Preview
FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023
NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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In the Matter of the Application of
NEW YORK CITY EARLY LEARNING CO.,
Index No. 154630/2023
Petitioner,
Hon. John J. Kelley
For a Judgment Pursuant to Article 78 of the Civil
Practice Law and Rules
-against-
NEW YORK STATE OFFICE OF CHILDREN AND
FAMILY SERVICES,
NEW YORK CITY ADMINISTRATION FOR
CHILDREN’S SERVICES,
Respondents.
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RESPONDENTS’ MEMORANDUM OF LAW IN SUPPORT OF
THEIR OBJECTIONS IN POINT OF LAW AND CROSS-
MOTION TO DISMISS THE VERIFIED PETITION
Respondent, the New York City Administration for Children’s Services (“ACS”),
hereby submits this memorandum of law in support of its motion pursuant to CPLR § 7804(f) to
raise objections in point of law; and/or CPLR 3211(a)(1) and/or CPLR 3211(a)(2) and/or CPLR
3211(a)(7), to dismiss the Verified Petition (“Petition”) on the grounds that Petitioner cannot seek
review where no final agency determination has been made; and for such other and further relief
as this Court may deem just and proper.
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STATEMENT OF FACTS
Petitioner New York City Early Learning Co. (“NYCELC”) is a childcare provider
that seeks reimbursement for its services under the New York State Child Care Block Grant
Program (“CCBG”). Martin Handler, the sole owner of NYCELC, was among several individuals
who were indicted on January 4, 2023 in connection with an alleged fraud scheme perpetrated
against ACS, the New York State Office of Children and Family Services (“OCFS”), and the
Federal Government, in connection with their roles with NYCELC and several other childcare
organizations receiving CCBG reimbursements. See Exhibit A (“the Indictment”) to the Affidavit
of Shari Gruber (the “Gruber Affidavit”). The Indictment includes allegations that Handler created
a fake after-hours childcare program and submitted false attendance and enrollment records to
obtain increased reimbursements from ACS, OCFS, and the Federal Government. Id. NYCELC is
among those organizations that Handler and the alleged co-conspirators allegedly used as a vehicle
for their fraud. See Indictment; Gruber Affidavit, ¶ 4. Handler allegedly stole millions of dollars
from the funds intended to be used to provide childcare services to low-income children. Id.
Upon learning of the Indictment, and based upon the recommendation of OCFS, on
or about April 28, 2023, ACS issued various letters to stakeholders in NYCELC, advising them
that ACS had the right to defer claims for reimbursement pursuant to 18 NYCRR §415.4(c)(9).
Gruber Affidavit, ¶ 5; Exhibits D-I to the Petition (NYSCEF Docs. 9, 10, 12, 13, 14, and 15). 18
NYCRR §415.4(c)(9) explicitly permits deferral upon the recommendation of OCFS or upon
notification of pending criminal charges involving fraud. Where a deferral is based on the
existence of criminal charges, ACS is permitted to defer its determination as to whether to allow
claims until the criminal charges have been resolved. See OCFS Local Commissioner’s
Memorandum 14-OCFS-LCM-04 (hereinafter, “the LCM”) annexed to Gruber Affidavit as
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Exhibit B at § III(A)(2). However, deferral does not amount to a denial or disallowance of
payment. 18 NYCRR §415.4. Instead, deferral allows ACS additional time to review the claims
that have been submitted in light of the allegations of fraud made against Handler.
By the Petition, NYCELC purports to challenge the April 28, 2023 letters issued
by ACS that placed Petitioner on notice of ACS’s future ability to defer payments based on the
criminal indictment of Martin Handler, owner of New York City Early Learning Co. See Exhibits
D-I to the Petition. However, as ACS has not yet made a determination on any claims presented to
it, either for deferral or for payment, the Petition seeks review of an decision that has not yet been
made, let alone subjected to the exhaustion of administrative remedies, and must be dismissed.
ARGUMENT
ACS HAS NOT ISSUED A FINAL
DETERMINATION THAT IS SUBJECT TO
REVIEW PURSUANT TO CPLR § 7801.
NYCELC seeks to challenge the April 28, 2023 letters that were issued by ACS as
a purported agency determination; however the letters are not reviewable because they do not
amount to a final determination. Pursuant to CPLR § 7801(1), an Article 78 proceeding cannot “be
used to challenge a determination: (1) which is not final . . . .” As the First Department has held,
CPLR § 7801 is “unequivocal” in barring actions where no final determination has been made.
Parent Teacher Assoc. of P.S. 124M v. Board of Education, 138 A.D.2d 108, 111-112 (1st Dep’t
1988). “A determination is deemed final and binding and thereby ripe for review ‘when it ‘has its
impact’ upon the petitioner who is thereby aggrieved.” Parent Teacher Assoc. of P.S. 124M, 138
A.D.2d at 112; see also Pheasant Pond Owners Association v. Board of Trustees of Southampton,
285 A.D.2d 597, 598 (2d Dep’t 2001) (finding that Village issuing a proposed plan and scheduling
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a hearing did not amount to a final determination subject to review by Article 78 proceeding). As
the Court reasoned in In re Joint Queensview Housing Enterprise, Inc., government agencies
should not be chilled from issuing guidance to the public by permitting judicial review where no
determination has actually been made. 179 A.D.2d 434, 437 (1st Dep’t 1992).
Here, NYCELC does not challenge any actual determination made by ACS—its
only purported challenge is to the unreviewable April 28, 2023 letters—and it has not sustained
any injury that is subject to this Court’s review. When hearing argument on NYCELC’s request
for a Temporary Restraining Order on June 1, 2023, this Honorable Court already determined that
“[t]here is just simply not an Administrative determination at this point in time that is reviewable.
The letter is not a final determination and, you know, deferral simply isn’t a final determination.
It’s a deferral for a decision that is going to be made later.” June 1, 2023 Oral Argument Transcript
at 2, annexed to Ahlberg Affirmation as Exhibit D. In other words, April 28, 2023 letters refer to
claims for payment that ACS has not yet determined whether to allow, disallow, or defer. Petitioner
does not challenge any claim that has been denied or actually delayed, and thus its “demand for
relief [is] premised upon the occurrence of future events which may or may not come to pass . . .
[and] there is no actual controversy.” Astacio v. American Arbitration Association, 260 A.D.2d
630 (2d Dep’t, 1999). Accordingly, there is no final determination that can be reviewed pursuant
to this Article 78 proceeding, and the Petition must be dismissed. Spano v. Wing, 285 A.D.2d 809,
810-811 (3d Dep’t 2001) (finding that County’s challenge to administration of TANF block grant
was not ripe, even though some reimbursements had been reduced, because the final review of
expenditures had not been concluded).
Additionally, an Article 78 proceeding is not ripe where the petitioner has not
exhausted their administrative remedies. Matter of Boyle v. N.Y.S. Dep’t of Motor Vehicles, 200
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A.D.3d 1375, 1377 (3d Dep’t 2021) (“First, the agency must have reached a definitive position on
the issue that inflicts actual, concrete injury and second, the injury inflicted may not be . . .
significantly ameliorated by further administrative action or by steps available to the complaining
party.”) (quoting Walton v. New York State Dep’t of Correctional Services, 8 N.Y.3d 186, 194
[2007]). Although ACS has not issued a determination on any claims that Petitioner seeks to
challenge here, prior to commencing an Article 78, Petitioner must also exhaust the Administrative
Review process set forth by the regulations. 1 See LCM, § III(C).
A party’s failure to exhaust administrative remedies is a jurisdictional bar
mandating dismissal. Indemini v. Beth Israel Medical Center, 4 N.Y.3d 63, 66 (2005) (affirming
dismissal of complaint “for lack of subject matter jurisdiction because plaintiff had not exhausted
her administrative remedies”). Thus, even if Petitioner were aggrieved by an administrative
determination, it may not seek judicial review if it has not first exhausted all available
administrative remedies. Uddin v. New York City Taxi & Limousine Commission, 106 A.D.3d 557
(1st Dep’t 2013). Thus, this matter is not ripe for review and the Petition must be dismissed.
CONCLUSION
ACS’s motion to dismiss and objections in point of law should be granted and the
Petition should be dismissed in its entirety. In the event that the Court denies motion to dismiss
and objections in point of law, ACS reserves the right, pursuant to CPLR § 7804(f), to serve and
1
Pursuant to the LCM, such an Administrative Review would comprise of ACS’s review of the
claims for accuracy. If false claims are located, ACS would issue a Preliminary Report, which the
provider would have the opportunity to respond to. The next step would be issuance of a Final
Review Report, and upon request of the provider, a Formal Review. A Formal Review allows the
provider to submit another response before ACS issues a Final Determination on the claims. If an
Administrative Review culminates in a finding that false claims were submitted, the provider may
be disqualified from receiving reimbursements.
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file an answer to the Verified Petition and respectfully requests forty-five days from service of
notice of entry of the order deciding this motion for that purpose.
Dated: New York, New York
June 22, 2023
HON SYLVIA O. HINDS-RADIX
Corporation Counsel of the City of New York
Attorney for ACS
100 Church Street
New York, New York 10007
(212) 356-2546
By:
BLAKE AHLBERG
DANIEL K. CRANDALL
Assistant Corporation Counsel
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Preview
FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------------- x In the Matter of the Application of NEW YORK CITY EARLY LEARNING CO., Index No. 154630/2023 Petitioner, Hon. John J. Kelley For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules -against- NEW YORK STATE OFFICE OF CHILDREN AND FAMILY SERVICES, NEW YORK CITY ADMINISTRATION FOR CHILDREN’S SERVICES, Respondents. ----------------------------------------------------------------------- x RESPONDENTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR OBJECTIONS IN POINT OF LAW AND CROSS- MOTION TO DISMISS THE VERIFIED PETITION Respondent, the New York City Administration for Children’s Services (“ACS”), hereby submits this memorandum of law in support of its motion pursuant to CPLR § 7804(f) to raise objections in point of law; and/or CPLR 3211(a)(1) and/or CPLR 3211(a)(2) and/or CPLR 3211(a)(7), to dismiss the Verified Petition (“Petition”) on the grounds that Petitioner cannot seek review where no final agency determination has been made; and for such other and further relief as this Court may deem just and proper. 1 of 6 FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 STATEMENT OF FACTS Petitioner New York City Early Learning Co. (“NYCELC”) is a childcare provider that seeks reimbursement for its services under the New York State Child Care Block Grant Program (“CCBG”). Martin Handler, the sole owner of NYCELC, was among several individuals who were indicted on January 4, 2023 in connection with an alleged fraud scheme perpetrated against ACS, the New York State Office of Children and Family Services (“OCFS”), and the Federal Government, in connection with their roles with NYCELC and several other childcare organizations receiving CCBG reimbursements. See Exhibit A (“the Indictment”) to the Affidavit of Shari Gruber (the “Gruber Affidavit”). The Indictment includes allegations that Handler created a fake after-hours childcare program and submitted false attendance and enrollment records to obtain increased reimbursements from ACS, OCFS, and the Federal Government. Id. NYCELC is among those organizations that Handler and the alleged co-conspirators allegedly used as a vehicle for their fraud. See Indictment; Gruber Affidavit, ¶ 4. Handler allegedly stole millions of dollars from the funds intended to be used to provide childcare services to low-income children. Id. Upon learning of the Indictment, and based upon the recommendation of OCFS, on or about April 28, 2023, ACS issued various letters to stakeholders in NYCELC, advising them that ACS had the right to defer claims for reimbursement pursuant to 18 NYCRR §415.4(c)(9). Gruber Affidavit, ¶ 5; Exhibits D-I to the Petition (NYSCEF Docs. 9, 10, 12, 13, 14, and 15). 18 NYCRR §415.4(c)(9) explicitly permits deferral upon the recommendation of OCFS or upon notification of pending criminal charges involving fraud. Where a deferral is based on the existence of criminal charges, ACS is permitted to defer its determination as to whether to allow claims until the criminal charges have been resolved. See OCFS Local Commissioner’s Memorandum 14-OCFS-LCM-04 (hereinafter, “the LCM”) annexed to Gruber Affidavit as -2- 2 of 6 FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 Exhibit B at § III(A)(2). However, deferral does not amount to a denial or disallowance of payment. 18 NYCRR §415.4. Instead, deferral allows ACS additional time to review the claims that have been submitted in light of the allegations of fraud made against Handler. By the Petition, NYCELC purports to challenge the April 28, 2023 letters issued by ACS that placed Petitioner on notice of ACS’s future ability to defer payments based on the criminal indictment of Martin Handler, owner of New York City Early Learning Co. See Exhibits D-I to the Petition. However, as ACS has not yet made a determination on any claims presented to it, either for deferral or for payment, the Petition seeks review of an decision that has not yet been made, let alone subjected to the exhaustion of administrative remedies, and must be dismissed. ARGUMENT ACS HAS NOT ISSUED A FINAL DETERMINATION THAT IS SUBJECT TO REVIEW PURSUANT TO CPLR § 7801. NYCELC seeks to challenge the April 28, 2023 letters that were issued by ACS as a purported agency determination; however the letters are not reviewable because they do not amount to a final determination. Pursuant to CPLR § 7801(1), an Article 78 proceeding cannot “be used to challenge a determination: (1) which is not final . . . .” As the First Department has held, CPLR § 7801 is “unequivocal” in barring actions where no final determination has been made. Parent Teacher Assoc. of P.S. 124M v. Board of Education, 138 A.D.2d 108, 111-112 (1st Dep’t 1988). “A determination is deemed final and binding and thereby ripe for review ‘when it ‘has its impact’ upon the petitioner who is thereby aggrieved.” Parent Teacher Assoc. of P.S. 124M, 138 A.D.2d at 112; see also Pheasant Pond Owners Association v. Board of Trustees of Southampton, 285 A.D.2d 597, 598 (2d Dep’t 2001) (finding that Village issuing a proposed plan and scheduling -3- 3 of 6 FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 a hearing did not amount to a final determination subject to review by Article 78 proceeding). As the Court reasoned in In re Joint Queensview Housing Enterprise, Inc., government agencies should not be chilled from issuing guidance to the public by permitting judicial review where no determination has actually been made. 179 A.D.2d 434, 437 (1st Dep’t 1992). Here, NYCELC does not challenge any actual determination made by ACS—its only purported challenge is to the unreviewable April 28, 2023 letters—and it has not sustained any injury that is subject to this Court’s review. When hearing argument on NYCELC’s request for a Temporary Restraining Order on June 1, 2023, this Honorable Court already determined that “[t]here is just simply not an Administrative determination at this point in time that is reviewable. The letter is not a final determination and, you know, deferral simply isn’t a final determination. It’s a deferral for a decision that is going to be made later.” June 1, 2023 Oral Argument Transcript at 2, annexed to Ahlberg Affirmation as Exhibit D. In other words, April 28, 2023 letters refer to claims for payment that ACS has not yet determined whether to allow, disallow, or defer. Petitioner does not challenge any claim that has been denied or actually delayed, and thus its “demand for relief [is] premised upon the occurrence of future events which may or may not come to pass . . . [and] there is no actual controversy.” Astacio v. American Arbitration Association, 260 A.D.2d 630 (2d Dep’t, 1999). Accordingly, there is no final determination that can be reviewed pursuant to this Article 78 proceeding, and the Petition must be dismissed. Spano v. Wing, 285 A.D.2d 809, 810-811 (3d Dep’t 2001) (finding that County’s challenge to administration of TANF block grant was not ripe, even though some reimbursements had been reduced, because the final review of expenditures had not been concluded). Additionally, an Article 78 proceeding is not ripe where the petitioner has not exhausted their administrative remedies. Matter of Boyle v. N.Y.S. Dep’t of Motor Vehicles, 200 -4- 4 of 6 FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 A.D.3d 1375, 1377 (3d Dep’t 2021) (“First, the agency must have reached a definitive position on the issue that inflicts actual, concrete injury and second, the injury inflicted may not be . . . significantly ameliorated by further administrative action or by steps available to the complaining party.”) (quoting Walton v. New York State Dep’t of Correctional Services, 8 N.Y.3d 186, 194 [2007]). Although ACS has not issued a determination on any claims that Petitioner seeks to challenge here, prior to commencing an Article 78, Petitioner must also exhaust the Administrative Review process set forth by the regulations. 1 See LCM, § III(C). A party’s failure to exhaust administrative remedies is a jurisdictional bar mandating dismissal. Indemini v. Beth Israel Medical Center, 4 N.Y.3d 63, 66 (2005) (affirming dismissal of complaint “for lack of subject matter jurisdiction because plaintiff had not exhausted her administrative remedies”). Thus, even if Petitioner were aggrieved by an administrative determination, it may not seek judicial review if it has not first exhausted all available administrative remedies. Uddin v. New York City Taxi & Limousine Commission, 106 A.D.3d 557 (1st Dep’t 2013). Thus, this matter is not ripe for review and the Petition must be dismissed. CONCLUSION ACS’s motion to dismiss and objections in point of law should be granted and the Petition should be dismissed in its entirety. In the event that the Court denies motion to dismiss and objections in point of law, ACS reserves the right, pursuant to CPLR § 7804(f), to serve and 1 Pursuant to the LCM, such an Administrative Review would comprise of ACS’s review of the claims for accuracy. If false claims are located, ACS would issue a Preliminary Report, which the provider would have the opportunity to respond to. The next step would be issuance of a Final Review Report, and upon request of the provider, a Formal Review. A Formal Review allows the provider to submit another response before ACS issues a Final Determination on the claims. If an Administrative Review culminates in a finding that false claims were submitted, the provider may be disqualified from receiving reimbursements. -5- 5 of 6 FILED: NEW YORK COUNTY CLERK 06/22/2023 02:48 PM INDEX NO. 154630/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 06/22/2023 file an answer to the Verified Petition and respectfully requests forty-five days from service of notice of entry of the order deciding this motion for that purpose. Dated: New York, New York June 22, 2023 HON SYLVIA O. HINDS-RADIX Corporation Counsel of the City of New York Attorney for ACS 100 Church Street New York, New York 10007 (212) 356-2546 By: BLAKE AHLBERG DANIEL K. CRANDALL Assistant Corporation Counsel -6- 6 of 6