffs initially appealed that decision (Notice of Appeal (Dkt. No. 33)), but they also sought in this Court to file a motion to re-argue, relying on the Second Circuit's opinion, issued August 7, 2009, in Spinelli v. City of New York, 579 F.3d 160 (2d Cir. 2009), (Letter from Sanford F. Young, Esq., to the Ct. (Aug. 12, 2009) (Dkt. No. 34)).*fn4 After this Court noted that it lacked jurisdiction to entertain Plaintiffs' request because they had filed a notice of appeal (id. at 3), Plaintiffs withdrew their appeal in November 2009 (Dkt. No. 40) and filed the Amended Complaint on February 11, 2010, (Dkt. No. 45). The present motions were fully submitted on January 28, 2011, and the Court held oral argument on June 15, 2011.

II. Discussion

A. Standards of Review

1. Rule 12(b)(1) "[A] federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the category of claim in suit (subject-matter jurisdiction) and the parties (personal jurisdiction)." Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007) (citing Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 93-102 (1998)). If a court lacks subject matter jurisdiction over a claim, the claim must be dismissed as the court "lacks the statutory or constitutional power to adjudicate it." Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (per curiam) (internal quotation marks omitted); see also Cave v. E. Meadow Union Free Sch. Dist., 514 F.3d 240, 250 (2d Cir. 2008) ("If a court perceives at any stage of the proceedings that it lacks subject matter jurisdiction, then it must take proper notice of the defect by dismissing the action."). "The plaintiff bears the burden of

proving subject matter jurisdiction by a preponderance of the evidence." Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). In deciding a motion to dismiss pursuant to Rule 12(b)(1), the Court "take[s] all facts alleged in the complaint as true and draw[s] all reasonable inferences in favor of [the] plaintiff." NRDC v. Johnson, 461 F.3d 164, 171 (2d Cir. 2006) (internal quotation marks omitted). However, "[j]urisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it." APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003) (internal quotation marks omitted). "In resolving a motion to dismiss . . . under Rule 12(b)(1), a district court . . . may refer to evidence outside the pleadings," Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000), but it "may not rely on conclusory or hearsay statements contained in" such evidence, J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004).

2. Rule 12(b)(6) "On a Rule 12(b)(6) motion to dismiss a complaint, the court must accept a plaintiff's factual allegations as true and draw all reasonable inferences in [the plaintiff's] favor." Gonzalez v. Caballero, 572 F. Supp. 2d 463, 466 (S.D.N.Y. 2008); see also Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010) ("We review the district court's grant of a Rule 12(b)(6) motion to dismiss de novo, accepting all factual claims in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor."). "In adjudicating a Rule 12(b)(6) motion, a district court must confine its consideration to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Leonard F. v. Isr. Disc. Bank of N.Y.,199 F.3d 99, 107 (2d Cir. 1999) (internal quotation marks omitted).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration, citations, and internal quotation marks omitted). Instead, the Supreme Court has emphasized that "[f]actual allegations must be enough to raise a right to relief above the speculative level," id., and that "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint," id. at 563. A plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Id. at 570. If a plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Id.; see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) ("Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to relief.'" (second alteration in original) (citation omitted) (quoting Fed. R. Civ. P. 8(a)(2))).

B. Analysis 1. Takings Claim In TZ Manor I, this Court dismissed Plaintiffs' takings claim without prejudice because it was not ripe under Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985). See TZ Manor I, 2009 WL 2242436, at *4-8. Specifically, Plaintiffs had not pled facts showing that they had sought compensation from the State for the alleged taking before filing their Complaint, as required by Williamson. Id. at *5 (citing Island Park, LLC v. CSX Transp., 559 F.3d 96, 109 (2d Cir. 2009); Murphy v. New Milford Zoning Comm'n, 402 F.3d 342, 348-49 (2d Cir. 2005)). The Court found unpersuasive Plaintiffs' arguments that the ripeness requirement should have been deemed satisfied in this case. Id. at *6-8.

The Amended Complaint reasserts the takings claim in Count 3 (Am. Compl. ΒΆΒΆ 81-83), but it again pleads no additional facts suggesting that Plaintiffs have satisfied the ripeness requirement, i.e., that they have "sought [compensation] from the state if it has a reasonable, certain and adequate provision for obtaining compensation," Island Park, 559 F.3d at 109 (internal quotation marks omitted), which New York does, as this Court held in its prior opinion, see TZ Manor I, 2009 WL 2242436, at *6-7. The State Defendants therefore move to dismiss this claim pursuant to Rule 12(b)(1). (Mem. of Law in Supp. of Mot. to Dismiss the Am. Compl. ("State Defs.' Mem.") (Dkt. No. 57) 21.) Plaintiffs' opposition memorandum is given over entirely to defending Plaintiffs' substantive due process claims, and Plaintiffs do not respond to Defendants' argument. (See Pls.' Mem. of Law in Opp'n to Defs.' Mots. to Dismiss the Am. Compl. ("Pls.' Mem.") (Dkt. No. 62).) The Court agrees with Defendants that nothing alleged in the Amended Complaint alters its ...

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