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Beechwood Restorative v. Laura E. Leeds

April 13, 2012


The opinion of the court was delivered by: David G. Larimer United States District Judge


On September 12, 2011, the Court issued a Decision and Order, 811 F.Supp.2d 667, granting in part and denying in part defendants' motion for summary judgment in this civil rights action arising out of the operation of a nursing home, Beechwood Restorative Care Center ("Beechwood"), in Rochester, New York, by plaintiffs Brook Chambery ("Chambery") and his mother Olive Chambery. Trial in this case is currently scheduled to begin on May 14, 2012.

The factual background of this case is set forth in the summary judgment decision, as well as in other decisions of this Court and of the Court of Appeals for the Second Circuit, familiarity with which is assumed. See 436 F.3d 147 (2d Cir. 2006); 494 F.Supp.2d 181 (W.D.N.Y. 2007); 317 F.Supp.2d 248 (W.D.N.Y. 2004).

The gist of plaintiffs' claim is that defendants, who were employed by the New York State

Department of Health ("DOH"), waged on "offensive" against Chambery and Beechwood, ultimately leading to the revocation of Beechwood's state-required operating certificate and the facility's subsequent closure, in retaliation for protected speech by which Chambery had challenged regulatory findings and rulings, all in violation of the First and Fourteenth Amendments.

Currently pending before the Court are motions in limine filed by both sides. The Court heard oral argument on the motions on February 17, 2012. The following Decision and Order sets forth the Court's rulings on those motions, to the extent that rulings are possible at this time.


I. Defendants' Motion

A. New York State Attorney General Medicaid Fraud Control Unit Evidence

Defendants seek to preclude plaintiffs from offering into evidence documents and testimony relating to an investigation of Beechwood that was conducted by the Medicaid Fraud Control Unit ("MFCU") of the New York State Attorney General's Office. The investigation lasted for nearly three years, and ultimately no charges were brought.

In an internal MFCU memorandum dated April 10, 2003, Assistant Attorney General Jerry Solomon stated that the investigation was opened when it was learned that, after a series of surveys found the residents of Beechwood to be in imminent danger, the NYSDOH decided to have a receiver appointed to operate the facility. When DOH failed to convince the Court to appoint a receiver, it sought revocation of the facility's operating license. After failing to issue a plan of correction satisfactory to the Department, the facility was closed in July 1999 and residents were transferred to other facilities.

Def. Ex. 510 at 2. After summarizing the conduct and results of investigation, Solomon concluded, "This facility has been closed and the owners heavily fined. Based upon insufficient evidence upon which to base a criminal prosecution, I recommend this investigation be closed." Id. at 8. As stated in another, one-page memo authored by Solomon, the investigation was closed on June 4, 2003. Id. at 1. A June 9, 2003 memo authored by Neil Davis, who according to plaintiffs was the chief investigator, stated that interviews with patients, staff and others "indicated that patient care at the facility was very good to excellent," and that "SAAG Solomon directed [the] case to be closed based on insufficient evidence upon which to have a criminal prosecution." Ex. 511.

On August 18, 2003, the Rochester Regional Office of MFCU issued a four-page "Final Report of Auditor" ("Final Report") containing the following "Findings and Conclusions":

The interviews [of patients, family members, and others] yielded far more positive testaments to the quality of care, staffing levels and family satisfaction than negative reponses. Several former employees, in addition to some family members, criticized DOH for their handling of the situation. The core issue the ALJ continually referred to was Beechwood's policy of charting by exception [a record-keeping procedure]. Due to the lack of documentation, it appeared that poor care was given. However, testimony during the hearing and interviews conducted by our office refuted that contention. Accordingly, SAAG Solomon, with approval of the Deputy Attorney General, closed the case.

Plaintiffs seek to introduce Solomon's memos, the Final Report, and certain other documents relating to the MFCU investigation, including handwritten notes, a subpoena, letters, and other materials.

Defendants contend that these documents are inadmissible hearsay, and also are excludable under Rule 403 of the Federal Rules of Evidence, as unduly prejudicial. Plaintiffs contend that these documents are admissible as public records or reports under Rule 803(8), and that they are not unfairly prejudicial to defendants.

I find that the Final Report is admissible under Rule 803(8), which permits admission of

[a] record or statement of a public office if:

(A) it sets out:

(i) the office's activities;

(ii) a matter observed while under a legal duty to report, but not including, in a criminal case, a matter observed by law-enforcement personnel; or

(iii) in a civil case or against the government in a criminal case, factual findings from a legally authorized investigation; and

(B) neither the source of information nor other circumstances indicate a lack of trustworthiness.

In my view, the Final Report falls squarely within this Rule. It contains factual findings by a state agency, resulting from an investigation by that agency regarding a matter within that agency's jurisdiction.

A report that meets the criteria of the rule is "presumptively admissible," Bridgeway Corp. v. Citibank, 201 F.3d 134, 143 (2d Cir. 2000), and the party opposing its admission has the burden of showing that the report is not sufficiently trustworthy to justify its admission. Ariza v. City of New York, 139 F.3d 132, 134 (2d Cir. 1998). I conclude that the Final Report does fall within the parameters of Rule 803(8).

I also reject defendants' argument that the report is inadmissible under Rule 403, on the ground that its probative value is outweighed by its prejudicial effect. A central--perhaps the central--issue in this case is what motivated defendants to act as they did with respect to Beechwood. Defendants contend that they were not motivated by any retaliatory animus, but by their genuine, good-faith belief that the level of care provided by Beechwood was so inadequate that the facility needed to be closed down, to protect the safety of its residents. Given that position, I believe that it is fair to allow plaintiffs to attempt to show that an agency other than DOH concluded, based on its own investigation of Beechwood, that the facility was generally well run, and its residents well cared for. The Final Report is plainly relevant in that regard, and is not unfairly prejudicial to defendants.

I recognize that MFCU was primarily concerned with whether criminal charges should be brought against Beechwood or Chambery, rather than with whether Beechwood's operating certificate should be revoked, which was DOH's focus. In addition, part of Solomon's rationale for recommending that the investigation be closed was that Beechwood had already been shut down and its owners heavily fined; in other words, that there was no reason to seek to impose punishment on plaintiffs beyond that which had already been meted out.

Arguably, those facts diminish somewhat the probative value of this evidence. I believe, however, that these are matters going to the weight, not the admissibility, of this evidence. Certainly defense counsel can argue to the jury that MFCU's findings and conclusions have little bearing on the issues in this case, but on balance, I find that this evidence is not subject to exclusion under Rule 403.

Solomon's memo arguably qualifies as a report of a public office under Rule 803(8), though there are other concerns about its admissibility as well. Although "interim agency reports or preliminary memoranda do not satisfy Rule 803(8)(C)'s requirements," Smith v. Isuzu Motors Ltd., 137 F.3d 859, 862 (5th Cir. 1998) (citing City of New York v. Pullman, Inc., 662 F.2d 910 (2d Cir. 1981)), nor do the opinions of individual agency employees that are not adopted by the agency itself, id., Solomon's memo is captioned "Closing Memo," and it did form the basis for the closing of the investigation. In effect, Solomon's recommendations and findings became the position of MFCU itself.

The inquiry does not end there, however. Even when a report falls within the public records exception of Rule 803(8), that does not automatically render all of its contents admissible. In particular, although an official's reliance on hearsay in preparing a report does not necessarily preclude the admission of the officials' conclusions contained in the report, see, e.g., Union Pacific R.R. Co. v. Kirby Inland Marine, Inc. of Mississippi, 296 F.3d 671, 679 (8th Cir. 2002), that does not necessarily mean that the hearsay statements themselves can come into evidence. See, e.g., United States v. Mackey, 117 F.3d 24, 28 (1st Cir. 1997) ("decisions in this and other circuits squarely hold that hearsay statements by third persons ... are not admissible under this exception merely because they appear within public records"); United States v. Moore, 27 F.3d 969, 975 (4th Cir. 1994) ("Even assuming that the report itself fell within the public records exception to the hearsay rule, Fed. R. Evid. 803(8), Bonet's statement to the examiner, which was contained in that report, is hearsay and inadmissible unless some exception to the hearsay rule applies") (citing Fed. R. Evid. 802); Parsons v. Honeywell, Inc., 929 F.2d 901, 907 (2d Cir. 1991) (factual findings based on a public official's "own observations and knowledge may be admitted but ... statements made by third persons under no business duty to report may not").

Solomon's memo contains statements by third parties that are clearly hearsay, and which do not appear to fall within any hearsay exception. For example, he recites statements made by a patient, identified in the memo as "E.C.," who was interviewed by MFCU investigators. Solomon relates E.C.'s statements concerning the care that she received at Beechwood in some detail. See Dkt. #257-18 at 25.

At least in its present form, then, this document is not admissible. There is authority, however, that portions of a report, or a redacted copy of a report, may be admitted into evidence where the report contains inadmissible evidence. See, e.g., Miller v. Field, 35 F.3d 1088, 1093 (6th Cir. 1994) (district court should not have allowed police reports containing inadmissible hearsay to be admitted in their entirety; "Instead, only those portions of the reports that constituted either factual findings resulting from the firsthand knowledge of the report's preparer or opinions and conclusions derived from those facts should have been admitted into evidence"); Ward v. Tinsley, No. 1:10--CV--329, 2011 WL 6151602, at *2 (N.D.Ind. Dec. 12, 2011) (stating that "[p]resumably, any narrative reports may ultimately be admissible, at least in part, under Federal Rule of Evidence 803(8), although certain hearsay statements within the reports may need to be redacted"). Accordingly, defendants' motion to preclude Solomon's memo from being admitted into evidence is granted, without prejudice to plaintiffs' offering excerpts from, or a redacted version of, the report at a later time.

Plaintiffs also apparently will seek to introduce a copy of what they describe as a "work allocation agreement between DOH and MFCU ... ." Plaintiffs' Mem. of Law (Dkt. #277) at 7, apparently to show how MCFU became involved in investigating Beechwood. The actual exhibit, however, Ex. 550, on its face is between MFCU and the New York State Department of Social Services ("DSS"). It is not clear how this document relates to DOH. The Court does not preclude admission of this document at this time, but its admission at trial will be subject to a proper foundation being laid for its admission.

As to the remainder of this evidence relating to the MFCU investigation, the Court cannot issue a definitive ruling at this time. These various documents, which include personal notes and emails, may be admissible as admissions of defendants or their agents, or as background evidence concerning the MCFU investigation, but again a foundation must be laid, by way of testimony by defendants or the authors of the documents, subject to a showing of relevance.

B. Justice Affronti's Decision

On June 21, 1999, New York State Supreme Court Justice Francis A. Affronti issued a decision (Ex. 238) denying DOH's application to appoint a caretaker for Beechwood pursuant to § 2806 of the New York State Public Health Law. That application, if granted, would have resulted in the ouster of the Chamberys, and their replacement by a caretaker while the proceedings were pending concerning the revocation of Beechwood's operating certificate.

Defendants argue that Justice Affronti's decision is not relevant to the issue of whether defendants retaliated against plaintiffs. Plaintiffs contend that it is relevant to whether defendants' enforcement actions were justified, and therefore, whether defendants acted in good faith in revoking Beechwood's operating certificate.

In general, a federal court may take judicial notice of the decisions of another court. See, e.g., 520 South Michigan Ave. Associates, Ltd. v. Shannon, 549 F.3d 1119, 1138 n.14 (7th Cir. 2008); Mihos v. Swift, 358 F.3d 91, 100 (1st Cir. 2004). Defendants do not seem to quarrel with that general principle, but argue instead that Justice Affronti's decision is not relevant to the issues in this case.

As stated, the central issue here concerns defendants' motivation for taking the actions that they did against Beechwood. Whether those actions were objectively reasonable or justifiable is directly relevant to that issue. Justice Affronti's decision, which includes his statement that DOH had submitted "seemingly inconsistent findings" regarding Beechwood's compliance with state regulations, is probative of that issue, and in my view is not overly prejudicial. I therefore deny defendants' motion to preclude the admission of Justice Affronti's decision, as well as related documents relating to DOH's state court petition for appointment of a caretaker.

C. Settlement Discussions

Defendants contend that certain exhibits offered by plaintiff relate to settlement discussions between plaintiffs and DOH, and that those documents are therefore inadmissible under Rule 408, which provides that evidence that a party has offered or accepted "a valuable consideration in compromising or attempting to compromise [a] claim," or "statements made during compromise negotiations about [a] claim" are generally "not admissible ... either to prove or disprove the validity or amount" of the claim.

Plaintiffs respond that these communications were not "settlement" discussions at all, but simply concerned plaintiffs' attempt to secure DOH's consent to allow Chambery to sell the Beechwood facility, as a going concern, to a third party while Beechwood still had a valid operating certificate. Plaintiffs further argue that they are not seeking to admit these exhibits as admissions of wrongdoing by defendants, but as evidence of retaliatory intent, by demonstrating that defendants unreasonably refused to allow them to sell Beechwood, for no other reason than to punish plaintiffs.

The exhibits in question show that during the summer of 1999, plaintiff, through his attorney, Kevin S. Cooman, discussed with defendants "a potential settlement of the [then-pending] administrative proceeding and the potential transfer of Beechwood's operating certificate to a different owner." See Letter from Kevin S. Cooman to Russell Altone, Sept. 16, 1999 (Ex. 245). DOH insisted "that any settlement which involved DOH's acquiescence in or support for an approved transfer of Beechwood's operating certificate would also require that Beechwood release its claims then pending in the Federal civil action in the Western District of New York." Id.

The civil action referred to in Cooman's letter was a civil rights lawsuit that plaintiffs filed in this Court in June 1999, seeking to enjoin DOH from taking further action to revoke their operating certificate. The Court denied plaintiffs' request for a temporary restraining order on June 17, 1999, on abstention and exhaustion grounds, and the action was dismissed without prejudice, by stipulation of the parties in August 1999.

After the action was dismissed, plaintiffs' counsel again asked whether, in light of the discontinuance of the plaintiffs' civil action, DOH "would still insist on a release of claim by my clients of the previously named State defendants as a condition of the transfer of [Beechwood's] operating certificate to another entity." Ex. 245. Defendant Edmund Russell Altone, the director of the DOH Bureau of Administrative Hearings, responded on September 22, 1999, stating that "the Department's position remains that any disposition of the Beechwood adminstrative proceeding, as well as any transfer of the operating certificate to another entity, must include, but is not limited to, release of all claims brought in the Federal civil action in the Western District of New York." Ex. 246. There was further correspondence between the parties concerning these matters, but their positions remained essentially unchanged, and they did not reach any agreement. See Exs. 251, 292, 299, 519.

Rule 408 does not provide a blanket exclusion of all evidence of statements referencing settlement or the compromise of a claim, but only prohibits the admission of such evidence "to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction." The rule itself provides that "[t]he court may admit this evidence for another purpose, such as proving a witness's bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution." Fed. R. Evid. 408(b). On its face, subsection (b) thus provides a nonexhaustive list of possible permitted uses of such evidence. The 2011 Advisory Committee Notes indicate that "if offered for a purpose not barred by the Rule, [the] admissibility [of such evidence] remains governed by the general principles of Rules 402, 403, 801, etc." See also Weems v. Tyson Foods, Inc., 665 F.3d 958, 966 (8th Cir. 2011) ("Evidence relating to a compromise offer is admissible if 'offered for "another purpose," i.e., for a purpose other than to prove or disprove the validity of the claims that the offers were meant to settle'") (quoting Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 510 (2d Cir. 1989)).

Thus, a motion to exclude evidence under Rule 408 implicates two fundamental questions: first, was the statement in question made "in compromising or attempting to compromise the claim," or "during compromise negotiations about the claim," and, second, is the evidence being offered "to prove or disprove the validity or amount of a disputed claim," or for some other purpose? The first part of that analysis can also be broken down into two parts: (1) whether, at the time of the statements, a "claim" existed, and (2) whether the statements concerned a compromise of that claim.

At the time of Cooman's September 16, 1999 letter to Altone, plaintiffs' civil action had been dismissed. That dismissal was without prejudice, however, and the administrative proceedings concerning the revocation of Beechwood's operating certificate were still pending. I find, then, that a "claim" did exist at the time that these letters and related documents were created. See Armstrong v. HRB Royalty, Inc., 392 F.Supp.2d 1302, 1305 n.7 (S.D.Ala. 2005) ("Assertion of a claim for purposes of Rule 408 does not require articulation of a specific legal cause of action, so long as the general contention has been adequately raised"); (citing Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 510 (2nd Cir. 1989); Alpex Computer Corp. v. Nintendo Co., Ltd., 770 F.Supp. 161, 163 (S.D.N.Y. 1991) ("All that is needed for Rule 408 to apply is an actual dispute, or at least an apparent difference of opinion between the parties as to the validity of a claim").

It is also apparent that the statements at issue were made relative to attempts to compromise that disputed claim. Cooman's September 16, 1999 letter to Altone referenced the parties' previous settlement discussions, and the ensuing correspondence was generally couched in terms of settlement. While Cooman expressed plaintiffs' belief that their execution of a release in favor of defendants was an "unreasonable requirement," see Ex. 299, it seems to have been understood throughout these discussions that ...

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