United States District Court, S.D. New York
UNITED STATES OF AMERICA ex rel. JOHN and JANE DOE, Plaintiff/Relators,
THE TACONIC HILLS CENTRAL SCHOOL DISTRICT, et al., Defendants
For United States of America ex rel. John and Jane Doe, Plaintiff: Andrew K. Cuddy, Cuddy Law Firm, Auburn, NY; Raphael Katz, Robert Wayne Sadowski, Sadowski Fischer PLLC, New York, NY; Sarah Sheive Normand, U.S. Attorney's Office, SDNY (86 Chambers St.), New York, NY.
For New York City Department of Education, Defendant: Stephen Edward Kitzinger, LEAD ATTORNEY, New York City Law Depart. Office of the Corporation Counsel, New York, NY; Emily Stern, Joseph Victor Willey, Scott Andrew Resnik, Katten Muchin Rosenman, LLP(NYC), New York, NY.
For The Taconic Hills Central School District, Defendant: Christopher P. Langlois, Patrick Joseph Fitzgerald, LEAD ATTORNEYS, Girvin & Ferlazzo, P.C., Albany, NY.
For The Auburn Enlarged City School District, The Mexico Central School District, Defendants: Joseph G. Shields, LEAD ATTORNEY, Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C., East Syracuse, NY.
For The Greene Central School District, Defendant: James E. Hughes, LEAD ATTORNEY, John G. Powers, Hancock Estabrook, LLP, Syracuse, NY.
OPINION AND ORDER
HONORABLE PAUL A. CROTTY, United States District Judge.
Relators John and Jane Doe (" Relators" ) bring this action against Defendants The Taconic Hills Central School District, The Auburn Enlarged City School District, The Mexico Central School District, The Greene Central School District (collectively, " Upstate Defendants" ), and The New York City Department of Education (" DOE" ) (collectively, " Defendants" ) alleging that Defendants violated the False Claims Act (the " FCA" ), 31 U.S.C. § 3729, et seq., by submitting fraudulent claims to Medicaid for case management services provided to disabled children when Defendants already received funding for those services under the Individuals with Disabilities Education Act (" IDEA" ), 20 U.S.C. § 1400, et seq. Individually, the Upstate Defendants move to dismiss the Amended Complaint for improper venue and, alternatively, to transfer the cases to the Northern District of New York. The DOE moves to dismiss, in part, for failure to state a claim upon which relief may be granted.
The Upstate Defendants' motions are GRANTED and the DOE's motion is GRANTED. The claims against the Upstate Defendants are dismissed for improper venue, and the claims against the DOE for failure to state a claim. Since Relators fail to state a claim upon which relief may be granted against the DOE and their claims against the Upstate Defendants are almost identical, transferring the claims against the Upstate Defendants would not be in the interest of justice. Pursuant to 28 U.S.C. § 1406(a), the Court declines to transfer the claims against the Upstate Defendants to the Northern District of New York.
I. Statutory and Regulatory Background
A. Special Education Programs
Congress enacted IDEA to ensure that " all children with disabilities have available to them a free and appropriate public education [" FAPE" ] that emphasizes special education and related services designed to meet their unique needs and prepare them for further education, employment, and independent living." 20 U.S.C. § 1400(d)(1)(A); see N.Y. Educ. Law § 4402(2)(a). New York school districts work to fulfill the IDEA's mission by providing special education services to public school students. See N.Y. Educ. Law § 4402(2)(a).
The IDEA and state law require schools to develop Individualized Education Programs (" IEPs" ) for special-needs students. See 34 C.F.R. § 300.320; N.Y. Educ. Law § 4402(3); 8 N.Y.C.R.R. § 200.4(b). Developed during meetings of the Committee on Special Education (" CSE" ), IEPs are written plans detailing the programs and services to " be provided to enable the child [t]o advance appropriately toward attaining the annual goals" for academic achievement and functional performance. 34 C.F.R. § 300.320(a)(4)(i); see 8 N.Y.C.R.R. § 200.4(b). The development of an IEP is based on information provided by parents, school district representatives, and teachers, evaluations conducted by healthcare professionals, and a review of school records and tests. See N.Y. Educ. Law § 4402(3); 8 N.Y.C.R.R. § 200.4(b).
B. Federal Funding
For services rendered prior to July 1, 2010, New York State school districts receive federal funding for special education programs in two ways. First, New York State agencies receive federal grants under the IDEA, see 20 U.S.C. § 1411(a)(1); 34 C.F.R. § 300.700(a); see also Declaration of Robert W. Sadowski (" Sadowski Decl." ), ECF No. 72, Ex. B, and distribute the funds to public school districts for development of special education services, see 20 U.S.C. § 1411(f)(1); 34 C.F.R. § 300.202(a). In order to receive these funds, school districts submit applications to the New York State Education Department (" SED" ). A school district can use IDEA funds for " related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 C.F.R. § 300.208(b). For example, SED's application lists expenditures related to IEP meetings and IEP team coordinator costs as allowable uses of IDEA funding. See Sadowski Decl., Ex. C at 19, 21.
Second, Title XIX of the Social Security Act (the " Medicaid Act" ), 42 U.S.C. § 1396, et seq., provides federal funds to participating states for Targeted Case Management (" TCM" ) services furnished to Medicaid-eligible disabled school children. See id. § 1396b(c). The Centers for Medicare & Medicaid Services (" CMS" ), a federal agency within the U.S. Department of Health and Human Services, administers the Medicaid program in partnership with state agencies. On January 21, 1988, CMS approved the New York State Plan Amendment (SPA) No. 96-41, see Declaration of Christopher P. Langlois (" Langlois Decl." ), ECF No. 44, Ex. C, which created the School Supportive Health Services Program (" SSHSP" ) and went into effect on October 3, 1996. The New York Department of Health (" DOH" ) and SED jointly administer SSHSP to assist New York State school districts in obtaining Medicaid reimbursement for TCM services.
The SED issues a handbook that describes the type and scope of TCM services covered by Medicaid (the " SSHSP Handbook" ). For services rendered between January 1, 2000 and July 1, 2010, the SSHSP Handbook provided the following billing codes, among others: 5491 (Initial Review), 5492 (Annual Review), 5493 (Triennial Review), 5494 (Amended/Requested Review), and 5495 (Ongoing Service Coordination). See Langlois Decl., Ex. E; see id., Ex. D. The SSHSP Billing Handbook defines the services for codes 5491-5494 as the " activities leading up to and including the writing of the IEP" and " conducting and convening the CSE conference to develop the IEP." Id., Ex. E at 30; see id., Ex. D at 20-21. In contrast, services billed under code 5495 are rendered subsequent to implementing a student's IEP and must include at least two contacts per month by a service coordinator relating to the student's ongoing needs. Id., Ex. E at 32; see id., Ex. D at 22. The DOE is not permitted to use code 5495 and therefore is unable to receive federal funding for ongoing service coordination activities. Id., Ex. E at 33. In ...