Memorandum by Posner, J

    rl 

MEMORANDUM 

SUPREME COURT, QUEENS COUNTY 

IA PART 5 
ald a rt Xx 

THE COUNCIL OF THE CITY OF NEW YORK, : BY: POSNER, J. 
PETER F. VALLONE, SPEAKER OF THE : 
COUNCIL, and ENOCH H. WILLIAMS, CHAIR : Action No. 1 
OF THE COUNCIL HEALTH COMMITTEE, : : 

INDEX NO.: 004897/96 
Plaintiffs, : 

: DATED: January 13, 1997 
- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
CITY OF NEW YORK, NEW YORK CITY HEALTH 
AND HOSPITALS CORPORATION, and NEW YORK 
CITY ECONOMIC DEVELOPMENT CORPORATION, : 

Defendants. 

CAMPAIGN TO SAVE OUR PUBLIC HOSPITALS - : INDEX NO. : 
QUEENS COALITION, an unincorporated 
association, by its member WILLIAM t.. Action No. 
MALLOY, CAMPAIGN TO SAVE OUR PUBLIC 
HOSPITALS - CONEY ISLAND HOSPITAL 
COALITION, an unincorporated associ- 
ation, by its member PHILIP R. METLING, 
ANNE YELLIN, and MARILYN MOSSOP, 

Plaintiffs, 

- against - : 

RUDOLPH W. GIULIANI, THE MAYOR OF THE 
CITY OF NEW YORK, NEW YORK CITY HEALTH 
AND HOSPITALS CORPORATION, and NEW YORK : 
CITY ECONOMIC DEVELOPMENT CORPORATION, 

Defendants. 

10763/96 

2 

Defendants, Mayor Rudolph Giuliani (“Giuliani”), the New 

 



  

York City Health and Hospitals Corporation (*HCC”) and the New York 

City Economic Development Corporation (*“NYCED”) have moved for 

summary judgment. Plaintiffs in Action No. 1, The Council of the 

City of New York (“Council”) and its principal leaders, and 

plaintiffs in Action No. 2, The darpaian to Save Our Public 

Hospitals, (“Campaign”) have cross-moved for summary fudonants 

Both Action No. 1 and Action No. 2 were combined for joint trial, 

without consolidation. (See Order of this court dated 

September 18, 1996.) The parties all agree that there are no 

issues of fact and that the legal issues are ripe for adjudication; 

though, initially, defendants had raised the issue of "ripeness" in 

their answer. 

The conflict between the Mayor of the City of New York 

and the Council of the City of New York is founded upon the age-old 

controversy between the executive and legislative branches of 

government. Fortunately, unlike the resolution adopted by the 

protagonists (Cassius and Brutus) in Shakespeare's "Julius Caesar", 

the authors of our State and Federal constitutions have wisely 

established the third branch of government as arbiter of disputes 

between the two. 

IEE ISSUES 

Plaintiffs in both actions originally petitioned the 

2 

 



  

® eo 
court for a declaratory Sukumar interpreting Sect ich 7385(6) of 

McKinney's Unconsolidated Laws of 1969. This section of the Health 

and Hospitals Corporation Act (“HHC Act”) subjected the HHC's power 

£0 sell ior lease its health facilities to the approval of the Board 

of Estimate. When the Board of Estimate was abolished by the new 

City Charter of 1989, no specific language was included to indicate 

which person or entity inherited this particular power previously 

exercised by the Board of Estimate. Furthermore, the New York 

State Legislature has failed to exercise its power to amend the 

statute substituting a specific officer or body to succeed the 

Board. (See A.8896 and A.11048 of 1996.) Defendant Giuliani 

claims that the new Charter intended that he alone should exercise 

that power. Plaintiffs contend that the new Charter gives the 

power to the Council acting in conjunction with the Mayor. 

A second issue has arisen since November 8, 1996 when the 

Board of Directors of defendant HHC voted to empower the HHC'’s 

president to execute a lease with a for-profit corporation. Said 

lease in effect turns over the operation of Coney Island Hospital 

in toto to the lessee for eight (8) generations (198 years). As a 

result of this action, plaintiffs amended their complaints to 

include a new cause of action against HHC alleging it exceeded its 

statutory powers. 

 



IHE BACKGROUND 

Defendant Giuliani took office as chief executive of the 

City of New York in 1994. When he realized that he had inherited 

a budget with fiscal problems (stretching back to the 70's), he 

sought numerous ways to bring the City's expenses in balance with 

its revenue. One of his proposals was for the privatization of the 

City's public hospitals - a continuous drain on the City's 

resources. It is his belief that a private for-profit corporation 

can more efficiently run the City's hospitals. Whether the 

plaintiffs agree or disagree with this philosophy is not the issue. 

Nor is the debate over that philosophy one in which the court has 

any right or power to immerse itself. To explore properly the 

issues involved herein, it is necessary to step back and consider 

the history of the HHC Act. 

HISTORY 

The New York State Constitution, Article Xvil, § 3 

states: 

“The protection and promotion of the 
health of the inhabitants of the state 
are matters of public concern and 
provision therefor shall be made by the 
state and by such of its subdivisions and 
in such manner, and by such means as the 
legislature shall from time to time 
determine."®  



Prior to 1970, in compliance with this constitutional 

requirement, the City of New York constructed, maintained .and 

operated hospital facilities providing care to residents of the 

City, including those persons who could not otherwise Rtfcrd. 

hospital services. In 1969, the New York State Legislature a, 

the Health and Hospital Corporation Act ("HHC Act"), creating the 

HHC and authorizing the City to transfer the municipal hospitals to 

HHC for the purpose of continuing to fulfill the constitutional 

mandates (L 1969, ch 101s, McKinney's Uncons Laws of NY §§ 7381 et 

seq, the HHC Act). 

| HHC's mission is to ensure the provision of "high 

quality, dignified and comprehensive" care to the ill and infirm of 

the City, and particularly chide persons who can least afford such 

services (gee, McKinney's Uncons Laws of NY § 7382). HHC was 

established at the behest of the City in part to permit independent 

financing of municipal hospital construction and improvements and 

to facilitate professional management of the hospital system. 

HHC's creation was intended to overcome the "myriad of complex and 

often deleterious constraints® which inhibited the provision of 

care by the City in its own operation of the municipal health 

system (McKinney's Uncons Laws of NY § 7382). To effect that goal, 

S  



  

* : = ® 
the Legislature gave HHC a number of powers designed es provide the 

"legal, financial and managerial" flexibility i. to cay : 

out its purpose (McKinney's Uncons Laws of NY §§ 7382, 7385). It 

was authorized "[t]o make and execute contracts and leases and all 

other agreements or instruments necessary or convenient for the 

exercise of its powers and the ENE nen: of its corporate 

purposes" (McKinney's Uncons Laws of NY § 7385([5]). In addition, 

HHC was granted the power "[t]o provide health and medical services 

for the public directly or by agreement or lease with any person, 

firm or private or public corporation or association through and in 

the health facilities of the corporation #*** n (McKinney's Uncons 

Laws § 7385(8]). 

Nevertheless, some of the powers conferred on HHC were 

constrained, and in some instances, subject to direct oversight and 

continuing control by the City.!? Among these powers was the power 

  

| 

See, e.g., McKinney's Uncons Laws of NY § 7386 (1) (a); HHC 
submits its program budget to the City in time for inclusion in the 
Mayor's executive budget and culminates in the City budget which 
the City Council has the sole authority to adopt; 

§ 7386(2) (b); the City has the right to acquire any health 
facility held by HHC; 

§ 7386(7); HHC must exercise its powers in accordance with 
policies and plans determined by the City; 

§ 7390(S)-(8); HHC employee grievances are governed by NYC 
Administrative Code; 

§ 7385(19); HHC may use City agents, employees and facilities 

6 

 



  

relevant to the issues herein: 

"To dispose of by sale, lease or 
sublease, real *** property including but 
not limited to a health facility, or any 
interest therein for its corporate 
purposes, provided, however, that no 
health facility or other real property 
acquired or constructed by the 
corporation shall be sold, leased or 
otherwise transferred by the corporation 
without public hearing by the corporation 
after twenty days notice and without the 
consent of the board of estimate of the 
Sity.” 
(McKinney's Uncons Laws § 7385[6]). 
(Emphasis added). 

  

On July 1, 1970, in accordance with the HHC Act and with 

the approval and authorization of the Board of Estimate, the City, 

by Mayor Lindsay, and HHC entered into an agreement under which HHC 

agreed to assume responsibility for maintaining and operating the 

City's public hospitals. Eleven hospitals, included under that 

agreement, have Sorted in operation since 1970. 

In 1994, the City, through the Mayor's office, began 

exploring the possibility of transferring the operation of three of 

those hospitals, Coney Island Hospital (*CIH”), Elmhurst Hospital 

Center and Queens Hospital Center (“the Queens Health Network”) to 

private entities. J.P. Morgan Securities, Inc., was retained by 

  

subject to collective bargaining agreements and the Mayor's 
consent. 

 



  

Ug th : | i * 

defendant EDC as financial advisor to prepare offering memoranda 

for proposals to privatize the operations of the three hospitals 

and to sublease their facilities. 

In spring of this year, HHC began receiving proposals, 

and on June 26, 1996, Peter J. CAEN Deputy Mayor of Zhe: 

City, Dr. Luis R. Marcos, as President of HHC, and Steven Volla, as 

Chairman of PHS New York Inc. ("PHS-NY") and of Primary Health 

Systems, Inc. ("Primary") executed a letter of Yitanticaviing tor 

negotiations to achieve a long-term sublease of property, plant and 

equipment of CIH to PHS-NY, and a contract for PHS-NY to operate 

CIH as a community based, acute care in-patient hospital during the 

term of the sublease. On October 8, 1996, HHC and the New York 

City Department of Health held a public hearing on the proposed 

sublease of CIH. On November 8, 1996, the HHC Board of Directors 

authorized and approved the sublease of CIH to PHS-NY for an 

initial term of 99 years (and renewable by PHS-NY for an additional 

95 year term). The sublease is rather unusual in that it recites 

those service obligations being imposed upon PHS-NY, including that 

PHS-NY take over HHC's operation of the hospital services and 

provide access to health care to indigent persons, in addition to 

the more typical tenant obligations. 

Both plaintiffs claim that (1) any sale, transfer, leave 

 



  

® | AREY 

or sublease of any HHC facilities to private lessees requires the 

approval of the Council pursuant to Unconsolidated Laws § 7385(6) ; 

(2) any such disposition requires the application of and compliance 

with the Uniform Land Use Review Procedure ("ULURP") process of 

sections 197-c and 197-d of the New York City Charter. The 

Coalition plaintiffs also originally claimed that defendants 

violated section 197-b of the Charter by failing to submit their 

plans for privatizing the hospitals to the New York City Planning 

Commission and affected community boards and borough presidents. 

On December 4, 1996, all parties stipulated, on the 

record in open court, to permit plaintiffs in Actions No. 1 and 2 

to amend their respective complaints to add a cause of action 

against HHC asking the court to void HHC's action on November 8, 

1996 as an ultra vires act. 

Defendants served a second amended answer to each second 

amended complaint denying various allegations and asserting 

affirmative defenses based upon the failure to state a cause of 

action and lack of ripeness, and sections 7385(6) and 7385(8) of 

the Unconsolidated Laws. 

At the outset, the affirmative defenses based upon 

failure to state a cause of action are stricken. An affirmative 

defense based upon the failure to state a cause of action cannot be 

9 

 



  

® eo 
interposed in an answer, but must be raised by a mokion to dismiss 

pursuant to CPLR 3211 (a) (7) (see, Propoco, Inc. v Birnbaum, 157 AD2d 

774, 775). 

The affirmative defense based upon lack of ripeness must 

also be stricken. At the time of the commencement of the action, 

the HHC Board of Directors had not yet considered the proposed 

sublease of CIH, and an argument could have been made that the 

suits were premature. Nevertheless, at this juncture, where the 

HHC board has acted to approve the sublease, the issues raised by 

the Council and Campaign plaintiffs are ripe for adjudication. 

This issue will be dealt with after consideration of the issue of 

the devolvement of the powers of the Board of Estimate (HHC Act 

7385[6]). 

IEE BOARD OF ESTIMATE ISSUE 

The HHC Act elbresuly provides that the les may "dispose 

of by sale, lease or sublease, real or personal property, including 

but not limited to a health facility, or any interest therein for 

ifs corporate purposes® (emphasis supplied) (McKinney's Uncons Laws 

§ 7385(6]). Such provision goes on to condition the exercise of 

that power upon the consent of the Board of Estimate of the City 

10 

 



9 Ti he 
(emphasis added) .? 

At the time of the passage of the HHC Act, the Board of 

Estimate consisted of eight elected members; the Mayor, the City 

Comptroller, the President of the City Council and the five Borough 

Presidents. Each of the citywide officers had two oR and each 

of the borough presidents had one vote. This voting distribution 

of the Board of Estimate members was declared violative of the 

constitutional requirement of one person, one vote (gee, Voriie 

Board of Estimate, 592 F Supp 1462 [E.D.N.Y. 1984], affd 831 F2d 

384, affd 489 US 688 [1989)). 

As a consequence of such ruling, and the United States 

District Court order that a plan be developed by the City to cure 

the constitutional deficiency (gee, Morris v Board of Estimate, 647 

F Supp 1463), the New York City Charter Revision Commission was 

formed, with one of its objectives for Charter revision being to 

build greater participation in policy debates and decisions (see, 

Final Report of the New York City Charter Revision Commission - 

  

3 

The authority of the Board to approve or consent to terms of 
leases of sales transactions was also recognized by the State 
Legislature in other States laws, e.g., Urban Development 
Corporation Act § 3(4), codified at Uncons Laws § 6253 (1); Not- 
for-Profit Corporation Law § 1411: Racing, Pari-Mutuel Wagering & 
Breeding Law §§ 607(1), (3). 

11  



  

% | i » 
Tanna 1989-November 1989 p 4). Following the enactment on 

November 7, 1989 at the general election of sweeping Charter 

amendments Brobouat by the Commission, the Board of Estimate was 

"abolished and its power distributed elsewhere. 

Notwithstanding the abolition of the Board of Estimate, 

: the requirement that the Board of Estimate give We natant to any 

transfer of a health facility or real property by HHC remains "on 

the books" (McKinney's Uncons Laws § 7385[b]) and the Legislature 

has not taken the opportunity to amend it. However, the failure of 

the Legislature to amend the section does not mandate a conclusion 

that it prefers a statutory construction severing the consent 

portion as obsolete. In fact, the contrary is true. The 

Legislature, by not having acted to eliminate the "board of 

estimate" language, can be said to have opted to allow the consent 

power to devolve upon the body, agency or officer designated in the 

revised Charter to succeed to the powers of the Board of Estimate. 

The Charter itself contemplates this result. 

Section 1152(e), adopted by the voters in 1989, as part 

of the Charter revisions, in relevant part, provides: 

the powers and responsibilities of the 
board of estimate, set forth in any 
state or local law, that are not 
otherwise devolved by the terms of such 
law, upon another body agency or officer 

12 

 



shall devolve upon the bodv, agencv or 
officer of the city charged with 
comparable and related powers and 
responsibilities under this charter, 
consistent with the purposes and intent 
of this charter...." 
(Emphasis supplied.) 

  

  

  

  

By applying such "savings" provision to the HHC Act, the. 

original intent of the Legislature (to allow a check on HHC's power 

to lease or transfer a health facility or real property) may be 

accomplished (see, McKinney's Statutes §§ 391-392, § 397; see also, 

Matter of New York Pub, Interest Research Group v Dinkins, 83 NY2d   

377, 386; Matter of Natural Resources Council v New York City Dept. 

of Sanitation, 83 NY2d 215, 222; Ball v State of New York, 41 NY2d 

617, 622). Moreover, none of the parties involved herein claim 

  

that no consent by a city agency, body or officer is required. 

This court concludes that section 7385(6) must be construed to 

continue to retraite consent; the question to be resolved is which 

Body, agency or officer, or combination thereof, has succeeded to 

the Board of Estimate in this regard. 

The Council plaintiffs urge that the consent power 

granted the Board of Estimate in § 7385(6) has devolved upon both 

the Council and the Mayor. They point to the fact that the powers 

to consider land use effects and business terms have been split 

under the Charter revisions between the Council, under section 197 

13  



°o a » 
c of the Charter (“ULURP”), and the Mayor, under § 384 (a) of the 

Charter, Yesnectively (see, Tribeca Community Assn. Inc. v New York 

ey Supreme Court, Queens County, Index No. 

20355/92, affd 200 AD2d 536, atipast dismissed 83 NY2d 905, lv to 

appeal denied 84 NY2d 805). They also contend that neither the HHC 

Act nor the Charter restricts the Council to ULURP considerations 

only. 

Defendants argue that because oi ote time of the HHC 

Act's enactment, the Board of Estimate had the right to consider 

business terms under the then Charter § 384 (a) and ULURP did not 

yet exist, the Legislature intended that the Board of Estimate be 

relegated to consideration of the business terms only of any sale 

or lease of property held by HHC. According to defendants, such 

consideration of business terms has been assigned to the Mayor 

RENE pursuant to § 384 of the Charter, and the Council has 

no role in the consent power of § 7385(6). 

The HHC Act, however, did not provide guidelines or 

limits on the type of issues the Board of Estimate could take into 

consideration when exercising the consent power. By its silence, 

the Act granted the Board of Estimate full authority to contemplate 

at least those issues usually associated with property disposition, 

including business terms and land use effects. 

14  



  

® | » 

Defendants further argue that the Council has no land use 

review role under the consent power of § 7385(6) because ULURP, as 

the mechanism Zit the Council's exercise of land use review is 

inapplicable to HHC. According to defendants, the "HHC Act 

supersedes any Charter provision regulating its power to sublease, 

citing Waybro v New York City Board of Estimate, 67 NY2d 349.   

Waybro, however, is distinguishable from this case, 

because unlike the statute at issue therein (the Urban Development 

Corporation Act [L. 1968, ch 174, as amended], McKinney's Uncons 

Law § 6251), nothing in the HHC Act indicates HHC has the authority 

to override requirements of the local charter in relation to 

disposition of health facilities or property (gee, Waybro v New 

York City Board of Estimate, supra at 355; gee also, Connor v 

Cuomo, 161 Misc 2d 889, 896). The HHC Act, by requiring consent 

of the Board of Estimate under § 7385(6) for dispositions of 

property, expresses, if anything, the contrary intent. Similarly, 

if this court was to adopt defendants' reasoning, then it would 

have to hold that the HHC Act supersedes even § 384 (a), the Charter 

provision granting the Mayor the power to review business terms of 

dispositions of City property. To the extent the parties agree on 

anything, they agree that this section gives the Mayor the power 

to review business terms of dispositions of City property, 

15 

 



  

including the HHC sublease. 

Section 384 (a) of the Charter provides: 

"No real property of the city may be 
sold, leased, exchanged or otherwise 
disposed of except with the approval of 

the mayor and as may be provided by law 
unless such power is expressly vested by 

(Emphasis added.) 

The section's language granting the Mayor the approval power, 

however, includes the conjunctive "and," followed by "as may be 

provided by law unless such power is expressly vested by law in 

another agency." The phrase "as may be provided by law" can be 

read without strain or force to include ULURP wherein the power 

to review sales, leases and other dispositions of real property 

of the City is bestowed upon the Council (gee, New York City 

Charter §§ 197-c, 197-4). 

ULURP was enacted in 1975, "in response to a perceived 

need for informed local community involvement in land use planning, 

for adequate technical and professional review of land use 

decisions and for final decision making by a politically 

accountable body, the City's Board of Estimate." (2 Morris, New 

York Practice Guide, Real Estate § 20.04, p 20-47.) In its final 

report, the Charter Revision Commission indicated that prior to the 

1989 revision of the Charter, the Board of Estimate had "final 

16 

 



  

* jo 
authority over land use decisions ***" and the Council "had no role 

in the land use review process" (Final Report of the New York City 

Charter Revision Commission - January 1989-November 1989, pp 7 and 

19 respectively). It noted that "[t]he basic change made by the 

1989 charter amendments vad re substitute the Council for the guard 

as the final decision maker in land use," and that "because taoial 

and language minority groups will enjoy greater representation on 

the Council than they have had on the Board, they will be able to 

exert more influence if there is conflict with the mayor on a land 

use matter" (The Final Report, pp 20-21). 

ULURP, as revised, in pertinent part, provides: 

"§ 197-c. Uniform land use review 
procedure. a. Except as otherwise 
provided in this charter, applications 
by any person or agency for changes, 
approvals, contracts, consents, permits 
or authorization thereof, respecting the 
use, development or improvement of real 
property subject to city regulation 
shall be reviewed pursuant to a uniform 
review procedure in the following 
categories *** (10) Sale, lease (other 
than the lease of office space), 
exchange, or pther disposition of the 
real property of the city." (Emphasis 
supplied). 

HHC has been held not to be an "agency" of the City (gee, 

Brepnac v City of New York, S59 NY2d 791, 792), and the term 

"person® is not specifically defined in § 197-c, or in the New York 

17 

 



  

: 6 : : PY 

City Administrative Code concerning land use topics. Nevertheless, 

§ 197-c of the Charter should be liberally construed (gee, Maudlin 

v New York City Transit Auth., 64 AD2d 114, 177), and thus, HHC, 

as a public benefit corporation, may be considered a "person" for 

the purposes of ULURP (gee, General Construction Law §§ 37, 65) . 

As for the meaning of "disposition," the term is not 

defined by statute, charter or code provision. This court must 

interpret the word. The word has been defined as "the act of 

disposing, transferring to the care or possession of another. The 

parting with, or alienation of, or giving up property." (Black's 

Law Dictionary 471 [6th ed. 1990]). By applying this definition, 

the court finds the sublease of CIH constitutes a "disposition" 

under ULURP because it is a transfer of a real property interest, 

as well as service duties from HHC to PHS-NY. 

Defendants further argue that even assuming ULURP evinces 

the partial devolvement of the consent power under § 7385(6) to the 

Council, it cannot actually apply to the CIH sublease because ULURP 

‘violates § 10(5) of the Municipal Home Rule Law. Section 10 (5) 

states: 

*e¢¢+ a local government shall not have 
the power to adopt local 1daws which 
impair the powers of any other public 
corporation.” 

18 

 



  

The Court of Appeals has interpreted § 10(5) to provide that 

public benefit corporations are exempt only from regulations which 

would interfere with their purpose (gee, Levy v Citv Comm. on   

Human Rights, 85 NY2d 740). Again, it is the HHC Act itself which 

grants a check on HHC's authority to dtepohs oF real property, 

albeit via the Board of Estimate, now a nonexistent body. As 

explained above, the consent power of the Board of Estimate under 

section 7385(6) has devolved to both the Council and the Mayor. 

Hence, ULURP must be viewed as not impairing che exercise of HHC's 

power to dispose of property by sublease. 

Defendants alternatively contend ULURP is inapplicable 

because the sublease of CIH is not the subject of any disposition 

by the City, but instead, a disposition by HHC. They argue that 

under traditional notions of property law, a lessee is free to 

exercise possession and control over the property as against the 

world, including the landlord. According to defendants, HHC is 

legally allowed to sublease, and to require it to undergo ULURP 

review would render its leasehold less significant. Charter § 

197-c, however, is not restricted to dispositions by the City, but 

instead, is applicable to any dispositions of the real property 

of the City. 

IEE ULTRA VIRES ISSUE 

1s 

 



The primary issue presented is whether the subleasing 

of CIH, along with the wholesale turnover of HHC's service 

obligations, constitutes an ultra vires act in violation of the 

HHC Act. 

As Mayor Lindsay pledged to the State Legislature, in 

his letter to Governor Nelson A. Rockefeller, 

"liln establishing a public benefit 
corporation, the Citv is not getting out 
of the hospital business. Rather it is 
establishing a mechanism to aid it in 
better managing that business for the 
benefit not only of the public served by 
the hospitals but the entire City health 
service system. The municipal and 
health care system will continue to be 
the City's responsibilitv, governed by 
policies, determined by the City 
Council, the Board of Estimate. the 
Mayor, and the Health Services 
Administration on behalf of and in 
consultation with the citizens of New 
York City.” 

(Letter of Mayor John V. Lindsay, 
Governor's Bill Jacket, L. 1969, 
ch. 1016.) 

  

  

  

  

  

  

The Legislature, by enacting the HHC Act chose to rely upon such 

pledges and created HHC, a public benefit corporation, to carry 

out the City's constitutional responsibilities. 

HHC, by contracting with PHS-NY by means of a 99 year 

sublease, to have PHS-NY take over the operation of CIH, is 

shirking its own statutorily imposed responsibility, without the 

20  



Legislature's approval. Although the HHC Act concededly allows 

for provision of health and medical services "by agreement or 

lease with any person firm or private or public corporation or 

association, through and in the health facilities of [HHC] and to 

make rules and regulations governing admissions and health and 

medical services" (McKinney's Uncons Laws § 7385[8]), such 

allowance may not be construed to permit the incongruous result 

that HHC can delegate or shift all of its responsibilities to a 

non-public entity as a means of "furthering its corporate 

purposes." (McKinney's Uncons Law § 7385([8]). Moreover, that 

reading would frustrate the purposes and obligations of the HHC 

to the people of the City (see, Matter of New York Public Interest 
  

Research Group, 83 NY2d 377, [City officials cannot frustrate a 

legislative purpose by eviscerating an agency or group created by 

statute for a public purpose]; Matter of Gallagher v Reagan, 42   

NY2d 230, 234 ["(a) legislative act of equal dignity and import" 

is required to modify a statute, and "nothing less than another 

statute will suffice®)). 

This situation 1s inherently different from one in which 

a particular hospital property is no longer needed, usable or 

affordable, requiring its closure by HHC (see, Matter of 

Greenpoint Renaissance Enterprise Corp. v Citv of New York, 137 
  

21  



CY eum ; @® 

AD2d 597; Raia Now. York fiey. Health 2 ms fala 419 F So 

809; see also, Bryan v Koch, 627 F2d 612, affg 492 F Supp 212), 

or even one in which a specific portion or service of a health 

facility is leased, subcontracted or merged by HHC with a view to 

saving costs or improving delivery of care. For in each of those 

instances, HHC maintains the reins of control and decision-making, 

and does not leave both the administration and day-to-day 

operation entirely to someone else. 

Put another way, HHC cannot put itself out of business 

in relation to CIH by subleasing all of its assets and 

staniterrins all of its duties, without the consent of the 

Legislature, any more than a private corporation, by its Board of 

Directors, could divest itself of its assets and property without 

permission of its shareholders (gee, Business Corporation Law § 

909 (a); Dukes v Davis Aircraft Prods. Co,, 131 AD2d 720, 721). 

| The evidence presented on these motions makes it clear 

that defendants seek to privatize all the HHC hospitals. It is 

also obvious that the “turning over" of CIH to a non-public 

corporation, is the first step towards defendants' ultimate goal 

of disengaging the City from the municipal hospital system and 

placing municipal hospital services in the hands of an outsider  



  

or the private sector.? At the least, defendants seek to 

"downsize" HHC and minimize its role (and therefore the City's 

role), for an examination of the sublease terms reveals such 

limited rorataed control by HHC as to raise the question of 

whether HHC's continued existence could be justified if such 

subleasing is repeated in connection with the other HHC hospitals. 

For example, the sublease provides an arbitration process in the 

event PHS-NY wishes to discontinue a core service, by which an 

arbitration award can become binding on HHC. The Legislature 

cannot possibly have intended or expected that by granting HHC the 

right to enter into agreements or leases, HHC would be put into 

a position where HHC's Board of Directors essentially stripped the 

  

b | 

"Mayor Rudolph Giulian: recently announced plans to sell 
Coney Island Hospital and two other Queens hospitals into private 
hands. Giuliani said he was worried about rising health-care 
costs and deficits at city-owned hospitals, and wants to get the 
city out of hospital business. * 

(Newsday, March 5, 1995, emphasis supplied). 

As the Mayor told the press: 

"Twenty years from now the mayor of New York City will not 
be standing here with New York City owning 11 acute-care 
hospitals. That will not be the case. It is going to happen, 
it's going to change. That change is either going to be forced 
on us or we're going to guide it.°® . 

(National Public Radio, Interview with Mayor Giuliani, Morning 
Edition, September S, 1995.) 

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® » 
corporation of its control over the carrying out of its duties. 

The history of the creation of HHC is instructive. HHC 

was borne out of the City's need to salvage a hospital system that 

was floundering. If HHC likewise is confronted with a system 

nearly drowning in red ink, defendants' response cannot be simply 

to jump ship. They must go back to the Legislature, and seek an 

amendment or repeal of the HHC Act, or devise some other plan for 

managing the crisis. 

By finding that HHC has domitted an ultra vires act in 

entering into a sublease to privatize CIH, this court is not 

attempting to second guess HHC or the other defendants ort 

substitute its own beliefs for that of the HHC Board of Directors. 

Instead, it is holding that HHC must give meaning to the intent 

of the People as expressed through the State Legislature's 

enactment of the HHC Act. 

Accordingly, the summary judgment motions by defendants 

In Action Nos. 1 and 2 are denied. The cross motions for summary 

judgment by the Council plaintiffs in Action No. 1 and by the 

Campaign plaintiffs in Action No. 2 are granted to the extent of 

declaring that the subleasing of HHC facilitites requires the 

application of ULURP and the approval of the Council, and further 

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8-5. ie @ 
declaring that the sublease of CIH to PHS-NY constitutes an ultra 

  

vires act and violates the HHC Act. 

Settle orders. 

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