author: R.S. Smith, J.

text:
    [859 NE2d 459, 825 NYS2d 653]
    Catholic Charities of the Diocese of Albany et al., Appellants, v Gregory V. Serio, as Superintendent of Insurance, Respondent.
    Argued September 6, 2006;
    decided October 19, 2006

      POINTS OF COUNSEL

      Tobin & Dempf LLP, Albany (Michael L. Costello and Brian R. Haak of counsel), and Williams & Connolly LLP, Washington, D.C. (Kevin T Baine of counsel), for appellants.
    I. The Women’s Health and Wellness Act violates the free exercise provision of the New York Constitution. (Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327; Matter of Rivera v Smith, 63 NY2d 501; Matter of Brown v McGinnis, 10 NY2d 531; People v Barber, 289 NY 378; City of Boerne v Flores, 521 US 507; La Rocca v Lane, 37 NY2d 575; Sherbert v Verner, 374 US 398; Matter of Holy Spirit Assn. for Unification of World Christianity v Rosenfeld, 91 AD2d 190; People ex rel. DeMauro v Gavin, 92 NY2d 963; People v Woodruff, 26 AD2d 236, 21 NY2d 848.) II. The Women’s Health and Wellness Act violates the Free Exercise Clause of the United States Constitution. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; United States v Lee, 455 US 252; University of Great Falls v National Labor Relations Bd., 278 F3d 1335; Mitchell v Helms, 530 US 793; Larson v Valente, 456 US 228; Cantwell v Connecticut, 310 US 296; Boy Scouts of America v Dale, 530 US 640; Espinosa v Rusk, 634 F2d 477, 456 US 951; Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327; Serbian Eastern Orthodox Diocese for United States and Canada v Milivojevich, 426 US 696.) III. The Women’s Health and Wellness Act violates the Establishment Clause of the United States Constitution. (Larson v Valente, 456 US 228; Epperson v Arkansas, 393 US 97; Zorach v Clauson, 343 US 306; Everson v Board of Ed. of Ewing, 330 US 1; Grumet v Pataki, 93 NY2d 677; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; Agostini v Felton, 521 US 203; Matter of Holy Spirit Assn. for Unification of World Christianity v Tax Commn. of City of N.Y., 55 NY2d 512; University of Great Falls v National Labor Relations Bd., 278 F3d 1335; Mitchell v Helms, 530 US 793.)

      Eliot Spitzer, Attorney General, New York City (Shaifali Puri, Caitlin J. Halligan, Daniel Smirlock and Lisa Landau of counsel), for respondent.
    I. The challenged provisions of the Women’s Health and Wellness Act do not violate plaintiffs’ free exercise rights under the New York Constitution. (.People v Wood-

      ruff, 26 AD2d 236; People ex rel. DeMauro v Gavin, 92 NY2d 963; La Rocca v Lane, 37 NY2d 575; Matter of Rivera v Smith, 63 NY2d 501; Matter of Rourke v New York State Dept. of Correctional Servs., 201 AD2d 179; Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Matter of Miller, 252 AD2d 156; McGann v Incorporated Vil. of Old Westbury, 256 AD2d 556; New York State Club Assn. v City of New York, 69 NY2d 211, 487 US 1; In re Union Pac. R.R. Empl. Practices Litig., 378 F Supp 2d 1139.) II. The Women’s Health and Wellness Act does not violate plaintiffs’ free exercise rights under the Federal Constitution. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327; Cutter v Wilkinson, 544 US 709; United States v Lee, 455 US 252; Serbian Eastern Orthodox Diocese for United States and Canada v Milivojevich, 426 US 696; Kedroff v Saint Nicholas Cathedral of Russian Orthodox Church of North America, 344 US 94; Jones v Wolf, 443 US 595; First Presbyt. Church of Schenectady v United Presbyt. Church in U.S. of Am., 62 NY2d 110; Presbyterian Church in U. S. v Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 US 440.) III. The challenged provisions of the Women’s Health and Wellness Act do not violate the plaintiffs’ Establishment Clause rights. (Epperson v Arkansas, 393 US 97; Larson v Valente, 456 US 228; Walz v Tax Comm’n of City of New York, 397 US 664; Agostini v Felton, 521 US 203; Lemon v Kurtzman, 403 US 602; Matter of Klein [Hartnett], 78 NY2d 662; Braunfeld v Brown, 366 US 599; Hernandez v Commissioner of Internal Revenue, 490 US 680; Bowen v Kendrick, 487 US 589; Matter of Holy Spirit Assn. for Unification of World Christianity v Tax Commn. of City of N.Y., 55 NY2d 512.)

      Marc D. Stern, New York City, for American Jewish Congress and another, amici curiae.
    I. The Court needs to set a standard for applying New York Constitution, article I, § 3. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; People ex rel. DeMauro v Gavin, 92 NY2d 963; People v Woodruff, 26 AD2d 236, 21 NY2d 848; In re Grand Jury Empaneling of Special Grand Jury, 171 F3d 826; Smilow v United States, 465 F2d 802, 409 US 944; Lightman v Flaum, 97 NY2d 128; Matter of New York State Empl. Relations Bd. v Christ the King Regional High School, 90 NY2d 244; Ware v Valley Stream High School Dist., 75 NY2d 114; Wisconsin v Yoder, 406 US 205; Matter of Fosmire v Nicoleau, 75 NY2d 218.) II. The standardless balancing applied by the court below is an inappropriate test for protecting religious liberty under New York Constitution, article I, § 3. (Ware v Valley Stream High School Dist., 75 NY2d 114; People ex rel. DeMauro v Gavin, 92 NY2d 963; People v Woodruff, 26 AD2d 236; Vieth v Jubelirer, 541 US 267; Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Board of Ed. of Kiryas Joel Village School Dist. v Grumet, 512 US 687; Carey v Piphus, 435 US 247; Lyng v Northwest Indian Cemetery Protective Assn., 485 US 439; Sherbert v Verner, 374 US 398.) III. The Court needs to assert a separate state standard under New York Constitution, article I, § 3. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; First Presbyt. Church of Schenectady v United Presbyt. Church in U.S. of Am., 62 NY2d 110; Matter of Foy Prods. v Graves, 253 App Div 475; O’Neill v Oakgrove Constr., 71 NY2d 521; Matter of Patchogue-Medford Congress of Teachers v Board of Educ. of Patchogue-Medford Union Free School Dist., 70 NY2d 57; Courtroom Tel. Network LLC v State of New York, 5 NY3d 222; People v Jacobs, 6 NY3d 188; Immuno AG. v Moor-Jankowski, 77 NY2d 235; Sherbert v Verner, 374 US 398.) IV Strict scrutiny is not inevitably fatal. (Valley Forge Christian College v Americans United for Separation of Church & State, Inc., 454 US 464; Sherbert v Verner, 374 US 398; Lyng v Northwest Indian Cemetery Protective Assn., 485 US 439; Grutter v Bollinger, 539 US 306.) V The Women’s Health and Wellness Act protects the peace and safety of the state. (Cornell Univ. v Bagnardi, 66 NY2d 603.)

      Elisabeth Ryden Benjamin, New York City, Galen Leigh Sherwin, Arthur N. Heisenberg, Julie Sternberg and Diana Kasdan for New York Civil Liberties Union and another, amici curiae.
    I. The Women’s Health and Wellness Act does not violate appellants’ free exercise rights under the New York Constitution. (People v Barber, 289 NY 378; Matter of Rivera v Smith, 63 NY2d 501; People v Pierson, 176 NY 201; Williams v Bright, 230 AD2d 548; La Rocca v Lane, 37 NY2d 575; People v Woodruff, 26 AD2d 236, 21 NY2d 848; Matter of Brown v McGinnis, 10 NY2d 531; People ex rel. DeMauro v Gavin, 92 NY2d 963; Sherbert v Verner, 374 US 398; Matter of Watson, 171 NY 256.) II. The Women’s Health and Wellness Act does not violate appellants’ free exercise rights under the Federal Constitution. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; DeMarco v Holy Cross High School, 4 F3d 166; Catho

      lie High School Assn. of Archdiocese of N.Y. v Culvert, 753 F2d 1161; Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327; Dole v Shenandoah Baptist Church, 899 F2d 1389; Gillette v United States, 401 US 437; Roemer v Board of Public Works of Md., 426 US 736; Hunt v McNair, 413 US 734; Tilton v Richardson, 403 US 672.) III. The Women’s Health and Wellness Act does not violate the Establishment Clause of the Federal Constitution. (Matter of Germenis v Coughlin, 232 AD2d 738; Matter of Lewis v Allen, 11 AD2d 447, 14 NY2d 867; McGowan v Maryland, 366 US 420; Equal Empl. Opportunity Commn. v Tree of Life Christian Schools, 751 F Supp 700; Bowen v Kendrick, 487 US 589; Gillette v United States, 401 US 437; Graham v Commissioner of Internal Revenue Serv., 822 F2d 844; Bob Jones Univ. v United States, 461 US 574; Larson v Valente, 456 US 228; Kong v Scully, 341 F3d 1132.)

      Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C. (A. Stephen Hut, Jr., Kimberly A. Parker and Ilona R. Cohen of counsel), for American College of Obstetricians and Gynecologists, New York District, and others, amici curiae.
    I. Access to contraception is essential to the basic health care of New York women and their children. II. Access to prescription contraception allows more New York women and their children to benefit from contraception and provides additional health advantages. III. The Women’s Health and Wellness Act’s prescription contraceptive coverage provision is necessary to ensure that New York women have adequate access to the wide range of contraceptive methods. IV The Women’s Health and Wellness Act furthers a compelling state interest and does not violate the Free Exercise Clause of either the Federal or New York State Constitution. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; United States v Lee, 455 US 252; People v Woodruff, 26 AD2d 236; Matter of Miller, 252 AD2d 156; Matter of Sampson, 37 AD2d 668; Prince v Massachusetts, 321 US 158; People ex rel. Fish v Sandstrom, 279 NY 523.)

      Wingate, Kearney & Cullen, Brooklyn (Kevin M. Kearney of counsel), Mark E. Chopko, Washington, D.C., and Michael F. Moses for Becket Fund for Religious Liberty and others, amici curiae.
    I. This case has grave implications for all religious denominations. II. Forcing appellants to pay for insurance coverage for contraceptives in their own workplaces violates the First Amendment to the United States Constitution. (Lemon v Kurtz

      man, 403 US 602; Illinois ex rel. McCollum v Board of Ed. of School Dist. No. 71, Champaign Cty., 333 US 203; Everson v Board of Ed. of Ewing, 330 US 1; Larkin v Grendel’s Den, Inc., 459 US 116; Gonzalez v Roman Catholic Archbishop of Manila, 280 US 1; City of Boerne v Flores, 521 US 507; Prince v Massachusetts, 321 US 158; Walz v Tax Comm’n of City of New York, 397 US 664; Kedroff v Saint Nicholas Cathedral of Russian Orthodox Church of North America, 344 US 94; Presbyterian Church in U. S. v Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 US 440.) III. The statutory exemption is neither constitutional nor rationally related to a legitimate government objective. (Lemon v Kurtzman, 403 US 602; University of Great Falls v National Labor Relations Bd., 278 F3d 1335; National Labor Relations Bd. v Catholic Bishop of Chicago, 559 F2d 1112, 440 US 490; Mitchell v Helms, 530 US 793; United States v Ballard, 322 US 78; Locke v Davey, 540 US 712; Larson v Valente, 456 US 228; Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520; Wilson v National Labor Relations Bd., 920 F2d 1282.) IV The contraceptive mandate is per se unconstitutional; in the alternative, the mandate is not the most restrictive means of furthering a compelling state interest. (Lemon v Kurtzman, 403 US 602; Church of Scientology Flag Serv. Org., Inc. v Clearwater, 2 F3d 1514; Larson v Valente, 456 US 228; Equal Empl. Opportunity Commn. v Roman Catholic Diocese of Raleigh, N.C., 213 F3d 795; Combs v Central Tex. Annual Conference of United Methodist Church, 173 F3d 343; Equal Empl. Opportunity Commn. v Catholic Univ. of Am., 83 F3d 455; Gellington v Christian M.E. Church, Inc., 203 F3d 1299; Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327; Hall v Baptist Mem. Health Care Corp., 215 F3d 618.)

      Planned Parenthood Federation of America, Inc., New York City {Eve C. Gartner and Jennifer Sandman of counsel), for American Jewish Committee and others, amici curiae.
    I. The Appellate Division correctly ruled that the Legislature enacted the Women’s Health and Wellness Act to ensure gender equity in prescription coverage in New York State. II. The Appellate Division correctly ruled that New York State has a compelling interest in prohibiting the sex discrimination caused by contraceptive exclusions. (In re Union Pac. R.R. Empl. Practices Litig., 378 F Supp 2d 1139; Erickson v Bartell Drug Co., 141 F Supp 2d 1266; Equal Empl. Opportunity Commn. v United Parcel Serv., Inc., 141 F Supp 2d 1216; Cooley v DaimlerChrys

      ler, 281 F Supp 2d 979; California Fed. Sav. & Loan Assn. v Guerra, 758 F2d 390, 479 US 272; Saks v Franklin Covey Co., 316 F3d 337; Matter of Beame v DeLeon, 87 NY2d 289; Lawrence v Texas, 539 US 558; Eisenstadt v Baird, 405 US 438; Griswold v Connecticut, 381 US 479.)

      Winston & Strawn LLP, New York City and Washington, D.C. (Piero A. Tozzi, Gene C. Schaerr and Steffen N. Johnson of counsel), for Campus Crusade for Christ, Inc., and another, amici curiae.
    The contraceptive mandate violates article I, § 3 of the New York State Constitution and should be declared unconstitutional. (Employment Div., Dept. of Human Resources of Ore. v Smith, 494 US 872; Lightman v Flaum, 278 AD2d 373, 97 NY2d 128; Matter of New York State Empl. Relations Bd. v Christ the King Regional High School, 90 NY2d 244; Matter of Miller, 252 AD2d 156; People v Alvarez, 70 NY2d 375; People v P.J. Video, 68 NY2d 296; City of Boerne v Flores, 521 US 507; People v Barber, 289 NY 378; People v Scott, 79 NY2d 474; O’Neill v Oakgrove Constr., 71 NY2d 521.)
   OPINION OF THE COURT

R.S. Smith, J.

Plaintiffs challenge the validity of legislation requiring health insurance policies that provide coverage for prescription drugs to include coverage for contraception. Plaintiffs assert that the provisions they challenge violate their rights under the religion clauses of the federal and state constitutions. We hold that the legislation, as applied to these plaintiffs, is valid.

The Challenged Legislation

In 2002, the Legislature enacted what is known as the “Women’s Health and Wellness Act” (WHWA), mandating expanded health insurance coverage for a variety of services needed by women, including mammography, cervical cytology and bone density screening (L 2002, ch 554). At issue here are provisions of the WHWA requiring that an employer health insurance contract “which provides coverage for prescription drugs shall include coverage for the cost of contraceptive drugs or devices” (Insurance Law § 3221 [Z] [16]; § 4303 [cc]).

The legislative history makes clear that the WHWA in general, and the provisions relating to contraception in particular, were designed to advance both women’s health and the equal treatment of men and women. The Legislature was provided with extensive information showing the need for the legislation.

For example, the Legislature had before it a study showing that women paid 68% more than men in out-of-pocket expenses for health care, and that the cost of reproductive health services was a primary reason for the discrepancy. The American College of Obstetricians and Gynecologists advised the Legislature that better access to contraception would mean fewer abortions and unplanned pregnancies, and that the ability to time and space pregnancies was important to women’s health. These conclusions are supported by studies contained in the record of this litigation, showing among other things that unintended pregnancies are often associated with delayed prenatal care; that such conditions as diabetes, hypertension, arthritis and coronary artery disease can be aggravated by pregnancy; that children born from unintended pregnancies are at risk of low birth weight and developmental problems; and that there are 3 million unintended pregnancies in the United States each year, of which approximately half end in abortion.

At the heart of this case is the statute’s exemption for “religious employers.” Such an employer may request an insurance contract “without coverage for . . . contraceptive methods that are contrary to the religious employer’s religious tenets” (Insurance Law § 3221 [Z] [16] [A]; § 4303 [cc] [1]). Where a religious employer invokes the exemption, the insurer must offer coverage for contraception to individual employees, who may purchase it at their own expense “at the prevailing small group community rate” (Insurance Law § 3221 [Z] [16] [B] [i]; § 4303 [cc] [2] [A]). A “religious employer,” as defined in the statute, is:

“an entity for which each of the following is true:
“(a) The inculcation of religious values is the purpose of the entity.
“(b) The entity primarily employs persons who share the religious tenets of the entity.
“(c) The entity serves primarily persons who share the religious tenets of the entity.
“(d) The entity is a nonprofit organization as described in Section 6033 (a) (2) (A) i or iii, of the Internal Revenue Code of 1986, as amended.” (Insurance Law § 3221 [Z] [16] [A] [1]; see § 4303 [cc] [1] [A] [i]-[iv].)

Plaintiffs say that this definition is unconstitutionally narrow.

The Legislature debated the scope of the “religious employer” exemption intensely before the WHWA was passed. A broader exemption was proposed, one that would have been available to any “group or entity . . . supervised or controlled by or in connection with a religious organization or denominational group or entity” (2001 NY Senate Bill S 3, § 14). Supporters of this version of the exemption argued, as do plaintiffs here, that religious organizations should not be forced to violate the commands of their faith. Those favoring a narrower exemption asserted that the broader one would deprive tens of thousands of women employed by church-affiliated organizations of contraceptive coverage. Their view prevailed.

This Action

Plaintiffs are 10 faith-based social service organizations that object to the contraceptive coverage mandate in the WHWA. Eight plaintiffs are affiliated in some way with the Roman Catholic Church: of these, three are large entities that provide a variety of social services, including immigrant resettlement programs, affordable housing programs, job development services, and domestic violence shelters; three primarily operate health care facilities, such as hospice centers, nursing homes and rehabilitative care facilities; and two operate schools. The other two plaintiffs are affiliated with the Baptist Bible Fellowship International: one of them offers a variety of social services to the public, including prison ministry, crisis pregnancy centers, job placement and homeless services; the other operates a K-12 school and provides day-care, preschool and youth services.

None of the plaintiffs qualifies as a “religious employer” under the WHWA. This is essentially because plaintiffs are not, or are not only, churches ministering to the faithful, but are providers of social and educational services. Each of the plaintiffs asserts that its purpose is not, or is not only, the inculcation of religious values; most of the plaintiffs acknowledge that they employ many people not of their faiths; all of the plaintiffs serve people not of their faiths; and only three of the plaintiffs are exempt from filing tax returns under Internal Revenue Code (26 USC) § 6033 (a) (2) (A) (i) or (iii) (now § 6033 [a] [3] [A] [i] or [iii]), provisions applicable to churches and religious orders.

Plaintiffs believe contraception to be sinful, and assert that the challenged provisions of the WHWA compel them to violate their religious tenets by financing conduct that they condemn. The sincerity of their beliefs, and the centrality of those beliefs to their faiths, are not in dispute.

Contending that they are constitutionally entitled to be exempt from the provisions of the WHWA providing for coverage of contraceptives, plaintiffs brought this action against the Superintendent of Insurance, seeking a declaration that these portions of the WHWA are invalid, and an injunction against their enforcement. The complaint asserts broadly that the challenged provisions are unconstitutional, but plaintiffs do not argue that they are unenforceable as to employers having no religious objections to contraception; in substance, plaintiffs challenge the legislation as applied to them. Supreme Court rejected the challenge, and granted summary judgment dismissing plaintiffs’ complaint and declaring the legislation valid. The Appellate Division affirmed, with two Justices dissenting. We now affirm.

Discussion

Plaintiffs argue that the provisions of the WHWA requiring coverage of contraception violate the Free Exercise clauses of the New York and United States constitutions, and the Establishment Clause of the United States Constitution. Plaintiffs’ strongest claim is under the New York Free Exercise Clause, but our analysis of that claim may be clearer if we discuss the federal Free Exercise Clause first.

I

The First Amendment to the United States Constitution provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” By virtue of the Fourteenth Amendment, this provision is binding on the states as well as the federal government (Cantwell v Connecticut, 310 US 296, 303 [1940]).

The United States Supreme Court’s decision in Employment Div., Dept. of Human Resources of Ore. v Smith (494 US 872 [1990]) bars plaintiffs’ federal free exercise claim. In Smith, the Court interpreted its First Amendment decisions as holding “that the right of free exercise does not relieve an individual of the obligation to comply with a ‘valid and neutral law of general applicability on the ground that the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes)’ ” (id. at 879, quoting United States v Lee, 455 US 252, 263 n 3 [1982, Stevens, J., concurring]). The Court held that where a prohibition on the exercise of religion “is not the object. . . but merely the incidental effect of a generally applicable and otherwise valid provision, the First Amendment has not been offended” (494 US at 878).

By that test, the First Amendment has not been offended here. The burden on plaintiffs’ religious exercise is the incidental result of a “neutral law of general applicability,” one requiring health insurance policies that include coverage for prescription drugs to include coverage for contraception. A “neutral” law, the Supreme Court has explained, is one that does not “target[ ] religious beliefs as such” or have as its “object ... to infringe upon or restrict practices because of their religious motivation” (Church of Lukumi Babalu Aye, Inc. v Hialeah, 508 US 520, 533 [1993]). Religious beliefs were not the “target” of the WHWA, and it was plainly not that law’s “object” to interfere with plaintiffs’ or anyone’s exercise of religion. Its object was to make broader health insurance coverage available to women and, by that means, both to improve women’s health and to eliminate disparities between men and women in the cost of health care.

The fact that some religious organizations — in general, churches and religious orders that limit their activities to inculcating religious values in people of their own faith — are exempt from the WHWA’s provisions on contraception does not, as plaintiffs claim, demonstrate that these provisions are not “neutral.” The neutral purpose of the challenged portions of the WHWA — to make contraceptive coverage broadly available to New York women — is not altered because the Legislature chose to exempt some religious institutions and not others. To hold that any religious exemption that is not all-inclusive renders a statute non-neutral would be to discourage the enactment of any such exemptions — and thus to restrict, rather than promote, freedom of religion. As the California Supreme Court explained, in a decision upholding a statute nearly identical to the WHWA:

“The high court has never prohibited statutory references to religion for the purpose of accommodating religious practice. To the contrary, the court has repeatedly indicated that ‘it is a permissible legislative purpose to alleviate significant governmental interference with the ability of religious organizations to define and carry out their religious missions’ ” (Catholic Charities of Sacramento, Inc. v Superior Ct., 32 Cal 4th 527, 551, 85 P3d 67, 83 [2004], quoting Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v Amos, 483 US 327, 335 [1987]).

Nor can plaintiffs escape the force of the Supreme Court’s decision in Smith by relying on the so-called “hybrid rights” exception. The notion of “hybrid rights” is derived from a dictum in which the Smith court distinguished certain of its previous cases by saying:

“The only decisions in which we have held that the First Amendment bars application of a neutral, generally applicable law to religiously motivated action have involved not the Free Exercise Clause alone, but the Free Exercise Clause in conjunction with other constitutional protections, such as freedom of speech and of the press, or the rights of parents . . . to direct the education of their children” (494 US at 881 [citations omitted]).

Assuming that the above language does create an exception to the general rule of Smith, the exception does not apply here, for this is not a case that involves free exercise “in conjunction with other constitutional protections.” Plaintiffs claim that the challenged legislation interferes with their rights of free speech and association, but the claim is insubstantial. The legislation does not interfere with plaintiffs’ right to communicate, or to refrain from communicating, any message they like; nor does it compel them to associate, or prohibit them from associating, with anyone (see Rumsfeld v Forum for Academic and Institutional Rights, Inc., 547 US 47, —, 126 S Ct 1297, 1309-1313 [2006]). It does burden their exercise of religion — but that alone, under Smith, cannot call the validity of a generally applicable and neutral statute into question.

Plaintiffs also suggest that an exception to the holding of Smith can be derived from the doctrine of church autonomy, which prevents states from interfering in matters of internal church governance (Serbian Eastern Orthodox Diocese for United States and Canada v Milivojevich, 426 US 696, 709-710 [1976]; Kedroff v Saint Nicholas Cathedral of Russian Orthodox Church of North America, 344 US 94, 107-108 [1952]) or determining ecclesiastical questions (Presbyterian Church in U.S. v Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 US 440, 447 [1969]). But church autonomy is not at issue in this case. The Legislature has not attempted through the WHWA to “lend its power to one or the other side in controversies over religious authority or dogma” (Employment Div. v Smith, 494 US at 877, citing Presbyterian Church, 393 US at 445-452, Kedroff, 344 US at 95-119, and Serbian Eastern Orthodox Diocese, 426 US at 708-725). The WHWA merely regulates one aspect of the relationship between plaintiffs and their employees.

Relying on the church autonomy cases, some lower federal courts have recognized a “ministerial exception” which exempts religious institutions from complying with title VII of the Civil Rights Act with respect to their ministers (see e.g. Equal Empl. Opportunity Commn. v Roman Catholic Diocese of Raleigh, N.C., 213 F3d 795, 800 [4th Cir 2000]; Alicea-Hernandez v Catholic Bishop of Chicago, 320 F3d 698, 702-703 [7th Cir 2003]). But the ministerial exception has no bearing here; this case does not involve the right of a church to determine who it will employ to carry out its religious mission. The existence of a limited exemption for ministers from antidiscrimination laws does not translate into an absolute right for a religiously-affiliated employer to structure all aspects of its relationship with its employees in conformity with church teachings. The ministerial exception has been applied only to employment discrimination claims, and only to “ministers,” broadly defined. This case involves neither.

In short, no exception to Smith is applicable in this case. Smith is an insuperable obstacle to plaintiffs’ federal free exercise claim.

II

Article I, § 3 of the New York Constitution provides:

“The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed in this state to all humankind; and no person shall be rendered incompetent to be a witness on account of his or her opinions on matters of religious belief; but the liberty of conscience hereby secured shall not be so construed as to excuse acts of licentiousness, or justify practices inconsistent with the peace or safety of this state.”

In interpreting our Free Exercise Clause we have not applied, and we do not now adopt, the inflexible rule of Smith that no person may complain of a burden on religious exercise that is imposed by a generally applicable, neutral statute. Rather, we have held that when the State imposes “an incidental burden on the right to free exercise of religion” we must consider the interest advanced by the legislation that imposes the burden, and that “[t]he respective interests must be balanced to determine whether the incidental burdening is justified” (La Rocca v Lane, 37 NY2d 575, 583 [1975], citing People v Woodruff, 26 AD2d 236, 238 [1966], affd 21 NY2d 848 [1968]). We have never discussed, however, how the balancing is to be performed. Specifically, we have not said how much, if any, deference we will give to the judgments of the Legislature when the result of those judgments is to burden the exercise of religion. We now hold that substantial deference is due the Legislature, and that the party claiming an exemption bears the burden of showing that the challenged legislation, as applied to that party, is an unreasonable interference with religious freedom. This test, while more protective of religious exercise than the rule of Smith, is less so than the rule stated (though not always applied) in a number of other federal and state cases.

Before Smith, the leading United States Supreme Court case involving burdens imposed on religious exercise by generally applicable laws was Sherbert v Verner, in which the Court held that justification of “any incidental burden on the free exercise of . . . religion” requires “a ‘compelling state interest in the regulation of a subject within the State’s constitutional power to regulate’ ” (374 US 398, 403 [1963], quoting NAACP v Button, 371 US 415, 438 [1963]). This test has been characterized as “strict scrutiny” (e.g., Catholic Charities of Sacramento, 32 Cal 4th at 548, 85 P3d at 81), and it might be thought that few laws would pass the test. However, after upholding a claim of free exercise against a neutral and generally applicable statute in Wisconsin v Yoder (406 US 205 [1972]), the Supreme Court “rejected every claim for a free exercise exemption to come before it” for 18 years (McConnell, The Origins and Historical Understanding of Free Exercise of Religion, 103 Harv L Rev 1409, 1417 [1990]). During that period, many thought the Court’s claim to be applying strict scrutiny — a claim finally abandoned when Smith was decided in 1990 — less than convincing (e.g., United States v Lee, 455 US 252, 262-263 [1982, Stevens, J., concurring]).

Since Smith, a number of state courts have interpreted, their states’ constitutions to call for the application of strict scrutiny (e.g., Smith v Fair Empl. & Hous. Commn., 12 Cal 4th 1143, 913 P2d 909 [1996]; Swanner v Anchorage Equal Rights Commn., 874 P2d 274 [Alaska 1994]; Attorney Gen. v Desilets, 418 Mass 316, 636 NE2d 233 [1994]). Often, however, as in the California and Alaska cases just cited, the courts rejected claims to religious exemptions, and it is questionable whether the scrutiny applied by those courts is really as strict as their statement of the rule implies. Justice Brown of the California Supreme Court, dissenting in Catholic Charities of Sacramento (32 Cal 4th at 583, 85 P3d at 105), remarked:

“Strict scrutiny is not what it once was. Described in the past as ‘strict in theory and fatal in fact’ (Gunther, Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for Newer Equal Protection (1972) 86 Harv. L. Rev. 1, 8), it has mellowed in recent decades ....
“If recent precedent is any guide, a state’s interest is compelling if the state says it is.”

The apparent reluctance of some courts to pay more than lip service to “strict scrutiny” may be an implicit recognition of what we now explicitly decide: Strict scrutiny is not the right approach to constitutionally-based claims for religious exemptions. Where the State has not set out to burden religious exercise, but seeks only to advance, in a neutral way, a legitimate object of legislation, we do not read the New York Free Exercise Clause to require the State to demonstrate a “compelling” interest in response to every claim by a religious believer to an exemption from the law; such a rule of constitutional law would give too little respect to legislative prerogatives, and would create too great an obstacle to efficient government. Rather, the principle stated by the United States Supreme Court in Smith — that citizens are not excused by the Free Exercise Clause from complying with generally applicable and neutral laws, even ones offensive to their religious tenets — should be the usual, though not the invariable, rule. The burden of showing that an interference with religious practice is unreasonable, and therefore requires an exemption from the statute, must be on the person claiming the exemption.

The burden, however, should not be impossible to overcome. As Professor (now Judge) McConnell has pointed out, a rule that the Constitution never requires a religious exemption from generally applicable laws could lead to results plainly inconsistent with basic ideas of religious freedom:

“Under the no-exemptions view . . . religious believers and institutions cannot challenge facially neutral legislation, no matter what effect it may have on their ability or freedom to practice their religious faith. Thus, a requirement that all witnesses must testify to facts within their knowledge bearing on a criminal prosecution ... if applied without exception, could abrogate the confidentiality of the confessional. Similarly, a general prohibition of alcohol consumption could make the Christian sacrament of communion illegal, uniform regulation of meat preparation could put kosher slaughterhouses out of business, and prohibitions of discrimination on the basis of sex or marital status could end the male celibate priesthood.” {The Origins and Historical Understanding of Free Exercise of Religion, 103 Harv L Rev at 1418-1419.)

We find these hypothetical laws to be well beyond the bounds of constitutional acceptability. And we by no means exclude the possibility that, even in much less extreme cases, parties claiming an exemption from generally applicable and neutral laws will be able to show that the State has interfered unreasonably with their right to practice their religion. We conclude, however, that plaintiffs here fall short of making such a showing.

The burden the WHWA places on plaintiffs’ religious practices is a serious one, but the WHWA does not literally compel them to purchase contraceptive coverage for their employees, in violation of their religious beliefs; it only requires that policies that provide prescription drug coverage include coverage for contraceptives. Plaintiffs are not required by law to purchase prescription drug coverage at all. They assert, unquestionably in good faith, that they feel obliged to do so because, as religious institutions, they must provide just wages and benefits to their employees. But it is surely not impossible, though it may be expensive or difficult, to compensate employees adequately without including prescription drugs in their group health care policies.

It is also important, in our view, that many of plaintiffs’ employees do not share their religious beliefs. (Most of the plaintiffs allege that they hire many people of other faiths; no plaintiff has presented evidence that it does not do so.) The employment relationship is a frequent subject of legislation, and when a religious organization chooses to hire nonbelievers it must, at least to some degree, be prepared to accept neutral regulations imposed to protect those employees’ legitimate interests in doing what their own beliefs permit. This would be a more difficult case if plaintiffs had chosen to hire only people who share their belief in the sinfulness of contraception.

Finally, we must weigh against plaintiffs’ interest in adhering to the tenets of their faith the State’s substantial interest in fostering equality between the sexes, and in providing women with better health care. The Legislature had extensive evidence before it that the absence of contraceptive coverage for many women was seriously interfering with both of these important goals. The Legislature decided that to grant the broad religious exemption that plaintiffs seek would leave too many women outside the statute, a decision entitled to deference from the courts. Of course, the Legislature might well have made another choice, but we cannot say the choice the Legislature made has been shown to be an unreasonable interference with plaintiffs’ exercise of their religion. The Legislature’s choice is therefore not unconstitutional.

Ill

Plaintiffs’ final claim is that the challenged sections of the WHWA violate the Establishment Clause of the Federal Constitution. We find this claim to be without merit.

The claim rests essentially on a misreading of a single United States Supreme Court case, Larson v Valente (456 US 228 [1982]). Larson held that the Establishment Clause was violated by a statute designed to exempt from certain regulatory requirements all religious faiths except a disfavored one, the Unification Church. The Court found the statute to violate the Establishment Clause’s “clearest command”: “that one religious denomination cannot be officially preferred over another” (id. at 244). Nothing of the kind has happened in this case. It cannot be convincingly argued that the WHWA was designed to favor or disfavor Catholics, Baptists or any other religion. The statute is, as we explained above, generally applicable and neutral between religions.

Plaintiffs contend that the legislation is invalid under Larson because it distinguishes between religious organizations that are exempt from the contraception requirements and those that are not. But this kind of distinction — not between denominations, but between religious organizations based on the nature of their activities — is not what Larson condemns. Plaintiffs’ theory would call into question any limitations placed by the Legislature on the scope of any religious exemption — and thus would discourage the Legislature from creating any such exemptions at all. But, as we pointed out above, legislative accommodation to religious believers is a long-standing practice completely consistent with First Amendment principles. A legislative decision not to extend an accommodation to all kinds of religious organizations does not violate the Establishment Clause.

IV

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graefeo and Read concur; Judge Pigott taking no part.

Order affirmed, with costs.


source: Caselaw Access Project

license: Public Domain

text:
    [858 NE2d 1127, 825 NYS2d 422]
    Aaron Rivera, an Infant, by His Mother and Natural Guardian, Denise Rivera, et al., Appellants, v Nelson Realty, LLC, et al., Respondents.
    Argued September 13, 2006;
    decided October 24, 2006

      POINTS OF COUNSEL

      Popkin & Popkin, L.L.P., New York City (Eric F. Popkin of counsel), for appellants.
    I. The owner and/or possessor of a multiple dwelling apartment building within the City of New York must maintain the entire premises in a reasonably safe manner free from dangerous conditions. (Basso v Miller, 40 NY2d 233; Mas v Two Bridges Assoc., 75 NY2d 680; Juarez v Wavecrest Mgt. Team, 88 NY2d 628; Duff v De Sorbo, 304 AD2d 870; Weiss v City of New York, 16 AD3d 680; Village of Saranac Lake, Inc. v State of New York, 17 AD3d 920; Dwellingham v 125 Uptown Realty Assoc., 279 AD2d 261; Trincere v County of Suffolk, 90 NY2d 976; Kush v City of Buffalo, 59 NY2d 26; Peralta v Henriquez, 100 NY2d 139.) II. The insulation requirements of section 27-809 of the Administrative Code of the City of New York apply to the exposed pipes of a metal steam radiator.

      Lester Schwab Katz & Dwyer, LLP, New York City (Steven B. Prystowsky and Harry Steinberg of counsel), for respondents.
    I. Defendants did not owe a duty to childproof the apartment plaintiffs leased. Any requirement to childproof the apartment should be legislated by state or municipal authorities. (Tagle v Jakob, 97 NY2d 165; Bua v Fernandez, 15 NY2d 664; Juarez v Wavecrest Mgt. Team, 88 NY2d 628; Matter of Sorbonne Apts. Co. v Board of Health of City of N.Y., 88 Misc 2d 970; Molina v

      Sercia, 290 AD2d 425; Moore v Bender, 280 AD2d 588; Costanzo v New York City Hous. Auth., 158 AD2d 576; Ramos v 600 W. 183rd St., 155 AD2d 333; Basso v Miller, 40 NY2d 233; Rodriguez v City of New York, 272 AD2d 68, 95 NY2d 919.) II. Defendants cannot be held liable if they merely furnished a condition for the occurrence rather than one of its causes. (Sheehan v City of New York, 40 NY2d 496; Margolin v Friedman, 43 NY2d 982; Rivera v City of New York, 11 NY2d 856; Ventricelli v Kinney Sys. Rent A Car, 59 AD2d 869, 45 NY2d 950; Martinez v Lazaroff, 66 AD2d 874, 48 NY2d 819; Green v New York City Hous. Auth., 82 AD2d 780, 55 NY2d 966; Hennigan v Johnson, 245 AD2d 1130; Sanchez v Biordi, 259 AD2d 434; Dugue v 1818 Newkirk Mgt. Corp., 301 AD2d 560; Napoli v Menicucci, 299 AD2d 466.) III. Administrative Code of the City of New York § 27-809, requiring pipes carrying steam water to be insulated, does not apply to radiators. (People v Finnegan, 85 NY2d 53, 516 US 919; People ex rel. Harris v Sullivan, 74 NY2d 305; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382; Juarez v Wavecrest Mgt. Team, 88 NY2d 628; McKuskie v Hendrickson, 128 NY 555; Servido v Superintendent of Ins., 77 AD2d 70, 53 NY2d 1041; Matter of Aylesworth v Phoenix Cheese Co., 170 App Div 34; People v Nemadi, 140 Misc 2d 712; People v Premier House, 174 Misc 2d 163; Sanchez v Biordi, 259 AD2d 434.)
   OPINION OF THE COURT

R.S. Smith, J.

We hold that the landlord of a home where children live does not have a common-law or other duty to provide or install radiator covers.

Facts and Procedural History

As in every case where a child is seriously injured, the facts are upsetting. Plaintiff Aaron Rivera, then three years old, was seriously burned when he climbed onto an uncovered radiator in his parents’ bedroom, where he was playing unsupervised with his brothers, ages four and two. Defendants, the landlord of the apartment where Aaron lived and the company that managed the building, knew that young children were living in the apartment; knew that the radiators in the apartment were not covered; and knew that the children’s parents believed that the radiators presented a danger. Several times during the months preceding the accident, Aaron’s parents had asked defendants to provide radiator covers, but defendants had refused on the ground of expense.

Aaron and his mother brought this action to recover for injuries resulting from the accident. Supreme Court denied defendants’ motion for summary judgment, finding an issue of fact as to whether “defendants breached their duty to maintain the premises in a safe condition.” The Appellate Division, with one Justice dissenting, reversed and dismissed the complaint, holding that “it was not the landlord’s duty to provide a cover for the radiator” (20 AD3d 316, 316-317 [2005]). We now affirm the Appellate Division’s order.

Discussion

Plaintiffs argue that a jury could find defendants liable for their failure to install radiator covers both under the common law and under the New York City Administrative Code. We reject both arguments.

I

Plaintiffs’ common-law argument is based on Basso v Miller (40 NY2d 233, 241 [1976]). They read that case as imposing a single, simple duty on owners and occupiers of land — that of “reasonable care under the circumstances” (id.). A jury could find, plaintiffs assert, that it was not reasonable under the circumstances for defendants to refuse to install radiator covers in an apartment occupied by young children. But plaintiffs read Basso too broadly. The law is not that simple.

The question we addressed in Basso was whether to continue to apply the long-standing common-law rule that the duty of an owner or occupier of land to persons on that land depended upon the status of the plaintiff. Under the traditional doctrine, a plaintiff must be fit into one of three categories: an invitee, present for the business purposes of the landowner; a licensee, i.e., a social guest; or a trespasser. The duty owed to each was different. Finding these distinctions unduly complicated and difficult to apply, we discarded them in Basso in favor of what we called “the simple rule of reasonable care under the circumstances” (40 NY2d at 240-241).

Chief Judge Breitel, joined by Judge Jasen, concurred in the result in Basso, but disagreed with the majority’s approach, which he characterized in sweeping terms. Chief Judge Breitel wrote:

“Abandoning all the rules governing liability of a possessor to one injured on his property, rules evolved progressively in the common-law process over the past 200 years, the court substitutes an amorphous ‘single standard’ of ‘reasonable care under the circumstances’ . . . [T]he substitution is deceptively simple; it raises more problems than it solves” (40 NY2d at 243 [Breitel, Ch. J., concurring]).

In the years since Basso, we have not deviated from its core holding — that the duty of a landowner does not depend upon the plaintiffs status as invitee, licensee or trespasser — but we have not given it the broad interpretation that the concurring Judges feared. Later cases made clear that we did not, in Basso, abandon “all the rules governing liability of a possessor to one injured on his property.”

Thus, in Tagle v Jakob (97 NY2d 165, 168 [2001]), we applied the common-law rule that “[o]rdinarily, a servient owner has no duty to maintain an easement to which its property is subject,” rejecting on that basis the claim of a plaintiff who was injured by touching an electric wire maintained by a utility company on the defendant’s property. Discussing our holding in Basso, we said in Tagle: “Although a jury determines whether and to what extent a particular duty was breached, it is for the court first to determine whether any duty exists, taking into consideration the reasonable expectations of the parties and society generally” (id.).

More directly relevant to this case, Basso did not abrogate the common-law rule that, with some exceptions, a landlord is not liable to a tenant for dangerous conditions on the leased premises, unless a duty to repair the premises is imposed by statute, by regulation or by contract. As the Appellate Division explained in Ramos v 600 W. 183rd St. (155 AD2d 333, 334 [1st Dept 1989]), discussing a landlord’s asserted duty to install window guards in an apartment:

“At common law, liability in tort with respect to land and buildings generally depended on occupation and control; as a result, it was the tenant, not the landlord, who was generally held responsible for injuries caused by the condition or use of leased premises.” (See Restatement [Second] of Torts § 356; Juarez v Wavecrest Mgt. Team, 88 NY2d 628, 642 [1996] [“Generally, a landlord may be held liable for injury caused by a defective or dangerous condition upon the leased premises if the landlord is under a statutory or contractual duty to maintain the premises in repair and reserves the right to enter for inspection and repair” (emphasis added and citations omitted)].)

While the common-law rule of nonliability of a landlord to a tenant was not abolished by Basso, we have recognized significant modifications of that duty by statute and contract. Long before Basso was decided, what is now Multiple Dwelling Law §78 (formerly the Tenement House Act) had been enacted. It provides that every multiple dwelling “shall be kept in good repair” and that “[t]he owner shall be responsible for compliance” with that obligation (Multiple Dwelling Law § 78 [1]). That statute expanded the landlord’s duty to repair defective conditions, limited at common law to areas of the leased property over which the landlord retained control (see Restatement [Second] of Torts § 360), to all parts of the premises leased (Altz v Leiberson, 233 NY 16, 17-18 [Cardozo, J., 1922]). In Juarez, we held that Multiple Dwelling Law § 78, in combination with Local Law No. 1 (1982) of New York City, requiring landlords to remove or cover lead paint in apartments where young children lived, could justify holding landlords liable in damages for failure to comply with the local law (see 88 NY2d at 642-643).

Even in the absence of statute, a common-law duty to repair defective conditions within the home may and often does arise from the contractual relationship between landlord and tenant. Thus in Chapman v Silber (97 NY2d 9, 20 [2001]), we held that in a community where no legislation governing lead paint existed, the defendant landlords had assumed a duty to make repairs, and that under “traditional common-law principles” a landlord who was on notice of lead-paint hazards was required to remedy them. The question for us here is whether defendants’ failure to supply radiator covers breached any duty to keep plaintiffs’ apartment in good repair.

Our answer to the question is no. Plaintiffs do not claim that the radiator that injured Aaron needed repair, or was defective in any way. Plaintiffs’ claim is that an uncovered radiator in good working order, though not a hazard in a home occupied only by adults, is dangerous to children. No duty to remedy this alleged hazard is imposed by the Multiple Dwelling Law or arises under common law by virtue of the lease. Accordingly, any duty to protect children from uncovered radiators remains that of the tenant, unless some other statute or regulation imposes it on the landlord (see Rodriguez v City of New York, 20 AD3d 327 [1st Dept 2005]; cf. Ramos, 155 AD2d at 334 [rejecting argument that landlords had a “common law duty of reasonable care ... to make . . . window(s) safe,” where a regulation relating to window guards was not violated]). The decision whether radiator covers must be supplied by landlords is thus left to legislators and regulators, who are in the best position to balance the harm prevented by this safety measure against its cost — a cost which, if imposed on landlords, becomes part of the overall cost of rental housing.

II

Plaintiffs argue, in the alternative, that New York City Administrative Code § 27-809 required defendants here to install the radiator covers that Aaron’s parents requested. That section provides: “All accessible piping in habitable and occupiable rooms carrying steam, water, or other fluids at temperatures exceeding one hundred sixty-five degrees Fahrenheit shall be insulated . . . .” Plaintiffs say that radiators are “piping,” which the Code provision requires to be “insulated” by covers.

Plaintiffs’ reading of the regulation is strained. People do not ordinarily speak of radiators as “piping” or of radiator covers as insulation. And other provisions of the Administrative Code show that the authors of the Code used the word “radiators” to mean something different from “piping” or “pipes.” Thus, section 10-118 refers to “used materials or parts of buildings or structures, including but not limited to, piping, heating equipment, wiring, or other fixtures, windows or parts thereof, doors, radiators, bricks, wood beams or other parts” (Administrative Code of City of NY § 10-118 [b] [emphasis added]). And section 27-4200 provides: “Radiators shall not be less than four inches above the floor. All steam pipes or risers within six feet of the floor shall be protected with wire guard or noncombustible pipe covering” (Administrative Code of City of NY § 27-4200 [i] [emphasis added]; cf. 14 NYCRR 375.14 [b] [3] [referring to “(s)team pipes and radiators”]; 18 NYCRR 414.5 [d] [“(r)adiators and pipes”]; 18 NYCRR 442.15 [a] [10] [“steam pipes, heating pipes and radiators”]). Finally, it makes sense to treat pipes and radiators differently: no one knows from looking at a pipe whether it carries hot or cold water, but most people, other than young children, can be expected to assume that radiators are hot.

In short, Administrative Code § 27-809 did not require defendants to install radiator covers in the apartment where Aaron was injured.

* * *

Neither common law nor any statute or regulation requires landlords to cover radiators in rented apartments where young children live. For that reason, defendants breached no duty to plaintiffs, and plaintiffs’ complaint was properly dismissed.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo and Read concur; Judge Pigott taking no part.

Order affirmed, with costs.


author: Read, J.

text:
    [858 NE2d 1131, 825 NYS2d 426]
    In the Matter of Nazareth Home of the Franciscan Sisters et al., Appellants, v Antonia C. Novello, M.D., as Commissioner of Health of State of New York, et al., Respondents.
    Argued September 14, 2006;
    decided October 24, 2006

      POINTS OF COUNSEL

      Harter, Secrest & Emery LLP, Rochester (Thomas G. Smith and Carol L. O’Keefe of counsel), for appellants.
    I. The Department of Health’s methodology and the resulting 2004 Medicaid rates paid to homes in the Erie Region are irrational. (New York State Assn. of Counties v Axelrod, 78 NY2d 158; Matter of Mount Sinai Med. Ctr. v Empire Blue Cross & Blue Shield, 282 AD2d 965, 96 NY2d 719; Society of N.Y. Hosp. v Axelrod, 163 AD2d 142; Matter of Beekman-Downtown Hosp. v Whalen, 44 NY2d 124.) II. The methodology and resulting rates violate Public Health Law § 2807 (3) and § 2808 (3). (Matter of Society of N.Y. Hosp. v Axelrod, 70 NY2d 467; Virginia Hosp. Assn. v Baliles, 868 F2d 653, affd sub nom. Wilder v Virginia Hospital Assn., 496 US 498; Kansas Health Care Assn., Inc. v Kansas Dept. of Social & Rehabilitation Servs., 31 F3d 1536; Matter of United Home for Aged Hebrews v Axelrod, 201 AD2d 656, 83 NY2d 760; Erie County Geriatric Ctr. v Sullivan, 952 F2d 71; New Jersey Hosp. Assn. v Waldman, 73 F3d 509; Abbeville Gen. Hosp. v Ramsey, 3 F3d 797, 511 US 1032; Matter of St. James Nursing Home v DeBuono, 12 AD3d 921; Multicare Med. Ctr. v State of Wash., 768 F Supp 1349; Temple Univ. v White, 941 F2d 201.) III. The resulting rates deny the Erie Region homes equal protection of the laws and constitute a taking. (Reynolds v Sims, 377 US 533; Reed v Reed, 404 US 71; Weissman v Evans, 56 NY2d 458; Dorsey v Stuyvesant Town Corp., 299 NY 512, 339 US 981; Matter of Abrams v Bronstein, 33 NY2d 488; Greenstein v Bane, 833 F Supp 1054; Schweiker v Wilson, 450 US 221; McGrath v Lippman, 273 AD2d 740; Johnson v Rodriguez, 110 F3d 299, 522 US 995; Allegheny Pittsburgh Coal Co. v Commission of Webster Cty., 488 US 336.) IV Recalculated rates for 2004 and thereafter constitute the appropriate form of relief for the Erie Region homes. (Matter of Avon Nursing Home v Axelrod, 83 NY2d 977; New York State Assn. of Counties v Axelrod, 78 NY2d 158; Matter of St. James Nursing Home v DeBuono, 12 AD3d 921; Temple Univ. v White, 941 F2d 201, cert denied sub nom. Snider v Temple Univ., 502 US 1032.)

      Eliot Spitzer, Attorney General, Albany (Victor Paladino, Caitlin J. Halligan, Daniel Smirlock and Nancy A. Spiegel of counsel), for respondents.
    I. Petitioners have failed to make a compelling showing that the use of 1983 base year costs and the trend factors is irrational. (Matter of Catholic Med. Ctr. of Brooklyn & Queens v Department of Health of State of N.Y., 48 NY2d 967; Matter of Consolation Nursing Home v Commissioner of N.Y. State Dept. of Health, 85 NY2d 326; Matter of Beekman-Downtown Hosp. v Whalen, 44 NY2d 124; Matter of Blossom View Nursing Home v Novello, 4 NY3d 581; Matter of Brothers of Mercy Nursing & Rehabilitation Ctr. v DeBuono,
      292 AD2d 775, 98 NY2d 692, 99 NY2d 502; Matter of Brothers of Mercy Nursing & Rehabilitation Ctr. v Commissioner of N.Y. State Dept. of Health, 192 AD2d 50, 83 NY2d 977.) II. Petitioners have failed to show that their overall rates are inadequate under Public Health Law § 2807 (3). (Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40; Matter of Patterson SNF v Chassin, 196 AD2d 155, 83 NY2d 962; Matter of St. James Nursing Home v DeBuono, 12 AD3d 921; New York State Health Facilities Assn. v Axelrod, 154 AD2d 10; Matter of High Point Hosp. v Surles, 218 AD2d 874; Matter of Bellevue Maternity Hosp. v McBarnette, 203 AD2d 769; Matter of Sunrise Manor Nursing Home v Axelrod, 135 AD2d 293; Matter of Amot-Ogden Mem. Hosp. v Blue Cross of Cent. N.Y., 118 AD2d 185; Lett v Magnant, 965 F2d 251; Portland Residence, Inc. v Steffen, 34 F3d 669.) III. Because participation in the Medicaid program is voluntary, the allegedly inadequate Medicaid reimbursement does not constitute a taking without just compensation. (Garelick v Sullivan, 987 F2d 913; Whitney v Heckler, 780 F2d 963, cert denied sub nom. Whitney v Bowen, 479 US 813; Minnesota Assn. of Health Care Facilities, Inc. v Minnesota Dept. of Pub. Welfare, 742 F2d 442, 469 US 1215; St. Francis Hosp. Ctr. v Heckler, 714 F2d 872; Idaho Health Care Assn. v Sullivan, 716 F Supp 464; Matter of New York State Health Facilities Assn. v Axelrod, 77 NY2d 340.) IV Petitioners’ 2004 rates and the rate-setting methodology do not deprive them of equal protection. (Matter of Samaritan Hosp. v Axelrod, 107 AD2d 911, 65 NY2d 636; Matter of 303 W. 42nd St. Corp. v Klein, 46 NY2d 686.) V Even if petitioners prevail, they are not entitled to a court order requiring reimbursement of their 2004 allowable costs. (Matter of Cabrini Med. Ctr. v Axelrod, 177 AD2d 824, 79 NY2d 755; Matter of Jewish Home & Infirmary of Rochester v Commissioner of N.Y. State Dept. of Health, 84 NY2d 252.)
   OPINION OF THE COURT

Read, J.

Petitioners in this CPLR article 78 proceeding are 62 nursing homes operating in western New York, which are reimbursed by the State of New York under its Medical Assistance Plan (Medicaid) for medical services provided to the indigent. On this appeal, petitioners claim that the Medicaid reimbursement that they have received since 2004 is nowhere near their legitimate actual costs to care for Medicaid-eligible residents, and that this massive shortfall threatens their financial viability and potentially compromises the quality of care. They blame their plight on the New York State Department of Health’s (DOH) Medicaid rate-setting methodology, which they claim irrationally relies on outdated and unrepresentative 1983 costs, keys inflation to the Consumer Price Index (CPI) and ignores inflation entirely for 1996; violates Public Health Law § 2807 (3)’s mandate for “reasonable and adequate” rates; and confiscates their property and deprives them of equal protection of the laws in violation of the federal and state constitutions. Petitioners ask us to declare DOH’s 2004 Medicaid rates and rate-setting methodology unlawful as applied to them; to direct the Commissioner of Health and the Director of the Division of the Budget to recalculate their 2004 Medicaid rates based on their legitimate actual 2003 or 2004 costs; and to take whatever action is necessary to eliminate or prevent post-2004 discrepancies between their justifiable costs and the Medicaid reimbursement that they receive.

Supreme Court dismissed the petition. The court noted that DOH’s rate-setting methodology included adjustments to account for regional differences in wages and fringe benefits; and that the Legislature had on occasion outright appropriated additional funds to nursing homes to cover unusual costs, and had recently amended the Public Health Law to allow use of 2001 wages and fringe benefits to calculate reimbursement rates for rate periods after April 2004. Nor was Supreme Court prepared to say that the CPI was an inadequate yardstick for measuring inflation. The Appellate Division affirmed the judgment “for reasons stated in the decision at Supreme Court” (21 AD3d 1388, 1388 [4th Dept 2005]), and subsequently granted petitioners leave to appeal. We now affirm.

I.

Medicaid, a joint federal-state program established pursuant to title XIX of the Social Security Act (42 USC § 1396 et seq.), pays for medical care for those otherwise unable to afford it, including nursing home care for older people with low incomes and limited assets. The federal government normally covers 50% of New York’s Medicaid costs, while the state and local governments share responsibility for the rest. New York operates its own Medicaid program, setting its own guidelines for eligibility and services in conformity with federal statutes and rules.

Pursuant to article 28 of the Public Health Law, DOH establishes Medicaid reimbursement rates for nursing homes using a complex system called the Resource Utilization Group-II (RUG-II) case mix reimbursement methodology (see generally 10 NYCRR subpart 86-2; Matter of Blossom, View Nursing Home v Novello, 4 NY3d 581 [2005]). Simply put, a nursing home’s reimbursement rate — the daily rate at which a facility can bill Medicaid for every Medicaid-eligible resident — reflects its allowable costs in a base year as adjusted to reflect patient conditions and care needs and regional differences in wages and fringe benefits, and trended forward to account for inflation. In general, 1983 is the base year for calculating a nursing home’s operating costs, which are the major constituent of its reimbursement rate (see 10 NYCRR 86-2.10 [b] [1]).

The Commissioner adopted this rate-setting methodology to encourage nursing homes to contain costs and operate efficiently and economically in line with their reimbursement rates. Specifically, rates are set in advance of the rate year, and are subject to a maximum (ceiling) and minimum (base) price derived from statewide averages (see generally Matter of Consolation Nursing Home v Commissioner of N Y. State Dept. of Health, 85 NY2d 326 [1995]).

For rate years on and after April 1, 2000, the Legislature requires DOH to use the “U.S. Consumer Price Index for all urban consumers published . . . after June first of the rate year prior to the year for which rates are being developed” as the trend factor (see Public Health Law § 2807-c [10] [c] [2]; see also L 2005, ch 58, part B, §§ 1, 2 [extending section 2807-c’s expiration date from July 1, 2005 until July 1, 2007]). The Legislature has also mandated that Medicaid reimbursement rates for nursing homes in effect on and after April 1, 1996 through March 31, 2007 shall not reflect trend factor projections or adjustments for the period April 1, 1996 through March 31, 1997 (i.e., state fiscal year 1996-1997) (see L 1996, ch 474, § 194, as amended by L 2006, ch 57, part A, § 78).

Finally, the Legislature recently enacted Public Health Law § 2808 (2-b), which provides for updating the base year for operating costs beginning as of January 1, 2007 (see L 2006, ch 109, part C, § 47). This new provision mandates full implementation in 2009, preceded by a two-year phase-in period, and calls for a 2002 base year. Further, section 2808 (2-b) (f) specifies updating thereafter no later than the 2012 rate period, using a base year no earlier than three years prior to the initial rate year, and for subsequent updating at least every six years, again using a three-year-old or more recent base year.

II.

“Generally, rate-setting actions of the Commissioner, being quasi-legislative in nature, may not be annulled except upon a compelling showing that the calculations from which [they] derived were unreasonable” (Matter of Society of N.Y. Hosp. v Axelrod, 70 NY2d 467, 473 [1987] [internal quotation marks omitted]). DOH is entitled to a “high degree of judicial deference, especially when . . . act[ing] in the area of its particular expertise,” and thus petitioners bear the “heavy burden of showing” that DOH’s rate-setting methodology “is unreasonable and unsupported by any evidence” (Consolation Nursing Home, 85 NY2d at 331-332).

At one time, DOH retrospectively reimbursed nursing homes based on their actual costs, which saddled taxpayers with ever-increasing expenditures without creating any incentives for efficiency. This is why DOH switched in 1986 to RUG-II, a prospective system linked to a base year, a key cost containment device that encourages facilities to economize (see Blossom View Nursing Home, 4 NY3d at 585 n 2 [“A base year is used in a prospective system to control for cost growth in excess of inflation”]).

Further, DOH’s rate-setting methodology does not, as petitioners argue, preserve costs for all time in the amber of 1983. For example, if a facility’s case mix index increases, so does its reimbursement rate. In addition, DOH has adjusted its methodology to reflect actual wages paid by each facility more realistically (see Matter of Brothers of Mercy Nursing & Rehabilitation Ctr. v DeBuono, 292 AD2d 775 [4th Dept 2002], lv denied 99 NY2d 502 [2002]; Matter of Brothers of Mercy Nursing & Rehabilitation Ctr. v Commissioner of N.Y. State Dept. of Health, 192 AD2d 50 [3d Dept 1993], revd on other grounds 83 NY2d 997 [1994]). In fact, DOH uses wage data from 1983, 1987, 1993 or 2001 when calculating reimbursement rates, depending on which year’s data most favors a facility (see 10 NYCRR 86-2.10 [m]; Public Health Law § 2808 [17]).

Although petitioners fault DOH for using the CPI as the trend factor and disregarding inflation during state fiscal year 1996-1997, these aspects of the rate-setting methodology are dictated by statute (see Public Health Law § 2807-c [10] [c] [2]; L 1996, ch 474, § 194, as amended by L 2006, ch 57, part A, § 78). The Legislature has also directed DOH to update the base year from 1983, but in 2009, after a two-year phase-in, not in 2004 as petitioners request.

In sum, we conclude that the Commissioner acted rationally in setting petitioners’ 2004 Medicaid reimbursement rates. Within the parameters set by the Legislature, DOH has advanced ample explanation for setting rates prospectively based on 1983 costs, as adjusted in various ways and trended forward.

III.

RUG-II was designed to produce rates complying with the federal Boren Amendment (42 USC former § 1396a [a] [13] [A]), which Congress repealed in 1997, and its New York analogue, section 2807 (3) of the Public Health Law. Section 2807 (3) tasks the Commissioner with determining that

“the proposed rate schedules for payments to hospitals[] for hospital and health-related services are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities. In making such certification, the commissioner shall take into consideration the elements of cost, geographical differentials in the elements of cost considered, economic factors in the area in which the hospital is located, the rate of increase or decrease of the economy in the area in which the hospital is located, costs of hospitals of comparable size, and the need for incentives to improve services and institute economies” (emphasis added).

Petitioners contend that their Medicaid reimbursement for 2004 was roughly $1 million less per home than the actual cost to provide necessary care for Medicaid-eligible residents; or, stated another way, that their Medicaid reimbursement rates covered only about 76% of their actual 2002 Medicaid costs. Petitioners essentially point to this discrepancy (which the State disputes) as sufficient proof that DOH’s reimbursement rates for 2004 were not reasonable and adequate as required by Public Health Law § 2807 (3).

As the Commissioner points out, however, section 2807 (3) does not require rates to cover every nursing home’s actual costs, the remedy that petitioners effectively seek. Rates are “reasonable and adequate” so long as they reimburse the necessary costs (i.e., the “costs which must be incurred”) of “efficiently and economically operated facilities” (EEOFs) (Public Health Law § 2807 [3]). In 1993, DOH conducted a study to determine whether its reimbursement rates satisfied this standard. DOH identified those facilities that were EEOFs; determined their necessary costs; and compared these costs to its reimbursement rates to assure that the rates were reasonable and adequate (see Pinnacle Nursing Home v Axelrod, 928 F2d 1306, 1314 [2d Cir 1991]). DOH subsequently used the findings from this study to confirm that its overall rates for rate years 1999 through 2003, the latest year for which data were available, complied with Public Health Law § 2807 (3). Thus, DOH had a rational basis for concluding that its 2004 reimbursement rates were reasonable and adequate. Moreover, DOH’s rate-setting methodology takes each of the statutory factors in section 2807 (3) into account, and the Commissioner is entitled to great deference in her determination that the rates were reasonable under the statute.

Finally, we reject petitioners’ arguments that DOH’s rate-setting methodology violates the Takings Clause of the Fifth and Fourteenth amendments of the Federal Constitution, and the Equal Protection clauses of the Fourteenth Amendment of the Federal Constitution and article I, § 11 of the New York State Constitution. Specifically, petitioners contend that New York effectively requires them to provide care to the indigent and then fails to reimburse them for their actual costs, thus forcing them to use their own assets to meet this public responsibility. But “where a service provider voluntarily participates in a price-regulated program or activity, there is no legal compulsion to provide service and thus there can be no taking” (Garelick v Sullivan, 987 F2d 913, 916 [2d Cir 1993] [contrasting circumstances of a public utility which is “under a state statutory duty to serve the public”], cert denied sub nom. Garelick v Shalala, 510 US 821 [1993]). As for petitioners’ claim that DOH’s rate-setting methodology favors nursing homes in the New York City area, they have not shown any intentional action by DOH to discriminate against facilities in western New York (see Matter of Samaritan Hosp. v Axelrod, 107 AD2d 911, 913 [3d Dept 1985] [“To support an equal protection argument, petitioner must show that any discriminatory effect of the regulations was the result of respondents’ ‘ “evil eye” ’ toward discrimination against petitioner”], quoting Matter of 303 W. 42nd St. Corp. v Klein, 46 NY2d 686, 695 [1979] [equal protection “forbids a public authority from applying or enforcing an admittedly valid law with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances” (id. at 693; internal quotation marks omitted)]).

Accordingly, the order of the Appellate Division should be affirmed, with costs. The certified question should not be answered upon the ground that it is unnecessary.

Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo and R.S. Smith concur; Judge Pigott taking no part.

Order affirmed, etc.

      . “Allowable costs” are defined as those costs that are “properly chargeable to necessary patient care” (10 NYCRR 86-2.17 [a]). DOH establishes a nursing home’s allowable costs through an initial desk review of the nursing home’s cost report for the base year and a later audit.

      . The word “hospital” includes “nursing home” (Public Health Law § 2801 [1]).


author: ClPARICK, J.

text:
    [858 NE2d 1140, 825 NYS2d 435]
    Beatrice Putter, Individually and as Executrix of Milton Putter, Deceased, Respondent, v North Shore University Hospital et al., Appellants.
    Argued October 17, 2006;
    decided November 16, 2006

      POINTS OF COUNSEL

      Martin Clearwater & Bell LLP, New York City (Ellen B. Fish-man, Anthony M. Sola and Rosaleen T. McCrory of counsel), for appellants.
    I. The Appellate Division erred in reversing the Supreme Court order granting defendants’ motion to dismiss the complaint pursuant to CPLR 3211 (a) (5). This medical malpractice action is time-barred as it was not commenced within the statutory period of limitations set forth in CPLR 214-a. (Nykorchuck v Henriques, 78 NY2d 255; Matter of Daniel J. v New York City Health & Hosps. Corp., 77 NY2d 630.) II. Plaintiffs cannot satisfy essential elements of the doctrine of equitable estoppel. In particular, the Appellate Division erred in finding that plaintiffs exercised due diligence in seeking the facts on which their claims are based and that they reasonably relied on the statements attributed to Dr. Farber in failing to commence a timely action. (McIvor v Di Benedetto, 121 AD2d 519; Zumpano v Quinn, 6 NY3d 666; Estate of Boyle v Smith, 15 AD3d 338; Simcuski v Saeli, 44 NY2d 442; General Stencils v Chiappa, 18 NY2d 125; Fuchs v New York Blood Ctr., 275 AD2d 240, 95 NY2d 769; Edmonds v Getchonis, 150 AD2d 879; Gleason v Spota, 194 AD2d 764; Nichilo v B.F.N. Realty Assoc., Inc., 19 AD3d 666; Kuhlman v Westfield Mem. Hosp., 212 AD2d 1007.) III. The Appellate Division erred in finding that plaintiffs satisfied the standard set forth in CPLR 3211 (d) and that they demonstrated that further discovery is appropriate to allow them to develop their estoppel claim. (Peterson v Spartan Indus., 33 NY2d 463; Ramsay v Mary Imogene Bassett Hosp., 113 AD2d 149, 67 NY2d 608; Klein v Jamor Purveyors, 108 AD2d 344; Mandel v Busch Entertainment Corp., 215 AD2d 455; Roswick v Mount Sinai Med. Ctr., 22 AD3d 409; Chopra v Pella

      Window Corp., 2 AD3d 1087; Davis v Smith Corp., 262 AD2d 752; Hoffman v Pelletier, 6 AD3d 889; Matter of Toal v Staten Is. Univ. Hosp., 300 AD2d 592; Matter of Perez v New York City Health & Hosps. Corp., 84 AD2d 789.)

      Jacob D. Fuchsberg Law Firm, LLP, New York City (Alan L. Fuchsberg and Danielle George of counsel), for respondent.
    I. The Appellate Division correctly applied Simcuski v Saeli (44 NY2d 442 [1978]) in holding that defendants’ motion to dismiss the complaint as time-barred should have been denied. (Owen v Mackinnon, 6 AD3d 684; Castagnazzi v Schlecker, 129 AD2d 605; Schirano v Paggioli, 99 AD2d 802; Vigliotti v North Shore Univ. Hosp., 24 AD3d 752; Matter of Eberhard v Elmira City School Dist., 6 AD3d 971; Doe v North Shore Univ. Hosp., 28 AD3d 603.) II. Plaintiffs have sufficiently alleged fraudulent concealment, due diligence and justifiable reliance. (Estate of Boyle v Smith, 15 AD3d 338, 5 NY3d 703; Gleason v Spota, 194 AD2d 764; Marshall v Duryea, 172 AD2d 726; Otero v Presbyterian Hosp. in City of N.Y., 240 AD2d 279; Hoemke v New York Blood Ctr., 912 F2d 550; Vigliotti v North Shore Univ. Hosp., 24 AD3d 752.) III. The Appellate Division properly found that further discovery was warranted. (Castagnazzi v Schlecker, 129 AD2d 605; Nappi v North Shore Univ. Hosp., 31 AD3d 509; Dillenbeck v Hess, 73 NY2d 278.) IV The cases cited by defendants-appellants are distinguishable from the case at bar. (Zumpano v Quinn, 6 NY3d 666; General Stencils v Chiappa, 18 NY2d 125; Simcuski v Saeli, 44 NY2d 442; McIvor v Di Benedetto, 121 AD2d 519; Gleason v Spota, 194 AD2d 764; Jordan v Ford Motor Co., 73 AD2d 422; Rockwell v Ortho Pharm. Co., 510 F Supp 266; Erbe v Lincoln Rochester Trust Co., 13 AD2d 211; Fuchs v New York Blood Ctr., 275 AD2d 240, 95 NY2d 769; Contento v Cortland Mem. Hosp., 237 AD2d 725, 90 NY2d 802.)
   OPINION OF THE COURT

ClPARICK, J.

The issue presented in this medical malpractice action is whether plaintiff is entitled to invoke the doctrine of equitable estoppel to toll the 2V2-year statute of limitations. We conclude, as a matter of law, that she may not and that defendants’ motion pursuant to CPLR 3211 (a) (5) to dismiss for failure to timely commence the action was properly granted.

Milton Putter had quadruple bypass surgery at defendant North Shore University Hospital in November 1993. Defendant Dr. Michael Hall performed the surgery. Several weeks later, during routine postoperative testing by his primary care physician Dr. Leslie Cooperman, Putter learned that his liver enzymes were elevated. Following additional tests, including a Ever biopsy, Putter was diagnosed with hepatitis C — a condition he did not have prior to the surgery. At his examination before trial, Putter testified that Dr. Cooperman had opined that he most likely contracted the disease during surgery. Moreover, Dr. Cooperman advised Putter that another of his patients had recently contracted hepatitis C — likewise after an operation performed by Dr. Hall at North Shore. Putter’s three sons, who are medical professionals — two physicians and one physician’s assistant — also concluded that Putter had contracted the disease in either the hospital or the operating room. In fact, when asked at his deposition if he had spoken with his sons about whether he was infected with hepatitis C during the surgery, Putter responded, “I think I did and it seemed pretty obvious.”

Based on this information, in 1994, Putter contacted Dr. Bruce Farber, chief of infectious diseases at North Shore. Putter inquired as to how he had contracted hepatitis C, since he had not received any blood products during his surgery. Farber allegedly told him that “there are a percentage of people who get Hepatitis C from quote unknown sources.” Putter later asserted in an affidavit that Farber had told him that his was a case where the hepatitis C was of unknown origin. Putter did not pursue any further investigation.

In 2002, long after the 21/2-year statute of limitations had expired, the New York State Department of Health (DOH) and the Nassau County DOH contacted Putter and informed him that North Shore was under investigation. The County DOH wrote a letter to the State DOH stating that it had identified 10 patients who had developed hepatitis C after cardiac surgery at North Shore between 1993 and 2001. Eight of those patients had surgery performed by the same doctor — Dr. Hall. The County DOH letter also stated that North Shore was aware of three of the cases, but did not report them to either DOH until after the investigation began. The letter further stated that several individuals at the hospital, including the director of infection control, had been aware for several years that the surgeon had hepatitis C. Putter also asserted that DOH advised him that epidemiological testing had revealed that he and Dr. Hall had the same type hepatitis C.

Putter commenced this suit in August 2002 alleging causes of action including medical malpractice, lack of informed consent and negligent hiring. Defendants answered and subsequently moved to dismiss the complaint pursuant to CPLR 3211 (a) (5) for failure to commence the action within the applicable statute of limitations. Putter opposed the motion, arguing that defendants should be equitably estopped from raising the statute of limitations as a defense. Supreme Court granted defendants’ motion to dismiss, finding that Putter had sufficient timely knowledge to place him under a duty to inquire and to determine the relevant facts before the statute of limitations expired.

A majority of the Appellate Division reversed and reinstated the complaint. The Court found that although Putter did not have enough information to defeat defendants’ motion, dismissal of the complaint was premature because with additional discovery under CPLR 3211 (d) Putter might be able to demonstrate that equitable estoppel was appropriate. Two Justices dissented and voted to affirm, finding that Putter did not establish that he was entitled to equitable estoppel, in that he did not demonstrate any active concealment by defendants or that he justifiably relied on any misrepresentations. The Appellate Division granted defendants leave to appeal, certifying the following question: “Was the decision and order of this court dated January 10, 2006, properly made?” We answer the question in the negative and now reverse.

We have recently reaffirmed that equitable estoppel will preclude a defendant from using the statute of limitations as a defense “ ‘where it is the defendant’s affirmative wrongdoing . . . which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding’ ” (Zumpano v Quinn, 6 NY3d 666, 673 [2006], quoting General Stencils v Chiappa, 18 NY2d 125, 128 [1966]). A plaintiff seeking to apply the doctrine of equitable estoppel must “establish that subsequent and specific actions by defendants somehow kept [him or her] from timely bringing suit” (Zumpano, 6 NY3d at 674). Equitable estoppel is appropriate where the plaintiff is prevented from filing an action within the applicable statute of limitations due to his or her reasonable reliance on deception, fraud or misrepresentations by the defendant. That is not the case here.

Although we have previously applied equitable estoppel in the context of medical malpractice cases, this case can be distinguished from the situation presented in Simcuski v Saeli (44 NY2d 442 [1978]). In Simcuski, the defendant doctor negligently injured the plaintiff during surgery. Although allegedly aware of his negligence and of the potential permanent damage resulting from the injury, the doctor advised the plaintiff that her impairment was temporary and would be resolved if she engaged in the prescribed physiotherapy (see Simcuski, 44 NY2d at 447). It was nearly four years later that another physician advised her of the actual cause of her injury. We concluded that equitable estoppel might be appropriate in that case, assuming that plaintiff exercised due diligence in bringing her claim after discovery, because plaintiff reasonably relied on her treating physician’s misrepresentations as to the nature of her injury (see Simcuski, 44 NY2d at 449).

Here, by contrast, Putter was aware of his condition within a few months of the surgery and was advised by four medical professionals — his primary care physician and his three sons— that he most likely contracted hepatitis C either in the hospital or during surgery. Dr. Cooperman also informed Putter that another patient had recently contracted hepatitis C after surgery at the same hospital with the same surgeon. Further, Putter indicated that it “seemed pretty obvious” that he had contracted the disease during surgery. Although the question of whether a defendant should be equitably estopped is generally a question of fact, here, given Putter’s level of awareness and subsequent inaction, equitable estoppel is inappropriate as a matter of law.

Putter had sufficient information available to require him to investigate whether there was a basis for a medical malpractice action. Putter never attempted to speak with the surgeon, Dr. Hall, concerning the operation — specifically, whether he could have contracted the disease during surgery. There is likewise no indication that he asked Dr. Farber about any other patient contracting hepatitis C, despite the information he had already received from Dr. Cooperman. Under these circumstances, even if Farber told Putter his disease was from “unknown sources,” any reliance Putter placed on this conversation with Farber — a person affiliated with the defendant hospital — was unreasonable. Farber’s statement did not alter Putter’s timely awareness of the facts requiring him to make further inquiry before the statute of limitations expired. We note that, although the record reflects that certain individuals at North Shore were aware of Dr. Hall’s illness, there is no indication that they allowed him to continue performing surgeries knowing that he posed a danger to patients.

As a result, additional discovery is not required under CPLR 3211 (d). We disagree with the Appellate Division’s holding that the plaintiffs demonstrated a reasonable basis to believe that with additional discovery they would be able to develop sufficient facts to sustain their equitable estoppel claim (25 AD3d 539, 540 [2006]). Since Putter had sufficient timely knowledge of the facts, was aware of the basis of a cause of action within the applicable statute of limitations and failed to bring a timely suit, further discovery is not necessary.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendants’ motion to dismiss the complaint should be granted and the certified question should be answered in the negative.

Chief Judge Kaye and Judges Rosenblatt, Graffeo, Read, Smith and Pigott concur.

Order reversed, etc.

       Milton Putter died during the pendency of this action. His wife, Beatrice Putter, is maintaining this appeal both individually and as the executor of his estate.


author: Graffeo, J.

text:
    [858 NE2d 772, 825 NYS2d 178]
    In the Matter of Azriel Reckess et al., Respondents, v New York State Commission on Quality of Care for the Mentally Disabled, Appellant.
    Argued October 11, 2006;
    decided November 16, 2006

      POINTS OF COUNSEL

      Eliot Spitzer, Attorney General, Albany (Kathleen M. Treasure, Caitlin J. Halligan, Daniel Smirlock and Peter H. Schiff of counsel), for appellant.
    Petitioners’ possession of records pertaining to the financial operations of their adult homes in their capacity as owners of related realty corporations does not shield those records from the Commission on Quality of Care for the Mentally Disabled’s review. (Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Matter of Worldwide Mgt. Consultants, 109 AD2d 626, 65 NY2d 911; Matter of Edge Ho Holding Corp., 256 NY 374; Matter of Parisi v Waterfront Commn. of N.Y. Harbor, 79 AD2d 967, 53 NY2d 914.)

      Hinman Straub, PC., Albany {James T. Potter of counsel), for respondents.
    I. The Commission on Quality of Care for the Mentally Disabled lacks the statutory authority to subpoena the private financial records of property owners leasing to adult homes. (Matter of Irwin v Board of Regents of Univ. of State of N.Y., 27 NY2d 292; Matter of Whalen v John P., 72 AD2d 961; Beacway Operating Corp. v Concert Arts Socy., 123 Misc 2d 452; Union Theol. Seminary v Harris, 1 Misc 3d 909; Matter of Worldwide Mgt. Consultants, 109 AD2d 626, 65 NY2d 911; Matter of Parisi v Waterfront Commn. of N.Y. Harbor, 79 AD2d 967, 53 NY2d 914; Matter of Edge Ho Holding Corp., 256 NY 374.) II. The subpoenaed information is irrelevant to a proper subject of inquiry. (Matter of Eastern Indus. Supply Corp. v Waterfront Commn. of N.Y. Harbor, 96 AD2d 469; Matter of Horn Constr. Co. v Fraiman, 34 AD2d 131, 29 NY2d 559.)
   OPINION OF THE COURT

Graffeo, J.

We are asked in this case whether respondent New York State Commission on Quality of Care for the Mentally Disabled had the authority to issue subpoenas seeking documents from petitioners, the operators of several adult care facilities, relating to mortgages that they secured through realty holding companies. We hold that the subpoenas are enforceable under Mental Hygiene Law §§ 45.09 and 45.10.

Petitioners Azriel and Paula Reckess operate five adult homes in Dutchess, Rockland and Ulster counties that provide long-term residential care and services to persons who are incapable of living independently, including some residents who would otherwise require placement in a nursing home. The facilities are licensed by the State Department of Health (see Social Services Law § 460-b [1]; § 461-b [2] [a]; L 1997, ch 436, part B, § 122 [e]; see also People v Cuttita, 7 NY3d 500, 503 [2006]) and petitioners receive a per diem, flat-rate reimbursement from state and federal sources for eligible residents, rather than the cost-plus reimbursement that is provided to nursing homes. In addition, because certain residents obtain services from mental health providers, petitioners’ adult homes are also subject to oversight by the New York State Commission on Quality of Care for the Mentally Disabled (the Commission) (see Mental Hygiene Law § 45.10 [a]), an agency created to monitor mental hygiene programs and to help ensure that “the quality of care provided to persons with mental disabilities in the state is of a uniformly high standard” (Mental Hygiene Law § 45.07 [a]).

In 2003, pursuant to its authority to examine the finances of any adult home in which at least 25 or 25% of the residents receive services from a mental health provider (see Mental Hygiene Law § 45.10 [a] [2]), the Commission conducted a financial review of four of petitioners’ facilities — Golden Acres Home for Adults, Village View Home for Seniors, Dutchess Manor Home for Adults and Avalon Assisted Living. Those properties were originally owned and operated by separate partnerships created by petitioners. But the Commission’s examination revealed that title to the real property had been transferred to limited liability companies that petitioners controlled and these realty holding companies then leased the properties back to the partnerships. Simply put, the holding companies became the landlords and the partnerships operating the homes paid rent to the holding companies.

The Commission further discovered that, from 1999 to 2001, petitioners’ holding companies had refinanced the homes, dramatically raising the outstanding debt on the properties by over $10 million. For example, the mortgage indebtedness on Golden Acres increased by over $3 million and, as a result, the annual rent due the holding company grew from $173,300 to $522,000. Village View, Dutchess Manor and Avalon also sustained significant increases in mortgage indebtedness, which led to rents that were three to four times higher than before the refinancings.

Although petitioners provided the Commission with access to certain records maintained by the adult homes, they declined to produce other documents pertaining to the transfers of title to the homes and the subsequent refinancings. Concerned with the fiscal stability of the homes, the Commission issued subpoenas duces tecum to petitioners requesting “[a] 11 information pertaining to mortgages” on the four adult homes, including “applications, appraisals, title insurance documents, closing statements, mortgage notes and all records executed at the mortgage closings.” According to a Commission analyst, the Commission was interested in examining the actual costs of operation of the facilities in order to assess whether the increased debt load would impede petitioners’ ability as operators to make timely mortgage payments and thereby “avoid potential foreclosure which could jeopardize the operations of the facilit[ies] and the individuals with disabilities who are receiving care.” The Commission also sought to determine whether any improvements to the facilities had been made with the mortgage proceeds. At no time did the Commission allege that petitioners’ transactions were improper or illegal.

Petitioners commenced this proceeding to quash the subpoenas, contending that the Commission lacked statutory authority to compel the production of documents executed by petitioners in their capacities as corporate officers of the realty holding companies, rather than as the operators of the adult homes. Supreme Court agreed, determining that although the Commission may demand information from “officers or employees” of an adult home pursuant to Mental Hygiene Law § 45.09 (a), the mortgage documents at issue related to the private finances of petitioners and were therefore beyond the subpoena authority of the Commission. The Appellate Division affirmed. We now reverse.

The power to issue a subpoena exists only when it is expressly granted by the Legislature (see Matter of Irwin v Board of Regents of Univ. of State of N.Y., 27 NY2d 292, 297 [1970]; see generally Matter of Shankman v Axelrod, 73 NY2d 203, 206 [1989]). Mental Hygiene Law §§ 45.09 and 45.10 provide the Commission with a statutory basis to execute subpoenas. Section 45.09 specifically allows the Commission to “issue and enforce a subpoena and a subpoena duces tecum” (Mental Hygiene Law § 45.09 [c]) to review the “programmatic and financial operations” of certain adult homes, among other purposes (Mental Hygiene Law § 45.10 [a] [2]). The Commission may demand that the “officers or employees of an adult home” disclose “any information deemed necessary” for such an examination (Mental Hygiene Law § 45.09 [a]).

The plain language of these provisions supplies the legislative authorization for the issuance of subpoenas by the Commission in this case. Petitioners concede that they are “officers” of the adult homes (Mental Hygiene Law § 45.09 [a]; see Social Services Law § 461-b [1] [a]), as well as officers of the holding companies. Because the statutes allow the Commission to subpoena “any information” (Mental Hygiene Law § 45.09 [a]) in an officer’s possession that is relevant to the Commission’s mandate — and the financial stability of an adult care facility surely is (see Mental Hygiene Law § 45.10 [a] [2]) — section 45.09, on its face, enables the Commission to review documents in petitioners’ possession that pertain to the fiscal operations of their adult homes. This is particularly true where, as here, the sale-leaseback arrangements resulted in significant rental increases that could affect the viability of the continued operation of the homes or the extent of services provided to the residents. In other words, the Commission may subpoena documents held by adult home officers or corporations they control that were used in the sale-leaseback transactions and the related refinancings in order to gauge the financial stability of the adult homes. Therefore, the fact that the mortgage and closing documents were executed by petitioners as officers of the holding companies does not deprive the Commission of its oversight and subpoena-issuing authority (cf. Matter of Worldwide Mgt. Consultants [Waterfront Commn. of N.Y. Harbor], 65 NY2d 911, 913 [1985], affg 109 AD2d 626 [1st Dept 1985]; Matter of Parisi v Waterfront Commn. of N.Y. Harbor, 53 NY2d 914, 915 [1981], affg 79 AD2d 967 [1st Dept 1981]; Matter of Edge Ho Holding Corp., 256 NY 374, 380 [1931]).

The facts of this case justify the Commission’s exercise of its subpoena power. Petitioners are in the business of providing residential care to the elderly and mentally disabled. To ensure that adequate services are provided to these vulnerable citizens, adult care facilities are regulated by the State and the Commission’s oversight authority includes directives to review the cost effectiveness of programs (see Mental Hygiene Law § 45.07 [b]), assess the quality of care extended to residents (see Mental Hygiene Law § 45.07 [e]) and examine the financial stability of adult homes (see Mental Hygiene Law § 45.10 [a] [2]). Here, although the Commission has not assigned a nefarious purpose to the sale-leaseback arrangements and refinancings, petitioners’ actions have resulted in a significant increase in the mortgage debt carried by their adult homes, which translates to substantially higher rental obligations owed by the partnerships operating the homes. Under these circumstances, and because petitioners control the realty holding companies and the adult home partnerships, we agree with the Commission that its ability to review the transactions at issue should not be defeated by petitioners’ corporate status. Consequently, the Commission did not exceed its statutory authority when it issued subpoenas directing petitioners to disclose documents held by the realty holding companies they control that pertain to the financial stability of the adult homes they operate.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the petition dismissed.

Chief Judge Kaye and Judges Ciparick, Read, Smith and Pigott concur; Judge Rosenblatt taking no part.

Order reversed, etc.

      . An “adult home” is defined by Social Services Law § 2 (25) as “an adult care facility established and operated for the purpose of providing long-term residential care, room, board, housekeeping, personal care, (either directly or indirectly), and supervision to five or more adults unrelated to the operator.”

      . After this litigation commenced, the Commission merged with the New York State Office of Advocate for Persons with Disabilities and was renamed the New York State Commission on Quality of Care and Advocacy for Persons with Disabilities (see L 2005, ch 58, part H, § 4).

      . Petitioners indicate that in 2001 they transferred the limited liability company that owned the Avalon property to their children.

      . There is an additional justification for an examination by the Commission in this type of situation. One of the Commission’s duties is to analyze the statewide costs of mental hygiene programs, identify the causes for rising costs and propose means for controlling cost increases (see Mental Hygiene Law § 45.07 [b]). Upon completion of an investigation of an adult home’s financial operations, the Commission may make findings and issue a report to the facility’s operator and the commissioner of any appropriate agency (see Mental Hygiene Law § 45.07 [f] [2]; [g]; § 45.10 [b]). Thus, if the Commission conducts a review of a questionable practice by an adult home and concludes that it may result in escalating health-care costs if adopted by other facilities, the Commission may recommend that the practice be restricted or prohibited.