Cases & Deals

Agencies for Children's Therapy Services wins action declaring invalid two regulations promulgated by N.Y. State Dept. of Health

Client(s) Agencies for Children's Therapy Services Inc.

Jones Day successfully won a declaratory judgment on behalf of its client, Agencies for Children's Therapy Services, Inc. ("ACTS"), in an action in the Nassau County Supreme Court, in New York. ACTS sought a declaration that two regulations promulgated by the New York State Department of Health ("DOH") are invalid: one that caps its members' executive compensation and administrative expenses; and the other that purports to address conflicts of interest in the provision of the State's Early Intervention Program. ACTS is a not-for-profit company comprised of thirty-three, for-profit member agencies that provide State-reimbursed early intervention services to approximately 25,000 developmentally disabled infants and toddlers throughout New York. On January 1, 2013, the DOH promulgated a rule purporting to regulate "conflicts of interest" in the program, by, among other things, forbidding an agency from both evaluating a child for eligibility in the early intervention program and treating the same child. Governor Cuomo also issued an Executive Order—and the DOH promulgated a rule pursuant to that Order—which required providers of early intervention services to cap at $199,000 the compensation they provide to their executives and also cap the amount they may spend on their administrative costs. In February 2013, ACTS obtained a preliminary injunction from the Nassau County Supreme Court against the enforcement and application of the conflict-of-interest rule. After the compensation-cap rule was promulgated in July 2013, ACTS moved for summary judgment on its requests for a final declaration that both the compensation-cap and the conflict-of-interest rules are invalid and may not be enforced. In a decision dated April 8, 2014, the Nassau County Supreme Court granted ACTS' motion and denied a cross motion by the DOH and Governor Cuomo. The Court ruled that the DOH lacked the authority, under New York's separation-of-powers doctrine, to issue both regulations. The agency improperly decided matters of policy that are reserved for the Legislature to decide. As the Court ruled, the DOH did not "fill in the details of broad legislation, but, rather, wrote on a clean slate" in promulgating the regulations at issue. Indeed, as the Court noted, the DOH acted in the face of the Legislature's rejection of proposals by the Governor to implement policies that the DOH later improperly sought to impose through these administrative regulations.

Agencies for Children's Therapy Services, Inc. v. New York State Department of Health and Andrew M. Cuomo, in his official capacity as Governor of the State of New York, Index No. 15763/12 (N.Y.)