The following papers numbered 1 to 31 were read on this petition for an order finding that the Department of Health's July 30, 2012 denial of petitioner's clinical laboratory permit renewal is not a final determination; or in the alternative, declaring that the challenged action, namely, respondent's July 30, 2012 denial of petitioner's laboratory permit renewal application is unlawful, invalid, arbitrary, capricious and unenforceable and violates petitioner's due process rights; and for an order expunging and annulling the determination by respondent that petitioner's April 12, 2012 laboratory permit renewal application be denied; or for an order declaring that petitioner is entitled to an administrative hearing to challenge the respondent's determination; or for an evidentiary hearing in this court to determine whether the Department of Health has acted arbitrarily and capriciously in denying petitioner's renewal application; and for an order awarding petitioner reasonable attorney's fees:

Papers Numbered

Order to Show Cause-Notice of Petition-Affirmations-

Exhibits-Memorandum of Law.......................... 1 - 15

Verified Answer-Affirmations-Exhibits-

Memorandum of Law in Opposition to the Petition......16 - 26

Reply Memorandum of Law-Exhibits.....................27 - 31 _________________________________________________________________

Petitioner, Finecare Medical Management, Inc. ("petitioner" or "Finecare"), is a licensed clinical laboratory doing business in Ridgewood, Queens County, New York. The laboratory has been in operation since 2001. Pursuant to Public Health Law § 574 all clinical laboratories doing business within New York State must possess a valid laboratory permit. On April 12, 2012, Finecare submitted a clinical laboratory permit renewal application to the Department of Health. Under PHL § 575(2) no clinical laboratory will be issued a permit or have its permit renewed unless the Department finds, among other things, that it is "competently staffed and properly equipped and will be operated in the manner required by this title." New York State clinical laboratory permits are valid for one year, commencing on July 1st of each year and extending through June 30th of the following year.

By letter dated July 30, 2012, from Stephanie Shulman, Director of the Clinical Laboratory Evaluation Program (CLEP) for the New York State Department of Health (DOH), Finecare was notified that the DOH denied its application to renew its permit. The denial letter states, inter alia, that "the Department has determined that Finecare is not competently staffed, properly equipped or operated in a manner required by the Department." The DOH cited certain controlling factors which led to their decision including, "a pattern of deficiencies found through onsite inspections particularly in areas of quality control, quality assurance, and laboratory management and deficiencies not corrected from inspection to inspection or deficiencies which recur at each inspection, even if interim corrections occurred, which jeopardize the quality of test results and patient management." Ms. Shulman attached Laboratory Evaluation Reports and Department communications which documented deficiencies following seven onsite inspections which were conducted through June 5, 2012. The laboratory evaluation for the inspection of June 5, 2012 cited 14 deficiencies all of which were repeat deficiencies. The July 30th denial letter states that, "the Department has determined that Finecare is unwilling/or unable to implement sustainable corrective action to bring the laboratory [*2]into compliance." The letter also states that Finecare was not to provide a plan of correction.

Ms. Shulman attached a copy of the laboratory evaluation report dated July 16, 2012 as well as copies of evaluation reports setting forth deficiencies dating back to 2009. The July 16, 2012 evaluation report found that the laboratory was out of compliance with fundamental standards of practice, that quality control was not properly managed and than nonconformances were not properly remediated.

Petitioner commenced the within CPLR Article 78 proceeding by Order to Show Cause dated December 20, 2012. In its petition dated November 28, 2012, Fineman contends that pursuant to PHL § 577(3), no permit or certificate may be revoked, suspended, limited or annulled without a hearing except when there is a finding by the Department that the public health, safety, or welfare is in imminent danger. Petitioner, therefore, requests that this court annul the Department's denial of its permit renewal and declare that petitioner is entitled to an administrative hearing to challenge the findings of the DOH.

The petitioner asserts that the denial by the DOH was arbitrary and capricious because the deficiencies alleged are not of a nature that warrants full revocation of petitioner's license. Petitioner also asserts that other similarly situated laboratories in New York including Wadsworth Center, the Department's own clinical laboratory, have received comparable deficiencies and repeat deficiencies but have not been shut down by the Department. The petitioner also requests that he finding of the DOH be annulled because the Department exceeded its authority by purporting to revoke Finecare's license based upon Standards of Practice not found in PHL § 580(3).

In addition, petitioner asserts that the letter of July 30, 2012, denying its renewal application was stated by the DOH to be a final determination that would be effective four months later on November 30, 2013. However, petitioner argues that the Department, by its actions subsequent to the denial, created substantial ambiguity with regard to whether the determination of July 30, 2012 was in fact a final determination. In support of this position, petitioner asserts that by letter dated September 20, 2012, from David Quist, Esq., Associate Attorney with the DOH, Finecare was notified that its permit became void on July 20, 2012 pursuant to Public Health Law 575(6) based upon the allegation that Finecare replaced its clinical director of record without notifying the DOH of the change. Pursuant to PHL § 575(6) "a permit shall become void by a change in the director, [*3]owner or location. However, on October 12, 2012, the DOH did acknowledge receipt of Finecare's notice of change of director and withdrew its prior advice that the license was void as of July 20, 2012.

Further, petitioner argues that after the alleged final determination was made in July 2012, the DOH appeared at Finecare on September 26, 2012 to make another on-site inspection. The Department then generated an Evaluation Report dated October 19, 2012 that identified four additional deficiencies and provided that a plan of correction could be submitted. The deficiencies at that time included failure to follow the procedure for AtheNA Rubela IgG Plus assay and failure to verify the accuracy of patient test results when an error in testing was discovered.

By email dated October 24, 2012, the DOH stated that Finecare could submit a plan of correction with regard to the laboratory deficiencies identified based upon the September 26, 2012 evaluation as well as the deficiencies identified in the July 30, 2012 letter denying the renewal application. Finecare thereupon submitted a plan of correction on November 12, 2012. Thus, petitioner argues the Department's conduct subsequent to the July 30, 2012 denial, which included additional on site inspections and permission to submit a plan of correction, created substantial ambiguity and the impression of non-finality of the denial letter. Petitioner contends, therefore, that the DOH has not, as a matter of law, issued a final determination.

Petitioner asserts therefore that the denial of its renewal application was done arbitrarily and capriciously, without clarity as to the finality of its determination, and without providing a due process hearing. The petitioner asserts that as of November 20, 2012, the Department had not responded to Finecare's plan of correction that it submitted on November 12, 2012. Counsel states that pursuant to Essex County v Zagata, 91 NY2d 447 (1998) "an agency's position will not be considered final if it is "tentative, provisional, or contingent, subject to recall, revision, or reconsideration" by the issuing agency. Petitioner also contends that Finecare is entitled to discovery and an evidentiary hearing in this Court to determine whether the DOH has treated Finecare differently with respect to other similarly situated laboratories.

In support of the petition, the petitioner submits an affirmation from its counsel, David M. Pohl, Esq., who states that subsequent to the denial letter of July 30th he engaged in negotiations with the Department in an attempt to resolve the Department's concerns which were noted in its July 30th letter. [*4]Counsel states however, that negotiations broke down and the Department, by letter dated September 18, 2012, reaffirmed its July 30th denial stating that it constituted a final determination and reiterating that the permit would remain valid for four months from the date of the notice expiring on November 30, 2012. However, petitioner contends that the laboratory was inspected again on September 26 2012 and given the opportunity to submit a comprehensive plan of correction by November 12, 2012, which the laboratory submitted. Thus, counsel asserts that the Department should be estopped from asserting that the July 30th date was final. Counsel also attaches a copy of a Laboratory evaluation report issued by the Department to its own laboratory, Wadsworth Center.

Petitioner also submits an affirmation from Imran Shams, Administrator and Director of Client Services at Finecare Medical. He states that since 2008, Finecare has submitted numerous plans of correction to the Department in response to the Department's laboratory evaluation reports and that Finecare has worked with the Department to correct all previous deficiencies.

In petitioner's memorandum of law, counsel asserts that the petitioner has protected property and liberty interests in its reputation, business and licensure and its clinical laboratory permit. Counsel asserts that the respondent has acted in an arbitrary and capricious manner in that standards of practice alleged to have been violated are not found in Pubic Health Law, Title V. In addition, counsel asserts that the Department acted arbitrarily and capriciously by denying petitioner's renewal application while not revoking the permit applications of other similarly situated laboratories in New York. Counsel states that there are disputed issues of material fact in this regard which require discovery and an evidentiary hearing. Counsel also asserts that the Department's positions, directives, and requirements subsequent to its July 30, 2012 denial have been contradictory and arbitrary, and impermissibly ambiguous, leaving Finecare without direction as to how to satisfy the Department.

In opposition, the DOH submits a verified answer, a memorandum of law and an affidavit from Stephanie H. Shulman, Director of the Department of Health Clinical Laboratory Evaluation Program. In her affidavit, dated January 25, 2013, Ms. Shulman states that the denial of Finecare's permit renewal application was based upon the accumulation of years of continuing on-site inspection findings of deficiencies which justified the Department's determination. She states that the Clinical Laboratory Standards of Practice were established by the DOH pursuant to PHL § 576(3). She lists many deficiencies which [*5]were found during the June 5, 2012 inspection which pose a serious risk to patient care including failing to meet basic sanitation standards, improper disposal of medical waste, failing to follow and correct proper blood testing procedures, failing to calibrate instruments properly, failure to provide personnel with education, training and experience commensurate with the complexity of services provided and putting quality control and testing materials into use before verifying thatthe materials were performing properly. Ms. Shulman also states that Finecare was advised, pursuant to her denial letter of July 30, 2012 that Finecare's permit would expire on November 30, 2012 which was later extended to December 26, 2012 pursuant to the Governor's Executive orders due to the Hurricane Sandy.

Ms. Shulman asserts that because Finecare's permit remained in effect after the date of the permit denial, it was still subject to all of the DOH's regulatory requirements including on site inspections and subject to PHL § 575(6) which requires the DOH to void the permit of a laboratory which changes directors without proper notification. Ms. Shulman states that on September 20, 2012, DOH learned that Finecare's laboratory director resigned and was replaced on July 20, 2012. Under state law, a clinical laboratory must give the Department advance notice of such change without which the laboratory's permit shall become void. There was a disagreement as to whether Finecare had provided DOH with the requisite advance notice. However, on October 12, 2012 DOH agreed to allow Finecare to submit a notification of change in laboratory director which was submitted on October 16, 2012. Finecare identified Dr. Gang as its new laboratory director. However, Ms. Shulman states that Finecare has to date, not addressed issues raised by the DOH concerning whether Dr. Ganag and Dr. Xiao could fulfill their duties at the facility. Ms. Shulman also states that as the permit remained in effect after the letter of July 30, 2012, the laboratory was subject to on site inspection. Thus, an inspection was completed on September 26, 2012 which found four deficiencies all involving testing errors.

Based upon the September 26, 2012 inspection, a laboratory evaluation was sent to petitioner as well as a request for a plan of correction. The plan of correction was received by DOH on November 13, 2012 and by letter dated December 19, 2012, Ms. Shulman advised Finecare that a review of the plan of correction submitted indicated that Finecare's responses were inadequate and lacked specificity on cause and corrective action. In addition, Ms. Shulman submits exhibits including letters and emails which she claims make it clear that the DOH always maintained that November 30, 2012 was a final date for expiration of the [*6]laboratory's permit and that they would not entertain a tolling agreement. She states that the DOH determined that it would not be possible for Finecare to correct years of previous noncompliance. Ms Shulman also stated that the on site inspection of September 26, 2012 was part of the continuing on site inspection program and was not relevant to the denial of the renewal application.

In their memorandum of law, respondents contend that pursuant to Daxor Corp. v State Dept. of Health, 90 NY2d 89(1997), the Court of Appeals held that due process does not require DOH to provide a hearing before denying a clinical laboratory's application for a permit. The court ruled that the issuance of a renewal permit is an exercise of discretion and property interests do not arise from benefits that are wholly discretionary in nature. Further DOH asserts that its determination to deny Finecare's application was not arbitrary and capricious and was rationally based on seven inspections it conducted over more than 3 years which found that Finecare had systematically and repeatedly failed to comply with PHL regulations and DOH standards in the areas of quality control, quality assurance and laboratory management.

In addition, respondent contends that the DOH determination was not arbitrary and capricious but was rational in light of Finecare's noted deficiencies, systematic non-compliance and systemic failure to comply with the Public Health Law. As stated by the court in Daxor, supra., "it is axiomatic that a court reviewing the determination of an agency may not substitute its judgment for that of the agency and must confine itself to resolving whether the determination was rationally based." Counsel contends that the denial of Finecare's permit is further justified by the laboratory's continued non-compliance with the law and DOH standards even after the Department issued the July 30th determination letter. Four deficiencies were found in September 2012 and in October and November Finecare failed to provide DOH with any assurance that the laboratory managers were adequately performing their duties.

Upon review and consideration of the petition, respondent's verified answer and opposition and petitioner's reply thereto, this court finds that the petition is denied and the Article 78 proceeding dismissed.

First, this court finds that the letter dated July 30, 2012, sent by Ms. Schulman, the Director of the Clinical Laboratory Evaluation Program on behalf of the Department of Health, denying the petitioner's application to renew its laboratory permit [*7]constituted a final determination by DOH that Finecare's application was denied and that Finecare would have to close. Mr. Pohl states that subsequent to said denial letter he engaged in negotiations with the Department to attempt to remediate the specified deficiencies. However, Mr. Pohl states that when negotiations broke down, the DOH reiterated its position by letter dated September 18, 2012 in which it was made clear that the Department's letter of July 30, 2012, "constitutes the Department's final determination with regard to the [renewal] application." The respondent stated in its letter that the permit would remain valid for four months from the date of the letter expiring on November 30, 2012. Mr. Pohl was advised that the only way the Department would consider additional information as to correction of deficiencies was by the submission of a new permit application. Again on November 28, 2012, Mr. Pohl was informed by letter from the Department that the Department would not enter into a tolling agreement and that the permit would expire on November 30 2012, subject only to the Governors executive orders extending the period of time due to Hurricane Sandy.

This court does not find that the agency created an impression of nonfinality or any ambiguity in their statements that the July 30th letter constituted a final determination. Although the DOH continued to promote compliance with the PHL statutory and regulatory requirements concerning on site inspections and changes in laboratory directors this did not create an ambiguity as to whether it had issued a final order. The actions taken by the laboratory subsequent to the final determination were based upon the fact that the Department was still charged with enforcing its regulations until the final date of the permit's expiration which was extended to December 26, 2012 and further extended again by this court's temporary restraining order. During the period following the July 30 2012 letter the Department remained unequivocal and definitive in its statements that the determination was final (see Essex County v. Zagata, 91 NY2d 447 [1998]; Mundy v Nassau County Civ. Serv. Commn., 44 NY2d at 358 [1978]; Beth Israel Med. Ctr. v Department of Health of State of New York, 18 AD3d 367 [1st Dept. 2005]). In addition, the petitioner was not prejudiced by any possible ambiguity as it was able to bring the within Article 78 petition within the four month statute of limitations.

Second, this court finds that the petitioner's due process rights were not denied by the denial of the application to renew its permit without providing an administrative hearing. "Due process rights only apply when an active license or permit is sought to be revoked. While existing licenses cannot be revoked without a hearing, the same due process considerations do not [*8]apply where a license or permit holder is seeking a renewal (see Public Health Law § 577 [3]; Daxor Corp. v State of NY Dept. of Health, 90 NY2d 89 [1997]; Matter of Fleming v Kidspeace Natl. Ctrs., 94 AD3d 1412 [4th Dept 2012][a hearing is required only where a license is to be suspended or revoked and due process does not mandate such a hearing before the denial of a renewal license]; Testwell, Inc. v New York City Dept. of Bldgs., 80 AD3d 266 [1st Dept. 2010][because the issuance of a license is an exercise of discretion, there is no inherent property interest in the renewal of an expired license and no constitutional due process right to a hearing]; Matter of Eastern Transfer of NY v Cahill, 268 AD2d 131[3d Dept 2000][same]).

Therefore, this Court finds that Finecare was not entitled to an administrative hearing or an opportunity to be heard prior to the DOH's denial of its permit renewal application.

Third, this Court finds that the standard of judicial review in the instant article 78 proceeding is limited to whether the record as a whole provides a rational basis for the underlying determination, which will not be disturbed absent a showing that it is wholly arbitrary or without any rational basis (see Heintz v Brown, 80 NY2d 998 [1992] citing Matter of Pell v Board of Educ., 34 NY2d 222[1974]; Matter of Rogan v Nassau County Civ. Serv. Commn., 91 AD3d 658 [2d Dept. 2012][this Court may not substitute its judgment for that of the agency responsible for making the determination and, as long as the administrative determination is not irrational or arbitrary and capricious, we may not annul it]; Matter of Jennings v Commissioner, N.Y.S. Dept. of Social Servs., 71 AD3d 98[2d Dept. 2010]). The determination of an administrative agency need only have a rational basis (see Matter of Senior Care Servs., Inc. v New York State Dept. of Health, 46 AD3d 962 [3rd Dept. 2007]).

Here, this court finds that the DOH had a rational basis to deny petitioner's permit renewal application. The DOH submitted copies of laboratory evaluation reports based upon several years of on-site survey findings that demonstrated Finecare's repeated deficiencies in areas of quality control, quality assurance, laboratory oversight and laboratory management which jeopardized the quality of the laboratory test results and consequently threatened the quality of the patients' results and care. "Furthermore, where, as here, the judgment of the agency involves factual evaluations in the area of the agency's expertise and is supported by the record, such judgment must be accorded great weight and judicial deference" (Matter of Gracie Point Community Council v New York State Dept, 92 AD3d 123 citing Flacke v Onondaga Landfill Sys., 69 NY2d 355[1987]; also see Matter of [*9]Jennings v Commissioner, N.Y.S. Dept. of Social Servs., 71 AD3d 98 [2d Dept. 2010] [an administrative agency's rulings, interpretations and opinions of the statute it is charged with enforcing or implementing are entitled to great weight, to the extent that the interpretation relies on the special competence which the agency is presumed to have developed in its statutory administration]).

Fourth, this court finds that the DOH's administrative determination to deny the renewal of the laboratory's permit did not exceed the agency's statutory authority. The Department's Standards and Practices were promulgated pursuant to Title V of the PHL. Pursuant to PHL § 576(3) the Department is authorized to "prescribe standards for the proper operation of clinical laboratories." In addition PHL § 576 (3) states that "failure to meet department standards for the proper operation of a clinical laboratory or blood bank, including the criteria for approval of methods, or failure to maintain satisfactory performance in proficiency testing shall result in termination of the permit in the category or categories of testing established by the department in regulation until remediation is achieved." Here the DOH determination was properly based upon noncompliance with its standards as well as violations of the provisions of Title V of the Public Health Law.

Lastly, this court finds that petitioner has failed to submit sufficient evidence to show that its application for renewal was treated differently than similarly situated facilities. Although Finecare contends that Wadsworth Center, the Departments's public health laboratory, has received numerous deficiencies including repeat deficiencies, the petitioner has not submitted sufficient evidence to show that Wadsworth Center is similarly situated or comparable to Finecare and has not shown that it had years of repeated deficiencies of the same nature as those identified in the Finecare evaluations. Merely providing evidence that another laboratory was cited for deficiencies is not sufficient to demonstrate a question of fact as to disparate treatment where the petitioner has not shown whether the deficiencies were the same, whether they were corrected, and how many times and over what period of years they were in noncompliance. In that respect this court also finds that the petitioner has failed to provide a sufficient evidentiary basis to obtain discovery pursuant to CPLR 408 on the issue of disparate treatment or for this court to hold an evidentiary hearing. Discovery is inconsistent with the summary nature of a special proceeding and is therefore only granted where there is a demonstrated need for such relief (see In re Shore, 109 AD2d 842 [2d Dept. 1985]). Finecare's mere hope that evidence of disparate [*10]treatment might be uncovered during the discovery process is insufficient for this court to order discovery and delay the determination of the within Article 78 proceeding.

Accordingly, for all of the above stated reasons, it is hereby,

ORDERED, that the petition of Finecare Medical Management Inc. is denied and the Article 78 petition is dismissed and it is further,

ORDERED, that all stays previously imposed by the Court are vacated.

Dated: April 8, 2013

Long Island City, NY

______________________________

ROBERT J. MCDONALD

J.S.C.