Commissioner of the Dept. of Social Servs. of the City of N.Y. v. New York Presbyt. Hosp., Index No. 450714/14(Ramos, J.)

Res judicata; medical malpractice; motion to reargue

By Andrea Bonilla | Staff Writer

While admitted for medical care at New York Presbyterian Hospital (“NYPH”), Chi Young Lee’s (“Chi”) son Merrick Lee (“Merrick”) died. Chi then commenced a proceeding against NYPH, which resulted in a settlement and hold harmless agreement between NYPH and Chi. The Court issued an Infant’s Compromise Order, approving the creation of an irrevocable trust (the “Trust”),with BNY Mellon, N.A. (“BNY”) and Chi as co-trustees. BNY and Chi were also co-administrators of the Estate of Merrick Lee (the “Estate”).

BNY and Chi commenced a proceeding (the “Final Trust Accounting Proceeding”) to settle their final accounts with the Commissioner of the Department of Social Services of the City of New York (“DSS”)DSS did not answer or otherwise respond to the proceeding, and the Court issued an order approving a payment of $7,133 from the Trust to satisfy a lien for Merrick.

Subsequently, DSS commenced this action against BNY, Chi, and NYPH for Medicaid expenses related to the hospitalization and treatment of Merrick. The second cause of action alleged that BNY and Chi breached their fiduciary obligations as co-trustees for failing to accurately reimburse Medicaid from the assets of the Trust. The third cause of action alleged that BNY and Chi, as co-administrators of the Estate, intended to defraud DSS, as creditor of the Trust, by disbursing the remaining assets of the Trust to the Estate. The fourth cause of action sought to recover the unreimbursed Medicaid expenses from the Estate pursuant to Social Services Law § 369(2)(b)(i)(A). The fifth cause of action alleged that NYPH and Chi breached the Settlement Agreements, which inured to the benefit of DSS, by failing to properly reimburse Medicaid for the costs related to the treatment and hospitalization of Merrick. BNY and Chi subsequently moved to dismiss these causes of action.

The Court granted the motion to dismiss because res judicata barred the causes of action, and DSS moved to reargue, averring that the Court overlooked certain facts or misapplied controlling law and that these claims could not be barred by res judicata because those issues were never litigated in the Final Trust Accounting Proceeding.

Although these causes of action were not addressed in the Final Trust Accounting Proceeding, the Court reasoned that DSS failed to raise these issues and, therefore, the effect of res judicata applied. The Court stated that these claims were clearly intertwined with the Trust and the Final Trust Accounting Proceeding and concluded that DSS’s failure to raise these issues in the Final Trust Accounting Proceeding was the result of mistake or negligence on DSS’s part, and not due to lack of notice. The Court concluded that further determination of the issues would contradict the principles of judicial economy and possibly result in conflicting rulings since DSS had moved to vacate the Final Trust Order and had previously raised some of these issues.

Commissioner of the Dept. of Social Servs. of the City of N.Y. v. New York Presbyt. Hosp., Index No. 450714/14(Ramos, J.).

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