People v. Abraham Operations Assoc. LLC
2024 NY Slip Op 32976(U)
N.Y. Sup. Ct., New York Cty.2024Background
- The New York Attorney General filed a special proceeding against four nursing homes and related entities/individuals, alleging persistent fraud and violations of state and federal law relating to nursing home operations.
- The State claims the respondents operated a complex web of collusive, self-dealing corporate entities that extracted millions of dollars in ill-gotten profit, to the detriment of resident care and in violation of Medicaid and Public Health Law requirements.
- The suit alleges these schemes included inflated rents, sham service fees, improper related party transactions, and false certifications to regulators, spanning 2013 through the petition filing in 2023.
- Respondents sought to dismiss the petition on multiple grounds, including lack of standing, jurisdiction, untimeliness (statute of limitations), legal sufficiency, preemption by federal law, duplicative claims, and alleged due process violations in the special proceeding format.
- The court considered all allegations in favor of the State at this pre-answer, motion-to-dismiss stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing | AG may commence 63(12) actions even if MFCU involved | Only MFCU, not AG, can bring this proceeding | For Plaintiff: AG may sue |
| Personal Jurisdiction | All respondents transacted business or own NY property | No specific connections for some respondents | For Plaintiff: Jurisdiction is proper |
| Statute of Limitations | Claims tolled/continuing wrong applies/fraudulent concealment | Most claims are time-barred; doctrine doesn't apply | For Plaintiff: Claims timely at this stage |
| Sufficiency of Pleading | Sufficient pleadings of persistent fraud and illegality | Insufficient specific facts; claims duplicative, speculative | For Plaintiff: Sufficiently pleaded |
| Federal Preemption | Section 63(12) supplements, doesn't conflict with, federal law | Federal fraud standard should control/preempt state action | For Plaintiff: No preemption |
| Due Process | Special proceeding gives ample opportunity to be heard | Proceeding is summary and deprives opportunity to defend | For Plaintiff: Procedures are adequate |
| Duplicative/Unjust Enrichment | May plead unjust enrichment in alternative | Unjust enrichment claim is duplicative of fraud claims | For Plaintiff: Not dismissible now |
| Immunity (COVID) | Violations predated and continued after COVID; no immunity | Emergency statute/waiver applies to excuse alleged conduct | For Plaintiff: Immunity not established |
Key Cases Cited
- People v. Trump Entrepreneur Initiative LLC, 137 A.D.3d 409 (N.Y. App. Div. 2016) (broad interpretation of Executive Law § 63(12), establishing claims do not require proof of scienter or reliance)
- People v. Apple Health and Sports Clubs, Ltd., Inc., 80 N.Y.2d 803 (N.Y. 1992) (Special proceedings under Executive Law § 63(12) offer sufficient procedural due process)
- People v. Coventry First LLC, 52 A.D.3d 345 (N.Y. App. Div. 2008) (Section 63(12) claims broader than common law fraud, do not require reliance or intent)
- People v. Northern Leasing Sys., Inc., 193 A.D.3d 67 (N.Y. App. Div. 2021) (Enterprise-wide liability for creating atmosphere conducive to fraud under § 63(12))